In re Tyco Internat’l MDL MD-00-1335-B 8/17/00 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

In re Tyco International, Ltd. MDL N o . 00-MD-1335-B

Securities Litigation ALL CASES

Opinion N o .

MEMORANDUM AND ORDER

These securities fraud actions have been transferred to this

court for consolidated pretrial proceedings. Plaintiffs in most

of the underlying actions allege that Tyco International Ltd.,

along with two of its top officers, L . Dennis Kozlowski and Mark

H. Swartz (the “individual defendants”), made material

misrepresentations and/or omitted to disclose material, non-

public information concerning Tyco’s accounting practices and

financial condition, in violation of §§ 10(b) and 20(a) of the

Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C.

§§ 78j(b) and 78t(a), and Rule 10b-5,

.10b-5,

promulgated thereunder. The complaint in the underlying action

filed by plaintiff Harold Landau claims that the individual defendants violated the Insider Trading and Securities Fraud

Enforcement Act, § 20A of the Exchange Act, as amended, 15 U.S.C.

§ 78t-1, by selling large amounts of Tyco common stock while in

possession of material, non-public information.

Currently before this court are a number of motions relating

to the appointment of lead plaintiff and lead counsel pursuant to

the Private Securities Litigation Reform Act of 1995, 15 U.S.C. §

78u-4 (“the PSLRA”), which amended the Exchange Act. A group of

three plaintiffs, who collectively refer to themselves as the

“Tyco Shareholder Group” (“TSG”), seek appointment as lead

plaintiff and approval of their choice of lead counsel.1 Landau

does not oppose the TSG’s appointment as lead plaintiff for those

plaintiffs whose claims arise under §§ 10(b) and 20(a) and Rule

10b-5, but seeks appointment as lead plaintiff of a separate

1 The TSG originally contained four members. Since the original motions were filed, however, one plaintiff -- Woodway Financial Advisors -- has withdrawn from the group and its bid for appointment as lead plaintiff. See Woodway Financial Advisors’ Notice of the Withdrawal of the Req. That It Be Named Lead P l . (Doc. # 2 9 ) . Accordingly, I consider only the remaining members of the TSG in this memorandum and order.

-2- class of plaintiffs whose claims arise under § 20A of the

Exchange Act. Landau also seeks approval of his counsel as lead

counsel for the separate § 20A class. The defendants have

opposed the TSG’s motion, and both the TSG and the defendants

have opposed Landau’s motion.2

2 Both the TSG and the defendants have elected to rely upon briefs originally filed in Greenberg v . Tyco Int’l, Ltd., 99-CIV- 11930-(JSR), an underlying action brought in the Southern District of New York, with respect to the lead plaintiff and lead counsel determination. See TSG’s Mem. of Law in Supp. of its Unopposed Mot. for Appointment as Lead Pls. and for Approval of its Selection of Lead Counsel (Doc. # 8 ) ; TSG’s Mem. of Law in Further Supp. of its Mot. (Doc. # 8 ) ; Defs.’ Mem. in Opp’n to Lead Pl.-Lead Counsel Mots. of the Proposed Tyco Lead Pls. and the Olenicoff Group (Doc. # 9 ) ; Defs.’ Supplemental Mem. (Doc. # 9 ) . Landau’s current motion is a renewal of the motion originally filed in his underlying action before this court. See Landau’s Mot. for Appointment as Lead P l . of the Section 20A Class and for Appointment of His Counsel as Lead Counsel for That Class (Doc. # 1 0 ) . Both the TSG and the defendants opposed the renewed Landau motion, see TSG’s Mem. in Opp’n to the Mot. for Appointment of a Separate Lead P l . and Lead Counsel for a Section 20A Claim (Doc. # 1 3 ) ; Defs.’ Mem. in Opp’n to Landau’s Mot. (Doc. # 1 4 ) , and Landau filed a reply in further support of his renewed motion, see Rep. Mem. in Further Supp. of Landau’s Mot. (Doc. # 1 5 ) . Finally, the TSG filed an additional brief and supporting affidavits in response to this court’s order of July 1 9 , 2000. See TSG’s Mem. in Resp. to the Court’s July 19, 2000 Mem. and Order (Doc. # 2 8 ) , with attached affidavits.

-3- I. The PSLRA, 15 U.S.C. § 78u-4

Congress enacted the PSLRA in 1995 to redress certain

perceived abuses in securities class actions. See In re Party

City Secs. Lit.,

1 , 103 (D.N.J. 1999); In re Oxford

Health Plans, Inc., Secs. Lit.,

2 , 43 (S.D.N.Y.

1998). 3 Among other objectives, Congress sought to ensure that

such actions would be controlled by investors with a significant

stake in the litigation, rather than by lawyers with an

independent financial interest in bringing “strike” suits. See

Greebel v . FTP Software, Inc.,

(1st Cir. 1999)

(“The enactment of the PSLRA in 1995 marked a bipartisan effort

to curb abuse in private securities lawsuits, particularly the

filing of strike suits.”) (citing H.R. Conf. Rep. N o . 104-369, at

32 (1995), reprinted in 1995 U.S.C.C.A.N. 730, 7 3 1 ) ; In re Lucent

Techs., Inc., Secs. Lit.,

3 7 , N o . CIV. A . 00-

621(AJL),

(D.N.J. Apr. 2 6 , 2000) (noting

3 Motion to amend denied by

(S.D.N.Y. 1998), appeal dismissed sub nom., Metro Servs. v . Wiggins,

(2d Cir. 1998).

-4- that in enacting the PSLRA Congress sought to “empower investors

so that they, not their lawyers, control private securities

litigation”) (quoting In re Party City Secs. Lit.,

) (internal quotation marks omitted); Greebel v . FTP Software,

Inc.,

7 , 58 (D. Mass. 1996) (“The principal impetus

underlying [the PSLRA] was the belief that the plaintiff’s bar

had seized control of class action suits, bringing frivolous

suits on behalf of only nominally interested plaintiffs in the

hope of obtaining a quick settlement.”) (citing Sen. R. N o . 104-

9 8 , at 8-11 (1995), reprinted in 1995 U.S.C.C.A.N. 679, 687-90).

