MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH (68581)
DAVID R. BOYD (184614)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
- and -
REED R. KATHREIN (139304)
JOHN K. GRANT (169813)
222 Kearny Street, 10th Floor
San Francisco, CA 94108
Telephone: 415/288-4545
[Proposed] Lead Counsel for Plaintiffs
[Additional counsel appear on signature page.]
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
JEFFREY M. BOREN, et al., On Behalf of Themselves
and All Others Similarly Situated,
Plaintiffs,
vs.
SMART MODULAR TECHNOLOGIES INC.,
Defendants.
___________________________________
No. C-98-20692-JW(PVT)
CLASS ACTION
DATE: October 5, 1998
TIME: 9:00 a.m.
CTRM: Honorable James Ware
NOTICE OF MOTION, MOTION AND
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF THE
BOREN PLAINTIFF GROUP'S MOTION TO BE APPOINTED LEAD PLAINTIFFS
PURSUANT TO §21D(a)(3)(B) OF THE SECURITIES EXCHANGE ACT OF 1934
AND FOR APPOINTMENT OF LEAD COUNSEL
I. INTRODUCTION
II. PROCEDURAL BACKGROUND
III. SUMMARY OF ACTIONS
IV. MOVANTS ARE THE MOST ADEQUATE PROPOSED LEAD PLAINTIFFS UNDER THE EXCHANGE ACT
A. The Boren Plaintiff Group Has A Very Substantial Financial Interest In The Related Actions
B. The Boren Plaintiff Group Is Qualified Under Rule 23
1. The Claims Of The Boren Plaintiff Group Are Typical Of The Claims Of The Class
2. The Boren Plaintiff Group Will Fairly And Adequately Represent The Interests Of The Class
V. THIS COURT SHOULD APPROVE THE BOREN PLAINTIFF GROUP'S CHOICE OF LEAD COUNSEL
VI. CONCLUSION
Cases
Blackie v. Barrack,
524 F.2d 891 (9th Cir. 1975)
Haley v. Medtronic, Inc.,
169 F.R.D. 643 (C.D. Cal. 1996)
Hanon v. Dataproducts Corp.,
976 F.2d 497 (9th Cir. 1992)
In re Activision Sec. Litig.,
621 F. Supp. 415 (N.D. Cal. 1985)
In re Cirrus Logic Sec. Litig.,
155 F.R.D. 654 (N.D. Cal. 1994)
In re United Energy Corp. Solar Power Modules Tax Shelter Inv. Sec. Litig.,
122 F.R.D. 251 (C.D. Cal. 1988)
Statutes, Rules and Regulations
15 U.S.C.
§78u-4(a)(3)(B)
17 C.F.R.
§240.10b-5
Federal Rules of Civil Procedure
Rule 23
TO: THE PARTIES AND THEIR ATTORNEYS OF RECORD
PLEASE TAKE NOTICE that on October 5, 1998, at 9:00 a.m. or as soon thereafter as this matter may be heard, in the courtroom of the Honorable James Ware, United States District Court, Northern District of California, San Jose Division, 280 South First Street, San Jose, CA 95113, the Boren Plaintiff Group will and hereby bring their motion before the Court.
Pursuant to §21D(a)(3)(B) of the Securities Exchange Act of 1934 (the "Exchange Act"), the Boren Plaintiff Group asks the Court to appoint them Lead Plaintiffs in this action and approve their selection of Lead Counsel. This motion is based on this notice, the memorandum of points and authorities, the pleadings and other files herein, and such other written or oral arguments as may be presented to the Court.
Named plaintiffs in the Boren, Woszczak, D'Amato, Cha and Chang actions and 193 other members of the proposed class (collectively, "Movants" or the "Boren Plaintiff Group")(1) move this Court for an order granting their Motion to be Appointed Lead Plaintiffs Pursuant to §21D(a)(3)(B) of the Securities Exchange Act of 1934 and for Appointment of Lead Counsel.
This motion is brought pursuant to §21D of the Exchange Act on the grounds that Movants have timely filed and are the most adequate plaintiffs. In addition, Movants seek the Court's approval of their selection of Lead Counsel for the class pursuant to 15 U.S.C. §78u-4(a)(3)(B)(v) of the Exchange Act.
