Preview
19CV348674
Santa Clara — Civil
KEVIN P. MUCK (CSB. No. 120918) Electronically Filed
kmuck@fenwick.com by Superior Court of CA,
DEAN S. KRISTY (CSB No. 157646) County of Santa Clara,
dkristy@fenwick.com on 6/19/2020 12:19 PM
MARIE C. BAFUS (CSB No. 258417) Reviewed By: R. Walker
mbafus@fenwick.com
ALISON C. JORDAN (CSB No. 311081) Case #19CV348674
ajordan@fenwick.com Envelope: 4479842
FENWICK & WEST LLP
555 California Street, 12th Floor
San Francisco, CA 94104
Telephone: (415) 875-2300
Facsimile: (415) 281-1350
Attorneys for Defendants Cloudera, Inc.,
Thomas J. Reilly, Jim Frankola, Priya Jain,
Michael A. Olson, Martin I. Cole, Kimberly
Hammonds, Rosemary Schooler, Steve J. Sordello,
10 Michael A. Stankey, Robert Bearden, Paul
Cormier, Peter Fenton and Kevin Klausmeyer
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oq, 13 SUPERIOR COURT OF THE STATE OF CALIFORNIA
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IN RE CLOUDERA, INC. SECURITIES Lead Case No. 19CV348674
16 LITIGATION
CLASS ACTION
17
REPLY MEMORANDUM IN SUPPORT
18 OF CLOUDERA DEFENDANTS’
RENEWED MOTION TO STAY
19 This Document Relates to: PROCEEDINGS
ALL ACTIONS
20 Date: June 26, 2020
Time: 9:00 a.m.
21 Dept: 1
Judge: The Honorable Brian C. Walsh
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Trial Date: None Set
23 Date Action Filed: June 7, 2019
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TABLE OF CONTENTS
Page
INTRODUCTION
II CONTRARY TO PLAINTIFFS’ SUGGESTION, THE PROCEDURAL
REQUIREMENTS OF SECTION 1008(B) HAVE BEEN FULLY SATISFIED...........
Ill. THE OPPOSITION CONFIRMS THAT A STAY IS PROPER...............
A Plaintiffs Cannot Contest that the Principal Basis on which they
Previously Opposed a Stay — that the Two Actions Were Not
“Substantially Identical” — Is No Longer Applicable.
The Opposition Is Unable to Overcome Defendants’ Showing that the
Caiafa Factors Weigh Heavily in Favor of a Stay ............
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1 There is No Real Dispute that Concurrent Litigation Will Result in
Waste and Prejudice, and Will Not Serve the Interests of the
12 Putative Class
oq, 13 There Is No Real Effort to Dispute the Inevitability of Unseemly
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14
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The Location of the Federal Action Indisputably Weighs in Favor
17 of a Stay. 13
18 5 Plaintiffs Do Not Demonstrate Any Actual Prejudice from a Stay 14
19 Plaintiffs’ Reliance on Cyan Remains Misplaced.......... 14
20 The Opposition Also Fails to Show That a Stay Pending Resolution of
the Pleadings in the Federal Action Would Be Improper............. 15
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IV. CONCLUSION 15
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TABLE OF AUTHORITIES
Page(s)
CASES
Berg v. MTC Elecs. Tech. Co.,
61 Cal. App. 4th 349 (1998) 13
Boyd v. Global Vision Prods., Inc.,
2003 WL 25547969 (Cal. Super. Ct. Sept. 23, 2003) 10
Buford v. Dignity Health,
No. CGC-19-575930 (Cal. Super. Ct. Aug. 1, 2019) 14
Caiafa Prof’! Law Corp. v. State Farm Fire & Cas. Co.
15 Cal. App. 4th 800 (1993) . . passim
10 Celotex Corp. v. Am. Ins. Co.,
199 Cal. App. 3d 678 (1987) 13
11
Clark’s Fork Reclamation Dist. v. Johns,
12 259 Cal. App. 2d 366 (1968) 13
oq, 13 Cyan, Inc. v. Beaver Cty. Emps. Ret. Fund,
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oe Deauville Rest., Inc. v. Superior Court,
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16 Fairley v. WIS Holdings Corp.,
2008 WL 7748851 (Cal. Super. Ct. Dec. 16, 2008) 10
17
Gauthier v. Apple Inc.,
18 2014 WL 1998003 (Cal. Super. Ct. Feb. 21, 2014) 11
19 Graham v. Hansen,
128 Cal. App. 3d 965 (1982).
20
Greene v. Granite Constr. Inc.,
21 2019 WL 6327229 (N.D. Cal. Nov. 26, 2019) 14
22 Harper v. Smart Techs., Inc.,
2013 WL 9745482 (Cal. Super. Ct. May 17, 2013) 10
23
Hawkins v. TACA Int’l Airlines, S.A
24 223 Cal. App. 4th 466 (2014) 11
25 In re Arlo Techs., Inc. Sec. Litig.,
No. 2018-1-CV-339231 (Cal. Super. Ct. June 21, 2019) passim
26
In re Everquote, Inc. Sec. Litig.,
27 2019 WL 3686065 (N.Y. Sup. Ct. Aug. 7, 2019) . 15
28 In re Gemstar-TV Guide Int'l, Inc. Sec. Litig.,
209 F.R.D. 447 (C.D. Cal. 2002) 12
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TABLE OF AUTHORITIES
(Continued)
Page(s)
In re Merit Med. Sys., Inc. Sec. Liti
2020 WL 2611256 (C.D. Cal. May 11, 2020) 13
In re Restoration Robotics, Inc. Sec. Litig.,
417 F. Supp. 3d 1242 (N.D. Cal. 2019) 11
In re Versata, Inc. Sec. Litig.
2001 WL 34012374 (N.D. Cal. Aug. 20, 2001). 12
Krieger v. Atheros Commc’ns, Inc.
776F. Supp. 2d 1053 (N.D. Cal. 2011) 13
Lucido v. Superior Court,
10 51 Cal. 3d 335 (1990) 12
11 Marks v. Cty. of Los Angeles.
2000 WL 35568348 (Cal. Super. Ct. Nov. 2, 2002) 15
12
Milano v. Auhll,
oq, 13 1996 WL 33398997 (Cal. Super. Ct. Oct. 2, 1996) 15
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Schimmel Family Trust v. Morgenthaler,
16 2001 WL 35965061 (Cal. Super. Ct. Nov. 7, 2001) 15
17 Schneider v. Vennard,
183 Cal. App. 3d 1340 (1986) 10, 14
18
Simmons v. Superior Court,
19 96 Cal. App. 2d 119 (1950) 10
20 Staehrv. Duffield,
2003 WL 25485513 (Cal. Super. Ct. June 18, 2003) 10
21
UAS Memt., Inc. v Mater Misericordiae ee 5
22 169 Cal. App. 4th 357 (2009)...
23 W. Va. Laborers’ Trust Fund v. STEC, Inc.
2012 WL 12806605 (Cal. Super. Ct. Feb. 17, 2012) 9, 11, 13
24
Wiltjer v. BigBand Networks, Inc.
25 No. CGC-07-469661 (Cal. Super. Ct. Aug. 11, 2008)
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TABLE OF AUTHORITIES
(Continued)
Page(s)
STATUTES AND RULES
California Code of Civil Procedure
Section 1008(b) 6, 7,8
Securities Act of 1933
Section 27(a)(3), 15 U.S.C. § 77z-1(a)(3). 10
Securities Exchange Act of 1934
Section 27(a), 15 U.S.C. § 78aa(a). 13
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REPLY ISO RENEWED MOTION TO STAY LEAD CASE NO. 19CV348674
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IL INTRODUCTION
In their moving papers, the Cloudera Defendants! established that new facts and circumstances
warrant a stay of this case pending resolution of the parallel Federal Action, to avoid needless costs,
confusion and prejudice and to prevent “unseemly conflicts” between courts. Nothing in plaintiffs’
opposition brief (“6/3/20 Opp.”) justifies a contrary conclusion. Plaintiffs instead offer a series of
arguments that mischaracterize the record, ignore governing law, and ultimately defy common sense.
Tellingly, plaintiffs try to prevent the Court from even considering the merits of the renewed
motion, arguing that the procedural requirements have not been met. That argument is baseless. As
tequired by Code Civ. Proc. § 1008(b), defendants’ motion is indisputably based on facts that are (in
10 the words of the statute) “new or different”: the addition of duplicative 1933 Act class claims in the
11 Federal Action and Judge Koh’s implementation of the 1933 Act’s mandatory lead plaintiff process.
12 Underscoring that point, plaintiffs have now abandoned the primary argument they advanced
oq, 13 in opposing a stay last fall: that this case and the Federal Action were not “substantially identical.”
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14 Plaintiffs recognize that, with the Federal Action’s addition of claims on behalf of the same class,
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ze 15 under the same statutory sections, against the same defendants and based on the same Registration
16 Statement, they can no longer argue there are meaningful differences between the cases.
17 Plaintiffs are thus left to argue the Court should not exercise its discretion to enter a stay, but
18 that effort is unavailing. Given that the same class claims in this case are now asserted in the Federal
19 Action, the relevant factors under California law — i.e., preventing wasteful duplicative litigation and
20 confusion to the class, avoiding what are now certain conflicts, the superiority of the local federal
21 forum and the absence of prejudice to plaintiffs — all weigh heavily in favor of a stay. That is the
22 conclusion Judge Kuhnle reached in Jn re Arlo Techs., Inc. Sec. Litig., No. 2018-1-CV-339231
23 (Cal. Super. Ct. June 21, 2019) (“Arlo”), a case directly on point. Plaintiffs mention Ar/o only in
24 passing and offer no cogent rationale for declining to follow Judge Kuhnle’s analysis and holding.
