# Silverberg v. Continenza

> District Court, W.D. New York · January 18, 2022

URL: https://www.frixlaw.com/law-library/cases/10364563

## Case

- **Court:** District Court, W.D. New York
- **Decided:** January 18, 2022
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10364563

## Opinion text

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK

LOUIS PETERS, Derivatively on Behalf of
Nominal Defendant EASTMAN KODAK DECISION AND ORDER
COMPANY,
6:21-CV-06621-EAW
Plaintiff,

v.

JAMES V. CONTINENZA, DAVID E.
BULLWINKLE, ROGER W. BYRD,
RICHARD TODD BRADLEY, GEORGE
KARFUNKEL, PHILLIPE D. KATZ,
JASON NEW, and RANDY VANDAGRIFF,

Defendants,
and

EASTMAN KODAK COMPANY,

Nominal Defendant.

HERBERT SILVERBERG, Derivatively on
Behalf of Nominal Defendant EASTMAN
KODAK COMPANY,

Plaintiff, 6:21-CV-06567-EAW

v.

JAMES V. CONTINENZA and
GEORGE KARFUNKEL,

Defendants,
and

EASTMAN KODAK COMPANY,

Nominal Defendant.
INTRODUCTION AND BACKGROUND
The above-captioned lawsuits represent two shareholder derivative actions related,
in part, to an announcement in July 2020 that Eastman Kodak Company (“Kodak”) was to

receive a $765 million federal loan from the United States International Development
Finance Corporation (“DFC”) in order to manufacture pharmaceutical products and the
allegedly contemporaneous approval of stock options to certain Kodak insiders, including
its Executive Chairman and Chief Financial Officer defendant James V. Continenza
(“Continenza”). The action commenced by plaintiff Herbert Silverberg (“Silverberg”), a

Kodak shareholder, was filed on September 2, 2021; names Continenza and Kodak Board
of Directors member George Karfunkel (“Karfunkel”) as defendants in addition to nominal
defendant Kodak; and asserts breach of fiduciary duty causes of action and a claim for
violation of section 14 of the Securities Exchange Act of 1934 (“Exchange Act”). (See
Silverberg v. Continenza et al., Case No. 6:21-cv-06567 (the “Silverberg Action”), Dkt. 1).

The action commenced by plaintiff Louis Peters (“Peters”), a Kodak shareholder, was filed
on October 4, 2021; names eight defendants in addition to nominal defendant Kodak—
Continenza, Karfunkel, Kodak’s Chief Financial Officer David E. Bullwinkle, Kodak’s
General Counsel Roger W. Byrd, Kodak Board of Directors members Richard Todd
Bradley, Phillipe D. Katz, and Jason New, and Kodak’s Senior Vice President Randy

Vandagriff; and asserts claims for breach of fiduciary duty, unjust enrichment, and
violations of section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder.
(See Peters v. Continenza et al., Case No. 6:21-cv-06621 (the “Peters Action”), Dkt. 1).
Pending before the Court are competing motions to consolidate and to appoint lead
counsel. (See Peters Action, Dkt. 2 (Peters’ motion); Dkt. 3 (Silverberg’s motion);
Silverberg Action, Dkt. 17 (Peters’ motion); Dkt. 18 (Silverberg’s motion)).1 Specifically,

Peters seeks to consolidate the Peters Action and the Silverberg Action, and appoint his
counsel Kessler Topaz Meltzer & Check, LLP (“KTMC”) and Faraci Lange LLP (“Faraci
Lange”) as Lead and Liaison counsel, respectively. (Dkt. 2).2 On the other hand,
Silverberg seeks to create “a co-leadership structure based upon responsibility for different
legal claims raised” or alternatively seeks to have his counsel, Abraham, Fruchter &

Twersky, LLP (“AF&T”), serve as Lead Counsel. (Dkt. 3-10 at 7). Silverberg describes
the structure he seeks as involving co-lead counsel “centered around the different claims,
with any overlapping claims being litigated on a co-leadership basis. . . .” (Dkt. 3-10 at 8).
MOTIONS TO CONSOLIDATE
Both Peters and Silverberg (hereinafter collectively “Plaintiffs”) agree that the cases

should be consolidated. (See Dkt. 2-5 at 11 (Peters arguing that the “[i]nsignificant

1 Because the motion papers and responses filed in the Peters Action and the
Silverberg Action are identical, the Court will hereinafter reference only the docket entries
in the Peters Action, unless otherwise specified. The Court notes that, while afforded the
opportunity (see Dkt. 8), no defendant has submitted papers in connection with the pending
motions.

