City of Royal Oak Retirement System v. Juniper Networks, Inc. et al

Filing 42

ORDER by Judge Lucy H. Koh granting 17 Public Retirement Systems' Motion to Appoint Lead Plaintiff and Lead Counsel; denying 19 IUOE Local 39's Motion to Appoint Lead Plaintiff and Lead Counsel; and denying 21 Pension Funds' Motion to Appoint Lead Plaintiff and Lead Counsel. (lhklc3, COURT STAFF) (Filed on 1/9/2012)

1
2
3
4
5
6
7
UNITED STATES DISTRICT COURT

8

NORTHERN DISTRICT OF CALIFORNIA

9

SAN JOSE DIVISION

United States District Court
For the Northern District of California

10
11
12

CITY OF ROYAL OAK RETIREMENT
SYSTEM, Individually and on Behalf of All
Others Similarly Situated,

13
14

Plaintiff,
v.

15
16
17
18

JUNIPER NETWORKS, INC., KEVIN R.
JOHNSON, ROBYN M. DENHOLM, and
SCOTT G. KRIENS,
Defendants.

)
)
)
)
)
)
)
)
)
)
)
)
)
)

CASE NO.: 5:11-CV-04003-LHK
ORDER GRANTING PUBLIC
RETIREMENT SYSTEMS’ MOTION
FOR APPOINTMENT AS LEAD
PLAINTIFF AND APPROVAL OF ITS
SELECTION OF LEAD COUNSEL;
DENYING STATIONARY
ENGINEERS LOCAL 39 PENSION
TRUST FUND’S MOTION; AND
DENYING THE PENSION FUNDS’
MOTION

19
20

On August 15, 2011, the City of Royal Oak Retirement System (“Plaintiff”) filed a private

21

securities class action complaint against Defendants Juniper Networks, Inc., Kevin R. Johnson,

22

Robyn M. Denholm, and Scott G. Kriens (collectively “Defendants”). ECF No. 1 (“Compl.”).

23

After Plaintiff published the pendency of this action on August 16, 2011, as required by federal

24

law, three parties moved the Court for appointment as lead plaintiff and for approval of lead

25

counsel: (1) City of Omaha Police and Fire Retirement System and City of Bristol Pension Fund

26

(collectively, the “Public Retirement Systems”), see ECF No. 17; (2) Stationary Engineers Local

27

39 Pension Trust Fund (the “IUOE Local 39”), see ECF No. 19; and (3) Roofers Local No. 149

28
1
Case No.: 5:11-cv-04003-LHK
ORDER RE: MOTIONS FOR APPOINTMENT OF LEAD PLAINTIFF AND LEAD COUNSEL

1

Pension Fund and Steamship Trade Association-International Longshoremen’s Pension Benefit

2

Fund (collectively, the “Pension Funds”), see ECF No. 21.

3

IUOE Local 39 filed a Notice of Nonopposition to Public Retirement Systems’ and the

4

Pension Funds’ motions for appointment as lead plaintiff. Upon review of the competing lead

5

plaintiff motions, IUOE Local 39 conceded that “it appears that IUOE Local 39 does not possess

6

the largest financial interest in the litigation.” ECF No. 36 at 1. Accordingly, IUOE Local 39

7

stated that it did not oppose appointment of the Public Retirement Systems or the Pension Funds as

8

lead plaintiff. Id.
The Pension Funds did not file an opposition or statement of non-opposition to the motions

10
United States District Court
For the Northern District of California

9

for appointment of lead plaintiff filed by IUOE Local 39 or Public Retirement Systems. Moreover,

11

the Pension Funds did not file a reply to Public Retirement Systems’ Opposition to Pension Funds’

12

motion. See ECF No. 37 (Public Retirement Systems’ Opposition to Competing Lead Plaintiffs’

13

Motions).

14

Thus, only the Public Retirement Systems’ motion is unopposed. Pursuant to Civil Local

15

Rule 7-1(b), the Court finds this matter appropriate for determination without oral argument and

16

hereby VACATES the hearing on these motions set for January 12, 2012. Having considered the

17

parties’ submissions and the relevant legal authorities, and for the reasons discussed herein, the

18

Court GRANTS Public Retirement Systems’ motion and DENIES IUOE Local 39’s and the

19

Pension Funds’ motions. The case management conference scheduled for January 12, 2012 at 1:30

20

p.m. remains as set.

