UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

IN RE: GROUPON DERIVATIVE )

LITIGATION ) 12-CV-5300

) Judge Joan H. Lefkow

)

OPINION AND ORDER

This is a consolidated shareholder derivative action brought on behalf of nominal

defendant Groupon, Inc. (“Groupon” or “the company”) against certain executive officers and

members of its board alleging breach of fiduciary duty and abuse of control.1

 Also pending in

this district is a class action brought against Groupon, certain executive directors, board

members and underwriters alleging various securities law violations. (In re Groupon, Inc.

Securities Litigation, Case No. 12-CV-2450). Defendants in the derivative action have moved to

stay proceedings pending the resolution of the related securities case. For the reasons set forth

herein, their motion (#51) will be granted in part and denied in part. 

 

1

 There six consolidated derivative actions include Monturano v. Lefkofsky, Case No. 12-CV2507; Wong v. Mason, Case No. 12-CV-2682; Potter v. Mason, Case No. 12-CV-3217; Martin v. Mason,

Case No. 12-CV-3412; Tipnis v. Mason, Case No. 12-CV-3792; and Lutz v. Mason, Case No. 12-CV3667. There are also two derivative actions pending in the Cook County Circuit Court, Orrego v.

Lefkofsky, Case No. 12-CH-12420, and Kim v. Lefkofsky, Case No. 12-CH-19431. Plaintiff and defendant

are negotiating a stay of the state actions pending further developments in the federal class action. 

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LEGAL STANDARD2

“[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, 57 S. Ct. 163, 81 L. Ed.

153 (1936); see Tex. Indep. Producers & Royalty Owners Ass’n v. EPA, 410 F.3d 964, 980 (7th

Cir. 2004). In deciding whether to grant a stay, courts will “balance the competing interests of

the parties and the interest of the judicial system.” Markel Am. Ins. Co. v. Dolan, 787 F. Supp.

2d 776, 779 (N.D. Ill. 2011) (citing Landis, 299 U.S. at 254–55 (The court “must weigh

competing interests and maintain an even balance.”)). Courts generally consider three factors

when determining whether to grant a stay: (1) whether a stay will simplify the issues in question

and streamline the trial; (2) whether a stay will reduce the burden of litigation on the parties and

on the court; and (3) whether a stay will unduly prejudice or tactically disadvantage the

non-moving party. See, e.g., Genzyme Corp. v. Cobrek Pharm., Inc., No. 10 CV 112, 2011 WL

686807, at *1 (N.D. Ill. Feb. 17, 2011); Tap Pharm. Prods., Inc. v. Atrix Labs., Inc., No. 03 C

7822, 2004 WL 422697, at *1 (N.D. Ill. Mar. 3, 2004). “[I]f there is even a fair possibility that

the stay . . . will work damage to some one else,” the party seeking the stay “must make out a

clear case of hardship or inequity in being required to go forward.” Landis, 299 U.S. at 255; see,

e.g., Helferich Patent Licensing, LLC v. N.Y. Times Co., Nos. 10-cv-4387, 11-cv-6914, 11-cv7189, 11-cv-7395, 11-cv-7607, 11-cv-7647, 2012 WL 1813665, at *1 (N.D. Ill. May 8, 2012);

2

 The court possesses subject matter jurisdiction over plaintiff’s claims under 28 U.S.C. § 1332

because plaintiff and defendants are citizens of different states and the amount in controversy exceeds

$75,000. Venue is proper in this district under 28 U.S.C. § 1391(b)(2) because a substantial portion of

the of the events or omissions giving rise to the claims occurred here. 

2

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Itex, Inc. v. Mount Vernon Mills, Inc., No. 08 CV 1224, 2010 WL 3655990, at *2 (N.D. Ill.

Sept. 9, 2010); Se-Kure Controls, Inc. v. Vanguard Prods. Grp., Inc., No. 02 C 3767, 2009 WL

5174701, at *1 (N.D. Ill. Dec. 18, 2009); Pfizer Inc. v. Apotex Inc., 640 F. Supp. 2d 1006, 1007

(N.D. Ill. 2009).3

 The court has broad discretion in exercising its authority to stay. Trippe Mfg.

