Hubuschman v. Zuckerberg et al

Filing 52

ORDER TRANSFERRING CASE to the United States District Court for the Southern District of New York. IN RE: FACEBOOK, INC., IPO SECURITIES AND DERIVATIVE LITIGATION. MDL No. 2389. Signed by John H. Heyburn, II; Chairman of the Panel on 10/4/12. (aaa, COURT STAFF) (Filed on 10/9/2012)

Case MDL No. 2389 Document 96 Filed 10/04/12 Page 1 of 6

UNITED STATES JUDICIAL PANEL
on
MULTIDISTRICT LITIGATION

IN RE: FACEBOOK, INC., IPO SECURITIES
AND DERIVATIVE LITIGATION

MDL No. 2389

TRANSFER ORDER

Before the Panel: Pursuant to 28 U.S.C. § 1407, defendants Facebook, Inc. (Facebook);
Mark Zuckerberg; Sheryl K. Sandberg; David A. Ebers man; David M. Spillane; Marc L. Andreessen;
Erskine B. Bowles; James B. Breyer; Donald E. Graham, Reed Hastings; Peter A. Thiel; Morgan
Stanley & Co. LLC (Morgan Stanley); J.P. Morgan Securities LLC (JP Morgan); and Goldman,
Sachs & Co. (Goldman Sachs) seek centralization in the Southern District of New York. This
litigation currently consists of 41 actions, pending in three districts, listed on Schedule A. 1
The remaining underwriter defendants2 concur in the motion for centralization, as do plaintiffs
in four Southern District ofNew York actions. Defendants The NASDAQ OMX Group, Inc. and
The Nasdaq Stock Market LLC (collectively "NASDAQ") and plaintiffs in one Southern District of
New York potential tag-along action support centralization of the actions involving NASDAQ in the
Southern District ofNew York and support limited coordination with the remaining actions, but
oppose coordination of all cases beyond the coordination of common discovery and oppose

Four additional actions were included in the motion for centralization, but they have since
been dismissed or closed. Additionally, the parties have notified the Panel of eleven related actions
pending in the Northern District of California, the District of District of Columbia, and the Southern
District ofN ew York. These actions and any other related actions are potential tag-along actions.
See Panel Rules 1.1(h), 7.1 and 7.2.
2

Merrill Lynch, Pierce, Fenner & Smith Inc., Barclays Capital Inc., Allen & Company LLC,
Citigroup Global Markets Inc., Credit Suisse Securities (USA), LLC, Deutsche Bank Securities Inc.,
RBC Capital Markets, LLC, Wells Fargo Securities, LLC, Blaylock Robert Van LLC, BMO Capital
Markets Corp., C.L. King & Associates, Inc., Cabrera Capital Markets, LLC, CastleOak Securities,
L.P., Cowen and Company, LLC., E*TRADE Securities LLC, Itau BBA USA Securities, Inc.,
Lazard Capital Markets LLC, Lebenthal & Co., LLC, Loop Capital Markets LLC, M.R. Beal &
Company, Macquarie Capital (USA) Inc., Muriel Siebert & Co., Inc., Oppenheimer & Co. Inc.,
Pacific Crest Securities LLC, Piper Jaffray & Co., Raymond James & Associates, Inc., Samuel A.
Ramirez & Co., Inc., Stifel, Nicolaus & Co., Inc., The Williams Capital Group, L.P., and William
Blair & Company, L.L.C.

A CERTIFIED COPY
RUBY J. KRAJICK, CLERK

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Case MDL No. 2389 Document 96 Filed 10/04/12 Page 2 of 6

