In re Enterasys Networks, Inc. CV-02-071-M 08/02/02 UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
In re Enterasys Networks, Inc. Securities Litigation
Civil Nos. 02-071-M, 02-074-M, 02-082-M, 02-103-M, 02-162-M Opinion N o . 2002 DNH 148
O R D E R
Eugene Roth (02-071-M), Anthony M. Leger (02-074-M), Market
Street Securities, Inc. (02-082-M), Peter Hawkins (02-103-M), and
the Los Angeles County Employees Retirement Association (02-162-
M ) have all filed class action suits against Enterasys Networks,
Inc. (“Enterasys”), Enrique P. Fiallo (“Fiallo”), and Robert J.
Gagalis (“Gagalis”), alleging violations of the Securities
Exchange Act of 1934 (“the Exchange Act”). 1 Plaintiffs have sued
under the provisions of 15 U.S.C. § 78u-4 (part of the Private
Securities Litigation Reform A c t ) , which allows private class
actions to enforce the Exchange Act. Before the court is an
1 Specifically, plaintiffs allege violations of: (1) 15 U.S.C. §§ 78j(b) and 78t(a) (also known as §§ 10(b) and 20(a) of the Exchange A c t ) ; and (2) 17 C.F.R. § 240.10b-5 (also known as Rule 10b-5). unopposed motion, filed by the Los Angeles County Employees
Retirement Association (“LACERA”), asking the court t o : (1)
consolidate all Exchange Act actions against these defendants;
(2) appoint LACERA to serve as lead plaintiff; and (3) approve
LACERA’s selection of lead and liaison counsel. For the reasons
given below, LACERA’s motion is granted.
As noted above, LACERA is one of five plaintiffs who have
filed class action suits against Enterasys, Fiallo, and Gagalis.
In addition, LACERA is one of four entities that initially filed
motions to consolidate, to be named lead plaintiff, and to have
their choices of lead and liaison counsel approved by the court.
The other three are: (1) Market Street Securities, Inc.
(plaintiff in 02-082-M); (2) EnTrust Partners LLC; and (3) The
City of Philadelphia and Jay Y . Gu. Those movants have since
withdrawn their motions, leaving LACERA as the only movant
seeking lead plaintiff status in this litigation.
Although LACERA’s motion is now unopposed, the court
considers, in turn, each of its three requests. See In re Lucent
Techs., Inc., Secs. Lit., 194 F.R.D. 1 3 7 , 152 (D.N.J. 2000) (“The
2 court is under no obligation to accept . . . a proposed lead
plaintiff merely because [its] proposed appointment is unopposed
by other members of the [p]roposed [c]lass.”) (citing In re
Network Assocs., Inc., Secs. Lit., 76 F . Supp. 2d 1017, 1024
(N.D. Cal. 1999)).
Motion to Consolidate
Having examined the complaints in the five cases listed in
the caption of this order, I find no reason why the cases should
not be consolidated. All five involve the same operative facts
and claim violations of the same federal statutes and rules. See
F E D . R . C I V . P . 42(a) (“When actions involving a common question
of law or fact are pending before the court . . . it may order
all the actions consolidated . . . ” ) . And, no party has objected
to consolidation. Accordingly, LACERA’s motion for consolidation
is granted. Hereafter, all pleadings and other filings shall
bear the caption used on this order, “In re Enterasys Networks,
Inc., Securities Litigation,” and shall bear the Civil Number
“02-071-M.” Additional information regarding the procedural
logistics of consolidation may be found in the court’s companion
order, issued this day.
3 Motion to Appoint LACERA as Lead Plaintiff
Under 15 U.S.C. § 78u-4(a)(3)(B)(i), the court “shall
appoint as lead plaintiff the member or members of the purported
plaintiff class that the court determines to be most capable of
adequately representing the interests of class members (hereafter
in this paragraph referred to as the ‘most adequate plaintiff’)
in accordance with this subparagraph.” Furthermore
Subject to subclause ( I I ) , for purposes of clause ( i ) , the court shall adopt a presumption that the most adequate plaintiff in any private action arising under this chapter is the person or group of persons that – (aa) has either filed the complaint or made a motion in response to a notice under subparagraph (A)(i); (bb) in the determination of the court, has the largest financial interest in the relief sought by the class; and (cc) otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure.
15 U.S.C. § 78u-4(a)(3)(B)(iii)(I).
LACERA plainly meets the first of the three qualification
standards. It filed the complaint in 02-162-M and has moved to
be appointed lead plaintiff.
4 As for the second standard, based upon the record before i t ,
including both LACERA’s factual assertions and the lack of
opposition to LACERA’s motion, the court determines that LACERA
has the largest financial interest of all class members. See
Greebel v . F T P Software, Inc., 939 F . Supp. 5 7 , 64 (D. Mass.
