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Deinnocentis v. Dropbox, Inc.

United States District Court, N.D. California, San Jose Division

January 16, 2020

JASON MICHAEL DEINNOCENTIS, Plaintiff,
v.
DROPBOX, INC., et al., Defendants.

          ORDER GRANTING MOVANT KURAICA'S MOTION FOR CONSOLIDATION OF ACTIONS, APPOINTMENT AS LEAD PLAINTIFF, AND APPROVAL OF LEAD COUNSEL; TERMINATING COMPETING MOTIONS [RE: ECF 28, 32, 36, 38]

          BETH LABSON FREEMAN UNITED STATES DISTRICT JUDGE

         This securities class action is brought on behalf of those who purchased, or otherwise acquired Dropbox, Inc. stocks pursuant to Dropbox Inc.'s (“Dropbox”) registration statement issued in connection with the Company's March 23, 2018 initial public offering (the “IPO”). The complaint asserts claims under the Securities Act of 1933 against Dropbox, the Company's senior executive officers and directors, and the venture capital sponsors of the IPO.

         Before the Court are four competing motions to consolidate this action with the related case Pikal v. Dropbox, Inc., et al., No. 3:19-cv-06360-BLF (“Pikal Action”), appoint lead plaintiff, and approve lead counsel. ECF 28, 32, 36, 38. Pursuant to Civil Local Rule 7-1(b), the Court finds this matter suitable for submission without oral argument and hereby VACATES the hearing set on January 30, 2020.

         For the reasons stated below, the Court GRANTS Ognjen Kuraica's motion for consolidation, APPOINTS Kuraica as lead plaintiff, and APPROVES Levi & Korsinsky, LLP as lead counsel. The competing motions are TERMINATED because (1) Luis Chavez has withdrawn his motion and (2) Xiangqun Miao and Rick Gammiere have informed the Court that they do not oppose Kuraica's motion.

         I. BACKGROUND

         Dropbox is a software and technology company, founded in 2007, and is commonly known for its eponymous filesharing service. Complaint (“Compl.”) ¶¶ 24-25, ECF 1. Dropbox's Class A common stock trades on the NASDAQ under the ticker symbol “DBX.” Id. ¶ 24. On February 23, 2018, Dropbox filed a registration statement for the IPO on Form S-1, which, after several amendments, was declared effective on March 22, 2018 (the “Registration Statement”). Id. ¶ 29. The Complaint alleges that the Registration Statement “was negligently prepared and, as a result, contained untrue statements of material fact or omitted to state other facts necessary to make the statements made not misleading and was not prepared in accordance with the rules and regulations governing its preparation.” Id. ¶ 30. According to the Complaint, once “the truth” emerged, Dropbox's stock fell 16% from the IPO price. Id. ¶ 42.

         On October 4, 2019, Plaintiff Jason Michael Deinnocentis filed this class action lawsuit individually and on behalf of all persons who purchased Dropbox Class A common stock pursuant or traceable to the Registration Statement. Compl. ¶ 1. The action asserts claims under the Securities Act of 1933 (“Securities Act”) against Dropbox, the Company's senior executive officers and directors, and venture capital sponsors of the IPO. Id. On October 4, 2019, counsel for Deinnocentis caused a notice (the “Notice”) to be published pursuant to Section 27(a)(3)(A) of the Exchange Act, which announced that a securities class action had been filed against Dropbox and certain of its officers, and advised putative class members that they had 60 days to file a motion to seek appointment as a lead plaintiff in the action. Declaration of Adam McCall (“McCall Decl.”), Exh. C, ECF 33-3.

         On December 3, 2019, Xiangqun Miao, Ognjen Kuraica, Rick Gammiere, and Luis Chavez filed competing motions for appointment of lead plaintiff and lead counsel. ECF 28, 32, 36, 38. On December 16, 2019, Miao filed a notice of non-opposition to the competing motions, noting that “[h]aving reviewed the competing motions before the Court, Miao does not appear to have the largest financial interest in this litigation within the meaning of the PSLRA.” ECF 55 at 1. On December 17, 2019, Chavez, Kuraica, and Gammiere timely filed oppositions to the competing lead plaintiff movants. ECF 56, 57, 59. On December 23, 2019, Gammiere filed a non-opposition to the appointment of Kuraica as the lead plaintiff. ECF 60 at 2. On December 24, 2019, Chavez withdrew his motion for lead plaintiff. ECF No. 61. Accordingly, Kuraica's motion is unopposed.

         Kuraica moves the Court to (1) consolidate this action with the Pikal Action, (2) appoint Ognjen Kuraica as lead plaintiff, and (3) approve Levi & Korsinsky, LLP as lead counsel. ECF 32. All parties in the Pikal Action have consented to the consolidation. See Pikal Action, ECF 21, 27, 30, 31.

         II. DISCUSSION

         A. Consolidation

         1. Legal Standard

         The Private Securities Litigation Reform Act of 1995 (“PSLRA”) provides that “[i]f more than one action on behalf of a class asserting substantially the same claim or claims arising under this subchapter has been filed, ” the Court shall not make the determination of the most adequate plaintiff until “after the decision on the motion to consolidate is rendered.” 15 U.S.C. § 77z-1(a)(3)(B)(ii). “As soon as practicable after [the consolidation] decision is rendered, the court shall appoint the most adequate plaintiff as lead plaintiff for the consolidated actions[.]” Id.

         “If actions before the court involve a common question of law or fact, the court may . . . consolidate the actions.” Fed.R.Civ.P. 42(a). District Courts have “broad discretion under [Rule 42(a)] to consolidate cases pending in the same district.” Investors Research Co. v. U.S. Dist. Court for Cent. Dist. of California, 877 F.2d 777, 777 (9th Cir. 1989). “In determining whether or not to consolidate cases, the Court should weigh the interest of judicial convenience against the potential for delay, confusion and prejudice.” Bodri v. Gopro, Inc., 2016 WL 1718217, at *1 (N.D. Cal. Apr. 28, 2016) (internal quotation marks and citation omitted).

         2. Analysis

         This case and the Pikal Action, both pending before this Court, present similar factual and legal issues, as they each involve the same subject matter and are based on the same alleged wrongful course of conduct. Compare Compl. with Pikal Action, ECF 1. Both cases bring claims under the Securities Act of 1933 against Dropbox, the Company's senior executive officers and directors, and venture capital sponsors of the IPO, while the Pikal Action also includes the underwriters of the IPO. Because the both actions arise from the same facts and circumstances (namely, statements made in Dropbox's Registration Statement) and involve the same subject matter and the same class (persons and entities who purchased Dropbox Class A common stock pursuant the Registration Statement), the same discovery and similar class certification issues will be relevant to all related actions. Moreover, all parties in the Pikal Action consent to the consolidation. See Pikal Action, ECF 21, 27, 30, 31. Accordingly, consolidation under Rule 42(a) is appropriate.

         3. ...


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