Kevin J. Yourman (147159)
James E. Tullman (175008)
WEISS & YOURMAN
10940 Wilshire Blvd.
24th Floor
Los Angeles, CA 90024
(310) 208-2800

Joseph H. Weiss
WEISS & YOURMAN
551 Fifth Avenue
New York, NY 10176
(212) 682-3025

Attorneys for Plaintiffs

TO: ALL PARTIES AND THEIR COUNSEL OF RECORD

PLEASE TAKE NOTICE that on April 10, 1998, at 9:30 a.m., or as soon thereafter as the matter may be heard, before the Honorable Charles A. Legge, Courtroom 10, located at 450 Golden Gate Ave., San Francisco, California, plaintiffs James C. Smith and Efren Rivera (collectively, the "Movants"), who purchased no less than 11,000 shares of EFI Corporation common stock between April 10, 1997 and December 11, 1997 (the "Class Period") and have collectively suffered losses in excess of $163,396 will, and hereby do, move this Court for an order granting Movants' Motion For Appointment of Lead Plaintiffs and Lead Counsel Pursuant to §21D(a)(3)(B) of the Securities Exchange Act of 1934 (the "Motion").

This Motion is brought pursuant to §21D of the Securities Exchange Act of 1934 and Local Rule 23-1(b) on the grounds that Movants have timely filed and are the "most adequate plaintiffs." In addition, Movants seek the Court's approval of their selection of their counsel, Weiss & Yourman, as Lead Counsel for the class pursuant to §21D(a)(3)(B)(v), 15 U.S.C. §78u-4(a)(3)(B)(v).

This Motion is based on this Notice of Motion and Motion, the accompanying Memorandum of Points and Authorities In Support Thereof, the Declaration of James E. Tullman filed herewith, the pleadings and other files herein, and such other written or oral argument as may be permitted by the Court.

I. INTRODUCTION

The plaintiffs in this action allege violations of the Exchange Act and Rule 10b-5 promulgated thereunder, on behalf of purchasers of Electronics for Imaging, Inc. ("EFI") common stock during the Class Period. Movants are the only plaintiffs, to the best of plaintiffs' knowledge, who have filed such action in this or any other federal district court, to date.

Movants submit this memorandum in support of their motion for: (i) the appointment of all Movants as Lead Plaintiffs, in this action; and (ii) approval of Movants' choice of Lead Counsel in this action and any other actions that may be consolidated therewith. The combined financial interest of all Movants is no less than $163,396 in losses.

Section 21D of the Exchange Act, as recently amended, sets forth the procedure for the selection of lead plaintiffs to oversee class actions brought under the federal securities laws.¹ Specifically, §21D(a)(3)(A)(i) provides that, within 20 days after the date on which a class action is filed under the PSLRA, 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.

15 U.S.C. §78u-4(a)(3)(A)(i).

Further, §21D(a)(3)(B) of the Exchange Act directs the Court to consider any motions by plaintiffs or purported class members to serve as lead plaintiffs in response to any such notice by not later than 90 days after the date of publication pursuant to §21D, or as soon as practicable after the Court decides any pending motion to consolidate any actions asserting substantially the same claim or claims. Under this section of the Exchange Act, the court "shall" appoint the "most adequate plaintiff," and is to presume that plaintiff is the person, or group of persons, which:

(aa) has either filed the complaint or made a motion in response to a notice . . . ;

(bb) in the determination of the court, has the largest financial interest in the relief sought by the class; and

(cc) otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure.

Section 21D(a)(3)(B)(iii)(I), 15 U.S.C. §78u-4(a)(3)(B)(iii)(I).

Movants collectively purchased no less than 11,000 shares of EFI stock between April 10, 1997 and December 11, 1997, inclusive, and have incurred out of pocket losses of no less than $163,396. See Movants' Purchases, Sales and Losses Chart attached as Ex. C to the Tullman Declaration.² Movants therefore have a very substantial financial interest in the relief sought by the class. Movants also satisfy the requirement of Rule 23 of the Federal Rules of Civil Procedure because their claims are typical of the claims of the class, and they will fairly and adequately represent the interest of the class since their interests are clearly aligned with the members of the class and they have retained experienced class counsel to represent the class.

