Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_06-cv-03864/USCOURTS-cand-5_06-cv-03864-3/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 28:1331 Fed. Question

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 This disposition is not designated for publication and may not be cited.

Case No. C-06-3864 JF (PVT)

ORDER GRANTING MOTION TO APPROVE LIAISON COUNSEL AND DENYING MOTION TO APPROVE

LEAD COUNSEL AND TO APPOINT LEAD PLAINTIFF

(JFLC1)

**E-Filed 10/10/2006**

NOT FOR CITATION

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

GALLARDO v. BENNETT et. al.

IN RE INTUIT INC. DERIVATIVE

LITIGATION.

Case Number C-06-3864 JF (PVT)

ORDER1 GRANTING MOTION TO

APPROVE LIAISON COUNSEL AND

DENYING MOTION TO APPROVE

LEAD COUNSEL AND TO APPOINT

LEAD PLAINTIFF

[re: docket no. 16]

I. BACKGROUND

Plaintiff Don Gallardo (“Gallardo”) filed a shareholder derivative action on behalf of

Intuit, Inc. (“Intuit”) on June 21, 2006 (represented by Schiffrin & Barroway LLP and Green

Welling LLP ). Plaintiff Beth Amado (“Amado”) filed a similar shareholder derivative action on

July 14, 2006 (Case Number C-06-4334 JF (PVT)) (represented by Schiffrin & Barroway LLP

and Bramson Plutzik Mahler & Birhaeuser LLP). On July 17, 2006, Amado moved for

consideration as to whether the two cases were related. The Court issued an order relating the

Case 5:06-cv-03864-JF Document 34 Filed 10/10/06 Page 1 of 7
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Case No. C-06-3864 JF (PVT)

ORDER GRANTING MOTION TO APPROVE LIAISON COUNSEL AND DENYING MOTION TO APPROVE

LEAD COUNSEL AND TO APPOINT LEAD PLAINTIFF

(JFLC1)

cases on July 28, 2006. On August 8, 2006, Amado, Gallardo, and Intuit stipulated to the

consolidation of the two cases. The Court ordered the consolidation of the two cases on August

9, 2006.

Gallardo and Amado move for appointment of Gallardo as the lead plaintiff and approval

of Schiffrin & Barroway LLP as lead counsel and Bramson Plutzik Mahler & Birhaeuser LLP as

liaison counsel. Nominal defendant Intuit opposes the motion. No other counsel has moved for

approval as lead or liaison counsel. The Court knows of no other derivative action plaintiffs, and

no other plaintiff has moved for appointment as lead plaintiff. 

The Court heard oral argument on October 6, 2006. For the reasons discussed below, the

Court will grant the motion as to the approval of liaison counsel, but deny the motion without

prejudice as to approval of lead counsel and appointment of a lead plaintiff. 

II. LEGAL STANDARD

1. Approval of Lead Counsel

Federal Rule of Civil Procedure 42(a) grants district courts the authority to consolidate

“actions involving a common question of law or fact” and to “make such orders concerning

proceedings therein as may tend to avoid unnecessary costs or delay.” The Second Circuit

interpreted this rule in MacAlister v. Guterma, 263 F.2d 65 (2d Cir. 1958), holding that a district

court may consolidate multiple derivative actions and appoint lead counsel for the consolidated

plaintiffs. The Ninth Circuit followed MacAlister in Vincent v. Hughes Air West, Inc., 557 F.2d

759 (9th Cir. 1977), noting that “[t]he benefits achieved by consolidation and the appointment of

general counsel, i.e. elimination of duplication and repetition and in effect the creation of a

coordinator through whom motions and discovery proceedings will be channeled, will most

certainly redound to the benefit of all parties to the litigation.” Vincent, 557 F.2d at 774 (citing

Guterma, 263 F.2d at 69). However, Vincent does not address specifically the appointment of a

lead plaintiff in a consolidated derivative action.

 2. Appointment of Lead Plaintiff

Plaintiffs do not cite any Ninth Circuit cases or district court cases from within this circuit

Case 5:06-cv-03864-JF Document 34 Filed 10/10/06 Page 2 of 7
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 This Court noted the absence of Ninth Circuit authority suggesting that the appointment

of a lead plaintiff might be appropriate in a derivative action in an order in Koherly v. Boston,

Case No. C 05-4642 JF (PVT) (N.D. Cal. Feb. 2, 2006).

3

 Plaintiffs cite Church of Scientology v. United States Dep’t of the Army, 611 F.2d 738,

750 (9th Cir. 1979), for the proposition that the first-to-file rule promotes efficiency. Motion 4. 

