Haverhill Retirement System v. Thiry et al
ORDER granting 54 Interested Party Haverhills Renewed Motion for Consolidation and Appointment of Lead Plaintiff and Lead Counsel; granting in part and denying in part 55 Plaintiff Clarks Motion to Consolidate Actions and Appoint Lead Plaintiff and L ead Counsel; Civil Action No. 12-cv-2074-WJM- CBS and Civil Action No. 13-cv-1308-WJM-MJW are CONSOLIDATED, and henceforth shall jointly be entitled In re DaVita HealthCare Partners, Inc. Derivative Litigation; Civil Action No. 12-cv-2074-WJM-CBS sha ll be the lead case and all future filings shall be made in this action; Magistrate Judge Craig B. Shaffer shall be assigned to both of the consolidated actions, and the cases shall henceforth be numbered as Civil Action No. 12-cv-2074-WJM-CBS and Ci vil Action No. 13-cv-1308-WJM-CBS; Haverhill Retirement System is DESIGNATED as Lead Plaintiff for the Consolidated Action; The law firm of Scott+Scott, LLP is DESIGNATED as Lead Counsel for the Consolidated Action with Dyer & Berens LLP as Liaison Counsel, by Judge William J. Martinez on 1/7/2013. (ervsl, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 12-cv-2074-WJM-CBS
COURTNEY CLARK, Derivatively on Behalf of DaVita, Inc.,
KENT J. THIRY,
PAMELA M. ARWAY,
CHARLES G. BERG,
WILLARD W. BRITTAIN, JR.,
CAROL ANTHONY DAVIDSON,
PAUL J. DIAZ,
PETER T. GRAUER,
JOHN M. NEHRA,
WILLIAM L. ROPER,
DAVID T. SHAPIRO, and
ROGER J. VALINE,
DAVITA, INC., a Delaware Corporation,
Civil Action No. 13-cv-1308-WJM-MJW
HAVERHILL RETIREMENT SYSTEM, Derivatively on Behalf of DaVita HealthCare
DR. WILLIAM ROPER,
DR. ROBERT J. MARGOLIS, and
CAROL ANTHONY (“JOHN”) DAVIDSON,
DAVITA HEALTHCARE PARTNERS, INC., a Delaware Corporation,
ORDER GRANTING MOTIONS TO CONSOLIDATE AND
APPOINTING LEAD PLAINTIFF AND LEAD COUNSEL
These shareholder derivative actions are brought on behalf of DaVita HealthCare
Partners, Inc. (“DaVita”). Before the Court are two Motions to Consolidate Actions and
Appoint Lead Plaintiff and Lead Counsel (“Motions”) filed by Plaintiff Courtney Clark
(“Clark”) and Plaintiff Haverhill Retirement System (“Haverhill”). (ECF Nos. 54, 55.)
Clark and Haverhill seek to consolidate Civil Action No. 12-cv-2074-WJM-CBS (the
“Clark Action”) with Civil Action No. 13-cv-1308-WJM-MJW (the “Haverhill Action”), and
each Plaintiff moves to be appointed Lead Plaintiff.
For the reasons set forth below, Haverhill’s Motion is GRANTED, and Clark’s
Motion is GRANTED in part and DENIED in part.
Federal Rule of Civil Procedure 42(a) provides that consolidation is appropriate
when the actions involve common questions of law or fact:
If actions before the court involve a common question of law
or fact, the court may: (1) join for hearing or trial any or all
matters at issue in the actions; (2) consolidate the actions;
or (3) issue any other orders to avoid unnecessary cost or
Fed. R. Civ. P. 42(a). Further, consolidation is committed to the sound discretion of the
trial court. Gillette Motor Transp. v. N. Okla. Butane Co., 179 F.2d 711, 712 (10th Cir.
1950). “The purpose of Rule 42(a) is to give the court broad discretion to decide how
cases on its docket are to be tried so that the business of the court may be dispatched
with expedition and economy while providing justice to the parties.” Skaggs v. Level 3
Commc’ns, Inc., No. 09-cv-200, 2009 WL 458682, at *1 (D. Colo. Feb. 24, 2009)
Pursuant to Rule 42(a) and D.C.COLO.LCivR 7.5E, the Court finds that the two
actions listed above involve common questions of law or fact, including nearly identical
parties1 and common claims. The Court also finds that consolidation of these two cases
will avoid unnecessary costs and delays. The Court notes that consolidation is not
opposed by any party to either of the actions. (See ECF Nos. 52 at 3; 55 at 2; 58 at 2.)
