Smith v. Sperling et al

Filing 62

ORDER that Defendants' Motion to Transfer (Doc. 82 in CV 10-1735- PHX-JAT; Doc. 15 in CV 11-722-PHX-PGR) is granted; all future filings relating to CV 11-722 shall be filed in CV 11-722-PHX-JAT. IT IS FURTHER ORDERED that the Clerk of the Court shall file a copy of this Order in CV 10-1735-PHX-JAT. Signed by Judge James A Teilborg on 09/14/11. (ESL)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Darlene Smith, derivatively on behalf of)
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Apollo Group, Inc.,
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Plaintiff,
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vs.
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John G. Sperling, Peter V. Sperling,)
Charles B. Edelstein, Gregory W.)
Cappelli, Terri C. Bishop, Dino J.)
Deconcini, Samel A. Dipiazza, Jr.,)
Stephen J. Giusto, Roy A. Herberger, Jr.,)
Ann Kirschner, K. Sue Redman, James R.)
Reis, Manuel F. Rivelo, George Zimmer,)
Joseph D’Amico, Gregory J. Iverson,)
Brian L. Swartz, Brian Mueller, P. Robert)
Moya, Robert W. Wrubel, William J.)
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Pepicello and Does 1025 inclusive,
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Defendants,
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vs.
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Apollo Group, Inc., an Arizona)
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corporation,
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Nominal Defendant.
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Case No. 11-0722-PHX-PGR
ORDER

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Pending before the Court is a motion to transfer shareholder derivative action No. CV
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11-0722-PHX-PGR (“Smith v. Sperling”) to this Court by individual defendants John G.
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Sperling, Peter V. Sperling, Charles B. Edelstein, Gregory W. Cappelli, Terri C. Bishop,
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Dino J. Deconcini, Samel A. Dipiazza, Jr., Stephen J. Giusto, Roy A. Herberger, Jr., Ann
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Kirschner, K. Sue Redman, James R. Reis, Manuel F. Rivelo, George Zimmer, Joseph

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D’Amico, Gregory J. Iverson, Brian L. Swartz, Brian Mueller, P. Robert Moya, Robert W.

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Wrubel, and William J. Pepicello (collectively, “Defendants”). Doc. 82 at 2.1 This Court

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presides over related putative securities class action In re Apollo Group, Inc. Securities

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Litigation, No. CV-10-1735-PHX-JAT (“Apollo II”).

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derivatively on behalf of Apollo Group, responded to Defendants’ motion with Plaintiff’s

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Opposition to Defendants’ Motion to Transfer under LRCiv 42.1(a). Doc. 86.

Id.

Plaintiff Darlene Smith,

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I.

FACTS

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In Smith v. Sperling, Plaintiff filed a derivative complaint against officers and

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directors of Apollo Group for violating federal securities law and breaching state-law

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fiduciary duties. (Doc. 86 at 6). Apollo II is a shareholder class action suit against officers

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and directors of Apollo Group for the same violation of federal securities laws. Defendants

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in Smith v. Sperling filed a Motion to Transfer so that this Court could preside over both

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Smith v. Sperling and Apollo II.

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II. LAW GOVERNING TRANSFER OF CASES

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LRCiv 42.1(a) provides factors for determining whether a party is permitted to file a

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motion to transfer a case to a judge hearing a related case.
Any party may file a motion to transfer the case or cases involved to
a single Judge whenever two or more cases are pending before
different Judges and any party believes that such cases: (1) arise from
substantially the same transaction or event; (2) involve substantially
the same parties or property; (3) involve the same patent, trademark,
or copyright; (4) call for determination of substantially the same
questions of law; or (5) for any other reason would entail substantial
duplication of labor if heard by different Judges.

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LRCiv 42.1(a).
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These factors only determine whether a party may file a motion to transfer. These
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factors are not binding on the Court’s ultimate decision to grant or deny the motion. See
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Badea v. Cox, 931 F.2d 573, 575 (9th Cir. 1991) (“District Court judges have ‘broad
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All Document numbers are in CV 10-1735 unless otherwise indicated.
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discretion’ regarding the assignment or reassignment of cases,” and the Ninth Circuit will not

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“review independently a district court’s determination of the scope and application of local

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rules.”) (quoting United States v. Gray, 876 F.2d 1411, 1414 (9th Cir. 1989)).

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These factors are also independently sufficient as demonstrated by the use of “or”

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preceding the fifth factor. A party who satisfies any one of the factors may file a motion to

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transfer. Gagan v. Estate of Sharar, Nos. CIV 2:99-1427-PHX-RCB, CIV 2:08-00018-PHX-

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EHC, 2008 WL 2810978, at *2 (D. Ariz. July 18, 2008).

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III. Application of Local Rule 42.1(a) to Present Motion

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Plaintiffs submit the following arguments in opposition to the Motion to Transfer: (1)

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LRCiv 42.1(a) mandates that a case can be transferred only if it is “substantially similar” to

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a case that the judge receiving the transferred case is presiding over, and the transfer “must

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result in the saving of judicial resources”; (2) Smith v. Sperling and Apollo II are not

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substantially similar; (3) transferring Smith v. Sperling would not save judicial resources; and

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(4) the Motion to Transfer is Defendants’ attempt “to avoid discovery and promote delay.”

