Plaintiff’s Motion for Expedited Discovery in Las Vegas Sands/Sheldon Adelson Derivative Case

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G. Mark
Albright

Nevada Bar No. 1394

William H. Stoddard, Jr.

Nevada Bar No. 8679

Albright, Stoddard, Warnick
and Albright

801 S Rancho Dr D4

Las Vegas, NV 89106

Phone:  (702) 384-7111

Fax:  (702) 384-0605

gma@albrightstoddard.com

bstoddard@albrightstoddard.com

 

 

Attorneys for Plaintiff W. A. Sokolowski

 

[Additional counsel listed on
signature block]

 

UNITED STATES DISTRICT COURT

DISTRICT OF NEVADA

 

 

 

 

 

W. A. SOKOLOWSKI

 

Plaintiff,

 

v.

 

SHELDON G. ADELSON, et al

 

Defendants,

 

and

 

LAS VEGAS SANDS

CORPORATION,

 

Nominal Defendant

 

 

 

Case
No.:2:14-cv-00111-JCM-NJK

 

 

PLAINTIFF’S MOTION FOR EXPEDITED
DISCOVERY AND SUPPORTING MEMORANDUM OF LAW

 

Judge: Hon.

Courtroom:

Date:               , 2014

Time: 1:30 p.m.

 

NO ORAL ARGUMENT UNLESS REQUESTED BY THE COURT

 

 

 

 

 

PLAINTIFF’S MOTION FOR EXPEDITED
DISCOVERY AND SUPPORTING MEMORANDUM OF LAW


TABLE OF CONTENTS

 

