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Stanford University Law School - Securities Class Action Clearinghouse
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BORIS FELDMAN, State Bar # 128838
AILEEN L. ARRIETA, State Bar # 130868
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Telephone: (415) 493-9300
Attorneys for Defendants
QUANTUM CORPORATION, MICHAEL A. BROWN,
WILLIAM F. ROACH, YOUNG K. SOHN,
GINA M. BORNINO, DEBORAH E. BARBER,
MARK JACKSON, AND STEVEN C. WHEELWRIGHT
SUPERIOR COURT OF CALIFORNIA
COUNTY OF SANTA CLARA
HOWARD GUNTY PROFIT SHARING, On ) CASE NO.: CV60370 [sic]
Behalf of Itself and All Others )
Similarly Situated, ) MEMORANDUM OF POINTS
) AND AUTHORITIES IN
Plaintiff, ) SUPPORT OF DEFENDANTS'
) MOTION FOR
v. ) DETERMINATION THAT
) ACTION NOT PROCEED AS
QUANTUM CORPORATION, MICHAEL A. ) CLASS ACTION
BROWN, WILLIAM F. ROACH, YOUNG K. )
SOHN, GINA M. BORNINO, DEBORAH E. ) DATE: January 21, 1997
BARBER, MARK JACKSON, AND ) TIME: 9:00 a.m.
STEVEN C. WHEELWRIGHT, ) DEPT: 4
)
Defendants. )
)
)
__________________________________)
/ / /
TABLE OF CONTENTS
Page
BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1. The Parallel Federal Action Weighs Heavily
Against Class Certification . . . . . . . . . . . . . 3
2. The Interests of Judicial Economy Militate
Against Duplicative Proceedings . . . . . . . . . . . 4
3. Concentrating This Dispute In Federal Court
Would Not Prejudice Plaintiff or the Class . . . . . . 5
4. The Interests of Plaintiff's Counsel Do Not
Support Certification of a Class in This Case . . . . 7
5. Defendants' Interests Strongly Favor Proceeding
in a Single Forum . . . . . . . . . . . . . . . . . . 7
6. The Public Interest Will Be Served By Denial
of Class Certification . . . . . . . . . . . . . . . . 8
CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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TABLE OF AUTHORITIES
Page(s)
CASES
Becker v. Schenley Industries, Inc.,
557 F.2d 346 (2d Cir. 1977) . . . . . . . . . . . . . . . 3, 5
Blue Chip Stamps v. Manor Drug Stores,
421 U.S. 723 (1975) . . . . . . . . . . . . . . . . . . . . 7
Blue Chip Stamps v. Superior Court,
18 Cal. 3d 381 (1976) . . . . . . . . . . . . . . . . . . . 3
Caiafa v. Professional Law Corp.
v. State Farm Fire & Casualty Co.,
15 Cal. App. 4th 800 (1993) . . . . . . . . . . . . . 6, 8, 9
City of San Jose v. Superior Court,
12 Cal. 3d 447 (1974) . . . . . . . . . . . . . . . . . . . 3
Dean Witter Reynolds, Inc. v. Superior Court,
211 Cal. App. 3d 758 (1989) . . . . . . . . . . . . . . . 2, 3
Goodridge v. Fernandez,
505 N.Y.S.2d 144 (Sup. Ct. 1986) . . . . . . . . . . . . . 9
In re Victor Technologies Sec. Litig.,
102 F.R.D. 53 (N.D. Cal. 1984),
aff'd, 792 F.2d 862 (9th Cir. 1986) . . . . . . . . . . . . 7
Katz v. Carte Blanche Corp.,
496 F.2d 747 (3d Cir.), cert. denied,
419 U.S. 885 (1974) . . . . . . . . . . . . . . . . . . . 3, 4
Marinaro v. Santa Clara County Superior Court,
No. H015699 (Sup. Ct. Oct. 30, 1996) . . . . . . . . . . . 9
Mitchell v. Texas Gulf Sulphur Co.,
446 F.2d 90 (10th Cir.), cert. denied,
404 U.S. 1004 (1971), cert. denied,
405 U.S. 918 (1972) . . . . . . . . . . . . . . . . . . . . 3
Retail Clerks Union Local 648 v. Exxon Corp.,
[1985-2 Trade Cas.] Trade Reg. Rep.
