ORDER APPOINTING LOUISIANA TEACHERS’ RETIREMENT SYSTEM OF LOUISIANA LEAD PLAINTIFF AND APPROVING ITS CHOICE OF COUNSEL
Before the Court are three competing motions regarding the appointment of lead plaintiff and approval, of lead counsel in this securities fraud class action lawsuit brought against Network Associates, Inc. (“Network Associates”) and two of its corporate officers. The members of the purported class that seek to be appointed lead plaintiff and to have the Court approve their choice of lead counsel are (1) the Louisiana Teachers’ Retirement System of Louisiana (“Louisiana Teachers”), (2) the Iowa Bakers Local 433 Pension Fund and Twin Cities Bakery Drivers Local 289 Pension Fund (the “Bakers Pension Funds”), and (3) Raymond E. Morales (“Morales”). Having considered the papers submitted by the parties and the arguments of counsel at the May 8, 2001 hearing on this matter, and for the reasons set forth below, the Court hereby appoints Louisiana Teachers’ as lead plaintiff in this action and approves Louisiana Teachers’ choice of counsel.
I. Factual Background
This matter involves eleven related class actions that have been consolidated for resolution in this Court. 1 The purported class in each case consists of all persons, except the defendants, who purchased Network Associates securities during the period from July 19, 2000 to December 26, 2000 (the “Class Period”). The complaints in these actions generally allege that the defendants violated the federal securities laws by disseminating false and misleading statements concerning Network Associates’ current operations and its future prospects. In particular, the plaintiffs claim that although distributors of Network Associates’ products were not accepting new shipments and were returning tens of millions of dollars of Network Associates’ products, the defendants continued to make positive but false statements about Network Associates’ current business and future prospects throughout the second half of 2000. On December 26, 2000, Network Associates announced significant losses for the fourth quarter 2000, a change in the way it accounted for sales to distributors, the replacement of its Chairman and Chief Executive Officer, and the resignations of its Chief Financial Officer and President. The day after these disclosures, Network Associates’ stock significantly declined, closing at $4.50 per share on December 27, 2000. The stock had traded as high as $27.00 per share during the Class Period.
II. The Proposed Lead Plaintiffs
A. Louisiana Teachers’ Retirement System of Louisiana
Louisiana Teachers is a public pension fund with over $10 billion in assets under management. It claims losses of $1,043,205.16 from purchases of 184,500 *1047 shares of Network Associates common stock during the Class Period. These stock purchases occurred from December 6, 2000 through December 21, 2000. Through declarations signed by its General Counsel, William T. Reeves, Jr. (“Reeves”), Louisiana Teachers expresses its willingness and ability to serve as lead counsel in this action. See Exh. C to Decl of Alan Schulman in Support of Louisiana Teachers’ Motion to be Appointed Lead Plaintiff; Supp. Decl. of William T. Reeves attached as Exh. A to Decl. of Blair A. Nicholas in Support of Louisiana Teachers’ Reply Memorandum. Reeves states that he has experience monitoring outside litigation matters for the Louisiana Teachers’ pension fund and supervising outside litigation counsel. Further, he maintains that Louisiana Teachers possesses the sophistication, expertise, and resources to supervise this litigation and its counsel effectively. He also explains his familiarity with the provisions of the Private Securities Litigation Reform Act (“PSLRA”) and Louisiana Teachers’ intention to fulfill its fiduciary duties to provide adequate representation to all class members, as is required by the PSLRA. Louisiana Teachers has selected Bernstein Litowitz Berger & Grossman LLP (“Bernstein Li-towitz”) to serve as its counsel in this action. According to Reeves, Bernstein Litowitz was selected based on its preeminence in representing public pension funds in securities class action litigation, successful track record, expertise and resources to serve as lead counsel, and discussions with the firm regarding the details of this particular case. Preliminary discussions have resulted in Bernstein Litowitz agreeing to serve as lead counsel based on a percentage of recovery method at percentages which Reeves claims are significantly below those typically awarded in a case of this type.
