TABLE OF CONTENTS PAGE TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . ii INTRODUCTION AND SUMMARY OF THE COMMISSION'S POSITION . . . . . . . . . 1 BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 A. The Litigation Reform Act and Its Lead Plaintiff Provisions . . . . . . . . . . . . . . . . 3 B. Legislative History of the Lead Plaintiff Provisions . . . . . . . . . . . . . . . . . . 4 C. Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 I. THE COMMISSION IS NOT AWARE OF ANY REASON THE ACTIONS SHOULD NOT BE CONSOLIDATED, NOR OF ANY LIMITATION THAT SHOULD BE PLACED ON CONSOLIDATION. . . . . . . . . . . . . . . . . . . . . . . . . . 10 II. THE COMMISSION BELIEVES THAT THE FLORIDA BOARD PRESUMPTIVELY IS THE MOST ADEQUATE PLAINTIFF, SUBJECT TO REBUTTAL OF THE PRESUMPTION IN ACCORDANCE WITH THE LANGUAGE AND PURPOSES OF THE LITIGATION REFORM ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 A. The Florida Board Has the Largest Financial Interest in the Litigation, Once the "Vesta Plaintiffs Group" Is Limited to a Size That Would Enable It To Manage the Litigation and the Lawyers Effectively. . . . . . . . . . . . . . . . . 12 B. The Court Should Be Guided by the Language and Purposes of the Litigation Reform Act in Deciding Whether the Vesta Plaintiffs Group Has Met Its Burden of Proving That the Florida Board Will Not Fairly and Adequately Protect the Interests of the Class. . . . . . . . . . . . . 29 C. The Court Should Not Appoint "Co-Lead Plaintiffs." . . . . . . . . . . . . . . . . . . . . . . . . 33 CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 ======END OF PAGE i====== TABLE OF AUTHORITIES CASES: PAGE Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299 (1985) . . . . . . . . . . . . . . . . . . . . . . . . . 3 Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (1975) . . . . . . . . . . . . . . . . . . . . . . . . . 3 Bobrow v. MobileMedia, Inc., No. 96-4715 (D.N.J. Mar. 31, 1997) . . . . . . . . . . . . . . . . . 24 In re California Micro Devices Sec. Litig., 168 F.R.D. 257 (N.D. Cal. 1996) . . . . . . . . . . . . . . . . . . . 15 In re California Micro Devices Sec. Litig., 965 F. Supp. 1327 (N.D. Cal. 1997) . . . . . . . . . . . . . . . . . 15 In re Cendant Corp., No. 98-CV-1664 (WHW), 1998 WL 598337 (D.N.J. Sept. 8, 1998) . . . . . . . . . . . . . . . . . . . 27, 35, 37 passim In re Cendant Corp., No. 98-CV-1664 (WHW) (D.N.J. Hearing Aug. 24, 1998) . . . . . . . . . 32 In re Cephalon Sec. Litig., No. CIV A 96-0633, 1996 WL 515203 (E.D. Pa. Aug. 27, 1996) . . . . . . . . . . . . . . . . . . . . . . 24 Chan v. Orthologic Corp., No. CIV 96-1514 PHX RCB (D. Ariz. Dec. 19, 1996) . . . . . . 14, 24, 31 Chill v. Green Tree Financial Corp., No. 97-2666 (JRT/RLE), 1998 WL 420557 (D. Minn. June 29, 1998) . . . . . . . . . . . . . . . . . . 11, 24, 25 City Nominees, Ltd. v. Macromedia, Inc., No. C97-3521-SC (N.D. Cal. Jan. 23, 1998) . . . . . . . . . . 15, 19, 20 D'Hondt v. Digi Int'l Inc., 1997 WL 405668 (D. Minn. Apr. 3, 1997) . . . . . . . . . . . 24, 25, 35 In re Diamond Multimedia Sys., Inc. Sec. Litig., No. C 96-2644-SBA (N.D. Cal. Jan. 13, 1997) . . . . . . . . . . . . . 24 In re Donnkenny Inc. Sec. Litig., 171 F.R.D. 156 (S.D.N.Y. 1997) . . . . . . . . . . . . . . . 18, 19, 37 passim ======END OF PAGE ii====== Gluck v. Cellstar Corp., 976 F. Supp. 542 (N.D. Tex. 1997) . . . . . . . . . . . . . . 13, 30, 31 passim In re Graham-Field Health Products Litig., No. 98-CV-19:3 (DRH) (E.D.N.Y. Aug. 10, 1998) . . . . . . . . . . . . 