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)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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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,
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v.
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United States District Court
Northern District of California

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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.

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Now pending are three motions to be appointed as lead

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plaintiff pursuant to the Private Securities Litigation Reform

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Act of 1995 (PSLRA), 15 U.S.C. § 77z-1 et seq., and for approval

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of the selection of lead counsel.

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Lindsay Grotewiel and Todd Vogel; Arindam Banerjee and Jogesh

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Harjai; and Michael Dolan.

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Banerjee/Harjai groups have opposed the others’ motions and filed

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replies to each others’ oppositions.

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Vogel filed objections to reply evidence submitted by Banerjee

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and Harjai, and Banerjee and Harjai filed a motion for leave to

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file a response to Grotewiel and Vogel’s objections.

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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

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approves their selection of the law firm of Scott+Scott,

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Attorneys at Law, LLP, as Lead Counsel for the putative class.

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The Court also grants the parties’ requests to submit

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supplemental filings, and has considered those filings.

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BACKGROUND
On May 22, 2017, Plaintiff Lindsay Grotewiel filed a class
action complaint in San Mateo County Superior Court against

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Avinger, Inc. and several of its individual officers and

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United States District Court
Northern District of California

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directors, alleging violations of the Securities Act of 1933 (the

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Securities Act), 15 U.S.C. §§ 77k, 77l(a)(2), 77o.

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claims that Defendants issued a materially false and misleading

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registration statement and prospectus in connection with

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Avinger’s January 30, 2015 initial public offering (IPO).

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Defendants removed the action to this Court on June 12, 2017.

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June 19, 2017, this Court granted the parties’ joint motion to

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relate this case to Olberding v. Avinger, No. 17-cv-03398,1 and

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Gonzalez v. Avinger, No. 17-cv-03401.

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Grotewiel

On

The plaintiffs in Olberding and Gonzalez filed motions to

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remand, but Grotewiel did not.

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cases and issued an order to show cause why this case should not

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also be remanded.

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Court discharged the order to show cause, holding that the

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statutory removal bar in the Securities Act is not jurisdictional

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and was waived by Grotewiel.

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The Court remanded the related

On August 22, 2017, following briefing, the

Meanwhile, Grotewiel published the PSLRA notice of pendency

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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.
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of a putative securities fraud class action on July 7, 2017, and

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these timely lead Plaintiff motions followed.

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§ 78u-4(a)(3)(A)(i).

See 15 U.S.C.

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LEGAL STANDARD

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The PSLRA provides that the Court “shall appoint as lead
plaintiff the member or members of the purported plaintiff class

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that the court determines to be most capable of adequately

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representing the interests of class members.”

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United States District Court
Northern District of California

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1(a)(3)(B)(i); see also In re Cavanaugh, 306 F.3d 726, 729-30

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(9th Cir. 2002) (discussing application of identical standard

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under 15 U.S.C. § 78u-4(a)(3)(B)).

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that the Court shall adopt a rebuttable presumption that the most

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adequate plaintiff is

15 U.S.C. § 77z-

The statute further provides

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the person or group of persons that--

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(aa) has either filed the complaint or made a motion in
response to a notice under subparagraph (A)(i);

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(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

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interest, courts consider factors that may include: “1) number of

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shares purchased during the class period; 2) net shares purchased

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during the class period; 3) net funds expended during the class

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period; and 4) approximate losses from the alleged fraud.”

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McKesson HBOC, Inc. Sec. Litig., 97 F. Supp. 2d 993, 995 (N.D.

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Cal. 1999) (citing In re Olsten Corp. Sec. Litig., 3 F. Supp. 2d

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286, 295 (E.D.N.Y. 1998) (suggesting this four-factor analysis);
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In re

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see also Markette v. XOMA Corp., No. 15-cv-03425-HSG, 2016 WL

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2902286, at **5-6 (N.D. Cal. May 13, 2016) (discussing methods of

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calculating financial stake).

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United States District Court
Northern District of California

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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.

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15 U.S.C. § 77z-1(a)(3)(B)(iii)(II); see also 15 U.S.C. § 77z-

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1(a)(3)(B)(vi) (additional restrictions on professional

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plaintiffs).

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The party chosen as lead plaintiff “shall, subject to the

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approval of the court, select and retain counsel to represent the

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class.”

15 U.S.C. § 77z-1(a)(3)(B)(v).

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DISCUSSION
If Banerjee and Harjai are permitted to proceed as a “group

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of persons” under 15 U.S.C. § 77z-1(a)(3)(B)(iii)(I), their

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financial interest is the largest of any of the lead plaintiff

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candidates.

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retained 9,195 shares of Avinger stock during the class period,

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for which they spent $148,535.59.

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a total of 16,551 shares of Avinger stock, expending $137,773.60,

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and retain 15,642 of those shares for a net loss of $127,589.98.

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Dolan has a net out-of-pocket loss of $19,064.54.

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They have submitted evidence that they purchased and

Grotewiel and Vogel purchased

Grotewiel and Vogel argue, however, that the Court may not

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consider Banerjee and Harjai as a group and aggregate their

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financial losses.

Grotewiel and Vogel are married to each other,
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and it is undisputed that they may be considered as a group.

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See, e.g., Markette, 2016 WL 2902286, at *8 (citing Aronson v.

