Baker v. McCarthy et al
Filing
66
ORDER granting in part and denying in part 39 Motion to Appoint Counsel; granting 39 Motion to Consolidate Cases; granting 43 Motion to Consolidate Cases; granting 44 Motion Defer Litigation. Signed by Judge Victor A. Bolden on 7/23/2018. (McDonough, S.)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
IN RE FRONTIER COMMUNICATIONS
CORPORATION DERIVATIVE
LITIGATION.
Lead Case No. 3:17-cv-1792 (VAB)
RULING AND ORDER ON MOTION TO CONSOLIDATE, MOTION TO APPOINT
LEAD PLAINTIFF AND APPROVE LEAD COUNSEL, AND MOTION TO DEFER
LITIGATION
Currently pending before the Court are three motions related to this shareholder
derivative lawsuit.
First, Cynthia Graham moved to consolidate In re Frontier Communications Corporation
Derivative Litigation, No. 3:17-cv-1792, with two other cases, Williams v. McCarthy, No. 3:18cv-00826, and Graham v. McCarthy, No. 3:18-cv-00844, as well as to appoint counsel, and to
modify the Court’s Ruling and Order appointing lead plaintiff and lead counsel, ECF No. 34.
Graham Br., ECF No. 39.
Second, Plaintiffs in In re Frontier Communications Corporation Derivative Litigation,
No. 3:17-cv-1792, also moved to consolidate that case with Williams v. McCarthy, No. 3:18-cv00826, and Graham v. McCarthy, No. 3:18-cv-00844. Feldbaum Mot. to Consolidate, ECF No.
43.
Third, nominal Defendant Frontier Communications Corporation (“Frontier”), Individual
Defendants1, and Plaintiffs filed a joint motion to defer litigation of the derivative case until after
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The “Individual Defendants” are Daniel J. McCarthy, Ralph Perley McBride, Donal W. Daniels, Leroy T. Barnes,
Jr., Peter C.B. Bynoe, Diana S. Ferguson, Edward D. Fraioli, Pamela D. A. Reeve, Virginia P. Ruesterholz, Howard
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a ruling on an anticipated motion to dismiss in a related case, In re Frontier Communications
Corporation Securities Litigation, Lead Case No. 3:17-cv-01617-VAB (the “Direct Securities
Action”).2 Mot. to Defer Litig., ECF No. 44.
For the following reasons, the motions to consolidate, ECF Nos. 39, 43, are GRANTED.
The motion to modify the Court’s Ruling and Order and to appoint Ms. Graham as lead plaintiff
and Scott + Scott Attorneys at Law LLP (“Scott + Scott”) as lead counsel, ECF No. 39, is
GRANTED IN PART AND DENIED IN PART. The Court will appoint Ms. Graham as colead plaintiff with Irving Feldbaum and Scott + Scott Attorneys at Law LLP (“Scott + Scott”) as
co-lead counsel with Johnson Fistel, LLP (“Johnson Fistel”). The motion to defer litigation is
GRANTED.
I.
FACTUAL AND PROCEDURAL BACKGROUND
The Court assumes familiarity with the factual and procedural background of this case.
See Order on Mot. to Appoint Lead Pl. and Lead Counsel at 2–5, ECF No. 34.
A.
Factual Allegations
In February 2015, Frontier allegedly announced a plan to acquire wireline operations
from Verizon Communications, Inc. (“Verizon”), for $10.54 billion in cash and assumed debt.
Baker Compl. ¶ 3. Frontier allegedly acquired the wireline in April 2016. Id. ¶ 4.
During the following year, Frontier allegedly disclosed that it had lost millions of dollars
after the acquisition, in part because of non-paying accounts acquired as a part of the Verizon
deal. Id. ¶ 5. Daniel McCarthy, Frontier’s Chief Executive Officer (“CEO”), allegedly claimed
L. Schrott, Mark S. Shapiro, Myron A. Wick, III, John M. Jureller, Mary A. Wilderotter, Mark D. Nielsen, Cecilia
K. McKenney, and Larraine D. Segil.
2
Another related case is pending in the Connecticut Superior Court, In re Frontier Communications Corporation
Shareholder Litigation, Lead Case No. FST-CV-17-6033884-S (the “State Derivative Action”).
