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)
ALISON M. TATTERSALL (149607)
DAVID R. STICKNEY (188574)
222 Kearny Street, 10th Floor
San Francisco, CA 94108
Telephone: 415/288-4545
DYER DONNELLY
ROBERT J. DYER III
KIP B. SHUMAN
JEFFREY A. BERENS
801 East 17th Avenue
Denver, CO 80218
Telephone: 303/861-3003
COHEN, MILSTEIN, HAUSFELD
& TOLL, P.L.L.C.
STEVEN J. TOLL
999 Third Avenue, Suite 3600
Seattle, WA 98104
Telephone: 206/521-0080
[Proposed] Co-Lead Counsel for Plaintiffs
[Additional counsel appear on signature page.]
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
MYRON GOLDSTEIN, On Behalf of )
No. C-99-1927-CW
Himself and All Others Similarly )
Situated,
) CLASS ACTION
)
Plaintiff, )
)
vs.
)
)
SECURE COMPUTING CORP., et al., )
DATE: September 10, 1999
) TIME: 10:00 a.m.
Defendants. ) CTRM: The Honorable
__________________________________)
Claudia Wilken
NOTICE OF MOTION AND MOTION AND
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
THE GOLDSTEIN PLAINTIFFS GROUP'S MOTION TO
CONSOLIDATE FOR ALL PURPOSES SIX RELATED ACTIONS
AGAINST SECURE COMPUTING CORPORATION
TABLE OF CONTENTS
I. INTRODUCTION
II. SUMMARY OF PENDING ACTIONS
III. ARGUMENT
A. This Court Should Consolidate The Six Related Lawsuits
For Purposes Of Efficiency
B. The PSLRA Requires Consolidation Prior To The Determination Of
The Appointment Of Lead Plaintiffs
IV. CONCLUSION
TO: ALL PARTIES AND THEIR COUNSEL OF RECORD
NOTICE IS HEREBY GIVEN that on September 10, 1999 at 10:00 a.m.,
or as soon thereafter as may be heard, before the Honorable Claudia Wilken
in Courtroom 2 of this Court, located on the fourth floor at 1301 Clay
Street, Oakland, California, the Goldstein Plaintiffs Group, by and through
counsel, will, and hereby does, move this Court for an order granting Plaintiffs'
Motion to Consolidate for All Purposes Six Related Cases Against Secure
Computing Corporation (the "Motion").
This Motion is brought pursuant to Rule 42(a) of the Federal Rules
of Civil Procedure on the grounds that the six below-captioned lawsuits
involve common questions of law and fact and should be consolidated for
purposes of efficiency. This Motion is and will be based upon this Notice,
the following Memorandum of Points and Authorities, the Declaration of
Alison M. Tattersall in Support of the Goldstein Plaintiffs Group's (1)
Motion to Be Appointed Lead Plaintiff Pursuant to §21D(a)(3)(B) of
the Securities Exchange Act of 1934 and for Approval of Lead Plaintiff's
Choice of Co-Lead Counsel; and (2) Motion to Consolidate for All Purposes
Six Related Actions Against Secure Computing Corporation ("Tattersall Decl."),
the entire file in this action and the arguments made or evidence submitted
by counsel at the time of the hearing of this Motion.
MEMORANDUM OF POINTS AND AUTHORITIES
I. INTRODUCTION
Presently pending in this District are six related securities fraud
class action lawsuits brought pursuant to §§10(b) and 20(a) of
the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. §§78j(b)
and 78k(a), and Rule 10b-5 promulgated thereunder, 17 C.F.R. §240
10b-5.(1) The pending cases are:
Abbreviated Case Name
Case Number Date Filed
Goldstein v. Secure Computing Corp., et al. C-99-20279-PVT
04/02/99
Plaintiff: Myron Goldstein ("Goldstein")
Silverberg v. Secure Computing Corp., et al. C-99-1809-MMC
04/09/99
Plaintiff: Herbert Silverberg ("Silverberg")
Preiner v. Secure Computing Corp., et al.