B. Iowa Bakers Local 433 Pension Fund and Twin Cities Bakery Drivers Local 289 Pension Fund
The Bakers Pension Funds are “Taft-Hartley” employee benefit funds that are responsible for the retirement investments of members of the Bakers Local 433 and Drivers Local 289 unions. Each fund is separately controlled by a Board of Trustees comprised of management and union representatives. Together, the funds currently have approximately $100 million invested in securities on behalf of 1000 pensioners. The Bakers Pension Funds claim to have suffered over $90,000 in losses from purchases of 4000 shares of Network Associates securities during the Class Period. The Bakers Pension Funds move to be appointed the only lead plaintiff in this action. However, they alternatively contend that if the Court finds Louisiana Teachers to be equally qualified to serve as lead plaintiff, then Bakers Pension Funds and Louisiana Teachers should be appointed co-lead plaintiffs in this case.
C. Raymond E. Morales
Morales is an individual investor who purchased 20 shares of Network Associates securities during the Class Period. His losses are estimated to be $371.00. Morales claims to have negotiated a fee arrangement with two law firms — Farrow, Bramson, Baskin & Plutzik and Beattie and Osborn LLP — that he claims will save the class millions of dollars in legal fees by allowing the class to retain a greater percentage of any recovery in this case.
III. The Private Securities Litigation Reform Act
The PSLRA governs the appointment of lead plaintiffs in securities class actions. Pursuant to 15 U.S.C. § 78u-4, the court “shall appoint as lead plaintiff the member or members of the purported plaintiff class *1048 that the court determines to be most capable of adequately representing the interests of class members.” 15 U.S.C. § 78u-4(a)(3)(B)(i). The PSLRA creates a rebut-table presumption that “the most adequate plaintiff in any private action arising under this title is the person or group of persons that (1) ‘either filed the complaint or made a motion’ to be appointed lead plaintiff, (2) “has the largest financial interest in the relief sought by the class,” and (3) “otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure.” 15 U.S.C. § 78u-4(a)(3)(B)(in)(I). This presumption may be rebutted “upon proof by a member of the purported plaintiff class that the presumptively most adequate plaintiff ... will not 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. § 78u~ 4(a)(3)(B)(iii)(II).
The legislative history of the PSLRA reveals that the above provisions were motivated by Congressional concerns about the prevalence of “lawyer-driven” securities class actions.
See
Statement of Managers — The “Private Securities Reform Act of 1995,” H.R. Conf. Report No. 104-369, 104th Cong., 1st Sess. (1995),
reprinted in
1995 U.S.C.C.A.N. 730. By creating the PSLRA’s lead plaintiff presumption, Congress sought to encourage the involvement of institutional investors in securities class actions, and thereby “increase the likelihood that parties with significant holdings in issuers, whose interests are more strongly aligned with the class of shareholders, will participate in the litigation and exercise control over the selection and actions of plaintiffs counsel.”
Id.; see also In re Network Associates, Inc. Sec. Litig.,
IY. Scope and Application of the PSLRA’s Lead Plaintiff and Lead Counsel Provisions
Through the incorporation of Rule 23’s requirements, the PSLRA clearly provides that the lead plaintiff inquiry is not confined to the proposed lead plaintiffs financial interest in the litigation. In addition to examining the proposed lead plaintiffs claimed financial loss, a court must also consider whether the proposed lead plaintiff satisfies Rule 23 and will therefore carry out the fiduciary duties that a class representative owes to the represented class. Sеe,
e.g.,
Fed.R.Civ.P. 23(d) (“the court may make appropriate orders ... for the protection of the members of the class”);
Cohen v. Beneficial Indus. Loan Corp.,
At the outset of the litigation, “a proposed lead plaintiff can best demonstrate the willingness and ability to discharge the fiduciary duties of the lead plaintiff by demonstrating the willingness and ability to take charge of the litigation and negotiate a reasonable rеpresentation arrangement with class counsel.”
