GOLD BENNETT & CERA LLP
SOLOMON B. CERA (99467)
GARY A. GARRIGUES (148667)
595 Market Street, Suite 2300
San Francisco, CA 94105
(415) 777-2230

BERGER & MONTAGUE, P.C.
SHERRIE R. SAVETT
MERRILL G. DAVIDOFF
SUSAN SCHNEIDER THOMAS
1622 Locust Street
Philadelphia, PA 19103
(215) 875-3000

Attorneys for Plaintiff And
All Others Similarly Situated

Defendants' opposition to plaintiff's Motion for Appointment as Lead Plaintiff is based entirely on one district court opinion that distorts and perverts the notice requirements of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). Not surprisingly, since the opinion in Ravens has not been followed in any published opinion (or any unpublished opinion to counsel's knowledge), defendants cited no other case in their opposition to plaintiff's motion. In fact, numerous lead plaintiff motions have been decided without the onerous and unworkable proceedings suggested by Ravens.

The statute is clear that only potential plaintiffs may be heard regarding appointment of a Lead Plaintiff. For example, Congress directed the Court to "consider any motion made by a purported class member" to determine the most adequate plaintiff. 15 U.S.C. §78u-4(a)(3)(B)(i) (emphasis added). **** And discovery regarding the issue "may be conducted by a plaintiff" only if "the plaintiff first demonstrates a reasonable basis" for finding the presumptively most adequate plaintiff inadequate. 15 U.S.C. §78u-4(a)(3)(B)(iv) (emphasis added); see Greebel v. FTP Software, Inc., 939 F. Supp. 57, 60 (D. Mass. 1996).

The legislative and judicial rationales are compelling. Initially, the lead plaintiff motion is intended to be decided quickly at the outset of the litigation, making it an improper vehicle for the types of challenges that defendants might raise.⁽¹⁾ More significantly, the class certification process allows full opportunity, after discovery, for defendants to challenge the lead plaintiff's ability to fairly and adequately represent the class, the adequacy of plaintiff's counsel, and the suitability of the case for treatment as a class action. Incorporating this analysis into the lead plaintiff motion would be senseless.

The far more typical determination of lead plaintiff -- even in a situation where more than one plaintiff has sought the appointment -- involves a quick look at the relative financial stakes of persons seeking appointment and an equally quick look at objections raised by other members of the plaintiff class. E.g., In re Donnkenny Inc. Sec. Litig., 171 F.R.D. 156, 158 (S.D.N.Y. 1997) (in response to suggestion that putative lead plaintiff lacked typicality or adequacy because it also traded in call and put options of company's stock, court simply noted that plaintiff held almost six times as much common stock as options and did not pursue merits or damages analysis). As the court stated in Gluck v. Cellstar Corp., 1997 U.S. Dist. LEXIS 13679 (N.D. Tex. 1997), when a court is deciding a motion for appointment as lead plaintiff, "[a] comprehensive reading of the [PSLRA] reveals that ... [the moving plaintiff] need only make a preliminary showing that it satisfies [typicality and adequacy] requirements." Id. at *6. See also Fischler v. Amsouth Bancororation, 1997 WL 118429 at *2 (M.D. Fla. Feb. 6, 1997) ("wide-ranging analysis under Rule 23 is not appropriate and should be left for consideration of a motion for class certification"); Lax v. First Merchants Acceptance Corp., 1997 U.S. Dist. LEXIS 11866 (N.D. Ill. 1997) (same).

The type of notice envisioned by defendants herein would only serve a meaningful purpose if the court were to become enmeshed in a fact-intensive scrutiny of the selected class period as well as of the factual allegations overall. This is graphically demonstrated by the court's exhaustive dissection of the class period and factual allegations in Ravens. Based on its premise that the early notice can only be evaluated together with the pleadings, the Ravens court criticized the complaint for, inter alia, speculating about defendants' motives (slip op. at 10), failing to include a chart of the stock price movement and how it correlated with the alleged misstatements (id. at 13), alleging statements that appeared to be protected by the "safe harbor" provision of the PSLRA (id. at 40) and failing to allege the true value of the company's stock throughout the class period (id. at 13). The court discussed the timing of the moving plaintiffs' purchases, how the timing could possibly subject them to unique defenses and how plaintiffs who may have bought in reliance on statements possibly protected by the safe harbor could be disqualified. Id. at 14, 40. The court performed its own analysis of the stock price movement, drew its own conclusions about the significance of corrective statements during the class period, and offered its own musings as to the ways in which the factual allegations could be deemed contradictory. Id. at 6-40. There is simply no support in the PSLRA for such blatant judicial intrusion.

Defendants herein obviously intend for this Court to perform a similar analysis. Thus they urge the Court to evaluate the pleadings and they proffer pages of price information about Avant! and various stock market indices. Parroting Ravens, they note that the complaint fails to include information about the stock's price behavior or true value. They then proceed to set forth their own analysis purportedly showing that Avant!'s stock price was not inflated for the first 3-4 months of the class period. Defs.' Mem. at 6. Such analysis of the merits of the action has been deemed inappropriate even in the context of plaintiff's motion for class certification. Eisen v. Carlisle and Jacquelin, 417 U.S. 156 (1974) (merits of claim may not be considered in context of class certification); Kirkpatrick v. J.C. Bradford & Co., 827 F.2d 718, 722-23 (11th Cir. 1987), cert. denied, 485 U.S. 959 (1988) (reversing district court's determination as an inappropriate inquiry into the merits of the plaintiffs' claims because it was based upon an assessment of the likelihood of success on the merits); In re Amerifirst Sec. Litig., 139 F.R.D. 423, 427 (S.D. Fla. 1991) (in determining whether certification is appropriate, "the court shall not consider the merits of the plaintiffs' claims"); In re One Bancorp Sec. Litig., 136 F.R.D. 526, 532 (D. Me. 1991) ("Plaintiffs need not prove the merits of their case at this stage of the litigation"). It is inconceivable that Congress intended to overturn this entire body of case law concerning class certification simply by enacting an early notice provision in securities fraud cases -- and then directed the courts to complete such an analysis and render a decision within 30 days!

