Hancook v. Spectranetics Corporation, The et al

Filing 123

USCA ORDER: Ted Karkus request a writ of mandamus vacating the district court's June 15, 2009 order. The petition for writ of mandamus is denied. USCA case no. 09-1500. (bjrsl, )

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Case: 09-1500 Document: 01018357400 Date Filed: U n i t e d States Court 1 Appeals 01/27/2010 Page: of T e n t h Circuit FILED J a n u a r y 27, 2010 U N I T E D STATES COURT OF APPEALSl i s a b e t h A. Shumaker E F O R THE TENTH CIRCUIT C l e r k of Court I n re: T E D KARKUS, Petitioner. N o . 09-1500 ( D . C . No. 1:08-CV-02048-REB-KLM) ( D . Colo.) ORDER B e f o r e KELLY, BRISCOE, and GORSUCH, Circuit Judges. T e d Karkus requests a writ of mandamus vacating the district court's J u n e 15, 2009, order that denied his motion to serve as lead plaintiff in a putative s e c u r i t i e s class action lawsuit against The Spectranetics Corporation and a p p o i n t e d the Spectranetics Investor Group (SIG) instead. Because Karkus has f a i l e d to show a clear and indisputable right to the writ, we deny the petition. " [ A ] writ of mandamus is a drastic remedy, and is to be invoked only in e x t r a o r d i n a r y circumstances." In re Cooper Tire & Rubber Co., 568 F.3d 1180, 1 1 8 6 (10th Cir. 2009) (quotation marks and citation omitted). Accordingly, we w i l l issue the writ "only when the district court has acted wholly without j u r i s d i c t i o n or so clearly abused its discretion as to constitute usurpation of p o w e r . " Id. (quotation marks omitted). The petitioner must show that he has "no Case: 09-1500 Document: 01018357400 Date Filed: 01/27/2010 Page: 2 o t h e r adequate means to attain [] relief" and "that his right to the writ is clear and i n d i s p u t a b l e . " Id. at 1187 (quotation marks omitted). In exercising our d i s c r e t i o n , we must also "be satisfied that the writ is appropriate under the c i r c u ms t a n c e s . " Id. (quotation marks omitted). Mandamus relief may be appropriate under certain circumstances to vacate l e a d - p l a i n t i f f appointments made in disregard of the Private Securities Litigation R e f o r m Act of 1995 (PSLRA), 15 U.S.C. § 78u-4(a)(3). See In re Cavanaugh, 3 0 6 F.3d 726, 729-32, 739 (9th Cir. 2002) (issuing writ where district court d e p a r t e d from sequential analysis mandated by PSLRA). But Karkus has failed to c o n v i n c e us that the district court's appointment of the SIG as lead plaintiff in t h i s case either ignored the mandates of the PSLRA or otherwise constituted a g r o s s abuse of discretion justifying issuance of the writ. The district court denied K a r k u s ' s motion because he failed to demonstrate that he personally holds the l a r g e s t financial stake in the outcome of this case. 1 Rejecting Karkus's attempt to c l a i m for himself the losses suffered by his personal investment vehicle, Forrester F i n a n c i a l , LLC, the court held it was unclear whether Karkus would have s t a n d i n g to assert claims stemming from Forrester's losses. In reaching this U n d e r the PSLRA, a district court must appoint as lead plaintiff the class me mb e r that it "determines to be most capable of adequately representing the i n t e r e s t s of class members." 15 U.S.C. § 78u-4(a)(3)(B)(i) (emphasis added). "The `most capable' plaintiff­and hence the lead plaintiff­is the one who has the g r e a t e s t financial stake in the outcome of the case, so long as he meets the r e q u i r e me n t s of Rule 23." Cavanaugh, 306 F.3d at 729 (footnote omitted). -2- 1 Case: 09-1500 Document: 01018357400 Date Filed: 01/27/2010 Page: 3 c o n c l u s i o n , the court distinguished Grubb v. Federal Deposit Insurance C o r p o r a t i o n , 868 F.2d 1151 (10th Cir. 1989), which held that a shareholder had s t a n d i n g to assert claims for his company's losses because he had shown he was t h e true party at risk in the challenged transaction. Seizing on a cautionary f o o t n o t e in Grubb, the district court held that Karkus's position as sole s h a r e h o l d e r of Forrester was not, by itself, sufficient to confer Article III standing u p o n him individually. And it found that other factors in this case counseled a g a i n s t combining Karkus's losses with Forrester's for purposes of determining K a r k u s ' s financial interest under the PSLRA. While this conclusion was based on an extremely narrow interpretation of G r u b b , we are not prepared to say that the district court's decision was an a b d i c a t i o n of its judicial function or "such a gross abuse of discretion as to w a r r a n t the issuance of the writ." Cooper Tire, 568 F.3d at 1186-87 (quotation ma r k s omitted). Accordingly, Karkus has not shown that his right to the writ is c l e a r and indisputable. His petition is, therefore, DENIED. E n t e r e d for the Court, E L I S A B E T H A. SHUMAKER, Clerk -3- Case: 09-1500 Document: 01018357400 Date Filed: 01/27/2010 Page: 4 0 9 - 1 5 0 0 , In re Spectranetics. K E L L Y , Circuit Judge, dissenting. T h e presumptive lead plaintiff in this action is the one who "has the largest f i n a n c i a l interest in the relief sought by the class" and can otherwise satisfy the r e q u i r e me n t s of Fed. R. Civ. P. 23. 