Michiana Area Electrical Workers' Pension Fund v. Inari Medical, Inc.

Background

Michiana filed the first securities lawsuit against Inari Medical and other defendants on May 13, 2024. The complaint alleged that the defendants misled investors by failing to disclose a bribery scheme. Paul Hartmann filed a second action on June 18, 2024, involving the same defendants, claims, and allegations. The court had already consolidated the two actions before deciding the competing motions for lead plaintiff and lead counsel.

The Pension Funds consisted of Michiana Area Electrical Workers’ Pension Fund, Oklahoma Law Enforcement Retirement System, and City of Pontiac Reestablished General Employees’ Retirement System. The Pension Funds and Hartmann each sought appointment as lead plaintiff and asked the court to approve their selected counsel.

Lead Plaintiff

The court applied the Private Securities Litigation Reform Act, which generally requires appointment of the “most adequate plaintiff” in a securities class action. The court first determined that the three funds could be considered together as a group. Although the record was unclear about whether they had a relationship before the litigation, the court found that the other relevant considerations favored the group: the funds had participated in litigation strategy, described plans for cooperation, were sophisticated institutional investors, and had selected their lawyers rather than being assembled by those lawyers. The court also found that the group was small enough to be cohesive.

Both Hartmann and the Pension Funds met the statute’s filing requirements and made preliminary showings that their claims were typical of the proposed class and that they could adequately represent it. The court then compared their financial interests using four factors: shares purchased, net shares purchased, net funds spent, and approximate losses. Hartmann purchased more shares overall. The Pension Funds, however, purchased more net shares, spent more net funds, and suffered greater approximate losses. The court treated losses as the most important factor and concluded that the Pension Funds had the largest financial interest.

Hartmann argued that the Pension Funds should not receive the statutory presumption because using multiple counsel could create unnecessary expense and duplication. The court rejected that argument, finding that the two proposed lead firms had worked successfully together before and that speculation about inefficiency did not overcome the presumption. The court therefore appointed the Pension Funds as lead plaintiffs.

Lead Counsel

The statute allows the most adequate plaintiff, subject to court approval, to select and retain counsel. The Pension Funds selected Grant & Eisenhofer P.A. and Robbins Geller Rudman & Dowd LLP. The court found both firms qualified based on their substantial securities-litigation experience and approved their appointment as lead counsel.

Disposition

The Pension Funds’ motion to be appointed lead plaintiff was granted. Their motion to appoint Grant & Eisenhofer P.A. and Robbins Geller Rudman & Dowd LLP as lead counsel was also granted. Hartmann’s motion to be appointed lead plaintiff was denied, and his motion to have his counsel appointed as lead counsel was denied. The Pension Funds were directed to confer with the defendants about a schedule for an amended complaint and responses, then file a proposed schedule with the court. The order also requested that the Clerk close specified motion docket entries.