MEMORANDUM AND ORDER
Currеntly before the Court in this mortgage-backed securities (“MBS”) class action is a motion by Lead Plaintiff Employees’ Retirement System of the Government of the Virgin Islands (“Virgin Is
Defendants J.P. Morgan Securities Inc. (now known as J.P, Morgan Securities LLC), J.P. Morgan Acceptance Corporation I, Brian Bernard, Louis Schioppo, Jr., Christine E. Cole, David M. Duzyk, William King, and Edwin F. McMichael (collectively, the “Defendants”) oppose the motion on procedural grounds, and argue that, in any event, Laborers lacks standing to serve as lead plaintiff in this case, and that any claims it may have had are time-barred.
For the reasons discussed below, the Court grants Virgin Islands’ motion to withdraw as lead plaintiff, but denies the motion to substitute Laborers without prejudice to renewal of that motion at the procedurally proper time. In addition, the Court holds that Laborers, and other purchasers of MBS certificates from the challenged offering, would have standing to serve as lead plaintiff in this case, notwithstanding the fact that they purchased MBS certificates from different “tranches” within that offering.
I. Procedural History
Familiarity with the procedural and factual background of this case is presumed.
Fort Worth Employees’ Retirement Fund (“Fort Worth”) filed the complaint in this case in New York Supreme Court on March 11, 2009. The case was removed to this Court on April 10, 2009. (Dkt. No. 1.) Under the lead plaintiff appointment process set forth by the Private Securities Litigation Reform Act of 1995, 15 U.S.C. § 78u-4(a)(3)(B)(i) (“PSLRA”), notice of the pendency of the suit was issued on July 30, 2009. (Dkt. No. 37, Ex. B.) The suit was described as
a securities class action on behalf of all persons who acquired the Certificates of JP Morgan Issuing Trusts ... pursuant and/or traceable to the J.P. Morgan Acceptance Corporation I (“J.P. Morgan Acceptance”) Registration Statement No. 333-141607 and accompanying Prospectus (collectively, the “Registration Statements”) and Prospectus Supplements, for violations of the Securities Act of 1933.
(Id.) The notice identified several J.P. Morgan Issuing Trusts “at issue in the action,” including J.P. Morgan Mortgage Trust 2007-S3 (“2007-S3”), from which Fort Worth and Virgin Islands had purchased MBS certificates.
Both Fort Worth and Virgin Islands moved for appointment as lead plaintiff In light of Virgin Islands’ showing that it possessed a larger financial interest in the case, thereby rendering it the presumptive lead plaintiff under the PSLRA, see 15 U.S.C. § 78u-4(3)(B)(iii)(I)(bb), Fort Worth filed a notice of support of Virgin Islands’ appointment as lead plaintiff, but stated that Fort Worth “remains a plaintiff and class member in this action.” (Dkt. No. 43.)
On July 8, 2010, Virgin Islands filed a Second Amended Complaint (“SAC” or the “Complaint”). (Dkt. No. 85.)
On November 18, 2011, Virgin Islands filed the instant motion to withdraw as lead plaintiff and to appoint Laborers in its stead. (Dkt. No. 151.) Defendants have filed an opposition to this motion. (Dkt. No. 158 (“Defs. Opp.”).) Defendants argue that it is procedurally improper under the PSLRA to allow the substitution of Laborers as lead plaintiff without re-opening the lead plaintiff appointment process as set forth in the PSLRA. In addition, Defendants argue that Laborers should not be substituted as lead plaintiff because Laborers lacks standing to serve as a plaintiff in this action and because the claims that it would have standing to bring are time-barred under the applicable statutes of limitations and repose.
The Court heard oral argument that primarily focused on the standing issues on March 8, 2012. On March 30, 2012, Virgin Islands filed a notice of recent authority to alert the Court to Judge Swain’s decision dealing with issues similar to those raised on this motion in In re Bear Steams Mortgage Pass-Through Certificates Litigation,
II. Discussion
A. Defendants’ Standing to Challenge the Withdrawal and Substitution of Lead Plaintiff
As a threshold matter, given the current procedural posture, it is not entirely clear under the statute whether Defendants have standing to oppose Virgin Islands’ motion to withdraw as lead plaintiff and to appoint Laborers as substitute lead plaintiff. See In re Initial Pub. Offering Sec. Litig.,
Given that this case is now over three years old. and that many of the arguments raised by Defendants affect their interests and will need to be addressed at some point in the litigation, the Court has allowed Defendants to be heard on this motion.
