Case Name:   Robinson, et al. vs. Audience, Inc., et al.

Case No.:       1-12-CV-232227

 

This is a putative securities class action by the shareholders of defendant Audience, Inc. (“Audience”) arising out Audience’s May 9, 2012 initial public offering (“IPO”).  Plaintiffs Brent T. Robinson, Boyd Deel, Dorothy Kasian, and Daren Nowak (“Plaintiffs”) allege that Audience’s prospectus and registration statement contained false and misleading statements in violation of sections 11 and 15 of the Securities Act of 1933, 15 U.S.C. §§ 77k, 77l(a)(2) and 77o (the “Securities Act”).  Plaintiffs sue Audience and various officers and directors of Audience.[1]

 

In the operative First Amended Complaint (“FAC”), Plaintiffs allege that Audience provides voice and audio solutions in mobile devices, and Audience is heavily reliant on its relationship with non-party Apple Inc. (“Apple”), which represented 82% and 75% of Audience’s revenue in fiscal years 2010 and 2011, respectively.[2]  Plaintiffs allege that Audience’s May 9, 2012 Registration Statement represented that “[t]hrough close, long-term relationships with [original equipment manufacturers or “OEMs”], we gain both a unique understanding of their product roadmaps and an ability to influence design decisions” and Audience touted its processors as having been incorporated in mobile device models sold by leading OEMs such as Apple.[3]  The Registration Statement further stated that Audience “work[s] closely with OEMs throughout their design processes, using our proprietary AuViD graphical design tools to integrate our solutions into their mobile devices, which enables us to improve design efficiency, increase productivity and establish differentiated design relationships with OEMs.”[4]  The Registration Statement further discussed the August 6, 2008 agreement with Apple for Audience to “develop, supply and support a custom version of one of our processors and related software to Foxconn and Protek for use in certain mobile phones” and “an additional license agreement with [Apple] in 2010 relating to a new generation of our processor IP[.]”[5]

 

The FAC alleges that 6,060,707 shares of Audience common stock were sold to the public at $17 per share during the IPO, but after the market closed on September 6, 2012, Audience issued a press release announcing that it was unlikely that Apple, its key client, would use Audience’s earSmart voice isolation/noise cancellation technology in Apple’s much anticipated iPhone 5, which was expected to launch in mid-to-late September 2012.[6]

 

Plaintiffs allege that the Registration Statement was misleading because it failed disclose that: (1) Audience’s relationship with Apple was not as close as indicated by its statements in the IPO Prospectus, and Audience did not have a unique understanding of Apple’s products; and (2) as demonstrated by the advanced technology required and the alterations to hardware and software necessary for the improved audio capabilities of the iPhone 5, together with the short lead-time between the IPO and the leaking of information revealing significant changes in the relationship with Apple, Apple had decided to replace Audience’s earSmart technology in the iPhone 5 and had decided to handle the function in-house, integrating its own voice isolation/noise cancellation technology into its mobile devices.[7]

 

The First Amended Complaint (“FAC”) asserts two causes of action for: (1) violation of Section 11 of the Securities Act of 1933 (against all Defendants); and (2) violation of Section 15 of the Securities Act of 1933 (against Audience and the remaining Individual Defendants [collectively the “Audience Defendants”]).

 

Plaintiffs now move for class certification.

 

Apple moves to seal portions of Defendants’ opposition to the certification motion.

 

Motion for Class Certification

 

Plaintiffs move to certify the following class:  “All persons or entities who acquired Audience common stock pursuant and/or traceable to the false and misleading Registration Statement and Prospectus (Registration No. 333-179016) issued in connection with the Company’s May 9, 2012 IPO (the “Class”). Excluded from the Class are defendants and their families, the officers, directors and affiliates of the defendants, at all relevant times, members of their immediate families and their legal representatives, heirs, successors or assigns and any entity in which defendants have or had a controlling interest.”  Plaintiffs propose Robinson and Kasian as Class representatives.[8]

 