20 Greebel v. FTP Software, Inc., 939 F. Supp. 57 (D. Mass. 1996) . . . . . . . . . . . . . . . 14, 23, 24 passim Hendrix v. Raybestos-Manhattan, Inc., 776 F.2d 1492 (11th Cir. 1985) . . . . . . . . . . . . . . . . . . . 10 In re Horizon/CMS Healthcare Corp. Sec. Litig., 3 F. Supp. 2d 1208 (D.N.M. 1998) . . . . . . . . . . . . . . . . 40-41 In re Informix Corp. Sec. Litig., No. C-97-1289-SBA (N.D. Cal. Oct. 17, 1997) . . . . . . . . . . . . . 20 J.I. Case Co. v. Borak, 377 U.S. 426 (1964) . . . . . . . . . . . . . . . . . . . . . . . . . 3 John Hancock Mut. Life Ins. Co. v. Harris Trust & Sav. Bank, 510 U.S. 86 (1993) . . . . . . . . . . . . . . . . . . . . . . . . . 30 Lax v. First Merchants Acceptance Corp., No. 97 C 2715, 1997 WL 461036 (N.D. Ill. Aug. 11, 1997) . . . . . . . . . . . . . . . . . . . . . . . 23, 24, 39 Malin v. Ivax Corp., No. 96-1843 (S.D. Fla. Nov. 1, 1996) . . . . . . . . . . . . . . 37, 42 In re Oxford Health Plans, Inc. Sec. Litig., No. MDL-1222, 1998 WL 400741 (S.D.N.Y. July 15, 1998) . . . . . . . . . . . . . . . . . . 19, 33, 37 passim Powers v. Eichen, No. 96-1431-B (AJB) (S.D. Cal. Nov. 15, 1996) . . . . . . . . . . . 24 Ravens v. Iftikar, 1997 WL 405110 (N.D. Cal. July 16, 1997) . . . . . . . . . . . . 14, 30 In re Read-Rite Corp. Sec. Litig., No. C-97-20059 RMW (N.D. Cal. May 27, 1997) . . . . . . . . . . . . . 24 In re Ride, Inc. Sec. Litig., Master File No. C97-402WD (W.D. Wash. Aug. 5, 1997) . . . . . . . . . . . . . . . . . . . . . . 24 ======END OF PAGE iii====== Steiner v. Frankino, No. 1:98 CV0264 (N.D. Ohio July 16, 1998) . . . . . . . . . . . . . . . . . . . . 36, 37 Zuckerman v. Foxmeyer Health Corp., No. 3:96-CV-2258-T, 1997 WL 314422 (N.D. Tex. Mar. 28, 1997) . . . . . . . . . . . . . . . . . . . . 23-24 STATUTES AND RULES Securities Exchange Act of 1934, 15 U.S.C. 78a et seq. Section 13(d), 15 U.S.C. 78m(d) . . . . . . . . . . . . . . . . . 22, 23 Section 13(d)(3), 15 U.S.C. 78m(d)(3) . . . . . . . . . . . . . . 22, 23 Section 21D, 15 U.S.C. 78u-4 . . . . . . . . . . . . . . . . . . . . 1 Section 21D(a)(3)(A), 15 U.S.C. 78u-4(a)(3)(A) . . . . . . . . . . . 11 Section 21D(a)(3)(A)(ii), 15 U.S.C. 78u-4(a)(3)(A)(ii) . . . . . . . 10 Section 21D(a)(3)(B)(i), 15 U.S.C. 78u-4(a)(3)(B)(i) . . . . . . . . 4 Section 21D(a)(3)(B)(iii), 15 U.S.C. 78u-4(a)(3)(B)(iii) . . . . . . . . . . . . . . . . . . . 4 Section 21D(a)(3)(B)(iii)(I), 15 U.S.C. 78u-4(a)(3)(B)(iii)(I) . . . . . . . . . . . . . . . 12, 13 Section 21D(a)(3)(B)(iii)(I)(aa), 15 U.S.C. 78u-4(a)(3)(B)(iii)(I)(aa) . . . . . . . . . . . . . . . 11 Section 21D(a)(3)(B)(iii)(I)(bb), 15 U.S.C. 78u-4(a)(3)(B)(iii)(I)(bb) . . . . . . . . . . . . . . . 40 Section 21D(a)(3)(B)(iii)(I)(cc), 15 U.S.C. 78u-4(a)(3)(B)(iii)(I)(cc) . . . . . . . . . . . . . . . 12 Section 21D(a)(3)(B)(iii)(II), 15 U.S.C. 78u-4(a)(3)(B)(iii)(II) . . . . . . . . . . . . . 12, 28, 29 passim Section 21D(a)(3)(B)(iii)(II)(aa), 15 U.S.C. 78u-4(a)(3)(B)(iii)(II)(aa) . . . . . . . . . . . . . . . 12 Section 21D(a)(3)(B)(iii)(II)(bb), 15 U.S.C. 78u-4(a)(3)(B)(iii)(II)(bb) . . . . . . . . . . . . . . . 12 Section 21D(a)(3)(B)(iv), 15 U.S.C. 78u-4(a)(3)(B)(iv) . . . . . . . 30 Section 21D(a)(3)(B)(v), 15 U.S.C. 78u-4(a)(3)(B)(v) . . . . . . 4, 39 Section 21D(a)(3)(B)(vi), 15 U.S.C. 78u-4(a)(3)(B)(vi) . . . . . . . . . . . . . . . . . 26, 30 Section 21D(a)(6), 15 U.S.C. 78u-4(a)(6) . . . . . . . . . . . . . . 