Aguilar v. Couillaud et al, No. 3:2011cv03668 - Document 8 (N.D. Cal. 2011)
Court Description: ORDER Denying Aguilar's Motion to Consolidate; Granting J&W's Motion for Appointment as Lead Counsel; and Denying L&K's Motion for Appointment as Lead Counsel. This order terminates Docket Nos. 9 and 10 in Lead Case No. C-11-3176. Signed by Judge Edward M. Chen on 9/14/2011. (emcsec, COURT STAFF) (Filed on 9/14/2011)
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Aguilar v. Couillaud et al Doc. 8 1 2 3 4 5 UNITED STATES DISTRICT COURT 6 NORTHERN DISTRICT OF CALIFORNIA 7 8 IN RE OCLARO, INC. DERIVATIVE LITIGATION. Lead Case No. C-11-3176 EMC 9 12 ORDER DENYING AGUILAR’S MOTION TO CONSOLIDATE; GRANTING J&W’S MOTION FOR APPOINTMENT AS LEAD COUNSEL; AND DENYING L&K’S MOTION FOR APPOINTMENT AS LEAD COUNSEL 13 (Docket Nos. 9, 10) ___________________________________/ 11 For the Northern District of California United States District Court 10 14 15 This Court is presiding over a securities fraud class action related to a company by the name 16 of Oclaro, Inc. as well as several shareholder derivative actions based on largely the same 17 underlying facts. Currently pending before the Court are motions in the shareholder derivation 18 actions – more specifically, (1) a motion to consolidate and (2) two competing motions for 19 appointment as lead counsel. Having considered the parties’ briefs and accompanying submissions, 20 as well as the oral argument of counsel, the Court hereby DENIES the motion to consolidate, 21 GRANTS the motion to appoint Johnson & Weaver (“J&W”) lead counsel, and DENIES the 22 motion to appoint Levi & Korsinsky (“L&K”) and Finkelstein Thomas (“FT”) lead counsel. 23 24 I. FACTUAL & PROCEDURAL BACKGROUND The Oclaro securities class action was filed on May 19, 2011. See Westley v. Oclaro, Inc., 25 No. C-11-2448 EMC (Docket No. 1) (complaint). Approximately a month later, on June 27, 2011, 26 Matteo Guindani, who is represented by J&W, filed the first shareholder derivative action. See 27 Guidani v. Couder, No. C-11-3176 EMC (Docket No. 1) (complaint). Subsequently, the following 28 shareholder derivative actions were filed: (1) on June 28, 2011, Coney v. Couder, No. C-11-3214 Dockets.Justia.com 1 EMC, in which the plaintiff is represented by the Pacific Coast Law Group; (2) on July 7, 2011, 2 Braman v. Couillaud, No. C-11-3322 EMC, in which the plaintiff is represented by L&K; and (3) on 3 July 26, 2011, Aguilar v. Couillaud, No. C-11-3668 EMC, in which the plaintiff is represented by 4 FT. 5 All of the lawsuits above have been related (including the securities class action). In Coney, and Braman actions. Only the Aguilar case has not been consolidated. Mr. Aguilar now 8 seeks to have his case consolidated with the other shareholder derivative actions. In addition, the 9 plaintiffs in the shareholder derivative actions have filed competing motions for appointment of lead 10 counsel. The competing law firms are (1) J&W and (2) L&K/FT (as co-lead counsel). Pacific Coast 11 For the Northern District of California addition, three of the four shareholder derivative suits have been consolidated – i.e., the Guindani, 7 United States District Court 6 supports J&W’s motion. 12 13 14 II. A. DISCUSSION Motion to Consolidate The Court addresses first Mr. Aguilar’s motion to consolidate. As a preliminary matter, the 15 Court notes that, on its face, Mr. Aguilar’s complaint refers not only to a shareholder derivative 16 action but also to a “Class Action.” At the hearing, his counsel – FT – clarified that the intent was to 17 bring only a shareholder derivative suit, with one of the claims being a federal securities claim (i.e., 18 §§ 10(b) and 21D of the Securities Exchange Act and Rule 10b-5). FT also affirmed that, because of 19 the federal securities claim, the basis for subject matter jurisdiction over the complaint was federal 20 question jurisdiction. FT disavowed any reliance on diversity jurisdiction (in contrast to the other 21 shareholder derivative suits). 22 The problem for Mr. Aguilar is that the viability of his federal securities claim is, at least at 23 this juncture, questionable. Even assuming that a shareholder may bring, e.g., a § 10(b)/Rule 10b-5 24 claim as part of a derivative action, see Frankel v. Slotkin, 984 F.2d 1328, 1333 (2d Cir. 1993) 25 (noting that stockholders of a company may bring a derivative action for damages to the corporation 26 suffered by reason of a violation of § 10(b) and Rule 10b-5); Herpich v. Wallace, 430 F.2d 792, 803 27 (5th Cir. 1970) (stating that “[t]he private right of action implied under Rule 10b-5 may be invoked 28 on behalf of a corporation in a shareholder’s derivative suit”), an issue yet to be addressed by the 2 1 Ninth Circuit, he has not alleged the purchase or sale of any shares, either by Oclaro or even himself 2 during the Class Period. See Aguilar Compl. ¶ 82 (simply alleging that “Class members acquired 3 Oclaro securities during the Class Period at artificially high prices and were damaged”). 