Plaintiffs argue the proposed class of investors who acquired Audience securities in the IPO is clearly and narrowly defined and readily ascertainable from company and trading records.  Plaintiffs argue the proposed Class is sufficiently numerous, as there are estimated to be hundreds, if not thousands of investors in Audience, and there were over six million shares sold in the IPO.  Plaintiffs argue that the questions of law and fact that are common to the Class and predominate over individual issues are: the elements required to show violations of §§ 11 and 15 of the 1933 Act; the existence of any due diligence defense; the application of strict liability; whether the proposed Class members meet the standing requirements of § 11 of the 1933 Act; whether statements made by defendants to the investing public in the Registration Statement and Prospectus misrepresented material facts about the business and prospects of Audience; and to what extent the members of the Class have sustained damages and the proper measure of damages.  Plaintiffs contend that both factually and legally, the claims of all putative Class members share the common issue of whether the Registration Statement and Prospectus was misleading and failed to properly inform investors.  Plaintiffs argue that the claims of Robinson and Kasian are typical of the claims and status of the proposed Class because like every other member of the Class, Robinson and Kasian acquired over-valued shares of Audience common stock.  Plaintiffs argue Robison and Kasian are adequate representatives because they do not possess any interests in conflict with the other Class members, and their counsel, Robbins Geller Rudman & Dowd LLP (“Robbins Geller”) is experienced in federal and state securities litigation.[9]  Finally, Plaintiffs argue that a class action is procedurally superior to multiple individual actions because it would serve the interests of judicial economy and consistent rulings and would allow individuals who have not suffered large losses from defendants’ conduct to recover.

 

In opposition, Audience, Santos and Palatnik (collectively “Defendants”) argue certification should be denied because Plaintiffs fail to establish that they can adequately protect the interests of the Class.  Defendants contend that Robinson and Kasian lack the understanding and knowledge of issues in the litigation to adequately represent the Class, and it is Robbins Geller, not Robinson and Kasian, who is actually in control of the litigation.[10]

 

Analysis:  California Code of Civil Procedure section 382 authorizes class actions “when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court, one or more may sue or defend for the benefit of all.”

 

The party seeking certification has the burden to establish the existence of both an ascertainable class and a well-defined community of interest among class members.  [Citations.]  The “community of interest” requirement embodies three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class.  [Citation.]

 

The certification question is “essentially a procedural one that does not ask whether an action is legally or factually meritorious.”  [Citation.]  A trial court ruling on a certification motion determines “whether … the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants.”  [Citations.]

 

(Sav-On, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326.)

 

Defendants do not challenge the requirements of ascertainability, typicality, or the predominance of common questions of law and fact.  Regarding ascertainability, the proposed Class definition is sufficiently “precise, objective and presently ascertainable” so as to “give adequate notice to class members or to determine after the litigation has concluded who is barred from relitigating.”  (Global Minerals & Metal Corp. v. Superior Court (2003) 113 Cal.App.4th 836, 858.)   Class members can be readily identified through Audience’s stock records without unreasonable time and expense.  (See Rose v. City of Hayward (1981) 126 Cal.App.3d 926, 932.)

 

Regarding numerosity, “[a] class action is proper when the parties are numerous and it is impracticable to bring them all before the court.  This requirement has been satisfied where the class numbers were as few as 200 [citations], or as many as several thousand [citation] if the members are scattered throughout the state.  [Citation.]”  (Miller v. Woods (1983) 148 Cal.App.3d 862, 873.)  Here, given the evidence of trading volume between May 10, 2012 and September 6, 2012 and the number of shares offered at Audience’s IPO (6,060,707 common shares),[11] it is very likely that there are many individual Class members so as to make joinder impracticable.

 

In order to demonstrate that questions of law or fact common to the class predominate over questions affecting the individual members, “each member must not be required to individually litigate numerous and substantial questions to determine his [or her] right to recover following the class judgment; and the issues which may be jointly tried, when compared with those requiring separate adjudication, must be sufficiently numerous and substantial to make the class action advantageous to the judicial process and to the litigants.”  (Washington Mut. Bank FA v. Superior Court (Briseno) (2001) 24 Cal.4th 906, 913-914 [internal citations and quotation marks omitted].)  Here, given that Plaintiffs seek to represent a similarly-situated group of individuals who purchased Audience shares pursuant and/or traceable to the same Registration Statement and Prospectus, it is likely that common issues of law and fact will predominate and that the claims against Defendants will be proven with common evidence.  Whether the Registration Statement and Prospectus contained false and misleading statements is an issue that will be common to all members of the putative Class.

