Rauch v. Vale S.A.
378 F. Supp. 3d 198
E.D.N.Y2019Background
- Two related securities class actions were filed against Vale S.A. (Rauch v. Vale S.A. "Vale I" and Epstein v. Vale S.A. "Vale II") alleging violations of Section 10(b), Rule 10b-5 and Section 20(a) based on public SEC filings about dam safety and related disclosures.
- Vale operated the Feijão tailings dam (and earlier the Fundão dam). The Feijão dam collapsed on Jan. 25, 2019; press reports and regulatory actions caused sharp declines in Vale's NYSE stock price.
- Vale I amended to expand the class period (June 7, 2016–Feb. 6, 2019) and to add former CEO Ferreira as a defendant; Vale II covered an overlapping but shorter period.
- Multiple investors moved to consolidate the actions and be appointed Lead Plaintiff; most withdrew or submitted non-opposition, leaving the Colleges of Applied Arts and Technology Pension Plan (CAAT) unopposed.
- CAAT purchased and held 611,999 shares during the longer class period, claiming approximately $912,956 in LIFO-calculated losses; it proposed Kaplan Fox & Kilsheimer LLP as Lead Counsel.
- The court consolidated the cases, appointed CAAT as Lead Plaintiff, and approved Kaplan Fox as Class Counsel.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether to consolidate Vale I and Vale II | Rauch/CAAT: Actions involve common questions of law/fact based on the same SEC filings and alleged misstatements; consolidation promotes efficiency | Defendants: (no opposition noted); potential differences in class periods/defendants could argue against consolidation | Court: Consolidation granted under Fed. R. Civ. P. 42 — overlapping issues and no prejudice to defendants |
| Whether prior PSLRA notice required republication after amendment | CAAT/Most movants: Original Business Wire notice (for shorter period) was adequate; amended complaint did not substantially alter claims | Potential concern: expanded class period and added defendant might require new notice | Court: No republication required — claims and allegations substantially similar despite extended period and added defendant |
| Who is the "most adequate" Lead Plaintiff under PSLRA | CAAT: Timely movant, largest financial interest (LIFO loss ~$912,956), typical and adequate, represented by experienced counsel | Other movants: some claimed larger losses earlier but withdrew or conceded CAAT's larger stake; no party raised unique defenses against CAAT | Court: CAAT entitled to presumption as most adequate plaintiff; appointment approved |
| Whether proposed Class Counsel should be approved | CAAT: Kaplan Fox experienced in securities class actions and appropriate to lead | No opposition | Court: Approved Kaplan Fox as Class Counsel; defers to Lead Plaintiff's selection absent reason to reject |
Key Cases Cited
- Devlin v. Transp. Commc'ns Int'l Union, 175 F.3d 121 (2d Cir. 1999) (consolidation promotes efficiency and avoids duplication)
- Reitan v. China Mobile Games & Entm't Grp., Ltd., 68 F. Supp. 3d 390 (S.D.N.Y. 2014) (consolidation analysis and precedent)
- Constance Sczesny Tr. v. KPMG LLP, 223 F.R.D. 319 (S.D.N.Y. 2004) (consolidation and PSLRA lead-plaintiff procedures)
- Kaplan v. Gelfond, 240 F.R.D. 88 (S.D.N.Y. 2007) (different class periods do not preclude consolidation)
- In re Olsten Corp. Sec. Litig., 3 F. Supp. 2d 286 (E.D.N.Y. 1998) (benefits of consolidating stockholder suits)
- Pirelli Armstrong Tire Corp. Retiree Med. Benefits Tr. v. LaBranche & Co., 229 F.R.D. 395 (S.D.N.Y. 2004) (consolidation despite different defendants/class periods)
- In re Gentiva Sec. Litig., 281 F.R.D. 108 (E.D.N.Y. 2012) (Olsten factors for lead-plaintiff financial-interest analysis)
- In re eSpeed, Inc. Sec. Litig., 232 F.R.D. 95 (S.D.N.Y. 2005) (LIFO preferred for loss calculations in securities cases)