United States District Court, N.D. California
ORDER GRANTING CONSOLIDATION AND APPOINTING LEAD
PLAINTIFF AND LEAD COUNSEL
CHARLES R. BREYER, UNITED STATES DISTRICT JUDGE
case stems from three class actions alleging violations of
the Securities Exchange Act and the Securities Act.
Purchasers of Pivotal Software, Inc.'s
(“Pivotal's”) securities assert that they are
entitled to damages caused by Pivotal's alleged false
and/or misleading statements about its financial and business
condition. Three sets of motions are now pending-for
consolidation, appointment as lead plaintiff, and approval of
lead counsel pursuant to the Private Securities Litigation
Reform Act of 1995 (“PSLRA”). Most substantial
are the motions for appointment of lead plaintiff.
Originally, five different plaintiffs sought to be named lead
plaintiff. Three of those subsequently withdrew or chose not
to oppose, leaving two competing motions: one by Steven
Doherty and the Tech Trader Fund LP (collectively, the
“Pivotal Investor Group” or “the
Group”) and one by the Oklahoma City Employee
Retirement System and Police Retirement System of St. Louis
discussed below, the Court (1) consolidates the three related
securities class actions; (2) appoints Oklahoma as lead
plaintiff in the consolidated action; and (3) appoints
Labaton Sucharow LLP as lead counsel and appoints Wagstaffe,
Von Loewenfeldt, Busch & Radwick LLP as liaison counsel
for plaintiffs in the consolidated action.
Pivotal is a Delaware corporation with its principal
executive offices in San Francisco, California. Doherty
Compl. (dkt. 1) ¶ 15. Pivotal and its subsidiaries
provide a cloud-native application platform and services in
the United States. Id. ¶ 2. Pivotal's
platform allegedly accelerates and streamlines software
development by reducing the complexity of building,
deploying, and operating cloud-native and modern
applications. Id. ¶ 21. Pivotal also allegedly
provides strategic services, enabling customers to accelerate
their adoption of a modern software development process.
Robert Mee served as Pivotal's Chief Executive Officer,
and defendant Cynthia Gaylor served as Pivotal's Chief
Financial Officer at all relevant times. Id.
¶¶ 16, 17. Defendants Mee and Gaylor (the
“Individual Defendants”) possessed the power and
authority to control the contents of Pivotal's Securities
and Exchange Commission (“SEC”) filings, press
releases, and other market communications at all relevant
times. Id. ¶ 19.
Plaintiff class consists of all persons and entities, other
than the defendants, who purchased or otherwise acquired (1)
Pivotal's common stock traceable to the registration
statement issued in connection with Pivotal's April 2018
initial public offering (“IPO”), and/or (2)
Pivotal securities between April 24, 2018 and June 4, 2019
(the “class period”). Id. ¶ 1.
December 15, 2017, the defendants filed a confidential draft
registration statement on Form S-1. Id. ¶ 24.
The draft went through a series of amendments in response to
SEC comments. Id. On or about April 18, 2018,
defendants filed a final amendment to the registration
statement, which registered over 37 million shares of Pivotal
common stock for public sale. Id. ¶ 25. The SEC
declared the registration statement effective on April 19,
2018. Id. ¶¶ 25-28. On or about April 20,
2018, defendants filed the final prospectus for the IPO.
Id. ¶ 25.
April 24, 2018, Pivotal completed the IPO, which, upon the
underwriters exercising their full overallotment option to
purchase additional shares, issued a total of 42, 550, 000
shares priced to the public at $15.00 per share. Id.
This generated over $638 million in gross proceeds for the
March 14, 2019, Pivotal issued a press release in which
Pivotal disclosed its financial and operating results for the
fourth quarter and full fiscal year 2019. Id.
¶¶ 29- 31. In that press release, Mee stated that
Pivotal was in the “early stages of [a] high-growth
market.” Id. ¶ 30. The press release also
contained Pivotal's financial outlook for the first
quarter and full fiscal year 2020. Id. ¶ 31.
on the same day, Pivotal held a conference call with analysts
to discuss its financial results for fiscal year 2019 and its
guidance for fiscal year 2020. Id. ¶ 32;
see also id. ¶¶ 35-39. On that call,
Gaylor told analysts and investors that Pivotal
“continue[s] to attract new customers and as many [sic]
of [its] existing customers grow their investments with
[Pivotal].” Id. ¶ 32. Gaylor discussed
Pivotal's “industry-leading” net expansion
rate, but also stated that Pivotal “continued to see
healthy expansion from existing customers, ” and that
Pivotal “expect[s] the percentage to come down
gradually over time.” Id. ¶ 33.
4, 2019, after the market closed, Pivotal issued a press
release reporting its financial and operating results for the
first quarter of fiscal year 2020. Id. ¶ 47. In
that press release, Mee advised investors that “sales
execution and a complex technology landscape impacted the
quarter.” Id. The June 4 press release also
contained a revised guidance for 2020. Id.
following day, on June 5, 2019, Pivotal held a conference
call, and multiple analysts questioned Gaylor about the
revised guidance. Id. ¶ 48. Following the call,
an analyst called the quarter a “train wreck” and
characterized Pivotal's operating results as
“disastrous.” Id. ¶ 49.
Pivotal's stock price fell $7.65 per share, or over 40%,
to close at $10.89 per share on June 5, 2019, far below the
IPO price of $15 per share. Id. ¶ 50.
20, 2019, Steven Doherty filed a complaint asserting claims
under Section 11 and Section 15 of the Securities Act and
Sections 10(b) and 20(a) of the Exchange Act. Id.