 

The typicality requirement requires that Plaintiffs have “the same or similar injury” as the members of the putative class (see Seastrom v. Neways, Inc. (2007) 149 Cal.App.4th 1496, 1502) and have the motive to litigate on behalf of all putative class members (see Classen v. Weller (1983) 145 Cal.App.3d 27, 45).  Here, Plaintiffs have the same general injury as the proposed Class.  Whether Plaintiffs have the proper motivation to litigate on behalf of the proposed Class dovetails with Defendants’ arguments regarding Plaintiffs’ adequacy as class representatives.

 

Defendants challenge Robinson’s and Kasian’s adequacy as class representatives by pointing to their lack of knowledge of certain details in the case, and accusing them of ceding control of the litigation to class counsel, Robbins Geller.  “Adequacy of representation depends on whether the plaintiff’s attorney is qualified to conduct the proposed litigation and the plaintiff’s interests are not antagonistic to the interests of the class.  [Citations.]”  (McGhee v. Bank of America (1976) 60 Cal.App.3d 442, 450.)  “The plaintiffs seeking certification have the burden to show that they can adequately represent the class by vigorously and tenaciously protecting the class members’ interests.  [Citations.]  As part of this analysis, the trial court assesses the competency of class counsel, if the firm is representing the class as a whole and not simply the interests of the named representative plaintiffs [citations], and if the named plaintiffs have lent their names to litigation that is controlled by class counsel.  [Citation.]  A person’s class representative status may be defeated if there is a serious conflict among the members of the class that ‘goes to the very subject matter of the litigation … .’  [Citations.]”  (Sharp v. Next Entm’t, Inc. (2008) 163 Cal.App.4th 410, 432-433.)

 

Defendants do not claim that Robinson and Kasian have a serious conflict with the putative Class that goes to the very subject matter of the litigation.  Nor do Defendants challenge the competency of Robbins Geller to act as Class counsel.  Rather, Defendants criticize Robinson and Kasian as not sufficiently diligent or informed, and Defendants rely on a number of federal authorities for the position that in a securities class action under the federal securities laws, the standard of adequacy for class representatives is raised.[12]

 

Specifically Defendants cite In re Kosmos Energy Ltd. Sec. Litig. (N.D. Tex. 2014) 299 F.R.D. 133 and the Fifth Circuit’s decision in Berger v. Compaq Computer Corp. (5th Cir. 2001) 257 F.3d 475 (“Berger I”) for the position that the Private Securities Litigation Reform Act of 1995 (“PSLRA”), which amended the 1933 Act and the Securities Exchange Act of 1934, raised the “standard adequacy threshold” of Federal Rule of Civil Procedure 23(a)(4).[13]  The Kosmos and Berger I courts held that because the PSLRA was enacted to curb abusive, lawyer-driven private securities fraud suits, “courts deciding class certification motions in securities cases must take into account ‘Congress’s emphatic command’ in the PSLRA and ensure that class representatives are informed, able individuals who are themselves—and not the lawyers—actually directing the litigation.”  (Kosmos, supra, 299 F.R.D. at pp. 140-141.)  “[P]laintiffs seeking certification must produce actual, credible evidence that the proposed class representatives are informed, able individuals, who are themselves—not the lawyers—actually directing the litigation.”  (Kosmos, supra, 299 F.R.D. at p. 145, footnote omitted.)

 

To assess a plaintiff’s adequacy, the Kosmos court instructed that “courts often consider the proposed representative’s personal attributes, including evidence of the representative’s character, honesty, and conscientiousness.  The representative’s familiarity with the case is also important.  Certification may be denied where the representative lacks knowledge or a basic understanding of ‘what the suit is about.’  Likewise, evidence of the representative’s willingness or ability to participate in the litigation is relevant.  When it appears that the potential representatives are ‘simply lending their names to a suit controlled entirely by the class attorney,’ or where the representative is too ‘closely affiliated with class counsel,’ courts may find them to be inadequate.  Failing to appear at the class certification hearing has also been considered a negative factor in the adequacy assessment.”  (Kosmos, supra, 299 F.R.D. at p. 145, footnotes omitted.)