To accomplish this objective, the PSLRA establishes a new

mechanism for appointing a lead plaintiff and lead counsel.4

4 The PSLRA also imposes certain procedural requirements on plaintiffs bringing securities fraud actions. The statute’s certification provision requires that a plaintiff seeking to serve as a representative party provide the court with certain information, including the plaintiff’s transactions in the security at issue during the class period. See 15 U.S.C. § 78u- 4(a)(2)(A) (Supp. 1996). The statute’s notice provision provides in relevant part that

Not later than 20 days after the date on which the complaint is filed, the plaintiff or plaintiffs shall cause to be published, in a widely circulated national business-oriented publication or wire service, a notice advising members of

-5- In a consolidated case such as this, the court must appoint

a lead plaintiff as soon as practicable after consolidation. See

15 U.S.C. § 78u-4(a)(3)(B)(ii) (Supp. 1996). Under the PSLRA,

the lead plaintiff (or the “most adequate plaintiff”) is “the

member or members of the purported plaintiff class that the court

determines to be most capable of adequately representing the

interests of class members.” Id. § 78u-4(a)(3)(B)(i) (Supp.

1996). The statute creates a rebuttable presumption under which

the lead (or most adequate) plaintiff is “the person or group of

persons” that (1) either filed a complaint or moved for

appointment as lead plaintiff, (2) has, in the court’s

the purported plaintiff class-- (I) of the pendency of the action, the claims asserted therein, and the purported class period; and (II) that, not later than 60 days after the date on which the notice is published, any member of the purported class may move the court to serve as lead plaintiff of the purported class.

Id. § 78u-4(a)(3)(A)(i) (Supp. 1996). The defendants challenge the adequacy of various notices published by the proposed co-lead counsel for the TSG. I have reviewed the notices in question, and I am satisfied that although they may not be models of what Congress had in mind when it sought to reform the process by which private securities actions are brought, they minimally comport with the statutory requirements.

-6- determination, “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.

Id. § 78u-4(a)(3)(B)(iii)(I)(aa)-(cc) (Supp. 1996). This

presumption “may be rebutted only upon proof by a member of the

purported plaintiff class that the presumptively most adequate

plaintiff . . . will not fairly and adequately protect the

interests of the class,” or “is subject to unique defenses that

render such plaintiff incapable of adequately representing the

class.” Id. § 78u-4(a)(3)(B)(iii)(II) (Supp. 1996).

Finally, the PSLRA provides that the lead plaintiff “shall,

subject to the approval of the court, select and retain counsel

to represent the class.” Id. § 78u-4(a)(3)(B)(v) (Supp. 1996).

II. Appointment of Lead Plaintiff

As noted above, a group of three plaintiffs have moved for

appointment as lead plaintiff in this action. The group, which

styles itself the Tyco Shareholders Group (or T S G ) , consists of

(1) Superius Securities (MPP), (3) Market Street Securities,

Inc., and (3) Andrei Olenicoff (or the “Olenicoff group”).

-7- A. The Membership of the TSG

1. Superius Securities (MPP)

Plaintiff Superius Securities (MPP) (hereinafter “Superius”)

claims to have suffered an estimated loss of $7,631,371, the

largest loss claimed by any member of the TSG. See Affidavit of

Kenneth J. Vianale in Supp. of Proposed Tyco Lead Pls.’ Mot.

(Doc. #8) (hereinafter “Vianale Affidavit”), Ex. D; TSG’s Mem. of

Law in Supp. of its Unopposed Mot. for Appointment as Lead Pls.

and for Approval of its Selection of Lead Counsel (Doc. #8) at 2 .

Superius attests that it purchased the Tyco securities described

in its certification on its own account, and that it has or had

sole record/legal title and sole equitable/beneficial title to

those securities. See Superius Securities’ Resps. Regarding

Title to Tyco Securities ¶ 2 , appended to TSG’s Mem. in Resp. to

the Court’s July 1 9 , 2000 Mem. and Order (Doc. # 2 8 ) . Superius

further attests that it purchased its Tyco securities for its own

benefit or loss, and did not act as a broker, short-seller, or

hedge fund in making those purchases. See id. ¶ 3 .

-8- 2. Market Street Securities, Inc.

Plaintiff Market Street Securities, Inc. (hereinafter

“Market Street”) claims to have suffered an estimated loss of

$4,272,693, the second largest amount claimed by any member of

the TSG. See Vianale Affidavit, Ex. D; TSG’s Mem. of Law in

Supp. of its Unopposed Mot. for Appointment as Lead Pls. and for

Approval of its Selection of Lead Counsel (Doc. #8) at 2 . Market

Street attests that it purchased the Tyco securities described in

its certification for its own account, and that it took

equitable/beneficial title to those securities. See Resp. of P l .

Market Street Securities, Inc. Regarding Title to Securities ¶¶

3 ( i ) , (iii), appended to TSG’s Mem. in Resp. to the Court’s July

1 9 , 2000 Mem. and Order (Doc. # 2 8 ) . Market Street’s clearing

agent, ABN-AMRO Sage Corp., took record/legal title to the Tyco

securities. See id. ¶ 3(ii). Market Street purchased the

securities for its own benefit, and did not act as a broker,

short-seller, or hedge fund when making its purchases. See id. ¶

3(v).

-9- 3. Andrei Olenicoff (or the “Olenicoff group”)

Andrei Olenicoff purchased 30,000 shares of Tyco common

stock on behalf of Sovereign Bancorp and 20,000 shares of Tyco

common stock on behalf of Continental Realty Corp. See Affidavit

of Norman Berman in Supp. of Mot. of the Olenicoff Group (Doc.

