Grotewiel v. Avinger, Inc. et al

Filing 83

ORDER by Judge Claudia Wilken APPOINTING LEAD PLAINTIFFS AND APPROVING PLAINTIFFS SELECTION OF LEAD COUNSEL(Granting 80 Motion for Leave to File).(ndrS, COURT STAFF) (Filed on 10/11/2017)

Download PDF
1 IN THE UNITED STATES DISTRICT COURT 2 FOR THE NORTHERN DISTRICT OF CALIFORNIA 3 4 5 6 ARINDAM BANERJEE and JOGESH HARJAI, Individually and on Behalf of All Others Similarly Situated, Case No. 17-cv-03400-CW ORDER APPOINTING LEAD PLAINTIFFS AND APPROVING PLAINTIFFS’ SELECTION OF LEAD COUNSEL Plaintiffs, 7 v. 8 United States District Court Northern District of California 9 10 11 12 13 14 AVINGER, INC., JEFFREY M. SOINSKI, MATTHEW B. FERGUSON, DONALD A. LUCAS, JOHN B. SIMPSON, JAMES B. MCELWEE, JAMES G. CULLEN, THOMAS J. FOGARTY, CANACCORD GENUITY, INC., COWEN AND COMPANY LLC, OPPENHEIMER & CO., BTIG, STEPHENS INC., AND DOES 1 through 25, inclusive, Defendants. 15 16 Now pending are three motions to be appointed as lead 17 plaintiff pursuant to the Private Securities Litigation Reform 18 Act of 1995 (PSLRA), 15 U.S.C. § 77z-1 et seq., and for approval 19 of the selection of lead counsel. 20 Lindsay Grotewiel and Todd Vogel; Arindam Banerjee and Jogesh 21 Harjai; and Michael Dolan. 22 Banerjee/Harjai groups have opposed the others’ motions and filed 23 replies to each others’ oppositions. 24 Vogel filed objections to reply evidence submitted by Banerjee 25 and Harjai, and Banerjee and Harjai filed a motion for leave to 26 file a response to Grotewiel and Vogel’s objections. 27 28 The motions were filed by: The Grotewiel/Vogel and Additionally, Grotewiel and Having considered all the papers filed by the parties, the Court appoints Banerjee and Harjai as Lead Plaintiffs and 1 approves their selection of the law firm of Scott+Scott, 2 Attorneys at Law, LLP, as Lead Counsel for the putative class. 3 The Court also grants the parties’ requests to submit 4 supplemental filings, and has considered those filings. 5 6 BACKGROUND On May 22, 2017, Plaintiff Lindsay Grotewiel filed a class action complaint in San Mateo County Superior Court against 8 Avinger, Inc. and several of its individual officers and 9 United States District Court Northern District of California 7 directors, alleging violations of the Securities Act of 1933 (the 10 Securities Act), 15 U.S.C. §§ 77k, 77l(a)(2), 77o. 11 claims that Defendants issued a materially false and misleading 12 registration statement and prospectus in connection with 13 Avinger’s January 30, 2015 initial public offering (IPO). 14 Defendants removed the action to this Court on June 12, 2017. 15 June 19, 2017, this Court granted the parties’ joint motion to 16 relate this case to Olberding v. Avinger, No. 17-cv-03398,1 and 17 Gonzalez v. Avinger, No. 17-cv-03401. 18 Grotewiel On The plaintiffs in Olberding and Gonzalez filed motions to 19 remand, but Grotewiel did not. 20 cases and issued an order to show cause why this case should not 21 also be remanded. 22 Court discharged the order to show cause, holding that the 23 statutory removal bar in the Securities Act is not jurisdictional 24 and was waived by Grotewiel. 25 The Court remanded the related On August 22, 2017, following briefing, the Meanwhile, Grotewiel published the PSLRA notice of pendency 26 1 27 28 Plaintiff Kyle Olberding was represented by John T. Jasnoch and Thomas L. Laughlin, IV, of Scott+Scott. Scott+Scott represent that they moved to withdraw as counsel for Olberding in state court on September 20, 2017. 2 1 of a putative securities fraud class action on July 7, 2017, and 2 these timely lead Plaintiff motions followed. 3 § 78u-4(a)(3)(A)(i). See 15 U.S.C. 4 LEGAL STANDARD 5 The PSLRA provides that the Court “shall appoint as lead plaintiff the member or members of the purported plaintiff class 7 that the court determines to be most capable of adequately 8 representing the interests of class members.” 9 United States District Court Northern District of California 6 1(a)(3)(B)(i); see also In re Cavanaugh, 306 F.3d 726, 729-30 10 (9th Cir. 2002) (discussing application of identical standard 11 under 15 U.S.C. § 78u-4(a)(3)(B)). 