[Proposed] Lead Counsel for Plaintiffs

[Additional counsel appear on signature page.]
 
 

I. INTRODUCTION

II. ARGUMENT

A. Detroit's Misinformed and Unfounded Accusations Should Not Prevent Adam Rosenberg From Serving As a Lead Plaintiff and Class Representative

B. The Legato Group Is a Proper Group Under the Reform Act

I. INTRODUCTION

The Legato Systems Lead Plaintiff Group ("Legato Group") respectfully submits this brief response to address two issues raised for the first time by the Policemen and Firemen Retirement System of the City of Detroit ("Detroit") in their reply in further support of their motion to be appointed lead plaintiff. As demonstrated below, Detroit's attack on Legato Group member Adam Rosenberg's adequacy to serve as lead plaintiff based upon his alleged association with Botta Trading, Inc., is completely devoid of any factual basis and must be corrected in order to protect the Record. In like manner, Detroit badly misstates the proceedings in the In re Oxford Health Plans, Inc. Sec. Litig., 182 F.R.D. 42 (S.D.N.Y. 1998), in order to convince this Court that only a large institution can safeguard the interests of the Class. In fact, the Oxford court's refusal to appoint ColPERA as sole lead plaintiff in favor of a tripartite structure consisting of an institution, three individuals and a mutual fund family has resulted in world-class representation for the entire Oxford class.

II. ARGUMENT

A. Detroit's Misinformed and Unfounded Accusations Should Not Prevent Adam Rosenberg From Serving As a Lead Plaintiff and Class Representative

As stated in the Legato Group's Opposition, an investor need not have an investment strategy identical to the class in order to meet the typicality requirement under Rule 23. Opposition at 20 (citing Kirby v. Cullinet Software, Inc., 116 F.R.D. 303 (D. Mass. 1987) (investment strategy is of little importance to suitability as a class representative)). In fact, it is not the manner in which the plaintiff relied that is the issue, but rather, whether the plaintiff actually relied on the integrity of the market. See Opposition at 20 (citing Tolan v. Computervision Corp., 696 F. Supp. 771, 779 (D. Mass. 1988)). Thus, where, as here, plaintiffs' claims rest upon a fraud-on-the-market theory, even those plaintiffs with unusual trading strategies would be permitted to represent the class as long as they relied on the integrity of the market. Rosenberg clearly falls within this category.

Moreover, even if the Court were to find that Rosenberg's trading pattern raises an issue as to whether he relied on the integrity of the market, any such issue has clearly been resolved by his recent Declaration.⁽³⁾ In his declaration, Rosenberg unequivocally states that he "based [his] decisions to invest in Legato on the statements issued by the Company and other information publicly available during the Class Period." Rosenberg Decl., ¶5. Rosenberg thus confirms that he relied on the integrity of the market (and nothing else) when making his decisions to invest in Legato. Accordingly, Rosenberg's trading strategy does not affect his ability to serve as a class representative.

Detroit's next attack on Rosenberg concerns his affiliation with Botta Trading, LLC and his adequacy to serve as a lead plaintiff. Specifically, through slight-of-hand, Detroit states that:

Although Botta Trading's website represents that the firm "makes markets in options on over 500 stocks and stock indexes," public sources reveal that the SEC canceled the firm's registration under the Exchange Act over nine months ago.

I HEREBY ATTEST that: The on line data base of this Commission reflects, an application on Form BD for registration as a broker-dealer was filed with this Commission November 10, 1998, under the name Botta Trading, LLC, File No. 8-51419, pursuant to the provisions of the Securities Exchange Act of 1934, and said registration became effective December 31, 1998, and is still in full force and effect.

Here, Detroit and its counsel Bernstein Litowitz seek to distract this Court from a fair consideration of the competing lead plaintiff motions by creating the implication that the lapsed registration of Botta Trading, Inc., a predecessor entity which no longer conducts broker-dealer functions and which has no connection to Rosenberg, represents some conflict or distraction which would impair class certification. Regrettably, a simple phone call to the SEC's Division of Broker-Dealer Regulation would have revealed that Botta Trading, LLC's registration as a broker-dealer remains effective. Detroit's suggestion that Rosenberg is somehow a party to improper activities relating to the purported cancellation of Botta Trading's registration is thus completely inaccurate and unfounded. Moreover, notwithstanding the fact that the Legato Group has not proposed Botta Trading, LLC as a lead plaintiff, significantly, its additional registrations with the American Stock Exchange, the Pacific Stock Exchange and the Chicago Board of Options Exchange also remain active and effective. These facts could also be confirmed through simple phone calls to said exchanges.

