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Stanford University Law School
- Securities Class Action Clearinghouse
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MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH (68581)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
- and -
REED R. KATHREIN (139304)
JEFFREY W. LAWRENCE (166806)
DAVID R. STICKNEY (188574)
222 Kearny Street, 10th Floor
San Francisco, CA 94108
Telephone: 415/288-4545
[Proposed] Lead Counsel for Plaintiffs
KAUFMAN, MALCHMAN, KIRBY
& SQUIRE, LLP
JEFFREY H. SQUIRE
IRA M. PRESS
919 Third Avenue, 11th Floor
New York, NY 10022
Telephone: 212/371-6600
KAPLAN, KILSHEIMER & FOX, LLP
ROBERT N. KAPLAN
JOEL STRAUSS
685 Third Avenue, 26th Floor
New York, NY 10017
Telephone: 212/687-1980
WOLF POPPER LLP
LESTER L. LEVY
845 Third Avenue
New York, NY 10022
Telephone: 212/759-4600
[Proposed] Executive Committee for Plaintiffs
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
DONALD and CYNTHIA GRIMM, On Behalf of
Themselves and All Others Similarly Situated,
Plaintiffs,
vs.
RASTER GRAPHICS, INC., et al.,
Defendants.
___________________________________
No. C-98-0807-FMS
CLASS ACTION
ERIK DOWGOS, On Behalf of Himself and All
Others Similarly Situated,
Plaintiff,
vs.
RASTER GRAPHICS, INC., et al.
Defendants.
___________________________________
No. C-98-0938-FMS
CLASS ACTION
DATE: June 5, 1998
TIME: 10:00 a. m.
COURTROOM: 6 (17th Floor)
OPPOSITION TO THE GRIMM GROUP'S MOTION
FOR DESIGNATION OF LEAD PLAINTIFF AND FOR
APPOINTMENT OF LEAD PLAINTIFFS' CHOICE OF COUNSEL
I. INTRODUCTION
II. ARGUMENT
A. The Raster Graphics Plaintiff Group Has The Largest Financial Interest In The Relief Sought By The Class
B. Plaintiffs In The Raster Graphics Plaintiff Group Are Entitled To Their Choice Of Lead Counsel
III. CONCLUSION
Purchasers of Raster Graphics, Inc.'s ("Raster" or the "Company") common stock commenced three class actions in this District against Raster and certain of its officers and directors for violations of §10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 promulgated thereunder. The plaintiffs in Grimm v. Raster Graphics, Inc., C-98-0807-FMS, the first-filed action, published a notice on March 3, 1998, inviting other class members to move the Court for appointment as Lead Plaintiff. Under §21D of the Exchange Act, within 60 days of the publication of notice, "any member of the purported class may move the court to secure as lead plaintiff of the purported class." 15 U.S.C. 78u-4(a)(3)(A)(i)(II).
On May 4, 1998, two distinct groups of Raster shareholders filed competing motions for appointment as Lead Plaintiff. One group consists of John Bowers, Steven Jay Colton, and 29 other members of the proposed class (the "Raster Graphics Plaintiff Group"). The other group consists of plaintiffs Donald and Cynthia Grimm, Erik Dowgos, Henry Bentley and 16 members of the proposed class (the "Grimm Group").(1)
The Private Securities Litigation Reform Act ("PSLRA") provides a straight-forward objective test to identify the "most adequate plaintiff" for appointment as the lead plaintiff. The lead plaintiff shall be "the person or group of persons that . . . has the largest financial interest in the relief sought by the class." 15 U.S.C. §78u-4(a)(3)(B)(iii)(I)(aa)-(cc) (emphasis added).
Applying this standard, the Raster Graphics Plaintiff Group should be appointed Lead Plaintiff in the present case because it has the largest financial interest in the relief sought. The Raster Graphics Plaintiff Group purchased over 162,090 Raster shares and suffered $357,510 in losses.(2) The Grimm Group purchased only 26,950 Raster shares for losses of $69,632.50 during the Class Period. Accordingly, the motion of the Grimm Group should be denied, and the Raster Graphics Plaintiff group should be appointed Lead Plaintiff.
