Free Opening Brief in Support - District Court of Delaware - Delaware

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

SAMUEL I. HYLAND, individually and on behalf of all others similarly situated, Plaintiff, v. J.P. MORGAN SECURITIES, INC., a Delaware corporation, Defendant.

Civil Action No. 06-224 JJF

CLASS ACTION

OPENING BRIEF IN SUPPORT OF THE MOTION BY PLAINTIFF SAMUEL HYLAND FOR APPOINTMENT AS LEAD PLAINTIFF AND APPOINTMENT OF LEAD COUNSEL

Dated: June 12, 2006 JOSEPH N. GIELATA (# 4338) Attorney at Law 501 Silverside Road, No. 90 Wilmington, Delaware 19809 (302) 798-1096 Attorney for Plaintiff Samuel Hyland

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TABLE OF CONTENTS PRELIMINARY STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 NATURE AND STAGE OF THE PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 SUMMARY OF THE ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 STATEMENT OF FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 I. Movant Satisfies The Statutory Criteria For Appointment As Lead Plaintiff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 A. Adequate Notice of the Pendency of the Action Was Properly Published. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Movant Believes That He Has The Most Substantial Financial Interest In This Case. . . . . . . . . . . . . . . . . . . . . . . . . 9 Movant Satisfies The Requirements of Rule 23. . . . . . . . . . . . . . . . . . . . 10 1. 2. Typicality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Movant Will Adequately Represent The Interests Of The Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

B.

C.

II.

Movant's Chosen Counsel Should Be Appointed Lead Counsel. . . . . . . . . . . . . 13

CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

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TABLE OF AUTHORITIES
Cases: Page(s)

Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Burke v. Ruttenberg, 102 F. Supp. 2d 1280 (N.D. Ala. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 In re Cendant Corp. Litig., 264 F.3d 201 (3d Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 13 In re Cendant Corp. Sec. Litig., 404 F.3d 173 (3d Cir. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 In re DaimlerChrysler AG Sec. Litig., 216 F.R.D. 291 (D. Del. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11, 12 East Texas Motor Freight System, Inc. v. Rodriguez, 431 U.S. 395 (1977) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Gluck v. CellStar Corp., 976 F. Supp. 542 (N.D. Tex. 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Janovici v. DVI, Inc., Nos. Civ. A. 2:03CV04795-LD et al., 2003 WL 22849604 (E.D. Pa. Nov. 25, 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8, 9, 13 In re Lucent Technologies, Inc., Sec. Litig., 194 F.R.D. 137 (D.N.J. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10, 11, 12 Marsden v. Select Medical Corp., No. 04-4020, 2005 WL 113128 (E.D. Pa. Jan. 18, 2005) . . . . . . . . . . . . . . . . . .8, 9 In re Milestone Scientific Sec. Litig., 183 F.R.D. 404 (D.N.J. 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 In re Nice Sys. Sec. Litig., 188 F.R.D. 206 (D.N.J. 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10, 12 In re Oxford Health Plans, Inc., Sec. Litig., 182 F.R.D. 42 (S.D.N.Y. 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 In re Prudential Ins. Co. of Am. Sales Practices Litig., 148 F.3d 283 (3d Cir. 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Ravens v. Iftikar, 174 F.R.D. 651 (N.D. Cal. 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 - iii -

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Sosna v. Iowa, 419 U.S. 393 (1975) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Wetzel v. Liberty Mut. Ins. Co., 508 F.2d 239 (3d Cir. 1975) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Statutes and Rules:

15 U.S.C. § 78u-4(a)(3)(A)(i)(II) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 15 U.S.C. § 78u-4(a)(3)(B)(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 15 U.S.C. § 78u-4(a)(3)(B)(iii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I)(cc) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II)(aa). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 15 U.S.C. § 78u-4(a)(3)(B)(v). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 15 U.S.C. §78u-4(a)(9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Fed. R. Civ. P. 23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim
Other Authority:

1 H. Newberg, Newberg on Class Actions § 3.13 (3d ed. 1992) . . . . . . . . . . . . . . . . . . . 11

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Plaintiff Samuel I. Hyland ("Movant") submits this Opening Brief in Support of his Motion For Appointment as Lead Plaintiff and Appointment of Lead Counsel. PRELIMINARY STATEMENT Section 21D of the Securities Exchange Act of 1934 (the "Exchange Act"), as amended by the Private Securities Litigation Reform Act of 1995 (the "PSLRA"), establishes the procedure for the selection of a lead plaintiff to oversee class actions brought under the federal securities laws. Specifically, § 21D(a)(3)(A)(i) provides that, within 20 days after the date on which a class action is filed under the PSLRA, [T]he plaintiff or plaintiffs shall cause to be published, in a widely circulated national business-oriented publication or wire service, a notice advising members of 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. 15 U.S.C. §78u-4(a)(3)(A)(i). Additionally, § 21D(a)(3)(B)(i) of the Exchange Act directs this Court to consider any motions brought by a plaintiff or purported class member(s) to appoint lead plaintiff filed in response to any such notice no later than 90 days after the date of publication, or as soon as practicable after this Court decides any pending motion to consolidate any actions asserting substantially the same claim or claims. Under this provision of the Exchange Act, this Court "shall" appoint the "most adequate plaintiff" to serve as lead plaintiff and shall presume that plaintiff is the person, or group of persons, that (aa) has either filed the complaint or made a motion in response to a notice ...;

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(bb) in the determination of the court, has the largest financial interest in the relief sought by the class; and (cc) 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). Movant believes that he has the largest financial interest of any lead plaintiff movant in the relief sought by the class in this case. Movant also seeks Court approval of his selection of counsel as provided by the statute. As is further discussed below, Movant is qualified to serve as lead plaintiff in this litigation under the relevant provisions of the PSLRA. Accordingly, this Court should appoint Movant as lead plaintiff and approve his chosen counsel as lead counsel.

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NATURE AND STAGE OF THE PROCEEDINGS This is a securities class action arising from the 2004 merger (the "Merger") of the Bank One Corporation ("Bank One") and JPMorgan Chase & Co. ("JPMC" or the "Company"). The defendant in this case, J.P. Morgan Securities, Inc. ("JPMSI") acted as JPMC's financial advisor in connection with the Merger. This is the second securities class action concerning the Merger that has been filed in this Court. On March 17, 2005, Movant filed a comprehensive class action complaint in this Court against JPMC and certain of its present and former directors asserting purchaser and holder claims under Sections 10(b), 14(a) and 20(a) of the Exchange Act (15 U.S.C. §§ 78j(b), 78n(a) and 78t(a)), Rules 10b-5 and 14a-9 promulgated thereunder by the Securities and Exchange Commission (17 C.F.R. §§ 240.10b-5 and 240.14a-9), Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (15 U.S.C. §§ 77k, 77l(a)(2) and 77o), and pendent common law claims for breach of fiduciary duty. That suit has been stayed pending the resolution of a related action filed in Illinois. See Hyland v. Harrison, Civ. A. 05-162 (D.I. 90, 91) (D. Del. Feb. 7, 2006). On April 6, 2006, Movant filed the instant suit against JPMSI, asserting seller claims under Section 10(b) of the Exchange Act and pendent common law claims for civil conspiracy and aiding and abetting breach of fiduciary duty.