Accordingly, the Court orders that the above-captioned cases are consolidated
and, to the extent they are assigned to different judges, should be reassigned to the
undersigned as the District Judge and U.S. Magistrate Judge Craig B. Shaffer. The
consolidated cases shall be denominated In re DaVita HealthCare Partners, Inc.
Derivative Litigation, Civil Action No. 12-cv-2074-WJM-CBS (the “Consolidated Action”).
Both Plaintiffs bring their respective actions on behalf of DaVita. The named
Defendants differ only in that the Clark Action names David Shapiro, DaVita’s Chief Compliance
Officer, and Willard W. Brittain, Jr., who is no longer a Director on DaVita’s Board, while the
Haverhill Action names as a defendant a new Director, Dr. Robert J. Margolis.
II. APPOINTMENT OF LEAD PLAINTIFF AND LEAD COUNSEL
Plaintiff Clark asks the Court to appoint her as Lead Plaintiff in the Consolidated
Action, and the law firm representing her, Kessler Topaz Meltzer & Check, LLP
(“Kessler Topaz”), as Lead Counsel, with the Shuman Law Firm as Liaison Counsel.
(ECF No. 55.) Plaintiff Haverhill asks the Court to appoint it as Lead Plaintiff, and
Scott+Scott, LLP, as Lead Counsel, with Dyer & Berens LLP as Liaison Counsel. (ECF
Under Federal Rule of Civil Procedure 23.1, a Lead Plaintiff in a shareholder
derivative action must “fairly and adequately represent the interests of shareholders or
members who are similarly situated in enforcing the right of the corporation or
association.” Fed. R. Civ. P. 23.1(a). “The decision regarding appointment of [Lead
Plaintiff and] Lead Counsel is within the discretion of the Court. The principle that
guides the Court’s decision is which counsel will best serve the interest of the [class of]
plaintiffs.” Horn v. Raines, 227 F.R.D. 1, 3 (D.D.C. 2005) (internal citations omitted).
Courts have considered a variety of factors when appointing a Lead Plaintiff and
Lead Counsel in consolidated derivative actions. Some of these factors include: (1)
the quality of the pleadings; (2) the size of the plaintiff’s financial stake; (3) whether the
plaintiff is an individual or institutional plaintiff; (4) the vigorousness of the prosecution
of the lawsuits; and (5) the capabilities of counsel. In re Bank of Am. Corp. Sec.
Derivative & ERISA Lit., 258 F.R.D. 260, 272 (S.D.N.Y. 2009) (citing pleading quality,
vigor of prosecution, and capabilities of counsel); Dollens v. Zionts, 2001 WL 1543524,
at *5-6 (N.D. Ill. Dec. 4, 2001) (also discussing financial stake and a preference for
institutional plaintiffs). The Court will discuss each factor below.
Quality of Pleadings
Haverhill’s Motion contends that, because it performed an investigation under the
provisions of 8 Delaware Code § 220 and obtained materials from DaVita’s Board of
Directors, its Complaint incorporating those materials is superior to the Complaint filed
in the Clark Action. (ECF No. 52 at 7-10, 13-14.) Clark contends that her original
Complaint was legally sufficient, and that because her Amended Complaint
incorporates the materials Haverhill obtained in its § 220 request, the two pleadings are
substantively equivalent. (ECF No. 55 at 13-15.)
Under Delaware law, applicable to DaVita as a Delaware corporation, a
shareholder derivative suit “seeks to displace the board’s authority” and must either
plead that the board wrongfully refused a demand to bring suit or that it would have
been futile to make such a demand. South v. Baker, 62 A.3d 1, 13-14 (Del. Ch. 2012).
Demand futility may be properly pleaded where the complaint alleges with particularity
that the board participated in or knowingly permitted the alleged “corporate trauma”,
thereby demonstrating the directors’ complicity in that trauma and consequential liability
for a breach of fiduciary duty. Id. at 14. Section 220 investigations can provide
documentation and evidence permitting a shareholder plaintiff to properly allege the
connection between the underlying corporate trauma and the board, though they are
not required where a specific board decision or other particular connection is evident
without such an investigation. Id. at 23.
