Plaintiffs Firms Jockey to Lead 'Flash Boys' Case

Plaintiffs Firms Jockey to Lead 'Flash Boys' Case Photo by Paul Giamou/iStock

The competition is heating up for plaintiffs firms jostling to win the lead counsel spot in litigation inspired by Michael Lewis’s best-selling book on high-frequency trading, “Flash Boys.”

Three prominent plaintiffs firms—Robbins Geller Rudman & Dowd; Motley Rice; and Labaton Sucharow—argued in a motion filed Tuesday that a judge should consolidate four class actions against the high-frequency trading industry and appoint them co-lead counsel. Their clients include the Plumbers and Pipefitters National Pension Fund and the City of Providence, R.I.

In a dueling motion filed the same day, Lovell Stewart Halebian Jacobson argued that it should get the nod, asserting that it’s more thoroughly investigated the defendants’ alleged wrongdoing. Wolf Popper also wants to be crowned lead counsel, arguing that its lead plaintiff, the trading firm Applied Financial Science Inc., has an in-depth understanding of the legal issues and it won’t just rubber-stamp its counsel’s decisions.

It’s unusual for three big plaintiffs firms like Robbins Geller, Motley Rice and Labaton to ask for joint leadership of a securities class action, and it appears to be the first time that all three have sought to share lead counsel status.

The case could well be a massive undertaking. The three firms seek to represent all investors who bought securities on a stock exchange or alternate trading venue between 2009 and the present—that is pretty much everyone. And they’ve sued not just high frequency trading firms, such as Citadel and Jump Trading, but also stock exchanges, such as NASDAQ, and financial institutions with brokerage arms, including JPMorgan Chase & Co. and Bank of America Corp.

U.S. District Judge Jesse Furman in Manhattan is expected to rule on the motions to appoint counsel at a July 9 hearing.

“Flash Boys” debuted on March 31, drawing wide attention to high-frequency trading, the practice of using computerized algorithms to move in and out of trading positions in fractions of a second. As Lewis recounts, HFT critics contend it’s a legalized version of front-running, the profitable but illegal practice of brokers trading on their knowledge of their customers’ pending requests.

In an April 18 complaint that repeatedly cites “Flash Boys,” Robbins Geller argues that HFT has eroded trust in the markets and siphoned billions of dollars from public pension funds. Robbins Geller roped the brokerage firms and stock exchanges into the case on a theory that they’ve taken forms of kickbacks from HFT firms. These alleged kickbacks include so-called “co-location fees” that HFT firms to set up computer servers near the stock exchange’s servers to get financial data nanoseconds before the competition.

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