United States District Court, D. Maryland, Southern Division
W. Grimm United States District Judge
me now are two separate but related lawsuits. The suits were
filed on the same day and have two defendants in common:
India Globalization Capital, Inc. ("India
Globalization") and its president and chief executive
officer, Ram Mukunda. Both suits accuse the company, Mukunda,
and other company officials of misleading investors in
violation of the Securities Exchange Act and Rule 10b-5.
series of motions have been filed seeking to consolidate the
cases, appoint a lead plaintiff, and select lead counsel.
Having reviewed these motions and additional requested
briefings, I am consolidating the cases, appointing the IGC
Investor Group as lead plaintiff, and approving its selection
of co-lead counsel.
Globalization is a public company based in Bethesda,
Maryland. Harris-Carr Compl. ¶¶3, 13,
Harris-Carr v. India Globalization Capital, Inc.,
No. 18-3408-GJH (D. Md. Nov. 2, 2018), ECF No.
I. Its common
stock trades on the NYSE American exchange. Id.
¶ 3. The company has two distinct businesses. Its
primary business, according to the pleadings before me, is
the "development and commercialization of
cannabinoid-based alternative therapies for indications such
as Alzheimer's disease, Parkinson's disease, and
pain." Id. ¶ 18. Separately, the company
continues to maintain a "legacy business that involves
trading commodities and heavy equipment rental."
controversy between India Globalization and its investors can
be traced to September 25, 2018, when the company issued a
press release entitled, "IGC to Enter the
Hemp/CBD-Infused Energy Drink Space." Id.
¶ 24. The press release announced the company had
entered into a 10-year agreement for the right to market
various products in North and South America, including a
sugar-free energy drink called "Nitro G."
Id. It appeared to indicate the deal involved a
manufacturer in Malaysia. Id.
announcement precipitated a meteoric rise in India
Globalization's stock, from $2.33 per share on September
25, 2018, to $13 per share on October 2, 2018. Id.
¶25. But the bonanza was short-lived. On October 28,
2018, the financial news site Marketwatch published an
article identifying several "red flags" about the
company. Id. ¶ 27. In particular, the article
reported that India Globalization had a history of announcing
plans to enter into the "latest hot market" (for
example, blockchain), that it had nevertheless "assigned
very little funding to research and development," and
that the SEC had been pressing the company to demonstrate
compliance with stock exchange rules. Id. The
article keyed in on the press release's suggestion (which
may have been a triumph of chutzpah over common sense) that
the company would work with a manufacturer in Malaysia,
noting that "that country has a mandatory death sentence
for cannabis possession and no medical marijuana
might be expected, amid this scrutiny, the company's
stock price dropped "precipitously." Tchatchou
Compl. ¶ 19, Tchatchou v. India Globalization
Capital Inc., No. 18- 3396-PWG, ECF No. 1. The next day,
October 29, 2018, NYSE American announced that it had
commenced proceedings to delist India Globalization's
common stock from the exchange and that all trading of the
stock was immediately suspended. Harris-Carr Compl. ¶31.
The announcement provided two bases for the decision. To
begin, it said, the exchange's regulators had
commenced delisting proceedings against the Company pursuant
to [an NYSE American guideline] which states that where the
issuer has substantially discontinued the business that it
conducted at the time it was listed or admitted to trading,
and has become engaged in ventures or promotions which have
not developed to a commercial stage or the success of which
is problematical, it shall not be considered an operating
company for the purposes of continued trading and listing on
Id. In addition, the regulators had concluded that
"the Company or its management have engaged in
operations which, in the opinion of the Exchange, are
contrary to the public interest." Id.
filed these two class action lawsuits on November 2, 2018.
The respective complaints include identical claims. First,
they accuse the company and various executives of making
false or misleading statements in violation of Section 10(b)
of the Securities Exchange Act of 1934 ("Exchange
Act") and Rule 10b-5. Second, they accuse certain
executives of aiding and abetting the fraud in violation of
Section 20(a) of the Exchange Act.
commencement of the litigation kicked off a competition among
investors seeking to consolidate the two suits and to win
appointment as lead plaintiff (and with it, of course, a
competition among the. various law firms hoping to represent
them). Among the seven groups or individual investors who
asked to be named lead plaintiff, five later withdrew their
motions or filed a "non-opposition," acknowledging
that other movants had larger financial stakes in the
litigation and were therefore more likely to win appointment.
