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CONSTANCE SCZESNY TRUST v. KPMG LLP

September 20, 2004.

The CONSTANCE SCZESNY TRUST and EDWARD S. SCZESNY TRUST, individually and on behalf of all others similarly situated Plaintiffs,
v.
KPMG LLP, GARY DICAMILLO, CARL LEUDERS, and DONALD HALSTEAD Defendants. LOUIS J. DECANIO, individually and on behalf of all others similarly situated Plaintiffs, v. GARY DICAMILLO, CARL LEUDERS, DONALD HALSTEAD, WILLIAM L. FLAHERTY, JUDITH G. BOYNTON and KPMG LLP, Defendants. EARNEST HACK, individually and on behalf of all others similarly situated Plaintiffs, v. GARY DICAMILLO, CARL LEUDERS, DONALD HALSTEAD, and KPMG LLP, Defendants. MICHAEL E. MAGNUSKI, individually and on behalf of all others similarly situated Plaintiffs, v. GARY DICAMILLO, CARL LEUDERS, DONALD HALSTEAD, WILLIAM L. FLAHERTY, JUDITH G. BOYNTON and KPMG LLP, Defendants. RICKY B. BLOCK, individually and on behalf of all others similarly situated Plaintiffs, v. GARY DICAMILLO, CARL LEUDERS, DONALD HALSTEAD, and KPMG LLP, Defendants. ALFRED and SANDRA DAY, individually and on behalf of all others similarly situated Plaintiffs, v. GARY DICAMILLO, CARL LEUDERS, DONALD HALSTEAD, and KPMG LLP, Defendants. NORMAN MOSCOWITZ, individually and on behalf of all others similarly situated Plaintiffs, v. KPMG LLP GARY DICAMILLO, CARL LEUDERS DONALD HALSTEAD, WILLIAM L. FLAHERTY, and JUDITH G. BOYNTON Defendants. ELWOOD LUTSEY, individually and on behalf of all others similarly situated Plaintiffs, v. GARY DICAMILLO, CARL LEUDERS, DONALD HALSTEAD, WILLIAM L. FLAHERTY, JUDITH G. BOYNTON and KPMG LLP, Defendants. THOMAS B. and DEBRA A. ACKERKNECHT, individually and on behalf of all others similarly situated Plaintiffs, v. GARY DICAMILLO, CARL LEUDERS, DONALD HALSTEAD, WILLIAM L. FLAHERTY, JUDITH G. BOYNTON and KPMG LLP, Defendants.



The opinion of the court was delivered by: SIDNEY STEIN, District Judge

OPINION AND ORDER

These are nine related securities actions arising from alleged misrepresentations in Polaroid Corporation's public securities filings in the spring of 2001. Plaintiffs, purchasers of shares of Polaroid common stock and options for the purchase of Polaroid shares, allege that defendant KPMG LLP and the individual defendants caused the issuance of false or misleading financial disclosures regarding the proper accounting for Polaroid's deferred tax credits and its restructuring costs, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5.

Four sets of plaintiffs have moved this Court to consolidate, pursuant to Rule 42(a) of the Federal Rules of Civil Procedure, the nine pending related actions and any subsequently filed related action.*fn1 Three sets of plaintiffs: the Catherine Sczesny Trust and the Edward S. Sczesny Trust (the "Sczesny Trusts"); Stephen Morgan; and Martin A. Braver and Harold K. Schultz have moved for their respective appointment as the lead plaintiff for those related actions and for approval of their selections for the lead counsel. Additionally, Jacob Bash, who purchased options for Polaroid common stock as well as shares of that stock, has moved for his appointment as the lead plaintiff for a sub-class of purchasers of Polaroid options and for approval of his selection of the lead counsel for that sub-class.

  For the reasons set forth below, the motions for consolidation, unopposed by defendants, are granted. Moroever, Sczesny Trusts' motion for appointment as the lead plaintiff and for approval of its selection of Goodkind, Labaton, Rudoff & Sucharow LLP as the lead counsel is granted, while the two similar motions filed on behalf of Braver and Schultz and on behalf of Morgan are denied. Finally, Bash's motion for his appointment as the lead plaintiff of a sub-class of option purchasers and for approval of his selection of the lead counsel for that sub-class is denied as premature, without prejudice to its renewal.

  BACKGROUND:

  Polaroid Corporation was a "leading instant imaging company," well-known for its instant film products and instant cameras. (Sczesny Trusts' Complaint at ¶ 11) In October of 2001, Polaroid filed a voluntary petition for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code, 11 U.S.C. § 1101 et. seq., in the District of Delaware. See In re Polaroid Corp., 01-10864, 2004 WL 253479 at *1 (D.Del. Feb. 09, 2004).

  The pending related securities actions pertain to financial disclosures in Polaroid's 2000 Form 10-K and first quarter 2001 Form 10-Q filings, issued a few months before Polaroid's foray into bankruptcy, regarding the accounting for more than $300 million of deferred tax credits and more than $5 million in restructuring costs. Plaintiffs allege that those disclosures contravened public accounting standards and resulted in the dissemination of materially false or misleading financial information to investors. Plaintiffs further allege that defendant KPMG LLP, Polaroid's outside auditor during the relevant period, and the individual defendants, who were Polaroid's corporate officers or KPMG partners responsible for Polaroid's audit, knowingly or recklessly caused the issuance of those false or misleading financial disclosures and thereby caused substantial losses to plaintiffs and other investors.

  Sczesny Trusts filed the initial class action complaint on August 26, 2003. In accordance with the requirements of the Private Securities Litigation Reform Act of 1995 (the "PSLRA"), 15 U.S.C. §§ 78u(3)(A)(i)(I)-4a, Sczesny Trusts also published a notice, over the PR Newswire, on that day announcing the pendency of the securities action. (Declaration of Joel H. Bernstein at Exhibit B) Within the statutory 60-day period, see 15 U.S.C. §§ 78u-4a(3)(A)(i)(II), eight related class action complaints were filed in this District based upon the same factual allegations and asserting substantially similar claims.

  DISCUSSION

  A. Consolidation

  Rule 42(a) of the Federal Rules of Civil Procedure vests this Court with the authority to order the consolidation of all actions that "involv[e] a common question of law or fact . . . pending before the court." Consolidation of multiple actions alleging securities fraud is appropriate where those actions relate to "the same `public statements and reports'" and where consolidation would not prejudice the defendants. See Primavera Familienstiftung v. Askin, 173 F.R.D. 115, 129 (S.D.N.Y. 1997) (internal quotations omitted).

  Here, the gravamen of the complaints in each of the related actions is the same allegedly fraudulent accounting treatment of certain tax credits and expenses in Polaroid's public securities filings issued in the spring of 2001. Therefore, crucial factual and legal questions are common to all the related actions. Although some variations exist in the parameters of the alleged class periods, such "minor differences" are insufficient to preclude consolidation. See Ferrari v. Impath, Inc., 03 Civ. 5667, 2004 WL 1637053 at *2 n. 5 (S.D.N.Y. July. 20, 2004). Moreover, it is clear that consolidation would not prejudice the defendants, who have not opposed the motions for consolidation. Accordingly, this Court finds that it is appropriate to consolidate the nine pending related securities actions.

  B. Appointment of the Lead ...


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