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In re Able Laboratories Securities Litigation

April 3, 2006

IN RE ABLE LABORATORIES SECURITIES LITIGATION


The opinion of the court was delivered by: Greenaway, Jr., U.S.D.J.

FOR PUBLICATION

OPINION

This matter comes before this Court on the motions of the Denver Employees Retirement Plan ("DERP"), Deka International (Ireland) Limited ("Deka"), Richard Upham ("Upham"), Floyd Webster, Kent Webster, Keith Webster and Helen Darrah (the "Webster Family"), the Communications Workers of America Plan for Employees' Pensions and Death Benefits ("CWA") with Daniel Levy, Genesee County Employees Retirement System with Julian M. Warren ("Genesee and Warren"), Edward Howlette, and Charles M. Gillis for appointment as lead plaintiff and appointment of their respective attorney as lead counsel. Following the filing of the individual motions seeking appointment as lead plaintiff, Deka and DERP proposed combining to form the Institutional Investor Group ("IIG"). For the reasons set forth below, this Court will appoint the IIG as lead plaintiff, and Grant & Eisenhofer P.A. and Murray, Frank and Sailer LLP as co-lead counsel.

Background

Between May 23, 2005 and June 16, 2005, nine cases were filed in this Court alleging security fraud violations by Able Laboratories ("Able Labs" or "Able") and various officers of Able.*fn1 Specifically, the complaints alleged that (1) Able Labs and the individual defendants made misrepresentations of material facts regarding Able's operations and (2) the individuals were control persons for purposes of § 20(a) of the Exchange Act. Allegedly, Able Labs, a manufacturer and developer of generic drugs, issued false and misleading public statements between 2002 and early 2005. These public statements addressed favorable financial results, as well as positive progress on obtaining Federal Drug Administration ("FDA") approvals for multiple abbreviated new drug applications ("ANDAs"). In May 2005, Able announced several product recalls, accompanied by the commencement of an internal compliance review directed at correcting problems with improper laboratory practices and noncompliance with various FDA requirements. As a result of the recalls and disclosure of the compliance review, the price of Able's stock decreased dramatically.

As is required by the Private Securities Litigation Reform Act ("PSLRA"), on May 23, 2005, a notice was published in the PR Newswire, "a widely circulated national business-oriented publication or wire service," alerting members of the purported plaintiff class of the pendency of the action. 15 U.S.C. § 78u-4(a)(3)(A)(i). Pursuant to 15 U.S.C. § 78u-4(a)(3)(A)(i)(II), within sixty days of the publication of this notice, eight motions were filed by entities seeking appointment as lead plaintiff. Attached to each of these motions was a sworn certification setting forth the information required by 15 U.S.C. § 78u-4(a)(2)(A). That is, the certifications

(i) state[d] that the plaintiff has reviewed the complaint and authorized its filing;

(ii) state[d] that the plaintiff did not purchase the security that is the subject of the complaint at the direction of plaintiff's counsel or in order to participate in any private action arising under this chapter;

(iii) state[d] that the plaintiff is willing to serve as a representative party on behalf of a class, including providing testimony at deposition and trial, if necessary;

(iv) set[] forth all of the transactions of the plaintiff in the security that is the subject of the complaint during the class period specified in the complaint;

(v) identifie[d] any other action under this chapter, filed during the 3-year period preceding the date on which the certification is signed by the plaintiff, in which the plaintiff has sought to serve as a representative party on behalf of a class; and

(vi) state[d] that the plaintiff will not accept any payment for serving as a representative party on behalf of a class beyond the plaintiff's pro rata share of any recovery, except as ordered or approved by the court in accordance with paragraph (4).

The transactions set forth in each of the certifications filed within the sixty-day limit demonstrated alleged losses in the following amounts:

DERP $841,282 (94,700 shares

Deka $882,357.22 (174,374 shares) Upham $1,589,163.09 (92,027 shares)

Webster Family $542,900 (24,800 shares)

CWA and Daniel Levy $243,216.22 Genesee and Warren $399,742.21 Edward Howlette $94,188 Charles M. Gillis $348,847.20 Before proceeding, this Court emphasizes that, for purposes of consideration of the motions for appointment as lead plaintiff, Upham's alleged losses are $1,589,163.09. Although Upham's counsel offered a revised certification alleging a loss of $2,130,804.66*fn2 during oral argument on January 23, 2006, that certification was submitted well beyond the sixty-day time limit set forth in 15 U.S.C. § 78u-4(a)(3)(A)(i)(II). The sixty-day limit is mandatory. That is, "[t]he plain language of the statute precludes consideration of a financial loss asserted for the first time in a complaint, or any other pleading, for that matter, filed after the sixty (60) day window has closed." In re Telxon Corp. Sec. Litig., 67 F. Supp. 2d 803, 818 (N.D. Ohio 1999) (emphasis in original). During oral argument on January 23, 2006, Upham's counsel acknowledged that the revised certification was being offered for informational purposes only, and that the loss amount to consider for purposes of the motion is the number from the original certification. (Tr.*fn3 48:3-48:16.)*fn4

On August 29, 2005, in a response to the motions for appointment as lead plaintiff, Deka and DERP requested that they be allowed to combine to form the IIG, with total alleged losses of $1,723,639. In the same response, the IIG opposed the appointment of Upham as lead plaintiff. The IIG based their opposition to Upham's appointment on the fact that Upham does not have the largest financial interest and that he has not met his burden of establishing a prima facie showing of adequacy to serve as lead plaintiff.

Upham, in turn, opposes the selection of the IIG as lead plaintiff, arguing that Deka and DERP should not be allowed to combine after the sixty-day period set forth in 15 U.S.C. ยง 78u-4(a)(3)(A)(i)(II). If Deka and DERP are allowed to combine to form the IIG, then Upham opposes their appointment due to Deka's alleged lack of standing and an alleged ...


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