108
Filed 5:06-cv-04327-JW
Document 09/07/2007
Page 1 of 5
1 2 3 4 5 6 7 8 9 10
NEIL L. SELINGER RICHARD BEMPORAD DAVID C. HARRISON LOWEY DANNENBERG BEMPORAD SELINGER & COHEN, P.C. One North Broadway, 5' Floor White Plains, New York 10601-23 10 Telephone: [phone] Lead Counsel for the New York City Pension Funds and the Putative Class WILLEM F. JONCKHEER S.B.N. 178748 SCHUBERT & REED LLP Two Embarcadero Center, Suite 1050 San Francisco, California 94111 415-788-4220 Telephone: Local Counsel UNITED STATES DISTRICT COURT
11
NORTHERN DISTRICT OF CALIFORNIA
12
SAN JOSE DIVISION
13 14 15 16 17
No. C06-04327-JW In re JUNIPER NETWORKS, INC. SECURITIES LITIGATION REPLY IN SUPPORT OF PLAINTIFF'S REQUEST FOR JUDICIAL NOTICE OF SEC MATERIALS IN OPPOSITION TO DEFENDANTS' MOTION TO DISMISS Date : Time : Courtroom: Before : September 10, 2007 9:00 a.m. 8 Hon. James Ware
This Document Relates To:
18
ALL ACTIONS
19 20 21 22 23 24 25 26 27 28
REPLY IN SUPPORT OF PLAINTIFF'S REQUEST FOR JUDICIAL NOTICE OF SEC MATERIALS IN OPPOSITION TO DEFENDANTS' MOTION TO DISMISS
1964 / MISC / 00083960.WPD v2
5:06-cv-04327-JW
Document 108
Filed 09/07/2007
Page 2 of 5
It is hardly surprising that the Juniper Defendants have reacted so strenuously to NYC's
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Complaints in SEC v. Juniper Networks, Inc., No. 07-04430-JW (N.D. Cal. ' "), and SEC v. Berry, No. 07-04431August 28, 2007) (hereinafter referenced as "JC "). RMW (N.D. Cal. August 28, 2007) (hereinafter referenced as "BC
submission of the recently filed SEC Complaints against Juniper Networks, Inc. ("Juniper" or the "Company") and its former General Counsel and Corporate Secretary, Lisa C. Berry,' and the SEC Litigation Release No. 202507 (collectively, the "SEC Materials")' describing the proceedings and settlement with Juniper. The SEC Complaints contain more of the sordid details concerning the repeated issuance of backdated stock options at Juniper, its failure to report hundreds of millions of dollars in compensation expenses relating to the grants and the dissemination of numerous SEC filings misrepresenting the operative facts. The Litigation Release discloses that Juniper has resolved the SEC enforcement action concerning the improprieties by consenting to a permanent injunction barring further violations of, inter alia, Sections 10(b) and 14(a) of the Securities Exchange Act of 1934 and SEC Rules I Ob-5 and 14a-9 thereunder. Notwithstanding the Juniper Defendants' protestations, this Court may and should take judicial notice of the SEC Materials and deny Movants' motion to dismiss in its entirety.'
In its recent decision in Tellabs, Inc. v. Makor Issues & Rights, Ltd., 127 S. Ct. 2499
(2007), the Supreme Court specifically rejected Defendants' argument (Opp. at 2) that a court determining a motion to dismiss cannot take judicial notice of documents that fall outside the four corners of the complaint. On the contrary, Tellabs holds that
courts must consider the complaint in its entirety, as well as other sources courts ordinarily examine when ruling on Rule 12(b)(6) motions to dismiss , in particular, documents incorporated into the complaint by reference, and matters ofwhich a court may take judicial notice. See 5B Wright & Miller 1357 (3d ed. 2004 and Supp . 2007).
23 24 25 26 27 28
2 The SEC Materials are annexed to the Supplemental Declaration of David C. Harrison as Exs. 13-15 (Dkt. No. 105).
Defendants do not object to the Court's consideration of the opinion, dated 3 August 27, 2007, in the Brocade Communications securities class action lawsuit denying certain nonmanagement directors' motions to dismiss (Dkt. No. 104).
