Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_06-cv-03817/USCOURTS-cand-3_06-cv-03817-33/pdf.json

Nature of Suit Code: 160
Nature of Suit: Stockholder's Suits
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 CNET NETWORKS, INC.

SHAREHOLDER DERIVATIVE

LITIGATION.

 /

This Document Relates To:

All Actions. /

No. C 06-03817 WHA

FURTHER CASE MANAGEMENT

ORDER SETTING DEADLINES

TO FILE AMENDED

COMPLAINT

Almost a year ago, the Court gave plaintiff a stay and long opportunity to file an action

in the Delaware Chancery Court to obtain corporate records to then “beef up” his inadequate

(and dismissed) pleading in this action. On November 21, 2007, the Delaware Court ordered

the documents produced. On November 28, 2007, this Court issued an order designed to

reactivate this case and to allow plaintiff time to digest the new material and to file yet another

amended complaint to be followed by the usual motion practice. Defendants represented that

all records would be produced within seven to ten days (of November 28). Many months have

now gone by with no new pleading. Upon recent inquiry, the Court was told that the two sides

had been talking settlement and that while most documents have been produced, some still have

not been. The Court’s inquiry provoked a joint motion to lift the stay for the limited purpose of

filing a motion for preliminary approval of a settlement, filed last Friday.

The Court is disappointed. The parties should have honored their representations. They

should have completed the production of corporate records and then filed the amended

complaint — long ago. 

Case 3:06-cv-03817-WHA Document 238 Filed 04/07/08 Page 1 of 2
United States District Court

For the Northern District of California

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Any settlement, at this early stage, seems very premature, for the Court could not be in a

position to evaluate a settlement until we know what claims are viable and what depositions,

discovery, and damage assessments show about the strength and magnitude of those claims. At

this stage, moreover, plaintiff has no standing at all to negotiate on behalf of the corporation and

its shareholders. Plaintiff has never been excused from the demand requirement. Plaintiff is not

in any way authorized to release claims on behalf of any shareholders or the corporation. It

would be hard to see how plaintiff could do so intelligently without first framing the claims and

then performing sufficient due diligence through formal discovery and investigation, including

a full damage report. Now, any legitimate settlement reached later may be tainted by what

could appear to have been collusion. To deal with this eventuality, all notes and materials

generated by or during the recent settlement discussions should be preserved. For the Court’s

views on collusive settlements see In Re Zoran Corporation Derivative Litigation, Case No. 06-

5503 WHA, Dkt. 164.

Plaintiff has had plenty of time — indeed, excessive time — to obtain the corporate

records via the Delaware Court and to seek enforcement of that order. If counsel have wasted

the opportunity to enforce full compliance with the Delaware order then they have no one to

blame but themselves. 

The best way to tee this case up for a settlement is to find out first of all whether

plaintiff even has standing to sue (the demand issue), and thus to release claims on behalf of the

corporation, and then to identify all options that were backdated and the dollar value to the

corporation of those claims, including the cost of the special committee. It would be very hard

to evaluate a settlement without due diligence, including depositions and documents.

Plaintiff shall please file its next amended complaint by April 24 or the case may be

dismissed for lack of prosecution. Defendants shall then have fourteen calender days to file any

motion to dismiss which shall then be heard on a normal 35-day track. The stay will be lifted

once any motion to dismiss has been decided or the deadline for filing one has passed. Please

do not request extensions without a very good reason.

Dated: April 7, 2008. WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

Case 3:06-cv-03817-WHA Document 238 Filed 04/07/08 Page 2 of 2