2 Peters also initially sought appointment as lead plaintiff (Dkt. 2-5 at 12), but
withdrew that request (Dkt. 49 at 7 n.1; 8-9). “In a shareholder derivative action, unlike a
private securities litigation action, the Court is not required to appoint a lead plaintiff.” In
re Frontier Commc’ns Corp. Derivative Litig., No. 3:17-CV-1792 (VAB), 2018 WL
3553332, at *4 (D. Conn. July 23, 2018). Here, the Court declines to appoint either Peters
or Silverberg as lead plaintiff—a request that is no longer being pursued in any event.

differences” between the Peters Action and Silverberg Action “‘do not defeat the value in
consolidating these actions so that one shareholder lawsuit’ may proceed”); Dkt. 3-10 at 7
(Silverberg stating: “Notwithstanding these differences in theory and emphasis, Silverberg

agrees that the two shareholder derivative actions share common questions of law and fact
and, therefore, should be consolidated pursuant to Fed. R. Civ. P. 42(a).”)). The Court
agrees.
“Consolidation is appropriate where there are actions involving ‘common
question[s] of law or fact’ pending before the Court.” In re Bank of Am. Corp. Sec.,

Derivative & ERISA Litig., 258 F.R.D. 260, 267 (S.D.N.Y. 2009) (quoting Fed. R. Civ. P.
42(a)) (alteration in original). The claims and defendants need not be identical in order for
two actions to be consolidated, so long as “the cases present sufficiently common questions
of fact and law, and the differences do not outweigh the interests of judicial economy
served by consolidation.” Id. at 268 (citation and quotation omitted). See also In re

Frontier Commc’ns Corp. Derivative Litig., 2018 WL 3553332, at *3 (“Differences in
causes of action, defendants, or the class period do not render consolidation inappropriate
if the cases present sufficiently common questions of fact and law, and the differences do
not outweigh the interests of judicial economy served by consolidation.” (citations
omitted)).

Here, while the claims and defendants are not identical, there is sufficient overlap—
most notably with respect to the underlying premise of the lawsuits based, in part, on the
allegedly contemporaneous grant of stock options to Continenza with the announcement
of the DFC loan and the Kodak Board’s rejection of Plaintiffs’ requests to litigate those
claims. See id. at *4 (“The Court finds that sufficient common questions of fact and law
exist between and among these four Complaints to consolidate the actions, most
importantly that each asserts that the Individual Defendants breached their fiduciary duties

to Frontier, and that a stockholder demand for the company to bring the asserted claims
against the Individual Defendants would be futile.”). The two actions involve common
questions of law and fact, judicial economy and convenience will be promoted by
consolidation, and it will avoid unnecessary costs to the parties. Accordingly, the Court
grants the motion to consolidate.

MOTIONS FOR APPOINTMENT OF LEAD COUNSEL
Having decided that consolidation is appropriate, the Court must now resolve the
remaining issue of whether it should appoint lead counsel, and if so, which attorney(s)
should be appointed, or alternatively whether the Court should endorse the “co-leadership”
structure advanced by Silverberg.

The Court agrees with Peters that the proposal advanced by Silverberg would
undermine the goals of consolidation, and in reality, reflects no effort to promote judicial
economy and efficiency. Given the complexity of the litigation, this Court is well within
its discretion to proactively manage the litigation and regulate the conduct of the
proceedings. See Farber v. Riker-Maxson Corp., 442 F.2d 457, 459 (2d Cir. 1971) (a

district court is not required to allow each individual plaintiff and his lawyer “to do what
he pleases in litigation as complex as this” nor should they be allowed to “behave in total
disregard of the interest of other litigants. . . .”). In that regard, the Court agrees with
Peters that appointment of lead counsel in this case will promote those goals.3
The decision concerning appointment of lead counsel is a matter within the Court’s

discretion. See In re Frontier Commc’ns Corp. Derivative Litig., 2018 WL 3553332, at *3
(“The appointment of lead plaintiff and lead counsel in a consolidated shareholder
derivative litigation is a matter of discretion.” (citations omitted)). Moreover, there is no
statutory or controlling case law setting forth the criteria that a court must apply in
appointing lead counsel in a consolidated shareholder derivative action. See In re

Comverse Tech., Inc. Derivative Litig., No. 06-CV-1849 (NGG) (RER), 2006 WL
3761986, at *2-3 & n.3 (E.D.N.Y. Sept. 22, 2006) (discussing the lack of any controlling
statute or case law but outlining the factors courts consider), objections overruled, No. 06-
CV-1849 NGG RER, 2006 WL 3511375 (E.D.N.Y. Dec. 5, 2006).
Both Peters and Silverberg cite to the alleged superiority of his respective complaint

in an effort to persuade the Court that his counsel should be appointed lead. The Court’s
best assessment at this stage of the proceedings is that Plaintiffs each may have some

