MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH (68581)
ALAN SCHULMAN (128661)
JAMES A. CAPUTO (120485)
JOHN D. BANDIERA (171074)
TOR GRONBORG (179109)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
SPECTOR & ROSEMAN, P.C.
ROBERT M. ROSEMAN
ELLEN GUSIKOFF STEWART (144892)
2000 Market Street
12th Floor
Philadelphia, PA 19103
Telephone: 215/864-2400
WOLF POPPER LLP
ROBERT C. FINKEL
845 Third Avenue
New York, NY 10022
Telephone: 212/759-4600
BERNSTEIN LIEBHARD & LIFSHITZ
MEL E. LIFSHITZ
274 Madison Avenue
New York, NY 10016
Telephone: 212/779-1414
KAUFMAN, MALCHMAN, KIRBY
& SQUIRE, LLP
JEFFREY H. SQUIRE
IRA M. PRESS
919 Third Avenue, 11th Floor
New York, NY 10022
Telephone: 212/371-6600
Attorneys for Plaintiffs
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
EDWARD RUDOLPH, et al., On Behalf of
Themselves and All Others Similarly Situated,
Plaintiffs,
vs.
S3 INCORPORATED, et al.,
Defendants.
___________________________________
No. C-97-4066-VRW
CLASS ACTION
DATE: June 5, 1998
TIME: 10:30 a.m.
COURTROOM: Honorable
Vaughn R. Walker
NOTICE OF MOTION AND MOTION FOR VOLUNTARY DISMISSAL
OF ACTION WITHOUT PREJUDICE AND MOVING PLAINTIFFS'
MEMORANDUM OF POINTS AND AUTHORITIES
I. INTRODUCTION
II. ARGUMENT
A. Moving Plaintiffs' Request For Voluntary Dismissal Comports With Applicable Federal Rules And Ninth Circuit Precedent
B. Although Unnecessary Here, Published Notice Of The Voluntary Dismissal Protects The Class From Any Prejudice
III. CONCLUSION
TO: ALL PARTIES AND THEIR COUNSEL OF RECORD
PLEASE TAKE NOTICE that on June 5, 1998, at 10:30 a.m., or as soon thereafter as the matter may be heard, before the Honorable Vaughn R. Walker, United States District Judge, United States Courthouse, Northern District of California, 450 Golden Gate Avenue
Room 16-1111, San Francisco, CA 94102, plaintiffs will and do hereby move the Court for an order voluntarily dismissing this action without prejudice in accordance with Rules 41(a)(1)(i), 41(a)(2) and Rule 23(e) of the Federal Rules of Civil Procedure.
This motion is based on the accompanying Memorandum of Points and Authorities, and Declaration of James A. Caputo, each filed concurrently herewith, the proposed form of Order, lodged concurrently herewith, all of the pleadings, papers and records on file herein, and on such further argument as may be presented by the plaintiffs at or before the time of the hearing on this motion, and on any other matters properly before the Court.
Plaintiffs respectfully submit this Memorandum of Points and Authorities in support of their motion to dismiss this action voluntarily without prejudice and without costs to any party.
On November 5, 1997, plaintiffs Edward Rudolph, Maurice Krisel, Idy Mandel and Lorry Wagner ("Moving Plaintiffs"), filed their class action complaint for violations of the federal securities laws against S3, Inc. ("S3" or the "Company") and certain of its officers and directors on behalf of all persons who purchased S3 common stock between July 15, 1996 and November 3, 1997.(1) Subsequently, two other securities actions against S3 and certain of the same defendants were filed in this District.(2) However, the Sanchez action was voluntarily dismissed without notice to the class by Judge Claudia Wilken before that action was transferred to this Court. See Exhibit A attached to the Declaration of James A. Caputo in Support of Moving Plaintiffs' Motion for Voluntary Dismissal of Action Without Prejudice ("Caputo Decl."), filed concurrently herewith.
Several securities actions alleging substantially similar facts were also filed in California state court.(3) The class sought to be represented in the now consolidated state court action is virtually identical to the class described in the Moving Plaintiffs' complaint.(4)
Moving Plaintiffs, joined by plaintiffs in the Zinberg action, seek to concentrate their efforts to prosecute efficiently the class' state law claims in state court. Accordingly, they move this Court to approve the voluntary dismissal of their respective federal actions. Significantly, Moving Plaintiffs' motion comes before any motions to dismiss have been filed and before any class has been certified, virtually assuring that none of the prospective class members will be prejudiced by the voluntary dismissal of the action. Indeed, all of the class members are members of the putative class represented in the pending consolidated state action. Additionally, any purported class member may file individual federal actions, if they choose, as the statute of limitations will not run on their claims for nearly 7 months. Finally, defendants will not be prejudiced if this action is voluntarily dismissed.