25 While plaintiffs may not relish deferring to their federal counterparts, that does not justify the
26 costs, burdens and confusion created by duplicative litigation on the same class claims — especially
27
28 ' All defined terms have the same meaning as in the opening brief (““Def. Mem.”). The Declaration
of Alison C. Jordan accompanying this reply memorandum is referred to as the “Jordan Decl.”
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because they could have moved for appointment as lead plaintiffs in the Federal Action under the
1933 Act. They did not do so, for reasons they never explain. Having instead made a tactical
decision to let other shareholders seek that statutory designation, plaintiffs cannot now use that as an
excuse for denial of a stay — and, in the process, undermine Judge Koh’s oversight authority under
the 1933 Act and set this case irretrievably on a collision course with the Federal Action.
In sum, governing law and common sense dictate that this case be stayed pending resolution
of the Federal Action (or, at the very least, pending resolution of pleading challenges in that action).
IL. CONTRARY TO PLAINTIFFS’ SUGGESTION, THE PROCEDURAL
REQUIREMENTS OF SECTION 1008(B) HAVE BEEN FULLY SATISFIED
10 The Opposition argues that the procedural requirements of Code Civ. Proc. § 1008(b) have not
11 been met (6/3/20 Opp. at 11-13), but that argument is meritless. As discussed in the moving papers
12 (Def. Mem. at 10-11), the key procedural requirement is straightforward: defendants must identify
oq, 13 the “new or different facts [or] circumstances” on which they ask the Court to grant relief that was
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14 previously denied. Code Civ. Proc. § 1008(b). Defendants complied with this requirement,
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ze 15 specifying that the renewed motion is based on: (1) the filing of a new federal complaint in February
16 2020 that asserted for the first time 1933 Act claims entirely duplicative of those in this action; and
17 (2) Judge Koh’s March 2020 decision to reopen the statutory lead plaintiff process to address the
18 duplicative 1933 Act claims. See Def. Mem. at 6-7, 9-11; see also Muck Decl. ff 8-9.
19 Notably, plaintiffs do not contest that these are “new or different facts [or] circumstances,”
20 that they were properly identified in the moving papers. See 6/3/20 Opp. at 11. Instead, plaintiffs
21 try to rewrite the statute by arguing they are not “significant new facts.” Jd. (emphasis added). Not
22 only is that contention frivolous — plaintiffs argued last fall that the most important fact militating
23 against a stay was the absence of 1933 Act claims in federal court (10/4/19 Opp. at 11-16), so the
24 new facts clearly alter the landscape of this case — the qualifier “significant” is not found in Section
25 1008(b). Plaintiffs’ argument is thus inaccurate, inconsistent with the statute, and unsupported by
26 case law. It also improperly conflates Section 1008(b)’s threshold procedural requirement with the
27 substantive merits of the renewed motion. See Graham v. Hansen, 128 Cal. App. 3d 965, 971-72
28 (1982) (once the Court determines the motion is supported by new facts, it addresses the merits).
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Because there is no dispute that defendants identify new facts and circumstances, any concern
about “seriatim motions” (6/3/20 Opp. at 7, 14) is a red herring. See Deauville Rest., Inc. v. Superior
Court, 90 Cal. App. 4th 843, 851-52 (2001). And the protest that defendants advance arguments
made previously (6/3/20 Opp. at 11-12) in no way undermines the renewed motion; to the contrary,
the entire point of Section 1008(b) is to permit a party to “renew/[] the earlier motion by submission
ofa new motion raising the same issues.” UAS Mgmt., Inc. v Mater Misericordiae Hosp., 169 Cal.
App. 4th 357, 367 (2009) (emphasis added); see also Deauville, 90 Cal. App. 4th at 848-49. Thus,
plaintiffs’ attempt to avoid the merits of the renewed motion on procedural grounds must be rejected.
Til. THE OPPOSITION CONFIRMS THAT A STAY IS PROPER
10 A. Plaintiffs Cannot Contest that the Principal Basis on which they Previously
Opposed a Stay — that the Two Actions Were Not “Substantially Identical” — Is
11 No Longer Applicable
12 When plaintiffs successfully opposed a stay last fall, their primary argument was that the two
oq, 13 cases were not “substantially identical” because there were no 1933 Act claims in the Federal Action.
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14 10/4/19 Opp. at 11-16. As noted in the moving papers (Def. Mem. at 12), plaintiffs relied on nine
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ze 15 differences (claims, plaintiffs, defendants, classes, time periods, methods of acquiring stock, alleged
16 misstatements, legal theories and elements, and standards) — all based on distinctions between 1933
17 Act and 1934 Act claims, which plaintiffs argued were dispositive. 10/4/19 Opp. at 11. Plaintiffs do
18 not dispute that these supposedly dispositive differences no longer exist. Indeed, the argument that
19 the cases are not “substantially identical” has been dropped entirely — and while plaintiffs protest
20 half-heartedly that it is “misleading” to suggest they relied so heavily on the argument before (6/3/20
21 Opp. at 12-13 n.2), that bit of revisionism is quickly belied by a review of their prior opposition.
22 Plaintiffs also try to minimize the extent to which this linchpin argument was accepted by the
23 Court. See 6/3/20 Opp. at 12. To be sure, the Court identified a number of factors in declining to
24 enter a stay last fall, but made clear it agreed with plaintiffs that: (1) the absence of 1933 Act claims
25 in the Federal Action made the cases different, with distinct standards and theories of liability;
26 (2) those differences meant “the federal court’s rulings on motions to dismiss may or may not
27 address issues relevant” to this case; and (3) also as a result of those differences, “the outcome of the
28 federal case may fail to shed light on the issues here.” See Order on Mot. to Stay at 7-8. The addition
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of 1933 Act claims in the Federal Action means those conclusions are no longer applicable. See Arlo
at 5 (staying state action in favor of broader federal action where both asserted 1933 Act claims).
Thus, it is irrelevant that defendants argued last year that then-existing differences in the two
cases were “not significant” and that “some overlap” was enough to warrant a stay. See 6/3/20 Opp.
at 11-12. The Court rejected those arguments based on facts that have since changed dramatically.
Muck Decl. § 8. Nor does it help plaintiffs that the Court considered the “possibility” of greater
similarities in the future. 6/3/20 Opp. at 12. What was once a mere “possibility” is now reality, and
that same reality is what Judge Kuhnle relied upon in granting a stay in Arlo. See Arlo at 4-5.
Specifically, the parallel actions in Ar/o arose out of “the same facts and circumstances,”
10 asserted 1933 Act claims on behalf
of the same class against common defendants, and challenged the
11 same registration statement. Arlo at 4-5. Those factors supported a stay of the state court action to
12 prevent waste, conflicts, and prejudice to the putative class (id. at 5), and they are equally applicable
oq, 13 in this case. In fact, the state and federal actions here are even more similar than in Arlo: all fifteen
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14 defendants are identical (unlike Ar/o), and the same 1933 Act claims are asserted in both actions
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ze 15 (unlike Ar/o, where there was no Section 12(a)(2) claim in the federal case). See Arlo at 4.
16 Plaintiffs have no answer to Arlo, merely asserting in passing that it is distinguishable because
17 the instant case is purportedly “at least one year ahead of the Federal Action.” 6/3/20 Opp. at 16.
18 That assertion is pulled from thin air, erroneous, and insufficient to justify the prejudice and conflicts
19 caused by duplicative class litigation. See Secs. II.B.1 and II.B.2, infra; see also W. Va. Laborers’
20 Trust Fund v. STEC, Inc., 2012 WL 12806605, at *1 (Cal. Super. Ct. Feb. 17, 2012) (staying 1933
21 Act claims where “the key issue” in both cases was “whether the statements in the offerings were
22 false and misleading”); Wiltjer v. BigBand Networks, Inc., No. CGC-07-469661, at *1 (Cal. Super.
23 Ct. Aug. 11, 2008) (staying 1933 Act claims in favor of action in Northern District of California).
24 B The Opposition Is Unable to Overcome Defendants’ Showing that the Caiafa
Factors Weigh Heavily in Favor of a Stay
25
1 There Is No Real Dispute that Concurrent Litigation Will Result in Waste
26 and Prejudice, and Will Not Serve the Interests of the Putative Class
27 Plaintiffs do not begin to refute defendants’ showing that the first factor identified in Caiafa
28 Prof’! Law Corp. v. State Farm Fire & Cas. Co., 15 Cal. App. 4th 800, 804 (1993), weighs in favor
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of a stay. See Def. Mem. at 15. Their only response is to assert (without support) that “this Action
was not designed to harass” defendants. 6/3/20 Opp. at 14. That argument — nothing more than a
bare conclusion — disregards that the law looks beyond plaintiffs’ subjective motivations to whether
duplicative suits may result in “vexation, oppression and harassment” or “unnecessary litigation.”
