JAMES L. ROBART, District Judge.
Before the court are Movant Mark Rudd's motion to appoint lead plaintiff and counsel (Rudd Mot. (Dkt. # 9))
This putative class action arises from the planned acquisition and merger of Defendant Outerwall, Inc. by affiliates of Apollo Global Management, LLC ("Apollo"). (Abbas Compl. (Dkt. # 1) ¶ 1.)
On July 25, 2016, Outerwall and Apollo issued a joint press release announcing their Agreement and Plan of Merger ("the Merger Agreement"). (Id. ¶ 2.) The Merger Agreement specified a tender offer to "purchase all of the outstanding shares of Outerwall common stock for $52.00 in cash for each share of Outerwall stock [that a stockholder] own[s]." (Id. ¶ 2.) The offer commenced on August 5, 2016, and ended on September 1, 2016. (Id.)
Shortly after Outerwall and Apollo announced the Merger Agreement, Plaintiffs filed five putative class actions in this District. (See Abbas Compl.); Baumgartner, No. C16-1281JLR, Dkt. # 1; Hunter, No. C16-1285JLR, Dkt. # 1; Mallinger, No. C16-1316JLR, Dkt. # 1; Filippov, No. C16-1329JLR, Dkt. # 1. The initial case—which Mr. Abbas filed—was assigned to the undersigned judge, and the four later-filed cases were transferred to the undersigned judge and subsequently consolidated. (See 9/28/16 Order (Dkt. # 7).)
Plaintiffs allege that the transaction was the product of "an unfair process stemming not from the Board's concern for the best interests of stockholders, but rather from the Board's desire to avoid a proxy contest with an activist investor and potential ouster from their positions." (Abbas Compl. ¶ 3.) Plaintiffs further allege that Outerwall and Apollo announced the transaction "just as [Outerwall] began to enjoy the results of initiatives to improve its financial results." (Id. ¶ 4.) Specifically, they assert that "as recently as July 19, 2016, an analyst with B. Riley & Co. set a $58.00 per share price target for the Company—a $6.00 premium to the Offer Price" of $52.00. (Id.)
In addition, Plaintiffs allege that "the Board agreed to lock up the deal with [five] coercive deal protective devices in the Merger Agreement," including (1) a "no-solicitation clause" that prevented Outerwall from soliciting and providing non-public information to alternate bidders; (2) an "information rights" provision that required Outerwall to notify Apollo of any competing bidder and all material terms of any competing bid; (3) "matching rights" that gave Apollo three business days to match any better offer Outerwall received as well as two business days after a material amendment is made to the terms and conditions of a competing offer or a newly submitted offer; (4) a "non-waiver" provision that restricted Outerwall from modifying or terminating any material provision of a confidentiality agreement to which Outerwall or its subsidiaries are a party; and (5) a provision that required Outerwall to pay Apollo $26.9 million if Outerwall pursued a competing bid. (Id. ¶ 5.) Finally, Plaintiffs allege that the Schedule 14D-9 that Outerwall filed with the Securities and Exchange Commission ("the SEC") on August 5, 2016, omitted material information or contained material misrepresentations. (Id. ¶ 6.)
Plaintiffs bring this putative class action on behalf of Outerwall's public stockholders for violations of Sections 14(e), 14(d)(4), and 20(a) of the Securities Exchange Act of 1934 ("the Act"), for breach of fiduciary duty, to enjoin a vote on the planned transaction, to rescind the transaction, and to recover damages and/or fees and costs. (See Abbas Compl. ¶ 1); see also Filippov, No. C16-1329JLR, Dkt. # 1 ¶ 70 (asserting a violation of Section 14(d)(4)); Hunter, No. C16-1285JLR, Dkt. # 1 ¶ 74 (alleging breach of fiduciary duty); Mallinger, No. C16-1316JLR, Dkt. # 1 ¶ 84 (same). Plaintiffs bring suit "on behalf of all persons and entities that own Outerwall common stock" (Abbas Compl. ¶ 26) for the period of the tender offer (id. ¶ 2).