21

I. BACKGROUND

22

This is a securities class action on behalf of all persons who purchased or otherwise

23

acquired the common stock of Juniper Networks, Inc. (“Juniper” or “Company”) between July 20,

24

2010 and July 26, 2011 (the “Class Period”), against Juniper and certain of its officers and directors

25

for alleged violations of §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule

26

10b-5. Compl. ¶¶ 1, 11. Juniper designs, develops, and sells products and services that provide its

27

customers with network infrastructure for accelerating the deployment of services and applications

28

over a single network. Id. ¶ 2. The Complaint alleges that during the Class Period, Defendants
2
Case No.: 5:11-cv-04003-LHK
ORDER RE: MOTIONS FOR APPOINTMENT OF LEAD PLAINTIFF AND LEAD COUNSEL

1

issued materially false and misleading statements regarding the Company’s business practices and

2

financial results. Id. ¶ 3. The Complaint alleges that Defendants knew of the Company’s negative

3

business trends, but failed to disclose such information to investors, causing the Company’s stock

4

to be traded at artificially inflated prices during the Class Period, reaching a high of $44.46 per

5

share on March 8, 2011. Id. ¶¶ 3, 34, 43-44.

6

On June 1, 2011, Defendant Kevin R. Johnson, CEO of Juniper, cautioned investors that

7

“there’s reason to be somewhat cautious in the near term.” Id. ¶¶ 4, 38. Subsequently, the

8

Company’s stock suffered a one-day decline of 10% on high volume, closing at $32.97 per share

9

on June 1, 2011. Id. ¶ 39. On July 26, 2011, Juniper’s stock closed at $31.17 per share. After the

United States District Court
For the Northern District of California

10

close of trading that day, Juniper issued a release reporting the Company’s actual second quarter

11

2011 financial and operating results and forward guidance, both of which came in well below what

12

Defendants had led stock analysts and the investment community to expect. Id. ¶ 7, 41. On this

13

news, Juniper’s stock dropped nearly 21%, or $6.51 per share, to close at $24.66 on volume of 61.6

14

million shares the following trading day. Id. at 42.

15

II. LEGAL STANDARD

16

The Private Securities Litigation Reform Act (“PSLRA”), 15 U.S.C. § 78u-4, governs the

17

selection of a lead plaintiff in private securities class actions. In the PSLRA’s own words, this

18

plaintiff is to be the “most capable of adequately representing the interests of class members.” 15

19

U.S.C. § 89u-4(a)(3)(B)(i). Under the PSLRA, a three-step process determines the lead plaintiff.

20

In re Cavanaugh, 306 F.3d 726, 729 (9th Cir. 2002). First, the first plaintiff to file an action

21

governed by the PSLRA must publicize the pendency of the action, the claims made, and the

22

purported class period “in a widely circulated national business-oriented publication or wire

23

service.” 15 U.S.C. § 78u-4(a)(3)(A)(i)(I). 1 This notice must also alert the public that “any

24

member of the purported class may move the court to serve as lead plaintiff.” 15 U.S.C. § 78u-

25

4(a)(3)(A)(i)(II). 2

26
27
28

1

This publication is to be made “[n]o later than 20 days after the date on which the complaint is
filed.” 15 U.S.C. § 78u-4(a)(3)(A)(i).
2
Those who wish to move the court for appointment as lead plaintiff must do so “not later than 60
days after the date on which the notice is published.” 15 U.S.C. § 78u-4(a)(3)(A)(i)(II).
3
Case No.: 5:11-cv-04003-LHK
ORDER RE: MOTIONS FOR APPOINTMENT OF LEAD PLAINTIFF AND LEAD COUNSEL

1

Second, the court must select the presumptive lead plaintiff. See In re Cavanaugh, 306

2

F.3d at 729-30 (citing 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I)). The PSLRA provides that the

3

presumptive lead plaintiff is the person or group of persons with “the largest financial interest in

4

the relief sought by the class,” who also “otherwise satisfies the requirements of Rule 23 of the

5

Federal Rules of Civil Procedure.” 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I). To determine the

6

presumptive lead plaintiff, “the district court must compare the financial stakes of the various

7

plaintiffs and determine which one has the most to gain from the lawsuit.” In re Cavanaugh, 306

8

F.3d at 730 (footnote omitted). Once the district court identifies the plaintiff with the most to gain,

9

the district court must determine whether that plaintiff, based on the information he provides,

United States District Court
For the Northern District of California

10

“satisfies the requirements of Rule 23(a), in particular those of ‘typicality’ and ‘adequacy.’” Id. If

11

he does, that plaintiff becomes the presumptive lead plaintiff. Id. If not, the court selects the

12

plaintiff with the next largest financial stake and determines whether that plaintiff satisfies the

13

requirements of Rule 23. Id. The court repeats this process until it selects a presumptive lead

14

plaintiff. Id.