See ECF Nos. 14-17, 23. The two remaining movants
are Guita Bahramipour ("Ms. Bahramipour") and a
seven-person group known as the IGC Investor Group
issues have been briefed in full. See ECF Nos. 18,
21, 32, 33. No hearing is necessary. See Loc. R.
Private Securities Litigation Reform Act (the
"PSLRA") dictates the procedures a court must
follow in resolving these motions. Under the statute, the
court's first task is to address any motions for
consolidation. See 15 U.S.C. §
78u-4(a)(3)(B)(ii). After that, the court may appoint a lead
plaintiff (an action the statute directs the court to take
"[a]s soon as practicable") and approve the
selection of counsel. See Id. I will proceed in that
movants have filed motions to consolidate these cases.
See ECF Nos. 14, 16-18, 21, 23. On January 10, 2019,
1 gave the parties and putative class members one week to
file any responses in opposition to these motions. ECF No.
26. No one filed a response.
principles governing the consolidation of securities fraud
suits "are found not in the PSLRA, but in Rule 42"
of the Federal Rules of Civil Procedure. In re
MicroStrategy Inc. Sees. Litig., 110 F.Supp.2d 427, 431
(E.D. Va. 2000). Rule 42 gives a court discretion to
consolidate actions that "involve a common question of
law or fact." Fed.R.Civ.P. 42(a)(2). In exercising this
discretion, the court "must consider the interest of
judicial economy as well as the interest of the parties in a
fair and impartial procedure." In re
MicroStrategy, 110 F.Supp.2d at 431. In that regard,
courts considering whether to order consolidation must
determine whether "the specific risks of prejudice and
possible confusion from consolidation are overborne by the
risk of inconsistent adjudications of common factual and
legal issues, the burden on parties, witnesses and available
judicial resources posed by multiple lawsuits, the length of
time required to conclude multiple suits as against a single
one, and the relative expense to all concerned."
Id. (quoting Arnold v. Eastern Air Lines
Inc., 681 F.2d 186, 193 (4th Cir. 1982)).
there is no question the two suits involve common questions
of law and fact. Both complaints center on the company's
statements in its September 25, 2018 press release, alleging
these statements were part of a scheme to artificially
inflate the stock price and defraud investors. See
Tchatchou Compl. ¶¶ 18, 23; Harris-Carr Compl.
¶¶ 26, 44. On the basis of these allegations, the
complaints assert identical legal claims.
sure, the suits are not without their differences. While both
name India Globalization and Mr. Mukunda as defendants, each
names at least one other defendant the other does
suits also propose different (but overlapping) class periods.
Both suits would close the class period on October 29, 2018,
when the NYSE American suspended all trading of the
company's stock. Tchatchou, though, would have
the class period start on September 26, 2018, the day after
the company issued the press release announcing the deal to
market the Nitro G energy drink. Tchatchou Compl. ¶ 1.
Harris-Carr, by contrast, would start the class
period earlier, on June 21, 2018, to include the date the
company filed its annual Form 10-K report with the U.S.
Securities and Exchange Commission ("SEC").
distinctions are by no means fatal to the motions for
consolidation. As this Court has previously explained:
"Differences in class periods, parties, or damages among
the suits do not necessarily defeat consolidation, so long as
the essential claims and facts alleged in each case are
similar." In re Royal Ahold N.V. Sees. & ERISA
Litig., 219 F.R.D. 343, 348 (D. Md. 2003). Consolidation
is often appropriate, regardless, where the securities fraud
actions "are based on the same public statements and
reports." Id. That is the case here. And seeing
as no putative class members have raised any concerns that
consolidation might prejudice them, I can see no reason to
keep the suits separate. It is my decision, accordingly, that
these two suits are now consolidated.