Table of Authorities……………………………………………………………………………….. ii

GENERAL BACKGROUND…………………………………………………………………… 1

THE ULTIMATE RELIEF SOUGHT……………………………………………………….. 3

ANTICIPATED MOTION FOR INJUNCTIVE RELIEF………………………………. 4

THE DISCOVERY SOUGHT…………………………………………………………………. 6

ARGUMENT……………………………………………………………………………………….. 6

I.      Legal
Standard for Expedited Discovery……………………………………………… 7

II.    Good
Cause Exists for Plaintiff’s Expedited Discovery…………………………… 9

III.   Defendants
Will Face No Prejudice From Expedited Discovery

        Because
Plaintiff Requests Only Limited And Narrowly Focused

        Discovery……………………………………………………………………………………. 10

IV.  The PSLRA
Discovery Stay Does Not Apply……………………………………… 11

V.    The PSLRA
Only Applies to Plaintiff’s Federal Securities

        Claims………………………………………………………………………………………… 13

CONCLUSION…………………………………………………………………………………… 14


TABLE OF AUTHORITIES

Cases

Allen v. News Corp.,

2005 WL 415095 (Del. Ch. Feb. 3, 2005)………………………………………………… 9

Alliantgroup, L.P. v. Feingold,

2009 WL 1109093 (S.D. Tex. April 24, 2009)…………………………………………… 8

Benbow v. Aspen Technology, Inc.,

2003 WL 1873910 (E.D. La. Apr. 11, 2003)……………………………………………. 11

Edudata Corp. v. Scientific Computers,
Inc.
,

599 F. Supp. 1084 (D.Minn. 1984)…………………………………………………………. 7

El Pollo Loco, S.A. de C.V. v. El Pollo
Loco
, Inc.,

344 F. Supp. 2d 986 (S.D. Tex. 2004)…………………………………………………….. 8

Federal Trade Commission v. Skybiz.com,
Inc.
,

2001 WL 34134696 (N.D. Okla.)……………………………………………………………. 8

In re Bank of Am. Corp. Sec., Deriv.
& ERISA Litig.,


2009 WL 4796169 (S.D.N.Y. Nov. 16,
2009)………………………………………….. 12

In Re Int’l Jensen Shareholders Litig.,

1996 WL 422345 (Del. Ch. July 13, 1996)……………………………………………….. 9

In re Pure Resources, Inc. Shareholders
Litig.
,

808 A.2d 421 (Del. Ch. 2002)……………………………………………………………….. 9

In re Royal Ahold N. V. Securities &
ERISA Litigation
,

319 F. Supp. 2d 634 (D. Md. 2004)………………………………………………………. 13

Kelleher v. ADVO, Inc.,

2007 WL 1232177 (D. Conn. Apr. 24, 2007)………………………………………….. 11

Medical Imaging Centers of America, Inc.
v. Lichtenstein,

917 F. Supp. 717 (S.D. Cal. 1996)……………………………………………………….. 11

Nichting v. DPL Inc.,

2011 WL 2892945 (S.D. Ohio July 15, 2011)………………………………………….. 12

ODS Technologies, L.P. v. Marshall,

832 A.2d 1254 (Del. Ch. 2003)………………………………………………………………. 9

Philadelphia Newspaper Corp. v. Gannett
Satelitte Information Networks, Inc.,

1998 WL 404820 (E.D. PA. July 15, 1998)………………………………………………. 7

Providence Property & Cas. Ins. Co.
v. Peoplelease Corp.,

2007 WL 2241492 (E.D. Tex. Aug. 3, 2007)…………………………………………….. 8

Ryan v. Walton,

2010 WL 3785660 (D.D.C. Mar. 9, 2010)…………………………………………. 12,
13

Standard Inv. Chartered v. Nat’l.
Association of Security Dealers, Inc.,

2007 WL 1121734 (S.D.N.Y. April 11, 2007)………………………………………….. 12

Tobias Holdings, Inc. v. Bank United
Corp.
,

177 F. Supp. 2d 162 (S.D.N.Y. 2001)………………………………………………….. 13

Tracfone Wireless, Inc. v. King Trading,
Inc.,


2008 WL 918243 (N.D. Tex. Mar. 13,
2008)…………………………………………….. 8

Vacold LLC v. Cerami,

2001 WL 167704 (S.D.N.Y. Feb. 16, 2001)……………………………………………. 11

Statutes

15 U.S.C. § 78n(a), §14(a)…………………………………………………………………….. 13

15 U.S.C. § 78u-4(b)(3)(B)……………………………………………………………………. 11

Other Authorities

 

8 C. Wright, A. Miller & R. Marcus, Federal
Practice

and Procedure 2046.1 (1994)…………………………………………………………………… 8

Rules

Fed. R. Civ. P. 26(d)……………………………………………………………………………… 7

Fed. R. Civ. P. 26(f)………………………………………………………………………. passim


Plaintiff
W. A. Sokolowski, through his undersigned attorneys, respectfully moves this
Court for the entry of an Order permitting expedited discovery pursuant to
Federal Rule of Civil Procedure 26(f) and to require Defendants to respond to
Plaintiff’s written discovery requests within seven days of service by
Plaintiff and to produce witnesses for deposition within 21 days
thereafter.  In support of his motion for
expedited discovery, Plaintiff relies on the following memorandum of law.

GENERAL BACKGROUND

This shareholder derivative suit has its origins in
wide-ranging corporate bribery, money laundering and other illegal activities
which have violated, among other laws, the Foreign Corrupt Practices Act
(“FCPA”), the Bank Secrecy Act, the Securities Exchange Act (“Exchange Act”)
and applicable state and other laws. This multi-year conduct, carried out with
the knowledge or acquiescence of the Board of Directors (“Board”) of Nominal
Defendant, Las Vegas Sands Corporation (“Sands” or the “Company”) and the
Company’s former auditor, PricewaterhouseCoopers, LLP (“PWC”) has subjected
Sands and its shareholders to presently incalculable, but massive, damages, and
resulted in Sands being required to make fundamental changes in its business
conduct. The Individual Defendants have admitted that any finding of violations
of the FCPA as described herein could have a material adverse effect upon the
Company’s financial condition.  A
violation of rules and regulations of the Nevada Gaming Control Board (“NGCB”)
could, as well, jeopardize Sands’ gaming license in Nevada.

