Tate v. Aterian, Inc.

Background

The opinion addresses two proposed securities class actions: the action brought by Andrew Tate, docketed as 21 Civ. 4323, and the action brought by Jeff Coon, docketed as 21 Civ. 5163. The complaints alleged that Aterian, Inc. violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 during the period from December 1, 2020, through May 3, 2021. The alleged misrepresentations concerned the health and viability of Aterian’s core businesses. According to the opinion, a May 4, 2021, report by Culper Research caused Aterian’s publicly traded stock to lose approximately 24 percent of its value in one day.

Antonio Velardo, Joseph Nolff, Tamara Rasoumoff, Andrew Zenoff, Hungen Lin, and Boris Kerzhner filed motions seeking consolidation, appointment as lead plaintiff, and approval of lead counsel under the Private Securities Litigation Reform Act. Lin and Kerzhner later filed notices stating that they did not oppose the competing motions because they had not suffered the greatest financial loss.

Consolidation

Federal Rule of Civil Procedure 42(a) allows consolidation when actions involve a common question of law or fact. The securities statute also addresses consolidation when multiple class actions assert substantially the same claims. The court found that the two actions involved the same or substantially similar underlying conduct, claims, and parties. It therefore ordered the actions consolidated for all pretrial purposes, directed that filings be made in the lower-numbered case, 21 Civ. 4323, and directed the Clerk to close 21 Civ. 5163 as a separate action and remove it from the docket.

Lead Plaintiff

The Private Securities Litigation Reform Act provides that the presumptively most adequate plaintiff is the timely movant with the largest financial interest who makes a preliminary showing of the required class-representative qualities. The court considered the number of shares purchased, net shares purchased, total net funds spent, and approximate losses. It treated financial loss as the most important factor.

The court found that Joseph Nolff had the largest financial loss, stated as $470,510. The other stated losses were $103,815 for Velardo, $57,819.51 for Rasoumoff, $119,011.73 for Zenoff, $14,687 for Lin, and $25,773 for Kerzhner. The court also found that Nolff made the required preliminary showing of typicality and adequacy: he asserted the same securities claims as the other class members, had suffered the greatest loss, and had investing experience that suggested he could lead the litigation.

Velardo argued that Nolff had not provided enough information to make that preliminary showing. The court rejected the challenge because Velardo offered no proof that Nolff could not adequately represent the class. The court therefore granted Nolff’s motion for appointment as lead plaintiff.

Lead Counsel

Under the securities statute, the lead plaintiff selects class counsel, subject to court approval. Nolff selected The Rosen Law Firm. Based on materials describing the firm’s attorneys and experience litigating class actions, the court found that the firm could capably represent the class and granted Nolff’s motion to appoint it as lead counsel.

Disposition

Judge Victor Marrero granted the motions to consolidate the actions. The court granted Joseph Nolff’s motion to be lead plaintiff and granted his motion to appoint The Rosen Law Firm as lead counsel. It denied the motions of Antonio Velardo, Tamara Rasoumoff, Andrew Zenoff, Hungen Lin, and Boris Kerzhner for appointment as lead plaintiff and lead counsel. The opinion addressed consolidation and leadership of the litigation; it did not decide whether Aterian violated the securities laws.