 

Notably, Kosmos and Berger I pertain to the adequacy standard under the Federal Rules of Civil Procedure.  However, “[r]ule 23 does not control in California.  ‘As a general rule, California courts are not bound by the federal rules of procedure but may look to them and to the federal cases interpreting them for guidance or where California precedent is lacking.  [Citations.]  California courts have never adopted Rule 23 as “a procedural strait jacket.  To the contrary, trial courts [are] urged to exercise pragmatism and flexibility in dealing with class actions.”  [Citations.]’  [Citations.]  California courts follow the federal rules for class action only in the absence of controlling state authority and only ‘look to Rule 23 for guidance where California precedent is lacking.’  [Citations.]”  (Laffitte v. Robert Half Internat. Inc. (2014) 231 Cal.App.4th 860, 872-873, footnote omitted.)

 

One could argue that Kosmos and Berger I provide persuasive authority on an issue where California law is lacking – namely, the effect of the PSLRA on the adequacy standards for representatives in California class actions.  However, as Plaintiffs point out, the persuasiveness and utility of Kosmos and Berger I in this regard are questionable.  After Berger I, in an order denying a petition for panel rehearing, the same three-judge panel of the Fifth Circuit clarified that Berger I did not “change[] the law of this circuit regarding the standard for conducting a rule 23(a)(4) adequacy inquiry” or “create[] an additional requirement under rule 23(a)(4) that, after completing the process of selecting the lead plaintiff and lead counsel, a court may grant class certification only if the putative class representative possesses a certain level of experience, expertise, wealth or intellect, or a level of knowledge and understanding of the issues, beyond that required by our long-established standards for rule 23 adequacy of class representatives.”  (Berger v. Compaq Computer Corp. (5th Cir. 2002) 279 F.3d 313 (“Berger II”).)  Likewise, the Ninth Circuit in In re Cavanaugh (9th Cir. 2002) 306 F.3d 726 held that the PSLRA “did not change the standard for adequacy, and that the adequacy inquiry remains the same in determining the lead plaintiff in securities cases as in determining the class representative in other cases brought under Rule 23.”  (Cavanaugh, supra, 306 F.3d at p. 736.)  Regarding Berger I, the Ninth Circuit held, “we cannot agree that the Reform Act was meant to ‘raise the standard adequacy threshold,’ or to authorize the district court to select as lead plaintiff ‘the most sophisticated investor available.’”  (Id. at p. 738.)

 

In In re Theragenics Corp. Sec. Litig. (N.D. Ga. 2002) 205 F.R.D. 687, 696, the U.S. District Court for the Northern District of Georgia refused to follow Berger I and instead followed the “well established” legal standard for adequacy in the Eleventh Circuit, which “involves inquiry into questions of whether Plaintiffs’ counsel are qualified, experienced and generally able to conduct the litigation.  [Citation.]  ‘Adequate class representation generally does not require that the named plaintiffs demonstrate to any particular degree that they will individually pursue with vigor the legal claims of the class.’  [Citation.] . . . . The fact that the proposed Class Representatives are allowing their counsel to prosecute the case demonstrates the exercise of good judgment and not abdication of their obligations as class representatives.  [Citation.]”

 

Thus, to the extent Berger I suggests there is a higher adequacy threshold for post-PSLRA securities class actions that requires a certain level of sophistication and active participation for class representatives, that suggestion was expressly walked back by Berger II and has been rejected by numerous other courts (e.g., Cavanaugh, supra, 306 F.3d 726; In re Theragenics, supra, 205 F.R.D. 687; McNamara v. Bre-X Minerals, Ltd. (E.D. Tex. Mar. 31, 2013) 2003 U.S. Dist. LEXIS 25641, at *33-34.)  Thus, the Court does not consider Kosmos and Berger I to be persuasive authority on how to apply the adequacy threshold under California law.  If anything, Berger I did not result in any change in the law on adequacy standards and merely highlighted the protections of the PSLRA to curb lawyer-driven securities lawsuits.