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that Frontier would clean up and disconnect those accounts. Id. ¶¶ 6–7. Frontier’s stock dropped.
Id. ¶ 7.
Frontier continued to lose money over the first quarter of 2017. Id. ¶ 8. Ralph Perley
McBride, Frontier’s Chief Financial Officer (“CFO”), explained that the financial loss was partly
due to the company’s efforts to clean up the non-paying accounts. Id. ¶ 9. Frontier’s stock
dropped again. Id. ¶ 9.
The Individual Defendants allegedly caused the nominal defendant, Frontier, to issue
false and misleading statements about its business operations and compliance policies. Id. ¶ 10.
As a result, and as a result of the decline in Frontier’s stock market value, the company allegedly
has lost value. Id. ¶ 11. Frontier’s Board, however, allegedly refuses to initiate litigation against
the Individual Defendants for breaches of fiduciary duties, and Plaintiffs therefore assert this
shareholder derivative lawsuit on its behalf. Id. ¶ 12.
B.
Procedural History
On February 10, 2018, this Court granted a motion to consolidate two cases: Baker v.
McCarthy, No. 3:17-cv-1792, and Feldbaum v. Barnes, No. 3:17-cv-1893. ECF No. 19.
Together, those cases became In re Frontier Communications Corporation Derivative Litigation,
No. 3:17-cv-1792.
On March 22, 2018, the Court granted an unopposed motion to appoint Celeste Baker and
Irving Feldbaum as joint lead plaintiffs, and to approve their choices of: Johnson Fistel as lead
counsel, Diserio Martin O’Connor & Castigliono LLP (“Diserio Martin”) as liaison counsel, and
the Law Offices of Nicholas Koluncich III, LLC as additional counsel for Plaintiffs. Order at 1,
ECF No. 34.
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On April 3, 2018, the parties filed a joint motion to extend the deadline for filing a Rule
26(f) Report until after the filing of an amended complaint in the Federal Direct Securities
Action. ECF No. 36. In order to have reasonable time to review the amended complaint in the
Direct Securities Action, the parties requested that the consolidated complaint in the Derivative
Action be filed on or before May 30, 2018, and the 26(f) Report be filed sixty days after that. Id.
On April 4, 2018, the Court granted the motion. Order, ECF No. 37 (granting motion for
extension of time “for the filing of a Rule 26(f) report to sixty (60) days following the filing of a
consolidated complaint in the Federal Securities Action”).
On May 18, 2018, Ms. Graham, the plaintiff in Graham v. McCarthy, No. 3:18-cv-00844,
filed a Notice of Related Cases. ECF No. 38. On May 24, 2018, she filed a motion to appoint
counsel and modify the March 22, 2018 Ruling and Order on Motion to Appoint Lead Plaintiff
and Approve Lead Counsel, and a motion to consolidate Graham v. McCarthy, No. 3:18-cv00844, In re Frontier Communications Corporation Derivative Litigation, No. 3:17-cv-1792,
and Williams v. McCarthy, No. 3:18-cv-00826. ECF No. 39.
Also on May 24, 2018, Ms. Baker and Mr. Feldbaum filed a motion to consolidate In re
Frontier Communications Corporation Derivative Litigation, No. 3:17-cv-1792, with Williams v.
McCarthy, No. 3:18-cv-00826, and Graham v. McCarthy, No. 3:18-cv-00844. ECF No. 43. That
same day, Ms. Baker, Mr. Feldbaum, Frontier, and the Individual Defendants filed a joint motion
to defer litigation until after a ruling on an anticipated motion to dismiss in the Frontier Direct
Securities Action, In re Frontier Communications Corporation Securities Litigation, No. 3:17cv-01617-VAB. ECF No. 44.
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On June 14, 2018, the Court granted a voluntary dismissal of one of the co-lead plaintiffs,
Ms. Baker, who had passed away. ECF No. 53. Mr. Feldbaum represented that he would
continue to pursue this action on behalf of Frontier. ECF No. 51.
