Overview
In an opinion Wednesday, Judge Pauley ruled that a securities class action plaintiff, Benjamin Gross, could serve in that role notwithstanding that co-lead counsel for the class, Jack Zwick, is his brother-in-law, and notwithstanding that neither promptly disclosed the relationship:
[A]s Gross points out, neither Rule 23 nor the PSLRA compels disclosure of a relationship between lead plaintiff and lead counsel. More importantly, as this Court has previously noted, “hypothetical conflict[s] of interest,” without more, are “too diaphanous to bar certification” on adequacy grounds . . . . Here, the record reveals no arrangement among Scott + Scott, Zwick, and Gross suggesting that Gross has an interest in any potential fee Zwick stands to earn. Although Gross admitted that he would like to see his immediate family members happy and financially secure (a wholly unsurprising sentiment), any conflict of interest raised by this testimony is too speculative to bar class certification. Indeed, the most that this Court can say is that Gross and the class’s interests are aligned; surely both would like to see the maximum possible recovery for the class. Any issues with the fairness of settlement terms can be resolved by this Court pursuant to the rigorous court-approval requirement of FRCP 23(e). A passing review of prior opinions should assure the parties that this Court has no qualms about prioritizing the interests of the class over those of class counsel in any settlement.For examples of the “prior opinions” Judge Pauley may have been referring to, see our coverage of orders here and here in which Judge Pauley reduced fees to class counsel.
