Peters v. Twist Bioscience Corporation

Background

This securities class action concerns allegations under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The complaint alleged that Twist Bioscience Corporation, Emily Leproust, and James Thorburn made misleading statements about Twist’s growth, gross margins, and plans to build a facility in Wilsonville, Oregon. After Scorpion Capital published a report on November 15, 2022, Twist’s stock price fell from $38 per share to $30.43 per share, a decline of nearly 20 percent.

The court’s order addressed competing motions to appoint a lead plaintiff and select lead counsel under the Private Securities Litigation Reform Act of 1995 (PSLRA). Eight motions were initially filed, but six movants withdrew or did not oppose another applicant. The two remaining applicants were the Policemen’s Annuity and Benefit Fund of Chicago (PABF) and the University of Puerto Rico Retirement System (UPR).

Legal standard

The PSLRA requires the court to appoint the “most adequate plaintiff” in a consolidated securities action. The statute creates a rebuttable presumption in favor of an applicant who timely moved for appointment, has the largest financial interest in the relief sought, and satisfies the typicality and adequacy requirements of Federal Rule of Civil Procedure 23.

The court applied the Ninth Circuit’s three-step process: notice of the action and claims, comparison of the applicants’ financial interests, and an opportunity for competing applicants to rebut the presumptive lead plaintiff’s showing.

Financial interest

Both PABF and UPR timely moved for appointment. The court compared their financial interests using four factors: shares purchased, net shares purchased, net funds spent, and estimated losses.

All four factors favored PABF under the court’s analysis. PABF purchased 19,112 shares, compared with UPR’s 10,630 shares; held 11,845 net shares, compared with UPR’s 10,630; and had net expenditures of $1,142,436.58, compared with UPR’s $435,229. PABF estimated its loss at $814,517.36, while UPR initially estimated its loss at $158,704 and later revised it to $113,859.

The court used PABF’s last-in, first-out (LIFO) calculation, which treats the most recently purchased shares as the first shares sold. The court found that this method was rational and consistently applied. It viewed UPR’s revised calculations skeptically because UPR changed its methodology after learning about the competing motions. The court rejected UPR’s proposed method of capping purchase prices at $38 per share and also rejected UPR’s alternative method based on matching shares with the same levels of alleged price inflation. The court concluded that PABF had the largest financial interest.

Typicality and adequacy

The court found that PABF satisfied Rule 23’s typicality requirement because, like other proposed class members, it purchased Twist stock during the class period at allegedly inflated prices caused by the defendants’ alleged misrepresentations. The court also found that PABF satisfied the adequacy requirement because it appeared to have no conflicts with other class members and had a substantial stake in the litigation. The court noted that PABF is an institutional investor that had previously served as lead plaintiff in two securities class actions.

Because no competing applicant attempted to rebut PABF’s presumptive status, the court appointed PABF as lead plaintiff.

Lead counsel

Under the PSLRA, the most adequate plaintiff may select counsel subject to court approval. No party objected to PABF’s selection of Bleichmar Fonti & Auld LLP. After reviewing the firm’s and attorneys’ resumes, the court found no need to appoint different counsel to protect the proposed class’s interests and approved the selection.

Disposition

The court GRANTED PABF’s motion. It appointed the Policemen’s Annuity and Benefit Fund of Chicago as lead plaintiff and Bleichmar Fonti & Auld as lead counsel. All other motions to appoint lead plaintiff and select lead counsel were DENIED.