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Chen v. NQ Mobile

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

May 31, 2018

SHIQIANG CHEN, Individually and on Behalf of All Others Similarly Situated



         Pending before the Court is Xiang Cao's Motion for Appointment of Lead Plaintiff and Approval of Section of Counsel (Dkt. #8). The Court, having considered the relevant pleadings and relevant case law, finds that the motion should be granted.


         On February 10, 2018, Plaintiff Shiqiang Chen filed this federal securities class action on “behalf of a class consisting of all persons and entities, other than Defendants and their affiliates, who purchased publicly traded NQ Mobile securities from March 30, 2017 through February 6, 2018” (Dkt. #1 at pp. 1-2). Five different movants filed three different motions seeking appointment as lead plaintiff(s), with their choice of lead counsel, under the Private Securities Litigation Reform Act of 1995 (“PSLRA”) (Dkt. #6; Dkt #7; Dtk #8). Four movants withdrew from lead plaintiff consideration, and only one movant remains: Xiang Cao (“Cao”) (See Dkt. # 10; Dkt #11).


         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).


         Cao requests that the Court appoint him as lead plaintiff and approve his choice of lead counsel. The Court will go through the analysis of the three factors contained in Section 78u-4(a)(3)(B)(iii) to determine if Cao is presumed to be the most adequate plaintiff.

         A. Procedural Requirements

         There is no dispute that Cao met the procedural requirements of Section 78u-4(a)(3)(A)(i) because he timely moved for appointment of lead counsel. The PSLRA requires plaintiffs filing a securities class action publish notice of the pendency of the suit within twenty days after the complaint is filed. Cao's notice went out on February 10, 2018. The notice informed potential plaintiffs that, if they wanted to be considered for appointment as lead plaintiff, they needed to file a motion by April 11, 2018.

         After notice is filed, any party wishing to serve as lead plaintiff must file a motion within sixty days of the publication of that notice. 15 U.S.C. § 78u-4(a)(3)(A)(i)(II). Any supplement or augmentation of the motion must also take place within the sixty-day deadline. In re Telxon Corp. Sec. Litig., 67 F.Supp.2d 803, 819 (N.D. Oh. 1999). The purpose of this requirement is to ensure that the lead plaintiff is appointed as early as possible, and to expedite the lead plaintiff process. See, e.g., In re XM Satellite Radio Holdings Sec. Litig., 237 F.R.D. 13 (D.D.C. 2006) (citations omitted); In re Telxon, 67 F.Supp.2d at 818-19; Lax v. First Merchants Acceptance Corp., 1997 WL 461036, at *4 (N.D. Ill. Aug. 11, 1997) (citations omitted). Thus, compliance with the procedural requirements of the PSLRA is mandatory and should be strictly enforced. See, e.g., Skworts v. Crayfish Co., 2001 WL 1160745, at *5 (S.D.N.Y. Sept. 28, 2001); In re MicroStrategy Inc. Sec. Litig., 110 F.Supp.2d 427, 440 (E.D. Va. 2000). Cao filed his motion on April 11, 2018. Thus, his motion is timely under Section 78u-4(a)(3)(A)(i)(II).

         B. Largest Financial Interest

         If a motion is timely filed, the presumptive lead plaintiff must have the largest financial interest. 15 U.S.C. § 78u-4(a)(3)(B)(iii). Cao argues that he has the largest financial interest of any other movant, which is not contested by any of the movants. ...

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