Strougo v. RealNetworks Inc
2:24-cv-00297
W.D. Wash.Oct 31, 2024Background
- Barbara Strougo filed a putative class action under the Private Securities Litigation Reform Act (PSLRA) against RealNetworks, Inc., and its former board members, alleging violations related to a 2022 merger led by Robert Glaser, the company’s founder and largest shareholder.
- The complaint claims Glaser manipulated RealNetworks’ stock price and forecasts to acquire the company at an unfairly low price, with the acquisition approved based on a misleading proxy statement.
- Concurrent motions were filed by Strougo and another class member, Richard Brender, both seeking appointment as lead plaintiff and to have their respective firms serve as lead class counsel.
- Brender also initiated a parallel state court action in King County, Washington, over similar factual allegations and class composition.
- Defendants sought to stay discovery in the state court case pending resolution of an anticipated federal motion to dismiss, citing the PSLRA’s automatic discovery stay in federal court.
- The Court conducted oral argument, considering the lead plaintiff motions as well as the motion to stay state-court discovery.
Issues
| Issue | Plaintiff’s Argument | Defendant’s Argument | Held |
|---|---|---|---|
| Appointment of Lead Plaintiff | Strougo: Should be lead | Brender has larger financial interest | Brender appointed as lead plaintiff; has largest financial stake |
| Adequacy/Typicality of Lead Plaintiff (Rule 23) | Brender’s state action creates conflict | No actual conflict, overlap is speculative | No actual conflict; Brender adequate/typical under Rule 23 |
| Appointment of Lead Counsel | Strougo: Brender’s counsel conflicted | Brender’s counsel adequate and competent | Brender’s chosen counsel appointed as co-lead counsel |
| Stay of State Court Discovery Under PSLRA | No need for stay; protective order suffices | State discovery could circumvent PSLRA stay | State court discovery stayed pending resolution of motion to dismiss |
Key Cases Cited
- In re Cavanaugh, 306 F.3d 726 (9th Cir. 2002) (sets lead plaintiff appointment procedure under PSLRA)
- Cohen v. U.S. Dist. Court for N. Dist. of Calif., 586 F.3d 703 (9th Cir. 2009) (court generally defers to lead plaintiff’s choice of counsel)
- Armour v. Network Assocs., Inc., 171 F. Supp. 2d 1044 (N.D. Cal. 2001) (typicality and adequacy are key for lead plaintiff determination)