In re Lyft Inc. Securities Litigation

Background

Lyft offered 32.5 million shares of common stock in its initial public offering at $72 per share. Lead Plaintiff Rick Keiner alleged that Lyft’s registration statement and prospectus contained materially misleading statements, omitted information necessary to make their statements not misleading, and omitted material facts required by the Securities Act of 1933.

Keiner moved to certify this class:

All persons and entities who purchased or otherwise acquired the common stock of Lyft issued and traceable to the IPO Registration Statement.

The proposed class excluded the defendants and their families, Lyft’s officers, directors, affiliates, their immediate families and legal representatives, entities controlled by defendants, and entities that underwrote the Lyft initial public offering, along with certain related people and entities. Keiner also asked the court to appoint him as class representative and Block & Leviton LLP as class counsel. Defendants argued that the proposed class failed to satisfy Federal Rule of Civil Procedure 23(b) and that the class definition should be modified, including by limiting it to investors who purchased before April 15, 2019.

Legal standard

Rule 23 requires a proposed class to satisfy four requirements: the class must be large enough that joining all members individually is impractical, members must share legal or factual questions, the representative’s claims must be typical of the class’s claims, and the representative and counsel must fairly and adequately protect the class. The plaintiff must also satisfy at least one additional requirement under Rule 23(b). Keiner relied on Rule 23(b)(3), which requires common questions to predominate over individual questions and a class action to be superior to other available methods of resolving the dispute.

Court’s analysis

The court found numerosity because Lyft had sold millions of shares through the offering, making it reasonable to conclude that more than 40 people purchased the stock. It found commonality because the claims involved common questions about whether Lyft’s registration statement contained untrue statements or material omissions, whether public information could have revealed those issues, and whether defendants violated the Securities Act.

The court found typicality because the proposed class members purchased shares traceable to the same registration statement and asserted claims based on the same alleged misstatements and omissions. It also found adequate representation. The court identified no conflict between Keiner, proposed class counsel, and other class members, and found that Keiner and counsel had vigorously pursued the case.

For predominance, the court concluded that common evidence could address whether Lyft’s registration statement contained material misstatements or omissions. Defendants argued that individual investors’ knowledge of publicly available information would require separate inquiries. The court rejected that argument at the certification stage because the evidence showed, at most, general awareness of sexual-assault allegations and bicycle maintenance problems, rather than knowledge of the alleged magnitude of the sexual-assault issue or the specific brake problem involving Lyft’s bicycle fleet. The court also found that questions about what the public reports actually disclosed could be addressed with common proof.

For superiority, the court determined that resolving the shared issues in one proceeding would be more efficient than conducting hundreds or thousands of individual actions. It noted that the class could be revisited if class treatment later became inefficient or unmanageable. The court was not persuaded that the proposed April 15, 2019 cutoff was relevant to defining the class at this stage; it stated that the issue might instead relate to damages.

Ruling

Judge Haywood S. Gilliam, Jr. granted Keiner’s motion for class certification and certified the proposed class as defined above. The court appointed Keiner as class representative and Block & Leviton LLP as class counsel. It also set a telephonic case-management conference and directed the parties to submit a joint case-management statement.