Bluestone v. Sadove et al

Filing 51

ORDER accepting and adopting 48 Report and Recommendations ; granting 18 Motion to Appoint Counsel; and Defendant's Objections to Magistrate Judge's Report and Recommendation 49 are OVERRULED. Signed by District Judge Harry S Mattice, Jr on 11/14/2018. (AML, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
at KNOXVILLE
ROBERT BLUESTONE, individually
and on behalf of all others similarly
situated,
Plaintiff,
v.
STEPHEN I. SADOVE, MARK W.
ADDICKS, DONALD E. HESS, F. LANE
CARDWELL JR., KEVIN T. CLAYTON,
JEFFREY J. O’NEILL, and JAMES F.
HYATT II,
Defendants.

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Case No. 3:18-cv-63
Judge Mattice
Magistrate Judge Guyton

ORDER
This matter is before the Court on the Report and Recommendation (Doc. 48) of
Magistrate Judge H. Bruce Guyton recommending that Plaintiff’s Renewed Motion for
Appointment as Lead Plaintiff and Approval of Lead Plaintiff’s Selection of Lead Counsel
(Doc. 18) be granted. Defendants timely filed their Objections to the Magistrate Judge’s
Report and Recommendation Granting Plaintiff’s Renewed Motion for Appointment as
Lead Plaintiff and Approval of Lead Plaintiff’s Selection of Counsel (Doc. 49). Defendants
contend that Plaintiff did not comply with the notice requirements of the Private
Securities Litigation Reform Act (“PSLRA”) and that Plaintiff cannot adequately
represent the putative class because he is subject to unique defenses. The Court has
reviewed the Report and Recommendation, the parties’ briefing, and the record related
to this matter and agrees with Magistrate Judge Guyton’s well-reasoned conclusions. The
Court will ACCEPT and ADOPT the Report and Recommendation (Doc. 48) and
Plaintiff’s Motion (Doc. 18) will be GRANTED.

I.

FACTUAL AND PROCEDURAL BACKGROUND
The parties do not object to the Magistrate Judge’s recitation of the facts and the

Court concludes it is accurate. The pertinent facts as summarized by Magistrate Judge
Guyton are as follows:
On October 16, 2017, Ruby Tuesday announced that it had entered
into a definite merger agreement (“Merger Agreement”) pursuant to which
certain affiliates of NRD Capital Management (“NRD”) would take Ruby
Tuesday private for $2.40 per share (“Acquisition”). On October 21, 2017,
Ruby Tuesday filed a Preliminary Proxy Statement on Schedule 14A
(“Preliminary Proxy”).
On November 8, 2017, Marcell Maseman filed the first class action
complaint, Maseman v. Ruby Tuesday, Inc., No. 3:17-CV-478-HSM-CCS,
alleging that defendants violated §§ 14(a) and 20 of the Securities Exchange
Act of 1934 (“Act”) and Securities Exchange Commission (“SEC”) Rule 14a9 promulgated thereunder, in connection with the Acquisition (“Maseman
Action”). Subsequently, eight other Ruby Tuesday stockholders filed related
complaints, Sun v. Ruby Tuesday, Inc., No. 3:17-CV-482; Rosenfeld v. Ruby
Tuesday, Inc., 3:17-CV-485; Raul v. Ruby Tuesday, Inc., No. 3:17-CV-494;
Patterson v. Ruby Tuesday, Inc., No. 3:17-CV-495; Breslau v. Ruby Tuesday,
Inc., No. 3:17-CV-496; Williams v. Ruby Tuesday, Inc., No. 3:17-CV-499;
Saile v. Ruby Tuesday, Inc., No. 3:17-CV-501; and Baily v. Ruby Tuesday,
Inc., No. 3:17-CV-511 (collectively, “Related Actions”).
On November 16, 2017, Plaintiff Maseman issued the statutory
notice of the pendency of his lawsuit in PR Newswire pursuant to the
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requirements in 15 U.S.C. § 78u-4(A). [Doc. 20-1]. A few days later, on
November 21, 2017, Maseman filed a motion seeking consolidation of the
Related Actions and appointment of interim lead plaintiff and interim lead
counsel. In his motion, he requested that the Court grant his request prior
to the deadline for any other class member to seek leave to serve as lead
plaintiff under the PSLRA. Plaintiff Robert Bluestone filed an objection to
Plaintiff Maseman’s motion on the basis that the request was contrary to
the PSLRA, which allowed putative class members sixty (60) days after the
date on which notice is published to seek appointment as lead plaintiff.
On December 18, 2017, prior to the expiration of the sixty-day
deadline, Maseman filed a notice of voluntary dismissal of his action. On
January 16, 2018, Plaintiff Bluestone filed a motion in Sun v. Ruby Tuesday,
Inc., No. 3:17-CV-482, seeking to consolidate the Related Actions and for
appointment as lead plaintiff. Two days later, on January 18, 2018, the
plaintiffs in the remaining Related Actions filed Stipulations of Dismissal.
On February, 21, 2018, Plaintiff Bluestone filed his own Complaint. He did
not publish notice with respect to his own Complaint.
(Doc. 48 at 1-3).
II.

