In re SVB Financial Group Securities Litigation

Background

This putative securities class action involved claims under the Securities Exchange Act and Securities Act against common defendants. Plaintiffs asked the court to consolidate the case with six later-filed cases in the Northern District of California. The motions were unopposed.

The court ordered consolidation of five cases: Vanipenta, No. 3:23-cv-01097; Snook, No. 3:23-cv-01173; Siddiqui, No. 3:23-cv-01228; Hialeh Employees, No. 3:23-cv-01697; and International Union of Operating Engineers, No. 3:23-cv-01962. The cases involved substantially similar claims, overlapping proposed class periods, and the same alleged conduct. They were consolidated into the lowest-numbered case, which was re-captioned In re SVB Financial Group Securities Litigation. The court deferred deciding whether to consolidate Stevenson, No. 4:23-cv-02277, and Rossi, No. 3:23-cv-02335, until another court resolved a pending remand issue.

Lead Plaintiff

Four parties or groups initially sought appointment as lead plaintiff under the Private Securities Litigation Reform Act. Mahendra Sreerama and Tamir Einy withdrew or stopped seeking appointment, leaving KBC Asset Management NV and the group of Norges Bank and Sjunde AP-Fonden.

The court applied the Act’s process for selecting a lead plaintiff. KBC reported approximately $8.9 million in losses using the last-in, first-out method. Norges and AP7 reported approximately $138.4 million and $23.5 million in losses, respectively, for a combined loss of approximately $161.8 million. Because Norges and AP7 had the largest financial interest, they became the presumptive most adequate plaintiffs, subject to any showing that they were not typical or adequate representatives under Federal Rule of Civil Procedure 23.

KBC argued that Norges and AP7 were an improper group because they lacked a genuine, pre-existing relationship. The court rejected that objection. It held that groups are not categorically barred from serving as lead plaintiff and found that KBC had not provided evidence that the group was created by lawyers, would be unable to work together, or could not control counsel. The court also found that their multi-year relationship and negotiated fee arrangements supported their adequacy. The court appointed Norges and AP7 as lead plaintiffs.

Lead Counsel

The court accepted Norges and AP7’s proposal to use Bernstein Litowitz and Kessler Topaz as lead counsel, subject to fee caps. Although the court generally does not appoint multiple lead counsel, it made an exception because the proposed fee agreements capped the percentages. The court said it appoints individual attorneys rather than law firms generally, but the firms had not identified lead attorneys. Appointment of lead counsel was therefore deferred until the firms provided that information.

Case Schedule and Disposition

The lead plaintiff was ordered to file a consolidated amended complaint within 45 days of the order. Defendants would have 30 days to respond. If defendants filed a motion to dismiss, plaintiffs would have 30 days to respond and defendants would have 21 days to reply. The consolidated complaint would replace the earlier complaints in the consolidated cases, and defendants would not need to respond separately to those earlier complaints.

The court also required the complaint to present the securities-fraud allegations in chart form, identifying for each statement the speaker, date, and medium; the allegedly false or misleading statement; why it was false or misleading when made; and the facts supporting a strong inference that the defendants acted knowingly or recklessly. The order was a case-management ruling and did not decide whether the securities claims were legally or factually valid.