MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH (68581)
PATRICK J. COUGHLIN (111070)
RANDI D. BANDMAN (145212)
HENRY ROSEN (156963)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
- and -
LENA C. CHANG (156280)
355 South Grand Avenue
Suite 4170
Los Angeles, CA 90071
Telephone: 213/617-9007
[Proposed] Chair of the Executive Committee for Plaintiffs
BARRACK, RODOS & BACINE
STEPHEN R. BASSER (121590)
600 West Broadway, Suite 1700
San Diego, CA 92101
Telephone: 619/230-0800
BERNSTEIN LITOWITZ BERGER &
GROSSMANN LLP
JEFFREY A. KLAFTER
VINCENT R. CAPPUCCI
1285 Avenue of the Americas
33rd Floor
New York, NY 10019
Telephone: 212/554-1400
KAUFMAN, MALCHMAN, KIRBY
& SQUIRE, LLP
JEFFREY H. SQUIRE
IRA M. PRESS
919 Third Avenue, 11th Floor
New York, NY 10022
Telephone: 212/371-6600
[Proposed] Executive Committee for Plaintiffs
[Additional counsel appear on signature page.]
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
ALAN FRIEDMAN, On Behalf of Himself and All Others Similarly Situated,
Plaintiff,
vs.
SYBASE, INC., et al.,
Defendants.
___________________________________
No. C-98-0252-CAL
CLASS ACTION
DATE: May 1, 1998
TIME: 9:30 a.m.
COURTROOM: The Honorable
Charles A. Legge
[CORRECTED]THE SYBASE PLAINTIFFS' GROUP'S
NOTICE OF MOTION AND MOTION TO CONSOLIDATE
FOR ALL PURPOSES TWENTY-ONE RELATED ACTIONS AGAINST SYBASE, INC.
TO: ALL PARTIES AND THEIR COUNSEL OF RECORD
PLEASE TAKE NOTICE that on May 1, 1998, at 9:30 a.m., or as soon thereafter as the matter may be heard, before the Honorable Charles A. Legge, Courtroom No. 10, located at 450 Golden Gate Avenue, San Francisco, California, plaintiffs in the Friedman, Strauch, Adelglass, Reid, Markle, Harad, and Timashov actions and other members of the Class identified in Exhibit 1 of the Declaration of Randi D. Bandman filed herewith ("Bandman Decl.") stock of Sybase, Inc. ("Sybase" or the "Company"), (collectively referred to as the "Sybase Plaintiffs' Group") will, and hereby do, move the Court for an order consolidating cases for all purposes under Rule 42 of the Federal Rules of Civil Procedure (the "Motion").
The Motion is brought pursuant to Rule 42 of the Federal Rules of Civil Procedure on the grounds that the 21 related actions set forth in the Motion are substantially identical because each alleges identical facts and law and each is brought under §§10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§78j(b) and 78t(a), and Rule 10b-5 promulgated thereunder, 17 C.F.R. §240.10b-5.
This Motion is based upon this Notice of Motion and Motion, the accompanying Memorandum of Points and Authorities, and the complete files and records in the actions and such other evidence as the Court may consider in deciding this Motion.