#8) (hereinafter “Berman Affidavit”), Exhibit C . The total

estimated loss associated with the combined 50,000 shares is

$1,200,000. See TSG’s Mem. of Law in Supp. of its Unopposed Mot.

for Appointment as Lead Pls. and for Approval of its Selection of

Lead Counsel (Doc. #8) at 2 .

Olenicoff serves as director of both Sovereign Bancorp and

Continental Realty Corp. See Berman Affidavit, Exhibit C . He

made the decision to invest in Tyco securities on the two

entities’ behalf and seeks to serve as the “designated

representative” of those entities “for the purpose of this

litigation.” Affidavit of Andrei Olenicoff ¶ 1 , appended to

TSG’s Mem. in Resp. to the Court’s July 19, 2000 Mem. and Order

(Doc. # 2 8 ) . The Tyco securities described in Olenicoff’s

certifications were purchased on the accounts o f , and for the

-10- benefit o f , Sovereign Bancorp and Continental Realty Corp. See

id. ¶ 2 ( i ) . The securities were held in nominee name for the

benefit of the two entities by Salomon Smith Barney; the two

entities were the equitable/beneficial owners of the securities.

See id. ¶¶ 2(ii), (iii). In purchasing the Tyco securities,

neither Olenicoff nor the two entities that he serves as director

acted as a broker, short-seller, or hedge fund. See id. ¶ 2(iv).

The TSG has made inconsistent representations as to whether

it is Andrei Olenicoff, in his individual capacity, or the

“Olenicoff group,” consisting of Sovereign Bancorp and

Continental Realty Corp., that serves as one of its members. In

Olenicoff’s original motion, filed before he joined forces with

the other members of the TSG, the proposed lead plaintiff was

identified as the “Olenicoff group,” i.e., Sovereign Bancorp and

Continental Realty Corp. See Mem. in Supp. of Mot. of the

Olenicoff Group (Doc. #8) at 1 . Later, when Olenicoff joined the

other members of the TSG in a motion for appointment as lead

plaintiff, it was Olenicoff the individual, rather than the two

-11- entities, that the TSG identified as its member. See TSG’s Mem.

of Law in Supp. of its Unopposed Mot. for Appointment as Lead

Pls. and for Approval of its Selection of Lead Counsel (Doc. #8)

at 1 & n.1, 2 ; TSG’s Mem. of Law in Further Supp. of its Mot.

(Doc. #8) at 4 .

It is clear from the affidavit filed by Olenicoff in

response to my July 1 9 , 2000 order that it is Sovereign Bancorp

and Continental Realty Corp., rather than Olenicoff himself, that

took beneficial title to the Tyco securities described in the

certifications and that suffered the claimed loss of

approximately $1,200,000. See Affidavit of Andrei Olenicoff ¶

2(i)-(iii), appended to TSG’s Mem. in Resp. to the Court’s July

1 9 , 2000 Mem. and Order (Doc. # 2 8 ) . Accordingly, it is the two

entities, which the TSG collectively refers to as the “Olenicoff

group,” that are properly considered to be a member of the TSG.5

5 In its most recent submission, the TSG recognizes that the two entities, rather than Olenicoff, are the proper constituents of the group. See TSG’s Mem. in Resp. to the Court’s July 1 9 , 2000 Mem. and Order (Doc. #28) at 4-5.

-12- While Olenicoff is not a member of the TSG, the two entities that

comprise the “Olenicoff group” have designated him to serve as

their representative for purposes of this litigation.

Accordingly, I must consider whether the TSG, a group

consisting of Superius, Market Street, and the “Olenicoff group”

(i.e., Sovereign Bancorp and Continental Realty Corp.), may be

appointed lead plaintiff in this action.

B. Propriety of a Group as Lead Plaintiff

As indicated in my July 1 9 , 2000 memorandum and order, the

plain language of the PSLRA clearly contemplates the appointment

of more than one plaintiff as lead plaintiff. The statute

directs a court to appoint as lead plaintiff “the member or

members of the purported plaintiff class that the court

determines to be most capable of adequately representing the

interests of class members.” 15 U.S.C. § 78u-4(a)(3)(B)(i)

(emphasis added). The statute also instructs a court to treat as

the presumptive lead plaintiff that “person or group of persons”

that meet specified criteria. Id. § 78u-4(a)(3)(B)(iii)(I)

(emphasis added).

-13- Despite this statutory language, courts have disagreed as to

whether the PSLRA allows for the appointment of multiple

plaintiffs as lead plaintiff. Although some courts have declined

to appoint a group of plaintiffs, especially when that group

consists of a large number of unrelated persons,6 others have

concluded that the appointment of a relatively small group of

unrelated persons as lead plaintiff is permissible under the

6 See, e.g., Sakhrani v . Brightpoint, Inc.,

(S.D. Ind. 1999) (“This court agrees that selecting as ‘lead plaintiff’ a large group of investors who have the largest aggregate losses but who have nothing in common with one another beyond their investment is not an appropriate interpretation of the term ‘group’ in the PSLRA.”); In re Network Assocs., Inc., Secs. Lit.,

(N.D. Cal. 1999) (concluding that large groups of unrelated investors cannot serve as lead plaintiff); Aronson v . McKesson HBOC, Inc.,

(N.D. Cal. 1999) (concluding that “the lead plaintiff must be an individual person or entity, or at most, a close-knit ‘group of persons’”); Mitchell v . Complete Management, Inc., N o . 99 CIV. 1454(DAB), 99 CIV. 2087(DAB), 99 CIV. 2342(DAB), 99 CIV. 2660(DAB), 99 CIV. 2846(DAB),

, at *3-4 (S.D.N.Y. Sept. 1 7 , 1999) (denying motion to appoint group of 141 investors as lead plaintiff); In re Telxon Corp. Secs. Lit.,

(N.D. Ohio 1999) (concluding that appointment of an amalgamation of unrelated persons as lead plaintiff is inconsistent with the PSLRA); In re Donnkenny Inc. Secs. Lit.,

(S.D.N.Y. 1997) (rejecting proposal that two unrelated institutional investors and four individual investors be appointed as lead plaintiffs).