Co. v. Am. Power Conversion Corp., 46 F.3d 624, 629 (7th Cir. 1995).

BACKGROUND4

I. The Parties

Plaintiff Theresa Monturano (“plaintiff”) brings this suit derivatively on behalf of

nominal defendant Groupon. Monturano is, and was at all relevant times, an owner and holder

of Groupon common stock. 

Nominal defendant Groupon is a corporation founded in 2008 and incorporated under the

laws of Delaware with its principal office in Chicago. Groupon serves as a local commerce

3

 Defendants argue that the standard for determining whether a stay is appropriate requires “only

that the Court ‘exercise [its] judgment’ by ‘weigh[ing] competing interests and maintain[ing] an even

balance.’” (Defs.’ Reply at 3 (citing Landis, 299 U.S. at 254–55; Market Am. Ins. Co. v. Dolan, 787 F.

Supp. 2d 776, 779 (N.D. Ill. 2011); GE Bus. Fin. Servs. Inc. v. Spratt, No. 08 C 6504, 2009 WL 1064608,

at *2 (N.D. Ill. Apr. 20, 2009))). Judges in this district have typically followed the more demanding

standard set forth in Landis, i.e., whether the movant makes a clear case of hardship or inequity. See

text, supra. Defendants cite Spratt for the position that “[w]here two federal courts with concurrent

jurisdiction are involved . . . the movant need not demonstrate a compelling need for a stay, . . . it must

demonstrate merely that the stay is appropriate.” 2009 WL 10646078, at *2. This quotation is taken

directly from Government of the Virgin Islands v. Neadle, 861 F. Supp. 1054, 1056 (M.D. Fla. 1994),

which explains that “[t]he party moving for a stay bears the burden of demonstrating that it is appropriate;

if a stay would create hardship for a party, however, then the movant must demonstrate that it would

suffer hardship or inequity from going forward.” Id. at 1055 (citing Landis, 299 U.S. 254–55). Dolan

also cites Landis but simply omits the “hardship or inequity” standard set forth in that case. 

4

 The following facts are taken from the complaints in the first filed derivative action, Monturano

v. Lefkofsky, Case No. 12-CV-2507, and the first filed class action, Zhang v. Groupon, Inc., Case No. 12-

CV-2450. While this decision was in its final editing stage, plaintiff filed a consolidated complaint. 

(Case No. 12-CV-5300, Dkt. #7.) The court has reviewed the consolidated complaint. The amended

pleading does not affect the outcome of this motion.

3

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marketplace, connecting merchants to consumers by offering goods and services at a discount

price via the Internet and email promotions. 

The individual defendants are eight current or former executive officers and/or members

of Groupon’s board of directors. These individuals include: Eric P. Lefkofsky, co-founder and

executive chairman; Bradley A. Keywell, co-founder and director since 2008;5 Andrew D.

Mason, founder, chief executive officer, and director since 2008; Peter J. Barris, director since

2008; Kevin J. Efrusy, director since 2009; Mellody Hobson, director before Groupon’s initial

public offering (“IPO”) on November 4, 2011; Theodore J. Leonsis, director since 2009; and

Howard Schultz, director since 2011 (collectively “the individual defendants”) (collectively with

Groupon “defendants”). 

II. The Derivative Action 

On April 5, 2012, plaintiff Monturano filed the first of six derivative actions against

Groupon and the individual defendants based on events surrounding the company’s IPO on

November 4, 2011. These cases were subsequently consolidated under the caption In re

Groupon Derivative Litigation. (See order at Case No. 12-CV-2507, Dkt. #45.) Plaintiff alleges

that the individual defendants breached their fiduciary duties (Count I) and abused their control

(Count II) by permitting Groupon to function with deficient accounting controls thereby harming

the company. These deficient controls came to light in the months proceeding and immediately

following Groupon’s IPO. The company filed its Form S-1 Registration Statement (“registration

statement”) with the Securities and Exchange Commission (“SEC”) on June 2, 2011. Between

5

 The complaint alleges that Keywell was a director since 2006, but because the company was

not founded until 2008 the court assumes that this is an error.

4

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that date and the date the company went public, it was forced to amend its SEC filings on two

separate occasions. 