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A.

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A transfer is proper if transferring satisfies any one of the factors provided in LRCiv

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42.1(a). Gagan, 2008 WL 2810978, at *2. Contrary to Plaintiff’s contention, LRCiv 42.1(a)

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does not require that a proposed transfer satisfy a “substantially similar” requirement and a

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“judicial economy” requirement.

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individually by the district court in its transfer decision. Id.

Requirements of LRCiv 42.1(a)

See id.

Instead, these are factors to be weighed

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The deference given to a district court’s transfer decision is so broad that “even where

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a case had ‘little in common with the prior case,’ there was no abuse of discretion in

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transferring that case to a judge ‘because it allegedly presented issues similar to those in

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another case previously heard by him.’” Parra v. Bashas’ Inc., Nos. CV 02-0591-PHX-

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RCB, CV 09-0209-PHX-JAT, 2009 WL 1024615, at *4 (D. Ariz. Apr. 15, 2009) (quoting

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Jacobson v. Hughes Aircraft Co., 105 F.3d 1288, 1302 (9th Cir. 1997), rev’d on other

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grounds, 525 U.S. 432 (1999)). Accordingly, Defendants are required only to show that

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transferring Smith v. Sperling would satisfy one of the LRCiv 42.1(a) factors. The Court,
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exercising its broad discretion, can then decide whether transferring would be appropriate.

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Because the Court finds that transferring Smith v. Sperling would satisfy multiple similarity

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factors, the Court does not need to address whether transferring would achieve judicial

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economy.

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The cases cited by Plaintiff are not persuasive because they do not evaluate the

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appropriateness of transferring cases under a similar standard to LRCiv 42.1(a). See In re

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Bear Stearns Cos. Sec., Derivative, and ERISA Litig., No. 07-Civ-10453, 2009 WL 50132,

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at *4-5 (S.D.N.Y. Jan. 5, 2009) (determining whether to consolidate cases); Lawrence E.

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Jaffe Pension Plan v. Household Int., Inc., No.02-5893, 2003 WL 21011757, at *2-3 (N.D.

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Ill. May 5, 2003) (analyzing relatedness under a local rule that imposed a series of mandatory

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requirements).

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B.

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Several of the LRCiv 42.1(a) factors evaluate the similarity between cases pending

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before different judges to determine whether transferring one of the cases would be

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appropriate. As previously stated, Defendants need to show only that one of the LR. 42.1(a)

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factors is satisfied for their motion to be proper, and then the Court will determine whether

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to grant the motion. The Court finds, however, that multiple factors are satisfied.

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Similarities Between Smith v. Sperling and Apollo II

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The Cases Arise From Substantially the Same Event

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The underlying events that give rise to both Smith v. Sperling and Apollo II are

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substantially the same. Although both cases involve claims based on different theories due

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to who is bringing the claims, the claims are based on substantially the same facts. The Smith

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v. Sperling complaint and the Apollo II complaint assert claims against Apollo officers for

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violating §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. Doc.

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1 of 11-00722, at 61-63; Doc.1 of 10-1735, at 47-52. These claims arise from the same

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alleged actions of the Apollo officers. Doc. 49 of 11-00722, at 4. Accordingly, Plaintiffs

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concede that “both cases share some common facts.” Id. Although Smith v. Sperling does

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allege additional state-law claims that will require additional facts to be proven, e.g., whether

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Defendants compensation to management “wasted Apollo’s corporate assets” (Doc. 86 at 9),
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the substantial similarity of the federal-securities-law claims sufficiently demonstrates that

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the cases arise from substantially the same events.

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2.

The Cases Involve Substantially the Same Parties

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The parties in Smith v. Sperling and Apollo II are also substantially the same. Plaintiff

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claims that because the cases have a different number of defendants, and Apollo Group is a

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plaintiff in Smith v. Sperling and a defendant in Apollo II, the cases are not substantially the

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same. Doc. 86, 9. LRCiv 42.1(a) does not require the parties to be identical in identity,

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number and position. See Parra, 2009 WL 1024615, at *5 (finding parties to be substantially

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the same even though the parties were different in number and position). All the defendants

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in Apollo II, except Darlene Smith, are defendants in Smith v. Sperling. (Doc. 1 at 82).

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Apollo Group’s difference of position in the two cases does not negate the existing

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substantial similarity of parties.

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C.

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The Court finds there is no evidence that Defendants are trying to delay the litigation

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Accusations of Discovery Delay

process in Smith v. Sperling by transferring.

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Accordingly,

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IT IS ORDERED that Defendants’ Motion to Transfer (Doc. 82 in CV 10-1735-

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PHX-JAT; Doc. 15 in CV 11-722-PHX-PGR) is granted; all future filings relating to CV 11-

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722 shall be filed in CV 11-722-PHX-JAT.

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IT IS FURTHER ORDERED that the Clerk of the Court shall file a copy of this
Order in CV 10-1735-PHX-JAT.
DATED this 14th day of September, 2011.

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