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OFI Risk Arbitrages v. Cooper Tire & Rubber Co.

United States District Court, D. Delaware

August 6, 2014

OFI RISK ARBITRAGES, OFI RISK ARB ABSOLU and TIMBER HILL LLC, individually and on behalf of all others similarly situated, Plaintiffs,
v.
COOPER TIRE & RUBBER COMPANY, ROY ARMES and BRADLEY HUGHES, Defendants

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[Copyrighted Material Omitted]

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For OFI Risk Arbitrages, OFI Risk Arb Absolu and Timber Hill LLC, Movants: David J. Margules, Esq., Bouchard Margules & Friedlander, P.A., Wilmington, DE; Albert J. Carroll, Esq., Bouchard Margules & Friedlander, P.A., Wilmington, DE, Liaison.

For OFI Risk Arbitrages, OFI Risk Arb Absolu and Timber Hill LLC, Movants: Vincent R. Cappucci, Esq., Entwistle & Cappucci LLP, New York, NY; Andrew J. Entwistle, Esq., Entwistle & Cappucci LLP, New York, NY; Alexander Broche, Esq., Entwistle & Cappucci LLP, New York, NY; Gerald H. Silk, Esq., Bernstein Litowitz Berger & Grossman LLP, New York, NY; Avi Josefson, Esq., Bernstein Litowitz Berger & Grossman LLP, New York, NY; Michael Blatchley, Esq., Bernstein Litowitz Berger & Grossman LLP, New York, NY.

For Zhi Sun and Xiaoyan Jia, Movants: James R. Banko, Esq., Faruqi & Faruqi, LLP, Wilmington, DE, Liaison.

For Zhi Sun and Xiaoyan Jia, Movants: Kim E. Miller, Esq., Kahn Swick & Foti, LLC, New York, NY.

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MEMORANDUM OPINION

Richard G. Andrews, U.S. District Judge.

Presently before the Court are two competing motions from two groups of movants seeking appointment as Lead Plaintiffs for the proposed securities class action and the approval of their choice of Lead Counsel.

On January 17, 2014, plaintiffs OFI Risk Arbitrages and OFI Risk Arb Absolu, through their asset manager OFI Asset Management (collectively " OFI" ), and Timber Hill LLC (collectively " OFI & Timber Hill" ) filed this securities class action against Cooper Tire and Rubber Company, Roy Armes, and Bradley Hughes

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(collectively " Defendants" ). (D.I. 1 ). That same day, OFI & Timber Hill also caused a notice of the pendency of this action to be published in compliance with the Private Securities Litigation Reform Act (the " PSLRA" ). (D.I. 12 at 8; D.I. 13, Ex. C at 1). The notice alerted Cooper Tire investors of the action and that the deadline to seek appointment as lead plaintiff in this action was March 18, 2014. (D.I. 12 at 8; D.I. 13, Ex. C at 3). On March 18, 2014, OFI & Timber Hill filed their Motion for Appointment as Lead Plaintiffs and Approval of Lead Counsel. (D.I. 11). On the same day, Zhi Sun and Xiaoyan Jia (collectively the " Sun Family" ) filed their competing Motion for Appointment as Lead Plaintiffs and Approval of Lead Counsel. (D.I. 8).

For the reasons discussed below, the Court will appoint OFI & Timber Hill as Lead Plaintiffs for this securities action and approve their selection of Lead Counsel.

BACKGROUND

I. The Proposed Class Action

The complaint seeks monetary damages for securities fraud perpetrated by Cooper Tire. It proposes a class including all persons who purchased the publicly traded common stock of Cooper Tire between June 12, 2013 and November 8, 2013 and Cooper Tire stockholders of record as of the close of business on August 30, 2013. (D.I. 1 at1-2). The complaint alleges violations of § § 10(b), 20(a), and 14(a) of the Securities Exchange Act of 1934 (the " Securities Exchange Act" ). Id. at 41-45. According to the complaint, Cooper Tire is a Delaware corporation and a leading tire manufacturer. Id. at 2. In June 2013, Cooper Tire announced it had entered into an agreement to be acquired by Apollo Tyres Ltd., an India-based tire company, for $35 per share, a deal totaling $2.5 billion. Id. Cooper Tire executives presented the acquisition as a deal " in the best interest of the shareholders." Id. at 3. The complaint alleges that Cooper Tire executives knowingly failed to disclose that Cooper Tire's joint venture partner had also sought to acquire Cooper Tire, would oppose the merger with Apollo, and was capable of thwarting the merger. Id. at 3-4. The complaint further alleges that Cooper Tire made false and misleading representations material to the merger about its Chinese subsidiary's operations and Cooper Tire's control over the subsidiary's operations and financial reporting. (D.I. 1 at 6). The complaint alleges that, as a result of these misrepresentation and omissions, investors in Cooper Tire were misled about the true risk involved in the merger deal, which the shareholders had approved. Id. at 9. Following disclosure of its joint venture partner's opposition to the merger and the shutdown of its subsidiary's facilities in response to the announced merger, the market realized the merger would not close at the promised $35 per share and Cooper Tire's stock prices fell, resulting in losses for investors. Id.