II.
STANDARD OF REVIEW
A district court will consolidate actions that share “common question[s] of law or fact.”
Fed. R. Civ. P. 42(a). “A party moving for consolidation ‘must bear the burden of showing the
commonality of factual and legal issues in different actions, and a district court must examine the
special underlying facts with close attention before ordering a consolidation.’” R.W. Grand
Lodge of Free & Accepted Masons of Pennsylvania v. Meridian Capital Partners, Inc., 634 Fed.
App’x 4, 6 (2d Cir. 2015) (quoting In re Repetitive Stress Injury Litig., 11 F.3d 368, 373 (2d Cir.
1993)). “Differences in causes of action, defendants, or the class period do not render
consolidation inappropriate if the cases present sufficiently common questions of fact and law,
and the differences do not outweigh the interests of judicial economy served by consolidation.”
In re Facebook, Inc., IPO Securities and Derivative Litig., 288 F.R.D. 26, 34 (S.D.N.Y. 2012)
(quoting Kaplan v. Gelfond, 240 F.R.D. 88, 91 (S.D.N.Y. 2007)).
“The appointment of lead plaintiff and lead counsel in a consolidated shareholder
derivative litigation is a matter of discretion.” In re Comverse Tech., Inc. Derivative Litig., No.
06-cv-1849, 2006 WL 3761986, at *1 (E.D.N.Y. Sept. 22, 2006) (citing MacAlister v. Guterma,
263 F.2d 65, 68 (2d Cir. 1958); 9 Wright & Miller, Fed. Prac. & Proc.: Civil 2d § 2385 at 463
(1995)).
The decision to grant a stay of litigation “is incidental to the power inherent in every
court to control the disposition of the causes on its docket with economy of time and effort for
itself, for counsel, and for litigants.” Landis v. N. American Co., 299 U.S. 248, 254 (1936). The
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district court therefore “has broad latitude to determine the scope of discovery and to manage the
discovery process.” EM Ltd. v. Republic of Argentina, 695 F.3d 201, 207 (2d Cir. 2012),
affirmed, 134 S. Ct. 2250 (2014); see also Kaye v. Merck & Co., Inc., 3:10-cv-1546 (RNC), 2014
WL 2002447, at *2 (D. Conn. May 15, 2014) (noting district court’s “inherent discretion to
manage discovery to conserve judicial and litigant resources and avoid prejudice”).
III.
DISCUSSION
A.
Motion to Consolidate
The Court may consolidate actions that “involve a common question of law or fact.” Fed.
R. Civ. P. 42(a); see also R.W. Grand Lodge, 634 Fed. App’x at 6 (holding that district court did
not abuse its discretion when it consolidated claims that had “common questions of fact among
all four consolidated actions which center on the representations that Appellees made in their
investor presentations, quarterly reports, and letters to investors that” affected investors’
financial decisions); Johnson v. Celotex Corp., 899 F.2d 1281, 1284 (2d Cir. 1990) (“Rule 42(a)
of the Federal Rules of Civil Procedure empowers a trial judge to consolidate actions for trial
when there are common questions of law or fact to avoid unnecessary costs or delay.”).
Ms. Graham moves to consolidate In re Frontier Communications Corporation
Derivative Litigation, No. 3:17-cv-1792, with Williams v. McCarthy, No. 3:18-cv-00826, and
Graham v. McCarthy, No. 3:18-cv-00844, arguing that all three are shareholder derivative suits
against nearly the same defendants involving largely the same facts and claims. Graham Mot. to
Consolidate, ECF No. 39. Mr. Feldbaum also moves to consolidate those three cases, also
arguing that all three cases are shareholder derivative actions arising out of the same events and
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against the same defendants. Feldbaum Mot. to Consolidate, ECF No. 43.3 The Court agrees and
grants both motions to consolidate these cases.
The Court has “examine[d] the special underlying facts with close attention,” R.W. Grand
Lodge, 634 Fed. App’x at 6 (quoting In re Repetitive Stress Injury Litig., 11 F.3d 368, 373 (2d
Cir. 1993)), and determines that these three shareholder derivative actions, all based on alleged
misrepresentations and omissions related to Frontier’s acquisition of Verizon’s wireline
operations, should be consolidated.
