The Ninth Circuit chided a district court today for usurping a right that the panel held belongs to the "lead plaintiff" in cases under the Private Securities Litigation Reform Act of 1995 — the right to choose counsel for the putative class.
The PSLRA, as you'll recall, all but directs district courts to award the lead plaintiff crown to the one that lost the most on his, her, or its securities investment due to the fraud. The court may demur but only for excellent reasons — as where the biggest loser has gone stark raving mad or lives in a prison cell due to his own financial shenanigans.
The statute also gives courts power to veto the lead plaintiff's choice of counsel for the class.
The district court in Cohen v. United States District Court, No. 09-70378 (9th Cir. Nov. 5, 2009), forgot that a veto doesn't divest the chooser of the right to select. His Honor named two co-lead plaintiffs as well as two co-lead law firms. Which seems fine. But one of the co-lead plaintiffs objected on the ground that the court ignored his pick and appointed as one of the co-lead counsel a law firm he didn't want. The court rejected his gripe.
The Ninth Circuit disagreed. It held, on co-lead plaintiff Roberto Cohen's mandamus petition, that the district court lacked power to install its own choice of class counsel:
Although it cannot be contested that the district court had the authority to reject Cohen's choice of lead counsel, it does not follow that having done so it had the authority to select lead counsel of its own choosing. This argument misses the fundamental point that the PSLRA unambiguously assigns this authority to the lead plaintiff.
Id., slip op. at 14917.
Blawgletter wishes to point out a bonus footnote in the court's opinion. There the panel poked at an issue that "none of the parties raise" — the question of whether the PSLRA allows more than one lead plaintiff. "While the PSLRA allows a group to serve as lead plaintiff, it also consistentlly refers to the lead plaintiff and most adequate plaintiff in the singular, suggesting that the district court should appoint only one lead plaintiff, whether an individual or a group." Id. at 14921 n.4. Mmmmm. Dicta.