Digital Link - CIVIL DOCKET FOR CASE #: 96-CV-20867 - NOTICE OF MOTION AND DEFENDANTS' MOTION TO STRIKE THE DECLARATION OF JOHN B. TORKELSEN

Stanford University Law School - Securities Class Action Clearinghouse

[Web note: Page formatting approximates, but does not match exactly, that of filed paper document.]

STEVEN M. SCHATZ, State Bar # 118356
TIMOTHY T. SCOTT, State Bar # 126971
THOMAS J. MARTIN, State Bar # 150039
DANIEL W. TURBOW, State Bar # 175015
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Telephone: (415) 493-9300

Attorneys for Defendants
VINITA GUPTA, DANIEL L. PALMER,
TIMOTHY K. MONTGOMERY, STANLEY E.
KAZMIERCZAK, TONI BELLIN, BENJAMIN W.
BERRY, MOREY R. SCHAPIRA, GREGORY M. AVIS,
CHARLES R. MOORE and DIGITAL LINK CORPORATION

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

GEORGE GENNA, On Behalf of Himself ) CASE NO.: C-96-20867-RMW (EAI)
and All Others Similarly Situated, )
) CLASS ACTION
Plaintiff, )
) NOTICE OF MOTION AND
v. ) DEFENDANTS' MOTION TO STRIKE
) THE DECLARATION OF JOHN B.
DIGITAL LINK CORPORATION, et al., ) TORKELSEN
)
Defendants. ) Date: April 18, 1997
) Time: 9:00 a.m.
) Judge: The Honorable Ronald M.
) Whyte
)
___________________________________)

NOTICE OF MOTION AND MOTION TO STRIKE
DECLARATION OF JOHN B. TORKELSEN
C-96-20867-RMW (EAI)

NOTICE OF MOTION AND MOTION

PLEASE TAKE NOTICE THAT on April 18, 1997, at 9:00 a.m., in

the Courtroom of the Honorable Ronald M. Whyte, 280 South First

Street, San Jose, California, defendants Digital Link Corporation

("Digital Link"), Vinita Gupta, Daniel L. Palmer, Timothy K.

Montgomery, Stanley E. Kazmierczak, Toni Bellin, Benjamin W. Berry,

Morey R. Schapira, Gregory M. Avis and Charles R. Moore

(collectively, the "defendants") will and hereby do move pursuant

to Federal Rule of Civil Procedure 12(f) to strike the declaration

of John B. Torkelsen ("Torkelsen Declaration" or "Decl.") submitted

in support of plaintiff's opposition to defendants' motion to

dismiss the Corrected Complaint ("Complaint"). This motion is

based on this notice, the memorandum of points and authorities that

follows, all pleadings and papers filed herein, oral argument of

counsel, and any other matter which may be submitted at the

hearing.

INTRODUCTION

On January 3, 1997, defendants moved to dismiss this action

under Federal Rules of Civil Procedure 12(b)(6) and 9(b) and the

Private Securities Litigation Reform Act ("Reform Act").¹

Plaintiff sought and was denied leave to file a fifty-page

opposition. On March 7, 1997, in connection with filing his

memorandum in opposition to defendants' motion, plaintiff submitted

a declaration of a self-described "analys[t] of individual stocks

and selected industries." Torkelsen Decl. ¶ 2. In his

Declaration, Torkelsen purports to opine on various allegations in

the Complaint including the materiality of certain statements

alleged therein. Id. ¶¶ 6(a), 17-18, 24-49, 61).² Plaintiff's submission of the Torkelsen Declaration is

entirely improper at this stage in the proceedings. As the Court

well knows, on a 12(b)(6) motion to dismiss, the Court may only

consider matters that are contained within the complaint or matters

that may be judicially noticed. "Evidence" such as the Torkelsen

____________________

¹ Securities Exchange Act of 1934, 15 U.S.C. §78a, Sections 21D
& 21E.

² The instant motion will not seek to rebut the purported
opinions contained in the Torkelsen Declaration. Where relevant and
permissible under Fed. R. Civ. P. 12(b)(6), defendants will address
those opinions in their forthcoming reply memorandum in support of
their motion to dismiss.

