The Private Securities Litigation Reform Act gives federal district court judges the unequivocal power to appoint lead plaintiffs in securities class actions. But are judges also empowered to appoint lead counsel?
Not according to the 9th U.S. Circuit Court of Appeals. In a 15-page Nov. 5 opinion, a three-judge appellate panel vacated San Francisco federal District Court Judge James Ware’s appointment of Girard Gibbs as co-lead counsel in the consolidated securities class action against Nvidia. The 9th Circuit found that Ware made a “clearly erroneous” decision when he appointed Girard Gibbs as co-lead counsel instead of Kahn Swick & Foti, even though he had picked Kahn Swick’s client (and not Girard Gibbs’) as co-lead plaintiff. “This error was a usurpation of power, pointing in favor of the issuance of the writ,” the appeals court ruled.
Last December, after a heated competition among seven lead-plaintiff candidates, Ware appointed two leads, the New Jersey Carpenters Pension Fund and an Nvidia investor named Roberto Cohen. Ware also selected two firms to lead the case. One was Milberg, which represents the pension fund. But the other was not Cohen’s counsel, Kahn Swicki. Instead, Ware concluded that Girard Gibbs (along with Milberg) was “the most qualified counsel for this case.”
Kahn Swick & Foti asked for reconsideration, pointing to a 2002 9th Circuit ruling that clarified a lead plaintiffs’ right to its own counsel. Ware refused to change his mind. He ruled that both the 2002 case and the express language of the PSLRA gave him discretion to reject a lead plaintiff’s choice of law firm.
Kahn Swick appealed to the 9th Circuit for a writ of mandamus, asking to be appointed lead counsel in place of Girard Gibbs.
The 9th Circuit didn’t go quite that far. In partially granting the writ, the appellate court did endorse Cohen’s right to choose his law firm. It also vacated Ware’s appointment of Girard Gibbs, but declined to take the next step and appoint Kahn Swick. Instead, the appeals judges sent the case back to Judge Ware with instructions for him “to accept or reject Cohen’s selection of [Kahn Swick], applying the applicable standard.”
We left messages with Lewis Kahn and Kim Miller of Kahn Swick, and with Jonathan Levine of Girard Gibbs, but didn’t hear back.
This article first appeared on The Am Law Daily blog on AmericanLawyer.com.