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Wayne County Employees' Retirement System v. Mavenir, Inc.

United States District Court, D. Delaware

August 1, 2019

WAYNE COUNTY EMPLOYEES' RETIREMENT SYSTEM, on behalf of itself and all others similarly situated, Plaintiff,
v.
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.

          MEMORANDUM OPINION I.INTRODUCTION

          SHERRY R. FALLON UNITED STATES MAGISTRATE JUDGE

         Presently 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.[1] (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").[2] 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.

         II. BACKGROUND

         a. The Parties

         Wayne County was a Xura, Inc. ("Xura")[3] 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)

         b. Facts

         On May 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.[4] (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)

         Attorney 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.[5] (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 counsel.

         c. Procedural History

         On 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.[6] (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)

         III. LEGAL STANDARD

         a. Appointment of Lead Plaintiff

         Both 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).

         First, 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.

         Second, 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.

         Once 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.

         IV. DISCUSSION

         a. Appointment as Lead Plaintiff

         i. Requirements ...


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