Each Complaint alleges that the Individual Defendants, who worked at Frontier, breached
their fiduciary duties to the company by making false and misleading statements about whether
the acquisition of Verizon’s wireline operations was successful. Baker Compl. ¶¶ 1–12, 117–32;
Feldbaum Compl. ¶¶ 115–22; Graham Compl. ¶¶ 1–6, 37–46, 78–100; Williams Compl. ¶¶ 1–
11, 96–100. Each Complaint also alleges that any stockholder demand to bring the asserted
claims against the Individual Defendants would be futile. Baker Compl. ¶¶ 97–116; Feldbaum
Compl. ¶¶ 104–14; Williams Compl. ¶¶ 84–94; Graham Compl. ¶¶ 66–77.
Three Complaints also assert that the Individual Defendants’ actions resulted in unjust
enrichment. Baker Compl. ¶¶ 113–38; Feldbaum Compl. ¶¶ 128–31; Williams Compl. ¶¶ 109–
13. And two Complaints assert that the Individual Defendants’ actions resulted in corporate
waste. Baker Compl. ¶¶ 133–44; Feldbaum Compl. ¶¶ 123–27.
Two complaints assert violations of Section 14(a) of the Securities and Exchange Act of
1934 (the “Exchange Act”). Graham Compl. ¶¶ 165–68; Baker Compl. ¶¶ 145–49. And one
Complaint asserts federal securities claims under Section 29(b) of the Exchange Act. Graham
Compl. ¶¶ 165–68.
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Mr. Feldbaum represents that he conferred with counsel for the Individual Defendants, who take no position on
whether to consolidate these cases and do not oppose the motions. Feldbaum Mot. to Consolidate at 2 n.2.
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The Court finds that sufficient common questions of fact and law exist between and
among these four Complaints to consolidate the actions, most importantly that each asserts that
the Individual Defendants breached their fiduciary duties to Frontier, and that a stockholder
demand for the company to bring the asserted claims against the Individual Defendants would be
futile. See Baker Compl. ¶¶ 1–12, 97–132; Feldbaum Compl. ¶¶ 104–22; Graham Compl. ¶¶ 1–
6, 37–46, 66–100; Williams Compl. ¶¶ 1–11, 84–100; see also Fed. R. Civ. P. 42(a) (permitting
a district court to consolidate actions that involve “common question of law or fact”).
Any differences in the specific claims between and among them do not defeat the value
in consolidating these actions so that one shareholder derivative lawsuit against the Individual
Defendants on behalf of Frontier may proceed. See In re Facebook, Inc., IPO Securities and
Derivative Litig., 288 F.R.D. at 34 (“Differences in causes of action, defendants, or the class
period do not render consolidation inappropriate if the cases present sufficiently common
questions of fact and law, and the differences do not outweigh the interests of judicial economy
served by consolidation.”) (quoting Kaplan, 240 F.R.D. at 91).
The Court therefore grants the motions to consolidate these four cases. The cases will
proceed as Lead Case In re Frontier Communications Corporation Derivative Litigation, No.
3:17-cv-1792.
B.
Motion to Appoint Lead Plaintiff and Approve Lead Counsel
1.
Lead Plaintiff
In a shareholder derivative action, unlike a private securities litigation action, the Court is
not required to appoint a lead plaintiff. In re Comverse Tech., Inc. Derivative Litig., 2006 WL
3761986, at *1, (“There is no statutory authority such as the Private Securities Litigation Reform
Act of 1995 (‘PSLRA’) . . . which requires the Court to appoint a lead plaintiff in a shareholder
8
derivative action.”); see also In re Bank of Am. Corp. Sec., Derivative & ERISA Litig., 258
F.R.D. 260, 271 (S.D.N.Y. 2009) (“In complex cases, courts may appoint a plaintiff leadership
structure to coordinate the prosecution of the litigation.”). If the Court appoints a lead plaintiff,
the lead plaintiff must comply with Rule 23.1, which requires that the plaintiff “fairly and
adequately represent the interests of the shareholders or members similarly situated in enforcing
the right of the corporation or association.” Fed. R. Civ. P. 23.1.