Six related securities class action lawsuits are presently pending in this District:(2)
Abbreviated Case Name Civil No. Date Filed
1. Boren, et al. v. Smart
Modular Technologies, Inc., et al. C98-20692JW 07/01/98
2. Woszczak v. Smart Modular
Technologies, Inc., et al. C98-20794JW 07/02/98
3. Bisson, et al. v. Smart
Modular Technologies, Inc., et al. C98-20714JW 07/08/98
4. D'Amato v. Smart Modular
Technologies, Inc., et al. C98-20793JW 07/16/98
5. Cha v. Smart Modular
Technologies, Inc., et al. C98-20795JW 07/17/98
6. Chang v. Smart Modular
Technologies, Inc., et al. C98-3151 08/13/98
The plaintiffs in each of the class actions allege violations of the Exchange Act and SEC Rule 10b-5, 17 C.F.R. §240.10b-5, on behalf of investors who purchased Smart Modular securities during the Class Period. The combined financial interest of all Movants in the relief sought by the class is approximately $3,300,000 in losses.(3)
Section 21D of the Exchange Act sets forth the procedure for the selection of lead plaintiffs to oversee class actions brought under the federal securities laws. Specifically, §21D(a)(3)(A)(i) provides that, within 20 days after the filing of a class action under the PSLRA,
the plaintiff or plaintiffs shall cause to be published, in a widely circulated national business-oriented publication or wire service, a notice advising members of the purported plaintiff class --
(I) of the pendency of the action, the claims asserted therein, and the purported class period; and
(II) that, not later than 60 days after the date on which the notice is published, any member of the purported class may move the court to serve as lead plaintiff of the purported class.
15 U.S.C. §78u-4(a)(3)(A)(i).
Further, §21D(a)(3)(B) of the Exchange Act directs the court to consider any motions to serve as lead plaintiff in response to any such notice by the later of (a) 90 days after the date of publication; or (b) as soon as practicable after the court decides any pending motion to consolidate any actions asserting substantially the same claim or claims. Under this section of the Exchange Act, the court "shall" appoint the "most adequate plaintiff" and is to presume that the "most adequate plaintiff" to serve as lead 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).
The Boren Plaintiff Group collectively purchased 554,472 shares of Smart Modular stock during the Class Period and has suffered approximately $3,300,000 in losses. See Grant Decl., Ex. 1. The Boren Plaintiff Group therefore has a very substantial financial interest in the relief sought by the class. The Boren Plaintiff Group also satisfies the requirements of Federal Rule of Civil Procedure 23 because its claims are typical of the claims of the class, and it will fairly and adequately represent the interests of the class, since its interests are clearly aligned with the members of the class, and it has retained experienced class counsel to represent the class.
Accordingly, the Boren Plaintiff Group believes it is "the most adequate plaintiff," as defined in the Private Securities Litigation Reform Act ("PSLRA"), and it brings this motion seeking to be appointed Lead Plaintiffs. The Boren Plaintiff Group also seeks this Court's approval of its choice of Lead Counsel to represent the class.
On July 1, 1998, the Boren action was filed in this District. Boren was the first-filed securities class action against Smart Modular. Pursuant to §21D(a)(3)(A)(i), 15 U.S.C. §78u-4(a)(3)(A)(i) of the Exchange Act, the Boren plaintiffs published notice to class members on July 1, 1998 on the Business Wire.(4) Grant Decl., Ex. 3. The notice advised purchasers of Smart Modular stock of the pendency of the lawsuit and the nature of the defendants' fraudulent statements which artificially inflated the price of Smart Modular's stock. The notice also advised class members of their right to move the court for lead plaintiff appointment within 60 days. Grant Decl., Ex. 3. The Boren Plaintiff Group has filed this motion in a timely manner (i.e., prior to August 31, 1998, the expiration of the 60-day period from the publication of the Boren notice). Thus, pursuant to §21D(a)(3)(B) of the Exchange Act, the Court should decide this motion within 90 days from the date of notice publication. 15 U.S.C. §78u-4(a)(3)(B)(i).(5)
The summary of actions discussed in the Boren Plaintiff Group's motion for consolidation filed concurrently with this motion is hereby incorporated by reference.
The "most adequate plaintiff" provision of the PSLRA provides that a Court
shall 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). The Exchange Act requires the Court to adopt a rebuttable presumption
that the most adequate plaintiff in any private action arising under this title is the person or group of persons that --
* * *
(bb) in the determination of the court, has the largest financial interest in the relief sought by the class . . . .
