In re Lyft Inc. Securities Litigation

Background

Lyft offered common stock to the public in an initial public offering. The complaint alleges that Lyft’s registration statement and prospectus failed to disclose material information about sexual-assault and safety problems, including an increasing number of sexual-assault allegations that could negatively affect Lyft’s business.

The defendants moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). This procedure allows a party to seek judgment based on the pleadings after the pleadings are closed. The court treats a Rule 12(c) motion under essentially the same standard as a motion to dismiss for failure to state a claim: it accepts the complaint’s factual allegations as true and views them in the plaintiff’s favor.

Requests to Consider Documents

The defendants asked the court to consider Lyft’s Form S-1 registration statement, an April 9, 2019 San Francisco Chronicle article, and a January 5, 2017 Business Insider article. The court granted the request as to the registration statement because it formed the basis of the plaintiff’s claim. It also granted the request as to the Chronicle article because the complaint extensively referred to it and relied on it. The court denied the request as to the Business Insider article because the defendants offered it to establish the truth of information about the number of sexual assaults compared with the total number of rides.

The court stated that it would generally consider only the pleadings and documents properly incorporated into them or subject to judicial notice. It criticized both sides’ references to discovery materials and other matters outside the pleadings.

Motions to Seal

The parties sought to seal portions of filings that referred to a joint letter brief and an associated exhibit. Because the filings related substantially to the motion for judgment on the pleadings, the court applied the demanding “compelling reasons” standard. That standard requires a strong, specific justification for restricting public access to judicial records.

The defendants argued that disclosure could cause competitive harm, alarm Lyft users, expose sensitive information, discourage users from reporting incidents, and cause users to stop using Lyft’s platform. The court found that confidentiality designations and general claims of harm were insufficient. It also found that the proposed redactions described statistical information only at a general level and were not narrowly tailored. The court therefore denied the motions to seal. It directed the parties to file public versions of the affected documents within seven days, while permitting new sealing motions that complied with the court’s requirements.

Motion for Judgment on the Pleadings

The defendants argued that the plaintiff had changed the theory of the sexual-assault claim by focusing on the magnitude and trend of sexual-assault allegations in materials supporting class certification. The plaintiff argued that the theory had not changed and was already adequately pleaded.

The court agreed with the plaintiff. It found that the complaint alleged more than simply that the registration statement did not mention sexual assault. The complaint alleged that Lyft failed to disclose pervasive sexual-assault and safety problems, that sexual-assault allegations against Lyft drivers were increasing, and that the trend could negatively affect Lyft’s business. The court also reviewed the parties’ earlier briefing and found that the plaintiff had previously raised the same theory, including under Item 303 concerning disclosure of known adverse trends or uncertainties.

The court held that the defendants had provided no basis to reconsider its earlier ruling that the allegations concerning an increase in sexual-assault allegations were sufficient under Item 303. It further held that disputed factual questions about whether the information was material could not be resolved on a motion for judgment on the pleadings. The court therefore denied the defendants’ motion for judgment on the pleadings.

Disposition

The court denied the defendants’ motion for judgment on the pleadings and denied the administrative motions to seal. It ordered the parties to file public versions of documents covered by the denied sealing requests within seven days and allowed new, specifically supported sealing motions.