The first amendment occurred on August 10, 2011, after it was discovered that the

company’s registration statement contained an unconventional non-GAAP accounting metric

that permitted Groupon to exclude substantial expenses and allowed it to show a positive

operating income metric even though it was not profitable. The second amendment occurred on

September 23, 2011, after the SEC forced Groupon to restate its revenue for the first half of 2011

from $1.5 billion to $688 million. Despite these amendments, Groupon went public as

scheduled, selling 35 million shares at $20 per share. 

Approximately three months later, Groupon released its first set of financial results,

reporting a net loss of $42.7 million for the fourth quarter and a $350.8 million net loss for the

full year 2011. On March 30, 2012, Groupon issued a press release revising its fourth quarter

revenue downward by $14.3 million and, according to The Financial Times, admitted that it had

identified a material weakness in its internal accounting controls. On this news, Groupon’s stock

dropped $3.10 to close at $15.28 per share on April 2, 2012. The next day, the Wall Street

Journal reported that the SEC was examining Groupon’s fourth quarter revisions. The first

derivative action followed two days later.

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III. The Securities Class Action 

On April 3, 2012, the first of five securities class actions6 was filed by shareholders

against Groupon. These cases were subsequently consolidated under the caption In re Groupon,

Inc. Securities Litigation, and are currently pending in this district before Judge Charles R.

Norgle, Sr. (“the class action”). (Case No. 12-CV-2450.) 

The class action plaintiffs allege that between November 4, 2011 and March 30, 2012

(the “class period”), Groupon issued materially false and misleading statements regarding the

company’s business practices and financial results and failed to disclose negative trends in the

company’s business. (Zhang v. Groupon, Inc., Case No. 12-CV-2450, Compl. ¶ 3.) As a result,

Groupon stock traded at artificially inflated prices during the class period, and once Groupon’s

misrepresentations were revealed, its shares dropped 41 percent from their class period high. 

(Id. ¶¶ 3, 9.) The class action plaintiffs seek to recover against Groupon, certain executive

officers, board members and/or underwriters for violating (1) § 11 of the Securities Act of 1933

(“1933 Act”), 15 U.S.C. § 77k, for filing a false registration statement (Count I); (2) § 15 of the

1933 Act, 15 U.S.C. § 77o, for being culpable participants in the § 11 violation (Count II); (3) §

10(b) of the Securities Exchange Act of 1934 (“1934 Act”), 15 U.S.C. § 78j, and Rule 10b-5, 17

C.F.R. § 240.10b-5, for use of manipulative and deceptive devices (Count III); and (4) § 20(a) of

the 1934 Act, 15 U.S.C. § 78t, for aiding and abetting the § 10(b) violation (Count IV). All of

the individual defendants in the derivative action are also defendants in the class action. 

IV. The Status of the Derivative and Class Actions

6

 The five consolidated securities class actions include Zhang v. Groupon, Inc., Case No. 12-CV2450; Roselli v. Groupon, Inc., Case No. 12-CV-2460; Einspahr v. Groupon, Inc., Case No. 12-CV-2547;

Pedrow v. Groupon, Inc., Case No. 12-CV-2791; and Cottrell v. Groupon, Inc., Case No. 12-CV-3129.

6

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Both the derivative action and the class action are in their early stages, although the

derivative action has progressed slightly faster than its class action counterpart. In the class

action, lead plaintiffs’ counsel has yet to be appointed, although the issue is fully briefed and

pending before the court. A status hearing is set in that case for August 24, 2012. (Case No. 12-

CV-2450, Dkt. #101.) In the derivative action, the court appointed lead plaintiffs’ counsel on

May 30, 2012, and held a pretrial scheduling conference pursuant to Federal Rule of Evidence

16 on June 6, 2012. (Case No. 12-CV-2507, Dkt. #45 & #47.) On June 20, 2012, the derivative

defendants filed the present motion. (Id. Dkt. #51.)

ANALYSIS

Defendants argue that staying the derivative action is appropriate because it would

simplify the issues in question and streamline the trial, would reduce the burden of litigation on

the parties and the court, and would not unduly prejudice or tactically disadvantage plaintiff. 

