Free Response in Opposition to Motion - District Court of California - California

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LE XSEE 240 F.R.D . 88

Positi ve As of: Mar 13, 2008 MOTTl KAPLAN, individually and on behalf of all others similarly situated, Plaintiff, - against - RICHARD L. GEL FOND, BRADLEY J. WECHSL ER, FRANCIS T. JOYCE, and IMAX CORPORATION, Defendants. SANTI AGO GUZMAN, individually and on behalf of all others similarly situated, Plaintiff, - against - IMAX CORPORATION, RICHARD L. GELFOND, BRADLEY J. WECHSLER, and F RA N C I S T. JOYCE, Defendants. ERIC S. BERGEN, individually and on behalf of all others s im ila r ly sit u a t ed , Plain tiff, - against - RICHARD L. GEL FOND, BRADLEY J . WECHSLER, FRANCIS T. JOYCE, and IMAX CORPORATIO N, Defend ants. MI CHAEL J . LAROSA, individually and on behalf of a ll others similarly situ ated, Plaintiff, - against - IMAX CORPORATIO :"l, RI CH ARD L. GEL FOND, BRADLEY J. WECHSLER, and F RA NC IS T. JOYCE, Defendants. ROBERT FEENEY, individuall y and on behalf of all others sim ila r ly situ ated , Plaintiff, - against - IMAX CORPORATIO N, RICHARD L. GEL FOND, BRADLEY J. WECHSLER, and FRA.NCIS T. JOY CE, Defendants. FLOYD REYNOLDS , individually and on behalf of all others sim ila rl y situ ated, Plaintiff, - against - IMAX CORPORAnO N, RICHARD L. G EL FO ND , BRADLEY J. WECHSLER, and FRANCIS T. JOYC E, Defendants. ANTHONY CAIAFA, ind ivid ua lly and on behalf of all others similarly s it u ated, Plaintiff, - against - IMAX CORPORA 1'10:\, RI CHARD L. GEL FO ND , BRADLEY J. WECHSLER, and FRA NCIS T. JOYCE, Defendants. ROBERT B. GRAY, individually and on behalf of all others sim ila rly sit u ated, Plaintiff, - against - IMAX CORPORATION, RICHARD L. GEL FOND, BRADLEY J. WECHSLER, and FRANCIS T. JOYCE, Defendants.

>

06 Civ, 6128 (NRB), 06 Civ. 6235 (NRB), 06 Civ. 6313 (NRB), 06 C iv. 6349 (NRB), 06 Civ. 6449 (NRB), 06 Civ. 6693 (NRB), 06 Civ, 7057 (NRB), 06 Civ. 7162 (NRB)
UNI TED STATES DISTRICT COURT FOR THE S OU T HE R N DI STRI CT
OF NEW YORK


240 F.R.D. 88; 2007

t:s. Dist. LEXIS 4446

January 17,2007, Decided
January 18,2007, Filed
Nancy Kab ooli an , Abbey S pa nier Rodd Abrams & Paradis, LLP, New Yo rk, ]\;Y.

CO UNSEL: [** I] For P laintiff Ma tti Kap lan and Mo vant Westcheste r Ca p ita l Management, Inc. :

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For Plaintiff Santiago Gu zman and Movant 1MAX Investor Group: Evan J. Smith, Brodsk y & Smith, L.L.c., Mmeola, NY. For Plaintiff Eric Bergen and Movant Y Lu: Robert l. Harwood, Samuel Kenneth Ros en, Wechsl er Harwood LLP , New York, NY. For Plaintiff Michael J. LaRo sa and Mov ant Jay M, Sp ntzlcr RO:l L' n Sarraf Sarraf Ge ntile. I. LP. New Yor k, \iY. . For Plainti ff Robert Feeney: Brian Philip Mur ray, Murra y, I· rank & Saile r, LLP, New York , NY. For Plaintiff Floyd Reynold s and Robert Lieblang: Jonathan K. Levine, Girard Gibbs & De Bar tolomeo, LLP , San Franci sco, CA. For Plaintiff Anthony Caiafa: Jack Gerald Fruchter Lawrence DUllald Le vit, Abraham Frucht er T wersky, L.L.P ., New York , NY.

