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In re Aqua Metals Securities Litigation

United States District Court, N.D. California

May 23, 2018

In Re Aqua Metals Securities Litigation

          ORDER DENYING SINGER'S AND JORDAN'S MOTIONS AND GRANTING THE PLYMOUTH GROUP'S MOTION FOR APPOINTMENT AS LEAD PLAINTIFF AND APPROVAL OF LEAD COUNSEL RE: DKT. NOS. 13, 21, 23

          HAYWOOD S. GILLIAM, JR. UNITED STATES DISTRICT JUDGE.

         On December 15, 2017, Plaintiff Arlis Hampton filed this securities class action lawsuit individually and on behalf of others who acquired common stock of Aqua Metals, Inc. (“Aqua Metals”) during the period between May 19, 2016 and November 9, 2017 (“Class Period”) and consequently suffered damages.[1] Dkt. No. 1 (“Compl.”) ¶ 1. Also on December 15, 2017, notice of this suit was published in Business Wire. See Dkt. No. 24 (“Lavallee Decl.”) Ex. 1. The complaint asserts claims under §§ 10(b) and 20(a) of the Exchange Act (15 U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 (17 C.F.R. § 240.10b-5). Compl. ¶ 16. The complaint names the following defendants: Aqua Metals, Inc. (“Aqua Metals”); Aqua Metals' Chief Executive Officer, Stephen R. Clarke; Aqua Metals' Chief Financial Officer until August 10, 2017, Thomas Murphy; and Aqua Metals' Chief Financial Officer from August 10, 2017 until the end of the class period, Mark Weinswig. Compl. ¶¶ 21-24.

         Three competing motions for appointment as lead plaintiff and approval of lead counsel are pending: (1) a motion filed by Andrew Singer, seeking appointment of himself as lead plaintiff and approval of Faruqi & Faruqi, LLP as lead counsel, Dkt. No. 13; (2) a motion filed by Paul Jordan, seeking appointment of himself as lead plaintiff and approval of Glancy Prongay & Murray LLP as lead counsel, Dkt. No. 21; and (3) a motion filed by the Plymouth County Retirement Association and Denis and Theresa Taillefer's private company 1103371 Ontario Ltd., (collectively, the “Plymouth Group”), seeking appointment of the Plymouth Group as lead plaintiff and approval of Berman Tabacco and Levi & Korsinsky as co-lead counsel (“Plymouth Mot.”).[2] Having carefully considered the relevant filings and authorities, the Court hereby DENIES the Singer and Jordan motions and GRANTS the Plymouth Group's motion.

         I. BACKGROUND

         Aqua Metals is a company purportedly formed to recycle lead through a process called “AquaRefining.” Compl. ¶ 2. Defendants allegedly made materially false or misleading statements and failed to disclose problems Aqua Metals was having in ramping up their lead recycling processes. Id. ¶ 14. As a result of Defendants' alleged omissions, when Aqua Metals stock price declined, Plaintiffs (who acquired Aqua Metals securities at artificially inflated prices during the Class Period) suffered financial losses. See Id. ¶¶ 1, 15, 54.

         Specifically, Plaintiffs allege that Defendants concealed:

(1) that Aqua Metals' breaking and separating process was facing substantial obstacles due to AquaRefining's need for a much higher degree of separation than is normal in the industry; (2) that the Company's breaking and separating process was not operating reliably or efficiently; (3) that the breaking and separating obstacles and issues were negatively impacting the Company's output; (4) that the Company's four “operating modules” were being used primarily for experimentation, rather than production; (5) that module operators were assisting with lead removal; (6) that, as a result of the foregoing, the ramp up of the Company's recycling process was being significantly hindered and delayed; and (7) that, as a result of the foregoing, Defendants' statements about Aqua Metals' business, operations, and prospects, were materially false and/or misleading and/or lacked a reasonable basis.

Id. ¶ 14.

         On November 9, 2017, after a series of allegedly incomplete disclosures in May, August, and October of 2017, Aqua Metals made an announcement revealing its struggles to become fully operational. Id. ¶¶ 32-33, 45. Aqua Metals stock declined by approximately 26%, 24%, 28%, and 2% following the May, August, October, and November announcements, respectively. Compl. ¶¶ 32-33, 37-38, 42. By November 14, 2017, Aqua Metals's stock closed at $3.00 per share, down from $16.65 per share in early May. Compl. ¶¶ 5, 13.

         II.APPOINTMENT OF LEAD PLAINTIFF

         The Private Securities Litigation Reform Act (“PSLRA”) “instructs district courts to select as lead plaintiff the one ‘most capable of adequately representing the interests of class members.'” In re Cavanaugh, 306 F.3d 726, 729 (9th Cir. 2002) (quoting 15 U.S.C. § 78u-4(a)(3)(B)(i)). “The ‘most capable' plaintiff-and hence the lead plaintiff-is the one who has the greatest financial stake in the outcome of the case, so long as he meets the requirements of Rule 23.” See Id. The Ninth Circuit has interpreted the PSLRA as establishing “a simple three-step process for identifying the lead plaintiff pursuant to these criteria.” Id.

         A. Step One

         Step one consists of meeting the PSLRA's notice requirement. See Id. “The first plaintiff to file an action covered by the [PSLRA] must post this notice ‘in a widely circulated national business-oriented publication or wire service.'” Id. (quoting 15 U.S.C. § 78u-4(a)(3)(A)(i)). The notice must be published within twenty days of the filing of the complaint. 15 U.S.C. § 78u-4(a)(3)(A)(i). The notice must also alert putative class members “(I) of the pendency of the action, the claims asserted therein, and the purported class period; and (II) that, not later than 60 days after the date on which the notice is published, any member of the purported class may move the court to serve as lead plaintiff of the purported class.” Id.

         Here, notice was published in Business Wire on December 15, 2017. See Lavallee Decl. Ex. 1. This clearly complied with the PSLRA's 20-day filing deadline. See 15 U.S.C. § 78u-4(a)(3)(A)(i). Business Wire is “a national, business-oriented news service.” Lavallee Decl. ¶ 2. Thus, as required, the notice was posted “in a widely circulated national business-oriented publication or wire service.” See Cavanaugh, 306 F.3d at 729 (quoting 15 U.S.C. ยง 78u- 4(a)(3)(A)(i)). Finally, the notice announced the filing of this class action, described the asserted claims, specified the putative class period, and explained that any motion to be appointed ...


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