3 Silverberg argues that KTMC cannot become his counsel in a consolidated action
“unless Silverberg’s choice of AF&T ‘was an unreasonable choice.’” (Dkt. 62 at 5-6).
This is an incorrect statement of the law. Silverberg cites to Cohen v. U.S. Dist. Ct. for N.
Dist. of California, 586 F.3d 703 (9th Cir. 2009), but that decision is not on point. Cohen
dealt with the appointment of lead counsel that was not the lead plaintiff’s choosing under
the Private Securities Litigation Reform Act. The Ninth Circuit remanded the case to the
district court to better explain its rationale for not selecting counsel chosen by the lead
plaintiff. Id. at 711-12. Silverberg also cites generally to MacAlister v. Guterma, 263 F.2d
65 (2d Cir. 1958), but the Second Circuit clarified in Farber, 442 F.2d at 459, that a district
court does have discretion to appoint lead counsel in a consolidated shareholder derivative
action and to regulate the conduct of non-lead counsel.
legitimate criticism of the other’s pleading. However, as noted by then-District Judge Chin
in In re Bank of Am. Corp. Sec., Derivative & ERISA Litig., 258 F.R.D. at 273: “I need not
determine which complaints are superior to the others. Many, if not all, deficiencies in the

different complaints may be cured when . . . a consolidated derivative complaint [is filed],
and differences among the complaints can also be addressed at that time.”
In assessing the more appropriate counsel to be appointed lead, the Court is partly
influenced by the pending state court litigation, already being pursued by Peters.4
Appointing the same counsel here that is already litigating the state court matter

(commenced several months before either federal court lawsuit) will promote judicial
economy, assist in coordination between the two actions, and promote the avoidance of
duplication, inefficiency, and inconsistent rulings. See, e.g., Sparano v. Lief, No.
10CV2079 BTM (BLM), 2011 WL 830109, at *2 (S.D. Cal. Mar. 3, 2011) (appointing law
firm that was already pursuing related state court derivative action for purposes of

efficiency as it would prevent needless duplication of efforts and waste of resources and
will “ensure that counsel can speak with one voice on behalf of [the Company], avoid
unseemly conflicts, and ensure consistency in the prosecution of the derivative claims
brought on the Company’s behalf.” (quotation omitted)).
Relatedly, the Court believes that the commencement of the state court litigation by

Peters reflects his diligent pursuit of the claims as opposed to Silverberg’s tactics, which

4 KTMC and Faraci Lange represent Peters in a shareholder derivative action
commenced in New York State Supreme Court, Monroe County, on May 19, 2021. (Dkt.
2-1 at ¶ 3; Dkt. 2-2 at 2-4).
involved some delay. (See Silverberg Action, Dkt. 1-5 (reflecting eight-month gap in
communication concerning status of litigation demand)). Silverberg cites to his filing of a
motion for partial summary judgment in the federal court action as evidence that he is

pursuing his claims more vigorously (Dkt. 62 at 11-12), but the Court disagrees. Taking
the atypical step of filing a pre-answer motion for summary judgment in a complex case
like this one, while outstanding motions to consolidate and appoint lead counsel are
pending, suggests to the Court that Silverberg is pursuing a course of action that may result
in inefficiencies and a waste of judicial resources.5

Moreover, while each party has launched criticisms of the other and their counsel
based on conduct in other litigation, the Court is influenced by the argument advanced by
Peters that “Silverberg has filed ten representative actions in the last two years, all with his
current counsel” and of those, six were abandoned within three months of filing. (Dkt. 2-
5 at 17). Silverberg responds by claiming that his objectives were achieved in those

lawsuits and that he is not a professional plaintiff acquiring stock simply for the sake of
commencing litigation (see Dkt. 3-5), but he does not dispute the underlying factual
premise of Peters’ argument that he and his counsel are prolific filers of lawsuits, many of
which were ultimately discontinued shortly after their commencement. Considered with

5 Through a Stipulated Order, it was agreed that the parties would meet and confer
about a schedule for responding to the complaints within 14 days of the Court issuing a
decision on the pending motions to consolidate and appoint lead counsel, with the
expectation that the defendants would have no less than 60 days to answer, move or
otherwise respond to the complaints. (Dkt. 7). Thus, no answer or dispositive motion has
been filed by the defendants in either the Peters or Silverberg Actions. Nonetheless, on
November 10, 2021, Silverberg filed a motion for partial summary judgment. (Silverberg
Action, Dkt. 39).
the unusual pre-answer motion for partial summary judgment that Silverberg filed, the
Court has concerns that appointing Silverberg’s counsel as lead will not promote the goals
of more effective case management, judicial efficiency, and reducing costs to the parties.

Finally, the Court has carefully reviewed the qualifications and background of the
competing law firms seeking appointment in this case, and concludes that Peters’ counsel
has the greater experience and background to warrant appointment as Lead and Liaison
counsel in this case.
All that being said, both parties appear to misapprehend the impact of consolidation.

