No one was more excited to hear this week's news about an earnings restatement at Diamond Foods than the securities class action bar. Back in November 2011, after the Wall Street Journal ran a story questioning Diamond's accounting on walnut purchases and Diamond disclosed an internal accounting investigation that would delay its acquisition of Pringles, plaintiffs' lawyers filed at least seven securities class actions in San Francisco federal court on behalf of Diamond shareholders. (Here's one of the complaints.) Diamond's restatement, said James Sabella of Grant & Eisenhofer, "validates what we said in the complaints. It makes the case stronger."

An inevitable consequence of the class action's ever-improving prospects is intensifying competition to lead the case. This is a hot one, folks. The lead plaintiff fight has come down to the Mississippi Public Employees Retirement System (represented by G&E; Chitwood Harley Harnes; and Lieff Cabraser Heimann & Bernstein) against the New England Carpenters Guaranteed Annuity and Pension Funds (represented by Robbins Geller Rudman & Dowd).

MissPERS clearly has the edge. As its Feb. 9 lead counsel brief points out, the Mississippi fund has by far the biggest losses of any lead plaintiff candidate. In fact, the brief said, most of the other shareholders that initially moved to lead the case dropped their bids -- and two of them threw their support to MissPERS -- because they recognized the strength of the fund's lead plaintiff argument. MissPERS's lawyers told U.S. District Judge William Alsup that he can be sure the fund will do a good job on behalf of all Diamond shareholders because MissPERS has plenty of experience as a lead plaintiff.

The New England fund contends that's exactly why Mississippi shouldn't get the appointment in the Diamond case. In a Feb. 9 response to the MissPERS bid, Robbins Geller argued that the Private Securities Litigation Reform Act bars investors from serving as lead plaintiff in more than five cases in any three-year period. "MPERS admits that it has been appointed as lead plaintiff in at least six cases in the last three years," the Robbins Geller brief said. "And MPERS is currently preoccupied with so many cases that it has apparently forgotten to advise the court of its involvement in at least one additional case in which MPERS was recently appointed lead plaintiff. Of equal concern is MPERS's apparent intention to continue to collect additional lead plaintiff appointments, as it recently filed yet another motion to be appointed lead plaintiff in a [securities class] action [against Green Mountain coffee]." By the New England fund's count, MissPERS has been a lead plaintiff in "as many as 16" cases in the last three years -- three times as many as the PSLRA limit.

Courts frequently make exceptions to the five-case rule for institutional investors like the Mississippi pension fund, but Robbins Geller pointed to a case called In re McKesson HBOC, in which U.S. District Judge Ronald Whyte of San Jose federal court refused to appoint MissPERS as lead plaintiff because of its commitments in other cases.

MissPERS uses a lot of different plaintiffs firms. (As lead counsel in the just-settled $315 million Merrill Lynch mortgage-backed securities class action, for instance, the fund was represented by Bernstein Litowitz Berger & Grossmann.) But one firm that doesn't work for MissPERS is Robbins Geller, which is one of the reasons this lead plaintiff (and lead counsel) fight may get ugly. Additional briefs are due next week; Alsup will hear arguments on March 1.

Darren Robbins of Robbins Geller declined comment. Martin Millette of the Mississippi Attorney General's office didn't return my call.

(Reporting by Alison Frankel)