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Case 6:13-cv-00247-MHS Document 14 Filed 05/14/13 Page 1 of 12 PageID #: 61

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF TEXAS

TYLER DIVISION

LOCAL 731 I.B. OF T. EXCAVATORS AND § PAVERS PENSION TRUST FUND, § Individually and on Behalf of All Others § Similarly Situated §

§ Plaintiff, §

§ vs. §

§ DIODES, INC., et al., §

§ Defendants. § §

Civil Action No. 6:13-cv-00247

CLASS ACTION

LOCAL 731 TEAMSTERS’ MOTION FOR APPOINTMENT AS LEAD PLAINTIFF AND APPROVAL OF SELECTION OF COUNSEL


Proposed lead plaintiff, Local 731 Teamsters, hereby move this Court for an Order (attached

hereto): (1) appointing Local 731 Teamsters as lead plaintiff in this action; (2) approving their

selection of Robbins Geller Rudman & Dowd LLP (“Robbins Geller”) to serve as lead counsel and

Thomas John Ward, Jr. and Jack Wesley Hill of the Ward & Smith Law Firm to serve as liaison

counsel; and (3) granting such other and further relief as the Court may deem just and proper. 15

U.S.C. §78u-4(a)(3)(B). 1 In support of this motion, Local 731 Teamsters submit the following

Memorandum of Law and the Declaration of Mario Alba Jr.

I. PRELIMINARY STATEMENT

This action was brought on behalf of all those who purchased or otherwise acquired Diodes,

Inc. (“Diodes” or the “Company”) common stock during the period between February 9, 2011 and

June 9, 2011. This action alleges violations of §§10(b) and 20(a) of the Securities Exchange Act of

1934 (“Exchange Act”), as amended by the Private Securities Litigation Reform Act of 1995

(“PSLRA”) (15 U.S.C. §78(j)(b) and 78(t)) and Rule 10b-5 promulgated thereunder (17 C.F.R.

§240.10b-5).

This Motion is made on the grounds that, to their knowledge, Local 731 Teamsters are the

“most adequate plaintiff” as defined by the PSLRA. See generally In re Dynegy, Inc. Sec. Litig ., No.

H-02-1571, 2002 U.S. Dist. LEXIS 27858, at *6 (S.D. Tex. Oct. 28, 2002). Local 731 Teamsters

suffered losses exceeding $22,232 during the Class Period and they otherwise satisfy the

requirements of Rule 23 of the Federal Rules of Civil Procedure. See id. Alba Decl., Ex. B.2

1 “Local 731 Teamsters” is comprised of Local 731 I.B. of T. Excavators and Pavers Pension Trust Fund and Local 731 I.B. of T. Private Scavenger and Garage Attendants Pension Trust Fund and Textile Maintenance and Laundry Craft Pension Fund.

2 References to the “Alba Decl.” are to the exhibits attached to the accompanying Declaration of Mario Alba Jr. in Support of Local 731 Teamsters’ Motion for Appointment as Lead Plaintiff and Approval of Selection of Counsel dated May 14, 2013 and submitted concurrently herewith.

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Finally, Local 731 Teamsters have selected counsel with the experience necessary to vigorously and

efficiently prosecute this litigation on behalf of the class. See Alba Decl., Exs. D and E.

II. FACTUAL BACKGROUND

Diodes, together with its subsidiaries, designs, manufactures and supplies application specific

standard products in the discrete, logic and analog semiconductor markets primarily in Asia, North

America and Europe. The complaint alleges that, during the Class Period, defendants issued

materially false and misleading statements regarding the Company’s financial performance and

future prospects.

Specifically, the complaint alleges that defendants misrepresented and/or failed to disclose

the following adverse facts: (a) that the Company’s labor problems associated with its backend

facility in China were much more severe and prolonged than publicly represented; (b) that the

Company’s gross margins were being impacted by higher than expected wages and labor shortages;

(c) that the Company was experiencing decreasing demand for its products, especially from its LED

TV and notebook customers; and (d) as a result of the foregoing, defendants lacked a reasonable

basis for their positive statements about the Company and its prospects.