In this regard,
Sands and its subsidiaries have been the subject of long-running investigations
by the United States Department of Justice (“DOJ”), the Securities and Exchange
Commission (“SEC”) and various regulatory bodies in the United States and
China. As recently as this summer, the Company settled money laundering charges
brought by the DOJ involving only two “high roller” individuals and agreed to
pay approx. $47 million to avoid criminal prosecution.[1]

Plaintiff has alleged
that the most comprehensive of these long-pending DOJ and SEC investigations,
including those involving very serious charges of bribery and FCPA violations
in connection with Sands’ Macau casino and related properties, have not been
resolved by the Company because negotiations are being carried out by
conflicted counsel representing simultaneously Sands’ interests and those of
Defendant Adelson and his colleagues on the Board. Upon information and belief,
legal counsel negotiating on behalf of the Company are also seeking to protect
Defendant Adelson, a principal target of the investigations, from personal
liability and sanctions, which may also include his being barred from
continuing to serve as chairman and Chief Executive Officer of Sands.[2]

Similarly, incurably conflicted counsel, Richard A.
Sauber, Esq., Steve Morris, Esq. and their respective firms have simultaneously
represented Sands and the individuals named as defendants in Moradi v. Adelson et al, Case Nos.
2:11-cv-490-MDD-RJJ in this Court, as well as have Walter C. Carlson, Esq. and
his firm, Sidley Austin LLP, in related shareholder cases pending in Clark
County District Court including in Kleinschmidt
v. Adelson, et al
, Case No. A-12-658749B.
The Consolidated Complaint in Moradi,
which argues that pre-suit demand on Sands’ Board was futile, contains
substantively similar claims arising out of the alleged bribery in Macau and
China as alleged in the Complaint in this litigation.[3]  Despite these well-documented conflicts of
interest on the part of the Moradi
defense lawyers, they are likely, absent intervention by the Court, to attempt
to appear herein for the same defendants.  Moreover, Mr. Sauber is virtually certain to
be a material witness in this litigation with respect to, inter alia, the Individual Defendants’ cover-up of the wrongdoing
alleged, the negotiations on behalf of Sands and the Individual Defendants with
the DOJ and SEC, the conduct of the Board’s Audit Committee during the past
three years and with respect to the derivative allegations at ¶¶ 136-163 of the
Complaint.

THE ULTIMATE RELIEF SOUGHT

Among the relief Plaintiff seeks by this litigation is the
Court’s appointment of a Conservator or Special Master (Complaint ¶¶ 186-188
and Prayer for Relief). In particular, Plaintiff alleges:

“The Company has been the subject of far-reaching and
serious investigations with respect to the wrongdoing alleged herein, including
multi-year investigations by the SEC and DOJ.

Because the Company’s Board suffers massive conflicts of
interest due to the personal culpability of Defendant Adelson and other members
of the Board, the members of the Board
are not capable of advancing solely the Company’s interests and not their own.  
Moreover, the legal counsel acting for them similarly have not acted
exclusively in the Company’s best interests in dealing with the foregoing
investigations,
in connection with possible resolution of claims against
Sands, and in seeking the dismissal of pending shareholder derivative suits.
Based upon the facts and circumstances described herein, it is a virtual
certainty that the members of the Sands’ Board or their legal counsel will not
deal with this litigation objectively and solely in the Company’s best
interests.

In order that the Company’s interests be addressed to the
exclusion of all others, Plaintiff requests the appointment by the Court of a
Conservator or Special Master to oversee the Company’s dealings with the DOJ,
the SEC and any other agencies investigating it in connection with the
wrongdoing alleged herein and in connection with the Company’s response to this
litigation in order that the Company’s interests are put before all others and
are not compromised by the defense of the Individual Defendants and/or material
conflicts of interest on the part of their legal counsel.  Should the Company’s interests continue to be
represented as they are at present by conflicted counsel whose principal
allegiance is to Defendant Adelson and the other Individual Defendants, Sands
will be irreparably harmed.” [emphasis added]

Plaintiff’s Prayer for Relief
asks the Court for, inter alia, the
following:

“Appointing a Conservator or Special Master to oversee and
direct (1) the Company’s negotiations with the DOJ and the SEC with respect to
the wrongdoing alleged herein; and (2) to act in place of Sands’ Board in
connection with the Company’s response to this litigation or any other pending
shareholder derivative litigation in which one or more of the Individual
Defendants herein is named as a defendant;”

