Shaev v. Baker, II et al
Filing
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ORDER REGARDING MOTIONS TO CONSOLIDATE AND APPOINT LEAD PLAINTIFF AND COUNSEL by Judge Jon S. Tigar granting in part (34) Motion to (1) Consolidate Related Actions; (2) Appoint Co-Lead Plaintiffs; and (3) Appoint Co-Lead Counsel; granting (41) Motion to Appoint Counsel in case 3:16-cv-05541-JST. (wsn, COURT STAFF) (Filed on 1/12/2017)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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IN RE WELLS FARGO & COMPANY
SHAREHOLDER DERIVATIVE
LITIGATION
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Lead Case No.16-cv-05541-JST
(Consolidated with Nos. 16-cv-05592; 16-cv05745; 16-cv-05817; 16-cv-05915; 16-cv06262; 16-cv-06624; and 16-cv-06631)
United States District Court
Northern District of California
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ORDER REGARDING MOTIONS TO
CONSOLIDATE AND APPOINT LEAD
PLAINTIFF AND COUNSEL
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Re: ECF Nos. 27, 30, 34, 36, 41
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Before the Court are a motion to consolidate and two competing motions to appoint lead
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plaintiff and lead counsel. ECF Nos. 34, 41. For the reasons below, the Court consolidates the
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Chicago Teachers case with this consolidated action, appoints Fire and Police Pension Association
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of Colorado and The City of Birmingham Retirement and Relief System as Co-Lead Plaintiffs,
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and appoints Lieff Cabraser Heimann & Bernstein and Saxena White as Co-Lead Counsel.
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I. CONSOLIDATION
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A. Legal Standard
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“When actions involving a common question of law or fact are pending before the court, it
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. . . may order all the actions consolidated.” Fed. R. Civ. P. 42(a). The “district court has broad
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discretion under this rule to consolidate cases pending in the same district.” Investors Research
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Co. v. Dist. Court, 877 F.2d 777, 777 (9th Cir. 1989). “In determining whether or not to
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consolidate cases, the Court should ‘weigh the interest of judicial convenience against the
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potential for delay, confusion and prejudice.’” Zhu v. UCBH Holdings, Inc., 682 F. Supp. 2d
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1049, 1052 (N.D. Cal. 2010) (quoting Southwest Marine, Inc. v. Triple A Machine Shop, Inc., 720
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F. Supp. 805, 806–807 (N.D. Cal. 1989)).
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B. Analysis
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The Court already consolidated eight related shareholder derivative cases in this action
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pursuant to the parties’ stipulation.1 ECF No. 39. All of the cases in the consolidated action,
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which is captioned In re Wells Fargo & Company Shareholder Derivative Litigation, are styled as
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shareholder derivative actions on behalf of Wells Fargo, and each asserts claims that arise out of
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Wells Fargo’s alleged fraudulent cross-selling strategy.
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On the same day the stipulated consolidation order was issued, the Public School
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Teachers’ Pension and Retirement Fund of Chicago filed a similar shareholder derivative
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complaint against Wells Fargo in this district. Case No. 16-cv-07089 (“Chicago Teachers”), ECF
No. 1. The Court has since related Chicago Teachers to the other Wells Fargo securities cases
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United States District Court
Northern District of California
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currently pending in this district. Id., ECF No. 9.
Chicago Teachers now moves to consolidate its case with In re Wells Fargo & Company
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Shareholder Derivative Litigation. ECF No. 41. No party has objected to this request for
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consolidation. In fact, all parties agreed in their stipulation that any similar shareholder derivative
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action brought on behalf of Wells Fargo would “automatically be consolidated for all purposes, if
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and when they are brought to the Court’s attention, together with In re Wells Fargo & Company
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Shareholder Derivative Litigation.” ECF No. 39 ¶ 3.
Like the other shareholder derivative complaints in the consolidated action, the Chicago
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Teachers complaint asserts claims against Wells Fargo’s directors and officers based on their
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approval of the cross-selling initiative and failure to timely correct the company’s fraudulent
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practices. Case No. 16-cv-07089, ECF No. 1. Given this factual and legal overlap, judicial
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convenience and a just resolution of the parties’ claims would be best served through
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consolidation. Therefore, the Court grants the motion to consolidate Chicago Teachers with In re
Wells Fargo & Company Shareholder Derivative Litigation.
