Cho v. Blackberry Ltd.

Citation991 F.3d 155
Decision Date11 March 2021
Docket NumberAugust Term, 2020,Docket No. 19-3376-cv
Parties Yong M. CHO, Batuhan Ulug, Plaintiffs-Appellants, Marvin Pearlstein, individually and on behalf of all others similarly situated, Todd Cox, Mary Dinzik, Plaintiffs, v. BLACKBERRY LIMITED, fka Research in Motion Limited, Thorsten Heins, Brian Bidulka, Steve Zipperstein, Defendants-Appellees.
CourtU.S. Court of Appeals — Second Circuit

David A.P. Brower, Brower Piven, A Professional Corp., New York, NY (Kim E. Miller, J. Ryan Lopatka, Kahn Swick & Foti, New York, NY, on the brief), for Plaintiffs-Appellants.

Joseph R. Palmore, Morrison & Foerster LLP, Washington, DC (Dan Marmalefsky, Morrison & Foerster LLP, Los Angeles, CA, James J. Beha II, Lena H. Hughes, Morrison & Foerster LLP, New York, NY on the brief), for Defendants-Appellees.

Before: Livingston, Chief Judge, Cabranes and Lynch, Circuit Judges.

Gerard E. Lynch, Circuit Judge:

Plaintiffs-Appellants Yong M. Cho and Batuhan Ulug, individual named plaintiffs in a putative securities class action, appeal a judgment of the United States District Court for the Southern District of New York (Colleen McMahon, C.J. ) granting judgment on the pleadings and dismissing their claims against Defendants-Appellees BlackBerry Limited, Thorsten Heins, Brian Bidulka, and Steve Zipperstein, because they failed to join the lead plaintiffs’ appeal of prior orders of the district court dismissing their complaint and denying reconsideration and leave to amend.

The appeal requires us to decide what individual named plaintiffs in a putative class action must do to indicate their intent to appeal from an unfavorable decision. Cho and Ulug argue that Federal Rule of Appellate Procedure 3 allows named plaintiffs who are also members of a putative class to rely on the notice of appeal of a "person qualified to bring the appeal as representative of the class" under Rule 3(c)(3), and that they are not required to indicate their intent to appeal individually. Consequently, they argue that they should be permitted to rely on the successful appeal by the lead plaintiffs in this case, and that the district court erred in granting judgment on the pleadings and dismissing their claims.

We disagree, and conclude that Rule 3(c)(1)(A) requires individual named plaintiffs – who, unlike absent class members, have chosen to litigate their claims personally – to indicate their intent to appeal, and that individual plaintiffs may not merely rely on a notice of appeal filed by the lead plaintiffs or other persons qualified to represent the class. Accordingly, we hold that Cho and Ulug's failure to appeal the district court's first dismissal of their claims rendered that decision final as to them, and that the district court properly dismissed their attempt to renew their claims after the lead plaintiffs successfully appealed.

We also reject Cho and Ulug's remaining arguments. Their claims against Defendant-Appellee Steve Zipperstein, which they argue should be allowed to proceed because Zipperstein was joined as a defendant only after the initial dismissal and the lead plaintiffs’ successful appeal, are barred by res judicata. Finally, we conclude, contrary to their remaining contention, that the district court did not abuse its discretion in denying Cho and Ulug's motion for reconsideration. Accordingly, we affirm the judgment of the district court.

BACKGROUND

The following facts are taken from the factual allegations in the second amended complaint, which we accept as true, Bryan v. Credit Control, LLC , 954 F.3d 576, 580 (2d Cir. 2020), and from the dockets of the relevant courts.

In early 2013, BlackBerry released the Z10 smartphone. Intended as BlackBerry's answer to the iPhone, it was a commercial flop. That October, several individuals filed separate putative securities class actions, alleging that BlackBerry and its then-CEO and CFO (Thorsten Heins and Brian Bidulka, respectively) made material misrepresentations and omissions related to the release of the Z10, thereby artificially inflating BlackBerry's stock price.

The cases were consolidated in the Southern District of New York before the late Judge Thomas P. Griesa. Several plaintiffs moved to be appointed lead plaintiff in the consolidated case, pursuant to the Private Securities Reform Litigation Act ("PSLRA").1 The aspiring lead plaintiffs included Todd Cox and Mary Dinzik, a couple who jointly owned BlackBerry stock, represented by law firm Kahn Swick & Foti, and the BlackBerry Limited Investment Group, represented by law firm Brower Piven and composed of five investors, including Cho and Ulug. The district court appointed Cox and Dinzik lead plaintiffs, with Kahn Swick & Foti as lead counsel.

