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In re Facebook, Inc., Ipo Securities and Derivative Litigation

United States District Court, Second Circuit

August 10, 2013

IN RE FACEBOOK, INC., IPO SECURITIES AND DERIVATIVE LITIGATION. MDL No. 12-2389 Case Relates to: Nos. 12-CV-4081, 12-CV-4763, 12-CV-4099, 12-CV-4777, 12-CV-4131, 12-CV-5511, 12-CV-4150, 12-CV-7542, 12-CV-4157, 12-CV-7543, 12-CV-4184, 12-CV-7544, 12-CV-4194, 12-CV-7545, 12-CV-4215, 12-CV-7546, 12-CV-4252, 12-CV-7547, 12-CV-4291, 12-CV-7548, 12-CV-4312, 12-CV-7550, 12-CV-4332, 12-CV-7551, 12-CV-4360, 12-CV-7552, 12-CV-4362, 12-CV-7586, 12-CV-4551, 12-CV-7587, 12-CV-4648 United States District Court, S.D. New York.

Joel C. Feffer, Esq., Samuel K. Rosen, Esq., HARWOOD FEFFER LLP., New York, NY., James V. Bashian, Esq., LAW OFFICES OF JAMES V. BASHIAN, P.C., New York, NY., Attorneys for Plaintiffs, Lawrence Corneck and Eugene Stricker.

James P. Rouhandeh, Esq., Charles S. Duggan, Esq., Andrew Ditchfield, Esq., DAVIS POLK & WARDELL LLP., New York, NY, Attorneys for the Underwriter Defendants.

Andrew B. Clubok, Esq., Brant Warren Bishop, Esq., KIRKLAND & ELLIS LLP., New York, NY, Richard D. Bernstein, Esq., Todd G. Cosenza, Esq., WILLKIE FARR & GALLAGHER LLP., Washington, DC, Attorneys for the Eacebook Defendants.

Max W. Berger, Esq., Steven B. Singer, Esq., John J. Rizio-Hamilton, BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP., New York, NY, Thomas A. Dubbs, Esq., James W. Johnson, Esq., Louis Gottlieb, Esq., LABATON SUCHAROW LLP., New York, NY, Attorneys for the Lead Plaintiffs.


ROBERT W. SWEET, District Judge.

Plaintiffs Lawrence Corneck and Eugene Stricker (the "Exchange Act Plaintiffs") have moved to sever their actions, Civil Actions Nos. 12 Civ. 4215 and 12 Civ. 4663, pursuant to Rule 21 of the Federal Rules of Civil Procedure. They also seek the consolidation of their actions, appointment as the lead plaintiffs in the newly consolidated action, and the appointment of their selection of counsel for their class.

Defendants Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC and Goldman, Sachs & Co. (collectively, the "Lead Underwriters Defendants"); defendants Facebook, Inc. ("Facebook"), Mark Zuckerberg, David A. Ebersman, David M. Spillane, Marc L. Andreessen, Erskine B. Bowles, James W. Breyer, Donald E. Graham, Reed Hastings and Peter A. Thiel (together with the Lead Underwriter Defendants, "Defendants"); and lead plaintiffs the North Carolina Department of State Treasurer on behalf of the North Carolina Retirement Systems, Banyan Capital Master Fund Ltd., Arkansas Teacher Retirement System, and the Fresno County Employees' Retirement Association (collectively, the "Lead Plaintiffs") oppose the Exchange Act Plaintiffs' motion.

Upon the facts and conclusions set for the below, the motion is denied.

I. Prior Proceedings and Facts

The facts and prior proceedings underlying this action are set out in In re Facebook IPO Secs. & Derivative Litig., 12 MDL No. 2389, 288 F.R.D. 26 (S.D.N.Y. 2012), familiarity with which is assumed. Accordingly, only facts relevant to this action will be provided below.

On December 6, 2012, this Court consolidated thirty-one putative shareholder class actions asserting securities law claims arising from Facebook's initial public offering (the "IPO"), including actions asserting claims under the Securities Act of 1933 (the "Securities Act") and actions filed by the Exchange Act Plaintiffs asserting claims under the Securities Exchange Act of 1934 (the "Exchange Act"). See In re Facebook, 288 F.R.D. at 36.

Twenty-nine of these putative class actions asserted claims under Sections 11, 12(a) (2) and 15 of the Securities Act against Facebook, certain of its senior executives and directors and the underwriters for the IPO. The remaining two actions asserted insider-trading claims against the Lead Underwriter Defendants under Section 20A of the Securities Exchange Act. At that time, the Exchange Act Plaintiffs argued that the two Exchange Act claims should not be consolidated and that they should be permitted to bring their claims in a separate class action. (See Dkt. Nos. 7 and 24 filed in No. 12 Civ. 4215). After considering the parties' arguments, the Court ordered the consolidation of all the class actions asserting federal securities law claims, including the Securities Act and Exchange Act cases, and appointed the Lead Plaintiffs to direct the prosecution of the single consolidated class proceeding, in accordance with the Private Securities Litigation Reform Act ("PSLRA") (the "Consolidated Securities Action"). In re Facebook, 288 F.R.D. at 36, 41. Specifically, the Court reasoned that both sets of claims "involve putative class actions that seek relief on behalf of similar classes, asserted against some of the same defendants, arising out of the same series of events, and assert claims under federal securities laws." Id . at 35. Thus, the Court held that there was no reason to allow two separate class action to proceed under different leadership structures, explaining that "[tic reject consolidation would unnecessarily create two distinct and parallel securities litigation cases with different plaintiffs and different leadership." Id . at 35-36.

On February 28, 2013, the Lead Plaintiffs filed a consolidated class action complaint (the "Consolidated Complaint"). (Dkt. No. 71). The Consolidated Complaint asserts claims under the Securities Act only.

On April 16, 2013, the Exchange Act Plaintiffs filed the instant motion seeking to sever their actions from the Consolidated Securities Action. The Exchange Act Plaintiffs also seek to assert the Exchange Act claims in a separate class action for which they should be appointed lead ...

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