 

Notably, there is no suggestion in the instant case that Robinson and Kasian are “professional plaintiffs.”  (See Howard Gunty Profit Sharing Plan v. Superior Court (2001) 88 Cal.App.4th 572, 575, fn. 2: “‘The term professional plaintiff generally is used to refer to a plaintiff who is either a frequent filer . . . or a “hired gun” (one who allows an attorney to sue in his name in exchange for a fee), or both.’ [Citation.]”)  While Robinson’s and Kasian’s moving declarations are conclusory and boilerplate, the supplemental evidence submitted with Plaintiffs’ reply papers establishes that they are not professional plaintiffs as that term is defined in Howard Gunty, and they are not motivated by any improper purpose.[14]  Robinson testified that he contacted an attorney after he lost investment money with Audience, and that he felt misled because he believed Audience’s technology would be incorporated in the iPhone 5.[15]  Kasian likewise testified that she felt angry and misled by Audience regarding the iPhone 5, and after seeing a news report, she emailed a law firm and indicated her willingness to participate in the class action.[16]  Both Robinson and Kasian understand what the case is about, the alleged basis for liability against Defendants under sections 11, 12(a)(2) and 15 of the 1933 Act, and that they are representing a class of similarly-situated shareholders.[17]  They have communicated with counsel on numerous occasions and shown their willingness to assist in the case, e.g., depositions and discovery.[18]

 

Defendants criticize Robinson and Kasian for not knowing particular details about the procedural background of the case and relying on counsel to draft pleadings, but there is no requirement under California law that class representatives actively manage or participate in the litigation, and as discussed above, any suggestion that this is the standard in federal securities class actions is questionable.  Defendants cite no authority requiring a class representative’s physical appearance at a mediation session to support his or her adequacy.  Defendants argue that Robinson and Kasian did not perform due diligence in selecting counsel, yet Defendants cite no authority requiring such due diligence to demonstrate adequacy, nor do Defendants even challenge the competency of Robbins Geller or Robinson’s and Kasian’s chosen counsel.  Defendants argue that Robinson’s and Kasian’s unfamiliarity with the Registration Statement evidences their inadequacy and abdication of responsibilities to counsel, but the Court finds that the evidence as a whole demonstrates Robinson and Kasian are adequate class representatives who are well-positioned to represent the rights and interests of the proposed Class and have already done more than merely lending their names to the litigation.

 

For all of these reasons, the motion for class certification is GRANTED.

 

Motion to Seal

 

On December 12, 2014, Defendants filed their opposition brief to the motion for class certification conditionally under seal with a redacted public version.  On December 22, 2014, Apple filed a motion to seal portions of Defendants’ opposition brief.  In particular, Apple moves to seal fifteen sentences that appear in the “Factual Background” of Defendants’ brief pertaining to Audience’s supplier agreement with Apple and related events prior to the Audience IPO.  Apple argues the redacted portions contain highly sensitive communications and insights into Apple’s operations, including detailed information concerning the timing of various development milestones for the iPhone 5, specific technical issues that were affecting such timing, Apple’s procurement procedures, and Apple’s intentions regarding the selection of technology to be included in the iPhone 5.  Apple further argues the information is protected from disclosure by contract between Apple and Audience under the terms of the Master Development and Supply Agreement, and it has been designated “Highly Confidential Information – Attorneys’ Eyes Only” pursuant to the Protective Order in this action.

 

Apple argues that contractual obligations not to disclose information constitute an overriding interest sufficient to support a court order to seal records.  Apple further argues that the public has no overriding right of access to the subject information because it is not relevant to trial proceedings or the substance of Defendants’ opposition.  Apple argues that it will be prejudiced if the subject information is made public because it gains much value from maintaining secrecy in all of its areas of its business, including anticipation in the public marketplace concerning the approaching release of new products.  Apple argues the proposed sealing is narrowly tailored to redact only information that falls under the Protective Order and the redactions represent the bare minimum amount of information necessary to protect Apple’s business and competitive interests.  The motion is supported by the declarations of Apple’s counsel William S. Freeman, and Apple’s Procurement Director Timothy A. Butzow.

 

The motion is opposed by Plaintiffs, who argue that the fifteen sentences sought to be sealed contain information that is already available in the public, or consists of common industry practices regarding deliverables and product releases.