15

Third, those plaintiffs not selected as the presumptive lead plaintiff may “rebut the

16

presumptive lead plaintiff’s showing that it satisfies Rule 23’s typicality and adequacy

17

requirements.” Id. (citing 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II)). This is done by showing that the

18

presumptive lead plaintiff either “will not fairly and adequately protect the interests of the class” or

19

“is subject to unique defenses that render such plaintiff incapable of adequately representing the

20

class.” 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II)(aa)-(bb). If the court determines that the presumptive

21

lead plaintiff does not meet the typicality or adequacy requirement, then it must return to step two,

22

select a new presumptive lead plaintiff, and again allow the other plaintiffs to rebut the new

23

presumptive lead plaintiff’s showing. In re Cavanaugh, 306 F.3d at 731. The court repeats this

24

process “until all challenges have been exhausted.” Id. (citation and footnote omitted).

25

Under the PSLRA, the lead plaintiff is given the right, subject to court approval, to “select

26

and retain counsel to represent the class.” 15 U.S.C. § 78u-4(a)(3)(B)(v). “[T]he district court

27

should not reject a lead plaintiff’s proposed counsel merely because it would have chosen

28

differently.” Cohen v. U.S. Dist. Court for N. Dist. of Cal., 586 F.3d 703, 711 (9th Cir. 2009)
4
Case No.: 5:11-cv-04003-LHK
ORDER RE: MOTIONS FOR APPOINTMENT OF LEAD PLAINTIFF AND LEAD COUNSEL

1

(citation omitted). “[I]f the lead plaintiff has made a reasonable choice of counsel, the district court

2

should generally defer to that choice.” Id. at 712 (citations omitted).

3
4

III. ANALYSIS
Before the Court are three motions for appointment as lead plaintiff and for approval of
lead counsel, filed by Public Retirement Systems, IUOE Local 39, and Pension Funds,

6

respectively. Public Retirement Systems’ motion is unopposed. See ECF Nos. 36 (IUOE Local

7

39’s Notice of Nonopposition), 38 (Public Retirement Systems’ Reply, noting the Pension Funds’

8

failure to file an opposition or notice of nonopposition). IUOE Local 39’s and Pension Funds’

9

motions are opposed by Public Retirement Systems. See ECF No. 37. In conformity with the

10
United States District Court
For the Northern District of California

5

procedure established by the PSLRA and the Ninth Circuit in In re Cavanaugh, the Court will

11

determine which of these three movants should serve as the lead plaintiff in the instant action.

12

A. Procedural Requirements

13

In accordance with the requirements under the PSLRA, Plaintiff City of Royal Oak

14

Retirement System timely published a notice in Business Wire on August 16, 2011, one day after

15

filing this action, informing the class of the pendency of the action, the claims made, and the

16

purported class period. See ECF No. 5 & Ex. A. Public Retirement Systems, IUOE Local 39, and

17

Pension Funds all filed their respective motions for appointment as lead plaintiff and approval of

18

lead counsel on October 17, 2011, which is within 60 days of publication of the notice. Therefore,

19

all three motions are timely and shall be considered by the Court. See 15 U.S.C. § 78u-

20

4(a)(3)(A)(i)(II); id. § 78u-4(a)(3)(B)(i).

21

B. Presumptive Lead Plaintiff

22
23

1. Largest Financial Interest
In selecting a lead plaintiff, the Court begins by “compar[ing] the financial stakes of the

24

various plaintiffs and determin[ing] which one has the most to gain from the lawsuit.” In re

25

Cavanaugh, 306 F.3d at 730. Neither the PSLRA nor the Ninth Circuit has provided specific

26

guidance for calculating which plaintiff has the largest financial interest. See Perlmutter v.

