SUPERIOR COURT OF CALIFORNIA

COUNTY OF SANTA CLARA

PHILIP AVERSA, Individually and on Behalf of All Others Similarly Situated,

Plaintiff,

vs.

ARLO TECHNOLOGIES, INC., MATTHEW MCRAE, CHRISTINE M. GORJANC, PATRICK C.S. LO, ANDREW W. KIM, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, DEUTSCHE BANK SECURITIES LLC, GUGGENHEIM SECURITIES LLC, RAYMOND JAMES & ASSOCIATES, INC., COWEN AND COMPANY, LLC, and IMPERIAL CAPITAL, LLC,

Defendants.

AND RELATED ACTIONS.

Case No. 2018-1-CV-339231

TENTATIVE RULING RE: MOTION FOR CONSOLIDATION OF RELATED CASES AND APPOINTMENT OF LEAD COUNSEL

The above-entitled action comes on for hearing before the Honorable Thomas E. Kuhnle on April 26, 2019, at 9:00 a.m. in Department 5. The Court now issues its tentative ruling as follows:

I. INTRODUCTION
II.
This is a putative securities class action brought on behalf of persons and/or entities that purchased or otherwise acquired the common stock of defendant Arlo Technologies, Inc. pursuant and/or traceable to the company’s registration statement and prospectus issued in connection with the company’s August 3, 2018, initial public offering.

Plaintiff Philip Aversa (“Aversa”) moves to consolidate this action with five other actions pending before this Court: (1) Case No. 19CV340741 (the “Pham Action”); (2) Case No. 19CV340758 (the “Patel Action”); (3) Case No. 19CV342071 (the “Perros Action”); (4) Case No. 19CV342318 (the “VML Action”); and (5) Case No. 19CV343033 (the “HKTR Action”). Aversa also seeks to organize prosecution of the consolidated action by appointing Glancy Prongay & Murray LLP and Robbins Geller Rudman & Dowd LLP as lead counsel and designating members of an executive committee consisting of Bottini & Bottini, Inc., Robbins Arroyo LLP, Hedin Hall LLP, Bragar Eagel & Squire, P.C., and Levi & Korsinsky, LLP.

III. DISCUSSION
IV.
A. Consolidation
B.
When actions involving a common question of law or fact are pending before the court, it may order a joint hearing or trial of any or all the matters in issue in the actions; it may order all the actions consolidated and it may make such orders concerning proceedings therein as may tend to avoid unnecessary costs or delay.

(Code Civ. Proc., § 1048, subd. (a).)

All of the cases Aversa seeks to consolidate with this case arise out of the same transaction and involve common questions of law and fact. No party opposes consolidation. The Court finds consolidation is appropriate because it will promote judicial economy and prevent unnecessary duplication of efforts.

C. Lead Counsel Appointment
D.
A trial court has inherent power in complex litigation to appoint lead counsel on behalf of parties who share common interests. (Asbestos Claims Facility v. Berry & Berry (1990) 219 Cal.App.3d 9, 23 (“[W]e conclude that the trial courts acted well within their inherent managerial powers when they appointed respondent as designated defense counsel. . . .”).)

Here, one party has opposed the request for appointment of lead counsel – defendant Netgear, Inc. Netgear states there is another related case pending in the Northern District of California – Wong v. Arlo Technologies, Inc., No. 5:19-cv-00372. Netgear asserts there are different shareholders in Wong who represent the same class of purchasers who are represented in the cases before this court. Netgear explains that in Wong the appointment of a lead plaintiff is governed by the Private Securities Litigation Reform Act of 1995 (the “PSLRA”). Netgear cites the legislative history of the PSLRA to argue that in assigning a lead plaintiff courts should take into account factors other than who filed an action first, thus avoiding the unseemly “race to the courthouse” that can truncate pre-filing diligence. The PSLRA requires plaintiffs to disclose the amount of their alleged losses. Netgear asserts such information has not yet been disclosed.

Plaintiffs respond that the PSLRA is a federal law that is not binding on this court. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 178 (“the PSLRA governs only actions in federal court”).) This Court agrees. Perhaps anticipating this point, Netgear makes two additional arguments.

First, Netgear argues that “California courts have looked to the Reform Act’s purpose and intent in analyzing lead-plaintiff decisions.” (Netgear’s Opp. to Mtn for Appt. of Lead Counsel, at p. 7.) Netgear cites Howard Gunty Profit Sharing Plan v. Superior Court (2001) 88 Cal.App.4th 572, 578-79 (“Gunty”), for this proposition. Gunty, however, arose in the context of a class certification motion, and it focused on concerns that a “professional plaintiff” might not fairly and adequately protect the interests of the class. (Gunty, supra, 88 Cal.App.4th at p. 577 (noting concerns about a “professional plaintiff” with questionable credibility).) Here, a certification motion is far down the road, and there is no suggestion that the “leadership structure” would somehow further the interest of a professional plaintiff. So as of now, Gunty’s references to the PSLRA has little applicability in this case.

Second, Netgear argues this Court should postpone any decision on a “leadership structure” until the Northern District rules on the lead-plaintiff motions pending in that court. The hearing on the lead-plaintiff motions is scheduled on May 9, 2019. This Court is not persuaded it should delay appointment of lead counsel. Plaintiffs have reached an agreement regarding a lead counsel structure. The only opposition is from a single defendant. No party has questioned the competence of counsel or the advantages to the proposed structure. The Court finds there is no reason to delay appointment of lead counsel based solely on the possible disclosure of information by different shareholders that is not required under California law. Appointing lead counsel at this point will aid in streamlining the case now that the six cases are consolidated.

All parties should be mindful that the Court may revisit this ruling if circumstances change in the future. Gunty teaches that if concerns about the leadership structure or the ability of a named plaintiff to represent the class arise, the Court will have a “duty to exercise control over the class action to protect the rights of all parties, and to prevent abuses which might undermine proper administrative of justice.” (Gunty, supra, 88 Cal.App.4th at p. 581.) For now, however, the Court is satisfied with the proposed structure.

E. Conclusion
F.
Aversa’s motion is GRANTED.

The Court will prepare the final order if this tentative ruling is not contested.