In these circumstances, granting the voluntary dismissal without prejudice and without costs is plainly appropriate under governing law. Additionally, to ensure that absent class members are informed of the requested dismissal, Moving Plaintiffs will publish the attached notice of the dismissal within 10 days of the granting of this motion and in a manner identical to the initial published notice of the federal class action. See Caputo Decl., Ex. E.
Rule 41 of the Federal Rules of Civil Procedure governs the voluntary dismissal of federal actions. Rule 41(a)(1) and (a)(2) provides:
[A]n action may be dismissed by the plaintiff without order of court (i) by filing a notice of dismissal at any time before service by the adverse party of an answer or of a motion for summary judgment, whichever first occurs, . . . .
[and]
Except as provided in paragraph (1) of this subdivision of this rule, an action shall not be dismissed at the plaintiff's insistence save upon order of the court and upon such terms and conditions as the court deems proper.
In the context of class actions, Rule 23(e) is also applicable to a requested voluntary dismissal and provides:
A class action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to all members of the class in such manner as the court directs.
As discussed below, in interpreting Rule 23(e), the Ninth Circuit has made it clear that notice to the class of the requested dismissal is not required when the action has not been certified by the court as a class action. See Diaz v. Trust Territory of Pacific Islands, 876 F.2d 1401, 1408 (9th Cir. 1989).
Dismissal of this action will permit Moving Plaintiffs and their counsel to concentrate their resources and avoid the duplication of effort required by prosecuting this litigation in two forums. Over 300 plaintiffs in the Santa Clara County Superior Court actions against S3, including all of the plaintiffs named in the actions before this Court, have consolidated their state law claims. Additionally, the state court has approved the class counsel structure to represent the class. The interests of these plaintiffs, whose Class Period losses exceed $7 million, are served by proceeding in a single forum, Santa Clara County Superior Court. Proceeding in one forum will also avoid the risk of inconsistent or conflicting results between the two forums.
On facts similar to this case, the court in Catherwood v. Portland General Corp., [1992 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶96,921 (D. Or. 1992), granted a pre-class certification motion for voluntary dismissal of a federal securities action where there were related state court actions which alleged substantially similar claims. In so doing, the court reasoned:
I conclude that plaintiffs' alternative motion to dismiss under Rule 41(a)(2) should be granted, and that this action should be dismissed without prejudice and without costs. Dismissal of the action here should enable the parties to more efficiently resolve the issues raised in conjunction with other actions pending in Utah. In deciding what "terms and conditions" should apply to dismissal, I have concluded that, as discussed above, notification of the proposed class is unnecessary. In dismissing the action without costs, I have concluded that defendants will not be prejudiced by dismissal of the action here, but may ultimately realize some savings by litigating all the claims in consolidated or related cases in Utah. Though some costs incurred here may be redundant, much of the legal defense work performed for this action should be useful in the Utah proceedings.
¶96,921, at 93,857 (emphasis added).
Similarly, the voluntary dismissal of this action will not only benefit the class, but also will not prejudice the defendants. The dismissal of this action will mean that the defendants will only be required to defend in one forum, which will undoubtedly reduce the defendants' litigation costs.
Finally, no class member's claims are being compromised by this dismissal. The federal claims against the defendants are being dismissed without prejudice and putative class members desiring to pursue their individual claims may do so as the statute of limitation has not run. Clearly, no class member's rights are being preferred in derogation to the rights of others in the proposed class.
Accordingly, the Court should grant plaintiffs' motion to voluntarily dismiss this action without prejudice and without costs.
Moving Plaintiffs will publish notice of the voluntary dismissal, if granted, consistent with the initial notice of this class action under 15 U.S.C. §78u-4(a)(3)(A)(i). Caputo Decl., Ex. E.(5) Within ten days of the granting of this motion, Moving Plaintiffs will contact Business Wire, Inc. to effect this published notice. Providing notice in this way will ensure that affected persons made aware of the federal actions through the initial published notice will receive notice of the voluntary dismissal as well. Additionally, the notice will specifically state that the statute of limitations for the filing of claims for federal securities law violations is one year after the discovery of the facts constituting the violation and that persons considering filing individual actions should investigate the filing deadline for their claims as soon as possible.
