United States District Court, D. New Jersey
DAVID KANEFSKY, Individually and on Behalf of Others Similarly Situated, Plaintiff,
HONEYWELL INTERNATIONAL INC., DARIUS ADAMCZYK, and THOMAS A. SZLOSEK., Defendants.
WILLIAM J. MARTINI. U.S.D.J.
putative securities class action comes before the Court on
three motions: (1) Wayne County Employees' Retirement
System's ("WCRS") motion to substitute the
court-appointed lead plaintiff, Charles Francisco, ECF No.
48; (2) Francisco's motion to approve of new lead
counsel, ECF No. 57; and WCRS's motion for sanctions, ECF
No. 67. For the reasons set forth below, WCRS's motions
are DENIED and Francisco's motion is GRANTED.
putative securities class action arises out of Defendant
Honeywell International Inc.'s purportedly false and
misleading statements regarding asbestos-related liabilities.
The case was initiated by David Kanefsky, a Honeywell
investor. ECF No. 1. Pursuant to the Private Securities
Litigation Reform Act of 1995 ("PSLRA"), the Court
entertained competing motions for appointment as lead
plaintiff. ECF Nos. 5-6. On February 26, 2019, the Court
appointed Plaintiff Charles Francisco as the lead plaintiff
and class representative! Op., ECF No. 14. The Court also
approved of Francisco's choice of counsel, naming Levi
& Korsinsky, LLP ("L&K") as lead counsel.
Id. at 3.
point between February and August 2019, Francisco and
L&K's relationship broke down. The details are
disputed, but the following facts are clear: Francisco and
L&K were unable to finalize a fee arrangement. On April
23, 2019, Francisco sent an email to an L&K attorney
which included the statement "I don't think there is
any reason to continue." Apton Decl. Ex. B, ECF No. 67-4
("April Email"). On May 13, 2019, L&K sent an
email to Francisco noting that the firm had identified
another shareholder and would "start the process of...
having them appointed as a lead plaintiff." Id.
Ex. C ("May Email"). On August 19, L&K sent
another email noting its plan to file a "motion to
formally substitute you out of the action as the lead
plaintiff and asking Francisco to "sign and return the
attached declaration stating that you support the
request." Id. Ex. D ("August Email").
Francisco did not reply to the May or August emails, and the
entirety of the April Email is redacted except the language
same day L&K sent the August Email, it filed the present
motion to substitute WCRS as the lead Plaintiff. ECF No. 48
("Plaintiff Substitution Motion"). On September 10,
the law firm of Kahn Swick & Foti, LLC
("KS&F") filed an opposition on Francisco's
behalf. ECF No. 55. With the opposition, KS&F submitted a
declaration from Francisco noting that, contrary to
L&K's representations, "[a]t no point did [he]
agree to withdraw as Lead Plaintiff." ECF No. 55-2
¶¶ 2-4 ("Francisco Declaration").
Instead, he was seeking new counsel due to his objection to
L&K's proposed fee arrangement. Id.
September 10, Francisco moved to substitute KS&F as lead
counsel. ECF No. 57 ("Counsel Substitution
Motion"). L&K opposed the motion on behalf of WCRS,
ECF No. 64, and filed a motion for sanctions based on
purportedly false representations in KS&F's briefs,
ECF No. 67 ("Sanctions Motion"). The motions are
now ripe for decision.
Plaintiff Substitution Motion
Court will deny WCRS's motion to replace Francisco as the
lead Plaintiff. The PSLRA establishes a procedure to appoint
lead plaintiffs, and the Court duly appointed Francesco
pursuant to that process. Op., ECF No. 14. WCRS did not file
a timely motion for lead plaintiff status and L&K has not
provided a sufficient basis for substitution.
its brief, L&K argues that "Francisco wishes to be
relieved of the role of Lead Plaintiff and he is "unable
or unwilling to serve in that capacity." PI. Subst. Mot.
at 1, 3. But those assertions are completely belied by
Francisco's sworn declaration, efforts to replace
L&K, and opposition to the substitution motion. The three
emails L&K cites do not justify a contrary result. First,
Francisco's statement that "I don't think there
is any reason to continue" is presented without any
context. Not only does L&K fail to include the email
Francisco was responding to, but the entire remainder of the
email is redacted. See April, Email. Given the disagreement
over attorney's fees, Francisco was likely ending fee
negotiations, not his entire involvement in the lawsuit.
Further, Francisco's failure to respond to the May and
August Emails, after fee negotiations faltered, is not a
sufficient expression of his desire to be relieved as lead
plaintiff. Indeed, during a conference call on July 29-after
the April and May Emails-an L&K attorney told Magistrate
Judge Mannion they were "still working through"
whether WCRS would take "a more supervisory role or more
important role later on in the action." Tr. at 5:15-19,
ECF No. 43. Thus, at that point, it was not clear to L&K
that Francisco needed to be replaced. As to the August Email,
L&K moved to substitute Francisco the very same day it
asked for his signature on a declaration endorsing the
motion. Rather than being evidence of his intent not to
continue litigating, the fact that Francisco never signed and
returned the declaration indicates Francisco never wanted to
be relieved as lead plaintiff. His signed declaration
supports that conclusion. Accordingly, the motion to
substitute WCRS as lead plaintiff, ECF No. 48, is DENIED.
Counsel Substitution Motion
Court will grant KS&F's motion to replace L&K as
lead counsel. The Court's involvement "is
appropriately limited to whether the lead plaintiffs
selection and agreement with counsel are reasonable on their
own terms." In re Cendant Corp. Litig., 264
F.3d 201, 276 (3d Cir. 2001). Courts consider the following
non-exhaustive list of factors in deciding whether to approve
of plaintiffs' choice of counsel:
(1) the quantum of legal experience and sophistication
possessed by the lead plaintiff; (2) the manner in which the
lead plaintiff chose what law firms to consider; (3) the
process by which the lead plaintiff selected its final
choice; (4) the qualifications and experience of counsel
selected by the lead plaintiff; and (5) the evidence that the
retainer agreement negotiated by the lead plaintiff was (or