In re Gentiva Securities Litigation
2012 U.S. Dist. LEXIS 9177
E.D.N.Y2012Background
- Consolidated securities fraud class action against Gentiva Health Services and executives regarding alleged inflated stock price from July 31, 2008 to Oct 4, 2011.
- Four motions by five institutional movants to be appointed lead plaintiff under PSLRA were before the court.
- Initial named plaintiff Endress filed the action; MPRA intervened but was denied lead plaintiff designation; Endress withdrew.
- Five related Gentiva actions were filed between Sept–Oct 2011 and consolidated for efficiency; the court reopened lead-plaintiff proceedings for 60 days.
- Movants: Indiana Laborers Pension Fund, Los Angeles City Employees’ Retirement System (LACERS), Arkansas Teacher Retirement System, Metropolitan Water Reclamation District Retirement Fund, and International Union.
- Court designated to select lead plaintiff using PSLRA criteria, considering largest financial interest, Rule 23 adequacy/typicality, and institutional-investor preference.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who is the presumptive lead plaintiff under PSLRA. | LACERS claims largest financial interest. | Arkansas Group argues combination should be considered; losses closely competitive. | LACERS is presumptively lead plaintiff; Arkansas Group’s combination insufficient to override. |
| What class period should anchor loss calculations for lead-plaintiff analysis. | Longer, inclusive period should be used to maximize potential class members. | End date anchored to final corrective disclosures; shorter period reduces dilution. | Class period July 31, 2008 to October 4, 2011 adopted for lead-plaintiff purposes. |
| Whether two institutional investors may jointly act as lead plaintiff. | Aggregation beneficial to represent class; PSLRA permits grouping. | Aggregation risks improper manipulation and conflicts with PSLRA purposes. | Arkansas Group allowed as two-member lead plaintiff; concerns addressed but does not overcome LACERS’ lead-plantiff status. |
| Whether Indiana Laborers should be considered given smaller losses. | Indiana had largest number of shares; may be adequate despite smaller losses. | Loss is the primary Olsten factor; smaller than LACERS/Arkansas Group. | Indiana Laborers rejected as lead plaintiff due to smaller losses; not surpassing LACERS. |
Key Cases Cited
- In re Bank of America Corp. Secs., Derivative and ERISA Litig., 258 F.R.D. 260 (S.D.N.Y. 2009) ( Olsten factors and largest financial interest guidance.)
- Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (U.S. 2005) (loss causation requirement.)
- In re Veeco Instruments, Inc. Sec. Litig., 235 F.R.D. 220 (S.D.N.Y. 2006) (partial disclosures and class-period dynamics in lead-plaintiff analysis.)
- Richman v. Goldman Sachs Group, Inc., 274 F.R.D. 473 (S.D.N.Y. 2011) (largest financial interest as key metric in lead-plaintiff selection.)