Tuesday, November 22, 2005

S.D.N.Y. Provides Thorough Lead Plaintiff Analysis under PSLRA

Judge Scheindlin has issued an opinion from this past summer that was just published yesterday (In re eSpeed, Inc. Sec. Lit., --- F.Supp.2d ----, 2005 WL 1653933 (S.D.N.Y. July 13, 2005)), in which she provides an excellent example of how to analyze motions to serve as lead plaintiff in a securities fraud action under the standards established by the Private Securities Litigation Reform Act (PSLRA). Under the Act, the preferred lead plaintiff is the one with the greatest financial loss from the alleged harm. However, various harmed investors may affiliate with one another and aggregate their losses in an effort to qualify for lead plaintiff status as a group.

In this case, two different groups were vying for the appointment and presented competiting accounting methods to calculate their respective losses. This required Judge Scheindlin to resolve the matter in part by determining that the LIFO accounting method (last in, first out) rather than the FIFO method (first in, first out) would be used to estimate losses, reflecting a more recent trend in that direction.


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