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Arkansas Teacher Retirement System v. Insulet Corp.

United States District Court, D. Massachusetts

March 31, 2016

ARKANSAS TEACHER RETIREMENT SYSTEM, Plaintiff
v.
INSULET CORP. et al., Defendants.

MEMORANDUM AND ORDER

WOLF, D.J.

This class action securities suit arises under the Securities Exchange Act of 1934, 15 U.S.C. §78a et seq. Pursuant to the Private Securities Litigation Reform Act of 1995 ("PSLRA"), 15 U.S.C. §78u-4, two putative class members and one group of three putative class members have filed motions for appointment as lead plaintiff. For the reasons explained below, the court is appointing the Institutional Investor Group as lead plaintiff in this action, and approving its selection of Bernstein Litowitz Berger & Grossmann LLP and Scott Scott LLP as co-lead counsel.

I. BACKGROUND

On June 16, 2015, the Arkansas Teacher Retirement System ("Arkansas Teacher") filed this class action against Insulet Corporation ("Insulet") and four of its officers. At the time, it was one of three class actions in this district seeking relief from Insulet under the Securities Exchange Act. The other two actions, 15-cv-1178 ("Murphy") and 15-cv-11855 ("Burns") were voluntarily dismissed on July 2, 2015.

All three complaints alleged that the defendants made false or misleading statements about the sales and performance of Insulet's OmniPod Insulin Management System ("OmniPod"). The plaintiffs, investors in Insulet, allege that they suffered losses when the defendants' misrepresentations were revealed. The only significant difference between the complaints, for the purposes of the current analysis, was the class periods. Murphy and Burns alleged a class period beginning on February 27, 2013, the day on which Insulet issued its 2012 financial results. The complaint in this action alleges a class period starting on May 7, 2013, "the first trading day after Insulet's former CEO Duane DeSisto touted the Company's launch of its new OmniPod system." Complaint SI3. The three complaints agreed that the class period ended on April 30, 2015, the day Insulet disclosed its first quarter 2015 revenues. See id. at ¶ 53.

The putative class members described below subsequently filed motions for appointment as lead plaintiffs under the PSLRA. See 15 U.S.C. §78u-4 (a) (2) . Each movant has filed a memorandum in support of its motion and made the certification necessary to establish that it is eligible to be appointed lead plaintiff. Each movant has also responded to the filings of the other moving parties. It is now the court's obligation to appoint a lead plaintiff. See id. §78u-4(a) (3) (B) .

II. APPLICANTS FOR LEAD PLAINTIFF

A. The Institutional Investor Group

Arkansas Teacher, the party that filed this action, has moved for appointment of the Institutional Investor Group ("IIG") as lead plaintiffs. The IIG consists of Arkansas Teacher, the City of Bristol Pension Fund ("Bristol"), and the City of Omaha Police and Fire Retirement System ("Omaha Police & Fire"). They seek appointment of Bernstein Litowitz Berger & Grossmann LLP and Scott Scott LLP as lead counsel.

With the exception of the complaint, the members of the IIG have filed all of their motions in coordination with each other. They have also submitted a joint affidavit signed by officers of each member institution. In the affidavit, the member institutions state that they have consulted regarding their duties during litigation, and have established a plan to communicate by conference call, email, and meetings. They also note that Bristol and Omaha Police & Fire served as joint lead plaintiffs in a PSLRA action in the Northern District of California.

The IIG alleges that, as a group, it purchased approximately 154, 000 total shares and, taking sales into account, 79, 000 net shares in Insulet during the class period. It alleges net expenditures of more than $2, 500, 000. Finally, it alleges total losses of approximately $834, 000 as calculated on a First-In-First-Out ("FIFO") basis or $330, 000 as calculated on a Last-In-First-Out ("LIFO") basis.

B. Alaska Electrical Pension Fund

The Alaska Electrical Pension Fund ("Alaska Electrical") has moved for appointment as the sole lead plaintiff in this case. It seeks appointment of Robbins Geller Rudman & Dowd LLP as lead counsel. Alaska Electrical alleges that it purchased approximately 25, 400 total shares in Insulet during the class period. It sold all of these shares during the class period and, therefore, purchased no net shares. It alleges net expenditures of $295, 000, and total losses of the same amount, regardless of calculation method.

C. Jefferey Smith

Jefferey Smith is the only individual plaintiff seeking appointment in this action. Although he initially filed a motion for appointment as the sole lead plaintiff, he has since filed a memorandum requesting appointment as co-lead plaintiff with the IIG. He seeks appointment of Glancy Prongay & Murray LLP as co-lead counsel. Smith alleges that he purchased approximately 168, 200 total shares, and 32, 200 net shares, in Insulet during the class period. He alleges net expenditures of approximately $650, 000 and total losses of $110, 660.

III. APPOINTMENT UNDER THE PSLRA

Section 101(b) of the PLSRA, codified at 15 U.S.C. §74u-4, governs the appointment of lead plaintiffs in securities class actions. As Judge Patti Saris succinctly explained:

The purpose of [§101(b)] is to establish new procedures for the appointment of the lead plaintiff and lead counsel in securities class actions. H.R. Conf. Rep. No. 104-369, at 32 (1995) (reprinted in 1995 U.S.C.C.A.N. 730, 731). The legislation responds to congressional concern that "the selection of the lead plaintiff and lead counsel should rest on considerations other than how quickly a plaintiff has filed its complaint, " as well as its desire "to increase the likelihood that institutional investors will serve as lead plaintiffs by requiring courts to presume that the member of the purported class with the largest financial stake in the relief sought is the most adequate plaintiff." Id. at 33-34. This is predicated upon the conclusion that "[i]nstitutional investors and other class members with large amounts at stake will represent the interests of the plaintiff class more effectively than class members with small amounts at stake." Id. at 34. Expressing a jaundiced view of "unsupervised" plaintiffs' attorneys, the Conference Committee was most hopeful that "the plaintiff will choose ...

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