On October 25, 2016, Mr. Rudd filed a motion for appointment as lead plaintiff and for approval of his selection of counsel pursuant to the Private Securities Litigation Reform Act ("the PSLRA").
Six days later, on October 31, 2016, Mr. Abbas moved for appointment as lead plaintiff and for approval of his selection of counsel pursuant to the PSLRA. (Abbas Mot.) Mr. Abbas contends that he should be appointed lead plaintiff because on September 16, 2016, Mr. Abbas entered into a Memorandum of Understanding ("the MOU") with Defendants that allowed Mr. Abbas access to "material information" and "provides the framework for a potential settlement of the [consolidated] Actions." (Id. at 7-8.) Mr. Abbas argues that "he is the only movant who already has, and will continue to, fairly and adequately protect the interests of the Class." (Id. at 9.) Even though Mr. Abbas owns only 1,690 shares (Abbas Cert. (Dkt. # 2) ¶ 4),
The PSLRA "instructs district courts to select as lead plaintiff the one `most capable of adequately representing the interests of class members.'" In re Cavanaugh, 306 F.3d 726, 729 (9th Cir. 2002) (quoting 15 U.S.C. § 78u-4(a)(3)(B)(i)). The presumptively most adequate plaintiff is the plaintiff who has the greatest financial stake in the outcome of the case and meets the requirements of Federal Rule of Civil Procedure 23. See id. The Ninth Circuit holds that the PSLRA provides a three-step process for identifying the lead plaintiff. Id. "The first step consists of publicizing the pendency of the action, the claims made[,] and the purported class." Id.
"In step two, the district court must consider the losses allegedly suffered by the various plaintiffs before selecting as the `presumptively most adequate plaintiff'—and hence the presumptive lead plaintiff—the one who `has the largest financial interest in the relief sought by the class' and `otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure.'" Cavanaugh, 306 F.3d at 729-30. In engaging in these inquiries, "the district court must compare the financial stakes of the various plaintiffs and determine which one has the most to gain from the lawsuit." Id. at 730. The court "then focus[es] its attention on that plaintiff" and determines "based on the information he has provided in his pleadings and declarations, whether he satisfies the requirements of Rule 23(a), in particular those of `typicality' and `adequacy.'" Id.
At the third step, the court gives "other plaintiffs an opportunity to rebut the presumptive lead plaintiff's showing that it satisfies Rule 23's typicality and adequacy requirements." Id.
The plaintiff who filed the first lawsuit must publish notice of the complaint in a widely circulated business publication within 20 days of filing the complaint. 15 U.S.C. § 78u-4(a)(3)(A)(l). In addition, all proposed lead plaintiffs must submit a sworn certification setting forth certain facts to demonstrate to the court that the plaintiff has suffered more than a nominal loss, is not a professional litigant, and is otherwise interested and capable of serving as a class representative. 15 U.S.C. § 78u-4(a)(2)(A).
Mr. Abbas was the first plaintiff to file suit, and he published notice in PR Newswire on September 1, 2016, within 20 days of filing suit.
In step two of the analysis, the court determines which movant has the largest financial interest in the litigation. See Cavanaugh, 306 F.3d at 730. In making this determination, "the court may select accounting methods that are both rational and consistently applied." Id. at 730 n.4. Courts usually consider four factors: (1) total shares purchased, (2) net shares purchased, (3) net funds expended, and (4) approximate loss suffered. See Frias v. Dendreon Corp., 835 F.Supp.2d 1067, 1075 (W.D. Wash. 2011); see also In re Solar City Corp. Sec. Litig., No. 16-CV-04686-LHK, 2017 WL 363274, at *4 (N.D. Cal. Jan. 25, 2017) (In some instances, courts "equate financial interest with actual economic losses suffered."). In cases involving Section 14(a) and 20(a) claims, "the candidate with the largest potential recovery [is] the candidate who ha[s] bought the largest number of . . . shares." Zucker v. Zoran Corp., No. C 06-04843 WHA, 2006 WL 3591156, at *3 (N.D. Cal. Dec. 11, 2006). Notably, the PSLRA "provides no occasion for comparing plaintiffs with each other on any basis other than their financial stake in the case." Cavanaugh, 306 F.3d at 732. Once the court identifies the plaintiff with the largest financial interest in the litigation, the court's inquiry "must focus on that plaintiff alone" and is "limited to determining whether he satisfies the other statutory requirements." Id.
