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Shotwell v. Zillow Group

United States District Court, W.D. Washington, Seattle

January 5, 2018

JAMES SHOTWELL, individually and on behalf of all others similarly situated, Plaintiff,
v.
ZILLOW GROUP, et al., Defendants.

          ORDER

          JOHN C. COUGHENOUR, UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on Jo Ann Offutt, Raymond Harris, and Johanna Choy's (collectively “Movants”) motion to consolidate, for appointment as lead plaintiffs, and approval of their choice of counsel (Dkt. No. 15). Having thoroughly considered the briefing and the relevant record, the Court finds oral argument unnecessary and hereby GRANTS the motion for the reasons explained herein.

         I. BACKGROUND

         This case involves two related class action lawsuits brought against Zillow Group, Inc., Spencer Rascoff (Zillow's CEO), and Kathleen Philips (Zillow's CFO) (collectively “Defendants”) for alleged violations of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. § 77, et seq. (Dkt. Nos. 10 at 2, 16-7 at 2.) On August 22, 2017, Stephen Vargosko filed a class action lawsuit against Defendants in the Central District of California (the “Vargosko Action”). (Dkt. No. 16-6) (Stephen Vargosko v. Zillow Group, Inc., et al., No. 2:17-cv-06207 (C.D. Cal. Aug 22, 2017)). Vargosko's counsel immediately filed notice pursuant to the Private Securities Litigation Reform Act of 1995 (“PSLRA”) advising potential class members of the alleged claims and the deadline for filing a motion to be appointed as lead plaintiff. (Dkt. No. 16-1 at 2.) On October 23, 2017, Movants filed a motion in the Vargosko Action to be appointed as lead plaintiffs and approve their selected counsel. (Dkt. Nos. 15 at 3, 16-2 at 2-8.)

         On September 14, 2017, Plaintiff James Shotwell filed his complaint against Defendants in this Court (the “Shotwell Action”). (Dkt. No. 1.) Shotwell's lawsuit alleges essentially the same claims and facts as the Vargosko Action. (Compare Dkt. No. 10, with Dkt. No. 16-6.) On November 15, 2017, the parties to the Vargosko Action stipulated to a transfer to this Court in anticipation that the suits would be consolidated. (Dkt. No. 16-8.)[1] Movants file this renewed motion asking the Court for three things: (1) to consolidate the Vargosko Action and Shotwell Action (as well as other related cases filed in the future); (2) to appoint Movants as lead plaintiffs pursuant to PSLRA; and (3) approve Movants selection of lead and local counsel. (Dkt. No. 15 at 2.) The Court addresses these issues in turn.

         II. DISCUSSION

         A. Consolidation

         A district court may consolidate actions that involve a common question of law or fact. Fed.R.Civ.P. 42(a)(1). Courts are afforded “broad discretion” to consolidate related matters that are pending in the same district. In re Adams Apple, Inc., 829 F.2d 1484, 1487 (9th Cir. 1987) (citation omitted). PLSRA envisions that separate actions asserting “substantially the same claim or claims” will be consolidated and requires the district court to rule on a motion to consolidate prior to appointing a lead plaintiff. 15 U.S.C. § 77z-1(a)(3)(B)(ii).

         The Vargosko and Shotwell actions are identical in nearly all respects. Both allege that Defendants violated the Exchange Act when they made material false and misleading statements in the Company's annual financial reports (form 10-K) in 2016 and 2017. (Compare Dkt. No. 10 at 14-20, with Dkt. No. 16-6 at 12-15.)[2] Both parties assert that Defendants' subsequent disclosure of possible violations in August 2017 caused over a 15% decline in Zillow's share price, which represents the harm caused to proposed class members. (Compare Dkt. No. 10 at 11, with Dkt. No. 16-6 at 9.) Also, the time period in which these acts are alleged to have occurred is largely the same. (See generally Dkt. Nos. 10, 16-6.) Defendants do not oppose consolidation. (Dkt. No. 18 at 2.)[3]

         For those reasons, the Court finds that the Vargosko and Shotwell actions share common questions of fact and law and it is appropriate to consolidate these matters for all purposes. Pursuant to Federal Rule of Civil Procedure 42(a), Movants motion to consolidate is GRANTED.

         B. Appointment as Lead Plaintiffs

         PSLRA sets out specific guidelines for appointing lead plaintiffs in class actions brought under the Exchange Act. A district court can consider a motion to appoint a lead plaintiff, filed by class members in response to a published notice of class action, “as soon as practicable after the Court decides any pending motion to consolidate.” 15 U.S.C. § 77z-1(a)(3)(B)(ii); 15 U.S.C. § 78u-4(a)(3)(B)(ii). The motion may be brought by “a class member who is not individually named as a plaintiff in the complaint or complaints . . . .” 15 U.S.C. § 77z-1(a)(3)(B)(i); 15 U.S.C. § 78u-4(a)(3)(B)(i). PSLRA establishes a “rebuttable presumption” that “the most adequate plaintiff” to serve as lead plaintiff is “the person or group of persons” that:

(aa) has either filed the complaint or made a motion in response to a notice . . .[who](bb) in the determination of the court, has the largest financial interest in the relief sought by the class; and (cc) otherwise satisfies the ...

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