Brian Roffe Profit Sharing Plan et al v. Facebook, Inc. et al
Filing
120
OPINION & ORDER re: (39 in 1:12-cv-04215-RWS, 37 in 1:12-cv-04763-RWS) MOTION to Sever filed by Lawrence Corneck, Eugene Stricker. Based upon the conclusions set forth above, the Exchange Act Plaintiffs' motion to sever is denied. (Signed by Judge Robert W. Sweet on 8/10/2013) Filed In Associated Cases: 1:12-md-02389-RWS et al.(cd)
CT COURT
UNITED STATES 01
SOUTHERN DISTRICT OF NEW YORK
----------- ---------------- -------x
IN RE FACEBOOK, INC., IPO SECURITIES AND
DERIVATIVE LITIGATION,
OPINION & ORDER
MOL No. 12 389
-----x
Case Relates to:
NO.
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NO.
12-CV-4081
12-CV-4099
12-CV-4131
12-CV-41S0
12-CV-41S7
12-CV-4184
12-CV-4194
12-CV-42lS
12-CV-42S2
12-CV-4291
12-CV-4312
12-CV-4332
12-CV-4360
12-CV-4362
12-CV-4S51
12-CV-4648
NO.
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12-CV-4763
12-CV-4777
12-CV-SS11
12-CV-7S42
12-CV-7S43
12-CV-7S44
12-CV-7S4S
12 CV-7S46
12-CV-7S47
12-CV-7S48
12-CV-7SS0
12-CV-7S51
12-CV-7552
12-CV-7586
12-CV-7587
... ..
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DOCU~V)
ELECTRO!"
DOC #:
DATE
FlLED:-JEB;B=_,
A P PEA RAN C E S:
cker
HARWOOD FEFFER LLP
488 Madison Avenue
New York, NY 10022
By:
Joel C. Feffer, Esq.
Samuel K. Rosen, Esq.
LAW OFFICES OF JAMES V. BASHIAN, P.C.
500 Fi h Avenue
New York, NY 10110
By:
James V. Bashian, Esq.
1
----- ..
,"
...
"'- ~-.
t
for the Underwriter Defendants
DAVIS POLK & WARDELL LLP
450 Lexington Avenue
New York, NY 10017
By:
James P. Rouhandeh, Esq.
Charles S. Duggan, Esq.
Andrew Ditchfie , Esq.
Att
for the Facebook Defendants
KIRKLAND & ELLIS LLP
601 Lexington Avenue
New York, NY 10022
By:
Andrew B. Clubok, Esq.
Brant Warren
shop, Esq.
WILLKIE FARR & GALLAGHER LLP
1875 K Street, N.W.
Washington, DC 20006
Richard D. Bernstein, Esq.
Todd G. Cosenza, Esq.
Att
the Lead Plaintiffs
BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP
1285 Avenue of the Americas
New York, NY 10019
By:
Max W. Berger, Esq.
Steven B. Singer, Esq.
John J. Rizio-Hamilton
LABATON SUCHAROW LLP
140 Broadway
New York, NY 10005
By:
Thomas A. Dubbs, Esq.
James W. Johnson, Esq.
Louis Gottlieb, Esq.
2
Sweet, D.J.
aintiffs Lawrence Corneck and Eugene Stricker (
"Exchange Act
aintiffs") have moved to sever their actions,
Civil Actions Nos. 12 Civ. 4215 and 12 Civ. 4663, pursuant to
Federal Rules of Civil Procedure.
Rule 21 of
They also seek
the consolidation of their actions, appointment as
plaintiffs in the newly consoli
lead
ed action, and the appointment
of their section of counsel for
ir class.
Defendants Morgan Stanley & Co. LLC, J.P. Mo
ties LLC and Goldman, Sachs
Underwriters De
&
Co.
(col
ively, the "Lead
s"); defendants
k,
Inc.
("Facebook"), Mark Zuckerberg, David A. Ebersman, David M.
llane, Marc L. Andreessen, Erskine B. Bowles, James W.
Breyer, Donald E. Graham, Reed Hastings
Peter A.
1
(together with the Lead Underwriter Defendants, "Defendants");
and lead plaintiffs the North Carolina Department of State
Treasurer on behalf of the No
Carolina Retirement Systems,
Banyan Capital Master Fund Ltd., Arkansas Tea
System, and the Fresno County Empl
r Retirement
s' Retirement Association
(collectively, the "Lead Plaintiffs") oppose the Exchange Act
aintiffs' motion.
