Sayce v. Forescout Technologies, Inc.
- Susan Illston
- 3:20-cv-00076
- U.S. District Court · Northern District of California
- 10
In Sayce v. Forescout, Judge Illston consolidated related securities cases, reopened lead-plaintiff selection, and denied defendants’ dismissal motion as moot.
The order affected Meitav Tachlit, the Arbitrage Fund Plaintiffs, the defendants, and potential members of the consolidated securities class who could seek appointment as lead plaintiff. It vacated Meitav Tachlit’s prior lead-plaintiff and lead-counsel appointments, required new notice and a new selection process, and left the defendants’ motion to dismiss available for refiling after that process.
What happened
Sayce v. Forescout Technologies, Inc. involved two proposed securities class actions alleging that Forescout and individual defendants made misleading statements or failed to disclose important information. The second case concerned the failed Advent acquisition and covered a period that overlapped with the amended complaint in the first case.
The court granted in part and denied in part Meitav Tachlit’s motion. It consolidated the two cases, vacated its earlier appointment of Meitav Tachlit as lead plaintiff and its approval of lead counsel, and required Meitav Tachlit to publish a new notice so potential lead plaintiffs could apply for appointment.
Judge Illston also denied as moot the defendants’ pending motion to dismiss, without prejudice to refiling after the new lead-plaintiff selection process. The order did not decide whether the securities allegations were legally valid.
The detailed version
- Sayce v. Forescout Technologies, Inc. · No. 3:20-cv-00076
- Susan Illston
- July 22, 2020
Background
Christopher L. Sayce filed the first securities class action against Forescout Technologies, Inc., Michael DeCesare, and Christopher Harms. The complaint asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5. It alleged that the defendants made materially false or misleading statements and failed to disclose problems involving Forescout’s sales pipeline, deal timing, business performance, and financial projections.
After Forescout announced an agreement to be acquired by affiliates of Advent International, and later announced that Advent would not proceed with the acquisition, Meitav Tachlit filed an amended complaint. The amended complaint expanded the proposed class period through May 15, 2020 and added allegations concerning the failed acquisition, Forescout’s financial results, sales practices, and business performance.
A second securities class action was filed by the Arbitrage Fund Plaintiffs against the same defendants. That complaint focused on alleged misstatements and omissions concerning the failed Advent acquisition and proposed a class covering purchases from February 6, 2020 through May 15, 2020.
Consolidation
Meitav Tachlit moved to consolidate the two cases and to vacate the notice and deadline for selecting a lead plaintiff in the second case. The Arbitrage Fund Plaintiffs opposed the motion and argued that the cases were materially different. They alternatively requested a new notice and lead-plaintiff process covering the expanded class period. The defendants supported consolidation but took no position on notice or lead-plaintiff issues.
The court applied Federal Rule of Civil Procedure 42, which permits consolidation when cases involve common questions of law or fact. It found sufficient overlap because both cases named the same defendants, asserted the same federal securities-law claims, concerned overlapping class periods, and relied on some of the same Forescout disclosures and press release concerning the failed Advent acquisition. The court concluded that not consolidating the cases would unnecessarily waste the parties’ and court’s resources.
The court therefore consolidated Case Nos. 3:20-cv-00076-SI and 3:20-cv-03819-SI.
Lead- plaintiff notice and selection process
The Private Securities Litigation Reform Act requires early public notice of a securities class action and gives members of the proposed class an opportunity to seek appointment as lead plaintiff. The court found that the amended complaint added facts and alleged misrepresentations concerning the failed Advent acquisition that arose after the original complaint and the original lead-plaintiff deadline. Investors whose losses related to the acquisition’s failure could not have sought appointment during the earlier process because those events had not yet occurred.
The court concluded that the amended complaint changed the contours of the lawsuit enough to require republication of the notice. It vacated its earlier order appointing Meitav Tachlit as lead plaintiff and approving its selection of lead counsel. The court ordered Meitav Tachlit to republish notice of the consolidated class action by July 31, 2020. Potential lead plaintiffs then had 60 days after publication to file motions seeking appointment.
Motion to dismiss and disposition
While this motion was pending, the defendants filed a motion to dismiss the amended complaint. Because the lead-plaintiff selection process was being reopened, the court denied the defendants’ motion to dismiss as moot, without prejudice to refiling after that process concluded.
The court granted in part and denied in part Meitav Tachlit’s motion to consolidate cases and vacate notice and the lead-plaintiff deadline. It consolidated the cases, vacated the prior lead-plaintiff and lead-counsel appointments, ordered republication of notice, and denied as moot the defendants’ pending motion to dismiss. The order did not resolve the merits of the securities claims.
Read the full 10-page opinion on CourtListener, the free public archive maintained by the Free Law Project.