Stephens v. Maplebear Inc.

Background

Andy Dean Stephens brought claims under Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The complaint alleges that Maplebear Inc., doing business as Instacart, and the individual defendants made materially false or misleading statements in documents filed with the Securities and Exchange Commission in connection with Instacart’s initial public offering. The opinion did not decide whether those allegations were true or whether the defendants were liable.

The court received motions from James Cheng, Tapiwanashe Nhundu, and Carlo Viscusi to be appointed lead plaintiff and to have their selected counsel appointed lead counsel. Nhundu filed a statement of non-opposition, and the court terminated his motion. Cheng and Viscusi later filed a stipulation seeking appointment of both as co-lead plaintiffs, with Levi & Korsinsky LLP and Pomerantz LLP serving as co-lead counsel. The defendants objected to the stipulation’s procedure.

Legal standard

The Private Securities Litigation Reform Act requires the court to appoint the “most adequate plaintiff” as lead plaintiff in a securities class action. The court generally presumes that the most adequate plaintiff is the movant with the largest financial interest who also meets the requirements of Federal Rule of Civil Procedure 23, particularly typicality and adequacy.

Typicality asks whether the proposed lead plaintiff suffered the same type of injury from the same conduct alleged by the other class members. Adequacy asks whether the plaintiff can fairly and adequately represent the class. After identifying the presumptive lead plaintiff, the court gives other class members an opportunity to show that the person cannot adequately represent the class or faces unique defenses.

The lead plaintiff may select class counsel, subject to court approval. The court generally defers to that choice when it is reasonable.

Court’s analysis

The court compared Cheng’s and Viscusi’s financial interests using four factors: shares purchased, net shares purchased, net funds expended, and approximate losses. Cheng purchased 15,000 shares during the class period, while Viscusi purchased 3,000. Cheng ultimately purchased zero net shares during that period because he sold the shares he purchased; Viscusi purchased 3,000 net shares.

Cheng’s net funds expended were $185,231.75, compared with Viscusi’s $109,200. Using the loss calculations discussed in the opinion, Cheng had $20,231.75 in Securities Act losses and $185,231.65 in Exchange Act losses. Viscusi had $26,279 in Securities Act losses and $33,769 in Exchange Act losses. Although Viscusi’s Securities Act losses were approximately $6,000 higher, the court found that Cheng’s approximately $150,000 greater Exchange Act losses made his overall financial interest substantially larger. The court also noted Cheng’s greater number of shares purchased and greater net funds expended, while recognizing that Viscusi had purchased more net shares.

The court found that Cheng made the required initial showing of typicality and adequacy. Like the other proposed class members, he purchased Instacart stock during the class period at allegedly inflated prices caused by the defendants’ alleged misrepresentations. The court found no apparent conflict between Cheng and the other class members and concluded that his substantial stake gave him an incentive to litigate vigorously. Because Cheng had the largest financial interest and met the Rule 23 requirements, the court identified him as the presumptive lead plaintiff. No class member sought to rebut that showing.

The court reviewed Cheng’s selection of Levi & Korsinsky LLP and found it reasonable, including because the firm had experience in securities-fraud litigation and had served as lead counsel in other securities class actions. The court was not persuaded that the case was complex enough to require two lead firms and two co-lead plaintiffs.

Disposition

The court GRANTED James Cheng’s Motion for Appointment as Lead Plaintiff and Approval of Selection of Counsel. Cheng was appointed lead plaintiff, and Levi & Korsinsky was appointed lead counsel.

The court DENIED Carlo Viscusi’s Motion to Appoint Lead Plaintiff and Lead Counsel. It also DENIED Cheng and Viscusi’s Joint Stipulation Appointing James Cheng and Carlo J. Viscusi as Co-Lead Plaintiffs. The court granted the defendants’ objection only as to the stipulation process and did not take a position against the movants’ individual motions. The order selected leadership for the proposed securities class action; it did not resolve the underlying securities claims.