3
Upon the facts and conclusions set for the below, the
motion is
I. Prior Proceedings and Facts
cts and prior
are set out in
underlying
s action
------------------------------------------------~
, 12
MDL No. 2389, 288 F.R.D. 26 (S.D.N.Y. 2012), familiarity with
which is assumed.
action
Accordingly, only facts relevant to t
s
11 be provided below.
On December 6, 2012, this Court consol
thirty
shareholder class actions asserting s
one
at
cIa
arising from Facebook's initial public of
(the "IPO"), including actions asserting claims
Securit
by
r the
"Securities Act") and actions filed
s Act of 1933
Exchange Act Pl
ties law
if
asserting claims
the
s Exchange Act of 1934 (the "Exchange Act").
~~~~k,
See In re
288 F.R.D. at 36.
Twenty-nine
these putative class actions asserted
claims under Sections 11, 12 (a) (2) and 15 of t
Securities Act
st Facebook, certain of its senior executives and directors
the underwriters
the IPO.
4
The rema
two actions
Lead Unde
ng claims aga
asserted inside
Defendants under
ction 20A of the
er
ities Exchange Act.
At
that time, the Exchange Act Plaintiffs argued that the two
Exchange Act
should not be consolidated and that
should be
to bring their claims in a separate class
action.
See Dkt. Nos. 7 and 24 fi
y
in No. 12 Civ. 4215).
er considering the
ies' arguments,
ordered the consolidation of all
Court
class actions asserting
federal securities law claims, including the Securities Act and
Exchange Act cases, and appo
the Lead Plaintiffs to direct
the prosecution of the single consolidated class proceeding, In
accordance
(" PSLRA")
th the Private S
"Consolidated Se
Facebook, 288 F.R.D. at 36, 41.
reasoned
actions
ties Litigation Re
ties Action") .
Specifically, t
"involve putat
both sets of cIa
seek relief on
Sf
Court
class
arising out of the same
series of events, and assert claims under
Id. at 35.
In re
If of similar classes, asserted
against some of the same
laws."
Act
ral securities
Thus, the Court held that there was no
reason to allow two separate class action to
under
different leadership structures, explaining t
"[t]o reject
consoli
ion would unnecessarily create two
parallel securities lit
ion cases with dif
5
stinct and
plaintiffs
and different leadership."
Id. at 35-36.
On February 28, 2013, the
ad Plaintiffs filed a
"Consol
consolidated class action compla
Complaint") .
(Dkt. No. 71).
claims under the Securit
The Cons
Act Plaintiffs filed
the instant motion seeking to sever
s Action.
also seek to assert the
action for which they
II.
ir actions from the
Exchange Act Plaintiffs
Act claims in a separate class
appointed lead plaintiffs.
d
motion was heard and mar
Complaint asserts
s Act only.
On April 16, 2013,
Consolidated Securit
ted
The
lly submitted on May 29, 2013.
The Applicable Standard
Federal Rules of Civil Procedure
Rule 21 of t
permits a court to "sever any claim against a party."
Civ. P. 21.
to
"
Fed. R.
sion whether to grant a several motion is
sound discretion of the trial court."
State of
N.Y. v.
ckson Bros.
1988) i
Wausau Bus. Inc. Co. v. Turner Constr. Co., 204
Inc.
840 F.2d 1065, 1082 (2d Cir.
F.R.D. 248, 250 (S.D.N.Y. 2001). "Courts may order a
severance when it will serve the ends of justice
6
e 21
fu
r
prompt and efficient disposition of litigation."
T.8.1. 27,
inc. v. Berman Enters. Inc., 115 F.R.D. 252, 254
(S.D.N.Y.
1987); see also In re Methyl Tertiary Butyl
--~
,247 F.R.D. 420, 427
r Prods.
(S.D.N.Y. 2007)
("Seve
ng the
claims of the non State plaintiffs is warranted due to
iples of judicial efficiency and fundamental fairness; it
facilitates the settlement of the claims by non-State
plaintiffs, serves judicial economy, and avo
fendants who properly removed the
pIa
s prejudic
aims of t
the
non-State
iffs.").
III. Discussion
Exchange Act Plaintif
contend that the
Plaintiffs' decision to assert only Securities Act claims in t
Consolidated Securities Action
language of
iled to comply with "
s Court's order that they were to be included."
(Pl. Memo. at 1).
failure to include
They also maintain
the Lead
aintiffs'
Exchange Act claims effectively severs
common issues of law nexus
Complaint and
plain
the Consolidated
Exchange Act Plaintiffs' compla
s.