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I)(bb) & (cc). The objective is to secure the lead plaintiff best able to represent the class. 15 U . S . C . § 77z-1(a)(3)(B)(i). The lead plaintiff selects class counsel. 15 U.S.C. § 78u-4(a)(3)(B)(v). T h e district court was required to "compare the financial stakes of the v a r i o u s plaintiffs and determine which one has the most to gain from the lawsuit." In re Cavanaugh, 306 F.3d 726, 730 (9th Cir. 2002). This should be a s t r a i g h t f o r w a r d requirement. Cohen v. U.S. Dist. Ct., 586 F.3d 703, 709 (9th Cir. 2 0 0 9 ) . Mr. Karkus has claimed losses of approximately $1.26 million, more than t w i c e that of the three-member group that became the lead plaintiff. T h e district court reasoned that because Mr. Karkus and his investment v e h i c l e , Forrester Financial, LLC, are separate legal entities, Mr. Karkus could n o t aggregate Spectranetics stock losses. Yet Mr. Karkus is the sole officer, b e n e f i c i a r y , member, owner, manager and employee of Forrester and all of F o r r e s t e r ' s operations, including stock losses, flow through Mr. Karkus's tax r e t u r n . Petition at 8 n.5, 16, 19-20. The statute merely requires Mr. Karkus to h a v e "the largest financial interest in the relief sought by the class." He certainly -4- Case: 09-1500 Document: 01018357400 Date Filed: 01/27/2010 Page: 5 a p p e a r s to. 2 The district court's focus on the legal separation of Mr. Karkus and F o r r e s t e r Financial, LLC, and insistence that Mr. Karkus disaggregate the losses i s inconsistent with the statute as well as Grubb v. FDIC, 868 F.2d 1151, 1162 ( 1 0 t h Cir. 1989), where we indicated that a court should look at transactions r e a l i s t i c a l l y , particularly given the remedial purpose of the securities laws. See a l s o Norris v. Wirtz, 719 F.2d 256, 259-61 (7th Cir. 1983) (trust beneficiary had s e c t i o n 10(b) and Rule 10b-5 standing); Kirshner v. United States, 603 F.2d 234, 2 4 0 (2d Cir. 1979) (same). Given rather specific statutory requirements for a p p o i n t me n t of a lead plaintiff and selection of class counsel, courts have granted ma n d a mu s relief when those requirements are not followed. See Cohen, 586 F.3d a t 710; Cavanaugh, 306 F.3d at 739. Mr. Karkus appears to have no other a d e q u a t e means to secure relief; though he could perhaps raise this issue on a p p e a l , by then it would be too late given litigation conducted by another lead p l a i n t i f f and its choice of counsel. The district court's order is difficult to r e c o n c i l e with the statute which speaks to "financial interest" and we have r e j e c t e d the same type of technical construction found here in Grubb. The issue The district court's suggestion that Mr. Karkus should have sought to have F o r r e s t e r appointed as a co-lead plaintiff appears inconsistent with the statute w h i c h speaks of a lead plaintiff, although the lead plaintiff may be an individual o r a group. Cohen, 586 F.3d at 711 n.4. Moreover, Mr. Karkus indicated that he w a s certifying the qualifying transactions individually and as sole officer and b e n e f i c i a r y of Forrester. Although with 20-20 hindsight, Mr. Karkus might have mo v e d to be appointed as part of a group including himself and Forrester, this is p l a i n l y a form over substance argument. -5- 2 Case: 09-1500 Document: 01018357400 Date Filed: 01/27/2010 Page: 6 i s important given the effort to ensure consistent application of the PSLRA. I w o u l d grant the writ and respectfully dissent. -6- Case: 09-1500 Document: 01018357401 Date Filed: 01/27/2010 Page: 1 UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT OFFICE OF THE CLERK Byron White United States Courthouse 1823 Stout Street Denver, Colorado 80257 (303) 844-3157 Elisabeth A. Shumaker Clerk of Court January 27, 2010 Douglas E. Cressler Chief Deputy Clerk Mr. Jeffrey A. Berens Dyer & Berens LLP 303 East 17th Avenue, Suite 300 Denver, CO 80203 Mr. Robert J. Dyer III Dyer & Berens LLP 303 East 17th Avenue, Suite 300 Denver, CO 80203 Mr. Henry Rosen Coughlin Stoia Geller Rudman & Robbins LLP 655 West Broadway Suite 1900 San Diego, CA 92101-0000 Mr. Trig Randall Smith Coughlin Stoia Geller Rudman & Robbins LLP 655 West Broadway Suite 1900 San Diego, CA 92101-0000 RE: 09-1500, In re: Spectranetics Corp, et al Dist/Ag docket: 1:08-CV-02048-REB-KLM, 1:08-CV-02055-REB-KLM, 1:08CV-02078-REB/KLM, 1:08-CV-02267-REB-KLM, 1:08-CV-02420REB/KLM, 1:08-CV-02603-REB/KLP Dear Counsel: Enclosed please find an order issued today by the court. Case: 09-1500 Document: 01018357401 Date Filed: 01/27/2010 Page: 2 Please contact this office if you have questions. Sincerely, Elisabeth A. Shumaker Clerk of the Court cc: David A.P. Brower Robert B. Carey W. Gordon Dobie Jonathan Gardner Rusty Evan Glenn Mark S. Goldman David J. Goldsmith John F. Head Reed R. Kathrein Charles J. Piven Steven C. Schulte Kip Brian Shuman Bruce G. Vanyo Carol C. Villegas Marisa Gayle Westervelt Richard H. Zelichov EAS/sds 2

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