Ms. Graham seeks to be appointed lead plaintiff and to replace Mr. Feldbaum, who
currently serves in that role, arguing that she “is the only derivative plaintiff to follow the
directives of Delaware law and conduct a pre-suit investigation into the alleged wrongdoing by
making a books and records demand pursuant to Section 220,” and that, as a result, she “obtained
highly probative confidential Board minutes and materials from the relevant period.” Graham
Mot. at 3. Ms. Graham alleges that these materials show that “Frontier’s Board knew that the
Verizon Acquisition was not bringing the results previously stated, and the materials thus
provide a firm foundation for alleging that Defendants consciously allowed Frontier to
misrepresent its financial performance.” Id.
She argues that the other derivative plaintiffs “eschewed a pre-suit books and records
investigation and instead filed complaints based solely on publicly available information.” Id. at
4. She also argues that the other plaintiffs’ allegations, “that the Board simply ‘had to have
known,’” are likely to be found “insufficient to excuse demand,” and therefore “Plaintiff Graham
is clearly better positioned to lead the Actions and should be appointed as Lead Plaintiff.” Id. at
5; see also id. at 6 (“[O]nly the Graham Complaint relies on confidential Frontier Board meeting
minutes and materials to plead with particularity the involvement of Frontier’s Board with the
Company’s misrepresentation of the success of the Verizon Acquisition.”); id. at 11 (“Plaintiff
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Graham asks the Court to intercede here because the other plaintiffs and their counsel hastily
filed litigation, bypassing the favored Section 220 request process.”).
Mr. Feldbaum opposes Ms. Graham’s motion to be appointed lead plaintiff. Opp. to
Graham Mot., ECF No. 52. Mr. Feldbaum argues that he and Johnson Fistel “have already
exhibited leadership and have demonstrated a willingness and ability to lead this litigation[.]” Id.
at 1, 4. Mr. Feldbaum argues that he and his attorneys “took steps to organize the cases and put a
leadership structure in place so as to facilitate discussions with defense counsel,” “undertook
discussions with both defense counsel and counsel in the State Derivative Action to determine
the best course of action for the Company,” and believe that “the best course of action for the
Company was to agree to defer this litigation in favor of the Federal Securities Action assuming
the Consolidated Derivative Action was not merely being frozen in place.” Id. at 5–6. Mr.
Feldbaum argues that his Complaint “provides more comprehensive allegations regarding the
fallout surrounding the Company’s acquisition of . . . wireline broadband, voice, and video
business and statewide fiber network services to residential, commercial, and wholesale
customers in Connecticut.” Id. at 7.4
Mr. Feldbaum also argues that Ms. Graham’s books and records investigation should not
justify appointing her lead plaintiff because, first, under Delaware law, “a shareholder who
makes a § 220 inspection demand is not necessarily a more adequate derivative plaintiff than one
who does not.” Id. at 9 (citing Pyott v. La. Mun. Police Emps.’ Ret. Sys., 74 A. 3d 612, 618 (Del
2013). Moreover, Mr. Feldbaum argues, “any purported advantage Plaintiff Graham might enjoy
from [her] receipt of Section 220 documents is temporary at best and does little to advance the
4
Mr. Feldbaum’s brief mentions the acquisition of AT&T’s wireline operations, but all four Complaints allege that
Frontier acquired Verizon’s wireline operations. The Court assumes that in the forthcoming consolidated complaint,
any discrepancies about the acquisition will be resolved.
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case or the interest of the Company given that the Proposed Deferral Order, if granted, will
entitle Lead Plaintiff Feldbaum and Johnson Fistel to whatever documents Scott + Scott received
through its records request, as well as the additional benefits discussed herein.” Id. at 11–12.