Def. Mem. at 15; see also Simmons v. Superior Court, 96 Cal. App. 2d 119, 124-25 (1950); Fairley
v. WIS Holdings Corp., 2008 WL 7748851 (Cal. Super. Ct. Dec. 16, 2008). Notably, Judge Kuhnle
granted the motion to stay in Arlo without any finding of a subjective intent to harass. Unable to
tespond to this point or the cited authorities, plaintiffs simply ignore them.
Putting aside that subjective intent is not the standard, unsupported denials of an intent to
10 harass are difficult to reconcile with an attempt to hurtle forward with needlessly duplicative class
11 litigation. See Boyd v. Global Vision Prods., Inc., 2003 WL 25547969, at *1-2 (Cal. Super. Ct. Sept.
12 23, 2003) (existence of two class actions in different jurisdictions “suggests that this might be
oq, 13 multiple litigation designed to harass defendant.”). Concerns in that regard are made more acute by
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14 plaintiffs’ refusal to coordinate with their federal counterparts and their refusal to participate in the
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ze 15 statutory lead plaintiff process (see Muck Decl. {J 10-13) — refusals they make no effort to explain,
16 let alone justify.” In any event, plaintiffs ignore the detrimental impact on the putative class and
17 make no attempt to address the authorities holding that a stay will prevent prejudice and confusion to
18 class members. See Arlo at 5 (“It is not in the putative class members’ interest for there to be
19 duplicative litigation’); see also Schneider v. Vennard, 183 Cal. App. 3d 1340, 1350 (1986); Harper
20 v. Smart Techs., Inc., 2013 WL 9745482, at *2 (Cal. Super. Ct. May 17, 2013).
21 Nor can plaintiffs avoid a stay by mischaracterizing this action as “first-filed.” 6/3/20 Opp. at
22 14-15.3 Not only was the Federal Action brought first, the order of filing new claims means little
23 when the addition of claims is permitted under the PSLRA (provided that adequate notice is given).
24 See 15 U.S.C. § 77z-1(a)(3); see also Staehr v. Duffield, 2003 WL 25485513 (Cal. Super. Ct. June
25
? Plaintiffs’ glib (and unexplained) characterization of pre-motion efforts to engage in discussion on
26 these issues as “[p]ure gamesmanship” (6/3/20 Opp. at 13 n.2), and the inability to dispute their
stonewalling (Muck Decl. ff 10-13, Exs. G-J), also suggest a troubling indifference to the burdens
27 that plaintiffs seek to impose on defendants, the Court, and putative class members.
28 3 Unlike this action, the inapposite cases plaintiffs cite (Jasnoch Decl., Exs. A and B) involve state
actions initiated well before parallel federal securities litigation.
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18, 2003) (staying case and holding that it “is not particularly relevant” which shareholder action was
filed first). In sum, plaintiffs fail to controvert defendants’ showing under the first Caiafa factor.
2. There Is No Real Effort to Dispute the Inevitability of Unseemly Conflicts
With duplicative 1933 Act claims pending on behalf of the same class and against the same
defendants in two courts, the second Caiafa factor — avoiding “unseemly conflicts” — also supports a
stay. Def. Mem. at 16-18. In response, plaintiffs cite the Court’s finding from eight months ago that
conflicts were “unlikely” and blithely assert “nothing of substance has changed” since then. 6/3/20
Opp. at 12, 16. Of course, the entire nature of the Federal Action has changed; with identical classes
now asserting the same claims against an identical group of defendants, conflicts are inevitable.
10 Plaintiffs are unable to explain how conflicts can be avoided when two courts will decide
11 (among other things) whether the same class is entitled to recovery from the same defendants under
12 the same statutes based on the same Registration Statement. See Caiafa, 15 Cal. App. 4th at 807
oq, 13 (“The potential for ‘unseemly conflict’ is great, unless both forums should reach the exact same
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14 resolution of the issues.”). In these circumstances, California law recognizes that a stay is proper to
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ze 15 prevent a collision between the two courts. See Arlo at 5; W. Va. Laborers, 2012 WL 12806605, at
16 *1; Gauthier v. Apple Inc., 2014 WL 1998003, at *2 (Cal. Super. Ct. Feb. 21, 2014).
17 Plaintiffs try to sidestep this conclusion by suggesting the claims are subject to a different (and
18 presumably more stringent) pleading standard in federal court (see 6/3/20 Opp. at 16), but that is
19 erroneous. Non-fraud claims under the 1933 Act are not subject to heightened pleading standards in
20 federal court. See, e.g., In re Restoration Robotics, Inc. Sec. Litig., 417 F. Supp. 3d 1242, 1257
21 (N.D. Cal. 2019).> Even if that were not the case, differing “pleading standards” would not outweigh
22 the other relevant factors. See Arlo at 5. Furthermore, plaintiffs have no answer to the conflicts that
23 would arise beyond the pleading stage (e.g., discovery, class certification, class notice, damages and
24 summary judgment). See Def. Mem. at 18. And even if decisions in one court may not be subject to
25
‘ Plaintiffs do not address (let alone distinguish) W. Va. Laborers or Gauthier, although those cases
26 were discussed in the moving papers. Instead, plaintiffs cite a New York trial court decision (6/3/20
Opp. at 16) that does not apply California law and — unlike Arlo, W. Va. Laborers and Gauthier —
27 involved parallel federal proceedings in a distant state (Illinois). See Jasnoch Decl., Ex. C.
28 5 If anything, the pleading standard is more onerous in this Court, where statutory claims must be
alleged with particularity. Hawkins v. TACA Int’l Airlines, S.A., 223 Cal. App. 4th 466, 478 (2014).
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“collateral estoppel effect” in the other forum (6/3/20 Opp. at 16), that would not prevent the burden,
confusion, and threat to “[p]ublic confidence in the integrity of the judicial system” caused by “two
tribunals render[ing] inconsistent [rulings].” Lucido v. Superior Court, 51 Cal. 3d 335, 347 (1990).
Perhaps the most imminent conflicts relate to Judge Koh’s ongoing process (mandated by the
1933 Act) to appoint a lead plaintiff. Def. Mem. at 18. Plaintiffs cannot dispute that process is in
place to “ensure that the goals of the PSLRA are effectuated.” Muck Decl., Ex. E at 6. Yet they try
to undermine Judge Koh’s statutory authority and the PSLRA’s goals — including efficient oversight
of 1933 Act class claims and prevention of “lawyer-driven” litigation® — by barreling forward with
the same class claims in this Court. Underscoring the point, plaintiffs improperly ask this Court to
10 tule on an issue before Judge Koh: that one of the federal plaintiffs lacks standing to pursue 1933
11 Act claims. 6/3/20 Opp. at 13, 17.’ These are precisely the sorts of “unseemly conflicts” — directly
12 pitting one tribunal against another — that should be avoided. Caiafa, 15 Cal. App. 4th at 807.
oq, 13 Not surprisingly, then, plaintiffs make no effort to address the confusion and prejudice that
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14 will exist after the lead plaintiff process is concluded, when two sets of plaintiffs — one with the
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ze 15 statutory imprimatur of the 1933 Act’s “lead plaintiff designation,” the other without it — both claim
16 to represent the same class for the purpose of litigating identical claims. Moreover, if plaintiffs are
17 (as they seem to suggest) the best equipped to litigate 1933 Act class claims, they could have (and
18 should have) moved for appointment as lead plaintiffs. Def. Mem. at 12-13, 19. In short, plaintiffs
19 could have avoided unseemly conflicts, but declined to do so — for reasons they refuse to explain.
20 Finally, the notion that Judge Koh could stay part of the Federal Action (6/3/20 Opp. at 17) is
21 anon-starter. Not only would that be contrary to the statutory lead plaintiff process, but plaintiffs
22 cite no authority to suggest a federal court may issue a stay to permit a federal claim to be litigated in
23
6 See, e.g., In re Versata, Inc. Sec. Litig., 2001 WL 34012374, at *2 (N.D. Cal. Aug. 20, 2001).
24
7 In addition to pitting the two courts against each other, plaintiffs’ argument erroneously conflates
25 the separate issues of standing and lead plaintiff status under the PSLRA. In the Federal Action, the
presumptive lead plaintiff (Klin) added two plaintiffs (Jones and Lenick) who acquired shares in the
26 Hortonworks merger; Jones and Lenick remain plaintiffs in the Federal Action. Jordan Decl. {ff 3, 7.
As Judge Koh has stated, she will decide whether this is sufficient for lead plaintiff purposes. Ex. E
27 at 6n.1 (“[I]t is possible that one lead plaintiff may adequately represent all putative class members,
because ‘the PSLRA presumes that the lead plaintiff can vigorously pursue all available causes of
28 action against all possible defendants under all available legal theories.””) (quoting In re Gemstar-TV.
Guide Int'l, Inc. Sec. Litig., 209 F.R.D. 447, 450 (C.D. Cal. 2002)).
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state court — especially when there would still be two class actions proceeding simultancously.*
3 Plaintiffs Cannot Seriously Dispute the Superiority of the Federal Forum
The new facts have also strengthened the third Caiafa factor, which considers whether the
federal court can best determine the rights of the parties. 15 Cal. App. 4th at 804. The 6/3/20 Opp.
not only ignores the expertise of federal courts in deciding issues of federal law (see Clark’s Fork
Reclamation Dist. v. Johns, 259 Cal. App. 2d 366, 369 (1968)), but also overlooks that the federal
court now has jurisdiction over all claims under the 1933 and 1934 Acts. See Def. Mem. at 18-19.
