Million v. Lottery.com, Inc. et al
OPINION AND ORDER re: 26 MOTION to Appoint Preston Million, Tim Weisheipl, Stephan de Bernede, Connor Hitt, and Solutions Tabarnapp Inc. to serve as lead plaintiff(s) . MOTION to Appoint Counsel Berger Montague PC and Kirby McIner ney LLP. filed by Preston Million, 27 MOTION to Appoint RTD Bros LLC, Todd Benn, Tom Benn, and Tomasz Rzedzian to serve as lead plaintiff(s) . MOTION to Appoint Counsel . filed by Tomasz Rzedzian, Todd Benn, Tom Benn, RTD Bros LLC.Accordingly, the Lottery Investor Groups unopposed motion is GRANTED, and the Security Groups motion is DENIED. The Clerk of Court is respectfully directed to terminate the motions pending at ECF Nos. 26 and 27. SO ORDERED. (Signed by Judge Jennifer L. Rochon on 11/18/2022) (jca)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
PRESTON MILLION, et al.,
Case No. 1:22-cv-07111 (JLR)
-againstLOTTERY.COM INC., formerly known as
TRIDENT ACQUISITIONS CORP., et al.,
OPINION AND ORDER
JENNIFER L. ROCHON, United States District Judge:
On August 19, 2022, Plaintiff Preston Million commenced this action on behalf of
himself and all others similarly situated (“Plaintiffs”), against Lottery.com Inc. (“Lottery.com”)
and individual defendants Anthony DiMatteo,1 Matthew Clemenson, and Ryan Dickinson
(“Individual Defendants”) alleging violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934, 15 U.S.C. §§ 78j(b), 78t(a), as amended by the Private Securities
Litigation Reform Act of 1995 (“PSLRA”), 15 U.S.C. § 78u-4 et seq. See ECF No. 1 (“Compl.”)
¶¶ 62-77. Now before the Court is the unopposed motion by RTD Bros LLC, Todd Benn, Tom
Benn, and Tomasz Rzedian (the “Lottery Investor Group” or the “Investor Group”) for
appointment as lead plaintiff and approval of lead counsel. ECF No. 27. For the following
reasons, the Lottery Investor Group’s motion is GRANTED.
Defendant Lottery.com is a Delaware corporation based in Texas, that “operates a
business-to-consumer” platform which allows users to electronically “purchase legally
sanctioned lottery games in the United States and internationally.” Compl. ¶¶ 2, 17. Plaintiffs
Mr. DiMatteo has not yet appeared in this action. See ECF No. 21 (indicating service occurred
on September 30, 2022).
allege that, after Lottery.com’s predecessor Trident Acquisitions Corp. (“TDAC”) entered into a
“Business Combination Agreement” with AutoLotto, Inc., pursuant to which Lottery.com would
become a publicly traded company, id. ¶¶ 3, 25-29, Defendants issued several public filings that
contained materially misleading information about the financial state of Lottery.com, id. ¶¶ 3044. After an internal investigation, Lottery.com issued a series of statements in July 2022 that
allegedly revealed non-compliance with the law and accounting controls, significant issues with
its financial statements, and that the company had insufficient financial resources to operate
without furloughing employees, causing its stock price to fall. Id. ¶¶ 45-52.
On October 18, 2022, Preston Million, Tim Weisheipl, Stephan de Bernede, Connor Hitt,
and Solutions Tabarnapp Inc. (the “Lottery.com Securities Group” or the “Securities Group”)
filed a motion to be appointed as lead plaintiffs and for the selection of law firms Berger
Montague and Kirby McInerney as co-lead counsel. ECF Nos. 26, 29. That same day, movants
RTD Bros LLC, Todd Benn, Tom Benn, and Tomasz Rzedzian (the “Lottery Investor Group”)
filed a motion to be appointed as lead plaintiffs, and for the selection of Glancy Prongay &
Murray LLP as lead counsel. ECF Nos. 27, 28. On November 1, 2022, the Lottery.com
Securities Group filed a notice of its non-opposition to the Lottery Investor Group’s motion.