Quintus,
Various courts have commented on and/or implemented differing methods for the approval of lead plaintiffs selected counsel. The most straightforward situation is presented where the court determines the plaintiff with the largest financial loss has adequately negotiated with counsel and has otherwise satisfied the adequacy requirements of Rule 23. If this is the case, the PSLRA presumption controls and the court “need not, and indeed should not, substitute its judgment for that of the lead plaintiff.”
Quintus,
In other cases, courts have determined that no prospective lead plaintiff has adequately selected counsel. This presents two options for the court. Where a plaintiff appears to have the ability and incentive to conduct adequate negotiations with counsel, the court can require that plaintiff to “undertake such a process and appoint that plaintiff as lead plaintiff subject to confirmation that the responsibility of identifying and negotiating reasonable arrangements with counsel has been discharged.”
Quintus,
On the other hand, where it appears that the purported lead plaintiff lacks the ability and incentive to negotiate an adequate arrangement with clаss counsel or has failed to negotiate an acceptable arrangement, the court, in the exercise of the fiduciary duties it owes to class action members, can itself supervise the selection and terms of class representation.
See Quintus,
,
Although the competitive bidding process has gained wide use in recent years, it must be noted that this method of selecting class counsel has not been universally accepted by all courts. In fact, some courts have rejected the method outright. For instance, in
Steiner v. Aurora Foods, Inc.,
No. C-00-602 CW (N.D.Cal. Jun. 5, 2000), competitive bidding was rejected because it “appears to be contrary to the plain languаge of the PSLRA.”
Id.
at 9-10. According to the
Steiner
ruling, a court’s authority under the PSLRA to approve counsel selected by the lead plaintiff,
see
15 U.S.C. § 78u-4(a)(3)(B)(v), and to limit the attorneys’ fees awarded to a reasonable percentage of any recovery,
see
15 U.S.C. § 78u-4(a)(6), is “sufficient to ensure that the interests of the class are protected, without depriving the lead plaintiff of its right to the counsel of its choice.”
Steiner,
at 10. Likewise, in
In re MicroStrategy Inc. Sec. Litig.,
Y. Appointment of Lead Plaintiff
In this ease, Louisiana Teachers is the most adequate plaintiff under the terms of the PSLRA’s lead plaintiff presumption.
See
15 U.S.C. § 78u-4(a)(3)(B)(iii)(I). It has filed a motion to be appointed lead plaintiff, thereby satisfying the first requirement of the presumption. Second, it has the largest financial interest in the relief sought by the class by reason of the fact that it has suffered the greatest financial loss of all proposed lead plaintiffs. Louisiana Teachers’ estimated loss of over $1 million significantly eclipses the $90,000 purportedly lost by the Bakers Pension Funds and overwhelmingly exceeds Morales’ estimated loss of $371.00. Third, as discussed in more detail below, Louisiana Teachers satisfies the requirements of Rule 23 because its claims are similar to the claims of other class members and because it has demonstrated that it is willing and able to obtain appropriate class counsel and adequately prosecute this case. The appointment of Louisiana Teachers as lead plaintiff is not only appropriate under the express terms of the PSLRA’s “most adequate plaintiff’ presumption, it also conforms with the Congressional concerns that motivated passage of the PSLRA. As an institutional investor with a large financial stake in the outcome of this litigation, Louisiana Teachers “is exactly the'type of lead plaintiff envisioned by Congress when it instituted the lead plaintiff requirements.”
Bowman,
In order to establish itself as the “most adequate plaintiff’ under the PSLRA, Louisiana Teachers must show that it can discharge the fiduciary duties that a class representative owes to absent class members under Rule 23. As mentioned, Louisiana Teachers has made this showing in this case. Rule 23 provides that a party may serve as a class representative if four prerequisites are satisfied:
(1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
Fed.R.Civ.P. 23(a). While the PSLRA requires that the lead plaintiff satisfy all of Rule 23’s requirements, the third and fourth requirements of Rule 23 — typicality and adequacy — are the key factors for a court’s lead plaintiff determination.
