The opinion of the court was delivered by: McLAUGHLIN, District Judge.
This is a class action on behalf of purchasers of Rent-Way securities
seeking damages for alleged violations of Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 ("Exchange Act"), as amended,
15 U.S.C. § 78t(a) and 78j(b), and Rule 15b-5 promulgated
thereunder, 17 C.F.R. § 240.15b-5. Presently pending are five motions
for the appointment of lead plaintiff and approval of counsel pursuant to
Section 21D(a)(3)(B), as amended, 15 U.S.C. § 78u-4 (a)(3)(B). These
motions were filed on behalf of the following plaintiffs: 1) Cramer
Rosenthal McGlynn LLC ("Cramer"); 2) Florida State Board of
Administration ("FSBA"); 3) Mesirow Asset Management ("Mesirow"); 4)
Sherleigh Associates, Inc. ("Sherleigh"); and 5) Harold L. Grogan and
William R. Latimer ("Grogan/Latimer"). For the reasons that follow,
Cramer's motion [Doe. No. 10] is granted and the other motions [Doc.
Nos. 4, 8, 11, and 13] are denied.
The instant action is a consolidation of numerous securities fraud
actions filed against Rent-Way. The facts, as alleged in the Class Action
Complaint and purportedly reviewed by each of the proposed lead
plaintiffs, are as follows:*fn1
Rent-Way is a Pennsylvania corporation with its principal place of
business in Erie, Pennsylvania. The company rents merchandise such as
home entertainment equipment, computers, furniture, and appliances from
1,093 stores located in 41 states. Complaint ¶ 10. As of July 26,
2000, Rent-Way had approximately 24.3 million outstanding shares. The
company was actively traded on the New York Stock Exchange during the
proposed class period, January 18, 2000 through October 27, 2000.
Defendant Jeffrey A. Conway is the President and Chief Operating
Officer of Rent-Way; prior to January 18, 2000, he was the Senior Vice
President and Chief Financial Officer. Defendant Matthew J Marini was the
Controller and Chief Accounting Officer during the class period. These
defendants are allegedly responsible for the disclosure of material false
and misleading statements regarding Rent-Way's true financial position,
as well as the concealment of information accurately reflecting the
company's financial position. See Complaint ¶ 17.
During the proposed class period, Rent-Way released its earnings
results for three fiscal quarters. Each of these releases reported
increases over the previous year's earnings. On January 18, 2000, the
first day of the proposed period, Rent-Way announced its results for the
first fiscal quarter ending December 31, 1999:
ERIE, Pa., Jan. 18 /PRNewswire/ — Rent-Way, Inc.
(NYSE: RWY) today announced record earnings per share
of $0.44 (diluted) and an operating margin of 16.0%
for the quarter ended December 31. 1999. All
historical financial information set forth in this
press release has been restated to reflect Rent-Way's
merger with Home Choice Holdings, Inc., in December
1998, and the accounting for the merger as a pooling
For the first quarter ended December 31, 1999, total
revenues were $140.9 million, a 13.7% increase over
$124.0 million reported in the same quarter last
year. Operating income was $22.6 million, a 418.4%
increase over the loss of $7.1 million reported in the
same quarter last year, net income was $10.1 million,
a 200.8% increase over the loss of $10.1 million
reported in the same quarter last year.
Same store revenues in core Rent-Way stores increased
5.1%, the fourteenth consecutive quarterly increase
between 5% and 8%. Home Choice same store revenue
showed sequential improvement, down only 0.9% compared
to negative 2.8% in the previous quarter and negative
5.3% in the third quarter of fiscal 199[sic]. "We are
excited at the trends we see in customer gain and
agreement growth. This, coupled with increased revenue
from new merchandise like computers, continue to
impact our same store results," said William E.
Morganstern, Chairman and CEO.
PR Newswire, January 18, 2000; Complaint ¶ 27. On April 18, 2000,
Rent-Way announced its earnings for the fiscal quarter ending March 31,
ERIE, Pa., April 18 /PRNewswire/ — Rent-Way,
Inc. (NYSE: RWY) today reported record revenues and
earnings per share for its second quarter, ended March
31, 2000. Total revenues of $148.9 million increased
18.4% over the $125.8 million reported in the same
quarter and up 5.7% versus the first quarter. Earnings
per share were $0.46 (diluted), an increase of 43.8%
over the $0.32 reported in the same quarter last year
and up to 4.5% versus the first quarter.
During the first half of fiscal 2000, Rent-Way total
revenues were $289.8 million an increase of 16.1% over
the $249.7 million reported in the same period last
year. First-half earnings per share of $0.90 rose in
comparison to the $0.14 loss reported during the first
half of 1999. The results for the six months ended
March 31, 1999 include $16.8 million of business
combination charges related to rent-Way's merger with
Home Choice on December 10, 1998. Excluding these
charges, earnings per share rose 80.0% over the 0.50
reported during the first half of 1999.
PR Newswire, April 18, 2000; Complaint ¶ 29. This announcement also
stated that during this quarter, Jeffrey Conway became the new President
and COO, William McDonnell became the new CFO, and the company
accelerated its plans for opening new stores from fifty new stores per
year to one hundred per year. See id. On July 20, 2000, Rent-Way
announced its third-quarter earnings:
ERIE, Pa., July 20 / — Rent-Way, Inc. (N.Y.SE"
[sic] RWY) today reported record revenues and earnings
per share for its third quarter, ended June 30, 2000.
Total revenues of $152.1 million increased 24.7% over
the $121.9 million reported in the same quarter last
year. Earnings per share were $0.47 (diluted), an
increase of 30.6% over the $0.36 reported in the same
quarter last year.
During the quarter, Rent-Way opened 28 new stores.
Core Rent-Way same store revenue increases were 7.1%.
Home Choice same store revenues increased ...