(CCH) ¶ 66,887 (Cal. Super. Ct. Nov. 22, 1985) . . . . . . 4
Reyes v. Board of Supervisors,
196 Cal. App. 3d 1263 (1987) . . . . . . . . . . . . . . . 2
Richmond v. Dart Industries, Inc.,
29 Cal. 3d 462 (1981) . . . . . . . . . . . . . . . . . . . 2
Schneider v. Vennard,
183 Cal. App. 3d 1340 (1986) . . . . . . . . . . . . . passim
Simmons v. Superior Court,
96 Cal. App. 2d 119 (1950) . . . . . . . . . . . . . . . . 5
Thomson v. Continental Ins. Co.,
66 Cal. 2d 738 (1967) . . . . . . . . . . . . . . . . . . 6, 8
STATUTES
Cal. Civ. Code §1709 . . . . . . . . . . . . . . . . . . . . . . 2
Cal. Civ. Code §1710 . . . . . . . . . . . . . . . . . . . . . . 2
Cal. Civ. Code §1781(b) . . . . . . . . . . . . . . . . . . . . 9
Cal. Civ. Proc. Code § 382 . . . . . . . . . . . . . . . . . . . 2
Cal. Corp. Code § 25400 . . . . . . . . . . . . . . . . . . . . 2
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Cal. Corp. Code § 25500 . . . . . . . . . . . . . . . . . . . . 2
Cal. Bus. & Prof. Code § 17200 . . . . . . . . . . . . . . . . . 2
Cal. Bus. & Prof. Code § 17500 . . . . . . . . . . . . . . . . . 2
Securities Exchange Act of 1934, Section 10(b),
15 U.S.C. §78j(b) . . . . . . . . . . . . . . . . . . . . 2, 3
Securities Exchange Act of 1934, Section 20(a),
15 U.S.C. §78t(a) . . . . . . . . . . . . . . . . . . . . . 2
15 U.S.C. § 78aa . . . . . . . . . . . . . . . . . . . . . . . 2, 6
15 U.S.C. §78u-4(b)(3)(B) . . . . . . . . . . . . . . . . . . . 7
RULES
Fed. R. Civ. P. 23 . . . . . . . . . . . . . . . . . . . . 32, 3, 9
MISCELLANEOUS
Advisory Committee Note to Amended Rule 23,
39 F.R.D. 69 (1966) . . . . . . . . . . . . . . . . . . . . 4
Joint Explanatory Statement of the Committee
of Conference, H.R. Rep. 104-369, 104th Cong.,
1st Sess. 37 (Nov. 28, 1995) . . . . . . . . . . . . . . . 7
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This case is one of two securities class actions filed against
Quantum Corporation after its stock price dropped on June 12, 1996.
The other class action is in federal court in San Jose. Both
actions were filed by the same plaintiff, Howard Gunty Profit
Sharing ("Plaintiff"), using the same counsel. Both actions were
brought on behalf of an identical class of people who purchased
Quantum stock. Both actions name the same defendants. Both
actions rest on the same factual allegations.
Under these circumstances, there is no legitimate basis for
allowing parallel, duplicative proceedings to go forward in two
separate courts in San Jose. Because the federal court can resolve
all of Plaintiff's claims in a single judicial proceeding, the
present action should be deemed inappropriate for class treatment.
The landmark decision in Schneider v. Vennard, 183 Cal. App. 3d
1340 (1986), compels the denial of class certification here.
