MARK HABELT, ET AL V. IRHYTHM TECHNOLOGIES, INC., ET AL, No. 22-15660 (9th Cir. 2023)
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iRhythm Technologies, Inc.’s (iRhythm) stock price fell after it received a historically low Medicare reimbursement rate for one of its products. Appellant, an investor in iRhythm, filed a putative securities fraud class action against iRhythm and one of its former Chief Executive Officers, alleging that investors were misled during the regulatory process preceding this stock price collapse. Pursuant to the Private Securities Litigation Reform Act of 1995 (PSLRA), the district court appointed Public Employees’ Retirement System of Mississippi (PERSM) as the lead plaintiff in the action. PERSM filed a first and then second amended complaint (SAC, the operative pleading) alleging securities fraud claims against iRhythm and additional corporate officers (together, Defendants). Defendants filed a motion to dismiss PERSM’s SAC for failure to state a claim. PERSM did not appeal the district court’s grant of this motion. Appellant appealed.
The Ninth Circuit dismissed, for lack of jurisdiction due to Appellant’s lack of standing, an appeal from the district court’s dismissal of a putative securities fraud class action. The panel held that Appellant lacked standing to appeal because he was not a party to the action. Appellant’s filing of the initial complaint and his listing in the caption of the second amended complaint were insufficient to confer party status upon him. The body of the operative complaint made clear that PERSM was the sole plaintiff, and Appellant’s status as a putative class member did not give him standing to appeal. The panel further held that Appelant failed to demonstrate exceptional circumstances conferring upon him standing to appeal as a non-party.
Court Description: Securities Fraud / Appellate Jurisdiction The panel dismissed, for lack of jurisdiction due to appellant’s lack of standing, an appeal from the district court’s dismissal of a putative securities fraud class action.
Appellant Mark Habelt filed the action, but, pursuant to the procedures of the Private Securities Litigation Reform Act of 1995, the district court appointed Public Employees’ Retirement System of Mississippi (PERSM) as lead plaintiff. PERSM filed a first and then second amended complaint, and the district court dismissed for failure to state a claim. PERSM did not appeal.
The panel held that Habelt lacked standing to appeal because he was not a party to the action. Habelt’s filing of the initial complaint and his listing in the caption of the second amended complaint were insufficient to confer party status upon him. The body of the operative complaint made clear that PERSM was the sole plaintiff, and Habelt’s status as a putative class member did not give him standing to appeal. The panel further held that Habelt failed to demonstrate exceptional circumstances conferring upon him standing to appeal as a non-party.
Dissenting, Judge Bennett wrote that he would allow the appeal by Habelt because he was a party, and even if he were not, exceptional circumstances would allow him to appeal as a non-party. On the merits, Judge Bennett would reverse the district court’s dismissal as to three alleged misrepresentations by defendants.
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