Plymouth County Retirement Association v. Array Technologies, Inc.

Background

The proposed class action alleges violations of federal securities laws by Array Technologies, Inc. and other defendants during a class period running from October 14, 2020, through May 11, 2021. The complaints allege that Array failed to disclose problems caused by rising steel and freight costs, which allegedly harmed its operations, caused it to miss profit expectations, and led it to revise its full-year projections. The asserted claims arise under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933; Sections 10(b) and 20(a) of the Securities Exchange Act of 1934; and Rule 10b-5.

The court had previously found that two related cases involved the same or substantially similar conduct, claims, and parties and that consolidation was appropriate. The issue in this decision was which investor should be appointed lead plaintiff under the Private Securities Litigation Reform Act, and which law firm should serve as lead counsel. The court did not decide whether the alleged securities-law violations occurred.

Legal standard

The Act generally gives a presumption in favor of the timely movant with the largest financial interest that makes a preliminary showing that it can satisfy the requirements for serving as a class representative. That presumption can be rebutted if the investor cannot fairly and adequately protect the class or faces unique defenses that could make it unable to represent the class. At this stage, the relevant class-representation requirements were typicality and adequacy.

Lead-plaintiff motions

The court considered motions from Discovery Global Opportunity Master Fund Ltd., the Institutional Investor Group, Erste Asset Management GmbH, and the Public Employees Retirement Association of New Mexico. The court determined that all four motions were timely. It also decided that the adequacy of Erste Asset Management’s certification was not determinative because it was unsettled whether the certification requirement applied to a lead-plaintiff candidate that had not filed the complaint.

Based on the investors’ submissions, Erste Asset Management claimed the greatest financial loss, $4,979,096.66. The Institutional Investor Group claimed losses of $1,517,965; Discovery Global Opportunity Master Fund Ltd. claimed $1,296,458; and the Public Employees Retirement Association of New Mexico claimed $1,202,806. The court therefore initially treated Erste Asset Management as the presumptively most adequate lead plaintiff.

The court nevertheless found that Erste Asset Management faced a unique defense concerning standing—the legal requirement that a plaintiff have a sufficient ownership or property interest in the claim. The shares at issue were bought and sold by Erste Asset Management Fonds Nr. 566, while Erste Asset Management stated that it was the fund’s management company. Erste Asset Management relied on an assignment dated July 12, 2021, under which Erste 566 assigned its claims to Erste Asset Management. Because the assignment occurred after the first complaint was filed on May 14, 2021, the court concluded that Erste Asset Management did not have an ownership interest in the claims, and therefore did not have standing to bring them, when the litigation began. The court also found that Erste Asset Management had not shown that an exception allowing it to assert another party’s claims applied.

The court concluded that these standing issues made Erste Asset Management unfit to represent the class. The Institutional Investor Group then became the next presumptively most adequate lead plaintiff because it had the second-largest financial interest. The court found that the group’s claims were typical because it, like other proposed class members, alleged that it bought Array shares during the class period, relied on Array’s misrepresentations, and suffered damages. The court also found that the group had made a preliminary showing that it could adequately protect the class’s interests.

Lead counsel

The Institutional Investor Group selected Labaton Sucharow LLP as lead counsel. The court approved that selection because the firm demonstrated experience litigating class actions and appeared capable of representing the class.

Order

The court granted the motion of the Plymouth County Retirement Association and the Carpenters Pension Trust Fund for Northern California, collectively the Institutional Investor Group, for appointment as lead plaintiff. The court granted the Institutional Investor Group’s motion to appoint Labaton Sucharow LLP as lead counsel. The court denied the motions of Discovery Global Opportunity Master Fund Ltd., Erste Asset Management GmbH, and the Public Employees Retirement Association of New Mexico for appointment as lead plaintiff and lead counsel.