See Gluck,
The typicality requirement of Rule 23(a)(3) is satisfied when the named plaintiffs have (1) suffered the same injuries as the absent class members, (2) as a result of the same course of conduct, and (3) their claims are based on the same legal issues.
See Hanon v. Dataproducts Corp.,
Louisiana Teachers has also shown itself to be an adequate representative pursuant to Rule 23(a)(4). This determination focuses around two questions: (1) do the interests of the class representative coincide with those of the class, and (2) does the representative have the ability to prosecute the action vigorously through the services of competent counsel.
See In re Computer Memories Sec. Litig.,
Turning to the second prong of the adequacy analysis, the Court must consider Louisiana Teachers’ willingness and ability to assume the duties of lead plaintiff, including the crucial duties of choosing adequate counsel at a negotiated fee and monitoring that counsel’s conduct throughout the litigation. The declarations submitted by Reeves state that Louisiana Teachers understands its fiduciary obligations to other class members and that it is willing to perform those duties. In particular, Louisiana Teachers expresses its commitment to remain informed as to all aspects of the litigation, consult with counsel regarding major litigation decisions, and direct counsel’s actions with respect to such decisions. Louisiana Teachers’ ability and intention to vigorously prosecute this case is also demonstrated by its selection of Bernstein Litowitz as its counsel. The firm resume of Bernstein Litowitz reveals its competence to provide class representation in a securities class action. Indeed, the firm has achieved several successful outcomes in similar lawsuits. Furthermore, the process by which Louisiana Teachers selected Bernstein Litowitz displays the former’s eligibility to serve as lead plaintiff. Reeves explains that soon after the 1995 passage of the PSLRÁ, Louisiana Teachers selected Bernstein Li-towitz from numerous law firm solicitations based on its track record, reputation, *1053 and reasonable fees, thereafter developed a long-term relationship with Bernstein Li-towitz, and choose Bernstein Litowitz to represent Louisiana Teachers in this case after discussing the specific issues of the case with members of the Bernstein Litow-itz firm. Moreover, Louisiana Teachers has negotiated a fee arrangement with Bernstein Litowitz that, it claims, will result in compensation that is significantly less than the fee percentage that is typically awarded in similar cases. The fee agreement negotiated between Louisiana Teachers and Bernstein Litowitz was submitted to the Court for in camera review. Having examined that agreement, the Court finds that the contemplated fee percentages, which vary depending on the stage of the litigation when recovery is obtained and the amount of any recovery, reflect reasonable and appropriate compensation amounts. Fоr purposes of the PSLRA’s lead plaintiff presumption, the above factors sufficiently demonstrate Louisiana Teachers’ adequacy under Rule 23(a)(4).
For the foregoing reasons, Louisiana Teachers is presumptively qualified to serve as lead plaintiff in this case. Nevertheless, under the PSLRA, this presumption may be rebutted. See 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II) (presumption re-buttable through “proof ... that the presumptively most adequate plaintiff ... will not 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.”). The other two proposed lead plaintiffs in this case — the Bakers Pension Funds and Morales — attempt to do just that.
First, the Bakers Pension Funds argue that Louisiana Teachers’ presumеd adequacy to serve as lead plaintiff is rebutted because its financial loss, when examined in the context of other facts, does not represent the largest financial interest in this case. According to the Bakers Pension Funds, although Louisiana Teachers’ amount of financial loss may be the highest, it is (a) not significant relative to the total likely damages to the class and (b) is no greater than the Bakers Pensions Funds’ loss when considered as a percentage of each fund’s total assets — Louisiana Teachers claims losses of approximately $1 million, which amounts to 0.01% of its $10 billion in total assets, while the Bakers Pension Funds claim losses of approximately $90,000, which amounts to 0.09% of their $100 million in total assets. Neither of these facts, however, is relevant to the presumption called for in the PSLRA. The second part of the presumption looks only to the monetary amount of loss suffered by the prospective lead plaintiff to determine if their “financial interest in the relief sought by the class” is the largest. 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I). If a prospective lead plaintiff shows it suffered the largest financial loss, that class member has sufficiently satisfied the second requirement of the lead plaintiff presumption, regardless of how that amount compares with the total damages in the case or the prospective lead plaintiffs total assets.
