Primo v. Pacific Biosciences of California Inc et al

Filing 88

ORDER by Judge Claudia Wilken DENYING DEFENDANTS #73 MOTION TO STAY AND DENYING PLAINTIFFS #80 CROSS- MOTIONS TO ENJOIN STATE COURT PROCEEDINGS AND LIFT THE PSLRA DISCOVERY STAY. (ndr, COURT STAFF) (Filed on 8/20/2013)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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THOMAS J. PRIMO; and EVAN POWELL,
individually and on behalf of all
others similarly situated,

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United States District Court
For the Northern District of California

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Plaintiffs,
v.
PACIFIC BIOSCIENCES OF
CALIFORNIA, INC.; HUGH C. MARTIN;
SUSAN K. BARNES; BRIAN B. DOW;
WILLIAM ERICSON; BROOK BYERS;
MICHAEL HUNKAPILLER; RANDALL
LIVINGSTON; SUSAN SIEGEL; DAVID
SINGER; J.P. MORGAN SECURITIES
LLC; MORGAN STANLEY & CO., INC.;
DEUTSCHE BANK SECURITIES, INC.;
and PIPER JAFFRAY & CO.,

No. C 11-6599 CW
ORDER DENYING
DEFENDANTS’ MOTION
TO STAY (Docket
No. 73) AND
DENYING
PLAINTIFF’S CROSSMOTIONS TO ENJOIN
STATE COURT
PROCEEDINGS AND
LIFT THE PSLRA
DISCOVERY STAY
(Docket No. 80)

Defendants.
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Defendants Pacific Biosciences of California, Inc. (PacBio);

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Hugh C. Martin, Susan K. Barnes, Brian B. Dow, William Ericson,
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Brook Byers, Michael Hunkapiller, Randall Livingston, Susan Siegel
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and David Singer (collectively, the PacBio Defendants); and J.P.
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Morgan Securities LLC, Morgan Stanley & Co., Deutsche Bank
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Securities Inc., Piper Jaffray & Co. (collectively, the
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Underwriter Defendants) move for a temporary stay of this action
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pending the final approval of a settlement in state court which,
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if approved, will extinguish the class claims in this case in
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their entirety.

Lead Plaintiff Thomas J. Primo and Plaintiff Evan

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Powell (collectively, Plaintiffs) oppose the motion to stay and
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cross-move to enjoin the state court proceedings and to lift
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partially the Private Securities Litigation Reform Act of 1995
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(PSLRA) discovery stay.

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Defendants oppose the cross-motions.

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parties’ papers and the entire record in this case, the Court

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DENIES Defendants’ motions to stay (Docket No. 73) and DENIES

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Plaintiffs’ cross-motions to enjoin the state court litigation and

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lift the PSLRA discovery stay (Docket No. 80).

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See 15 U.S.C. § 78u-4(b)(3)(B).
Having considered the

BACKGROUND
I.

Federal Action
Plaintiffs bring this putative class action suit against

United States District Court
For the Northern District of California

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PacBio, nine of its officers and directors and four underwriting

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firms, on behalf of themselves and all persons or entities that

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purchased PacBio common stock between October 27, 2010, the day of

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PacBio’s initial public offering (IPO), and September 20, 2011.

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Plaintiffs allege that the offering materials filed in connection

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with PacBio’s IPO contained false and materially misleading

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statements in violation of federal securities laws: sections 10(b)

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and 20(a) of the Exchange Act, 15 U.S.C. §§ 78j(b) and 78t(a));

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Rule 10b-5 promulgated under section 10(b), 17 C.F.R. § 240.10b 5;

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and sections 11, 12(a)(2) and 15 of the Securities Act of 1933, 15

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U.S.C. §§ 77k, 771(a)(2) and 77o).

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at ¶ 9.

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motion to be appointed as Lead Plaintiff.

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April 15, 2013, the Court granted Defendants’ motion to dismiss

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Plaintiffs’ First Amended Complaint and granted Plaintiffs leave

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to amend their complaint within sixty days.

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June 13, 2013, one day before Plaintiffs’ 2AC was due, Defendants

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filed the instant motion for a temporary stay and the parties

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stipulated that Defendants’ response to the 2AC would not be due
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Second Amended Complaint(2AC)

On April 26, 2012, the Court granted Plaintiff Primo’s
Docket No. 18.

On

Docket No. 72.

On

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until thirty days after any denial of the motion to stay.

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Defendants’ motion to stay is based on the preliminary approval of

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an earlier-filed state court action discussed below.

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filed their 2AC on June 14 and, on July 18, Plaintiffs filed an

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opposition to Defendants’ motion to stay and filed their cross-

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motions to enjoin the state court proceedings and partially lift

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the PSLRA discovery stay.

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II.

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Plaintiffs

State Action
Three state court putative class actions making similar

United States District Court
For the Northern District of California

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allegations have been filed against Defendants.

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been consolidated into a single case alleging violations of

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sections 11, 12(a)(2) and 15 of the Securities Act.

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Biosciences of California, Inc. Securities Litigation, San Mateo

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County Superior Court, Case No. CIV509210.