Mr. Rudd contends that he has the largest financial interest because he held 6,000 shares of Outerwall common stock at the time of the tender offer. (See Rudd Cert. ¶ 4.) Mr. Rudd contends that those shares were valued at approximately $312,000.00 based upon the tender offer. (Rudd Mot. at 9.) Mr. Abbas does not dispute that Mr. Rudd has the largest financial interest—Mr. Abbas owned only 1,200 shares of common stock at the time of tender offer (Abbas Cert. ¶ 4)—and instead focuses on whether Mr. Rudd meets the Rule 23 requirements (see Abbas Resp. at 12-16).
Rule 23 requires numerosity, commonality, typicality, and adequacy as prerequisites to bringing a class action. See Fed. R. Civ. P. 23(a)(1)-(4). On a motion to appoint a lead plaintiff, the court focuses solely on the typicality and adequacy requirements. Frias, 835 F. Supp. 2d at 1075 (citing Cavanaugh, 306 F.3d at 730 n.5). The court's "Rule 23 inquiry is not as searching as it would be on a motion for class certification." Schriver v. Impac Mortg. Holdings, Inc., No. SACV 06-31 CJC (RNBx), 2006 WL 6886020, at *5 (C.D. Cal. May 2, 2006). "[T]he prospective lead plaintiff need only make a prima facie showing that it meets the typicality and adequacy factors." Id.
In addressing the typicality requirement, the court analyzes "whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct." Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992). Typicality is generally shown "when each class member's claim arises from the same course of events, and each class member makes similar legal arguments to prove the defendants' liability." Rodriguez v. Hayes, 591 F.3d 1105, 1122 (9th Cir. 2010).
Here, Mr. Rudd asserts that the proposed merger resulted from an unfair process, specifically identifying five "coercive deal protection devices in the Merger Agreement." (Rudd Mot. at 4-5.) Mr. Rudd also contends that Outerwall violated Sections 14 and 20(a) of the Act when on August 5, 2016, Outerwall filed with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 that omitted or misrepresented certain material information. (Id. at 5-6.) Mr. Rudd therefore alleges injuries similar to those of the other putative class members. See Hanon, 976 F.2d at 508. Mr. Rudd's claims also arise from the same events and conduct—the events leading up to the proposed merger, the announcement of the merger, and the tender offer—as the other putative class members' claims. (Compare Rudd Mot. at 4-7, with Abbas Compl. ¶¶ 2-7, 33-96); Rodriguez, 591 F.3d at 1122. In addition, it appears to the court that Mr. Rudd bases his claims on the same legal theories that the other putative class members base their claims. (Compare Rudd Mot. at 4-7, 10, with Abbas Compl. ¶¶ 33-106); Rodriguez, 591 F.3d at 1122. For these reasons, Mr. Rudd makes a prima facie showing that he satisfies the typicality requirement.
A lead plaintiff is adequate if the plaintiff does not have any conflicts of interest with other putative class members and the plaintiff and his counsel will vigorously litigate on the class's behalf. See Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998); Staton v. Boeing Co., 327 F.3d 938, 957 (9th Cir. 2003). The adequacy requirement is also met "when counsel for the class is qualified and competent, the representative's interests are not antagonistic to the interests of absent class members, and it is unlikely that the action is collusive." Tanne v. Autobytel, Inc., 226 F.R.D. 659, 667 (C.D. Cal. 2005) (citing In re N. Dist. of Cal., Dalkon Shield IUD Prods. Liab. Litig., 693 F.2d 847, 855 (9th Cir. 1982)).
