Case 6:13-cv-00247-MHS Document 14 Filed 05/14/13 Page 1 of 12 PageID #: 61 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF TEXAS TYLER DIVISION LOCAL 731 I.B. OF T. EXCAVATORS AND PAVERS PENSION TRUST FUND, Individually and on Behalf of All Others Similarly Situated Plaintiff, vs. DIODES, INC., et al., Defendants. Civil Action No. 6:13-cv-00247 CLASS ACTION LOCAL 731 TEAMSTERS MOTION FOR APPOINTMENT AS LEAD PLAINTIFF AND APPROVAL OF SELECTION OF COUNSEL
Case 6:13-cv-00247-MHS Document 14 Filed 05/14/13 Page 2 of 12 PageID #: 62 Proposed lead plaintiff, Local 731 Teamsters, hereby move this Court for an Order (attached hereto): (1) appointing Local 731 Teamsters as lead plaintiff in this action; (2) approving their selection of Robbins Geller Rudman & Dowd LLP ( Robbins Geller ) to serve as lead counsel and Thomas John Ward, Jr. and Jack Wesley Hill of the Ward & Smith Law Firm to serve as liaison counsel; and (3) granting such other and further relief as the Court may deem just and proper. 15 U.S.C. 78u-4(a)(3)(B). 1 In support of this motion, Local 731 Teamsters submit the following Memorandum of Law and the Declaration of Mario Alba Jr. I. PRELIMINARY STATEMENT This action was brought on behalf of all those who purchased or otherwise acquired Diodes, Inc. ( Diodes or the Company ) common stock during the period between February 9, 2011 and June 9, 2011. This action alleges violations of 10(b) and 20(a) of the Securities Exchange Act of 1934 ( Exchange Act ), as amended by the Private Securities Litigation Reform Act of 1995 ( PSLRA ) (15 U.S.C. 78(j)(b) and 78(t)) and Rule 10b-5 promulgated thereunder (17 C.F.R. 240.10b-5). This Motion is made on the grounds that, to their knowledge, Local 731 Teamsters are the most adequate plaintiff as defined by the PSLRA. See generally In re Dynegy, Inc. Sec. Litig., No. H-02-1571, 2002 U.S. Dist. LEXIS 27858, at *6 (S.D. Tex. Oct. 28, 2002). Local 731 Teamsters suffered losses exceeding $22,232 during the Class Period and they otherwise satisfy the requirements of Rule 23 of the Federal Rules of Civil Procedure. See id. Alba Decl., Ex. B. 2 1 Local 731 Teamsters is comprised of Local 731 I.B. of T. Excavators and Pavers Pension Trust Fund and Local 731 I.B. of T. Private Scavenger and Garage Attendants Pension Trust Fund and Textile Maintenance and Laundry Craft Pension Fund. 2 References to the Alba Decl. are to the exhibits attached to the accompanying Declaration of Mario Alba Jr. in Support of Local 731 Teamsters Motion for Appointment as Lead Plaintiff and Approval of Selection of Counsel dated May 14, 2013 and submitted concurrently herewith. - 1 -
Case 6:13-cv-00247-MHS Document 14 Filed 05/14/13 Page 3 of 12 PageID #: 63 Finally, Local 731 Teamsters have selected counsel with the experience necessary to vigorously and efficiently prosecute this litigation on behalf of the class. See Alba Decl., Exs. D and E. II. FACTUAL BACKGROUND Diodes, together with its subsidiaries, designs, manufactures and supplies application specific standard products in the discrete, logic and analog semiconductor markets primarily in Asia, North America and Europe. The complaint alleges that, during the Class Period, defendants issued materially false and misleading statements regarding the Company s financial performance and future prospects. Specifically, the complaint alleges that defendants misrepresented and/or failed to disclose the following adverse facts: (a) that the Company s labor problems associated with its backend facility in China were much more severe and prolonged than publicly represented; (b) that the Company s gross margins were being impacted by higher than expected wages and labor shortages; (c) that the Company was experiencing decreasing demand for its products, especially from its LED TV and notebook customers; and (d) as a result of the foregoing, defendants lacked a reasonable basis for their positive statements about the Company and its prospects. On June 9, 2011, Diodes updated its financial guidance for the second quarter of 2011. For the second quarter, the Company maintained its revenue guidance of $170 to $178 million, but lowered its gross margin guidance to 32.5% plus or minus 1.5% as compared to its previous guidance of 36.5% plus or minus 1%. Defendants explained that the Company s gross margin was being impacted by a mix shift due to a softening of demand and the slower than expected recovery from the previously disclosed manpower shortages at the Company s packaging facilities. In reaction to the announcement, the price of Diodes stock fell $4.38 per share over the next two trading days, or just over 16%, to close at $22.98 per share, on heavy trading volume. - 2 -