NAOMI REICE BUCHWALD UNITED STATES DISTRICT JUDGE

&.

For Plaintiff Rob ert B. Gr ay and Movants Gary and Creag h: Cathe rine A. Tor ell, Cohen, Mil stein, Hausfeld & Toll , P.L.L. c. , New York , NY.
M ~ rlene

.T his matter invol ves eight related cases brought against the IMAX Corporation ("IM AX"), a Cana dian compan y, and three of its high level execu tives, I on beh alf of a purported class of inve stor s who pur chased I\flA X stock durin g the class period . ! Se ven sets of investors each filed motion s to con so lida te the actions, to be app ointed as lead plain tiff, and to designate their lawyer s as lead coun sel. T hese include: ( l) Westch ester Capital Manage ment , Inc. ("Wes tcheste r Ca pital"), acting as the investm ent advisor for five different investment funds ("fi v!: funds"); (2 ) Snow Cap ital Investment Partners, L.P . ("Snow Capital" ); (3) the Steelwork ers Pen sion Tru st ("St ee lworkers Pension" ); (4) Y Lu; (5) Paul Witt, Gerald Nash, Micha el Pemberton, and Stacey Shehorn (collectivel y, [**3' the "IMAX Investor Group"); and (7) Jay M~ Spritz ler. For the reasons set forth below, we co n solidate the above-captioned actions pursuant to Fed. R. Civ. Proc. 42(a), appoint Westch ester Capi tal as lead plaintiff, and desi gnate the law firm of Abbey Spanier Rodd Abrams & Paradis, LLP , as lead counsel.
1
4

For Movant Snow Ca pital Investm ent Partners L.P .: David Avi Ros enfeld , Lerach , Co ug hlin: Stoia, Ge ller, Rudm an & Robbins, LLP (LIs), Me l
v Ilk,0: Y .

For Movant Steelwo rkers Pen sion [* *2] LLP, New YUI'k, NY,

Trust:

Christopher J. Kel ler, Lab aton Rudoff & Sucharow

I Richard Gelfond has serv ed as co- chi ef executive offic er sinc e May of 1996, and co chairman of IMAX since June of 1996. Brad ley J. Wech sler has served as co-chi ef ex ecu tive officer with Gelfand since May of 19C)o. Franci s T. Joyce has served as IMAX 's chief financ ial offic er since 200 I.

For Defend ant s 1MAX Corporation, Rich ard L. Gelfond, Bradley J. Wechsler, and Francis T. Joyce: Lewi s Liman, Cleary Gottlieb Steen & Hamilton LLP, New York, NY.
JUDGES: NAOMI REICE BUCHWALD UNIT ED STATES DISTRI CT JUDG E. ' OPINLON BY: NAOMI REICE BUCHWALD OPINION
r*901 MEMORANDUM AND ORDER

2 Sev en of the eight plaintiffs (Eric Berg en,
Robert Gray, Santiago Guzman , Rob ert Feene y, Motti Kaplan , Mich ael LaRo sa, and Floyd Reynold s), along with mov ants West che ster Capital Management, Y Lu, and Jay Spritzler, specify the class period to begin on Febru ary 17, 200 6 and end on August 9 . 2 006. Plaintiff Anth on y Caiafa and movants Snow Capital Investments, Robert Lieblang, Steelwo rke rs Pen sion , Gary and Marl ene Creagh , an d IMAX Investo r Group spec ify the class period to begin on October 28, 2004 and end on Au gust 9 , 200 6. We will address the issue of differing class periods below ,
[* *4J

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3 The se five funds are GS \!laster Tr ust, :YlSS Merger Arbitrage f und, The Merger Fund, The Merge r Fund VL, and SphinX Merger Arbitrage Fund. See Declaration of Roy Behren (:\ov . 2, 2006) ("Behren Decl.")
P2

prejudice to the parties." ld . (quoti ng Ka tz v. Realty
Eq ui tie s Corp., 1975)) .

52 / F 2d / 354, 1360 (2d Cir.

4

We note that Gary and Marlene Creagh have since withd rawn their motion.