As the moving papers explained and plaintiffs concede (6/3/20 Opp. at 17), federal courts have
exclusive jurisdiction over 1934 Act claims such that Judge Koh cannot stay the action before her.
10 15 U.S.C. § 78aa(a). The federal court is thus uniquely positioned to address the issues presented,
11 and only this Court can enter a stay that protects the class and serves judicial economy.
12 Plaintiffs’ argument that their “choice of forum” should not be disturbed (6/3/20 Opp. at 16,
oq, 13 18) ignores two critical points: (1) they do not even claim to be California residents (see Celotex
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14 Corp. v. Am. Ins. Co., 199 Cal. App. 3d 678, 683 (1987)); and (2) a named plaintiffs choice of
os
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ze 15 forum is given far less deference in class actions (see, e.g., In re Merit Med. Sys., Inc. Sec. Litig.,
16 2020 WL 2611256, at *2 (C.D. Cal. May 11, 2020)).? In short, the forum choice of non-California
17 plaintiffs in a class action carries little (if any) weight, particularly where the alternative forum is a
18 few blocks away. See W. Va. Laborers, 2012 WL 12806605, at *1.
19 4 The Location of the Federal Action Indisputably Weighs in Favor of a Stay
20 The assertion of 1933 Act claims in the Northern District of California only strengthens this
21 Court’s prior finding that “the location of the federal action does favor a stay.” Order on Mot. to
22 Stay at 8; see also Def. Mem. at 19. Plaintiffs make no attempt to argue otherwise.
23
5 Contrary to plaintiffs’ suggestion (6/3/20 Opp. at 17), nothing in Krieger v. Atheros Commc’ns,
24 Inc., 776 F. Supp. 2d 1053 (N.D. Cal. 2011), supports their argument. That case stayed state-law
claims (not federal claims) under the Colorado River doctrine where duplicative state-law claims
25 were pending in Delaware. Jd. at 1061-63. A decisive factor was that “Delaware corporate law
provide[d] the rule of decision on the merits of [the] state-law class action claims” (id. at 1063),
26 which is not relevant here. Moreover, the stay in Krieger did not result in dueling class actions; only
plaintiff's individual federal claims remained to be litigated in federal court. Jd. at 1063.
27
° The cases on which plaintiffs rely on (6/3/20 Opp. at 10) all involve individual actions — and in one,
28 a California resident’s securities claims were stayed pending resolution of duplicative litigation in a
federal court in New York. Berg v. MTC Elecs. Tech. Co., 61 Cal. App. 4th 349, 363 (1998).
REPLY ISO RENEWED MOTION TO STAY 13 LEAD CASE NO. 19CV348674
PROCEEDINGS
5. Plaintiffs Do Not Demonstrate Any Actual Prejudice from a Stay
The cursory argument that plaintiffs will be “severely” prejudiced by a stay (6/3/20 Opp. at
18) is unavailing. They grossly overstate the differences in the relative stages of the cases, pulling
out of thin air the claim that there will be “another amended complaint” in the Federal Action (id. at
15) —an assertion devoid of factual basis. Jordan Decl. §9.'° And any purported delay is far
outweighed by the waste, prejudice, and confusion to the very same class members (and the very
same defendants). See Sec. III.B.1, supra; see also Schneider, 183 Cal. App. 3d at 1349-50.
Plaintiffs also ignore that they are members of the 1933 Act class in federal court, where
their interests are fully protected. They “will not be prejudiced by a stay because [their] interests
10 are represented by” the lead plaintiffs in that action. Buford v. Dignity Health, No. CGC-19-575930
11 (Cal. Super. Ct. Aug. 1, 2019); see also Greene v. Granite Constr. Inc., 2019 WL 6327229, at *3
12 (N.D. Cal. Nov. 26, 2019) (“A lead plaintiff is a fiduciary for the investor class.”).
oq, 13 Moreover, plaintiffs’ claims of prejudice ring hollow given their refusal to seek statutory lead
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14 plaintiff status, which would have given them an opportunity to avoid the adverse effects of
os
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ze 15 duplicative litigation and participate fully in moving the Federal Action forward expeditiously. See
16 Def. Mem. at 18. As noted above, plaintiffs make no effort to explain their inaction.
17 Cc. Plaintiffs’ Reliance on Cyan Remains Misplaced
18 Finally, the Opposition cites to Cyan, Inc. v. Beaver Cty. Emps. Ret. Fund, 138 S. Ct. 1061,
19 1069 (2018), no fewer than a dozen times, even though the case has no bearing on the Court’s
20 discretion to stay this action. Cyan merely held that 1933 Act claims cannot be removed to federal
21 court under the Securities Litigation Uniform Standards Act. /d. at 1078. Nothing in that case
22 suggests plaintiffs have an unfettered right to proceed in state court — as evidenced by Arlo, a post-
23 Cyan decision in which Judge Kuhnle granted a motion to stay after applying the Caiafa factors.
24 Also of note is the Delaware Supreme Court’s recent decision in Salzberg v. Sciabacucchi,
25 2020 WL 1280785 (Del. Mar. 18, 2020), which held that corporations can require 1933 Act claims
26 to be brought in federal court via bylaws and corporate charters. /d. at *10. Far from finding that
27
'0 Klin possesses the largest financial interest in the Federal Action and will likely be appointed lead
28 plaintiff (see Jordan Decl. {ff 7, 8), but he has never suggested filing another amended complaint or
dropping Jones and Lenick as co-plaintiffs. /d. [J 9, 10.
REPLY ISO RENEWED MOTION TO STAY 14 LEAD CASE NO. 19CV348674
PROCEEDINGS
Cyan gives plaintiffs carte blanche to litigate duplicative 1933 Act claims in state court, Salzberg
noted the troubling rise in parallel litigation post-Cyan and stressed that a federal forum provision is
one way to prevent the resulting “costs, 2 6s 1 inefficiencies” and “inconsistent” results. Id. at *5.''! As
Arlo demonstrates, a discretionary stay under California law is another way to achieve that result.
D. The Opposition Also Fails to Show That a Stay Pending Resolution of the
Pleadings in the Federal Action Would Be Improper
Plaintiffs are also unable to offer a cogent response to the alternative request for a limited stay
pending resolution of the pleadings in the Federal Action. See Def. Mem. at 19-20. Instead, they
simply assert the PSLRA’s mandatory discovery stay is a “procedural” matter that does not apply in
state court. See 6/3/20 Opp. at 19-20. Setting aside that plaintiffs are wrong as a matter of law,'?
10
they miss the point: this Court may issue a limited stay to prevent inconsistent rulings, especially as
11
to the duplicative 1933 Act claims. Def. Mem. at 19-20; Marks v. Cty. of Los Angeles, 2000 WL
12
35568348, at *1 (Cal. Super. Ct. Nov. 2, 2002). Nor do plaintiffs contest that: (1) this Court may
oq, 13
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14
os Federal Action; and (2) a protective order is insufficient to address this concern. Def. Mem. at 20;
wie
ze 15
Schimmel Family Trust v. Morgenthaler, 2001 WL 35965061, at *1 (Cal. Super. Ct. Nov. 7, 2001).
16
17 IV. CONCLUSION
For the foregoing reasons, the Court should stay this action pending resolution of the Federal
18
Action, or, alternatively, until resolution of the pleadings in the Federal Action.
19
20 Dated: June 19, 2020 FENWICK & WEST LLP
21 By /s/ Kevin P. Muck
Kevin P. Muck
22
Attorneys for Defendants Cloudera, Inc., Thomas J. Reilly,
23 Jim Frankola, Priya Jain, Michael A. Olson, Martin I.
Cole, Kimberly Hammonds, Rosemary Schooler, Steve J.
24 Sordello, Michael A. Stankey, Robert Bearden, Paul
Cormier, Peter Fenton and Kevin Klausmeyer
25
26 "| Significantly, plaintiffs cite two recent California decisions (Jasnoch Decl., Exs. A, B) in which
courts stayed 1933 Act claims pending a decision in Sa/zberg — something that would have been
27 wholly unnecessary if Cyan actually gave plaintiffs free rein to litigate in state court.
28 "2 See, e.g., Milano v. Auhll, 1996 WL 33398997, at *4 (Cal. Super. Ct. Oct. 2, 1996); In re
Everquote, Inc. Sec. Litig., 2019 WL 3686065, at *8 (N.Y. Sup. Ct. Aug. 7, 2019).