-14- PSLRA.7

I determine that the appointment of a group of three

substantial shareholders as lead plaintiff is consistent with the

language and purpose of the PSLRA.8 While a group comprised of

7 See, e.g., In re The First Union Corp., Secs. Lit., 3:99CV237-MCK,

(W.D.N.C. Jan. 2 7 , 2000) (appointing three individuals and one institutional investor as lead plaintiffs); In re Party City Secs. Lit.,

1 , 114 (D.N.J. 1999) (appointing institutional investor and individual investor as lead plaintiffs); In re Nice Sys. Secs. Lit.,

(D.N.J. 1999) (appointing group of five individuals as lead plaintiff); Takeda v . Turbodyne Techs., Inc.,

(C.D. Cal. 1999) (appointing group of seven unrelated investors lead plaintiff); In re Baan C o . Secs. Lit.,

1 4 , 217 (D.D.C. 1999) (“The Lead Plaintiff decision should be made under a rule of reason but in most cases three should be the initial target, with five or six as the upper limit.”); In re Advanced Tissue Sciences Secs. Lit.,

(S.D. Cal. 1998) (refusing to appoint group of “over 250 unrelated, individual investors” as lead plaintiffs, but appointing smaller group of six plaintiffs as lead plaintiffs); In re Oxford Health Plans, Inc., Secs. Lit.,

2 , 45 (S.D.N.Y. 1998) (appointing two institutional investors and group of three large individual investors as “co- lead plaintiffs”); Chill v . Green Tree Fin. Corp.,

(D. Minn. 1998) (appointing group of six individual investors as lead plaintiff); Greebel v . FTP Software, Inc.,

7 , 64-65 (D. Mass. 1996) (appointing group of three individuals as lead plaintiff). 8 While I am not convinced that increasing the number of lead plaintiffs increases their ability to “more effectively withstand any supposed effort by the class counsel to seize

-15- many small shareholders might be unwieldy and lack the proper

incentive to serve as an effective lead plaintiff, see In re Nice

Sys. Secs. Lit.,

(D.N.J. 1999), a group

that consists of a small number of large shareholders should be

capable of managing this litigation and providing direction to

class counsel.9 See Takeda v . Turbodyne Techs., Inc.,

(C.D. Cal. 1999) (noting that district courts

have frequently interpreted “group of persons” language in PSLRA

lead plaintiff provision “to mean a small group of manageable

control of the class claims,” D’Hondt v . Digi Int’l, Inc., Civ. N o . 97-5(JRT/RLE), Civ. N o . 97-156(JRT/RLE), Civ. N o . 97- 351(JRT/RLE), Civ. N o . 97-295(JRT/RLE), Civ. N o . 97-538(JRT/RLE), Civ. N o . 97-440(JRT/RLE),

, at *13 (D. Minn. Apr. 2 , 1997); see also In re Oxford Health Plans, Inc., Secs. Lit., 182 F.R.D. at 49 (“[I]n actuality a greater number of plaintiffs allows them, as a group, to wield more control over counsel.”), neither am I persuaded that appointing a small group as lead plaintiff necessarily diminishes the group’s ability to control class counsel. 9 My conclusion that a group of three substantial investors is an adequate lead plaintiff under the PSLRA is consistent with the view expressed by the Securities and Exchange Commission, which has acknowledged the propriety of appointing as lead plaintiff a group containing no more than five plaintiffs. See In re Baan C o . Secs. Lit., 186 F.R.D. at 216-17, 224-225 (quoting and appending SEC amicus brief).

-16- size that is capable of joint decisionmaking regarding the

litigation”). As one court recently noted, “[w]here the

interests of proposed lead plaintiffs are aligned, concerns

regarding the division of authority and dilution of control are

not paramount.” In re Party City Secs. Lit.,

1 , 114

(D.N.J. 1999). The same conclusion applies when the number of

plaintiffs in the proposed lead plaintiff group is small enough

to allow for coordinated decision making.

Finally, while it appears that Superius, Market Street, and

the Olenicoff group had no relationship prior to the inception of

this litigation, I decline to read into the PSLRA a pre-existing

relationship requirement that appears nowhere on the face of the

statute. See In re Baan C o . Secs. Lit.,

1 4 , 216

(D.D.C. 1999) (“The text of the PSLRA does not limit the

composition of a ‘group of persons’ to those only with a pre-

litigation relationship, nor does the legislative history provide

a sound enough foundation to support such a gloss.”). A recent

opinion from the Western District of North Carolina suggests,

moreover, that insistence on a pre-existing relationship among

-17- members of a proposed lead plaintiff group would be particularly

unnecessary where, as in this case, previously competing

candidates for lead plaintiff have come together in a joint

motion unopposed by any member of the purported plaintiff class.

See In re The First Union Corp., Secs. Lit., 3:99CV237-MCK,

(W.D.N.C. Jan. 2 7 , 2000) (“Although

the cases cited by Defendant are certainly well-reasoned and may

well represent a trend against unrelated groups in lead plaintiff

appointment, this Court is not persuaded that their concerns

regarding the best interests of the class are implicated here

where all plaintiffs have filed the joint stipulation. Moreover,

there is now an overwhelming weight of authority allowing the

appointment of such an unrelated group to serve as lead

plaintiffs.”) (footnote omitted).