The "most adequate plaintiff" provision of the PSLRA provides that a court
[s]hall 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.
15 U.S.C. §78u-4(a)(3)(B)(i) (emphasis added). In making this determination, the PSLRA requires the Court to adopt a rebuttable presumption that the most adequate plaintiff 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.
15 U.S.C. §78u-4(a)(3)(B)(iii)(I) (emphasis added).
Thus, the statutory language permits "a person or group of persons" to combine or constitute "the largest financial interest" and thereby jointly serve as "the most adequate plaintiff."
A comparison of the financial interests of the competing movants plainly shows that the Raster Graphics Plaintiff Group has the largest financial interest in the relief sought by the class. The Raster Graphics Plaintiff Group collectively purchased 162,099 shares of Raster common stock between October 20, 1997 and April 3, 1998, and, in the aggregate, suffered losses of at least $357,510. By contrast, the Grimm Group purchased 26,950 shares and lost $69,632.50 In other words, the Raster Graphics Plaintiff Group suffered more than five times greater losses than the Grimm Group. In fact, a single member of the Raster Graphics Plaintiff Group, John Bowers, has a greater financial interest in the outcome of the litigation than all of the members of the Grimm Group combined. Mr. Bowers purchased 110,000 shares and lost over $190,869. May 4, 1998 Declaration of Jeffrey W. Lawrence ("Lawrence Decl."), Ex. D. He, alone, is a more adequate lead plaintiff than the entire Grimm Group. Other comparisons are likewise instructive.(3) For example, the Class Period losses of Steven Jay Colton, another plaintiff in the Raster Graphics Plaintiff Group, exceeds the combined losses of the Grimm Group's top three money-losers. Likewise, the Class Period losses of Midas Partners L.P., Lawrence Colton, and John Hodgson -- three other Raster Graphics Plaintiff Group members -- also exceeds the combined losses of the Grimm Group's top three money-losers. Plainly, then, the Raster Graphics Plaintiff Group has the largest financial interest in the outcome of this litigation and, therefore, is presumed to be the most adequate plaintiff. 15 U.S.C. §78u-4(a)(3)(B)(iii).
That presumption may be rebutted only upon proof that the plaintiffs "will not fairly and adequately protect the interest of the class" or are "subject to unique defenses." 15 U.S.C. §78u-4(a)(B)(iii)(II). Neither situation applies here. As explained more fully in Movants' Motion, the Raster Graphics Plaintiff Group's claims are typical of the class, and the Raster Graphics Plaintiff Group's interests are aligned with those of the proposed class. See Movants' Motion at 9-10. Therefore, the Grimm Group's motion should be denied, and the Raster Graphics Plaintiff Group's motion for Lead Plaintiff appointment should be granted.
The PSLRA vests authority in the lead plaintiffs to select and retain counsel of their choice to represent the interests of the class in the action, subject to court approval. See §21D(a)(3)(B)(v). The legislative history of the PSLRA indicates that the Court should not disturb the lead plaintiff's choice of counsel unless "necessary to protect the interests of the plaintiff class." See H.R. Conf. Rep. No. 104-369 at 35, 104th Cong. 1st Sess., Statement of the Managers (Nov. 28, 1995). The Raster Graphics Plaintiff Group has selected Milberg Weiss Bershad Hynes & Lerach LLP to serve as Lead Counsel for the class, with Kaufman, Malchman, Kirby & Square, LLP; Kaplan, Kilsheimer & Fox, LLP; and Wolf Popper LLP serving as members of plaintiffs' executive committee. These firms possess extensive experience in the area of securities litigation and have successfully prosecuted numerous securities fraud class actions on behalf of injured investors. See Lawrence Decl., Exs. E-H. Therefore, the Raster Graphics Plaintiff Group is entitled to its choice of counsel.
