Notice of Motion and Motion to Consolidate Related Actions Against Sagent Technology, Inc. for Violations of the Securities Exchange Act of 1934; Memorandum of Points and Authorities in Support Thereof Source: Milberg Weiss Date: 01/29/02 Time: 7:18 PM MILBERG WEISS BERSHAD HYNES & LERACH LLP RANDI D. BANDMAN (145212 CHRISTOPHER P. SEEFER (201197 SHIRLEY H. HUANG (206854 100 Pine Street, Suite 2600 San Francisco, CA 94111 Telephone: 415/288-4545 415/288-4534 (fax -and- WILLIAM S. LERACH (68581 401 B Street, Suite 1700 San Diego, CA 92101 Telephone: 619/231-1058 619/231-7423 (fax LAW OFFICES OF ALFRED G. YATES, JR. ALFRED G. YATES, JR. GERALD L. RUTLEDGE DONALD A. BROGGI 519 Allegheny Building 429 Forbes Avenue Pittsburgh, PA 15219 Telephone: 412/391-5164 412/471-1033 (fax [Proposed] Co-Lead Counsel for Plaintiffs UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA 1 of 7 8/20/02 6:24 PM
FRANK BIELANSKI, On Behalf of Himself and All Others Similarly Situated, vs. Plaintiff, SAGENT TECHNOLOGY, INC., BEN C. BARNES and DAVID ELIFF, Defendants. No. C-01-4637-PJH CLASS ACTION NOTICE OF MOTION AND MOTION MOTION TO CONSOLIDATE RELATED ACTIONS AGAINST SAGENT TECHNOLOGY, INC. FOR VIOLATIONS OF THE SECURITIES EXCHANGE ACT OF 1934; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF DATE: March 6, 2002 TIME: 1:30 p.m. COURTROOM: 3, 17th Floor JUDGE: The Honorable Phyllis J. Hamilton TABLE OF CONTENTS I. INTRODUCTION II. SUMMARY OF ALLEGATIONS III. ARGUMENT A. This Court Should Consolidate These Related Actions for Purposes of Efficiency B. The PSLRA Requires that the Question of Consolidation Be Decided Prior to the Determination of the Appointment of Lead Plaintiff C. This Court Should Order the Preservation of Documents IV. CONCLUSION NOTICE OF MOTION AND MOTION TO: ALL PARTIES AND THEIR ATTORNEYS OF RECORD PLEASE TAKE NOTICE that on March 6, 2002, at 1:30 p.m., or as soon thereafter as the matter may be heard in the Courtroom of the Honorable Phyllis J. Hamilton, located at 450 Golden Gate Avenue, 17th Floor, Courtroom 3, San Francisco, California, Movant (1 will, and hereby does, move the Court for an Order consolidating the following actions for all purposes under Rule 42 of the Federal Rules of Civil Procedure: 2 of 7 8/20/02 6:24 PM
Abbreviated Case Name Case No. Date Filed Bielanski v. Sagent Technology, Inc., et al. Plaintiff: Frank Bielanski ("Bielanski" Lefkowitz v. Sagent Technology, Inc., et al. Plaintiff: Eugene Lefkowitz ("Lefkowitz" CV-01-4637 PJH 11/30/01 CV-01-4681-PJH 12/03/01 This motion is brought on the grounds that these actions are substantially identical because each alleges claims for violations of 10(b of the Securities Exchange Act of 1934 ("Exchange Act", 15 U.S.C. 78j(b, and Securities and Exchange Commission ("SEC" Rule 10b-5 promulgated thereunder, 17 C.F.R. 240.10b-5, based upon similar factual allegations against substantially the same defendants. The motion is also brought on the ground that consolidation of these cases will promote efficiency. This motion is based upon this notice of motion, memorandum of points and authorities, the Huang Decl. and the complete files and records in the related actions and such oral argument as the Court may consider in deciding this motion. I. INTRODUCTION (2 MEMORANDUM OF POINTS AND AUTHORITIES Presently pending in this District are two related securities fraud class action lawsuits, identified supra, brought pursuant to 10(b of the Exchange Act, 15 U.S.C. 78j(b and SEC Rule 10b-5 promulgated thereunder, 17 C.F.R. 240.10b-5. (3 Movant seeks to consolidate the above related securities class actions pursuant to Rule 42(a of the Federal Rules of Civil Procedure. Each action asserts substantially the same claims and raises substantially the same questions of fact and law. Each of these cases alleges securities fraud claims on behalf of a class of all persons who purchased the securities of Sagent during the Class Period. Thus, consolidation of these actions is appropriate. II. SUMMARY OF ALLEGATIONS These related class actions allege a common course of conduct by substantially the same defendants in violation of 10(b of the Exchange Act and Rule 10b-5 promulgated thereunder. Each action alleges that the defendants made a series of false and misleading statements during the Class Period (May 11, 2001 to November 28, 2001 about the Company's business prospects and financial results. 2. (4 The actions name Sagent and two of its senior executives as defendants and are brought on behalf of all persons who purchased the securities of Sagent during the Class Period. 1. Sagent develops, markets, and supports products and services that are designed to help businesses collect, analyze, understand, and act on customer and operational information in real-time. 8. During the Class Period, defendants caused Sagent's shares to trade at artificially inflated levels through the issuance of false and misleading financial statements. 2. Due to this inflation, Sagent was able to complete a private placement offering of 9.1 million shares, raising net proceeds of $16.8 million on August 1, 2001. 2. On November 15, 2001, just months after the offering was completed, Sagent revealed that (1 it was 3 of 7 8/20/02 6:24 PM
