Summary
finding that moving to intervene three weeks after a motion for class certification was filed was timely
Summary of this case from Barry's Cut Rate Stores Inc. v. Visa, Inc.Opinion
Case No. 2:17-cv-03679-SVW-AGR
01-10-2019
IN RE SNAP INC. SECURITIES LITIGATION
Proceedings: IN CHAMBERS ORDER REOPENING LEAD PLAINTIFF APPOINTMENT PROCESS [114] [115] [120] [192]
I. Introduction
Several motions are currently pending before this Court, including Lead Plaintiff's Motion for Class Certification (Dkt. 114), Lead Plaintiff's Motion to Add Donald R. Allen and Shawn B. Dandridge As Named Plaintiffs and Withdraw David Steinberg as Named Plaintiff (Dkt. 115), Proposed Intervenor Joseph Iuso's Motion for Leave to Intervene to Oppose, in Part, Lead Plaintiff's Motion for Class Certification (Dkt. 120), and Irland James Stewart and Howard Weisman's Motion to Renew Motion for Appointment as Lead Plaintiff and Approval of Selection of Counsel (Dkt. 192). The Court is also aware of Lead Plaintiff's Notice of Withdrawal of Request for Appointment as Class Representative (Dkt. 118). For the reasons discussed below, the Court DENIES all of the pending motions except that it GRANTS Lead Plaintiff's request to withdraw David Steinberg as Named Plaintiff.
II. Relevant Background
On September 18, 2017, this Court appointed Thomas DiBiase as Lead Plaintiff and Kessler Topaz as Lead Counsel. Dkt. 54. On November 1, 2017, Lead Plaintiff DiBiase filed a Consolidated Amended Class Action Complaint, which included David Steinberg as a Named Plaintiff. Dkt. 67. On August 30, 2018, Lead Plaintiff DiBiase filed a Motion for Class Certification. Dkt. 114. Lead Plaintiff DiBiase also concurrently filed a motion to withdraw Steinberg as Named Plaintiff and to add Donald R. Allen and Shawn B. Dandridge as Named Plaintiffs. Dkt. 115. On September 28, 2018, Lead Plaintiff DiBiase filed a notice of withdrawal of his request for appointment as Class Representative in his motion for Class Certification. Dkt. 118. This notice also stated that Lead Plaintiff DiBiase intends to withdraw as Lead Plaintiff due to health reasons after the Court rules on his motions regarding class certification and the other Named Plaintiffs. Id. On October 3, 2018, Joseph Iuso filed a motion for leave to intervene to oppose, in part, Lead Plaintiff DiBiase's motion for class certification. Dkt. 120. On November 26, 2018, the Court issued a partial stay of this case, which vacated the trial date and all pre-trial deadlines but did not stay the Court's adjudication of the pending motions. Dkt. 186. Lastly, on December 3, 2018, Irland James Stewart and Howard Weisman renewed their prior motion for appointment as Lead Plaintiffs and for selection of counsel. Dkt. 192.
III. Discussion
A. Lead and Named Plaintiffs
i. Legal Standards
The Private Securities Litigation Reform Act ("PSLRA"), 15 U.S.C. §§ 78u-4 et seq. , sets forth requirements for the appointment of a Lead Plaintiff. Based on these requirements, which were discussed and applied in this Court's September 18, 2017 order, the Court concluded that DiBiase was the "most adequate" plaintiff—of those who sought to be appointed Lead Plaintiff—to represent the putative class and appointed him Lead Plaintiff.
Federal Rule of Civil Procedure 21 governs the addition or withdrawal of parties, providing that "[o]n motion or on its own, the court may at any time, on just terms, add or drop a party." Courts consider requests to add or withdraw a party pursuant to Rule 21 under the same standard that applies to requests to amend a complaint under Rule 15. See Heilman v. Cook , No. 14-CV-1412 JSL (MDD), 2017 WL 727672, at *1-2 (S.D. Cal. Feb. 24, 2017). Thus, generally, the "test of whether additions or subtractions of parties should be allowed under Rule 21, like the test under Rule 15, is whether such action will prejudice the non-moving party, and whether it will serve to avoid multiplicity of suits." Id. at *2.
ii. Named Plaintiff Steinberg's Withdrawal
Under the liberal standard, the Court GRANTS Lead Plaintiff DiBiase's request to withdraw Steinberg as Named Plaintiff. See, e.g. , Org. of Minority Vendors, Inc. v. Ill. Central-Gulf R.R. , No. 79 C 1512, 1987 WL 8997, at *1 (N.D. Ill. Apr. 2, 1987) ("Absent a good reason ... a plaintiff should not be compelled to litigate if it doesn't wish to.").
iii. Lead Plaintiff DiBiase's Withdrawal
The circumstances and timing of Lead Plaintiff DiBiase's withdrawal warrant special consideration. Lead Plaintiff DiBiase repeatedly stated in his briefs that his withdrawal would occur only after the Court ruled on his motions regarding class certification and the other Named Plaintiffs. Thus, the question before the Court is how to treat Lead Plaintiff DiBiase's purported delayed withdrawal.