Here, while the Court agrees that Ms. Graham adds value to this lawsuit, going forward,
the lawsuit will be best served by her serving jointly with Mr. Feldbaum. Although performing a
books and records investigation does not guarantee that a plaintiff will become a lead plaintiff,
see Pyott, 74 A.3d at 618 (“We reject the ‘fast filer’ irrebuttable presumption of inadequacy.”), a
books and records investigation may put a plaintiff in a position to plead sufficiently particular
facts to overcome a motion to dismiss. See South v. Baker, 62 A.3d 1, 6 (Del. Ch. 2012)
(“Because a plaintiff asserting a Caremark claim must plead facts sufficient to establish board
involvement in conscious wrongdoing, our Supreme Court has admonished stockholders
repeatedly to use Section 220 of the General Corporation Law, 8 Del. C. § 220, to obtain books
and records and investigate their claims before filing suit.”). As a result, based on the document
productions that Ms. Graham obtained from Frontier, she is able to allege that Frontier’s Board
knew details about the company’s poor financial performance after the wireline acquisitions,
including that there was a risk that Frontier would breach its credit agreements by taking on too
much debt, and that the Board had access to revenue projections that showed that the Company
needed to improve. Graham Compl. ¶¶ 52–54.
At the same time, Mr. Feldbaum has so far effectively led this case by managing its pace
relative to the direct securities case against Frontier, In re Frontier Communications Corporation
Securities Litigation, Lead Case No. 3:17-cv-01617-VAB. See ECF No. 36 (managing, in
coordination with Defendants, schedule relative to pace of direct action); ECF No. 44 (same).
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The Court thus finds that Ms. Graham’s investigation into Frontier’s books and records
will assist the prosecution of this case, and assist Mr. Feldbaum as this lawsuit proceeds. Her
motion to modify the Court’s first Order appointing Mr. Feldbaum and Ms. Baker co-lead
plaintiffs therefore is granted in part and denied in part and Ms. Graham is appointed as co-lead
plaintiff with Mr. Feldbaum.
2.
Lead Counsel
In determining whether to approve a lead plaintiff’s selection for lead counsel, the Court
must consider whether that lead counsel is “best able to represent the interests of the class.” Fed.
R. Civ. P. 23(g)(2). “Courts consider: (i) the work counsel has done in identifying or
investigating potential claims in the action; (ii) counsel’s experience in handling class actions,
other complex litigation, and the types of claims asserted in the action; (iii) counsel’s knowledge
of the applicable law; and (iv) the resources that counsel will commit to representing the class.”
In re Bank of Am. Corp. Sec., Derivative & ERISA Litig., 258 F.R.D. 260, 272 (S.D.N.Y. 2009)
(citing Fed. R. Civ. P. 23(g)(1)(A)). Courts may consider “any other matter pertinent to counsel’s
ability to fairly and adequately represent the interests of the class,” Fed. R. Civ. P. 23(g)(1)(B),
including “(1) the quality of the pleadings; (2) the vigorousness of the prosecution of the
lawsuits; and (3) the capabilities of counsel,” In re Comverse Tech., Inc. Derivative Litig., 2006
WL 3761986, at *2–3.
Courts may also consider “whether counsel ‘are qualified and responsible, . . . [whether]
they will fairly and adequately represent all of the parties on their side, and . . . [whether] their
charges will be reasonable.’” In re Bank of Am. Corp. Sec., Derivative & ERISA Litig., 258
F.R.D. at 272 (quoting In re Bear Stearns, 08 M.D.L. No. 1963 (RWS), 2009 WL 50132, at *11
(S.D.N.Y. Jan. 5, 2009)) (internal citation omitted). Courts also have appointed co-lead counsel
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where this arrangement adds appropriate value to the case. See In re Bank of America Corp.
Securities, Derivative and Employment Retirement Income Security Act (ERISA) Litig., 258
F.R.D. 260, 273 (S.D.N.Y. 2009) (“[A]ppointment of multiple counsel is routine and widely
accepted.”).
Here, consistent with the reasoning for adding Ms. Graham as a co-lead plaintiff with Mr.
Feldbaum, the Court will appoint Scott + Scott as co-lead counsel with Johnson Fistel.
C.