I. Simplifying the Issues in Question and Streamlining the Trial

To determine whether staying the derivative action in favor of the class action would

simplify the issues in question and streamline the trial, it is helpful to understand the similarities

between the two types of lawsuits. As summarized by an article in the Notre Dame Law Review, 

In a securities class action, the plaintiffs are shareholders alleging that a corporation

and its individual officers and directors violated the federal securities laws by

making false or misleading public statements. The defendants . . . are the

corporation and the corporation’s current or former officers and directors. The

corporation is directly liable for its own false or misleading statements and

vicariously liable for the false or misleading statements of its officers and directors.

Any recovery in the lawsuit goes to the corporation’s shareholders.

7

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Jessica Erickson, Corporate Misconduct and the Perfect Storm of Shareholder Litigation,

84 NOTRE DAME L. REV. 75, 80–81 (Nov. 2008) (internal citations omitted). The role of the

corporation in a derivative action, however, is reversed. 

In a derivative suit, the corporation is the functional plaintiff – the real party in

interest – and the allegations are that the corporation’s current or former officers and

directors breached their fiduciary duty to the corporation. Any recovery in a

derivative suit is returned to the corporation. As a result, shareholders may receive

an indirect benefit from a derivative suit because of their share of ownership in the

corporation, but they do not receive any direct financial benefit.

Id. at 81 (internal citations omitted); see generally 7 ALBA CONTE & HERBERT NEWBERG,

NEWBERG ON CLASS ACTIONS §§ 22:1–110 (4th ed. 2002). Defendants argue that staying the

derivative action until the class action is complete would simplify the derivative litigation

because if the class action claims are dismissed,7

 then the question of whether the individual

defendants are liable for Groupon’s alleged securities violations is moot. Indeed, central to

plaintiff’s derivative claims is the allegation that Groupon has been seriously harmed by

“potential liability due to currently filed securities class actions,” and if the class action is

dismissed, then a significant portion of the derivative action falls away.8 (Monturano Compl.

¶ 40(d).) 

Courts that have considered the interplay between derivative and securities actions have

often found that derivative claims “cannot be adjudicated in full (or even in large measure) until

7

 Defendants state that the class action defendants intend to file a motion to dismiss promptly

after a lead plaintiff and lead counsel are appointed and a consolidated or amended complaint is filed. 

(Defs.’ Mot. to Stay at 2.)

8

 The alleged remaining harm to Groupon includes (1) costs incurred in responding to the SEC

probe; (2) costs incurred in compensation and benefits paid to defendants that breached their duties to the

company (although if the class claims are dismissed it may be more difficult for plaintiff to prove a

breach); (3) loss of market capital; and (4) loss of goodwill towards the company. (Monturano Compl.

¶ 40.)

8

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the [securities class] [a]ction is tried.” Brudno v. Wise, No. Civ. A. 19953, 2003 WL 1874750,

at *4 (Del. Ch. Apr. 1, 2003); see also Rosenblum v. Sharer, No. CV 07-6140 PSG (PLAx),

2008 U.S. Dist. LEXIS 65353, at *25 (C.D. Cal. July 28, 2008) (noting that “if [the company] is

exonerated in the securities class action, then it is unclear what, if anything, would be left of the

derivative action”); Cucci v. Edwards, No. SACV 07-532 PSG (MLGx), 2007 WL 3396234, at

*2 (C.D. Cal. Oct. 31, 2007) (recognizing that “[i]f Defendants are successful on the motion to

dismiss the Securities Class Action complaint, Plaintiffs may have little basis for pursuing this

Shareholder Derivative Action”). In these circumstances, “the sensible ordering of events is for

the . . . [securities class] [a]ction to proceed first.” Brudno, 2003 WL 1874750, at *5. 

Plaintiff argues that a stay is not warranted because the derivative action seeks relief for

ongoing harm and the class action does not. As such, the parties in the class action have less

incentive to proceed quickly. In addition, argues plaintiff, unlike the Brudno complaint, which

was a “placeholder indemnity action filed on [the company’s] behalf,” 2003 WL 1874750, at *1,

the present complaint seeks more than just indemnification from members of board; it also seeks

reforms to improve corporate governance. (See Monturano Compl. Prayer for Relief.) Thus,

proceeding promptly is of the utmost importance. 

