United States District Court, N.D. California, San Jose Division
In re EXTREME NETWORKS INC. SECURITIES LITIGATION This Document Relates to All Actions.
ORDER APPOINTING LEAD PLAINTIFF AND LEAD COUNSEL [RE:
ECF NOS. 27, 28, 68]
LABSON FREEMAN United States District Judge
putative securities class action, Arkansas Teacher Retirement
System (“ATRS”) and the City of Lakeland
Employees Pension Plan (“Lakeland”) have filed
competing motions seeking appointment of lead plaintiff
status. The motions were fully briefed, and the Court heard
arguments on the matter on May 5, 2015. For the reasons that
follow, the Court GRANTS the Motion to appoint ATRS as lead
plaintiff, GRANTS the appointment of Labaton Sucharow LLP as
lead counsel and Berman DeValerio as liaison counsel, and
DENIES the Motion to appoint Lakeland as lead plaintiff.
Extreme Networks, Inc. (“Extreme Networks”)
develops and sells network infrastructure equipment, and
offers related services contracts for extended warranty and
maintenance. See Complaint (ECF No. 1) ¶ 3. On
October 23, 2015, Plaintiff Jui-Yang Hong, individually and
on behalf of a putative class of individuals who purchased or
otherwise acquired Extreme Networks common stock between
November 4, 2013, and April 9, 2015, inclusive, filed a class
action Complaint in the Northern District of California
against Extreme Networks and individual Defendants Charles W.
Berger, Kenneth B. Arola, and John T. Kurtzweil, all of whom
are officers of the company. See generally Id. The
Complaint alleges that Defendants disseminated materially
false and misleading statements, and concealed material
adverse facts regarding the company’s financial
condition and growth prospects. Id. ¶¶ 2,
26-72. Specifically, it alleges that Defendants
misrepresented the company’s business prospects and
engaged in a scheme to deceive the market by artificially
inflating the price of Extreme Networks common stock.
Id. ¶ 73. Later, when Defendants’ alleged
misrepresentations and fraudulent conduct became apparent to
the market, the price of Extreme Networks common stock fell
sharply. Id. As a result of their purchases of
Extreme Networks common stock during the relevant class
period, the Complaint alleges that the plaintiff and class
members suffered economic loss under federal securities laws.
December 1, 2015, the Court consolidated this case, Hong
v. Extreme Networks, Inc. et al., No. 4:15-cv-04883-BLF,
with another case, Kasprzak v. Extreme Networks, Inc. et
al., No. 5:15-cv-04975-BLF, upon stipulation of the
parties. See Order Granting Stipulation and Proposed
Order Consolidating Cases (ECF No. 18). In the months
following, the consolidated case, proceeding under the
present master file number, garnered four separate motions
seeking appointment of lead plaintiff status. Those four
motions were on behalf of (1) William Reardon, an individual
(ECF No. 18); (2) Mark Kasprzak, an individual (ECF No. 23);
(3) Arkansas Teacher Retirement System, an institutional
investor (ECF No. 27); and (4) City of Lakeland Employees
Pension Plan, an institutional investor (ECF No. 28). Reardon
and Kasprzak subsequently withdrew their motions for lead
plaintiff appointment, conceding that they did not have the
largest financial stake in the relief being sought by the
class. See Notice of Withdrawal of Motion Regarding
Motion of William Reardon (ECF No. 55); Notice of Withdrawal
of Motion of Mark Kasprzak (ECF No. 42). This left the two
competing lead plaintiff motions from institutional
investors, ATRS and Lakeland.
filed papers in opposition to ATRS’ lead plaintiff
motion on January 5, 2016, see (ECF No. 45), and
ATRS filed a Reply on January 12, 2016, see (ECF No.
53). ATRS filed its Opposition to Lakeland’s lead
plaintiff motion on January 5, 2016, see (ECF No.
44), and Lakeland filed a Reply on January 12, 2016,
see (ECF No. 51). Thereafter, pursuant to Civil
Local Rule 7-3(d), Lakeland filed a Statement of Recent
Events, see (ECF No. 62), and Statement of Recent
Decisions, see (“Statement of Recent
Decisions, ” ECF No. 63), and ATRS filed a Motion for
Leave to File a Statement of Supplementary Materials,
see (ECF No. 68). The Court heard arguments on the
Motions on May 5, 2016, and took the matter under submission.
selection of a lead plaintiff or plaintiffs in class action
litigation brought under federal securities law is governed
by the Private Securities Litigation Reform Act
(“PSLRA”) amendments to the Securities Act of
1933 and the Securities Exchange Act of 1934. See 15
U.S.C. §§ 77z-1, 78u-4. In relevant part, the
amendments provide that:
the court shall consider any motion made by a purported class
member in response to [the required notice of the filing of a
class action suit], including any motion by a class member
who is not individually named as a plaintiff in the complaint
or complaints, and shall appoint as lead plaintiff the member
or members of the purported class that the court determines
to be the most capable of adequately representing the
interests of class members.
15 U.S.C. § 78u-4 (a)(3)(B)(i).
Ninth Circuit in In re Cavanaugh, 306 F.3d 726 (9th
Cir. 2002) described, the PSLRA lays out a three-step process
for identifying the lead plaintiff. First is verification of
the proper posting of a “notice ‘in a widely
circulated national business-oriented publication or wire
service.’” 306 F.3d at 729 (quoting 15 U.S.C.
§ 78u-4(a)(3)(A)(i)). Second is the district
court’s consideration of “the losses allegedly
suffered by the various plaintiffs before selecting as the
‘presumptively most adequate plaintiff’-and hence
the presumptive lead plaintiff-the one who ‘has the
largest financial interest in the relief sought by the
class’ and ‘otherwise satisfies the requirements
of Rule 23 of the Federal Rules of Civil
Procedure.’” Id. at 729-30. “In
other words, the district court must compare the financial
stakes of the various plaintiffs and determine which one has
the most to gain from the lawsuit, ” and then determine
“whether he satisfies the requirements of Rule 23(a),
in particular those of ‘typicality’ and
‘adequacy.’” Id. at 730. Third is
the opportunity for plaintiffs not found to be the
presumptive lead plaintiff to rebut the presumptive lead
plaintiff’s showing in satisfaction of the adequacy and
typicality requirements for lead plaintiff designation.
Id. at 730.
is no dispute that notice pursuant to 15 U.S.C. §
78u-4(a)(3)(A)(I) was properly given. See Cavanaugh,
306 F.3d at 729. The Court therefore proceeds to step two.
Presumptively Most Adequate Plaintiff
PSLRA sets forth a rebuttable presumption that the
“most adequate plaintiff, ” that is, the one who
is to be selected as lead plaintiff, is the one who:
(aa) has either filed the complaint or made a motion in
response to a notice under subparagraph (A)(i);
(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).
may be rebutted only by proof by a member of the purported
plaintiff class that the presumptively most ...