Habelt v. iRhythm Technologies, Inc.

Background

This federal securities class action was filed on February 1, 2021. The complaint names iRhythm Technologies, Inc. and Kevin M. King, identified as iRhythm’s President, Chief Executive Officer, and a board member, as defendants. It alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on alleged misrepresentations in December 2020 and January 2021 concerning the Centers for Medicare and Medicaid Services’ payment rules and rates for certain iRhythm products and services.

The Public Employees’ Retirement System of Mississippi (PERSM) moved without opposition for appointment as lead plaintiff and for approval of its selection of Pomerantz LLP as lead counsel. Other individuals had also sought appointment, but two of those individuals withdrew their motions before the court ruled.

Lead Plaintiff

Under the Private Securities Litigation Reform Act of 1995 (PSLRA), the court generally appoints as lead plaintiff the movant with the largest financial interest, if that movant also satisfies the class-representation requirements of typicality and adequacy under Federal Rule of Civil Procedure 23.

The court found that PERSM had the largest financial interest under any relevant measure. It spent $7,944,181 to purchase 35,160 iRhythm shares, retained 26,269 shares, and incurred a stated loss of $1,809,061 during the relevant period. The court found PERSM’s claims typical because it purchased iRhythm stock during the relevant period and alleged losses from the same stock-price decline caused by the corrective disclosures described in the complaint. The court also found that PERSM’s substantial losses gave it a sufficient stake to prosecute the case vigorously and identified no allegation that its claims were atypical or subject to unique defenses.

The court exercised its discretion to waive the PSLRA’s restriction against appointing a lead plaintiff in more than five securities class actions during a three-year period. It did so because PERSM was presumptively the most adequate lead plaintiff and no other plaintiff opposed its motion.

Lead Counsel

The PSLRA allows the lead plaintiff to select and retain lead counsel, subject to court approval. PERSM selected Pomerantz LLP. The court found that Pomerantz had substantial experience in securities litigation and class actions and found no basis to conclude that the selection failed to protect the proposed class’s interests.

Disposition and Court-Ordered Protocols

Judge Edward M. Chen granted PERSM’s motion for appointment as lead plaintiff and selection of Pomerantz as lead counsel. The court also ordered that no law firm other than Pomerantz work for the proposed class without prior court approval. Any request to approve additional plaintiffs’ counsel must identify the lawyers and their backgrounds, describe the proposed tasks, and explain why Pomerantz cannot perform them.

The court required anyone seeking fees—including staff, consultants, and experts—to keep daily, contemporaneous time records. Block billing was prohibited, records had to account for each tenth of an hour, and work had to be recorded no later than seven days after completion. Pomerantz was directed to minimize expenses through lean staffing and limits on travel costs. The court reserved discretion to request records or reports concerning these protocols. The order states that it disposes of Docket No. 22.