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SUMMARY OF ARGUMENTS 1. Movant is presumptively entitled to serve as lead plaintiff because, based on

available information and after having published adequate notice, he has a greater financial interest in the outcome of this case than any other known putative class member seeking appointment as lead plaintiff. 2. Movant's claims are typical of the proposed class and he will adequately represent

the class within the purview of Fed. R. Civ. P. 23. 3. Movant's chosen counsel is experienced in prosecuting securities class action

claims under the PLSRA, has demonstrated the willingness and ability to vigorously adequately represent the interests of the class, and should be appointed lead counsel.

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STATEMENT OF FACTS JPMC is a global financial services firm involved in investment banking, financial services for consumers and businesses, financial transaction processing, investment management, private banking, and private equity. In 2003, William B. Harrison, Jr. was Chief Executive Officer ("CEO") and Chairman of the Board of Directors of JPMC. However, by late 2003, after years of poor business decisions, costly acquisitions, and financial scandals, numerous public reports denounced Harrison's leadership and predicted that he would soon lose his job. This situation forced Harrison to conjure yet another massive deal to protect his lucrative and prestigious CEO title. Thus, Harrison commenced discussions with James Dimon, Chairman and CEO of Bank One, concerning the possibility of a business combination between JPMC and Bank One. As a result of these discussions, JPMC and Bank One issued a joint press release on January 14, 2004 announcing their agreement to merge. When the Merger was announced, the acquisition premium for Bank One shares amounted to approximately 14 percent, based on that day's closing prices. In other words, to merge with Bank One, JPMC shareholders funded an acquisition premium of more than $7 billion in stock, which substantially diluted their individual holdings. The total value of the deal was approximately $57 billion. JPMC and Bank One issued a Joint Proxy Statement-Prospectus, dated April 19, 2004 (the "Proxy Statement"), to gain shareholder approval of the Merger. Unaware that the Proxy Statement contained materially false and misleading statements and failed to disclose material facts, JPMC shareholders approved the Merger. However, several weeks later, it was revealed that, in the course of the highly secretive negotiations between Dimon and Harrison, Dimon had been willing to agree to -5-

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a zero-premium deal if he could be CEO of the combined company immediately. The Proxy Statement omitted this valuable opportunity. Ultimately, Harrison and Dimon agreed that Harrison would retain the CEO title for two more years in exchange for paying a substantial premium. However, a June 27, 2004 article in the New York Times entitled "The Yin, the Yang and the Deal" revealed the entrenchment scheme: During the negotiations with Mr. Dimon, [Harrison] fought hard to give himself the two extra years, to secure a smooth transition, although he may have cost J.P. Morgan shareholders extra money in doing so. Mr. Dimon, always the tough deal maker, offered to do the deal for no premium if he could become chief executive immediately, according to two people close to the deal. When Mr. Harrison resisted, Mr. Dimon insisted on a premium, which Mr. Harrison was able to push down to 14 percent. The two men declined to comment on the specifics of their negotiations. This article revealed that the Proxy Statement was incomplete and materially misleading and that several persons and entities, including JPMSI, had violated federal securities laws by omitting any reference to the zero-premium opportunity rejected by Harrison. In particular, JPMSI's "fairness" opinion was a false and misleading artifice designed to cloak the entrenchment scheme and fraudulently induce JPMC shareholders to vote for the Merger even though, in reality, the $7 billion premium in the Merger was completely unnecessary. Moreover, the Merger's enormous acquisition premium was a betrayal of the interests of JPMC shareholders, as it served only to entrench Harrison in the CEO position for two more years, even though under his leadership JPMC's stock price had fallen significantly and JPMC's value and reputation had suffered.

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ARGUMENT I. Movant Satisfies The Statutory Criteria For Appointment As Lead Plaintiff Under the PSLRA, any member(s) of the purported class may move for appointment as lead plaintiff within 60 days of the publication of notice that the action has been filed. 15 U.S.C. § 78u-4(a)(3)(A)(i)(II). Subsequently, the court "shall 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). See also In re Cendant Corp. Litig., 264 F.3d 201, 222 (3d Cir. 2001). Consistent with its legislative history, the PSLRA provides that the court shall make a significant presumption when determining the "most capable" plaintiff: [T]he court shall adopt a presumption that the most adequate plaintiff in any private action arising under this title is the person or group of persons that ­ (aa) has either filed the complaint or made a motion in response to a notice under subparagraph (A)(i); in the determination of the court, has the largest financial interest in the relief sought by the class; and otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure.

(bb)

(cc)

15 U.S.C. § 78u-4(a)(3)(B)(iii). A. Adequate Notice Of the Pendency of the Action Was Properly Published

The PSLRA mandates that after filing a putative class action complaint, a plaintiff seeking to represent the proposed class must publish a notice that sets forth (i) the pendency of the action, including a description of the claims asserted and the proposed -7-

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class period, and (ii) a statement that any party seeking to serve as lead plaintiff for the action referenced in the notice must move the applicable court within sixty (60) days of the date of the notice. 15 U.S.C. § 78u-4(a)(3)(A)(i). See Janovici v. DVI, Inc., Nos. Civ.A.2:03CV04795-LD et al., 2003 WL 22849604, at *5 (E.D. Pa. Nov. 25, 2003) (in considering motions for appointment of lead plaintiff, court has an independent duty to scrutinize the published notice for compliance with PSLRA requirements). For notice to be adequate under the PSLRA, it must include such information as the names of the defendants, the claims asserted, and the Court before which the action is pending. See, e.g., Marsden v. Select Medical Corp., No. 04-4020, 2005 WL 113128, at *6 (E.D. Pa. Jan. 18, 2005) (accepting notice which "adequately informs class members of `the pendency of the action,' as it identifies the caption of the case, its civil action number, the Court before which the action was brought, and the names of all five Defendants."); Burke v. Ruttenberg, 102 F. Supp. 2d 1280, 1311 (N.D. Ala. 2000) ("notice must, at a minimum, provide information about...who has filed the suit, who is being sued, the court in which the suit is taking place, and the civil action number of the case"). Cf. Ravens v. Iftikar, 174 F.R.D. 651, 655 (N.D. Cal. 1997) (finding notice inadequate because "[t]here is no explanation of the legal theory underlying plaintiffs' suit; no discussion of who violated the Securities Exchange Act of 1934; and no description of the alleged wrongdoing that forms the basis of the complaint."); Burke, 102 F. Supp. 2d at 1316 ("the notice published by [one] plaintiff and his counsel fails to indicate who is seeking relief and against whom relief is sought, facts that would be revealed were the entire name of the action included in the notice"). The notice must also advise class members of their right to retain counsel of their choice. See, e.g., Burke, 102 F. Supp. 2d at 1311 n.39 ("giving only information -8-

