Klein v. Ellison

Background

R. Andre Klein filed a derivative action against certain directors and officers of Oracle Corporation and Oracle America, Inc., asserting claims for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, abuse of control, unjust enrichment, and violation of Section 14(a) of the Securities Exchange Act. Kathleen Dinsmore later filed a substantially similar derivative action, and the court previously consolidated those two actions.

Alison Sherman then filed a derivative action involving substantially the same parties and factual allegations. The Sherman action primarily alleged that director defendants violated federal securities law and breached their fiduciary duties by falsely representing a commitment to diversity. The court previously treated the Klein and Sherman actions as related. The defendants then moved to consolidate them.

Consolidation

Federal Rule of Civil Procedure 42(a) permits consolidation when actions involve a common question of law or fact. The court found consolidation appropriate because the Klein and Sherman actions concerned substantially the same parties and events, arose from the same factual allegations, and presented the same legal issues concerning alleged federal securities-law violations and breaches of fiduciary duties. The Klein plaintiffs did not oppose consolidation, and the opinion states that Sherman agreed to consolidation. The court concluded that consolidation would promote judicial economy without creating potential delay or prejudice.

Consolidated Complaint

The parties disputed whether filing a consolidated complaint would eliminate the plaintiffs’ ability to amend that complaint once as a matter of course under Rule 15(a)(1). That rule generally permits one amendment without the opposing party’s written consent or the court’s permission within specified time limits.

The court held that filing the consolidated complaint should not prevent the plaintiffs from later filing an amended complaint as a matter of course within the applicable Rule 15(a)(1) timeframe. The court found nothing indicating that the consolidated complaint would contain substantive amendments or do more than join the parties and claims from the related actions. The court did not decide whether any future amendments would create grounds for dismissal.

Disposition

The court granted the defendants’ motion to consolidate the Klein and Sherman actions. It ordered the plaintiffs to file a consolidated complaint by December 7, 2020. It also continued the case-management conference to December 17, 2020, at 1:30 p.m., and required a joint case-management conference statement one week beforehand. The court allowed the parties to submit a stipulation if they agreed on a briefing schedule and wanted to continue the conference again.