Defendants and Lead Plaintiffs, on the other hand,
contend that no mandate was issued by
7
s Court
recting
Exchange Act
Complaint.
aims to be included in the Consolidated
They aver that the Lead Plaintiffs appropriately
exercised their de
PSLRA, which
sion-making authority as vest
s the court-appointed lead
authority to make strat
by the
aintiffs the sole
c decisions on behalf of the class.
To begin with, while the Exchange Act Plaintiffs
contend that the "plain language" of this Court's consolidation
order states that their cIa
consol
"were to be included" in any
ion complaint, the Court held that the decision to
bring those claims were solely within Lead Plaintiffs'
aut
ty.
ifically,
of which
Court held t
aims to assert in t
t "the determination
consolidated compla
will be
determined by the Court-appointed lead plaintiff, who is charged
with acting in the
st interest of all class members."
In re
Facebook, 288 F.R.D. at 36 (citing to In re Gen. Elec. Sec.
Liti
No. 09 Civ. 1951(DC), 2009 WL 2259502, at *3 (S.D.N.Y.
July 29, 2009)
(noting that t
lead
aintiff could reso
any
difference in an action through the filing of a consolidated
complaint and preserve "the tone and direction of the
lawsuit.").
Thus, there was no mandate by this Court to include
the Exchange Act claims
the Consolidated Complaint.
Consistent with this Court's holdi
8
,courts in
is
Circu
aintiff has the
have consistently held that a lead
to pursue on
sole authority to determine what cla
class.
lf of
The Second Circuit has held that the PSLRA's 1
plaintiff provisions are a mandate by Congress to vest the 1
plaintiff with authority "to exercise control over the
1
igation as a whole."
Hevesi v. Citigroup, Inc., 366 F.3d 70,
83 n.13 (2d Cir. 2004).
Thus, "any requirement that a different
lead plaintiff be appointed to bring every single avai
claim would contravene the main purpose of having a lead
plaintiff - namely to empower one or several investors with a
major stake in the litigation to exercise control over t
lit
Offeri
ion as a whole."
Sec. Liti.
(stating t
Id.
ing to In re Init
214 F.R.D. 117, 123 (S.D.N.Y. 2002)
"[t]he only other possibil
y - that the court
should cobble together a lead plaintiff group that
to sue on all poss
1 Pub.
e causes of action - has
repeatedly by courts in this
s standing
en rejected
rcuit and undermines the purpose
of the PSLRA.").
In addition, the long history of the Bank of Ame
litigation and the decisions by
Hono
ca
e Denny Chin and the
Honorable P. Kevin Castel are particularly instructive to the
instant case.
In In re Bank of Am.
Deriv. &
------------------------~------~------------~~
Litig., No. 09 MD 2058, 2010 WL 1438980, at *1-2
9
(S.D.N.Y. Apr.
9, 2010)
(hereina
aintiffs initially
er "BoA I"), the lead
elected to sue only on behalf of stock ho
cIa
on behalf of options holders
After
lead plaintiffs fil
rs, and not to bring
bondho
rs.
their consolidated complaint,
several individual plaintiffs sought to file
rate class
actions asserting claims on behalf of options hoI
bondholders.
Id.
plaintiffs
See id.
Relying on Hevesi
rs and
Judge Chin held that these
ain separate class actions
d not ma
e:
[I]n a securities class action, a 1
plaintiff is
empowe
to control the management of t
litigation
as a whole, and it is within
lead plaintiff's
authority to decide what claims to assert on behalf of
class.
. Lead
intiffs have the autho ty to
decide what
aims to assert on behalf of securities
holders.
Permitting other plaintiffs to bring
addit
I class actions now, with additional lead
plaintiffs and additional lead counsel, would
interfere with Lead PI
iffs'
lity to authorize
and manage the Consol
Secur ies Actions.
Id. at *2.
After Judge Chin's decision, the lead plaintiffs later
included certain options claims in an amended consoli
compla
,but
grounds.
See In re
claims were largely
smissed on standing
k of Am. Co
Deriv. & ERI
Liti ., No. 09 MD 2058, 2011 WL 3211472, at *14
29, 2011).
Lead plaintif
dec
10
, for st
(S.D.N.Y. July
ic reasons,
not to add a
standing to bring t
plaintiff wi
claims that had been dismissed, thus finally dete
assert those
bring a
ions claims.