NOTICE OF MOTION AND MOTION TO STRIKE
DECLARATION OF JOHN B. TORKELSEN
C-96-20867-RMW (EAI) -1-

Declaration that is outside the pleadings may not be considered on

a motion to dismiss for failure to state a claim. Furthermore, the

Torkelsen Declaration is irrelevant to the issues presented in

defendants' motion to dismiss. That motion is directed solely to

the legal sufficiency of the Complaint. Plaintiff's submission of

the Declaration also runs contrary to Congress' intent in passing

the Reform Act -- Congress clearly did not intend for plaintiffs'

to have their own experts submit evidentiary-type opinions on why

their own allegations pass muster under the heightened pleading

standards of the Reform Act. For these reasons this Court should

strike the Declaration.³ ARGUMENT

I. THE TORKELSEN DECLARATION SHOULD BE STRICKEN BECAUSE
IT IS IMMATERIAL TO THE COURT'S DETERMINATION OF
DEFENDANTS' MOTION TO DISMISS

A. On A 12(b)(6) Motion, The Court Should Only
Consider The Allegations In The Complaint And
Any Documents That Are The Proper Subject Of
Judicial Notice

In consideration of a motion to dismiss under Rule 12(b)(6),

the court's inquiry is restricted to whether the allegations of the

complaint are legally sufficient to state a claim. For this

reason, courts are "confined to consider[ing] . . . the allegations

in the pleadings and any documents attached to the pleadings."

Arbabian v. BP America, 898 F. Supp. 703, 707 (N.D. Cal. 1995)

(citing Hal Roach Studios v. Richard Feiner & Co., 896 F.2d 1542,

1555 n. 19 (9th Cir. 1989)); Branch v. Tunnell, 14 F.3d 449, 454

(9th Cir.) ("[D]ocuments whose contents are alleged in a complaint

and whose authenticity no party questions, but which are not

physically attached to the pleading, may be considered in ruling on

a Rule 12(b)(6) motion to dismiss."), cert. denied, 114 S. Ct. 2704

____________________

³ Defendants strongly believe that it would be improper for the
Court to convert defendants' motion to dismiss into one for summary
judgment and consider the Declaration at this stage. However,
should this Court choose to convert the motion to dismiss into a
motion for summary judgment, defendants request that the Court give
them reasonable notice and opportunity to present evidence to
counter plaintiff's allegations. See Glessner v. Kenny, 952 F.2d
702, 707 n.4 (3rd. Cir. 1991) (failure to give all parties notice
that court has converted motion to dismiss into motion for summary
judgment is reversible error); c.f. Mack v. South Bay Beer
Distrib., Inc., 798 F.2d 1279, 1282 (9th Cir. 1986) (granting of
motion to dismiss without giving all parties notice that motion has
been converted to summary judgment reversible error).

NOTICE OF MOTION AND MOTION TO STRIKE
DECLARATION OF JOHN B. TORKELSEN
C-96-20867-RMW (EAI) -2-

(1994). Courts have held that it is also proper when deciding a

motion to dismiss to address documents that are specifically

referenced in the complaint or judicially noticeable, including

documents that are matters of public record or that have been filed

with a public agency. See Emrich v. Touche Ross & Co., 846 F.2d

1190, 1198 (9th Cir. 1988) ("'[W]hen passing on a motion attacking

the legal efficacy of the plaintiff's statement of his claim, the

court may properly look beyond the complaint only to items in the

record of the case or to matters of general public record.'")

(emphasis added). Accord In re Valence Tech. Sec. Litig., No. C

95-20459 JW, 1996 WL 37788, *3 (N.D. Cal. Jan. 23, 1996) ("[A]

district court deciding a motion to dismiss a securities fraud

action may review and consider public disclosure documents required

by law to be and which actually have been filed with the

SEC....'")⁴; Kramer v. Time Warner Inc., 937 F.2d 767, 769-770 (2d

Cir. 1991) ("We hold that a district court may consider relevant

documents required by the securities laws to be filed with the

[SEC] in determining a motion to dismiss a complaint alleging

material misrepresentations and omissions in such documents.").