C-99-1831-MMC 04/12/99
Plaintiff: William Preiner ("Preiner")
McInnis v. Secure Computing Corp., et al.
C-99-1873-JL 04/14/99
Plaintiff: Charles McInnis ("McInnis")
Freedenberg v. Secure Computing Corp., et al. C-99-1924-SBA
04/20/99
Plaintiff: Melvin Freedenberg ("Freedenberg")
Rosenquist v. Secure Computing Corp., et al. C-99-20342-EAI
04/20/99
Plaintiff: George H. Rosenquist ("Rosenquist")
The Goldstein Plaintiffs Group moves the Court to consolidate the
above-captioned actions for all purposes pursuant to Rule 42 of the Federal
Rules of Civil Procedure.(2) Consolidation
is appropriate because each action asserts the same factual and legal claims
and names the same defendants. Each of these six cases alleges claims on
a class-wide basis on behalf of those who purchased the securities of defendant
Secure Computing from November 10, 1998 through March 31, 1999 (the "Class
Period"). For the reasons set forth herein, consolidation of these actions
is appropriate.
II. SUMMARY OF PENDING ACTIONS
Secure Computing develops and sells network security projects, such
as firewalls, web filters and other products for end-to-end network solutions.
¶13. After an initial public offering in 1995, the Company's stock
price shot up to $64 per share. ¶¶3, 35. However, as the Company
reported disappointing results and the failure to generate revenue growth,
the stock price dropped to just $5 per share in 1996, where it remained
for several months during 1997. ¶¶3, 36. In late 1997, Secure
Computing attempted to transform itself. Management was revamped; the Company
introduced new products and focused on the indirect sales channel (as opposed
to direct sales); and the Company attempted to emphasize sales to corporate
accounts while de-emphasizing sales to the federal government. ¶36.
In addition, the Company imposed a unique options-vesting program for management's
newly repriced options. ¶37. If Secure Computing's stock price remained
above $21.125 on February 13, 1999, certain shares of each of the Individual
Defendants would immediately vest and become exercisable.(3)
¶37.
All six actions allege that, in order to sell millions of dollars
of Secure Computing's stock at inflated prices, defendants falsely painted
Secure Computing as a growing company and reported increasing earnings
from November 10, 1998 until announcing Secured Computing's first quarter
results on March 31, 1999.(4) All six actions
allege that Secure Computing and certain of its high-ranking officers misled
the market by falsely representing strong demand and sales.(5)
All actions allege that defendants manipulated Secure Computing's earnings
by selling excessive inventory into the channel, which caused delays in
collecting receivables, as customers would not pay for unnecessary product.(6)
In addition, all six actions allege that defendants concealed Secure Computing's
slowing growth and the failure of the indirect sales effort.(7)
The price of Secure Computing's securities remained artificially
inflated from November 10, 1998 until March 31, 1999, when the Company
disclosed that, contrary to earlier representations, the Company suffered
from severe problems that adversely affected its sales and growth prospects.(8)
The six actions allege that Secure Computing's insiders took advantage
of the artificial inflation to reap millions of dollars through massive
insider trading.(9) Plaintiffs in all six
actions seek damages pursuant to §§10(b) and 20(a) of the Exchange
Act.
Because Goldstein, Silverberg, Preiner, McInnis,
Freedenberg
and Rosenquist involve identical factual and legal issues, they
are appropriate for consolidation in order to promote judicial economy
and efficiency.
III. ARGUMENT
A. This Court Should Consolidate The Six Related Lawsuits For Purposes
Of Efficiency
Rule 42(a) of the Federal Rules of Civil Procedure allows this Court
to order consolidation of separate actions:
When actions involving a common question of law or fact
are pending before the court, it may order a joint hearing or trial of
any or all the matters in issue in the actions; it may order all the actions
consolidated; and it may make such orders concerning proceedings therein
as may tend to avoid unnecessary costs or delay.
Consolidation pursuant to Rule 42(a) is proper when actions involve
common questions of law and fact. In re Equity Funding Corp. of Am.
