ALLENTOWN – A federal judge has consolidated a securities class action litigation, which claims that a software and payment processing company made materially false and misleading statements regarding its own business, operations and compliance policies.
Alfred O’Meara and Robert Baer (individually and on behalf of all others similarly-situated) initially filed suit in the U.S. District Court for the Eastern District of Pennsylvania on Aug. 18 versus Shift4 Payments, Inc., its CEO Jared Isaacman, its current CFO Nancy Disman and its former CFO Bradley Herring, all of Allentown.
(Baer filed a related lawsuit against the same defendants in the same court on Oct. 13.)
U.S. District Court for the Eastern District of Pennsylvania Judge Joseph F. Leeson Jr. issued a memorandum opinion on Nov. 3, which granted Baer’s motion to consolidate the cases, to appoint him as lead plaintiff and his choice of both counsel and co-counsel.
“Shift4 Payments, Inc. is a company which provides software and payment processing solutions. Shift4’s corporate leaders include defendants Jared Isaacman (Chief Executive Officer), Nancy Disman (Chief Financial Officer since Aug. 5, 2022), and Bradley Herring (Chief Financial Officer prior to Aug. 5, 2022). In the third quarter of 2022, Shift4 completed its ‘mass strategic buyout program.’ The program was an effort to insource its sales distribution network. However, O’Meara and Baer allege that, in the wake of the program, a series of accounting maneuvers presented an inaccurate picture of Shift4’s financial performance. This came to light on Oct. 21, 2022, when Shift4 filed a report with the SEC disclosing that a number of its prior financial statements could no longer be relied upon because of a material weakness in its financial controls. Specifically, the issue arose out of treating customer acquisition costs as cash used in investing activities as opposed to operating activities. The revised statements presented a significant decrease in net cash provided by operating activities. As a result, Shift4’s stock price fell 2.67%,” Leeson said.
“Additionally, Shift4 is not a ‘member bank’ and is thus ‘not eligible for primary membership in certain payment networks.’ To gain access to them, Shift4 utilizes a sponsor bank. The sponsor bank agreement requires that Shift4 deposit significant funds with the sponsor bank to cover overdraft obligations. Sometime before the fourth quarter of 2022 ended, Shift4 withdrew the entire deposit while claiming the maneuver was part of negotiations for lower collateral requirements. However, Shift4 reported the withdrawal as an addition to its operating cash flow. On April 19, 2023, Blue Orca Capital issued a report, in part, detailing this maneuver. On this news, Shift4’s stock price fell 8.68%. On Aug. 18, 2023, O’Meara filed the instant complaint, docketed at 5:23-cv-03206, bringing a securities class action on behalf of those who purchased Shift4 securities between Nov. 10, 2021, and April 18, 2023. On Oct. 13, 2023, Baer filed the instant complaint, subject to consolidation, which is docketed at 5:23-cv-03969 and brings a securities class action on behalf of those who purchased Shift4 securities between June 5, 2020, and April 18, 2023.”
Leeson added that the Court “finds consolidation appropriate as the related actions concern common question of law and fact” and that plaintiff counsel provided proper notice of the action to prospective class members.
“Each action asserts violations of Sections 10(b) and 20(A) of the Securities Exchange Act of 1934 against Shift4. The related actions are also premised on the same wrongdoing and will thus turn on common questions of law and fact – namely, the propriety of Shift4’s financial statements and omissions. Further, maintaining separate actions will waste judicial resources. Accordingly, the Court consolidates the related actions. The Court is also satisfied with the class notice. As an exhibit to the instant motion, Baer has attached a copy of the published notice. It is an Aug. 20, 2023, Globe Newswire posting wherein Pomerantz LLP announced the filing of the instant class action, and apprised the purported class of the nature of the suit as well as the purported class period. The notice also notified shareholders of the opportunity to serve as lead plaintiff. Having found notice sufficient, the Court turns to the task of selecting the lead plaintiff,” Leeson stated.
“The only motion for appointment of lead plaintiff received by the Court was filed by Baer on Oct. 19, 2023. Having reviewed the motion, the Court finds that Baer satisfies the statute’s rebuttable presumption framework. He filed the original complaint in the matter docketed with this Court at 5:23-cv-03969, which was consolidated. He also has the largest financial interest in the matter. Baer purchased 160 shares of Shift4 stock during the class period, spending $13,039 and losing $2,677. Baer also satisfies Rule 23’s typicality and fairness/adequacy requirements. Baer’s claims are typical of the class in that his financial interest was harmed by the alleged false or misleading statements concerning Shift4’s finances. Thus, his claims are typical such that in pursuing his claims, he will advance the interests of the class. The Court also finds that Baer will fairly and adequately represent the interests of the class. He is a sophisticated investor. He holds a Master’s Degree in Business Management from John Hopkins University and has been investing in securities markets for over 45 years. Finally, the Court also approves of Baer’s choice of counsel. Pomerantz, LLP has a wealth of experience in class action securities litigation. Pomerantz has been at the forefront of securities litigation in this country and has achieved numerous sizeable settlements for its clients. The Court also approves of the Schall Law Firm as co-counsel. Per the firm’s representations to the Court, the Schall Firm has been at the forefront of securities litigation and recovered significant sums for its clients as well.”
For counts of violating Sections 10(b), 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934, the plaintiffs are seeking damages of an unspecified amount, pre-judgment and post-judgment interest, reasonable attorneys’ fees, expert fees and other costs, and such other and further relief as this Court may deem just and proper.
The plaintiffs are represented by Brenda Szydlo, J. Alexander Hood II, Dean Paul Ferrogari, Jeremy A. Lieberman and Emily Finestone of Pomerantz Law in New York, N.Y., plus Corey D. Holzer of Holzer & Holzer, in Atlanta, Ga.
The defendants have not yet secured legal counsel.
U.S. District Court for the Eastern District of Pennsylvania case 5:23-cv-03206
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com