BACKGROUND
Quantum is a leading manufacturer of disk drives for
computers. This lawsuit focuses on Quantum's introduction of a
line of high-capacity disk drives, called the "Bigfoot" family.
Plaintiff alleges that statements made by Quantum and others
between February 26 and June 12, 1996 were misleading. According
to Plaintiff, Quantum knew that orders for Bigfoot would be weak at
the time those statements were made.
Because of a slowdown in industry demand, sales of Quantum
drives came in below internal projections during the first quarter
of fiscal 1997 ("the First Quarter").1 Complaint ¶ 38. On June 12
-- well before the First Quarter had ended, and weeks before its
normal earnings release -- Quantum announced that projected revenue
and earnings for the quarter would be lower than anticipated. Id.
Quantum's stock price fell as a result of that announcement.2
On August 30, 1996, Plaintiff filed suit in the United States
District Court for the Northern District of California. The
Federal Complaint was served as of September 18, 1996. Plaintiff
____________________
1 The First Quarter ended on June 30, 1996.
2 The price of Quantum's stock dropped from $18 1/2 per share
immediately prior to the June 12 announcement to $15 3/8 per
share just after the announcement. Today, Quantum's stock is
trading at $25 5/8 per share.
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also filed this State Complaint, which was served as of September
3, 1996.3 Both actions are brought by the same plaintiff on behalf
of the same persons, i.e., those who purchased Quantum stock
between February 26 and June 13, 1996. Compare State Complaint
¶ 40 with Federal Complaint ¶ 41. Both Complaints name the same
group of defendants (Quantum, Michael A. Brown, William F. Roach,
Young K. Sohn, Gina M. Bornino, Deborah E. Barber, Mark Jackson,
and Steven C. Wheelwright ("Defendants")). Both Complaints contain
identical factual allegations based on the same alleged statements
and omissions. Compare State Complaint ¶¶ 19-38 with Federal
Complaint ¶¶ 20-39. The State Complaint alleges claims under
Corporations Code Sections 25400 and 25500, Civil Code Sections
1709 and 1710, and Business & Professions Code Sections 17200 and
17500. The Federal Complaint alleges claims under Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa.
In the interests of judicial economy, Defendants asked
Plaintiff to litigate all of its claims in federal court, by
appending the California claims to the Federal Complaint.
Defendants stated that they would waive any objections to joinder.
See letter dated October 14, 1996 (copy attached to Arrieta Decl.
as Exhibit C). Plaintiff has not agreed to join its state law
claims in the federal action.
ARGUMENT
Certification of a class, pursuant to Code of Civil Procedure
§ 382, is discretionary. Dean Witter Reynolds, Inc. v. Superior
Court, 211 Cal. App. 3d 758, 764 (1989); Schneider v. Vennard, 183
Cal. App. 3d 1340, 1345 (1986). "[I]n light of the general
character of . . . section 382 which fails to define a procedural
framework for class certification, the courts have sought guidance
from . . . the Federal Rules of Civil Procedure, rule 23 . . . . "
Reyes v. Board of Supervisors, 196 Cal. App. 3d 1263, 1271 (1987).
Accord Schneider, 183 Cal. App. 3d at 1347; Dean Witter Reynolds,
Inc., 211 Cal. App. 3d at 773; Richmond v. Dart Industries, Inc.,
29 Cal. 3d 462, 469-70 (1981).
Federal Rule of Civil Procedure 23(b) provides that a court
may certify a class only upon finding that "a class action is
superior to other available methods for the fair and efficient
adjudication of the controversy." Considerations relevant to the
____________________
3 The State and Federal Complaints are attached to the
Declaration of Aileen L. Arrieta (hereinafter, the "Arrieta
Decl.") as Exhibits A and B, respectively.
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determination of superiority include "the extent and nature of any
litigation concerning the controversy already commenced by or
against members of the class," as well as "the desirability or
undesirability of concentrating the litigation of the claims in the
particular forum." Fed. R. Civ. P. 23(b)(3).
