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Oklahoma Law Enforcement Retirement System v. Adeptus Health Inc.

United States District Court, E.D. Texas, Sherman Division

August 31, 2017

OKLAHOMA LAW ENFORCEMENT RETIREMENT SYSTEM
v.
ADEPTUS HEALTH INC., et al.

          MEMORANDUM OPINION AND ORDER

          AMOS L. MAZZANT, UNITED STATES DISTRICT JUDGE

         Pending before the Court are four motions for appointment of lead counsel (Dkt. #19, 21, 49, 73). The Court, having considered the relevant pleadings and relevant case law, finds that the Motion of Alameda County Employees' Retirement Association and Arkansas Teacher Retirement System for Appointment as Lead Plaintiff, Approval of Selection of Counsel, and Consolidation of Related Actions (Dkt. # 19) should be granted.

         BACKGROUND

         On October 27, 2016, named Plaintiff Oklahoma Law Enforcement Retirement System filed this federal securities class action “on behalf of all person who purchased the Class A common shares of [Adeptus Health, Inc. (“Adeptus Health”)] pursuant to [Adeptus Health's] secondary public offering on or about July 31, 2015 . . . and on behalf of purchasers of [Adeptus Health's] common shares between April 23, 2015 and November 16, 2015.” (“Oklahoma Class”) (Dkt. #1 at 1). This action was consolidated with: (1) an action filed by Laborers' Local 235 Benefit Funds “on behalf of all persons or entities that purchased or otherwise acquired [Adeptus Health] Class A common shares between June 25, 2014 and November 1, 2016, ” (“Laborors' Local Class”); (2) an action filed by Winston Kim “on behalf of all persons and entities . . . who purchased or otherwise acquired the publicly traded securities of [Adeptus Health] from April 29, 2016 through March 1, 2017, ” (“Kim Class”); and (3) an action filed by Sascha Troll “on behalf of a class consisting of all persons . . . who purchased or otherwise acquired [Adeptus Health] securities between April 29, 2016 and March 1, 2017, ” (“Troll Class”). Adeptus Health filed bankruptcy petitions on April 19, 2017, in the United States Bankruptcy Court for the Northern District of Texas. The Court stayed the claims as to Adeptus Health (Dkt. #51); however, the parties urge the Court to decide the motions for appointment of lead plaintiff in order to represent the class in the bankruptcy proceedings (Dkt. # 80).

         Six different movants have filed eight different motions seeking appointment as lead plaintiff, with their choice of lead counsel, under the Private Securities Litigation Reform Act of 1995 (“PSLRA”). Three movants withdrew from lead plaintiff consideration, and three movants remain: (1) David Swehla, Rodeo Plastic Bag & Film Inc., Wissam Mattar, Heriberto Vale, and Yixin Shi (“Adeptus Investor Group”); (2) Alameda County Employees' Retirement Association (“ACERA”) and Arkansas Teacher Retirement System (“Arkansas Teacher”) (collectively “Retirement Group”); and (3) Michigan Laborers' Pension Fund (“Pension Fund”).

         APPLICABLE LAW

         The PSLRA establishes the procedure for appointing a lead plaintiff in an action “that is brought as a plaintiff class action pursuant to the Federal Rules of Civil Procedure.” 15 U.S.C. § 78u-4(a)(1). The PSLRA requires that within twenty days after filing the class action, “the plaintiff or plaintiffs shall cause to be published, in a widely circulated national business-oriented publication or wire service, a notice advising members of the purported plaintiff class: (1) of the pendency of the action, the claims asserted therein, and the purported class period; and (2) that, not later than [sixty] days after the date on which the notice is published, any member of the purported class may move the court to serve as lead plaintiff of the purported class.” 15 U.S.C. § 78u-4(a)(3)(A)(i). The Court must then appoint the “most capable of adequately representing the interests of class members.” 15 U.S.C. § 78u-4(a)(3)(B)(i). After deciding any pending motion to consolidate the related actions, the Court shall consider any motion made by a purported class member to serve as lead plaintiff. 15 U.S.C. § 78u-4(a)(3)(B)(ii).

         The PSLRA requires all proposed lead plaintiffs to submit a sworn declaration to assure the Court that the proposed plaintiff: (1) has suffered financial harm; (2) is not a serial litigant; and (3) is interested and able to serve as lead plaintiff. 15 U.S.C. § 78u-4(a)(2)(A). There is then a “rebuttable presumption” that the most adequate plaintiff has: (1) either filed the complaint or made a motion in response to a notice; (2) the largest financial interest in the relief sought by the class during the proposed class period; and (3) otherwise satisfied the requirements of Rule 23 of the Federal Rules of Civil Procedure. 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I). The presumption can be rebutted only when a class member offers proof that the presumptive lead 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.” 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II).

         ANALYSIS

         Three movants request that the Court appoint them as lead plaintiff and approve their choice of lead counsel. The Court will address the request of each movant.

         I. Lead Plaintiff

         The Court will go through the analysis of the three factors contained in Section 78u-4(a)(3)(B)(iii) to determine which party is presumed to be the most adequate plaintiff.

         A. Procedural Requirements

         There is no dispute that the Retirement Group and the Pension Fund met the procedural requirements of Section 78u-4(a)(3)(A)(i) because both the Retirement Group and the Pension Fund timely moved for appointment of lead counsel. However, the parties dispute whether the Adeptus Investor Group filed its motion in a timely fashion.

         The Retirement Group and the Pension Fund argue that notice went out on October 27, 2016. The notice informed potential plaintiffs that, if they wanted to be considered for appointment as lead plaintiff, they needed to file a motion by December 27, 2016. Because the Adeptus Investor Group filed its renewed motion on July 13, 2017, the Retirement Group and the Pension Fund argue that Adeptus Investor Group's renewed motion is late pursuant to Section 78u-4(a)(3)(A)(i).[1]

         The Adeptus Investor Group responds that because it moved to be appointed as lead plaintiff in the Kim action and on behalf of the Kim Class and Troll Class, its motion is timely. The Adeptus Investor Group asserts that it filed a motion for appointment as lead plaintiff within sixty days of the notice filed in the Kim action. (Dkt. # 81 at 3). Adeptus Investor Group argues that the allegations in the Kim and Troll actions are “that, during a class period running from April 29, 2016 through March 1, 2017, Defendants failed to disclose material weaknesses in [Adeptus Health's] internal control over financial reporting.” Id. at 2. Adeptus Investor Group compares these allegations to the contentions in the Oklahoma and Laborers' Local action that ‚Äúduring a class period running from June 25, 2014 through November 1, 2016, Defendants misled Adeptus shareholders about widespread predatory billing practices and failed to advise them that [Adeptus Health's] financial ...


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