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Those cases are Shaev v. Baker, et al., Case No. 16-cv-05541; Cook v. Loughlin, et al., Case No.
16-cv-05592; Sherman v. Stumpf, et al., Case No. 16-cv-05745; Elson, IRA v. Stumpf, et al., 16cv-05817; The City of Birmingham Retirement and Relief System v. Baker, et al., 16-cv-05915;
LeBendig v. Wells Fargo & Company, et al., Case No. 16-cv-6262; Hannon v. Loughlin, et al.,
Case No. 16-cv-06624; Fire and Police Pension Association of Colorado v. Stumpf, et al., Case
No. 16-cv-06631.
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II.
APPOINTMENT OF LEAD PLAINTIFF AND LEAD COUNSEL
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A. Legal Standard
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Under Federal Rule of Civil Procedure 23.1, a district court has the inherent authority to
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appoint lead counsel and/or lead plaintiff as long as the plaintiff “fairly and adequately
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represent[s] the interests of shareholders or members who are similarly situated in enforcing the
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right of the corporation or association.” Berg v. Guthart, 2014 WL 3749780, at *2 (N.D.Cal.,
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2014) (quoting Fed. R. Civ. P. 23.1(a)). For purposes of Rule 23.1, “[a]n adequate representative
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must have the capacity to vigorously and conscientiously prosecute a derivative suit and be free
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from economic interests that are antagonistic to the interests of the class.” Larson v. Dumke, 900
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United States District Court
Northern District of California
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F.2d 1363, 1367 (9th Cir. 1990).
To assess a proposed plaintiff’s adequacy, courts in this circuit consider the following
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factors: (1) indications that the plaintiff is not the true party in interest; (2) the plaintiff's
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unfamiliarity with the litigation and unwillingness to learn about the suit; (3) the degree of control
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exercised by the attorneys over the litigation; (4) the degree of support received by the plaintiff
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from other shareholders; (5) the lack of any personal commitment to the action on the party of the
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representative plaintiff; (6) the remedy sought by plaintiff in the derivative action; (7) the relative
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magnitude of plaintiff's personal interests as compared to his interest in the derivative action itself;
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and (8) plaintiff's vindictiveness toward the defendants. Nicolow v. Hewlett Packard Co., 2013
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WL 792642, at *7 (N.D.Cal. 2013) (citing Larson, 900 F.2d at 1367)). Courts have also
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considered the factors found in the PSLRA and the Manual for Complex Litigation, “such as the
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quality of the plaintiff’s pleadings, the vigorousness of the plaintiff’s efforts, the size of the
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plaintiff’s financial interest, and a general preference for institutional investors.” Id.; accord Berg,
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2014 WL 3749780 at *4.
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B. Analysis
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There are currently two competing motions to appoint lead plaintiff and lead counsel in
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this consolidated action. ECF Nos. 34, 41. Plaintiffs Fire and Police Pension Association of
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Colorado and The City of Birmingham Retirement and Relief System (collectively
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“Colorado/Birmingham”) jointly move to be appointed as co-lead plaintiffs and to appoint Lieff
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Cabraser Heimann & Bernstein and Saxena White as co-lead counsel. ECF No. 34.2 Plaintiffs
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Police & Fire Retirement System City of Detroit and Public School Teachers’ Pension and
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Retirement Fund of Chicago (collectively “Detroit/Chicago”) jointly move to be appointed as co-
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lead plaintiffs and to appoint Bernstein Litowitz Berger & Grossman and Bottini & Bottini as co-
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lead counsel. ECF No. 41.3
Each of the proposed pairs of co-lead plaintiffs and co-lead counsel would adequately
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represent the interests of shareholders as required by Rule 23.1. Notably, all of the proposed lead
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plaintiffs are sophisticated, institutional investors who have experience participating as lead
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plaintiffs in similar shareholder derivative actions. Horn v. Raines, 227 F.R.D. 1, 3 (D.D.C. 2005)
(adopting Congress’ reasoning underlying the PSLRA’s preference for institutional investors in
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United States District Court
Northern District of California
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the context of a derivative action). And they all have a large financial interest in Wells Fargo:
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Birmingham holds 93,898 shares of Wells Fargo common stock; Colorado Fire and Police holds
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87,178 shares of Wells Fargo common stock; Chicago Teachers holds approximately 850,000
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shares of Wells Fargo stock; and Detroit Police & Fire holds 81,000 shares. See Hacker v.
