Wang v. Zymergen Inc.

Background

This is a securities-fraud class action. Lead plaintiff Biao Wang’s second amended complaint asserted that DCVC Management Co, LLC, Data Collective II, L.P., and DCVC Opportunity Fund, L.P., collectively called DCVC, were secondarily liable under Sections 11 and 15 of the Securities Act.

The complaint alleged two bases for DCVC’s Section 15 liability: DCVC’s control of Matthew Ocko, who was an owner of DCVC and a member of Zymergen’s board, and DCVC’s control of Zymergen. It also alleged that DCVC was responsible for Mr. Ocko’s alleged Section 11 violation under a theory that can make an organization responsible for an employee or agent’s conduct.

The court dismissed the Section 15 claim to the extent it relied on DCVC’s control of Mr. Ocko and dismissed the Section 11 claim against DCVC. It did not dismiss the Section 15 claim based on DCVC’s alleged control of Zymergen.

Motion and legal standard

DCVC moved under Rule 54(b) of the Federal Rules of Civil Procedure for partial final judgment on the Section 15 and Section 11 claims based on DCVC’s relationship with Mr. Ocko. Rule 54(b) permits final judgment on fewer than all claims or parties only when the court determines that there is no just reason to delay judgment.

The court explained that Rule 54(b) requires a final judgment that fully disposes of an individual claim and a determination that no just reason exists for delaying final judgment. The decision is within the district court’s discretion.

Analysis

The court held that final judgment was improper as to the Section 15 claim. Wang had alleged two theories of secondary liability under Section 15, but both theories were part of one Section 15 claim. Because the theory based on DCVC’s control of Zymergen remained active, the Section 15 claim had not been fully resolved. Dismissing one theory therefore did not end the litigation on that claim.

The court also held that final judgment was improper as to the Section 11 claims against DCVC, even though all Section 11 claims against DCVC had been dismissed. Entering judgment would not streamline the remaining litigation. DCVC remained a defendant on the Section 15 claim, so an appeal of the Section 11 dismissal could proceed at the same time as litigation in the district court. In addition, Wang’s Section 11 claims against Mr. Ocko remained pending, and a ruling in Mr. Ocko’s favor could make an appeal concerning DCVC’s Section 11 liability unnecessary.

Disposition

The court denied DCVC’s motion for partial final judgment. It did not enter final judgment on the dismissed Section 15 theory based on control of Mr. Ocko or on the dismissed Section 11 claims against DCVC.