MEMORANDUM OF POINTS AND AUTHORITIES
I. INTRODUCTION
Presently pending in this district are twenty-one 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 78t(a), and Rule 10b-5 promulgated thereunder, 17 C.F.R. §240.10b-5:
Abbreviated Case Name Case Number Date Filed
1. Friedman v. Sybase, Inc., et al. ("Friedman") C-98-0252-CAL 01/22/98
Plaintiff: Alan Friedman
2. Strauch, et al. v. Hoffman, et al. ("Strauch") C-98-0253-CAL 01/22/98
Plaintiffs: Seymour Strauch and Baruch Strauch
3. Adelglass v. Sybase, Inc., et al. ("Adelglass") C-08-0268-CAL 01/23/98
Plaintiff: Evan Adelglass
4. Reid, et al. v. Sybase, Inc., et al. ("Reid") C-98-0739-CAL 01/23/98
Plaintiffs: Bruce Reid, Miriam Werczberger,
Peter Billis and David Lers
5. Markle v. Sybase, Inc., et al. ("Markle") C-98-0740-CAL 01/26/98
Plaintiff: Daniel E. Markle
6. Draper, et al. v. Sybase, Inc., et al.("Draper")C-98-0277-CAL 01/26/98
Plaintiffs: Donald Draper and Edith Draper
7. Sinnreich, et al. v. Kertzman, Inc., et al. C-98-00281-CAL 01/26/98
("Sinnreich")
Plaintiffs: Simon Sinnreich and Ben Gross
8. Weiss v. Sybase, Inc., et al. ("Weiss") C-98-0288-CAL 01/26/98
Plaintiff: Robert Weiss
9. Harad, et al. v. Sybase, Inc., et al. ("Harad")C-98-0741-CAL 1/27/98
Plaintiffs: Charles A. Harad and Barry Sugar
10. Steif v. Kertzman, et al. ("Steif") C-98-00334-CAL 1/28/98
Plaintiff: Barry Steif
11. Goetcheus, et al. v. Sybase, Inc., et al. C-98-0742-CAL 1/28/98
("Goetcheus")
Plaintiffs: John Goetcheus and Marion Finkel
12. Timashov v. Sybase, Inc., et al. ("Timashov")C-98-0335-CAL 1/28/98
Plaintiff: Gregory Timashov
13. Green and Silberman v. Sybase, Inc., et al C-98-0348-CAL 1/29/98
("Green")
Plaintiffs: Dr. Gerald Green and Max Silberman
14. Katz v. Sybase, Inc., et al. ("Katz") C-98-0371-CAL 1/30/98
Plaintiff: Moise Katz
15. Feldberger v. Sybase, Inc., et al. C-98-0743-CAL 1/30/98
("Feldberger")
Plaintiff: Rivka Feldberger
16. Levin v. Sybase, Inc., et al. ("Levin") C-98-0414-CAL 2/4/98
Plaintiff: Mark A. Levin
17. Montgomery v. Sybase, Inc., et al C-98-0436-CAL 2/5/98
("Montgomery") Plaintiff: John A. Montgomery
18. Kumar v. Sybase, Inc., et al. ("Kumar") C-98-00483-VRW 2/6/98
Plaintiff: Alok Kumar
19. Du v. Sybase, Inc., et al. ("Du") C-98-20154-RMW 2/19/98
Plaintiff: Charles Du
20. Adllirad v. Sybase, Inc., et al. C-98-0519-CAL 2/9/98
("Adllirad") Plaintiff: Tony Adllirad
21. Feldman v. Sybase, Inc., et al. C-98-1008-SBA 3/13/98
("Feldman") Plaintiff: Benjamin Feldman
Plaintiffs in seven of these related actions move this Court to consolidate all of the above-referenced actions pursuant to Rule 42(a) of the Federal Rules of Civil Procedure because each action asserts substantially the same claims and raises substantially the same questions of fact and law. Each of the cases alleges claims on behalf of a class of purchasers of the common stock of defendant Sybase during substantially the same proposed class period (April 17, 1997 through January 21, 1998).(1) For the reasons set forth herein, consolidation of these actions is appropriate.
II. SUMMARY OF ACTIONS
Sybase designs and develops software products geared towards open, distributed, high-performance end-to-end solutions. ¶10.(2) Its client-server products consist of RDBMS servers, interoperability software, application development tools and system management and multimedia products. Id.
Each of these 21 related securities fraud class actions allege that Sybase and certain of its officers and directors(3) inflated the price of Sybase common stock during the Class Period by making false and misleading statements about Sybase's current and prospective earnings and revenues, while defendants sold over $6 million of Sybase stock. The wrongful scheme and common course of conduct alleged in the related actions is described briefly below.
In the fourth quarter of fiscal 1996, Sybase reported a net profit of $5.1 million. ¶17. However, many investors and analysts remained skeptical of Sybase's purported turnaround and Sybase's stock began to decline from January 1997 through April 1997. Id.
In order to counter the downward slide of Sybase's stock price, defendants initiated a scheme to falsely report positive financial results and news regarding Sybase. Id. Pursuant to this scheme, during the first three quarters of fiscal year 1997, Sybase overstated its revenues, net income and earnings per share by falsely reporting $65 million dollars of sales revenues. ¶¶32, 34. Defendants filed with the Securities and Exchange Commission ("SEC") quarterly financial statements showing millions of dollars of revenue that simply did not exist. ¶¶21-22, 26-27, 30-31. This enabled Sybase to report earnings per share of $.05, $.06 and $.07 in the first, second and third fiscal 1997 quarters, respectively. ¶35.