Mr. Rudd also meets the adequacy requirement. First, he does not appear to have any conflicts of interest with other putative class members. (See, e.g., Rudd Cert. ¶ 6 (stating that Mr. Rudd "will not accept any payment for serving as a representative party beyond Proposed Lead Plaintiff's pro-rata share of any recovery, except reasonable costs and expenses").) Mr. Rudd and his proposed counsel will also vigorously conduct the litigation, which Mr. Rudd demonstrates by certifying that he "is willing to serve as a representative party on behalf of the class, including testifying at deposition or trial." (Rudd Cert. ¶ 3.) Because Mr. Rudd alleges the greatest financial loss from the merger, the court concludes that he will be a vigorous advocate on the putative class's behalf. See Tanne, 226 F.R.D. at 668 (stating that the movant was "an `adequate' plaintiff because he has suffered the greatest financial loss, ensuring vigorous advocacy"). In addition, there is no evidence before the court that Mr. Rudd has engaged in collusion, and Mr. Rudd has retained experienced and qualified counsel. (See, e.g., Moore Decl. ¶ 2, Ex. 4 ("Robbins Geller Resume") (describing the qualifications of Mr. Rudd's proposed counsel, Robbins Geller.) For these reasons, Mr. Rudd makes a prima facie showing that he satisfies Rule 23's adequacy requirement.
Because Mr. Rudd has the largest financial interest in this litigation and makes a prima facie showing of the Rule 23 requirements, the court concludes that he is the presumptively most adequate plaintiff.
Mr. Abbas seeks to rebut the presumption that Mr. Rudd is the most adequate plaintiff. (See Abbas Resp.) A purported class member may rebut the presumption of adequacy only upon proof that the presumptively most adequate plaintiff will not fairly and adequately protect the interests of the class or is subject to unique defenses that make the plaintiff incapable of adequately representing the class. 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II)(aa)-(bb). "At this stage, the process turns adversarial, and other plaintiffs may present proof that disputes the presumptively most adequate plaintiff's prima facie showing of typicality and adequacy." Niederklein v. PCS EdventuresA.com, Inc., No. 1:10-cv-00479-EJL-CWD, 2011 WL 759553, at *9 (D. Idaho Feb. 24, 2011) (citing Cavanaugh, 306 F.3d at 730.)
Mr. Abbas's first set of arguments attempting to rebut the presumption that Mr. Rudd is the most adequate lead plaintiff is less than clear. (See Resp. at 10-11.) Mr. Abbas appears to argue that (1) the court appointed him lead plaintiff at the time it consolidated the actions, and (2) nothing prevented Mr. Abbas from "entering into the MOU regarding the claims asserted" before he moved for appointment as lead plaintiff. (See Abbas Mot. at 9-10.) The court addresses each of these preliminary arguments in turn.
First, the court did not appoint Mr. Abbas lead plaintiff when it consolidated the actions nor did any plaintiff seek such relief at the time of consolidation. (See 9/28/16 Order; see generally Dkt.); 15 U.S.C. § 78u-4(a)(3)(B)(ii) (directing courts to "[a]s soon as practicable . . . appoint the most adequate plaintiff as lead plaintiff for the consolidated actions"); see also Gluck v. CellStart Corp., 976 F.Supp. 542, 550 (N.D. Tex. 1997) (noting that the PSLRA "promulgates a timetable" that requires the court to appoint a lead plaintiff "as soon as practicable" after the court consolidates the actions). Neither Mr. Abbas nor any of the other plaintiffs in this matter requested appointment as lead plaintiff at the time they stipulated to consolidation of the actions, and the court has not yet appointed a lead plaintiff.