DISCUSSION I. Consolidation of the Actions
Rule 42(a) of th e Fe de ra l Rules of Civil Proce d ure prov ides as fol lows :

When actions Invo lving a co mmo n quest ion of law and fact are pending before the co urt, it may orde r J joi nt hearm g or trial of any or all of the matters in issue in the actions; it may order a II the actions conso lidated: [*9 1J and it may make such orders conc ernin g pro ceedin gs therein as may tend to avoid unnecessary co st or de lay.

Under Rule 42(a) , we have broad discretion to de term ine whether to conso lidate actio ns, and in mak ing th is determination, we are to consider whether j udicial eco nomy favors conso lidatio n. Se e John son
v Celotex Corp., 899 F2d 1281 , 1285 (2d Cir. 1990), cert . deni ed 498 US. 920, I II S. Ct . 29 7, IJ 2 L. Ed. 2d 250 (1990) . [**5] Whe n a court is

present ed with securities actions in which the co m plaints are based on the same "publ ic statements and report s," consolidatio n is appropriate if the ac tions present common questions of law and fact and if the partie s will not be prej udice d. Wer ne r v. Satterlee, Step hens, B urke & Burke, 797 FiSupp. 1196, 1211 ( 'l.D N Y 1992) (conso lidation in secu rities action s appropr iate in cases whe re complaints arc based or. "overlap[pi ngJ" nub lic statements and reports and \\ here there are common question s of law and fact). However, "each case in which it may appear tu be desirab le to co nsolidate complaints in different actio ns must be eva luated on its own facts with close attention to whether the anticip ated bene fits of a conso lidated comp laint outweigh potenti al

Here, all plain tiffs and mov ants allege that de fendants vio lated sections /O(b) and 20(a) of the Securities Exchange Act of 1934, and Rule / Ob-5 promulgated thereunde r, by issuing public state ments and re po rts whieh misrepresen ted the finan cia l standing of [MAX . All plainti ffs l**6J and movants also agree that the relevant class period ended on August 9, 20 06 , See supra note 2 . On that day, IMAX announced: ( I) that the SEC was inves tigating the timing of its revenue recogn ition prac tice, which seg regated and recognized revenue in different financial q uart ers; (2) that it had uncov ered a mater ial weakness in its acco unting which affected revenues; and (3) that a previo usly an noun ced potential sale of the compa ny was not pro gressing. This news preci pitated a drop in the price of lMAX stock. See, e.g. , Kaplan v. Gelfand, No. 06 Civ . 6 128 . Class Action Comp laint for Violation of Federa l Securi ties Laws PP 23-48. However, there is disagreement as to whe n the class period began, thus resulting in two different class periods alleged by the plainti ffs and the m ov ant s, The shorter of the two alleged class per iods, whic h is relied upon by seve n co mplaints and three of the seve n mo vant s , starts on February 17, 2006, when IMAX announced its anticipa ted 2005 financial results in a press release. Betwee n February 17, 2006 and August 9, 2007, [MAX made seve ral ad ditional public annou nce ments abou t the well-being of the comp any, which resulted in a rise in the price of [**7J IMAX stock. Th e longer alleged class pe riod, found in one of the eight complaints and relied upon by four of the seven mova nts, starts on Octo ber 28 , 2004, sixtee n months pr ior to the specified start of the shorter period. The parti es who allege this period claim that the series of IMAX misrepre sentat ions began with an Oc tober 28 , 2004 press release, In which IMAX reported its third qu arter 2004 financial results. See. e.g., Caiafa v l Ml X Corp ., No . 06 Civ. 705 7, Co mplaint for Vio lation of the Federa l Securities Laws PP 18-31 Despite the different start dates fo r the class pe riod, we believe that conso lidation is appropriate here . At the outset, we note that all the movants suppo rt co nsolidation and that no patt y obj ects, a cons idera tion wh ich weighs heavil y against the po