4 Because Mr. Aguilar claims subject matter jurisdiction based on federal question jurisdiction 5 alone, and there appear to be insufficient allegations supporting the federal securities claim, then this 6 Court would appear to have no subject matter jurisdiction over his case. In this circumstance, the 7 propriety of consolidation of his case with the other shareholder derivative lawsuits is questionable. 8 J&W argued at the hearing that consolidation would destroy diversity jurisdiction, and L&K/FT did 9 not dispute such. Indeed, L&K/FT effectively conceded that it would, stating that they would substitute a new plaintiff in the place of Mr. Aguilar. 11 For the Northern District of California United States District Court 10 In light of L&K/FT’s effective concession, the Court shall, at least at this juncture in the 12 proceedings, deny without prejudice Mr. Aguilar’s motion to consolidate his case with the other 13 shareholder derivative actions. 14 B. 15 Competing Motions for Appointment as Lead Counsel Because the Court is not consolidating the Aguilar case, FT (Mr. Aguilar’s counsel) cannot 16 be considered a candidate for the position of lead counsel. Therefore, the Court shall construe the 17 motion for appointment of L&K/FT as co-lead counsel to be a motion for appointment of L&K as 18 lead counsel alone. Competing against this motion is the motion for appointment of J&W as lead 19 counsel. 20 With respect to appointment of lead counsel, the Ninth Circuit has held that a court has the 21 inherent power to consolidate actions and appoint lead counsel to supervise and coordinate 22 prosecution of a case. See Vincent v. Hughes Air West, Inc., 557 F.2d 759, 774 (9th Cir. 1977) 23 (agreeing with the Second Circuit that “‘[t]he benefits achieved by consolidation and the 24 appointment of general counsel, i.e. elimination of duplication and repetition and in effect the 25 creation of a coordinator of diffuse plaintiffs through whom motions and discovery proceedings will 26 be channeled, will most certainly redound to the benefit of all parties to the litigation”). In this case, 27 as indicated in the hearing herein, the Court is concerned with the accrual of needless and excessive 28 attorney fees in the derivative actions which are likely to follow the class action securities suit. 3 1 Factors that courts typically consider in lead counsel determinations include: (1) the quality of the 2 pleadings, (2) the vigorousness of the prosecution of the lawsuits, (3) the capabilities of counsel, 3 including their experience and prior success record, and whether counsel’s charges are reasonable, 4 and (4) whether one complaint is simply a “copycat action” of another. See Pirelli Armstrong Tire 5 Corp. Retiree Med. Benefits Trust, No. C 11-2369 SI, 2011 U.S. Dist. LEXIS 86421, at *9-10 (N.D. 6 Cal. Aug. 3, 2011); Resnik v. Woertz, Nos. 10-527-GMS, 10-603-GMS, 2011 U.S. Dist. LEXIS 7 31868, at *15 (D. Del. Mar. 28, 2011); Sexton ex rel. Jones Soda Co. v. Van Stolk, Nos. 8 C07–1782RSL, C08–0018RSL, 2008 WL 1733242, at *1 (W.D. Wash. Apr. 10, 2008). 9 Most of these factors are neutral. For example, the quality of J&W’s complaint and L&K’s complaint are roughly on par with one another. The Court finds that J&W’s complaint is a bit more 11 For the Northern District of California United States District Court 10 detailed, but is not markedly superior. For example, J&W has not pointed to any authority 12 establishing that a failure to make a jury request in compliance with Civil Local Rules results in a 13 waiver, particularly when the party includes a demand for a jury on the caption page. J&W points 14 out that its complaint has additional allegations about demand futility that L&K’s complaint does 15 not. While this is true, L&K’s complaint contains more than sufficient allegations regarding 16 demand futility – indeed, contains the critical allegations regarding demand futility (i.e., the 17 individual officers have no incentive to expose their own misconduct). Finally, although J&W’s 18 complaint has allegations about the individual officers’ incentive compensation and L&K’s 19 complaint does not, it is not clear whether those allegations are material to the lawsuit, at least as 20 pled. For example, J&W does not allege that Oclaro’s officers made misleading statements in order 21 to bolster Oclaro’s stocks or profits which would affect their incentive compensation. 