A resolution of the class claims would significantly simplify the central issue in the

derivative case, i.e., the scope of the individual defendants’ liability. At the same time, the

derivative action presents issues related to Groupon’s loss of market capital and goodwill that

are not dependent on the outcome of the class claims. One possible solution is to stay the

derivative action until Judge Norgle has had an opportunity to consider the sufficiency of the

class action complaint. If the class claims are disposed of on a motion to dismiss, then the scope

9

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of the derivative action will be significantly limited. If the class claims are allowed to proceed,

then the need to adjudicate the non-dependent derivative claims and implement corporate

reforms may persuade this court that simultaneous proceedings are necessary. For the time

being, however, the court believes that this factor favors granting a stay. See Brenner v.

Albrecht, No. 6514-VCP, 2012 WL 252286, at *6 (Del. Ch. Jan. 27, 2012) (staying derivative

action in favor of class action where the relief sought by the derivative plaintiffs was “only

partially contingent on the outcome of the Securities Class Action”). 

II. Reducing the Burden of Litigation on the Parties and the Court

Defendants next argue that the derivative action should be stayed because the parties,

issues and allegations substantially overlap with those of the class action and judicial economy

favors a stay. Plaintiff counters that the derivative action is based on different law and facts and

the burden on the parties will not be lessened by a stay. 

As for the similarity of the parties, both sets of plaintiffs are Groupon shareholders and

all eight of the individual defendants are named as defendants in the class action. The class

action also names fourteen underwriter defendants who are not parties to the derivative action,

and plaintiff argues that class proceedings as to these defendants will cause undue delay. This

delay can be remedied in part, however, by awarding plaintiff prejudgment interest on her

claims. See Brenner, 2012 WL 252286, at *7 (“As to delaying any recovery, the relief [plaintiff]

seeks in this derivative action is primarily monetary. Therefore, prejudgment interest can redress

any harm caused by the delay.”). Although the class action contains different plaintiffs and

additional defendants, the parties in both cases need not be perfectly aligned for the court to

issue a stay. See In re Ormat Techs., Inc., No. 3:10-cv-177-ECR-RAM, 2011 WL 3841089, at

10

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*5 (D. Nev. Aug. 29, 2011) (“We do not believe that the two actions must involve exactly the

same parties . . . in order for a stay [sic].”); In re Westell Techs., Inc. Derivative Litig., No. CIV.

A. 18533, 2001 WL 755134, at *2 (Del. Ch. June 28, 2001) (the parties in the two actions need

only be substantially or functionally identical to issue a stay). Here, all of the individual

defendants are facing class claims as is the nominal defendant Groupon. These parties are

sufficiently similar. 

As for the similarity of the facts, both sets of plaintiffs rely on the same documents to

support their claims, including Groupon’s (1) registration statement and amendments thereto;9

(2) IPO prospectus, which contained financial representations about the company and a letter by

CEO Andrew Mason;10 (3) November 3, 2011 press release announcing the price of the IPO;11

(4) February 8, 2012 press release containing the company’s fourth quarter and full year 2011

financial results;12 and (5) March 30, 2012 press release announcing revisions to the company’s

fourth quarter and full year 2011 financial results.13 Both complaints also rely on articles

published on March 30, 2012 by The Financial Times,

14 and Seeking Alpha15 critical of Groupon

and its accounting procedures. Finally, both sets of plaintiffs allege that the company reported a

9

 See Monturano Compl. ¶¶ 24–26; Zhang Compl. ¶¶ 46.

10 See Monturano Compl. ¶¶ 27–29; Zhang Compl. ¶¶ 48–50.

11 See Monturano Compl. ¶ 30; Zhang Compl. ¶ 51.

12 See Monturano Compl. ¶ 32; Zhang Compl. ¶ 53.

13 See Monturano Compl. ¶ 34; Zhang Compl. ¶ 55.

14 See Monturano Compl. ¶ 36; Zhang Compl. ¶ 56.

15 See Monturano Compl. ¶ 37; Zhang Compl. ¶ 57.

11

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net forth quarter loss of $42.7 million on February 8, 2011,16 and that the company’s March 30,

2012 earnings revisions reduced fourth quarter revenue by $14.3 million,17 decreasing Groupon

stock by $3.10 per share to close at $15.28 per share on April 2, 2012.18

Plaintiff acknowledges that both complaints describe similar temporal events but argues

that the operative facts are different in each case. The operative facts in the class action include

whether false statements were made, and whether the officers, directors or underwriters who

made those statements acted with scienter; whereas the operative facts in the derivative action

include whether Groupon was susceptible to accounting problems, whether the company had an

ongoing problem with accounting controls and whether Groupon would be seriously harmed by a

lack of sufficient controls over accounting. 