The lead plaintiffs then filed an amended complaint ("FAC"), which Cho and Ulug joined as individual "additional" plaintiffs. The complaint was signed by Kahn Swick & Foti as "Lead Counsel for Lead Plaintiffs and the Class," and by Brower Piven as "Counsel for Additional Plaintiffs Yong M. Cho and Batuhan Ulug and the Class." The amended complaint alleged material misrepresentations and omissions related to the Z10 smartphone release based on four documents: BlackBerry's fiscal year 2013 financial results; an April 12, 2013 press release refuting a negative market report claiming that Z10 return rates were exceptionally high; BlackBerry's financial results for the first quarter of fiscal year 2014; and an August 12, 2013 press release announcing a potential sale of the company.

Defendants moved to dismiss the amended complaint. On March 13, 2015, the district court granted the motion, concluding that plaintiffs "failed to plausibly allege that defendants made misrepresentations or omissions of material fact, and have failed to show that defendants acted with scienter." Pearlstein v. BlackBerry Ltd. , 93 F. Supp. 3d 233, 236 (S.D.N.Y. 2015). Plaintiffs then moved for reconsideration and for leave to amend their complaint. The district court denied that motion, which was signed by Kahn Swick & Foti, as "Lead Counsel for Lead Plaintiffs and the Class," and by Brower Piven, as "Counsel for Additional Plaintiffs Yong M. Cho and Batuhan Ulug and the Class." D. Ct. Dkt. No. 56 at 1-2.

The lead plaintiffs appealed on behalf of the class. The caption on their notice of appeal reproduced the caption in the district court: "MARVIN PEARLSTEIN, Individually And On Behalf of All Others Similarly Situated, Plaintiff, vs. BLACKBERRY LIMITED et al., Defendants." J.A. 119. The notice began, "Lead Plaintiffs Todd Cox and Mary Dinzik hereby give notice, on behalf of themselves and all others similarly situated ... [,]" id. , and was signed by Kahn Swick & Foti as "Lead Counsel for Lead Plaintiffs and the Class." J.A. 120. Brower Piven also signed the notice as "Additional Counsel for Lead Plaintiffs and the Class" (and not "Counsel for Additional Plaintiffs Yong M. Cho and Batuhan Ulug and the Class," as it had in all previous submissions). Id. The notice did not name or otherwise refer to Cho and Ulug.

On August 24, 2016, this Court affirmed the district court's dismissal of the complaint, but concluded that the district court had erred in denying leave to amend without explanation, and remanded on that basis. Cox v. Blackberry Ltd. , 660 F. App'x 23 (2d Cir. 2016).2 Our summary order named Cox and Dinzik in the body and caption, id . at 23-24, but made no reference to Cho and Ulug.

On remand, the district court granted leave to amend and the lead plaintiffs filed a second amended complaint ("SAC"). The SAC again named Cho and Ulug as individual plaintiffs, represented by Brower Piven. It renewed plaintiffs’ earlier securities fraud claims and added new claims against Steve Zipperstein, BlackBerry's former chief legal officer, arising out of the April 12, 2013 press release cited in the original complaint. J.A. 138, 173-74.

Defendants, including Zipperstein, moved to dismiss the amended complaint. Chief Judge Colleen McMahon (to whom the case had been assigned following the death of Judge Griesa) denied the motion. Defendants then answered the complaint, denying all material allegations of wrongdoing, and discovery began.

On July 20, 2018, while discovery was ongoing, defendants successfully moved for leave to amend their answer to assert additional affirmative defenses. Defendants then filed an amended answer asserting as an affirmative defense that plaintiffs’ claims were barred in whole or in part by the doctrines of res judicata, collateral estoppel and/or law-of-the-case. Defendants moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c), arguing that the claims of Cho and Ulug should be dismissed because, unlike the rest of the class, they failed to appeal the district court's earlier dismissal of their complaint, and that as a result the earlier judgment was now final as to them. The district court referred the motion to Magistrate Judge Katharine H. Parker, who, after hearing oral argument, issued a Report and Recommendation concluding that Cho and Ulug's claims should be dismissed. Pearlstein v. BlackBerry Ltd. , No. 13-CV-07060, 2019 WL 6831554 (S.D.N.Y. Aug. 2, 2019).

On September 24, 2019, the district court accepted the recommendation over plaintiffs’ objections3 and dismissed Cho and Ulug's claims. Pearlstein v. BlackBerry Ltd. , No. 13-CV-07060, 2019 WL 4673757 (S.D.N.Y. Sept. 24, 2019). The district court concluded that Rule 3 required Cho and Ulug to indicate their individual intent to appeal. The court further rejected their contention that they should have been permitted to rely on Rule 3(c)(3), which provides that in a class action, "the notice of appeal is sufficient if it names one person qualified to bring the appeal as representative of the class," reasoning that Cho and Ulug had "cease[d] to be ‘represented’ by the Lead Plaintiffs" when they joined the complaint as individual named plaintiffs. Id. at *4.

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