Torkelsen's declaration meets none of these criteria. Courts

have properly refused to consider affidavits submitted by

plaintiffs in opposition to a motion to dismiss when evaluating the

motion. See Summit Tech. v. High-line Medical Instruments Co., 933

F. Supp. 918, 927 (C.D. Cal. 1996) (on a motion to dismiss, courts

may not consider matters outside of the complaint, including

affidavits); Bureerong v. Uvawas, 922 F. Supp. 1450, 1451 (C.D.

1996) (same). Beachy v. Board of Aviation Comm'rs Of Kokomo, Ind.,

699 F. Supp. 742, 749 (S.D. Ind. 1988) (striking affidavit); Berent

v. Kemper Corp., 780 F. Supp. 431, 440 n.11 (E.D. Mich. 1991)

(refusing to consider affidavit submitted by plaintiff's securities

law expert), aff'd, 973 F.2d 1291 (6th Cir. 1992); Moore v.

Powermatic, 738 F. Supp. 1188, 1189 (N.D. Ill. 1990) (same); Three

D Dep't, Inc. v. Kmart Corp., 670 F. Supp. 1404, 1406 (N.D. Ill.

1987) (same). Moreover, it is virtually axiomatic that a court may

not rely on affidavits or declarations that go to the truth or

____________________

⁴ A copy of In re Valence Tech. Sec. Litig., No. C 95-20459 JW,
1996 WL 37788 (N.D. Cal. Jan. 23, 1996) is attached as Ex. 6 to the
Declaration of Daniel W. Turbow In Support Of Defendants' Motion to
Dismiss ("Turbow Decl. ISO Mot. to Dismiss").

NOTICE OF MOTION AND MOTION TO STRIKE
DECLARATION OF JOHN B. TORKELSEN
C-96-20867-RMW (EAI) -3-

falsity of the allegations in the complaint when deciding a

12(b)(6) motion. See id.

B. The Torkelsen Declaration Addresses Issues
That Are Largely Irrelevant To Defendants'
Motion To Dismiss

Plaintiff's submission of the Declaration is a transparent

effort to bolster an otherwise insufficient Complaint. Torkelsen

has previously been retained by plaintiff's law firm in more than

200 different lawsuits. However, Torkelsen's declaration does

virtually nothing to support plaintiff's opposition brief in this

action. Despite the length of the Declaration (24 pages and 61

paragraphs)⁵ and its purported analysis of multiple subjects related

to plaintiff's allegations, plaintiff's only citation to the

Declaration in their opposition to defendants' motion to dismiss

is in a footnote in support of the proposition that "statements

about a company's business in important markets and its future EPS

are material." Plaintiff's Opposition at 7 n.9. Only three

paragraphs of the Declaration are cited in this footnote. See id.

Significantly, the motion to dismiss is not based on any argument

that defendants statements were not material as a matter of law.

The declaration is therefore completely irrelevant to the issues

before the Court. The closest that defendants come to arguing

materiality is the bespeaks caution doctrine, a topic on which Mr.

Torkelsen is completely silent. Indeed, his silence on that issue

and on plaintiff's allegation that Digital Link's adverse

disclosures were "boilerplate" speaks volumes about the merits of

plaintiff's claims. The declaration itself simply assumes the

truth of the allegations in the Complaint and concludes that such

allegations are material.

The proper focus of the court's inquiry on the motion to

dismiss is to assess the legal adequacy of plaintiff's complaint

when measured against the arguments raised by defendants and the

pleading standards of the Reform Act. This is a task solely within

the purview of the Court and not within the purview of Torkelsen or

any other third party declarant. See Berent, 780 F. Supp. at 440

n.11. The issues presented in this motion are not questions of

fact for which expert witnesses may submit opinions. For these

reasons, plaintiff's submission of the Declaration under the guise

____________________

⁵ This Court has already expressed its desire to keep the
briefing on the motion to dismiss limited to that consistent with
the local rules. See February 19, 1997 Order.

NOTICE OF MOTION AND MOTION TO STRIKE
DECLARATION OF JOHN B. TORKELSEN
C-96-20867-RMW (EAI) -4-

of an "expert" opinion is both improper and irrelevant and

therefore it should be stricken. See id.; Fed. R. Evid. 702

("scientific, technical or other specialized knowledge" to "assist

the trier of fact to understand the evidence . . .") (emphasis

added).