1996) (“As no other persons have sought to be appointed lead
plaintiff, [movants] have the largest financial interest in the
relief sought by the class.”). Factually, L A C E R A claims losses
of over $2 million, and i s , unquestionably, the kind of
institutional investor Congress envisioned as an appropriate lead
plaintiff in actions such as these. See id. at 63-64.
Finally, as to the third standard, compliance with F E D . R .
C I V . P . 2 3 , “a proposed [l]ead [p]laintiff need only make a
preliminary showing that he or she satisfies the typicality and
adequacy requirements of Rule 23.” Chill v . Green Tree Fin.
Corp., 181 F . R . D . 3 9 8 , 407 n.8 (D. Minn. 1998) (citations
omitted). Here, L A C E R A has made a preliminary showing that it
meets the typicality requirement because its “claims arise from
the same event or practice or course of conduct that gives rise
to the claims of the class members and the claims are based on
5 the same legal theory.” Fields v . Biomatrix, Inc., 198 F.R.D.
451, 456 (D.N.J. 2000) (citations and internal quotation marks
omitted). And LACERA has made a preliminary showing that it
meets the adequacy requirement because the supporting material
submitted with its motion demonstrates that its counsel is
“qualified, experienced, and generally able to conduct the
proposed litigation,” id. at 457 (citations omitted), and because
it does “not have interests antagonistic to those of the class,”
id. (citations omitted).
Because LACERA meets all three of the qualification
standards set out in 15 U.S.C. §§ 78u-4(a)(3)(B)(iii)(I)(aa)-
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In re Enterasys Networks, Inc. CV-02-071-M 08/02/02 UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
In re Enterasys Networks, Inc. Securities Litigation
Civil Nos. 02-071-M, 02-074-M, 02-082-M, 02-103-M, 02-162-M Opinion N o . 2002 DNH 148
O R D E R
Eugene Roth (02-071-M), Anthony M. Leger (02-074-M), Market
Street Securities, Inc. (02-082-M), Peter Hawkins (02-103-M), and
the Los Angeles County Employees Retirement Association (02-162-
M ) have all filed class action suits against Enterasys Networks,
Inc. (“Enterasys”), Enrique P. Fiallo (“Fiallo”), and Robert J.
Gagalis (“Gagalis”), alleging violations of the Securities
Exchange Act of 1934 (“the Exchange Act”). 1 Plaintiffs have sued
under the provisions of 15 U.S.C. § 78u-4 (part of the Private
Securities Litigation Reform A c t ) , which allows private class
actions to enforce the Exchange Act. Before the court is an
1 Specifically, plaintiffs allege violations of: (1) 15 U.S.C. §§ 78j(b) and 78t(a) (also known as §§ 10(b) and 20(a) of the Exchange A c t ) ; and (2) 17 C.F.R. § 240.10b-5 (also known as Rule 10b-5). unopposed motion, filed by the Los Angeles County Employees
Retirement Association (“LACERA”), asking the court t o : (1)
consolidate all Exchange Act actions against these defendants;
(2) appoint LACERA to serve as lead plaintiff; and (3) approve
LACERA’s selection of lead and liaison counsel. For the reasons
given below, LACERA’s motion is granted.
As noted above, LACERA is one of five plaintiffs who have
filed class action suits against Enterasys, Fiallo, and Gagalis.
In addition, LACERA is one of four entities that initially filed
motions to consolidate, to be named lead plaintiff, and to have
their choices of lead and liaison counsel approved by the court.
The other three are: (1) Market Street Securities, Inc.
(plaintiff in 02-082-M); (2) EnTrust Partners LLC; and (3) The
City of Philadelphia and Jay Y . Gu. Those movants have since
withdrawn their motions, leaving LACERA as the only movant
seeking lead plaintiff status in this litigation.
Although LACERA’s motion is now unopposed, the court
considers, in turn, each of its three requests. See In re Lucent
Techs., Inc., Secs. Lit., 194 F.R.D. 1 3 7 , 152 (D.N.J. 2000) (“The
2 court is under no obligation to accept . . . a proposed lead
plaintiff merely because [its] proposed appointment is unopposed
by other members of the [p]roposed [c]lass.”) (citing In re
Network Assocs., Inc., Secs. Lit., 76 F . Supp. 2d 1017, 1024
(N.D. Cal. 1999)).
Motion to Consolidate
Having examined the complaints in the five cases listed in
the caption of this order, I find no reason why the cases should
not be consolidated. All five involve the same operative facts
and claim violations of the same federal statutes and rules. See
F E D . R . C I V . P . 42(a) (“When actions involving a common question
of law or fact are pending before the court . . . it may order
all the actions consolidated . . . ” ) . And, no party has objected
to consolidation. Accordingly, LACERA’s motion for consolidation
is granted. Hereafter, all pleadings and other filings shall
bear the caption used on this order, “In re Enterasys Networks,
Inc., Securities Litigation,” and shall bear the Civil Number
“02-071-M.” Additional information regarding the procedural
logistics of consolidation may be found in the court’s companion
order, issued this day.