On June 9, 2011, Diodes updated its financial guidance for the second quarter of 2011. For

the second quarter, the Company maintained its revenue guidance of $170 to $178 million, but

lowered its gross margin guidance to 32.5% plus or minus 1.5% as compared to its previous

guidance of 36.5% plus or minus 1%. Defendants explained that the Company’s gross margin was

“being impacted by a mix shift due to a softening of demand and the slower than expected recovery

from the previously disclosed manpower shortages at the Company’s packaging facilities.” In

reaction to the announcement, the price of Diodes stock fell $4.38 per share over the next two

trading days, or just over 16%, to close at $22.98 per share, on heavy trading volume.

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On August 9, 2011, Diodes announced its financial results for the second quarter of 2011, the

period ended June 30, 2011. For the quarter, the Company reported revenue of $169.8 million –

below the Company’s guidance – and gross profit margin of 32.8% – at the low end of the

Company’s guidance.

III. ARGUMENT

A. Local 731 Teamsters Are the “Most Adequate Plaintiff”

1. The PSLRA’s Lead Plaintiff Provisions

The PSLRA governs the appointment of a lead plaintiff in “each private action arising under

[the Exchange Act] that is brought as a plaintiff class action pursuant to the Federal Rules of Civil

Procedure.” 15 U.S.C. §78u-4(a)(1). First, the plaintiff who files the initial action must publish a

notice to the class, within 20 days of filing the action, informing class members of their right to file a

motion for appointment as lead plaintiff. 15 U.S.C. §78u-4(a)(3)(A)(i). Here, the first notice

regarding the pendency of these actions was published on BusinessWire , a national, business-

oriented newswire service, on March 15, 2013. 3 See Alba Decl., Ex. A. Within 60 days after

publication of the notice, any members of the proposed class may apply to the court to be appointed

as lead plaintiff, whether or not they have previously filed a complaint in the action. 15 U.S.C.

§78u-4(a)(3)(A)(i).

Second, the PSLRA provides that, within 90 days after publication of the notice, the court

shall consider any motion made by a class member and shall appoint as lead plaintiff the member or

members of the class that the court determines to be most capable of adequately representing the

3 Business Wire is “a widely circulated national business-oriented wire service,” as required by 15 U.S.C. §78u-4(a)(3)(A)(i). In re Atlas Mining Co. Sec. Litig. , No. CV 07-428-N-EJL-MHW, 2008 U.S. Dist. LEXIS 24201 (D. Idaho Mar. 25, 2008).

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interests of class members. 15 U.S.C. §78u-4(a)(3)(B)(i). In determining the “most adequate

plaintiff,” the PSLRA provides that:

[T]he court shall adopt a presumption that the most adequate plaintiff in any private action arising under this [Act] is the person or group of persons that –

(aa) has either filed the complaint or made a motion in response to a notice . . .;

(bb) in the determination of the court, has the largest financial interest in the relief sought by the class; and

(cc) otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure.

15 U.S.C. §78u-4(a)(3)(B)(iii)(I).

2. Local 731 Teamsters Satisfy the “Lead Plaintiff” Requirements of the Exchange Act

a. Local 731 Teamsters’ Motion is Timely

Local 731 Teamsters have timely filed their motion, within 60 days of the March 15, 2013,

publication of notice, and have duly signed and filed certifications evidencing, among other things,

their willingness to serve as a representative party on behalf of the class. See Alba Decl., Ex. C.

Accordingly, Local 731 Teamsters have satisfied the individual requirements of 15 U.S.C. §78u-

4(a)(3)(B) and are entitled to have their application for appointment as lead plaintiff considered by

the Court.

b. Local 731 Teamsters Have the Largest Financial Interest in the Relief Sought by the Class

During the Class Period, Local 731 Teamsters purchased 2,820 shares of Diodes common

stock and suffered losses exceeding $22,232 in connection therewith. See Alba Decl., Ex. C. To

their knowledge, this represents the largest financial interest in the relief sought by the class. See 15

U.S.C. §78u-4(a)(3)(B)(iii)(I).

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c. Local 731 Teamsters Satisfy Rule 23

In addition to possessing the largest financial interest in the outcome of the litigation, the lead

plaintiff must also “otherwise satisf[y] the requirements of Rule 23 of the Federal Rules of Civil

Procedure.” 15 U.S.C. §78u-4(a)(3)(B)(iii)(I)(cc). Rule 23(a) provides that a party may serve as a

class representative only if the following four requirements are satisfied:

(1) the class is so numerous that joinder of all members is impracticable;

(2) there are questions of law or fact common to the class;

(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and

(4) the representative parties will fairly and adequately protect the interests of the class.