As part of this argument, Mr. Abbas urges the court to follow Wojno v. FirstMerit Corporation, No. 16-cv-0461BYP (N.D. Ohio). In that case, Judge Benita Pearson appointed a group of interim co-lead plaintiffs when she consolidated the actions pursuant to a stipulated motion, id., Dkt. # 46, and a putative class member later—but within the PSLRA's 60-day period—moved to vacate that order and for appointment as lead plaintiff, id., Dkt. # 66. Judge Pearson declined to vacate the court's earlier order because she determined that "[i]t would not have been appropriate . . . for the Court to delay appointing a class representative until the expiration of the cutoff for filing a lead plaintiff motion." Id., Dkt. # 73 at 7. The court is unpersuaded, however, that it should apply Judge Pearson's approach in Wojno here. The court has not yet appointed a lead plaintiff, so the court need not consider whether to vacate such an order. (See generally 9/28/16 Order; Dkt.) In addition, Mr. Abbas has not shown that Mr. Rudd moved for appointment as lead plaintiff "at the eleventh hour" as Judge Pearson found the movant in FirstMerit had.
Second, Mr. Abbas also argues against Mr. Rudd's appointment based on the MOU into which he entered with Defendants. Mr. Abbas states that the MOU contemplates an eventual settlement if Mr. Abbas and his counsel "determine that the proposed settlement remains fair, adequate[,] and reasonable." (See Resp. at 11; see also 2d Townsend Decl. (Dkt. # 17) ¶ 3, Ex. 2 ("Sched. 14D-9/A") at 6 ("The MOU contemplates that the parties would enter into a stipulation of settlement.").) For this reason, he contends that "other district courts have issued orders permitting settlement proceedings before a lead plaintiff has been appointed." (Resp. at 11; see also id. at 11 n.3.) Although that may be the case, neither Mr. Abbas nor any of the other plaintiffs have sought to stay the proceedings or entered a stipulation of settlement for the court's review. (See generally Dkt.) For these reasons, the fact that the court could permit settlement proceedings before appointing a lead plaintiff is immaterial to the court's consideration of the currently pending motions.
The court now addresses Mr. Abbas's contention that Mr. Rudd will not fairly and adequately represent the class. Mr. Abbas primarily argues that Mr. Rudd did not act as quickly as Mr. Abbas in taking action to benefit the putative class before the tender offer expired. (See Abbas Resp. at 5, 12-14.) Specifically, Mr. Abbas argues that Mr. Rudd "waited a month after the Consolidation Stipulation was entered to file his motion for lead plaintiff appointment." (Id. at 14.) Because the court consolidated the actions and Mr. Rudd should have been aware of the MOU, Mr. Abbas contends that Mr. Rudd's "lack of diligence" makes him inadequate. (Id. at 14, n.5.) Mr. Abbas further argues that he is "uniquely qualified to serve" as lead plaintiff because "he is entitled to conduct discovery to investigate whether there is liability for damages" under the MOU, something that he contends other putative class members will not be able to do until they first defeat a motion to dismiss. (Id. at 8, 14, n.6.)
The court concludes that Mr. Abbas has not offered sufficient proof to rebut the presumption on the basis of fairness and adequacy. Mr. Abbas's arguments merely raise the question of "whether another movant"—in this case, Mr. Abbas—"might do a better job of protecting the interests of the class than the presumptive lead plaintiff." Cavanaugh, 306 F.3d at 732, n.10. But the appropriate question is not whether Mr. Abbas was a better putative class representative leading up to Mr. Rudd's and Mr. Abbas's respective motions. See id.; Tanne, 226 F.R.D. at 669 (noting that the question is not whether another movant will do a better job of protecting the class); Solar City, 2017 WL 363274, at *7 (citing Cavanaugh and declining to credit a movant's argument that it would "be a better lead plaintiff" than the presumptively most adequate plaintiff). Rather, Mr. Abbas "must prove" that Mr. Rudd will not be a fair and adequate lead plaintiff going forward. See Cavanaugh, 306 F.3d at 732, n.10 (citing In re Cendant Corp. Litig., 264 F.3d 201, 268 (3d Cir. 2001)). Mr. Abbas has not met his burden of proof here.