Furthermore, it seems particularly inappropriate to impose burdensome notice provisions in this District, which is in the forefront of ensuring access to pleadings in the case by requiring them to be posted on an internet site. See Local Rule 23-03. This electronic posting is specifically designed to provide better access to information about a case and should make it unnecessary to incorporate substantial segments of the Complaint in the early notice.⁽⁵⁾ Among the documents posted under this case are the Complaint and plaintiff's required certification setting forth her Avant! purchases and her prior history as a class representative, papers submitted in support of and in opposition to Plaintiff's Motion For Appointment As Lead Plaintiff, and Defendants' Memorandum of Points and Authorities in Support of Motion To Dismiss. Plainly these give putative class members ample information about the case and provide the specifics that defendants say were lacking in the notice (i.e., the amount and timing of plaintiff's purchase, the case name and number, and a full description of the claims).

Moreover, even in districts without the internet posting requirements, experience to date with early notices published pursuant to the PSLRA convincingly demonstrates that the summary form of notice envisioned by the Act is highly effective in informing investors of the pendency of class action lawsuits and in encouraging those investors to take steps to protect their interests. Plaintiffs' counsel herein can attest to numerous cases in which a notice substantially similar to the notice subjudice led to tens or even hundreds of phone inquiries from shareholders, large and small, individual and institutional. Defendants' feigned fear that investors will be hampered in their ability to procure information due to the absence of, e.g., a case caption and number, is readily dispelled by the facts.

Furthermore, presumably no responsible shareholder would seriously consider becoming involved in a lawsuit without reviewing the complaint. The complaint is readily available to anyone with the information contained in the summary notice (either by calling plaintiffs' counsel at their listed numbers, obtaining a copy of the complaint from the court identified in the notice or, in cases in this district, searching online). The relevant information about the plaintiff, the timing and amount of the purchase, and the plaintiff's prior experience as a class plaintiff, as well as comprehensive detail about the claims, are all set forth in the complaint and certification. As a practical matter, the information could not all be included in the early notice and Congress did not require that it must be. Instead, the early notice was designed to inform potential class members that a case has been filed and to enable those who want additional information to obtain it. The notice provided herein fulfills both purposes.

Dated: November 14, 1997
 

BERGER & MONTAGUE, P.C.                    /s/ By: ______________________________       Susan Schneider Thomas            - and -       GOLD BENNETT & CERA LLP       Attorneys for Plaintiff and       All Others Similarly Situated

1. The PSLRA provides that a motion for lead plaintiff should be filed within 60 days after the notice is published and that the court shall consider any motion not later than 90 days after the notice is published. 15 U.S.C. §78u-4(a)(3)(b)(i).

2. A copy of the notice given by plaintiff Hoffman is attached as Exhibit B.

3. Other notices that have been deemed sufficient by the courts are attached as Exhibit C.

4. The court in Ravens determined that the PSLRA's provision that early notice be in addition to Rule 23 notice somehow means that Rule 23 is the baseline and the early notice must provide more. Slip. op. at 5. The court then proceeded to discuss totally irrelevant issues such as the due process right to opt out or object, id., despite the obvious fact that the early notice is not intended to inform potential class members about either right.

5. Since the PSLRA was specifically concerned with "inviting" large, often institutional, investors to move for appointment as lead plaintiff, it can be assumed that the target group has access to this internet site and can, simply by knowing the name of the company being sued, access the pleadings. Exhibit D hereto demonstrates the information that is obtainable by searching "Avant! Corporation". Any of the listed pleadings can be viewed merely by clicking on them.

I am employed by Gold Bennett & Cera LLP, 595 Market Street, Suite 2300, San Francisco, California 94105. I am over the age of eighteen years and am not a party to this action.

On January 6, 1998, I served a copy of the foregoing Plaintiff's Reply Memorandum in support of Motion for Appointment as Lead Plaintiff on the following parties:
 

Seth Aronson, Esq. O'Melveny & Myers 400 South Hope Street, Suite 1060 Los Angeles, California 90071

Susan Schneider Thomas Berger & Montague, P.C. 1622 Locust Street Philadelphia, Pennsylvania 19103

by causing true and correct copies of same to be enclosed in sealed envelopes and deposited in the United States mail (or as otherwise indicated).

In compliance with Local Rule 23-3 of the Local Rules of the United States District Court for the Northern District of California, I also forwarded both a hard copy of the same document, and a floppy diskette containing electronic versions of the same (minus exhibits), via regular mail, to the entity listed below:

Executed November 14, 1997 at San Francisco, California.
 

/s/ ______________________________ William H. R. Trout

 

8 Jan 1998
Source: Diskette file from Gold Bennett & Cera LLP