In addition to issuing false financial statements which overstated Sybase's reported results, defendants made false statements about Sybase's on-going business, prospects and finances. For example, defendants falsely represented in May 1997 that Sybase's turnaround would continue to generate profits in 1997 and that the Company was seeing revenue growth in its Intercontinental region, which combined with the introduction of PowerBuilder 6.0, would ensure that Sybase would earn at least $.28 per share in 1997. ¶19. Defendants falsely stated that "we have reversed the trends that existed in the company . . . and have established . . . a pretty strong commitment to and an ability to deliver operating profitability." ¶20.
In truth, Sybase's financial statements for the first three quarters of fiscal 1997 were false, and, contrary to defendants' reports, the Company did not (and could not) increase its revenues and bring about a turnaround. During the first three quarters of fiscal 1997, Sybase's reported Intercontinental revenues were overstated by at least 70%. ¶33. Defendants knew that Sybase's internal accounting controls were inadequate, that Sybase was encountering stiff competition from Oracle and Informix, that Sybase's true Intercontinental revenues were well below the levels necessary for Sybase to achieve the 1997 earnings per share it had publicly disseminated. Sybase was improperly recognizing revenue on sales to resellers/customers of the Company's Japanese subsidiary which provided rights of return to the customers through "side agreements" and other means. ¶¶34, 39. Taking advantage of the inflated stock price caused by their dissemination of materially false and misleading information to the market, the Individual Defendants sold Sybase stock for proceeds in excess of $6 million.
During the course of Sybase's year-end audit, defendants were confronted by their auditors who were unwilling to approve of Sybase's improper accounting practices. ¶4. On January 2, 1998, defendants were forced to begin preparing the market for its disastrous January 21, 1998 revelation. ¶¶5, 32. Defendants disclosed that, at best, it would report earnings per share of $.02 for the fourth quarter 1997. Id. This initial disclosure caused Sybase's stock to decline by approximately 25% to $9-15/16 per share. Id.
Then, on January 21, 1998, Sybase admitted that all of the Company's 1997 revenue growth in Asia had been obtained by means of accounting fraud and that Sybase would report a loss "substantially" beyond that even hinted at on January 2, 1998. Id. In fact, Sybase revealed that it would be restating its results for each of the previous three quarters of fiscal 1997. Id. Sybase stock fell again to as low as $7-1/8 per share, a drop of more than 65% from its Class Period high of $23-1/2 per share. Id.
III. THIS COURT SHOULD CONSOLIDATE THE TWENTY-ONE RELATED ACTIONS 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). This Court has broad discretion under this rule to consolidate cases pending within its district. Investors Research Co. v. United States Dist. Court For Cent. Dist., 877 F.2d 777 (9th Cir. 1989).
As discussed in §II., supra, the twenty-one actions pending before this Court present identical factual and legal issues, each alleges violations of the same sections of the Exchange Act and each names substantially the same defendants. Because these actions are based on the same facts and involve the same subject matter, the same discovery will be relevant to all lawsuits. Thus, consolidation is appropriate here.
Courts have recognized that class action shareholder suits, in particular, are ideally suited to consolidation pursuant to Federal Rule of Civil Procedure 42(a), because their unification expedites pretrial proceedings, reduces case duplication, avoids the contacting of parties and witnesses for 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 these related class action cases separately. Equity Funding, 416 F. Supp. at 176.
IV. STATUTORY LAW REQUIRES THAT THE QUESTION OF CONSOLIDATION BE DECIDED PRIOR TO THE DETERMINATION OF THE APPOINTMENT OF LEAD PLAINTIFFS
The Private Securities Litigation Reform Act of 1995 ("PSLRA") provides, among other things, for consolidation of substantially similar actions. The PSLRA provides, 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)] until after the decision on the motion to consolidate is rendered.
15 U.S.C. §78u-4(a)(3)(B)(ii).
The PSLRA thus establishes a two-step process for resolving lead plaintiff and consolidation issues where more than one action on behalf of a class asserting substantially the same claims has been filed. The court "shall" first decide the consolidation issue and thereafter decide the lead plaintiff issue "[a]s soon as practicable" after the consolidation motion has been decided. Id.