Mr. Abbas appears to understand that Ninth Circuit precedent precludes his arguments because he cites almost exclusively out-of-circuit authority, which he suggests should lead the court to conclude that Mr. Abbas is the preferable lead plaintiff. (See Abbas Mot. at 12 (citing Plumbers & Pipefitters Local 562 Pension Fund v. MGIC, 256 F.R.D. 620, 623 (E.D. Wis. 2009)).) For example, Mr. Abbas quotes an Eastern District of Wisconsin case in which the court stated the largest financial interest should be "based on whatever factors seem most appropriate under the facts of the case before it." Plumbers & Pipefitters, 256 F.R.D. at 623. However, that approach to calculating the largest financial interest has no bearing on rebutting the presumptive lead plaintiff's ability to adequately and fairly represent the class, particularly in light of the Ninth Circuit's clear mandate in Cavanaugh. As binding precedent on this court makes clear, it does not matter that Mr. Abbas might be a better lead plaintiff. Rather, Mr. Abbas must affirmatively show that Mr. Rudd will not adequately and fairly protect the class's interests, and Mr. Abbas has not made that showing.
Indeed, courts in the Ninth Circuit have denied lead plaintiff status to plaintiffs who had already done considerable work on behalf of the putative class. For example, in In re Leapfrog Enterprises, Inc. Securities Litigation, a group of plaintiffs had "filed a comprehensive amended complaint," "procured twenty-two document preservation subpoenas," and "developed an intimate knowledge of the case." No. C-03-05421 RNW, 2005 WL 3801587, at *2 (N.D. Cal. Nov. 23, 2005). They contested a plaintiff's appointment because they had "already conferred substantial benefits to the class through their vigorous prosecution of the case." Id. (internal quotation marks omitted). Nevertheless, the court concluded that "Cavanaugh squarely holds that such peripheral issues cannot be the basis for elevating a particular plaintiff to lead status." Id. (citing Cavanaugh, 306 F.3d at 732); see also Smilovits v. First Solar, Inc., No. CV 12-0555 PHX DGC, 2012 WL 3002513, at *5 (D. Ariz. July 23, 2012) (concluding that various factors that made one movant a "superior" lead plaintiff were irrelevant). Because the court concluded that another plaintiff had the largest financial stake in the litigation and met Rule 23's typicality and adequacy requirements, the court appointed that plaintiff lead status. Id. at *4.
For these reasons, the court concludes that Mr. Abbas has not proved that Mr. Rudd will not fairly or adequately represent the class.
Mr. Abbas also contends that Mr. Rudd is subject to unique defenses that render him inadequate. Specifically, Mr. Abbas argues that Mr. Rudd will be subject to a laches defense and a defense based on the fact that he may not have tendered his shares in the tender offer. (Abbas Mot. at 14 n.5, 16.) In demonstrating that a presumptive lead plaintiff is subject to a unique defense, the party opposing the presumptive lead plaintiff need "only to show a degree of likelihood that a unique defense might play a significant role at trial." In re CTI Biopharma Corp. Sec. Litig., No. C16-0216RSL, 2016 WL 7805876, at *2 (W.D. Wash. Sept. 2, 2016) (internal quotation marks omitted). A speculative defense "is insufficient to rebut the presumption" that the presumptively most adequate plaintiff "satisfies the adequacy and typicality requirements." Cook v. Atossa Genetics, Inc., No. C13-1836RSM, 2014 WL 585870, at *5 (W.D. Wash. Feb. 14, 2014).