C. Application of Statutory Criteria to the Group

To qualify as the presumed lead plaintiff, the TSG must (1)

have either filed a complaint or moved for appointment as lead

plaintiff, (2) have, in the determination of the court, the

largest financial interest in the relief sought by the class, and

-18- (3) otherwise satisfy the requirements of Rule 23 of the Federal

Rules of Civil Procedure. See 15 U.S.C. § 78u-4(a)(3)(B)(iii)

(I)(aa)-(cc).

The first two requirements are easily satisfied. First, the

TSG filed a motion to be appointed lead plaintiff. Second, taken

in the aggregate, the members of the TSG have claimed an

estimated loss of $13,104,064. See TSG’s Mem. of Law in Supp. of

its Unopposed Mot. for Appointment as Lead Pls. and for Approval

of its Selection of Lead Counsel (Doc. #8) at 2 . This combined

estimated loss constitutes the largest demonstrated financial

interest in the relief sought by the class.

Rule 23 of the Federal Rules of Civil Procedure also poses

no obstacle to the TSG’s appointment as lead plaintiff. At this

early stage of the proceedings, the plaintiffs seeking

appointment need only make a preliminary showing that they

satisfy the typicality and adequacy requirements of Rule 23(a)(3)

and (a)(4). 10 See Chill v . Green Tree Fin. Corp.,

Limiting the inquiry at this stage to typicality and adequacy is sensible because these two requirements “focus . . . on the desired characteristics of the class representative.” 1

-19- 398, 407 n.8 (D. Minn. 1998); In re Olsten Corp. Secs. Lit.,

(E.D.N.Y.), opinion adhered to on

reconsideration,

(E.D.N.Y. 1998). As one court

has recognized, “[t]he analysis inevitably comes down to the

question of whether Movant[s] will fairly and adequately

represent the interests of the class.” Fischler v . Amsouth

Bancorporation, 96-1567-CIV-T-17A,

, at

*8 (M.D. Fla. Feb. 6, 1997). 11

To satisfy Rule 23's typicality requirement, a class

representative’s injuries must arise from the same event or

course of conduct as the injuries allegedly suffered by other

class members, and its claims must be based on the same legal

Herbert B . Newberg & Alba Conte, Newberg on Class Actions § 3.13 (3d ed. 1992). 11 In this section of this memorandum and order, I limit my analysis to whether the TSG has satisfied this burden with respect to the claims of those plaintiffs who allege violations of §§ 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder (the “§ 10(b) plaintiffs”). In the next section, I consider whether the TSG has demonstrated that it will fairly and adequately represent the interests of those plaintiffs whose claims arise under § 20A of the Exchange Act (the “§ 20A plaintiffs”).

-20- theory. See Modell v . Eliot Sav. Bank,

7 , 22 (D.

Mass. 1991). 12 The proper inquiry is “whether a [class

representative], in presenting his case, will necessarily present

the claims of the absent plaintiffs.” Priest v . Zayre Corp.,

(D. Mass. 1988) (citation and internal quotation

marks omitted).

The injuries asserted by the members of the TSG -- i.e., the

losses associated with their purchase of Tyco securities -- arise

from the same omissions and/or misrepresentations alleged by all

the other § 10(b) plaintiffs. The TSG’s claims, like the claims

of all the other § 10(b) plaintiffs, are based on the theory that

the defendants perpetrated a fraud upon the market and thereby

12 Typicality may be absent when a purported representative is “subject to unique defenses that would divert attention from the common claims of the class.” Modell,

2 . While the defendants argue that at least some members of the TSG may be subject to unique defenses and thus that their claims may be atypical, see Defs.’ Mem. in Opp’n to Lead Pl.-Lead Counsel Mots. of the Proposed Tyco Lead Pls. and the Olenicoff Group (Doc. #9) at 13-15, as noted in the text below I conclude that it would be more appropriate to consider this issue at the class certification stage, when defendants clearly have standing to raise i t .

-21- artificially inflated the price of Tyco securities during the

relevant period. Accordingly, the typicality requirement is

satisfied.

Whether a class representative “will fairly and adequately

protect the interests of the class,” Fed. R. Civ. P. 23(a)(4),

depends upon (1) whether the interests of the representative will

conflict with the interests of any class members, and (2) whether

the representative is represented by qualified, experienced

counsel capable of vigorously prosecuting the proposed

litigation. See Andrews v . Bechtel Power Corp.,

(1st Cir. 1985); Curtis v . Comm’r, Maine Dep’t of Human

Servs.,

(D. M e . 1994); Priest,

.

At this juncture, I perceive no conflict between the

interests of the TSG and the interests of the other § 10(b)

plaintiffs. All of these plaintiffs share a common interest in

maximizing the recovery on their common claims. Moreover, the

magnitude of the estimated losses alleged by the TSG indicates

that its members have a strong interest in pursuing this

-22- litigation. Finally, a review of the resumes of the four law

firms proposed as lead counsel makes it clear that they have the

qualifications and expertise necessary to provide vigorous

representation in this action.13 Accordingly, I conclude that

the adequacy requirement has been satisfied.

D. The Landau Motion

As noted at the outset of this memorandum and order, Harold

Landau has moved to be appointed lead plaintiff of a separate

class of plaintiffs whose claims arise under § 20A of the

Exchange Act. Landau also seeks approval of his counsel as lead

counsel for this class of § 20A plaintiffs. Although he does not

oppose the TSG’s motion with respect to the § 10(b) plaintiffs,

Landau contends that the § 20A plaintiffs need separate

leadership and representation because their claim targets a

distinct set of defendants, allows for a distinct remedy, depends

on different evidence, and contains a special standing

13 I consider the issue of whether the proposed structure of four co-lead counsel is permissible and/or appropriate under the PSLRA in section III, infra.

