Case 2:23-cv-00445-GMN-BNW Document 5 Filed 03/24/23 Page 1 of 9 1 MARK J. CONNOT (10010) COLLEEN E. MCCARTY (13186) 2 FOX ROTHSCHILD LLP 1980 Festival Plaza Drive, Ste 700 3 Las Vegas, NV 89135 Telephone: 702.262.6899 4 Facsimile: 702.597.5503 mconnot@foxrothschild.com 5 cmccarty@foxrothschild.com Counsel for Defendants Zachary K. Bradford, 6 Lori L. Love, S. Matthew Schultz, Roger P. Beynon, Larry McNeill, Thomas L. Wood, Amer Tadayon, and 7 Nominal Defendant CleanSpark Inc. 8 9 UNITED STATES DISTRICT COURT 10 DISTRICT OF NEVADA 11 IN RE CLEANSPARK, INC. DERIVATIVE Case No.: 2:21-cv-01004-GMN-BNW LITIGATION, 12 Consolidated with: Case No.: 2:21-cv-01181-GMN-BNW 13 This Document Relates to: Pending Consolidation with: 14 ALL ACTIONS Case No. 2:23-cv-00358-ART-BNW Case No. 2:23-cv-00315-JAD-NJK 15 Case No. 2:23-cv-00444-GMN-NJK and Case No. 2:23-cv-00445-GMN-BNW 16 17 DEFENANTS’ MOTION TO 18 CONSOLIDATE 19 Defendants Zachary K. Bradford (“Bradford”), S. Matthew Schultz (“Schultz”), Roger P. 20 Beynon (“Beynon”), Lori L. Love (“Love”), Larry McNeill (“McNeill”) Thomas L. Wood 21 (“Wood”), and Amer Tadayon (“Tadayon”) (collectively, “Individual Defendants”) and nominal 22 Defendant CleanSpark, Inc. (“CleanSpark” and with the Individual Defendants, “Defendants”) 23 hereby move this Honorable Court under Federal Rule of Civil Procedure 42(a)(2) of the Federal 24 Rules of Civil Procedure (“FRCP”) and the Joint Stipulation and Order Consolidating Related 25 Action and Appointing Co-Lead Counsel (Dkt. No. 10) (“Consolidation Order”) for an Order 26 consolidating the matters styled Iraci v. Bradford, et al., Case No. 2:23-cv-00315-JAD-NJK 27 (“Iraci Matter”), Atanasoff v. Bradford, et al. Case No. 2:23-cv-00358-ART-BNW (“Atanasoff 28 Matter”), Smith v. Bradford, et al., Case No. 2:23-cv-00445-GMN-BNW (“Smith Matter”), and 144042733.1 Case 2:23-cv-00445-GMN-BNW Document 5 Filed 03/24/23 Page 2 of 9 1 France v. Bradford, et al., Case No. 2:23-cv-00444-GMN-NJK (“France Matter” and 2 collectively with the Iraci, Atanasoff, and Smith Matters, “Subsequent Related Actions”) with 3 the first filed shareholder derivative action filed on behalf of CleanSpark, styled In re CleanSpark 4 Inc. Derivative Litigation, Case No. 2:21-cv-01004-GMN-BNW (“Consolidated Action”), 5 (previously consolidated with Case No. 2:21-cv-01181-GMW-BNW). The Subsequent Related 6 Actions share common questions of law and fact with the Consolidated Action and the separately 7 filed proceedings can and should be considered together as a matter of convenience and judicial 8 and party economy. 9 This Motion to Consolidate is made and based on the following Memorandum of Points 10 and Authorities; the pleadings and papers on file herein, and any oral argument the Court may 11 permit at a hearing of this matter. 12 DATED: March 24, 2023 FOX ROTHSCHILD LLP 13 /s/ Colleen E. McCarty 14 MARK J. CONNOT (10010) COLLEEN E. MCCARTY (13186) 15 1980 Festival Plaza Drive, Ste. 700 Las Vegas, NV 89135 16 Telephone: 702.262.6899 Facsimile: 702.597.5503 17 mconnot@foxrothschild.com cmccarty@foxrothschild.com 18 Counsel for Defendants Zachary K. Bradford, S. Matthew Schultz, Lori L. 19 Love, Robert P. Beynon, Larry McNeill, Thomas L. Wood, Amer Tadayon, and 20 Nominal Defendant Cleanspark, Inc. 21 22 MEMORANDUM OF POINTS AND AUTHORITIES 23 I. 24 INTRODUCTION 25 Defendants respectfully request the Court continue its consolidation efforts in this matter 26 by further ordering consolidation with the instant Consolidated Action the four recently filed 27 actions noted above, the Iraci Matter pending before the Honorable Jennifer A. Dorsey, the 28 Atanasoff Matter, pending before the Honorable Anne R. Traum, and the France and Smith Page 2 144042733.1 Case 2:23-cv-00445-GMN-BNW Document 5 Filed 03/24/23 Page 3 of 9 1 Matters, pending before this Court. In addition to these cases involving identical and/or 2 overlapping factual and legal issues, events, and questions of law, and defendants, as well as 3 duplicative claims, the Consolidation Order (Dkt. No. 10) entered by this Court, requires that all 4 related shareholder derivative actions – which inarguably include the Subsequent Related 5 Actions – be further consolidated with the Consolidated Action. 