REPLY ISO RENEWED MOTION TO STAY 15 LEAD CASE NO. 19CV348674
PROCEEDINGS
Preview
19CV348674 Santa Clara — Civil KEVIN P. MUCK (CSB. No. 120918) Electronically Filed kmuck@fenwick.com by Superior Court of CA, DEAN S. KRISTY (CSB No. 157646) County of Santa Clara, dkristy@fenwick.com on 6/19/2020 12:19 PM MARIE C. BAFUS (CSB No. 258417) Reviewed By: R. Walker mbafus@fenwick.com ALISON C. JORDAN (CSB No. 311081) Case #19CV348674 ajordan@fenwick.com Envelope: 4479842 FENWICK & WEST LLP 555 California Street, 12th Floor San Francisco, CA 94104 Telephone: (415) 875-2300 Facsimile: (415) 281-1350 Attorneys for Defendants Cloudera, Inc., Thomas J. Reilly, Jim Frankola, Priya Jain, Michael A. Olson, Martin I. Cole, Kimberly Hammonds, Rosemary Schooler, Steve J. Sordello, 10 Michael A. Stankey, Robert Bearden, Paul Cormier, Peter Fenton and Kevin Klausmeyer 11 12 oq, 13 SUPERIOR COURT OF THE STATE OF CALIFORNIA Re A Be Be 14 COUNTY OF SANTA CLARA oe xz és wie ze 15 IN RE CLOUDERA, INC. SECURITIES Lead Case No. 19CV348674 16 LITIGATION CLASS ACTION 17 REPLY MEMORANDUM IN SUPPORT 18 OF CLOUDERA DEFENDANTS’ RENEWED MOTION TO STAY 19 This Document Relates to: PROCEEDINGS ALL ACTIONS 20 Date: June 26, 2020 Time: 9:00 a.m. 21 Dept: 1 Judge: The Honorable Brian C. Walsh 22 Trial Date: None Set 23 Date Action Filed: June 7, 2019 24 25 26 27 28 REPLY ISO RENEWED MOTION TO STAY LEAD CASE NO. 19CV348674 PROCEEDINGS TABLE OF CONTENTS Page INTRODUCTION II CONTRARY TO PLAINTIFFS’ SUGGESTION, THE PROCEDURAL REQUIREMENTS OF SECTION 1008(B) HAVE BEEN FULLY SATISFIED........... Ill. THE OPPOSITION CONFIRMS THAT A STAY IS PROPER............... A Plaintiffs Cannot Contest that the Principal Basis on which they Previously Opposed a Stay — that the Two Actions Were Not “Substantially Identical” — Is No Longer Applicable. The Opposition Is Unable to Overcome Defendants’ Showing that the Caiafa Factors Weigh Heavily in Favor of a Stay ............ 10 11 1 There is No Real Dispute that Concurrent Litigation Will Result in Waste and Prejudice, and Will Not Serve the Interests of the 12 Putative Class oq, 13 There Is No Real Effort to Dispute the Inevitability of Unseemly Re A Be Conflicts 11 14 os wie Plaintiffs Cannot Seriously Dispute the Superiority of the Federal ze 15 Forum 13 16 The Location of the Federal Action Indisputably Weighs in Favor 17 of a Stay. 13 18 5 Plaintiffs Do Not Demonstrate Any Actual Prejudice from a Stay 14 19 Plaintiffs’ Reliance on Cyan Remains Misplaced.......... 14 20 The Opposition Also Fails to Show That a Stay Pending Resolution of the Pleadings in the Federal Action Would Be Improper............. 15 21 IV. CONCLUSION 15 22 23 24 25 26 27 28 REPLY ISO RENEWED MOTION TO STAY LEAD CASE NO. 19CV348674. PROCEEDINGS TABLE OF AUTHORITIES Page(s) CASES Berg v. MTC Elecs. Tech. Co., 61 Cal. App. 4th 349 (1998) 13 Boyd v. Global Vision Prods., Inc., 2003 WL 25547969 (Cal. Super. Ct. Sept. 23, 2003) 10 Buford v. Dignity Health, No. CGC-19-575930 (Cal. Super. Ct. Aug. 1, 2019) 14 Caiafa Prof’! Law Corp. v. State Farm Fire & Cas. Co. 15 Cal. App. 4th 800 (1993) . . passim 10 Celotex Corp. v. Am. Ins. Co., 199 Cal. App. 3d 678 (1987) 13 11 Clark’s Fork Reclamation Dist. v. Johns, 12 259 Cal. App. 2d 366 (1968) 13 oq, 13 Cyan, Inc. v. Beaver Cty. Emps. Ret. Fund, Re A 138 S. Ct. 1061 (2018) 14, 15 Be Be 14 oe Deauville Rest., Inc. v. Superior Court, xz os wie 90 Cal. App. 4th 843 (2001) ze 15 16 Fairley v. WIS Holdings Corp., 2008 WL 7748851 (Cal. Super. Ct. Dec. 16, 2008) 10 17 Gauthier v. Apple Inc., 18 2014 WL 1998003 (Cal. Super. Ct. Feb. 21, 2014) 11 19 Graham v. Hansen, 128 Cal. App. 3d 965 (1982). 20 Greene v. Granite Constr. Inc., 21 2019 WL 6327229 (N.D. Cal. Nov. 26, 2019) 14 22 Harper v. Smart Techs., Inc., 2013 WL 9745482 (Cal. Super. Ct. May 17, 2013) 10 23 Hawkins v. TACA Int’l Airlines, S.A 24 223 Cal. App. 4th 466 (2014) 11 25 In re Arlo Techs., Inc. Sec. Litig., No. 2018-1-CV-339231 (Cal. Super. Ct. June 21, 2019) passim 26 In re Everquote, Inc. Sec. Litig., 27 2019 WL 3686065 (N.Y. Sup. Ct. Aug. 7, 2019) . 15 28 In re Gemstar-TV Guide Int'l, Inc. Sec. Litig., 209 F.R.D. 447 (C.D. Cal. 2002) 12 REPLY ISO RENEWED MOTION TO STAY LEAD CASE NO. 19CV348674 PROCEEDINGS TABLE OF AUTHORITIES (Continued) Page(s) In re Merit Med. Sys., Inc. Sec. Liti 2020 WL 2611256 (C.D. Cal. May 11, 2020) 13 In re Restoration Robotics, Inc. Sec. Litig., 417 F. Supp. 3d 1242 (N.D. Cal. 2019) 11 In re Versata, Inc. Sec. Litig. 2001 WL 34012374 (N.D. Cal. Aug. 20, 2001). 12 Krieger v. Atheros Commc’ns, Inc. 776F. Supp. 2d 1053 (N.D. Cal. 2011) 13 Lucido v. Superior Court, 10 51 Cal. 3d 335 (1990) 12 11 Marks v. Cty. of Los Angeles. 2000 WL 35568348 (Cal. Super. Ct. Nov. 2, 2002) 15 12 Milano v. Auhll, oq, 13 1996 WL 33398997 (Cal. Super. Ct. Oct. 2, 1996) 15 Re A Be Be 14 Salzberg v. Sciabacucchi oe xz os 2020 WL 1280785 (Del. Mar. 18, 2020) 14, 15 wie ze 15 Schimmel Family Trust v. Morgenthaler, 16 2001 WL 35965061 (Cal. Super. Ct. Nov. 7, 2001) 15 17 Schneider v. Vennard, 183 Cal. App. 3d 1340 (1986) 10, 14 18 Simmons v. Superior Court, 19 96 Cal. App. 2d 119 (1950) 10 20 Staehrv. Duffield, 2003 WL 25485513 (Cal. Super. Ct. June 18, 2003) 10 21 UAS Memt., Inc. v Mater Misericordiae ee 5 22 169 Cal. App. 4th 357 (2009)... 23 W. Va. Laborers’ Trust Fund v. STEC, Inc. 2012 WL 12806605 (Cal. Super. Ct. Feb. 17, 2012) 9, 11, 13 24 Wiltjer v. BigBand Networks, Inc. 25 No. CGC-07-469661 (Cal. Super. Ct. Aug. 11, 2008) 26 27 28 REPLY ISO RENEWED MOTION TO STAY LEAD CASE NO. 19CV348674 PROCEEDINGS TABLE OF AUTHORITIES (Continued) Page(s) STATUTES AND RULES California Code of Civil Procedure Section 1008(b) 6, 7,8 Securities Act of 1933 Section 27(a)(3), 15 U.S.C. § 77z-1(a)(3). 10 Securities Exchange Act of 1934 Section 27(a), 15 U.S.C. § 78aa(a). 13 10 11 12 oq, 13 Re A Be 14 os wie ze 15 16 17 18 19 20 21 22 23 24 25 26 27 28 REPLY ISO RENEWED MOTION TO STAY LEAD CASE NO. 19CV348674 PROCEEDINGS IL INTRODUCTION In their moving papers, the Cloudera Defendants! established that new facts and circumstances warrant a stay of this case pending resolution of the parallel Federal Action, to avoid needless costs, confusion and prejudice and to prevent “unseemly conflicts” between courts. Nothing in plaintiffs’ opposition brief (“6/3/20 Opp.”) justifies a contrary conclusion. Plaintiffs instead offer a series of arguments that mischaracterize the record, ignore governing law, and ultimately defy common sense. Tellingly, plaintiffs try to prevent the Court from even considering the merits of the renewed motion, arguing that the procedural requirements have not been met. That argument is baseless. As tequired by Code Civ. Proc. § 1008(b), defendants’ motion is indisputably based on facts that are (in 10 the words of the statute) “new or different”: the addition of duplicative 1933 Act class claims in the 11 Federal Action and Judge Koh’s implementation of the 1933 Act’s mandatory lead plaintiff process. 12 Underscoring that point, plaintiffs have now abandoned the primary argument they advanced oq, 13 in opposing a stay last fall: that this case and the Federal Action were not “substantially identical.” Re A Be 14 Plaintiffs recognize that, with the Federal Action’s addition of claims on behalf of the same class, os wie ze 15 under the same statutory sections, against the same defendants and based on the same Registration 16 Statement, they can no longer argue there are meaningful differences between the cases. 17 Plaintiffs are thus left to argue the Court should not exercise its discretion to enter a stay, but 18 that effort is unavailing. Given that the same class claims in this case are now asserted in the Federal 19 Action, the relevant factors under California law — i.e., preventing wasteful duplicative litigation and 20 confusion to the class, avoiding what are now certain conflicts, the superiority of the local federal 21 forum and the absence of prejudice to plaintiffs — all weigh heavily in favor of a stay. That is the 22 conclusion Judge Kuhnle reached in Jn re Arlo Techs., Inc. Sec. Litig., No. 2018-1-CV-339231 23 (Cal. Super. Ct. June 21, 2019) (“Arlo”), a case directly on point. Plaintiffs mention Ar/o only in 24 passing and offer no cogent rationale for declining to follow Judge Kuhnle’s analysis and holding. 