By citing this case in conjunction with Wright, Plaintiff appears to suggest that the Ninth Circuit

adopted a rule similar to Wright’s. It did not. Church of Scientology construed the Freedom of

Information Act, not the law of derivative actions. Its reference to the first-to-file rule belongs to

a discussion of the comity principle and to the existence of concurrent litigation in the D.C.

Circuit. Church of Scientology provides the general principle that the first-to-file rule promotes

efficiency, but it does not provide a Ninth Circuit example of the appointment of a lead plaintiff

in a derivative action.

4

 Plaintiffs provide the Court with two orders from within the Northern District of

California which appoint lead and liaison counsel in consolidated derivative actions. McKinney

v. Beck, Case No. C 06-3344 JW (N.D.Cal. June 14, 2006); Eisenberg v. Coghlan, Case No. C

06-3290 MMC (N.D.Cal. June 13, 2006) (Attached as Exh. B-C to Declaration of Robin

Winchester in Support of Motion). Neither order appoints a lead plaintiff. The Eisenberg order

refers to “the order designating the Lead Plaintiff,” Eisenberg at 4, but plaintiff has not provided

the Court with a copy of this order, and the Court did not find such an order in a review of the

docket of the Eisenberg case. The Court understands these two orders as appointing lead counsel

for the consolidated plaintiffs in the two cases.

3

Case No. C-06-3864 JF (PVT)

ORDER GRANTING MOTION TO APPROVE LIAISON COUNSEL AND DENYING MOTION TO APPROVE

LEAD COUNSEL AND TO APPOINT LEAD PLAINTIFF

(JFLC1)

suggesting that appointment of a lead plaintiff is appropriate in a derivative action.2 Relevant

cases in the Ninth Circuit discuss the appointment of a lead plaintiff in the context of securities

fraud class actions, not derivative actions. See, e.g., In re Cavanaugh, 306 F.3d 726 (9th Cir.

2002); Bowman v. Legato Systems, Inc., 195 F.R.D. 655 (N.D. Cal. 2000).3 Appointment of lead

plaintiff in securities fraud cases is governed by the Private Securities Litigation Reform Act of

1995, Pub.L. No. 104-67 (1995). There is no analog with respect to derivative actions.4

Courts in other circuits have appointed lead plaintiffs in derivative actions where multiple

plaintiffs contested the lead plaintiff role. See e.g. Horn v. Raines, 227 F.R.D. 1 (D.D.C. 2005)

(holding that institutional plaintiffs are favored); Wright v. Krispy Kreme Doughnuts, Inc., 232

F.R.D. 528 (M.D.N.C. 2005) (holding that the first to file was the most appropriate lead

plaintiff); Millman v. Brinkley, 2004 WL 2284505 at *3 (N.D.Ga. 2004) (unpublished opinion)

(appointing lead plaintiffs on the basis of: (1) continuous ownership of stock by the selected

Case 5:06-cv-03864-JF Document 34 Filed 10/10/06 Page 3 of 7
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 Defendant also raised jurisdictional issues at oral argument. The Court will not

consider at this time whether the alleged deficiencies in Plaintiff’s complaint are sufficient to

merit dismissal of the complaint.

4

Case No. C-06-3864 JF (PVT)

ORDER GRANTING MOTION TO APPROVE LIAISON COUNSEL AND DENYING MOTION TO APPROVE

LEAD COUNSEL AND TO APPOINT LEAD PLAINTIFF

(JFLC1)

plaintiffs; (2) failure to file a verified complaint by another applicant for lead plaintiff; and (3)

the strength of their lawyers’ pleadings); Dollens v. Zionts, 2001 WL 1543524 at *5-6 (N.D.Ill.

2001) (unpublished opinion) (assessing: (1) the size of plaintiff’s financial interest; (2) an

institutional investor preference; (3) the quality of the pleading; (4) the vigorousness of

prosecution of the lawsuits; and (5) attorney’s fees).

III. DISCUSSION

A. Approval of Lead Counsel and Liaison Counsel

Intuit argues that the Court should deny the motion on the grounds that plaintiff’s

complaint is unverified and that plaintiff has failed to show that he can satisfy the continuous

ownership requirement. Opposition 1-4. For the purposes of this motion, the Court considers

only whether these alleged deficiencies show that plaintiff’s counsel is unequipped to act as

counsel for the consolidated plaintiffs.5 The Court concludes that they do not. Schiffrin &

Barroway LLP’s experience litigating complex shareholder litigation will allow it to litigate this

case proficiently. See Declaration of Robin Winchester in Support of Motion, Exh. A. 