The Court has reviewed the initial complaints filed in the Clark Action and the
Haverhill Action, and finds that Haverhill’s Complaint makes particular allegations with
respect to the connection between the board and the alleged corporate trauma, while
Clark’s original Complaint makes only general allegations with respect to that
connection. The Court declines to speculate as to Haverhill’s argument that Clark’s
original Complaint may not have survived a motion to dismiss based upon failure to
allege demand futility, but notes that the requirement to plead such allegations with
particularity raises the bar well above that set by Federal Rule of Civil Procedure 8.
See South, 62 A.3d at 23. When comparing the original complaints filed in the two
cases here, the Court finds that the Haverhill Complaint is superior due to the inclusion
of allegations resulting from the documents acquired in Haverhill’s § 220 investigation.
Clark contends that even if her original Complaint was not superior to Haverhill’s
Complaint, her Amended Complaint is substantively equivalent to Haverhill’s, as it
incorporates particularized allegations in reliance on the documentation produced in
Haverhill’s § 220 investigation. (ECF No. 55 at 14-15.) Clark further argues that this
Court’s holding in an unrelated shareholder derivative case permits any unique
information from one complaint to be incorporated into the other, regardless of who is
appointed Lead Plaintiff. (Id. (citing Richey v. Ells, 2013 WL 179234, at *2 (D. Colo.
Jan. 17, 2013)).) Plaintiff’s citation to Richey is misplaced where, unlike in Richey, the
content of the two complaints here differs substantially. Further, Clark’s reliance on the
documentation gained through Haverhill’s § 220 request in her Amended Complaint
could be read as a concession that such information improves the complaint. Thus, the
Court finds that Clark’s subsequent filing of an Amended Complaint does not alter the
finding that Haverhill’s pleading is superior.2
In sum, the Court finds that the “quality of the pleadings” factor weighs in favor of
Haverhill due to the inclusion of particularized allegations gleaned from its § 220
Size of Financial Stake and Institutional Plaintiff Preference
The next two factors, size of financial stake and institutional plaintiff preference,
are considered because they may indicate a party’s relative economic incentive to
represent the class of shareholders. See Dollens, 2001 WL 1543524, at *5
(recognizing Congressional preference for an institutional investor as Lead Plaintiff “due
to the fact that institutional investors are most likely to have the largest financial interest
in the case.”).
Haverhill argues that because it holds a larger number of shares than Clark and
it is an institutional plaintiff, both of these factors weigh in its favor. (ECF Nos. 52 at 14;
60 at 8.) Clark admits that Haverhill holds a larger number of DaVita shares and is an
institutional plaintiff, but argues that neither of these factors should be determinative
and should carry little weight. (ECF No. 55 at 15-16.) Clark contends that because
Haverhill is not a large institutional investor, and its financial stake is relatively small as
a percentage of all outstanding shares of DaVita stock, its institutional status and
Clark further argues that the Court should not give weight to Haverhill’s suggestion
that she copied its Complaint in drafting her Amended Complaint, because Haverhill first
refused to provide Clark with a copy of its Complaint, only later providing a redacted copy.
(ECF No. 55 at 7, 15.) The Court has not considered this contention in comparing the
pleadings under this factor of the analysis. However, the Court notes that after consolidation,
Plaintiffs’ respective counsel are expected to fully cooperate in prosecuting this case, and the
Court will have little patience for unprofessional or obstructionist behavior.
financial investment does not indicate a greater incentive to litigate the case. (Id.)
Haverhill does not counter Clark’s contention that these factors carry little weight,
emphasizing only that they weigh in Haverhill’s favor. (ECF No. 60 at 8-9.)
Because Clark has not stated the number of shares she holds, the Court cannot
quantify precisely the relative financial stakes held by each Plaintiff. However, because
the “institutional investor” factor is relevant only insofar as it represents financial stake,
it is relevant that Haverhill is not a large institutional investor, nor does it hold a large
percentage of DaVita shares. Accordingly, the Court finds that these factors do not
weigh strongly in the analysis here, but to the extent that they carry any weight, they
weigh in favor of Haverhill.
Vigorousness of Prosecution and Capabilities of Counsel
The Lead Counsel analysis includes determining whether one plaintiff has
demonstrated greater “energy, enthusiasm or vigor” in the prosecution of the case, as
well as whether counsel has the capability of successfully prosecuting the case.
