87 F. Supp. 3d 563
S.D.N.Y.2015Background
- Two putative securities class actions were filed (Sept. and Oct. 2014) on behalf of purchasers of Millennial Media, Inc. (MM) securities from March 28, 2012 to May 7, 2014, alleging MM and certain officers made materially false statements about MM’s ad-technology platform (MYDAS), inflating stock price.
- Plaintiffs allege MYDAS was not functional or sufficiently functional, causing poor performance, over-billing, and customer loss; stock declined sharply after corrective disclosures and poor earnings guidance, culminating in a >37% one-day drop after May 7, 2014.
- Five movants sought appointment as lead plaintiff (or co-lead): Mississippi Public Employees’ Retirement System ("Mississippi"), the Selz Funds, Christensen, Kang, and Ostroviak. Mississippi and the Selz Funds proposed to serve as co-lead plaintiffs.
- The Court consolidated the two actions under In re Millennial Media, Inc. Securities Litigation (14 Civ. 7923) because they involve common questions of law and fact and consolidation would promote efficiency without undue prejudice.
- Under the PSLRA, the Court evaluated lead-plaintiff motions considering notice, largest financial interest (Lax factors), and Rule 23 typicality/adequacy. Selz Funds had the largest alleged loss (~$3.6M); Mississippi alleged ~$1.75M and was the only movant with shares traceable to MM’s IPO and secondary offering.
- The Court appointed Mississippi and the Selz Funds as co-lead plaintiffs and approved their counsel (Bernstein Litowitz Berger & Grossman LLP, Labaton Sucharow LLP, and Gold Bennett Cera & Sidener LLP) as co-lead counsel, finding co-lead structure best protected class interests and that the movants meet Rule 23 typicality and adequacy at this stage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether to consolidate related securities suits | Plaintiffs in both actions argued the suits arise from the same allegedly false statements and overlapping defendants, so consolidation promotes efficiency | Defendants did not oppose consolidation | Consolidation granted: cases involve common questions and consolidation serves judicial economy without prejudice |
| Who is the "most adequate" lead plaintiff under the PSLRA | Various movants sought appointment; Selz Funds argued largest losses; Mississippi emphasized IPO/secondary-offering purchases and institutional status; both proposed co-lead structure | Other movants (Christensen, Kang, Ostroviak) had smaller losses and offered less institutional resources | Court appointed Mississippi and Selz Funds as co-lead plaintiffs (co-lead structure preferred given facts) |
| Application of Lax financial-interest factors (which movant has largest interest) | Selz Funds asserted largest claimed loss (~$3.6M); Mississippi ~$1.75M; others far smaller | Defendants did not contest loss calculations materially | Selz Funds had largest financial interest, but court still chose co-leadship due to Mississippi’s IPO/secondary-offering traceability and class interests |
| Whether proposed lead plaintiffs satisfy Rule 23 typicality and adequacy | Mississippi and Selz Funds argued their claims arise from same events, no unique defenses, institutional competence, and proposed experienced counsel | No credible showing defendants would assert unique defenses rendering them inadequate | At pleadings stage, court found typicality and adequacy satisfied and approved co-lead plaintiffs and co-lead counsel |
Key Cases Cited
- Johnson v. Celotex Corp., 899 F.2d 1281 (2d Cir. 1990) (trial court may consolidate actions with common questions to promote efficiency)
- Oxford Health Plans, Inc. Sec. Litig., 182 F.R.D. 42 (S.D.N.Y. 1998) (PSLRA contemplates appointment of multiple lead plaintiffs; co-lead structure appropriate where it serves class interests)
- City of Monroe Emps. Ret. Sys. v. Hartford Fin. Servs. Group, Inc., 269 F.R.D. 291 (S.D.N.Y. 2010) (procedures for PSLRA lead-plaintiff notice and motion practice)
- Glauser v. EVCI Ctr. Colls. Holding Corp., 236 F.R.D. 184 (S.D.N.Y. 2006) (PSLRA intended to encourage institutional investors to serve as lead plaintiffs)