That said, the Court perceives no reason to appoint lead counsel in this case. Schiffrin &

Barroway LLP acted as lead counsel on each of the two cases that the Court consolidated on

August 9, 2006. Consolidated plaintiffs already have agreed that Schiffrin & Barroway LLP will

act as lead counsel. The Court will not grant a motion for appointment of lead counsel when no

other plaintiffs have brought a derivative suit and no other counsel claims the position of lead

counsel. 

The Court recognizes the efficiency resulting from appointment of a liaison counsel for

consolidated plaintiffs, particularly because proposed lead counsel does not have an office in

state. Different law firms acted as liaison counsel in each of the cases consolidated by the Court

on August 9, 2006. Consolidated plaintiffs now agree that Bramson Plutzik Mahler &

Case 5:06-cv-03864-JF Document 34 Filed 10/10/06 Page 4 of 7
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 Intuit has not asked the Court formally to consider whether consolidated plaintiffs fairly

and adequately represent the interests of shareholders. This issue is governed by Federal Rule of

Civil Procedure 23.1, which requires that a plaintiff bringing a derivative action must “fairly and

adequately represent the interests of the shareholders or members similarly situated in enforcing

the right of the corporation or association.” The Ninth Circuit has identified eight factors

relevant to determining the adequacy of a plaintiff: (1) indications that the plaintiff is not the true

party in interest; (2) the plaintiff’s unfamiliarity with the litigation and unwillingness to learn

about the suit; (3) the degree of control exercised by the attorneys over the litigation; (4) the

degree of support received by the plaintiff from other shareholders; (5) the lack of any personal

commitment to the action on the part of the representative plaintiff; (6) the remedy sought by

plaintiff in the derivative action; (7) the relative magnitude of plaintiff’s personal interests as

compared to his interest in the derivative action itself; and (8) plaintiff’s vindictiveness toward

the defendants. Larson v. Dumke, 900 F.3d 1363, 1367 (9th Cir. 1990). 

5

Case No. C-06-3864 JF (PVT)

ORDER GRANTING MOTION TO APPROVE LIAISON COUNSEL AND DENYING MOTION TO APPROVE

LEAD COUNSEL AND TO APPOINT LEAD PLAINTIFF

(JFLC1)

Birhaeuser LLP should serve as liaison counsel, and the Court is satisfied that Bramson Plutzik

Mahler & Birhaeuser LLP has the capacity and experience to fill this role. 

B. Appointment of Lead Plaintiff

The Court does not perceive a reason to appoint a lead plaintiff among the consolidated

plaintiffs.6 Plaintiffs’ counsel has not provided the Court with an example of such an

appointment in a derivative action within the Ninth Circuit. Consolidated plaintiffs apparently

have agreed to the present course of action, and the Court concludes that it need not formalize the

relationship among the plaintiffs in the absence of a dispute between the plaintiffs or Ninth

Circuit authority for such an appointment.

IV. ORDER

1. Plaintiffs’ motion for approval of lead counsel is DENIED. 

2. Plaintiffs’ motion for approval of liaison counsel is GRANTED. The Court

hereby appoints Bramson, Plutzik, Mahler & Birkaeuser, LLP as liaison counsel. 

3. Plaintiffs’ motion for appointment of lead plaintiff is DENIED.

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Case No. C-06-3864 JF (PVT)

ORDER GRANTING MOTION TO APPROVE LIAISON COUNSEL AND DENYING MOTION TO APPROVE

LEAD COUNSEL AND TO APPOINT LEAD PLAINTIFF

(JFLC1)

DATED: October 10, 2006

 

JEREMY FOGEL

United States District Judge

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Case No. C-06-3864 JF (PVT)

ORDER GRANTING MOTION TO APPROVE LIAISON COUNSEL AND DENYING MOTION TO APPROVE

LEAD COUNSEL AND TO APPOINT LEAD PLAINTIFF

(JFLC1)

This Order has been served upon the following persons:

Boris Feldman boris.feldman@wsgr.com, ncarvalho@wsgr.com;

bhickman@wsgr.com 

Robert S. Green CAND.USCOURTS@CLASSCOUNSEL.COM 

Alan R. Plutzik aplutzik@bramsonplutzik.com 

Ignacio E. Salceda isalceda@wsgr.com, rlustan@wsgr.com 

Kathryn A. Schofield kschofield@bramsonplutzik.com, mfogle@bramsonplutzik.com 

Eric L. Zagar ezagar@sbclasslaw.com 

Notice will be delivered by other means to: 

Sandra G. Smith 

Schiffrin & Barroway LLP

280 King of Prussia Road

Radnor, PA 19087

Case 5:06-cv-03864-JF Document 34 Filed 10/10/06 Page 7 of 7