Smith v. Suprema Specialties, Inc.
| Decision Date | 01 July 2002 |
| Docket Number | Civ. Action No. 02-CV-334 (WHW).,Civ. Action No. 02-CV-766 (WHW).,Civ. Action No. 02-CV-499 (WHW).,Civ. Action No. 02-CV-550 (WHW).,Civ. Action No. 02-CV-335 (WHW).,Civ. Action No. 02-CV-329 (WHW).,Civ. Action No. 02-CV-697 (WHW).,Civ. Action No. 02-CV-661 (WHW).,Civ. Action No. 02-CV-168 (WHW).,Civ. Action No. 02-CV-201 (DRD).,Civ. Action No. 02-CV-672 (WHW). |
| Citation | 206 F.Supp.2d 627 |
| Parties | Donald SMITH, et al., Plaintiffs, v. SUPREMA SPECIALTIES, INC., et al., Defendants. Judith Graham, et al., Plaintiffs, v. Suprema Specialties, Inc., et al., Defendants. David Green, et al., Plaintiffs, v. Suprema Specialties, Inc., et al., Defendants. Gregory Harris, et al., Plaintiffs, v. Suprema Specialties, Inc., et al., Defendants. Murray Notkin, et al., Plaintiffs, v. Suprema Specialties, Inc., et al., Defendants. Teachers' Retirement System of Louisiana, et al., Plaintiffs, v. Suprema Specialties, Inc., et al., Defendants. Ronald Oliver, et al., Plaintiffs, v. Suprema Specialties, Inc., et al., Defendants. Stoneridge Investment Partners, et al., Plaintiffs, v. Suprema Specialties, Inc., et al., Defendants. Rena Nadoff, et al., Plaintiffs, v. Suprema Specialties, Inc., et al., Defendants. Stanley Sved, et al., Plaintiffs, v. Suprema Specialties, Inc., et al., Defendants. Scott Walls, et al., Plaintiffs, v. Suprema Specialties, Inc., et al., Defendants. |
| Court | U.S. District Court — District of New Jersey |
Andrew Eckstein, Michael Z. Brownstein, Kathryn (Katy) L. Saurack, Blank Rome Tenzer Greenblatt LLP, New York, NY, Counsel for Suprema Specialties, Inc. (by First Class Mail).
A. Ross Pearison, Sills Cummis Radin Tischman Epstein & Gross, Newark, NJ, Counsel for Defendant Mark Cocchiola (by First Class Mail).
Nancy E. Delaney, Pamela J. Labaj, Curtis, Mallet-Prevost, Colt & Mosle LLP, Newark, NJ, Counsel for Defendant Venechanos (by First Class Mail).
Edward T. Kole, Wilentz, Goldman & Spitzer, Woodbridge, NJ, Counsel for Defendant Estate of Paul Lauriero (by First Class Mail).
Michael J. Canavan, Pepper Hamilton LLP, Princeton, NJ, Counsel for Janney Montgomery Scott, Pacific Growth Equities, and Roth Capital Partners (by First Class Mail).
Joseph J. DePalma, Allyn Zissel Lite, Lite DePalma Greenberg & Rivas, Newark, NJ, Counsel for Plaintiffs Donald Smith, Ronald Oliver, Rena Nadoff, Gregory Harris, Judith Graham, David Green, Wyper Capital Management, Ascend Capital, the Hitel Group Inc. (by Federal Express).
Stuart L. Berman, Schiffrin & Barroway, LLP Bala, Cynwyd, PA, Samuel H. Rudman, Milberg Weiss Bershad Hynes & Lerach LLP, New York, NY, Counsel for Plaintiffs Wyper Capital Management, Ascend Capital (by Federal Express).
James A. Harrod, Wolf Popper LLP, New York, NY, Counsel for Plaintiff The Hitel Group Inc. (by Federal Express).
Marvin Frank, Rabin & Peckel LLP, New York, NY, Counsel for Plaintiff Garden State Securities Group (by Federal Express).
Leo W. Desmond, Sparta, NJ, Counsel for Plaintiffs Scott Walls, Garden State Securities Group (by Federal Express).
Gary S. Graifman, Kantrowitz, Goldhammer & Graifman, Montvale, NJ, Counsel for Plaintiff Stoneridge Investment Partners LLC (by Federal Express).
Harvey Greenfield, Law Firm of Harvey Greenfield, New York, NY, Counsel for Plaintiff Stoneridge Investment Partners LLC (by Federal Express).
Andrew Robert Jacobs, Epstein Fitzsimmons Brown Ringle Gioia & Jacobs PC, Chatham Township, NJ, Counsel for Plaintiff Stanley Sved (by First Class Mail).
Fred T. Isquith, Wolf Haldenstein Adler Freeman & Herz LLP, New York, NY, Counsel for Plaintiff Stanley Sved (by First Class Mail).
William J. Pinilis, Kaplan, Kilsheimer & Fox LLP, Morristown, NJ, Counsel for Plaintiff Murray Notkin (by First Class Mail).
Harold G. Levison, Jonathan Minsker, Kasowitz Benson Torres & Friedman LLP, New York, NY, Seth R. Lesser, Bernstein Litowitz Berger & Grossman LLP, Lead Counsel, Hackensack, NJ, Counsel for Lead Plaintiff Teachers' Retirement.