II. The Competing Movants

Plaintiffs OFI Risk Arbitrages and OFI Risk Arb Absolu (collectively the " OFI Funds" ) are Fonds Commun de Placement (" FCPs" ) organized under the laws of France. (D.I. 17, Ex. B at 3). According to the General Secretary of OFI Asset Management, under French law, the OFI Funds have no legal personality, and OFI Asset Management has the exclusive right to manage the OFI Funds and engage in litigation in the OFI Funds' names. Id. OFI Asset Management is a subsidiary of a French asset manager that " manages a variety of mutual funds" with assets totaling $75 billion. Id. OFI claims that the

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OFI Funds purchased 51,000 shares during the class period and suffered losses of $247,893.94. (D.I. 13, Ex. B at 2; D.I. 16 at 6). OFI's co-plaintiff, Timber Hill, is a registered securities broker dealer in the United States and a subsidiary of Interactive Broker Group, Inc., a global electronic broker dealer with $29 billion in assets. (D.I. 17, Ex. C at 2). Timber Hill trades a variety of securities-listed products on its proprietary account and creates liquidity from " tight bid/offer spreads." Id. Timber Hill claims it suffered $265,296.74 in losses as a result of its investment in Cooper Tire shares. (D.I. 16 at 6). Thus, OFI & Timber Hill claim combined losses of $513,190.68. Id.

Sun and Jia are a married couple residing in San Jose, California. (D.I. 20, Ex. A at 3). The Sun Family claims Sun purchased 5,100 Cooper Tire shares and suffered losses of $18,309. (D.I. 10, Ex. B at 2). The Sun Family also claims Jia purchased 14,000 shares and suffered losses of $74,780. Id. Therefore, the Sun Family claims combined losses of $93,089. Id.

Both OFI & Timber and the Sun Family assert that they are the most adequate plaintiffs to represent the class in this securities action and should be appointed lead plaintiffs. (D.I. 16 at 8; D.I. 18 at 8).

DISCUSSION

I. Legal Standard

The selection of lead plaintiff and the approval of lead counsel are " committed to the court's discretion." Vandevelde v. China Natural Gas, Inc., 277 F.R.D. 126, 131 (D. Del. 2011) (internal citation omitted). The PSLRA sets out a two-step process the court must follow in order to determine the " most adequate plaintiff." Id. First, the court must identify the presumptive lead plaintiff. Id. Second, the court must determine whether the presumption has been rebutted. Id.

Under the PSLRA, the presumptive lead plaintiff is the person or group that (A) " filed the complaint or made a motion" to serve as lead plaintiff; (B) " has the largest financial interest in the relief sought; " and (C) " otherwise satisfies" Federal Rule of Civil Procedure 23. 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I)(aa)-(cc).

The presumption may be rebutted by opposing parties " only upon proof" that the presumptive lead plaintiff " will not fairly and adequately protect the interests of the class," or that the presumptive lead plaintiff 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)(aa)-(bb).

Once the most adequate plaintiff is determined by the court, the lead plaintiff " shall, subject to the approval of the court, select and retain counsel to represent the class." 15 U.S.C. § 78u-4(a)(3)(B)(v).

II. Presumptive Lead Plaintiffs

The Court finds that OFI & Timber Hill are the most adequate plaintiffs to represent the class and are entitled to the presumption. The threshold determination of the presumptive lead plaintiffs " should be a product of the court's independent judgment." In re Cendant Corp. Litig., 264 F.3d 201, 263 (3d Cir. 2001). Arguments why particular movants are not entitled to the presumption " should be considered only in the context of assessing whether the presumption has been rebutted." Id. at 263-64 (emphasis in original). In their briefing and at oral argument, both the Sun Family and OFI & Timber Hill assert that they are entitled to the presumption. (D.I. 16 at 8; D.I. 18 at 8; D.I. 45 (" Transcript" and hereafter " Tr." ) at 6-7). Because the Court finds that OFI & Timber Hill have the presumption, the

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Sun Family's arguments why OFI & Timber Hill should not be considered the presumptive lead plaintiffs will be addressed as rebuttals to the presumption.

A. Motion for Appointment

First, the PSLRA requires that the presumptive lead plaintiff must have filed the complaint or made a motion for appointment within sixty days of the publication of notice regarding the action. 15 U.S.C. ยง 78u-4(a)(3)(A)(i)(II), (B)(iii)(II)(aa). Both OFI & Timber Hill and the Sun Family ...


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