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Doshi v. General Cable

United States District Court, E.D. Kentucky, Northern Division, Covington

November 7, 2017

SATISH DOSHI, Individually And on behalf of all other Persons similarly situated PLAINTIFFS
v.
GENERAL CABLE, DEFENDANTS

          MEMORANDUM OPINION AND ORDER

          William O. Bertelsman, United States District Judge

         This is a securities class action brought on behalf of all persons who purchased General Cable securities between February 23, 2012 and February 10, 2016.

         This matter is currently before the Court on competing motions for appointment as lead plaintiff. One is by The Employees Retirement System of the Puerto Rico Electric Power Authority (“PREPA”) (Doc. 19), and the other is by William Edward Long, as Trustee of the UA 09-21-2001 William Edward Long & Bonnie Diane Long Living Trust (“the Long Trust”) (Doc. 22).[1]

         The Court has reviewed this matter and concludes that oral argument is not necessary.[2]

         Factual and Procedural Background

         General Cable is manufacturer and distributor of fiber optic wire and cable products for use in the energy, industrial, construction, specialty and communications markets. (Compl. ¶ 21).

         Plaintiffs allege that, beginning on February 23, 2012, the Company made false or misleading statements in its public filings, or failed to disclose information, regarding the fact that the Company was violating the Foreign Corrupt Practices Act of 1992 (“FCPA”) by paying millions of dollars in bribes to foreign officials in countries where it did business. (Compl. § 47). When the Company disclosed information about its potential liability under the FCPA, its stock price dropped, causing harm to shareholders. (Compl. ¶¶ 48, 49, 63, 64).

         Specifically, the Complaint alleges two such “corrective” disclosures:

• “On September 22, 2014, General Cable disclosed that the Company was reviewing ‘payment practices, ' ‘the use of agents, ' and ‘the manner in which the payments were reflected on our cooks and records' in connection with General Cable's operations in Portugal, Angola, Thailand, and India. General Cable advised investors that these issues ‘may have implications under' the [FCPA].” (Compl. ¶ 5). On this news, the company's stock price dropped 4.68%. (Compl. ¶ 6).
• On February 10, 2016, post-market, General Cable reported that the Company had increased a previously disclosed disgorgement of profits related to bribe-tainted sales in Angola from $24 to $33 million, after identifying “certain other transactions that may raise concern.” (Compl. ¶ 8). On this news, the company's stock price dropped 31.61%. (Compl. ¶ 9).

         Plaintiffs filed this class action on January 5, 2017, in the United States District Court for the Southern District of New York. (Doc. 1). It was transferred to this Court on February 27, 2017. (Doc. 9). The Complaint alleges a claim against General Cable for violation of Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b) and Rule 10(b)(5) promulgated thereunder, as well as a claim against defendants Kenny and Robinson for violation of Section 20(a) of the Exchange Act (“control person” liability). (Doc. 1).

         Analysis

         The Private Securities Litigation Reform Act (“PSLRA”), 15 U.S.C. § 78u-4, governs the selection of a lead plaintiff in private securities class actions.[3]

         “The PSLRA provides a rebuttable presumption with regard to the most adequate plaintiff.” Farrah v. Provectus Biopharmaceuticals, Inc., 68 F.Supp.3d 800, 804 (E.D. Tenn. 2014). This presumption is triggered where a potential lead plaintiff has: (1) either filed the complaint or made a motion in response to a notice; (2) in the determination of the Court, has the largest financial interest in the relief sought by the class; and (3) otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure. 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I).

         However, this presumption can be overcome by a showing that the presumptive lead plaintiff will be subject to unique defenses or is otherwise inadequate. 15 U.S.C. § 78u-4(a)(3)(iii)(II).

         A. Largest Financial Interest

         The PSLRA does not define the term “largest financial interest, ” and it does not appear that the Sixth Circuit has ...


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