Arthur S. Goldstein, Wolf & Samson, Roseland, NJ, Counsel for Defendants.
Diane J. O'Neil, Mendes & Mount, Esqs. Newark, NJ, Counsel for Defendants.
The matter before this Court is the appointment of lead plaintiff and lead counsel in this securities class action against Suprema Specialties, Inc. ("Suprema" or the "Company") pursuant to Section 21D(a)(3)(B) of the Securities Exchange Act of 1934 (the "Exchange Act") and Section 27(a)(3) of the Securities Act of 1933 (the "Securities Act"), each as amended by the Private Securities Litigation Reform Act of 1995 (the "PSLRA" or the "Reform Act"). The following parties move for lead plaintiff and counsel, respectively (1) StoneRidge Investment Partners, LLC ("StoneRidge Investment"), and the Law Firm of Harvey Greenfield with the Law Office of Kantrowitz, Goldhamer & Graifman as co-lead counsel, (2) the Garden State Securities Group ("Garden State") and Rabin & Peckel, LLP, (3) Teachers' Retirement System of Louisiana ("Louisiana Teachers") and Bernstein Litowitz, Berger & Grossman, LLP ("Bernstein Litowitz"), (4) The Hitel Group Inc. ("Hitel Group") and Wolf Popper, LLP with Lite DePalma Greenberg & Rivas, LLC as liason counsel, and (5) Wyper Capital Management, LP and Ascend Capital who withdrew their motion in support of StoneRidge Investment. After considering the factual and legal arguments raised in the parties' papers and hearing oral argument, this Court appoints Louisiana Teachers as Lead Plaintiff and Bernstein Litowitz as Lead Counsel.
This action was brought on behalf of a class consisting of all persons and entities who purchased the common stock of Suprema in the open market and/or traceable to a prospectus and offering during the period of August 15, 2001 through December 21, 2001 (the "Class Period"). Currently pending before this Court are eleven related class action complaints1 alleging violations of Sections 10(b) and 20(a) of the Exchange Act, 15 U.S.C. §§ 78j(b) and 78t(a), and the rules promulgated thereunder, including Rule 10b-5, 17 C.F.R. § 240.10b-5. Some complaints also allege violations of Sections 11, 12(a) and 15 of the Securities Act, 15 U.S.C. §§ 77k, 77(a)(2) and 77(o).
On August 15, 2001, Suprema issued a press release wherein the Company announced consolidated new sales, net income, and earnings per share for the year ended June 30, 2001, and made numerous positive statements concerning its net sales and net income. On or about September 23, 2001, Suprema filed its Annual Report (Form 10-K) for the year ended June 30, 2001 which contained similar positive statements. On November 14, 2001, Suprema filed its Quarterly Report (Form 10-Q) for the first quarter of 2001, ending on September 30, 2001 which reflected corporate growth. In each of these filings, Suprema assured the public and the Securities Exchange Commission ("SEC") that the financial statements were in conformance with Generally Accepted Accounting Principles ("GAAP"). However, the positive statements in each of the filings allegedly were materially false and misleading because they failed to truthfully and accurately disclose Suprema's net sales, net income, gross margins and working capital. As a result of these statements, the market price of Suprema's common stock was inflated.
On November 6, 2001, the Company filed a registration statement and prospectus with the SEC seeking the issuance of 4.05 million shares of common stock, of which 3.5 million shares were to be sold by the Company and 550,000 by certain selling shareholders. The offering would nearly double the number of outstanding shares of Suprema common stock from 5.7 million shares to 9.75 million shares. The Secondary Offering commenced on or about November 8, 2001. During the course of the Secondary Offering, Suprema raised in excess of $41 million. In addition, the following defendants sold stock in the Secondary Offering: Mark Cocchiola, Steven Venechanoa, and the Estate of Lauriero.
On Friday, December 21, 2001, just before the close of the market, Suprema issued a press release which revealed the resignations of its Chief Financial Officer and its Controller. The Company also announced that it "has initiated an internal investigation of its prior financial results and has instructed its auditors to review the Company's financial records." (Decl. of Erik Sandstedt, Ex. 4). Immediately thereafter, the National Association of Securities Dealers Automated Quotation System ("NASDAQ") halted trading of Suprema common stock, which was trading at $13, until Suprema satisfied their request to provide information concerning the internal investigation. On January 8, 2002, Suprema revealed the existence of material accounting irregularities. Subsequent reports indicated that substantial accounts receivable reported by the Company were false and illusory. In late February, Suprema announced that it had filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 1101 et. seq., in the United States Bankruptcy Court of the Southern District of New York. The Company also announced that its stock would be de-listed by NASDAQ. On or about March 1, 2002, Suprema was de-listed and since that time the Company's stock has been trading on the pink sheets for less than pennies per share.
The Reform Act established new standards and procedures for selecting lead plaintiffs in securities fraud class actions.2 Under the Reform Act, courts are required to appoint a "lead plaintiff" at the initial stages of litigation. Specifically, the Reform Act instructs the court to "appoint as plaintiff the member or members of the purported plaintiff class that the court determines to be most capable of adequately representing the interests of the class members." 15 U.S.C. § 78u-4(a)(3)(B)(i). The Reform Act then creates a rebuttable presumption that the most adequate plainti...
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