Motion to Defer Litigation
“‘The decision whether to issue a stay is firmly within a district court’s discretion,’ and in
balancing the relevant factors ‘the basic goal is to avoid prejudice.’” Kaye, 2014 WL 2002447, at
*2 (quoting United Rentals, Inc. v. Chamberlain, 3:12-cv-1466 (CSH), 2013 WL 6230094, at *3
(D. Conn. Dec. 2, 2013)).
Mr. Feldbaum filed a joint motion with the Individual Defendants to defer litigation in
this case until after the Federal Direct Action has proceeded through the motion to dismiss stage.
Mot. to Defer, ECF No. 44. The parties argue that “[t]he Federal Securities Action and the
Federal Derivative Action arise out of substantially similar operative facts, as both actions allege
that the Individual Defendants made false and misleading statements on behalf of the Company
related to the Company’s agreement to acquire certain wireline operations of Verizon
Communications, Inc., and its subsequent completion of that acquisition. Compl. ¶ 7.
The parties also argue that another case arises out of substantially the same alleged
misconduct, a derivative action currently pending in Connecticut Superior Court. Id. ¶ 9. They
argue that, “in the interests of preserving the Company’s and the Courts’ resources, efficient and
effective case management, and moving the case expeditiously towards resolution,” litigation on
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the case should be deferred until the Court rules on an anticipated motion to dismiss in the Direct
Action. Id. ¶ 12.
Ms. Graham opposes the motion to defer litigation. Opp. to Mot. to Defer, ECF No. 47.
She argues that “a stay of litigation is an extraordinary remedy that should only be granted in
rare circumstances,” and that the moving parties here have not justified a need to stay the
litigation. Id. at 3. She argues that continuing with this litigation will be more efficient because
the Court will need to decide demand futility as a threshold matter, “and it can easily be decided
on the same track as the motion to dismiss in the Securities Action.” Id. at 4. She also argues that
there are fundamental differences between the direct action and the derivative action. Id. at 5
(“The actions, like all related derivative and securities actions, present disparate claims, issues,
remedies and legal standards, and involve largely different parties and different counsel.”).
Finally, she argues that delaying resolving the demand futility issue does not preserve resources,
because the Court will need to, at some point, adjudicate the issue. Id. at 8. And she argues that
“the Company and its plaintiff-shareholders will be compromised by a delay in the Derivative
Action.” Id. at 9. The Court disagrees.
Exercising its discretion in the management of cases, see Deitz v. Bouldin, 136 S. Ct.
1885, 1892 (2016) (noting the district court’s inherent authority to manage its docket with a
“view toward the efficient and expedient resolution of cases”), the Court agrees that the path of
this litigation, as negotiated by Mr. Feldbaum, currently lead plaintiff and, Johnson Fistel,
currently lead counsel, and as agreed to by Defendants, is appropriate. See Feldbaum Opp. to
Graham Mot. at 6 (“The Proposed Deferral Order, if entered, will (i) preserve resources for the
Company, the parties, and the respective Courts by ensuring the Related Actions will proceed
efficiently . . . .”); see also id. (“Importantly, the joint deferral in no way prevents Lead Plaintiff
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Feldbaum [and] Johnson Fistel from filing a consolidated complaint while the Consolidated
Derivative Action is deferred.”). The Court therefore will grant the stay requested.
IV.
CONCLUSION
For the foregoing reasons, the motions to consolidate, ECF Nos. 39, 43, are GRANTED.
The motion to modify the Court’s ruling and order and to appoint Ms. Graham as lead plaintiff
and Scott + Scott as lead counsel, ECF No. 39, is GRANTED IN PART AND DENIED IN
PART. The Court will appoint Graham as co-lead plaintiff with Irving Feldbaum and Scott +
Scott Attorneys at Law LLP as co-lead counsel with Johnson Fistel, LLP. The motion to defer
litigation is GRANTED.
SO ORDERED at Bridgeport, Connecticut, this 23rd day of July, 2018.
/s/ Victor A. Bolden
THE HONORABLE VICTOR A. BOLDEN
UNITED STATES DISTRICT JUDGE
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