The court finds Mr. Abbas's laches argument unpersuasive. A laches defense rests "on the maxim that `one who seeks the help of a court of equity must not sleep on his rights.'" AirWair Int'l Ltd. v. Schultz, 84 F.Supp.3d 943, 955 (N.D. Cal. 2015) (quoting Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 835 (9th Cir. 2002)). "To prevail on a laches defense," a defendant must show that "the claimant unreasonably delayed in filing suit based on when the claimant knew or should have known of the allegedly infringing conduct" and "as a result of the delay, the defendant suffered prejudice." Id. Mr. Abbas has not shown that it is likely that this defense "might play a significant role at trial." CTI Biopharma, 2016 WL 7805876, at *2; (see also Abbas Mot. at 14 n.5). The court cannot conclude based solely on Mr. Abbas's conclusory assertion that Mr. Rudd unreasonably delayed filing suit after the events that gave rise to the putative class claims or that this argument would be unique to Mr. Rudd. (See Abbas Mot. at 14 n.5 (raising the laches issue in a footnote and providing no substantive argument).) In addition, there is no indication in the record at this time that Defendants have suffered prejudice from any delay on Mr. Rudd's part. (See generally Dkt.)
Mr. Abbas also argues that Mr. Rudd will be subject to a unique defense based on the fact that he did not tender his shares. (Abbas Resp. at 16 ("It is unclear whether or not [Mr.] Rudd tendered his shares in the Tender Offer, which would raise a unique defense. . . .").) As an initial matter, Mr. Abbas does not provide any substantive argument in support of his contention or state specifically why Mr. Rudd would be uniquely subject to this defense. (Id. at 16.) In response, Mr. Rudd argues that this fact is irrelevant and would not subject Mr. Rudd to a unique defense. (See Rudd Reply at 5 n.7 (quoting Plaine v. McCabe, 797 F.2d 713, 718 (9th Cir. 1986)).
The Ninth Circuit has held that "even a non-tendering shareholder may bring suit for violation of [S]ection 14(e)" when the plaintiff shareholder otherwise alleges injury "as a result of fraudulent activity in connection with a tender offer." Plaine, 797 F.2d at 718; see also Brody v. Transitional Hosps. Corp., 280 F.3d 997, 1003 (9th Cir. 2002) (stating that outside of the non-insider trading context, "Section 14(e) can be understood as protecting not only those who buy or sell stocks but also shareholders who decide not to trade"). Without any additional context from Mr. Abbas about why Mr. Rudd does not have standing as a non-tendering shareholder, Plaine's holding appears to undermine Mr. Abbas's argument that Mr. Rudd is subject to a unique defense based on his status as a non-tendering shareholder. In addition, nothing in the record indicates that this defense would be unique to Mr. Rudd. There may be a substantial number of putative class members who are also subject to this defense. See In re Netflix, Inc. Sec. Litig., No. 12-0225 S.C. 2012 WL 1496171, at *5 (N.D. Cal. Apr. 27, 2012) (citing Hanon, 976 F.2d at 508-09) (stating that "[t]he point of the [unique defense] requirement is . . . to protect the absent class members from the expense of litigating defenses applicable to lead plaintiffs but not to the class as a whole"). Moreover, courts have routinely stated that a plaintiff may properly be a lead plaintiff even when the plaintiff does not have standing for every claim alleged on the class's behalf. See CTI Biopharma, 2016 WL 7805876, at *4 ("Potential standing issues with respect to certain claims do not preclude appointment as lead plaintiff and can be resolved by the appointment of additional class representatives as the litigation proceeds."). For these reasons, Mr. Abbas has also failed to demonstrate that unique defenses disqualify Mr. Rudd as an adequate lead plaintiff.
In the alternative, Mr. Abbas requests that the court appoint Mr. Rudd and Mr. Abbas co-lead plaintiffs. (Abbas Resp. at 16; Abbas Mot. at 16-17.) He urges the court to appoint co-lead plaintiffs because Mr. Rudd "is the only other movant," "is not an institutional investor," and "owns only slightly more shares" of Outerwall stock than Mr. Abbas, and Mr. Abbas "has already demonstrated his commitment to protecting the rights of the Class." (Id. at 16.) Mr. Abbas cites several authorities from outside of the Ninth Circuit to support his contention that appointing co-lead plaintiffs is appropriate under the circumstances of this case. (See id. (citing In re Baan Co., Sec. Litig., 271 F.Supp.2d 3, 13 (S.D.N.Y. 2002); Dolan v. Axis Capital Holdings Ltd., No. 04CIV. 8564 (RJH), 2005 WL 883008, at *5-6 (S.D.N.Y. Apr. 13, 2005); Piven v. Sykes Enters., 137 F.Supp.2d 1295, 1303 (M.D. Fla. 2000)).)