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directing putative class members to contact counsel would not comport with the purposes of the subsection"); id. at 1314 ("the notice published appears to have been drafted with the aim of directing clients to the law firms listed in it, thereby permitting the Burke plaintiffs and counsel associated therewith to avoid any lead plaintiff challenge."). On April 11, 2006, Movant's counsel caused to be published a national notice of the pendency of this action in the Investor's Business Daily (Decl. Ex. A)1 which (1) advised class members of their right to retain counsel of their own choice in considering or seeking the lead plaintiff appointment and (2) included the name of the defendant, the civil action number, the class definition, and the claims asserted on behalf of the class. See Marsden, 2005 WL 113128, at *5 (finding publication in Investor's Business Daily to satisfy the PSLRA notice requirement); Janovici, 2003 WL 22849604, at *8 (finding notice adequate which "[u]nlike the first three notices, ...lists the names of the Defendants...[,] advises the purported...Class of the pendency of the action, the claims asserted, and the purported Class Period...[and] also advises that potential class members may retain counsel of their choice."). Accordingly, the aforementioned notice triggered the 60-day period for all lead plaintiff motions. This motion is timely filed within 60 days of the date of publication. B. Movant Believes That He Has The Most Substantial Financial Interest In This Case

As described above, damages in this action are sought on behalf of sellers of JPMC common stock who sustained monetary damages in connection with the Merger. As a result of his holding and sale of JPMC common stock during the relevant time period, Movant believes he is presumptively the most adequate plaintiff to lead this case.

1

This exhibit and unreported decisions referenced herein are attached to the Declaration of Joseph N. Gielata, filed contemporaneously herewith and cited as "Decl. ¶ _" or "Decl. Ex. _."

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See In re Nice Sys. Sec. Litig., 188 F.R.D. 206, 216-217 (D.N.J. 1999) (appointing investors with largest financial interest in the case). C. Movant Satisfies The Requirements of Rule 23

The PSLRA's presumption that the plaintiff with the largest financial interest in the case is best qualified to serve as lead plaintiff may be overcome only by proof that the lead plaintiff will not adequately represent the class or is subject to unique defenses. 15 U.S.C. § 78u-4(a)(3)(B)(iii)(cc) (providing that the lead plaintiff or plaintiffs must "otherwise satisf[y] the requirements of Rule 23 of the Federal Rules of Civil Procedure"). Rule 23(a) provides that a party may serve as a class representative so long as the following four requirements are satisfied: (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class. Of the four prerequisites of class certification under Rule 23(a), only two ­ typicality and adequacy of representation ­ directly address the characteristics of the lead plaintiff under the PSLRA which must be satisfied. See In re Lucent Technologies, Inc., Sec. Litig., 194 F.R.D. 137, 149-50 (D.N.J. 2000) ("This inquiry `focus[es] on the qualities of the class representatives enumerated in Rule 23(a)(3) and 23(a)(4), that is typicality and adequacy.'") (quoting Gluck v. CellStar Corp., 976 F. Supp. 542, 546 (N.D. Tex. 1997)). See also In re Oxford Health Plans, Inc., Sec. Litig., 182 F.R.D. 42, 49 (S.D.N.Y. 1998) ("Typicality and adequacy of representation are the only provisions relevant to a determination of lead plaintiff under the PSLRA."). The remaining requirements of Rule 23 relate to the adequacy of the claims themselves and should not enter into the Court's analysis in its selection of a lead plaintiff. - 10 -

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1.

Typicality

Rule 23(a)(3) of the Federal Rules of Civil Procedure requires that "the claims . . . of the representative parties" be "typical of the claims . . . of the class." "To satisfy the typicality requirement of Rule 23(a)(3), the plaintiffs must show that the class representatives are part of the class and possess the same injury as the class members." In re DaimlerChrysler AG Sec. Litig., 216 F.R.D. 291, 298 (D. Del. 2003) (quoting East Texas Motor Freight System, Inc. v. Rodriguez, 431 U.S. 395, 403 (1977)) (internal quotes omitted). See also 1 H. Newberg, Newberg on Class Actions § 3.13 (3d ed. 1992) ("When it is alleged that the same unlawful conduct was directed at or affected both the named plaintiff and the class sought to be represented, the typicality requirement is usually met regardless of minor variations in fact patterns underlying individual claims"). The Rule 23(a)(3) typicality requirement "helps ensure alignment of the interests of the Proposed Class with those of the class representatives `so that the [class representatives] will work to benefit the entire class through the pursuit of their own goals.'" Lucent, 194 F.R.D. at 150 (quoting In re Prudential Ins. Co. of Am. Sales Practices Litig., 148 F.3d 283, 311 (3d Cir. 1998)). Here, Movant's claims arise from the same course of conduct from which the claims of all other class members arise. As a JPMC shareholder who lost a valuable opportunity, Movant, like other putative class members, was an innocent victim of JPMSI's fraudulent conduct. The injuries alleged by Movant, like the injuries suffered by other members of the class, arise from JPMSI's misleading fairness opinion and its role in concealing the zero-premium opportunity in the Proxy Statement and other communications. Thus, Movant's claims are in all respects "typical" of the claims of the class. See DaimlerChrysler, 216 F.R.D. at 298 (finding claims typical which were based - 11 -

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on the same allegedly false and misleading statements made by defendants in connection with corporate merger). 2. Movant Will Adequately Represent The Interests Of The Class

Rule 23(a)(4)'s requirement of adequate representation is satisfied where it appears that (1) the named plaintiff's interests are not antagonistic to other members of the class, and (2) plaintiff's counsel is qualified, experienced and generally able to conduct the litigation. See DaimlerChrysler, 216 F.R.D. at 299 (citing Wetzel v. Liberty Mut. Ins. Co., 508 F.2d 239, 247 (3d Cir. 1975)). See also Sosna v. Iowa, 419 U.S. 393, 403 (1975). The Rule 23(a)(4) requirement of "[a]dequacy, for purposes of the lead plaintiff determination, is contingent upon both the existence of common interests among the proposed lead plaintiffs and the class, and a willingness on the part of the proposed lead plaintiff to vigorously prosecute the action." Lucent, 194 F.R.D. at 151. "The adequacy of representation inquiry `serves to uncover conflicts of interest between named parties and the class they seek to represent."' Id. (quoting Amchem Products, Inc. v. Windsor, 521 U.S. 591, 625 (1997)). Movant easily meets the adequacy requirements. As noted above, given that his stake in the outcome of this action, Movant will vigorously prosecute the claims asserted. See Nice Sys., 188 F.R.D. at 219 (observing that, where proposed lead plaintiff purchased securities at issue at a cost of $93,633.88, "[t]his financial stake in the litigation provides an adequate incentive for the Proposed Lead Plaintiffs to vigorously prosecute the action."). Movant has duly signed and filed a certification stating his willingness to serve as a representative party on behalf of the class. (D.I. 1, Certification of Samuel I. Hyland in Support of Securities Class Action Complaint ¶ 9.) Movant has also chosen counsel with extensive experience in the prosecution of securities class actions and corporate fiduciary litigation. (Decl. ¶¶ 5-7.) - 12 -

