Case Name: Stephen Bushansky v. Alliance Fiber Optic Products, Inc., et al.
Case No.: 16-CV-294245

Case Name: Bahman Khaki v. Alliance Fiber Optic Products, Inc., et al.
Case No.: 16-CV-294833

These related shareholder class actions arise from the sale of Alliance Fiber Optic Products, Inc. (“AFOP”) to Corning Incorporated and its affiliates. On May 2, 2019, the Court granted final approval of a class settlement over the objection of class member Eric Alan Isaacson and entered judgment accordingly. Isaacson now brings a motion for reconsideration of the May 2nd order and a motion for leave to intervene. The motion for reconsideration is opposed by both AFOP and plaintiff Stephen Bushansky, while the motion for leave to intervene is unopposed.

I. Motion for Reconsideration

In his motion for reconsideration, Isaacson contends that the Court’s “reduction in the award of attorneys’ fees” to class counsel in the May 2nd order constitutes a new fact or circumstance supporting reconsideration of the Court’s ruling, in the same order, that Isaacson himself is not entitled to an award of attorney fees. (See Code Civ. Proc., § 1008, subds. (a) and (b) [motion for reconsideration may be made only “upon new or different facts, circumstances, or law”].) He argues that his objection to the settlement caused the “reduction” in the fees awarded to class counsel, which created a common fund or substantial benefit in favor of the class supporting an award of fees to Isaacson.

To support his argument, Isaacson points to the the fact that plaintiff Bahman Khaki, who had initially supported the settlement, withdrew his support for unstated reasons on the eve of the final fairness hearing, about two weeks after Isaacson filed his objection. Khaki indicated that he would no longer seek to be appointed co-lead plaintiff with Bushansky and would not seek to recover attorney fees incurred by his counsel. In light of this development, counsel for AFOP and Bushansky agreed at the final fairness hearing—at which Isaacson’s counsel also appeared—that the lodestar supporting class counsel’s attorney fee request should be reduced so that Bushansky did not take credit for time billed by Khaki’s attorneys for purposes of the lodestar analysis. As noted in the Court’s May 2nd order, there was no indication that Bushansky had reduced his fee request of $500,000. The Court ultimately awarded Bushansky $238,916.50 in fees and expenses, $36,232.50 less than his reduced lodestar. The Court concluded that an award in this amount was “in line with comparable settlements discussed in the parties’ briefing” and “represent[ed] a fair assessment of the value class members received” from the settlement.

Isaacson’s motion for reconsideration is opposed by both AFOP and Bushansky on the ground that the reduced lodestar, which Isaacson contends was caused by him and in turn caused the Court to award lower attorney fees to Bushansky, is not a new fact or circumstance, but was specifically discussed by Isaacson, the parties, and the Court at the final fairness hearing. As urged by the parties, the Court raised the issue of whether Khaki’s withdrawal “change[d] anything” about the parties’ and objector’s “position[s] in [their] papers or cause[d] [them] to want to comment anything further on that particular issue”; allowed the parties and the objector to meet and confer on the issue outside the courtroom before responding; and specifically indicated that the parties or the objector could request to file supplemental briefing if they so desired. Isaacson’s counsel nevertheless stated that, because Isaacson’s position was that class counsel should receive no more than $17,000 in fees due to the low value of the settlement to the class, “it would not be worth submitting new papers for the delta on how it would change $17,000.”

The Court agrees with the parties that Khaki’s withdrawal from the settlement and the reduction to class counsel’s lodestar that resulted do not constitute new facts or circumstances considering this sequence of events. Isaacson received notice of these developments before the Court took the motion for final approval under submission and specifically declined the Court’s invitation to request supplemental briefing, stating that “it would not be worth submitting new papers” on the issue of how Khaki’s withdrawal impacted the attorney fee analysis. To the extent Isaacson contends that Khaki’s withdrawal caused the Court to “reduce” its award of attorney fees to class counsel—and this “reduction” constitutes a new fact or circumstance—this argument also lacks merit. The Court did not award attorney fees to class counsel prior to taking the motion for final approval under submission, so there was no award to “reduce.” At the time of the hearing, Isaacson knew that the Court had not made a decision on the fee issue and might award less than the full $500,000 requested. He still declined to offer supplemental briefing.