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consolidation of the cases involving Facebook with those involving NASDAQ. 3 NASDAQ also
opposes transfer of the actions involving NASDAQ to any other district. Plaintiffs in one Southern
District ofNew York NASDAQ action oppose global centralization of the securities and derivative
actions and the NASDAQ actions and, alternatively, support the Southern District ofNew York as
transferee district. Plaintiffs in seven removed Northern District of California securities actions and
three removed Northern District of California derivative actions argue that if the actions remain in
federal court, the Northern District of California is the preferable transferee district. Generally, these
plaintiffs oppose inclusion of the NASDAQ actions and believe the MDL should include only the
securities and derivative actions.
All actions arise from Facebook's May 18, 2012 initial public offering (IPO). Thirty of these
actions allege violations of the Securities Act of 1933 (the 1933 Act) or the Securities Exchange Act
of 1934 against movants and various underwriter defendants. Three of these actions assert derivative
claims against certain ofFacebook's directors and officers in connection with alleged violations of
the 1933 Act. Specifically, they allege that although Facebook publicly announced before the IPO
that its growth in users had continued to outpace the number of ads displayed on its site, Facebook
had material non-public discussions with the underwriters' analysts concerning ad growth, and that
these analysts relayed their resulting revised earnings forecasts to "preferred investors." The plaintiffs
allege that after the IPO, Facebook's stock price declined when the public first learned about these
non-public discussions. The remaining eight actions against NASDAQ allege that it caused technical
and other trading-related errors that created market uncertainty and caused investor losses.
Almost all parties agree that the securities and derivative actions should be centralized, and
that the NASDAQ actions should be centralized. The securities and derivative actions allege that the
Facebook and underwriter defendants violated federal securities laws by providing material nonpublic information to certain preferred investors, causing Facebook's stock price to decline. The
securities actions plaintiffs seek to represent overlapping putative classes of purchasers ofFacebook
IPO stock. Certainly, these actions share questions of fact. On the other hand, the NASDAQ
plaintiffs allege that trading errors by the NASDAQ defendants caused some of their losses. Seven
of the NASDAQ actions are brought on behalf of overlapping putative classes of purchasers of
Facebook IPO stock who experienced such trading errors. The NASDAQ actions thus also involve
common questions of fact.
The central dispute among the parties is whether the NASDAQ actions should be included
in one MDL with the securities and derivative actions. All actions do address the common issue of

At oral argument, NASDAQ clarified that they agree the securities and derivative actions
involving Facebook should be in the same court as the NASDAQ actions, whether in two separate
MDLs or in a single MDL with separate tracks. They would oppose any suggestion of consolidation
of the Facebook and NASDAQ actions.

Case MDL No. 2389 Document 96 Filed 10/04/12 Page 3 of 6

-3the cause of the decline in Facebook's stock price. Various parties in both the securities and
derivative actions on the one hand, and the NASDAQ actions on the other, will argue that
NASDAQ's actions caused the investor losses in some instances. Parties opposing global
centralization argue that such factual overlap is too limited to warrant centralization and that the
NASDAQ actions involve separate defendants, different claims, and arise from different conduct.
These parties also argue that the securities actions will be stayed pursuant to the Private Securities
Litigation Reform Act of 1995, 15U.S.C. § 78u-4, which will unduly delay the NASDAQ actions.
The NASDAQ defendants themselves do not oppose inclusion ofthe NASDAQ actions in the MDL,
conceding that there will be some factual overlap, but they argue that the NASDAQ actions should
be included only for limited coordination for discovery purposes and not consolidation.
We conclude that though the NASDAQ actions involve different defendants and claims from
those in the securities and derivative actions, they do involve enough common questions of fact,
related circumstances and common discovery to warrant centralization. The securities and derivative
actions involve some unique factual issues and some discovery and pretrial motions practice that will
not overlap with the NASDAQ actions. While NASDAQ expresses concerns about this, as we have
held in the past,"[ w ]e leave the degree of any coordination or consolidation to the discretion of the
transferee judge." In re: GerovaFin. Group, Ltd., Sec. Litig., 816 F. Supp. 2d 1381, 1832 (J.P.M.L.
2011). We have complete confidence that the transferee judge can accommodate these differences
without delaying or compromising consideration of claims on their individual merits. See In re:
Tribune Co. Fraudulent Conveyance Litig., 831 F. Supp. 2d 1371, 1371-72 (J.P.M.L. 2011). We
also fmd persuasive that all the actions in the Southern District ofNew York have been related before
Judge Robert W. Sweet without apparent objection from any party.
We will not delay transfer of the removed Northern District of California actions. The
Northern District of California recently denied the motions to remand the securities actions. Plaintiffs
in the removed derivative actions can present their pending motions for remand to state court to the
transferee court. See, e.g., In re: Ivy, 901 F.2d 7 (2nd Cir. 1990); In re: Prudential Ins. Co. ofAm.
Sales Practices Litig., 170 F.Supp.2d 1346, 1347-48 (J.P.M.L. 2001). We are confident the
transferee judge will give the pending remand motions his prompt attention.
The Southern District of New York is an appropriate transferee district for pretrial
proceedings in this litigation. Twenty-six of the actions are already pending there before Judge
Sweet, including seven ofthe eight NASDAQ actions. Much of the relevant discovery will be located
in New York, including most discovery relating to alleged NASDAQ trading errors and discovery
from the underwriter defendants, many of whom are located in New York.
IT IS THEREFORE ORDERED that pursuant to 28 U.S.C. § 1407, the actions listed on
Schedule A and pending outside the Southern District ofNew York are transferred to the Southern
District of New York and, with the consent of that court, assigned to the Honorable Robert W.
Sweet, for coordinated or consolidated pretrial proceedings.

