Snyder v. Baozun Inc.

Background

Cathy Snyder brought a securities class action on behalf of people who purchased Baozun Inc.’s American Depository Receipts between March 6, 2019, and November 20, 2019. The complaint named Baozun, Vincent Wenbin Qiu, and Robin Bin Lu as defendants. It alleged that the defendants failed to disclose material information about Baozun’s relationship with Huawei Technologies Co., Ltd., including Baozun’s reliance on Huawei, additional service fees associated with Huawei’s work, and Huawei’s alleged plans to bring its online merchandising in-house.

The complaint alleged that Baozun’s stock price fell after the company announced lower-than-expected third-quarter 2019 results and disappointing fourth-quarter guidance on November 21, 2019. It asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5.

Ivar Aus later filed a second, substantially similar class action. The court referred to the two cases collectively as the Actions. Five plaintiffs or plaintiff groups initially moved to consolidate the Actions, seek appointment as lead plaintiff, and obtain approval of lead counsel. Four groups later stated that they did not claim the largest financial interest and did not oppose appointment of another competing movant. The Baozun Investor Group’s motion remained for decision.

Consolidation

Under Federal Rule of Civil Procedure 42(a), cases involving common questions of law or fact may be consolidated. The court found that both Actions asserted the same claims against Baozun and certain executives, relied on the same allegations concerning Huawei-related statements or omissions, and involved the same class period. It also found that judicial efficiency and convenience favored consolidation and that there was little apparent risk of prejudice.

The court therefore granted the motion to consolidate.

Lead Plaintiff Selection

The Private Securities Litigation Reform Act requires the court to appoint the member or members of the proposed class most capable of adequately representing the class. The court explained that the presumptive lead plaintiff is generally the timely movant with the largest financial interest who also meets the preliminary requirements of typicality and adequacy under Federal Rule of Civil Procedure 23.

The Baozun Investor Group timely moved for appointment. The group reported purchasing 14,275 gross and net shares, spending $641,908.76 in net funds, and suffering approximately $408,156.69 in losses. The opinion states that no other plaintiff claimed a larger loss.

The court found the group’s claims typical because, like other proposed class members, its members allegedly purchased Baozun American Depository Receipts at prices inflated by the defendants’ alleged misstatements and omissions and suffered damages. The court also found no indication of conflicts with the proposed class at that stage, determined that the group had a sufficient financial interest to encourage vigorous representation, and found its counsel competent and experienced.

The court appointed the Baozun Investor Group—Alvin Osofsky, Juan M. Gonzalez Bonilla, and Mica Park De Gonzalez—as lead plaintiff.

Lead Counsel

The Act permits the lead plaintiff to select lead counsel, subject to court approval. The Baozun Investor Group selected Levi & Korsinsky, LLP. The court found the firm well-qualified based on its experience serving as lead or co-lead counsel in securities class actions and obtaining favorable judgments for clients.

The court approved Levi & Korsinsky, LLP as lead counsel.

Disposition and Scope

The court granted the Baozun Investor Group’s motion to consolidate and for appointment as lead plaintiff, consolidated the Actions, appointed the group lead plaintiff, and approved Levi & Korsinsky, LLP as lead counsel. This opinion addressed case management and representation of the proposed class; it did not decide the merits of the securities-fraud allegations.