Finally, even if the Court’s issuance of the May 2nd order itself constitutes a new fact or circumstance supporting reconsideration of its denial of Isaacson’s request for attorney fees in that same order, Isaacson’s motion fails on its merits. It is speculative to conclude that Isaacson’s objection caused Khaki to withdraw from the settlement, particularly considering that other plaintiffs had already withdrawn following the Court’s continuance and subsequent denial of plaintiffs’ original motion for preliminary approval in 2017. Khaki’s withdrawal did not “moot” any aspect of the fee request as Isaacson contends: as already discussed, the unchanged $500,000 request was submitted to the Court by Bushansky. Isaacson’s assumption that the Court would have awarded an amount closer to the requested $500,000 in attorney fees absent his objection and/or Khaki’s withdrawal is also speculative. The fee request was opposed by AFOP—which maintained since 2017 that plaintiffs’ counsel should be awarded no more than $100,000—long before Isaacson filed his objection. The award ultimately issued by the Court was more in line with AFOP’s position than Isaacson’s. As stated in the May 2nd order, Isaacson’s participation in this case did not materially impact the Court’s analysis in approving the settlement—including with regard to the long-disputed attorney fee request—and thus does not support an award of attorney fees to the objector. (See In re Riverbed Technology, Inc. Stockholders Litigation (Del. Ch., Dec. 2, 2015, No. CV 10484-VCG) 2015 WL 7769861, at *1-2 [“equity may support a fee award to an objector, where the efforts of the objector better enabled the Court to act in the interests of the class, even where the suggestions of the objector were not adopted by the Court”; however, “a perverse incentive to object could be created if counsel fees are granted in such a situation too liberally or with too much regularity. In fact, it should be a rare occurrence indeed where an objector receives a fee award for proposing, unsuccessfully, that a settlement of a class action be rejected.”].)

The motion for reconsideration is accordingly DENIED.

II. Motion for Leave to Intervene

Isaacson also moves for leave to intervene in this action “for the limited purpose of preserving [his] appellate rights concerning issues already raised before this Court.”

A. Legal Standard

Intervention is governed by California Code of Civil Procedure section 387. Under subdivision (d)(1)’s mandatory terms, the Court “shall” permit intervention where the proposed intervenor demonstrates in a “timely application” that “[a] provision of law confers an unconditional right to intervene” or “[t]he person seeking intervention claims an interest relating to the property or transaction that is the subject of the action and that person is so situated that the disposition of the action may impair or impede that person’s ability to protect that interest, unless that person’s interest is adequately represented by one or more of the existing parties.” (See Code Civ. Proc., § 387, subd. (d)(1).) Where the would-be intervenor “meets the qualifications for mandatory intervention…, the fact that such intervention would add to the complexity of the action, create delay or adversely affect the original parties is of no moment.” (California Physicians’ Service v. Superior Court (Gilmore) (1980) 102 Cal.App.3d 91, 96.)

Subdivision (d)(2) pertains to permissive intervention. “[F]or permissive intervention, three factors must be established: ‘The intervenor must have a direct interest in the lawsuit, the intervenor must not enlarge the issues raised by the original parties, and the intervenor must not tread on the rights of the original parties to conduct their own lawsuit.’ ” (Lincoln National Life Ins. Co. v. State Bd. of Equalization (1994) 30 Cal.App.4th 1411, 1422, footnote omitted.) “[T]he intervener’s interest in the litigation must be direct and immediate rather than consequential, the issues must not be enlarged by the intervention and the reasons for intervention must outweigh the rights of the original parties to litigate in their own way.” (California Physicians’ Service v. Superior Court, supra, 102 Cal.App.3d at pp. 95-96.) “One cardinal rule which is established by the cases is that an intervener’s interest must be more direct and immediate than that of a simple creditor of one of the parties.” (Ibid.)

“[C]ourts have recognized California Code of Civil Procedure section 387 should be liberally construed in favor of intervention.” (Lincoln National Life Ins. Co. v. State Bd. of Equalization, supra, 30 Cal.App.4th at p. 1423.) “The purpose of allowing intervention is to protect others potentially affected by a judgment, thus obviating delay and multiplicity of suits.” (Catello v. I.T.T. General Controls (1984) 152 Cal.App.3d 1009, 1013.)