In a final attempt to convince the Court that the Legato Group should not be appointed lead plaintiff, Detroit again makes inaccurate assertions, specifically stating that:

[N]one of the members of the Legato Group have made any showing that they understand and are willing to fulfill the duties and obligations of serving as a lead plaintiff, including:

o remaining informed as to the progress and status of the case, its strengths and weaknesses, the prospects for settlement, and the resources invested in the litigation;

o directing counsel's activities with respect to each major litigation event, including important motions, settlement discussions, trial and trial preparation; and

o meeting with counsel in person on a regular basis to review the status of the case, and ensuring that the litigation is being prosecuted efficiently and effectively.

Notwithstanding the foregoing misrepresentations, Rosenberg, once again, clarifies the record in his declaration by clearly describing his commitment to the litigation, his extensive involvement in the case thus far as well as the commitment and involvement of the additional members of the Legato Group. Specifically, Rosenberg states that:

I understand my obligations as a lead plaintiff under the Private Securities Litigation Reform Act of 1995 and believe I am adequately suited to represent the interests of the Class. I am committed to maximizing recoveries on behalf of the Class and possess the experience and expertise to actively participate in strategic decision-making.

I, along with the other members of the Legato Systems Lead Plaintiff Group, have already consulted with our proposed lead counsel on several occasions concerning oversight of the litigation and related significant issues in the case. I have thus been actively involved in the decision-making of the litigation. I intend to continue to exercise supervision over the prosecution of this case.

Accordingly, based upon Rosenberg's commitment to the litigation, combined with his typicality, adequacy and the level of his losses, he is clearly qualified to serve as a class representative and lead plaintiff.

B. The Legato Group Is a Proper Group Under the Reform Act

Detroit's attempt to distinguish Oxford, 182 F.R.D. 42, also fails. Detroit Reply at 7 n.7. Contrary to Detroit's argument that "every member of the Vogel Group withdrew from the Action," the Oxford court did, in fact, conclude that two members of the Vogel Group (Hurley and Sabbia) appeared to be adequate class representatives under Rule 23. The court held as follows:

The Proposed Class and Class Representatives also meet the Typicality requirement and Lead Plaintiffs Hurley and Sabbia appear to do so, based on the facts currently known to the Court....

* * *

The ColPERA and PBHG Funds meet the Adequacy requirement, and Lead Plaintiffs Hurley and Sabbia appear to do so although Defendants have not had the opportunity to test their adequacy. ...

* * *

There is also no requirement in the statute that all the Lead Plaintiffs qualify, and in the case of the Vogel Group, that Lead Plaintiff was well within its rights in offering only Mr. Weber as a Class Representative from that group. ...

* * *

This Court finds and concludes under the circumstances of this case, that in order to provide adequate protection to the members of the Plaintiff Class and subclasses, a third Class Representative should be permitted to qualify, preferably from the Vogel Group. Within ten (10) days, Mr. Hurley and Mr. Sabbia, or either of them may serve written notice of their willingness so to act.

Detroit's argument that the Legato Group is too large and, therefore, is not a proper group under the Reform Act must also fail. The Legato Group is comprised of six class members, each of whom suffered significant losses due to their transactions in Legato securities. As the Rosenberg Declaration demonstrates, the Legato Group has already met several times with counsel to discuss this litigation and is fully committed to prosecuting this action on behalf of the class. Rosenberg Decl., ¶7. Indeed, in much smaller cases, the SEC has publicly endorsed 5-member groups as proper under the Reform Act. See, e.g., In re Baan Co. Sec. Litig., 186 F.R.D. 214, 218 (D.D.C. 1999). Thus, Detroit cannot credibly argue that a six-member lead plaintiff group with a close post-litigation working relationship is too large to effectively oversee this very large and complex securities class action. Indeed, in a similarly large and complex securities class action, a 10-member lead plaintiff group recovered $142 million for defrauded investors of Informix Corporation - the largest securities class action recovery in Northern District of California history! See In re Informix Corp. Sec. Litig., No. C-97-1289-SBA, 1997 U.S. Dist. LEXIS 23687, at *11-*12 (N.D. Cal. Oct. 17, 1997). Thus, Detroit's argument that the Legato Group is too large to effectively oversee this litigation is ludicrous and must be rejected.⁽⁵⁾

III. CONCLUSION

Accordingly, for all the reasons stated above and those set forth in the Legato Group's earlier submissions, the Legato Group - which suffered $2.1-$2.6 million in losses - has the largest financial interest in the relief sought by the Class and, therefore, should be appointed lead plaintiff. Likewise, the Legato Group's choice of Milberg Weiss Bershad Hynes & Lerach LLP as lead counsel should be approved.
 