ANTICIPATED MOTION FOR INJUNCTIVE
RELIEF

Although the factual allegations as set forth in the
Complaint provide ample support for Plaintiff’s anticipated motion for
injunctive relief (i.e., the
appointment of a Conservator or Special Master), narrowly-focused discovery by
Plaintiff will amplify the record and further strengthen his arguments as to
why the Court should appoint a Conservator or Special Master for the limited
purposes of overseeing the Company’s reaction to Plaintiff’s allegations in
this litigation and making a determination as to whether, in Sands’ best
interests, some or all of the claims alleged, should be pursued.  The entire Sands Board including, in
particular, its Audit Committee and its counsel, O’Melveny & Myers, LLP
(“O&M”) are so thoroughly conflicted in their loyalties and subject to
liability themselves that they cannot be expected to objectively or
independently address the issues created by this litigation and the pre-suit
Demand Letter sent to the Board a year ago.

Of equal
significance is the need for the Court to appoint a well-qualified, independent
and disinterested Conservator or Special Master
to oversee, solely in Sands’ best interests, the ongoing negotiations
between the Company and the DOJ, the SEC and other investigating bodies, to protect
against the possibility of the Individual Defendants putting their own
interests before those of the Company, particularly if, as seems likely,
personal sanctions are being sought against Defendant Adelson and possibly
others of the Individual Defendants.

Inasmuch as the
Individual Defendants will be controlling the defense of this litigation
imminently and, in particular, be controlling the identity of counsel appointed
to represent Sands as well as the positions to be taken by such counsel, time
is of the essence for there to be independent oversight.

The need for such
an appointment is highlighted by the possibility that Sands, through its
counsel negotiating a settlement of FCPA violation claims by the DOJ and SEC, could
offer to use the Company’s cash to settle those claims as a means to insulate
the Individual Defendants from personal financial liability and sanctions.
Indeed, it is not unlikely that such negotiations are well underway.  While the underlying wrongdoing may well merit
hundreds of millions of dollars in fines and penalties (including penalties for
non-cooperation in the investigations) imposed against Sands, the problematic
issue is that the Board may use more of the Company’s cash to avoid charges
being leveled against Defendant Adelson or others of the Individual Defendants.
Such a step, if taken by the Individual
Defendants and their counsel, will immediately and irrevocably impact seriously
on the rights of Sands and its shareholders.

THE DISCOVERY SOUGHT

Appropriate discovery,
narrowly-tailored to the above issues, is needed to enable Plaintiff to support
his anticipated motion seeking the appointment by the Court of a Conservator or
Special Master to oversee the Company’s dealings with these critically-important
and time-sensitive issues.  Among the
discovery Plaintiff seeks will be communications with the DOJ and SEC on the
one hand and counsel representing Sands.  None of such communications are privileged nor
amount to attorney work product. Their production, together with other
documents sought by Plaintiff’s Request for Production of Documents-Set I
(“Document Requests”) attached hereto as Exhibit “A,” will assist Plaintiff in
demonstrating to the Court why the ongoing negotiations with the DOJ and SEC
are laden with conflicts that cannot be reconciled without, at minimum,
substantial independent oversight.[4]

ARGUMENT

Plaintiff has good cause to warrant expedited discovery
proceedings before a conference takes place under Fed. R. Civ. P. 26(f).
Given the need for the Court to be assured that the Company’s reaction to the
Complaint in this litigation will be solely in its interests and of its
shareholders and not designed to protect the Individual Defendants from personal
liability for their wrongdoing, and that decisions are being made concurrently
as to who will be Sands’ counsel and who will control such counsel, the Court
will need to reach the ultimate injunctive relief Plaintiff seeks as promptly
as possible.