Case 6:13-cv-00247-MHS Document 14 Filed 05/14/13 Page 4 of 12 PageID #: 64 On August 9, 2011, Diodes announced its financial results for the second quarter of 2011, the period ended June 30, 2011. For the quarter, the Company reported revenue of $169.8 million below the Company s guidance and gross profit margin of 32.8% at the low end of the Company s guidance. III. ARGUMENT A. Local 731 Teamsters Are the Most Adequate Plaintiff 1. The PSLRA s Lead Plaintiff Provisions The PSLRA governs the appointment of a lead plaintiff in each private action arising under [the Exchange Act] that is brought as a plaintiff class action pursuant to the Federal Rules of Civil Procedure. 15 U.S.C. 78u-4(a)(1). First, the plaintiff who files the initial action must publish a notice to the class, within 20 days of filing the action, informing class members of their right to file a motion for appointment as lead plaintiff. 15 U.S.C. 78u-4(a)(3)(A)(i). Here, the first notice regarding the pendency of these actions was published on BusinessWire, a national, businessoriented newswire service, on March 15, 2013. 3 See Alba Decl., Ex. A. Within 60 days after publication of the notice, any members of the proposed class may apply to the court to be appointed as lead plaintiff, whether or not they have previously filed a complaint in the action. 15 U.S.C. 78u-4(a)(3)(A)(i). Second, the PSLRA provides that, within 90 days after publication of the notice, the court shall consider any motion made by a class member and shall appoint as lead plaintiff the member or members of the class that the court determines to be most capable of adequately representing the 3 Business Wire is a widely circulated national business-oriented wire service, as required by 15 U.S.C. 78u-4(a)(3)(A)(i). In re Atlas Mining Co. Sec. Litig., No. CV 07-428-N-EJL-MHW, 2008 U.S. Dist. LEXIS 24201 (D. Idaho Mar. 25, 2008). - 3 -
Case 6:13-cv-00247-MHS Document 14 Filed 05/14/13 Page 5 of 12 PageID #: 65 interests of class members. 15 U.S.C. 78u-4(a)(3)(B)(i). In determining the most adequate plaintiff, the PSLRA provides that: [T]he court shall adopt a presumption that the most adequate plaintiff in any private action arising under this [Act] is the person or group of persons that (aa) has either filed the complaint or made a motion in response to a notice...; (bb) in the determination of the court, has the largest financial interest in the relief sought by the class; and (cc) otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure. 15 U.S.C. 78u-4(a)(3)(B)(iii)(I). 2. Local 731 Teamsters Satisfy the Lead Plaintiff Requirements of the Exchange Act a. Local 731 Teamsters Motion is Timely Local 731 Teamsters have timely filed their motion, within 60 days of the March 15, 2013, publication of notice, and have duly signed and filed certifications evidencing, among other things, their willingness to serve as a representative party on behalf of the class. See Alba Decl., Ex. C. Accordingly, Local 731 Teamsters have satisfied the individual requirements of 15 U.S.C. 78u- 4(a)(3)(B) and are entitled to have their application for appointment as lead plaintiff considered by the Court. b. Local 731 Teamsters Have the Largest Financial Interest in the Relief Sought by the Class During the Class Period, Local 731 Teamsters purchased 2,820 shares of Diodes common stock and suffered losses exceeding $22,232 in connection therewith. See Alba Decl., Ex. C. To their knowledge, this represents the largest financial interest in the relief sought by the class. See 15 U.S.C. 78u-4(a)(3)(B)(iii)(I). - 4 -