Despite plaintiff’s attempt to distinguish the operative facts, a review of the complaints

demonstrates that “both actions rest on the same or closely related transactions, happenings or

events, and thus will call for the determination of the same or substantially related questions of

fact.” Cucci, 2007 WL 3396234, at *2; see also In re Ormat Techs., Inc., 2011 WL 3841089, at

*5 (staying derivative action in favor of class action where “both lawsuits are based on

Defendants’ accounting practices and public financial statements in 2008 and 2009”);

Rosenblum, 2008 U.S. Dist. LEXIS 65353, at *25 (staying derivative action where plaintiffs

“will need to prove the same core factual allegations at issue in the securities class action”). In

addition, it is likely that both sets of plaintiffs will rely on similar witnesses as the individual

16 See Monturano Compl. ¶ 32; Zhang Compl. ¶ 53.

17 See Monturano Compl. ¶ 34; Zhang Compl. ¶ 55.

18 See Monturano Compl. ¶ 38; Zhang Compl. ¶ 58.

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defendants’ testimony will be necessary to establish the relevant facts in both cases. See

Breault v. Folino, No. SACV010826 GLTANX, 2002 WL 31974381, at *2 (C.D. Cal. Mar. 15,

2002) (staying derivative action where derivative defendants would likely be called as witnesses

in the securities class action); accord In re Ormat Techs., Inc., 2011 WL 3841089, at *4. Given

the duplicative nature of the facts at issue, staying the present case in favor of the class action

would preserve judicial resources and reduce the litigation burden on the parties and the court. 

As to the similarity of the allegations in the two actions, plaintiff argues that a stay is not

in order because the derivative claims differ from their class counterparts. To succeed on her

derivative claims, plaintiff must show that the individual defendants intentionally or recklessly

breached their duties to exercise reasonable care and prudent supervision over Groupon’s

management, policies and controls. The securities plaintiffs, on the other hand, must show that

Groupon’s registration statement contained an untrue statement of material fact and that the

securities defendants are liable for false and misleading statements. 

Although the class and derivative actions are based on different legal claims, the

underlying issues are similar. Plaintiff must prove that certain alleged misstatements constitute a

breach of the individual defendants’ fiduciary duties, whereas the class action plaintiffs must

prove that these same statements constitute securities fraud. As defendants point out, these

alternate theories are merely two sides of the same coin, and courts have regularly stayed one

action in favor of the other despite the different nature of the claims. See, e.g, Ormat Techs.,

Inc., 2011 WL 3841089, at *5; Rosenblum, 2008 U.S. Dist. LEXIS 65353, at *25; Cucci, 2007

WL 3396234, at *2; Breault, 2002 WL 31974381, at *2; Brenner, 2012 WL 252286, at *7;

Brudno, 2003 WL 1874750, at *5; In re Westell Techs., Inc. Derivative Litig., 2001 WL 755134,

13

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at *3. Given the similarity of the parties, issues and facts, this factor on a whole favors granting

defendants’ motion.19

III. Whether a Stay Would Unduly Prejudice or Tactically Disadvantage Plaintiff

Defendants assert that a stay would not unduly prejudice or tactically disadvantage

plaintiff and is necessary to avoid extreme prejudice to the real party in interest, Groupon. 

Plaintiff argues that if a stay is granted Groupon and its shareholders will be harmed by the

lengthy delay while the class claims are litigated. During this time, the company will continue to

function with deficient internal controls and without the full confidence of the financial markets. 

Plaintiff is correct that staying the present action will delay her requested relief. The prejudice

inherent in such a delay can be minimized, however, by periodically evaluating the status of the

two cases and determining whether a stay is still warranted. Rather than stay the derivative

action pending the conclusion of the class action, which could take years, a more reasonable

approach is to stay the derivative action until the parties are at issue in the class action case. 