Accordingly, Movants are "the most adequate plaintiffs," as defined in the PSLRA, and they bring this motion seeking that all Movants be appointed Lead Plaintiffs. Movants also request the Court to approve their choice of Weiss & Yourman as Lead Counsel.

II. SUMMARY OF ACTION

EFI markets and develops products and technologies that enable digital color printing over computer networks .¶7.³ EFI's products are distributed by the Company's OEM partners -- Canon, Digital Equipment Corporation, Epson, IBM, Kodak/Danka Business Systems, Konica, Minolta, Océ, Ricoh, Sharp and Xerox. The Company's products are installed in corporations, advertising agencies, graphic design studios and print-for-pay businesses. ¶7

The complaint alleges that defendants disseminated materially false and misleading statements and/or concealed material adverse facts, thus artificially inflating the price of EFI stock, while defendants concurrently issued and sold shares of EFI at such inflated prices. The complaint described herein identifies a scheme and common course of conduct carried out by defendants, set forth briefly as follows.

Between April 10, 1997 and December 11, 1997, defendants made positive statements about EFI's on-going business and prospects which were misleading when made and operated to inflate the market price for EFI stock. For example, EFI announced in press releases and filings consecutive "record-breaking" quarters of revenue, that there was "strong demand" for EFI's products, and an "ongoing expansion of the Company's sales and marketing organizations and corresponding new market penetration." ¶¶31-39.

These statements misrepresented and/or failed to disclose that defendants had no reasonable basis for the belief that EFI's sales would continue to grow at the same high rates, that EFI's Japanese partner OEMs, which represented "significantly more than half" of EFI's quarterly revenues were overstocked with inventory, and were reducing such inventories to near zero in anticipation of a launch of new products from EFI, that such launch of new products was going to be delayed, and that EFI's 1997 and early 1998 revenues were still highly dependent on sales of the older products, orders for which EFI knew were not materializing. ¶39.

After the close of the stock market on December 11, 1997, EFI stunned the market by announcing that it expected its revenues for the fourth quarter ending December 31, 1997 to be in the range of $60 million, half of the $120 million in revenues defendants knew the market had been forecasting, and compared with $107 million in revenues for the third quarter 1997. EFI also revealed it expected earnings per share of $0.06 versus the market expectation of $0.49 and compared with $0.46 in the third quarter 1997. ¶40.

Following these revelations, EFI's stock price plunged 60% from a close of $39 on December 11, 1997 to a low of $14.50 on December 12, 1997 before finally closing at $14.88 on a huge volume of over 32 million shares traded. ¶40.

During this time period, defendants Avida, Lenches, Rosenzweig and Saltzman sold over 221,000 shares of EFI stock for proceeds of almost $12 million. ¶8-11, 44. Further, EFI issued over $7 million in new shares of stock during this time via various stock option plans as officer and employee compensation, and thus benefited from the inflation in EFI's stock price. ¶¶7, 46.

The complaint alleges violations of Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder.

III. PROCEDURAL BACKGROUND

This action was filed on December 31, 1997. Pursuant to §21D(a)(3)(A)(i) of the Exchange Act, the plaintiffs published the required notice to class members on January 2, 1997. See Tullman Declaration, Ex. A.

As amended by the PSLRA, the Exchange Act requires notice to advise class members of their right to move this Court to be appointed "lead plaintiff," and provides any member or members of the class may so request this within 60 days of publication of the notice. Further, §21D(a)(3)(B) of the Exchange Act requires that the Court decide this motion within 90 days from the date of the publication of the notice. On January 2, 1998 notice was made in this action and, as provided by the Exchange Act, Movants now request this Court to appoint them lead plaintiffs.

