In re Cohen
Filed November 5, 2009
Cite as 09-70378

Court not Authorize to Appoint Lead Counsel

Several investors who purchased NVIDIA Corporation securities brought a consolidated putative securities fraud class action against NVIDIA.

The complaint alleged that NVIDIA fraudulently concealed from the investors the use of flawed materials and processes in the production of certain products. As a consequence, the stock price substantially decreased following such disclosure.

The district court appointed Roberto Cohen (Cohen) as lead plaintiff and Milberg LLP and Girard Gibbs (Gibbs) as choice for lead counsel.

Cohen requested leave to file a motion for reconsideration of the court’s appointment arguing that Gibbs’ appointment was contrary to Private Securities Litigation Reform Act of 1995 (PSLRA). The court denied the motion.

Subsequently, Cohen filed a petition for mandamus for the same order and to compel the district court to appoint Kahn Gauthier Swick, LLC (KGS) as lead counsel instead.

The United States Court of Appeals, Ninth Circuit granted the petition for writ of mandamus in part and ordered district court to vacate its order appointing Gibbs as lead counsel.

The court ruled that under the PSLRA, a district court may reject Cohen’s selection of lead counsel. However, it does not have authority to select lead counsel of its own choosing. Such an usurpation of Cohen’s power was a clear error which entitled him to writ relief directing district court to vacate its appointment of lead counsel.