Plaintiffs urge the Court to resolve the consolidation motion as soon as practicable and consolidate these twenty-one related actions under the lowest case number. A prompt determination is reasonable and warranted under Federal Rule of Civil Procedure 42(a), given the common questions of fact and law presented by the twenty-one actions now pending in this District.
V. CONCLUSION
For the above reasons, and in order to promote judicial economy, plaintiffs respectfully request that the Court consolidate the twenty-one related actions identified herein.
DATED: March 26, 1998
Respectfully submitted,
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH
PATRICK J. COUGHLIN
RANDI D. BANDMAN
HENRY ROSEN
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
LENA C. CHANG
355 South Grand Avenue
Suite 4170
Los Angeles, CA 90071
Telephone: 213/617-9007
[Proposed] Chair of the Executive Committee for Plaintiffs
BARRACK, RODOS & BACINE
STEPHEN R. BASSER
600 West Broadway, Suite 1700
San Diego, CA 92101
Telephone: 619/230-0800
BERNSTEIN LITOWITZ BERGER &
GROSSMANN LLP
JEFFREY A. KLAFTER
VINCENT R. CAPPUCCI
1285 Avenue of the Americas
33rd Floor
New York, NY 10019
Telephone: 212/554-1400
KAUFMAN, MALCHMAN, KIRBY
& SQUIRE, LLP
JEFFREY H. SQUIRE
919 Third Avenue, 11th Floor
New York, NY 10022
Telephone: 212/371-6600
[Proposed] Executive Committee for Plaintiffs
SHALOV STONE & BONNER
LEE S. SHALOV
70 West 36th Street
Suite 1404
New York, NY 10018
Telephone: 212/268-2727
ABBEY, GARDY & SQUITIERI, LLP
JILL S. ABRAMS
212 East 39th Street
New York, NY 10016
Telephone: 212/889-3700
FARUQI & FARUQI, LLP
NADEEM FARUQI
415 Madison Avenue
21st Floor
New York, NY 10017
Telephone: 212/986-1074
BERNSTEIN LIEBHARD & LIFSHITZ
SANDY A. LIEBHARD
274 Madison Avenue
New York, NY 10016
Telephone: 212/779-1414
LAW OFFICES OF RICHARD
D. KRANICH
RICHARD D. KRANICH
120 Broadway, Suite 1016
New York, NY 10271-0074
Telephone: 212/608-8965
COHEN, MILSTEIN, HAUSFELD
& TOLL, P.L.L.C.
STEVEN J. TOLL
999 Third Avenue, Suite 3600
Seattle, WA 98104
Telephone: 206/521-0080
SPECTOR & ROSEMAN, P.C.
ELLEN GUSIKOFF STEWART
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/338-4514
WOLF POPPER LLP
PATRICIA I. AVERY
845 Third Avenue
New York, NY 10022
Telephone: 212/759-4600
SCHIFFRIN CRAIG &
BARROWAY, LLP
RICHARD S. SCHIFFRIN
ANDREW L. BARROWAY
Three Bala Plaza East
Suite 400
Bala Cynwyd, PA 19004
Telephone: 610/667-7706
LAW OFFICES OF JEFFREY
S. ABRAHAM
JEFFREY S. ABRAHAM
60 East 42nd Street
Suite 4700
New York, NY 10165
Telephone: 212/692-0555
REINHARDT & ANDERSON
RANDALL H. STEINMEYER
E-1000 First National
Bank Building
332 Minnesota Street
St. Paul, MN 55101
Telephone: 612/227-9990
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 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 March 26, 1998, declarant served the [CORRECTED] THE SYBASE PLAINTIFFS' GROUP'S NOTICE OF MOTION AND MOTION TO CONSOLIDATE FOR ALL PURPOSES TWENTY-ONE RELATED ACTIONS AGAINST SYBASE, INC. 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 26th day of March, 1998, at San Diego, California.
SUSAN MILLER
1. Plaintiffs in the above-referenced actions allege a starting date for the class period of either April 17 or 18, 1997. The class period in the consolidated complaint to be filed in these related actions will resolve these differences.
2. All "¶__" references are to the Complaint in Friedman v. Sybase, et al., Case No. C-98-0252-MEJ, filed on January 22, 1998.
3. The Complaints in the twenty one related actions are substantially similar although they name various officers and directors as individual defendants. The consolidated complaint to be filed in these related actions will also resolve these differences.