 

Analysis:  “Unless confidentiality is required by law, court records are presumed to be open.”  (Cal. Rules of Court, rule 2.550(c).)  “A record must not be filed under seal without a court order.  The court must not permit a record to be filed under seal based solely on the agreement or stipulation of the parties.”  (Cal. Rules of Court, rule 2.551(a).)  “The court may order that a record be filed under seal only if it expressly finds facts that establish: [¶] (1) There exists an overriding interest that overcomes the right of public access to the record; [¶] (2) The overriding interest supports sealing the record; [¶] (3) A substantial probability exists that the overriding interest will be prejudiced if the record is not sealed; [¶] (4) The proposed sealing is narrowly tailored; and [¶] (5) No less restrictive means exist to achieve the overriding interest.”  (Cal. Rules of Court, rule 2.550(d).)  Where some material within a document warrants sealing, but other material does not, the document should be edited or redacted if possible, to accommodate the moving party’s overriding interest and the strong presumption in favor of public access.  (Cal. Rules of Court, rule 2.550(d)(4), (5).)  In such a case, the moving party should take a line-by-line approach to the information in the document, rather than framing the issue to the court on an all-or-nothing basis.  (In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 309.)

 

Apple’s counsel states in his declaration that Apple and Audience entered into a Master Development and Supply Agreement effective August 6, 2008 that required Audience to “take steps to ‘protect the Confidential Information of [Apple], using at least the same degree of care that it uses to protect its own confidential and proprietary information of similar importance.”[19]  Mr. Freeman further states that “documents relating to the commercial relationship between Audience and Apple concerning the potential inclusion of Apple’s iPhone 5 of Audience’s technology…contain information that is highly confidential to Apple[.]”[20]  Mr. Freeman further states that the subject statements in Defendants’ opposition to certification “are directly derived from, and related to, documents that Audience designated as ‘Highly Confidential Information – Attorneys’ Eyes Only’ when it originally produced them.”[21]

 

A binding contractual agreement not to disclose information may constitute “a potential overriding interest” if prejudice to that interest is substantially probable.  (See Universal City Studios, Inc. v. Superior Court (2003) 110 Cal.App.4th 1273, 1282-1283.)  Furthermore, financial information involving confidential matters relating to the business operations of a party may be sealed where public revelation of the information would interfere with the party’s ability to effectively compete in the marketplace and there is a substantial probability that their revelation would prejudice the foregoing legitimate interests of the party.  (Id. at pp. 1285-1286; see also Overstock.com, Inc. v. Goldman Sachs Group, Inc. (2014) 231 Cal.App.4th 471, 503-506 [discussing sealing of financial information to protect privacy interests].)

 

Even if Apple demonstrates a potential overriding interest in the contractual confidentiality of statements derived from confidential documents Apple produced in discovery, Apple fails to demonstrate a substantial probability of prejudice from disclosure.  The Butzow declaration is too conclusory to demonstrate a substantial probability of prejudice from public disclosure of the particular sentences at issue, and as Plaintiffs point out, some of the information stated in the opposition brief is already publicly available, either through statements made by Audience’s CEO, or in Audience’s filings with the U.S. Securities and Exchange Commission.  Some of the sentences Apple seeks to seal are devoid of any particular details to support an inference that Apple would very likely be prejudiced by public disclosure.

 

Apple argues that because the subject information is not relevant to the substance of Defendants’ opposition to certification, the public does not have an unqualified right of access to the information.  While the Court agrees that details regarding Apple’s and Audience’s communications are not relevant to issues raised in opposition to the certification motion, it cannot be said that this information is “tangentially related to the litigation” for purposes of assessing the public’s right of access to court records.  (See Oyie v. Fox (2012) 211 Cal.App.4th 1036, 1070, emphasis added.)  Instead, details regarding the communications between Audience and Apple prior to the Audience IPO may prove relevant to the core merits issues in this litigation, including Audience’s defenses.

 

Under these circumstances, the Court feels it is appropriate to simply STRIKE the fifteen sentences at issue from the record as irrelevant to the certification motion.  (See Overstock.com, supra, 231 Cal.App.4th at pp. 499-500, fn. 18, 508-510.)  This of course is not a final order on the sealing controversy regarding Apple and Audience’s communications, but simply a practical way to avoid an unnecessary sealing proceeding at this time.

