The opinion of the court was delivered by: Marilyn L. Huff, District Judge United States District Court
ORDER GRANTING MOTIONS TO CONSOLIDATE CASES, PENSION FUND GROUP'S MOTION FOR APPOINTMENT AS LEAD PLAINTIFF AND APPROVAL OF LEAD COUNSEL & DENYING NEW JERSEY BUILDING LABORERS PENSION FUND & SEXTON GROUP'S MOTIONS
On September 15, 2008, Plaintiff Maureen Backe filed a securities class action against Defendants Novatel Wireless, Inc. ("Novatel"), George Weinert, Dan Halvorson, Peter Leparulo, Kenneth Leddon, and Shawn Swaney, seeking remedies under sections 10(b) and 20(a) of the Securities Exchange Act, 15 U.S.C. §§78j(b) and 78t(a), and SEC Rule 10b-5, 17 C.F.R. §240.10b-5. (Backe Doc. No. 1.) On September 18, 2008, Plaintiff Matthew Harms filed a securities class action against Defendants Novatel, George Weinert, Kenneth Leddon, James Ledwith, Greg Lorenzetti, Shawn Swaney, Peter Lerparulo, Dan Halvorson, Christopher Ross, and David Werner, seeking remedies under sections 10(b) and 20(a) of the Securities Exchange Act and SEC Rule 10b-5. (Harms Doc. No. 1.) On November 17, 2008, the New Jersey Building Laborers Pension Fund, the Sexton Group, and the Pension Fund Group each filed a motion to consolidate cases under Federal Rule of Civil Procedure 42(a), for appointment as lead plaintiff pursuant to the Private Securities Litigation Reform Act of 1995 ("PSLRA"), 15 U.S.C. 78u-4, and for approval of lead plaintiff's selection of lead counsel. (Backe Doc. Nos. 4, 8, 10.) The Sexton Group filed a non-opposition to the New Jersey Building Laborers Pension Fund and the Pension Fund Group's motions on December 1, 2008. (Backe Doc. No. 15.) The Pension Fund Group filed a response in opposition to the other motions and in further support of its own motion on December 1, 2008. (Backe Doc. No. 16.) The New Jersey Building Laborers Pension Fund filed a response in non-opposition to the other motions on December 8, 2008. (Backe Doc. No. 17.) On December 8, 2008, the Pension Fund Group filed a reply in support of its motion. (Backe Doc. Nos. 18, 19.) The Court, pursuant to Local Rule 7.1(d)(1), determines that these motions are appropriate for resolution without oral argument and therefore submits them on the parties' papers.
Both actions are brought on behalf of persons and entities who purchased or otherwise acquired Novatel securities during the Class Period, defined in each complaint as February 5, 2007 to August 19, 2008, and who were damaged thereby, seeking remedies under the Securities Exchange Act and SEC Rule 10b-5. (See Backe Compl.; Harms Compl.) The Plaintiffs allege Novatel and certain of its officers and/or directors repeatedly issued materially false and misleading statements that misrepresented Novatel's buisness, prospects, and operations. (Backe Compl.¶5; Harms Compl. ¶3.) On the last day of the class period, August 19, 2008, Novatel issued a press release concerning its preliminary financial results for the second quarter of 2008 and the possibility that the company may have to restate its audited financial statements for fiscal year 2007. (Backe Compl. ¶3; Harms Compl. ¶3.) In response, Novatel's stock dropped $2.11 per share, or 25%, to close on August 20, 2008 at $6.29 per share, on unusually heavy trading volume. (Backe Compl. ¶4; Harms Compl. ¶4.) Plaintiffs allege that Novatel's materially false and misleading statements during the class period caused members of the class to purchase Novatel's common stock at artificially inflated prices, thus causing damages to the class. (Backe Compl. ¶6; Harms Compl. ¶4.)
In response to notice that was published after Plaintiff Backe filed her class action complaint, movants filed their motions for consolidation of related actions, to be appointed lead plaintiff, and for approval of lead plaintiff's selection of counsel. The Sexton Group alleges it purchased 24,343 shares of Novatel during the class period and suffered financial losses of $181,408.87. (Doc. No. 8 at p.6, Goldberg Decl.) The New Jersey Building Laborers Pension Fund alleges it purchased 11,745 shares of Novatel during the class period and suffered financial losses of $138,935. (Doc. No. 4 at p.8, Kim Decl., Ex. B) The Pension Fund Group alleges it purchased over 82,000 shares of Novatel during the class period and suffered financial losses of approximately $585,900. (Doc. No. 10 at p. 4, O'Mara Decl., Ex. B.)
Under the PSLRA, a court must first decide whether to consolidate related actions prior to selecting a lead plaintiff. See 15 U.S.C. §78u-4(a)(3)(B)(ii). After making this determination, the court must then appoint as lead plaintiff the person or group of persons with the largest financial interest in the relief sought by the class that otherwise satisfy the requirements of Federal Rule of Civil Procedure 23. Id. §78u-4(a)(3)(B)(iii). The court should also approve of the lead plaintiff's selection of lead counsel. Id. §78u-4(a)(3)(B)(v).
1. Consolidation of Related Actions
The PSLRA provides that "[i]f more than one action on behalf of a class asserting substantially the same claim or claims arising under this chapter has been filed," the court shall not appoint a lead plaintiff until "after the decision on the motion to consolidate is rendered."
15 U.S.C. §78u-4(a)(3)(B)(ii). Under Federal Rule of Civil Procedure 42(a), a court may consolidate actions "if [the] actions before the court involve a common question of law or fact." "The district court has broad discretion under this rule to consolidate cases pending in the same district." Investors Research Co. v. U.S. District Court for Cent. Dist. of C.A., 877 F.2d 777, 777 (9th Cir. 1989).
The Court grants the parties' motions for consolidation of the related actions of Backe v. Novatel Wireless, Inc., et al., case no. 08-CV-01689-H (RBB), and Harms v. Novatel Wireless, Inc., et al., case no. 08-CV-01714-H (RBB). The Plaintiffs' complaints present virtually identical factual and legal issues, as each alleges Novatel violated sections 10(b) and 20(a) of the Securities Exchange Act and SEC Rule 10b-5 during the same class period, from February 5, 2007 to August 19, 2008. Both complaints also name the same defendants. Because the related actions are based on the same facts and involve the same subject matter, the same discovery will be relevant to both lawsuits. Consolidation is appropriate to save time and effort and will not produce inconvenience, delay, or expense on the litigants or trial judge.
2. Appointment of Lead Plaintiff
The PSLRA provides that, "[a]s soon as practicable after such decision is rendered, the court shall appoint the most adequate plaintiff as lead plaintiff for the consolidated actions."
15 U.S.C. §78u-4(a)(3)(B)(ii). In selecting the lead plaintiff, the PSLRA directs the court to: adopt a presumption that the most adequate plaintiff in any private action . . . is the person or group of persons that-- has either filed the complaint or made a motion in response to a notice; in the determination of the court, has the largest financial interest in the relief sought by the ...