15 U.S.C. §78u-4(a)(3)(B)(iii)(I) (emphasis added).
Thus, the statutory language explicitly provides that a "member or members" of the class or a "person or group of persons" may combine to constitute "the largest financial interest" and thereby jointly serve as the "most adequate plaintiff." Id. According to the statute's plain language, individual plaintiffs may aggregate their losses in order to serve as the lead plaintiffs. See City Nominees Ltd., et al. v. Macromedia, Inc., et al., No. C 97-3521-SC, Order re Motion to Appoint Lead Plaintiff, at 5-7 (N.D. Cal. Jan. 23, 1998) (proposed lead plaintiffs can pool together their shares to form the largest financial interest) (Grant Decl., Ex. 4).(6)
During the Class Period, the Boren Plaintiff Group collectively purchased 554,472 shares of Smart Modular stock at prices artificially inflated by defendants' false and misleading statements. As a result, the Boren Plaintiff Group collectively suffered losses of approximately $3,300,000. See Grant Decl., Ex. 1.(7) The Boren Plaintiff Group believes that it has the largest financial interest in the outcome of this litigation, and, therefore, is presumed to be the most adequate group of plaintiffs. 15 U.S.C. §78u-4(a)(3)(B)(iii)(I)(bb).
In addition to having a very large financial stake in the litigation, the Boren Plaintiff Group is otherwise qualified to represent the proposed class. Each member of the Boren Plaintiff Group is willing to serve as a representative party on behalf of the class. Grant Decl., Ex. 2.(8) The Boren Plaintiff Group also has selected and retained counsel highly experienced in prosecuting securities class actions to represent it. See the firm résumé of Milberg Weiss Bershad Hynes & Lerach LLP ("Milberg Weiss") (Grant Decl., Ex. 11). Accordingly, Movants satisfy the prerequisite for appointment as Lead Plaintiffs pursuant to §21D(a)(3)(B).
Section 21D(a)(3)(B)(iii)(I)(cc) of the Exchange Act provides that, in addition to possessing the largest financial interest in the outcome of the litigation, the lead plaintiff or plaintiffs must also "otherwise satisf[y] the requirements of Rule 23 of the Federal Rules of Civil Procedure." With respect to the qualifications of the class representatives, Rule 23(a) requires that the claims be typical of the claims of the class and that the representatives fairly and adequately protect the interests of the class.
As detailed below, each member of the Boren Plaintiff Group satisfies the typicality and adequacy requirements of Rule 23(a).
The typicality requirement of Rule 23(a)(3) is satisfied when the named plaintiffs have suffered the same or similar injuries as the class members, as a result of the same course of conduct by defendants, and their claims are based on the same legal issues. Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992); Haley v. Medtronic, Inc., 169 F.R.D. 643, 649 (C.D. Cal. 1996); In re Cirrus Logic Sec. Litig., 155 F.R.D. 654, 657 (N.D. Cal. 1994); In re Activision Sec. Litig., 621 F. Supp. 415 (N.D. Cal. 1985). Here, the same course of conduct caused the Boren Plaintiff Group to suffer the same injuries as absent class members. The questions of law and fact common to the members of the class include the following:
(a) Whether the federal securities laws were violated by defendants;
(b) Whether defendants' statements omitted material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;
(c) Whether defendants acted with scienter;
(d) Whether the Smart Modular stock was artificially inflated during the Class Period; and
(e) The extent of damages sustained by class members and the appropriate measure of damages.
There is a well-defined community of interest in the questions of law and fact involved in this case. Thus, the claims asserted by the Boren Plaintiff Group are typical of the claims of the members of the proposed class. Each of the Movants alleges, as do the members of the class, that defendants violated the Exchange Act by publicly disseminating a series of false and misleading statements about Smart Modular during the Class Period. Each of the Movants acquired Smart Modular securities at prices inflated by defendants' misrepresentations and omissions and were damaged thereby. Typicality exists here because the claims asserted by the Boren Plaintiff Group are based on the same legal theory and arise from the same event or course of conduct as the class claims, and give rise to the same legal theory. In re United Energy Corp. Solar Power Modules Tax Shelter Inv. Sec. Litig., 122 F.R.D. 251, 256 (C.D. Cal. 1988); accord Blackie v. Barrack, 524 F.2d 891, 902-03 & n.19 (9th Cir. 1975).
