Adamo v. Nextdoor Holdings, Inc.

Background

Frankie J. Adamo brought a proposed class action against Nextdoor Holdings, Inc., certain former executives and its founder, Khosla Ventures LLC, and Khosla Ventures SPAC Sponsor II LLC. The complaint alleges violations of the Securities Exchange Act of 1934 based on alleged misrepresentations and omissions about Nextdoor’s revenue projections before its merger with Khosla Ventures Acquisition Co. II. The proposed class consists of purchasers of Nextdoor Class A common stock during the period from July 6, 2021, through November 8, 2022.

The court considered motions from Keith Hollingsworth, Paul Stankewich, and Per Christensson seeking appointment as lead plaintiff and approval of lead counsel. Former movants Brett Curtis and Greg Williamson withdrew their motions.

Legal standard

The Private Securities Litigation Reform Act requires the court to appoint the class member or members most capable of adequately representing the class as lead plaintiff. The statute generally presumes that the most adequate plaintiff is the person who timely filed a motion or complaint, has the largest financial interest in the requested relief, and satisfies the relevant requirements of Federal Rule of Civil Procedure 23, particularly typicality and adequacy. The presumption can be rebutted by proof that the proposed lead plaintiff cannot fairly and adequately protect the class or faces unique defenses that would prevent adequate representation.

The most adequate plaintiff may select and retain class counsel, subject to court approval. Courts generally accept that selection unless different counsel is needed to protect the class’s interests.

Court’s analysis

The court found that Hollingsworth was the only movant with an unopposed motion. It determined that he met the statutory requirements because he timely filed his motion and submitted the required sworn certification. Hollingsworth reported purchasing 55,000 net shares and suffering an approximately $219,078 loss, which was about $41,000 greater than any other movant’s financial stake.

The court also found that Hollingsworth satisfied Rule 23’s typicality and adequacy requirements. His claims were described as identical to those of the proposed class because the class members purchased Nextdoor Class A common stock during the proposed class period at allegedly inflated prices. The court found no evidence of conflict or antagonism between Hollingsworth and the class, and it found that his financial loss gave him a sufficient interest in the litigation’s outcome.

The court approved Hollingsworth’s selection of Pomerantz LLP as lead counsel. No party objected to the firm, and the court found no need to appoint different counsel to protect the class.

Disposition

The court GRANTED Hollingsworth’s motion. It appointed Keith Hollingsworth as lead plaintiff and approved Pomerantz LLP as lead counsel. It DENIED Stankewich’s and Christensson’s motions, and the conclusion states that all other motions to appoint lead plaintiff and lead counsel are DENIED.

The order assigns lead counsel responsibility for coordinating motions, discovery, depositions, pretrial conferences, meetings among plaintiffs’ counsel, settlement negotiations, pleadings, trial preparation, and other matters concerning prosecution or resolution of the claims. It also requires plaintiffs to obtain lead counsel’s approval before initiating motions, discovery requests, other pretrial proceedings, or settlement negotiations.