In re Eventbrite, Inc. Securities Litigation

Background

The federal securities class action concerned alleged misleading statements and concealed risks related to Eventbrite’s acquisition and integration of Ticketfly, LLC. The plaintiffs alleged violations of Sections 11 and 15 of the Securities Act of 1933, Item 303 of Securities and Exchange Commission Regulation S-K, and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The proposed class period ran from September 20, 2018, through May 1, 2019.

The court had previously granted the defendants’ motion to dismiss with leave to amend. The plaintiffs did not file another amended complaint. The parties later reached a settlement in principle, and the plaintiffs filed a motion seeking preliminary approval of a proposed $1.9 million class-action settlement.

A related securities case was pending in California state court. Crystal L. Clemons and Christina Cotte, who were plaintiffs in that state case and members of the proposed federal class, moved to intervene under Federal Rule of Civil Procedure 24. They sought intervention only to request a continuance of the federal settlement-approval hearing until after the state court ruled on a demurrer to their proposed second amended complaint. In the alternative, they asked the court to require fuller notice of the state case to federal class members or to deny preliminary approval because the settlement might not be fair, adequate, or reasonable.

Intervention Analysis

The court found that the motion was timely because neither the federal plaintiffs nor the defendants argued otherwise. It also found that the state-court plaintiffs had a significant protectable interest because they were members of the federal class.

The main dispute concerned whether the proposed settlement could impair the state-court plaintiffs’ ability to protect their interests. The court concluded that waiting for the state court’s ruling would give class members more information about the claims and potential damages involved in the state case. Without a continuance, class members might have to submit claims, object, or opt out before the state court ruled. The court therefore found that the state-court plaintiffs’ interests, and those of other class members, could be impaired or impeded.

The court also found that the federal plaintiffs’ representation might be inadequate. It cited the federal plaintiffs’ release of claims involved in the state case, their failure to notify state-court lead counsel, their decision not to use a mediator or seek discovery, their failure to amend despite receiving permission to do so, their description of the state case in the settlement papers, and their refusal to agree to a short continuance. The court further noted substantial differences between the groups’ damages calculations.

Ruling

The court held that the state-court plaintiffs satisfied all four requirements for intervention as of right under Rule 24(a)(2). It granted the motion to intervene and continued the hearing on the federal plaintiffs’ motion for preliminary approval of the class-action settlement. The court tentatively set the hearing for 9:00 a.m. on March 18, 2021, and ordered the parties to submit an updated status report by February 11, 2021. The opinion did not decide whether to grant preliminary approval of the settlement.