Anot
were no longer
should now
r plaintiff then sought to
prosecuted, a
Der
iffs had
See In re Bank of Am. Corp.
. 29, 2011)
inafter "BoA
II~)
Judge Castel, to whom the case had
after Judge Chin's appo
the options pIa
class action.
plaintiff.
.
transferred
to the Second Circuit, also
iff's attempt to bring a separate
As the court held, "[s]uch tactical decisions
[about which claims to assert] are the
. Such a
ive of a lead
ision is with
the lead plaintiff's
prerogative 'to exercise control over the I
ation as a
Id. at *1 (quoting Hevesi, 366 F.3d at 82, n.13).
Judge Castel further reasoned that if t
pe
a
. & ERISA Liti ., No. 09 MD 2058, 2011 WL 4538428
(S.D.N.Y.
whole.'~
that he
i
rmitted to do so because lead
decided not to pursue those cIa
reject
ning not to
e class action on behalf of the options holders
whose cIa
Sec.
options
options holders were
tted to bring a separate class action, such a res
not only contravene
t would
PSLRA, but lead to a landscape in which:
. any consolidated securities fraud class action
[would] carry with it a corresponding ecosystem of
separate class actions seeking relief on behalf of
11
s whose claims vary from the lead
securit s ho
ions
a
iff's] approach invites
plaintiffs.
iven litigation that the PSLRA
the type of 1
would likely promote near-endless
seeks to avoid,
skirmishes about securities holders who fall outside a
class definit
Id. at *2.
Following the BoA II
sought leave to file an
inion, the options plaintiff
erlocutory appeal.
See In re Bank of
Am. Corp. Sec., Deriv. & ERISA Litig., No. 09 MD 2058, 2012 WL
1308993 (S.D.N.Y. Apr. 16, 2012).
Castel denied this
request on the ground
law that a litigant may
is settl
not assert a separate class action to
ing claims that the lead
plaintiff has determined not to pursue on a class basis.
Id. at
*2.
Similarly, if the Exchange Act
iffs are allowed
to bring their own separate class action for t
would render the PSLRA's lead plaintiff
See BoA II, 2011 WL 4528428, at *2
(stati
ir claims, it
sions meaningless.
t
such a result
that the
would lead to the "type of lawyer-driven 1
PSLRA see
that
to avoid.").
The Exchange Act
iffs contend
Bank of America decisions "are irre evant to the issue
of severance because the consolidation there invol
cornmon questions of law and
12
ct."
( PI.
actions
y at 5).
is Court has already rul
However,
that "the s
larities
Exchange Act] claims and the Securit
between
warrant consolidation."
These similarities i
s Act claims
In re Facebook, 288 F.R.D. at 35.
ude putative class actions that "seek
relief on behalf of similar classes, asserted against some of
the same defendants, arising out of the same series of events,
r federal securities laws."
and assert claims
Id.
The Exchange Act Plaintiffs also rely on a recent
sion by the Honorable John G. Koeltl in In re New Oriental
--- F.R.D. ---, 2013 WL
1875102 (S.D.N.Y. May 6, 2013).
iffs highli
P
Amer
that Judge Koeltl dist
decisions,
like the court in BoA I, d
1
tations
They cont
the statute
to sever was
not consi
r the statute of
rcussions for the affect
that "[t]he
aintiffs."
judicial ef
limitations is the rna
Id. at
of the running
reason why" t
motion
ed.
In New Oriental,
movants st
ished the Bank of
part, by noting that "[t]he court in BoA
II
*4.
Specifically, the Exchange Act
to
e competi
lead pia
idate their securities act
appoint one movant, MPS, as lead plaintiff. Id. at *1.
iff
and
One of
the movants, an options investor, agreed to the stipulation only
13
on the condition that MPS include options investors in the class
asserted in the consolidated complaint.
Id.
Even though MPS
had explicitly agreed to include options investors, its
consolidated complaint excluded them from the class.
result,
As a
the options investor moved to sever his action and
assert claims on behalf of a separate class of options
investors.
Contrary to the Exchange Act Plaintiffs' assertion,
for several reasons, New Oriental is inapposite.
First, the
Court severed the options claims specifically because MPS
induced the options plaintiff to "stipulate[J to a lead
plaintiff based on representations that the options class would
be included in the action."
Id. at *4.
Here,
in contrast, Lead
Plaintiffs never induced the Exchange Act Plaintiffs to
stipulate to the Lead Plaintiffs' appointment based on a
representation that they would bring Exchange Act claims in the
Consolidated Complaint.
