Feldman v. Neuroscience

Background

This securities class action concerns alleged false or misleading statements by Alto Neuroscience, Inc. and its directors in connection with Alto’s February 2024 initial public offering. The complaint alleges that information related to the alleged misrepresentations became public in November 2024 and that Alto’s stock price then fell more than 70%.

Nathan Feldman filed the complaint on July 21, 2025, asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. That same day, his counsel published notice informing investors about the lawsuit and their opportunity to seek appointment as lead plaintiff. Four class members timely filed motions. Two later withdrew, leaving motions from the Special Situations Funds and from Eileen Beiter and Nathan Feldman.

Legal Standard

The Private Securities Litigation Reform Act governs the appointment of a lead plaintiff in private securities class actions. The court must appoint the class member or members most capable of adequately representing the class. Under the Ninth Circuit’s three-step process, the court identifies the movant with the largest financial interest who also satisfies the typicality and adequacy requirements of Rule 23 of the Federal Rules of Civil Procedure. Other movants may try to rebut that person’s presumed status as the most adequate plaintiff.

The lead plaintiff selects class counsel, subject to court approval. The court generally defers to that choice and may override it only when necessary to protect the class’s interests.

Lead Plaintiff

The court found, and the Individuals did not dispute, that the lawsuit’s notice was published within the required period. The Individuals also conceded that the Special Situations Funds’ alleged losses exceeded $5 million, far more than the Individuals’ combined losses of approximately $28,000. The remaining question was whether the Special Situations Funds satisfied Rule 23’s typicality and adequacy requirements.

The Individuals argued that the Special Situations Funds were atypical and inadequate because the phrase “Special Situations” in the funds’ names suggested that they made unusual investments, and because the funds had used allegedly contradictory trading strategies on one day. The Individuals argued that these circumstances showed the funds had not relied on the alleged misstatements and might face unique defenses.

The court rejected these arguments as speculation. It explained that overcoming the presumption in favor of the movant with the largest financial interest requires proof, not rhetorical questions about what the funds or their portfolio manager might say. The court also noted errors in the Special Situations Funds’ papers, including a request to consolidate related actions that did not exist. But it concluded that these errors were immaterial and did not show that the funds were inadequate.

The court therefore found the Special Situations Funds adequate and granted their motion to serve as lead plaintiff.

Lead Counsel

The Special Situations Funds selected Rolnick Kramer Sadighi LLP, also referred to as RKS, as counsel. The court noted that RKS had extensive experience litigating securities class actions and had served as lead or co-lead counsel in several such cases. The Individuals did not dispute that RKS was qualified.

The court appointed RKS as lead counsel.

Disposition

The court vacated the hearing set for December 3, 2025, because oral argument was not required. It granted the Special Situations Funds’ motion and denied the motion filed by Eileen Beiter and Nathan Feldman. The order appointed the Special Situations Funds as lead plaintiff and Rolnick Kramer Sadighi LLP as lead counsel.