Defendants argue that it is procedurally improper under the PSLRA to allow the substitution of Laborers as lead plaintiff without re-opening the lead plaintiff appointment process as set forth in the PSLRA. Although there is limited guidance on the proper procedure for the replacement of a duly appointed lead plaintiff, the Court determines that a limited allowance of opportunity for other class members to move for appointment as lead plaintiff is appropriate under the circumstances.
Ordinarily, the PSLRA requires the plaintiff who files the complaint to publish a notice of the pendency of the action, thereby giving members of the class the opportunity to file a motion to be appointed as lead plaintiff. See 15 U.S.C. § 78u-4(a)(3) (A) (i). The statute then provides that the presumptive lead plaintiff is the one who (1) filed the complaint or made a motion in response to the notice; (2) “in the determination of the court, 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)(iii)(I). To satisfy the requirements of Rule 23, a plaintiff must show that
(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). At this stage, the moving plaintiff need make “only ... a preliminary showing that the adequacy and typicality requirements have been met.” Janbay v. Canadian Solar, Inc.,
That presumption may be rebutted “only upon proof by a member оf the purported plaintiff class that the presumptively most adequate plaintiff’ (1) “will not fairly and adequately protect the interest of the class;” or (2) “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 policy behind this procedure is “to prevent lawyer-driven litigation, and to ensure that parties with significant financial interests in the litigation will participate in the litigation and exercise control over the selection and actions of plaintiffs!’] counsel.” In re NYSE Specialists Sec. Litig.,
As several courts have recognized, although the PSLRA carefully sets forth the procedure for the initial appointment of a lead plaintiff, the statute is silent as to the procedure for substituting a lead plaintiff if the previously appointed lead plaintiff withdraws. See IPO,
On the one hand, “[i]t is certainly within the lead plaintiffs’ discretion and, perhaps more importantly, part of a lead plaintiffs responsibility to propose their own withdrawal and substitution should it be discovered that they may no longer adequately represent the interests of the purpоrted plaintiff class.” NYSE Specialists,
Courts have taken different approaches to the replacement of a duly appointed lead plaintiff. Theoretically, a court could require a full re-opening of the lead plaintiff appointment process, essentially starting the process anew and following the PSLRA schedule accordingly, though Defendants do not point to any decision going that far. Some courts have held that the withdrawal of the lead plaintiff requires a limited re-opening of the PSLRA appointment process. For example, in Neopharm,
A court in this District held that “where a new lead plaintiff is willing to step forward, there is no need to start the process anew when all putative class members were given notice of the opportunity to move for appointment as lead plaintiff by means of the statutorily required published notice.” IPO,
Here, thе only other party to file for lead plaintiff status was Fort Worth, the entity that filed the original complaint In light of what then appeared to be Virgin Islands’ greater financial interest, Fort Worth supported Virgin Islands’ application but remained a plaintiff and class member in the action. (See Dkt. No. 43.) Since Virgin Islands filed its motion to withdraw and substitute Laborers as lead plaintiff, neither Fort Worth nor any other potential lead plaintiff has sought appointment as lead plaintiff or otherwise intervened.
Under these circumstances, and in light of the authority discussed above and the limited statutory guidance, the Court holds that the most appropriate approach in this case is a modified version of the one used by Judge Scheindlin in IPO. The court will deem timely any movant for appointment as lead plaintiff who either (a) filed the complaint, (b) moved to be appointed lead plaintiff in response to the initial notice of pendency, or (c) moved to be appointed lead plaintiff within 30 days of the withdrawal of the previous lead plaintiff.
Because the Court only now grants Virgin Islands’ withdrawal, the time period in which another party may move begins as of the date of this order. Thus, the Court will not simply appoint Laborers now, even though it is “willing to step fоrward.” IPO,
After thirty days have elapsed, the Court will consider any motions to be appointed as lead plaintiff. Since Laborers has already so moved, the Court will deem Laborers’ motion timely, and will not require an additional submission.
