Ragan v. AppHarvest, Inc.
1:21-cv-07985
| S.D.N.Y. | Dec 13, 2021Background
- AppHarvest became public via a SPAC merger (Novus) in Jan 2021; the company operates large controlled-environment greenhouses and had an exclusive distributor, Mastronardi.
- May 17, 2021: AppHarvest issued Q1 2021 statements and an 10-Q reporting modest net sales and guidance; public statements emphasized ramping Morehead farm and distributor support.
- Aug 11, 2021: AppHarvest disclosed worse Q2 results, reduced 2021 sales guidance sharply, and blamed operational ramp-up and labor/productivity issues; stock dropped ~29%.
- Two putative class actions followed: Ragan (filed Sept. 24, 2021) alleged a class period May 17–Aug 10, 2021; Plymouth County (filed Nov. 22, 2021) alleged a longer class period beginning Oct. 9, 2020 (based on Registration Statement and related releases).
- Lead-plaintiff motions were filed by Alan Narzissenfeld (claiming $391,369.23 loss in Ragan period) and Plymouth County (claiming losses only if longer period used). Court had to decide which lead plaintiff to appoint, which class period to use for that analysis, whether to approve lead counsel, and whether to consolidate the two actions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Which movant has the largest financial interest / should be lead plaintiff? | Narzissenfeld: timely move re Ragan class period; largest losses ($391,369). | Plymouth Cty: urges longer class period to show its losses and thus larger stake. | Appointed Narzissenfeld as lead plaintiff (largest financial interest under Ragan period; satisfies Rule 23 prima facie). |
| Appropriate class period for lead-plaintiff analysis | Plymouth Cty: class should start Oct 9, 2020 (Registration Statement/press releases). | Narzissenfeld: lead-plaintiff analysis should use Ragan period; earlier statements did not speak to the operational issues corrected Aug 2021. | Court rejected the longer period as implausible here; the Oct 2020 statements did not relate to the later operational problems—used Ragan period. |
| Approval of lead counsel | Narzissenfeld selected Levi & Korsinsky, LLP. | Plymouth Cty proposed Scott & Scott. | Court approved Levi & Korsinsky as lead counsel (PLSRA presumption to accept properly selected counsel). |
| Consolidation of related cases | Both actions arise from same statements/defendants; consolidation promotes efficiency. | No persuasive barrier to consolidation; concerns about fairness addressed by court. | Cases consolidated under In re AppHarvest Securities Litigation, No. 21-cv-7985-LJL. |
Key Cases Cited
- In re BP, PLC Sec. Litig., 758 F. Supp. 2d 428 (S.D. Tex. 2010) (district court should avoid making binding class-period determinations at lead-plaintiff stage)
- Plumbers & Pipefitters Local 562 Pension Fund v. MGIC Inv. Corp., 256 F.R.D. 620 (E.D. Wis. 2009) (discussing use of longer class period when appropriate)
- Varghese v. China Shenghuo Pharm. Holdings, Inc., 589 F. Supp. 2d 388 (S.D.N.Y. 2008) (lead-plaintiff selection framework and analysis)
- In re Doral Fin. Corp. Sec. Litig., 414 F. Supp. 2d 398 (S.D.N.Y. 2006) (using longer class period when it encompasses more class members and relevant misstatements)
- Johnson v. Celotex Corp., 899 F.2d 1281 (2d Cir. 1990) (standards and discretion for consolidation under Rule 42)
- Weltz v. Lee, 199 F.R.D. 129 (S.D.N.Y. 2001) (consolidation appropriate where complaints are based on same public statements and reports)
- In re Cendant Corp. Litig., 264 F.3d 201 (3d Cir. 2001) (presumption in favor of approving lead plaintiff’s counsel selection)
- Iron Workers Loc. No. 25 Pension Fund v. Credit-Based Asset Servicing & Securitization, LLC, 616 F. Supp. 2d 461 (S.D.N.Y. 2009) (5-in-3 lead-plaintiff rule may be waived for institutional investors)
- Khunt v. Alibaba Grp. Holding Ltd., 102 F. Supp. 3d 523 (S.D.N.Y. 2015) (only a prima facie Rule 23 showing—typicality and adequacy—is required at lead-plaintiff stage)