6 As even a cursory review of the operative complaints makes clear, all of the claims at 7 issue are premised on allegedly false or misleading statements or omissions made by virtually 8 identical parties 1 related to CleanSpark’s acquisition of ATL Data Centers. These are the very 9 same allegations that make up the subject matter of the Consolidated Action currently before this 10 Court. For these reasons, Defendants respectfully request, pursuant to FRCP 42 and the 11 Consolidation Order, that the Subsequent Related Actions be consolidated with the Consolidated 12 Action for all purposes, which will benefit both the Court and the parties. 13 FACTUAL BACKGROUND AND PROCEDURAL POSTURE 14 On May 26, 2021, plaintiff Andrea Ciceri filed a shareholder derivative action herein on 15 behalf of CleanSpark, captioned Ciceri v. Bradford, et al., Case No. 2:21-cv-01004-GMN-BNW 16 (Dkt. No. 1) (the “Ciceri Matter”). The Ciceri Matter was assigned to this Court and Magistrate 17 Judge Brenda Weksler. Thereafter, on June 22, 2021, plaintiff Mark Perna filed a second 18 shareholder derivative action on behalf of nominal defendant CleanSpark in the United States 19 District Court for the District of Nevada, captioned Perna v. Bradford, et al., Case No. 2:21-cv- 20 01181-GMN-BNW (Dkt. No. 1) (the “Perna Matter”). 21 Pursuant to the Consolidation Order (Dkt. No. 10), dated June 29, 2021, this Court 22 consolidated the Ciceri and Perna Matters and designated the complaint filed in the Ciceri Matter 23 as the operative complaint. Paragraph 11 of the Consolidation Order specifically provides as 24 follows: 25 This Order shall apply to each related shareholder derivative action 26 involving the same or substantially the same allegations, claims, 27 1 Defendant Lori Love is not named as a defendant in the Atanasoff matter. Defendant Amer 28 Tadayon is only named as a defendant in the France Matter. With those exceptions, all other defendants in the Consolidated Action, and the Subsequent Related Actions are identical. Page 3 144042733.1 Case 2:23-cv-00445-GMN-BNW Document 5 Filed 03/24/23 Page 4 of 9 1 and defendants, and arising out of the same, or substantially the same, transactions or events as the Consolidated Action, that is 2 subsequently filed in, removed to, reassigned to, or transferred to this Court (“Potential Subsequent Related Derivative Action”). 3 When a shareholder derivative action that properly belongs as part of In re CleanSpark, Inc. Derivative Litigation, Lead Case No. 4 2:21-cv-01004-GMN-BNW, is hereafter filed in this Court, removed to this Court, reassigned to this Court, or transferred to 5 this Court from another court, this Court requests the assistance of counsel in calling to the attention of the Clerk of the Court the 6 filing, removal, reassignment, or transfer of any case that might properly be consolidated as part of In re CleanSpark, Inc. 7 Derivative Litigation, Lead Case No. 2:21-cv-01004-GMN-BNW, and counsel are to assist in assuring that counsel in subsequent 8 actions receive notice of this order. Unless otherwise ordered, the terms of all orders, rulings, and decisions in the Consolidated 9 Action shall apply to Potential Subsequent Related Derivative Actions filed in this Court, removed to this Court, reassigned to 10 this Court, or transferred to this Court from another court. 