The Supreme Court has recognized that the superiority
requirement is implicit in the determination, under Section 382,
that a class action would produce substantial benefits to the
litigants and the judicial system. See Blue Chip Stamps v.
Superior Court, 18 Cal. 3d 381, 385 (1976); City of San Jose v.
Superior Court, 12 Cal. 3d 447, 459 (1974); see also Dean Witter
Reynolds, Inc., 211 Cal. App. 3d at 772-73; Schneider, 183 Cal.
App. 3d at 1347. Borrowing guidance from the federal Rule 23
decisions, California courts have considered the following factors
in determining whether a class should be certified in the face of
related proceedings in another court:
• the extent and nature of other litigation commenced
by members of the class;
• judicial economy;
• the interests of potential class members and of the
plaintiff;
• the interests of attorneys for the litigants;
• the interests of the public at large; and
• the interests of defendants.
See Schneider, 183 Cal. App. 3d at 1347. See also Katz v. Carte
Blanche Corp., 496 F.2d 747, 760 (3d Cir.), cert. denied, 419 U.S.
885 (1974). We now turn to these factors.
1. The Parallel Federal Action Weighs Heavily
Against Class Certification
"One of the factors to be considered in determining whether a
class action is superior to other available methods is the extent
and nature of other litigation already commenced by members of the
class. Courts have cited this factor in denying class
certification where a class action was pending in another
jurisdiction." Schneider, 183 Cal. App. 3d at 1347 (citation
omitted). See also Becker v. Schenley Industries, Inc., 557 F.2d
346, 348 (2d Cir. 1977); Mitchell v. Texas Gulf Sulphur Co., 446
F.2d 90, 107 (10th Cir.), cert. denied, 404 U.S. 1004 (1971), cert.
denied, 405 U.S. 918 (1972).
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Schneider is squarely on point. Plaintiffs there filed state
and federal securities class actions against Apple Computer and its
officers. The state complaint alleged violations of the California
Corporations Code. The federal complaint alleged violations of
section 10(b) of the Securities Exchange Act. The Superior Court
for the County of Santa Clara denied class certification because of
the pendency of a duplicative federal action. The Court of Appeal
affirmed, on the ground that the state court action was not a
"superior" method of resolving the litigation. In upholding the
Superior Court's decision, the Court of Appeal held that denial of
class certification would "preven[t] duplicative class actions,
eliminat[e] inconsistent results and avoi[d] undue burdens on the
parties and the judiciary." Id. at 1350. See also Retail Clerks
Union Local 648 v. Exxon Corp., [1985-2 Trade Cas.] Trade Reg. Rep.
(CCH) ¶ 66,887, at 64,419-20 (Cal. Super. Ct. Nov. 22, 1985) ("[S]o
long as the identical claims . . . of the class sought to be
certified . . . . remain pending and under active consideration in
[a federal action], it cannot be said that the certification of a
class to pursue the very same claims in these proceedings is the
superior method for the adjudication of those claims.").
The same outcome is appropriate here. In this case, the
complaints filed by Plaintiff in state and federal court are carbon
copies of one another. The complaints contain the same operative
factual allegations, on behalf of an identical class, over an
identical class period, against the same defendants. Thirty-six of
this Complaint's thirty-nine substantive paragraphs are contained
in haec verba in the federal Complaint. Compare State Complaint ¶¶
1-39 with Federal Complaint ¶¶ 1-40. Both actions were filed
around the same time. Both actions are at the same stage in the
proceedings. Given the unequivocal duplication posed by the two
actions, this Court should not permit the instant action to
continue.