C. Proposed Lead Plaintiffs Standing
Defendants also argue that Laborers cannot meet the PSLRA requirements that it “has the largest financial interest” in the case and. “otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure,” 15 U.S.C. § 78u — 4(a)(3)(B)(iii)(I)(bb)-(cc), because it lacks standing even to bring the claims asserted by Virgin Islands. Although the Court has decided to re-open the PSLRA lead plaintiff process, it is appropriate to address the standing issue at this point because its resolution will guide the parties in the lead plaintiff appointment procеss, in particular, by identifying who is eligible to vie for lead plaintiff status in this case.
Defendants’ argument that Laborers lacks standing to assert these claims is based on the fact that, although Laborers purchased 2007-S3 certificates from the same offering as Virgin Islands, Laborers purchased certificates from different “tranches” than did Virgin Islands and Fort Worth. A “tranche” is a grouping of MBS certificates within a given offering. According to the SAC, when mortgage loans are securitized,
the cash flow [from the mortgage payments] is distributed to the holders of the MBS certificates in order of priority based on the specific tranche held by the MBS investors. The highest tranche*329 (also referred to as the senior tranche) is first to receive its share of the mortgage proceeds and is also the last to absorb any losses should borrowers become delinquent or default on their mortgage. Of course, since the investment quality and risk of the higher tranches is affected by the cushion afforded by the lower tranches, diminished cash flow to the lower tranches results in impaired value of the higher tranches.
(SAC ¶ 46.) Here, Laborers purchased certificates from tranches l-A-96 and 1-A-97, while Virgin Islands (and Fort Worth) purchased certificates from tranche 1-A-l.
Defendants argue that in a class action under Section 11, as both a statutory and constitutional matter, a named plaintiff has standing to represent only a class of plaintiffs who have purchased the “same security” as the named plaintiff. Defendants point out that each tranche is actually a different security, with its own distinct characteristics, that is traded independently from other tranches. Each tranche has its own (1) Committee on Uniform Security Identification Procedures (“CUSIP”) number; (2) original principal note balance; (3) interest rate; (4) payment rights; (5) credit rating; and (6) payment priority. (See Defs. Opp. at 10 (citing In re Wash. Mut. Mortgage-Backed Sec. Litig.,
Although this argument arises in the context of a motion to substitute the lead plaintiff, Defendants’ arguments essentially go to whether Laborers could represent the class as a named plaintiff. As courts have made clear, and as discussed in more detail below, “in order for a claim to be asserted on behalf of a putative class, only the named plaintiffs — but not necessarily the lead plaintiff — must have standing.” IPO,
The Court recognizes that this decision is necessarily based on a limited record. At this stage in the litigation (ie., before discovery), the Court must assess standing “on the basis of the pleadings” and will “ ‘accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party.’ ” New Jersey Carpenters Health Fund v. Residential Capital, LLC, No. 08 Civ. 8781,
1. Previous Rulings
This Court previously held on the motion to dismiss by Defendants that the lead plaintiff (then Virgin Islands) had standing to represent only purchasers of certificates from the same offering. See Virgin Islands,
Subsequent to (or in -one case nearly simultaneously with) this Court’s decision on the motion to dismiss, several courts directly addressed the tranche-based standing argument and have reached widely divergent results. Compare Plumbers’ & Pipefitters’ Local # 562 Supp. Plan & Trust, et al. v. JP Morgan Acceptance Corp 1, et al., No. 08 Civ. 1713,
To resolve this question, it is necessary to review principles of standing in the class action context in general, as well as how those principles have been applied in the MBS context in particular.
2. Constitutional Standing in Class Actions
In order to bring a suit in federal court, a plaintiff must demonstrate that he or she
This requirement is drawn from the constitutional provision of jurisdiction to federal courts to hear “cases” or “controversies.” U.S. Const. Art, III, § 2. See Allen v. Wright,
It is also well settled that the requirement that a plaintiff have standing to sue is “no less true with respect to class actions than with respect to other suits.” Lewis v. Casey,
For each claim asserted in a class action, there must be at least one class representative (a named plaintiff or a lead plaintiff) with standing to assert that claim. See Cent. States Se. & Sw. Areas Health & Welfare Fund v. Merch-Medco Managed Care, L.L.C.,
At the same time, it is important to recognize that the entire concept of class actions is in some degree of tension with the requirement of standing. In a class action, “the named plaintiffs regularly litigate not only their own claims but also claims of other class members based on transactions in which the named plaintiffs played no part.” Plumbers’ Union Local No. 12 Pension Fund v. Nomura Asset Acceptance Corp.,
the cancer-stricken lead plaintiff in an asbestos case brings claims based on other people’s cancers; a lead plaintiff, paralyzed from the waist down due to a car brake malfunction, can bring product liability claims on behalf of other people who were paralyzed from the neck down due to the same faulty break design.
