Kasilingam v. Tilray, Inc.

Background

This proposed securities class action concerns Tilray, Inc.’s January 15, 2019 announcement of a marketing and revenue-sharing agreement with Authentic Brands Group LLC. The complaint alleges that Tilray overstated the agreement’s advantages and failed to disclose that its underperformance could significantly affect Tilray’s financial results.

Tilray later reported a $321.2 million net loss for 2019, along with non-cash charges of $112.1 million related to impairment of the agreement and $68.6 million in inventory reserves. Its stock price then fell 15.18 percent, or $2.33 per share, and closed at $13.02 on March 3, 2020.

Lead- Plaintiff Standard

The Private Securities Litigation Reform Act requires the court to appoint the class member or group most capable of adequately representing the class. Courts generally presume that the most adequate plaintiff is the applicant with the largest financial interest who has made the required preliminary showing under Federal Rule of Civil Procedure 23. Rule 23 requires, among other things, that the representative’s claims be typical of the class’s claims and that the representative fairly and adequately protect the class’s interests.

The opinion states that the court may consider the number of shares purchased, net shares purchased, total net funds spent, and approximate losses, with many courts emphasizing approximate losses.

Application

Four applicants remained for consideration: Saul Kassin, the Tilray Investor Group, Brett Mitchell and Nancy Nguyen, and Douglas Chabot. Their stated financial interests, in descending order, were Kassin at $2,324,266.59; the Tilray Investor Group at $1,043,150.76; Mitchell and Nguyen at $948,929.52; and Chabot at $286,959.49.

The court found that Kassin filed a timely motion, had the largest financial interest, and made the required preliminary showing of typicality and adequacy. His claims arose from the same alleged conduct and legal theory as the proposed class’s claims. The court also found that his selected counsel was qualified and experienced, that Kassin had no conflict with other class members, and that his financial interest was sufficient to support vigorous advocacy.

The other applicants argued that Kassin had not provided enough personal information to establish that he was adequate. Kassin later submitted a declaration containing personal and investment information, but the court held that it did not need to examine those issues further because it otherwise found him adequate.

Lead Counsel

The court stated that the most adequate plaintiff is presumptively entitled to select lead counsel. Kassin selected the Rosen Law Firm, P.A., which submitted information describing its experience litigating securities class actions. The court approved the Rosen Law Firm as lead counsel.

Disposition

Kassin’s motion to be appointed lead plaintiff and to have the Rosen Law Firm, P.A., approved as lead counsel was granted. The lead-plaintiff and lead-counsel motions filed by the Tilray Investor Group, Mitchell and Nguyen, and Chabot were denied. The motions filed by the other plaintiffs were deemed abandoned or denied as moot. The Clerk was directed to close the listed motions.