Id.

While the PSLRA dictates that a lead plaintiff meet the four requirements of Rule 23(a), the

presumptive lead plaintiff must make a preliminary showing of typicality and adequacy. Dynegy ,

2002 U.S. Dist. LEXIS 27858, at *11. The Court defers examination of the remaining requirements

until the lead plaintiff moves for class certification.

Rule 23(a)(3) requires that the claims or defenses of the representative parties are typical of

those of the class. Typicality is present where the “plaintiff’s claims arise from the same event or

course of conduct that gives rise to claims of other class members and the claims are based on the

same legal theory.” Dynegy , 2002 U.S. Dist. LEXIS 27858, at *15. The questions of law and fact

common to the members of the class which predominate over questions which may affect individual

class members include the following:

Whether defendants violated the Exchange Act;

Whether defendants omitted and/or misrepresented material facts;

Whether defendants’ statements omitted material facts necessary to make the statements made, in light of the circumstances under which they were made, not misleading; and

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. Whether defendants knew or recklessly disregarded that their statements were false and misleading.

There is a well-defined community of interest in the questions of law and fact involved in

this case, of which Local 731 Teamsters are a part. Local 731 Teamsters, in concert with the other

members of the class, allege that defendants violated the securities laws by publicly disseminating

materially false and misleading statements, as well as statements which omitted material facts, about

Diodes during the Class Period. As a result of defendants’ fraudulent representations and omissions,

Local 731 Teamsters, as well as all other members of the class, purchased Diodes common stock at

artificially inflated prices and were damaged thereby. Because the claims asserted by Local 731

Teamsters are premised on the same legal and remedial theories and are based on the same types of

misrepresentations and omissions as the class’s claims, typicality is satisfied. See 7 Herbert B.

Newberg & Alba Conte, Newberg on Class Actions §22.24, at 107-08 (4th ed. 2002) (“The majority

of class action decisions support the view that when it is alleged that the same unlawful conduct was

directed at or affected both the named plaintiff and the class sought to be represented, the typicality

requirement is met.”); In re Enron Corp., Sec. Litig. , 206 F.R.D. 427, 441 (S.D. Tex. 2002.

Under Rule 23(a)(4), a representative party must also “fairly and adequately protect the

interests of the class.” The standard for adequacy of representation under Rule 23(a)(4) is met by the

absence of potential conflict between the named plaintiffs and the class members. Id. Here, Local

731 Teamsters are adequate representatives. As evidenced by their injuries, Local 731 Teamsters’

interests are clearly aligned with the members of the class who also suffered damages due to

defendants’ wrongdoing and there is no evidence of any antagonism between Local 731 Teamsters’

interests and those of the other members of the class. Further, Local 731 Teamsters’ substantial

losses motivate them to pursue this case with vigor and they have retained competent and

experienced counsel to assist in this process.

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B. The Court Should Approve Local 731 Teamsters’ Selection of Counsel

The PSLRA vests authority in the lead plaintiff to select and retain counsel to represent the

class, subject to court approval. See 15 U.S.C. §78u-4(a)(3)(B)(v). The court should not disturb

lead plaintiff’s choice of counsel unless necessary to “protect the interests of the class.” 15 U.S.C.

§78u-4(a)(3)(B)(iii)(II)(aa). Local 731 Teamsters have selected Robbins Geller as lead counsel and

Thomas John Ward, Jr. and Jack Wesley Hill of the Ward & Smith Law Firm as liaison counsel for

the class.

Robbins Geller is a 180-lawyer law firm that is actively engaged in complex litigation,

emphasizing securities, consumer, and antitrust class actions. See Cortese v. Radian Group, Inc. ,

No. 07-3375, 2008 U.S. Dist. LEXIS 6958, at *18 (E.D. Pa. Jan. 30, 2008) (“‘The firm is comprised

of probably the most prominent securities class action attorneys in the country.’”) (citation omitted);

Alba Decl., Ex. D. Robbins Geller possesses extensive experience litigating securities class actions

and has successfully prosecuted numerous securities fraud class actions on behalf of injured

investors, including In re Cardinal Health, Inc. Sec. Litig., 226 F.R.D. 298, 308 (S.D. Ohio 2005)

(“the Court finds that [Robbins Geller] will represent deftly the class’s interests”) and In re Enron

Corp. Sec. , 586 F. Supp. 2d 732, 789 (S.D. Tex. 2008) (“The Court finds that in the face of

extraordinary obstacles, the skills, expertise, commitment, and tenacity of Lead Counsel in this

litigation cannot be overstated.”). Robbins Geller’s securities department includes numerous trial

attorneys and many former federal and state prosecutors and law clerks, and utilizes an extensive

group of in-house experts to aid in the prosecution of complex securities issues. See Alba Decl., Ex.

