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Sallustro v. Cannavest Corp.

United States District Court, S.D. New York

March 19, 2015

TANYA SALLUSTRO, Individually and on Behalf of all Others Similarly Situated, Plaintiff, -
v.
CANNAVEST CORP., MICHAEL MONA, JR., BART P. MACKAY, THEODORE R. SOBIESKI, EDWARD A. WILSON, and MICHAEL MONA, III, Defendants. MICHAEL A. SICILIANO, Individually and on Behalf of all Others Similarly Situated, Plaintiff, -
v.
CANNAVEST CORP., MICHAEL MONA, JR., BART P. MACKAY, THEODORE R. SOBIESKI, EDWARD A. WILSON, and MICHAEL MONA, III, Defendants

Page 266

[Copyrighted Material Omitted]

Page 267

For Steve Schuck, Lead Plaintiff (1:14-cv-02900-PGG): William Bernard Federman, LEAD ATTORNEY, Federman & Sherwood, Oklahoma City, OK.

For Tanya Sallustro, individually and on behalf of all others similarly situated, Plaintiff (1:14-cv-02900-PGG): Laurence Matthew Rosen, The Rosen Law Firm, P.A. (NYC), New York, NY; Phillip C. Kimm, Yu Shi, The Rosen Law Firm P.A., New York, NY.

For Anamaria Schelling, Movant (1:14-cv-02900-PGG): Ira M. Press, Thomas W. Elrod, Kirby McInerney LLP, New York, NY.

For Wayne Chesner, Movant (1:14-cv-02900-PGG): Phillip C. Kim, LEAD ATTORNEY, The Rosen Law Firm P.A., New York, NY.

For Jane Ish, Movant (1:14-cv-02900-PGG): Andrei V. Rado, LEAD ATTORNEY, Milberg LLP (NYC), New York, NY.

For Mark Williams, Movant (1:14-cv-02900-PGG): Adam M. Apton, Levi & Korsinsky LLP (DC), Washington, DC.

For Cannavest Corp., Michael Mona, Jr., Bart P. Mackay, Theodore R. Sobieski, Edward A. Wilson, Michael Mona, III, Defendants (1:14-cv-02900-PGG): Sean Michael Sullivan, Stacey Todd Neal, LEAD ATTORNEY, PRO HAC VICE, Procopio Cory Hargreaves & Savitch LLP, San Diego, CA; Henry Edward Mazurek, Clayman & Rosenberg, LLP, New York, NY.

For Otilda LaMont, ADR Provider (1:14-cv-02900-PGG): Thomas James McKenna, Gainey McKenna & Egleston, New York, NY.

For Michael A. Siciliano, individually and ob behalf of all others similarly situated, Plaintiff (1:14-cv-03079-PGG): William Bernard Federman, LEAD ATTORNEY, Federman & Sherwood, Oklahoma City, OK.

For Anamaria Schelling, Movant (1:14-cv-03079-PGG): Ira M. Press, Thomas W. Elrod, Kirby McInerney LLP, New York, NY.

For Mark Williams, Movant (1:14-cv-03079-PGG): Adam M. Apton, Levi & Korsinsky LLP (DC), Washington, DC.

Page 268

MEMORANDUM OPINION & ORDER

Paul G. Gardephe, United States District Judge.

Pending before the Court are five motions to appoint lead plaintiff, approve lead counsel, and consolidate two putative class actions brought under the federal securities laws by shareholders of CannaVest Corp. (" CannaVest" or the " Company" ). Sallustro v. CannaVest Corp., Case No. 14 Civ. 2900 (PGG); Siciliano v. CannaVest Corp., Case No. 14 Civ. 3079 (PGG).[1] For the reasons stated below, these actions will be consolidated, Steve Schuck's motion to be appointed lead plaintiff will be granted, and the four competing motions for lead plaintiff status will be denied.[2]

BACKGROUND

CannaVest is a publicly traded company headquartered in Las Vegas, Nevada whose shares are listed on the OTC Bulletin Board under the symbol " CANV." (Cmplt. (Dkt. No. 2) ¶ ¶ 7-8) Carina Vest's primary business is the manufacture, marketing, and sale of consumer products containing industrial hemp-based compounds, including the hemp plant extract cannabidiol (" CBD" ). (Id. ¶ 7)

