Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_06-cv-03445/USCOURTS-cand-5_06-cv-03445-1/pdf.json

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

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United States District Court

For the Northern District of California

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 The Related Derivative Cases are: Theodore R. Kornreich Revocable Trust v. Barnholt, et

al., 06-3345 JW (filed May 22, 2006); Ziolkowski v. Levy, et al., 06-3445 JW (filed May 26, 2006);

Ziering v. Levy, et al., 06-3512 JW (filed May 31, 2006); and Alaska Electrical Pension Plan v.

Levy, et al., 06-4002-JW (filed June 28, 2006).

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 Several of these motions reference a fifth case, Rabin v. Barnholt, et al., 06-4142 JW (filed

July 3, 2006). Pursuant to the Court's October 23, 2006 Order Granting Remand, that case is no

longer before the Court. 

United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

Theodore R. Kornreich Revocable Trust, et

al.,

Plaintiffs,

 v.

Edward W. Barnholt, et al.,

Defendants.

 /

NO. C 06-03345 JW 

Related Cases: C-06-3445-JW, C-06-3512-JW,

C-06-4002-JW

ORDER CONSOLIDATING RELATED

DERIVATIVE CASES AND APPOINTING

LEAD PLAINTIFF AND LEAD COUNSEL 

I. INTRODUCTION

There are currently four related shareholders' derivative actions (the "Related Derivative

Cases") on behalf of Nominal Defendant KLA-TENCOR, Inc. ("KLA") pending before the Court.1

Presently before the Court are a number of motions to consolidate the Related Derivative Cases and

to appoint lead plaintiff and lead counsel.2

 The Court conducted a hearing on October 23, 2006. 

Based on the papers filed to date and the oral arguments of counsel, the Court ORDERS (1) the

Related Derivative Cases consolidated; (2) Alaska Electrical Pension Fund appointed Lead Plaintiff;

and (3) Lerach Coughlin Stoia Geller Rudman & Robbins LLP ("Lerach") appointed Lead Counsel.

Case 5:06-cv-03445-JW Document 76 Filed 10/23/06 Page 1 of 5
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3

 On August 18, 2006, Kornreich filed a voluntary dismissal of this action without prejudice

pursuant to Fed. R. Civ. P. 41(a). (See Docket Item No. 59.)

2

II. BACKGROUND

On May 22, 2006, Theodore R. Kornreich Revocable Trust ("Kornreich") filed the first

shareholders' derivative complaint on behalf of KLA alleging that Defendants, senior executives and

directors of KLA, engaged in an illegal stock option "backdating" scheme which diverted millions of

dollars to Defendants and caused KLA to issue materially false and misleading financial statements

in violation of the federal securities laws and California and Delaware securities laws. Subsequent

to Kornreich's filing, Mark Ziering ("Ziering"), James Ziolkowski ("Ziolkowski"), and Alaska

Electrical Pension Fund ("Alaska Electrical") filed similar actions on behalf of KLA. The Court

found that these derivative actions were related within the meaning of Civil Local Rule 3-12(a). 

(See Related Case Orders, Docket Items No. 24, 47.)

On June 30, 2006, Kornreich filed a motion to consolidate the related derivative actions then

pending and to appoint lead plaintiff and counsel; the motion was amended on July 6, 2006.3

 (See

Docket Item Nos. 27, 37.) On August 4, 2006, Alaska Electric and Ziolkowski separately filed

motions to consolidate the related derivative actions then pending and to appoint lead plaintiff and

lead counsel. (See Docket Items Nos. 50, 53.) On August 21, 2006, Ziering filed an opposition to

Kornreich and Alaska Electrical's motions. (See Docket Item No. 65.) On August 31, 2006, Ziering

withdrew his opposition. (See Docket Item No. 12, Case No. 06-3512 JW.)

III. DISCUSSION

The Derivative Plaintiffs seek consolidation of the Related Derivative Cases and

appointment of lead plaintiff and lead counsel. The Court must determine whether the cases should

be consolidated before it considers the appointment of lead plaintiff and lead counsel.