Moving Plaintiffs' proposed notice affords more protection then that required by Rule 23(e). The leading Ninth Circuit decision analyzing Rule 23(e) notice requirements in pre-certification class actions holds that notice in circumstances such as those here is not required. Diaz, 876 F.2d at 1409.
In Diaz, the Ninth Circuit stressed three objectives served by the Rule 23(e) notice provision that should be examined to determine whether notice is required in a particular instance: first, notice "protects a defendant by preventing a plaintiff from appending class allegations to her complaint in order to extract a more favorable settlement;" second, "notice protects the class from objectionable structural relief, trade-offs between compensatory and structural relief or depletion of limited funds available to pay the class claims"; and, third, "notice of dismissal protects the class from prejudice it would otherwise suffer if class members have refrained from filing suit because of knowledge of the pending class action." Diaz, 876 F.2d at 1409. (Emphasis omitted.)
None of the three Diaz factors used to determine if notice is required are present in the instant case.(6) First, no consideration of any kind, whether direct or indirect, has been given or has agreed to be given to any named party or his, her or its attorney with respect to the dismissal of this action. Second, no claims are being compromised at all. Rather, the claims against the defendants are being dismissed without prejudice, class claims will continue to be pursued vigorously in the pending state court action, and no class member's rights are being preferred to derogation to the rights of others in the proposed class. And third, absent class members will suffer no prejudice as a result of the dismissal of this action. To the contrary, class members will continue to be represented by the named plaintiffs in the state class proceedings and, as discussed, the statute of limitations will not run for more than half a year on the class members seeking to file individual federal claims against S3.(7)
Diaz and its progeny expressly permit dismissal of this action without prejudice and without notice to the class, even if no parallel state court action were pending. However, while notice may not be required under Rule 23(e), plaintiffs propose a further safeguard to absent class members. Plaintiffs shall publish notice to the class through Business Wire, Inc. within 10 days of the voluntary dismissal to ensure that no prejudice to the class will result from the granting of Moving Parties' motion for voluntary dismissal.
For all of the foregoing reasons and authorities, it is respectfully requested that the Court dismiss this action without prejudice and without costs to any party.
DATED: April 28, 1998
Respectfully submitted,
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
ALAN SCHULMAN
JAMES A. CAPUTO
JOHN D. BANDIERA
TOR GRONBORG
______________________________
JAMES A. CAPUTO
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
SPECTOR & ROSEMAN, P.C.
ELLEN GUSIKOFF STEWART
DIANE P. DOHERTY
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/338-4514
SPECTOR & ROSEMAN, P.C.
ROBERT M. ROSEMAN
__________________________
ROBERT M. ROSEMAN
2000 Market Street
12th Floor
Philadelphia, PA 19103
Telephone: 215/864-2400
WOLF POPPER LLP
ROBERT C. FINKEL
845 Third Avenue
New York, NY 10022
Telephone: 212/759-4600
BERNSTEIN LIEBHARD & LIFSHITZ
MEL E. LIFSHITZ
274 Madison Avenue
New York, NY 10016
Telephone: 212/779-1414
KAUFMAN, MALCHMAN, KIRBY
& SQUIRE, LLP
JEFFREY H. SQUIRE
IRA M. PRESS
919 Third Avenue, 11th Floor
New York, NY 10022
Telephone: 212/371-6600
Attorneys for Plaintiffs
S3II\KFC00399.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 Diego, over the age of 18 years, and not a party to or interested in the within action; that declarant's business address is 600 West Broadway, Suite 1800, San Diego, California 92101.
2. That on April 28, 1998, declarant served the NOTICE OF MOTION AND MOTION FOR VOLUNTARY DISMISSAL OF ACTION WITHOUT PREJUDICE AND MOVING PLAINTIFFS' MEMORANDUM OF POINTS AND AUTHORITIES by depositing a true copy thereof in a United States mailbox at San Diego, 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 28th day of April, 1998, at San Diego, California.
______________________________
Sandra Anderson
1. Defendants are S3, Gary J. Johnson, Neal G. Margulis, Diosdado P. Banatao, Dale R. Lindly, Terry N. Holdt, George A. Hervey, Ronald T. Yara, Jackson K.C. Hu, Harry L. Dickinson, Carmelo J. Santoro, John C. Colligan and Robert P. Lee.