42 Federal Rules of Civil Procedure Fed. R. Civ. P. 23 . . . . . . . . . . . . . . . . . . . . 4, 12, 24 Fed. R. Civ. P. 42(a) . . . . . . . . . . . . . . . . . . . . . . . . 10 CONGRESSIONAL MATERIAL 141 Cong. Rec. H14038 (Dec. 6, 1995) . . . . . . . . . . . . . . . . 7 141 Cong. Rec. H14039 (Dec. 6, 1995) . . . . . . . . . . . . . . . . 7 ======END OF PAGE iv====== 141 Cong. Rec. H14048 (Dec. 6, 1995) . . . . . . . . . . . . . . . . 7 141 Cong. Rec. H14050 (Dec. 6, 1995) . . . . . . . . . . . . . . . . 7 141 Cong. Rec. H15214-215 (Dec. 20, 1995) . . . . . . . . . . . . . . 5 141 Cong. Rec. H15223-224 (Dec. 20, 1995) . . . . . . . . . . . . . 4-5 141 Cong. Rec. S8895 (June 22, 1995) . . . . . . . . . . . . . . . . 5 141 Cong. Rec. S8897 (June 22, 1995) . . . . . . . . . . . . . . . . 6 141 Cong. Rec. S9040 (June 26 1995) . . . . . . . . . . . . . . . . . 6 141 Cong. Rec. S9055 (June 26, 1995) . . . . . . . . . . . . . . . . 6 141 Cong. Rec. S9065 (June 26, 1995) . . . . . . . . . . . . . . . . 6 141 Cong. Rec. S9075-77 (June 26, 1995) . . . . . . . . . . . . . . . 6 141 Cong. Rec. S9172-73 (June 27, 1995) . . . . . . . . . . . . . . . 6 141 Cong. Rec. S9212 (June 28, 1995) . . . . . . . . . . . . . . . . 6 141 Cong. Rec. S9321 (June 28, 1995) . . . . . . . . . . . . . . . . 6 141 Cong. Rec. S17934 (Dec. 5, 1995) . . . . . . . . . . . . . . . . 6 141 Cong. Rec. S17956 (Dec. 5, 1995) . . . . . . . . . . . . . . . . 6 141 Cong. Rec. S17967 (Dec. 5, 1995) . . . . . . . . . . . . . . . . 6 141 Cong. Rec. S17969 (Dec. 5, 1995) . . . . . . . . . . . . . . . . 6 141 Cong. Rec. S17980 (Dec. 5, 1995) . . . . . . . . . . . . . . . . 6 141 Cong. Rec. S17982-984 (Dec. 5, 1995) . . . . . . . . . . . . . 6-7 141 Cong. Rec. S19054 (Dec. 21, 1995) . . . . . . . . . . . . . . . . 7 141 Cong. Rec. S19084 (Dec. 21, 1995) . . . . . . . . . . . . . . . . 7 141 Cong. Rec. S19180 (Dec. 22, 1995)) . . . . . . . . . . . . . . . 5 Conference Report on Securities Litigation Reform, H.R. Rep. No. 104-369 (1995) . . . . . . . . . . . . . 3, 5, 7 passim Report on the Private Securities Litigation Reform Act of 1995, S. Rep. No. 104-98 (1995) . . . . . . . . . 5, 7, 14 passim Report on the Common Sense Legal Reform Act of 1995, H.R. Rep. No. 104-50 (1995) . . . . . . . . . . . . . . . 5, 7 Testimony of Securities and Exchange Commission Concerning S. 1260, the "Securities Litigation Uniform Standards Act of 1997," Before the Subcommittee on Securities, Committee on Banking, Housing, and Urban Affairs, U.S. Senate (Oct. 29, 1997) . . . . . . . 35 MISCELLANEOUS Elliott J. Weiss & John S. Beckerman, Let the Money Do the Monitoring: How Institutional Investors Can Reduce Agency Costs in Securities Class Actions, 104 Yale L.J. 2053 (1995) . . . . . . . . . . . . . . . . . . . . 14, 18 Memorandum of Securities and Exchange Commission in Support of Motion for an Order Permitting Securities Trading in Certain Circumstances, filed in In re WRT Energy Corp., No. 96-BK-5012 (Bankr. W.D. La. May 6, 1996) . . . . . . . . . . . . . . . . . . . . 16 ======END OF PAGE v====== Securities and Exchange Commission, Report to the President and the Congress on the First Year of Practice Under the Private Securities Litigation Reform Act of 1995 (Apr. 1997) . . . . . . . . . . . . . . . . . . . . . . . 17, 35 Janet Cooper Alexander, Do the Merits Matter? A Study of Settlements in Securities Class Actions, 43 Stan. L. Rev. 497 (1991) . . . . . . . . . . . . . . . . 33 ======END OF PAGE vi======