Sec. Litig., 416 F. Supp. 161, 175 (C.D. Cal. 1976). The Court has
broad discretion under this rule to consolidate cases pending within its
district. Investors Research Co. v. U.S. Dist. Court for Cent. Dist.,
877 F.2d 777 (9th Cir. 1989); Perez-Funez v. District Director, Immigration
& Naturalization Servs., 611 F. Supp. 990, 994 (C.D. Cal. 1984)
("A court has broad discretion in deciding whether or not to grant a motion
for consolidation, although, typically, consolidation is favored.") (citations
omitted).
As discussed in §II, supra, the six actions pending
before this Court present virtually identical factual and legal issues.
All the actions are based on the same facts and involve the same subject
matter. Each alleges violations of the same sections of the Exchange Act
based on the same wrongful course of conduct, and each names the same defendants.
Thus, the same discovery will be relevant to all six lawsuits.
Courts have recognized that class action shareholder suits are ideally
suited to consolidation because their unification expedites pretrial proceedings,
reduces case duplication, avoids the harassment of parties and witnesses
from inquiries in multiple proceedings and minimizes the expenditure of
time and money by all persons concerned. Equity Funding, 416 F.
Supp. at 176 (citing
Garber v. Randell, 477 F.2d 711, 714 (2d Cir.
1973)). Consolidating multi-shareholder class action suits simplifies pretrial
and discovery motions, class action issues and clerical and administrative
management duties. Moreover, consolidation will reduce the confusion and
delay that may result from prosecuting related class action cases separately.
Id.
B. The PSLRA Requires Consolidation Prior To The Determination Of The
Appointment Of Lead Plaintiffs
The Private Securities Litigation Reform Act of 1995 ("PSLRA"), Pub.
L. No. 104-67, 109 Stat. 737 (1995), enacted in December 1995, provides
for consolidation of actions. The PSLRA states in pertinent part:
If more than one action on behalf of a class asserting
substantially the same claim or claims arising under this title has been
filed, and any party has sought to consolidate those actions for pretrial
purposes or for trial, the court shall not make the determination [of appointment
of lead plaintiff under §21D(a)(3)(B)(i)] until after the decision
on the motion to consolidate is rendered.
15 U.S.C. §78u-4(a)(3)(B)(ii).
Thus, the Court "shall" first decide the consolidation issue and,
thereafter, decide the lead plaintiff issue "[a]s soon as practicable."
Id.(10)
IV. CONCLUSION
For the above reasons and in order to promote judicial economy, plaintiffs
respectfully request that the Court consolidate the Goldstein,
Silverberg,
Preiner,
McInnis, Freedenberg and
Rosenquist actions.
DATED: June 1, 1999
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
REED R. KATHREIN
ALISON M. TATTERSALL
DAVID R. STICKNEY
______________________________
ALISON M. TATTERSALL
222 Kearny Street, 10th Floor
San Francisco, CA 94108
Telephone: 415/288-4545
DYER DONNELLY
ROBERT J. DYER III
KIP B. SHUMAN
JEFFREY A. BERENS
801 East 17th Avenue
Denver, CO 80218
Telephone: 303/861-3003
COHEN, MILSTEIN, HAUSFELD
& TOLL, P.L.L.C.
STEVEN J. TOLL
999 Third Avenue, Suite 3600
Seattle, WA 98104
Telephone: 206/521-0080
[Proposed] Co-Lead Counsel for Plaintiffs
PRONGAY & BORDERUD
KEVIN M. PRONGAY
JON W. BORDERUD
12121 Wilshire Blvd.
Suite 400
Los Angeles, CA 90025
Telephone: 310/207-2848
LOCKRIDGE GRINDAL NAUEN
& HOLSTEIN, P.L.L.P.
