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Pace v. Quintanilla

United States District Court, C.D. California

August 19, 2014

PENNY PACE
v.
TIMOTHY QUINTANILLA, ET AL

CIVIL MINUTES - GENERAL

DAVID O. CARTER, District Judge.

PROCEEDINGS (IN CHAMBERS): ORDER GRANTING RENEWED MOTION FOR APPOINTMENT OF LEAD PLAINTIFF AND APPROVAL OF CHOICE OF COUNSEL [46]

Before the Court is Movant EGMI Group's Renewed Motion for Appointment of Lead Plaintiff and Approval of its Choice of Counsel (Dkt. 46). The Court finds this matter appropriate for decision without oral argument. Fed.R.Civ.P. 78; Local Rule 7-15. Having considered the written submissions, the Court hereby GRANTS the Motion in its entirety.

I. BACKGROUND

The following is a summary of the allegations contained in the Complaint (Dkt. 1):

This is a putative securities class action brought on behalf of purchasers of the common stock of Electronic Game Card, Inc. ("EGMI") between April 5, 2007 and February 19, 2010, seeking remedies under the Securities Exchange Act of 1934. Compl. ¶ 1.

Beginning on April 5, 2007, EGMI issued a materially false annual report for the fiscal year ending on December 31, 2006. Compl. ¶ 14. The report, issued on Form 10-KSB (the "10-KSB"), was false and misleading because EGMI violated Generally Accepted Accounting Principles by misrepresenting its assets and true financial condition in its financial statements. Compl. ¶ 14. Separate signed Sarbanes-Oxley Act of 2002 certifications were attached to the 10-KSB. Compl. ¶ 15.

Defendants are partners of the accounting firm, Mendoza Berger & Co., LLP ("M&B"). Compl. ¶¶ 6-11. M&B included its unqualified audit opinion in the 10-KSB, stating that M&B had conducted an audit of the financial statements and that the statements fairly presented, in all material respects, the financial position of EGMI. Compl. ¶ 19.

On March 24, 2009, EGMI issued another materially false annual report that contained another unqualified audit opinion by M&B. Compl. ¶¶ 20-22. EGMI also filed materially false and misleading quarterly reports to the SEC. Compl. ¶ 23.

On February 10, 2010, EGMI issued an announcement delaying a previously scheduled conference call, which was caused by the materialization of previously undisclosed fraud. Compl. ¶ 27. The announcement caused EGMI's stock to fall 15.8% on over 1.65 million shares traded that day. Compl. ¶ 28. On February 19, 2010, EGMI filed an announcement that its auditor, M&B, has withdrawn its audit opinions for the years ending on December 31, 2006, 2007, and 2008. Compl. ¶ 29. On the same day, the SEC issued an order temporarily halting any trading of EGMI's stock. Compl. ¶ 30.

Plaintiffs filed this action on January 4, 2013 in the United States District Court for the Southern District of New York. See generally Compl. On the same day, the Rosen Law Firm, P.A. issued a Private Securities Litigation Reform Act of 1995 ("PSLRA") early notice, advising potential class members of the pendency of the action and the option of class members to seek appointment as lead plaintiff. Decl. of Laurence Rosen ("Rosen Decl.") Ex. 1. EGMI Group ("Movant") filed a Motion for Appointment of Lead Plaintiff and Lead Counsel pursuant to the PSLRA early notice. See Mot. to Appoint EGMI Group (Dkt. 10). While the Motion was pending, the United States District Court for the Southern District of New York granted Defendants' Motion to Transfer. See Order, September 23, 2013 (Dkt. 30).

Now, Movant has filed a Renewed Motion for Appointment of Lead Plaintiff and Lead Counsel. See Mot. (Dkt. 46).

II. DISCUSSION

A. Local Rules 7-9 ...


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