Kanugonda v. Funko, Inc et al, No. 2:2018cv00812 - Document 35 (W.D. Wash. 2018)
Court Description: ORDER denying Movant Carl Berkelhammer's 29 Motion and Memorandum of Law of Carl Berkelhammer for Appointment as Lead Plaintiff and Approval of His Selection of Lead and Liaison Counsel signed by Judge Ricardo S. Martinez. (TH)
Download PDF
<![CDATA[
Kanugonda v. Funko, Inc et al Doc. 35 1 2 3 4 5 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 6 7 8 9 SATYANARAYANA KANUGONDA, Individually and On Behalf of All Others Similarly Situated, 10 11 12 13 Plaintiff, v. Case No. C18-812RSM ORDER DENYING CARL BERKELHAMMER’S LEAD PLAINTIFF MOTION FUNKO, INC., et al., Defendants. 14 15 I. 16 INTRODUCTION 17 This matter comes before the Court on the Motion and Memorandum of Law of Carl 18 Berkelhammer for Appointment as Lead Plaintiff and Approval of His Selection of Lead and 19 Liaison Counsel. Dkt. #29. No competing motion to be appointed lead plaintiff was filed in this 20 securities fraud class action. Mr. Berkelhammer (“Movant”) seeks to be appointed lead plaintiff 21 22 23 24 because he is unopposed and because he has a significant financial interest and will adequately represent the class. Dkts. #29 and #32. Having considered the Motion and the relevant record, and for the reasons set forth below, the Court denies Movant’s Motion. 25 26 ORDER – 1 Dockets.Justia.com II. 1 2 BACKGROUND A. Plaintiff’s Lawsuit 3 This action arises from Defendant Funko Inc.’s (“Funko”) November 1, 2017 initial 4 public offering (“IPO”). Dkt. #1 at ¶ 1. Plaintiff contends that Funko’s Form S-1, filed with the 5 6 7 8 9 Securities and Exchange Commission, contained untrue statements of fact and omissions with regards to Funko’s profits and growth, insulation from adverse industry, sales, and earnings trends, and materially misleading statements regarding Funko’s business, operations, and prospects. Id. at ¶ 4. Funko’s stock was initially valued at $12.00 per share during the IPO. Id. 10 at ¶ 3. After the untrue statements of fact and omissions came to light, Funko’s stock plummeted 11 to $6.00 per share on December 21, 2017, resulting in significant losses and damages for Plaintiff 12 and other similarly situated class members. Id. at ¶ 5. Plaintiff asserts claims under Sections 11, 13 14 15 16 12, and 15 of the Securities Act of 1933 (15 U.S.C. § 77a–77aa). B. Prior Lead Plaintiff Motion This is the second round of motions seeking appointment of a lead plaintiff in this putative 17 securities fraud class action. On the same day that Plaintiff filed this lawsuit, Mr. A. Parikh 18 sought to be appointed as lead plaintiff. Dkt. #4. Mr. A. Parikh relied on notice provided in a 19 previous case before this Court that was dismissed prior to Plaintiff’s filing. See Dkt. #4. Finding 20 that Mr. A Parikh could not rely on notice provided in a dismissed case and that the required 21 22 23 24 statutory notice had not been provided, the Court denied Mr. A. Parikh’s motion. Dkt. #22. Plaintiff subsequently republished the statutory notice and Movant brought his Motion during the notice period following republication. Dkts. #29 and #30-1. 25 26 ORDER – 2 III. 1 DISCUSSION A. Legal Standard 2 3 In securities class actions under the Private Securities Litigation Reform Act 4 (“PSLRA”),1 the Court is to appoint a lead plaintiff who is intended to “monitor, manage, and 5 6 7 8 9 control the litigation” and who “owes a fiduciary duty to all members of the proposed class.” In re Network Assocs., Inc., Sec. Litig., 76 F. Supp. 2d 1017, 1020, 1032 (N.D. Cal. 1999). The lead plaintiff is not necessarily the plaintiff filing the lawsuit, but is intended to be the class member “most capable of adequately representing the interests of class members.” 15 U.S.C. 10 § 77z-1(a)(3)(B)(i). To this end, the PSLRA sets up a three step process. In re Cavanaugh, 306 11 F.3d 726, 729 (9th Cir. 2002). That process consists of: (1) public notice of the pending lawsuit, 12 (2) identification of a “presumptively most adequate plaintiff,” and (3) an opportunity for other 13 potential plaintiffs to rebut the appointment of the presumptive lead plaintiff. Id. at 729–30. 14 15 16 As the first step in the process, proper notice is vital and “[a] court has an independent duty to scrutinize published notice for compliance with the PSLRA requirements.” Janovici v. 17 DVI, Inc., 2003 WL 22849604, at *5 (E.D. Pa. Nov. 25, 2003) (citations omitted). The PSLRA 18 requires that a plaintiff filing suit, within 20 days, “cause to be published, in a widely circulated 19 national business-oriented publication or wire service, a notice advising members of the 20 purported plaintiff class” of the details of the action and that “not later than 60 days after the date 21 22 23 24 25 on which the notice is published, any member of the purported class may move the court to serve as lead plaintiff of the purported class.” 15 U.S.C. § 77z-1(a)(3)(A)(i). Additionally, a prospective lead plaintiff may file a complaint and be eligible for appointment as lead plaintiff. 15 U.S.C. § 77z-1(a)(3)(B)(iii)(I)(aa); Coopersmith v. Lehman Bros., Inc., 344 F. Supp. 2d 783, 26 1 Pub. L. 104-67, 109 Stat. 737 (15 U.S.C. § 77a–77aa). ORDER – 3 1 786 (D. Mass. 2004) (eligible parties are “1) those who have moved for appointment within 60 2 days and 2) those who have filed a complaint”). 