27

Intuitive Surgical, Inc., No. 10-cv-03451-LHK, 2011 WL 566814, at *3 (N.D. Cal. Feb. 15, 2011).

28
5
Case No.: 5:11-cv-04003-LHK
ORDER RE: MOTIONS FOR APPOINTMENT OF LEAD PLAINTIFF AND LEAD COUNSEL

1

The Ninth Circuit has instructed only that “the court may select accounting methods that are both

2

rational and consistently applied.” In re Cavanaugh, 306 F.3d at 730 n.4.

3

Here, all three movants advocate calculating their financial interests based on approximate

4

losses suffered, which requires the Court to consider: “(1) the number of shares purchased during

5

the class period; (2) the number of net shares purchased during the class period; (3) the total net

6

funds expended during the class period; and (4) the approximate losses suffered during the class

7

period.” In re Olsten Corp. Sec. Litig., 3 F. Supp. 286, 295 (E.D.N.Y. 1998) (citing Lax v. First

8

Merchants Acceptance Corp., No. 97 Civ. 2715, 1997 WL 461036, at *5 (N.D. Ill. Aug. 11,

9

1997)). Courts applying the Olsten test generally place the greatest emphasis on the last of these

United States District Court
For the Northern District of California

10
11

factors. See Perlmutter, 2011 WL 566814, at *7.
Under the “last-in, first-out” method for calculating losses suffered, which this and other

12

courts have approved as a reasonable accounting method, see id., Public Retirement Systems

13

claims that it purchased 125,008 shares of Juniper securities during the Class period and suffered

14

losses of $2,092,159. See ECF No. 17 at 5-6; Blasy Decl. Ex. B; ECF No. 37 at 3-5. The Pension

15

Funds assert that they purchased 46,087 shares of Juniper securities during the Class Period and

16

suffered losses of approximately $717,795. See ECF No. 21 at 4; McCormick Decl. Exs. A & B.

17

IUOE Local 39 asserts that it purchased 43,280 shares and suffered losses of approximately

18

$518,872. See ECF No. 19 at 4; Goldberg Decl. Exs. B & C. There is no dispute that Public

19

Retirement Systems suffered the greatest loss during the Class Period under the last-in, first-out

20

calculation method. See, e.g., IUOE Local 39 Notice of Nonopposition, ECF No. 36 at 1

21

(conceding that “it appears that IUOE Local 39 does not possess the largest financial interest in the

22

litigation”). Moreover, neither IUOE Local 39 nor Pension Funds argues that under a different

23

calculation method, it would possess the largest financial interest in the litigation. Accordingly, the

24

Court finds that Public Retirement Systems has the largest financial interest in the relief sought by

25

the class.

26

2. Rule 23 Requirements

27

Having determined that Public Retirement Systems is the plaintiff with the greatest

28

financial interest in this case, the Court next considers whether Public Retirement Systems satisfies
6
Case No.: 5:11-cv-04003-LHK
ORDER RE: MOTIONS FOR APPOINTMENT OF LEAD PLAINTIFF AND LEAD COUNSEL

1

the requirements of Rule 23(a), in particular the typicality and adequacy requirements. See In re

2

Cavanaugh, 306 F.3d at 730; see also Fed. R. Civ. P. 23(a). This showing need not be as thorough

3

as would be required on a motion for class certification. See Zhu v. UCBH Holdings, Inc., 682 F.

4

Supp. 2d 1049, 1053 (N.D. Cal. 2010).

5

“The test of typicality is whether other members have the same or similar injury, whether
the action is based on conduct which is not unique to the named plaintiffs, and whether other class

7

members have been injured by the same course of conduct.” Hanon v. Dataproducts Corp., 976

8

F.2d 497, 508 (9th Cir. 1992) (internal quotation marks and citation omitted). Here, the Court

9

finds that the claims asserted by Public Retirement Systems are based on the same conduct giving

10
United States District Court
For the Northern District of California

6

rise to the other class members’ claims, namely Defendants’ alleged misrepresentations during the

11

Class Period. The Court also finds that Public Retirement Systems has suffered the same injury as

12

other plaintiffs, namely the purchase of Juniper stock during the Class Period at prices artificially

13

inflated by Defendants’ materially false and misleading statements and omissions. Accordingly,

14

the Court finds that Public Retirement Systems satisfies the typicality requirement of Rule 23(a).