STANDARD OF REVIEW
District Courts review de novo the portions of a report and recommendation to

which timely objections are filed. Fharmacy Records v. Nassar, 465 F. App’x 448, 456
(6th Cir. 2012). As the Sixth Circuit has explained:
Thus, § 636(b) creates two different standards of review for district courts
when a magistrate court's finding is challenged in district court. A district
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court shall apply a “clearly erroneous or contrary to law” standard of review
for

the

“nondispositive”

preliminary

measures

of § 636(b)(1)(A).

Conversely, “dispositive motions” excepted from § 636(b)(1)(A), such as
motions for summary judgment or for the suppression of evidence, are
governed by the de novo standard.
United States v. Curtis, 237 F.3d 598, 603 (6th Cir. 2001) (internal citations omitted).
The United States Supreme Court has further indicated that “in providing for ‘de novo
determination’ rather than a de novo hearing, Congress intended to permit whatever
reliance a district judge, in the exercise of sound judicial discretion, chose to place on a
magistrate’s proposed findings and recommendations.” United States v. Raddatz, 447
U.S. 667, 676, (1980). “Moreover, the filing of an objection does not oblige the district
court to ignore the report and recommendation; it requires the court to give fresh
consideration to the finding objected to insofar as the objection impugns the integrity of
the finding.” Fharmacy Records, 465 F. App’x at 456.
Defendants object to the Report and Recommendation in two respects. First,
Defendants object to the Magistrate Judge’s finding that Plaintiff may rely on the notice
published in the Maseman Action to satisfy the requirements of the PSLRA. Defendants
identify specific reasoning and findings with which they disagree and the Court has
therefore conducted a de novo review of this aspect of the Report and Recommendation.
Second, Defendants object to the Magistrate Judge’s determination that Plaintiff is the
most adequate plaintiff to serve as lead plaintiff in this matter. Because Defendants fail to
object with any specificity, de novo review of this recommendation is unwarranted and
the Court will review it to determine whether it is clearly erroneous or contrary to law.

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III.

ANALYSIS
A.

Compliance with Notice Requirements of the PSLRA

Defendants object to the Magistrate Judge’s finding that Plaintiff may rely on the
notice published in the Maseman Action to satisfy the PSLRA’s requirement that putative
class members receive early notice of the suit. The statute provides:
(i) Not later than 20 days after the date on which the complaint is filed, the
plaintiff or plaintiffs shall cause to be published, in a widely circulated
national business-oriented publication or wire service, a notice advising
members of the purported plaintiff class - (I) of the pendency of the action, the claims asserted therein, and the
purported class period; and
(II) that, not later than 60 days after the date on which the notice is
published, any member of the purported class may move the court to serve
as lead plaintiff of the purported class.
(ii) If more than one action on behalf of a class asserting substantially the
same claim or claims arising under this chapter is filed, only the plaintiff or
plaintiffs in the first filed action shall be required to cause the notice to be
published in accordance with clause (i).
15 U.S.C. § 78u-4(a)(3)(A)(i)-(ii). Thus, in order for Plaintiff to rely on the notice
published in the Maseman Action, it must have been published in accordance with
clause (i). Statutory notice was issued in the Maseman Action on November 16, 2017.
(Doc. 20-1). The 60-day period expired on January 16, 2018, but the Maseman Action was
dismissed a month prior, on December 18, 2017. (Doc. 48 at 2).