District courts in the Ninth Circuit have declined to appoint co-lead plaintiffs when the plaintiff seeking co-lead status has not shown that its appointment is necessary. See Tanne, 226 F.R.D. at 673 (concluding that "the appointment of co-lead plaintiffs" was not "preferable to the appointment of a single lead plaintiff in this case"); Bodri v. Gopro, Inc., No. 16-cv-00232-JST, 2016 WL 1718217, at *6 (N.D. Cal. Apr. 28, 2016) (declining to appoint a co-lead plaintiff where the movant had not shown that it was necessary "to represent the interests of options purchasers"); see also Hodges v. Immersion Corp., No. C-09-4073 MMC, 2009 WL 5125917, at *4 n.5 (N.D. Cal. Dec. 21, 2009) (stating that even though there may be situations where a district court should appoint co-lead plaintiffs who have no preexisting relationship, such a situation was not present); Weisz v. Calpine Corp., No. 4:02-CV-1200, 2002 WL 32818827, at *3 n.3 (N.D. Cal. Aug. 19, 2002) (declining to appoint a co-lead plaintiff and stating that the matter of a subclass could be addressed upon class certification).
On the other hand, district courts have appointed co-lead plaintiffs where it is necessary to ensure that all plaintiffs are adequately represented. See In re MGM Mirage Sec. Litig., No. 2:09-cv-01558-GMN-LRL, 2010 WL 4316754, at *5 (D. Nev. Oct. 25, 2010) (appointing co-lead counsel to ensure that all plaintiffs—both common stock purchasers and debt securities purchasers—"are adequately represented"). The case law therefore suggests that the decision whether to appoint a co-lead plaintiff often turns on the existence of disparate sub-groups of plaintiffs in the putative class. But where the presumptively most adequate plaintiff acting alone will adequately represent the class, a co-lead plaintiff is unnecessary.
The court concludes that Mr. Abbas has not shown that it is necessary in this case to appoint co-lead plaintiffs. The cases Mr. Abbas cites in his favor on this point "predate Cavanaugh" or "are from jurisdictions outside the Ninth Circuit."
The PSLRA provides that the most adequate plaintiff "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). If the lead plaintiff makes "a reasonable choice of counsel, the district court should generally defer to that choice." Cohen, 586 F.3d at 712. A court may reject the lead plaintiff's choice of counsel, but the court does not have "the authority to select lead counsel of its own choosing." Id. at 709. The court therefore has only "the limited power to accept or reject the lead plaintiff's selection." Id.
Mr. Rudd has selected Robbins Geller as lead counsel and submitted the law firm's resume to the court. (Rudd Mot. at 11; Robbins Geller Resume.) The court concludes that Robbins Geller's resume indicates that the firm is well-qualified to serve as lead counsel, particularly because the firm has represented clients in dozens of class action securities cases. (See Robbins Geller Resume at 1-5.) Accordingly, the court approves Mr. Rudd's selection of Robbins Geller as lead counsel.
For the reasons set forth above, the court GRANTS Mr. Rudd's motion for appointment as lead plaintiff (Dkt. # 9), APPROVES his selection of Robbins Geller as lead counsel (Dkt. # 9), and DENIES Mr. Abba's motion for appointment as lead plaintiff and approval of his selection of lead counsel (Dkt. # 13). In addition, the court ORDERS the parties to file a joint status report that proposes a schedule for the filing of a consolidated complaint, any motion to dismiss, and any motion for class certification no later than seven (7) days after the entry of this order.
