Sanders v. VeriFone Systems, Inc. et al
Filing
59
ORDER granting 31 Motion to Appoint Lead Plaintiff and Lead Counsel; denying 25 , 26 , 33 Motion to Appoint Lead Plaintiff and Lead Counsel; denying Motions to Consolidate. All future filings shall be in 5:13-CV-1038-EJD and shall bear the c aption "In re Verifone Securities Litigation." The clerk shall rename this case accordingly. Lead Plaintiff shall file an Amended Class Action Complaint on or before 11/7/2013. Signed by Judge Edward J. Davila on 10/7/2013. (ejdlc4S, COURT STAFF) (Filed on 10/7/2013) Modified on 10/7/2013 (ejdlc1, COURT STAFF).
1
2
3
4
5
6
UNITED STATES DISTRICT COURT
7
NORTHERN DISTRICT OF CALIFORNIA
8
SAN JOSE DIVISION
United States District Court
For the Northern District of California
9
10
SCOTT A. SANDERS, Individually and on
behalf of all others similarly situated, ET AL.,
Plaintiffs,
11
12
13
14
15
16
17
18
v.
VERIFONE SYSTEMS, INC., ET AL.,
Defendants.
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
Case No.: 5:13-CV-01038-EJD
ORDER DENYING (1) MOTIONS
FOR CONSOLIDATION; AND (2)
STIPULATION IN RELATED
ACTION ZOUMBOULAKIS V.
RICHARD A. MCGINN, ET AL.;
GRANTING THE SELZ FUNDS’
MOTION FOR APPOINTMENT OF
LEAD PLAINTIFF AND APPROVAL
OF THEIR SELECTION OF LEAD
COUNSEL
[Re: Docket Nos. 25, 26, 31, 33]
Presently before the court in these related securities class actions are four motions for (1)
19
consolidation of related actions; (2) appointment as lead plaintiff, and (3) approval of selection of
20
lead counsel brought, respectively, by plaintiffs Länsförsäkringar Fondförvaltning AB; The Selz
21
Family 2011 Trust, Karnak Partners L.P., Ermitage Selz Fund Ltd., GAM Selection Hedge
22
Investments, Inc. and Bernard Selz (collectively, the “Selz Funds”); Austin Police Retirement
23
System; and Ironworkers Locals 40, 361 & 417 – Union Security Funds, Iron Workers Local 580 –
24
Joint Funds, and Iron Workers District Council of Western New York and Vicinity, Pension and
25
Annuity Funds, and Manh Phan’s (collectively, “the Iron Workers and Phan”) (together with the
26
above-listed plaintiffs, “Movants”). Dkt. Nos. 25, 26, 31, 33. Also before the court is a later-filed
27
1
Case No.: 5:13-CV-01038-EJD
ORDER DENYING (1) MOTIONS FOR CONSOLIDATION; AND (2) STIPULATION IN
RELATED ACTION ZOUMBOULAKIS V. RICHARD A. MCGINN, ET AL.; GRANTING THE
SELZ FUNDS’ MOTION FOR APPOINTMENT OF LEAD PLAINTIFF AND APPROVAL OF
THEIR SELECTION OF LEAD COUNSEL
28
1
stipulation to enlarge defendants’ time to respond, appoint lead counsel, and consolidate in related
2
case Zoumboulakis v. Richard A. McGinn, et al. No. 13-CV-2379, Dkt. No. 10. The court found
3
these matters suitable for decision without oral argument and previously vacated the hearing
4
pursuant to Civil Local Rule 7-1(b). Having reviewed the parties’ submissions, and for the
5
following reasons, the court DENIES the class action plaintiffs’ motions for consolidation,
6
DENIES the stipulation in Zoumboulakis, and GRANTS the Selz Funds’ motion for appointment
7
as lead plaintiff and approval of their selection of lead counsel.
8
United States District Court
For the Northern District of California
9
I.
