Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_02-cv-01486/USCOURTS-cand-4_02-cv-01486-8/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:78m(a) Securities Exchange Act

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

IN RE JDS UNIPHASE CORPORATION

SECURITIES LITIGATION

 /

No. C 02-1486 CW

ORDER GRANTING

OKLAHOMA FUND

LEAVE TO

INTERVENE AS

NAMED PLAINTIFF

Proposed Intervenor Oklahoma Firefighters Pension and

Retirement System (Oklahoma Fund) moves for leave to intervene as

an additional named plaintiff in this securities action. Lead

Plaintiff Connecticut Retirement Plans and Trust Funds has filed a

memorandum in support of the motion. Defendants JDS Uniphase

Corporation (JDS), Jozef Straus, Anthony R. Muller and Charles Abbe

(JDS Defendants) oppose the motion to intervene. Defendant Kevin

Kalkhoven joins JDS Defendants' opposition. Pursuant to the

Court's July 15, 2005 order and JDS Defendants' request, the matter

was taken under submission on the papers. Having considered all of

the papers filed by the parties, the Court GRANTS Oklahoma Fund

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For the Northern District of California

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leave to intervene.

BACKGROUND

According to the second amended consolidated complaint (SACC), 

JDS manufactures and supplies components of fiber-optic networks to

telecommunications and cable television system providers. Messrs.

Straus, Muller, Abbe and Kalkhoven are current and former executive

officers and directors of JDS. 

Lead Plaintiff purports to represent a class of persons and

entities who purchased or otherwise acquired securities of JDS

between October 28, 1999 and July 26, 2001. Lead Plaintiff itself

purchased and sold JDS securities during that period, as did other

Plaintiffs named in the SACC. See SACC, Ex. B, Listing of Other

Plaintiffs and Their Counsel. 

Lead Plaintiff alleges that, during the class period,

Defendants engaged in a scheme to inflate artificially the price of

JDS stock by fraudulently recognizing revenue, falsely representing

that demand for JDS products was strong, and overstating the value

of its inventory by failing to write off excess inventory. Lead

Plaintiff further alleges that Defendants benefitted from this

scheme by selling stock at inflated prices and by using the value

of JDS stock to purchase other companies for less than their worth.

On November 4, 1999, JDS acquired Optical Coating Laboratory,

Inc. (OCLI). Lead Plaintiff alleges that prior to acquiring OCLI,

JDS engaged in fraudulent revenue recognition practices that

artificially inflated its sales statistics and, thus, its stock

price. Defendants made the OCLI acquisition by exchanging shares

of stock with the acquired companies, and it was thus in

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Defendants' best interest to keep the JDS stock price artificially

high in order to secure a more favorable exchange rate. JDS's

stock price increased significantly just before the OCLI

acquisition. Additionally, Lead Plaintiff alleges that the proxyprospectus that JDS filed with the Securities and Exchange

Commission (SEC) in connection with the OCLI acquisition was

fraudulent in that it identified strong demand based in part on

JDS's faulty accounting practices. 

Oklahoma Fund is a former OCLI shareholder. On February 4,

2000, in connection with JDS' acquisition of OCLI, Oklahoma Fund

exchanged 2,400 shares of OCLI for 4,454 share of JDS. Jones Decl.

¶ 4. Oklahoma Fund adopts the allegations of the SACC, including

Lead Plaintiff's claims on behalf of former OCLI shareholders. Id.

¶ 7. 

On March 27, 2002, Lead Plaintiff filed the complaint that

initiated this lawsuit, one of twenty-seven related securities

fraud class actions then pending before this Court. On July 26,

2002, the Court held a hearing to determine which of six applicants

should be appointed lead plaintiff. At the hearing, now-Lead

Plaintiff Connecticut Retirement Plans acknowledged that it had not

purchased or exchanged all of the securities encompassed by its

complaint, and stated its intention to designate other plaintiffs

to represent different subgroups. Fernandez Decl., Ex. A, July 26,

2002 Hearing Tr. at 19. 

On October 11, 2002, Lead Plaintiff filed the first amended

consolidated complaint (FACC), which alleged causes of action under

the Securities Act of 1933 (Securities Act) and the Securities

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Exchange Act of 1934 (Exchange Act). Defendants moved to dismiss

the FACC and, on November 3, 2003, the Court issued an order

denying Defendants' motion to dismiss the Securities Act claims and

granting the motion to dismiss the Exchange Act claims. The Court

granted Lead Plaintiff leave to amend these claims. 