A. Consolidation of the Related Derivative Cases

A district court has broad discretion to consolidate actions involving "common issues of law

or fact." Fed. R. Civ. P. 42(a); Investors Research Co. v. United States District Court for the Central

District of California, 877 F.2d 777 (9th Cir. 1989). In exercising its broad discretion to order

Case 5:06-cv-03445-JW Document 76 Filed 10/23/06 Page 2 of 5
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4

 Plaintiff Ziolkowski also submitted a motion to be named Lead Plaintiff. However, he has

failed to submit any information about his stake in the litigation, nor has he provided any nonconclusory evidence of his fitness to serve as Lead Plaintiff.

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consolidation, the district court "weighs the saving of time and effort consolidation would produce

against any inconvenience, delay, or expense that it would cause." Huene v. U.S.,743 F.2d 703, 704

(9th Cir. 1984).

Here, the Derivative Plaintiffs move for consolidation of the four currently pending Related

Derivative Cases. Having reviewed the complaints in these actions, the Court concludes that they all

involve virtually identical factual issues, in particular whether the Defendants participated in an

illegal stock option backdating scheme. The legal issues involved in the four actions are

substantially similar; three of the actions allege violations of both federal and state securities laws,

and all allege breaches of the Defendants' fiduciary duties. Since no party has opposed the

consolidation motions nor identified any inconvenience, delay, or expense that would result from

consolidation, the Court finds it appropriate to consolidate the Related Derivative Cases.

B. Appointment of Lead Plaintiff

According to Federal Rule of Civil Procedure 23.1, a plaintiff in a shareholders' 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." Factors courts have considered in

analyzing a plaintiff's fitness to be lead plaintiff include: (1) whether the plaintiff held shares during

the relevant time period; (2) whether the plaintiff is represented by capable counsel; and (3) whether

the plaintiff is subject to any unique defense that would frustrate appointment. See Horn v. Raines,

227 F.R.D. 1, 3 (D.D.C. 2005); Millman v. Brinkley, Nos. 03-cv-3831, 03-cv-3832, 03-cv-0058,

2004 WL 2284505, at *3 (N.D. Ga. Oct. 1, 2004).

Alaska Electrical has submitted a motion to be named Lead Plaintiff. It has a substantial

financial stake in this lawsuit and should be well-capable of representing the interests of KLA and

its shareholders. The Court does not find that any factors against establishing this proposed

leadership structure. The Court appoints Alaska Electrical as Lead Plaintiff.4

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C. Appointment of Lead Counsel

Alaska Electrical has selected Lerach to represent it in this action. The firm has substantial

experience with similar shareholder actions. The Court finds it appropriate to appoint Lerach as

Lead Counsel.

IV. CONCLUSION

The Court ORDERS (1) the Related Derivative Cases consolidated; (2) Alaska Electrical

Pension Fund appointed Lead Plaintiff; and (3) Lerach Coughlin Stoia Geller Rudman & Robbins

LLP appointed Lead Counsel.

The Clerk shall consolidate these actions. 

Though case 06-03345-JW is the earliest filed case, the sole Plaintiff, Theordore R.

Kornreich Revocable Trust has voluntarily dismissed itself. According, the Clerk shall close case

06-03345-JW.

Case 06-03445-JW is the next earliest filed action and therefore, it shall be the lead case. All

future filings shall be filed in C-06-03445-JW and bear the caption: "In re KLA-Tencor Corp.

Shareholder Derivative Litigation."

Dated: October 23, 2006 

JAMES WARE

United States District Judge

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THIS IS TO CERTIFY THAT COPIES OF THIS ORDER HAVE BEEN DELIVERED TO:

Arthur L. Shingler ashingler@scott-scott.com

Benjamin P. Smith bpsmith@morganlewis.com

Eric L. Zagar ezagar@sbclasslaw.com

Jonathan Herschel Bornstein jonathan@bornsteinandbornstein.com

Joseph Edward Floren jfloren@morganlewis.com

Leigh A. Parker info@wllawca.com

Robert S. Green RSG@CLASSCOUNSEL.COM

Sean M. Handler ecf_filings@sbclasslaw.com

Shawn A. Williams shawnw@lerachlaw.com

Dated: October 23, 2006 Richard W. Wieking, Clerk

By: /s/ JW Chambers 

Elizabeth Garcia

Courtroom Deputy

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