Case 6:13-cv-00247-MHS Document 14 Filed 05/14/13 Page 6 of 12 PageID #: 66 c. Local 731 Teamsters Satisfy Rule 23 In addition to possessing the largest financial interest in the outcome of the litigation, the lead plaintiff must also otherwise satisf[y] the requirements of Rule 23 of the Federal Rules of Civil Procedure. 15 U.S.C. 78u-4(a)(3)(B)(iii)(I)(cc). Rule 23(a) provides that a party may serve as a class representative only if the following four requirements are satisfied: Id. (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class. While the PSLRA dictates that a lead plaintiff meet the four requirements of Rule 23(a), the presumptive lead plaintiff must make a preliminary showing of typicality and adequacy. Dynegy, 2002 U.S. Dist. LEXIS 27858, at *11. The Court defers examination of the remaining requirements until the lead plaintiff moves for class certification. Rule 23(a)(3) requires that the claims or defenses of the representative parties are typical of those of the class. Typicality is present where the plaintiff s claims arise from the same event or course of conduct that gives rise to claims of other class members and the claims are based on the same legal theory. Dynegy, 2002 U.S. Dist. LEXIS 27858, at *15. The questions of law and fact common to the members of the class which predominate over questions which may affect individual class members include the following: Whether defendants violated the Exchange Act; Whether defendants omitted and/or misrepresented material facts; Whether defendants statements omitted material facts necessary to make the statements made, in light of the circumstances under which they were made, not misleading; and - 5 -
Case 6:13-cv-00247-MHS Document 14 Filed 05/14/13 Page 7 of 12 PageID #: 67. Whether defendants knew or recklessly disregarded that their statements were false and misleading. There is a well-defined community of interest in the questions of law and fact involved in this case, of which Local 731 Teamsters are a part. Local 731 Teamsters, in concert with the other members of the class, allege that defendants violated the securities laws by publicly disseminating materially false and misleading statements, as well as statements which omitted material facts, about Diodes during the Class Period. As a result of defendants fraudulent representations and omissions, Local 731 Teamsters, as well as all other members of the class, purchased Diodes common stock at artificially inflated prices and were damaged thereby. Because the claims asserted by Local 731 Teamsters are premised on the same legal and remedial theories and are based on the same types of misrepresentations and omissions as the class s claims, typicality is satisfied. See 7 Herbert B. Newberg & Alba Conte, Newberg on Class Actions 22.24, at 107-08 (4th ed. 2002) ( The majority of class action decisions support the view that when it is alleged that the same unlawful conduct was directed at or affected both the named plaintiff and the class sought to be represented, the typicality requirement is met. ); In re Enron Corp., Sec. Litig., 206 F.R.D. 427, 441 (S.D. Tex. 2002. Under Rule 23(a)(4), a representative party must also fairly and adequately protect the interests of the class. The standard for adequacy of representation under Rule 23(a)(4) is met by the absence of potential conflict between the named plaintiffs and the class members. Id. Here, Local 731 Teamsters are adequate representatives. As evidenced by their injuries, Local 731 Teamsters interests are clearly aligned with the members of the class who also suffered damages due to defendants wrongdoing and there is no evidence of any antagonism between Local 731 Teamsters interests and those of the other members of the class. Further, Local 731 Teamsters substantial losses motivate them to pursue this case with vigor and they have retained competent and experienced counsel to assist in this process. - 6 -
Case 6:13-cv-00247-MHS Document 14 Filed 05/14/13 Page 8 of 12 PageID #: 68 B. The Court Should Approve Local 731 Teamsters Selection of Counsel The PSLRA vests authority in the lead plaintiff to select and retain counsel to represent the class, subject to court approval. See 15 U.S.C. 78u-4(a)(3)(B)(v). The court should not disturb lead plaintiff s choice of counsel unless necessary to protect the interests of the class. 15 U.S.C. 78u-4(a)(3)(B)(iii)(II)(aa). Local 731 Teamsters have selected Robbins Geller as lead counsel and Thomas John Ward, Jr. and Jack Wesley Hill of the Ward & Smith Law Firm as liaison counsel for the class. Robbins Geller is a 180-lawyer law firm that is actively engaged in complex litigation, emphasizing securities, consumer, and antitrust class actions. See Cortese v. Radian Group, Inc., No. 07-3375, 2008 U.S. Dist. LEXIS 6958, at *18 (E.D. Pa. Jan. 30, 2008) ( The firm is comprised of probably the most prominent securities class action attorneys in the country. ) (citation omitted); Alba Decl., Ex. D. Robbins Geller possesses extensive experience litigating