D.

Thus, the Court may be assured that in the event this Motion is granted, the members of the

class will receive the highest caliber of legal representation available from lead counsel. See

Borochoff v. Glaxosmithkline PLC , 246 F.R.D. 201, 205 (S.D.N.Y. 2007) (Robbins Geller is “a firm

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which is well qualified and has successfully served as lead counsel . . . in numerous complex

securities class actions”). Accordingly, the Court should approve Local 731 Teamsters’ selection of

counsel.

IV. CONCLUSION

For all the foregoing reasons, Local 731 Teamsters respectfully request that the Court: (i)

appoint Local 731 Teamsters as Lead Plaintiff; (ii) approve Local 731 Teamsters’ selection of

counsel; and (iii) grant such other relief as the Court may deem just and proper.

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DATED: May 14, 2013 /s/ Samuel H. Rudman (by permission Wesley Hill)

ROBBINS GELLER RUDMAN & DOWD LLP

SAMUEL H. RUDMAN – LEAD ATTORNEY MARIO ALBA JR. SEAN T. MASSON 58 South Service Road, Suite 200 Melville, NY 11747 Telephone: 631/367-7100 631/367-1173 (fax) [email protected] [email protected] [email protected]

ROBBINS GELLER RUDMAN & DOWD LLP

TRICIA L. McCORMICK 655 West Broadway, Suite 1900 San Diego, CA 92101 Telephone: 619/231-1058 619/231-7423 (fax) [email protected]

CAVANAGH & O’HARA PATRICK J. O’HARA 407 East Adams Street Springfield, IL 62701 Telephone: 217/544-1771 217/544-9894 (fax)

T. John Ward, Jr. Texas State Bar No. 00794818 J. Wesley Hill Texas State Bar No. 24032294 WARD & SMITH LAW FIRM 1127 Judson Rd., Suite 220 Longview, Texas 75601 Tel: (903) 757-6400 Fax: (903) 757-2323 [email protected] [email protected]

ATTORNEYS FOR PLAINTIFF

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CERTIFICATE OF CONFERENCE

This motion for appointment as lead plaintiff and approval of selection of counsel has been

filed pursuant to §21D of the Securities and Exchange Act, 15 U.S.C. §78u-4(a)(3)(A) and (B), as

amended by the Private Securities Litigation Reform Act of 1995. Per these statutory requirements,

within 60 days after publication of the required notice, any member or members of the proposed

class may apply to the Court to be appointed as lead plaintiff, whether or not they have previously

filed a complaint in this action. Therefore, any potential party to the action is aware of the

requirements for filing a lead plaintiff motion. However, due to the nature of the filing, counsel has

no way of knowing which class members will be filing competing lead plaintiff motions at this time.

As a result, counsel for movant has been unable to “meet and confer” with any other counsel filing

lead plaintiff motions, whom movant believes would be regarded as opposing counsel for purposes

of Local Rule CV-7(h), and thus believes such conference attempts are not possible at this stage of

the litigation.

/s/ Wesley Hill Wesley Hill

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CERTIFICATE OF SERVICE

I hereby certify that a copy of the foregoing document was filed electronically in compliance

with Local Rule CV-5(a). Therefore, this document was served on all counsel who are deemed to

have consented to electronic service. Local Rule CV-5(a)(3)(A). Pursuant to Fed. R. Civ. P. 5(d)

and Local Rule CV-5(d) and (e), all other counsel of record not deemed to have consented to

electronic service were served with a true and correct copy of the foregoing by email on this the 14th

day of May, 2013.

/s/ Wesley Hill Wesley Hill

Documents

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF TEXAS ...securities.stanford.edu/.../2013514_f01o_13CV00247.pdf · Case 6:13-cv-00247-MHS Document 14 Filed 05/14/13 Page 7 of 12