Under such
circumstances, discovery which must ordinarily await a formal conference
pursuant to Rule 26(f), which may be months away, will not provide
Plaintiff and the Court in a timely manner all the most material evidence to
support the anticipated motion for the appointment of a Conservator or Special
Master.  Quite simply, the ordinary
course of discovery proceedings under the Federal Rules of Civil Procedure
would be inappropriate since, by the time discovery responses are due, Sands,
through counsel appointed by the Individual Defendants, will likely have taken
action contrary to the best interests of the Company and its shareholders.  Further, neither Sands nor the Individual
Defendants will face prejudice if discovery proceedings are expedited. As
reflected by the Document Requests, Plaintiff requests very limited discovery
related only to the immediate issues relevant to his anticipated motion, which
would take relatively little effort to gather and produce.

I.       Legal
Standard for Expedited Discovery

Although Fed. R. Civ. P. 26(d) generally prohibits parties from seeking
discovery before the parties have conferred as required by Rule 26(f),
courts permit a party to conduct discovery on an expedited basis upon a showing
of good cause. “Expedited discovery has been ordered where it would
‘better enable the Court to judge the parties’ interests and respective chances
for success on the merits at a preliminary injunction hearing.” Philadelphia Newspaper Corp. v. Gannett
Satelitte Information Networks, Inc.,
1998 WL 404820 at *2 (E.D. PA. July
15, 1998) (quoting Edudata
Corp. v. Scientific Computers, Inc.
, 599 F. Supp. 1084, 1088 (D.Minn. 1984), aff’d in part, rev’d in part
on other grounds 746 F.2d 429 (8th Cir. 1985)); Federal Trade Commission v. Skybiz.com, Inc., 2001 WL 34134696, at
*12 (N.D. Okla.) (granting a temporary restraining order and
expedited discovery in anticipation of a preliminary injunction); see also El Pollo Loco, S.A. de C.V. v. El
Pollo Loco
, Inc., 344 F. Supp. 2d 986, 991 (S.D. Tex. 2004) (citing 8 C. Wright, A. Miller & R.
Marcus, Federal Practice and Procedure 2046.1 (1994)).

Courts routinely grant expedited discovery in anticipation
of a motion for preliminary injunction. See
Skybiz.com, Inc.,
2001 WL 34134696, at *12  (providing that in anticipation of the
preliminary injunction motion the Commission was permitted to depose any
witness at any time after the date of the order upon three (3) business days’
notice and defendants were ordered to respond to any interrogatories, requests
for admissions, or requests for production of documents within four (4)
business days after service of the discovery request); see also Tracfone Wireless, Inc. v. King Trading, Inc.,
No. 3-08-CV-0398, 2008 WL 918243, *1 (N.D. Tex. Mar. 13, 2008) (finding expedited discovery necessary so that
plaintiffs can determine whether to seek a preliminary injunction); Providence Property & Cas. Ins. Co. v.
Peoplelease Corp.,
No. 4:06cv285, 2007 WL 2241492, *2 (E.D. Tex. Aug. 3,
2007) (permitting expedited discovery prior to
consideration of preliminary injunction motion); Alliantgroup, L.P. v. Feingold, No. H-09-0479, 2009 WL 1109093, *2
(S.D. Tex. April 24, 2009) (granting motion for expedited discovery prior
to hearing on temporary injunction).

Plaintiff has
shown good cause as to why expedited discovery should be granted and he
anticipates that he will file his motion seeking the Court’s appointment of a
Conservator or Special Master promptly upon receipt of the documents sought by
the Document Requests and concluding the three depositions noticed. Further,
since Plaintiff is seeking a very limited universe of documents, and only these
three depositions on very limited issues, the Defendants will not be prejudiced
by the discovery Plaintiff is seeking. Moreover, the documents Plaintiff is
seeking have likely already been compiled through the course of the
negotiations with the DOJ and SEC and can be produced quickly and with minimal
effort. Thus, Plaintiff’s motion seeking expedited discovery should be granted.

II.      Good
Cause Exists for Plaintiff’s Expedited Discovery

Here, Plaintiff has shown good cause to conduct limited
discovery on an expedited basis.  Fed. R.
Civ. P. 26(f) generally does not require a discovery conference to take place until 21
days before the first such conference. Since no scheduling conference has been
set yet in this case, it may be months before Plaintiff can begin conducting
any discovery for a forthcoming preliminary injunction motion.  Thus, the ordinary course of discovery
proceedings under the federal rules would be inappropriate and insufficient,
given the exigencies of the issues involved as well as the time required for
the preparation, briefing, argument and consideration of the anticipated
motion.