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state court entered an order preliminarily approving a settlement

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and setting a final approval hearing for October 25, 2013.

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parties do not dispute that approval of the settlement as proposed

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would “extinguish all claims in this litigation, including

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Plaintiffs’ Exchange Act claims.”

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Cross-Motion at 4.

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Those cases have

In re Pacific

On June 3, 2013, the

The

Plaintiffs’ Opposition and

LEGAL STANDARD
It is well-established that “the power to stay proceedings is

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incidental to the power inherent in every court to control the

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disposition of the causes on its docket with economy of time and

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effort for itself, for counsel, and for litigants.”

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North Am. Co., 299 U.S. 248, 254 (1936); see also Ethicon, Inc. v.

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Quigg, 849 F.2d 1422, 1426-27 (Fed. Cir. 1988) (“Courts have

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Landis v.

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inherent power to manage their dockets and stay proceedings.”)

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the Ninth Circuit instructs,

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A trial court may, with propriety, find it is efficient
for its own docket and the fairest course for the
parties to enter a stay of an action before it, pending
resolution of independent proceedings which bear upon
the case. This rule applies whether the separate
proceedings are judicial, administrative, or arbitral in
character, and does not require that the issues in such
proceedings are necessarily controlling of the action
before the court.

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Leyva v. Certified Grocers of Cal., Ltd., 593 F.2d 857, 863-

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64 (9th Cir. 1979).

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United States District Court
For the Northern District of California

As

In determining whether to grant a stay, courts generally

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consider the following competing interests: “the possible damage

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which may result from the granting of a stay, the hardship or

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inequity which a party may suffer in being required to go forward,

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and the orderly course of justice measured in terms of the

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simplifying or complicating of issues, proof, and questions of law

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which could be expected to result from a stay.”

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Corp., 398 F.3d 1098, 1110 (9th Cir. 2005) (citation omitted).

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Lockyer v. Mirant

DISCUSSION
I.

Motion to Stay
Defendants argue that the Court should temporarily stay this

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action until the settlement is finalized in state court because

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the release in the state court case would extinguish all of

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Plaintiffs’ claims.

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case to proceed in this Court would be duplicative and a waste of

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judicial and party resources.

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their Exchange Act claims would be an improper abdication of this

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Court’s exclusive jurisdiction over such claims.

Accordingly, Defendants argue, allowing the

Plaintiffs counter that staying

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See 15 U.S.C.

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§ 78aa (“The district courts of the United States and the United

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States courts of any Territory of other place subject to the

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jurisdiction of the United States shall have exclusive

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jurisdiction of violations of this chapter or the rules and

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regulations thereunder . . .”).

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Plaintiffs cite Silberkleit v. Kantrowitz, in which a

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district court had stayed a “federal action involving two claims

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within exclusive federal jurisdiction . . . based on grounds of

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‘wise judicial administration.’”

713 F.2d 433 (9th Cir. 1983).

United States District Court
For the Northern District of California

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The Ninth Circuit reversed the stay, noting that the “‘wise

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judicial administration’ exception to the exercise of jurisdiction

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is invoked only ‘when both the federal and state courts have

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concurrent jurisdiction over particular claims.’”

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Turf Paradise, Inc. v. Arizona Downs, 670 F.2d 813, 820-21 (9th

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Cir. 1982)).

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court has no discretion to stay proceedings involving claims

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within exclusive federal jurisdiction.”

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Id. (quoting

The Silberkleit court concluded that “a district

Id.

Defendants argue that Silberkleit concerns abstention rather

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than a temporary stay.

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seek a stay until the state court acts, at which point the stay

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will be automatically lifted.

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Plaintiffs’ claims will be extinguished if the state court grants

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final approval of the state court action and Plaintiffs do not opt

Moreover, Defendants argue that they only

Nonetheless, as the parties agree,

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out.1

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no reason to stay their individual claims in this Court.

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If Plaintiffs do opt out of the state court case, there is

The Court declines to exercise its discretion to stay this

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case.

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this case in the most efficient manner possible, the Court sets

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the following deadlines.

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the state court action, Defendants’ response to the 2AC will be

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due within two weeks of the date the opt-out form is received by

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Defendants.

Defendants’ motion to stay is DENIED.

However, to manage

If either or both Plaintiffs opt out of

If neither Plaintiff opts out and the settlement is

United States District Court
For the Northern District of California

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not finally approved by the state court, Defendants’ response to

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the 2AC shall be due within two weeks of the date of the state

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court’s order rejecting the settlement.

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out and the settlement is finally approved by the state court, the

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parties shall file a stipulated order of dismissal within one week

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of the date of the final approval.

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II.

If neither Plaintiff opts

Cross-Motion to Enjoin the State Court Proceedings

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Plaintiffs have filed a cross-motion to enjoin the state

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court settlement to the extent that it would release or extinguish

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the state class members’ Exchange Act claims.