The interests of the Boren Plaintiff Group are clearly aligned with the members of the proposed class. There is no antagonism between the interests of the individuals in the Boren Plaintiff Group and the proposed class members. As detailed above, the claims of the Boren Plaintiff Group share substantially similar questions of law and fact with the claims of the members of the proposed class, and Movants' claims are typical of those of the members of the class. The members of the Boren Plaintiff Group have amply demonstrated their adequacy as class representatives by signing sworn certifications, filed with the Court, affirming their willingness to serve as class representatives. In addition, the Boren Plaintiff Group has selected counsel highly experienced in prosecuting securities class actions, such as the present actions, to represent it.
The PSLRA vests authority in the lead plaintiff to select and retain lead counsel, subject to court approval. See 15 U.S.C. §78u-4(a)(3)(B)(v). Thus, the Court should not disturb the lead plaintiff's choice of lead counsel unless necessary to "protect the interests of the class." 15 U.S.C. §78u-4(a)(3)(B)(iii)(II)(aa). Movants have selected the law firm of Milberg Weiss to serve as Lead Counsel for the class in the consolidated actions. Milberg Weiss possesses extensive experience in the area of securities litigation and has successfully prosecuted numerous securities fraud class actions on behalf of injured investors. See Grant Decl., Ex. 11.
For all of the foregoing reasons, the Boren Plaintiff Group respectfully requests that the Court: (a) appoint them as Lead Plaintiffs for the class in the consolidated actions, pursuant to §21D(a)(3)(B) of the Exchange Act or, alternatively, permit them to designate several representative members of their Group to proceed as Lead Plaintiffs in their class certification motion, and (b) approve their choice of Milberg Weiss as Lead Counsel for the class in the consolidated actions.
DATED: August 28, 1998
Respectfully submitted,
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH
DAVID R. BOYD
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
REED R. KATHREIN
JOHN K. GRANT
______________________________
REED R. KATHREIN
222 Kearny Street, 10th Floor
San Francisco, CA 94108
Telephone: 415/288-4545
[Proposed] Lead Counsel for Plaintiffs
BARRACK, RODOS & BACINE
STEPHEN R. BASSER
600 West Broadway, Suite 1700
San Diego, CA 92101
Telephone: 619/230-0800
COHEN, MILSTEIN, HAUSFELD
& TOLL, P.L.L.C.
STEVEN J. TOLL
999 Third Avenue, Suite 3600
Seattle, WA 98104
Telephone: 206/521-0080
WOLF POPPER LLP
PAUL O. PARADIS
845 Third Avenue
New York, NY 10022
Telephone: 212/759-4600
CHITWOOD & HARLEY
MARTIN D. CHITWOOD
JOHN O'SHEA SULLIVAN
2900 Promenade II
1230 Peachtree Street, N.E.
Atlanta, GA 30309
Telephone: 404/873-3900
FINKELSTEIN & KRINSK
JEFFREY R. KRINSK
501 West Broadway, Suite 1250
San Diego, CA 92101
Telephone: 619/238-1333
SCOTT & SCOTT, LLC
NEIL ROTHSTEIN
1520 Spruce Street
Suite 308
Philadelphia, PA 19102
Telephone: 215/545-3226
RABIN & PECKEL LLP
I. STEPHEN RABIN
MARVIN L. FRANK
275 Madison Avenue
New York, NY 10016
Telephone: 212/682-1818
LAW OFFICES OF LEO W.
DESMOND
LEO W. DESMOND
2161 Palm Beach Lake Blvd.
Suite 204
Palm Beach, FL 33409
Telephone: 561/712-8000
GOLD BENNETT & CERA LLP
PAUL F. BENNETT (63318)
595 Market Street, Suite 2300
San Francisco, CA 94105
Telephone: 415/777-2230
Attorneys for Plaintiffs
SMARTMOD\SLK00386.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 August 28, 1998, declarant served the NOTICE OF MOTION, MOTION AND MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF THE BOREN PLAINTIFF GROUP'S MOTION TO BE APPOINTED LEAD PLAINTIFFS PURSUANT TO §21D(a)(3)(B) OF THE SECURITIES EXCHANGE ACT OF 1934 AND FOR APPOINTMENT OF LEAD 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 28th day of August, 1998, at San Francisco, California.
