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One key provision included in the Private Securities Litigation Reform Act of 1995 is the requirement that the court appoint a “lead plaintiff” to control the prosecution of each securities class action. 15 U.S.C. 77z-1(a)(3), 78u-4(a)(3). This provision was designed to correct perceived abuses that arose from the absolute control exercised by plaintiffs’ counsel over the securities litigation process. See, e.g., Burke v. Ruttenberg, 102 F. Supp. 2d 1280, 1303-06 (N.D. Ala. 2000). Congress perceived that plaintiffs’ counsel, by affiliating themselves with “professional plaintiffs” who could be dominated by them, obtained settlements that were more favorable to counsel than to the arguably aggrieved shareholders. Id. at 1304. By creating the “lead plaintiff” position, Congress sought to put a highly motivated investor in the driver’s seat so that the investor-plaintiff would control the lawyers and not the reverse. Id. at 1307. Since its enactment, however, issues have arisen regarding the lead plaintiff provision that have complicated what Congress intended to be a streamlined and efficient system. One issue that has been the focus of several recent decisions is the idea that, prior to ruling on class certification, the court should divide the class into subclasses and appoint different lead plaintiffs and lead counsel for each subclass. As discussed below, most courts have refused this invitation to multiply the number of plaintiffs and counsel involved in each case. Although the reform act was clearly designed to foster competition among qualified investors, the act has also led to a corresponding increase in competition among lawyers in high-profile cases. To distinguish themselves from the competition, counsel may highlight the differences among class members rather than focus on the similarities, as one would expect in a putative class action. Defendants may choose to sit on the sidelines while the various plaintiffs’ factions fight among themselves for control. Defendants should, however, pay close attention to the arguments made by plaintiffs regarding unique and conflicting subclasses. Plaintiffs’ strategy of highlighting different constituencies may alert defendants to arguments that could be used against plaintiffs later in the case. The issue of early designation of subclasses has arisen in several recent hotly contested lead plaintiff fights. In such cases, incentives exist for lead plaintiff candidates to argue that there must be separate representation for certain “subclasses” of investors because their claims are purportedly different from other potential class members. For example, in recent cases, investors in options, notes, bonds and preferred stock have argued that their claims cannot be adequately prosecuted by an investor who acquired shares in a different manner-e.g., someone who purchased common stock on the open market. See, e.g., Weinberg v. Atlas Air Worldwide Holdings Inc., 216 F.R.D. 248, 253-55 (S.D.N.Y. 2003); In re Enron Corp. Sec. Litig., 206 F.R.D. 427, 437-39, 444-51 (S.D. Texas 2002). Proponents of this view claim that multiple competing groups of plaintiffs and counsel should not be winnowed down to one lead plaintiff and one set of lead lawyers because of the need to ensure adequate representation of supposedly diverse constituencies. Seeking a seat at the table Plaintiffs’ counsel typically cannot avoid the lead plaintiff battle because their case will most likely be consolidated with similar cases pending against the same company. See 15 U.S.C. 77z-1(a)(3)(B)(ii), 78u-4(a)(3)(B)(ii). Thus, they have no choice but to seek appointment as lead counsel for some separate class or subclass in the hope of maintaining a “seat at the table” in post-consolidation proceedings. Also, their clients often do not qualify for the presumption afforded under the reform act that the investor with “the largest financial interest” in the litigation (i.e., that has suffered the largest loss) is “the most adequate plaintiff.” 15 U.S.C. 77z-1(a)(3)(B)(iii), 78u-4(a)(3)(B) (iii). Accordingly, these firms have been forced to develop an alternative argument to attempt to justify their continued participation. To suggest their indispensability, these plaintiffs seek to import prematurely a full-blown analysis of class certification under Rule 23 of the Federal Rules of Civil Procedure. On its face, the reform act appears to invite a preliminary assessment of the adequacy and typicality requirements of Rule 23(a). For example, to identify the presumptively most adequate plaintiff, the court is required to consider whether the person or entity “otherwise satisfies the requirements of Rule 23.” 15 U.S.C. 77z-1(a)(3)(B)(iii)(I)(cc), 78u-4(a)(3)(B)(iii) (I)(cc). The act also allows for discovery by another plaintiff on whether the presumptive lead plaintiff “will . . . fairly and adequately protect the interests of the class” or “is subject to unique defenses that render such plaintiff incapable of adequately representing the class.” 15 U.S.C. 77z-1(a)(3)(B)(iii)(II), 78u-4(a)(3)(B)(iii)(II). These aspects of the reform act do not, however, mean that class certification could or should be decided at this early stage of the case. Numerous courts have recognized that a comprehensive Rule 23 analysis is not appropriate at the lead plaintiff stage. See, e.g., Gluck v. CellStar Corp., 976 F. Supp. 542, 546 (N.D. Texas 1997); In re Nice Sys. Sec. Litig., 188 F.R.D. 206, 219 n.12 (D.N.J. 1999). This is true due to, among other reasons, the fact that plaintiffs often take the position that defendants do not have standing to comment on the selection of lead plaintiff. See Gluck, 976 F. Supp. at 550. Defendants, however, have a well-recognized due process right to be heard on issues related to class certification. Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 805 (1985). Thus, it cannot be the case that any discussion of Rule 23 at the lead plaintiff stage could alter a defendant’s undisputed right to be heard on these issues later in the case. Gluck, 976 F. Supp. at 550. Control and efficiency goals Despite Congress’ intent that any discussion of adequacy and typicality be preliminary in nature, some plaintiffs push for a more comprehensive analysis to support their candidacy for lead plaintiff of some subset of the proposed class. However, any appointment of niche lead plaintiffs utilizing the “subclass” vehicle would be contrary to the purpose for which the lead plaintiff provision was designed: i.e., to streamline proceedings and foster better client control over counsel. See, e.g., Weinberg, 216 F.R.D. at 254; Enron, 206 F.R.D. at 451; Greenberg v. Bear Stearns & Co., 80 F. Supp. 2d 65, 70 (E.D.N.Y. 2000). In fact, the appointment of separate lead plaintiffs and counsel to oversee multiple subclasses raises the same practical problems as other multiple lead plaintiff configurations previously rejected by courts as inconsistent with the reform act. For these reasons, most judges, who have been asked to appoint separate lead plaintiffs and lead counsel for subclasses, have declined to do so. See, e.g., Weinberg, 216 F.R.D. at 253-54; Enron, 206 F.R.D. at 451; In re MicroStrategy, Inc. Sec. Litig., 110 F. Supp. 2d 427, 440 (E.D. Va. 2000); Greenberg, 80 F. Supp. 2d at 70; In re Tyco Int’l Ltd. Sec. Litig., 2000 WL 1513772, at 6-7 (D.N.H. Aug. 17, 2000); Aronson v. McKesson HBOC Inc., 79 F. Supp. 2d 1146, 1150-51 (N.D. Calif. 1999); In re Cendant Corp. Litig., 182 F.R.D. 476, 479-80 (D.N.J. 1998). Courts have rejected the subclass approach to avoid creating a structure that would “obstruct any efficient and controlled progress” of the case and fragment the plaintiff class. Enron, 206 F.R.D. at 451; see also Cendant, 182 F.R.D. at 480. In other words, courts have decided that creating subclass lead plaintiffs would make it harder, not easier, for the lead plaintiffs to control counsel and would, therefore, thwart the central purpose for which the lead plaintiff provision was designed. Also, courts have recognized that the text of the reform act authorizes only the appointment of “the most adequate plaintiff for the consolidated actions.” Enron, 206 F.R.D. at 451. And, although the act recognizes that a “person or group of persons” may serve as lead plaintiff, courts interpret the reference to a “group” as allowing for only a small cohesive group who can ” ‘vigorously pursue all available causes of action against all possible defendants under all available legal theories.’ ” Id. (internal citations omitted). The reform act thus allows for only one lead plaintiff or, in the alternative, for one small group of plaintiffs who will represent a single class of investors instead of various subgroups. Accordingly, a “group” cannot be made up of several separate lead plaintiffs, each of whom supposedly represents a different constituency. See, e.g., id.; see also MicroStrategy, 110 F. Supp. 2d at 440. In deciding against subclasses, courts often acknowledge that the parties presented interesting or even persuasive arguments on potential conflicts of interest that might require separate representation at class certification and trial. These courts nevertheless find that the lead plaintiff stage is not the time to address these issues and that these conflicts should be reargued later, if they still exist. See Weinberg, 216 F.R.D. at 254; Enron, 206 F.R.D. at 451; MicroStrategy, 110 F. Supp. 2d at 440. Indeed, courts have been so loath to complicate proceedings that they have required a lead plaintiff to represent a subgroup of investors, despite the lead plaintiff’s perceived lack of standing to bring the particular claims at issue. See Weinberg, 216 F.R.D. at 253-54. In sum, plaintiffs have not found the subclass strategy to be a successful means of ensuring a continued role for themselves or their counsel in these cases. This strategy also has significant downsides for plaintiffs because, in the process of arguing that subclasses are necessary, counsel may alert defendants to issues that defendants may raise later in opposing a class certification motion under Rule 23. For example, defendants may wish to point out at the class certification stage that the presence of intraclass conflicts prevents certification. In response, plaintiffs may wish to argue that these conflicts are speculative or not necessarily fatal to adequate representation. This argument, however, is severely undercut if other putative class members have already raised the same issues earlier in the case. Practical considerations Also, there are practical reasons why courts should consider avoiding the establishment of multiple-plaintiff constituencies at the early stages of the litigation. Increasing the number of plaintiffs and their counsel who have to be consulted at each stage of the case may have adverse consequences for the efficient prosecution of the case, including complicating efforts to reach an early resolution. Also, initial case proceedings, such as the preparation of the consolidated complaint and briefing on related motions to dismiss, may be best handled by streamlined plaintiffs’ representation. Further, it is often best for the legal sufficiency of the consolidated complaint to be tested first and to reserve for later the issue of any conflicts class members may have in prosecuting those claims, if any, that survive the motion to dismiss. This is particularly true given that the question of whether there will be further subdivision of the class must necessarily be addressed later: i.e., when plaintiffs make a formal Rule 23 motion. At that point in the case, the court will have before it the final iteration of the class period and will have identified those claims that will proceed to discovery. Also, at that later time, the court will have the benefit of the adversarial process (i.e., full briefing by all parties, including the defendants) to assist it with any decision on the composition of the class. Input from all potentially affected parties will best foster the “rigorous analysis” that the district court is required to perform in analyzing potential class certification under Rule 23. General Tel. Co. v. Falcon, 457 U.S. 147, 161 (1982). Susan E. Hurd is a partner, and Christine M. Bautista is an associate, in the securities litigation group of Atlanta’s Alston & Bird.

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