In re Nutanix, Inc. Securities Litigation

Background

This putative class action alleges violations of federal securities laws during the period from March 1, 2018, through May 30, 2019. The court had previously appointed Shimon Hedvat as lead plaintiff, and plaintiffs filed a Consolidated Amended Complaint and then a Second Amended Complaint. After Hedvat withdrew as lead plaintiff, the court appointed the California Ironworkers Field Pension Trust as the new lead plaintiff and Robbins Geller Rudman & Dowd LLP as lead counsel. The City of Miami Fire Fighters’ and Police Officers’ Retirement Trust remained a named plaintiff represented by Levi & Korsinsky, LLP.

The Pension Trust moved under Federal Rule of Civil Procedure 15(d) for permission to supplement the Second Amended Complaint. Its proposed revisions would replace “Shimon Hedvat” with “California Ironworkers Field Pension Trust,” replace “undersigned Lead Counsel” with “counsel,” and replace paragraph 40 with an allegation that the Pension Trust purchased Nutanix common stock during the class period and was damaged by that purchase.

Arguments and analysis

Nutanix argued that the motion should be denied because the Pension Trust did not attach a complete proposed complaint as required for an amended pleading under Civil Local Rule 10-1. The court held that the rule did not apply because the Pension Trust sought to supplement, rather than amend, the existing complaint. The court treated the appointment of a new lead plaintiff as an event occurring after the existing pleading, making Rule 15(d) the appropriate procedure.

Nutanix also argued that the proposed supplement did not provide adequate notice of the parties or the basis of the claims. The court disagreed. It held that the City of Miami trust and Levi & Korsinsky had not withdrawn, that the City of Miami trust could remain a named plaintiff even though it was no longer represented by lead counsel, and that the proposed revisions gave Nutanix sufficient notice.

Nutanix further argued that the supplement would be futile because it violated Federal Rule of Civil Procedure 11. The court rejected the argument that the supplemental pleading would be unsigned, explaining that the existing Second Amended Complaint remained operative and had been signed by Levi & Korsinsky, which remained counsel for the City of Miami trust. Robbins Geller would assume Rule 11 responsibility for the facts in the proposed supplement that it signed.

The court also rejected Nutanix’s argument that the new lead plaintiff and its counsel had to repeat the earlier investigation, including re-interviewing confidential witnesses. The court found no cited case requiring a replacement lead plaintiff and lead counsel, appointed after the pleading stage, to conduct a new investigation when the prior counsel remained involved in the case. It stated that discovery, including depositions of the confidential witnesses with all counsel present, could address concerns about the investigation.

Disposition

The court held that the motion satisfied pleading requirements and did not violate Rule 11. It granted the Pension Trust’s Motion to Supplement and allowed the Pension Trust to file a supplemental complaint based on the proposed revisions by August 23, 2021. This order concerned permission to supplement the pleading; it did not decide the merits of the federal securities-law claims.