11 (Dkt. No. 10 at ¶ 11). 12 13 On February 24, 2023, plaintiff Nicholas Iraci filed a third shareholder derivative action 14 on behalf of nominal defendant CleanSpark in Nevada’s Eighth Judicial District Court, captioned 15 Iraci v. Bradford, et al., Case No. A-23-866172-C. A true and correct copy of the complaint in 16 the Iraci Matter is attached hereto as Exhibit A. On February 28, 2023, defendant Schultz filed 17 a Petition for Removal and Notice of Petition for Removal, removing the Iraci Matter to the U.S. 18 District Court. The Iraci Matter is now pending before the Honorable Jennifer A. Dorsey, 19 captioned Iraci v. Bradford, et al., Case No. 2:23-cv-00315-JAD-NJK. On March 6, 2023, 20 defendant Schultz filed a Notice of Related Case (Dkt. No. 46), requesting that the Iraci Matter 21 be transferred to this Court and added to the Consolidated Action as required pursuant to the 22 Consolidation Order. 23 On March 1, 2023, plaintiff Eric Atanasoff filed a fourth shareholder derivative action on 24 behalf of CleanSpark, also in Nevada’s Eighth Judicial District Court, captioned Atanasoff v. 25 Bradford, et al., Case No. A-23-866492-C. A true and correct copy of the complaint in the 26 Atanasoff Matter is attached hereto as Exhibit B. Thereafter, on March 7, 2023, defendant 27 Schultz filed a Petition for Removal and Notice of Petition for Removal, removing the Atanasoff 28 Matter to the U.S. District Court. The Atanasoff Matter is now pending before the Honorable Page 4 144042733.1 Case 2:23-cv-00445-GMN-BNW Document 5 Filed 03/24/23 Page 5 of 9 1 Anne R. Traum, captioned Atanasoff v. Bradford, et al., Case No. 2:23-cv-00358-ART-BNW. 2 On March 9, 2023, defendant Schultz filed a Notice of Related Case (Dkt. No. 48), requesting 3 that both the Iraci and Atanasoff Matters be transferred to this Court and added to the 4 Consolidated Action as required pursuant to the Consolidation Order. 5 On February 21, 2023, plaintiff Brandon Smith filed a fifth shareholder derivative action 6 on behalf of nominal defendant CleanSpark in Nevada’s Eighth Judicial District Court, captioned 7 Smith v. Bradford, et al., Case No. A-23-866051-C. A true and correct copy of the complaint in 8 the Smith Matter is attached hereto as Exhibit C. On March 23, 2023, Defendants filed a Petition 9 for Removal and Notice of Petition for Removal, removing the Smith Matter to the U.S. District 10 Court. The Smith Matter is now pending before this Court, captioned Smith v. Bradford, et al., 11 Case No. 2:23-cv-00445-GMN-BNW. On March 24, 2023, Defendants filed a Notice of Related 12 Case (Dkt. No. 50), requesting that the Smith Matter be added to the Consolidated Action as 13 required pursuant to the Consolidation Order. 14 On March 8, 2023, plaintiff Travis France filed a sixth shareholder derivative action on 15 behalf of nominal defendant CleanSpark in Nevada’s Eighth Judicial District Court, captioned 16 France v. Bradford, et al., Case No. A-23-866925-C. A true and correct copy of the complaint 17 in the France Matter is attached hereto as Exhibit D. On March 23, 2023, Defendants filed a 18 Petition for Removal and Notice of Petition for Removal, removing the France Matter to the U.S. 19 District Court. The France Matter is now pending before this Court, captioned France v. 20 Bradford, et al., Case No. 2:23-cv-00444-GMN-NJK. On March 24, 2023, Defendants filed a 21 Notice of Related Case (Dkt. No. 51), requesting that the France Matter be added to the 22 Consolidated Action as required pursuant to the Consolidation Order. 