DATED: April 27, 2000

Respectfully submitted,  MILBERG WEISS BERSHAD HYNES & LERACH LLP PATRICK J. COUGHLIN KIMBERLY C. EPSTEIN 100 Pine Street, Suite 2600 San Francisco, CA 94111 Telephone: 415/288-4545 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH TRAVIS E. DOWNS, III DARREN J. ROBBINS         ______________________________ WILLIAM S. LERACH 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 [Proposed] Lead Counsel for Plaintiffs ENTWISTLE & CAPPUCCI LLP VINCENT R. CAPPUCCI 400 Park Avenue, 16th Floor New York, NY 10022-4406 Telephone: 212/894-7200 KAPLAN, KILSHEIMER & FOX LLP FREDERIC S. FOX LAURENCE D. KING CHRISTINE M. COMAS ADRIENNE L. VALENCIA 805 Third Avenue, 22nd Floor New York, NY 10022 Telephone: 212/687-1980 BERNSTEIN LIEBHARD & LIFSHITZ, LLP SANDY A. LIEBHARD 10 East 40th Street New York, NY 10016 Telephone: 212/779-1414 SPECTOR, ROSEMAN & KODROFF, P.C. ELLEN GUSIKOFF STEWART 600 West Broadway, Suite 1600 San Diego, CA 92101 Telephone: 619/338-4514 SHEPHERD & GELLER, LLC PAUL J. GELLER 7200 W. Camino Real, Suite 203 Boca Raton, FL 33433 Telephone: 561/750-3000 LAW OFFICES OF ALFRED G. YATES, JR. ALFRED G. YATES, JR. 519 Allegheny Building 429 Forbes Avenue Pittsburgh, PA 15219 Telephone: 412/391-5164 BARRACK, RODOS & BACINE EDWARD M. GERGOSIAN 600 West Broadway, Suite 1700 San Diego, CA 92101 Telephone: 619/230-0800 RABIN & PECKEL LLP BRIAN MURRAY 275 Madison Avenue New York, NY 10016 Telephone: 212/682-1818 LAW OFFICES OF BRUCE G. MURPHY BRUCE G. MURPHY 265 Llwyds Lane Vero Beach, FL 32963 Telephone: 561/231-4202 LAW OFFICES OF JAMES V. BASHIAN, P.C. JAMES V. BASHIAN OREN GISKAN 500 Fifth Avenue, Suite 2700 New York, NY 10110 Telephone: 212/921-4110 KOHN, SWIFT & GRAF, P.C. MICHAEL J. BONI 1101 Market Street 2400 One Reading Center Philadelphia, PA 19107 Telephone: 215/238-1700 COHEN, MILSTEIN, HAUSFELD & TOLL, P.L.L.C. STEVEN J. TOLL MATTHEW J. IDE 999 Third Avenue, Suite 3600 Seattle, WA 98104 Telephone: 206/521-0080 WECHSLER HARWOOD HALEBIAN & FEFFER LLP JOHN HALEBIAN 488 Madison Avenue, 8th Floor New York, NY 10022 Telephone: 212/935-7400 SAVETT FRUTKIN PODELL & RYAN, P.C. STUART H. SAVETT BARBARA A. PODELL 325 Chestnut Street, Suite 700 Philadelphia, PA 19106 Telephone: 215/923-5400 BERGER & MONTAGUE, P.C. SHERRIE R. SAVETT ARTHUR STOCK 1622 Locust Street Philadelphia, PA 19103 Telephone: 215/875-3000 LEVY & LEVY, P.C. STEPHEN G. LEVY 245 Park Avenue, 39th Floor New York, NY 10167 Telephone: 212/792-4343 LEVIN, FISHBEIN, SEDRAN & BERMAN ARNOLD LEVIN 510 Walnut Street, Suite 500 Philadelphia, PA 19106 Telephone: 215/592-1500 WEINSTEIN, KITCHENOFF, SCARLATO & GOLDMAN, LTD. PAUL J. SCARLATO 1608 Walnut Street, Suite 1400 Philadelphia, PA 19103 Telephone: 215/545-7200 DONOVAN MILLER, LLC MICHAEL D. DONOVAN 1608 Walnut Street, Suite 1400 Philadelphia, PA 19103 Telephone: 215/732-6020 STULL, STULL & BRODY MICHAEL D. BRAUN MARC L. GODINO 10940 Wilshire Blvd., Suite 2300 Los Angeles, CA 90024 Telephone: 310/209-2468 WEISS & YOURMAN KEVIN J. YOURMAN 10940 Wilshire Blvd., 24th Floor Los Angeles, CA 90024 Telephone: 310/208-2800 DYER DONNELLY F. JAMES DONNELLY 801 East 17th Avenue Denver, CO 80218 Telephone: 303/861-3003 THE SOHMER LAW FIRM STEPHEN M. SOHMER P.O. Box 811 Caldwell, NJ 07007 Telephone: 973-364-1616 FINKELSTEIN & KRINSK JEFFREY R. KRINSK JAMES A. CAPUTO ARTHUR L. SHINGLER, III 501 West Broadway, Suite 1250 San Diego, CA 92101 Telephone: 619/238-1333 LAW OFFICES OF LEO W. DESMOND LEO W. DESMOND 2161 Palm Beach Lake Blvd., Suite 204 West Palm Beach, FL 33409 Telephone: 561/712-8000 BULL & LIFSHITZ, LLP PETER D. BULL JOSHUA M. LIFSHITZ 246 West 38th Street New York, NY 10018 Telephone: 212-869-9449 WOLF POPPER LLP LESTER LEVY MICHAEL A. SCHWARTZ 845 Third Avenue New York, NY 10022 Telephone: 212/759-4600 SCOTT & SCOTT, LLC DAVID R. SCOTT NEIL ROTHSTEIN 108 Norwich Avenue Colchester, CT 06415 Telephone: 860/537-3818 Attorneys for Plaintiffs