Second, the Bakers Pension Funds contend Louisiana Teachers should not be appointed lead plaintiff because its presumed adequacy to serve as lead plaintiff may be rebutted during the litigation. This argument relies on the fact that all of Louisiana Teachers’ purchases of Network Associates securities were made within 15 days of the end of the Class Period. According to the Bakers Pension Funds, Louisiana Teachers will seek to maximize its damages by employing a damages theory that assumes the fraudulent inflation of Network Associates’ stock price was constant throughout the Class Period, and thus, those who purchased stock at the end of the period, like Louisiana Teachers, *1054 suffer increased damages. Because this theory is antagonistic to the interests of other class members, the Bakers Pension Funds argue that Louisiana Teachers will have claims that are atypical of the class and that its adverse interests will render it an inadequate class representаtive. In addition, the Bakers Pension Funds speculate that Louisiana Teachers will be subject to unique defenses. They contend that Louisiana Teachers’ conflict with the class regarding damages will enable the defendants to challenge class certification. Furthermore, they argue that the timing of Louisiana Teachers’ stock purchases makes its claims susceptible to a defense based on any corrective disclosures issued by Network Associates prior to Louisiana Teachers’ first purchase on December 6, 2000.
These arguments fail for several reasons. Most importantly, they are based on pure speculation. The PSLRA requires “proof’ that the presumptively most adequate plaintiff will not fairly and adequately protect the class or is subject to unique defenses.
See
15 U.S.C. § 78u-4(a)(3)(B)(iii)(II). Speculative assertions such as those offered by the Bakers Pension Funds are therefore insufficient to rebut the lead plaintiff presumption in this case.
See Gluck,
The third attempt to rebut Louisiana Teachers’ lead plaintiff eligibility is offered by Morales and is based on Louisiana Teachers’ selection of counsel for this action. Morales argues that because Louisiana Teachers has failed to show that they accepted representation bids from numerous law firms and thereafter negotiated to obtain the highest quality representation at the lowest price, their adequacy to serve as lead plaintiff is rebutted. As mentioned earlier, a proposed lead plaintiffs adequacy under Rule 23 and the PSLRA’s lead *1055 plaintiff presumption is partially based upon that plaintiffs efforts to select class counsel. By demonstrating the willingness and ability to retain competent counsel at a negotiated fee that conforms with the interests of the class, a proposed lead plaintiff can confirm its position as the “most adequate plaintiff.” Conversely, a proposed lead plaintiff who utterly fails to fulfill its fiduciary duties in selecting appropriate class counsel will in most cases be unable to prove that it can adequately protect the class as lead plaintiff. See Hernandez, at *4-5.
The Court recognizes that a clearly unfair fee arrangement may, in itself, rebut the lead plaintiff presumption.
See Bank One,
VI. Approval of Lead Plaintiffs Choice of Counsel
While the PSLRA gives the “most adequate plaintiff’ the authority to “select and retain counsel to represent the class,” it makes that selection “subject to the approval of the court.” 15 U.S.C. § 78u-4(a)(3)(B)(v). This provision implicates multiple interests in the selection of counsel for securities class actions. On the one hand is the plain language of the statute which states that the lead plaintiff “shall” choose counsel. Accordingly, some level of deference to the lead plaintiffs selection is envisioned by the PSLRA. On the other hand, the fiduciary duties owed to the class under Rule 23 by both the lead plaintiff and the court require the selection of the “best” counsel for the litigation. A determination of the “best” counsel is dependent on various factors. One is the proposed counsel’s experience with securities class actions. Another factor involves its resources to pursue the litigation. The fees to be paid for counsel’s services are also crucial because the lower the fees, the more money available to the class from any recovery in the case. The lowest feе, however, is not necessarily the preferable fee in all cases. For example, more experienced counsel or counsel with a stellar track record in similar cases may demand a premium for their services. Also, counsel serving at a reduced fee may be inclined to settle the case at an early juncture in the case, not necessarily for the benefit of the class, but rather to limit their litigation costs.