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tential for prejudice. See, e.g., Olsen v. New York Community BanCOII), lnc., 233 FR.D. 101, 104-105 (E.D.N Y. 2005) ("[I]t is apparent that no party will suffer prejudice from consolidation, a fact con firmed by the complete absence of any opposition thereto ."). However, since consolidation issues di rectly involve the court's supervision of these litiga tions, we nevertheless address how the [**8] par ties' disagreement regarding the appropriate start date for the: period c lass period affects our Rule 42(a) analysis Differences in causes of action, defendants, or the class period do not render consolidation inap propriate if the cases present sufficie.itly common questions of fact and law, and the differences do not outweigh the interests of judicial economy served by consolidation . See, e.g., Pinkowitz v. Elan Corp., Nos . 02 Civ. 862 (WK) et 01., 2002 u.s. Dist. LEXIS 14593,2002 WL 1822118, at *3-4 (3.D.N.Y. July 29, 2002). In [*92] this case, the difference in start dates results 111 parties' reliance upon different fi nancial statements in their pleadings. Of course, to the extent that the class periods overlap, the factual allegations overlap . However, even for the non overlapping period, all plaintiffs and movants rely on a common pattern in their allegations: that de fendants' statements to the investing public misrep resented or omitted to state material ft.cts about the financial status of IMAX. Further, these matters share a common legal question: whether defendants' misrepresentations \ iolated federal securities laws. In other words, the acnons arc all "secunues fraud claims that arise [**9] from a com mon course of conduct. The dates on which the misrepresentations occurred do not change their nature." In re Cendant Corp. ui: /82 F.R.D. 476, 478 (D .N.J. 1YWJ) (not ing that "[cjourts which have addressed the issue have held that differing class periods alone will not defeat consolidation or create a conflict"); sec also In re Olsten Sec, Litig., 3 F.Supp.2d. 286, 293 (E.D.N. Y. I(98) (consolidating actions alleging vio lations of section / Orb) and 20(a) under Securities Exchange Act of 1934. despite the fact that one of the four complaints specified a class period which began before and ended during the class period al leged in the other three complaints); Dolan v. Axis
Capital Holdings Ltd., Nos . 04 Civ. 8564 (RJH) et al., 2005 U.S. Dist. LEXIS 6538, 2005 WL 883008, at *2 (S.D. /V'. Y Apr /3, 1005) (finding consolida tion of cases with "similar or overlapping claims"

under Section /O(b) and 20(a) of the Securities and Exchange Act of 1934, along with Rule 10b-5, ap propriate pursuant to Rule 42(a) despite different but "coextensive" class periods). Given the overlapping questions of law and fact presented in the cases before us, litigating a multi tude [** 1OJ of separate actions wou III only ensure the duplication of effort amongst parties and the needless expenditure of judicial resources. Thus, in light of the "well recognized" principle that the "consolidation of stockholders' suits often benefits both the courts and the parties by expediting pretrial proceedings, avoiding duplication of discovery, and minimizing costs," In re Olsten Sec. Litig., 3 FSupp.2d. at 293-94, we find it appropriate to con solidate these actions under Rule 42(0). finally, we note that the filing of a consolidated complaint, see, e.g., Olsen, 233 FR.D. at /04-105, and the deter mination of class certification each offer opportuni ties to resolve remaining issues concerning the dif fering class periods.
II. The PSLRA

The PSLRA provides that a cOUl1 "shall appoint as lead plaintiff the member . . . of the purported plaintiff class that the court determines to be the most capable of adequately representing the inter ests of class members": in other words, the "most adequate plaintiff." /5 u.s.c. § 78u-4(a)(3)(B)(l}. This decision is to be made "as soon as practicable after [the dec ision to consul idate J [* * I I J is ren dered." 1d. § 78u-4(a)(3)(B)(ii). In addition, the PSLRA establishes a rebuttable presumption regarding the appointment of the lead plaintiff. A plaintiff is presumed to be the most adequate plaintiff if it: (I) has either filed the com plaint or made a motion in response to the publica tion of notice; (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 Id § rs« 4(a)(3)(B)(ii1){1). This presumption may be rebutted by proof that the presumptive lead plaintiff "will not fairly and adequately protect the interests of the class" or instead is subject to "unique defenses" that render the plaintiff incapable of adequately repre senting the class, Id. § 78u-4(a)(3)(B)(iii)(ff) , After the appointment of the most adequate plaintiff, that

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pla.nn lf shall retain counsel to represen t the class subject to co urt app rova l. Id. .\\' 78u-4(a)(3)(B)(v). ' Ill. The Propo sed Lead Plaintiffs A. The Presumptive Lead Plaintiff 1. Timely Complaints and Motions

