Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_13-cv-02645/USCOURTS-casd-3_13-cv-02645-2/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 28:1332sa Diversity: Securities &amp; Exchange Commiss

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UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF CALIFORNIA 

JAMES CANNON, derivatively on

behalf of Nominal Defendant 

BRIDGEPOINT EDUCATION, INC., 

Plaintiff,

v. 

ANDREW S. CLARK; DANIEL J.

DEVINE; JANE MCAULIFFE; 

RODNEY T. SHENG; PATRICK 

HACKETT; RYAN CRAIG; ROBERT 

HARTMAN; ADARSH SARMA; DALE 

CRANDALL; DR. MARYE ANNE FOX; 

and ANDREW M. MILLER, 

Defendants.

 Case No.: 13cv2645 JM (NLS) 

CONDITIONAL DENIAL OF 

MOTION FOR ISSUANCE OF 

NOTICE 

This order addresses the parties’ Motion for Issuance of Notice (“Motion”), filed 

on September 2, 2015. (Doc. No. 26). The motion is conditionally denied as the parties’ 

proposed method of notice falls short of the court’s suggested method as provided in the 

Order Denying Motion for Dismissal without Notice to Shareholders (“Order”), filed on 

August 3, 2015. (Doc. No. 22). However, the deficiency in the parties’ proposed method 

of notice can be easily remedied by including an 8-K filing in the method of notice, to be 

combined with the already proposed (1) press release to be issued by Hynes Keller & 

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Hernandez, LLC through PR Newswire; (2) press release to be issued by Bridgepoint 

Education, Inc. (“Bridgepoint”), maintained on its website in its Media Room, and 

hyperlinked to Bridgepoint’s Investor Relations website; and (3) website content to be 

maintained on Bridgepoint’s website in the Investor Relations section where the link shall 

remain active for a minimum of 30 days. 

BACKGROUND 

Plaintiff’s First Motion for Voluntary Dismissal 

On June 12, 2015, Plaintiff filed a motion for voluntary dismissal without 

prejudice and without notice to shareholders. (Doc. No. 19.) Plaintiff asserted that no 

notice was necessary because neither he nor his counsel had received compensation for 

the dismissal, and that a state derivative action was substantially similar to this case and 

was still pending. 

On June 16, 2015, the court denied Plaintiff’s motion without prejudice. (Doc. No. 

20). The court noted that voluntary dismissal under Federal Rule of Civil Procedure 

41(a)(1)(A)(i) is subject to Federal Rule of Civil Procedure 23.1(c), which provides that a 

derivative action can be voluntarily dismissed only with the court’s approval, and that 

notice of the proposed dismissal must be given to shareholders in the manner the court 

orders. The court denied Plaintiff’s motion because he had not provided any legal 

authority or analysis addressing the circumstances under which the notice requirement 

can be dispensed with, and he did not submit a proposed order or any information to 

allow the court to verify that the state derivative action was similar to this one. 

Plaintiff’s Second Motion for Voluntary Dismissal 

On July 7, 2015, Plaintiff filed a second motion for voluntary dismissal without 

prejudice and without notice to shareholders, which was supported by legal analysis and 

accompanied by the complaint from the state derivative action. (Doc. No. 21). Because 

Plaintiff did not show that there was no risk of prejudice if the case was dismissed 

without giving shareholders notice and an opportunity to intervene, the court denied 

Plaintiff’s second motion for voluntary dismissal without notice to shareholders, and 

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ordered the parties to meet and confer and submit a joint notice plan to the court, 

including the proposed language, forms, methods of delivery, and dates for the proposed 

intervention period. Additionally, the court suggested implementing a combination of 

cost-saving methods of notice, such as a press release by the company, a link on the 

company’s investor website to a webpage that will be displayed for at least 30 days, and 

an 8-K filing with the SEC. 

Instant Motion for Issuance of Notice 

 Pursuant to the court’s order, the parties filed a Motion for Issuance of Notice on 

September 3, 2015. (Doc. No. 26). While the parties’ proposed method of notice, 

including the language, forms, method of delivery, and dates of the intervention period 

generally complies with the court’s suggested method of notice, the parties failed to 

include an 8-K filing in the proposed notice. 

DISCUSSION 

Rule 23 of the Federal Rules of Civil Procedure states that “[a] derivative action 

may be settled, voluntarily dismissed, or compromised only with the court's approval. 

Notice of a proposed settlement, voluntary dismissal, or compromise must be given to 

shareholders or members in the manner that the court orders.” Fed. R. Civ. P. 23.1(c). 

In the Order, the court suggested that the parties implement a combination of costsaving methods of notice, such as “a press release by the company, a link on the 

company’s investor website to a webpage that will be displayed for at least 30 days, and

an 8-K filing with the SEC.” (Order, p. 9) (emphasis added). The court’s proposed 

method is consistent with what other district courts have required in similar cases. See 

Bushansky v. Armacost, 2014 WL 2905143, at *6-7 (N.D. Cal. June 25, 2014) (requiring 

a notice plan to include a link on defendant’s investor relations website that leads to a 

webpage to be displayed for a minimum of 30 days, a press release to be issued by 

defendant, and an 8-K filing with the SEC). See also In re Rambus Inc. Derivative Litig., 

2009 WL 166689, at *2 (N.D. Cal. Jan. 20, 2009) (approving settlement where notice 

included a link on a company website, press release, and an 8-K filing with the SEC); In 

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re MRV Commc’ns, Inc. Derivative Litig., 2013 WL 2897874, at *1 (C.D. Cal. June 6, 

2013) (approving notice filed as an attachment to an 8-K filing, published on company 

website, and published for one day in Investor's Business Daily ); Feuer v. Thompson,

2012 WL 665297, at *2–3 (N.D. Cal. Dec. 13, 2012) (approving notice by publication on 

company website, in an 8-K filing, and publication in the Wall Street Journal and The 

New York Times ); In re PMC–Sierra, Inc. Derivative Litig., 2010 U.S. Dist. LEXIS 5818 

at *4 (N.D. Cal. Jan. 26, 2010) (approving notice via an 8-K filing, posting on company's 

website, and single day publication in the national edition of Investor's Business Daily). 

The court concludes that the best practices in a case such as this call for an 8-K 

filing as a necessary component of notice to be given to shareholders. Because the 

parties did not include an 8-K filing with the SEC in their proposed method of notice, the 

court conditionally denies the motion and instructs the parties to file an amended notice 

plan, which must include an 8-K filing, to be combined with the rest of the notice 

methods suggested by parties. Upon submission of the proposed method of notice 

including an 8-K filing, the court will provide the requested approval. 

IT IS SO ORDERED. 

DATED: September 17, 2015 JEFFREY T. MILLER 

 United States District Judge 

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