12 that the Court shall adopt a rebuttable presumption that the most 13 adequate plaintiff is 15 U.S.C. § 77z- The statute further provides 14 the person or group of persons that-- 15 (aa) has either filed the complaint or made a motion in response to a notice under subparagraph (A)(i); 16 17 18 19 20 21 (bb) in the determination of the court, has the largest financial interest in the relief sought by the class; and (cc) otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure. 15 U.S.C. § 77z-1(a)(3)(B)(iii)(I). In determining which candidate has the largest financial 22 interest, courts consider factors that may include: “1) number of 23 shares purchased during the class period; 2) net shares purchased 24 during the class period; 3) net funds expended during the class 25 period; and 4) approximate losses from the alleged fraud.” 26 McKesson HBOC, Inc. Sec. Litig., 97 F. Supp. 2d 993, 995 (N.D. 27 Cal. 1999) (citing In re Olsten Corp. Sec. Litig., 3 F. Supp. 2d 28 286, 295 (E.D.N.Y. 1998) (suggesting this four-factor analysis); 3 In re 1 see also Markette v. XOMA Corp., No. 15-cv-03425-HSG, 2016 WL 2 2902286, at **5-6 (N.D. Cal. May 13, 2016) (discussing methods of 3 calculating financial stake). 4 5 6 7 8 United States District Court Northern District of California 9 The presumption may be rebutted only upon proof that the presumptively most adequate plaintiff (aa) will not fairly and adequately protect the interests of the class; or (bb) is subject to unique defenses that render such plaintiff incapable of adequately representing the class. 10 15 U.S.C. § 77z-1(a)(3)(B)(iii)(II); see also 15 U.S.C. § 77z- 11 1(a)(3)(B)(vi) (additional restrictions on professional 12 plaintiffs). 13 The party chosen as lead plaintiff “shall, subject to the 14 approval of the court, select and retain counsel to represent the 15 class.” 15 U.S.C. § 77z-1(a)(3)(B)(v). 16 17 DISCUSSION If Banerjee and Harjai are permitted to proceed as a “group 18 of persons” under 15 U.S.C. § 77z-1(a)(3)(B)(iii)(I), their 19 financial interest is the largest of any of the lead plaintiff 20 candidates. 21 retained 9,195 shares of Avinger stock during the class period, 22 for which they spent $148,535.59. 23 a total of 16,551 shares of Avinger stock, expending $137,773.60, 24 and retain 15,642 of those shares for a net loss of $127,589.98. 25 Dolan has a net out-of-pocket loss of $19,064.54. 26 They have submitted evidence that they purchased and Grotewiel and Vogel purchased Grotewiel and Vogel argue, however, that the Court may not 27 consider Banerjee and Harjai as a group and aggregate their 28 financial losses. Grotewiel and Vogel are married to each other, 4 1 and it is undisputed that they may be considered as a group. 2 See, e.g., Markette, 2016 WL 2902286, at *8 (citing Aronson v. 3 McKesson HBOC, Inc., 79 F. Supp. 2d 1146, 1153-54 (N.D. Cal. 4 1999)). 5 relationship, however. 6 in which they state that they are medical doctors who “have known 7 each other personally and professionally for 3 years.” 8 Declaration at ¶¶ 3, 5.2 United States District Court Northern District of California 9 The Court knows very little about Banerjee and Harjai’s They submitted a joint reply declaration Joint Courts “have found that unrelated groups of individuals, 10 brought together solely for the purpose of aggregating their 11 claims in an effort to become the presumptive lead plaintiff fail 12 to meet the adequacy prong of Rule 23.” 13 835 F. Supp. 2d 1067, 1073 (W.D. Wash. 2011). 14 if the group is not small and cohesive, and especially if the 15 individuals in the group were brought together by counsel for the 16 purpose of becoming lead plaintiffs, it may undermine the purpose 17 of the PSLRA to prevent lawyer-driven litigation. 18 Banerjee and Harjai have sworn that they were acquainted prior to 19 their purchases of Avinger stock, which means that they had a 20 relationship prior to this litigation. 21 that they consulted together before deciding to seek appointment 22 as lead plaintiffs. 23 their relationship, the way they intend to function as a cohesive 24 group and their intention to direct the litigation rather than be 25 directed by their counsel detracts substantially from their Frias v. Dendreon Corp., This is because, Id. Here, They also have declared The lack of significant information about 26 2 27 28 The Court discourages the parties, in the future, from filing joint declarations, especially when all declarants cannot attest under penalty of perjury to each and every statement in the declaration. 5 1 showing. 2 00414-MJP, 2010 WL 3064427, at *6 (W.D. Wash. Aug. 2, 2010). 3 balance, however, the Court finds that the evidence of their pre- 4 existing relationship is sufficient to treat them as a lead 5 plaintiff group under the PSLRA. See Sabbagh v. Cell Therapeutics, Inc., No. 10-cvOn Grotewiel and Vogel also argue that Banerjee and Harjai are 7 not adequate to serve as lead plaintiffs because the share price 8 information submitted by Banerjee is inaccurate, falling outside 9 United States District Court Northern District of California 6 the range of prices at which Avinger stock traded on the days in 10 question. 