¶ 1 (the “Doherty Action”). On the same day,
Mikebeb M. Abera filed a complaint asserting claims under
Section 11 and Section 15 of the Securities Act. See
Abera Compl. (dkt. 1) ¶ 9 in Abera v. Pivotal
Software, Inc., No. 19-cv-3601-HSG (the “Abera
Action”). The Abera Action named the same defendants as
the Doherty Action, and included additional defendants such
as Pivotal directors and underwriters of its IPO.
Id. ¶¶ 14-40. Doherty published notice of
the action on June 20, 2019, which advised investors in
Pivotal securities that they had until August 19, 2019 to
seek appointment as lead plaintiff. See Wagstaffe
Decl., Ex. C (dkt. 22-3). The next day, on June 21, 2019,
Peter Kleinman filed a complaint asserting claims under
Section 11, Section 12(a)(2), and Section 15 of the
Securities Act against the same defendants as the Abera
Action. See Kleinman Compl. (dkt. 1) ¶¶ 2,
7-34 in Kleinman v. Pivotal Software, Inc., No.
19-cv-3605-RS (“the Kleinman Action”); Abera
Compl. ¶¶ 14-40.
three actions advance substantially the same allegations. The
complaints allege that the defendants made false and/or
misleading statements regarding Pivotal's business,
operational, and compliance policies. See Doherty
Compl. ¶ 1; Abera Compl. ¶ 1; Kleinman Compl.
¶ 1. Specifically, they allege that the defendants
failed to disclose that: (1) “Pivotal was facing major
problems with its sales execution and a complex technology
landscape”; (2) those issues “resulted in
deferred sales, lengthening sales cycles, and diminished
growth as its customers and the industry's sentiment
shifted away from Pivotal's principal products because
[they] were outdated, inadequate, and incompatible with the
industry-standard platform”; and (3) Pivotal's
“public statements were materially false and misleading
at all relevant times.” Doherty Compl. ¶ 6.
August 19, 2019, class members Dana Penza, Vasant Punjabi,
Mary Anderson, Oklahoma, and the Pivotal Investor Group filed
five competing motions to consolidate the related actions,
appoint lead plaintiff, and appoint lead counsel.
See Penza Mot. (dkt. 7); Punjabi Mot. (dkt. 11);
Anderson Mot. (dkt. 16); Okl. Mot. (dkt. 21); Group Mot.
August 28, 2019, Penza withdrew his motion, conceding that he
does not have the largest financial interest in the relief
sought by the class, as required by the PSLRA. Penza Not.
(dkt. 35) at 3. On the same day, Punjabi withdrew his motion
for the same reason. See Punjabi Not. (dkt. 36) at
1. On September 3, 2019, Anderson filed a notice of
non-opposition to competing motions. See Anderson
Not. (dkt. 37). Movants Oklahoma and the Group continue to
seek appointment as lead plaintiff.
Rule of Civil Procedure 42(a) permits consolidation where
“actions before the court involve a common question of
law or fact.” Fed.R.Civ.P. 42(a). “Consolidation
is within the broad discretion of the district court.”
In re Adams Apple, Inc., 829 F.2d 1484, 1487 (9th
Cir. 1987). In determining whether consolidation is
appropriate, a court “should ‘weigh the interest
of judicial convenience against the potential for delay,
confusion and prejudice.'” See Hessefort v.
Super Micro Computer, Inc., 317 F.Supp.3d 1056, 1060
(N.D. Cal. 2018) (quoting Zhu v. UCBH Holdings,
Inc., 682 F.Supp.2d 1049, 1052 (N.D. Cal. 2010));
see also Huene v. United States, 743 F.2d 703, 704
(9th Cir. 1984). Courts in the Ninth Circuit “have
recognized that class action shareholder suits are
particularly well suited to consolidation . . . because
unification expedites pretrial proceedings, reduces case
duplication, avoids the need to contact parties and witnesses
for multiple proceedings, and minimizes the expenditure of
time and money for all parties involved.” See
Hessefort, 317 F.Supp.3d at 1060 (quoting Miami
Police Relief & Pension Fund v. Fusion-io, Inc., No.
13-CV-05368-LHK, 2014 WL 2604991, at *3 (N.D. Cal. June 10,
Court agrees with the parties that consolidation of the
Doherty Action, the Abera Action, and the Kleinman Action is
proper. No party has opposed such consolidation. That the
complaints differ slightly does not impede consolidation.
See 15 U.S.C. § 78u-4(a)(3)(A)(ii)
(contemplating consolidation when “more than one action
on behalf of a class asserting substantially the same claim
or claims” has been filed). All three actions involve
common questions of law and fact related to the Pivotal IPO,
and contain similar allegations regarding Pivotal's
public dissemination of false and misleading information to
investors during the same time periods. See Doherty
Compl. ¶ 1; Abera Compl. ¶ 1; Kleinman Compl.
¶ 1. Consolidation is proper because it serves the
judicial interest in convenience, there is no reason to think
it would increase delay, including each claim in one action
will reduce confusion, and no party has articulated a concern
the Court orders that:
following actions are consolidated pursuant to Federal Rule
of Civil Procedure 42(a) for all purposes including, but not
limited to, discovery, pretrial proceedings and trial
Abbreviated Case Name
Doherty v. Pivotal Software, Inc.
Abera v. Pivotal Software, Inc.
Kleinman v. Pivotal Software, Inc.
consolidated cases shall be identified as: In re Pivotal
Securities Litigation and the files of this action shall
be maintained in one file. Any other actions now pending or
hereafter filed in this District which arise out of the same
or similar facts and circumstances as alleged in these
related actions shall be consolidated for all purposes as the
Court is notified of them. The parties shall notify the Court
of any other action which is pending or filed outside of this
District which may be related to the subject matter of these
consolidated actions when they become aware of such actions.
Every pleading filed in the consolidated action shall bear
the following caption:
IN RE PIVOTAL SECURITIES LITIGATION,
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