ECF No. 35. The Lottery.com Securities Group reasoned that the Lottery Investor Group
possesses “the largest financial interest in the relief sought by the class.” Id. at 2. On November
2, 2022, the Lottery Investor Group filed a notice that its motion was not opposed, as the
deadline to file any opposition to its motion had passed. ECF No. 36.
I. Lead Plaintiff
The PSLRA sets forth the process for the appointment of a lead plaintiff in class actions
brought pursuant to the Securities Act. See 15 U.S.C. § 78u-4(a). The statute provides that,
“[n]ot later than 20 days after the date on which the complaint is filed,” the first plaintiffs to file
a complaint must publish notice to the alleged class members advising them about “the pendency
of the action; the claims asserted therein; and the purported class period;” as well as their right to
seek to be appointed as lead plaintiff within sixty days of the publication of the notice. 15 U.S.C.
§ 78u–4(a)(3)(A)(i). Within 90 days after publication of notice, the Court “shall consider any
motion made by a purported class member” and shall appoint as lead plaintiff the “member or
members of the purported plaintiff class that the court determines to be most capable of
adequately representing the interest of class members . . . .” 15 U.S.C. § 78u-4(a)(3)(B); see
Carpenter v. Oscar Health, Inc., No. 22-cv-03885 (ALC) (VF), 2022 WL 4485276, at *2
(S.D.N.Y. Sept. 27, 2022).
When making this determination, the PSLRA instructs the Court to “adopt a presumption
that the most adequate plaintiff in any private action . . . is the person or group of persons
that[: (1)] has either filed the complaint or made a motion in response to a notice . . . ; [(2)] in the
determination of the court, has the largest financial interest in the relief sought by the class; and
[(3)] otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure.”
15 U.S.C. § 78u–4(a)(3)(B)(iii)(I)(aa)-(cc). That presumption may be rebutted if class members
offer proof that the “presumptively most adequate plaintiff [ ] will not fairly and adequately
protect the interests of the class . . . or . . . is subject to unique defenses that render such plaintiff
incapable of adequately representing the class.” 15 U.S.C. § 78u–4(a)(3)(B)(iii)(II). Notably,
“[e]ven when a motion to appoint lead plaintiff is unopposed, the Court must still consider the
factors under the PSLRA to ensure that the movant is the most adequate plaintiff.” City of
Warren Police & Fire Ret. Sys. v. Foot Locker, Inc., 325 F. Supp. 3d 310, 314 (E.D.N.Y. 2018)
(citing Springer v. Code Rebel Corp., No. 16-cv-3492, 2017 WL 838197, at *1 (S.D.N.Y. Mar.
2, 2017) (“Though [the] motion is now unopposed, the Court nevertheless addresses the
requirements under the [PSLRA] . . . for appointment of lead plaintiff.”)); see also Carpenter,
2022 WL 4485276, at *1 (considering the adequacy of the lead plaintiff even when the motion is
unopposed). Even though there are two motions for lead counsel, because both movants agree
that the Investor Group is the presumptively adequate lead Plaintiff here, the Court considers the
relevant factors as to the Investor Group’s motion only.
A. Timeliness of Motion for Appointment of Lead Plaintiff
Counsel for Plaintiff Million published a notice of the instant lawsuit, in accordance with
the PSLRA, on August 19, 2022, the same day the Complaint was filed. See ECF No. 31-2,
Decl. of T. Elrod in Support of Lottery.com Securities’ Motion, Ex. B; see also ECF No. 22.
The Investor Group timely filed its motion to be appointed lead plaintiff on October 18, 2022.
See ECF No. 27.