Applying the PSLRA's straight-forward objective test for identifying and appointing the lead plaintiff, the Raster Graphics Group is clearly entitled to Lead Plaintiff appointment. The losses of the Raster Graphics Plaintiff Group exceed those of the Grimm Group by a multiple of five, and the Raster Graphics Plaintiff Group is otherwise qualified to represent the class. Therefore, the Grimm Group's Motion for Designation of Lead Plaintiffs and for Appointment of Lead Plaintiffs' Choice of Counsel should be denied.
DATED: May 15, 1998
Respectfully submitted,
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
REED R. KATHREIN
JEFFREY W. LAWRENCE
DAVID R. STICKNEY
______________________________
JEFFREY W. LAWRENCE
222 Kearny Street, 10th Floor
San Francisco, CA 94108
Telephone: 415/288-4545
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
[Proposed] Lead Counsel for Plaintiffs
KAUFMAN, MALCHMAN, KIRBY
& SQUIRE, LLP
JEFFREY H. SQUIRE
IRA M. PRESS
919 Third Avenue, 11th Floor
New York, NY 10022
Telephone: 212/371-6600
KAPLAN, KILSHEIMER & FOX, LLP
ROBERT N. KAPLAN
JOEL STRAUSS
685 Third Avenue, 26th Floor
New York, NY 10017
Telephone: 212/687-1980
WOLF POPPER LLP
LESTER L. LEVY
845 Third Avenue
New York, NY 10022
Telephone: 212/759-4600
[Proposed] Executive Committee for Plaintiffs
RASTER-G\LSN00623.BRF
DECLARATION OF SERVICE BY MAIL
PURSUANT TO NORTHERN DISTRICT LOCAL RULE 23-2(c)(2)
I, the undersigned, declare:
1. That declarant is and was, at all times herein mentioned, a citizen of the United States and a resident of the County of San Francisco, over the age of 18 years, and not a party to or interested in the within action; that declarant's business address is 222 Kearny Street, 10th Floor, San Francisco, California 94108.
2. That on May 15, 1998, declarant served the OPPOSITION TO THE GRIMM GROUP'S MOTION FOR DESIGNATION OF LEAD PLAINTIFF AND FOR APPOINTMENT OF LEAD PLAINTIFFS' CHOICE OF COUNSEL by depositing a true copy thereof in a United States mailbox at San Francisco, California in a sealed envelope with postage thereon fully prepaid and addressed to the parties listed on the attached Service List and that this document was forwarded to the following designated Internet site at:
http://securities.milberg.com
3. That there is a regular communication by mail between the place of mailing and the places so addressed.
I declare under penalty of perjury that the foregoing is true and correct. Executed this 15th day of May, 1998, at San Francisco, California.
______________________________
LISA NEWELL
1. Plaintiffs in the group with Donald and Cynthia Grimm referred to themselves as "Movants" in their moving papers. Because the Raster Graphics Plaintiff Group also referred to itself, alternatively, as "Movants" in its moving papers, plaintiffs in the group with Donald and Cynthia Grimm shall hereinafter be referred to as the "Grimm Group" to avoid confusion. The Grimm Group, when moving for Lead Plaintiff appointment, simultaneously moved pursuant to Fed. R. Civ. P. 42 to consolidate the three actions pending in this District. The Raster Graphics Plaintiff Group does not oppose the motion for consolidation.
2. The $357,510 in losses reflect purchases between October 20, 1997 and April 3, 1998 (the current Class Period), and not the period from April 24, 1997 through April 3, 1998. If the Court considers the period from April 24, 1997 through April 3, 1998 -- the class period in a parallel state court action, which the Raster Graphics Plaintiff Group believes will be the class period in a subsequent consolidated complaint -- the Raster Graphics Plaintiff Group lost an additional $135,920. The Court is respectfully referred to Movants' Motion to be Appointed Lead Plaintiffs pursuant to Section 21D(a)(3)(B) of the Securities Exchange Act of 1934 and Approval of Lead Plaintiffs' Choice of Counsel ("Movants' Motion").
3. Compare Declaration of Nicole Lavelle, Ex. C. with Lawrence Decl., Ex. C.