IN RE: VONAGE INITIAL PUBLIC OFFERING (IPO) SECURITIES LITIGATION

Filing 107

OPINION. Signed by Judge Freda L. Wolfson on 6/3/09. (lk)

*NOT FOR PUBLICATION

U N I T E D STATES DISTRICT COURT D IS T R I C T OF NEW JERSEY

: IN RE VONAGE INITIAL PUBLIC OFFERING (IPO) SECURITIES : L IT IG A T IO N _______________________________: W O L F S O N , District Judge:

C iv il Action No. 07-177 (FLW) OPINION

On April 6, 2009, the Court rendered its decision on two motions to dismiss f ile d by the Underwriter Defendants1 and the Vonage Defendants,2 (collectively, " D e f e n d a n ts " ) which, inter alia, dismissed Counts I - V of the Consolidated A m e n d e d Complaint (the "Amended Complaint"). However, despite the fact that th e original consolidated complaint had already been amended, the Court permitted th e appointed lead plaintiff, the Zyssman Group ("Lead Plaintiff") to once again a m e n d its Amended Complaint, but with specific limitations and instructions. Lead P la in tif f now moves for reconsideration/clarification of the Court's decision; s p e c if ic a lly, Lead Plaintiff requests the Court to permit it to re-plead its Section 11
1

The Underwriter Defendants include Citigroup Global Markets Inc., Deutsche Bank Securities Inc., UBS Securities LLC, Bear Sterns & Co., Inc., Piper Jaffray & Co., and Thomas Weisel Partners LLC.
2

The Vonage Defendants include Vonage Holdings Corporation ("Vonage") and individual defendants, Jeffrey A. Citron, Michael Snyder, John S. Rego, Peter Barris, J. Sandford Miller, Harry Weller, Sharon A. O'Leary, Betsy S. Atkins, David Morton, Obit Gadiesh, John J. Roberts, Hugh Panero, and Thomas J. Ridge.

and 12 claims under a negligence standard, thus, obviating the need to plead with p a rtic u la rity. Next, Lead Plaintiff requests the Court to re-visit the claim dismissed b y the Court regarding Vonage's misrepresentation of its network based on in te rn a lly developed software. For the reasons that follow, the Court permits Lead P la in tif f one last opportunity to either re-plead its Section 11 and 12 claims based u p o n negligence or plead in accordance with the Court's previous decision. Lead P la in tif f must file its seconed amended consolidated complaint within 15 days of the d a te of the Order accompanying this Opinion. However, Lead Plaintiff is not p e rm itte d to re-allege its claim regarding Vonage's internally developed software. BACKGROUND AND PROCEDURAL HISTORY F o r the purposes of this motion, the Court shall refer to and incorporate facts s e t forth in its Opinion dated April 6, 2009. Lead Plaintiff, on behalf of other in v e sto r plaintiffs, filed the Amended Complaint on November 19, 2007. On J a n u a ry 18, 2008, the Vonage Defendants and the Underwriter Defendants moved to dismiss the Amended Complaint. After oral argument held in October 2008, on A p ril 6, 2009, the Court dismissed all of Lead Plaintiff's Section 11and 12 claims (C o u n ts I - V) relating to allegations of misrepresentation and/or omission of V o n a g e 's Prospectus and the Registration Statement ("Offering Documents"). The C o u rt reasoned these claims were not pled as negligence claims and thus, Lead P la in tif f failed to plead these claims with the requisite specificity under Fed. R. Civ.

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P. 9(b) as required by Third Circuit case law. However, the Court provided Lead P la in tif f an opportunity to cure the deficiencies with respect to its allegations p e rta in in g to Vonage's facsimile service and intellctual property patents. The Court a ls o provided specific instructions and limitations on how these claims should be re -p le a d . In this motion, Lead Plaintiff is seeking an opportunity to plead its Section 11 a n d 12 claims under a negligence theory rather than fraud. In addition, Lead P la in tif f requests leave to revive its intellectual property claim that Vonage made m is re p re s e n ta tio n s by stating in the Offering Documents that its network is based o n software that was developed internally. The Court shall turn to each of these re q u e s ts below. DISCUSSION This Court has repeatedly held that relief by way of a motion for re c o n s id e ra tio n is "an extraordinary remedy" that is to be granted "very sparingly." Pegasus Consulting Group v. Admin. Review Bd. for the Dept. of Labor, 2008 U.S. D is t. LEXIS 27541, at *7-8 (D.N.J. Mar. 31, 2008); Osteotech, Inc. v. Regneration T e c h s , Inc., 2009 WL 235222, at *1 (D.N.J. Jan. 30, 2009); see also Interfaith Cmty. O rg . v. Honeywell Int'l, Inc., 215 F. Supp. 2d 482, 507 (D.N.J. 2002). While the F e d e ra l Rules of Civil Procedure do not expressly recognize motions for " re c o n s id e ra tio n ," United States v. Compaction Sys. Corp., 88 F.Supp. 2d 339, 345