-23- requirement.14 In short, Landau argues that the TSG will not

fairly and adequately represent the interests of the § 20A

plaintiffs.15

While Landau’s motion highlights the possibility of future

conflict between the § 10(b) plaintiffs and the § 20A plaintiffs,

I conclude that there is no present need for separate leadership

and/or representation for the § 20A plaintiffs. Rather, as

14 The relief that Landau’s motion seeks -- which could be characterized as the recognition either of multiple classes or of a subclass –- does not appear to be contemplated under the PSLRA’s lead plaintiff provisions. Rather, the statute seems to contemplate, even in consolidated actions such as this, the appointment of a lead plaintiff for a single purported plaintiff class. See 15 U.S.C. §§ 78u-4(a)(3)(B)(i), 78u-4(a)(3)(B)(ii), 78u-4(a)(3)(B)(iii)(I)(bb), 78u-4(a)(3)(B)(iii)(II), 78u- 4(a)(3)(B)(iv), 78u-4(a)(3)(B)(v). It may prove difficult, however, to manage a class action composed of several distinct classes or subclasses with only a single lead plaintiff. For example, litigating such an action with only a single lead plaintiff would be problematic where the lead plaintiff was subject to a conflict of interest that prevented it from adequately representing the interests of a subclass. I decline to reach a final resolution of the issue now and reserve the right to reconsider it at the class certification stage if I determine that a separate § 20A subclass is necessary. 15 I need not address the first two statutory criteria under 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I). Landau does not contest that the TSG has satisfied those criteria.

-24- explained below, I determine that the TSG has made the requisite

preliminary showing regarding typicality and adequacy with

respect to the § 20A plaintiffs.

“Rule 23(a)(3) does not require the claims of the Proposed

Lead Plaintiffs to be identical to those of the class. Rather,

the typicality requirement is satisfied when the plaintiff’s

claim arises from the same event or course of conduct that gives

rise to the claims of other class members and is based on the

same legal theory.” In re Lucent Techs., Inc., Secs. Lit.,

, N o . CIV. A . 00-621(AJL),

(D.N.J. Apr. 2 6 , 2000) (internal citations and quotation marks

omitted); see also Takeda v . Turbodyne Techs., Inc., 67 F.

Supp.2d. 1129, 1136 (C.D. Cal. 1999) (“Under [Rule 23's]

permissive standards, representative claims are ‘typical’ if they

are reasonably coextensive with those of absent class members;

they need not be substantially identical.”) (quoting Hanlon v .

Chrysler Corp.,

(9th Cir. 1998)) (internal

quotation marks omitted); Modell v . Eliot Sav. Bank,

7 , 22 (D. Mass. 1991) (“The claims of the class representative

-25- are considered typical when the plaintiff’s injuries arise from

the same course of conduct as do the injuries that form the basis

of the class claims, and when the plaintiff’s claims are based on

the same legal theory.”) (internal citations omitted).

Based on these interpretations of Rule 23's typicality

requirement, I conclude that the §§ 10(b), 20(a), and Rule 10b-5

claims (collectively, “the § 10(b) claims”) presented by the TSG

are typical of the claim asserted by the § 20A plaintiffs. Both

the § 10(b) claims and the § 20A claim appear to be based on the

same (or similar) alleged misrepresentations and/or omissions

concerning Tyco’s accounting practices and financial condition.

Compare Compl. in Greenberg v . Tyco Int’l, Ltd., 99-CIV-11930-

(JSR) (S.D.N.Y.) (reproduced as Exhibit A to Vianale Affidavit)

(hereinafter “Greenberg Compl.”) ¶¶ 1 1 , 30-39, 44-48, with Compl.

in Landau v . Kozlowski, Civil N o . 00-56-B (D.N.H.) (Doc. #1 in

Landau action) (hereinafter “Landau Compl.”) ¶¶ 1 , 18-28, 3 1 , 3 5 ,

3 8 , 3 9 . All of these claims sound in fraud.

The § 10(b) and § 20A claims also share certain common legal

elements, at least in the context of the present action. A claim

-26- under § 20A requires proof of a predicate violation of the

Exchange Act or the rules and regulations promulgated thereunder.

See In re Advanta Corp. Secs. Lit.,

(3d Cir.

1999); Jackson Nat’l Life Ins. C o . v . Merrill Lynch & Co., Inc.,

, 703 (2d Cir. 1994); In re VeriFone Secs. Lit.,

, 872 (9th Cir. 1993). In the present case, the

predicate violation alleged in support of the § 20A claim is

based on the same (or similar) pattern of omissions and/or

misrepresentations alleged by the § 10(b) plaintiffs. See Landau

Compl. ¶¶ 29 (A)&(B), 37-40. Conversely, to prevail upon their

claims, the § 10(b) plaintiffs must prove the required state of

mind, i.e., scienter.16 See 15 U.S.C. § 78u-4(b)(2); Greebel v .

FTP Software, Inc.,

(1st Cir. 1999); Alfus v .

Pyramid Tech. Corp.,

(N.D. Cal. 1990).

In the present case, the TSG has indicated that it will seek to

16 “The Supreme Court has defined scienter as ‘a mental state embracing intent to deceive, manipulate, or defraud.’” Greebel v . FTP Software, Inc.,

(1st Cir. 1999) (quoting Ernst & Ernst v . Hochfelder,

, 193 n.12 (1976)).

-27- satisfy the scienter requirement by proving the same alleged acts

of insider trading that give rise to the § 20A claim.17 See

Greenberg Compl. ¶¶ 8 , 9, 1 4 , 4 9 ; TSG’s Mem. in Opp’n to the Mot.

for Appointment of a Separate Lead P l . and Lead Counsel for a

Section 20A Claim (Doc. #13) at 8 . Because the § 10(b) and § 20A

claims share a common factual basis and a close legal

relationship, I conclude that the typicality requirement is

satisfied.