______________________________
LISA NEWELL
1. The members of the Boren Plaintiff Group are identified in Exs. 1 and 2 attached to the Declaration of John K. Grant in Support of the Boren Plaintiff Group's Motion to be Appointed Lead Plaintiffs Pursuant to §21D(a)(3)(B) of the Securities Exchange Act of 1934 and for Appointment of Lead Counsel ("Grant Decl."), filed concurrently herewith. Each of the Movants is an investor who purchased Smart Modular Technologies, Inc. ("Smart Modular" or the "Company") securities between July 1, 1997 and May 21, 1998 (the "Class Period").
2. Simultaneously with this motion, the Boren Plaintiff Group has moved to consolidate all of the cases in this District with the Boren action, the first-filed action. By order dated August 13, 1998, this Court has already related the Boren, Bisson, Woszczak, D'Amato and Cha actions pursuant to Local Rule 3-12(b).
3. For ease of case management, the Boren Plaintiff Group alternatively proposes the designation of several members of the Group to serve as Lead Plaintiffs, and to give testimony on behalf of the class in subsequent proceedings, which designation could occur when a motion for class certification is brought.
4. Numerous additional notices were published after July 1, 1998, in connection with the later-filed actions. Section 21D(a)(3)(A)(ii) provides that if more than one action on behalf of a class asserting substantially the same claims is filed, only plaintiffs in the first-filed action are required to publish the notice. 15 U.S.C. §78u-4(a)(3)(A)(ii).
5. Pursuant to §21D(a)(3)(B)(ii) of the Exchange Act, this Court is required to decide the consolidation motion prior to making a determination on any motion for appointment of lead plaintiff. 15 U.S.C. §78u-4(a)(3)(B)(ii). Consequently, due to the additional requirement that the Court make a determination on the motion for the appointment of lead plaintiff not later than 90-days from the date of the early notice publication, the Boren Plaintiff Group urges this Court to decide their concurrently-filed consolidation motion as soon as possible.
6. See also In re Read-Rite Corp. Sec. Litig., NO. C-97-20059 RMW, Order Granting Plaintiffs' Motion for Appointment of Lead Plaintiff and Lead Counsel, at 4-5 (N.D. Cal. May 28, 1997) (same); In re Diamond Multimedia Systems, Inc., Sec. Litig., No. C 96-2644-SBA, Order re Appointment of Lead Plaintiff and Lead Counsel, at 2-4 (N.D. Cal. Jan. 13, 1997) (same); Powers, et al. v. Eichen, et al., Civ. No. 96-1431-B(AJB), Order Granting Plaintiffs' Motion to be Appointed Lead Plaintiffs Pursuant to §21D(a)(3)(B) of the Securities Exchange Act of 1934 and for Appointment of Lead Plaintiffs' Lead Counsel, at 1 (S.D. Cal. Nov. 15, 1996) (nine individual plaintiffs collectively appointed lead plaintiff); Malin v. IVAX Corp., et al., Case No. 96-1843-CIV-MORENO, Order Granting Malin/Ferretti/Pennsylvania Pension Fund Plaintiffs Group's Motion for Appointment as Lead Plaintiffs and Order Approving Lead Plaintiffs' Choice of Counsel, at 4-8 (S.D. Fla. Nov. 1, 1996) (holding the plaintiff group with the largest number of shares is the most adequate plaintiff under the PSLRA); Zuckerman, et al. v. Foxmeyer Health Corp., et al., No. 3:96-CV-2258-T, Order Granting Motion to Withdraw Motion and Granting Joint Motion for Appointment of Lead Plaintiffs and Lead Counsel, at 5 (N.D. Tex. Mar. 28, 1997) (eleven individual plaintiffs with the largest financial interest collectively appointed lead plaintiff); Chan v. Orthologic Corp., et al., No. CIV 96-1514 PHX RCB, Order, at 13 (D. Ariz. Dec. 19, 1996) (plaintiffs from five separate actions collectively appointed lead plaintiff). Grant Decl., Exs. 5-10.
7. Exhibit 1 of the Grant Decl. is a chart providing details of each of the Movants' transactions in Smart Modular's securities during the Class Period, including the losses suffered.
8. Each member of the Boren Plaintiff Group has signed a sworn certification attesting that they have reviewed and authorized the related actions filed in this District. The sworn certifications of the Movants are attached as Ex. 2 to the Grant Decl.