IN RE ENOVIX CORPORATION SECURITIES LITIGATION

Background

Two class actions were filed under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5. The complaints alleged that Enovix Corporation, Harrold Rust, Steffen Pietzke, Cameron Dales, and Thurman Rodgers made false or misleading statements, or failed to disclose material adverse information, about Enovix’s revenue and ability to manufacture its battery technology.

The proposed class covers persons and entities that purchased or otherwise acquired Enovix common stock, or RSVAC common stock before July 15, 2021, between February 22, 2021, and January 3, 2023. The complaints identified disclosures on November 1, 2022, and January 3, 2023, after which Enovix’s stock price allegedly declined.

Consolidation

The court applied Federal Rule of Civil Procedure 42, which permits consolidation when cases share common legal or factual questions. Because the two cases asserted the same causes of action against the same defendants and arose from the same alleged disclosures, the court consolidated them for all purposes into one Consolidated Action. The court directed that a master docket and master file be used and set a deadline of May 8, 2023, for the parties to file a stipulation concerning the schedule for any consolidated complaint and related motions.

Lead Plaintiff Selection

The Private Securities Litigation Reform Act requires the court to appoint the class member or members that are most capable of adequately representing the class. Under the process used in the Ninth Circuit, the court first identifies the movant with the largest alleged financial loss and then considers whether that movant preliminarily satisfies the adequacy and typicality requirements of Federal Rule of Civil Procedure 23. Other movants may rebut that presumption with proof that the presumptive lead plaintiff is not typical or adequate.

The Discovery Funds reported alleged losses of $3,889,312.42, compared with approximately $700,106.53 for Gary Kung and approximately $561,583.26 for Dale M. Wagner. The court found that the Discovery Funds’ claims were typical because they purchased Enovix stock during the class period and allegedly suffered the same type of injury as other class members. It also found the Discovery Funds adequate because of their larger financial interest, institutional-investor status, and selection of experienced securities class-action counsel.

Wagner argued that the Discovery Funds were atypical because they sold all their Enovix stock before the second alleged disclosure. Kung argued that the Discovery Funds lacked standing without assignments from the beneficial owners of the stock and raised additional concerns about the funds’ structure, trading strategy, authority to participate, and affiliated funds. The court found that these arguments did not rebut the presumption favoring the Discovery Funds. It therefore granted the Discovery Funds’ motion for appointment as lead plaintiff.

The court nevertheless determined that appointing a co-lead plaintiff who held Enovix stock through the second disclosure would protect the class’s interests. It found that Gary Kung was the next eligible movant, had retained some stock through both disclosures, and satisfied Rule 23’s typicality and adequacy requirements. The court therefore appointed Kung as co-lead plaintiff.

Counsel and Disposition

The court appointed Rolnick Kramer Sadighi LLP and The Rosen Law Firm, P.A. as Co-Lead Counsel and Sawyer & Labar LLP as Liaison Counsel. The Co-Lead Counsel were given responsibility for coordinating pleadings, motions, discovery, settlement negotiations, experts, and trial preparation. Plaintiffs were not permitted to initiate motions, discovery, or settlement negotiations without the approval of the Co-Lead Plaintiffs and Co-Lead Counsel.

In IN RE ENOVIX CORPORATION SECURITIES LITIGATION, Judge Susan Illston granted the motions to consolidate; granted the motions of the Discovery Funds and Gary Kung and appointed them as Co-Lead Plaintiffs; appointed the specified Co-Lead Counsel and Liaison Counsel; and denied the remaining motions for appointment of lead plaintiff and lead counsel. The order addressed case management and class-representation appointments, not whether the alleged securities-law violations occurred.