Dollens, 2001 WL 1543524, at *4. Some courts have also considered the criteria set
forth in Fed. R. Civ. P. 23(g)(1) for appointing interim class counsel, discussing the work
counsel has done in identifying or investigating potential claims in the action, as well as
counsel’s experience, knowledge of the applicable law, and resources. In re Bank of
Am. Corp. Sec. Derivative & ERISA Litig., 258 F.R.D. at 272; In re Comverse Tech.
Derivative Litig., 2006 WL 3761986 at *2-3 (E.D.N.Y. Sept. 22, 2006).
With respect to the relative capabilities of Plaintiffs’ respective counsel, the Court
finds that both law firms have significant experience in shareholder derivative litigation
and a history of obtaining favorable results. Both have the resources and expertise to
fulfill the role as lead counsel, and are more than qualified to handle this action.
Further, neither party’s oppositional briefs contest the experience or capabilities of the
competing law firm. (See ECF Nos. 52 at 15; 55 at 16-19.) Accordingly, the
“capabilities of counsel” factor is neutral in the Court’s analysis.
However, the Plaintiffs are in disagreement with respect to the “vigorousness of
prosecution” factor, each contending that its counsel has demonstrated greater vigor
than the other in prosecuting its case. Clark contends that because she was the first to
file her case, the Court should find that her counsel acted with greater vigor, while
Haverhill argues that its § 220 request demonstrated superior vigor because its more
thorough investigation made its Complaint more likely to survive a motion to dismiss.
(ECF Nos. 52 at 11-14; 55 at 11-15.)
The Court finds Clark’s “first to file” argument unpersuasive here, where
Haverhill’s delay resulted from its § 220 request, which was made in April 2012, four
months before Clark’s Complaint was filed in August 2012. (See ECF No. 60 at 11.)
The Court again finds Clark’s citation to Richey misplaced, as the Richey decision
considered the “first to file” factor as a tie-breaker where the other factors were evenly
balanced, not as a superseding factor. See Richey, 2013 WL 179234 at *2 (citing
Biondi v. Scrushy, 820 A.2d 1148, 1159 (Del. Ch. 2003) (noting that courts will consider
which action was filed first for lead counsel purpose where “there is a need for an
As discussed above, the Court finds that Haverhill’s Complaint benefitted from its
§ 220 request. This supports a finding that Haverhill’s counsel worked more vigorously
to identify and/or investigate potential claims in the action, weighing in favor of
appointing Scott+Scott as Lead Counsel. See In re Bank of Am. Corp. Sec. Derivative
& ERISA Litig., 258 F.R.D. at 272. Thus, Haverhill’s decision to make a § 220 request
here in an attempt to better substantiate its claim against the Board demonstrated
greater vigor with regard to the prosecution of this case.
In conclusion, the Court finds that all the factors it has considered are either
neutral or weigh in favor of appointing Haverhill as Lead Plaintiff and its counsel,
Scott+Scott, as Lead Counsel.
For the reasons set forth above, the Court ORDERS as follows:
Interested Party Haverhill’s Renewed Motion for Consolidation and Appointment
of Lead Plaintiff and Lead Counsel (ECF No. 54) is GRANTED;
Plaintiff Clark’s Motion to Consolidate Actions and Appoint Lead Plaintiff and
Lead Counsel (ECF No. 55) is GRANTED IN PART and DENIED IN PART;
Civil Action No. 12-cv-2074-WJM-CBS and Civil Action No. 13-cv-1308-WJMMJW are CONSOLIDATED, and henceforth shall jointly be entitled In re DaVita
HealthCare Partners, Inc. Derivative Litigation;
Civil Action No. 12-cv-2074-WJM-CBS shall be the lead case and all future
filings shall be made in this action;
Magistrate Judge Craig B. Shaffer shall be assigned to both of the consolidated
actions, and the cases shall henceforth be numbered as Civil Action No. 12-cv2074-WJM-CBS and Civil Action No. 13-cv-1308-WJM-CBS;
Haverhill Retirement System is DESIGNATED as Lead Plaintiff for the
The law firm of Scott+Scott, LLP is DESIGNATED as Lead Counsel for the
Consolidated Action with Dyer & Berens LLP as Liaison Counsel; and
The Clerk shall docket a copy of this Order in 13-cv-1308-WJM-CBS.
Dated this 7th day of January, 2014.
BY THE COURT:
William J. Martínez
United States District Judge
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