Michiana Area Electrical Workers' Pension Fund v. Inari Medical, Inc.

District Court, S.D. New York·Decided March 27, 2025·No. 1:24-cv-03686·Unknown

Opinion

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

MICHIANA AREA ELECTRICAL WORKER’S PENSION FUND, Individually and on behalf of all others ORDER similarly situated, 24-CV-3686 (JHR) (JW) Plaintiff,

-against-

INARI MEDICAL, INC., et al,

Defendants.

JENNIFER E. WILLIS, United States Magistrate Judge: Before the Court are two sets of dueling motions by plaintiffs Paul Hartmann (“Hartmann”) and Michiana Area Electrical Workers’ Pension Fund (“Michiana”)1. One set of motions are for the appointment of lead plaintiff and the other set of motions are for the appointment of lead counsel. For the following reasons, Michiana and the other pension funds’ motions are GRANTED. The Court appoints the Pension Funds as lead plaintiffs and Grant & Eisenhofer P.A. (“G&E”) and Robbins Geller Rudman & Dowd LLP (“RGRD”) as lead counsels. Accordingly, Hartmann’s motions to be appointed lead plaintiff and to have his choice of counsel appointed as lead counsel are DENIED.

1 Michiana brought their action individually and on behalf of other similarly situated, which includes Oklahoma Law Enforcement Retirement System (“OLERS”) and City of Pontiac Reestablished General Employees’ Retirement System (“PGERS”) (collectively “Pension Funds”). BACKGROUND On May 13, 2024, Michiana Area Electrical Workers’ Pension Fund (“Michiana”) filed the Michiana action. Michiana alleged that Defendants mislead

investors by failing to disclose a bribery scheme. Michiana, No. 24-CV-3686 (JHR) (JW), Dkt. No. 1, at 2. One month later, on June 18, 2024, Hartmann filed the Hartmann action. Hartmann involves the same defendants, the same claims, and the same allegations concerning Defendants’ bribery scheme. Hartman, No. 24-CV-4662 (JHR) (JW), Dkt. No. 1, at 2. In the month July 2024, the instant motions were made by Hartmann and the Pension Funds.2 Hartmann moved to consolidate the Hartmann and Michiana

actions and moved the Court to appoint him and his counsel as lead plaintiff and counsel. Michiana, No. 24-CV-3686 (JHR) (JW), Dkt. No. 13. Michiana, joined by other pension funds, Oklahoma Law Enforcement Retirement System and City of Pontiac Reestablished General Employees’ Retirement System, also moved to consolidate the two actions and have the Pension Funds and their counsels appointed as lead plaintiffs and counsels. Michiana, No. 24-CV-3686 (JHR) (JW), Dkt. No. 18.

These motions were referred to this Court, along with general pretrial matters. Oral argument for these motions was held on March 19, 2025. The Court has already granted the motions to consolidate the two cases. Hartman, No. 24-CV-4662 (JHR) (JW), Dkt. No. 31; Michiana, No. 24-CV-3686 (JHR) (JW), Dkt. No. 40.

2 Arvin Nazerzadeh-Yazdi also filed a motion to consolidate and to have him and his counsel be appointed lead plaintiff and counsel, however he withdrew his motion once it became apparent that he did not “have the largest financial interest in this litigation.” Michiana, No. 24-CV-3686 (JHR) (JW), Dkt. No. 21, at 1-2. DISCUSSION I. Lead Plaintiff The PSLRA asks courts to appoint the “most adequate plaintiff” as the lead

plaintiff as soon as practicable after the consolidation decision is rendered. Constance Sczesny Tr., 223 F.R.D. at 322. A. “[P]erson or [G]roup of [P]ersons” As a preliminary mater, before the Court can choose the lead plaintiff, the Court must determine whether the group of three pension funds can be considered lead plaintiffs under the PSLRA. Hartmann argues that the Court should not appoint the “cobbled together” group as lead plaintiffs, because it would be “contrary to the