23 As the relevant pleadings make clear, the Consolidated Action and the Subsequent 24 Related Actions are all derivative actions brought on behalf of nominal defendant CleanSpark, 25 and the cases involve significantly overlapping defendants: Bradford, Love, Schultz, Beynon, 26 McNeill, and Wood. Although the Consolidated Action has been pending since June 21, 2021, 27 the matter was stayed from January 21, 2022 until January 5, 2023, and discovery has not yet 28 advanced. Further, the Subsequent Related Actions, like the Consolidated Action, allege that Page 5 144042733.1 Case 2:23-cv-00445-GMN-BNW Document 5 Filed 03/24/23 Page 6 of 9 1 Defendants made material misstatements and omissions in the same public statements and 2 regarding the same event: i.e., CleanSpark’s acquisition of ATL Data Centers, Inc. And, they all 3 rely heavily on the same reports by a short-seller, Culper Research, to support their claims. 4 The Subsequent Related Actions and the Consolidated Action also allege significantly 5 overlapping claims in connection with the above-alleged acts and omissions: i.e., the 6 Consolidated Action alleges breach of fiduciary duty, unjust enrichment, abuse of control, gross 7 mismanagement, and waste of corporate assets, the Iraci Matter alleges breach of fiduciary duty, 8 aiding and abetting breach of fiduciary duty, and unjust enrichment, the Atanasoff Matter alleges 9 breach of fiduciary duty and unjust enrichment, the Smith Matter alleges breach of fiduciary duty 10 and unjust enrichment, and the France Matter alleges breach of fiduciary duty, unjust enrichment, 11 and corporate waste. 12 Finally and critically, the Consolidated Action and the Subsequent Related Actions all 13 ask the Court to afford relief to the same party: nominal defendant CleanSpark. Accordingly, the 14 Consolidated Action and the Subsequent Related Actions involve identical and/or overlapping 15 defendants, factual and legal issues, events, and questions of law, as well as duplicative claims, 16 warranting consolidation. 17 II. 18 ARGUMENT 19 A. The Legal Standard Applicable to a Motion to Consolidate is Met Herein 20 1. The Court Has Broad Discretion to Consolidate Cases. 21 Consolidation is available “[i]f actions before the court involve a common question of 22 law or fact[.]” FRCP 42(a). Under FRCP 42(a), courts have broad discretion to order 23 consolidation and must balance their interests in saving time against any inconvenience, delay 24 or expense that consolidation of cases may cause. See Huene v. U.S., 743 F.2d 703, 704 (9th Cir. 25 1984). Consolidation is particularly appropriate where such action will save the parties time and 26 money and avoid the possibility of inconsistent outcomes. See BAE Systems Mobility & 27 Protection Sys. v. Armorworks Enterprises, LLC, 2009 WL 995862, *1 (D. Ariz. 2009). 28 /// Page 6 144042733.1 Case 2:23-cv-00445-GMN-BNW Document 5 Filed 03/24/23 Page 7 of 9 1 2. Under This Standard, Consolidation of the Cases in Question Is Warranted. 2 As is evident from a review of the complaints filed in the Subsequent Related Actions, 3 attached hereto as Exhibits A – Exhibit D, and the operative complaint in the Consolidated 4 Action (Dkt. No. 1), the matters carry the identical and/or overlapping allegations, with the same 5 evidence to be developed in discovery. The parties are the same in each action, with the 6 exception of Defendant Love, who was only not named in the Atanasoff Matter, and Defendant 7 Tadayon, who was only named in the France Matter, and the testimony of the same individuals 8 will be sought in each case. The allegations arise from the same and/or overlapping transactions 9 and occurrences and the suits were all brought ostensibly for the benefit of the same entity: 10 CleanSpark. However, the pursuit of copycat litigation in multiple courts is hardly beneficial to 11 CleanSpark when consolidation will save the parties duplication of efforts and the corresponding 12 time and money expenditures that will surely result. 