Damri v. LivePerson, Inc.

Background

Noam Damri filed a proposed securities class action on behalf of people who purchased LivePerson shares between May 10, 2022, and March 16, 2023. He sued LivePerson, Inc., and its officers Robert Locascio and John Collins. The complaint alleges that LivePerson made misleadingly positive statements about its business, operations, prospects, and internal controls while failing to disclose that WildHealth, a company LivePerson had acquired, had been notified that Medicare reimbursements for services connected to a COVID-19 testing demonstration program were suspended pending further review. The opinion states that LivePerson later disclosed the issue and that its share price fell from $11.81 to $4.13 during the disclosure period.

The motion before the court concerned appointment of a lead plaintiff and lead counsel under the Private Securities Litigation Reform Act. Damri was the only person who sought appointment. He stated that he had purchased 500 LivePerson shares during the class period, retained 50 shares through the end of that period, and suffered a $375 loss. Damri selected Pomerantz LLP as proposed lead counsel.

Lead Plaintiff Analysis

The Act directs the court to appoint the person most capable of adequately representing the proposed class. It creates a rebuttable presumption in favor of a candidate who filed the complaint or moved in response to the required notice, has the largest financial interest in the requested relief, and satisfies the relevant requirements of Federal Rule of Civil Procedure 23. At this stage, the court focused on typicality and adequacy. Typicality asks whether the proposed lead plaintiff’s claims arise from the same conduct and involve similar legal arguments as the class members’ claims. Adequacy asks whether the plaintiff has interests that conflict with the class and whether the plaintiff and counsel can competently represent the class.

The court found that Damri met the first requirement because he filed the complaint and was the only applicant. Because no competing applicant had come forward, the court treated Damri’s financial interest as sufficient, subject to its analysis of the Rule 23 factors. The court found his claims typical because, like the claims of other proposed class members, they arose from purchases of LivePerson securities allegedly made at artificially inflated prices because of false or misleading statements or omissions, followed by losses when the truth was disclosed.

LivePerson argued that Damri’s $375 loss was too small to provide an adequate incentive to control the litigation and supervise counsel. The court rejected that argument. It explained that the Act’s lead-plaintiff provisions were intended to prevent a race to the courthouse and to create a competitive process for selecting a qualified representative, not to disqualify people with modest losses. The court also stated that allowing small individual losses to be combined through a class action is a central purpose of class litigation.

The court found no evidence that Damri’s interests conflicted with those of other investors. It also noted his certifications that he had discussed the case with counsel, understood the litigation’s status, and was motivated to participate because of his investment losses. Damri had certified that he was willing to perform the duties of lead plaintiff, and he had retained counsel with significant securities-fraud experience. The court therefore found him adequate and held that no unique defense had been raised against him. It appointed Damri lead plaintiff.

Lead Counsel Analysis

The Act permits the most adequate plaintiff to select class counsel, subject to court approval. Damri selected Pomerantz LLP. After reviewing the firm’s submissions concerning its background and experience, including its experience litigating securities class actions, the court found Pomerantz well qualified and appointed it lead counsel.

Disposition

The court granted Damri’s motion by appointing Noam Damri lead plaintiff and Pomerantz LLP lead counsel. It directed the Clerk of Court to terminate all pending motions and ordered the parties to file a joint letter by March 29, 2024, proposing a schedule for an amended complaint and any motion to dismiss. The opinion addressed leadership and counsel-selection issues; it did not decide whether the securities claims were legally or factually valid.