Backe v. Novatel Wireless, Inc. et al

Filing 494

ORDER denying 489 Defendants' Motion for Reconsideration. Signed by Judge Anthony J. Battaglia on 11/13/13. (All non-registered users served via U.S. Mail Service)(cge)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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ALL ACTIONS.
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In re NOVATEL WIRELESS
12 SECURITIES LITIGATION

Civil No.08cv1689 AJB (RBB)
ORDER DENYING DEFENDANTS’
MOTION FOR
RECONSIDERATION
(Doc. No. 489)

Before the Court is Defendants’ Motion for Reconsideration. (Doc. No. 489.)

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Defendants seek reconsideration of the Court’s previous order denying Defendants’ Motion

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to Exclude Plaintiff’s Expert, Bjorn Steinholt. (Doc. No. 485.) For the reasons set forth,

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Defendants’ Motion is DENIED.

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I.

PROCEDURAL BACKGROUND

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On October 29, 2013, the Court issued an Order denying Defendants’ Motion to

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Exclude Plaintiffs’ Loss Causation and Damages Expert, Bjorn Steinholt. (Id.) A detailed

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explanation of the procedural background with regards to that Daubert motion can be found

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in the Order, and the Court incorporates by reference the details contained therein.

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Defendants now seek reconsideration on the grounds that the Court committed clear

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error, arguing that the Court sua sponte raised an alternative theory for which Plaintiffs may
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prove loss causation for the 2008 corrective disclosures. (Doc. No. 489 at 2.) The Court

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respectfully disagrees with Defendants’ interpretation of the Court’s Daubert Order.

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II.

DISCUSSION

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a.

Legal Standard

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A motion for reconsideration may be brought under Federal Rules of Civil Procedure

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59(e) or 60(b). A motion is treated as a motion to alter or amend judgment under Rule 59(e)

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if it is filed within 28 days of entry of judgment; otherwise, it is treated as a Rule 60(b)

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motion for relief from a judgment or order. See Am. Ironworks & Erectors, Inc. v. N. Am.

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Constr. Corp., 248 F.3d 892, 898–99 (9th Cir. 2001) (noting that a motion for reconsidera-

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tion filed within the time period set forth in Rule 59(e) is treated as a motion to alter or

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amend the judgment under Fed. R. Civ. P. 59(e), while a motion filed beyond that time

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period is treated as a Rule 60(b) motion for relief from a judgment or order). Inasmuch as

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Plaintiff's motion was filed within twenty-eight days of the Court’s previous order,

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Plaintiff's motion is properly characterized as arising under Rule 59(e) rather than Rule

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60(b). Id. The Court may grant a motion to alter or amend under Rule 59(e) when: (1) the

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district court is presented with newly discovered evidence, (2) the district court committed

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clear error or made an initial decision that was manifestly unjust, or (3) there is an

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intervening change in controlling law. Duarte v. Bardales, 526 F.3d 563, 567 (9th Cir.

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2008) (quoting Zimmerman v. City of Oakland, 255 F.3d 734, 740 (9th Cir. 2001)). The

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standard for reconsideration under Rule 60(b) is substantially similar. United Nat’l Ins. Co.

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v. Spectrum Worldwide, Inc., 666 F.3d 772, 780 (9th Cir. 2009).

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B.

Analysis

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Under Rule 59(e), reconsideration may be appropriate if the Court committed clear

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error or rendered a manifestly unjust decision. Defendants seek reconsideration of the

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Court’s Order upholding Steinholt’s loss causation as to the 2008 disclosure dates, arguing

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that there is no other method by which Plaintiffs may be able to establish loss causation in

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light of the Court’s previous summary judgment order issued November 23, 2011. (See

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Doc. No. 414.) The Court dismissed Plaintiffs’ channel stuffing claim finding that Plaintiffs

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failed to demonstrate falsity, materiality or scienter.

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Defendants misinterpret the spirit of the Court’s Order. The Court is not raising a

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new theory by which Plaintiffs may establish loss causation, the Court was merely

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responding to Defendants’ assertion raised in their Daubert Motion. In that Motion,

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Defendants argued that with the dismissal of Plaintiffs’ channel stuffing claim, Defendants’

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financial statements are necessarily deemed accurate. (Doc. No. 468 at 13-14.) It was as

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if Defendants were seeking a summary adjudication from the Court declaring that all of

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Novatel’s financial statements were accurate and without irregularities. The Court was not

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and is not of a position to confirm and bless such a declaration. The Court stated that “it

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may still be the case” that there were some financial irregularities, and this is a burden upon

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Plaintiffs to show. (Doc. No. 485 at 16.) Defendants cite to the Court’s Order stating that

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“[i]f Defendants’ contention, that the financial statements are now ‘accurate’ is true, then

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Plaintiffs would not be able to establish loss causation from the 2008 disclosure dates,” as

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the disclosures would merely be repeating information known to the public about the true

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level of product demand. (Doc. No. 485 at 16.) For the Court, this theory would only work

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if the financial statements indeed accurately represented the level of product demand in a

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way that the reasonable investor could comprehend despite any alleged active misrepresen-

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tations from the Company and its officials. If this were the case, then the truth with regards

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to Novatel’s ability or inability to meet the needs of its customers would be known to the

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public.

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However, Plaintiffs have continuously represented that the Company’s financial

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results were false and misleading and that Defendants actively concealed the true financial

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condition of the Company. (See e.g., Consolidated Complaint, Doc. No. 23 at ¶ 57.) Indeed,

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Plaintiffs objected to Defendants’ characterization that the financial statements are

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“accurate,” even with the dismissal of the channel stuffing claim and any evidence that

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purports to show improper revenue recognition resulting from channel stuffing.

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The Court realizes the confusion its Order may have caused and takes this opportunity

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to further clarify. The confusion stemmed from the fact the Order referred to testimony of

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Plaintiffs’ accounting expert Paul Regan.1 What the Order meant to convey was that to the

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extent Plaintiffs have properly disclosed and pursued discovery on alleged accounting

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misrepresentations that sought to conceal the true level of product demand, based on

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Plaintiffs’ product mix claim and unrelated to channel stuffing, such evidence may still

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properly be a part of the litigation. However, if Plaintiffs asserted nothing other than

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channel stuffing relative to accounting misrepresentations for the 2008 disclosures in the

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case to date, then Plaintiffs will not be allowed to attempt to prove loss causation with

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regards to the 2008 disclosure dates as no triable issue will exist in that regard. Such

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matters will be addressed during the upcoming Pretrial Conference and subsequent Motion

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in Limine hearing, and at the end of the day, would be the subject of a Rule 50(a) Motion

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for Judgment as a Matter of Law at trial.

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IT IS SO ORDERED.

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DATED: November 13, 2013

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Hon. Anthony J. Battaglia
U.S. District Judge

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The 125 transactions allegedly in violation of Generally Accepted Accounting Principles should
not have been mentioned in the Order as those transactions relate to alleged pull-in transactions that are
related to the channel stuffing claim. This evidence would be impermissible.
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