13 In the final analysis, consolidation by this Court of the instant Consolidated Action and 14 the Subsequent Related Actions will allow for the most expeditious resolution of all outstanding 15 disputes, will serve the interests of judicial and party economy, and will avoid the possibility of 16 inconsistent judgments. Indeed, the possibility of inconsistent rulings is not merely academic. 17 To the contrary, with multiple, nearly identical complaints pending before different courts, the 18 threat of inconsistent rulings – for example on motions to dismiss what are effectively identical 19 complaints – is very real. Moreover, consolidation will not prejudice any of the parties where 20 discovery has not yet commenced. Accordingly, this Court should grant the instant Motion to 21 Consolidate, pursuant to FRCP 42(a). 22 B. The Consolidation Order Also Requires Consolidation 23 The Consolidation Order entered by this Court on June 29, 2021 contemplated 24 circumstances such as these where related shareholder derivative actions “involving the same or 25 substantially the same allegations, claims, and defendants, arising out of the same or 26 substantially the same, transactions or events as the Consolidated Action” were subsequently 27 filed in, removed to, reassigned to, or transferred to the U.S. District Court. (Dkt. No. 10 at ¶ 28 11). The Order provides that such cases should be properly consolidated with the Consolidated Page 7 144042733.1 Case 2:23-cv-00445-GMN-BNW Document 5 Filed 03/24/23 Page 8 of 9 1 Action and requests the assistance of counsel to call to the attention of the court any related 2 actions. Id. Moreover, the Order uses the mandatory language that it “shall apply” to each 3 related derivative action. As set forth herein, there can be no reasonable dispute that the 4 Subsequent Related Actions are related to the Consolidated Action. Therefore, pursuant to the 5 Consolidation Order, Defendants respectfully request that they be consolidated with the 6 Consolidation Action for all purposes. 7 III. 8 CONCLUSION 9 For the foregoing reasons the Defendants respectfully request that the Court grant this Motion 10 to Consolidate and order that the Iraci Matter, Case No. 2:23-cv-00315-JAD-NJK, the Atanasoff 11 Matter, Case No. 2:23-cv-00358-ART-BNW, the France Matter, Case No. 2:23-cv- 00444- 12 GMN-NJK, and the Smith Matter, Case No. 2:23-cv-00445-GMN-BNW, be consolidated with 13 the Consolidated Action, Case No. 2:21-cv-01004-GMW-BNW for all purposes, including trial. 14 DATED: March 24, 2023 15 16 FOX ROTHSCHILD LLP 17 /s/ Colleen E. McCarty MARK J. CONNOT (10010) 18 COLLEEN E. MCCARTY (13186) 19 1980 Festival Plaza Drive, Ste. 700 Las Vegas, NV 89135 20 mconnot@foxrothschild.com cmccarty@foxrothschild.com 21 Counsel for Defendant Zachary K. Bradford, S. Matthew Schultz, Lori L. Love, Robert P. 22 Beynon, Larry McNeill, and Thomas L. Wood, Amer Tadayon, and Nominal 23 Defendant Cleanspark, Inc. 24 25 26 27 28 Page 8 144042733.1 Case 2:23-cv-00445-GMN-BNW Document 5 Filed 03/24/23 Page 9 of 9 1 CERTIFICATE OF SERVICE 2 I hereby certify that I am an employee of Fox Rothschild LLP and that on the 24th day of March 3 2023, pursuant to Rule 5(b) of the Federal Rules of Civil Procedure, I served a true and correct 4 copy of the foregoing DEFENDANTS’ MOTION TO CONSOLIDATE via electronic 5 transmission via the Federal Court Filing System (CM/ECF). 6 7 /s/ Deborah L. Pressley 8 An employee of Fox Rothschild LLP 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 144042733.1