conducting an internal investigation of sales orders to government agencies, (2 the Company had discovered information indicating a $1.1 million sales order recognized as revenue in 3Q01 might not be valid, and (3 a restatement of revenues recognized in the first nine months of 2001 might be required. 16. Then, on November 28, 2001, defendants issued a press release revealing that Sagent's 1Q-3Q results had been materially misstated and would have to be restated. 17. The press release stated in part: Id. Sagent... today announced that it is revising revenues for the first nine months of 2001 as a result of an internal investigation into the validity of sales orders to various government agencies. The investigation efforts led by Sagent in conjunction with its outside counsel and independent accountants, confirmed that sales orders booked by one of its employees in its Washington, D.C. office to government agencies from the first through third quarters of 2001, totaling approximately $5 million, were forged and determined to be invalid. Sagent is reducing its first quarter reported revenue from $11.0 million to $10.3 million, its second quarter reported revenue from $13.3 million to $12.5 million, and its previously announced third quarter revenue from $14.5 million to $11.4 million... On November 21, 2001, Sagent was notified by the NASDAQ Listing Qualifications Department that it has become subject to NASDAQ delisting procedures as a result of the company's failure to file the Form 10-Q for the third fiscal quarter ending September 30, 2001, in accordance with NASDAQ Rule 4310(e(14. The Sagent Form 10-Q for this period was not filed due to the previously discussed investigation of certain sales orders. The company's trading symbol has been appended with an "E", beginning November 26, 2001. The company is working cooperatively with the NASDAQ staff and has requested a hearing with the NASDAQ Listing Qualifications Panel. Thus, Sagent admitted that it inappropriately recorded transactions included in its 1Q-3Q 2001 results, and has restated those results to remove some $5 million in improperly reported revenues, such that its 1Q-3Q financial statements were not a fair presentation of Sagent's results and were presented in violation of Generally Accepted Accounting Principles ("GAAP" and SEC rules. 21. III. ARGUMENT A. This Court Should Consolidate These Related Actions for Purposes of Efficiency Consolidation pursuant to Rule 42(a is proper when actions involve common questions of law and fact. (5 In re Equity Funding Corp. of Am. Sec. Litig., 416 F. Supp. 161, 175 (C.D. Cal.1976. This Court has broad discretion under this Rule to consolidate cases pending within this District. Investors Research Co. v. United States Dist. Court for Cent. Dist., 877 F.2d 777 (9th Cir. 1989; Perez-Funez v. District Director, Immigration & Naturalization Service, 611 F. Supp. 990, 994 (C.D. Cal. 1984 ("A court has broad discretion in deciding whether or not to grant a motion for consolidation, although, typically, consolidation is favored." (citation omitted. Courts have recognized that class action shareholder suits, in particular, are ideally suited to 4 of 7 8/20/02 6:24 PM
consolidation pursuant to Rule 42(a because their unification expedites pretrial proceedings, reduces case duplication, avoids the contacting of parties and witnesses for inquiries in multiple proceedings, and minimizes the expenditure of time and money by all persons concerned. See Equity Funding, 416 F. Supp. at 176. Consolidating multi-shareholder class action suits simplifies pretrial and discovery motions, class action issues, and clerical and administrative management duties. Moreover, consolidation will reduce the confusion and delay that may result from prosecuting these related class action cases separately. See id. The actions pending before this Court present virtually identical factual and legal issues, each one alleges violations of the same sections of the Exchange Act and each action names similar defendants. Because these actions are based on the same facts and involve the same subject matter, the same discovery will be relevant to all lawsuits. Thus, consolidation is appropriate here. B. The PSLRA Requires that the Question of Consolidation Be Decided Prior to the Determination of the Appointment of Lead Plaintiff The PSLRA provides, among other things, for consolidation of substantially similar actions. The PSLRA states in pertinent part: If more than one action on behalf of a class asserting substantially the same claim or claims arising under this chapter has been filed, and any party has sought to consolidate those actions for pretrial purposes or for trial, the court shall not make the determination [of appointment of lead plaintiff under 21D(a(3(B] until after the decision on the motion to consolidate is rendered... 