Bear Steams,
In short, the named plaintiff must be part of the same “case or controversy” against the defendant as the members of the class. See O’Shea,
It is also important not to collapse the standing inquiry into the class certification inquiry. Courts in this District have long made clear that “the Article III standing determination should precede that of class certification.” In re Salomon Smith Barney Mut. Fund Fees Litig.,
3. Tranche-Based Standing for Securities Act Claims
Turning to the application of standing principles to the specific context- of tranches under the Securities Act, the Court begins with constitutional standing, and then addresses statutory standing.
a. Constitutional Standing
Although the Court previously has held that the lead plaintiff was limited to representing purchasers of securities from the same offering, it does not follow from the reasoning of that decision that named plaintiffs standing is further limited to purchasers of the same tranche of certificates.
[t]he actionable conduct under Section 11 is ... the specific registration statement containing misrepresentations.... A plaintiff who purchased a security issued pursuant to one particular registration statement therefore has suffered harm, and has standing to sue. only with respect to the specific registration statement and prospectus that cover the specific security that it purchased. The plaintiff was not harmed by, and thus has no standing to sue for, alleged misrepresentations contained in other prospectuses or registration statements offering other securities that it did not purchase.
Defendants would focus on the “specific security that it purchased” language, arguing that a named plaintiff must have purchased the same “specific security” as each of the class members in order to have suffered the same harm. But the reason that purchasers of securities from different offerings lack standing to rеpresent each other’s claims is because each offering represented a separate act of alleged misconduct by the Defendants, causing separate harm.
Each offering was issued pursuant to a different set of offering documents, each of which contained the alleged misstatements that could give rise to a claim. Most of the material misstatements at issue were contained in the prospectus supplements, which were unique to each offering. The statements in one set of offering documents did not apply to certificates issued in other offerings. Thus, a plaintiff harmed by an alleged misstatement in one set of offering documents is not harmed by alleged misstatements in a wholly different set of offering documents that it never received. In standing terms, the “injury in fact” that a plaintiff suffers when it purchases securities based on a particular misstatement of a defendant is not “fairly traceable” to other, unrelated alleged misstatements by the same defendant, Lujan,
The fact that other offerings are issued pursuant to separate offering documents, representing separate acts of alleged misconduct by the defendant, underlies each of the decisions from this District holding that standing is offering-based. See, e.g., In re Lehman Bros. Securities and Erisa Litigation,
The cases in this District holding that a named plaintiff can represent purchasers in other MBS offerings have so held when the plaintiffs “do not rely on the information furnished in the prospectus and pricing supplements unique to each of the ... offerings but rather on the alleged material misstatements and omissions located in the common elements of the ... different registration statements.... ” In re Am. Int’l Grp., Inc.,
Defendants attempt to distinguish the holding in Bear Steams, in which Judge Swain held that standing was not tranche-
As Defendants explain, the 2007-S3 offering was composed of certificates backed by two “pools” of loans. Those pools were subdivided into subgroups. The different tranches were backed by different subgroups of loans. Tranche 1-A-l was tied to Subgroup 1-1 while Tranches l-A-96 and l-A-97 were tied to Subgroup 1-2. (See J.P. Morgan Mortgage Trust 2007-S3 Prospectus Supplement (July 27, 2007), Declaration of Dorothy J. Spenner in Support of Defendants’ Motion to Dismiss the Second Amended Complaint, Ex. B, Dkt. No. 91 (“Prosp. Supp.”), at S-10.) The loans within each “subgroup” had certain specific ranges of “net mortgage rate[s].” (Id.)