25 While plaintiffs may not relish deferring to their federal counterparts, that does not justify the 26 costs, burdens and confusion created by duplicative litigation on the same class claims — especially 27 28 ' All defined terms have the same meaning as in the opening brief (““Def. Mem.”). The Declaration of Alison C. Jordan accompanying this reply memorandum is referred to as the “Jordan Decl.” REPLY ISO RENEWED MOTION TO STAY 6 LEAD CASE NO. 19CV348674 PROCEEDINGS because they could have moved for appointment as lead plaintiffs in the Federal Action under the 1933 Act. They did not do so, for reasons they never explain. Having instead made a tactical decision to let other shareholders seek that statutory designation, plaintiffs cannot now use that as an excuse for denial of a stay — and, in the process, undermine Judge Koh’s oversight authority under the 1933 Act and set this case irretrievably on a collision course with the Federal Action. In sum, governing law and common sense dictate that this case be stayed pending resolution of the Federal Action (or, at the very least, pending resolution of pleading challenges in that action). IL. CONTRARY TO PLAINTIFFS’ SUGGESTION, THE PROCEDURAL REQUIREMENTS OF SECTION 1008(B) HAVE BEEN FULLY SATISFIED 10 The Opposition argues that the procedural requirements of Code Civ. Proc. § 1008(b) have not 11 been met (6/3/20 Opp. at 11-13), but that argument is meritless. As discussed in the moving papers 12 (Def. Mem. at 10-11), the key procedural requirement is straightforward: defendants must identify oq, 13 the “new or different facts [or] circumstances” on which they ask the Court to grant relief that was Re A Be 14 previously denied. Code Civ. Proc. § 1008(b). Defendants complied with this requirement, os wie ze 15 specifying that the renewed motion is based on: (1) the filing of a new federal complaint in February 16 2020 that asserted for the first time 1933 Act claims entirely duplicative of those in this action; and 17 (2) Judge Koh’s March 2020 decision to reopen the statutory lead plaintiff process to address the 18 duplicative 1933 Act claims. See Def. Mem. at 6-7, 9-11; see also Muck Decl. ff 8-9. 19 Notably, plaintiffs do not contest that these are “new or different facts [or] circumstances,” 20 that they were properly identified in the moving papers. See 6/3/20 Opp. at 11. Instead, plaintiffs 21 try to rewrite the statute by arguing they are not “significant new facts.” Jd. (emphasis added). Not 22 only is that contention frivolous — plaintiffs argued last fall that the most important fact militating 23 against a stay was the absence of 1933 Act claims in federal court (10/4/19 Opp. at 11-16), so the 24 new facts clearly alter the landscape of this case — the qualifier “significant” is not found in Section 25 1008(b). Plaintiffs’ argument is thus inaccurate, inconsistent with the statute, and unsupported by 26 case law. It also improperly conflates Section 1008(b)’s threshold procedural requirement with the 27 substantive merits of the renewed motion. See Graham v. Hansen, 128 Cal. App. 3d 965, 971-72 28 (1982) (once the Court determines the motion is supported by new facts, it addresses the merits). REPLY ISO RENEWED MOTION TO STAY 7 LEAD CASE NO. 19CV348674 PROCEEDINGS Because there is no dispute that defendants identify new facts and circumstances, any concern about “seriatim motions” (6/3/20 Opp. at 7, 14) is a red herring. See Deauville Rest., Inc. v. Superior Court, 90 Cal. App. 4th 843, 851-52 (2001). And the protest that defendants advance arguments made previously (6/3/20 Opp. at 11-12) in no way undermines the renewed motion; to the contrary, the entire point of Section 1008(b) is to permit a party to “renew/[] the earlier motion by submission ofa new motion raising the same issues.” UAS Mgmt., Inc. v Mater Misericordiae Hosp., 169 Cal. App. 4th 357, 367 (2009) (emphasis added); see also Deauville, 90 Cal. App. 4th at 848-49. Thus, plaintiffs’ attempt to avoid the merits of the renewed motion on procedural grounds must be rejected. Til. THE OPPOSITION CONFIRMS THAT A STAY IS PROPER 10 A. Plaintiffs Cannot Contest that the Principal Basis on which they Previously Opposed a Stay — that the Two Actions Were Not “Substantially Identical” — Is 11 No Longer Applicable 12 When plaintiffs successfully opposed a stay last fall, their primary argument was that the two oq, 13 cases were not “substantially identical” because there were no 1933 Act claims in the Federal Action. Re A Be 14 10/4/19 Opp. at 11-16. As noted in the moving papers (Def. Mem. at 12), plaintiffs relied on nine os wie ze 15 differences (claims, plaintiffs, defendants, classes, time periods, methods of acquiring stock, alleged 16 misstatements, legal theories and elements, and standards) — all based on distinctions between 1933 17 Act and 1934 Act claims, which plaintiffs argued were dispositive. 10/4/19 Opp. at 11. Plaintiffs do 18 not dispute that these supposedly dispositive differences no longer exist. Indeed, the argument that 19 the cases are not “substantially identical” has been dropped entirely — and while plaintiffs protest 20 half-heartedly that it is “misleading” to suggest they relied so heavily on the argument before (6/3/20 21 Opp. at 12-13 n.2), that bit of revisionism is quickly belied by a review of their prior opposition. 22 Plaintiffs also try to minimize the extent to which this linchpin argument was accepted by the 23 Court. See 6/3/20 Opp. at 12. To be sure, the Court identified a number of factors in declining to 24 enter a stay last fall, but made clear it agreed with plaintiffs that: (1) the absence of 1933 Act claims 25 in the Federal Action made the cases different, with distinct standards and theories of liability; 26 (2) those differences meant “the federal court’s rulings on motions to dismiss may or may not 27 address issues relevant” to this case; and (3) also as a result of those differences, “the outcome of the 28 federal case may fail to shed light on the issues here.” See Order on Mot. to Stay at 7-8. The addition REPLY ISO RENEWED MOTION TO STAY LEAD CASE NO. 19CV348674 PROCEEDINGS of 1933 Act claims in the Federal Action means those conclusions are no longer applicable. See Arlo at 5 (staying state action in favor of broader federal action where both asserted 1933 Act claims). Thus, it is irrelevant that defendants argued last year that then-existing differences in the two cases were “not significant” and that “some overlap” was enough to warrant a stay. See 6/3/20 Opp. at 11-12. The Court rejected those arguments based on facts that have since changed dramatically. Muck Decl. § 8. Nor does it help plaintiffs that the Court considered the “possibility” of greater similarities in the future. 6/3/20 Opp. at 12. What was once a mere “possibility” is now reality, and that same reality is what Judge Kuhnle relied upon in granting a stay in Arlo. See Arlo at 4-5. Specifically, the parallel actions in Ar/o arose out of “the same facts and circumstances,” 10 asserted 1933 Act claims on behalf of the same class against common defendants, and challenged the 11 same registration statement. Arlo at 4-5. Those factors supported a stay of the state court action to 12 prevent waste, conflicts, and prejudice to the putative class (id. at 5), and they are equally applicable oq, 13 in this case. In fact, the state and federal actions here are even more similar than in Arlo: all fifteen Re A Be 14 defendants are identical (unlike Ar/o), and the same 1933 Act claims are asserted in both actions os wie ze 15 (unlike Ar/o, where there was no Section 12(a)(2) claim in the federal case). See Arlo at 4. 16 Plaintiffs have no answer to Arlo, merely asserting in passing that it is distinguishable because 17 the instant case is purportedly “at least one year ahead of the Federal Action.” 6/3/20 Opp. at 16. 18 That assertion is pulled from thin air, erroneous, and insufficient to justify the prejudice and conflicts 19 caused by duplicative class litigation. See Secs. II.B.1 and II.B.2, infra; see also W. Va. Laborers’ 20 Trust Fund v. STEC, Inc., 2012 WL 12806605, at *1 (Cal. Super. Ct. Feb. 17, 2012) (staying 1933 21 Act claims where “the key issue” in both cases was “whether the statements in the offerings were 22 false and misleading”); Wiltjer v. BigBand Networks, Inc., No. CGC-07-469661, at *1 (Cal. Super. 23 Ct. Aug. 11, 2008) (staying 1933 Act claims in favor of action in Northern District of California). 24 B The Opposition Is Unable to Overcome Defendants’ Showing that the Caiafa Factors Weigh Heavily in Favor of a Stay 25 1 There Is No Real Dispute that Concurrent Litigation Will Result in Waste 26 and Prejudice, and Will Not Serve the Interests of the Putative Class 27 Plaintiffs do not begin to refute defendants’ showing that the first factor identified in Caiafa 28 Prof’! Law Corp. v. State Farm Fire & Cas. Co., 15 Cal. App. 4th 800, 804 (1993), weighs in favor REPLY ISO RENEWED MOTION TO STAY LEAD CASE NO. 19CV348674 PROCEEDINGS of a stay. See Def. Mem. at 15. Their only response is to assert (without support) that “this Action was not designed to harass” defendants. 