I also determine that the TSG will fairly and adequately

protect the interests of the § 20A plaintiffs. As noted

previously, the adequacy requirement under Rule 23(a)(4) focuses

on whether the proposed representative has interests that

17 In a recent case interpreting the pleading requirements under the PSLRA, the First Circuit concluded “that allegations of unusual insider trading by a defendant with access to material non-public information can support a strong inference of scienter.” Greebel v . FTP Software, Inc.,

. The court cautioned, however, that “[a]t a minimum, the [insider] trading must be in a context where defendants have incentives to withhold material, non-public information, and it must be unusual, well beyond the normal patterns of trading by those defendants.”

-28- conflict with the interests of any absent class members.18 See

Andrews v . Bechtel Power Corp.,

(1st Cir.

1985); Curtis v . Comm’r, Maine Dep’t of Human Servs.,

(D. M e . 1994); Priest v . Zayre Corp.,

5 2 ,

556 (D. Mass. 1988).

Landau argues that there is a conflict between the § 10(b)

plaintiffs and the § 20A plaintiffs because the two groups “have

different interests when it comes to establishing and

apportioning damages.” Landau’s Mot. for Appointment as Lead P l .

of the Section 20A Class and for Appointment of His Counsel as

Lead Counsel for That Class (Doc. #10) at 9; see also Rep. Mem.

in Further Supp. of Landau’s Mot. (Doc. #15) at 3 (alluding to

“conflicts that arise when establishing and apportioning damages

18 The adequacy requirement also calls for an inquiry into whether the proposed representative is represented by qualified, experienced counsel capable of vigorously prosecuting the proposed litigation. See Andrews v . Bechtel Power Corp.,

(1st Cir. 1985); Curtis v . Comm’r, Maine Dep’t of Human Servs.,

(D. M e . 1994); Priest v . Zayre Corp.,

5 2 , 556 (D. Mass. 1988). I have already determined that the counsel selected by the TSG satisfy this standard.

-29- from a single fund”) (emphasis in original). While I recognize

the potential conflict identified by Landau, “courts have

generally declined to consider conflicts, particularly as they

regard damages, sufficient to defeat class action status at the

outset unless the conflict is apparent, imminent, and on an issue

at the very heart of the suit.” Blackie v . Barrack,

(9th Cir. 1975); see also Bokusky v . Edina Realty, Inc.,

N o . 3-92 CIV. 223,

, at *7 (D. Minn. Aug. 6, 1993);

Alvarado Partners, L.P. v . Mehta,

(D. Colo.

1990). While the potential for conflict based on the different

remedies available to the § 10(b) and § 20A plaintiffs is real,

the lead plaintiff determination is not the appropriate stage in

the litigation to address this concern.

Because the TSG will fairly and adequately represent the §

20A plaintiffs as well as the § 10(b) plaintiffs, I appoint the

TSG as the lead plaintiff for all plaintiffs in this consolidated

action. Landau’s motion is accordingly denied.19 This

19 This resolution of Landau’s motion is consistent with the opinions of courts that have addressed analogous motions. In Aronson v . McKesson HBOC, Inc.,

(N.D. Cal.

-30- determination, however, in no way precludes Landau from raising

the same issues presented in his current motion at the class

certification stage, when such concerns are entitled to a more

thorough analysis under Rule 2 3 . See Aronson v . McKesson HBOC,

1999), a group of plaintiffs whose claims arose under provisions other than § 10(b) or were based on transactions involving securities other than common stock (the “niche” plaintiffs) moved for appointment as lead plaintiffs for their separate causes of action. See id. at 1150. The “niche” plaintiffs raised many of the same arguments made here by Landau, e.g., that their claims might involve different defendants, allow for distinct remedies, and/or require different showings of scienter and proof than the § 10(b) claims. See id. at 1150-51. The Aronson court rejected the “niche” plaintiffs’ motion for reasons similar, in large part, to those given in this memorandum and order. See id. Similarly, in In re Cendant Corp. Litigation,

(D.N.J. 1998), a court faced with arguments analogous to those presented by Landau declared that

The [PSLRA] demands only that the interests of the class members be adequately represented by the lead plaintiff. Thus, notwithstanding every plaintiff’s undeniable interest in the outcome most favorable to his or her position, every warrior in this battle cannot be a general. . . . [I]n pursuit of their interests, the [presumptive lead plaintiffs] will necessarily seek to establish the elements of every plaintiff’s claim. Under these circumstances, such self-interest of the presumptive lead plaintiffs will ensure adequacy of representation for all the class.

(internal citation omitted).

-31- Inc.,

, 1151 n.4 (N.D. Cal. 1999); In re

Cendant Corp. Lit.,

4 4 , 148 n.4 (D.N.J. 1998).

III. Approval of Lead Counsel

As noted at the outset, the PSLRA provides that lead counsel

shall be selected by the lead plaintiff, “subject to the approval

of the court.” 15 U.S.C. § 78u-4(a)(3)(B)(v). In determining

whether to approve the lead plaintiff’s choice of counsel, I

consider whether that choice is well-calculated to protect the

interests of the purported plaintiff class. See In re Milestone

Scientific Secs. Lit.,

0 4 , 418 (D.N.J. 1998).

The TSG has proposed that four law firms -- Bernstein

Liebhard & Lifshitz LLP, Milberg Weiss Bershad Hynes & Lerach

LLP, Weiss & Yourman, and Berman DeValerio & Pease LLP

-- serve as co-lead counsel for the purported class. See TSG’s

Mem. of Law in Supp. of its Unopposed Mot. for Appointment as

Lead Pls. and for Approval of its Selection of Lead Counsel (Doc.

#8) at 5 . The TSG has also sought to use the firm of Upshall,

-32- Cooper & Temple, P.A. as liaison counsel.20 See TSG’s Mot. for

an Order for Preservation of Disc. Material and Service of Third

Party Subpoenas (Doc. #16) at 2 ; TSG’s Supplemental Mot. for

Orders for Preservation of Disc. Material by Defs. and Service of

Nonparty Subpoenas (Doc. #19) at 3 .