Delaware law is
also instructive on expedited discovery proceedings since Delaware courts
routinely handle litigation challenging corporate governance.  For example, Delaware courts routinely permit
a plaintiff to conduct discovery on an expedited basis because of the potential
for irreparable harm to shareholders if a merger or acquisition is consummated
as a result of an inadequate process and inadequate disclosures.  Allen v.
News Corp.
, No. Civ-A-979-N, 2005 WL 415095 (Del. Ch. Feb. 3, 2005); ODS
Technologies, L.P. v. Marshall
, 832 A.2d 1254, 1262 (Del. Ch. 2003); In re
Pure Resources, Inc. Shareholders Litig.
, 808 A.2d 421, 452 (Del. Ch.
2002).  In anticipation of a motion for injunctive
relief, the Delaware courts recognize the need for expedited discovery.  See In
Re Int’l Jensen Shareholders Litig
., No. CIV-A-14992, 1996 WL 422345, (Del.
Ch. July 13, 1996) (holding that [a] party’s request to schedule
an application for a preliminary injunction and to expedite the discovery
related thereto is normally routinely granted. Exceptions to that norm are
rare.).

The slower pace of
normal pretrial discovery will clearly prejudice Plaintiff and the other Sands
shareholders since, by the time discovery responses are due in the ordinary
course, the Individual Defendants are likely have taken actions prejudicial to
the Company’s interests and those of its shareholders.  Such prejudicial action is likely to include, inter alia, the appointment by the Board
of the same legal counsel representing all the Defendants in the Moradi case and taking positions herein
contrary to Sands’ best interests as well as concluding negotiations of a
settlement of the FCPA claims solely with the Company’s cash.  While the former could likely be undone, the
latter would, almost certainly, be binding on Sands.

Thus, good cause
exists for expedited discovery.

III.    Defendants
Will Face No Prejudice From Expedited Discovery Because        Plaintiff Requests Only Limited And Narrowly Focused
Discovery

Defendants will face no prejudice from the expedited
discovery Plaintiff seeks.  Plaintiff’s
discovery requests are limited and narrowly focused on documents and testimony
regarding the conflicts of interest inherent in Sands lack of truly independent
counsel representing it at a critical moment in time.  Such discovery would pose little burden on
Defendants.  Specifically, Plaintiff
requests that the Court Order Sands and the Individual Defendants to produce
the documents identified in the attached Document Requests and to permit him to
take no more than three depositions following review of such document
production.

Defendants will be
unable to argue credibly any prejudice from having to respond to such discovery
on an expedited basis. In any event, each of the discovery requests concerns
evidence highly relevant to Plaintiff’s claims as alleged in the Complaint.  Such claims include multiple allegations that
the members of the Board and their counsel suffer and have demonstrated serious
conflicts of interest and, in the case of Board members, breached their
fiduciary duties (including the duty of loyalty) each owed to Sands and its
shareholders. Sands and the Individual Defendants will most likely need to
produce this identical discovery after the Rule 26(f) conference even in the absence of expedited discovery.
Thus, such Defendants should produce the requested documents on an expedited
basis in the interest of the prompt and efficient disposition of critical
issues in this litigation.

IV.     The
PSLRA Discovery Stay Does Not Apply

The automatic discovery stay of the Private Securities
Litigation Reform Act of 1995 (“PSLRA, 15 U.S.C. § 78u-4(b)(3)(B), does not apply to situations
where, as here, the imposition of a stay would result in “undue
prejudice.”  “Undue prejudice
has been defined as improper or unfair treatment amounting to something less
than irreparable harm.”  Benbow v. Aspen Technology, Inc., No.
Civ. A. 02-2881, 2003 WL 1873910, at *4 (E.D. La. Apr. 11, 2003) (internal quotations and citations omitted); see also Medical Imaging Centers of
America,
Inc. v. Lichtenstein,
917 F. Supp. 717, 720 (S.D. Cal. 1996) (“This ‘undue prejudice’ standard is …
something less than ‘irreparable harm.”‘).  Plaintiff also maintains that Sands and its
shareholders will suffer irreparable harm if the Company is to be represented
in this litigation by the same counsel as representing all the Defendants in
the Moradi case and, as well, if
seriously conflicted counsel negotiate a settlement of the FCPA claims being
pursued by the DOJ and SEC solely with Sands’ cash.