On April 3, 2014, CannaVest filed a Form 8-K with the SEC stating that it had misreported its financial condition on Form 10-Qs for the quarters ending March 31, 2013, June 30, 2013, and September 30, 2013, and that it intended to issue corrective disclosures for those quarters. (Id. ¶ 28) In trading that day, shares of CannaVest stock fell $7.30 per share, or more than 20%, to close at $25.30 per share. (Id. ¶ 29)

On April 14, 2014, CannaVest filed an Amended Form 8-K in which it disclosed, inter alia, that it had overstated its goodwill by more than 1300% and its sales by more than 17%. (Id. ¶ 30, 32) After this second disclosure, the Company's stock declined $4.49 per share, or 19.5%, to close at $18.51 per share. (Id. ¶ 31)

The complaints in these actions were filed on April 23, 2014 (the " Sallustro Complaint" ) and April 29, 2014 (the " Siciliano Complaint" ). The Class Period is defined in both complaints as May 20, 2013 through April 3, 2014. (Sallustro Cmplt. (Dkt. No. 2) ¶ 1; Siciliano Cmplt (14 Civ. 3079, Dkt. No. 2) ¶ 1)

I. CONSOLIDATION

All movants seek consolidation of these actions, and the Court has received no objection to the requests for consolidation.

Page 269

Fed.R.Civ.P. 42(a) provides that a district court may consolidate " actions before the court involv[ing] a common question of law or fact." Fed.R.Civ.P. 42(a). " 'A determination on the issue of consolidation is left to the sound discretion of the Court,'" In re UBS Auction Rate Sec. Litig., No. 08 Civ. 2967 (LMM), 2008 WL 2796592, at *1 (S.D.N.Y. July 16, 2008) (quoting Albert Fadem Trust v. Citigroup Inc., 239 F.Supp.2d 344, 347 (S.D.N.Y. 2002)), and involves weighing considerations of convenience, judicial economy, and cost reduction while ensuring that the " paramount concern for a fair and impartial trial" is honored. Johnson v. Celotex Corp., 899 F.2d 1281, 1284-85 (2d Cir. 1990).

Here, consolidation is plainly appropriate. Both cases arise from the same alleged misrepresentations made by CannaVest in its Form 10-Qs for the quarters ending March 31, 2013, June 30, 2013, and September 30, 2013. (Sallustro Cmplt. (Dkt. No. 2) ¶ ¶ 21-27; Siciliano Cmplt. (14 Civ. 3079, Dkt. No. 2) ¶ ¶ 20-26) Moreover, the parties assert similar claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and the complaints name the same defendants.[3] (Sallustro Cmplt. (Dkt. No. 2) ¶ ¶ 1-2; Siciliano Cmplt. (14 Civ. 3079, Dkt. No. 2) ¶ ¶ 1-2) Accordingly, pursuant to Rule 42(a), these two actions -- as well as any other related CannaVest class actions hereafter filed in or hereafter transferred to this Court -- will be consolidated.

The actions shall be referred to collectively as In re: CannaVest Corp. Securities Litigation, No. 14 Civ. 2900 (PGG) (the " Consolidated CannaVest Corp. Class Action" ). The Clerk of Court shall file a copy of this Order in the separate file for each of the above-captioned CannaVest Corp. class action cases. Unless otherwise ordered by this Court, future filings in any CannaVest Corp. class action case herein consolidated shall be filed and docketed only under docket number 14 Civ. 2900 (PGG). All counsel who have entered appearances in the above-captioned class action cases shall be deemed to have entered an appearance in the Consolidated CannaVest Corp. Class Action under the docket number 14 Civ. 2900 (PGG). All motions for admission pro hac vice and all orders granting such motions in the above-captioned actions shall also be deemed filed in the Consolidated CannaVest Corp. Class Action under the docket number 14 Civ. 2900 (PGG).

Counsel is directed to alert the Clerk of Court to the filing or transfer of any case that might properly be consolidated as part of this litigation. Any class action involving substantially related questions of law and fact hereafter filed in or transferred to this Court ...


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