S.D.N.Y. Notes Intra-Circuit Split Re Whether Unrelated Plaintiffs May Aggregate Claims for Designation of Lead Plaintiff Under PSLRA
Per Bhojwani v. Pistiolis, Slip Copy, 2007 WL 2197836 (S.D.N.Y. Jul 31 , 2007) (NO. 06 CIV 13761 CM KNF):
Although PSLRA permits the appointment of a group of persons as lead plaintiff, courts within the Second Circuit are divided over whether unrelated plaintiffs may join together, aggregate their claims and compete, within the context of the rebuttable presumption, for the designation of lead plaintiff. See Goldberger v. PXRE Group, Ltd., No. 06-CV-3410 et al., 2007 WL 980417, at *3-4 (S.D.N.Y. Mar. 30, 2007). Since the principal purpose of PSLRA is to prevent lawyer-driven litigation, allowing attorneys to assemble otherwise unrelated plaintiffs as a group and to aggregate their holdings in order to manufacture the largest financial interest, would defeat the statute's purpose, and some courts, accordingly, disapprove aggregation. In re Doral Fin. Corp. Sec. Litig., 414 F.Supp.2d 398, 401-02 (S.D.N.Y.2006); see In re Pfizer Inc. Sec. Litig., 233 F.R.D. 334, 337 (S.D.N.Y.2005) (refusing to consider potential lead plaintiffs as a group); In re Veeco Instruments Inc. Sec. Litig., 233 F.R.D. 330, 334 (S.D.N.Y.2005) (disapproving aggregation of unrelated persons who join together in the hope of "becoming the biggest loser for PSLRA purposes"); Goldberger v. PXRE Group, LTD., 2007 WL 980417, at *5 (noting reluctancy to aggregate a group comprised of "disparate and apparently unrelated plaintiffs"); In re Razorfish, Inc. Sec. Litig., 143 F.Supp.2d 304, 308-12 (S.D.N.Y.2001); In re Donnkenny Inc. Sec. Litig., 171 F.R.D. 156, 157-58 (S.D.N.Y.1997).
Other courts allow aggregation of unrelated investors in certain instances, for example, "when it would be most beneficial to the class under the circumstances of a given case." See In re Star Gas Sec. Litig., No. 3:04CV1766, 2005 WL 818617, at *5 (D.Conn. Apr. 8, 2005); Weltz v. Lee, 199 F.R.D. 129, 132-33 (S.D.N.Y.2001) (citing to cases in which the courts approved aggregation). Nevertheless, all courts share a common concern about aggregation: "[the assemblage] of unrelated investors [who have] been cobbled together as a 'group' to displace a single competing institutional investor, or a smaller, closely-related group of investors." See Barnet v. Elan Corp., PLC, 236 F.R.D. 158, 163 (S.D.N.Y.2005). In determining whether aggregation is appropriate courts consider factors, such as: (a) the size of a group; (b) whether the group was formed in bad faith; and (c) the relationship among the parties. See id. at 162.