The opinion of the court was delivered by: Amy J. St. Eve, District Court Judge
MEMORANDUM OPINION AND ORDER
Lead Plaintiff and proposed class representative Macomb County Employees' Retirement System ("Macomb County" or "Lead Plaintiff") and proposed additional class representative St. Clair Shores Police and Fire Pension System ("St. Clair," and collectively, "Plaintiffs") have moved to certify a class of those who purchased publicly-traded securities of Defendant Motorola, Inc. ("Motorola") from July 19, 2006 through January 4, 2007 (the "Class Period"). (See R. 85-1, Pls.' Mot. at 6.) Plaintiffs assert violations of §§ 10(b) and 20(a) of the Securities Exchange Act of 1934, (15 U.S.C. §§ 78j(b) and 78t(a)), and Rule 10b-5 promulgated thereunder. 17 C.F.R. § 240.10b-5. Plaintiffs allege that leading up to the fourth quarter of 2006, certain Motorola executives and officers (the "Individual Defendants") made intentionally false and misleading communications that artificially inflated Motorola's stock price. After corrective information later became public, Motorola's share price fell and members of the putative class allegedly suffered harm. For the following reasons, Plaintiffs' motion for class certification is granted.
This consolidated case arises from three individual cases filed against Motorola, each alleging violations of securities laws. Judge Moran provided extensive background on this case in his September 23, 2008 Order on Defendants' motion to dismiss. (R. 60-1; See Silverman v. Motorola, Inc., No. 07-C-4507, 2008 WL 4360648, at *1 (N.D. Ill. Sept. 23, 2008).)*fn1
Accordingly, the Court recites only the facts relevant to resolution of the present issues and additional background facts that provide helpful context.
Based in Schaumburg Illinois, Motorola designs, manufactures, and markets products relating to broadband, embedded systems, and wireless networks. (R. 40-1, Consolidated Am. Compl. ¶¶ 2, 16.) At times relevant to this action, Motorola designed and manufactured mobile phones for use in third generation mobile networks. (Id. ¶ 3.) Third generation ("3G") networks support enhanced data services, internet access to mobile users, and increased voice capacity. (Id.)
The Individual Defendants each served as an officer or director of Motorola during the Class Period. Defendant Edward J. Zander joined Motorola in 2004 and served as served as Motorola's Board Chairman and Chief Executive Officer from 2004 to 2007. (Id. ¶ 17.) On November 30, 2007, Defendant Gregory Q. Brown replaced Zander as Chief Executive Officer. (Id.) During the Class Period, Mr. Brown served as Motorola's President, Chief Operating Officer and Executive Vice President of Motorola's Networks and Enterprise division. (Id. ¶ 20.) Defendant David W. Devonshire served as Motorola's Executive Vice President and Chief Financial Officer during the Class Period. (Id. ¶ 18.) Also during the Class Period, Defendant Ronald G. Garriques served as Executive Vice President and President of Motorola's Mobile Devices division, (id. ¶ 19), Defendant Daniel M. Moloney served as Executive Vice President and President of Connected Home Solutions division, (id. ¶ 21), Defendant Richard N. Nottenburg served as Executive Vice President and Chief Strategy Officer, (id. ¶ 22), and Defendant Padmasree Warrior served as Motorola's Executive Vice President and Chief Technology Officer. (id. ¶ 23.) Plaintiffs assert control person liability pursuant to § 20(a) of the 1934 Exchange Act, 15 U.S.C. § 78t(a)), against each of the Individual Defendants. (R. 40-1 at 62.)
Lead Plaintiff Macomb County, an institutional investor, claims to have incurred losses totaling $589,647 during the Class Period. (R. 88-1, Ex. A to Diegel Decl. at 9.) According to Macomb County's Named Plaintiff Certification, it made three purchases during the Class Period for a total of 90,500 shares. (Id. at 8.) Macomb County purchased these shares at prices as high as $25.95 per share and sold these shares at a loss later in the Class Period. (Id.)
Proposed class representative St. Clair is a public pension fund that provides benefits to retired police and fire department employees. (R. 87-1, Haddad Decl. at ¶ 3.) Like Macomb County, St. Clair is an institutional investor with assets of approximately $74 million. (Id.) According to its Named Plaintiff Certification, St. Clair made five purchases of Motorola stock during the Class Period for a total of 34,200 shares, at prices as high as $24.03, for an approximate total loss of $117,619.25 during the Class Period. (R. 87-1 at 8--9.) Together, St. Clair and Macomb claim to have lost more than $700,000. (R. 85-1 at 6).
II. Plaintiffs' Allegations
Plaintiffs' allegations center on a number of statements made during the second, third, and fourth quarters of 2006, as Motorola faced increased competition to its industry-leading RAZR phone and its wireless competitors raced to introduce new feature-rich 3G mobile phones.
(R. 40-1 at ¶ 45.) These statements concerned "new high profit margin 3G products and the Linux/Java operating system" Motorola developed to support the new 3G handsets. (R. 85-1 at 7.) Defendants' statements allegedly suggested that "Motorola was coming to market with a supply of new cell phones including 3G cell phones and that its new product offerings would be available for the 2006 Holiday Selling Season." (Id.) At various times, one or more Defendants stated that Motorola's 3G product development was "on track" and that these products were "running" on the new Linux/Java operating system.
According to Plaintiffs, however, while Motorola was making public statements regarding its upcoming 3G products, the development of these products suffered "hiccup after hiccup" based on a difficult-to-manufacture chip design, issues with software integration, and delays in completing the user interface. (Id. at ¶¶ 46--65.) These problems eventually prevented Motorola from shipping its Liunx/Java-based 3G designs for the 2006 Holiday Season.
After the market closed on January 4, 2007, Motorola issued a press release announcing a preliminary estimate of its fourth quarter 2006 results. (Id. at ¶ 92.) The press release described a shortfall in earnings, as compared to previous estimates made on October 17, 2006:
The shortfall in both sales and earnings occurred in the Mobile Devices segment and is attributed to an unfavorable geographical and product-tier mix of sales as compared to the company's internal forecast. In the fourth quarter, Mobile Devices unit sales were approximately 66 million units, up 23 percent from the third quarter of 2006 and up 48 percent from the fourth quarter of 2005.
(Id.) Motorola's share prices fell the next day, from $20.31 per share to $18.72 per share, or approximately 8%, and further declined in subsequent weeks. (Id. at ¶ 93.)
Plaintiffs propose a class of "persons and entities who purchased or otherwise acquired the publicly-traded securities of" Motorola from July 19, 2006 through January 4, 2007. (See R. 85-1, Pls.' Mot. at 6.) The proposed class excludes: (1) Defendants and their immediate family; (2) any entity in which Defendants have or had a controlling interest; (3) Motorola Officers and Directors; and (4) the legal representatives, heirs, ...