Kux-Kardos v. VimpelCom, Ltd.

151 F.Supp.3d 471

Charles Kux–Kardos, individually and on behalf of all others similarly situated, Plaintiff,

v.VimpelCom, Ltd., Jean–Yves Charlier, Jo Lunder, Alexander Izosimov, Andrew Davies, and Cornelis Hendrik Van Dalen, Defendants.

Westway Alliance Corp., individually and on behalf of all others similarly situated, Plaintiff,

v.Vimpelcom, Ltd., Jean–Yves Charlier, Jo Lunder, Alexander Izosimov, Andrew Davies, and Cornelis Hendrik Van Dalen, Defendants.

1:15–CV–08672 (ALC)

1:15–CV–09492 (ALC)

United States District Court, S.D. New York.

Signed April 27, 2016

Joseph Alexander Hood, II, Jeremy Alan Lieberman, Pomerantz LLP, New York, NY, for Plaintiff.

John Patrick Coffey, Kerriann Law, Kramer Levin Naftalis & Frankel, LLP, New York, NY, for Defendant.

OPINION AND ORDER

ANDREW L. CARTER, JR., United States District Judge:

Before the court are two securities fraud class actions against VimpelCom, Ltd. (“VimpelCom”) and certain of its officers and directors. In both cases, plaintiffs allege that Defendants made false and/or misleading statements and failed to disclose material adverse facts about VimpelCom's business, operations, and prospects, and that the disclosure of these acts and omissions caused a precipitous decline in stock prices.

Currently pending are motions for consolidation, appointment of lead plaintiff, and approval of class counsel. Plaintiff Westway Alliance Corp. (“Westway”), putative class members Boris Lvov and Richard McColloch (“Lvov and McColloch”), putative class members Vimal K. Kocher and Dhirendra Prasad Sangal (“Kocher and Sangal”), and putative class members Igor Melnikov and Max Nussbaumer (“Melnikov and Nussbaumer”) have moved to consolidate the two actions currently pending before the Court. (ECF Nos. 11, 12, 15, 18.)¹ In addition, Westway, as well as Lvov and McColloch, has moved to be appointed lead plaintiff.^{2 ,3} (ECF Nos. 8, 18.) For the reasons stated below, the Court consolidates the actions, appoints Westway as lead plaintiffs, and approves Westway's choice of counsel.

I. Consolidation

Plaintiff Westway and various putative class members move to consolidate the two cases presently before the Court, Kux–Kardos v. VimpelCom, Ltd. Et al, No. 15 Civ. 8672, and Westway Alliance Corp. v. VimpelCom, Ltd., et al, No. 15 Civ. 9492. No party objects to consolidation.

Consolidation is proper “[i]f actions before the court involve a common question of law or fact.” Fed. R. Civ. P. 42(a)(2). “Under Rule 42 and the Private Securities Litigation Reform Act (the 'PSLRA'), actions need not be 'identical' to allow for consolidation.” Reitan v. China Mobile Games & Entm't Grp., Ltd., 68 F.Supp.3d 390, 394 (S.D.N.Y.2014) (quoting Pinkowitz v. Elan Corp., PLC, Nos. 02 Civ. 865 et al., 2002 WL 1822118, at *3 (S.D.N.Y. July 29, 2002) ). The court should “look [ ] to the particular facts of cases to determine if the anticipated benefits of consolidated actions, such as considerations of judicial economy and unnecessary costs to the parties, outweigh potential prejudice to the parties.” Id. (quoting Kaplan v. Gelfond, 240 F.R.D. 88, 91 (S.D.N.Y.2007) ). The Court enjoys “broad discretion to determine whether consolidation is appropriate.” Johnson v. Celotex Corp., 899 F.2d 1281, 1284–85 (2d Cir.1990).

Consolidation is appropriate here because the Kux–Kardos and Westway actions involve substantially identical questions of law and fact. Both suits are putative class actions, raising claims against the same defendants pursuant to the same provisions of the Securities Exchange Act. See Kux–Kardos Compl. ¶¶ 84–94, 95–100; Westway Compl. ¶¶ 85–88, 89–90. Both are actions brought by investors who purchased or otherwise acquired VimpelCom securities and were damaged by the revelation of alleged corrective disclosures. See Kux–Kardos Compl. ¶¶ 1, 30, 75; Westway Compl. ¶¶ 1, 30, 78. Indeed, the recitations of fact in the two complaints are virtually identical. See, e.g. Kux–Kardos Compl. 54–74; Westway Compl. 59–78.

While the complaints do allege different start dates for the class period, compare Kux–Kardos Compl. ¶ 30 with Westway Compl. ¶ 30, “differences in ... the class period do not render consolidation inappropriate if the cases present sufficiently common questions of fact and law, and the differences do not outweigh the interests of judicial economy served by consolidation.” Kaplan, 240 F.R.D. at 91 (citation omitted). Here, the difference in start dates results from the parties' reliance upon different financial statements in their pleadings. However, all plaintiffs rely on a common pattern of factual allegations and share a common legal question, and thus, consolidation is proper. See id. (collecting cases where courts consolidated securities class actions despite varying class periods). “[T]he filing of a consolidated complaint, and the determination of class certification each offer opportunities to resolve remaining issues concerning the different class periods.” Id. On balance, considerations of judicial economy justify consolidation.

