McCormack v. Dingdong Ltd.

Background

Ryan McCormack brought a securities-fraud action against Dingdong (Cayman) Ltd. and several officers and underwriters. He alleged violations of Sections 11, 12, and 15 of the Securities Act of 1933. The opinion addressed only McCormack’s request to reopen the process for appointing a lead plaintiff and approving lead counsel; it did not decide whether the securities-fraud allegations were true or legally sufficient.

Under the Private Securities Litigation Reform Act, or PSLRA, courts generally presume that the most adequate plaintiff should serve as lead plaintiff in a securities class action if that person meets the statutory requirements. The court explained that the PSLRA is intended to reduce lawyer-driven litigation and give investors primary control over the case. It also stated that the statute generally contemplates selecting a lead plaintiff at the beginning of the lawsuit, rather than repeatedly reopening that process.

McCormack’s request

McCormack had claimed that he bought and held 40 shares of Dingdong stock during the class period and suffered total losses of $504.40. He was the only person who filed a motion seeking appointment as lead plaintiff. In an earlier order, the court determined that McCormack was not suitable to serve as lead plaintiff, and no other candidate had applied.

McCormack asked the court to reopen the process, including because he contended that Scott+Scott’s initial notice was deficient. The court noted that several other law firms had also published notices in widely circulated publications and wire services. Those notices informed potential lead plaintiffs about the action, the claims, the proposed class period, and the opportunity to seek appointment. The court cited notices published through Business Wire and PR Newswire as examples of notices that provided sufficient information.

McCormack also argued that reopening was necessary because some class members might be prevented from pursuing claims as early as March 2023 under the Securities Act’s one-year limitations period for Section 11 claims. The court stated that McCormack could still pursue his claims individually. It also found that the lead-plaintiff process had been procedurally satisfied and that McCormack had not shown good cause, such as a substantial change to the complaint or claims or a fatal defect in the earlier process.

Ruling

The court denied McCormack’s motion to reopen the lead plaintiff and lead counsel appointment process. It reasoned that reopening would be inconsistent with the PSLRA’s purpose, would further delay the case, and was not warranted because the scope of the claims had not changed and potential lead plaintiffs had received ample notice.

The court directed the parties to submit, within 21 days, a proposed schedule for filing any amended complaint and later responses. The opinion did not resolve the merits of McCormack’s securities claims.