B. Analysis

The California Supreme Court recently addressed intervention by unnamed class members in Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260, where it was held that class members must be parties of record in order to have standing to appeal a judgment in a class action. The court explained that “[u]nnamed class members may become parties of record to class actions in one of two generally acceptable ways.” (Id. at p. 267.) “First, they may file a timely complaint in intervention,” which “is possible” even after judgment. (Ibid.) “Second, although not a method of intervention, an unnamed party to the action may also become a named party by filing an appealable motion to set aside and vacate the class judgment under section 663.” (Ibid.) Because the class member in Hernandez had followed neither process, the court did not address the circumstances in which intervention, versus the filing of a motion to vacate, would be appropriate. However, it reasoned that “requiring intervention does not discourage unnamed class members from filing a meritorious appeal” but constitutes “a manageable process under a bright-line rule that promotes judicial economy by providing clear notice of a timely intent to challenge the class representative’s settlement action” and “enables the trial court to review the motion to intervene in a timely manner.” (Id. at p. 272.)

Here, the Court finds that intervention is not the appropriate way for Isaacson to pursue his appeal. First, Isaacson does not satisfy the requirements for mandatory intervention. He fails to show that he is inadequately represented by the named plaintiff and his counsel, who are subject to “strict fiduciary responsibilities … to ensure the litigation proceeds in the best interests of all unnamed class members.” (Hernandez v. Restoration Hardware, Inc., supra, 4 Cal.5th at p. 273.) Beyond his disagreement with the terms of the settlement, Isaacson fails to identify any facts or circumstances suggesting that he is not adequately represented as a class member. The Court, which is also obligated to safeguard the rights of class members, has already considered his objections and, despite them, found that the settlement is fair and reasonable to the class. Isaacson does not establish that his interests have received inadequate representation in this action, and, consequently, the requirements for mandatory intervention are not satisfied. (See Edwards v. Heartland Payment Systems, Inc. (2018) 29 Cal.App.5th 725, 733-735 [trial court properly found objecting class member was not entitled to mandatory intervention].)

As to permissive intervention, while Isaacson has a direct interest in this lawsuit and his proposed complaint raises the same issues that have already been addressed by the parties (namely, the fairness of their settlement), his intervention after judgment will serve no purpose where he can proceed by simply moving to vacate the class judgment under Code of Civil Procedure section 663. (See Hernandez v. Restoration Hardware, Inc., supra, 4 Cal.5th at p. 267; see also County of Alameda v. Carleson (1971) 5 Cal.3d 730, 736-737 [one who is denied the right to intervene in an action but who is legally aggrieved by a judgment may nonetheless become a party of record and obtain a right to appeal by moving to vacate the judgment pursuant to section 663].) Allowing Isaacson to intervene and file his own pleading would introduce unnecessary confusion regarding the finality of the settlement and the scope of Isaacson’s participation in the action. Isaacson’s own argument in his moving papers foreshadows this problem: while he repeatedly insists that he seeks to intervene only to “preserv[e] [his] appellate rights concerning issues already raised before this Court,” he also argues that proceeding through a motion to vacate would be “more restrictive,” because the Court could not “change any finding of fact” in response to such a motion and appellate review would be limited to a determination of whether the Court’s conclusions of law and judgment are consistent with and supported by its findings of fact. Isaacson does not specify what findings of fact he might ask the Court to change through proceedings following intervention or what authority would authorize such proceedings, nor does he cite any authority for the proposition that he could obtain a more favorable standard of appellate review by intervening. Under the circumstances, intervention would only create confusion and could interfere with the parties’ interests in finalizing and administering their settlement. (See Noya v. A.W. Coulter Trucking(2006) 143 Cal.App.4th 838, 842 [“Allowing Zurich to intervene at this late juncture could delay or impede the resolution reached by [the] parties.”].) The Court exercises its discretion to deny permissive intervention. (See Edwards v. Heartland Payment Systems, Inc., supra, 29 Cal.App.5th at pp. 736-737 [trial court properly denied permissive intervention where objector could proceed by objecting to or opting out of the settlement, and could preserve his appellate rights through a motion to vacate the judgment].

C. Conclusion and Order

Isaacson’s motion for leave to intervene is DENIED.

The Court will prepare the order.