In re SelectQuote, Inc. Securities Litigation

Background

Two proposed securities class actions were pending against SelectQuote, Inc. and its directors and officers. The complaints alleged that the defendants made materially false or misleading statements and failed to disclose material adverse facts concerning SelectQuote’s financial metrics, sustainability, and growth in China. The proposed classes consisted of people who purchased SelectQuote shares during proposed class periods.

Both complaints asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act. The West Palm Beach Police Pension Fund complaint also asserted claims under Sections 11, 12(a)(2), and 15 of the Securities Act. The proposed class periods differed: the UA Local 38 Group proposed beginning February 8, 2021, while the West Palm Group proposed beginning May 20, 2020, the date of SelectQuote’s initial public offering. Both proposed ending the period on May 11, 2021.

Consolidation

The court held that consolidation was warranted under Federal Rule of Civil Procedure 42(a). The cases involved identical Exchange Act provisions, analogous facts, and similar parties. The court also found that consolidation would avoid unnecessary cost and delay. Although the UA Local 38 Group argued that the West Palm Group could face unique standing defenses if the shorter class period were adopted, the court found that concern insufficient at that stage of the litigation.

The court ordered the action in West Palm Beach Police Pension Fund v. SelectQuote, Inc., No. 1:21-cv-08279-UA, consolidated with the action in Hartel v. SelectQuote, Inc., No. 1:21-cv-06903-AKH. It further ordered that related pending, later-filed, removed, or transferred actions be consolidated for all purposes, that the consolidated case proceed under the name In re SelectQuote, Inc. Securities Litigation, and that the file be maintained under Master File No. 1:21-cv-06903-AKH.

Lead Plaintiff and Lead Counsel

The Private Securities Litigation Reform Act requires the court to appoint the person or group most capable of adequately representing the class. The statute creates a rebuttable presumption in favor of the plaintiff or group with the largest financial interest that also meets the relevant requirements of Federal Rule of Civil Procedure 23. At this early stage, the court focused on typicality and adequacy.

The West Palm Group argued that it should be appointed lead plaintiff for the class period beginning with SelectQuote’s initial public offering. The court found that the group’s allegations concerning SelectQuote’s pre-offering renewal rates and recognized revenue did not make it inadequate, even if a shorter class period were later adopted. The court declined to rely on hypothetical future developments and selected the West Palm Group as the most appropriate lead plaintiff for the proposed class period.

Order

The court granted West Palm Beach Police’s and Fort Lauderdale P&F’s motion. It appointed West Palm Beach Police Pension Fund and the City of Fort Lauderdale Police & Fire Retirement System as lead plaintiff, approved their selection of Bernstein Litowitz Berger & Grossmann LLP, and appointed that firm as lead counsel for the class. The court also directed the parties to meet and confer and submit a proposed case schedule, including a timeline for filing a consolidated amended complaint, by October 3, 2022. The Clerk was directed to terminate ECF Nos. 9, 12, and 14.