3 B. Proper Notice Was Not Provided 4 5 6 7 8 9 Plaintiff’s notice in this action was not sufficient to fulfill its statutory purpose of aiding identification of the most adequate plaintiff. As the Court noted in its prior order, the PSLRA’s notice requirement is intended to broaden the number of potential plaintiffs seeking to be appointed lead plaintiff. Dkt. #22 at 5 (quoting In re Cavanaugh, 306 F.3d at 729 and citing In re White Elec. Designs Corp. Sec. Litig., 416 F. Supp. 754, 775 (D. Ariz. 2006)). Several courts 10 have also noted the similarities between the PSLRA’s notice requirement and due process 11 requirements that notice be “reasonably calculated, under all the circumstances, to apprise 12 interested parties of the pendency of the action.” Lane v. Page, 250 F.R.D. 634, 643 (D.N.M. 13 14 15 16 2007) (quoting Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950)); In re Lucent, Inc. Secs. Litig., 194 F.R.D. 137, 146 (D.N.J. 2000) (same). The notice Movant relies upon in this action indicated that Plaintiff’s counsel had filed a 17 class action lawsuit, but did nothing to identify that lawsuit and allow potential class members to 18 consider whether to seek appointment as the lead plaintiff. In re White Elec. Designs Corp. Sec. 19 Litig., 416 F. Supp. 2d at 775 (main purpose of notice is to allow investors to “make informed 20 determination whether intervention is appropriate to protect” their interests) (quoting Ravens v. 21 22 23 24 25 Iftikar, 174 F.R.D, 651, 654 (N.D. Cal. 1997)). Providing adequate notice is also important to the PSLRA’s statutory scheme as “qualified investors must decide whether to intervene or compete for lead plaintiff appointment and to negotiate attorney arrangements so that the class representative that emerges is the ‘most capable of adequately representing the interests of the 26 ORDER – 4 1 2 class.’” Ravens, 174 F.R.D. at 675–76 (quoting 15 U.S.C. § 78u-4(a)(3)(B)(i), which is identical to 15 U.S.C. § 77z-1(a)(3)(B)(i)). 3 The notice relied upon, however, gave no information that would assist potential class 4 members in obtaining information about the case. Haung v. Acterna Corp., 220 F.R.D. 255 (D. 5 6 7 8 9 Md. 2004) (disapproving of notice that did not provide case name or docket number, names of plaintiff or judge or address of court and noting that notice appeared more likely intended to attract class members). Much like Haung, the notice did not identify the action or what court it was filed in and directed potential class members to contact Plaintiff’s counsel’s firm “for 10 information on the class action.” Dkt. #30-1. While the notice did alert the class that “if you 11 wish to serve as lead plaintiff, you must move the Court no later than August 27, 2018,” it gave 12 no indication that the action was pending before this Court. Id. The notice directed the class to 13 14 15 16 Plaintiff’s counsel’s website for information and that webpage also did not give an indication of what court the action was pending in. Id. and http://rosenlegal.com/cases-1297.html (last visited Oct. 12, 2018). Only by clicking on a link to “View Complaint” can the class view an unfiled 17 copy of the Complaint that indicates the lawsuit was likely filed within the Western District of 18 Washington, but does not indicate the Plaintiff, the case number, or whether the case is filed in 19 the Seattle Division or the Tacoma Division of this Court. 20 21 22 23 24 Consistent with many cases to the same effect, the Court will not find notice adequate where it provides the class no assistance in accessing additional information about the case in order to determine whether action is required to adequately protect their rights. See In re Lucent Techs. Sec. Litig., 194 F.R.D. 137 (rejecting notice that did not contain the case caption, identify 25 the plaintiff, name of the judge assigned, or provide the address of the court); California Pub. 26 Emps. Ret. Sys. v. Chubb Corp., 127 F. Supp. 2d 572 (D.N.J. 2001) (rejecting notice that did not ORDER – 5 1 contain the case caption, docket number, judge assigned, or location of the court); Holley v. Kitty 2 Hawk, Inc., 200 F.R.D. 275 (N.D. Tex. 2001) (rejecting notice that did not contain “the style of 3 the case, case number,” or the court); cf. Lane, 250 F.R.D. 634 (distinguishing preceding cases 4 because notice listed the case number, described allegations, and advised of right to seek lead 5 6 7 8 plaintiff status). Plaintiff may republish notice of this action that complies sufficiently with the requirements of the PSLRA. IV. 9 CONCLUSION 10 Having reviewed the Motion, along with the remainder of the record, the Court hereby 11 finds and ORDERS the Motion and Memorandum of Law of Carl Berkelhammer for 12 Appointment as Lead Plaintiff and Approval of His Selection of Lead and Liaison Counsel 13 14 15 (Dkt. #29) is DENIED. Dated this 15 day of October, 2018. A 16 17 RICARDO S. MARTINEZ CHIEF UNITED STATES DISTRICT JUDGE 18 19 20 21 22 23 24 25 26 ORDER – 6
]]>
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You
should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.