In light of these various considerations, it is reasonable to conclude that the PSLRA does not permit a court to substitute its judgment for that of the lead plaintiff regarding the selection of counsel
so long as the representation arranged by the lead plaintiff is reasonable
and thus does not interfere with that plaintiffs presumed
*1056
adequacy to represent the entire class. Several courts have made class counsel determinations that are consistent with the above-stated interpretation of the PSLRA. Where the appointed lead plaintiff is found capable of selecting and monitoring counsel, courts have permitted that plaintiff to select class counsel and have given deference to its selection.
See, e.g., Quintus,
at 980;
Bowman,
In this case, Louisiana Teachers, an institutional investor, has sufficiently demonstrated that it utilized an appropriate selection process to choose counsel and that the feе arrangement it negotiated with Bernstein Litowitz is reasonable. These factors not only require Louisiana Teachers’ appointment as lead plaintiff, they also compel this Court’s approval of Louisiana Teachers’ choice of Bernstein Litowitz to serve as lead counsel. As mentioned earlier, where the presumptively most adequate plaintiff has satisfactorily negotiated a representation arrangement with counsel, the court “need not, and indeed should not, substitute its judgment for that of the lead plaintiff.”
Quintus,
at 973;
see also Bowman,
VII. Conclusion
Louisiana Teachers is the most adequate plaintiff under the PSLRA’s lead plaintiff presumption, and that presumption has not been rebutted in this case. Therefore, the Court GRANTS the Louisiana Teachers’ motion to be appointed lead *1057 plaintiff pursuant to section 21D(a)(3)(B) of the Securities Exchange Act of 1934 and to approve Louisiana Teachers’ choice of counsel. Louisiana Teachers is hereby APPOINTED lead plaintiff in these consolidated actions, and its selection of Bernstein Litowitz to serve as lead counsel is APPROVED.
The Bakers Pension Funds’ motion for appointment of lead plaintiff and approval of selection of lead counsel is DENIED.
Morales’ motion to be appointed lead plaintiff or, in the alternative, for competitive bidding is DENIED.
IT IS SO ORDERED.
Notes
. The following cases have been consolidated with Armour v. Network Assocs,, Inc., the low-numbered lawsuit against Network Associates:
Wendell v. Network Assocs., C 01-00007;
Lukoff v. Network Assocs., C 01-0008;
Rizzuti v. Network Assocs., C 01-0860;
McDougal v. Network Assocs., C 01-0861;
539, Inc. v. Network Assocs., C 01-0599;
Novakovic v. Network Assocs., C 01-0831;
Iowa Bakers v. Network Assocs., C 01-0856;
Denigris v. Network Assocs., C 01-20170;
Lam v. Network Assocs., C 01-20183;
Morales v. Network Assocs., C 01-1575.
. The Court notes that a competitive bidding process is entirely unsuited to the facts of this casе because it would result in the elevation of cost' considerations over all other factors. While such an approach may be appropriate in some situations, for example, where no proposed lead plaintiff has the incentive or ability to retain competent counsel and negotiate a reasonable fee, it is ill-suited to a case, such as this one, where an institutional investor with a large amount at stake and the resources to vigorously prosecute the action comes forward as the proposed lead plaintiff. Through the terms of the PSLRA, Congress has established that such a plaintiff can adequately protect the interests of the class regardless of whether or not they select the least expensive counsel available.