Abrams v. Intuitive Surgical, Inc. et al

Filing 50

ORDER GRANTING IN PART AND DENYING IN PART 14 MOTION to Consolidate Cases MOTION to Appoint Lead Plaintiff and Lead Counsel filed by Employees' Retirement System of the State of Hawaii signed by Judge Edward J. Davila on November 18, 2013. (ejdlc4S, COURT STAFF) (Filed on 11/18/2013)

1
2
3
4
5
6
7
8

United States District Court
For the Northern District of California

9
10

UNITED STATES DISTRICT COURT

11

NORTHERN DISTRICT OF CALIFORNIA

12

SAN JOSE DIVISION

13
14

SPENCER ABRAMS, individually and on
behalf of all others similarly situated,
Plaintiff,

15
16
17
18
19

v.
INTUITIVE SURGICAL, INC., et al.,
Defendants.

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

Case No.: 5:13-CV-01920-EJD
ORDER DENYING MOTION FOR
CONSOLIDATION; GRANTING THE
HAWAII EMPLOYEES’
RETIREMENT SYSTEM’S MOTION
FOR APPOINTMENT OF LEAD
PLAINTIFF AND APPROVAL OF ITS
SELECTION OF LEAD COUNSEL

[Re: Docket No. 14]

20
Presently before the court in this securities class action is Plaintiff the Employees’
21
Retirement System of the State of Hawaii’s (“Hawaii ERS”) Motion for Consolidation of Related
22
Actions, Appointment as Lead Plaintiff, and Approval of Selection of Lead Counsel. Dkt. No. 14.
23
The court finds these matters suitable for decision without oral argument and hereby VACATES
24
the hearing set for November 22, 2013 pursuant to Civil Local Rule 7-1(b). Having reviewed the
25
submissions, and for the following reasons, the court DENIES Hawaii ERS’s motion for
26
27
28

1
Case No.: 5:13-CV-01920-EJD
ORDER DENYING MOTIONS FOR CONSOLIDATION; GRANTING THE HAWAII
EMPLOYEES’ RETIREMENT SYSTEM’S MOTION FOR APPOINTMENT OF LEAD
PLAINTIFF AND APPROVAL OF ITS SELECTION OF LEAD COUNSEL

1

consolidation and GRANTS Hawaii ERS’s motion for appointment as lead plaintiff and approval

2

of its selection of lead counsel.

3

I.

4

Background
Hawaii ERS seeks to consolidate two securities fraud class action lawsuits brought on

behalf of persons who purchased or otherwise acquired publicly-traded securities of Defendant

6

Intuitive Surgical, Inc. (“Intuitive”) during the purported class period: the instant action Abrams v.

7

Intuitive Surgical, Inc., et al., No. 13-CV-01920, filed April 26, 2013 and Adel v. Intuitive

8

Surgical, Inc., et al., No. 13-CV-02365, filed May 24, 2013. These actions each allege that

9
United States District Court
For the Northern District of California

5

Intuitive and individual defendants Gary Guthart, Marshall Mohr, and Lonnie Smith (collectively

10

with Intuitive, “Defendants”) violated Sections 10(b) and 20(a) of the Securities Exchange Act

11

(“Exchange Act”) and Securities and Exchange Commission Rule 10b-5 by misleading investors as

12

to the soundness of the da Vinci Surgical System, the sales practices used by Defendants to market

13

it, and the company’s financial results and outlook.

14

On June 25, 2013, plaintiffs Hawaii ERA and Darien Adel each filed a Motion for

15

Consolidation of Related Actions, Appointment as Lead Plaintiff, and Approval of Selection of

16

Lead Counsel in the instant action. Dkt. Nos. 14, 23. Plaintiff Adel subsequently withdrew his

17

motion and voluntarily dismissed his case without prejudice. Dkt. Nos. 33, 39. No opposition has

18

been filed as to Hawaii ERA’s Motion.

19
20

II.

Discussion
a. Consolidation

21

Pursuant to the Private Securities Litigation Reform Act of 1995 (“PSLRA”), the court

22

must decide whether to consolidate any related actions prior to selecting a plaintiff to lead this

23

litigation on behalf of the putative class. See 15 U.S.C. § 78u–4(a)(3)(B)(ii). The court notes that

24

the two securities class actions discussed above each raise nearly identical claims under nearly

25

identical facts, and thus would typically be considered appropriate for consolidation. See Fed. R.

26

Civ. P. 42(a). However, here, Plaintiff Adel has voluntarily dismissed his case, leaving the instant

27

2
Case No.: 5:13-CV-01920-EJD
ORDER DENYING MOTIONS FOR CONSOLIDATION; GRANTING THE HAWAII
EMPLOYEES’ RETIREMENT SYSTEM’S MOTION FOR APPOINTMENT OF LEAD
PLAINTIFF AND APPROVAL OF ITS SELECTION OF LEAD COUNSEL

28

1

matter as the only open case. Accordingly, the court DENIES the motion for consolidation as

2

moot.