On January 9, 2004, Lead Plaintiff filed the SACC. The SACC

alleges that JDS, Straus, Muller and Kalkhoven violated section 11

of the Securities Act; JDS violated section 12(a)(2) of the

Securities Act; Straus, Kalkhoven and Muller violated section 15 of

the Securities Act; JDS, Kalkhoven, Muller, Abbe and Straus

violated section 10(b) of the Exchange Act and Rule 10b-5

promulgated thereunder; Kalkhoven, Muller and Straus violated

section 14 of the Exchange Act and Rule 14a-9 promulgated

thereunder; Kalkhoven, Muller, Straus and Abbe violated section

20(a) of the Exchange Act; and Kalkhoven, Muller, Straus and Abbe

violated section 20A of the Exchange Act. 

On March 9, 2004, Defendants moved to dismiss the SACC. On

January 6, 2005, the Court granted the motion to dismiss one of the

Securities Act claims against Kalkhoven, and denied the motion to

dismiss the remaining claims. Lead Plaintiff's motion for class

certification has been noticed for November 18, 2005. 

LEGAL STANDARD

To intervene as a matter of right under Federal Rule of Civil

Procedure 24(a)(2), “an applicant must claim an interest the

protection of which may, as a practical matter, be impaired or

impeded if the lawsuit proceeds without” the applicant. Forest

Conservation Council v. United States Forest Serv., 66 F.3d 1489,

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1Lead Plaintiff characterizes Oklahoma Fund as an "unnamed

class member," and suggests that intervention is proper under

Federal Rule of Civil Procedure 23(d), which permits unnamed class

members "to intervene and present claims or defenses, or otherwise

come into the action." The characterization of Oklahoma Fund as an

"unnamed class member" is premature, as a class has not yet been

certified.

5

1493 (9th Cir. 1995).1 The Ninth Circuit applies a four-part test

to motions under Rule 24(a). An applicant seeking intervention as

of right must show that: 

(1) it has a significant protectable interest relating to the

property or transaction that is the subject of the action;

(2) the disposition of the action may, as a practical matter,

impair or impede the applicant's ability to protect its

interest; (3) the application is timely; and (4) the existing

parties may not adequately represent the applicant's interest. 

Donnelly v. Glickman, 159 F.3d 405, 409 (9th Cir. 1998) (citing

Cabazon Band of Mission Indians v. Wilson, 124 F.3d 1050, 1061 (9th

Cir. 1997), cert. denied, 524 U.S. 926 (1998)).

The Ninth Circuit interprets Rule 24(a) broadly in favor of

intervention. Id. In evaluating a motion to intervene under Rule

24(a), a district court is required “to take all well-pleaded,

nonconclusory allegations in the motion . . . as true absent sham,

frivolity or other objections.” Southwest Ctr. for Biological

Diversity v. Berg, 268 F.3d 810, 820 (9th Cir. 2001). 

The most important consideration in evaluating the timeliness

of a motion to intervene is whether any delay in moving for

intervention may prejudice existing parties; as long as prejudice

is not likely to result from the timing of the motion, courts

interpret the timeliness requirement liberally. See, e.g.,

Cummings v. United States, 704 F.2d 437, 439 (9th Cir. 1983)

(motion to intervene timely even though made after interrogatories

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and two weeks before date set for close of discovery). The Court

considers three factors in evaluating whether a motion to intervene

is timely: "(1) the stage of the proceeding at which an applicant

seeks to intervene; (2) the prejudice to other parties; and (3) the

reason for and length of the delay." California Dep't of Toxic

Substances Control v. Commercial Realty Projects, Inc., 309 F.3d

1113, 1119 (9th Cir. 2002) (quoting United States v. State of

Washington, 86 F.3d 1499, 1503 (9th Cir. 1996)). 

