In re TerraVia Holdings, Inc.

Background

This consolidated securities class action is against TerraVia Holdings, Inc. and its former officers. The court appointed the TerraVia Investor Group as lead plaintiffs under the Private Securities Litigation Reform Act and appointed Pomerantz LLP as sole lead counsel for the proposed class. The court said it relied on Pomerantz’s firm resume when making that appointment.

The court described several concerns about Pomerantz’s handling of the case:

- In June 2020, Pomerantz filed a second amended complaint that was not permitted as a matter of right and had not been authorized by the court. - In September 2020, the parties reported that they had signed a binding settlement term sheet and planned to seek preliminary approval. The case then remained inactive for approximately 15 months. - After the court noted the inactivity and administratively closed the case, Pomerantz waited another couple of months before asking to reopen it. - Pomerantz filed its motion for preliminary approval in March 2022, approximately 18 months after reporting the settlement. The court said the motion did not competently address the requirements of Federal Rule of Civil Procedure 23 and the district’s guidance for class-action settlements.

At the preliminary approval hearing, Louis C. Ludwig said he was the sole attorney handling the case and that an extended family issue had prevented him from managing the litigation. The court said this raised serious questions about how Pomerantz handled its responsibilities to the named plaintiffs and the proposed class. The court emphasized that it had appointed the firm, not Ludwig alone, as lead counsel.

Order to Show Cause

An order to show cause requires a party to explain why the court should not take a proposed action. Here, the court ordered Pomerantz to respond in writing to why sanctions should not be imposed for the professional-conduct violations described in the order.

The court stated that possible sanctions could include a monetary fine, referral to the court’s Standing Committee on Professional Conduct, suspension from practicing in the district, or dismissal of the case for failure to prosecute under Federal Rule of Civil Procedure 41(b). The court also said it could consider measures addressing similar defaults in other cases in which Pomerantz might seek appointment as lead counsel.

The written response was due August 4, 2022, and the court set a hearing for August 18, 2022. The order did not impose sanctions at that time. It stated that Pomerantz’s managing partner, Jeremy A. Lieberman, was expected to attend and address the issues.