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Finally, there are no facts which indicate any conflict of interest between Movant and other class members. See In re Milestone Scientific Sec. Litig., 183 F.R.D. 404, 416 (D.N.J. 1998). Accordingly, Movant will adequately represent the interests of the class. II. Movant's Chosen Counsel Should Be Appointed Lead Counsel The PSLRA vests authority in the lead plaintiff to select and retain counsel to represent the class, subject to the Court's approval. See 15 U.S.C. § 78u-4(a)(3)(B)(v). See also In re Cendant Corp. Sec. Litig., 404 F.3d 173, 186 (3d Cir. 2005) ("The PSLRA is explicit that the power to select counsel resides in the lead plaintiff") (Cendant II). Thus, the Court should not disturb the lead plaintiff's choice of counsel unless necessary to "protect the interests of the class." 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II)(aa). Movant has selected counsel with experience in prosecuting securities class action claims under the PLSRA. (Aff. ¶ 5-6.) See also Cendant II, 404 F.3d at 192 ("The power to select counsel lets clients choose lawyers with whom they are comfortable and in whose ability and integrity they have confidence." (quoting Cendant, 264 F.3d at 254)). Movant's counsel has also certified that he does not directly own or otherwise have a beneficial interest in JPMC common stock. (Decl. ¶ 4.) Such disclosure is necessary for the Court to make the following determination mandated by the PSLRA: Attorney conflict of interest If a plaintiff class is represented by an attorney who directly owns or otherwise has a beneficial interest in the securities that are the subject of the litigation, the court shall make a determination of whether such ownership or other interest constitutes a conflict of interest sufficient to disqualify the attorney from representing the plaintiff class. 15 U.S.C. §78u-4(a)(9). See also Janovici, 2003 WL 22849604, at *12 (observing that lead plaintiff movant's "selected counsel are capable of satisfying their obligations; evidence of conflict with the interests of other class members is lacking."). - 13 -

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Movant's attorney has already vigorously protected the interests of the class by thoroughly investigating and filing a comprehensive complaint in this case. Thus, Movant's selected counsel can be trusted to continue protecting the interests of the class fairly and adequately in this lawsuit and should be appointed lead counsel. Accordingly, Movant's choice of counsel should be upheld, and the undersigned appointed lead counsel. CONCLUSION For all of the foregoing reasons, Movant should be appointed lead plaintiff in this matter on behalf of the class and his choice of counsel should be approved. DATED: June 12, 2006 Respectfully submitted, /s/ Joseph N. Gielata JOSEPH N. GIELATA (#4338) Attorney at Law 501 Silverside Road, No. 90 Wilmington, Delaware 19809 (302) 798-1096 Attorney for Plaintiff Samuel Hyland

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CERTIFICATE OF SERVICE I hereby certify that, on June 12, 2006, I electronically filed the OPENING BRIEF IN SUPPORT OF THE MOTION BY PLAINTIFF SAMUEL HYLAND FOR APPOINTMENT AS LEAD PLAINTIFF AND APPOINTMENT OF LEAD COUNSEL with the Clerk of Court using CM/ECF which will send notification of such filing to: Michael R. Robinson, Esq. RICHARDS LAYTON & FINGER , P.A. One Rodney Square Wilmington, DE 19801 Counsel for Defendant

/s/ Joseph N. Gielata Joseph N. Gielata (# 4338)

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

SAMUEL I. HYLAND, individually and on behalf of all others similarly situated, Plaintiff, v. J.P. MORGAN SECURITIES, INC., a Delaware corporation, Defendant.

Civil Action No. 06-224 JJF

CLASS ACTION

DECLARATION OF JOSEPH N. GIELATA IN SUPPORT OF THE MOTION BY PLAINTIFF SAMUEL HYLAND FOR APPOINTMENT AS LEAD PLAINTIFF AND APPOINTMENT OF LEAD COUNSEL JOSEPH N. GIELATA, a member of the Bar of the Supreme Court of Delaware, for this Declaration states: 1. 2. I represent Samuel I. Hyland, the plaintiff in the above-captioned matter. I make this Declaration in support of Mr. Hyland's Motion For

Appointment As Lead Plaintiff And Appointment Of Lead Counsel. Except as otherwise stated, I have personal knowledge of the facts stated in this declaration and, if called as a witness, could and would competently testify to them. 3. I have been retained by Mr. Hyland and have agreed to a fee structure

which I believe is far more favorable to my client and the class than the fee arrangements generally prevailing in the field of class action securities litigation. I have prepared a memorandum setting forth the basis for this fee structure, to be submitted ex parte and

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under seal at the Court's request. 1 The purpose of this memorandum is to assist the Court in reviewing the reasonableness of the requested fee in the event that a recovery for the class is obtained. It is suggested that the Court may, in its discretion, unseal the memorandum for review in camera if and when a recovery for the class is obtained. 4. In accepting this engagement, I have determined that I do not have any

conflict of interest. In particular, I do not own any JPMC common stock and I do not own any mutual fund or similar investment which holds JPMC common stock. If I am appointed lead counsel in this action, I will, throughout the pendency of the action, (a) refrain from becoming involved in any other litigation in which JPMC is a defendant, and (b) refrain from purchasing JPMC common stock or otherwise owning any interest, direct or indirect, in JPMC common stock. 5. My law practice is confined to the representation of investors. I am

knowledgeable and experienced in securities law and litigation, and have represented both individual and institutional investors in complex class actions. I am also knowledgeable and experienced in Delaware corporate law and shareholder litigation involving breach of fiduciary duty. I previously represented investors with the prominent plaintiffs' firms of Grant & Eisenhofer, P.A. and Milberg Weiss Bershad & Schulman LLP, both of which specialize in shareholder litigation, including securities class actions. 6. During my tenure with Grant & Eisenhofer, the firm prosecuted the

following noteworthy cases:

1

The inspiration for this memorandum comes from a decision by Judge Vaughn Walker. See In re HPL Technologies, Inc. Sec. Litig., 366 F. Supp. 2d 912 (N.D. Cal. 2005) ("[C]ounsel's ex ante assessment...that laid out in detail the factors that went into the evaluation [of a potential case] and presented data to back it up would carry a good deal of weight even if the predicted outcome, length of proceedings and costs differed from what actually occurred.").