Background
Movants seek to consolidate three pending securities fraud class action lawsuits brought on
10
behalf of persons who purchased or otherwise acquired publicly-traded securities of Defendant
11
VeriFone, Inc. between December 14, 2011 and February 20, 2013. These actions each allege that
12
VeriFone and individual defendants Douglas G. Bergeron, Robert Dykes, and Marc E. Rothman
13
(collectively with VeriFone, “Defendants”) violated Sections 10(b) and 20(a) of the Securities
14
Exchange Act (“Exchange Act”) and Securities and Exchange Commission Rule 10b-5 by
15
misrepresenting the nature of VeriFone’s growth as well as its business, operational and
16
compliance policies during the alleged class period. See, e.g., No. 13-CV-1038, Dkt. No. 1 at ¶¶ 1-
17
8. The cases implicated in Movants’ motions are:
18
Abbreviated Case Name
Case Number
Date Filed
19
Sanders v. VeriFone
5:13-CV-01038-EJD
March 17, 2013
20
Laborers Local 235 Benefit
3:13-CV-01676-JST
April 12, 2013
21
Funds v. VeriFone
22
Bland v. VeriFone
4:13-CV-01853-SBA
April 23, 2013
23
These cases were never ordered related, and the Laborers Local and Bland plaintiffs each filed a
24
Notice of Voluntary Dismissal without Prejudice in their respective cases. See No. 13-CV-1676,
25
Dkt. No. 7; No. 13-CV-1853, Dkt. No. 5.
26
27
28
2
Case No.: 5:13-CV-01038-EJD
ORDER DENYING (1) MOTIONS FOR CONSOLIDATION; AND (2) STIPULATION IN
RELATED ACTION ZOUMBOULAKIS V. RICHARD A. MCGINN, ET AL.; GRANTING THE
SELZ FUNDS’ MOTION FOR APPOINTMENT OF LEAD PLAINTIFF AND APPROVAL OF
THEIR SELECTION OF LEAD COUNSEL
1
On May 6, 2013, plaintiffs Roy McMillan, Iron Workers District Council (Philadelphia and
Vicinity) Retirement and Pension Plan (“Philadelphia Iron Workers”), Länsförsäkringar
3
Fondförvaltning AB, Austin Police Retirement System, the Selz Funds, the Iron Workers and Phan,
4
and Oklahoma Firefighters Pension and Retirement System each filed a Motion for Consolidation
5
of Related Actions, Appointment as Lead Plaintiff, and Approval of its Selection of Lead Counsel
6
in the instant action. Dkt. Nos. 10, 11, 25, 26, 31, 33, 35. Plaintiffs Roy McMillan, Philadelphia
7
Iron Workers, and Oklahoma Firefighters Pension and Retirement System subsequently withdrew
8
their motions. Dkt. Nos. 40, 46, 94. Plaintiffs Austin Police Retirement System and
9
United States District Court
For the Northern District of California
2
Länsförsäkringar Fondförvaltning AB filed statements of non-opposition to the competing motions.
10
Dkt. Nos. 39, 44.
11
After the filing of these competing motions, on July 22, 2013, Defendants filed a motion to
12
relate this case to Zoumboulakis v. McGinn, et al., a companion shareholder derivative suit that
13
had been assigned to Judge Paul S. Grewal. Dkt. No. 50. The court ordered Zoumboulakis related
14
to the instant case on August 12, 2013. Dkt. No. 57. The competing motions for consolidation and
15
appointment of lead plaintiff and lead counsel presently before the court, which were filed before
16
the relation, did not contemplate this additional related case.
17
18
II.
Discussion
a. Consolidation
19
Each movant has filed a motion for consolidation of the above-identified securities class
20
actions, and such motions are uncontested. Pursuant to the Private Securities Litigation Reform
21
Act of 1995 (“PSLRA”), the court must decide whether to consolidate any related actions prior to
22
selecting a plaintiff to lead this litigation on behalf of the putative class. See 15 U.S.C. § 78u–
23
4(a)(3)(B)(ii). The court notes that the three securities class actions discussed above each raise
24
nearly identical claims under nearly identical facts, and thus would typically be considered
25
appropriate for consolidation. See Fed. R. Civ. P. 42(a). In this instance, however, the court finds
26
itself in a procedural quandary: the movants ask the court to consolidate cases that have already
27
3
Case No.: 5:13-CV-01038-EJD
ORDER DENYING (1) MOTIONS FOR CONSOLIDATION; AND (2) STIPULATION IN
RELATED ACTION ZOUMBOULAKIS V. RICHARD A. MCGINN, ET AL.; GRANTING THE
SELZ FUNDS’ MOTION FOR APPOINTMENT OF LEAD PLAINTIFF AND APPROVAL OF
THEIR SELECTION OF LEAD COUNSEL
28
1
been dismissed. See No. 13-CV-1676, Dkt. No. 7; No. 13-CV-1853, Dkt. No. 5. Moreover, these
2
dismissed cases were at no point in time ordered related to the instant matter. Considering these
3
circumstances, the court DENIES the motions for consolidation as moot.
