Desvarieux v. Axiom Holdings, Inc.

Background

Ashley Desvarieux brought the action individually and on behalf of others similarly situated against Axiom Holdings, Inc. and Curtis Riley. The order concerns the lead plaintiffs’ motion to certify a class before entry of default judgment. The proposed claims concerned alleged violations of federal securities laws, including whether defendants made material misrepresentations or omissions about Axiom’s business, operations, and management; whether Riley caused Axiom to issue false or misleading financial statements; whether defendants acted knowingly or recklessly; whether Axiom securities traded at artificially inflated prices; and whether class members suffered damages.

Class-certification findings

Applying Federal Rule of Civil Procedure 23, the court found that:

- The proposed class was sufficiently numerous that joining all members individually would be impracticable. - Common questions of law and fact existed, including questions about alleged misrepresentations, omissions, financial statements, defendants’ state of mind, inflated security prices, and damages. - The proposed class representatives’ claims were typical because they purchased Axiom securities at allegedly inflated prices and were affected by statements and omissions made uniformly to the proposed class. - The proposed representatives would fairly and adequately protect the class’s interests. - Block & Leviton LLP and Pomerantz LLP had experience litigating similar class actions and could adequately represent the class. - Common questions predominated over individual issues. - The class was entitled to a presumption of reliance for its claim under Section 10(b) of the Securities Exchange Act of 1934 under the standard identified by the court. - A class action was superior to individual lawsuits because the proposed class members were allegedly harmed in the same way by the same defendants, and separate litigation would cause waste, delay, and inefficient use of judicial resources.

Order and affected class

The court certified the action as a class action under Rule 23(b)(3) as to all claims and defenses at issue in the class-action complaint. The Judgment Class consists of all people who purchased or otherwise acquired Axiom Holdings, Inc. securities from October 14, 2016, through June 19, 2017, inclusive.

The class excludes anyone named as a defendant; Axiom’s officers and directors who held those positions at any relevant time; members of their immediate families; their legal representatives, heirs, successors, or assigns; and entities in which defendants had or have a controlling interest.

Disposition and next steps

Judge Laura Taylor Swain appointed Phillip H. Rhodes Jr. and Shem Properties, Inc. as class representatives and Pomerantz LLP as class counsel. The court ordered the class representatives to move for entry of default judgment against Axiom within 14 days of the order, consistent with a separate order authorizing that motion. It also ordered them to submit a proposed notice to the Judgment Class within 21 days. The opinion does not state that the court entered default judgment or decided the underlying securities claims on their merits.