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The Magistrate Judge found the notice sufficient under these “unique
circumstances” and the Court agrees. (Doc. 48 at 6). Because the Related Actions were
pending during the entire 60-day notice period, Plaintiff was entitled to rely on the notice
filed in the Maseman Action as the first-filed case when he filed his initial motion for
appointment as lead plaintiff. The statute does not require that subsequently-filed actions
be consolidated or procedurally linked to the first action in order for that initial notice to
be effective as to later-filed actions. The Magistrate Judge thus reasoned that the notice
was effective as to the Related Actions and the full 60-day period ran prior to their
dismissal, during which no other plaintiff sought appointment as lead plaintiff. The notice
requirement was thus satisfied as to this action.
Defendants take issue with the Magistrate Judge’s reasoning in several respects.
First, to the extent Defendants argue that the Magistrate Judge erred in relying on
Oklahoma Law Enforcement Retirement System v. Adeptus Health, Inc., No. 4:17-cv449, 2017 WL 3780164 (E.D. Tex. Aug. 31, 2017), that argument is without merit. The
Magistrate Judge did not accord any precedential weight to this case and plainly
acknowledged the factual differences between it and the present matter.
Substantively, Defendants argue that notice was insufficient because none of the
Related Actions or the Maseman Action were pending when the instant case was filed.
(Doc. 49 at 3-4). Defendants maintain that a stockholder who, at some unspecified time,
accessed the court’s docket based on the Maseman Notice would have concluded that
there was no remaining opportunity to serve as lead plaintiff. (Id. at 4). This argument is
speculative and premised on an overly-narrow interpretation of what constitutes notice.
The statute on its face does not require the notice of suit to putative class members to
include the civil action number of all related pending cases, nor does it require all related
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cases to be simultaneously pending. It does not require the cases to be consolidated or
otherwise procedurally linked in order for notice in the first-filed case to be effective as to
later cases. Defendants’ argument, if accepted, would thus invalidate notices that appear
to be permitted by the PSLRA. Moreover, as a practical matter, the Related Actions, the
Maseman Action, and the instant case were all filed in the Eastern District of Tennessee
and name almost identical defendants. A stockholder who sought to investigate the
Maseman Notice could have readily located all eight Related Actions and moved for
appointment as lead plaintiff. No one but Mr. Bluestone did so. The notice was therefore
proper as to the Related Actions when Bluestone filed his first motion for appointment,
and by virtue of Plaintiff’s renewed Motion, is sufficient now.
Defendants also argue that unlike the prior actions, this suit seeks monetary
damages, which might motivate more stockholders to seek lead plaintiff status. (Doc. 49
at 4). First, it appears that monetary damages were sought in all the Related Actions. (Doc.
50 at 10-11). Second, the actions need not be identical for the notice in the first-filed action
to extend to subsequently-filed cases. See 15 U.S.C. § 78u-4(a)(3)(A)(ii) (allowing one
notice for multiple actions “asserting substantially the same claim or claims arising under
this chapter”); Oklahoma Law Enf’t Ret. Sys., 2017 WL 3780164 at *3 (new notice not
required where later complaints expanded allegations but did not present entirely new
factual or legal allegations).
Finally, Defendants argue the Motion must be denied because it was not made
within 60 days of the Maseman Notice and is not a renewed motion. (Doc. 49 at 5-6); 15
U.S.C. § 78u-4(a)(3)(A)(i)(II) (motion must be filed “not later than 60 days after the date
on which the notice is published”). Plaintiff does not assert that the instant Motion is
independently timely, but rather relies on the timeliness of his first motion, couching the
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instant Motion as “renewed.” Defendants cite Oklahoma Law Enforcement for the
proposition that “a motion for appointment as lead plaintiff cannot be supplemented or
augmented beyond the sixty (60) day window established by the PSLRA.” 2017 WL
3780164 at *4. There, the moving plaintiff “did not simply file an identical motion in the
consolidated action for clarity, but expanded and changed its arguments” and sought
slightly different relief. Id. The court therefore rejected the argument that the motion was
“renewed” outside of the 60-day window as opposed to supplemented. Id. Here, Plaintiff
seeks appointment as lead plaintiff on the basis of the same facts and for the same reasons
set out in his original briefing. (See Sun v. Ruby Tuesday, Inc., et al., Civil Action No.
3:17-cv-482 (Doc. 16)). In light of the purposes of the PSLRA, the Court will consider the
instant Motion a renewal of Plaintiff’s original motion for appointment as lead plaintiff.
The Court determines that Plaintiff’s original motion was timely-filed, renewal of the
motion is permissible, and Plaintiff may therefore rely on the notice filed in the Maseman
Action to satisfy the early notice requirements of the PSLRA. Defendants’ objections in
this regard are therefore OVERRULED.
B.

