In What Appears To Be A Nationwide Trend Of Attacking Class Certifications, Snapchat Seeks 9th Circuit Review

Last month, Snapchat (“Snap”) petitioned the 9th Circuit to review U.S. District Judge Stephen Wilson’s certification of a class of investors suing Snap over alleged misrepresentations and omissions from its 2017 IPO. Snap argued that, among other reasons, the U.S. Supreme Court’s China Agritech v. Resh, 138 S.Ct. 1800 (2018) decision precluded the class certification because Judge Wilson had already denied a motion for class certification in 2018.

A Snap investor was originally appointed lead plaintiff in 2017 and moved for class certification in mid-2018. Following the bid for certification, the Snap lead plaintiff withdrew from the case due to health reasons causing Judge Wilson to deny the class certification and reopen the lead plaintiff selection process. A new investor group was selected to lead the case and a new motion for certification was filed and subsequently granted. Snap now wants the 9th circuit to step in, arguing that Judge Wilson erred by granting the certification since this situation fits the facts of China Agritech.

In China Agritech, the Supreme Court ruled that once a class certification is denied, a putative class member cannot commence a new class action with the same allegations after the applicable statute of limitations has expired. Id. at 1804-1811. Snap asserts that the Snap case is exactly this: Judge Wilson denied the original motion for class certification and none of the new lead plaintiffs from the investor group originally filed a class action within the applicable statute of limitations. Judge Wilson acknowledged these facts but ruled that this case was different. Judge Wilson found that because “(1) class certification has never been addressed on the merits, (2) the new Lead Plaintiffs were chosen to replace a class representative who withdrew for medical reasons, and (3) the previous Lead Plaintiff had validly asserted these claims within the requisite time period,” this case did not raise the concerns addressed by China Agritech and therefore the class could be certified. In re Snap Inc. Securities Litigation, No. 2:17-cv-03679-SVW-AGR, 2019 WL 6270291, at *10 (C.D. Cal Nov. 20, 2019).

The 9th Circuits decision on whether there are exceptions to China Agritech will have a substantial effect on investors who want to file class action lawsuits.