IN RE LYFT, INC. DERIVATIVE LITIGATION

Background

This was a shareholder derivative action, meaning the plaintiffs sued on behalf of Lyft, Inc. against several Lyft officers and directors. The plaintiffs alleged that the individual defendants breached their fiduciary duties by failing to prevent or address sexual and physical assaults by Lyft drivers, provide adequate reporting and oversight systems, and implement adequate driver background checks. They also alleged that the defendants made false or misleading statements in connection with Lyft’s March 28, 2019 initial public offering concerning passenger assaults, bike-braking defects, related injuries, safety problems, and internal controls.

The plaintiffs asserted claims for alleged breaches of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, and contribution under Sections 11(f) of the Securities Act of 1933 and 21D of the Securities Exchange Act of 1934. The consolidated case had been stayed while a related federal securities class action proceeded. After that action settled, the parties reached the settlement addressed in this order.

Settlement Terms and Notice

The settlement requires Lyft to keep specified corporate-governance reforms in place for at least three years. The reforms include changes involving Lyft’s clawback policy, Code of Business Conduct and Ethics, Compensation Committee Charter, and Corporate Governance Guidelines. Lyft must also post a link to its Compliance and Ethics Hotline within 90 days of final approval, add a standing member to its Culture of Ethics and Compliance Committee, improve safety-compliance and safety-feature awareness, and make at least one additional blog post about in-app safety features within 12 months.

The settlement does not provide monetary compensation to Lyft or its shareholders. It releases specified claims relating to the derivative actions and their settlement, while excluding claims alleged in the related federal and state securities actions. Notice was published in Investor’s Business Daily and through PR Newswire, and the settlement materials were posted on a webpage accessible through Lyft’s website. The deadline for objections was January 13, 2025, and no shareholder objected to the settlement or fee request.

Final Approval

Under Federal Rule of Civil Procedure 23.1, a derivative action settlement requires court approval. The court must determine whether the settlement is fair, reasonable, and adequate. The Court had previously granted preliminary approval and, after reviewing the notice process and the lack of objections, continued to find the settlement fair, reasonable, and adequate. The Court therefore granted the plaintiffs’ motion for final approval of the shareholder derivative action settlement.

Attorneys’ Fees and Costs

Plaiffs’ counsel requested $700,000 in attorneys’ fees and expenses based on 764.05 hours of work. The Court found that the settlement provided some value through the governance and safety reforms, but that the precise value was difficult to quantify and many reforms were already in place before the settlement. The Court also found that the litigation involved relatively little activity because it had been stayed for most of the period after filing.

The Court identified excessive, redundant, and overlapping billing, including substantial time spent editing the complaint and preparing approval papers. It concluded that the claimed lodestar and overall fee request were substantially inflated. The Court applied a downward adjustment of just under 15 percent and awarded $600,000 in attorneys’ fees. It also awarded $7,453.67 in litigation costs.

Service Awards and Disposition

The plaintiffs requested three $1,500 service awards, to be paid from the attorneys’ fee award. The Court found those amounts reasonable and granted the awards. The parties were directed to implement the order and settlement agreement, and the Clerk was directed to enter judgment consistent with the order and close the file. Judge Haywood Gilliam ordered the final approval and fee, cost, and service-award payments described above.