C. The Submission Of The Declaration Is Contrary
To the Purpose Of The Private Securities
Litigation Reform Act

Plaintiff's submission of the Torkelsen Declaration is

especially ironic after the enactment of the Reform Act, wherein

Congress expressed its intent to intensify judicial scrutiny of

securities class actions at the pleading stage.⁶ One of the main

goals of the Reform Act was to instill more stringent pleading

requirements to provide courts with greater power to dismiss

frivolous securities class actions at the pleading stage. See Def.

Mem. at 15; Turbow Decl. ISO Defendants' Motion to Dismiss Ex. 1 at

31, 41. A corollary to this goal was Congress' intent to reduce

the ability of plaintiffs' law firms to repeatedly bringing these

types of lawsuits without sufficient basis or investigation.⁷ For

the convenience of the Court, a copy of this excerpt from the

Congressional Record is attached as Exhibit 1 to the Declaration of

Daniel W. Turbow In Support of Defendants' Motion to Strike the

Declaration of John B. Torkelsen ("Turbow Decl. ISO Mot. to

Strike"). It adds nothing to the equation for the plaintiff's law

firm's "house expert" to lend his two-cents here. Congress would

be surprised if the Reform Act could be so readily circumvented.

Apparently, plaintiff has not taken Congress' message to

heart. See Turbow Decl. ISO Mot. to Strike Ex. 2 (plaintiff's law

firm "dominates the [plaintiffs securities] market like never

before" and that it is a "virtual monopolist in the all-important

California market"). The tougher pleading requirements of the

Reform Act apparently have compelled plaintiff to submit the

Declaration in an effort to buttress the allegations in the

Complaint. Given the irrelevancy of the Declaration and the

impropriety of submitting it at this stage, plaintiff's actions

____________________

⁶ Defendants respectfully refer the Court to their memorandum in
support of their motion to dismiss ("Def. Mem.") for a more
complete analysis of Congress' intent in passing the Reform Act as
well as the higher pleading standards thereunder.

⁷ See id. at 31 (Reform Act designed to remedy abuses of
"lawyer-driven lawsuits" and filing of lawsuits "without regard to
any underlying culpability of thie issuer, and with only faint hope
that the discovery process might lead eventually to some plausible
cause of action"); 141 Cong. Rec. S 1075, *1090 (daily ed. Jan. 18,
1995) (attaching article of Wall Street Journal with specific
references to role of plaintiff's law firm in securities fraud
lawsuits to proposed bill introduced by Sen. Domenici); Peter
Scheer, How Milberg Weiss Tightened Its Grip, The Recorder, Mar. 7,
1997, at p. 4 (Turbow Decl. ISO Mot. to Strike Ex. 2).

NOTICE OF MOTION AND MOTION TO STRIKE
DECLARATION OF JOHN B. TORKELSEN
C-96-20867-RMW (EAI) -5-

illustrate their concern for the way this Court may view their

Complaint in light of the Reform Act.⁸ However, nothing in the

Reform Act or the legislative history thereto suggests that

Congress intended to encourage experts of the plaintiffs' bar to

instruct the courts on how to interpret allegations in securities

class action complaints. This is precisely what plaintiff has

sought to do by submitting the Torkelsen Declaration. Accordingly,

the Court should strike the Torkelsen Declaration.

CONCLUSION

For the foregoing reasons, this Court should strike the

Torkelsen Declaration or refuse to consider it at this stage.

Dated: March 14, 1997 WILSON, SONSINI, GOODRICH & ROSATI

By: ____________________________________
Timothy T. Scott

Attorneys for Defendants VINITA GUPTA,
DANIEL L. PALMER, TIMOTHY K. MONTGOMERY,
STANLEY E. KAZMIERCZAK, TONI BELLIN,
BENJAMIN W. BERRY, MOREY R. SCHAPIRA,
GREGORY M. AVIS, CHARLES R. MOORE and
DIGITAL LINK CORPORATION

____________________

⁸ For an analysis of why the Complaint is legally insufficient,
defendants respectfully refer the Court to their memorandum in
support of their motion to dismiss the Complaint.

NOTICE OF MOTION AND MOTION TO STRIKE
DECLARATION OF JOHN B. TORKELSEN
C-96-20867-RMW (EAI) -6-

8 May 1997