Unfair prejudice
has been found “where defendants might be shielded from liability in the
absence of the requested discovery.”
Vacold LLC v. Cerami
, No. 00-4024,
2001 WL 167704, at *6 (S.D.N.Y. Feb. 16, 2001).  See also, Kelleher v. ADVO, Inc., No.
3:06-cv-01422 (AVC), 2007 WL 1232177, at *4 (D. Conn. Apr. 24, 2007); see
also In re Bank of Am. Corp. Sec., Deriv. & ERISA Litig.,
09 MDL 2058
(DC), 2009 WL 4796169, at *2 (S.D.N.Y. Nov. 16, 2009).  Here,
Plaintiff requests limited, highly particularized discovery to enable him to
develop an enhanced record in anticipation of his motion seeking the
appointment of a Conservator or Special Master by the Court.  In the event Plaintiff is unable to obtain
such limited expedited discovery (most likely consisting of one box of documents),
Plaintiff will be unable to protect Sands and its shareholders from suffering
the irreparable harm that will inevitably result from a seriously compromised
representation of the Company in this litigation and the possible settlement of
the FCPA claims in a way that unjustly protects Defendant Adelson and/or other
Individual Defendants from financial liability and sanctions.  Plaintiff needs the opportunity to gather
sufficient additional evidence to meet the high standard required for obtaining
a preliminary injunction, which standard he would have to satisfy in order for
the Court to seriously consider granting him the relief sought.  See,
e.g., Nichting v. DPL Inc.,
3:11-CV-141, 2011 WL 2892945, at *4 (S.D. Ohio
July 15, 2011) (lifting PSLRA stay and granting expedited discovery
so plaintiffs could prepare motion for preliminary injunction); Ryan v. Walton, CIV.A. 10-145 RMC, 2010
WL 3785660 (D.D.C. Mar. 9, 2010) (same); Standard
Inv. Chartered v. Nat’l. Association of Security Dealers, Inc.,
No. 07 Civ.
2014(SWK), 2007 WL 1121734 (S.D.N.Y. April 11, 2007) (refusing discovery stay and granting
expedited discovery so plaintiffs could prepare motion for preliminary
injunction).

Plaintiff has
shown that, absent the relief that he is seeking as set forth above, Sands and
its shareholders stand to suffer irreparable harm. Plaintiff clearly has satisfied
the lesser showing of undue prejudice required to avoid the PSLRA’s discovery
stay.

V.      The
PSLRA Only Applies To Federal Securities Claims

Plaintiff also asserts
independent state law breach of fiduciary claims and, therefore, is entitled to
discovery on those claims irrespective of whether the PSLRA’s discovery stay
should apply to the claims brought under 15 U.S.C. § 78n(a), §14(a) of the Exchange Act and 17 C.F.R. § 240.14a-9,
Rule 14a-9 of the Exchange Act.  See Tobias Holdings, Inc. v. Bank United
Corp.
, 177 F. Supp. 2d 162 (S.D.N.Y. 2001) (concluding that securities plaintiffs could
seek discovery on related state law claims notwithstanding the PSLRA).

In a recent
decision specifically applicable here, a district court in Ryan v. Walton, No. 1:10cv-00145-RMC (D.D.C.), held that the PSLRA’s discovery stay would
not operate to preclude expedited discovery in light of the fast-approaching
shareholder vote.  Id.  In so
holding, the court accepted the plaintiffs’ argument in such case that
prejudice would result from the irreparable harm which shareholders of Allied
Capital Corporation would suffer if they were unable to cast a fully informed
vote on the merger.  See id.  Thus, the court ordered expedited discovery in
order for the plaintiffs to be able to move for injunctive relief prior to the
shareholder vote. See id.; see
also In re Royal Ahold N. V. Securities & ERISA Litigation
, 319 F.
Supp. 2d 634, 635 (D. Md. 2004) (lifting
PSLRA discovery stay where the plaintiffs “have shown that a delay in the
production of the particularized discovery sought here would cause undue
prejudice to their ability to litigate and, most significantly, resolve as
expeditiously their claims against [the defendants]”).

