Steamfitters Local 449 Pension & Retirement Security Funds v. Sleep Number…

Background

Steamfitters Local 449 Pension & Retirement Security Funds filed a securities class action against Sleep Number Corporation, Shelly R. Ibach, and David R. Callen under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5. The complaint alleges that the defendants made false or misleading statements and that investors who bought Sleep Number securities between February 18, 2021, and July 20, 2021, suffered losses.

After Steamfitters published the notice required by the Private Securities Litigation Reform Act of 1995, Ricardo Dario Schammas, who purchased Sleep Number securities during the class period, moved to be appointed lead plaintiff. He also asked the court to approve Pomerantz LLP as lead counsel and Forsgren Fisher McCalmont DeMarea Tysver LLP as liaison counsel. Steamfitters opposed Schammas’s motion, argued that it was the most adequate plaintiff, and alternatively asked to serve with Schammas as co-lead plaintiff.

Lead-Plainiff Analysis

The Act creates a rebuttable presumption that the most adequate lead plaintiff is the class member or group that timely applies, has the largest financial interest, and preliminarily satisfies the typicality and adequacy requirements of Federal Rule of Civil Procedure 23. The court applied four factors to compare financial interests: shares purchased, net shares purchased, net funds spent, and approximate losses.

The number of shares purchased favored Steamfitters. The parties provided no calculations for net shares or net funds, so those factors were neutral. Approximate loss—the factor the court treated as most important—favored Schammas. Schammas calculated his loss at approximately $14,599, while Steamfitters calculated its loss at approximately $6,056.

The court also found that Schammas made the required preliminary showing of typicality and adequacy. His claims arose from the same alleged misrepresentations or omissions and stock-price decline as the other class members’ claims. The court found that his losses gave him an adequate interest in seeking recovery for the class.

Steamfitters argued that Schammas’s possible multiple trading accounts or options transactions could affect his financial-interest calculation or create a unique defense. It also questioned whether his loss provided enough incentive, whether he could travel from Buenos Aires, Argentina, to Minnesota, whether discovery in Argentina would complicate the case, and whether he had enough experience to oversee counsel. The court held that these concerns were speculation, not the actual proof required to rebut Schammas’s presumptive status.

The court therefore found Schammas presumptively eligible to serve as lead plaintiff. It rejected the argument that Steamfitters’s status as an institutional investor automatically gave it priority over an individual investor who satisfied the statutory requirements.

Co-Lead Plaintiffs and Counsel

The court then considered Steamfitters’s alternative request to serve as co-lead plaintiff. Applying a case-by-case rule of reason, the court concluded that appointing both an individual investor and an institutional investor would provide different perspectives, pooled resources, and joint decision-making that would help ensure adequate representation. The court appointed Schammas and Steamfitters as co-lead plaintiffs.

The court approved Pomerantz LLP, selected by Schammas, and Robbins Geller Rudman & Dowd LLP, selected by Steamfitters, as co-lead counsel. The approval was conditioned on avoiding duplicated attorney work and ensuring that using co-lead counsel did not increase attorneys’ fees or expenses. The court also approved the respective selections of liaison counsel, but required lead counsel to meet and define the liaison counsel’s roles so that their work would not overlap.

Disposition

The court ordered that Schammas’s motion for appointment as lead plaintiff and approval of lead and liaison counsel was GRANTED IN PART and DENIED IN PART. Steamfitters’s request was also GRANTED IN PART and DENIED IN PART. The court appointed Schammas and Steamfitters as co-lead plaintiffs and approved the selections of lead and liaison counsel subject to the no-duplication conditions. The order did not decide whether the defendants violated the securities laws or whether the proposed class would ultimately prevail.