2

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A. In re DaimlerChrysler AG Securities Litig., D. Del., Master File No. 00-0993 (JJF) (co-lead for class, on behalf of Florida State Board of Administration) (achieved $300 million settlement); B. In re Global Crossing, Ltd. Securities Litig., S.D.N.Y., Case No. 02 Civ. 910 (GEL) (sole lead counsel for class, on behalf of the Public Employees' Retirement System of Ohio and State Teachers' Retirement System of Ohio) (recovered in excess of $300 million); C. In re Oxford Health Plans, Inc., Securities Litig., S.D.N.Y., MDL Docket No. 1222 (CLB) (co-lead counsel, on behalf of Public Employees' Retirement Association of Colorado) (recovered $300 million from the company and its auditors); D. In re Telxon Corp., Securities Litig., N.D. Ohio (represented hedge fund in opt-out securities suit, obtained substantial recovery); E. In re Safety-Kleen Corp. Bondholders Litig., D. S. Carolina, Consol. Case No. 3-00-1145 17 (sole lead counsel, on behalf of American High-Income Trust and USAA Research Income Trust) (Grant & Eisenhofer eventually took this case through trial and obtained $284 million in judgments and settlements). 7. I received my law degree from the University of Chicago Law School,

where I was a Yee Scholar. As an undergraduate, I studied economics, politics and philosophy at the University of Pittsburgh, where I was a Chancellor's Scholar, graduated magna cum laude, and was named to Phi Beta Kappa. In addition to my work

3

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experience, my undergraduate and graduate coursework substantially enhanced my competence in the fields of corporate finance and accounting, both of which are relevant to my representation of investors. 8. Attached to this Declaration are true and correct copies of the following: A. The affidavit of Charles Brown attesting to the publication of the notice of the pendency of this action (attached thereto), as published in the Investor's Business Daily on April 11, 2006; B. Janovici v. DVI, Inc., Nos. Civ.A.2:03CV04795-LD, Civ.A.2:03CV04963-LD, Civ.A.2:03CV05000-LD, Civ.A.2:03CV05111-LD, Civ.A.2:03CV05141-LD, Civ.A.2:03CV05244-LD, Civ.A.2:03CV05336-LD, Civ.A.2:03CV05674-LD, 2003 WL 22849604 (E.D. Pa. Nov. 25, 2003); and C. Marsden v. Select Medical Corp., No. 04-4020, 2005 WL 113128 (E.D. Pa. Jan. 18, 2005). I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct. Executed: June 12, 2006 /s/ Joseph N. Gielata JOSEPH N. GIELATA (# 4338)

4

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Exhibit

A

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-JJF

Notice is hereby given that, on April 6, 2006, Joseph Gielata filed in the United States District Court for the District of Delaware a class action lawsuit on behalf of shareholders of JPMorgan Chase & Co. (the "Company") (NYSE:JPM) who held such stock on January 14, 2004 and thereafter sold any or all such stock. The lawsuit, captioned Hyland v. J.P. Morgan Securities, Inc., No. 1:06cv224, arises out of the merger between the Company and Bank One Corporation ("One") and seeks to pursue remedies under the Securities Exchange Act of 1934 and common law against defendant J.P. Morgan Securities, Inc., the Company's financial advisor in the merger. The complaint alleges that the Company's CEO rejected a valuable opportunity to merge One into the Company without paying any premium solely because One's CEO sought to be CEO of the combined Company immediately. Instead, unbeknownst to investors, the Company's CEO agreed to a multi-billion dollar premium to guarantee his CEO title for two more years. The complaint further alleges that the defendant participated in this entrenchment scheme, including intentionally omitting the superior opportunity from the fairness opinion and solicitations disseminated to shareholders in connection with the merger. The truth emerged on June 27, 2004, when The New York Times published an article revealing the backroom deal. If you are a member of the class described above, and sustained damages, you may, no later than 60 days after the date of this notice, request that the Court appoint you as lead plaintiff. To be lead plaintiff, you must meet certain legal standards. Your ability to share in any recovery is not, however, affected by the decision of whether or not to serve as a lead plaintiff. You may retain Joseph Gielata, or other counsel of your choice, to serve as your counsel in this action. If you wish to discuss this action, or have any questions concerning this notice or your rights and interests with regard to the case, you may contact Joe Gielata via email at [email protected] or at (302) 798-1096.

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Exhibit

B

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Not Reported in F.Supp.2d 2003 WL 22849604 (E.D.Pa.), Fed. Sec. L. Rep. P 92,636 (Cite as: 2003 WL 22849604 (E.D.Pa.))

Page 1

Plaintiff. Motions, Pleadings and Filings United States District Court, E.D. Pennsylvania. Jeff JANOVICI, Individually and On Behalf of All Others Similarly Situated v. DVI, INC., et al. Mark B. WILLIAMS, Individually and On Behalf of All Others Similarly Situated v. Michael A. O'HANLON, et al. Allison B. RICE, Individually and On Behalf of All Others Similarly Situated v. Michael A. O'HANLON, et al. Bharat PAREKH, Individually and On Behalf of All Others Similarly Situated v. Michael A. O'HANLON, et al. Stephen BENCE, IV, Individually and On Behalf of All Others Similarly Situated v. Michael A. O'HANLON, et al. Murari OJHA, Individually and On Behalf of All Others Similarly Situated v. Michael A. O'HANLON, et al. Kenneth GROSSMAN, Individually and On Behalf of All Others Similarly Situated v. Michael A. O'HANLON, et al. Shirley H. KAREL, Individually and On Behalf of All Others Similarly Situated v. Michael A. O'HANLON, et al. No. Civ.A.2:03CV04795-LD, Civ.A.2:03CV04963LD, Civ.A.2:03CV05000-LD, Civ.A.2:03CV05111-LD, Civ.A.2:03CV05141-LD, Civ.A.2:03CV05244-LD, Civ.A.2:03CV05336-LD, Civ.A.2:03CV05674-LD. Filed Aug. 20, 2003. Nov. 25, 2003. represented by Marc A. Topaz, Schiffrin & Barroway, LLP, Bala Cynwyd, PA, Lead Attorney, Attorney to be Noticed, for Jeff Janovici, Individually and on Behalf of all Others Similarly Situated, represented by Gary M. Schildhorn, Adelman Lavine Gold & Levin, Philadelphia, PA, Lead Attorney, Attorney to be Noticed, for DVI, Inc., Defendant. represented by Maura E. Fay, Dilworth Paxson LLP, Philadelphia, PA, Lead Attorney, Attorney to be Noticed, for Steven R. Garfinkel, Defendant. represented by Andrew L. Barroway, Darren J. Check, Schiffrin & Barroway, LLP, Bala Cynwyd, PA, Lead Attorney, Attorney to be Noticed, Jeffrey M. Norton, Wechsler Harwood, LLP, New York, NY, Lead Attorney, Attorney to be Noticed, for Stephen Bence, IV, Movant. represented by Deborah R. Gross, Law Offices Bernard M. Gross, PC, Philadelphia, PA, Lead Attorney, Attorney to be Noticed, Susan R. Gross, Law Offices Bernard Gross, PC, Philadelphia, PA, Lead Attorney, Attorney to be Noticed, for Milton Wolson, Movant. represented by DeBorah R. Gross, Susan R. Gross, (See above for address), Lead Attorney, Attorney to be Noticed, for Bharat Parekh, Movant. represented by Deborah R. Gross, Susan R. Gross, (See above for address), Lead Attorney, Attorney to be Noticed, for James Schwartz, Movant. represented by Robert A. Kauffman, Berger and Montague, Philadelphia, PA, Lead Attorney, Attorney to be Noticed, for Gottlieb Family Foundation Trust, Movant. represented by Robert A. Kauffman, (See above for address), Lead Attorney, Attorney to be Noticed, for Richard Morrell, Movant. represented by M. Richard Komins, Barrack Rodos & Bacine, Philadelphia, PA, Lead Attorney, Attorney to be Noticed, for Thomas Sciba, Movant. represented by Steven A. Schwartz, Chimicles & Tikellis LLP, Haverford, PA, Lead Attorney, Attorney to be Noticed, for Kenneth Grossman, Movant. represented by Steven A. Schwartz, (See above for

