Trustees of the Welfare and Pension Funds of Local 464A Pension Fund v. Energy

Background

This is a federal securities class action for people and entities that purchased or otherwise acquired Enphase Energy, Inc. common stock between April 25, 2023, and October 22, 2024. The complaint alleges that Enphase underrepresented the competitive challenges it faced in European markets, which led to declines in Enphase’s stock price when the company failed to gain market share in Europe.

The court considered competing motions to appoint a lead plaintiff and lead counsel from HANSAINVEST Hanseatische Investment-GmbH and from Cheshire Pension Fund and the Rhondda Cynon Taf Pension Fund, together called the UK Pension Funds. Curt L. Cotner withdrew a motion, and the motions of Jeffrey Schumacher, Haridarshan Singh, and Plymouth County Retirement Association were also before the court; those plaintiffs later acknowledged that they did not have the largest financial interest or filed notices of non-opposition.

Legal Standard

The Private Securities Litigation Reform Act requires the court to select the plaintiff most capable of adequately representing the class. Under the Ninth Circuit’s approach, the presumptive lead plaintiff is the movant with the largest financial interest that makes an initial showing of typicality and adequacy under Federal Rule of Civil Procedure 23. Other movants can overcome that presumption by showing that the presumptive lead plaintiff cannot fairly or adequately represent the class.

Courts in the Ninth Circuit generally consider four factors when comparing financial interests: the number of shares purchased during the class period, the number of net shares purchased, the total net funds spent, and the approximate losses suffered. The amount of loss is generally given the most weight, and this district generally uses the last-in, first-out method to calculate losses.

Financial Interest

HANSAINVEST and the UK Pension Funds each claimed the largest financial interest. The UK Pension Funds argued that HANSAINVEST’s losses should be calculated using a unified method because HANSAINVEST manages several funds that bought and sold Enphase securities at different times and prices. Under that approach, the UK Pension Funds said HANSAINVEST’s losses would total about $1.6 million.

HANSAINVEST argued that its funds were legally separate and economically independent. The court agreed that calculating losses separately for HANSAINVEST’s individual funds better represented the circumstances because the funds had separate prospectuses, assets, investment strategies, portfolios, and investors, and were legally separate from one another and from HANSAINVEST. The court accepted HANSAINVEST’s calculation of approximately $2.8 million in losses and found that HANSAINVEST had the largest financial interest. It therefore became the presumptive lead plaintiff.

Typicality and Adequacy

The court found that HANSAINVEST made the required initial showing of typicality by stating that, like other class members, it sought recovery for losses on Enphase common stock resulting from the defendants’ alleged misrepresentations and omissions. HANSAINVEST also made the required initial showing of adequacy by stating that its substantial losses aligned its interests with those of the class and that it had no potential conflicts with other class members.

The UK Pension Funds raised concerns about HANSAINVEST’s standing and possible issues under German law, but they did not challenge HANSAINVEST’s initial showing of standing. The court held that speculation that defendants might raise those issues later was not enough to defeat the presumption in HANSAINVEST’s favor. The court therefore appointed HANSAINVEST as Lead Plaintiff.

Lead Counsel and Disposition

The court generally defers to a lead plaintiff’s reasonable choice of counsel. It found HANSAINVEST’s choice of Kessler Topaz Meltzer & Check, LLP reasonable in light of the firm’s experience obtaining favorable results as lead counsel in shareholder derivative litigation. The court appointed that firm as Lead Counsel.

The court granted HANSAINVEST’s motion, ECF No. 16, and appointed HANSAINVEST as Lead Plaintiff and Kessler Topaz Meltzer & Check, LLP as Lead Counsel. The court denied the UK Pension Funds’ motion, ECF No. 31; Plymouth County Retirement Association’s motion, ECF No. 37; and Jeffrey Schumacher and Haridarshan Singh’s motion, ECF No. 20. The court ordered HANSAINVEST to serve and file a consolidated complaint or designate a previously filed complaint as the operative complaint within 60 days of the order.

This order addressed leadership of the proposed class action and did not decide whether the allegations against Enphase or the other defendants were legally or factually correct.