Neither party has identified, and the Court cannot find, any case that squarely answers this question. The most similar case appears to be In re Neopharm, Inc. Secs. Litig. , No. 02 C 2976, 2004 WL 742084 (N.D. Ill. Apr. 7, 2004). In Neopharm , the Lead Plaintiff filed a motion that both sought the Court's leave to withdraw from serving as Lead Plaintiff and that advanced another party to serve as Lead Plaintiff. Id. at *1. The court permitted the Lead Plaintiff to withdraw but rejected the attempt to appoint a designated successor Lead Plaintiff. The court observed that the Lead Counsel had "apparently deemed itself fit to choose whom it believe[d] should be the most adequate plaintiff after [the Lead Plaintiff's] withdrawal." Id. at *2. Yet, noted the court, "merely accepting counsel's suggestion with input from no other potential lead plaintiff is contrary to the PSLRA," which, at a minimum, "requires that a potential lead plaintiff either file a complaint or make a motion to serve as lead plaintiff within 60 days of being provided notice of the law suit." Id. at *2-3.
The instant case is similar to the facts in Neopharm. Although Lead Plaintiff DiBiase has not filed a noticed motion for withdrawal as Lead Plaintiff, he has withdrawn his motion to be appointed a class representative and has informed the Court that he will withdraw as Lead Plaintiff as soon as the Court rules on his pending motions. His stated intent to withdraw due to health reasons is an admission that he cannot adequately represent the putative class moving forward. Thus, as in Neopharm , Lead Plaintiff DiBiase's motion and notice of withdrawal can only be seen as an attempt to circumvent the PSLRA's Lead Plaintiff appointment process by having the two proposed Named Plaintiffs replace him without a full review under the PSLRA; indeed, were this not Lead Plaintiff DiBiase's (or Lead Counsel's) aim, he would presumably have withdrawn effective immediately—especially given that his withdrawal is due to his health. As the court in Neopharm observed, a Lead Plaintiff's (or Lead Counsel's) selection of a successor Lead Plaintiff without court input is contrary to the PSLRA; indeed, "one of the goals of the PSLRA was to minimize lawyer driven lawsuits." In re Bank of Am. Corp. Auction Rate Secs. (ARS) Mktg. Litig. , No. MDL 09-02014 JSW, 2009 WL 2031764, at *2 (N.D. Cal. July 9, 2009). Thus, the Court treats Lead Plaintiff DiBiase's purported delayed withdrawal as a withdrawal effective immediately. To conclude otherwise would be to follow form over substance.
The withdrawals of DiBiase and Steinberg mean that the putative class lacks both any Named Plaintiffs and also (and more importantly) a Lead Plaintiff. Based on its interpretation of the PSLRA, the Court believes that it must apply the guidelines of the PSLRA in appointing a new Lead Plaintiff. See Reese v. Malone , No. C08-1008 MJP, 2015 WL 1526567, at *3 (W.D. Wash. Apr. 3, 2015) ("[C]ourts generally require at least a modified renewed PSLRA [sic] selection process upon withdrawal of a lead plaintiff ...."); see also Z-Seven Fund, Inc. v. Motorcar Parts & Accessories , 231 F.3d 1215, 1218-19 (9th Cir. 2000) ("Nothing in the statutory language [of the PSLRA] requires a specific reservation before a lead plaintiff designation can be re-opened. Quite the contrary.... It is not inconceivable that a lead plaintiff appointed originally might turn out to be an inadequate class representative and that a change might have to be made. Ordering such a change would be consistent with the district court's continuing duty to see that a class is adequately represented by counsel.") (emphasis in original). Reopening the Lead Plaintiff process will "permit[ ] this [C]ourt to make a reasoned analysis under the PSLRA rather than to summarily accept the submissions provided by [L]ead [C]ounsel for the former [L]ead [P]laintiff." Neopharm , 2004 WL 742084, at *3. The Court thus DENIES Lead Plaintiff DiBiase's motion to add Allen and Dandridge as Named Plaintiffs at this time. The Court will allow 21 days—until January 31, 2019—for any party to move for appointment as Lead Plaintiff.
B. Other Pending Motions
The Court need not address the issue of class certification until a new Lead Plaintiff is appointed. See id. Thus, the motion for class certification is DENIED. Iuso's motion for leave to intervene is DENIED as moot. Lastly, Stewart and Weisman's motion to renew motion for appointment as lead plaintiff and approval of selection of counsel is DENIED because it was filed prematurely.
IV. Conclusion
For the reasons discussed above, the Court GRANTS Lead Plaintiff DiBiase's motion to withdraw Steinberg as Named Plaintiff and DENIES Lead Plaintiff DiBiase's motion to add Allen and Dandridge as Named Plaintiffs. Dkt. 115. The Court also DENIES Lead Plaintiff DiBiase's motion for class certification (Dkt. 114), Iuso's motion for leave to intervene (Dkt. 120), and Stewart and Weisman's motion to renew motion for appointment as Lead Plaintiff and approval of selection of counsel (Dkt. 192).
IT IS SO ORDERED.