B. Largest Financial Interest
“The PSLRA does not specify a method for calculating which plaintiff has the largest
financial interest.” In re Fuwei Films Sec. Litig., 247 F.R.D. 432, 436 (S.D.N.Y. 2008) (internal
citations omitted). Courts in the Second Circuit generally consider four factors: “(1) the number
of shares purchased during the class period; (2) the number of net shares purchased during the
class period; (3) the total net funds expended during the class period; and (4) the approximate
losses suffered.” Id. at 436-37; see also Pirelli Armstrong Tire Corp. Retiree Med. Benefits Tr.
v. LaBranche & Co., 229 F.R.D. 395, 404 (S.D.N.Y. 2004) (collecting cases). Importantly,
“[m]ost courts agree that the largest loss is the critical ingredient in determining the largest
financial interest and outweighs net shares purchased and net expenditures.” Zawatsky v. Vroom,
Inc., No. 21-cv-2477 (PGG), 2021 WL 3498191, at *5 (S.D.N.Y. Aug. 6, 2021) (quoting
Richman v. Goldman Sachs Grp., Inc., 274 F.R.D. 473, 479 (S.D.N.Y. 2011)); see Kaplan v.
Gelfond, 240 F.R.D. 88, 93 (S.D.N.Y. 2007) (“[W]e . . . shall place the most emphasis on the last
of the four factors: the approximate loss suffered by the movant.”) (collecting cases).
The Lottery Investor Group contends that, at least as of the time of its filing, it has the
largest financial interest among class members who filed timely applications for appointment as
lead counsel. ECF No. 28 at 7. Specifically, the Lottery Investor Group alleges it has lost a total
of $8,554,826.37. See ECF No. 30-3, Decl. of Gregory B. Linkh in Support of Lottery Investor
Group Motion, Ex. C at 2. The Lottery.com Securities Group agrees that this is the largest
known financial loss among the movants and filed a notice that it did not oppose the Investor
Group’s motion for that reason. ECF No. 35 at 2. Indeed, the Securities Group alleged a loss of
$1,835,188 – far lower than the loss alleged by the Investor Group. See ECF No. 29 at 7.
Therefore, the Lottery Investor Group is presumptively the appropriate lead Plaintiff provided it
also meets the requirements of Rule 23. See, e.g., Zawatsky, 2021 WL 3498191, at *5.
C. Requirements of Rule 23 of the Federal Rules of Civil Procedure
Rule 23 of the Federal Rules of Civil Procedure provides that a party may serve as a class
representative only if “(1) the class is so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact common to the class; (3) the claims or defenses of the
representative parties are typical of the claims or defenses of the class; and (4) the representative
parties will fairly and adequately protect the interests of the class.” Fed. R. Civ. P. 23(a).
“[T]ypicality and adequacy of representation are the only provisions [of Rule 23] relevant to the
determination of lead plaintiff under the PSLRA.” Kaplan, 240 F.R.D. at 94; see also
Carpenter, 2022 WL 4485276, at *3 (noting that “the moving plaintiff must only make a
preliminary showing that the adequacy and typicality requirements have been met”).
“The typicality requirement ‘is satisfied when each class member’s claim arises from the
same course of events, and each class member makes similar legal arguments to prove the
defendant’s liability.’” Maliarov v. Eros Int’l PLC, No. 15-cv-8956 (AJN), 2016 WL 1367246,
at *6 (S.D.N.Y. Apr. 5, 2016) (quoting In re Drexel Burnham Lambert Grp., Inc., 960 F.2d 285,
291 (2d Cir. 1992)). “[T]he lead plaintiff’s claims need not be identical to the claims of the class
to satisfy the preliminary showing of typicality.” Zawatsky, 2021 WL 3498191, at *6 (internal
quotation marks omitted). Like all members of the purported class here, the Investor Group
alleges that “Defendants’ material misstatements and omissions concerning Lottery.com’[s]
business, operations, and financial prospects violated the federal securities laws.” ECF No. 28 at
8. The Investor Group, like the other class members, allegedly acquired Defendants’ securities
in reliance on those misstatements. See id. Accordingly, the Investor Group has made a
preliminary showing of typicality.
“The adequacy requirement is satisfied where: (1) class counsel is qualified, experienced,
and generally able to conduct the litigation; (2) there is no conflict between the proposed lead
plaintiff and the members of the class; and (3) the proposed lead plaintiff has a sufficient interest
in the outcome of the case to ensure vigorous advocacy.” City of Monroe Employees’ Ret. Sys. v.
