United States District Court, D. Delaware
WAYNE COUNTY EMPLOYEES' RETIREMENT SYSTEM, on behalf of itself and all others similarly situated, Plaintiff,
MAVENIR, INC. F/K/A XURA, INC., PHILIPPE TARTAVULL, HENRY R. NOTHHAFT, SUSAN D. BOWICK, JAMES BUDGE, NICCOLO DE MASI, MATTHEW A. DRAPKIN, DORON INBAR, and MARK C. TERRELL, Defendants.
R. FALLON UNITED STATES MAGISTRATE JUDGE
before the court in this putative class action alleging
violations of the Securities Exchange Act of 1934 are
cross-motions by the parties, wherein plaintiff Wayne County
Employees' Retirement System ("Wayne County")
has moved for appointment as lead plaintiff and approval of
its selection of lead counsel, and defendants have moved to
disqualify plaintiffs counsel. (D.I. 28; D.I. 33) The moving
defendants are as follows: Mavenir, Inc.
("Mavenir"), Philippe Tartavull
("Tartavull"), Henry R. Nothhaft
("Nothhaft"), Susan D. Bowick ("Bowick"),
James Budge ("Budge"), Niccolo de Masi ("de
Masi"), Doron Inbar ("Inbar"), and Mark C.
Terrell ("Terrell") (collectively,
"defendants"). For the following reasons, plaintiffs
motion for appointment as lead plaintiff and approval of its
selection of lead counsel is GRANTED and defendants'
motion to disqualify plaintiffs counsel is DENIED.
County was a Xura, Inc. ("Xura") shareholder.
(D.I. 1 at ¶ 11) Mavenir is a corporation formerly known
as Xura. (Id. at ¶ 12) Tartavull was a Xura
director, President, and CEO. (Id. at ¶ 13)
Nothhaft was a Xura director that served as Chairman of the
Board. (Id. at ¶ 14) Bowick, Budge, de Masi,
Inbar, and Terrell were Xura directors. (Id. at
¶¶ 15-17, 19-20)
23, 2016, Xura's Board of Directors entered into an
agreement and plan of merger (the "Merger
Agreement"), wherein Xura shareholders received $25 per
share. (Id. at ¶¶ 1, 3)
Defendants issued a Preliminary Proxy Statement on June 28,
2016 and a Final Proxy Statement on July 12, 2016
(collectively, the "Proxy"). (Id. at
¶ 4) On July 26, 2016, defendants issued a supplemental
Proxy Statement (the "Supplemental Proxy").
(Id.) The merger was approved by Xura shareholders
on August 16, 2016 and closed on August 19, 2016.
(Id. at ¶ 3) Plaintiff alleges that the Proxy
and Supplemental Proxy contained materially incomplete and
misleading disclosures. (Id. at ¶¶ 4-5)
Derrick Farrell ("Mr. Farrell") formerly practiced
with the firm of DLA Piper LLP (US) ("DLA Piper"),
where he served as counsel to defendants Mavenir, Tartavull,
Nothhaft, and Budge in prior related actions before the
Delaware Chancery Court. (D.I. 34 at 4; D.I. 35 at ¶ 4) He
served as the lead non-partner attorney in the Chancery Court
actions. (D.I. 34 at 1) He subsequently joined the firm of
Labaton Sucharow LLP ("Labaton") on July 13, 2018.
(D.I. 35 at ¶ 8) Labaton filed this action on behalf of
Wayne County on August 10, 2018. (D.I. 1) Defendants assert
that Mr. Farrell has a conflict of interest which is imputed
to Labaton and law firms subsequently retained by the
plaintiff in the instant case. Therefore, defendants oppose
the motion for appointment of lead plaintiff and approval of
plaintiff s lead counsel and move to disqualify plaintiffs
August 10, 2018, plaintiff originally filed this putative
class action, alleging violations of the Securities Exchange
Act of 1934. (D.I. 1) See also 15 U.S.C. § 78a
et seq. On August 13, 2018, Wayne County published
notice, alerting investors that the deadline for class
members to move for lead plaintiff was October 12, 2018.
(D.I. 30, Ex. A) On October 12, 2018, Utah Retirement Systems
("URS") filed a motion for appointment as lead
plaintiff and approval of its selection of counsel. (D.I. 7)
URS subsequently withdrew its motion on January 29,
2019. (D.I. 22) On February 15, 2019, Wayne
County filed the instant motion for appointment as lead
plaintiff and approval of its selection of counsel. (D.I. 28)
On March 15, 2019, defendants filed their present motion to
disqualify counsel. (D.I. 33)
Appointment of Lead Plaintiff
the selection of a lead plaintiff, or the "most adequate
plaintiff," and the approval of a lead plaintiffs choice
of lead counsel is "committed to the court's
discretion." Dutton v. Harris Stratex Networks,
Inc., C.A. No. 08-755-JJF, 2009 WL 1598408, at *2 (D.
Del. June 5, 2009) (quoting In re Molson Coors Brewing
Co. Sec. Litig., 233 F.R.D. 147, 150 (D. Del. 2005)).
Despite having this discretion, the court nevertheless must
follow the procedures established in the Private Securities
Litigation Reform Act (the "PSLRA"). See
id.; 15 U.S.C. § 78u-4. Under the PSLRA,
determining which movant qualifies as the lead plaintiff is a
two-step process. See In re Cendant Corp. Litig.,
264 F.3d 201, 262 (3d Cir. 2001); City of Roseville
Employees' Ret. Sys. v. Horizon Lines Inc., C.A. No.
08-969, 2009 WL 1811067, at *1 (D. Del. June 18, 2009);
OFI Risk Arbitrages v. Cooper Tire & Rubber Co.,
63 F.Supp.3d 394, 399 (D. Del. 2014).
the court must identify the presumptive lead plaintiff.
See Cendant, 264 F.3d at 262-63; Vandevelde v.
China Nat. Gas, Inc., 277 F.R.D. 126, 131 (D. Del.
2011). Under the PSLRA, the presumptive lead plaintiff is the
person or group that (1) "has either filed the complaint
or made a motion in response to a notice," (2) "in
the determination of the court, has the largest financial
interest in the relief sought by the class," and (3)
"otherwise satisfies the requirements of Rule 23 of the
Federal Rules of Civil Procedure." 15 U.S.C. §
78u-4(a)(3)(B)(i) & (iii)(I); see also City of
Roseville, 2009 WL 1811067, at *1.
the court must determine whether the presumption has been
rebutted. See Cendant, 264 F.3d at 268;
Vandevelde, 277 F.R.D. at 131. The presumption may
be rebutted "only upon proof by a member of the
purported plaintiff class" that the presumptive lead
plaintiff "will not fairly and adequately protect the
interests of the class" or is "subject to unique
defenses that render such plaintiff incapable of adequately
representing the class." 15 U.S.C. §
78u-4(a)(3)(B)(iii)(II)(aa)-(bb); see also Cendant,
264 F.3d at 268.
the most adequate plaintiff is determined by the court, the
lead plaintiff "shall, subject to the approval of the
court, select and retain counsel to represent the
class." 15 U.S.C. § 78u-4(a)(3)(B)(v); see also
OFI Risk Arbitrages, 63 F.Supp.3d at 399.
Appointment as Lead Plaintiff