2. The Interests of Judicial Economy Militate
Against Duplicative Proceedings
One of the principal justifications for class action treatment
is to promote judicial economy by avoiding a multiplicity of
actions arising out of the same factual dispute. See Advisory
Committee Note to Amended Rule 23, 39 F.R.D. 69, 102-03 (1966)
("Subdivision (b)(3) encompasses those cases in which a class
action would achieve economies of time, effort, and expense, and
promote uniformity of decision as to persons similarly situated
. . . ."); Katz, 496 F.2d. at 759 ("A major social policy in favor
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of the § [sic] 23(b)(3) class action is the prevention of multiple
relitigation of the factual and legal issues as to a defendant's
liability."). Judicial economy will be promoted by concentrating
shareholder class action claims against Quantum in a single forum.
Shareholder class actions impose substantial burdens on the
courts in which they are pending. Not only must the courts
consider a host of pretrial motions, such as pleading motions,
discovery motions, class certification motions, and summary
judgment motions, but they are also called upon to assist in
settlement discussions and, if those fail, to oversee complicated,
lengthy trials. Even after the trial is over, the courts will be
called upon to resolve any remaining issues on appeal. Taking up
the time and resources of multiple courts to resolve the same
dispute is a waste of judicial resources.
As the Court of Appeal held in Schneider: "[i]t is
undoubtedly preferable from the point of view of the judicial
system to resolve the instant dispute by one class action rather
than by duplicate class actions in two jurisdictions. If two class
actions [are] allowed to proceed simultaneously, the already
overtaxed resources of two courts will have been devoted to the
resolution of a single dispute. Judicial economy and efficiency
would not be served by allowing both actions to proceed as class
actions." Schneider, 183 Cal. App. 3d at 1348. See Becker, 557
F.2d at 348. Because "[i]t is the policy of the law to reduce to
the minimum the number of actions which may subsist between the
same parties," Simmons v. Superior Court, 96 Cal. App. 2d 119, 130
(1950) (citation omitted), the Court should not permit this suit to
proceed as a class action.
3. Concentrating This Dispute In Federal Court
Would Not Prejudice Plaintiff or the Class
Where a pending federal class action will provide plaintiffs
with all the remedies available in state court, a duplicative class
action in state court "cannot be said to be 'superior to other
available methods for the fair and efficient adjudication of the
controversy.'" Schneider, 183 Cal. App. 3d at 1348. That is
particularly true when the federal court can resolve all of
Plaintiffs' claims in a single proceeding, by hearing state law
claims that are pendent to the federal action. By contrast, this
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Court cannot resolve all of Plaintiff's claims, because
jurisdiction over Plaintiff's claims under the Securities Exchange
Act of 1934 is vested exclusively in federal court. See 15 U.S.C.
§ 78aa.
Lest there be any doubt as to the federal court's ability to
resolve all Plaintiff's claims -- federal and state -- in one
forum, defendants have agreed to waive any objection to filing of
Plaintiffs' state law claims as pendent claims in the federal
action. See Arrieta Decl., Exhibit C. Indeed, "in the Northern
District of California securities actions are routinely filed with
pendent state claims which are then certified as class actions."
See Schneider, 183 Cal. App. 3d at 1349. Because Defendants have
already offered to stipulate to joinder of Plaintiff's state law
claims in the federal action, Plaintiff cannot assert that the
class will be prejudiced by declining to allow a state class action
to proceed.
Because the federal class action is pending in the Northern
District of California, refusing to certify a class here would not
work a hardship on Plaintiff by forcing it to litigate in a foreign
jurisdiction. "[T]he federal fraud action is pending in the
[Northern] District of California, not in some other state. Thus,
the federal court is of equal convenience to the parties and
witnesses as is the state court . . . ." Caiafa v. Professional
Law Corp. v. State Farm Fire & Casualty Co., 15 Cal. App. 4th 800,
807 (1993). See also Thomson v. Continental Ins. Co., 66 Cal. 2d
738, 747 (1967). Plaintiff chose to file its federal action in
Northern California. It cannot be prejudicial to force Plaintiff
to litigate in a forum that it selected.