Hartford Fin. Servs. Grp., Inc., 269 F.R.D. 291, 297 (S.D.N.Y. 2010). The Investor Group’s
counsel – Glancy Prongay & Murray LLP – has “extensive experience in securities class actions
on behalf of injured investors,” ECF No. 28 at 9, as demonstrated by the significant relevant
cases set forth on the firm’s resume. See ECF No. 30-5, Decl. of Gregory B. Linkh in Support
of Lottery Investor Group Motion, Ex. E. Additionally, the Investor Group has alleged a “loss
amount suggesting that it will have a strong interest in advocating on behalf of class members.”
Zawatsky, 2021 WL 3498191, at *6. No movant has suggested that there is a conflict, or unique
defense, that would make the Investor Group inadequate to represent the class here.
Accordingly, the Investor Group has made a preliminary showing of adequacy.
Finally, the PSLRA permits a “group of persons” to be appointed as lead plaintiff.
15 U.S.C. § 78u-4(3)(b)(iii)(I). “In this District, courts have permitted unrelated investors to join
together as a group seeking lead-plaintiff status on a case-by-case basis, if such a grouping would
best serve the class.” Carpenter, 2022 WL 4485276, at *4. Here, several members of this
“group” of investors appear to have both familial and business connections to one another. See
ECF No. 30-4, Decl. of Gregory B. Linkh in Support of Lottery Investor Group Motion, Ex. D
¶¶ 2-5 (noting that the Benns are brothers, and that Rzedzian has had a business relationship with
the Benns). In addition to these relationships, the members signed a declaration indicating that
they have conferred with each other and counsel regarding this motion, understand their
responsibilities as lead plaintiff, and have developed a protocol to ensure seamless
communication among themselves. Id. ¶¶ 7-10. Moreover, RTD Bros LLC’s agent, Hutchin
Stone, is an experienced investor. Id. ¶ 2. In light of these facts, the Court concludes that this
group “can effectively work together to vigorously pursue the claims on behalf of the proposed
class.” Carpenter, 2022 WL 4485276, at *4.
The Investor Group’s status as presumptively the most adequate plaintiff has not been
rebutted by any proof that they will not fairly and adequately protect the interests of the class or
that they are subject to unique defenses that render the group unable to adequately represent the
class. See 15 USC 78u-4(a)(3)(B)(iii)(II); Varghese v. China Shenghuo Pharmaceutical
Holdings, Inc., 589 F. Supp. 2d 388, 397-98 (S.D.N.Y. 2008).
For the foregoing reasons, the Court concludes that the Lottery Investor Group is the
plaintiff “most capable of adequately representing the interest of class members.” 15 U.S.C.
II. Lead Counsel
Pursuant to the PSLRA, “[t]he most adequate plaintiff shall, subject to the approval of the
court, select and retain counsel to represent the class.” 15 U.S.C. § 78u–4(a)(3)(B)(v). “There is
a strong presumption in favor of approving a properly-selected lead plaintiff’s decisions as to
counsel selection.” Zawatsky, 2021 WL 3498191, at *6. Here, the Investor Group has sought
the appointment of Glancy Prongay & Murray LLP as lead counsel. As described above, having
reviewed the resume of the firm, the Court finds that it has ample experience in the area of
securities class actions and representing injured investors, see ECF No. 30-5, Decl. of Gregory
B. Linkh in Support of Lottery Investor Group Motion, Ex. E; ECF No. 28 at 9. Additionally, at
least one other court has previously found that the firm may adequately serve as lead counsel.
See Elkin v. Walter Inv. Mgmt. Corp., No. CV 17-2025, 2017 WL 2547292, at *4 (E.D. Pa. June
13, 2017). Therefore, the Court approves the Investor Group’s choice of counsel.
Accordingly, the Lottery Investor Group’s unopposed motion is GRANTED, and the
Security Group’s motion is DENIED.
The Clerk of Court is respectfully directed to terminate the motions pending at ECF Nos.
26 and 27.
Dated: November 18, 2022
New York, New York
JENNIFER L. ROCHON
United States District Judge
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