6/3/20 Opp. at 14. That argument — nothing more than a bare conclusion — disregards that the law looks beyond plaintiffs’ subjective motivations to whether duplicative suits may result in “vexation, oppression and harassment” or “unnecessary litigation.” Def. Mem. at 15; see also Simmons v. Superior Court, 96 Cal. App. 2d 119, 124-25 (1950); Fairley v. WIS Holdings Corp., 2008 WL 7748851 (Cal. Super. Ct. Dec. 16, 2008). Notably, Judge Kuhnle granted the motion to stay in Arlo without any finding of a subjective intent to harass. Unable to tespond to this point or the cited authorities, plaintiffs simply ignore them. Putting aside that subjective intent is not the standard, unsupported denials of an intent to 10 harass are difficult to reconcile with an attempt to hurtle forward with needlessly duplicative class 11 litigation. See Boyd v. Global Vision Prods., Inc., 2003 WL 25547969, at *1-2 (Cal. Super. Ct. Sept. 12 23, 2003) (existence of two class actions in different jurisdictions “suggests that this might be oq, 13 multiple litigation designed to harass defendant.”). Concerns in that regard are made more acute by Re A Be 14 plaintiffs’ refusal to coordinate with their federal counterparts and their refusal to participate in the os wie ze 15 statutory lead plaintiff process (see Muck Decl. {J 10-13) — refusals they make no effort to explain, 16 let alone justify.” In any event, plaintiffs ignore the detrimental impact on the putative class and 17 make no attempt to address the authorities holding that a stay will prevent prejudice and confusion to 18 class members. See Arlo at 5 (“It is not in the putative class members’ interest for there to be 19 duplicative litigation’); see also Schneider v. Vennard, 183 Cal. App. 3d 1340, 1350 (1986); Harper 20 v. Smart Techs., Inc., 2013 WL 9745482, at *2 (Cal. Super. Ct. May 17, 2013). 21 Nor can plaintiffs avoid a stay by mischaracterizing this action as “first-filed.” 6/3/20 Opp. at 22 14-15.3 Not only was the Federal Action brought first, the order of filing new claims means little 23 when the addition of claims is permitted under the PSLRA (provided that adequate notice is given). 24 See 15 U.S.C. § 77z-1(a)(3); see also Staehr v. Duffield, 2003 WL 25485513 (Cal. Super. Ct. June 25 ? Plaintiffs’ glib (and unexplained) characterization of pre-motion efforts to engage in discussion on 26 these issues as “[p]ure gamesmanship” (6/3/20 Opp. at 13 n.2), and the inability to dispute their stonewalling (Muck Decl. ff 10-13, Exs. G-J), also suggest a troubling indifference to the burdens 27 that plaintiffs seek to impose on defendants, the Court, and putative class members. 28 3 Unlike this action, the inapposite cases plaintiffs cite (Jasnoch Decl., Exs. A and B) involve state actions initiated well before parallel federal securities litigation. REPLY ISO RENEWED MOTION TO STAY 10 LEAD CASE NO. 19CV348674 PROCEEDINGS 18, 2003) (staying case and holding that it “is not particularly relevant” which shareholder action was filed first). In sum, plaintiffs fail to controvert defendants’ showing under the first Caiafa factor. 2. There Is No Real Effort to Dispute the Inevitability of Unseemly Conflicts With duplicative 1933 Act claims pending on behalf of the same class and against the same defendants in two courts, the second Caiafa factor — avoiding “unseemly conflicts” — also supports a stay. Def. Mem. at 16-18. In response, plaintiffs cite the Court’s finding from eight months ago that conflicts were “unlikely” and blithely assert “nothing of substance has changed” since then. 6/3/20 Opp. at 12, 16. Of course, the entire nature of the Federal Action has changed; with identical classes now asserting the same claims against an identical group of defendants, conflicts are inevitable. 10 Plaintiffs are unable to explain how conflicts can be avoided when two courts will decide 11 (among other things) whether the same class is entitled to recovery from the same defendants under 12 the same statutes based on the same Registration Statement. See Caiafa, 15 Cal. App. 4th at 807 oq, 13 (“The potential for ‘unseemly conflict’ is great, unless both forums should reach the exact same Re A Be 14 resolution of the issues.”). In these circumstances, California law recognizes that a stay is proper to os wie ze 15 prevent a collision between the two courts. See Arlo at 5; W. Va. Laborers, 2012 WL 12806605, at 16 *1; Gauthier v. Apple Inc., 2014 WL 1998003, at *2 (Cal. Super. Ct. Feb. 21, 2014). 17 Plaintiffs try to sidestep this conclusion by suggesting the claims are subject to a different (and 18 presumably more stringent) pleading standard in federal court (see 6/3/20 Opp. at 16), but that is 19 erroneous. Non-fraud claims under the 1933 Act are not subject to heightened pleading standards in 20 federal court. See, e.g., In re Restoration Robotics, Inc. Sec. Litig., 417 F. Supp. 3d 1242, 1257 21 (N.D. Cal. 2019).> Even if that were not the case, differing “pleading standards” would not outweigh 22 the other relevant factors. See Arlo at 5. Furthermore, plaintiffs have no answer to the conflicts that 23 would arise beyond the pleading stage (e.g., discovery, class certification, class notice, damages and 24 summary judgment). See Def. Mem. at 18. And even if decisions in one court may not be subject to 25 ‘ Plaintiffs do not address (let alone distinguish) W. Va. Laborers or Gauthier, although those cases 26 were discussed in the moving papers. Instead, plaintiffs cite a New York trial court decision (6/3/20 Opp. at 16) that does not apply California law and — unlike Arlo, W. Va. Laborers and Gauthier — 27 involved parallel federal proceedings in a distant state (Illinois). See Jasnoch Decl., Ex. C. 28 5 If anything, the pleading standard is more onerous in this Court, where statutory claims must be alleged with particularity. Hawkins v. TACA Int’l Airlines, S.A., 223 Cal. App. 4th 466, 478 (2014). REPLY ISO RENEWED MOTION TO STAY 11 LEAD CASE NO. 19CV348674 PROCEEDINGS “collateral estoppel effect” in the other forum (6/3/20 Opp. at 16), that would not prevent the burden, confusion, and threat to “[p]ublic confidence in the integrity of the judicial system” caused by “two tribunals render[ing] inconsistent [rulings].” Lucido v. Superior Court, 51 Cal. 3d 335, 347 (1990). Perhaps the most imminent conflicts relate to Judge Koh’s ongoing process (mandated by the 1933 Act) to appoint a lead plaintiff. Def. Mem. at 18. Plaintiffs cannot dispute that process is in place to “ensure that the goals of the PSLRA are effectuated.” Muck Decl., Ex. E at 6. Yet they try to undermine Judge Koh’s statutory authority and the PSLRA’s goals — including efficient oversight of 1933 Act class claims and prevention of “lawyer-driven” litigation® — by barreling forward with the same class claims in this Court. Underscoring the point, plaintiffs improperly ask this Court to 10 tule on an issue before Judge Koh: that one of the federal plaintiffs lacks standing to pursue 1933 11 Act claims. 6/3/20 Opp. at 13, 17.’ These are precisely the sorts of “unseemly conflicts” — directly 12 pitting one tribunal against another — that should be avoided. Caiafa, 15 Cal. App. 4th at 807. oq, 13 Not surprisingly, then, plaintiffs make no effort to address the confusion and prejudice that Re A Be 14 will exist after the lead plaintiff process is concluded, when two sets of plaintiffs — one with the os wie ze 15 statutory imprimatur of the 1933 Act’s “lead plaintiff designation,” the other without it — both claim 16 to represent the same class for the purpose of litigating identical claims. Moreover, if plaintiffs are 17 (as they seem to suggest) the best equipped to litigate 1933 Act class claims, they could have (and 18 should have) moved for appointment as lead plaintiffs. Def. Mem. at 12-13, 19. In short, plaintiffs 19 could have avoided unseemly conflicts, but declined to do so — for reasons they refuse to explain. 20 Finally, the notion that Judge Koh could stay part of the Federal Action (6/3/20 Opp. at 17) is 21 anon-starter. Not only would that be contrary to the statutory lead plaintiff process, but plaintiffs 22 cite no authority to suggest a federal court may issue a stay to permit a federal claim to be litigated in 23 6 See, e.g., In re Versata, Inc. Sec. Litig., 2001 WL 34012374, at *2 (N.D. Cal. Aug. 20, 2001). 24 7 In addition to pitting the two courts against each other, plaintiffs’ argument erroneously conflates 25 the separate issues of standing and lead plaintiff status under the PSLRA. In the Federal Action, the presumptive lead plaintiff (Klin) added two plaintiffs (Jones and Lenick) who acquired shares in the 26 Hortonworks merger; Jones and Lenick remain plaintiffs in the Federal Action. Jordan Decl. {ff 3, 7. As Judge Koh has stated, she will decide whether this is sufficient for lead plaintiff purposes. Ex. E 27 at 6n.1 (“[I]t is possible that one lead plaintiff may adequately represent all putative class members, because ‘the PSLRA presumes that the lead plaintiff can vigorously pursue all available causes of 28 action against all possible defendants under all available legal theories.””) (quoting In re Gemstar-TV. Guide Int'l, Inc. Sec. Litig., 209 F.R.D. 447, 450 (C.D. Cal. 2002)). REPLY ISO RENEWED MOTION TO STAY 12 LEAD CASE NO. 19CV348674 PROCEEDINGS state court — especially when there would still be two class actions proceeding simultancously.