4
b. Related Derivative Action
The court must also consider whether to consolidate the instant securities class action with
6
the related Zoumboulakis action. See No. 13-CV-2379, Dkt. No. 10. Unlike the actions discussed
7
above, Zoumboulakis is a derivative suit brought on behalf of nominal defendant VeriFone and
8
contains claims of (1) breach of fiduciary duty; (2) abuse of control; and (3) Violation of Exchange
9
United States District Court
For the Northern District of California
5
Act Section 14(a). See id. at Dkt. No. 1. On August 12, 2013, more than four months after the
10
above-mentioned motions for consolidation and for appointment of lead counsel and plaintiff were
11
filed, the Zoumboulakis parties filed a stipulation to, inter alia, consolidate the derivative action
12
with this securities class action, appoint Ms. Zoumboulakis as lead plaintiff, and appoint her
13
counsel as lead counsel. See 13-CV-2379, Dkt. No. 10.
14
While the court may consolidate cases involving a common party and common issues of
15
fact or law (see Fed. R. Civ. P. 42(a)), consolidation is nonetheless inappropriate if it causes
16
confusion or leads to delay, inefficiency, inconvenience, or unfair prejudice to a party (see Fed. R.
17
Civ. P. 42(b)). Here, the parties have failed to show that consolidation of the shareholder
18
derivative action with the instant securities class action would be appropriate. The nature of a
19
derivative action differs substantially from that of a securities class action: the two have varying
20
procedural and substantive requirements, not the least of which is the requirement that a securities
21
class action, but not necessarily any corollary derivative action, be governed by the PSLRA.
22
Moreover, Zoumboulakis names nine defendants in addition to the named defendants in the
23
securities class action 1; thus, consolidation may result in unfair prejudice to these additional
24
parties. Under these circumstances, the court declines to consolidate the derivative action with the
25
instant securities class action, and accordingly DENIES the parties’ stipulation.
26
1
27
28
The court also notes that the derivative suit does not name Marc Rothman as a defendant, but Mr. Rothman is named
as a defendant in the securities class action.
4
Case No.: 5:13-CV-01038-EJD
ORDER DENYING (1) MOTIONS FOR CONSOLIDATION; AND (2) STIPULATION IN
RELATED ACTION ZOUMBOULAKIS V. RICHARD A. MCGINN, ET AL.; GRANTING THE
SELZ FUNDS’ MOTION FOR APPOINTMENT OF LEAD PLAINTIFF AND APPROVAL OF
THEIR SELECTION OF LEAD COUNSEL
1
c. Lead Plaintiff
In cases governed by the PLSRA, the plaintiff in the first-filed action must, within twenty
3
days of the filing of the complaint, publish notice of the complaint in a widely circulated business
4
publication. 15 U.S.C. § 78u–4(a)(3)(A)(i). The notice must include a description of the claim and
5
notify prospective class members that they may move within 60 days of the notice to be named
6
lead plaintiff. 15 U.S.C. § 78u–4(a)(3)(A)(i) (I)-(II). Once applications for lead plaintiff status are
7
closed, the district court must determine who among the movants for lead plaintiff status is the
8
“most adequate plaintiff.” 15 U.S.C. § 78u–4(a)(3)(B)(i). To aid the court in its determination,
9
United States District Court
For the Northern District of California
2
each proposed lead plaintiff must submit a sworn statement setting forth certain facts designed to
10
assure the court that the plaintiff (1) has suffered more than a nominal loss, (2) is not a professional
11
litigant, and (3) is otherwise interested and able to serve as a class representative. 15 U.S.C. § 78u-
12
4(a)(2)(A). Here, each movant has provided this information to the court.