Some courts have held that these differences among loan groups create a separate “case or controversy” for the holders of each tranche. This view was explained by the District Court for the Central District of California:
Because the loan groups backing the Certificates differed from tranche to tranche, the statements regarding underwriting and credit characteristics found in the prospectus supplements for those MBS dеals were essentially different statements for each tranche, given that the point of reference for those statements — the loan groups — differed at the tranche level. In other words, an alleged misstatement as to the origination practices with respect to one loan group backing a particular tranche would not necessarily constitute a misstatement as to a different loan group backing a different tranche.
Maine State,
The Court is not persuaded that this analysis applies in this case, or that these factors ought to affect the constitutional standing inquiry. The SAC in this case alleges misstatements in the Offering Documents pertaining to the 2007-S3 offering in which Plaintiff purchased securities. Those alleged misstatements are not tranche-specific, but rather are based on the entire pool of loans backing the certificates in the offering. Indeed, although the characteristics of the different tranches and sub-groups are listed in the Offering Documents, the alleged misstatements do not concern these particular characteris
Here, the SAC alleges that the Offering Documents contained material misstatements regarding the underwriting stаndards, the appraisal standards, and the LTV ratios of the underlying loans.
These allegations are not specific to any one pool or subgroup of loans. Rather, the allegations address the general practices pertаining to the entire body of loans backing the 2007-S3 offering and how those practices are characterized in the Offering Documents. Though the truth or falsity of the statements will depend in part on practices by specific loan originators, the SAC does not make allegations as to each loan, or a particular set of loans. For example, the SAC alleges that loan originators deviated from underwriting standards “as a matter of course.” It is of course possible that certain individual loans were issued in compliance with the requisite underwriting standards. That would not necessarily render the allegation untrue, if many more loans were issued in violation of those standards and guidelines. There is no suggestion that these allegedly industry-wide practices would have affected only particular tranches. The fact that one tranche is backed by one sub-group of loans with particular interest rates, while another tranche is backed by another subgroup of loans with other interest rates, does not affect whether a plaintiff has the requisite “personal stake” in establishing that particular underwriting practices pervaded the entire industry, and that descriptions of those underwriting practices in the Offering Documents were fаlse and misleading.
In any event, this line of analysis is not necessary to the core standing inquiry. A lead plaintiff who has purchased from one tranche has the same “personal stake” in proving the allegations of this Complaint as a purchaser of any other tranche where (as here) the tranches are tied to the same alleged misrepresentations. As the court in the RALI litigation held, in the context of class certification,
[t]he heart of Plaintiffs’ claims under sections 11 and 12 of the Securities Act is that the offering documents were materially misleading as to whether the underlying loans were originated in compliance with underwriting guidelines. Plaintiffs show that the four loan groups comprising the relevant securities were originated under identical loan underwriting guidelines, and by the same four principal loan originators. The alleged disregard for- those guidelines thus impacted all proposed class members in the same manner, irrespective of which tranche they purchased.
RALI II,
[N]amed Plaintiffs and the members of the class have suffered an identical form of injury (a decline in their Certificates’ value) traceable to a single, allegedly unlawful act by Defendants (disseminating Offering Documents with misrepresentations and omissions). As such, named Plaintiffs have clearly established that they, and the purchasers of all other tranches within the offerings, are part of the same case and controversy with Defendants.
Bear Stearns,
Finally, although the record is not yet clear on this point, as alleged in the SAC, even if misrepresentations in the Offering Documents pertained only to loans backing particular tranches, based on the payment structure of the offering, a drop in value of one tranche affected the value of all of the tranches. (See SAC ¶ 46 (“[Sjinee the investment quality and risk of the higher tranches is affected by the cushion afforded by the lower tranches, diminished cash flow to the lower tranches results in impaired value of the higher tranches.”).) Thus, a purchaser of one tranche is allegedly in fact injured by misstatements that
In sum. the Court concludes that, as a constitutional matter, Laborers would have standing to assert the claims brought in the SAC. Although the differences among the tranches may affect the class certification inquiry down the line, those differences do not take away Laborers’ standing to assert claims on behalf of all purchasers of certificates in the same offering, pursuant to the exact same alleged misrepresentations.
b. Statutory Standing
Defendants also argue that the statute giving rise to the cause of action limits the lead plaintiffs standing to representing only purchasers of the same security.