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Not Reported in F.Supp.2d 2003 WL 22849604 (E.D.Pa.), Fed. Sec. L. Rep. P 92,636 (Cite as: 2003 WL 22849604 (E.D.Pa.)) address), Lead Attorney, Attorney to be Noticed, for Cedar Street Funds, Movant. represented by Steven A. Schwartz, (See above for address), Lead Attorney, Attorney to be Noticed, for Cedar Street Offshore Fund, Movant. represented by Joanne G. Noble, Trujillo Rodriguez & Richards LLC, The Penthouse, Philadelphia, PA, Lead Attorney, Attorney to be Noticed, R. Bruce McNew, Taylor & McNew, Greenville, DE, Lead Attorney, Attorney to be Noticed, for Shirley H. Karel, Movant. MEMORANDUM DAVIS, J. *1 Presently pending before the Court are eight securities fraud class action lawsuits against Michael A. O'Hanlon ("O'Hanlon"), former Chief Executive Officer and President of DVI and a former member of its Board of Directors, and Steven R. Garfinkel [FN1] ("Garfinkel"), Chief Financial Officer and Executive Vice President of DVI [FN2] and a member of its Board of Directors, and the underwriter of its securities, Merrill Lynch & Co., Inc. ("Merrill Lynch"), who was, at all relevant times, DVI's financial advisor and the lead underwriter in managing DVI's securitizations. (Garfinkel and O'Hanlon are collectively identified as the "DVI Defendants"; O'Hanlon, Garfinkel and Merrill Lynch are collectively identified as "Defendants".) These eight actions (the "DVI Actions") allege claims under Section 21D(a)(3)(B) of the Securities Exchange Act of 1934 (the "Exchange Act"), as amended by the Private Securities Litigation Reform Act of 1995 (the "PSLRA"). Defendants are alleged to have violated Sections 10(b) and 20(a) of the Exchange Acts, and Rule 10b-5. FN1. On August 13, 2003, DVI placed Garfinkel on administrative leave. FN2. DVI is not named as a defendant in the instant action because it filed for Chapter 11 Bankruptcy protection on August 25, 2003 Numerous plaintiffs request consolidation the DVI Actions pursuant to Rule 42(a) of the Federal Rules of Civil Procedure. Multiple plaintiffs also petition to be appointed as Lead Plaintiff as well as for approval of their selection of Lead Counsel. On November 21, 2003, this Court held oral argument with respect to these motions. Based on the parties' submissions and

the oral arguments presented to the Court, we grant the Cedar Street Group's Motion to Consolidate, appoint the Cedar Street Group as Lead Plaintiff, and approve Krislov & Associates, Ltd. to serve as Lead Counsel and Chimicles & Tikellis LLP to serve as Liaison Counsel. I. BACKGROUND On July 25, 2003, James T. Bennett filed a class action on behalf of purchasers of DVI stock during the period of November 7, 2001 through June 27, 2003, against DVI (the "Bennett Complaint"), an independent specialty finance company for healthcare providers worldwide with $2.8 billions of managed assets, and O'Hanlon and Garfinkel. The Bennett Complaint alleged that DVI and the DVI Defendants violated Sections 10(b) and 20(a) of the Exchange Acts, and Rule 10b-5. Specifically, the Bennett Complaint alleged that DVI and the DVI Defendants participated in a fraudulent scheme and course of business that operated as a fraud or deceit on purchasers of DVI common stock by disseminating materially false and misleading statements and/or concealing material adverse facts. The Bennett Complaint alleged that the scheme did in fact: (i) deceive the investing public regarding DVI's business and operations and the intrinsic value of DVI securities; (ii) enable DVI to sell $25 million of its subordinated convertible notes during the class period; (iii) enable DVI to secure credit facilities for $175 million on favorable terms; and (iv) cause Bennett and other members of the Class to purchase DVI securities at artificially inflated prices. (Bennett Compl. ¶ 56). On August 26, 2003, the Bennett Complaint was voluntarily dismissed. *2 On August 20, 2003, Jeff Janovici ("Janovici") filed a class action against DVI, O'Hanlon and Garfinkel (DVI, O'Hanlon and Garfinkel collectively identified as the "Janovici Defendants") on behalf of purchasers of DVI stock during the period of November 7, 2001 through June 27, 2003, alleging violations of Section 10(b) and 20(a) and the Exchange Action and Rule 10b-5 (the "Janovici Complaint"). [FN3] Specifically, the Janovici Complaint alleges that the Janovici Defendants participated in a fraudulent scheme and course of business that operated as a fraud or deceit on purchasers of DVI securities by disseminating materially false and misleading statements and/or concealing material adverse facts. The scheme: (i) deceived the investing public regarding DVI's business and operations and the intrinsic value of DVI securities; (ii) enabled DVI to sell $25 million of

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Not Reported in F.Supp.2d 2003 WL 22849604 (E.D.Pa.), Fed. Sec. L. Rep. P 92,636 (Cite as: 2003 WL 22849604 (E.D.Pa.)) its subordinated convertible notes during the class period; (iii) enabled DVI to secure credit facilities for $175 million on favorable terms; and (iv) caused plaintiff and members of the Class to purchase DVI securities at artificially inflated prices. (Janovici Compl. ¶ 14). On September 15, 2003, the Court entered an Order, pursuant to 11 U.S.C. § 362, staying the Janovici action with respect to DVI because the company had filed for bankruptcy protection. FN3. The law firm of Schiffrin & Barroway filed the Janovici Complaint on behalf on Mr. Janovici. Schiffrin & Barroway also filed the Bennett Complaint on behalf of Mr. Bennett. On September 3, 2003, Mark B. Williams ("Williams") filed a class action against on behalf of purchasers of DVI common stock and Senior Notes during the period of November 7, 2001 through August 13, 2003 (the "Class Period"), [FN4] O'Hanlon and Garfinkel alleging violations of Sections 10(b) and 20(a) of the Exchange Acts, and Rule 10b-5 (the "Williams Complaint"). Specifically, the Williams Complaint alleges that the DVI Defendants: (i) employed devices, schemes, and artifices to defraud; (ii) made untrue statements of material fact and/or omitted material facts necessary to make the statements not misleading; and (iii) engaged in acts, practices, and a course of business which operated as a fraud and deceit upon the purchasers of the Company's securities in an effort to maintain artificially high market prices for DVI's securities. (Williams Compl. ¶ 73). FN4. Three of the complaints define the class period as November 7, 2001 through June 27, 2003, and four of the complaints extend the class period through August 13, 2003. Because four of the complaints allege that false and/or materially misleading statements were made through August 13, 2003, we find that Class Period should be extended through that date. One complaint, Civil Action No. 03-5674, however, defines the class period as September 1, 2001 through August 13, 2003. Because the complaint filed in this actions fails to allege that any false and/or materially misleading statements were made prior to November 7, 2001, we find that there is no basis for setting the Class Period prior to this date.