11 due to a clerical error, inadvertently listing the transactions 12 as occurring on the settlement dates rather than the purchase 13 dates. 14 there is no indication that the error was committed in bad faith. 15 The Court finds that this clerical error is not sufficient to 16 prove that Banerjee and Harjai will not be adequate plaintiffs 17 under the PSLRA. 18 No. 16-CV-04686-LHK, 2017 WL 363274, at *6 (N.D. Cal. Jan. 25, 19 2017) (“While the Court finds the error in Fish’s claimed damages 20 to be troubling, those errors do not rebut the presumption that 21 Fish is lead plaintiff. 22 ‘minor or inadvertent mistakes made in a sworn certification do 23 not strike at the heart of Rule 23’s adequacy requirement.’”). 24 The Court warns Banerjee and Harjai, however, that they must 25 review the briefing and evidence that they submit more carefully 26 in the future. 27 28 Banerjee and Harjai respond that this discrepancy is Banerjee and Harjai corrected the error in reply, and See, e.g., In re Solar City Corp. Sec. Litig., Multiple district courts have held that Next, Grotewiel and Vogel argue that Harjai is subject to a unique defense based on reliance, because he purchased his shares 6 of Avinger stock in March 2016, more than twelve months after 2 Avinger’s January 2015 IPO. 3 734 F.3d 854, 859–60 (9th Cir. 2013) (discussing reliance 4 requirement of 15 U.S.C. § 77k(a)). 5 Harjai note that a portion of Grotewiel and Vogel’s losses will 6 be subject to the same defense, and even if all such losses are 7 excluded, Banerjee and Harjai’s losses would still be larger. 8 Additionally, Banerjee and Harjai note that this issue is not 9 United States District Court Northern District of California 1 unique, but rather, will be common to many class members, because See Hildes v. Arthur Andersen LLP, In reply, Banerjee and 10 the class period is alleged to include dates more than a year 11 after the IPO. 12 purchases is not enough to subject him to a unique defense under 13 15 U.S.C. § 77z-1(a)(3)(B)(iii)(II)(bb). 14 The Court finds that the timing of Harjai’s Banerjee and Harjai may be considered as a group and no 15 other candidate has submitted proof that this presumptive lead 16 plaintiff group will not fairly and adequately protect the 17 interests of the class or is subject to unique defenses. 18 Court appoints Banerjee and Harjai as the lead Plaintiff group. 19 The In addition, the Court approves Banerjee and Harjai’s choice 20 of Scott+Scott as lead counsel, based on the information 21 submitted regarding the firm’s experience and expertise in the 22 area of securities litigation. 23 that Scott+Scott formerly represented Plaintiff Olberding in a 24 related action in this Court, obtained remand of that action and 25 then withdrew as counsel after seeking appointment in this 26 action, does not create a conflict of interest or mean that they 27 have engaged in impermissible forum shopping. 28 LendingClub Corp., No. 16-cv-02627-WHA, 2016 WL 9108914, at *4 The Court finds that the fact 7 See Evellard v. 1 (N.D. Cal. Aug. 15, 2016) (approving lead counsel who had 2 withdrawn from parallel state court action). 3 CONCLUSION 4 For the foregoing reasons, the Court APPOINTS Arindam 5 Banerjee and Jogesh Harjai as the lead Plaintiff group, and 6 APPROVES their selection of Scott+Scott as lead counsel (Docket 7 No. 41). 8 United States District Court Northern District of California 9 10 11 The Clerk shall update the docket. The Court DENIES the competing motions of Michael Dolan (Docket No. 37) and Lindsay Grotewiel and Todd Vogel (Docket No. 44). The Court also GRANTS Grotewiel and Vogel leave to file 12 objections (Docket No. 79) to Banerjee and Harjai’s reply 13 evidence and GRANTS Banerjee and Harjai’s motion for leave to 14 file a response to those objections (Docket No. 80). 15 and Harjai’s response (Docket No. 80-1) is deemed filed. 16 Court has fully considered both the objections and the response. 17 Banerjee The The case management conference remains set for October 17, 18 2017 at 2:30 p.m. 19 remains due October 13, 2017 at 12:00 p.m. 20 The joint case management conference statement IT IS SO ORDERED. 21 22 Dated: October 11, 2017 CLAUDIA WILKEN United States District Judge 23 24 25 26 27 28 8

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.

Why Is My Information Online?