* 3 Plaintiffs Cannot Seriously Dispute the Superiority of the Federal Forum The new facts have also strengthened the third Caiafa factor, which considers whether the federal court can best determine the rights of the parties. 15 Cal. App. 4th at 804. The 6/3/20 Opp. not only ignores the expertise of federal courts in deciding issues of federal law (see Clark’s Fork Reclamation Dist. v. Johns, 259 Cal. App. 2d 366, 369 (1968)), but also overlooks that the federal court now has jurisdiction over all claims under the 1933 and 1934 Acts. See Def. Mem. at 18-19. As the moving papers explained and plaintiffs concede (6/3/20 Opp. at 17), federal courts have exclusive jurisdiction over 1934 Act claims such that Judge Koh cannot stay the action before her. 10 15 U.S.C. § 78aa(a). The federal court is thus uniquely positioned to address the issues presented, 11 and only this Court can enter a stay that protects the class and serves judicial economy. 12 Plaintiffs’ argument that their “choice of forum” should not be disturbed (6/3/20 Opp. at 16, oq, 13 18) ignores two critical points: (1) they do not even claim to be California residents (see Celotex Re A Be 14 Corp. v. Am. Ins. Co., 199 Cal. App. 3d 678, 683 (1987)); and (2) a named plaintiffs choice of os wie ze 15 forum is given far less deference in class actions (see, e.g., In re Merit Med. Sys., Inc. Sec. Litig., 16 2020 WL 2611256, at *2 (C.D. Cal. May 11, 2020)).? In short, the forum choice of non-California 17 plaintiffs in a class action carries little (if any) weight, particularly where the alternative forum is a 18 few blocks away. See W. Va. Laborers, 2012 WL 12806605, at *1. 19 4 The Location of the Federal Action Indisputably Weighs in Favor of a Stay 20 The assertion of 1933 Act claims in the Northern District of California only strengthens this 21 Court’s prior finding that “the location of the federal action does favor a stay.” Order on Mot. to 22 Stay at 8; see also Def. Mem. at 19. Plaintiffs make no attempt to argue otherwise. 23 5 Contrary to plaintiffs’ suggestion (6/3/20 Opp. at 17), nothing in Krieger v. Atheros Commc’ns, 24 Inc., 776 F. Supp. 2d 1053 (N.D. Cal. 2011), supports their argument. That case stayed state-law claims (not federal claims) under the Colorado River doctrine where duplicative state-law claims 25 were pending in Delaware. Jd. at 1061-63. A decisive factor was that “Delaware corporate law provide[d] the rule of decision on the merits of [the] state-law class action claims” (id. at 1063), 26 which is not relevant here. Moreover, the stay in Krieger did not result in dueling class actions; only plaintiff's individual federal claims remained to be litigated in federal court. Jd. at 1063. 27 ° The cases on which plaintiffs rely on (6/3/20 Opp. at 10) all involve individual actions — and in one, 28 a California resident’s securities claims were stayed pending resolution of duplicative litigation in a federal court in New York. Berg v. MTC Elecs. Tech. Co., 61 Cal. App. 4th 349, 363 (1998). REPLY ISO RENEWED MOTION TO STAY 13 LEAD CASE NO. 19CV348674 PROCEEDINGS 5. Plaintiffs Do Not Demonstrate Any Actual Prejudice from a Stay The cursory argument that plaintiffs will be “severely” prejudiced by a stay (6/3/20 Opp. at 18) is unavailing. They grossly overstate the differences in the relative stages of the cases, pulling out of thin air the claim that there will be “another amended complaint” in the Federal Action (id. at 15) —an assertion devoid of factual basis. Jordan Decl. §9.'° And any purported delay is far outweighed by the waste, prejudice, and confusion to the very same class members (and the very same defendants). See Sec. III.B.1, supra; see also Schneider, 183 Cal. App. 3d at 1349-50. Plaintiffs also ignore that they are members of the 1933 Act class in federal court, where their interests are fully protected. They “will not be prejudiced by a stay because [their] interests 10 are represented by” the lead plaintiffs in that action. Buford v. Dignity Health, No. CGC-19-575930 11 (Cal. Super. Ct. Aug. 1, 2019); see also Greene v. Granite Constr. Inc., 2019 WL 6327229, at *3 12 (N.D. Cal. Nov. 26, 2019) (“A lead plaintiff is a fiduciary for the investor class.”). oq, 13 Moreover, plaintiffs’ claims of prejudice ring hollow given their refusal to seek statutory lead Re A Be 14 plaintiff status, which would have given them an opportunity to avoid the adverse effects of os wie ze 15 duplicative litigation and participate fully in moving the Federal Action forward expeditiously. See 16 Def. Mem. at 18. As noted above, plaintiffs make no effort to explain their inaction. 17 Cc. Plaintiffs’ Reliance on Cyan Remains Misplaced 18 Finally, the Opposition cites to Cyan, Inc. v. Beaver Cty. Emps. Ret. Fund, 138 S. Ct. 1061, 19 1069 (2018), no fewer than a dozen times, even though the case has no bearing on the Court’s 20 discretion to stay this action. Cyan merely held that 1933 Act claims cannot be removed to federal 21 court under the Securities Litigation Uniform Standards Act. /d. at 1078. Nothing in that case 22 suggests plaintiffs have an unfettered right to proceed in state court — as evidenced by Arlo, a post- 23 Cyan decision in which Judge Kuhnle granted a motion to stay after applying the Caiafa factors. 24 Also of note is the Delaware Supreme Court’s recent decision in Salzberg v. Sciabacucchi, 25 2020 WL 1280785 (Del. Mar. 18, 2020), which held that corporations can require 1933 Act claims 26 to be brought in federal court via bylaws and corporate charters. /d. at *10. Far from finding that 27 '0 Klin possesses the largest financial interest in the Federal Action and will likely be appointed lead 28 plaintiff (see Jordan Decl. {ff 7, 8), but he has never suggested filing another amended complaint or dropping Jones and Lenick as co-plaintiffs. /d. [J 9, 10. REPLY ISO RENEWED MOTION TO STAY 14 LEAD CASE NO. 19CV348674 PROCEEDINGS Cyan gives plaintiffs carte blanche to litigate duplicative 1933 Act claims in state court, Salzberg noted the troubling rise in parallel litigation post-Cyan and stressed that a federal forum provision is one way to prevent the resulting “costs, 2 6s 1 inefficiencies” and “inconsistent” results. Id. at *5.''! As Arlo demonstrates, a discretionary stay under California law is another way to achieve that result. D. The Opposition Also Fails to Show That a Stay Pending Resolution of the Pleadings in the Federal Action Would Be Improper Plaintiffs are also unable to offer a cogent response to the alternative request for a limited stay pending resolution of the pleadings in the Federal Action. See Def. Mem. at 19-20. Instead, they simply assert the PSLRA’s mandatory discovery stay is a “procedural” matter that does not apply in state court. See 6/3/20 Opp. at 19-20. Setting aside that plaintiffs are wrong as a matter of law,'? 10 they miss the point: this Court may issue a limited stay to prevent inconsistent rulings, especially as 11 to the duplicative 1933 Act claims. Def. Mem. at 19-20; Marks v. Cty. of Los Angeles, 2000 WL 12 35568348, at *1 (Cal. Super. Ct. Nov. 2, 2002). Nor do plaintiffs contest that: (1) this Court may oq, 13 Re A Be impose a discretionary stay here to ensure that discovery does not undermine the statutory stay in the 14 os Federal Action; and (2) a protective order is insufficient to address this concern. Def. Mem. at 20; wie ze 15 Schimmel Family Trust v. Morgenthaler, 2001 WL 35965061, at *1 (Cal. Super. Ct. Nov. 7, 2001). 16 17 IV. CONCLUSION For the foregoing reasons, the Court should stay this action pending resolution of the Federal 18 Action, or, alternatively, until resolution of the pleadings in the Federal Action. 19 20 Dated: June 19, 2020 FENWICK & WEST LLP 21 By /s/ Kevin P. Muck Kevin P. Muck 22 Attorneys for Defendants Cloudera, Inc., Thomas J. Reilly, 23 Jim Frankola, Priya Jain, Michael A. Olson, Martin I. Cole, Kimberly Hammonds, Rosemary Schooler, Steve J. 24 Sordello, Michael A. Stankey, Robert Bearden, Paul Cormier, Peter Fenton and Kevin Klausmeyer 25 26 "| Significantly, plaintiffs cite two recent California decisions (Jasnoch Decl., Exs. A, B) in which courts stayed 1933 Act claims pending a decision in Sa/zberg — something that would have been 27 wholly unnecessary if Cyan actually gave plaintiffs free rein to litigate in state court. 28 "2 See, e.g., Milano v. Auhll, 1996 WL 33398997, at *4 (Cal. Super. Ct. Oct. 2, 1996); In re Everquote, Inc. Sec. Litig., 2019 WL 3686065, at *8 (N.Y. Sup. Ct. Aug. 7, 2019). REPLY ISO RENEWED MOTION TO STAY 15 LEAD CASE NO. 19CV348674 PROCEEDINGS