In accordance with the PSLRA, 15 U.S.C. § 78u4(a)(3)(A)(I), Williams published a notice of pendency of the action in Business Wire on September 3, 2003. Since the filing of the Williams Complaint, six other complaints arising out of similar, if not identical, facts alleging parallel claims have been filed in the Eastern District of Pennsylvania. In addition to these six complaints, six plaintiff and/or plaintiff "groups" filed motions requesting: (i) consolidation of the actions; (ii) appointment as lead plaintiff; and (ii) approval of selection of lead counsel. [FN5] FN5. The following plaintiffs filed complaints did not move for appointment as Lead Plaintiff: (I) Mark B. Williams, (ii) Jeff Janovici, (iii) Murari P. Ojha, and (iv) Allison B. Rice. A. The Movants 1. Thomas Sciba Mr. Sciba is an individual investor who allegedly suffered losses of approximately $30,000 as a result of purchasing DVI stock at prices inflated by the DVI Defendants' false and misleading statements. [FN6] FN6. Mr. Sciba did not pursue appoint as Lead Plaintiff beyond the filing of his motion for appointment as lead plaintiff. 2. Stephen Bence, IV *3 Mr. Bence is an individual investor who allegedly suffered losses of nearly $60,000 as a result of purchasing DVI stock at prices inflated by the DVI Defendants' false and misleading statements. 3. The Wolson Group The Wolson Group is comprised of three individual investors, Milton Wolson, Bharat Parekh, and James Schwartz. The Wolson Group asserts losses of approximately $60,656.30. 4. The Gottlieb/Morrell Group The Gottlieb/Morrell Group Gottlieb Family Foundation investor Richard W. Morrell. Group claims to have approximately $46,000. 5. The Cedar Street Group is comprised of the Trust and individual The Gottlieb/Morrell suffered losses of

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The Cedar Street Group is comprised of two institutional investors, the Cedar Street Fund and the Cedar Street Offshore Fund, and an individual investor, Kenneth Grossman. The Cedar Street Group alleges that it suffered losses in excess of $1.6 million as result of purchasing DVI securities at prices inflated by the DVI Defendants' false and misleading statements. 6. The Karel Group The Karel Group is comprised of seven individual investors who allege a preexisting investment relationship. The Karel Group claims to have suffered losses of approximately $333,000. II. DISCUSSION A. Motions to Consolidate A court has broad discretion to consolidate actions involving common questions of law or fact ... if it will facilitate the administration of justice." See Smithkline Beecham Corp. v. Geneva Pharmaceuticals, Inc., 2001 WL1249694, at * 5 (E.D.Pa. Sept. 26, 2001) (citing Fed.R.Civ.P. 42(a)). Rule 42(a) provides: When actions involving a common question of law or fact are pending before the court, it may order a joint hearing or trial of any of all the matters in issue in the actions; it may order all the actions consolidated; and it may make such orders concerning proceedings therein as may tend to avoid unnecessary costs or delay. Fed.R.Civ.P. 42(a). "When considering consolidation the court 'must balance the benefits of judicial economy and expediting the litigation against the possibility of prejudice." ' Smithkline Beecham, 2001 WL1249694, at *5 (quoting Kerley v. Great Lakes Dredge & Dock Co., 1996 WL 131136, at *1 (E.D.Pa. March 20, 1996)); see also Rosario v. SCM Group USA, Inc., 2003 WL 21982116, at *1 (E.D.Pa. July 2, 2003) ("Consolidation is at the discretion of the trial court and "should be permitted where the consolidation of separate actions presenting common questions of law or fact will promote convenience and economy in judicial administration.") Moreover, the PSLRA directs that cases should be consolidated where there is "more than one action on behalf of a class asserting substantially the same claim or claims." 15 U.S.C. § 78u-4(a)(3)(B)(ii). The actions at issue share significant common issues of law and fact. A review of each of the complaints

reveals that each case involves claims against O'Hanlon and Garfinkel for violations of Rule 10b-5 and Sections 10(b) and 20(a) of the Exchange Act. Indeed, the factual basis supporting the claims asserted in the DVI Actions are parallel. The Plaintiffs are all investors who purchased common stock and/or No tes during the Class Period. Additionally, each Plaintiff, in purchasing shares of DVI stock, relied upon statements contained in the same public filings, press releases and other publications. Although the Cedar Group is unique in the claims asserted against Merrill Lynch, this difference is not determinative because the Cedar Group's claims against Merrill Lynch are premised on the same facts and statutory provisions as the claims against O'Hanlon and Garfinkel. See Skwortz v. Crayfish Co., 2001 WL 1160745, at *2 (S.D.N.Y. Sept. 28, 2001) (granting consolidation of eleven complaints where each complaint was based on the same facts and statutory provision, despite the fact that all the complaints did not contain the same claims against the same defendants) (citations omitted). That the actions share common questions of law and fact and should be consolidation is further supported by the fact that each of the movants requested consolidation pursuant to Rule 42(a) and counsel for the moving plaintiffs expressly agreed on consolidation at oral argument. Because consolidation will facilitate the administration of justice and promote judicial economy without any foreseeable prejudice, the Motions to Consolidate filed by the Cedar Street Group in each of the DVI Actions are granted. B. Appointment of Lead Plaintiff *4 The PSLRA instructs that, "as soon as practicable" after the resolution of the motions to consolidate, the Court shall appoint the most adequate plaintiff to serve as lead plaintiff of the class. 15 U.S.C. § 78u-4(a)(3)(B) (ii). In 1995, in response to perceived abuses in securities fraud class actions, Congress enacted the PSLRA. See S.Rep. No. 104-98 (1995), reprinted in 1995 U.S.C.C.A.N. 679; H.R. Conf. Rep. No. 104-369 (1995), reprinted in 1995 U.S.C.C.A.N. 730. "The purpose behind the PSLRA is to prevent 'lawyerdriven' litigation, and to ensure that 'parties with significant holdings in issues, whose interests are more strongly aligned with the class of shareholders, will participate in the litigation and exercise control over the selection and actions of plaintiffs' counsel." ' Crayfish Co., 2001 WL 1160745, *2 (citations omitted). "Congress believed that this could best be