Civ . 4617 (IU H) , 2006 U.s. Dis t. LEX/S 3028, WL 19 7036, at *3 (S.D.N Y. Jan . 25, 2006) ("The

All seven of the class memb ers seeking ap pointment [** 12] as lead plaintiff meet the first requirement: namel y, they have filed complaints and/or submitted motions for lead plaintiff status in a timely manner. Accordingly, [*93] we look to the seco nd requirement to determine the presump tive lead plaintiff: that the movant have the largest financial interes t in the action.
2. Largest Financial Interest

amount of financial loss is the most significant of [the Lax test] elements") (quoting In re Vicuro n Pharm s. Inc. Sec. Litig., 225 F. R.D. 508, 51 0-1 1 (E. D.Pa. 20(4)); see also Taka ra Trust v. Mol ex Inc., 229 F R.D. 5 77, 5 79 (ND. Ill. 2005) (in de termin ing the largest financi al interest, "most courts simply determine which potential lead [** 14] plaintiff has suffered the greatest total losses"); In re Bally Total Fitn ess Sec . Litig., No . 04 Civ. 46 97, 2005 u.s. o.« LEXIS 6243, 2005 WL 62 796 0, at *4 (N D. III. Mar. 15, 2005) . As set forth by the movants in their papers, it would appear that Westchester Capital has the larg est financial interest in this case, followed by Snow Capital.' We note, to begin, that Westchester Capi tal and Snow Capital re ly upon different class peri ods. Westchester Capital used the later start date of February 17, 2006, whereas Snow Capital used the earlier start date of October n, 20 04 . For the pur po ses of this analysis, we use the longer class pe nod With the earlier sta rt date. We do so because the result under both potential class period s is the same for Westchester Capital. 0 See Memorandum of Points and Authorit ies in Support of Westchester Capital Management Inc/s Motion ("Westchester Capital Mem. Supp .") at 9. The total number of shares purchased by Westchester Capital over the class period is 1,538,087 shares. Jd. Since West chester Capital sold 872,950 shares over the course of the class period, the net numb er of shares pur chased by Westch ester Ca pital is 7 10, 137. See Dec laration [* * IS] of Nancy Kaboolian in Support of Westchester Capital [*9 4 ] Management, lnc.'s Motion ("Kaboolian Decl .") , Ex. C at 2. West chester Capital spent $ 15,887,55 7.30 to purch ase IMAX shares and received S 8,7 48, 283.6 1 from the sale of IMAX shares over the course of the class period, which results in $ 7, 139 ,273 .69 in net funds expe nded on IMAX stock. See id. Its appro ximate losses equal S 3, 023, 55 1.79 , using FIFO, or "first in, first out" analysis. ' Westchester Capital Mel11. Supp . at 9; sec a/sa Kaboolian Decl., Ex. C at 6. By comparison, since Snow Cap ital nud e no sales ; f its IMAX stock dur ing the class period, it purchased 150 ,000 total shares of IMAX stock, resultin g in S 1,3 57,050 .00 funds expended. See Decl. Rosenfeld, Ex. A, B. Snow Capital's losses, using FIFO, are approx imately 4 81 ,327.03 . [d. Thi s comparison

The r SLRA is not ex plicit as to what method co urts are to use in determining w hic h plain tiff has the largest financia l interest In the relief sought by the class. ThIS onu ssion has caused disput es ove r the appropriate method for ca lculating the largest financial interest among potential lead plaintiffs. However, in making this assess ment, many courts have looked to four factor s, first set forth in Lax v. First Merchants Acceptan ce Corp ., Nos . 97 Civ. 271 5 et al., I Y9 7 u. s. Di st. LE-US 11866, 199 7 WL 46103() (N D. III. Aug j 1,199 7): ( I ) tie total num ber of shares purchased dur ing the class period ; (2) the net shares purchased durin g the class period (in other words, the difference between the number of shares purch ased and the numbe r of shares sold dur ing . the class period); (3) the net funds expended durin g the class period (in other wore's, the differ ence [** 13] between the amount sper t to purchase shares and the amount rece ived for the sale of s ha r~s durin g the class period); and (4) the ap proximate losses suffered. Pirelli Armstro ng Tire Corp. Retiree Medical Benefit s Trust v. Labranche ~ Co ., 229 F R.U 395, 404 (SU N Y. 2004) (ado pt mg the four-factor "Lax test"); In re «Speed, Inc, Se.c Liti g., 232 FR .D. 95, 100 (S.D.N Y. 2005) (re lying on Lax test factors). Although courts have differed on how much weight to assign to each of the Lax factors, we, as have other courts, shall place the most emphasis on the last of the four factors: the approximat e loss suffered by the movant. See Weiss v. Friedm an, Billin g:" Ramsey Gro up, In L., No. 05

