City of Warwick Municipal Employees Pension Fund v. Rackspace Hosting, Inc.
Status: Newly Filed Case
On May 10, 2017, Labaton Sucharow filed a securities class action lawsuit on behalf of its client City of Warwick Municipal Employees Pension Fund (Warwick) against Rackspace Hosting, Inc. (NYSE: RAX), and certain of its senior executives (collectively, the defendants). The action asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (Exchange Act), and U.S. Securities and Exchange Commission (SEC) Rule 10b-5 promulgated thereunder, on behalf of all investors who purchased or otherwise acquired Rackspace common stock between November 11, 2014 and August 10, 2015, inclusive (the class period).
The complaint alleges that the defendants violated provisions of the Exchange Act by issuing false and misleading statements regarding the impending loss of its contract with Vodafone Group Plc (Vodafone) and the attendant impact on the company’s profitability and growth prospects. Rackspace is a cloud computing company that provides data hosting and other related services to business customers around the world.
If you would like to consider serving as lead plaintiff or have any questions about this lawsuit, you may contact Francis P. McConville, Esq. of Labaton Sucharow, at (800) 321-0476, or via email at firstname.lastname@example.org. You can view a copy of the complaint online by clicking on the links under Case Materials.
What is a class action?
A class action is a case brought against a company and/or individuals whose actions have damaged many people in a similar way. Specifically in a securities class action, a company's misrepresentations that cause the stock price to be artificially inflated (thereby causing serious losses when the truth is disclosed to the public) are actionable for violations of the federal securities laws. If the case results in a successful recovery, either through settlement or trial, all eligible class members receive their portion of the amount paid by the wrongdoers.
How many people are needed to bring a class action?
If the conduct of an individual or entity has injured many victims in a similar way, a single person who has been injured may bring a class action on behalf of everyone who has been harmed. It is common, however, after the action has been started for many other injured people to join the class suit. If you are interested in consulting an attorney about a possible class action case, you may contact us at 1-800-321-0476 or e-mail us at email@example.com.
How can I tell if I've been a victim of a securities fraud?
Every case is different but when the price of a stock has dropped, your loss may be due to fraud when:
- Company executives misrepresented facts relating to important aspects of the business, or held off revealing "bad news" that should have been disclosed earlier.
- The company or its accountants "restate" financial results to reflect the true state of the company's financial affairs.
- The stock drops rapidly on a disclosure of wrongdoing by the company or its executives or employees.
- Before bad news is revealed, insiders engage in insider trading by selling their shares at inflated prices.
- Many other scenarios may be reflective of fraud. If you are unsure of your rights, you may wish to consult an attorney.
Can I bring a securities case if I never sold at a loss?
Yes. In almost all cases, so long as you held when your stock dropped in reaction to bad news, you may bring a case. What matters is that you bought your stock at a fraudulently inflated price. Your rights are the same whether you later sold at a loss or have held some or all of your shares in the hope that the price will recover. You do not have to sell your shares to participate in a lawsuit, nor are you required to keep them. Damages recoverable pursuant to the federal securities laws are not necessarily the same as what someone would consider to be a loss or a gain in everyday terms. If you are interested in consulting with us in this regard, you may contact us at 1-800-321-0476 or e-mail us at firstname.lastname@example.org.
Can I participate in the class action if I made money on the security during the class period?
If you did not incur an overall loss as a result of purchasing the security, you will not benefit from any potential recovery. The lawsuit is for persons who purchased the security and lost money as a result of the company's alleged violations of the securities laws.
Do class actions produce substantial recoveries?
While the result obtained ultimately depends on the strength of the case, it is a myth that class actions do not produce substantial returns for claimants. For instance, settlements in In re American Continental/Lincoln Savings & Loan Securities Litigation yielded approximately $250 million, over eighty percent of total damages of $288 million. More recently, Waste Management, Inc. shareholders recovered $457 million. Strong cases can and do yield strong recoveries.
How are attorneys' fees paid in a class action?
Almost all class actions are brought on a contingent basis, which means that the attorneys incur all costs of the litigation and only get paid out of any recovery amount they obtain. This system helps insure that many investors or consumers with small losses can easily afford to bring class actions to assert their rights.
How am I eligible to be included in the class?
You are a member of the class if your purchases of the security were made during the "class period," that is, the alleged period of time that the company and others violated the securities laws. The methods for acquiring the securities that are covered in a class action are open-market purchases, investments made in a 401K or IRA account, or exchanges of shares through a merger or acquisition, to name a few. Gifts and employee stock options are typically excluded from securities class actions, although they may qualify for other types of civil actions.
Do I have to be a U.S. citizen to participate in a class action?
No. As long as your transactions were made on a U.S. exchange, you can participate in the class action.
What is a lead plaintiff?