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Not Reported in F.Supp.2d 2003 WL 22849604 (E.D.Pa.), Fed. Sec. L. Rep. P 92,636 (Cite as: 2003 WL 22849604 (E.D.Pa.)) achieved by encouraging institutional investors to serve as lead plaintiffs. Id. (citations omitted). Accordingly, the PSLRA regulates the procedures for bringing class actions under the Securities Act. The PSLRA requires plaintiffs filing private securities class action complaints to publish a notice of pendency of the suit in a widely circulated business publication or wire service no later than twenty days after the complaint is filed. 15 U.S.C. § 78u-4(a)(3)(A)(I). No later than sixty days after the publication of notice, any member of the purported class may file a motion to serve as lead plaintiff. 15 U.S.C. § 78u-4(a)(3)(A)(i)(II). If a motion for consolidation has been made, the court shall not appoint a lead plaintiff until after it renders a decision on the motion to consolidate. 15 U.S.C. § 78u4(a)(3)(B)(ii). The PSLRA instructs the 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 the class members." 15 U.S.C. § 78u-4(a)(3)(B)(I). To this end, the statute creates a rebuttable presumption that the most adequate plaintiff is "the person or group of persons that--(aa) has either filed the complaint or made a motion in response to a notice ...; (bb) in the determination of the court, has the largest financial interests in the relief sought by the class; (cc) otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure." 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II) (emphasis added). This presumption may only be rebutted by a member of the purported plaintiff class upon proof that the presumptively most adequate plaintiff--"(aa) will not fairly and adequately protect the interest of the class; or (bb) 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); see also In re Cendant Corp. Lit., 264 F.3d 201, 266-8 (3d Cir.2001). The process of determining the "most adequate" plaintiff has been summarized by the Third Circuit: "The Reform Act establishes a two -step process for appointing a lead plaintiff: the court first identifies the presumptive lead plaintiff, and then determines whether any member of the putative class had rebutted the presumption." In re Cendant Corp. Lit., 264 F.3d at 262 (citing 15 U.S.C. § 78u4(a)(3)(B)(iii)(I) & (II)). 1. Adequacy of Notice and Filing a Timely Complaint and/or Motion *5 The PSLRA instructs that, wi thin 20 days of

filing a complaint under the statute, plaintiff or plaintiffs shall "cause to be published, in a widely circulated national business-oriented publication or wire service, a notice advising members of the purported plaintiff class ... (I) of 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 was published, any member of the purported class may move the court to serve as lead plaintiff of the purported class." 15 U.S.C. § 78u-4(a)(3)(A)(I). If more than one action on behalf of the class asserting substantially the same claims or claims is filed, only the plaintiff or plaintiffs in the "first filed action shall be required to cause notice to be published." 15 U.S.C. § 78u4(a)(3)(A)(ii). In deciding a motion for the appointment of lead plaintiff under the PSLRA, the Court has an independent duty to scrutinize the published notice and ensure that the notice comports with the objectives of the PSLRA, that is, encouraging the most adequate plaintiff, the plaintiff with the largest financial stake in the outcome of the litigation, to come forward and take control of the litigation. See Ravens v. Iftikar, 174 F.R.D. 651, 654-55 (N . D.Cal.1997) (quoting House Conf. Rep. No. 104-369, 104th Cong., 1st Sess., 1996 U.S.C.C.A.N. 730, 731); see also Burke v. Ruttenberg, 102 F.Supp.2d 1280, 1309 (N.D.Ala.2000) ("A district court must exercise exceptional care to insure [sic] that in applying the lead plaintiff provisions of the statute, the concerns that motivated Congress are carefully heeded, as the determination of lead plaintiff by the district court is, with probably little exception, not immediately subject to review."); In re Oxford Health Plans, Inc. Securities Lit., 182 F.R.D. 42, 45 (S.D.N.Y.1998) ("The PSLRA calls for greater supervision by the Court in the selection of which plaintiffs will control the litigation."). This means that in order for a notice of pendency to encourage the most adequate plaintiff to come forward and control the litigation, it must contain accurate information from which an interested class member may contact the Court and readily obtain a copy of the complaint in a pending action and/or file a motion to be appointed as lead counsel in that case. See California Public Employees' Retirement System v. Chubb Corp., 127 F.Supp.2d 572, 576 (D.N.J.2001) (finding a notice inadequate where it failed to disclose the caption of the case, the docket number, the judge to whom the case was assigned, the vicinage in which the judge sits, or the address of the Court because "an interested class member would not even know to which courthouse to go to examine a copy of the

© 2005 Thomson/West. No Claim to Orig. U.S. Govt. Works.

Case 1:06-cv-00224-JJF

Document 14-2

Filed 06/12/2006

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Not Reported in F.Supp.2d 2003 WL 22849604 (E.D.Pa.), Fed. Sec. L. Rep. P 92,636 (Cite as: 2003 WL 22849604 (E.D.Pa.)) complaint" or "would not know before which judge an appropriate motion should be filed."). Requiring the provision of such information comports with the objectives of the PSLRA by ensuring that "institutional plaintiffs with expertise in the securities markets and real financial interests in the integrity of the markets and outcome of the litigation would come forward and control the litigation, rather than the lawyers and their professional plaintiffs." Id. at 576. Most significantly, providing information from which a interested class member may contact the Court and readily obtain a copy of the complaint in a pending action and/or file a motion to be appointed as lead counsel in that case shields against lawyer driven litigation because such class members are not forced to contact noticing counsel for additional information to aid in their decision of whether to move for lead plaintiff status. *6 On July 25, 2003, the Bennett action was filed by the law firm of Schriffrin & Barroway. On July 31, 2003, within 20 days of filing his complaint, Mr. Bennett caused a notice to be published noticing the pendency of the Bennett action. On August 20, 2003, Schriffrin & Barroway filed a substantially similar action on behalf of Mr. Janovici. On August 26, 2003, the Bennett action was voluntarily dismissed. On September 3, 2003, three notices of pendency were published in three different business-oriented publications and wire services. Two of the notices, one published by Schiffrin & Barroway in PrimeZone Media Network, and the other, published by the law firm of Caully Geller Bowman & Rudman, LLP in PR Newswire, noticed the pendency of the Bennett action despite the fact that the Bennett action had not been "pending" for over one week. Both of these notices stated that September 29, 2003 was the moving deadline. The third notice published on September 3, 2003 by the law firm of Milberg Weiss Bershad Hynes & Lerach LLP in Business Wire, noticed the pendency of the Williams action, which was filed that very day. The Williams notice stated that November 3, 2003 was the moving deadline. In the instant action, we find that the Janovici action was the first filed action in the DVI litigation because the Bennett was voluntarily dismissed prior to the consolidation. Consequently, for purposes of the PSLRA notice requirements, we find that the Bennett notice has no effect. More significantly, we find that the Mr. Janovici failed to comply with the notice requirements of the PSLRA because he did not notice the pendency of the Janovici action, which notice is required by the plain language of the PSLRA. Indeed, the September 3, 2003 notices filed by Schiffrin &

Barroway and Caully Geller incorrectly noticed the pendency of the Bennett action, which notice was clearly inaccurate because the Bennett action was, in fact, no longer pending. Purported class members could not have relied on either of these notices for sufficient information from which they could contact the Court and readily obtain a copy of the complaint for an action filed on behalf of DVI securities holders on July 25, 2003 because no such complaint existed. Additionally, purported class members could not have filed a motion for appointment as lead plaintiff in an action that was no longer pending. We find that such misinfo