II. Appointing Lead Plaintiffs

Under the Private Securities Litigation Reform Act of 1995 (“PSLRA”), the Court is to “appoint as lead plaintiff the member or members of the purported plaintiff class 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 establishes a rebuttable presumption that the “most adequate plaintiff” is the one who: (1) “filed the complaint or made a motion in response to a notice,” (2) “has the largest financial interest in the relief sought by the class,” and (3) “otherwise satisfies the requirements of [Federal Rule of Civil Procedure] Rule 23.” Id. § 78u–4(a)(3)(B)(iii)(I)(aa)-(cc).

The presumption of the most adequate plaintiff may only be rebutted by proof that the purportedly 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.” Id. § 78u–4(a)(3)(B)(iii)(II)(aa), (bb).

a. Westway's Financial Interest

Courts in this district consider the following factors to determine which party had the largest financial interest: “(1) the total number of shares purchased during the class period; (2) the net shares purchased during the class period ...; (3) the net shares purchased during the class period ...;(4) the net funds expended during the class period ...; and (5) the approximate losses suffered.” Peters v. Jinkosolar Holding Co., Ltd., No. 11 Civ. 7133 (JPO), 2012 WL 946875, at *5 (S.D.N.Y. March 19, 2012) (quoting Kaplan v. Gelfond, 240 F.R.D. 88, 93 (S.D.N.Y.2007) ). “It is well settled that ‘[f]inancial loss, the last factor, is the most important element of the test.’ ” Id. (quoting Varghese v. China Shenghuo Pharm. Holdings, Inc., 589 F.Supp.2d 388, 395 (S.D.N.Y.2008) ). When evaluating financial loss, “courts must consider only those losses that will actually be recoverable in the class action.” Topping v. Deloitte Touche Tohmatsu CPA, 95 F.Supp.3d 607, 617 (S.D.N.Y.2015) (citing In re Comverse Tech., Inc. Sec. Litig., No. 06 Civ. 1825 (NGG), 2007 WL 680779, at *4 (E.D.N.Y. Mar. 2, 2007) ). In securities fraud cases, plaintiffs must “prove that the defendant's misrepresentation (or other fraudulent conduct) proximately caused [his] economic loss” in order to recover. Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 125 S.Ct. 1627, 161 L.Ed.2d 577 (2005). Thus, in evaluating financial loss, courts must consider only those losses proximately caused by the defendant's misrepresentations or other fraudulent conduct.

Here, Westway alleges that it has the largest financial interest in the litigation because it suffered losses of over $679,339. Lvov and McColloch do not contend that they suffer losses above that amount but they argue that Westway in fact has no financial interest in the litigation because it suffered no recoverable losses.

“Where, as here, plaintiffs endeavor to establish loss causation based on a corrective disclosure, losses that may have incurred before a company's misconduct was ever disclosed to the public are not recoverable, because those losses cannot be proximately linked to the misconduct at issue in the litigation.” Topping, 95 F.Supp.3d at 617 (quoting Comverse, 2007 WL 680779, at *4 ) (internal alterations and quotation marks omitted). “Therefore, when calculating movants' financial interests on a lead plaintiff motion, courts should not include losses resulting from 'in-and-out' transactions, which took place during the class period, but before the misconduct identified in the complaint was ever revealed to the public.” Id. (internal alterations and quotation marks omitted). However, a plaintiff's theory of “loss causation may be premised on partial revelations that do not uncover the complete extent of the falsity of specific prior statements” where the partial disclosure “somehow reveals to the market that a defendant's prior statements were not entirely true.” In re Take–Two Interactive Sec. Litig., 551 F.Supp.2d 247, 283 (S.D.N.Y.2008).

Westway does not dispute that it sold its shares prior to the alleged corrective disclosures made on August 13, 2015, and November 3, 2015. See Westway Compl. ¶¶ 74–78; Westway Reply, ECF No. 25, 5 n.1. But it argues that VimpelCom made a series of partial disclosures, two of which preceded its March 6, 2015, sale of its shares:

(1) “On March 12, 2014, the Company announced that it was facing investigations by both the SEC and Dutch authorities related to its operations in Uzbekistan.”

(2) “On March 18, 2014, the Company reported that the Company was the focus of an investigation by the U.S. Department of Justice ('DOJ') related to the Company's operations in Uzbekistan.”

Kux–Kardos Compl. ¶¶ 5–6, 54–55; Westway Compl. ¶¶ 5–6, 59. The Court agrees that these disclosures “somehow reveal[ed] to the market that a defendant's prior statements were...