Consolidation pursuant to Federal Rule of Civil Procedure 42(a) “means the joining
together—but not the complete merger—of constituent cases.” Hall v. Hall, ___ U.S. ___,
138 S. Ct. 1118, 1125 (2018). In other words, the Silverberg and Peters Actions will not
be completely merged into one, but instead they will be consolidated to enable “more
efficient case management while preserving the distinct identities of the cases and the rights

of the separate parties in them.” Id. No question, this Court “enjoy[s] substantial discretion
in deciding whether and to what extent to consolidate cases,” id. at 1131, but it does not
view that discretion as permitting consolidation to result in the foreclosure of meritorious
claims that one party may seek to pursue, see Schnall v. Proshares Tr., No. 09 CIV. 6935
(JGK), 2010 WL 1962940, at *2 (S.D.N.Y. May 17, 2010) (“Consolidation means that the

litigation will be consolidated, not that [a plaintiff] . . . will lose their individual claims. . .
. [T]he Court will have to adopt flexible procedures to deal with any individual claims.”).
Therefore, consistent with the directions set forth below, the Court is requiring the filing
of a consolidated complaint, and KTMC and Faraci Lange shall consult with counsel for
Silverberg in drafting that consolidated complaint, but in the event that certain claims are
not pursued in that consolidated complaint that Silverberg believes should be pursued, he
may apply to the Court for leave to independently continue to pursue those claims as part

of the consolidated action.
CONCLUSION AND ORDER
For the foregoing reasons, the motion by Peters for consolidation and appointment
as lead counsel (Peters Action, Dkt. 2; Silverberg Action, Dkt. 17) is granted and the motion
by Silverberg for consolidation is granted but the motion is otherwise denied (Peters

Action, Dkt. 3; Silverberg Action, Dkt. 18). The Court hereby orders as follows:
1. Pursuant to Federal Rule of Civil Procedure 42(a), the Peters Action and the
Silverberg Action are hereby consolidated and shall hereinafter be referred to as
“In re Eastman Kodak Company Derivative Litigation” and assigned the case
number of the Peters Action (case no. 6:21-cv-06621) (hereinafter “the

Consolidated Action”). All filings need only be made in the Consolidated
Action. After consolidation, and for purposes of judicial efficiency, the Clerk
of Court is directed to administratively terminate the Silverberg Action (case no.
6:21-cv-06567)6;

6 As a result, the Court directs the Clerk of Court to also terminate the pending motion
for partial summary judgment filed in the Silverberg Action (Silverberg Action, Dkt. 39),
meaning that it is terminated without prejudice subject to renewal consistent with the terms
of this Decision and Order (i.e., Lead Counsel may elect to renew the motion, or
alternatively if any request to renew is rejected by Lead Counsel, Silverberg may seek leave
of Court to ultimately pursue it and/or any additional claims that are not included in a
consolidated complaint).
2. Kessler Topaz Meltzer & Check, LLP is hereby appointed as Lead Counsel and
Faraci Lange LLP is hereby appointed as Liaison Counsel to act on behalf of all
plaintiffs in the Consolidated Action.  Lead Counsel with Liaison Counsel shall

assume and exercise the full authority to litigate this action on behalf of all
plaintiffs, and no pleadings or other papers shall be filed, or discovery conducted
by any plaintiff except as directed or undertaken by Lead Counsel and Liaison
Counsel, without leave of Court. In the event leave of Court is sought in this
regard, the party seeking such relief must file a motion that sets forth in detail

the good faith efforts to have Lead Counsel and Liaison Counsel pursue certain
actions and the results of those efforts.
3. Each newly filed or transferred shareholder derivative action that arises out of
the subject matter of the Consolidated Action shall be consolidated with the
Consolidated Action, and this Decision and Order shall apply to each such newly

filed or transferred case. Upon such filing or transfer of a related case, the Clerk
of Court shall: (a) file a copy of this Decision and Order on the docket in the
newly filed or transferred action; (b) mail a copy of this Decision and Order to
the attorneys for the plaintiff(s) in the newly filed or transferred case and to any
new defendant(s) in the newly filed or transferred case; and (c) make the

appropriate entry in the docket for this Consolidated Action. A new party to any
related case filed in the future may object to said consolidation by filing a motion
for relief from the Court’s Decision and Order within twenty (20) days after the
date of receipt of the Court’s Decision and Order.
4. The parties shall meet and confer within 20 days hereof to agree upon an initial
case management order for submission to the Court for its approval, including a
deadline for the filing of a consolidated complaint.

SO ORDERED.

ELIZABETH A. WOLFORD
Chief Judge
United States District Court

Dated: January 18, 2022
Rochester, New York

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10364563. Public record. Not legal advice.