13
In the Ninth Circuit, In re Cavanaugh, 306 F.3d 726, 729–30 (9th Cir. 2002), governs the
14
selection of a lead plaintiff in a securities class action using a three-step process. First, as discussed
15
above, timely and complete notice of the action must be published. Id. at 729. Second, the district
16
court considers the losses suffered by potential lead plaintiffs and selects “the one who ‘has the
17
largest financial interest in the relief sought by the class’ and ‘otherwise satisfies the requirements
18
of Rule 23 of the Federal Rules of Civil Procedure.’” Id. at 730 (citing 15 U.S.C. § 78u–4(a)(3)(B)
19
(iii)(I)). In doing so, the court determines which plaintiff “has the most to gain from the lawsuit.”
20
Cavanaugh, 306 F.3d at 730. Third, the court evaluates the proposed lead plaintiff to ensure he or
21
she “satisfies the requirements of [Fed. R. Civ. Pro.] 23(a), in particular those of ‘typicality’ and
22
‘adequacy.’” Id. A plaintiff who satisfies the first two steps becomes the “presumptively most
23
adequate plaintiff.” Id. However, at step three, the competing plaintiffs have the opportunity to
24
rebut the presumptive lead plaintiff’s showing of typicality and adequacy. Id. at 730 (citing 15
25
U.S.C. § 78u–4(a)(3)(B)(iii)(II)).
26
27
28
5
Case No.: 5:13-CV-01038-EJD
ORDER DENYING (1) MOTIONS FOR CONSOLIDATION; AND (2) STIPULATION IN
RELATED ACTION ZOUMBOULAKIS V. RICHARD A. MCGINN, ET AL.; GRANTING THE
SELZ FUNDS’ MOTION FOR APPOINTMENT OF LEAD PLAINTIFF AND APPROVAL OF
THEIR SELECTION OF LEAD COUNSEL
1
Here, the parties do not dispute that notice was adequately published. Accordingly, step
one has been satisfied. Under step two, the Selz Funds have emerged as the plaintiffs with the
3
largest financial interest in the matter. Cavanaugh, 306 F.3d at 730. The Selz Funds purport to
4
have lost over $6.2 million as a result of Defendants’ alleged securities law violations; this alleged
5
loss is nearly twice as a large as the next closest movant, and in fact larger than the combined
6
losses of all other movants. See Dkt. No. 4 at 2. Accordingly, the Selz Funds appear to be the
7
presumptive “most adequate plaintiff.” Cavanaugh, 306 F.3d at 730. Like all movants, the Selz
8
Funds allege that they purchased VeriFone securities during the class period based upon
9
United States District Court
For the Northern District of California
2
Defendants’ false and misleading statements. These allegations suffice at this stage to show that
10
the Selz Funds satisfy the typicality requirements of Federal Rule of Civil Procedure 23(a). In
11
addition, the court does not find any indication in the record that the Selz Funds’ interests would
12
compete with those of the class. Thus, the Selz Funds preliminarily satisfies the adequacy
13
requirement of Rule 23(a). No movant has come forward to rebut this presumption, as permitted
14
by step three of the Cavanaugh analysis. Considering the Selz Funds’ presumptive adequacy, and
15
noting that no movant has contested the Selz Funds’ typicality or adequacy, the court GRANTS the
16
Selz Funds’ motion for appointment as lead plaintiff.
17
18
d. Lead Counsel
Once the court has designated a lead plaintiff, that lead plaintiff “shall, subject to the
19
approval of the court, select and retain counsel to represent the class.” 15 U.S.C. § 78u–4(a)(3)
20
(B)(v). A court generally should accept the lead plaintiff’s choice of counsel unless it appears
21
necessary to appoint different counsel to “protect the interests of the class.” Id. at § 78u–
22
4(a)(3)(B)(iii)(II)(aa). In the Ninth Circuit, Cavanaugh establishes the standard for approval of
23
lead counsel. 306 F.3d at 732. “[T]he district court does not select class counsel at all,” and
24
typically approves the lead plaintiff’s selection of counsel. Id. at 732–34. Here, the Selz Funds
25
have selected the law firm of Gold Bennett Cera & Sidener LLP to represent them. No opposition
26
27
28
6
Case No.: 5:13-CV-01038-EJD
ORDER DENYING (1) MOTIONS FOR CONSOLIDATION; AND (2) STIPULATION IN
RELATED ACTION ZOUMBOULAKIS V. RICHARD A. MCGINN, ET AL.; GRANTING THE
SELZ FUNDS’ MOTION FOR APPOINTMENT OF LEAD PLAINTIFF AND APPROVAL OF
THEIR SELECTION OF LEAD COUNSEL
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?