In re Okta, Inc. Securities Litigation

Background

The lawsuit is a securities class action involving Okta, Inc. and certain current and former senior executives. The complaint alleges violations of Section 10(b) of the Securities Exchange Act and Securities and Exchange Commission Rule 10b-5 related to a January 2022 breach of Okta’s security systems by a hacking group identified as Lapsus$. The alleged class period ran from March 5, 2021, through March 23, 2022. Plaintiffs alleged that the defendants failed to disclose inadequate cybersecurity controls and initially concealed, then downplayed, the seriousness of the breach.

The order concerned motions to appoint a lead plaintiff and lead counsel under the Private Securities Litigation Reform Act. Three proposed lead plaintiffs filed motions: the City of Miami Fire Fighters and Police Officers Retirement Trust, Kathryn Flynn, and the Nebraska Investment Council. Miami and Flynn did not oppose Nebraska’s appointment, and the defendants also stated that they did not oppose it.

Legal standard

The Act requires the court to select the “most adequate plaintiff” to represent the proposed class. The court considers factors including whether notice of the action was properly published, the proposed plaintiff’s financial losses, and whether the plaintiff satisfies the adequacy and typicality requirements of Federal Rule of Civil Procedure 23(a). The court generally accepts the lead plaintiff’s choice of counsel unless different counsel is needed to protect the class’s interests. Counsel competency is part of the lead plaintiff’s adequacy assessment.

Court’s analysis

The court found that Miami properly filed notice of publication of the securities class action. The parties did not dispute that Nebraska had the largest financial interest. The court also found that the cause of Nebraska’s financial loss— a decrease in Okta’s stock value—was similar to the cause of the other plaintiffs’ losses during the class period.

Nebraska selected Labaton Sucharow LLP as lead counsel and Wagstaffe, Von Loewenfeldt, Busch & Radwick LLP as liaison counsel. Those firms represented that they had sufficient securities-litigation experience, resources, and financial ability to serve in those roles. The court approved Nebraska’s selections.

Disposition

The court GRANTED Nebraska’s motion to appoint lead plaintiff and lead counsel and DENIED the remaining motions for appointment as lead plaintiff and lead counsel. The court appointed Nebraska as lead plaintiff, Labaton Sucharow LLP as Lead Counsel, and Wagstaffe, Von Loewenfeldt, Busch & Radwick LLP as Liaison Counsel.

The order gave Lead Counsel authority to speak for all plaintiffs and class members in litigation matters, including pretrial proceedings, motion practice, trial, and settlement. It also assigned Lead Counsel responsibility for coordinating briefing, discovery, depositions, counsel meetings, settlement negotiations, experts, attorney time reports, and related work. The parties were ordered to file a stipulation concerning the schedule for an amended complaint and motion practice by September 9, 2022. Judge Susan Illston did not decide the merits of the securities allegations in this order.