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I, the undersigned, declare:

1. That declarant is and was, at all times herein mentioned, a citizen of the United States and a resident of the County of San Diego, over the age of 18 years, and not a party to or interest in the within action; that declarant's business address is 600 West Broadway, Suite 1800, San Diego, California 92101.

2. That on April 27, 2000, declarant served the REPLY OF THE LEGATO LEAD PLAINTIFF GROUP IN RESPONSE TO THE REPLY IN FURTHER SUPPORT OF THE MOTION OF THE POLICEMEN AND FIREMEN RETIREMENT SYSTEM OF THE CITY OF DETROIT TO BE APPOINTED LEAD PLAINTIFF PURSUANT TO §21D(a)(3)(B) OF THE SECURITIES EXCHANGE ACT OF 1934 AND TO APPROVE PROPOSED LEAD PLAINTIFF'S CHOICE OF COUNSEL by depositing a true copy thereof in a United States mailbox at San Diego, California in a sealed envelope with postage thereon fully prepaid and addressed to the parties listed on the attached Service List and that this document was forwarded to the following designated Internet site at:

http://securities.milberg.com

3. That there is a regular communication by mail between the place of mailing and the places so addressed.

I declare under penalty of perjury that the foregoing is true and correct. Executed this 27th day of April, 2000, at San Diego, California.
 

_________________________
DEBORAH D. HAYES
 

1. See The Legato Systems Lead Plaintiff Group's Opposition to Detroit's Motion for Appointment as Lead Plaintiff and for Approval of Its Selection of Counsel ("Opposition") at 20-25.

2. Reply Memorandum of Law in Further Support of the Motion of the Policemen and Firemen Retirement System of the City of Detroit to Be Appointed Lead Plaintiff Pursuant to §21D(a)(3)(B) of the Securities Exchange Act of 1934 and to Approve Proposed Lead Plaintiff's Choice of Counsel ("Reply" or "Detroit Reply").

3. Declaration of Adam Rosenberg in Support of the Legato Systems Lead Plaintiff Group's Reply in Support of Its Motion to Be Appointed Lead Plaintiff Pursuant to §21D(a)(3)(B) of the Securities Exchange Act of 1934 and for Appointment of Lead Counsel ("Rosenberg Declaration" or "Rosenberg Decl.").

4. In support of its accusation, Detroit seriously misquotes a specific issue of the SEC News Digest, which states that: "[t]he registration of Botta Trading, Inc. was canceled by Commission order pursuant to Section 15(b)(5) of the Securities Exchange Act of 1934 on 6/29/99." See SEC News Digest, Issue 99-138 (7/20/99) (emphasis added), attached as Exhibit C to the Declaration of Blair A. Nicholas in Support of Reply Memorandum of Law in Further Support of the Motion of the Policemen and Firemen Retirement System of the City of Detroit to be Appointed Lead Plaintiff.

5. Detroit's reliance upon In re Network Assocs. Sec. Litig., 76 F. Supp. 2d 1017, 1027 (N.D. Cal. 1999), and similar District Court decisions, is entirely misplaced. None of those decisions involved a small, cohesive group of investors that had met several times, adopted procedures for decision-making and oversight of the litigation and formed a close post-litigation working relationship. Rather, in Networks Associates, hundreds of investors that had nothing in common all sought to be appointed lead plaintiff. That is not the situation here. The Legato Group consists of 6-members who are already overseeing and supervising this litigation on behalf of the Class. Rosenberg Decl., ¶7. Indeed, in similar situations, the courts in this District have routinely appointed small, cohesive groups of investors as lead plaintiff. See Exs. 5-34 to the Declaration of Kimberly Epstein in Support of the Legato Systems Lead Plaintiff Group's Opposition to Detroit's Motion to Be Appointed Lead Plaintiff and to Approve Lead Plaintiff's Choice of Counsel (collecting orders appointing small groups of investors as lead plaintiff).