s

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reveals that Westchester Capital has a greater finan cial interest than Snow Capital in the litigation at hand, as measured by each of the Lax test factors. 5 An examination of the other movants' pa pers reveals that Westchester Capital and Snow Capital purchased significantly more shares of IMAX stock and sustained signifi cantly greater losses than any of the other movants during the class period. See Decla ration of Samuel K. Rosen in Support of Mo tion [on Behalf of Y Lu], Ex. B; Memoran dum of Law III Support of Motion for Con solidation, Appointment of [Jay Spritzler as] Lead Plaintiff, and Approval of Selection of Co-Lead Counsel, at 10; Declaration of Douglas M. Risen in Support of Motion by the Steelworkers Pension Trust, Ex. A: Memorandum of Law in Support of the Mo tion of Robert Lieblang for Consolidation, Appointment as Lead Plaintiff and Approval of Selection of Lead Counsel, at 8; Declara non of Evan J. Smith in Support of the Mo tion of the IMAX Investor Group, Ex. A. [** 16] b We note that Snow Capital purchased all of its shares of IMAX prior to February 17, 2006, and sold all of its shares on August 10, 2006. See Declaration of David A. Rosenfeld in Support of Snow Capital Investment Part ners, L.P 's Motion, ("Decl. Rosenfeld"), Ex. B. Thus, had we relied upon the shorter class period in our Lax factor analysis, Snow Capital would have purchased zero shares during the period, and consequently would not have had any losses. 7 FIFO, or "first in, first out," is a method of accounting where stocks which were ac quired first are assumed to be sold first for the purpose of loss calculations Another fre qucntly employed method to assess losses for purposes of the Lax test is LIFO, or "last in, first out," where those stocks which were acquired most recently are assumed to be sold first. Many courts have stated a prefer ence for LIFO over FIFO in securities cases, since the inflation of stock prices over the course of the class period may have resulted in gains accrued to plaintiffs. As a result,

FIFO may overstate actual losses suffered by stockholders, whereas LIFO takes into ac count these gains. See In re eSpeed. 232 F.R.D. at 101. Here, at this stage, we use FIFO, as the parties have not provided enough information to conduct a LIFO analysis.
[** 17] 3. Rule 23

FInally, we turn to the third requirement for the presumptive lead plaintiff; namely, that the plaintiff meet the requirements of Rule 23 of the Federal Rules of CIVt! Procedure. As this Court has previ ously noted, "typicality and adequacy of representa tion are the on ly provisions [of Rule 23] relevant to the determination of lead plaintiff under the PSLRA ." Xianglin Shi v. SINA Corp.. Nos. 05 Civ. 2154 (NRB) et 01.. 2005 U.S Dist. LEXIS 13176. 2005 WI. 1561438. at *2 (SD.N. Y. July 1. 20U5) (quoting In re Oxford Health Plans. Inc. Sec. Litig.. 182 F.R .D. 42, 49 (SD.N. Y. 1998)). Further, at this stage of litigation, only a preliminary showing of typicality and adequacy is required. In re «Speed, Inc. Sec. Litig., 232 F.R.D. at 102. The typicality threshold is satisfied "where the claims arise from the same conduct from which the other class members' claims and injuries arise." Id. As discussed above in the context of consolidation, both Westchester Capital and other members of the class claim to have been injured by the overvalua tion of [MAX stock . The underlying conduct hom which the class members' claims l ** 18] arise is the same : alleged misrepresentations on the part of the defendants as to the company's worth. Thus, West chester Capital meets the typicality requirements under Rule 23 for the purposes of qualification for lead plaintiff. The adequacy requirement is satisfied where: (1) class counsel is qualified, experienced , and gen erally able to conduct the litigation; (2) there is no conflict between the proposed lead plaintiff and the members of the class; and (3) the proposed lead plaintiff has a sufficient interest in the outcome of the case to ensure vigorous advocacy. See id.; Shi, 2005 U.S Dist. LEXIS 13176, 2005 WI. 156143R, at *2. Westchester Capital has retained competent and experienced counsel, and its significant financial interest should ensure vigorous advocacy on behalf of the class. Further, there is no reason to believe

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that Westchester Capital has intere sts that are ad verse to those of the class memb ers. Accordingly, Westchester Capital is entitled to the most adequate plamtiff presumption.