15 U.S.C. 78u-4(a(3(B(ii. Thus, the PSLRA establishes a two-step process for resolving lead plaintiff and consolidation issues where more than one action on behalf of a class asserting substantially the same claims has been filed. The court "shall" first decide the consolidation issue and thereafter decide the lead plaintiff issue, "[a]s soon as practicable" after the consolidation motion has been decided. Id. Given that the selection of lead plaintiff and lead counsel is the necessary first step to prosecute the actions, Movant urges the Court to grant the consolidation motion as soon as practicable and consolidate these related actions under the lowest case number. A prompt determination is reasonable and warranted under Rule 42(a, given the common questions of fact and law presented by the actions now pending in this District. C. This Court Should Order the Preservation of Documents Through this motion, Movant also requests that the Court order the preservation of documents relating to this litigation in accordance with 15 U.S.C. 78u-4(b(3(C(i, both prior to and after the filing of any motion to dismiss. In complex securities fraud cases involving companies with numerous employees, such an order is appropriate and will prevent the loss of key documents, whether through inadvertence or otherwise. IV. CONCLUSION For the reasons stated above, and in order to promote judicial economy, Movant respectfully requests 5 of 7 8/20/02 6:24 PM
that the Court consolidate the related actions identified herein, permit the filing of a consolidated complaint within 45 days from entry of the Court's Order granting this motion, and require the preservation of documents in this action. Respectfully submitted, DATED: January 29, 2002 MILBERG WEISS BERSHAD HYNES & LERACH LLP RANDI D. BANDMAN CHRISTOPHER P. SEEFER SHIRLEY H. HUANG I, the undersigned, declare: CHRISTOPHER P. SEEFER 100 Pine Street, Suite 2600 San Francisco, CA 94111 Telephone: 415/288-4545 415/288-4534 (fax MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH 401 B Street, Suite 1700 San Diego, CA 92101 Telephone: 619/231-1058 619/231-7423 (fax LAW OFFICES OF ALFRED G. YATES, JR. ALFRED G. YATES, JR. GERALD L. RUTLEDGE DONALD A. BROGGI 519 Allegheny Building 429 Forbes Avenue Pittsburgh, PA 15219 Telephone: 412/391-5164 412/471-1033 (fax [Proposed] Co-Lead Counsel for Plaintiffs DECLARATION OF SERVICE BY FACSIMILE PURSUANT TO NORTHERN DISTRICT LOCAL RULE 23-2(c(2 1. That declarant is and was, at all times herein mentioned, a citizen of the United States and a resident of the County of San Francisco, over the age of 18 years, and not a party to or interest in the within action; that declarant's business address is 100 Pine Street, 26th Floor, San Francisco, California 94111. 6 of 7 8/20/02 6:24 PM
2. That on January 29, 2002, declarant served by facsimile the NOTICE OF MOTION, MOTION AND MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF TO CONSOLIDATE RELATED ACTIONS AGAINST SAGENT TECHNOLOGY, INC. FOR VIOLATIONS OF THE SECURITIES EXCHANGE ACT OF 1934 to the parties listed on the attached Service List and this document was forwarded to the following designated Internet site at: http://securities.milberg.com 3. That there is a regular communication by facsimile between the place of origin and the places so addressed. I declare under penalty of perjury that the foregoing is true and correct. Executed this 29th day of January, 2002, at San Francisco, California. Carolyn Burr 1. Movant is Jeffrey Johnson as an individual and as General Manager and sole beneficiary of the Twin Mountain Trust, who purchased Sagent Technology, Inc. ("Sagent" or the "Company" securities during the Class Period. For purposes of this motion, the ("Class Period" is defined as May 11, 2001 to November 28, 2001. Johnson is identified in Exhibit A attached to the Declaration of Shirley H. Huang in Support of: (1 Motion to Appoint Jeffrey Johnson As Lead Plaintiff Pursuant to 21D(a(3(B of the Securities and Exchange Act of 1934 and to Approve Lead Plaintiff's Choice of Counsel; and (2 Motion to Consolidate Related Actions Against Sagent Technology, Inc. for Violations of the Securities Exchange Act of 1934 ("Huang Decl.", filed concurrently herewith. 2. Concurrently with the filing of this motion for consolidation, Movant has filed a motion to be appointed lead plaintiff pursuant to 21D(a(3(B of the Exchange Act and to approve lead plaintiff's choice of counsel. Under the Private Securities Litigation Reform Act of 1995 ("PSLRA", the consolidation motion is to be heard by this Court prior to hearing the lead plaintiff motion. 15 U.S.C. 78u-4(a(3(B(ii. 3. The related case order was issued by this Court on December 19, 2001. 4. All paragraph references (" " are to the Bielanski complaint, unless otherwise indicated. Each action contains similar, if not identical, allegations. 5. Rule 42(a allows this Court to order consolidation of separate actions: 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. 7 of 7 8/20/02 6:24 PM