Case MDL No. 2389 Document 96 Filed 10/04/12 Page 4 of 6

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PANEL ON MULTIDISTRICT LITIGATION

Kathryn H. Vratil
Barbara S. Jones
Marjorie 0. Rendell

W. Royal Furgeson, Jr.
Paul J. Barbadoro
Charles R. Breyer

Case MDL No. 2389 Document 96 Filed 10/04/12 Page 5 of 6

IN RE: FACEBOOK, INC., IPO SECURITIES
AND DERIVATIVE LITIGATION

MDL No. 2389

SCHEDULE A

Northern District of California
Michael Spatz, et al. v. Facebook, Inc., et al., C.A. No. 3:12-02662
James Chang, et al. v. Facebook, Inc., et al., C.A. No. 3:12-02680
John Gregory v. Facebook, Inc., et al., C.A. No. 3:12-02815
Darryl Lazar v. Facebook, Inc., et al., C.A. No. 3:12-03199
Edward J. Shierry v. Facebook, Inc., et al., C.A. No. 3:12-03200
Michael Lieber v. Facebook, Inc., et al., C.A. No. 3:12-03202
Thomas J. Ahrendtsen, et al. v. Facebook, Inc., et al., C.A. No. 3:12-03212
Kevin Hicks, et al. v. Facebook Inc., et al., C.A. No. 3:12-03353
Harvey Lapin v. Facebook, Inc., et al., C.A. No. 3:12-03195
Karen Cuker, et al. v. Facebook, Inc., et al., C.A. No. 3:12-03201
Jennifer Stokes v. Facebook, Inc., et al., C.A. No. 3:12-03203
William Cole v. Mark Zuckerberg, et al., C.A. No. 3:12-03367
VernonR. DeMois, Jr. v. Facebook, Inc. et al., C.A. No. 3:12-03196
Hal Hubuschman v. Mark Zuckerberg, et al., C.A. No. 3:12-03366
Middle District ofFlorida
Jonathan R. Simon, et al. v. The Nasdaq Stock Market LLC, C.A. No. 6:12-00973
Southern District ofNew York
Phillip Goldberg v. Nasdaq OMX Group, Inc., et al., C.A. No. 1:12-04054
Brian Roffe Profit Sharing Plan, et al. v. Facebook, Inc., et al., C.A. No. 1:12-04081
Maren Twining v. Facebook, Inc., et al., C.A. No. 1:12-04099
Goldrich Cousins P.C. 401(k) Profit Sharing Plan & Trust, et al. v. Facebook, Inc.,
C.A. No. 1:12-04131
Irving S. Braun, et al. v. Facebook, Inc., et al., C.A. No. 1:12-04150
Edward Childs v. Mark Zuckerberg, et al., C.A. No. 1:12-04156
Alexis Alexander, et al. v. Facebook, Inc., et al., C.A. No. 1:12-04157
Douglas M. Lightman v. Facebook, Inc., et al., C.A. No. 1:12-04184
Kathy Reichenbaum v. Facebook, Inc., et al., C.A. No. 1:12-04194
Jun Yan v. Nasdaq OMX Group, Inc., et al., C.ANo. 1:12-04200
Elbita Alfonso v. The Nasdaq Stock Market LLC, et al., C.A. No. 1:12-04201
Lawrence Corneck v. Morgan Stanley & Co. LLC, et al., C.A. No. 1:12-04215
Justin F. Lazard v. Facebook, Inc., et al., C.A. No. 1:12-04252

Sylvia Gregorcyzk v. Facebook, Inc., et al., C.A. No. 1:12-04291

Case MDL No. 2389 Document 96 Filed 10/04/12 Page 6 of 6

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MDL No. 2389 Schedule A (Continued)
Southern District ofNew York (Continued)
Peter Brinckerhoffv. Facebook, Inc., et al., C.A. No. 1:12-04312
Lidia Levy v. The Nasdaq Stock Market LLC, et al., C.A. No. 1:12-04315
David Goldberg, et al. v. Facebook, Inc., et al., C.A. No. 1:12-04332
Richard P. Eannarino v. Facebook, Inc., et al., C.A. No. 1:12-04360
Peter Mamula v. Facebook, Inc., et al., C.A. No. 1:12-04362
Khodayar Amin v. The Nasdaq Stock Market LLC, et al., C.A. No. 1:12-04403
Elliot Leitner v. Facebook, Inc., et al., C.A. No. 1:12-04551
Barbara Steinman v. Nasdaq OMX Group, Inc., et al., C.A. No. 1:12-04600
Howard Savitt v. Facebook, Inc., et al., C. A. No. 1:12-04648
Chad Roderick v. Nasdaq OMX Group, Inc., et al., C.A. No. 1:12-04716
Eugene Stricker v. Morgan Stanley & Co. LLC, et al., C.A. No. 1:12-04763
Keith Wise, et al. v. Facebook, Inc., et al., C.A. No. 1:12-04777