A court may also at its discretion permit intervention “when

an applicant’s claim or defense and the main action have a question

of law or fact in common.” Fed. R. Civ. P. 24(b)(2). In

exercising its discretion, a court is to “consider whether the

intervention will unduly delay or prejudice the adjudication of the

rights of the original parties.” Id. 

DISCUSSION

I. Standing

Defendants argue that the motion should be denied because

intervention cannot be used to cure an existing plaintiff's lack of

standing. See Lierboe v. State Farm Mut. Auto. Ins. Co., 350 F.3d

1018, 1022 (9th Cir. 2003) (vacating class certification where sole

named plaintiff could not state a claim and therefore lacked

standing to sue). As Lead Plaintiff notes, Defendants' standing

argument is inapposite. Defendants do not claim that Lead

Plaintiff's standing suffers the same constitutional defect as did

the class representative in Lierboe, who never had a case or

controversy sufficient to bring suit in federal court. See

generally Baker v. Carr, 369 U.S. 186, 204 (1962) (explaining that

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the gist of standing is whether plaintiffs have a personal stake in

the outcome sufficient "to assure that concrete adverseness which

sharpens the presentation of issues"). 

Instead, Defendants argue only that the named Plaintiffs lack

standing to bring claims on behalf of the OCLI Subclass, because no

named Plaintiff exchanged OCLI stock for JDS stock. In the absence

of a successful motion to dismiss the case for lack of standing,

the authority cited by Defendants is inapposite. Cf., e.g., Krim

v. pcOrder.com, 402 F.3d 489, 495 (5th Cir. 2005) (affirming

district court's dismissal of plaintiffs' claims for lack of

standing under Section 11 and subsequent denial of a motion to

intervene); Lidie v. State of California, 478 F.2d 552 (9th Cir.

1973) ("where the original plaintiffs were never qualified to

represent the class, a motion to intervene represents a back-door

attempt to begin the action anew, and need not be granted").

Defendants' attack on the standing of the current named Plaintiffs

to bring claims on behalf of the OCLI Subclass actually bolsters

the motion to intervene, because it illustrates why Oklahoma Fund

seeks, in an abundance of caution, to intervene to protect its

interests. 

II. Intervention as of Right

Defendants do not dispute that Oklahoma Fund has a

significant, protectable interest relating to the property or

transaction that is the subject of this action. Defendants do

contest the other three prongs of the test for intervention as of

right under Rule 24(a). Defendants' arguments are taken in turn. 

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A. Timeliness

Defendants argue that the motion to intervene is untimely,

based on both the length of time between the original complaint and

the instant motion and the running of the statute of limitations on

the claims of the OCLI Subclass. 

As Defendants note, more than three years have passed since

the filing of the original complaint, and Lead Plaintiff and

Oklahoma Fund provide no justification for their delay. However,

these facts alone are not dispositive, because the other relevant

factors weigh in favor of allowing intervention. Despite several

years of litigation, the proceedings are still at a relatively

early stage: the class has not yet been certified; discovery is

still underway; and the deadline for dispositive motions is not yet

imminent. Oklahoma Fund is willing to rest upon the allegations of

the SACC. Defendants identify no actual prejudice likely to result

from the timing of the motion, apart from their allegations that

the OCLI claims are time-barred. Defendants have been on notice

since the July 26, 2002 hearing that Lead Plaintiff intended to

designate other entities to represent different subgroups. On

balance, the factors weigh in favor of granting the motion to

intervene. See In re Initial Public Offering Sec. Litig., 214

F.R.D. 117, 122 (S.D.N.Y. 2002) (allowing additional named

plaintiffs to intervene for purposes of curing alleged pleading

deficiencies where material allegations of complaint not affected

and defendants had notice of plaintiffs' intentions "well in

advance of the filing of their motions to dismiss"); cf. Smith v.

Marsh, 194 F.3d 1045 (9th Cir. 1999) (affirming denial of motion to

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intervene where district court found that motion occurred at a late

stage in the proceedings, had been unduly delayed and if granted

would cause prejudice to existing parties). 

