Stephen Bushansky, derivatively on behalf of Progenity, Inc. v. Harry Styli, et al.

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 STEPHEN BUSHANSKY, derivatively on Case No.: 3:21-cv-01065-RBM-AHG behalf of PROGENITY, INC, 12 ORDER GRANTING JOINT Plaintiff, 13 MOTION AND STIPULATION FOR v. VOLUNTARY DISMISSAL 14 WITHOUT PREJUDICE HARRY STYLLI, et al., 15 Defendants, [Doc. 15] 16 and 17 PROGENITY, INC., a Delaware 18 Corporation,

19 Nominal Defendant, 20 21 22 On April 22, 2026, Plaintiff Stephen Bushansky (“Plaintiff”), Defendants Harry 23 Stylli, Jeffrey D. Alter, John T. Bigalke, Jeffrey A. Ferrell, Brian L. Kotzin, Samuel R. 24 Nussbaum, and Lynne Powell (“Individual Defendants”), and nominal defendant 25 Progenity, Inc. (“Progenity”) (collectively, the “Parties”) filed a Joint Motion and 26 Stipulation for Voluntary Dismissal Without Prejudice (“Joint Motion”). (Doc. 15.) The 27 Parties “seek to voluntarily dismiss [the instant] [a]ction in its entirety without prejudice.” 28 (Id. at 3.) For the reasons set forth below, the Joint Motion (Doc. 15) is GRANTED. 1 I. BACKGROUND 2 The Court previously granted the Parties’ joint motion to stay this Derivative Action 3 pending the “resolution of Defendants’ motion to dismiss” in the related securities class 4 action captioned In re Progenity, Inc. Securities Litigation, Case No. 20-cv-1683-RBM- 5 AHG (S.D. Cal.) (“Securities Class Action”). (Doc. 6.)1 The Court further extended the 6 stay “until the time to appeal the Court’s order granting the motion to dismiss in [the 7 Securities Class Action] expires and/or any such appeal is resolved by the Ninth Circuit 8 Court of Appeals.” (Doc. 10). On January 10, 2025, Defendants filed a Notice of 9 Suggestion of Bankruptcy and Automatic Stay informing the Court that Progenity had filed 10 a voluntary petition for relief and commenced bankruptcy proceedings. (Doc. 13.) 11 On March 4, 2026, this Court granted final approval of the class action settlement in 12 the Securities Class Action. In re Progenity, Inc. Securities Litigation, Case No. 20-cv- 13 1683-RBM-AHG (S.D. Cal.), ECF No. 105. As the class action settlement was finally 14 approved, the Parties indicate that Progenity and certain Individual Defendants moved the 15 Ninth Circuit Court of Appeals for an order dismissing the appeal of the Securities Class 16 Action” (Doc. 15 at 3.)2 The Parties also indicate that on December 30, 2025, Progenity’s 17 bankruptcy proceedings and estate “were closed, the Bankruptcy Trustee reported that 18 there was no property available for distribution from the bankruptcy estate . . . , that the 19 estate . . . was fully administered, and, consequently, the Bankruptcy Trustee was 20 discharged from and relieved of his trust.” (Id. at 3.)3 21

22 23 1 Plaintiff and Individual Defendants were parties to the Securities Class Action. (See Doc. 15 at 2.) 24

25 2 Having served its purpose, the Court LIFTS is previously ordered stay.

26 3 As Progenity’s bankruptcy proceedings have concluded, the automatic stay has been 27 terminated. See Roohan v. Nat’l Mortg., Case No.: 17cv01876 JAH-JLB, 2018 WL 1562013, at *2 (S.D. Cal. Mar. 29, 2018) (citing In re Weston, 110 B.R. 452, 456, 457 28 l Il. DISCUSSION 2 Under Federal Rule of Civil Procedure(“Rule’’) 41, a court order is not required to 3 effectuate the dismissal when the notice of dismissal is filed before any defendant has 4 ||answered or moved for summary judgment. Fed. R. Civ. P. 41(a)(1)(A). However, Rule 5 states that “[a] derivative action may be settled, voluntarily dismissed, or 6 ||compromised only with the court’s approval.” Fed. R. Civ. P. 23.1(c). In such cases, 7 ||“[nJotice of a proposed settlement, voluntary dismissal, or compromise must be given to 8 ||shareholders or members in the manner that the court orders.” Jd. “While the language of 9 23.1(c) suggests that notice is mandatory, courts have exercised their discretion to 10 || allow parties to dispense with the notice requirement . . . when absent class members will 11 ||not be prejudiced by the lack of notice.” Bushansky v. Armacost, Case No. 12—cv—01597- 12 || IST, 2014 WL 2905143, at *2 (N.D. Cal. June 25, 2014). 13 The Court finds there is no risk of prejudice to absent shareholders if notice is not 14 || given because, as the Parties note (see Doc. 15 at 3-4), the dismissal is without prejudice 15 || and will therefore not preclude other shareholders from pursuing claims. See Bushansky, 16 }}2014 WL 2905143, at *2; In re Intel Corp. S’holder Derivative Litig., Case No. 18-cv- 17 ||01489-YGR, 2019 WL 317401, at *3 (N.D. Cal. Jan. 24, 2019). Rule 23.1(c)’s notice 18 requirement is therefore excused. 19 Ht. CONCLUSION 20 Accordingly, the Joint Motion (Doc. 15) is GRANTED and the above-captioned 21 |;action is DISMISSED WITHOUT PREJUDICE. Each party shall bear their own 22 ||attorneys’ fees and costs. The Clerk is directed to close the case. 23 IT IS SO ORDERED. 24 ||DATE: April 23, 2026 ZR Ea rady Maye 6 HON. RUTH BERMUDEZ MONTENEGRO UNITED STATES DISTRICT JUDGE 27 28