REPLY IN SUPPORT OF PLAINTIFF'S REQUEST FOR JUDICIAL NOTICE OF SEC MATERIALS IN OPPOSITION TO DEFENDANTS' MOTION TO DISMISS
1964 / MISC / 00083960.WPD v2
5:06-cv-04327-JW
Document 108
Filed 09/07/2007
Page 3 of 5
li Tellabs, 127 S. Ct. at 2509 (emphasis added).
21
3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
20 21 22 23 24 25
The SEC Materials fall squarely within these parameters. Courts in this District have routinely taken judicial notice of public records, such as consent decrees with governmental agencies and the contents thereof. E.g., Citizens for a Better Env't v. Union Oil Co., 861 F. Supp. 889, 896-97 (N.D. Cal . 1994), aff'd, 83 F.3d 1111 (9' Cir. 1996); City ofArcadia v. U.S. Environmental Prot. Agency, 265 F. Supp . 2d 1142 , 1146 n.4 (N.D. Cal. 2003 ). The Court may also take notice of its own records , including pleadings and proceedings in other actions. See, e.g., id. The SEC Materials are relevant to the motion dismiss to because they corroborate and amplify the allegations in NYC 's Complaint and debunk many of Movants ' baseless assertions. Juniper has essentially stipulated in its settlement with the SEC that Berry, a former corporate officer, and her colleagues on the Stock Option Committee ("SOC") (i.e., Defendants Kriens and Gani) repeatedly issued and received backdated options , created or signed fictitious minutes concerning the transactions , misrepresented the true facts in Juniper ' s public filings , and caused Juniper to underreport its expenses by $900 million during the Class Period . JC 1-3 and 143 8; BC 1-5 , 11 and 41-71 . These facts also corroborate NYC's allegations charging Juniper with responsibility for the knowing or reckless misconduct of Defendants Kriens, Gani, and former management . See Complaint 285-93 , 304-16.
The SEC Materials amplify NYC's allegations by identifying Berry as the remaining member of the three-member SOC, along with CEO Kriens and former CFO Gani,4 which backdated dozens of option grants, and then created phantom minutes of SOC meetings purporting to authorize the grants.5 Berry signed and presented the minutes to Kriens and Gani,
BC47. 26 1 E.g., BC 48-49. 27 1 28
REPLY IN SUPPORT OF PLAINTIFF'S REQUEST FOR JUDICIAL NOTICE OF SEC MATERIALS IN OPPOSITION TO DEFENDANTS' MOTION TO DISMISS
1964 / MISC / 00083960 .WPD v2 2
5:06-cv-04327-JW
Document 108
Filed 09/07/2007
Page 4 of 5
I who either signed the fictitious minutes or permitted facsimile stamps to be used to sign them.' Berry also drafted and signed Juniper Proxy Statements (for which Defendants have requested I judicial notice, Dkt. Nos. 81, 83), misrepresenting the dates on which stock options were purportedly granted and falsely stating that the options were granted at the market prices on the 5 6 7 8 9 10 11 12 13 14 15 16 dates of grant.7 See Complaint 82, 102, 105, 115, 255-58. Under well-settled principles of corporate attribution, the knowledge of Berry, Kriens, Gani and other senior officers is imputed to Juniper. See, e.g., W. R. Grace v. Western U.S. Industries, 608 F.2d 1214, 1218 (91' Cir. 1979).8 The SEC Materials also corroborate these senior officers ' involvement in and knowledge of the admittedly backdated options worth tens of millions of dollars in immediate gains that Defendants Kriens, Gani, Sindhu, and their cohorts received in 1999 and 2000. See Complaint
83, 285, 292. Again, Berry created minutes for phantom SOC meetings approving the
backdated grants, and Kriens and Gani either signed or gave Berry carte blanche to use signature stamps approving the fictitious minutes.' The SEC Materials confirm that NYC's Complaint is well-founded and that the misconduct at issue involved fraud , not just mere negligence, as Movants contend. ...