3 Motion to Appoint LACERA as Lead Plaintiff
Under 15 U.S.C. § 78u-4(a)(3)(B)(i), the court “shall
appoint as lead plaintiff the member or members of the purported
plaintiff class that the court determines to be most capable of
adequately representing the interests of class members (hereafter
in this paragraph referred to as the ‘most adequate plaintiff’)
in accordance with this subparagraph.” Furthermore
Subject to subclause ( I I ) , for purposes of clause ( i ) , the court shall adopt a presumption that the most adequate plaintiff in any private action arising under this chapter is the person or group of persons that – (aa) has either filed the complaint or made a motion in response to a notice under subparagraph (A)(i); (bb) in the determination of the court, has the largest financial interest in the relief sought by the class; and (cc) otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure.
15 U.S.C. § 78u-4(a)(3)(B)(iii)(I).
LACERA plainly meets the first of the three qualification
standards. It filed the complaint in 02-162-M and has moved to
be appointed lead plaintiff.
4 As for the second standard, based upon the record before i t ,
including both LACERA’s factual assertions and the lack of
opposition to LACERA’s motion, the court determines that LACERA
has the largest financial interest of all class members. See
Greebel v . F T P Software, Inc., 939 F . Supp. 5 7 , 64 (D. Mass.
1996) (“As no other persons have sought to be appointed lead
plaintiff, [movants] have the largest financial interest in the
relief sought by the class.”). Factually, L A C E R A claims losses
of over $2 million, and i s , unquestionably, the kind of
institutional investor Congress envisioned as an appropriate lead
plaintiff in actions such as these. See id. at 63-64.
Finally, as to the third standard, compliance with F E D . R .
C I V . P . 2 3 , “a proposed [l]ead [p]laintiff need only make a
preliminary showing that he or she satisfies the typicality and
adequacy requirements of Rule 23.” Chill v . Green Tree Fin.
Corp., 181 F . R . D . 3 9 8 , 407 n.8 (D. Minn. 1998) (citations
omitted). Here, L A C E R A has made a preliminary showing that it
meets the typicality requirement because its “claims arise from
the same event or practice or course of conduct that gives rise
to the claims of the class members and the claims are based on
5 the same legal theory.” Fields v . Biomatrix, Inc., 198 F.R.D.
451, 456 (D.N.J. 2000) (citations and internal quotation marks
omitted). And LACERA has made a preliminary showing that it
meets the adequacy requirement because the supporting material
submitted with its motion demonstrates that its counsel is
“qualified, experienced, and generally able to conduct the
proposed litigation,” id. at 457 (citations omitted), and because
it does “not have interests antagonistic to those of the class,”
id. (citations omitted).
Because LACERA meets all three of the qualification
standards set out in 15 U.S.C. §§ 78u-4(a)(3)(B)(iii)(I)(aa)-
( c c ) , it is the “most adequate plaintiff” under 15 U.S.C. § 78u-
4(a)(3). Accordingly, its motion for appointment as lead counsel
is granted.
Motion to Approve LACERA’s Selection of Counsel
LACERA asks the court to approve Berman DeValerio (of
Boston, West Palm Beach, and San Francisco) as lead counsel, and
Sulloway & Hollis (of Concord, New Hampshire) as liaison counsel.
Under the applicable statutory provision, “[t]he most adequate
6 plaintiff shall, subject to the approval of the court, select and
retain counsel to represent the class.” 15 U.S.C. § 78u-
4(3)(B)(v). Based upon LACERA’s submissions, the court concludes
that its “choice [of counsel] is well-calculated to protect the
interests of the purported plaintiff class.” In re Tyco Int’l,
Ltd. Secs. Lit., N o . 00-MD-1335-B, 2000 WL 1513772 (D.N.H. 2000)
(citing In re Milestone Scientific Secs. Lit., 183 F.R.D. 4 0 4 ,
418 (D.N.J. 1998)). Accordingly, LACERA’s motion to approve its
selection of lead and liaison counsel is granted.
Conclusion
For the reasons given above, LACERA’s Motion to Consolidate
All Actions, for the Appointment as Lead Plaintiff and Approval
of its Selection of Lead and Liaison Counsel (document n o . 11 in
02-071-M, document no. 7 in 02-074-M, document n o . 8 in 02-082-M,
document n o . 2 in 02-103-M, and document no. 2 in 02-162-M) is
granted in its entirety.
7 SO ORDERED.
Steven J. McAuliffe United States District Judge
August 2 , 2002
cc: Frederick E . Upshall, Jr., Esq. Christopher H. M . Carter, Esq. David H. Kistenbroker, Esq. Andrew W . Serell, Esq. Fred L. Potter, Esq. Gregory M. Nespole, Esq. Barbara A . Podell, Esq. Andrew L. Barroway, Esq. John R. Harrington, Esq. Glen DeValerio, Esq.