B. The Rebuttal Evidence and Standing
As noted above, the presumpti on that West ches ter Capital is the most adequate plaintiff may be rebutted if there is evidence that it will not fairly [** 19] and adequately protect the in.erests of the class, or is subject to unique defenses that render it incapable of adequately repre senting the cla ss. 15 u.s. C. § 78u-4(a)(3)(B)(iii)(ff) . Here , Snow Capital a.rgues that Westch ester Cap ital should be disquali fied from consideration as most adequate plaintiff. [*95] argue s that Specifically, Snow Capital Westchester Capital was acting as an investment advisor, not purchasing the IMAX sha res for its own account, as Snow Ca pital did , and thus West chester Capital has no financial mteresi in the case and lacks standing to sue. Se e Snow Capital In vestment Partners, L.P.'s Opp osition to Competing Motions for Appointm ent as Lead Plaintiff ("Snow Capit al Opp." ) at 1-2. Courts have found standing for an investment advisor if it is authori zed to act as attorney-in-fact with unre stricted deci sion makin g authority for the fund s at issu e. In such instances, cou rts have con sidered the investm ent advisor to be the "purchaser" ~nd.er federa l securities law s, with standing to sue III Its own nam e. S See Weinberg v. Atlas Air Worldwide H oldings, Inc ., 216 FR .D. 248, 255 (SD.N Y. 2003) (con cluding tha t inve stment advi sor [**20] who wa s also attorney-in-fact for clients with unre stri cted decision making authority and who had otherwi se satisfied requirements under PSLRA for presumptive lead plaintiff had standing to pur sue securities c laims on behalf of investors) ; In re «Speed, Inc. Sec. Litig., 232 F.R.D. at 98 ("In order for an inves tme nt adv isor [0 attain standing on behalf o f investors j.] the transactions in que stion must have been exec uted as iI' by a single person. Mor eo ver, the advisor must be the attorney in fact for his cl ient s, and he mu st be granteel both unre stricted decision-making autho rity and the specific right to reco ver on beh alf of his clie nts."); Olsen , 233 FR.D. at 107 (same).

8 It is true , as Snow Capital point s out, that this Court has previously found an invest ment advisor to lack standing for the reason s set forth here by Snow Ca pita l. See in re Turk cell Ileti sim Hi zni etler , A .S Se curities Litigation, 20 9 FR .D. 353, 358 (SD. N Y. 2002). However, we were careful to note in Turkc cll that the investment advis or at issue was not an attorney-in-fact for the investors, which distinguish es the situation in Turkcell from other cases in whi ch investment advi sors were found to have standing. See id. (citing Smith v, Suprema Sp ecialties, 206 F.Supp.2d 627, 634-35 (D.N] 2002)). Thus, our decision in Turk cell is not at odds with our conclusion her e: if Westch ester Capital is an attorn ey-in-fact for the five funds which suffered losses from IMAX stock, it has standing to sue and to serve as lead plaintiff. [**2 1] Snow Ca pita l furth er ass erts that West che ste r Capita l has not demonstr ated that it has the authority to sue on beh alf o f the five funds, nor to serv e as lead plaintiff in their stead . Other courts have relied on declarations stating that the invest ment manager or advi ser was the attorney-in-fact with the auth ori zation to bring suit to recover in vestment losses . Se e. e.g , Weinberg, 2 I 6 F.R .D . at 255 (citing Ezra Charitable Trust v. Rent-Way, Inc., 136 FSupp.2d 435, 441 (W.D. Pa . 2001)). Here, Westchester Capital has submitted a sworn declara tion from Roy Behren, its Chief Compliance Offi cer, stating that Westch ester Capi tal is attorney-in fact for the five fund s, and further that it is "author ized to undertake all acts on behalf of [the five fund s], including the right to commence legal action on their behalfI,] which include s the right to seek to serve as lead plaintiff in an action brought pursuant to the fed eral sec urities laws on their behalf." Behr en Dec!. PP 1, 3. On the basis of this represen tation, and given that Snow Capital's proffer to the contrary is inconclu sive at best, v we conclude that the five fund s have appointed Westch ester [**2 2] Capital as atto rne y-in-fact, w ith the capac ity to sue on beh alf of the funds . Accordingly, Westch ester Ca pital has standing to sue to recover thc losses that its investor s a llegedly sustained due to IMAX's mis rep resentations. Since there is no evidence in the record that suggests either that Westchester Capital would not fairly and adequately protect the intere sts of the [ * CJ6 ~ class, or that it is subject to any

