By Joyce Hanson

Law360, New York (May 18, 2017, 5:10 PM EDT) -- A Wendy’s Co. shareholder who filed a data breach suit on behalf of the company asked an Ohio federal court Wednesday to consolidate his suit with another one alleging Wendy’s top executives and its board of directors made poor security decisions that led to the 2016 breach.

Thomas Caracci moved to consolidate his shareholder derivative action against the board of directors and former executives, which he filed on April 17, with that of shareholder James Graham, who filed suit on Dec. 16 over similar allegations regarding credit card data breaches that occurred at the company’s franchised restaurants, which is currently pending before U.S. District Judge Timothy S. Black’s Ohio court.

“Consolidation of the derivative actions is warranted, as the actions require proof of the same basic set of facts: specifically, whether certain officers and directors of the company breached their fiduciary duties to Wendy’s,” Caracci said in a memo accompanying his motion. “Since the derivative actions pending before this court present many of the same factual and legal issues, involve substantially the same defendants, and will involve substantially the same discovery, consolidation is appropriate.”

Caracci also asked the court on Wednesday to appoint the law firms Kahn Swick & Foti LLC and Newman Ferrara LLP as co-lead counsel for plaintiffs in the consolidated action.

Wendy’s disclosed the breach in January 2016 but didn’t offer its first estimate of its scope until May of that year, when it said that 300 stores had been affected. That number was then raised in July 2016 to encompass 1,025 of the fast-food chain’s U.S. franchises.

Graham’s derivative action launched in December 2016 claimed the group of company leaders, including Trian Fund Management LP CEO Nelson Peltz, made a number of poor security decisions. Those decisions allegedly included requiring all franchisees to implement a flawed point-of-sale system, failing to implement or enforce any effective internal data security procedures, and not properly reporting the scope and impact of the breach.

But the board and executives struck back March 10 in a dismissal motion saying Graham’s complaint was nothing more than speculation, and that he failed to include any specific allegations that they acted with gross negligence or reckless disregard of their duties, or that they consciously failed to monitor the company’s data security protocols and disregarded known vulnerabilities.

What’s more, the board contended, stockholders who file derivative actions must plead that they made a demand on the board to investigate potential wrongdoing prior to bringing suit, or else demonstrate that such a demand would have been futile, but Graham failed on both accounts.

Graham had argued that making a demand would be futile, because the board had already expressed that the company intends to vigorously oppose lawsuits brought by financial institutions and proposed consumer class actions in the wake of the breach. The board members have deep roots with each other and face significant liability as well, and thus the board was incapable of making an independent decision to investigate its own actions, Graham said.

Counsel for Caracci on Thursday did not immediately return a request for comment.

Counsel for Wendy’s executives and board members did not return a request for comment.

Caracci is represented by Jeffrey M. Norton and Roger A. Sachar of Newman Ferrara LLP, Melinda A. Nicholson and Michael R. Robinson of Kahn Swick & Foti LLC, and Richard L. Norton.

Graham is represented by Richard S. Wayne, William K. Flynn and Thomas P. Glass of Strauss Troy and Stuart J. Guber, Nadeem Faruqi and Nina M. Varindani of Faruqi & Faruqi LLP.

The board members are represented by Eric K. Combs and Christen M. Steimle of Dinsmore & Shohl LLP and John L. Latham, Cara M. Peterman and Charles W. Cox of Alston & Bird LLP.

The case is James Graham v. Nelson Peltz et al., case number 1:16-cv-01153, in the U.S. District Court for the Southern District of Ohio.

--Additional reporting by Steven Trader and Allison Grande. Editing by Philip Shea