Moreover, proceeding with the derivative action while the class action is pending may

prejudice Groupon’s defense to the securities claims. As recently explained by the Delaware

Court of Chancery,

19 Plaintiff cites Sonkin v. Barker, 670 F. Supp. 249 (S.D. Ind. 1987), to support her position that

staying the present case will not lessen the litigation burden on the parties or the court because plaintiff

makes allegations that are not encompassed by the class action; namely, whether the company incurred a

loss of market capital or goodwill as a result of the individual defendants’ actions. In Sonkin, the court

refused to dismiss or stay a derivative action in part because the derivative complaint “allege[d] damages

to [the company] beyond those attributable to [fraud and securities] proceedings yet [to be] concluded.” 

Id. at 253. Unlike Groupon, however, the nominal defendant in Sonkin had already agreed to write off

losses of $2.7 billion before the defendant moved to stay the action. This write-off was part of the

damages that the derivative plaintiffs sought to recover and was not contingent on the other proceedings.

Id. at 252–53. Sonkin is distinguishable on its facts. 

14

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it is not practical for two actors—[the derivative plaintiff] and [the Company’s]

board—to pursue divergent strategies in two simultaneous actions on behalf of the

same entity. . . . Prosecution of [the] derivative action would involve taking actions

designed to refute the merits of the Company’s defense of the Securities Class

Action, and vice versa. The Individual Defendants are likely witnesses in both cases,

but [the derivative plaintiff] must attempt to undermine their credibility while the

Company presumably will attempt to rely on their veracity. The potential for such

conflicts . . . creates a significant risk that prosecution of [the derivative] case will

prejudice [the Company]. 

Brenner, 2012 WL 252286, at *5–6. Other courts have similarly recognized this risk and

declined to allow the derivative action to proceed. See Cucci, 2007 WL 3396234, at *2

(“[P]rosecution of the Shareholder Derivative Action would likely conflict with [the company’s]

defense of the Securities Class Action, since the shareholder derivative Plaintiffs would need to

prove allegations that would seriously undermine [the company’s] defense of the class

action.”).20 Proceeding with the present action will also “divert [the company’s] financial and

management resources from the pending litigation[] against it.” Breault, 2002 WL 31974381, at

*2; accord In re Ormat Techs., Inc., 2011 WL 3841089, at *4. Given the significant overlap

between the two cases, and the potential prejudice to Groupon should the present action proceed,

the court concludes that Groupon would face hardship if forced to go forward at this juncture.

“As with any stay ruling,” however, “the court should remain flexible and open to revisiting the

situation as events develop.” Brudno, 2003 WL 1874750, at *5. This action is therefore stayed

pending a ruling in the class action on a motion to dismiss. Once Judge Norgle determines

20 Plaintiff also cites In re FirstEnergy Shareholder Derivative Litigation, 291 F.R.D. 584 (N.D.

Ohio Jan. 26, 2004) to support her position that she would be materially disadvantaged by a stay. The

issue in that case was whether the court should issue a protective order under Rule 26(c) staying the

derivative action “because the plaintiffs in the securities litigation will have access to the derivative

discovery and impermissibly use it to amend their complaint or oppose Defendants’ motion to dismiss.” 

Id. at 587. The court declined to enter a protective order based on such “speculative harm.” Id. It did not

consider whether denying the motion would pose a conflict of interest to the company as a party to both

the derivative and class actions.

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whether the class complaint has merit, both the court and the parties will be in a better position

to understand the scope of defendants’ potential liability. 

CONCLUSION AND ORDER

For the foregoing reasons, defendants’ motion to stay the derivative action pending the

resolution of the related securities class action (#51) is granted in part and denied in part. This

action is stayed pending the resolution of a motion to dismiss in In re Groupon, Inc. Securities

Litigation, Case No. 12-CV-2450, and (if the case goes forward) the court has directed the

defendants to answer. Thereafter, the court and the parties may reevaluate the need for a stay. 

Enter:____________________________________

 JOAN HUMPHREY LEFKOW

Date: July 31, 2012 United States District Judge

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