In re Green Dot Corporation Securities Litigation, 2:19-cv-10701

Background

Securities-fraud putative class action against Green Dot; competing lead-plaintiff motions under the PSLRA by the New York Hotel Trades Pension Fund ("Pension Fund") and an investor group (the "IGG").
Pension Fund claimed ~$662,539 in losses; IGG comprised of three institutional investors claimed individual losses of $592,917, $301,353, and $130,114 (total ~$1,071,666).
Court applied the PSLRA three-step framework (Cavanaugh) and declined to aggregate IGG members’ losses, citing district-court consensus rejecting unrelated, lawyer-assembled groups formed solely to aggregate claims.
The Court therefore treated the Pension Fund as the movant with the largest financial stake and appointed it lead plaintiff.
After the Ninth Circuit's decision in In re Mersho, IGG moved for reconsideration arguing Mersho requires aggregation and appointment of IGG; the Court denied reconsideration.
Court held Mersho did not compel a different result: district courts may consider pre-litigation relationships/cohesion (often at step two), and IGG failed to make a prima facie showing of adequacy.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether an investor group may aggregate separate members’ losses to satisfy the PSLRA "largest financial interest" requirement	IGG: Mersho permits aggregation; IGG's combined losses make it largest movant	Pension Fund/Court: Aggregation improper for unrelated, lawyer-assembled groups; look to individual stakes	Court declined to aggregate IGG losses and treated Pension Fund as largest movant
Whether Mersho requires treating an investor group as the presumptive lead plaintiff absent contrary evidence	IGG: Mersho supports presumption for groups that show adequacy	Opposing: Mersho does not compel such treatment in every case; district courts retain discretion	Court: Mersho does not mandate presumption here; factual differences matter; IGG was never treated as presumptive lead
Whether courts may consider pre-litigation relationships/cohesion when assessing adequacy at PSLRA step two	IGG: Cohesion is irrelevant to aggregation/lead status	Opposing: Lack of pre-litigation relationship bears on adequacy and ability to control counsel	Court: District courts may consider pre-litigation relationships/cohesion at step two; such factors are relevant to adequacy
Whether IGG made a prima facie showing of typicality and adequacy to be presumptive lead plaintiff	IGG: Its members are typical/adequate and should lead	Opposing: IGG is artificially formed, lacks cohesion and control, so not adequate	Court: IGG failed to show adequacy; motion for reconsideration denied

Key Cases Cited

In re Cavanaugh, 306 F.3d 726 (9th Cir. 2002) (explains the PSLRA lead-plaintiff three-step framework)
In re Mersho, 6 F.4th 891 (9th Cir. 2021) (clarifies evidentiary burdens when rebutting the lead-plaintiff presumption, and discusses treatment of investor groups)
In re Gemstar-TV Guide Int’l, Inc. Sec. Litig., 209 F.R.D. 447 (C.D. Cal. 2002) (rejects appointment of unrelated, lawyer-assembled investor groups for aggregation)
In re Stitch Fix, Inc. Sec. Litig., 393 F. Supp. 3d 833 (N.D. Cal. 2019) (refuses to permit aggregation for groups without pre-existing relationships)
Frias v. Dendreon Corp., 835 F. Supp. 2d 1067 (W.D. Wash. 2011) (discusses rationales for rejecting artificially formed investor groups)
In re Network Assocs., Inc., Sec. Litig., 76 F. Supp. 2d 1017 (N.D. Cal. 1999) (addresses investor-group aggregation and adequacy concerns)