To the contrary, Lead Plaintiffs and
the Exchange Act Plaintiffs each litigated their respective lead
plaintiff motions.
Thus, the kind of prejudice at issue in New
Oriental is absent here.
In addition,
in considering the statute of
limitations, the New Oriental court was concerned "[tJhe
14
ass," because the
rcussions for the abandoned
potent
options investors would not have been
ld.
In any class,
re, all investors asserted to
are al
members of the class aSSe
Compla
Exchange Act claims
Specifically, both
the Consolidated
Act class and the
class asserted in the Consolidated
a
stors who purchased stock in t
IPO.
ass as investors "who
1
,4215
(defining
sed shares of Facebook Inc.
common stock pursuant to a re
stration statement and
issued in connection with the .
prospectus
~
Act Complaint, Corneck v.
Ie to the" lPO) with
No. 12 C
Act
Compare Complaint
sed common stock "in or
ing class as investors who
t
consist of
Accordingly, unlike in New Orient
, I PO, If) •
the Exchange Act Plaintiffs
here are included in the Consolidated Securities Action
claims have been assert
on
Moreover, if a
ir behalf.
leI class action were to
permitted, both actions would therefore seek recovery for the
same absent class members.
A judgment in ei
r class action
would preclude
her litigation of the ot
Act Plaintiffs
the Lead Plaintiffs would thus necessarily be
in destabilizing
r, and the Exchange
ition to race to an early resolution.
_S_e_e_W_a_l_d_m_a_n_v_,_V_l_'1_1_._o_f_K_l_'--L--'---=-_--'---'=----l,
15
207 F.
105, 110
(2d Cir.
2000)
(explaining the "well-established rule that a plaintiff
cannot avoid the effects of res judicata by 'splitting' his
claim into various suits, based on different legal theories
(with different evidence 'necessary' to each suit)"); see also
Cieszkowska v.
Line N.Y.
295 F.3d 204, 205
--------------------~-----------
("Even claims based upon dif
provided they arise from
(2d Cir. 2004)
rent legal theories are barred
same transaction or occurrence.")
(internal quotation marks omitted).
Such conflicts are avoided
by having Lead Plaintiffs control a sing
consolidated action
on behalf of a unitary putative class.
The Exchange Act Plaintiffs assert that
their yet-
to-be filed amended complaint they would seek to represent a
broader class of plaintiffs that would include investors who
purchased Facebook stock on
1-2 n.2).
~private
exchanges."
(Pl. Memo. at
They do not themselves claim to have purchased on
private exchanges, nor does the class defined in the complaints
they have already filed reach purchasers on
But in any event, as this Court has not
finition do not
feat consoli
,variations in class
ion or justify a
proliferation of overlapping classes.
F.R.D. at 35 (consolidation of
ivate exchanges.
See In re Facebook, 288
~putative
class actions that seek
relief on behalf of similar classes" is appropriate
added)).
(emphasis
The Exchange Act Plaintiffs cannot displace Lead
16
Plaintiffs from t
rship role by laying
ir 1
ass. Lead
more inc Ius
representation of a
plaintiffs "necessa
rna
class of shareholders.
Inevitably, any
aim to
[] determinations
limit the
lon
ass
establishes boundaries as to who may recover" as
part of the
ass.
BoA II, 2011 WL 4538428, at *2.
Lastly,
Exchange Act Plaintiffs will not suffer
any prejudice if they are not permitted to bring their own
separate class action.
to pursue their cia
The Exchange Act P
intiffs remain free
through an
1 action, which wou
permit them to obtain a ruling on
me
ts of their claims.
See BoA I, 2010 WL 4138980, at *1-2; BoA II
*2.
While
suffer
2011 WL 4538428, at
Exchange Act Plaintiffs argue that they will
jud
unless they are pe
se "discovery [on
class act
cannot even
ted to bring a separate
ir Exchange Act
gin until the allegations of the Consol
Complaint are finally adjudicated" (Pl. Memo. at 6), filing an
indivi
by Le
same t
potent
1 suit will provide
access to any discove
ntiffs in the Consol
the Lead Plainti
ed Securities Action, at the
s receive it.
There
1 prejudice exists to either the Lead P
Exchange Act Plaintiffs.
17
taken
re, no
if
or the
IV.
Conclusion
Baseci linon t
conc
ions set forth
Exchange Act Plaintiffs' motion to sever is deni
It is so
0
New York, NY
Auqust)- ~
2013
I
ROBERT W. SWEET
U.S.O.J.
18
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