As the Court in Schneider observed, certification of
duplicative class actions may itself be detrimental to class
members. Simultaneous prosecution of two class actions requires
greater resources, and higher attorneys' fees, thereby reducing any
potential recovery by the plaintiff class. Moreover, pursuit of
two class actions would require publication of two sets of notices
to potential class members. Publication of more than one notice
with respect to the same underlying facts may confuse class members
in either suit. See Schneider, 183 Cal. App. 3d at 1349-50.
Thus, class members will be better served by pursuit of one class
action rather than two.
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4. The Interests of Plaintiff's Counsel Do Not
Support Certification of a Class in This Case
Plaintiff's counsel will suffer no prejudice from being
required to concentrate their litigation in a single forum. Given
that counsel chose to file actions in state and federal court in
San Jose, each suit is presumably of equal convenience to counsel.
"The federal court would apply state law to the state claims and is
experienced in deciding pendent claims in securities cases."
Schneider, 183 Cal. App. 3d at 1349. See also In re Victor
Technologies Sec. Litig., 102 F.R.D. 53, 59-60 (N.D. Cal. 1984),
aff'd, 792 F.2d 862 (9th Cir. 1986). Plaintiff's counsel are not
strangers to the Northern District of California.
5. Defendants' Interests Strongly Favor Proceeding
in a Single Forum
Simultaneous litigation of the same claims in two forums would
materially prejudice Defendants. Defendants would be forced to
file motions challenging the legal sufficiency of the same
allegations in different courts. If Plaintiff's claims survived
the pleading stage, Defendants would be forced to engage in
duplicative, burdensome, and costly discovery. More discovery
disputes than normal would arise because state and federal courts
have different rules regarding the commencement, and permissible
scope, of discovery. Parallel class actions would result in
duplicate motions for summary judgment, duplicate trials, and
duplicate appeals. There would even be separate settlement
discussions for each action, should Defendants seek to settle.
Litigating in two forums also would undermine Defendants'
rights under the Private Securities Litigation Reform Act of 1995.
The Reform Act provides that filing of a motion to dismiss stays
all discovery in a federal shareholder suit. See 15 U.S.C. §78u-
4(b)(3)(B). Congress adopted the discovery stay because "[t]he
cost of discovery often forces innocent parties to settle frivolous
securities class actions." H.R. Conf. Rep. No. 104-369, 104th
Cong., 1st Sess. 37. By staying discovery, the Reform Act sought
to curb the practice of filing baseless claims and then engaging in
a "fishing expedition" in hopes of discovering facts that might
support a viable cause of action. See Joint Explanatory Statement
of the Committee of Conference, H.R. Rep. 104-369, 104th Cong., 1st
Sess. 37 (Nov. 28, 1995). See also Blue Chip Stamps v. Manor Drug
Stores, 421 U.S. 723, 741 (1975) (observing that discovery in
securities class actions "permits a plaintiff with a largely
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groundless claim to simply take up the time of a number of other
people, with the right to do so representing an in terrorem
increment of the settlement value, rather than a reasonably founded
hope that the process will reveal relevant evidence").
Although the Reform Act curbed "fishing expeditions" in
federal court, it did not prevent plaintiffs from engaging in the
same behavior in state court. Because California imposes no
statutory stay of discovery in securities class actions, plaintiffs
seeking discovery for their federal claims need only commence a
second litigation in state court to obtain the early discovery.
Plaintiff should not be allowed to use duplicative proceedings for
the purpose of circumventing federal discovery limitations.
6. The Public Interest Will Be Served By Denial
of Class Certification
Duplicative litigation of the same issue does not serve the
public interest. This is particularly so where, as here, Plaintiff
can receive a fair adjudication of its claims, and adequate relief,
in the federal action. Under such circumstances, the public
interest is best served by avoiding two lawsuits, the simultaneous
prosecution of which will further burden the California courts.
