District Court Went Too Far in Naming Lead Counsel

The 9th Circuit granted a writ of mandamus to vacate part of a lower court order naming one of two firms to serve as lead counsel in a class action fraud suit. While recognizing that the issuance of a writ of mandamus is a "drastic" and "extraordinary" remedy, the appellate panel found clear error in the appointment of a firm not selected by the lead plaintiffs. (In re Cohen v. U.S. District Court for the Northern District of California, link).

Following PSLRA requirements, the district court named an individual and a pension fund as lead plaintiffs. The court then named the firm selected by the pension fund as co-lead counsel, but appointed a firm other than that chosen by the individual lead plaintiff to also serve. The district court stated that after a "review of each firm’s resume, . . . [and] given each firm’s experience with similar actions, these firms were the most qualified counsel for this case.”

On appeal, the court found that the district court's authority under the PSLRA to approve the choice of lead counsel did not extend to the court selecting counsel itself. The panel vacated that portion of the lower court's order, but declined to name the individual's selected firm to choose. Rather, the appellate court directed the trial judge to review the individual lead plaintiff's selection under the appropriate criteria, and should defer to that selection if it was reasonable. "The district court should not reject a lead plaintiff’s proposed counsel merely because it would have chosen differently," concluded the panel.

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