While Plaintiff
alleges federal claims under and pursuant to the Exchange Act that, arguably,
might be affected by the PSLRA’s automatic stay provision, none of those claims
are in the slightest way implicated by his anticipated motion for the
appointment of a Conservator or Special Master.  If Plaintiff is precluded from developing a
more complete evidentiary record now, it will be necessary to file his motion
on a more limited record.  Because Plaintiff
and other Sands shareholders will suffer irreparable harm if such motion is
denied, he should be given a reasonable opportunity to obtain specific evidence
of the manifestation of the alleged conflicts of interest of the Individual
Defendants and their counsel. Based thereupon, there would be sufficient undue
prejudice to Plaintiff’s ability to justify why the automatic stay provisions
of the PSLRA should be disregarded.

It should also be
noted that the claims alleged by Plaintiff under and pursuant to the Exchange
Act are not brought on behalf of a class, but individually and derivatively on
behalf of Sands.  Thus, there is no
practical need for a stay as there would be in a Rule 23 class action, where, inter alia, there would have to be
delays while the Court considered who would serve as “lead plaintiff” and also
test the sufficiency of the pleading of the securities claims.  Here, of course, even if there were no
Exchange Act claims alleged, the breach of fiduciary duty and other common law
claims would remain to be litigated. Thus, there is no practical reason why
there should even be a stay.

CONCLUSION

For the reasons stated above, Plaintiff respectfully
requests that the Court allow expedited discovery proceedings as detailed
herein.

 

Dated: January 24, 2014

 

ALBRIGHT, STODDARD, WARNICK AND ALBRIGHT

By:                                                          

G. Mark Albright

Nevada Bar No. 1394

William H. Stoddard, Jr.

Nevada Bar No. 8679

801 S Rancho Dr D4

Las Vegas, NV 89106

(702) 384-7111

Fax: (702) 384-0605

gma@albrightstoddard.com

bstoddard@albrightstoddard.com

Richard D. Greenfield

Ilene F. Brookler

Marguerite R. Goodman

GREENFIELD & GOODMAN LLC

250 Hudson Street, 8th Floor

New York, NY
10013

(917) 495-4446

ibrookler@gmail.com

whitehatrdg@earthlink.net

twowhitehats@earthlink.net

Rose F. Luzon

Valerie Chang

SHEPHERD, FINKELMAN,

MILLER & SHAH, LLP

401 West A Street, Suite 2350

San Diego, CA 92101

(619) 235-2416

rluzon@sfmslaw.com

vchang@sfmslaw.com

Scott R. Shepherd

SHEPHERD, FINKELMAN,

MILLER& SHAH, LLP

35 E. State Street

Media, PA  19063

(610) 891-9880

sshepherd@sfmslaw.com

Counsel for
Plaintiff

W.A.
Sokolowski

 


[1] On
August 27, 2013, the DOJ announced that Sands agreed to “return”
$47,400,300 to the U.S. Treasury in order to avoid criminal prosecution.  This settlement does not resolve the DOJ’s
FCPA and other investigations into Sands’ business operations.

[2] It
should be noted that, on March 1, 2013, the Company disclosed that it had
informed the SEC in its December 31, 2012 10-K that an internal review,
presumably by the Audit Committee, found that Sands had “likely
violated” the books and records and internal controls provisions of the
FCPA.

 

[3] Plaintiff’s claims herein, which were mostly included
in a pre-suit demand on Sands’ Board on January 22, 2013, pursuit to Rule 23.1,
Fed. R. Civ. P., are substantially broader than those alleged in Moradi.

[4] Such oversight may include a recommendation to the
Court that independent counsel be appointed by the Court to represent the
interests of Sands and its shareholders, counsel not burdened by the
simultaneous representation of the interests of Defendant Adelson and the other
Individual Defendants.

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