3

b. Lead Plaintiff
In cases governed by the PLSRA, the plaintiff in the first-filed action must, within twenty

5

days of the filing of the complaint, publish notice of the complaint in a widely circulated business

6

publication. 15 U.S.C. § 78u–4(a)(3)(A)(i). The notice must include a description of the claim and

7

notify prospective class members that they may move within 60 days of the notice to be named

8

lead plaintiff. 15 U.S.C. § 78u–4(a)(3)(A)(i) (I)-(II). Once applications for lead plaintiff status are

9
United States District Court
For the Northern District of California

4

closed, the district court must determine who among the movants for lead plaintiff status is the

10

“most adequate plaintiff.” 15 U.S.C. § 78u–4(a)(3)(B)(i). To aid the court in its determination,

11

each proposed lead plaintiff must submit a sworn statement setting forth certain facts designed to

12

assure the court that the plaintiff (1) has suffered more than a nominal loss, (2) is not a professional

13

litigant, and (3) is otherwise interested and able to serve as a class representative. 15 U.S.C. § 78u-

14

4(a)(2)(A). Here, Hawaii ERS has provided this information to the court.

15

In the Ninth Circuit, In re Cavanaugh, 306 F.3d 726, 729–30 (9th Cir. 2002), governs the

16

selection of a lead plaintiff in a securities class action using a three-step process. First, as discussed

17

above, timely and complete notice of the action must be published. Id. at 729. Second, the district

18

court considers the losses suffered by potential lead plaintiffs and selects “the one who ‘has the

19

largest financial interest in the relief sought by the class’ and ‘otherwise satisfies the requirements

20

of Rule 23 of the Federal Rules of Civil Procedure.’” Id. at 730 (citing 15 U.S.C. § 78u–4(a)(3)(B)

21

(iii)(I)). In doing so, the court determines which plaintiff “has the most to gain from the lawsuit.”

22

Cavanaugh, 306 F.3d at 730. Third, the court evaluates the proposed lead plaintiff to ensure he or

23

she “satisfies the requirements of [Fed. R. Civ. Pro.] 23(a), in particular those of ‘typicality’ and

24

‘adequacy.’” Id. A plaintiff who satisfies the first two steps becomes the “presumptively most

25

adequate plaintiff.” Id. However, at step three, the competing plaintiffs have the opportunity to

26
27
28

3
Case No.: 5:13-CV-01920-EJD
ORDER DENYING MOTIONS FOR CONSOLIDATION; GRANTING THE HAWAII
EMPLOYEES’ RETIREMENT SYSTEM’S MOTION FOR APPOINTMENT OF LEAD
PLAINTIFF AND APPROVAL OF ITS SELECTION OF LEAD COUNSEL

1

rebut the presumptive lead plaintiff’s showing of typicality and adequacy. Id. at 730 (citing 15

2

U.S.C. § 78u–4(a)(3)(B)(iii)(II)).

3

Here, the parties do not dispute that notice was adequately published. Accordingly, step
one has been satisfied. Under step two, Hawaii ERS has emerged as the plaintiff with the largest

5

financial interest in the matter. Cavanaugh, 306 F.3d at 730. Hawaii ERS purports to have lost

6

$828,955 as a result of Defendants’ alleged securities law violations; this alleged loss is

7

substantially larger than the $5,347 loss alleged by Mr. Adel. See Dkt. No. 14 at 8, Dkt. No. 23 at

8

6. Accordingly, Hawaii ERS appears to be the presumptive “most adequate plaintiff.” Cavanaugh,

9
United States District Court
For the Northern District of California

4

306 F.3d at 730.

10

Hawaii ERS alleges that it purchased Intuitive securities during the class period based upon

11

Defendants’ misrepresentations and omissions. Like all members of the Class, Hawaii ERS seeks

12

recovery for losses resulting from this reliance, and does so by advancing the same legal theories as

13

other class members. Hawaii ERS is not subject to any special defenses. These allegations suffice

14

at this stage to show that Hawaii ERS satisfies the typicality requirements of Federal Rule of Civil

15

Procedure 23(a). In addition, the court does not find any indication in the record that Hawaii

16

ERS’s interests would compete with those of the class. Thus, Hawaii ERS preliminarily satisfies

17

the adequacy requirement of Rule 23(a). No other potential plaintiff has come forward to rebut this

18

presumption, as permitted by step three of the Cavanaugh analysis. Considering Hawaii ERS’s

19

presumptive adequacy, and noting that no potential plaintiff has contested Hawaii ERS’s typicality

20

or adequacy, the court GRANTS Hawaii ERS’s motion for appointment as lead plaintiff.

21
22

c. Lead Counsel
Once the court has designated a lead plaintiff, that lead plaintiff “shall, subject to the

23

approval of the court, select and retain counsel to represent the class.” 15 U.S.C. § 78u–4(a)(3)

24

(B)(v). A court generally should accept the lead plaintiff’s choice of counsel unless it appears

25

necessary to appoint different counsel to “protect the interests of the class.” Id. at § 78u–

26

4(a)(3)(B)(iii)(II)(aa). In the Ninth Circuit, Cavanaugh establishes the standard for approval of

27

4
Case No.: 5:13-CV-01920-EJD
ORDER DENYING MOTIONS FOR CONSOLIDATION; GRANTING THE HAWAII
EMPLOYEES’ RETIREMENT SYSTEM’S MOTION FOR APPOINTMENT OF LEAD
PLAINTIFF AND APPROVAL OF ITS SELECTION OF LEAD COUNSEL

28