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various cases in support of their argument that the Anti-

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Injunction Act, 28 U.S.C. § 2283, would not prohibit such an

Plaintiffs cite

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In their motion to stay, Defendants state that if the
settlement “is finally approved, the Federal Plaintiffs may opt
out of the State Action settlement and individually pursue
litigation in this forum.” However, the exhibit Defendants cite
in support of this statement clearly states that any request for
exclusion from the class must be received at least thirty days
prior to the final approval hearing. Moreno Dec. Ex. 2 at ¶ 12.
Contrary to Defendants’ statement, Plaintiffs cannot opt out after
the settlement is finally approved.
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injunction, and that the All Writs Act, 28 U.S.C. § 1651(a),

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provides the Court with authority to issue such an injunction.

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However, to the extent the Court has the authority to issue such

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an injunction, it declines to do so.

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moved to certify the class in this case.

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for this Court to act can only be made in their individual

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capacities.

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claims, they may opt out of the state court settlement and pursue

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their individual claims in this Court.

United States District Court
For the Northern District of California

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Plaintiffs have not even
Accordingly, any request

If Plaintiffs wish to pursue their Exchange Act

The fact that Plaintiff Primo has been appointed Lead

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Plaintiff in this action does not change the analysis.

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assert that allowing the state court settlement to go forward will

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interfere with Lead Plaintiff’s “fiduciary duty to monitor, manage

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and control the litigation.”

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Litig., 2004 U.S. Dist. LEXIS 3131, at *17 (N.D. Cal.) (internal

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quotation omitted).

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Plaintiffs

In re Terayon Comm’ns Sys., Sec.

Plaintiffs cite In re BankAmerica Corp. Securities

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Litigation, a case in which a court in the Eastern District of

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Missouri enjoined state court proceedings.

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(E.D. Mo. 2000).

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distinguishable from this case on multiple grounds, primarily

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because the federal class in BankAmerica had already been

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certified and there were problems with the certification of the

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later filed state action.

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action have not yet filed a motion to certify the class.

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Defendants intend to a file a motion to dismiss the 2AC.

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Moreover, the state action Plaintiffs seek to enjoin in this case

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was earlier filed, and, according to the complaints in each case,
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95 F. Supp. 2d 1044

However, as Defendants point out, BankAmerica is

In contrast, Plaintiffs in this federal
Indeed

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the named plaintiffs in the state action own significantly more

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shares than Plaintiffs in this case.

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BankAmerica where “competing state court plaintiffs, representing

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a significantly smaller number of shares [sought to] institute

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premature settlement negotiations which threaten[ed] the orderly

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conduct of the federal case and which could result in the release

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of the federal claims.”

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United States District Court
For the Northern District of California

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This is a far cry from

95 F. Supp. 2d at 1049.

Accordingly, the Court DENIES Plaintiffs’ motion to enjoin
the state court proceedings.
III. Motion to Lift the PSLRA Discovery Stay

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Plaintiffs further argue that the Court should partially lift

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the PSLRA Discovery stay to permit “discovery as to the names and

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contact information of shareholders who obtained shares in the

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IPO.”

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explain that such “information will permit Plaintiffs to identify

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persons for contact who may wish to serve as additional plaintiffs

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in the Federal Action to enforce the Section 12 claims pursuant to

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the Securities Act.”

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Plaintiffs’ Opposition and Cross-Motion at 16.

Plaintiffs

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However, the PSLRA provides that “all discovery and other

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proceedings shall be stayed during the pendency of any motion to

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dismiss, unless the court finds upon the motion of any party that

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particularized discovery is necessary to preserve evidence or to

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prevent undue prejudice to that party.”

15 U.S.C. § 78u-

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In its order dismissing the 1AC, the Court found that
“neither named Plaintiff has standing to assert the § 12(a)(2)
claim.” Docket No. 72 at 36. It granted leave to amend only
“with a new named Plaintiff who has standing to assert his claim.”
Id. In their 2AC, Plaintiffs again allege a § 12(a)(2) claim, but
they have not added any new named plaintiffs.
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4(b)(3)(B).

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securities actions should stand or fall based on the actual

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knowledge of the plaintiffs rather than information produced by

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the defendants after the action has been filed.”

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United States Dist. Ct., 99 F.3d 325, 328 (9th Cir. 1996).

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“Congress clearly intended that complaints in these

Medhekar v.

Plaintiffs state that they “will be prejudiced without access

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to documents already produced to the plaintiffs in the State

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Action” and cite various cases in which courts have found undue

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prejudice when requested documents have already been produced to

United States District Court
For the Northern District of California

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other entities.

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However, Plaintiffs do not provide any additional information

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regarding the prejudice they will suffer.

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DENIES Plaintiffs’ motion to lift the PSLRA discovery stay.

Plaintiffs’ Opposition and Cross-Motion at 13.

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Accordingly, the Court

CONCLUSION
For the reasons set forth above, the Court DENIES Defendants’

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motion to stay (Docket No. 73) and DENIES Plaintiffs’ motions to

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enjoin the state court action and to lift the PSLRA discovery stay

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(Docket No. 80).

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IT IS SO ORDERED.

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Dated: 8/20/2013

CLAUDIA WILKEN
United States District Judge

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