Simultaneous consideration of the same issues by this Court
and the federal court would give rise to a danger of conflicts
between the two courts. See Thomson, 66 Cal. 2d at 747
(recognizing potential for "unseemly conflicts" as consideration
relevant to determination of whether to stay a state court action
because parallel action pending in federal court). Here, the
federal action involves the identical subject matter, and raises
the same factual issues, as those raised in the state action. If
both actions were permitted to proceed, Plaintiffs' claims would
necessarily be decided in both forums. Consideration of these
issues by two courts could result in inconsistent factual findings,
certification of inconsistent classes, inconsistent rulings
regarding the scope of discovery, and inconsistent summary judgment
or trial rulings. As the Court in Caiafa held:
The potential for "unseemly conflict" [in such
a situation] is great, unless both forums should
reach the exact same resolution of the issues.
On the other hand, if the broader federal fraud
action is allowed to proceed to judgment first,
it may well resolve the issues [plaintiff] seeks
to decide . . . in the state court. In that
instance, . . . [plaintiff's state court action]
would be entirely unnecessary. "Unseemly
conflict" will have been avoided and the
interest in judicial economy well served.
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Caiafa, 15 Cal. App. 4th at 807. See also Schneider, 183 Cal. App.
3d at 1350 ("[T]he trial court's refusal to certify the instant
action as a class action prevented duplicative class actions,
eliminated inconsistent results and avoided undue burdens on the
parties and the judiciary."); Goodridge v. Fernandez, 505 N.Y.S.2d
144, 147 (Sup. Ct. 1986) (holding that stay of state court
action would avoid "the unnecessary risk of inconsistent
adjudications" by state and federal courts). Here, "unseemly
conflict" can be avoided by ruling that this case may not proceed
as a class action.4
CONCLUSION
Only three weeks ago, the Supreme Court addressed the
propriety of parallel securities class actions in state and federal
court. Marinaro v. Santa Clara County Superior Court, No. H015699
(Sup. Ct. Oct. 30, 1996) (copy attached to Arrieta Decl. as Exhibit
D). In the underlying case, defendants moved the trial court for a
stay of the state court class action pending the outcome of a
parallel federal proceeding. The trial court denied defendants'
motion, and defendants petitioned the Court of Appeal for a writ of
mandate to stay the state court action. The Court of Appeal denied
defendants' petition, and defendants sought review in the Supreme
Court. On October 30, 1996, the Supreme Court issued an order
granting review and vacating the Court of Appeal's denial of
defendants' petition for writ of mandate. In its order, the
Supreme Court instructed the Court of Appeal to issue an order
directing the Santa Clara County Superior Court to show cause why a
stay of the action should not be entered. See Order dated October
30, 1996. While not dispositive of the issue, the Supreme Court's
order indicates the inclination of the Supreme Court on the very
issue presented by this motion. As the Supreme Court apparently
recognized, duplicative securities class actions are a waste of
scarce judicial resources and impose needless burdens on
defendants. For the foregoing reasons, this Court should determine
that the present action should not proceed as a class action.
____________________
4 Because Defendants believe that the existence of parallel
state and federal proceedings presents sufficient grounds for
denial of class certification, Defendants have not addressed
whether other criteria for class certification (such as
adequacy of class representative, typicality of claims,
numerosity of class members, and commonality of questions of
law or fact) have been satisfied. See Cal. Civ. Code
§ 1781(b); see also Fed. R. Civ. P. 23(a). If the Court does
not find that the parallel federal action is a superior
mechanism for resolving Plaintiff's claims, then Defendants
expressly reserve the right to raise additional arguments
concerning the factors listed above when Plaintiff moves for
class certification.
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Dated: November 21, 1996 Respectfully submitted,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/
By__________________________________
Aileen L. Arrieta
Attorneys for Defendants
QUANTUM CORPORATION, MICHAEL A.
BROWN, WILLIAM F. ROACH, YOUNG K.
SOHN, GINA M. BORNINO, DEBORAH E.
BARBER, MARK JACKSON, AND STEVEN C.
WHEELWRIGHT
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