In re Lyft Inc. Securities Litigation

Background

Plaintiffs bought Lyft Inc. common stock when the company went public on March 28, 2019. They asserted claims under Sections 11 and 15 of the Securities Act of 1933 against Lyft and certain officers and directors, alleging that Lyft’s initial public offering registration statement misrepresented or failed to disclose risks involving sexual-assault allegations against drivers, a shrinking market share allegedly connected to a price war with Uber, and safety problems with Lyft’s bike-sharing program.

The court had previously appointed Rick Keiner as Lead Plaintiff and Block & Leviton LLP as Lead Counsel, certified a class, and denied in part and granted in part Defendants’ motion to dismiss. The parties later negotiated a settlement after discovery, motion practice, and mediation. The settlement covered people and entities who purchased or acquired Lyft common stock issued and traceable to the registration statement between March 28, 2019, and August 19, 2019.

Settlement Terms and Objections

Lyft agreed to provide a $25 million non-reversionary settlement fund. The estimated average recovery was 77 cents per share, and authorized claimants were to receive at least $10. The fund covered notice and administration expenses, taxes, court-approved attorneys’ fees and costs, any approved award to Lead Plaintiff, and other approved expenses. Any remaining balance after further distributions was to be donated to the Bluhm Legal Clinic Center for Litigation and Investor Protection at Northwestern University Pritzker School of Law.

Class members who did not opt out released claims related to the allegations, events, and transactions involved in the case and claims connected to the purchase, acquisition, holding, sale, or disposition of covered Lyft securities. The claims administrator mailed 351,970 notice packets, published notice in The Wall Street Journal and through a national newswire service, and maintained a telephone helpline and website. The administrator received more than 68,369 claims, 29 requests for exclusion that were not rescinded, and objections on behalf of six class members.

Certain class members involved in a related California state-court action objected to the settlement. They argued, among other things, that the settlement undervalued the claims, that Lead Plaintiff lacked information about the market-share theory, and that the settlement resulted from an improper “reverse auction.” The court rejected those objections, finding no evidence of improper conduct and concluding that the settlement resulted from extended, arms-length negotiations after substantial litigation and discovery.

Final Settlement Approval

The court incorporated its earlier class-certification analysis and found that the notice plan complied with Federal Rule of Civil Procedure 23 and the additional notice requirements of the Private Securities Litigation Reform Act. Applying Rule 23’s requirement that a class settlement be fair, reasonable, and adequate, the court considered the strength of the claims, litigation risks, the settlement amount, the stage of the case, the extent of discovery, counsel’s experience, and class members’ reactions.

The court concluded that the $25 million settlement was within the reasonable range given the case’s complexity and the risk that Defendants could prevail on issues including causation. It also approved the pro rata allocation plan and the proposed cy pres recipient. The court found that the low number of objections and opt-outs compared with the class size supported approval.

The court therefore overruled the objections and granted Lead Plaintiff’s motion for final approval of the class action settlement.

Attorneys’ Fees and Litigation Expenses

Lead Counsel requested $6,250,000 in attorneys’ fees, equal to 25 percent of the settlement fund, and $498,683.75 in litigation expenses. The court found the fee request reasonable under the percentage-of-the-fund method, considering the results achieved, litigation risks, counsel’s work and skill, the contingent nature of the representation, and awards in similar cases. A lodestar cross-check—comparing the requested percentage with counsel’s documented time and hourly rates—also supported the request. The court granted the request and awarded Lead Counsel $6,250,000 in fees and $498,683.75 in costs.

Lead Plaintiff’s Costs

Lead Plaintiff requested $10,000 for costs and expenses related to representing the class, or alternatively $8,000 for time that he said he could otherwise have spent working. The court explained that the Private Securities Litigation Reform Act does not permit incentive payments for serving as a class representative, although it permits reasonable costs, expenses, and lost wages directly related to class representation.

The court found that Lead Plaintiff did not document actual costs, expenses, or lost wages. He stated that he spent 40 hours on the case and estimated an hourly rate of $200, but provided no evidence supporting that rate and did not claim to have lost income from his salaried positions. The court denied Lead Plaintiff’s request for costs and expenses.

Other Orders and Disposition

The court denied the administrative motion to seal filed by State Plaintiffs and directed them to file public versions of the affected documents or portions within seven days. The parties and settlement administrator were directed to implement the settlement, and the parties were ordered to file a short stipulated final judgment within 21 days. After the settlement checks became stale, or after all funds were distributed if no checks were issued, the parties were required to file a post-distribution accounting containing specified information about claims, payments, expenses, fees, and any cy pres distribution.

Judge Haywood S. Gilliam, Jr. thus granted the motions for final approval of the class action settlement and attorneys’ fees and litigation expenses, awarded the specified fees and expenses, denied the motion for costs for Lead Plaintiff, and denied the administrative motion to seal.