In re Lyft Inc. Securities Litigation

Background

This securities class action alleges that Lyft Inc.’s 2019 initial-public-offering registration statement contained material misstatements and omissions. The federal action reached a proposed $25 million settlement, for which the federal plaintiff sought final approval. The state plaintiffs, who are class members in the federal action and plaintiffs in a parallel state-court case, objected that the settlement was inadequate and that the federal lead plaintiff and class counsel were inadequate.

The objections focused partly on a market-share theory concerning Lyft’s alleged use of ride-discount coupons in a price war with Uber and the resulting decline in Lyft’s market share. The state plaintiffs argued that the federal settlement negotiations did not sufficiently account for damages under that theory. They sought the damages analysis prepared by Global Economics Group LLC, the federal plaintiff’s damages expert, and deposition testimony about the expert’s work.

Discovery dispute

The state plaintiffs argued that the discovery was necessary to assess whether the federal plaintiff had been adequately informed about the market-share theory’s value and whether the settlement was fair. They also argued that the federal plaintiff had waived work-product protection by relying on Global Economics Group’s damages analysis in seeking final approval.

The federal plaintiff argued that the state plaintiffs had no legitimate need for the discovery, that publicly available information and their own damages expert gave them the information needed to evaluate the settlement, and that the requested material remained protected work product. The federal plaintiff also raised objections to the proposed deposition, including that an expert deposition should follow submission of an expert report and that the requested deposition location was improper.

Court’s analysis

The court explained that objectors to a class-action settlement may obtain discovery to the extent it may assist the court in deciding whether the settlement is fair and adequate. Relevant considerations include the nature and amount of prior discovery, whether there is a reasonable basis for the requested evidence, and the number and interests of the objectors. The court recognized that the state plaintiffs had a greater interest than ordinary objectors because they were pursuing a parallel putative class action and had helped develop the market-share theory.

The court also addressed work-product protection, which generally protects materials prepared in anticipation of litigation. It explained that a party may waive that protection by expressly relying on an expert’s statements, findings, or opinions in a pleading or motion, but that relying on an expert’s opinion does not create a blanket waiver covering unrelated material.

The court found that Global Economics Group had provided analyses concerning both damages and potential negative-causation defenses. Because the final-approval motion cited only the damages analysis, the court held that only that analysis had been placed at issue and was potentially subject to disclosure.

Even so, the court concluded that the requested discovery was not warranted. It reasoned that the likely value of discovery into the damages estimate was reduced, if not eliminated, because damages were calculated by reference to Lyft’s stock-price movement, which was public information. The court therefore found the state plaintiffs’ argument that the estimate was uninformed because the expert lacked access to particular discovery less compelling. It declined to disturb the work-product protection attached to the damages estimate.

Disposition

The court denied the state plaintiffs’ request for discovery and stated that the order resolved the discovery dispute identified as Electronic Case Filing No. 328. The order addressed discovery concerning the proposed settlement; it did not decide whether the settlement would receive final approval.