Boston Retirement System v. Uber Technologies, Inc.

Background

This case is a proposed securities class action arising from Uber Technologies, Inc.’s May 10, 2019 initial public offering. Uber sold 180 million common shares at $45 per share. Boston Retirement System purchased Uber stock in the offering and from an underwriter, under documents that included Uber’s registration statement.

The plaintiffs alleged violations of Sections 11, 12(a)(2), and 15 of the Securities Act. The court had previously denied motions to dismiss, concluding that the plaintiff adequately alleged that Uber’s offering documents omitted material information about the legality of Uber’s business model, its passenger-safety record, and its financial condition. Boston Retirement System later moved to certify this proposed class:

All persons and entities that purchased or otherwise acquired Uber’s publicly traded common stock pursuant and/or traceable to the Offering Documents for Uber’s IPO, and who were damaged thereby.

The proposed class excluded Uber and the individual defendants, certain family members, officers, directors, affiliates, subsidiaries, employee benefit and retirement plans and their participants or beneficiaries in specified circumstances, entities controlled by defendants, and the legal representatives, heirs, successors, or assigns of excluded persons or entities. Boston Retirement System, David Messinger, Salvatore Toronto, Irving S., and Judith Braun sought appointment as class representatives. Joseph Cianci, who was also named in the amended complaint, did not seek appointment.

Class-certification standard

Under Federal Rule of Civil Procedure 23, plaintiffs seeking class certification must establish numerosity, commonality, typicality, and adequacy under Rule 23(a), and must also satisfy at least one requirement under Rule 23(b). For a Rule 23(b)(3) class, common questions must predominate over individual questions, and a class action must be the superior method for resolving the dispute.

The defendants did not challenge numerosity or commonality, so the court did not address those requirements. The defendants challenged predominance, superiority, adequacy, and typicality.

Predominance and superiority

The defendants argued that differences in investors’ actual knowledge of the allegedly omitted information defeated predominance and superiority. Under Sections 11 and 12, actual knowledge can be a defense if a purchaser knew about the alleged misstatement or omission when acquiring the securities.

The defendants submitted deposition testimony indicating that some employees of Boston Retirement System’s investment manager, Zevenbergen Capital Investments LLC, knew about pieces of information related to the alleged omissions. The court held that this evidence did not defeat class certification. It found that knowledge of separate pieces of information or general awareness of an issue was different from knowledge of the full scope or magnitude of the problems alleged in the amended complaint. The court also stated that it did not need to resolve whether the employees’ knowledge could be attributed to Boston Retirement System.

The court rejected the defendants’ arguments that individualized knowledge would create individualized causation issues or conflicts within the class. It also concluded that the defendants had not shown that individualized issues concerning negative causation—the defense that the alleged omission did not cause the stock losses—would predominate. The court determined that the causes of Uber’s stock declines were factual questions suitable for class-wide resolution.

The court further held that Comcast Corp. v. Behrend did not prevent certification. In the court’s reading of Ninth Circuit law, Comcast requires plaintiffs to show that their damages resulted from the defendants’ conduct creating legal liability. The defendants had not identified a securities class action in which Comcast’s concerns prevented certification, and the court noted that damages in Section 11 cases are governed by a statutory formula. The court therefore found that predominance and superiority were satisfied.

Adequacy

Adequacy asks whether the proposed representatives and their lawyers have conflicts with other class members and whether they will pursue the case vigorously. The defendants argued that Boston Retirement System and the individual plaintiffs were inadequate because they did not sufficiently control the litigation or their lawyers and costs.

The court found that the defendants applied a higher standard than the Ninth Circuit requires. It concluded that the proposed representatives had demonstrated familiarity with the case, its claims, and the responsibilities of a class representative. The court also held that the Private Securities Litigation Reform Act did not prohibit adding named plaintiffs to assist the lead plaintiff.

The court addressed concerns about the participation of ten law firms on the plaintiffs’ side. It noted that only Labaton Sucharow sought appointment as lead counsel, that the firm had experience litigating securities class actions, and that it had an incentive to avoid duplicative work. The court found the proposed representatives and proposed lead counsel adequate.

Typicality

The defendants argued that the proposed representatives were subject to unique actual-knowledge defenses. The court rejected that argument for the same reasons it rejected the predominance and superiority arguments. Although some class members and proposed representatives may have learned about information concerning Uber through news reports, the court found that the alleged knowledge did not necessarily include the full scope of the alleged omissions. The court concluded that the proposed representatives’ actual-knowledge defenses were not so unique that they defeated typicality.

Other motions and final ruling

The court denied the defendants’ motion to file a sur-reply because the issues addressed in that filing were not necessary to decide class certification.

The court ruled on two administrative motions concerning sealed materials. As to one motion, the court granted sealing for limited pieces of information but denied without prejudice Zevenbergen Capital Investments LLC’s broader sealing designations. As to the other motion, the court granted sealing for a small number of deposition-transcript lines. The court directed Zevenbergen Capital Investments LLC to submit a revised list of proposed designations within fourteen days and stated that updated public versions of the materials would later be required.

Judge Richard Seeborg granted the motion for class certification, appointed Boston Retirement System, David Messinger, Salvatore Toronto, Irving S., and Judith Braun as class representatives, and appointed Labaton Sucharow as class counsel.