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McKesson HBOC, Inc., 79 F. Supp. 2d 1146, 1153-54 (N.D. Cal.

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1999)).

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relationship, however.

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in which they state that they are medical doctors who “have known

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each other personally and professionally for 3 years.”

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Declaration at ¶¶ 3, 5.2

United States District Court
Northern District of California

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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,

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brought together solely for the purpose of aggregating their

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claims in an effort to become the presumptive lead plaintiff fail

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to meet the adequacy prong of Rule 23.”

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835 F. Supp. 2d 1067, 1073 (W.D. Wash. 2011).

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if the group is not small and cohesive, and especially if the

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individuals in the group were brought together by counsel for the

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purpose of becoming lead plaintiffs, it may undermine the purpose

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of the PSLRA to prevent lawyer-driven litigation.

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Banerjee and Harjai have sworn that they were acquainted prior to

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their purchases of Avinger stock, which means that they had a

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relationship prior to this litigation.

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that they consulted together before deciding to seek appointment

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as lead plaintiffs.

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their relationship, the way they intend to function as a cohesive

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group and their intention to direct the litigation rather than be

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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

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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.
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showing.

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00414-MJP, 2010 WL 3064427, at *6 (W.D. Wash. Aug. 2, 2010).

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balance, however, the Court finds that the evidence of their pre-

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existing relationship is sufficient to treat them as a lead

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plaintiff group under the PSLRA.

See Sabbagh v. Cell Therapeutics, Inc., No. 10-cvOn

Grotewiel and Vogel also argue that Banerjee and Harjai are

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not adequate to serve as lead plaintiffs because the share price

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information submitted by Banerjee is inaccurate, falling outside

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United States District Court
Northern District of California

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the range of prices at which Avinger stock traded on the days in

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question.

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due to a clerical error, inadvertently listing the transactions

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as occurring on the settlement dates rather than the purchase

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dates.

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there is no indication that the error was committed in bad faith.

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The Court finds that this clerical error is not sufficient to

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prove that Banerjee and Harjai will not be adequate plaintiffs

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under the PSLRA.

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No. 16-CV-04686-LHK, 2017 WL 363274, at *6 (N.D. Cal. Jan. 25,

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2017) (“While the Court finds the error in Fish’s claimed damages

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to be troubling, those errors do not rebut the presumption that

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Fish is lead plaintiff.

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‘minor or inadvertent mistakes made in a sworn certification do

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not strike at the heart of Rule 23’s adequacy requirement.’”).

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The Court warns Banerjee and Harjai, however, that they must

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review the briefing and evidence that they submit more carefully

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in the future.

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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
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of Avinger stock in March 2016, more than twelve months after

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Avinger’s January 2015 IPO.

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734 F.3d 854, 859–60 (9th Cir. 2013) (discussing reliance

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requirement of 15 U.S.C. § 77k(a)).

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Harjai note that a portion of Grotewiel and Vogel’s losses will

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be subject to the same defense, and even if all such losses are

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excluded, Banerjee and Harjai’s losses would still be larger.

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Additionally, Banerjee and Harjai note that this issue is not

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United States District Court
Northern District of California

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unique, but rather, will be common to many class members, because

See Hildes v. Arthur Andersen LLP,

In reply, Banerjee and

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the class period is alleged to include dates more than a year

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after the IPO.

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purchases is not enough to subject him to a unique defense under

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15 U.S.C. § 77z-1(a)(3)(B)(iii)(II)(bb).

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The Court finds that the timing of Harjai’s

Banerjee and Harjai may be considered as a group and no

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other candidate has submitted proof that this presumptive lead

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plaintiff group will not fairly and adequately protect the

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interests of the class or is subject to unique defenses.

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Court appoints Banerjee and Harjai as the lead Plaintiff group.

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The

In addition, the Court approves Banerjee and Harjai’s choice

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of Scott+Scott as lead counsel, based on the information

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submitted regarding the firm’s experience and expertise in the

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area of securities litigation.

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that Scott+Scott formerly represented Plaintiff Olberding in a

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related action in this Court, obtained remand of that action and

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then withdrew as counsel after seeking appointment in this

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action, does not create a conflict of interest or mean that they

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have engaged in impermissible forum shopping.

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LendingClub Corp., No. 16-cv-02627-WHA, 2016 WL 9108914, at *4

The Court finds that the fact

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See Evellard v.

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(N.D. Cal. Aug. 15, 2016) (approving lead counsel who had

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withdrawn from parallel state court action).

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CONCLUSION

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For the foregoing reasons, the Court APPOINTS Arindam

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Banerjee and Jogesh Harjai as the lead Plaintiff group, and

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APPROVES their selection of Scott+Scott as lead counsel (Docket

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No. 41).

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United States District Court
Northern District of California

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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

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objections (Docket No. 79) to Banerjee and Harjai’s reply

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evidence and GRANTS Banerjee and Harjai’s motion for leave to

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file a response to those objections (Docket No. 80).

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and Harjai’s response (Docket No. 80-1) is deemed filed.

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Court has fully considered both the objections and the response.

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Banerjee
The

The case management conference remains set for October 17,

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2017 at 2:30 p.m.

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remains due October 13, 2017 at 12:00 p.m.

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The joint case management conference statement

IT IS SO ORDERED.

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Dated:

October 11, 2017
CLAUDIA WILKEN
United States District Judge

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