RICHARD A. LOCKRIDGE
KAREN M. HANSON
100 Washington Avenue South
Suite 2200
Minneapolis, MN 55401-2159
Telephone: 612/339-6900
LAW OFFICES OF RICHARD
D. KRANICH
RICHARD D. KRANICH
120 Broadway, Suite 1016
New York, NY 10271-0074
Telephone: 212/608-8965
SCOTT & SCOTT, LLC
DAVID R. SCOTT
NEIL ROTHSTEIN
108 Norwich Avenue
Colchester, CT 06415
Telephone: 860/537-3818
LAW OFFICES OF BRUCE G. MURPHY
BRUCE G. MURPHY
265 Llwyds Lane
Vero Beach, FL 32963
Telephone: 561/231-4202
FINKELSTEIN & KRINSK
HOWARD D. FINKELSTEIN
JEFFREY R. KRINSK
501 West Broadway, Suite 1250
San Diego, CA 92101
Telephone: 619/238-1333
Attorneys for Plaintiffs
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 June 1, 1999, declarant served the NOTICE OF MOTION AND
MOTION AND MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF THE GOLDSTEIN
PLAINTIFFS GROUP'S MOTION TO CONSOLIDATE FOR ALL PURPOSES SIX RELATED ACTIONS
AGAINST SECURE COMPUTING CORPORATION 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 1st day of June, 1999, at San Francisco, California.
______________________________
DEBORAH R. DASH
1. For the Court's convenience, copies of the
complaints are attached as Ex. D to the Tattersall Decl. All paragraph
references ("¶") herein are to the Goldstein Complaint, unless
specified otherwise.
2. The Goldstein Plaintiffs Group consists of
Myron Goldstein, Paul Emmarco, Susan Federgreen TTEE, Warren R. Federgreen
MD PA Profit Sharing, Gary Glick, Andrew Kaiser, Paul A. Jacobsen, Tom
Tresnowski, Boote Feichtner and 185 other investors in Secure Computing
Corporation's ("Secure Computing" or the "Company") securities (collectively
"Goldstein Plaintiffs Group" or "Movants"), who have executed certifications
and consented to be lead plaintiff. See Movants' signed certifications
attached as Ex. A to the Tattersall Decl.
3. The "Individual Defendants" are Jeffrey H.
Waxman, Timothy P. McGurran, Patrick Regester, Gary D. Taggart, Howard
Smith and Christine Hughes.
4. Goldstein, ¶2; Silverberg,
¶2; Preiner, ¶2; McInnis, ¶2;
Freedenberg,
¶2; Rosenquist, ¶2.
5. Goldstein, ¶¶39-54; Silverberg,
¶¶43-57; Preiner, ¶¶39-54;
McInnis, ¶¶43-57;
Freedenberg,
¶¶39-54; Rosenquist, ¶¶39-54.
6. Goldstein, ¶¶5(b), 57(b);
Silverberg,
¶¶5(b), 57(b);
Preiner, ¶¶5(b), 59(b); McInnis,
¶¶5(b), 59(b); Freedenberg, ¶¶5(b), 57(b); Rosenquist,
¶¶5(b), 57(b).
7. Goldstein, ¶¶5(b), 57(e);
Silverberg,
¶¶5(e), 57(e);
Preiner, ¶¶5(e), 57(e); McInnis,
¶¶5(e), 59(e); Freedenberg, ¶¶5(e), 59(e); Rosenquist,
¶¶5(e), 57(e).
8. Goldstein, ¶¶54-56; Silverberg,
¶¶54-56; Preiner, ¶¶57-58;
McInnis, ¶¶57-58;
Freedenberg,
¶¶54-56; Rosenquist, ¶¶54-56.
9. Goldstein, ¶58; Silverberg,
¶58; Preiner, ¶60; McInnis, ¶60;
Freedenberg,
¶58; Rosenquist, ¶58.
10. Concurrent with the filing of this Motion
to Consolidate, the Goldstein Plaintiffs Group filed a Motion to Be Appointed
Lead Plaintiff Pursuant to §21D(a)(3)(B) of the Securities Exchange
Act of 1934 and for Approval of Lead Plaintiff's Choice of Counsel.