Moradpour v. Velodyne Lidar, Inc.

Background

The opinion concerns three securities class actions involving Velodyne Lidar, Inc.; Anand Gopalan; Andrew Hamer; and, in one of the actions, additional defendants. The actions alleged violations of Section 10(b) of the Securities Exchange Act, Securities and Exchange Commission Rule 10b-5, and Section 20(a) of the Exchange Act. The plaintiffs alleged that the defendants made false or misleading statements and failed to disclose material adverse facts concerning Velodyne's business operations and financial prospects.

The three cases were Moradpour, No. 21-cv-01486-SI; Reese, No. 21-cv-01736-VC; and Nick, No. 21-cv-01950-JST. The alleged class periods were not identical. The Moradpour and Reese actions identified a class period from November 9, 2020, through February 19, 2021. The Nick action identified a class period from July 2, 2020, through March 17, 2021.

The court considered seven motions to consolidate the cases and seven motions seeking appointment as lead plaintiff and lead counsel. The opinion states that the consolidation motions were unopposed. All lead-plaintiff movants except Diane and William Smith filed statements that they did not oppose appointing Diane and William Smith.

Consolidation

Federal Rule of Civil Procedure 42(a) permits consolidation when cases share a common question of law or fact. The court found consolidation appropriate because all three actions involved the same substantive public statements and Securities and Exchange Commission filings. The cases also arose from the same factual question: whether Velodyne securities were artificially inflated during the relevant class period because of the defendants' alleged conduct and public statements.

The court granted the motions to consolidate and consolidated Case Nos. 21-cv-01486-SI, 21-cv-01736-VC, and 21-cv-01950-JST under the lowest case number, 21-cv-01486-SI.

Lead Plaintiffs

Under the Private Securities Litigation Reform Act, the court must select the "most adequate plaintiff" to represent the proposed class. The court considered factors including whether notice of the action was properly published, the losses claimed by the proposed plaintiffs, and the requirements for class representation under Federal Rule of Civil Procedure 23(a).

The court found that Diane and William Smith had purchased 675,842 shares during the class period, retained the most net shares, spent the most net funds during the class period, and suffered the greatest financial loss among the proposed lead plaintiffs. The court also found that the cause of their loss—decreased Velodyne stock value—was similar to the cause of other plaintiffs' alleged losses.

The court granted Diane and William Smith's motion to appoint lead plaintiff and lead counsel, appointed Diane and William Smith as lead plaintiffs, and denied the remaining motions for appointment as lead plaintiff and lead counsel.

Lead Counsel and Further Proceedings

The Private Securities Litigation Reform Act generally allows the selected lead plaintiff to choose class counsel, subject to court approval. Diane and William Smith selected Kahn Swick & Foti, LLP. The firm represented that it had experience in securities actions and the resources and financial ability to serve as lead counsel. The court approved that selection and appointed Kahn Swick & Foti, LLP as lead counsel.

The court ordered lead counsel to file an amended consolidated complaint by September 1, 2021. This order addressed consolidation and the selection of class leadership; it did not decide whether the securities-fraud allegations were proven.