As noted above, Section 11 of the Securities Act provides that “[i]n case any part of the registration statement, when such part became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring such security” may bring suit against specified defendants. 15 U.S.C. § 77k(a). Defendants argue that the fаct that the potential plaintiff under this statute is “any person acquiring such security” means that “a plaintiff lacks standing under ... Section 11 ... to bring claims based on securities that it did not purchase.” (Defs. Opp. at 11.)
This is certainly true in a limited sense. The statute clearly provides that not just anyone may sue for misstatements in a registration statement; only someone purchasing “such security” may do so. The statute does not explain precisely what “such security” refers to — as Judge Swain pointed out, the phrase has no grammatical referent in the statute, Bear Steams,
But this does not resolve thе issue before the Court. When a plaintiff purchases a particular security pursuant to a particular registration statement, that plaintiff has standing to sue under Section 11. When a different plaintiff purchases a different security pursuant to that same
Defendants would read the statute to provide a cause of action to “any person acquiring such security” pursuant to a registration statement containing misstatements, and then to add the further qualification that “each different security issued under a single registration statement containing misstatements yields a separate case or controversy for standing purposes.” The plain language of Section 11 contains no such qualification.
The statute does not contain any requirement as to who can and cannot represent a class of plaintiffs when all members of the сlass have standing under the statute to sue the same defendant for the same misstatements in the same registration statement. In other words, the fact that the statute requires a plaintiff to have purchased “such security” — ie., a security that is traceable to an alleged misstatement — does not resolve the distinct question whether one such purchaser may represent another such purchaser in a single class action. As this Court has already held, “[t]he actionable conduct under Section 11 is ... the specific registration statement containing misrepresentations.” Virgin Islands,
The Court acknowledges that other district courts, including courts within this District, have recently read the statute differently, see Maine State,
Defendants argue that these decisions “did not anаlyze the ‘such security’ language at all.” (Defs. Response at 3.) But that does not mean those decisions were incorrect; it just means that (presumably) the parties’ submissions in those cases did not call upon the courts to address that particular statutory argument. In any event, notwithstanding the recent decisions that have read an additional standing requirement into the statute, the plain language of the statute simply does not contain any such requirement.
To be sure, the older, broader decisions, such as Dreyfus,
The Court recognizes the theoretical simplicity of requiring that a securities class action involve a class of only purchasers of exactly the same security, but neither the Constitution nor the statute mandates this rеsult. Moreover, as a practical matter, Defendants’ arguments, taken to their logical conclusion, would severely undermine the efficiency concerns underlying class actions in general, In the 2007-S3 offering alone there were over 100 tranches. Under Defendants’ view of the law, there would necessarily be up to 100 named plaintiffs (or 100 separate lawsuits), all raising nearly identical allegations. This in itself is impractical.
To the extent that there are material differences among the different classes of purchasers of 2007-S3 certificates, those differences may be addressed at the class certification stage. As the First Circuit has noted, “Rule 23 criteria can still be used as a required tool for shaping the scope of a class action without abandoning the notion that Article III creates some outer limit based on the incentives of the named plaintiffs to adequately litigate issues of importance to them.” Nomura,
D. Statutes of Limitations and Repose
Defendants also argue that, to the extent that Laborers is allowed to assert claims on behalf of purchasers of Tranches l-A-96 and l-A-97, those claims are barred by the applicable statutes of limitations and repose because those claims are being newly asserted now. However, because the Court holds that Laborers has standing to assert the claims already brought in this case (which include claims on behalf of purchasers of all tranches within the 2007-S3 offering), the time-bar analysis is irrelevant. It is not necessary to inquire whether the statutes of limitations and repose were tolled for these claims, because they are not new claims at all. If Laborers is ultimately selected as lead plaintiff, it would be representing a class asserting the same claims as have been asserted all along.
III. Conclusion
For the foregoing reasons, Virgin Islands’ motion to withdraw and substitute Laborers as lead plaintiff, and appoint Robbins Geller Rudman & Dowd LLP as lead counsel is GRANTED in part and DENIED in part. Virgin Islands’ motion is GRANTED insofar as Virgin Islands is permitted to withdraw as lead plaintiff. Virgin Islands’ motion is DENIED without prejudice insofar as it seeks to substitute Laborers as lead plaintiff before other class members have the opportunity to seek appointment as lead plaintiff in place of Virgin Islands.