22 As for the capabilities of counsel, this factor is a close call. Both J&W and L&K have 23 demonstrated that they are qualified and experienced and are capable of acting as lead counsel. 24 Contrary to what J&W asserts, there is evidence indicating that L&K have sufficient experience as 25 lead or co-lead counsel in shareholder derivative actions. Furthermore, L&K’s experience in 26 securities actions generally translates sufficiently into a shareholder derivative case such as this 27 where fraud is involved. However, the Court is favorably impressed by J&W’s presentation and 28 knowledge. 4 1 2 3 As for the assertion that L&K’s complaint is merely a “copycat,” it too is effectively neutral; it appears that both J&W and L&K tracked the complaint filed in the Oclaro securities class action. To the extent L&K argues that firm resources is another factor that should be taken into 4 account, again, the Court finds this factor largely neutral. While L&K may be a bigger law firm, the 5 Court does not expect that all of the firm’s lawyers would be working on this litigation. L&K 6 admitted as much at the hearing. Moreover, having many lawyers working on the matter would run 7 counter to the Court’s directive to the plaintiff’s attorneys in the shareholder derivative actions that 8 it does not want fees and costs to be run up in the actions (i.e., no fee churning) because the cases 9 are essentially “piggyback” actions to the Oclaro securities class action as noted above. L&K points out that it can help reduce costs because it has access to an in-house expert. While L&K’s having 11 For the Northern District of California United States District Court 10 such access would potentially be useful, that fact ultimately does not weigh much in the calculus 12 given that (1) the shareholder derivative actions will largely be riding on the coattails of the Oclaro 13 securities class action and (2) J&W’s experience litigating shareholder derivative actions gives it a 14 certain amount of pre-existing expertise. 15 The remaining factor that weighs slightly in favor of one firm over another is the factor of 16 vigorousness of prosecution. Here, the evidence of record indicates that J&W has done more than 17 L&K. J&W’s complaint was the first-filed derivative action, and J&W appears to have taken the 18 lead in relating and consolidating the various derivative suits. The Court acknowledges that these 19 cases are at their inception and thus J&W has not done substantially more than L&K. Nevertheless, 20 at this point in the proceedings, J&W has done more – even if only marginally more – to move the 21 lawsuits forward. 22 Taking into account the above factors, the Court finds that appointment of J&W as lead 23 counsel is appropriate. The Court notes that it also has considered the possibility of appointing 24 J&W and L&K as co-lead counsel. However, this approach is not advisable because it could well 25 drive up fees and costs as a result of duplication and thus defeat the purpose of appointing lead 26 counsel in the first place. The Court takes this opportunity to reiterate that it expects fees and costs 27 in the shareholder derivative suits to be well maintained within reasonable bounds. Furthermore, the 28 Court advises J&W that, should a fee motion ultimately be filed, that motion will not be rubber 5 1 stamped but rather will be rigorously scrutinized, both in terms of the number of hours and the 2 reasonable hourly rates. Billing judgment in cases such as these, which are tag-alongs to the 3 securities class action, must be employed. Further, the Court expects that if reasonably required 4 work expands beyond the regular capabilities of J&W, J&W will allocate work to L&K. 5 III. 6 CONCLUSION For the foregoing reasons, Mr. Aguilar’s motion to consolidate is denied, J&W’s motion for 7 appointment as lead counsel is granted, and L&K’s motion for appointment as lead counsel is 8 denied. 9 This order disposes of Docket Nos. 9 and 10. 11 For the Northern District of California United States District Court 10 IT IS SO ORDERED. 12 13 Dated: September 14, 2011 14 EDWARD M. CHEN United States District Judge 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6
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