purposes of the PSLRA to avoid lawyer-driven litigation.” He also argues the Pension Funds lack a pre-litigation relationship and are a transparent effort by their counsels to manufacture the largest financial interest. Michiana, No. 24-CV-3686 (JHR) (JW), Dkt. No. 23, at 2. In response, the Pension Funds make several arguments. First, they argue that the text of the PSLRA “explicitly instructs that a group may be afforded the

presumption of lead plaintiff.” Id., Dkt. No. 26, at 1-2; 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I) (“the court shall adopt a presumption that the most adequate plaintiff in any private action arising under this chapter is the person or group of persons…”) (emphasis added). Second, they argue that small groups of institutional investors, even without prior relationship, have been appointed lead plaintiffs in other cases. Michiana, No. 24-CV-3686 (JHR) (JW), Dkt. No. 26, at 2. It is “indisputabl[e]” that groups can aggregate their losses to become lead

plaintiff. In re Tarragon Corp. Sec. Litig., No. 07-CV-7972 (PKC), 2007 WL 4302732, at *2 (S.D.N.Y. Dec. 6, 2007). The lack of a pre-litigation relationship does not disqualify the Pension Funds consideration as lead plaintiffs because the PSLRA is “silent as to the relationship, if any, that members of the group must have with one another,” and courts in this District have previously appointed groups who have no pre-litigation relationship as lead plaintiff. Peters v. Jinkosolar Holding Co., No. 11- CV-7133 (JPO), 2012 WL 946875, at *6 (S.D.N.Y. Mar. 19, 2012); Pack v. LuxUrban

Hotels Inc., No. 24-CV-1030 (PAE), 2024 WL 3046258, at *3 (S.D.N.Y. June 18, 2024). However, courts are reluctant to appoint a group as lead plaintiffs if the group was simply assembled to qualify as lead plaintiffs. Peters, 2012 WL 946875, at *6. As a result, a majority of courts in this District will appoint a group of plaintiffs lacking a pre-litigation relationship as lead plaintiffs on a “case-by-case” basis, if the “grouping would best serve the class.” May v. Barclays PLC, No. 23-CV-2583 (LJL),

2023 WL 5950689, at *5 (S.D.N.Y. Sept. 13, 2023) (collecting cases). The five Varghese factors are typically used to determine whether a group can be considered as lead plaintiffs: “(1) the existence of a pre-litigation relationship between group members; (2) involvement of the group members in the litigation thus far; (3) plans for cooperation; (4) the sophistication of its members; and (5) whether the members chose outside counsel, and not vice versa.” Id. (citing Varghese v. China Shenghuo Pharm. Holdings, Inc., No. 09-CV-7422 (VM), 589 F. Supp. 2d 388, 392 (S.D.N.Y. 2008)). Factor one leans against considering the Pension Funds as lead plaintiffs

because the Pension Funds’ declaration is unclear as to whether there was any pre- litigation relationship. Michiana, No. 24-CV-3686 (JHR) (JW), Dkt. No. 20; Id., Dkt. No. 41, at 10. Factors two, three, four, and five lean in favor of considering the Pension Funds as lead plaintiffs. As detailed below, the Pension Funds’ declaration describes their “involvement” in the litigation, their “plans for cooperation,” and their “sophistication.” Id., Michiana, No. 24-CV-3686 (JHR) (JW), Dkt. No. 20-4, at 3. The

Pension Funds have been significantly involved in the litigation’s strategy. Id. The funds were individually interested in creating a group of “sophisticated institutional investors” when seeking lead plaintiff appointment and sought each other out because of their “comprehensive and complimentary purchasing patterns” would allow then to provide broad representation. Id. The Pension Funds have “plans for cooperation.” Id., at 5. They are able to contact each other if a conflict arises, and as

managers of pension funds, they “anticipate arriving at joint decisions consensually.” Id.

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