The Facebook, Inc. v. Connectu, Inc et al

Filing 218

SEALED MOTION and memorandum in support thereof (FILED UNDER SEAL) (bw, COURT STAFF) (Filed on 10/17/2007) Modified on 5/2/2008 (cv, COURT STAFF). Modified on 5/2/2008,(clerk's error incorrect event, correct event is motion, not memorandum (cv, COURT STAFF).

The Facebook, Inc. v. Connectu, LLC et al

Doc. 218

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BORIS FELDMAN, State Bar No. 128838 CYNTHIA A. DY, State Bar No. 172761 CHRISTOPHER D. CATALANO, State Bar No. 208606 WILSON SONSINI GOODRICH & ROSATI Professional Corporation 650 Page Mill Road Palo Alto, CA 94304-1050 Telephone: [phone] Facsimile: [phone] Attorneys for Defendant TIER TECHNOLOGIES, INC.

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION JACK SPERLING, On Behalf of Himself and All ) Others Similarly Situated, ) ) Plaintiff, ) ) v. ) ) TIER TECHNOLOGIES, INC., JAMES L. ) BILDNER, LAURA B. DEPOLE and STEPHEN ) McCARTY, ) ) Defendants. ) ) CASE NO.: C 03-5509 VRW DEFENDANT TIER, TECHNOLOGIES, INC.'S NOTICE OF PENDENCY OF OTHER ACTION OR PROCEEDING (Civil L.R. 3-13)

TIER'S NOTICE OF PENDENCY (CIVIL L.R. 3-13) C 03-5509 VRW

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Dockets.Justia.com

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Pursuant to Civil L.R. 3-13, defendant Tier Technologies, Inc. ("Tier") respectfully submits this Notice of Pendency of Other Action or Proceeding. 1. Description Of State Court Action And Its Relation To This Action

The instant case ("Sperling") was filed December 8, 2003. Sperling is a purported shareholder class action brought against Tier and three current or former Tier officers, James Bildner, Laura DePole, and Stephen McCarty, for alleged violations of the federal securities laws. On December 10, 2003, two days after Sperling was filed, Elizabeth Scala filed a "tagalong" purported shareholder derivative action on behalf of nominal defendant Tier against certain current and former officers and directors of Tier, including Bildner, DePole, and McCarty. This action is titled Scala v. Bildner et al., Case No. C-03-03077. It was filed in the Superior Court of the State of California, County of Contra Costa. Sperling and Scala are based on substantially identical allegations. Indeed, while Scala purports to be a derivative rather than a direct action, the gist of both lawsuits is the same: plaintiffs in both Sperling and Scala allege that Tier's financial statements were false and misleading because Tier allegedly improperly recognized revenue pursuant to a contract between Tier and CalPERS. Compare Sperling Complaint ¶¶ 13-40 with Declaration of Christopher D. Catalano ("Catalano Decl."), Ex. 1 (Scala Complaint) ¶¶ 34-60 (repeating substantive allegations nearly verbatim). In addition, in Scala, plaintiff alleges that, by allowing the issuance of false financial statements, the defendant directors and officers breached their fiduciary duty to Tier, abused their ability to control Tier, committed gross mismanagement, wasted corporate assets, and were unjustly enriched. See Scala Complaint ¶¶ 78-100. Plaintiff in Scala further alleges that the individual defendants in that matter caused harm to Tier through their alleged violations of federal securities laws. Id. ¶ 25. Specifically, plaintiff in Scala asserts that these alleged violations have exposed Tier to federal class action lawsuits, and that these lawsuits, in turn, will have a negative impact on Tier's finances, corporate image, and goodwill. Id. ¶¶ 25-26.

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Plaintiff in Scala also alleges that two Tier executives (DePole and McCarty) sold stock in breach of their fiduciary duty to Tier and in violation of California Corporations Code Section 25402, based on their supposed knowledge of the purportedly misleading financial statements. Id. ¶¶ 68-77; see also id. ¶ 61. Similarly, the plaintiff in Sperling alleges that DePole and McCarty sold Tier stock based on their supposed knowledge of the same purportedly misleading financial statements. See Sperling Complaint ¶¶ 7-8, 10-12. 2. Coordination and Consolidation of State Court Action, This Action, and Declaratory Judgment Action

On December 31, 2003, Tier and the defendants in Scala filed a declaratory judgment action in this District against Ms. Scala based on the allegations in Scala. Tier Technologies, Inc. et al. v. Scala, U.S. District Court, N.D. Cal., C-03-5901 (CW) (the "Declaratory Judgment Action"). Pursuant to Civil L.R. 3-12, Tier and the other plaintiffs in the Declaratory Judgment Action filed a Notice of Related Case in that action on December 31, 2003 and in Sperling on January 5, 2004. This Notice of Related Case seeks assignment of the Declaratory Judgment Action to the Hon. Vaughn R. Walker so that all issues in the Declaratory Judgment Action and Sperling can be decided in one proceeding. On January 12, 2004, nominal defendant Tier moved in Contra Costa County Superior Court to stay proceedings in Scala because of its similarity to Sperling. Catalano Decl. Exs. 2 (Notice of Motion to Stay), 3 (Motion to Stay), and 4 (Memorandum In Support of Motion to Stay). As Tier showed in that motion, a refusal to stay proceedings in Scala creates the risk of conflicting rulings on identical issues, would result in a waste of valuable party and judicial resources, and would impose substantial burdens on defendants in both Scala and Sperling. For the same reasons that warrant a stay of proceedings in Scala, Tier respectfully submits that this Court should coordinate proceedings in Sperling with any proceedings that may occur in Scala. In addition, for the reasons set forth in its Notice of Related Case, Tier

respectfully submits that the Declaratory Judgment Action should be consolidated with Sperling. Consolidating Sperling and the Declaratory Judgment Action in this Court (the Hon. Vaughn R. Walker), and coordinating any proceedings in Scala with these proceedings, would avoid
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conflicts, conserve resources, and promote an efficient determination of all three actions. See Civil L.R. 3-13(b)(3)(C).

Date: January 13, 2004

WILSON SONSINI GOODRICH & ROSATI Professional Corporation /s/ Christopher D. Catalano Christopher D. Catalano Attorneys for Defendant TIER TECHNOLOGIES, INC.

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