The company’s lawyers said the proposed class was already represented by a previously-certified class in a suit filed in federal court in California.
The investors in the state court suit in San Francisco Superior Court are alleging claims under the Securities and Exchange Act of 1934. They say the company’s registration statement and prior disclosures made misleading statements or omissions about its market share and price competition with
Lyft told potential investors that market share was flat or growing, and that the company was successfully competing with its main rival, the complaint alleged. But in reality, market share was collapsing, and Lyft was engaged in a vicious price war with Uber, that its competitor was winning, the investors said.
That price war was waged through “couponing,” the practice of offering consumers discounted rates through coupons they can access on their phones, and Lyft’s market share was falling week over week in the months leading up to its IPO, the investors alleged.
The investors asked San Francisco Superior Court Judge Andrew Y.S. Cheng to certify a class of IPO stock purchasers who were damaged by Lyft’s alleged omissions, over the rideshare company’s objections that proposed class members were already represented in a previously-certified class in federal court.
In August, Judge Haywood S. Gilliam Jr. of the U.S. District Court for the Northern District of California certified a class of IPO investors also alleging Securities Act violations.
Class certification in the state case is still appropriate, the investors told Cheng, because the state action is significantly different from the federal one. The state suit names the IPO underwriters as defendants, has an earlier proposed trial date, and includes claims under Section 12 of the Securities and Exchange Act, which the federal case lacks, the investors said.
California appellate court precedent indicates that one of the factors to be weighted when considering class certification is the extent of similar litigation, Lyft told Cheng. The federal case is based on the same set of facts, and involves the same parties, Lyft said.
There are already lawyers who represent the proposed class, in federal court, and those lawyers made a strategic decision early on in the federal case to dismiss the underwriters as parties, Lyft argued. The federal court plaintiffs have significantly more shares at stake, and the underwriters are indemnified by Lyft, so including them as defendants doesn’t increase the possible award, the company said.
Scott & Scott LLP represents the state investors. Latham & Watkins LLP represents Lyft.
The case is In Re Lyft Inc. Securities Litigation, Cal. Super. Ct., No. CGC19575293, 11/4/21.