Case 3:07-cv-02245-BTM-NLS

Document 25-5

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240 F.R.D . 88 , *; 200 7 U.S. Dist. LEXrS 444b , **

unique defen ses, the presumption that Westchester Capital should serve as lead plaintiff is not rebutted. 9 To support its assertion, Snow Capital submits selected pages of the Form N-1 A/A, Registration Statement of an Open-End Man agement Investm ent Compan y for Merger Fund VL , one of the five funds , filed with the Securities Exchange Commi ssion on July 23, 2003. See Snow Ca pital Investment Partners, L.P.'s Repl y Memorandum in Fur ther Support of its Mot ion for Appointment as Lead Plaintiff, Appro val of its Selection of Lead Counsel and for Consolidation of Re lated Action s ("Snow Capital Reply"), Ex. A, B. Although this submission includes EX 990 , the Advi sory Agreement,3now Capital did not include EX-99B , which is the Power of Attorney section of the Statement. Re trieval of the complete document reveals that the Merger Fund VL designated Frederick W. Green , the President of Westchester Capital , as attorney-in-fact and agent. See Rezistration Statement of an Open- End b Management Investment Company, Ex-99H , avai lable at http .z/www .sec.gov/Archives/ed gar/dat a!120

why the firm should not repre sent the class. Ac cordingly, we approve We stchester Capital's selec tion of Abbev Spanier to serve as lead counsel.
CONCLUSION

For the afor ementioned reason s, we hereby or der: ( I) that the above-cap tioned action s be con so lidated for all purp oses pursuant to Fed. R. Civ. P. 42(0) , under the follo wing caption: In re IMI1X Corpo ration Securities Litigation, Master File No . 06 Civ. 612 ~ ; (2) that class memb er Westchester Capital is appointed to serve as lead plaintiff in ~he con sol idated action, pursuant to section 21 D(a)(3)(B )(iii ) of the Securities Exchange Act of 1934, 15 U S C. Ii 78u-4(0)(3)(B) , as amended by the Private Securities Litigation Act of 1995; (3) that the law firm of Abbey [**24] Spanier Rodd Abram s & Paradi s LLP is appointed to serve as lead coun sel for the cla ss in the con solidated action , pur suant to section 2ID(a)(3)(B)(v) of the Securities Exchange Act of 1934,15 USc. Ii 78u-4( a)(3)(lJ) , as amended by the Private Securities Litigation Act of 1995; and (4) within 20 days , lead plaintiff and lead counsel shall submit to this Court any prop osed ord er that would further facilitate their representa tion of the class. Accordi ngly, all motions movants are hereby denied.
IT IS SO ORDERED.

8133/0000894 18 90300 1004' 0000894 189
03-001004-index.htm . r**23 J IV. Lead Counsel As noted above, the PSLRA dir ects the lead plaintiff to select and retain counsel to repre sent th ~ class, subjec t to the Court's approval . 15 US C. .~ 7811-4(0 ) (3 ) (8)(v). Westchester Capi ta I has accord ingly selected the law firm of Abbey Spani er Rodd Abrams & Paradis LLP to serve as lead counsel. After reviewing the finn's resume, we see no reason

by

comp eting

Dated : New York. New York January 17, 200 7 NAO MI REICE Bll CHWALD UNITED STATES DISTRICT JUDG E