securities class actions and has successfully prosecuted numerous securities fraud class actions on behalf of injured investors, including In re Cardinal Health, Inc. Sec. Litig., 226 F.R.D. 298, 308 (S.D. Ohio 2005) ( the Court finds that [Robbins Geller] will represent deftly the class s interests ) and In re Enron Corp. Sec., 586 F. Supp. 2d 732, 789 (S.D. Tex. 2008) ( The Court finds that in the face of extraordinary obstacles, the skills, expertise, commitment, and tenacity of Lead Counsel in this litigation cannot be overstated. ). Robbins Geller s securities department includes numerous trial attorneys and many former federal and state prosecutors and law clerks, and utilizes an extensive group of in-house experts to aid in the prosecution of complex securities issues. See Alba Decl., Ex. D. Thus, the Court may be assured that in the event this Motion is granted, the members of the class will receive the highest caliber of legal representation available from lead counsel. See Borochoff v. Glaxosmithkline PLC, 246 F.R.D. 201, 205 (S.D.N.Y. 2007) (Robbins Geller is a firm - 7 -
Case 6:13-cv-00247-MHS Document 14 Filed 05/14/13 Page 9 of 12 PageID #: 69 which is well qualified and has successfully served as lead counsel... in numerous complex securities class actions ). Accordingly, the Court should approve Local 731 Teamsters selection of counsel. IV. CONCLUSION For all the foregoing reasons, Local 731 Teamsters respectfully request that the Court: (i) appoint Local 731 Teamsters as Lead Plaintiff; (ii) approve Local 731 Teamsters selection of counsel; and (iii) grant such other relief as the Court may deem just and proper. - 8 -
Case 6:13-cv-00247-MHS Document 14 Filed 05/14/13 Page 10 of 12 PageID #: 70 DATED: May 14, 2013 /s/ Samuel H. Rudman (by permission Wesley Hill) ROBBINS GELLER RUDMAN & DOWD LLP SAMUEL H. RUDMAN LEAD ATTORNEY MARIO ALBA JR. SEAN T. MASSON 58 South Service Road, Suite 200 Melville, NY 11747 Telephone: 631/367-7100 631/367-1173 (fax) srudman@rgrdlaw.com malba@rgrdlaw.com smasson@rgrdlaw.com ROBBINS GELLER RUDMAN & DOWD LLP TRICIA L. McCORMICK 655 West Broadway, Suite 1900 San Diego, CA 92101 Telephone: 619/231-1058 619/231-7423 (fax) triciam@rgrdlaw.com CAVANAGH & O HARA PATRICK J. O HARA 407 East Adams Street Springfield, IL 62701 Telephone: 217/544-1771 217/544-9894 (fax) T. John Ward, Jr. Texas State Bar No. 00794818 J. Wesley Hill Texas State Bar No. 24032294 WARD & SMITH LAW FIRM 1127 Judson Rd., Suite 220 Longview, Texas 75601 Tel: (903) 757-6400 Fax: (903) 757-2323 jw@wsfirm.com wh@wsfirm.com ATTORNEYS FOR PLAINTIFF - 9 -
Case 6:13-cv-00247-MHS Document 14 Filed 05/14/13 Page 11 of 12 PageID #: 71 CERTIFICATE OF CONFERENCE This motion for appointment as lead plaintiff and approval of selection of counsel has been filed pursuant to 21D of the Securities and Exchange Act, 15 U.S.C. 78u-4(a)(3)(A) and (B), as amended by the Private Securities Litigation Reform Act of 1995. Per these statutory requirements, within 60 days after publication of the required notice, any member or members of the proposed class may apply to the Court to be appointed as lead plaintiff, whether or not they have previously filed a complaint in this action. Therefore, any potential party to the action is aware of the requirements for filing a lead plaintiff motion. However, due to the nature of the filing, counsel has no way of knowing which class members will be filing competing lead plaintiff motions at this time. As a result, counsel for movant has been unable to meet and confer with any other counsel filing lead plaintiff motions, whom movant believes would be regarded as opposing counsel for purposes of Local Rule CV-7(h), and thus believes such conference attempts are not possible at this stage of the litigation. /s/ Wesley Hill Wesley Hill - 10 -
Case 6:13-cv-00247-MHS Document 14 Filed 05/14/13 Page 12 of 12 PageID #: 72 CERTIFICATE OF SERVICE I hereby certify that a copy of the foregoing document was filed electronically in compliance with Local Rule CV-5(a). Therefore, this document was served on all counsel who are deemed to have consented to electronic service. Local Rule CV-5(a)(3)(A). Pursuant to Fed. R. Civ. P. 5(d) and Local Rule CV-5(d) and (e), all other counsel of record not deemed to have consented to electronic service were served with a true and correct copy of the foregoing by email on this the 14th day of May, 2013. /s/ Wesley Hill Wesley Hill