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(D.N.J. 1999), Local Civil Rule 7.1(I) allows a party to seek reconsideration of a c o u rt's decision if there are "matters or controlling decisions which counsel believes th e Judge ... has overlooked." L. Civ. R. 7.1(I). A timely motion for reconsideration m a y only be granted upon a finding of at least one of the following grounds: "(1) an in te rv e n in g change in the controlling law; (2) the availability of new evidence that w a s not available when the court granted the motion . . . ; or (3) the need to correct a clear error of law or fact or to prevent manifest injustice.'" Max's Seafood Café v . Quinteros, 176 F.3d 669, 677 (3d Cir. 1999). Indeed, a "party seeking reconsideration must show more than a disagreement w ith the court's decision," Panna v. Firstrust Sav. Bank, 760 F. Supp. 432, 435 (D .N .J . 1991), and will fail to meet its burden if it merely presents "a recapitulation o f the cases and arguments considered by the Court before rendering its original d e c isio n ." Elizabethtown Water Co. v. Hartford Casualty Ins. Co., 18 F. Supp. 2d 4 6 4 , 466 (D.N.J. 1998) (quoting Carteret Sav. Bank, F.A. v. Shushan, 721 F. Supp. 7 0 5 , 706 (D.N.J. 1989)). The Court will only grant such a motion if the matters o v e rlo o k e d might reasonably have resulted in a different conclusion. Bowers v. N a t'l Collegiate Athletic Assoc., 130 F. Supp. 2d 610, 613 (D.N.J. 2001). In sum, it is improper on a motion for reconsideration to "ask the Court to rethink what it h a [ s] already thought through ­ rightly or wrongly." Oritani Sav. & Loan Ass'n v. F id e lity & Deposit Co., 744 F. Supp. 1311, 1314 (D.N.J. 1990)(citations omitted).

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Rather than following the Court's instructions, Lead Plaintiff files this motion f o r reconsideration or clarification asking for leave to amend its Section 11 and 12 c la im s based upon negligence. Since the inception of this action, Lead Plaintiff's C o m p la in t and Amended Complaint were primarily predicated upon alleged f ra u d u le n t omissions and misrepresentations in the Offering Documents. In fact, th e Court found the language of the allegations amounts to knowing and intentional c o n d u c t. While Lead Plaintiff fails in this motion to offer any reasons why the C o u rt's decision is incorrect or to demonstrate how the Court overlooked any issues p re s e n te d in the parties' briefing, the Court will grant Lead Plaintiff's request to p le a d its claims in negligence in light of repeated representations made by Lead P la in tif f in this briefing and during oral argument that it had so intended since the b e g in n in g of this case. At this juncture, allowing Lead Plaintiff to pursue its claims ro o te d in negligence would not result in any prejudice to Defendants since discovery h a s not begun and this case is in its infancy. However, it should be noted that the Court would have to undertake a strained re a d in g of the record to discern a negligence theory from Lead Plaintiff's Section 1 1 and 12 claims. Indeed, given the gravamen of Lead Plaintiff's Amended C o m p la in t, it is inexorable that Plaintiff's case lies in fraudulent misrepresentations, n o t careless omissions. Nevertheless, should Lead Plaintiff choose to base its c la im s on negligence, the Court cautions Lead Plaintiff that simply by employing

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the word "negligent" throughout the allegations will not suffice. Rather, the new c la im s would be analyzed in accordance with the nature of the claims themselves, n o t by some "magic" words or phrases. Consequently, if these claims are still g ro u n d e d in fraud and insufficiently pled, they will be dismissed. Furthermore, L e a d Plaintiff may not, if it now chooses to plead the claims in negligence and these c la im s are found to be inadequate, then move again to re-plead the claims based on f ra u d . In other words, this is Lead Plaintiff's last chance to plead these claims. N e x t, Lead Plaintiff requests the Court to reconsider its ruling regarding the d e v e lo p m e n t of Vonage's network. Specifically, Lead Plaintiff maintains that V onage misrepresented that its network was based on internally developed software. In that connection, the Court, in its Opinion, rejected those allegations by holding th a t such statements in the Offering Documents could not be misleading because " s o f tw a re can be internally developed and yet infringe on a patent already d e v e lo p e d ." Nothing Lead Plaintiff has presented in this motion demonstrates that th is holding is legally erroneous. Certainly, the Court did not, and neither did Lead P la in tif f suggest, overlook these allegations in the Amended Complaint. Moreover, L e a d Plaintiff has failed to offer any explanation why the Court's decision would re s u lt in manifest injustice. Instead, Lead Plaintiff expresses a general disagreement w ith the Court's holding, which is improper on a motion for reconsideration. Accordingly, Lead Plaintiff's request on this issue is denied.

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CONCLUSION L e a d Plaintiff shall have fifteen (15) days from the date of the Order a c c o m p a n yin g this Opinion to file its second amended consolidated complaint. In s o doing, Lead Plaintiff must amend its Section 11 and 12 claims based on either n e g lig e n c e or fraud and it is advised to bear in mind the Court's concerns expressed in this Opinion and proceed accordingly.

Dated: June 3, 2009 /s/ Freda L. Wolfson Freda L. Wolfson, U.S.D.J.

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