A Manhattan federal judge has allowed a Houston-based day trader to represent BlackBerry shareholders in a class action lawsuit over the BlackBerry 10, saying the man’s past brushes with the law do not automatically disqualify him.
U.S. District Judge Colleen McMahon on Tuesday certified a class of investors who bought BlackBerry shares in 2013 and said that two lead plaintiffs represented by Kahn Swick & Foti and Brower Piven can pursue claims on their behalf. The judge rebuffed an argument Morrison & Foerster attorneys made for the company that one of the plaintiffs was disqualified by past arrests and civil lawsuits stemming from when he ran a car repair shop.
McMahon noted that while she might not have appointed Todd Cox to lead plaintiff in the early stages of the lawsuit, he had been representing investors in the case without incident since U.S. District Judge Thomas Griesa appointed him to lead the proposed class in 2014, before McMahon took over the case following Griesa’s death.
The judge added that in securities class actions, “the best measure of whether a plaintiff will adequately represent the interests of a class is whether his lawyers are equipped to handle the matter.” BlackBerry had not challenged the plaintiffs lawyers’ abilities.
Kim Miller of Kahn Swick & Foti, who represents the class, said on Wednesday that the plaintiffs are pleased the judge rejected the “aggressive and personal attacks.”
Dan Marmalefsky and James Beha of Morrison & Foerster did not immediately reply to requests for comment.
BlackBerry (then RIM) launched BlackBerry 10 in January 2013 in a bid to recoup market share lost to Apple’s iPhone and devices powered by Google’s Android. The device won positive reviews, but low sales led to a projected $930 million write-down for unsold inventory on Sept. 20, 2013, causing BlackBerry shares to lose about one-sixth of their value and prompting investors to sue the company and executives. BlackBerry decided in 2016 to stop making its own smartphones.
Cox, who allegedly lost more than $360,000 on shares he co-owned with fellow lead plaintiff Mary Dinzik, urged the court to certify the class in June. BlackBerry and the executives opposed the bid on several grounds in August, including by arguing that a string of arrests, including a 2009 arrest on arson charges that were later dismissed, and civil judgments made Cox untrustworthy.
Certifying the class on Tuesday, McMahon said that arrests do not make a criminal history and that civil judgments against Cox for racking up unauthorized repair charges at his auto shop do not amount to a fraud conviction – a factor that other judges in the district have said disqualifies securities plaintiffs.
The case is Pearlstein v. Blackberry Limited et al., U.S. District Court, Southern District of New York, No. 13-cv-07060.
