Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_13-cv-00966/USCOURTS-casd-3_13-cv-00966-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 28:1332 Diversity-Breach of Fiduciary Duty

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

IN RE MAXWELL

TECHNOLOGIES, INC.

DERIVATIVE LITIGATION,

LEAD CASE NO. 13-CV-966 BEN (RBB)

(Derivative Action)

ORDER DENYING

MOTION TO STAY

[Docket No. 19]

This Document Relates To:

 ALL ACTIONS.

Presently before the Court is Plaintiffs’ Motion to Stay Action. (Docket No. 19.) 

For the reasons stated below, the Motion to Stay Action is DENIED.

BACKGROUND

On March 13, 2013, Foster v. Maxwell Technologies, Inc., No. 13-CV-580, a

putative securities class action complaint against Maxwell Technologies, Inc. and

certain of its current and former officers, was filed in this Court. Three related actions,

Weinstein v. Maxwell Technologies, Inc., No. 13-CV-686, Abanades v. Maxwell

Technologies, Inc., No. 13-CV-867, and Mebarak v. Maxwell Technologies, Inc., No.

13-CV-942, were subsequently filed in this Court. All four of these actions allege that

the defendants made fraudulentstatements about Maxwell’s financial performance and

business prospects. All four actions were brought on behalf of a class of persons who

purchased Maxwell’s common stock between April 28, 2011 and March 7, 2013. 

These four cases were consolidated as In re Maxwell Technologies Inc., Securities

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Litigation, No. 13-CV-580 (“Federal Putative Class Action”).

On April 11, 2013, Evan Warsh filed Warsh v. Schramm, Case No. 37-2013-

00043884-CU-BT-CTL, a shareholder derivative action, in the Superior Court of

California, County of San Diego. This action was brought on behalf of Maxwell

against certain of its officers and directors for breaches of fiduciary duties and unjust

enrichment due to false and misleading statements made by the defendants. On April

18, 2013, Stephen Neville filed Neville v. Cortes, Case No. 37-2013-00044911-CUBT-CTL, another shareholder derivative action, in the Superior Court of California,

County of San Diego. This action was brought on behalf of Maxwell against similar

defendants and containing substantially similar allegations as those brought in Warsh. 

On June 5, 2013, Warsh and Neville were consolidated with the caption, In re Maxwell

Technologies, Inc. Derivative Litigation, Lead Case No. 37-2013,00043884-CU-BTCTL (“State Shareholder Derivative Action”).

On April 23, 2013, Plaintiff Walter Kienzle filed Kienzle v. Schramm, Case No.

13-CV-966, on behalf of Maxwell, against similar defendants and containing similar

allegations and requests for relief as in the State Shareholder Derivative Action. On

May 7, 2013, Plaintiff Sameer AgrawalfiledAgrawal v. Cortes, Case No. 13-CV-1084,

another shareholder derivative action. This action was also brought on behalf of

Maxwell against similar defendants and containing similar allegations and requests for

relief as in the State Shareholder Derivative Action. Kienzle and Agrawal were

consolidated with the caption, In re Maxwell Technologies, Inc. Derivative Litigation,

Case No. 13-CV-966 (“Federal Shareholder Derivative Action”).

On July 3, 2013, Nominal Defendant Maxwell moved to stay the State

Shareholder Derivative Action pending resolution of the Federal Shareholder

Derivative Action, arguing that the State Shareholder Derivative Action was

duplicative of the Federal Shareholder Derivative Action, the federal court was the

more efficient forum because it was handling the securities class action, and a stay

would avoid conflicts and prevent the waste of resources. On September 27, 2013,

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Judge Joel R. Wohlfeil issued a tentative ruling granting Maxwell’s motion to stay the

State Shareholder Derivative Action. A day before Judge Wohlfeil issued the tentative

ruling, on September 26, 2013, Plaintiffs moved to stay the Federal Shareholder

Derivative Action. Plaintiffs argue that they have reached an agreement with the state

plaintiffs to coordinate their efforts and stay theFederal Shareholder Derivative Action. 

DISCUSSION

“[T]he power to stay proceedings is incidental to the power inherent in every

court to control the disposition of the causes on its docket with economy of time and

effort for itself, for counsel, and for litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254

(1936). In determining whether to grant a stay, a court considers: (1) “the hardship or

inequity which a party may suffer in being required to go forward,” (2) “possible

damage which may result from the granting of a stay,” and (3) “the orderly course of

justice measured in terms of the simplifying or complicating of issues, proof, and

questions of law which could be expected to result from a stay.” CMAX, Inc. v. Hall,

300 F.2d 265, 268 (9th Cir. 1962). 

Either the federal orstate shareholder derivative action should be stayed in order

to prevent conflicting rulings and the waste of judicial resources. Pending in this Court

is theFederal PutativeClass Action, which involvesthe same alleged wrongful conduct

as the shareholder derivative actions. Once any threshold procedural issues are

resolved, this Court will rule on dispositive motions in the Federal Putative Class

Action, which will require an analysis for the circumstances surrounding Maxwell’s

restatement, which is also at the core of the derivative litigation. It would be most

efficient to have one judge handle both the Federal Putative Class Action and the

shareholder derivative claims in order to prevent conflicting rulings and the waste of

judicial resources. In addition, Judge Wohlfeil has already issued a tentative ruling

granting Maxwell’s motion to stay the State Shareholder Derivative Action.

Accordingly, it would be most efficient to deny the motion to stay the Federal

Shareholder Derivative Action and to allow it to continue forward in this Court. 

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In addition, litigating the derivative claims in federal court does not cause any

hardship to Plaintiffs. The state plaintiffs did not file an operative complaint in the

State Shareholder Derivative Action until September 27, 2013. In addition, although

the state plaintiffs have served discovery, Judge Wohlfeil has not yet ordered

discovery. Accordingly, the State Shareholder Derivative Action is not significantly

further along in the proceedings than the Federal Shareholder Derivative Action.

Plaintiffs argue that the claims against McGladrey LLP, Maxwell’s former

auditor, can only be brought in state court, which favors staying the Federal

Shareholder Derivative Action rather than the State Shareholder Derivative Action. As

Judge Wohlfeil found, however, having the same judge decide both the Federal

PutativeClass Action and the derivative claims “outweighs the necessity of moving the

claim against the accounting firm forward in the state actions.” (Miller Decl., Exh. A

[Docket No. 24-2], at 1.) Accordingly, Plaintiffs’ Motion to Stay is DENIED.

CONCLUSION

For the reasons stated above, the Motion to Stay Action is DENIED. 

IT IS SO ORDERED.

DATED: October 30, 2013

Hon. Roger T. Benitez

United States District Judge

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