In re Unity Software Inc. Securities Litigation

Background

Ishita Das filed a securities class action on behalf of people and entities that purchased or acquired Unity Software stock between March 5, 2021, and May 10, 2022. The complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on allegedly false or misleading statements and omissions about Unity’s platform, its machine-learning technology, revenue prospects, and 2022 financial guidance.

After the market closed on May 10, 2022, Unity announced financial results and fiscal guidance that referred to a fault in its platform that reduced the accuracy of its Pinpointer service. The opinion states that Unity’s stock price fell $17.83 per share, or about 37 percent, the next day.

Seven movants initially sought appointment as lead plaintiff and approval of lead counsel. Dennis Johnson and Aleksandr Kuperman later withdrew their motions. Melanie Kight, Timothy Aines, City of North Miami Beach Police Officers and Firefighters Retirement Plan, and Victor Winfrey filed notices stating that they did not have the largest financial interest in the litigation.

Legal standard

The Private Securities Litigation Reform Act requires the court to appoint the plaintiff or group of plaintiffs most capable of adequately representing the class. The law creates a rebuttable presumption in favor of a timely movant with the largest financial interest that also satisfies the requirements of Federal Rule of Civil Procedure 23. Rule 23 requires that the proposed representative’s claims be typical of the class’s claims and that the representative fairly and adequately protect the class’s interests.

The court applied the Ninth Circuit’s three-step process: public notice of the case and class period, identification of the movant with the largest financial stake, and consideration of whether that presumptive lead plaintiff satisfies the typicality and adequacy requirements.

Analysis

The court found that Oklahoma Firefighters Pension and Retirement System and Indiana Public Retirement System had the largest financial interest, with alleged losses totaling $3,895,186.93 calculated using a last-in, first-out method. Their losses were nearly seven times the $569,214 loss identified for Victor Winfrey. The two funds purchased 53,119 shares during the class period and held 31,132 net shares purchased during that period at a net cost of approximately $5,084,477.39.

The court found a preliminary showing that the funds’ claims were typical because they purchased or acquired Unity securities during the class period, allegedly paid artificially inflated prices because of the defendants’ statements or omissions, and suffered damages. The court also found that the funds could adequately represent the class. It noted that they were institutional investors, that the record contained no evidence of conflicts, and that they had experience serving as lead or co-lead plaintiffs in securities class actions. No competing movant challenged the presumption in their favor or their choice of counsel.

The court approved Labaton Sucharow LLP as lead counsel because of the firm’s securities class-action experience and qualifications. It also approved Hagens Berman Sobol Shapiro LLP as liaison counsel based on that firm’s experience in securities and investor-fraud class actions. No movant challenged these selections.

Disposition

The court GRANTED Oklahoma Fire and Indiana’s motion, APPOINTED them as lead plaintiffs, and APPROVED their selection of Labaton Sucharow LLP as lead counsel and Hagens Berman Sobol Shapiro LLP as liaison counsel. The court DENIED the competing motions at ECF Nos. 21, 30, 34, and 35.

The order established a master file for the proceeding under Case No. 5:22-cv-03962-EJD and directed that subsequently filed or transferred cases involving the same subject matter be consolidated unless a party timely objected and the court granted relief. It also assigned lead counsel authority to coordinate the plaintiffs’ litigation activities, including briefing, discovery, depositions, pretrial matters, settlement negotiations, and attorney-fee administration.