Louisiana Municipal Police Employees Retirement System v. KPMG LLP et al

Filing 109

Memorandum Opinion and Order The Court denies Defendant Sandra Miller's motion to stay discovery in the State shareholder derivative action as moot (ECF No. 67 ); and grants Defendants Kevin Krakora, Gregory Geswein, and Diebold's motions to the extent they regard striking Plaintiff's allegations preceding June 30, 2005 (ECF Nos. 93 ; 95 ; 97 ). Judge Benita Y. Pearson on 2/14/2012. (S,L)

PEARSON, J.
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
LOUISIANA MUNICIPAL POLICE
EMPLOYEES RETIREMENT SYSTEM,
Plaintiff,
v.
KPMG LLP, et al.,
Defendants.

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CASE NO. 1:10CV01461

JUDGE BENITA Y. PEARSON

MEMORANDUM OF OPINION AND
ORDER (Resolving ECF Nos. 67, 93, 95
& 97 (in part))

Plaintiff Louisiana Municipal Police Employees Retirement System individually and on
behalf of others who purchased publicly traded securities of Deibold, Inc. filed a putative private
securities fraud class action against KPMG LLP (“KPMG”), Diebold, Inc. (“Diebold”), Gregory
T. Geswein (“Geswein”), Kevin J. Krakora (“Krakora”), and Sandra K. Miller (“Miller”) alleging
violations of (1) Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 and (2)
Section 20(a) of the Exchange Act of 1934. ECF No. 85 (second amended complaint).
Currently pending before the Court are Defendant Miller’s Motion for Partial Stay of
Overlapping State Court Proceedings and For Coordination of Discovery (ECF No. 67);
Defendant Krakora’s Motion to Strike Certain Allegations in Plaintiff’s Second Amended
Complaint (ECF No. 93); Defendant Geswein’s Motion to Dismiss Plaintiff’s Second Amended
Complaint and to Strike Certain Allegations Therefrom (ECF No. 95); and, Defendant Diebold’s
Motion to Strike Plaintiff’s Second Amended Complaint (ECF No. 97).
For the following reasons, the Court denies Defendant Miller’s motion for a partial stay

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as moot; grants Defendant Krakora’s motion to strike; and grants the portions of Defendants
Geswein and Diebold’s motions regarding striking Plaintiff’s allegations preceding June 30,
2005.
I. Discussion
A.
Defendant Sandra Miller’s (“Miller”) has moved the court to stay discovery in a State
shareholder derivative action captioned Levine v. Geswein, Case No. 2010CV3848, pending
before the Honorable Judge Frank Forchione in the Court of Common Pleas, Stark County Ohio.1
ECF Nos. 67, 67-2. In her motion, Defendant Miller seeks to stay discovery in the State
shareholder derivative action pursuant to the Private Securities Litigation Reform Act
(“PSLRA”), 15 U.S.C. § 78a–4(b)(3)(B), and the Securities Litigation Uniform Standards Act
(“SLUSA”), 15 U.S.C. § 78u–4(b)(3)(D).2 ECF No. 67-1. Miller’s motion to stay is premised
on the PSLRA’s provision automatically staying discovery during the pendency of a motion to
dismiss. Miller’s motion to stay is now moot because her motion to dismiss, in the instant case,
has been denied. See ECF Nos. 42; 82.

1

Defendants Diebold and Geswein filed separate statements in support of Miller’s
motion to stay discovery in the State derivative action. See ECF Nos. 72; 73.
2

The PSLRA provides for a mandatory stay of discovery while a motion to dismiss is
pending in a private action brought under the federal securities laws. See 15 U.S.C. § 78u4(b)(3)(B) (“in any private action arising under this Chapter, all discovery and other
proceedings shall be stayed during the pendency of any motion to dismiss, unless . . .
particularized discovery is necessary to preserve evidence or to prevent undue prejudice . . .”).
The SLUSA provides that “[u]pon a proper showing, a court may stay discovery proceedings in
any private action in state court, as necessary in aid of its jurisdiction, or to protect or effectuate
its judgments, in an action subject to a stay of discovery pursuant to this paragraph.” 15 U.S.C. §
78u-4(b)(3)(D).

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B.
Pursuant to Fed. R. Civ. P. 12(f),3 Defendants Krakora, Geswein, and Diebold separately
move to strike all of Plaintiff’s allegations that precede June 30, 2005 in accordance with the
Court’s September 30, 2011 Order (ECF No. 82). ECF Nos. 93; 95; 97. In its Order, the Court
held that “[a]ll allegations that a defendant participated in the alleged fraud that precede June 30,
2005 are barred by the five-year statute of repose.” ECF No. 82 at 10-11. The Court further
ordered Plaintiff to submit a second amended complaint reflecting this ruling and, in so doing,
specifically cautioned that the new amended complaint “shall not include allegations outside of
the five-year repose period.” ECF No. 82 at 26. For reasons unclear to the Court, Plaintiff has
ignored the Court’s instruction, and justified the inclusion of such allegations in its second
amended complaint. ECF No. 85.
The Court, therefore, grants Defendants’ motions with respect to striking Plaintiff’s
allegations that precede June 30, 2005. Plaintiff’s second amended complaint (ECF No. 85) shall
be further amended to conform to the Court’s initial instruction to strike all allegations occurring
prior to June 30, 2005, by no later than February 21, 2012.
To the extent that this overdue amendment makes necessary modifications to any other
pending motions, Counsel is hereby ordered to consult among themselves and, if necessary, to
suggest a jointly agreed upon schedule to permit required but expedient modifications, for the
Court’s approval. Counsel may also move the Court for reimbursement of attorney fees and

3

Fed. R. Civ. P. 12(f) states that “[t]he court may strike from a pleading an insufficient
defense or any redundant, immaterial, impertinent, or scandalous matter.”

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costs incurred as a result of Plaintiff’s failure to comply with the Court’s instructions, in the first
instance.
II. Conclusion
For the aforementioned reasons, the Court denies Defendant Sandra Miller’s motion to
stay discovery in the State shareholder derivative action as moot (ECF No. 67); and grants
Defendants Kevin Krakora, Gregory Geswein, and Diebold’s motions to the extent they regard
striking Plaintiff’s allegations preceding June 30, 2005 (ECF Nos. 93; 95; 97).

IT IS SO ORDERED.

February 14, 2012
Date

/s/ Benita Y. Pearson
Benita Y. Pearson
United States District Judge