[1] The named individual defendants are Peter B. Santos, Mohan S. Gyani (“Gyani”), Kevin S. Palatnik, Forest Baskett (“Baskett”), Marvin D. Burkett (“Burkett”), Barry L. Cox (“Cox”), Rich Geruson (“Geruson”), and George A. Pavlov (“Pavlov”).  Plaintiffs also sued several underwriters for Audience’s IPO, including J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., and Pacific Crest Securities LLC.  On April 3, 2013, the Court entered an order dismissing without prejudice the “Outside Directors” Gyani, Baskett, Burkett, Cox, Geruson, and Pavlov, as well as the Underwriter defendants.

[2] First Amended Compl. (“FAC”) ¶¶ 3, 30.

[3] FAC ¶ 40.

[4] FAC ¶ 40.

[5] FAC ¶ 40.

[6] FAC ¶¶ 4-5.

[7] FAC ¶ 49.

[8] On October 9, 2014, Plaintiffs filed a Notice of Suggestion of Death of plaintiff Boyd Deel.

[9] In support, Plaintiffs submit declarations from Robinson and Kasian (Exhs. D and E to Decl. John K. Grant ISO Pltfs’ Mot. for Class Cert), and the firm resumes of Robbins Geller, Holzer & Holzer LLC, and Robbins Arroyo LLP (Grant Exhs. F-H).

[10] In the “Factual Background” portion of their opposition brief, Defendants argue that at the time of the IPO, Audience did not know, nor could it have known, Apple’s plans with respect to the iPhone 5.  Defendants also argue that Audience adequately disclosed the risks related to its relationship with Apple in the Registration Statement.  However, these arguments go to the merits of Plaintiffs’ claims, and generally, the certification question does not ask whether an action is legally or factually meritorious.  (See Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 219, 326.)  Other than citing a federal case for the position that class certification at the trial level “frequently overlaps with the merits[,]” (Defs’ Opp. at p. 10:6-7, citing Katz v. China Century Dragon media (C.D. Cal. 2012) 287 F.R.D. 575, 582), Defendants do not actually contend that the merits of Plaintiffs’ claims here are so “enmeshed” with the class action requirements that a “peek” into the merits is necessary at this time.  (See Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1023-1024.)  None of the details regarding Apple and Audience included in the “Factual Background” section of Defendants’ opposition brief are cited in Defendants’ arguments challenging the motion for class certification.

[11] See Exhs. B and C to Decl. John K. Grant ISO Pltfs’ Mot. for Class Cert.

[12] Defendants also cite Howard Gunty Profit Sharing Plan v. Greenwood (2002) 2002 Cal.App.Unpub. LEXIS 8732 and Gatan v. Alarm One, Inc. (2007) 2007 Cal. App. Unpub. LEXIS 7095 in response to Plaintiffs’ reliance on the published McGhee decision.  However, these cases are unpublished and “must not be cited” by Defendants.  (See Cal. Rules of Court, rule 8.1115(a).)  The exceptions for citing an unpublished appellate opinion do not apply here.  (See Cal. Rules of Court, rule 8.1115(b).)

[13] Under FRCP 23(a)(4), “[o]ne or more members of a class may sue or be sued as representative parties on behalf of all members only if…the representative parties will fairly and adequately protect the interests of the class.”

[14] See Exhs. A and B to Suppl. Decl. John K. Grant ISO Pltfs’ Reply.

[15] See Suppl. Grant Exh. A at pp. 5920-22, 60:10-11, 63:11-15.

[16] See Suppl. Grant Exh. B at pp. 80:18-23, 81:2-22.

[17] See Suppl. Grant Exh. A at pp. 61:22-62:17, 63:11-15, 73:12-74:22, 77:2-10, 78:16-79:15, 82:20-83:10, 84:3-7; Suppl. Grant Exh. B at pp. 28:11-15, 80:18-23, 89:5-90:16, 92:25-93:4.

[18] See Privilege Logs, Decl. Jessica Valenzuela ISO Defs’ Opp., Exhs. 5, 12; Suppl. Grant Exh. A at p. 71:19-25; Suppl. Grant Exh. B at 6:22-25.

[19] Decl. Freeman ¶ 2.

[20] Decl. Freeman ¶ 4.

[21] Decl. Freeman ¶ 5.