IV. THE PROPOSED LEAD PLAINTIFFS ARE THE MOST ADEQUATE PLAINTIFFS UNDER THE EXCHANGE ACT

A. The Proposed Lead Plaintiffs Satisfy The Requirements Of The PSLRA For Appointment As Lead Plaintiff

The "most adequate plaintiff" provision of the PSLRA provides that a court shall appoint as lead plaintiff the member or members of the purported plaintiff class that the court determines to be most capable of adequately representing the interests of class members (hereafter in this paragraph referred to as the "most adequate plaintiff") in accordance with this subparagraph. Section 21D(a)(3)(B)(i). Moreover, the Exchange Act, as amended by the PSLRA, provides:

that the most adequate plaintiff in any private action arising under this title is the person or group of persons that --

(aa) has either filed the complaint or made a motion in response to a notice . . .;

(bb) in the determination of the court, has the largest financial interest in the relief sought by the class; and

(cc) otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure.

Section 21D(a)(3)(B)(iii)(I). Thus, a "member or members" of the class or a "person or group of persons" may combine to constitute "the largest financial interest" and thereby jointly serve as the "most adequate plaintiff." Id.; see In re Diamond Multimedia Systems, Inc. Sec. Litig., No. C-96-2644-SBA, slip op. at 2-4 (N.D. Cal. Jan. 13, 1997) (proposed lead plaintiffs can pool together their shares to form the largest financial interest) (Tullman Declaration, Ex. E).⁴

Pursuant to §21D(a)(3)(B) of the Exchange Act, Movants respectfully request that all Movants be appointed Lead Plaintiffs (hereinafter referred to as the "Proposed Lead Plaintiffs"), in this action. The Proposed Lead Plaintiffs also respectfully request that the Court approve their selection of Lead Counsel for the class.

During the class period, the Proposed Lead Plaintiffs collectively purchased no less than 11,000 shares of EFI stock at prices artificially inflated by defendants' false and misleading statements and have collectively suffered losses in excess of $163,396. See Chart of Movants' Purchases, Sales and Losses, attached as Ex. C to the Tullman Declaration.

The Proposed Lead Plaintiffs are qualified to represent the proposed class. Each of them has signed and filed a sworn certification of their review of the complaint and authorization of its filing, and is willing to serve as a representative party on behalf of the class. In addition, the Proposed Lead Plaintiffs have selected and retained counsel highly experienced in prosecuting securities class actions such as this to represent them. See the firm resume of Weiss & Yourman attached as Ex. K to the Tullman Declaration

Accordingly, Proposed Lead Plaintiffs satisfy the prerequisites for appointment as "lead plaintiffs" pursuant to §21D(a)(3)(B).

B. The Proposed Lead Plaintiffs Are Qualified Under Rule 23

Section 21D(a)(3)(B)(iii)(I)(cc) of the Exchange Act provides that the lead plaintiff or plaintiffs must also "otherwise satisf[y] the requirements of Rule 23 of the Federal Rules of Civil Procedure." With respect to the qualifications of the class representative, Rule 23(a) requires that the claims be typical of the claims of the class and that the representative will fairly and adequately protect the interests of the class.

As detailed below, each of the Proposed Lead Plaintiffs satisfies the typicality and adequacy requirements of Rule 23(a), thereby justifying the appointment of the Proposed Lead Plaintiffs.

1. The Claims Of The Proposed Lead Plaintiffs Are Typical Of The Claims Of The Class

The typicality requirement of Rule 23(a)(3) is satisfied when a named plaintiff has: (a) suffered the same injuries as the absent class members; (b) as a result of the same course of conduct by defendants; and (c) their claims are based on the same legal issues. See, e.g., Epstein v. MCA, Inc., 50 F.3d 644, 668 (9th Cir. 1995), rev'd on other grounds sub nom. Matsushita Elec. Indus. Co. v. Epstein, 116 S. Ct. 873 (1996); In re Cirrus Logic Sec. Litig., 155 F.R.D. 654, 657 (N.D. Cal. 1994); In re Activision Sec. Litig., 621 F. Supp. 415, 428 (N.D. Cal. 1985).

