In re Romeo Power Inc. Securities Litigation

Background

The plaintiffs sued Romeo Power, Inc. under Section 10(b) of the Securities Exchange Act and Securities and Exchange Commission Rule 10b-5. Romeo’s counsel moved to withdraw, and the court granted that motion on June 6, 2023. The court required Romeo to retain new counsel, but no new counsel appeared. The plaintiffs then obtained a certificate of default based on Romeo’s failure to defend the action by retaining counsel.

The plaintiffs moved for default judgment. The court stated that federal procedure uses a two-step process: first, entry of default when a party fails to plead or otherwise defend; and second, entry of default judgment, which turns the admitted liability into a final judgment and awards relief to which the plaintiff is entitled. A corporation may not appear in federal court without counsel. A default admits the complaint’s well-pleaded factual allegations, but it does not admit the amount of damages.

Liability

The plaintiffs alleged that Romeo violated Section 10(b) and Rule 10b-5. The court relied on its June 2, 2022 opinion and order, which granted in part and denied in part the defendants’ motion to dismiss the amended complaint. In that earlier ruling, the court found that the plaintiffs had adequately pleaded Romeo’s violations. The court also stated that it had subject-matter jurisdiction under 28 U.S.C. § 1331 and personal jurisdiction over Romeo under New York Civil Practice Law and Rules § 302(a)(1).

Damages

The plaintiffs sought $206.8 million in damages. Their calculation began with total damages of $221.7 million, as calculated by their damages expert, and subtracted a $14.9 million settlement against Defendants Lionel Selwood, Jr. and Lauren Webb. The court found that the plaintiffs’ evidence established with reasonable certainty the damages for which Romeo was liable. The court stated that a separate damages hearing was not required because the damages calculation was supported by sufficient evidence.

Disposition

The court granted the plaintiffs’ motion for default judgment against Romeo. Judgment by default was entered against Romeo in the amount of $206.8 million plus costs.