Summary
finding this factor to favor a group of plaintiffs that held at least 2,700 shares in the corporation at issue, over a plaintiff who owned 666 shares
Summary of this case from KBC Asset Management NV ex rel. Chemed Corp. v. McNamaraOpinion
No. C-06-05598 RMW.
February 12, 2007
ORDER APPOINTING LEAD PLAINTIFF AND APPROVING SELECTION OF LEAD COUNSEL [Re: Docket Nos. 20, 26]
Before the court are motions for appointment of lead plaintiff and approval of selection of lead counsel by (1) Sunanda A. Desai, Jean McDonald and David M. Jackson ("Desai Group"); and (2) Doug Edrington. The Desai Group and Edrington oppose each other's motion. The court heard oral argument on the motions on Friday, February 2, 2007. The court has read the moving and responding papers and considered the arguments of counsel. For the reasons set forth below, the court appoints the Desai Group as lead plaintiffs and the law firms of Keller Rohrback and Schiffrin Barroway as co-lead counsel for the above-captioned action.
The plaintiffs also move to consolidate the actions. Because the court has already issued an order consolidating the actions pursuant to stipulation by the parties, that issue is moot.
I. ANALYSIS
A. Appointment of Lead Plaintiff
Foundry Networks, Inc. ("Foundry") has publicly announced that the accounting measurement dates of certain stock option grants may differ from their recorded grant dates. The Desai Group plaintiffs filed shareholder complaints derivatively on behalf of Foundry on September 12, 2006 alleging violations of federal and state laws based on Foundry's alleged backdating of stock options. Plaintiff Doug Edrington filed a derivative complaint on behalf of Foundry on October 31, 2006 based on similar factual allegations.
Nothing presented by the parties indicates that either of the proposed lead plaintiff have "economic interests that are antagonistic to the interests of the class." See Larson v. Dumke, 900 F.2d 1363, 1367 (9th Cir. 1989) (setting forth the criteria required of a lead plaintiff in a derivative action). The consolidated action is in its early stages and nothing indicates that either of the proposed lead plaintiff would not pursue the action diligently, vigorously, and conscientiously. See id. However, several factors weigh in favor of appointment of the Desai Group. The fact that the individual plaintiffs in the Desai Group have worked cooperatively together is some indication of their interest in vigorously pursuing the interest of those represented. In addition, although there is no presumption in favor of selecting the plaintiff with the largest financial stake as there is in cases under the Private Securities Litigation Reform Act, financial stake has some relevance to the plaintiff's interest in a derivative action and the likelihood that the plaintiff will pursue the derivative claims vigorously. Here, Edrington owns 666 shares of Foundry stock while each of the plaintiffs in the Desai Group owns a greater number, collectively owning at least 2,700 shares. Finally, although the quality of the pleadings is not a specific factor under Larson, Delaware courts have considered the quality of the pleadings as an indicator of which plaintiff will best serve the interest of the shareholder base as a whole. TCW Tech. Ltd. P'ship v. Intermedia Commc'ns, Inc., 2000 WL 1654504, *4 (Del.Ch. 2000). Here, plaintiff Jackson's complaint appears to be marginally better tailored to the issues. Accordingly, the court appoints the Desai Group as lead plaintiffs.
B. Approval of Class Counsel
Once the most adequate plaintiffs are selected, the "most adequate plaintiff[s] shall, subject to the approval of the court, select and retain counsel to represent the class." 15 U.S.C. § 78u-4(a)(3)(B)(v). The Desai Group seeks appointment of two co-lead counsel in addition to separate liaison counsel. Based on the resumes submitted to the court, all three law firms appear highly qualified to serve as counsel in the present action. In its tentative ruling, the court questioned the functional difference between lead counsel and liaison counsel. At oral argument, counsel for the Desai Group informed the court that counsel had decided no liaison counsel will be necessary in this action. The court further expressed some concern about duplication of costs if two law firms were appointed to serve as co-lead counsel. Counsel for the Desai Group assured the court that the two firms have worked together efficiently in the past and represented that they would not bill more than would be billed with only one lead counsel. Based on counsel's representations, the court is satisfied that appointment of the law firms of Keller Rohrback and Schiffrin Barroway as co-lead counsel is appropriate in this matter.
Specifically, (1) Keller Rohrback as co-lead counsel, (2) Schiffrin Barroway as co-lead counsel, and (3) Bramson, Plutzik, Mahler Birkhaeuser, LLP as liaison counsel.
II. ORDER
For the reasons set forth above, the court appoints the Desai Group as lead plaintiffs and the law firms of Keller Rohrback and Schiffrin Barroway as co-lead counsel for the above-captioned action.