Klein v. Ellison

Opinion

R. ANDRE KLEIN, et al., Case No. 20-cv-04439-JSC Plaintiffs, Case No. 20-cv-05255-JSC v. ORDER RE DEFENDANTS’ MOTION LAWRENCE J. ELLISON, et al., TO CONSOLIDATE Defendants. Re: Dkt. No. 46

ALISON SHERMAN, et al., Plaintiffs, v.

LAWRENCE J. ELLISON, et al., Defendants. Before the Court is Defendants’ motion to consolidate the Klein and Sherman actions. (Dkt. No. 46.) Having considered the parties’ briefs, the Court concludes that oral argument is unnecessary, see N.D. Cal. Civ. L.R. 7-1(b), and GRANTS Defendants’ motion to consolidate. On July 2, 2020, Mr. Klein filed a derivative action against certain directors and officers of defendants Oracle Corporation and Oracle America, Inc. (“Oracle”), bringing claims for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, abuse of control, unjust enrichment, and violation of section 14(a) of the Security Exchange Act. (See Dkt. No. 1.)1 Kathleen Dinsmore, also represented by Mr. Klein’s counsel, filed a substantially similar derivative action in this District on July 8, 2020. On July 21, 2020, Defendants, Mr. Klein and Ms. Dinsmore filed a stipulation and proposed order consolidating the related Klein and Dinsmore actions that this Court granted. (Dkt. Nos. 7 & 8.) After the Court’s order, Mr. Klein and Ms. Dinsmore (the “Klein Plaintiffs”) filed a consolidated complaint asserting the same claims against Defendants as the originally filed Klein complaint. (Dkt. No. 21.) On July 30, 2020, Ms. Sherman filed a derivative action that concerned substantially the same parties based on the same factual allegations, chiefly that Director Defendants violated federal securities law and breached their fiduciary duties by falsely representing a commitment to diversity. In light of the actions’ similarities, on August 17, 2020 the Klein Plaintiffs filed a motion to relate the Klein and Sherman actions that this Court granted over Ms. Sherman’s opposition.2 (Dkt. No. 25.) On October 16, 2020, Defendants filed the instant motion to consolidate. The motion is fully briefed. I. Consolidation When actions before the court “involve a common question of law or fact,” it may consolidate the actions. Fed. R. Civ. P. 42(a). District courts have broad discretion to consolidate cases. See Inv'rs Research Co. v. U.S. Dist. Court for Cent. Dist. of California, 877 F.2d 777, 777 (9th Cir. 1989). “In determining whether or not to consolidate cases, [courts] should weigh the interest of judicial convenience against the potential for delay, confusion and prejudice.” Deinnocentis v. Dropbox, Inc., No. 19-CV-06348-BLF, 2020 WL 264408, at *2 (N.D. Cal. Jan. 16, 2020) (internal quotation marks and citation omitted). Here, consolidation of the Klein and Sherman actions is appropriate. As the Court previously determined, the cases concern substantially the same parties and events, and are based on the same factual allegations. (Dkt. No. 25.) They present the same legal issues regarding Defendants’ violations of federal securities laws and breach of fiduciary duties. Moreover, the Klein Plaintiffs “obtained the agreement of Plaintiff Sherman to consolidation[,]” and the Klein Plaintiffs do not oppose consolidation of the actions. (Dkt. No. 49 at 2.) See JBF Interlude 2009

2 All parties have consented to the jurisdiction of a magistrate judge pursuant to 28 U.S.C. § Ltd v. Quibi Holdings LLC, Case No. 2:20-CV-2299-CAS (SKx), 2020 WL 4339896, at *6 (C.D. Cal. July 28, 2020) (holding that consolidation was appropriate where the defendant did not oppose consolidation); Kaminske v. JP Morgan Chase Bank N.A., No. SACV 09-00918 JVS, 2011 WL 521338, at *1 (C.D. Cal. Jan. 3, 2011) (consolidation was appropriate where the plaintiffs “[did] not oppose the motion to consolidate”). For these reasons, consolidation promotes judicial economy with no potential delay or prejudice to the parties. Accordingly, the Court consolidates the Klein and Sherman actions. II. Consolidated Complaint The parties dispute whether the filing of a consolidated complaint following this Court’s Order forfeits Plaintiffs’ ability to later file an amended consolidated complaint pursuant to Federal Rule of Civil Procedure 15(a)(1). A party may amend its pleading once “as a matter of course” without the opposing party’s written consent or the court’s leave, so long as the pleading is amended 21 days after its service or, in the case of pleadings “to which a responsive pleading is required,” 21 days after service of the responsive pleading or certain enumerated Rule 12 motions, whichever is earlier. Fed. R. Civ. P. 15(a)(1). Plaintiffs argue that filing a consolidated complaint should not prejudice their ability to later file an amended complaint pursuant to Rule 15(a)(1). Defendants counter that they will not “waive their right” to later argue that the consolidated complaint is an amended pleading under Rule 15(a)(1)—thus precluding Plaintiffs’ ability to file an amended complaint without Defendants’ consent or leave from this Court—if it includes “substantive amendments” from the currently filed Klein complaint. (Dkt. No. 50 at 3.) The filing of the consolidated complaint should not preclude Plaintiffs’ ability to later file an amended complaint as a matter of course pursuant to Rule 15(a)(1). There is nothing to indicate that the consolidated complaint would contain “substantive” amendments, or do more than Plaintiffs did when consolidating the Klein and Dinsmore actions by “join[ing] the parties and their claims.” (Dkt. No. 49 at 3.) If Plaintiffs choose to file an amended consolidated complaint within the timeframe contemplated by Rule 15(a)(1), and Defendants believe there are problems with the amendments that they would move to dismiss, the parties should meet and 1 Court resources. The Court can discern no benefit to any party by requiring Plaintiffs to move for 2 leave to amend rather than amend as of right under the limited time frame allowed by Rule 3 15(a)(1). 5 For the reasons set forth above, the Court consolidates the Klein and Sherman actions. 6 Plaintiffs shall file their consolidated complaint by December 7, 2020. The case management 7 conference scheduled for December 3, 2020 is continued to December 17, 2020 at 1:30 p.m., with 8 a joint case management conference statement due one week in advance. If the parties are able to 9 agree on a briefing schedule and thus wish to continue the case management conference they may submit a stipulation to do so. Dated: November 30, 2020 1 Ste ne ACQUELINE SCOTT CORLEY United States Magistrate Judge