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Peterschmidt, 2006 WL 2925683, at *5 (N.D.Cal. 2006) (finding that proposed co-lead plaintiffs
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who collectively held 5,500 shares had “demonstrated substantial financial interest in the outcome
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of these actions”). Both pairs of proposed co-lead counsel are similarly qualified in that each has
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significant experience obtaining favorable results as lead counsel in shareholder derivative
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litigation. Therefore, the Court concludes that both of the competing movants have the capacity to
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vigorously prosecute this derivative action.
However, the Court finds that Colorado/Birmingham and their counsel have “demonstrated
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a superior ability to move this litigation forward effectively and efficiently, and to otherwise best
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serve the interests of the plaintiffs.” Nicolow, 2013 WL 7922642 at *8. Colorado/Birmingham’s
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counsel played a key role in the effort to consolidate these cases pursuant to stipulation, which
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made the outset of this litigation more efficient for both the parties and this Court. ECF No. 45 at
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Colorado Fire and Police and the City of Birmingham originally filed separate motions. See
ECF Nos. 27, 30.
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Detroit Police & Fire originally filed a joint motion with another plaintiff, George Hannon, but
later requested, and was granted, leave to amend its motion. See ECF Nos. 36, 40, 50.
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20. Moreover, four other Plaintiffs in this action support Colorado/Birmingham’s proposed
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leadership structure because of “their stated willingness to coordinate and work with plaintiffs’
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counsel in the related actions” and their “demonstrated dedication to vigorously pursuing the
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interest of those represented.” ECF Nos. 43, 44. This “widespread, vocal recognition of their
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inclusive approach to working with other plaintiffs and co-counsel in this case” weighs strongly in
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favor of their appointment. Nicolow, 2013 WL 792642 at *8. The Court concludes that this
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factor will be critical given the size and complexity of this consolidated action.
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Other considerations do not disrupt the Court’s conclusion. Although Chicago/Detroit
have a larger financial stake in Wells Fargo than Colorado/Birmingham—925,169 shares versus
181,076 shares—that factor is not dispositive in the context of a shareholder derivative action.
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United States District Court
Northern District of California
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See In re Foundry Networks, Inc. Derivative Litigation, 2007 WL 485974, at *1 (N.D. Cal. 2007).
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Given the significant financial stake of both pairs of proposed co-lead plaintiffs, the Court finds
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that this factor will translate into a marginal difference, if any, in the vigor of representation.
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Although the Chicago/Detroit complaints assert some claims that the Colorado/Birmingham
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complaints do not—insider trading claims, for example—all of the pleadings in this action are
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substantially similar and of high quality. Moreover, “any unique information included, or cause of
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action asserted, in any one complaint can easily be incorporated into a consolidated amended
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complaint, regardless of who is appointed lead counsel.” Richey v. Ells, 2013 WL 179234, at *2
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(D. Colo. 2013) (citing In re Bank of Am. Corp. Sec., Derivative & “ERISA” Litig., 258 F.R.D.
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260, 273 (S.D.N.Y. 2009)). In fact, counsel for all of the Plaintiffs have already agreed to a
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timeline for filing a consolidated amended complaint. ECF No. 39 ¶ 11.
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The Court therefore appoints Birmingham/Colorado as Co-Lead Plaintiffs and Lieff
Cabraser Heimann & Bernstein and Saxena White as Co-Lead Counsel.
CONCLUSION
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The Court grants the motion to consolidate Chicago Teachers, Case No. 16-cv-07089, with
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In re Wells Fargo & Company Shareholder Derivative Litigation, Lead Case No. 16-cv-5541. The
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Court appoints Birmingham/Colorado as Co-Lead Plaintiffs and Lieff Cabraser Heimann &
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Bernstein and Saxena White as Co-Lead Counsel. Pursuant to the parties’ stipulation, Co-Lead
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Plaintiffs and Co-Lead Counsel must serve and file a consolidated complaint, or designate a
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previously-filed complaint as the operative complaint, within sixty days of this Order.
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IT IS SO ORDERED.
Dated: January 12, 2017
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______________________________________
JON S. TIGAR
United States District Judge
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United States District Court
Northern District of California
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