Defendants argue further that the motion to intervene is

untimely because the statute of limitations on the OCLI claims has

passed. However, the motion to intervene does not seek to add new

claims to the SACC. Both the FACC and SACC already set forth the

claims which Defendants now argue are time-barred, well within the

limitations period alleged by Defendants to have ended on February

4, 2003. None of the case law cited by Defendants suggests that

intervenors cannot be allowed to bolster claims brought within the

statute of limitations and not already subject to dismissal. See

In re Elscint, Ltd., Sec. Litig., 674 F. Supp. 374, 378 (D. Mass.

1987) (denying motion to intervene filed after court issued

tentative conclusion regarding dismissal of claims); Fleming v.

Bank of Boston Corp., 127 F.R.D. 30, (D. Mass. 1989) (holding

motions to intervene untimely when filed after court found original

plaintiff lacked standing to bring claims). The Court therefore

need not reach the question of whether the statute of limitations

was tolled, pursuant to Am. Pipe & Constr. Co. v. Utah, 414 U.S.

538, 553-54 (1974), by the filing of the class action. 

Defendants argue that they would be prejudiced by Oklahoma

Fund's intervention and that allowing intervention would set a

"dangerous precedent." Defendants' claim of prejudice rests on the

the assumption that intervention would allow Plaintiffs to

circumvent the statute of limitations. See Defs.' Opp. at 16

("Defendants will be prejudiced if the Court allows the Oklahoma

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Fund to intervene and revive the time-barred OCLI Claims.") 

However, Defendants' complaint is significantly undercut by their

own failure to address the potential standing issue in either of

their previous motions to dismiss. 

For these reasons, the Court finds that the motion to

intervene is timely. 

B. Impairment of Oklahoma Fund's Interests and Adequacy of

Representation

Defendants argue that the disposition of the action will not

impair or impede Oklahoma Fund's ability to protect its interests,

and that the existing named Plaintiffs will adequately represent

Oklahoma Fund. 

Here, Defendants note that Oklahoma Fund and Lead Plaintiff do

not concede that Lead Plaintiff lacks standing to represent the

OCLI Subclass, and argue that failure to concede this fact is fatal

to a motion for mandatory intervention. Defendants also argue that

Oklahoma Fund's interests are already being pursued in State court

in Pang v. Dwight, Case No. 231989 (Sonoma County Sup. Ct., filed

Feb. 3, 2003). 

The standard for intervention as of right is only whether

disposition of an action "may, as a practical matter, impair or

impede the applicant's ability to protect its interest" and whether

"existing parties may not adequately represent the applicant's

interest." Donnelly, 159 F.3d at 409 (emphasis added). The Ninth

Circuit's language does not suggest that proposed intervenors must

concede that their interests will certainly be harmed. Moreover,

Defendants provide no authority for the proposition that proposed

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intervenors must concede that intervention is essential, or that

the availability of State remedies obviates the need for

intervention. The fact that the parties dispute the validity of

the OCLI Subclass' claims is sufficient to show both that

disposition of the action may impair or impede Oklahoma Fund's

interest, and that the current named Plaintiffs may not adequately

represent that interest. 

For the foregoing reasons, the Court finds that Oklahoma Fund

may intervene as of right, pursuant to Rule 24(a). It does not

reach the issue of permissive intervention. 

III. Futility

Defendants maintains that Oklahoma Fund's intervention is

futile because it is subject to a unique defense and therefore it

cannot be an adequate representative of the OCLI Subclass. Lead

Plaintiff and Oklahoma Fund argue that futility is irrelevant to

the motion to intervene. The Court agrees. Oklahoma Fund's

adequacy as a representative of the OCLI Subclass is more properly

tested in the context of the motion for class certification. 

CONCLUSION

For the foregoing reasons, the Court GRANTS Lead Plaintiff's

motion (Docket No. 289) and allows Oklahoma Fund to intervene as a

named Plaintiff in this action.

IT IS SO ORDERED.

Dated: 10/12/05

 

CLAUDIA WILKEN

United States District Judge

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