The claims asserted by the Proposed Lead Plaintiffs are typical of the claims of the members of the proposed class. Each of the Proposed Lead Plaintiffs, as do all members of the class, allege that certain of EFI's directors and high ranking officers violated the Exchange Act by publicly disseminating false and misleading statements about EFI during the Class Period. Each of the Proposed Lead Plaintiffs, as did all of the members of the proposed class, acquired EFI stock at prices inflated by defendants' misrepresentations and omissions and was damaged thereby. Typicality exists here because the claims asserted by the Proposed Lead Plaintiffs are based on the same legal theory and arise "from the same event or course of conduct giving rise to the claims of other class members." In re United Energy Corp. Solar Power Modules Tax Shelter Inv. Sec. Litig., 122 F.R.D. 251, 256 (C.D. Cal. 1988). Accord, Blackie v. Barrack, 524 F.2d 891, 902-03 & n.19 (9th Cir. 1975), cert. denied, 429 U.S. 816 (1976).

2. The Proposed Lead Plaintiffs Will Fairly And Adequately Represent The Interests Of The Class

The interests of the Proposed Lead Plaintiffs are clearly aligned with the members of the proposed class, and there is no evidence of any antagonism between the interests of these individuals and the proposed class members. As detailed above, the Proposed Lead Plaintiffs share substantially similar questions of law and fact with the members of the proposed class, and their claims are typical of the members of the class. The Proposed Lead Plaintiffs have amply demonstrated their adequacy as class representatives by signing a certification, filed with the Court, affirming their willingness to serve as and assume the responsibilities of a class representative. In addition, the Proposed Lead Plaintiffs have selected counsel highly experienced in prosecuting securities class actions such as this to represent them.

V. THIS COURT SHOULD APPROVE THE PROPOSED LEAD PLAINTIFFS' CHOICE OF LEAD COUNSEL

The PSLRA vests authority in the Lead Plaintiffs to select and retain lead counsel, subject to court approval. See §21D(a)(3)(B)(v). Thus, the Court should not disturb the Lead Plaintiffs' choice of counsel unless "necessary to protect the interests of the plaintiff class." See Tullman Declaration, Ex. D at 62. The Proposed Lead Plaintiffs have selected the law firm of Weiss & Yourman to serve as Lead Counsel for the class. This firm possesses extensive experience in the area of securities litigation and has successfully prosecuted numerous securities fraud class actions on behalf of injured investors. See Tullman Declaration, Ex. K. Thus, the Court may be assured that, in the event this motion is granted, the members of the class will receive the highest caliber of legal representation available.

VI. CONCLUSION

For all the foregoing reasons, Movants respectfully request that the Court: (i) appoint all Movants as Lead Plaintiffs in the above-captioned action, pursuant to §21D(a)(3)(B); and (ii) approve the Proposed Lead Plaintiffs' choice of Weiss & Yourman as Lead Counsel for the class.

¹ Congress amended the Exchange Act by the Private Securities Litigation Reform Act of 1995 ("PSLRA"), codified at 15 U.S.C. §78u-4. A copy of the relevant section of the PSLRA is attached as Ex. D to the Tullman Declaration.

² Copies of the certifications of the named plaintiffs for each of the movants are attached as Ex. B to the Tullman Declaration. Originals are on file with the original complaint in this action.

³ All "¶_" and "¶¶__" references are to the Complaint in Smith, et al. v. EFI, et al, Case No. C-97-04739 CAL, filed on December 31, 1997.

⁴ See also In re Read-Rite Corp. Sec. Litig., No. C-97-20059-RMW, slip op. at 4-5 (N.D. Cal. May 23, 1997) (same); Malin v. IVAC Corporation, et al., No. 96-1843-CIV-Moreno, slip op. at 4-8 (S.D. Fla. Nov. 1, 1996) (holding the plaintiff group with the largest number of shares is the most adequate plaintiff under the PSLRA); Zuckerman v. Foxmeyer Health Corp., No. 3:96-CV-2258-T, slip op. at 5 (N.D. Tex. Mar. 28, 1997) (eleven individual plaintiffs with the largest financial interest collectively appointed lead plaintiff); Chan v. Orthologic Corp., No. Civ. 96-1514 PHX RCB, slip op. at 13 (D. Ariz. Dec. 19, 1996) (plaintiffs from five separate actions collectively appoint lead plaintiff); Powers v. Eichen, Civ. No. 96-1431-B(AJB), Order at 1 (S.D. Cal. Nov. 15, 1996) (nine individual plaintiffs collectively appointed lead plaintiff). Tullman Declaration, Exs. F-J.

Source: File to epost from Weiss & Yourman