2. Zinberg, et al. v. S3, Inc., et al., No. C-97-4079 VRW, was reassigned to this Court by Order dated December 17, 1997, and Sanchez, et al. v. S3, Inc., et al., No. C-97-04084 CW.
3. Kamen, et al. v. S3 Inc., et al., Case No. CV770003, Santa Clara County Superior Court; Schenkel, et al. v. S3 Inc., et al., Case No. CV770077, Santa Clara County Superior Court; Boudakian v. S3 Inc., et al., Case No. CV770078, Santa Clara County Superior Court; Lloyd, et al. v. S3 Inc., et al., Case No. CV770340, Santa Clara County Superior Court; Selph, et al v. S3 Inc., et al., Case No. CV770341, Santa Clara County Superior Court; The Great Neck Capital Appreciation Investment Partnership, L.P. v. S3 Inc., et al., Case No. CV770432, Santa Clara County Superior Court; Freidus, et al. v. S3 Inc., et al., Case No. CV770518, Santa Clara County Superior Court; Goldstein, et al. v. S3 Inc., et al., Case No. CV770731, Santa Clara County Superior Court; and Klotz v. S3 Inc., et al., Case No. CV771075, Santa Clara County Superior Court. Plaintiffs in each of these actions have alleged that defendants, among other causes of actions, violated California's securities laws.
4. On February 25, 1998, over 300 state court plaintiffs with Class Period purchases of S3 securities exceeding 1.3 million shares filed a motion to consolidate the nine complaints and for the appointment of plaintiffs' counsel in Santa Clara Superior Court. The first-filed Kamen complaint, like the Moving Plaintiffs' complaint, alleges a Class Period of July 15, 1996 to November 3, 1997. On March 31, 1998, the Kamen defendants, the same defendants named in this action, stated their non-opposition to the motion to consolidate and for appointment of plaintiffs' counsel. The court approved the consolidation on April 27, 1998, and the consolidated action is captioned In re S3 Securities Litigation, Master File No. CV770003. Caputo Decl., Ex. B.
5. In compliance with 15 U.S.C. §78u-4(a)(3)(A)(i), Moving Plaintiffs published notice of the filing of a class action complaint against S3 through Business Wire, Inc. Business Wire, Inc. distributes notices and press releases throughout the United States by wire service and on the Internet. The publication of notices of class actions through Business Wire, Inc. has been approved by numerous courts. See, e.g., Greebel v. FTP Software, Inc., 939 F. Supp. 57, 64 (D. Mass. 1996).
6. See also Hockert Pressman & Flohr Money Purchase Plan v. American President Cos., No. C94 1449 CAL, 1995 U.S. Dist. LEXIS 17608 (N.D. Cal. Nov. 20, 1995) (granting request for voluntary dismissal without prejudice and holding that notice was not required); Sher v. Rohr, Inc., et al., No. 97cv1818-IEG, Order of Dismissal Without Prejudice (S.D. Cal. Jan. 5, 1998) (granting request for voluntary dismissal and holding no notice to the putative class is necessary) (Caputo Decl., Ex. C); Johnson v. Peters Truck Lines, No. C-91-3809-JPV, 1993 U.S. Dist. LEXIS 3928 (N.D. Cal. March 23, 1993) (granting motion to voluntarily dismiss putative class action and holding that no notice was required under Diaz); Tepper v. Western Investment Real Estate Trust, No. 92-2746-JPV, 1993 U.S. Dist. LEXIS 2148 (N.D. Cal. Feb. 23, 1993) (dismissing class action based on parties' stipulation and holding that "the past practice under circumstances such as these is not to require the expense and burden of providing notice to absent class members of an uncertified class"); Kas v. Chevron Corp., Civ. No. C-89-4335-SC, 1992 U.S. Dist. LEXIS 13635 (N.D. Cal. Aug. 20, 1992) (granting request to voluntarily dismiss shareholder class actions after adverse ruling in a similar state court class action and holding that there was no need to notify members of the class).
7. Additionally, publicity regarding the federal class action against S3 has been minimal. A comprehensive search of media databases contained on LEXIS-NEXIS conducted on April 16, 1998 indicated that the only substantive publicity concerning the instant actions was the Business Wire, Inc. notices published in connection with the filing of these actions and minor articles derived from those notices. Moreover, the published notices direct potential class members to contact the same law firms which have been appointed class counsel in the state consolidated action. Caputo Decl., Ex. D.