15

The test for adequacy is whether the class representative and his counsel “have any

16

conflicts of interest with other class members” and whether the class representative and his counsel

17

will “prosecute the action vigorously on behalf of the class.” Staton v. Boeing Co., 327 F.3d 938,

18

957 (9th Cir. 2003) (citations omitted). The Court finds that the claims of Public Retirement

19

Systems are typical of the class and that Public Retirement Systems’ interests are aligned with the

20

interests of the absent class members. The Court further finds, upon review of their submitted

21

declarations, that the Public Retirement Systems and their selected counsel have amply

22

demonstrated they will vigorously prosecute the action on behalf of the class. See Blasy Decl. Ex.

23

C (sworn certifications) & D (firm resume); Public Retirement Systems Decl. ¶¶ 4-7. Accordingly,

24

the Court finds that Public Retirement Systems has shown it will fairly and adequately protects the

25

interests of the class, satisfying the adequacy requirement of Rule 23(a).

26
27
28

3. Rebuttal of Presumptive Lead Plaintiff
Having established that it has the greatest financial stake and that it satisfies the
requirements of Rule 23(a), Public Retirement Systems is presumptively the most adequate
7
Case No.: 5:11-cv-04003-LHK
ORDER RE: MOTIONS FOR APPOINTMENT OF LEAD PLAINTIFF AND LEAD COUNSEL

1

plaintiff to represent the class in this securities litigation. This presumption may be rebutted only

2

upon proof by a member of the purported plaintiff class that Public Retirement Systems either (1)

3

“will not fairly and adequate protect the interests of the class,” or (2) “is subject to unique defenses

4

that render [it] incapable of adequately representing the class.” 15 U.S.C. § 78u-

5

4(a)(3)(3)(B)(iii)(II). No purported class member has come forward with such rebuttal evidence.

6

Neither IUOE Local 39 nor Pension Funds opposed Public Retirement Systems’ motion for

7

appointment as lead plaintiff. Accordingly, the presumption that Public Retirement Systems is the

8

most adequate lead plaintiff has not been rebutted, and the Court therefore need not proceed to

9

consider the motion of the movant with the next largest financial stake. See In re Cavanaugh, 306

United States District Court
For the Northern District of California

10

F.3d at 730-31.

11

C. Lead Counsel

12

The PSLRA provides that “[t]he most adequate plaintiff shall, subject to the approval of the

13

court, select and retain counsel to represent the class.” 15 U.S.C. § 78u-4(a)(3)(B)(v). The statute

14

expressly provides that the power to select lead counsel rests with the lead plaintiff, not with the

15

Court. Cohen, 586 F.3d at 709. So long as the lead plaintiff has made “a reasonable choice of

16

counsel, the district court should generally defer to that choice.” Id. at 712. Here, the Public

17

Retirement Systems has selected the law firm of Scott+Scott LLP (“Scott+Scott”), a firm with

18

substantial experience in the prosecution of shareholder and securities class actions and with the

19

necessary resources to conduct this litigation efficiently. See Blasy Decl. Ex. D. The Court has

20

reviewed the firm’s resume and is satisfied that Public Retirement Systems has made a reasonable

21

choice of counsel. See id. Accordingly, the Court defers to that choice and hereby approves Public

22

Retirement Systems’ selection of Scott+Scott as lead counsel.

23

IV. CONCLUSION

24

For the foregoing reasons, the Court GRANTS Public Retirement Systems’ motion for

25

appointment of lead plaintiff and approval of its selection of lead counsel, and DENIES IUOE

26

Local 39’s and Pension Funds’ motions. Public Retirement Systems is hereby appointed lead

27

plaintiff in this action, and Scott+Scott LLP is hereby appointed lead counsel.

28

IT IS SO ORDERED.
8
Case No.: 5:11-cv-04003-LHK
ORDER RE: MOTIONS FOR APPOINTMENT OF LEAD PLAINTIFF AND LEAD COUNSEL

1
2
3

Dated: January 9, 2012

_________________________________
LUCY H. KOH
United States District Judge

4
5
6
7
8
9

United States District Court
For the Northern District of California

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
9
Case No.: 5:11-cv-04003-LHK
ORDER RE: MOTIONS FOR APPOINTMENT OF LEAD PLAINTIFF AND LEAD COUNSEL