Any party wishing to serve as lead plaintiff may file a motion with this Court on or before June 15, 2012. Selection of the lead plaintiff will be based upon the standards set forth by the PSLRA, 15 U.S.C. § 78u-4(a)(3)(B). Laborers need not file a new motion for appointment; the current motion will suffice as Laborers’ motion.
The Court also holds that Laborers does not lack standing to seek appointment as lead plaintiff by virtue of the fact that it purchased securities from a different tranche within the 2007-S3 offering. Any class member who purchased certificates in the 2007-S3 offering may move to be appointed lead plaintiff, regardless of which tranche within that offering that class member purchased.
Any responses to any new applications for appointment as lead plaintiff shall be filed by June 29, 2012.
The Clerk of Court is directed to terminate the motion at Docket Number 151.
SO ORDERED.
Notes
. A fuller summary of the allegations of the Second Amended Complaint ("SAC”) is contained in this Court’s decision on the motion to dismiss. See Emp. Ret. Sys. of the Gov’t of the Virgin Islands v. J.P. Morgan Chase & Co.,
. The defendants in Neopharm objected to the substitution because the process was not fully re-opened through published notice as set forth in the PSLRA for the initial appointment of lead plaintiff. The court noted that, "perhaps in hindsight it should have” restarted the process and required such notice, but held that because it was "no secret that [the previous lead plaintiff] sought leave to withdraw some time ago, and included on the service list in [the] case [were] law firms for other plaintiffs that had previously moved for appointment as lead plaintiff,” the court was "satisfied that sufficient opportunity was present for another potential lead plaintiff to come forward.” Id.
. As the District Court for the Northern District of California pointed out,
It would turn securities litigation into a game of snakes and ladders to hold that any time a new plaintiff is added, the action must 'go back to square one’ and recommence the PSLRA lead plaintiff selection process. Relatedly, there is no indication that Congress intended such repetitive preliminaries to securities litigation. The PSLRA's lead plaintiff provision is designed only to get cases off on the right foot. (One may debate whether the PSLRA does so, but that is another matter.)
In re Impax Labs., Inc. Sec. Litig., No. C 04-04802 JW,
. Defendants contend that the Bear Steams decision "confuses the issue of a named plaintiff's standing with the role of a lead plaintiff,” and that it is thus not persuasive authority for this case. (Defs. Response at 4.) The Court disagrees with Defendants’ argument, but notes that Judge Swain’s use of the term “lead plaintiff” in this context obviously refers to the more generic “class representative,” and not the PSLRA "lead plaintiff” process, which does not apply in the products liability context.
. As more fully discussed in the section below regarding statutory standing issues, the phrase "such security’’ does not have a grammatical rеferent in the statute.
. The plaintiffs also brought claims under Sections 12 and 15, but those claims were dismissed. See Virgin Islands,
. Subgroup 1-1 is composed of "100% of the principal balance of each pool 1 mortgage loan with a net mortgage rate less than 5,50% per annum” and "a portion of each pool 1 mortgage loan with a net mortgage rate greater than or equal to 5.50% per annum and less than 6.00% per annum, equal to” a specified equation. (Prosp. Supp. at S-10). Subgroup 1-2 is composed of "a portion of each pool 1 mortgage loan with a net mortgage rate greater than or equal to 5.50% per annum and less than 6.00% per annum, equal to” the same equation, and a portion of each pool 1 mortgage loan with a net mortgage rate "(i) greater than or equal to 6.00% per annum, or (ii) greater than equal to 6.75% per annum and less than 7.00% per annum equal to” a different equation. (Id.)
. If this were a lawsuit about misstated interest rates for the different loans, then it is possible that a named plaintiff purchasing loans with one set of interest rates could not represent a class of plaintiffs purchasing loans with a different set of interest rates. But even then, if the complaint alleged simply that "the offering documents misstated the interest rates of the loans,” then each plaintiff would presumably have the same "personal stake” in establishing that fact, even if the evidence later revealed that the different rates were misstated to different degrees. Similarly, of course, the different payout rates of the different tranches will affect damages for the individual class members, but it is well settled that "so long as a formula for calculating damages is proposed, the fact that damages must be calculated, on an individual basis is no impediment to class certification.” Fogarazzo v. Lehman Bros., Inc.,
. The SAC also alleged misstatements regarding investment ratings, but those claims were dismissed by this Court for failure to state a claim.