The opinion of the court was delivered by: WILLIAM STANDISH, Senior District Judge
Pending before the Court is a Motion by Albert and Barbara
Glover ("the Glover Plaintiffs" or "the Glovers"), seeking to
become the lead plaintiff in this securities class action.
(Docket No. 25.) For the reasons discussed below, the Motion is
denied without prejudice.
The facts of this case are largely irrelevant to the decision
herein and will not be reiterated in detail. Briefly stated,
Howard G. Clair, Ralph S. Weaver, and Carol S. Pintek ("Plaintiffs") filed an action on behalf of themselves and other
investors similarly situated against the "Individual
Defendants"*fn2 and The Carlyle Group*fn3
(collectively, "Defendants"), claiming that Defendants' actions
on behalf of IT Group, Inc., violated federal securities law. IT
Group, Inc. ("IT" or "the Company"), was an environmental waste
remediation firm based in Monroeville, Pennsylvania. The Carlyle
Group acquired control of IT in November 1996 and, at
approximately the same time, the Company expanded rapidly by
acquiring other firms who performed similar services. Plaintiffs
claim that by the end of 2001, Defendants had made a number of
poor financial and management decisions which, inter alia,
resulted in liquidity problems and violation of the company's
highly lucrative government contracts. IT declared bankruptcy on
January 15, 2002.
During the course of the bankruptcy proceedings, Plaintiffs
learned that Defendants had consistently misrepresented IT's
financial condition and results in annual and quarter filings
made with the Securities and Exchange Commission, press releases,
and other statements disseminated to the investing public. As a
result, Plaintiffs and other investors were damaged when they purchased IT common stock at artificially inflated prices during
the Class Period.*fn4 Plaintiffs did not learn of
Defendants' fraudulent activities until March and April 2002 when
the relevant documents were published in the bankruptcy
Plaintiffs filed suit on February 27, 2003, alleging (1) that
Defendants breached their fiduciary duty to investors by making
false and misleading statements; (2) that by preparing and
issuing public statements containing misrepresentations and
omissions which induced Plaintiffs and members of the class to
purchase IT common stock at artificially inflated prices, the
Individual Defendants violated Section 10(b) of the Securities
Exchange Act of 1934 ("the Act"), 15 U.S.C. §§ 78j(b) and
78(n) and Rule 10b-5, 17 C.F.R. § 240.10b-5, promulgated
thereunder; and (3) that Defendants caused the Company to engage
in the illegal conduct and practices described above inasmuch as
they were "controlling persons" of IT Group as that term is
defined in Section 20(a) of the Act, 15 U.S.C. § 78t(a).
On May 18, 2003, Plaintiffs published a notice of the pending
private securities class action pursuant to Section 21D(a)(3)(B)
of the Act as amended by the Private Securities Litigation Reform Act of 1995 (the "Reform Act.")*fn5 (See
Docket No. 17, Exhibit A.) On July 7, 2003, Albert and Barbara
Glover moved for approval as lead plaintiff, approval of Glancy
Binkow & Goldberg, LLP, and Miller Shea, PC, as Co-Lead Counsel,
and approval of Chimicles & Tikellis, LLP, as Liaison Counsel for
the Class. (Docket No. 15.) Defendants opposed this motion,
claiming that Plaintiffs had failed to comply with the Reform Act
requirement that the early notice be published not more than 20
days after the complaint was filed and that any motion seeking
appointment as lead plaintiff be filed within 60 days thereafter.
(Docket No. 19.) Plaintiffs responded that such notice was not
required in light of the relationship between this case and
Payne v. DeLuca, CA 02-1927,*fn6 and their reasonable
assumption that this case would be consolidated with Payne. (Docket No. 21.) When
Defendants refused to consolidate the cases "for tactical
reasons," Plaintiffs provided the additional notice "out of an
abundance of caution," albeit beyond the 20 day publication
period. (Id. at 1.)
In considering the motion by the Glover Plaintiffs, the Court
found that although no additional notice was required, given the
timely notice provided in the Payne action and the fact that
the allegations in the two cases were substantially the
same,*fn7 Plaintiffs herein could not rely on the Payne
notice because a motion to dismiss had been granted in that case.
(Memorandum and Order of December 16, 2004, Docket No. 24,
"December 16 Order," at 4-5.) Moreover, we agreed with Defendants
that the notice filed in this action failed to conform with the
requirements of 15 U.S.C. § 78u-4(a)(3). Plaintiffs were directed
to re-publish notice and renew their motion for appointment of lead plaintiff and lead counsel.
On March 18, 2005, the Glover Plaintiffs filed a renewed motion
for appointment to act as lead plaintiff and for the same firms
to serve as co-lead counsel and liaison counsel. ("Motion,"
Docket No. 25.) They*fn8 indicated that on January 20, 2005,
they published a revised notice of this action on "Primezone," a
"widely circulated national business-oriented wire service."
(Memorandum of Points and Authorities in Support of Motion of the
Glover Plaintiffs for Appointment as Lead Plaintiff and for
Approval of Lead Plaintiff's Selection of Co-Lead Counsel, Docket
No. 26, "Plfs.' Memo," at 5.) No other members of the putative
class responded to the republished notice by seeking to be
appointed lead plaintiff, and no class member has opposed the
Glover Plaintiffs' Motion.
Defendants oppose the Motion, however, arguing that once again,
Plaintiffs failed to publish notice of the class action within
the 20 days mandated by the Reform Act and that the Glover
Plaintiffs failed to file the motion for lead plaintiff status
within 80 days of the December 16 Order permitting them to do so. (Memorandum of Law in Opposition to the Glover Plaintiffs' Motion
for Appointment as Lead Plaintiff and Approval of Lead
Plaintiff's Selection of Co-Lead Counsel, Docket No. 30, "Defs.'
Opp.," at 5-6.) Defendants further argue that the Glover
Plaintiffs do not satisfy the ...