As other courts have recognized, the approval of a

multiplicity of firms as co-lead counsel raises the specter of

“duplicative services and a concomitant increase in [the]

attorneys’ fees” ultimately charged to the purported plaintiff

class. In re Milestone Scientific Secs. Lit., 183 F.R.D. at 418.

At the same time, the approval of multiple firms as co-lead

counsel may provide the purported class with the benefits of

combined resources and expertise, which may be especially

20 “Liaison Counsel is ordinarily charged with administrative matters, such as communications between the Court and other counsel, and convenes meetings of counsel, advises parties of developments in the case, and coordinates the activities and the positions of the class. Such counsel may act for the group in managing document depositories, and in resolving scheduling conflicts. Liaison counsel will usually have offices in the same locality as the forum.” Chill v . Green Tree Fin. Corp.,

9 8 , 413 n.13 (D. Minn. 1998) (citing Manual for Complex Litigation § 20.221 (3d ed. 1995)).

-33- valuable in a complex case where the defendants are represented

by several large and highly qualified law firms.21 See In re

Oxford Health Plans, Inc., Secs. Lit.,

2 , 46

(S.D.N.Y. 1998) (noting that purported plaintiff class may

benefit from “pooling . . . the resources of the plaintiffs’

counsel in order to support what could prove to be a costly and

time-consuming litigation”).

In the present case, I determine that the potential dangers

stemming from multiple representation, while real, are less

weighty than the benefits that it may produce. As a preliminary

matter, I note that the four proposed co-lead counsel have

assured the court that they will devise (or have already devised)

a system for dividing and managing the workload arising from this

litigation efficiently and without duplication. See Tr. of July

1 3 , 2000 Hearing (Doc. #26) at 67-69; TSG’s Mem. in Resp. to the

21 The Securities and Exchange Commission has recognized the potential benefits and dangers of multiple lead counsel, and has argued that courts should “inquire into the appropriateness of multiple lead counsel in the circumstances of each securities class action” in which such an arrangement is proposed. See In re Baan C o . Secs. Lit.,

1 4 , 229 (D.D.C. 1999) (appending SEC amicus brief).

-34- Court’s July 1 9 , 2000 Mem. and Order (Doc. #28) at 9. The

proposed co-lead counsel have also represented that they have no

pre-existing arrangement regarding legal fees and expenses in

this litigation, and that they are content to leave any future

award to the court’s discretion. See Tr. of July 1 3 , 2000

Hearing (Doc. #26) at 6 7 , 6 9 , 7 2 ; TSG’s Mem. of Law in Further

Supp. of its Mot. (Doc. #8) at 2 2 . The PSLRA expressly limits

the total fees and expenses that may be awarded to counsel for a

plaintiff class to no more than “a reasonable percentage of the

amount of any damages and prejudgment interest actually paid to

the class.” 15 U.S.C. § 78u-4(a)(6) (Supp. 1996). Plaintiffs’

lead and liaison counsel are hereby put on notice that this court

will not approve any award of fees and expenses that reflects

duplication, inefficiency, or the costs of coordinating the

efforts of the firms involved in the representation.

Furthermore, approval of this co-lead and liaison counsel

arrangement is conditioned upon plaintiffs’ counsel speaking with

a single voice in their dealings with the defendant and defense

counsel; simply put, I will not allow the co-lead and liaison

-35- counsel structure to impose upon the defendants or defense

counsel the burden of doing battle with a five-headed hydra. If

it appears at any point in this litigation that these conditions

are not satisfied, I will not hesitate to revisit the issue.

Mindful of the conditions set forth above, I approve the

selection of Bernstein Liebhard & Lifshitz LLP, Milberg Weiss

Bershad Hynes & Lerach LLP, Weiss & Yourman, and Berman DeValerio

& Pease LLP as co-lead counsel for the TSG and for the purported

plaintiff class.22 I also approve the selection of Upshall,

Cooper & Temple, P.A. as liaison counsel.

22 At oral argument, one of the proposed co-lead counsel candidly acknowledged that each of the four proposed co-lead counsel originally represented one member of the TSG. Tr. of July 1 3 , 2000 Hearing (Doc. #26) at 1 0 . While the origin of the proposed representation structure is not relevant to my analysis of the lead counsel issue, I emphasize that the co-lead counsel approved in this memorandum and order represent the TSG and the purported plaintiff class as a whole. The co-lead counsels’ professional duty to the lead plaintiff and the purported class supersedes any duties arising from prior lawyer-client relationships with individual plaintiffs. Co-lead counsel have expressed their agreement with this proposition, see id. at 66- 6 7 , and I will hold them to that agreement.

-36- IV. Conclusion

For the reasons set forth in this memorandum and order, I

appoint the TSG, a group consisting of Superius, Market Street,

and the Olenicoff group, as lead plaintiff in this consolidated

action. I deny Landau’s motion for the appointment of a separate

lead plaintiff and lead counsel for the § 20A plaintiffs, without

prejudice to raise the issue of separate leadership and/or

representation for the § 20A plaintiffs at the class

certification stage of this litigation. Finally, based on the

conditions expressed above, I approve the selection of Bernstein

Liebhard & Lifshitz LLP, Milberg Weiss Bershad Hynes & Lerach

LLP, Weiss & Yourman, and Berman DeValerio & Pease LLP as co-lead

counsel and approve the selection of Upshall, Cooper & Temple,

P.A. as liaison counsel.

SO ORDERED.

Paul Barbadoro Chief Judge

August 1 7 , 2000

cc: Michael J. Beck, Judicial Panel on MDL Steven Schulman, Esq.

-37- Jeffrey Haber, Esq. Joseph Weiss, Esq. Norman Berman, Esq. Frederick E . Upshall, Jr., Esq. Paul Kfoury, Sr., Esq. Steven Madsen, Esq. Lewis Liman, Esq. Edward Haffer, Esq.

-38-