Congress established the Private Securities Litigation Reform Act ("PSLRA") in 1995 to provide guidelines as to the way the securities litigation is managed. The PSLRA requires the court to appoint a "lead plaintiff" based, among other things, upon the amount of financial loss incurred as a result of purchasing the security. The court will appoint the person or entity who makes a motion with the court within the specified time (60 days from the date of the first notice of class action) and who have the largest financial loss to be lead plaintiff, and the law firm representing them is appointed lead counsel. The lead plaintiff and lead counsel will represent the interests of the entire class and have an obligation to the class to obtain the best results possible. The lead plaintiff works directly with the lead counsel during the prosecution of the case.
Should I apply to become a lead plaintiff?
If you have incurred a substantial loss as a result of purchasing the security, acting as a lead plaintiff is a way that you can assist in recovering your losses. Being a lead plaintiff means that you have an active part in the litigation of the case and represent the shareholders in the class. You will be in a position to participate in making critical decisions regarding the litigation, including whether to settle the action and at what amount, and the formula to be used in determining attorneys’ fees.
How will I be notified if I choose not to be a named plaintiff in the action?
If you are a member of the proposed class, notifications will be mailed out to class members by the court-appointed administrator.
When will this case be resolved?
It varies for each case, but typically class actions take several years to be finally resolved. Even if there is a settlement, it may be years after the settlement is reached before all of the claims can be processed accurately. Therefore, do not expect a speedy resolution, but be sure to retain your records so that you can provide documentation of your purchases in the event of a settlement.
Are unfair deals with insiders or related companies considered fraud?
These deals may represent a type of improper conduct usually referred to as "breach of fiduciary duty." Such wrongdoing includes waste of your company's assets, unfair business transactions with insiders or related entities, agreeing to a sale of your company at a price that doesn't reflect its true value, or any other act that improperly robs a company or its shareholders of value. In such cases, a suit can be brought on behalf of the company and/or its shareholders to recover damages, or to ensure that shareholders are treated fairly.
What is the Sherman Act?
The Sherman Antitrust Act is a federal law that prohibits certain business activities that reduce competition in the marketplace. Section One of the Sherman Act makes illegal all contracts, combinations, and conspiracies that unreasonably restrain interstate and foreign trade. This includes agreements among competitors to fix prices, rig bids, and allocate customers. Section 2 of the Sherman Act makes it a crime to willfully acquire or maintain monopoly power over interstate trade or commerce.
What is the Clayton Act?
The Clayton Act is a Federal civil statute that prohibits mergers or acquisitions that are likely to lessen competition. The Clayton Act also permits private parties injured by an antitrust violation to sue in Federal court for three times their actual damages plus costs and attorneys’ fees.
What are state antitrust laws?
Most states have antitrust laws directly comparable to the provisions of Sections 1 and 2 of the Sherman Act. Many states also have specific industry statutes, in addition to laws dealing with particular practices, such as bid rigging and below-cost sales.
What is price-fixing?
Price-fixing occurs when two or more competing sellers agree on what prices to charge, such as by agreeing that they will increase prices a certain amount or that they will not sell below a certain price.
What is bid rigging?
Bid rigging most commonly occurs when two or more firms agree to bid for contracts in such a way that a designated firm submits the winning bid.
What is customer allocation?
Customer-allocation agreements involve some arrangement between competitors to split up customers, such as by geographic area, to reduce or eliminate competition.
What is an unlawful monopoly?
Monopoly power traditionally has been defined as “the power to control market prices or exclude competition.” An unlawful monopolization claim under Section 2 of the Sherman Act requires proof of both monopoly power (the power to control prices or exclude competition) and the willful acquisition or maintenance of that power (that is, anticompetitive conduct that contributes to the acquisition or preservation of such power).
Who may file a lawsuit to recover damages under the antitrust laws?
Generally, any business or consumer can bring a claim in federal court to stop alleged antitrust violations. However, only a business or consumer that purchased a product or service directly from the firm engaging in the anticompetitive conduct can sue for damages under the Federal antitrust laws; while a business or consumer that purchased the product or service indirectly (e.g., from a middleman) can sue for damages under certain state antitrust and consumer protection laws.
How do the antitrust laws benefit businesses and consumers?
Antitrust laws protect competition, which benefits businesses and consumers by ensuring lower prices and new and better products. In a freely competitive market, each competing firm generally will try to attract businesses and consumers by cutting its prices and increasing the quality of its products or services.
When competitors agree to fix prices, rig bids, or allocate customers, business and consumers who purchase those products or services lose the benefits of competition. The prices that result when competitors agree in these ways are artificially high, do not accurately reflect cost, and distort the allocation of resources.
How can you help enforce the antitrust laws?
There are many ways in which the antitrust laws are enforced, including class action lawsuits brought by private parties asserting damage claims on behalf of a class of persons or entities that were similarly injured. Because private parties injured by an antitrust violation are permitted to sue in Federal court for three times their actual damages plus costs and attorneys’ fees, class action lawsuits have proven to be a very effective deterrent to antitrust activity.
Price fixing, bid rigging, and customer allocation conspiracies are by their nature secret and therefore inherently difficult to detect and prove. Accordingly, complaints, tips and information are invaluable. If you have any information about possible antitrust violations, please contact Labaton Sucharow.