Appointment as Lead Plaintiff

Defendants next object to the Magistrate Judge’s determination that Plaintiff is the
most adequate plaintiff to serve as lead plaintiff. (Doc. 49 at 6). The PSLRA establishes a
rebuttable presumption that the most adequate plaintiff in any action arising under the
Act is the party that (i) has either filed the complaint or made a motion in response to the
early class notice, (ii) has the largest financial interest in the relief sought by the class, and
(iii) otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil
Procedure. 15 U.S.C. § 78u-4(a)(3)(B)(iii). The statute further provides:

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The presumption described in subclause (I) may be rebutted only upon
proof by a member of the purported plaintiff class that the presumptively
most adequate plaintiff - (aa) will not fairly and adequately protect the interests of the class; or
(bb) is subject to unique defenses that render such plaintiff incapable of
adequately representing the class.
15 U.S.C. § 78u-4(a)(3)(B)(iii)(II). Magistrate Judge Guyton found that Plaintiff had
presented evidence that he held 10,000 shares of Ruby Tuesday stock and that no other
plaintiff had evidenced a larger interest. (Doc. 48 at 9-10). The Magistrate Judge further
found that Plaintiff had filed a sworn declaration with the representations required by 15
U.S.C. § 78u-4(2)(a)(i)-(v), timely filed a motion for appointment, and satisfied the
typicality and adequacy requirements Federal Rule of Civil Procedure 23. (Id. at 9-11).
Defendants urge the Court to “reconsider the arguments raised in” their response
in opposition to the Motion. (Doc. 49 at 8). The majority of this objection is devoted to
arguing they have standing to object to Plaintiff’s appointment, an issue Magistrate Judge
Guyton considered but did not resolve or rely on in reaching his conclusion. (Doc. 49 at
6-7; Doc. 48 at 11). They argue without explanation that Plaintiff is subject to “several
unique defenses.” (Doc. 49 at 7). The Magistrate Judge considered this argument and
found it unpersuasive, noting Defendants’ failure to cite any legal authority in support of
their position. (Doc. 49 at 11). Defendants next question Plaintiff’s ability to represent the
class in light of his purported procedural missteps. (Doc. 49 at 7).
It is well-settled that “a general objection, or one that merely restates the
arguments previously presented is not sufficient to alert the court to alleged errors on the
part of the magistrate judge.” VanDiver v. Martin, 304 F. Supp. 2d 934, 937 (E.D. Mich.
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2004). Defendants do not point to any particular error or misconstruction of authority in
the Report and Recommendation. They simply disagree that Plaintiff should be appointed
lead plaintiff in this action. Such a perfunctory objection is insufficient to trigger de novo
review of the Magistrate Judge’s recommendation on this issue. Moreover, Defendants’
general arguments do not constitute “proof” sufficient to rebut the presumption that
Plaintiff is the most adequate plaintiff as required by 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II).
The Magistrate Judge’s findings of fact and conclusions of law with respect to the
appointment of Robert Bluestone as lead plaintiff were not clearly erroneous or contrary
to law and Defendants’ objection will therefore be OVERRULED.
IV.

CONCLUSION
For the reasons stated herein, it is hereby ORDERED as follows:

1. Defendants’ Objections to the Magistrate Judge’s Report and Recommendation
Granting Plaintiff’s Renewed Motion for Appointment as Lead Plaintiff and
Approval of Lead Plaintiff’s Selection of Counsel (Doc. 49) are OVERRULED;
2. Magistrate Judge Guyton’s Report and Recommendation (Doc. 48) is
ACCEPTED and ADOPTED;
3. Plaintiff’s Renewed Motion for Appointment as Lead Plaintiff and Approval of
Lead Plaintiff’s Selection of Lead Counsel (Doc. 18) is GRANTED; Robert
Bluestone is appointed lead plaintiff and his selection of Robbins Geller Rudman
& Dowd LLP as lead counsel is likewise. approved.
SO ORDERED this 14th day of November, 2018.

/s/ Harry S. Mattice, Jr._____
HARRY S. MATTICE, JR.
UNITED STATES DISTRICT JUDGE
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