Ninth Circuit Dismisses For Lack Of Jurisdiction Non-Lead Plaintiff's Appeal From The Dismissal Of A Putative Class Action Against Medical Device Company

• Published date: 19 January 2024
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Class Actions, Trials & Appeals & Compensation, Securities
• Law Firm: Shearman & Sterling LLP
• Author: Shearman & Sterling LLP

On October 11, 2023, a divided panel of the United States Court of Appeals for the Ninth Circuit dismissed for lack of standing an appeal from the dismissal of a putative class action asserting claims under the Securities Exchange Act of 1934 against a medical device company and its former CEO. Habelt v. iRhythm Technologies, Inc., —F.4th—, 2023 WL 6614359 (9th Cir. 2023). Lead plaintiff alleged that the Company made misrepresentations regarding the regulatory process prior to the company receiving a historically low Medicare reimbursement rate for one of its products. After the district court granted defendants' motion to dismiss, lead plaintiff declined to appeal. However, the individual who filed the initial complaint in the action (but did not make a motion for appointment as lead plaintiff, or thereafter participate in the action) sought to appeal. The majority of the three-judge panel held that appellant was not a party to the action and therefore dismissed the appeal for lack of jurisdiction. In a dissenting opinion, Judge Mark J. Bennett opined that appellant should be deemed a party and that, even if he were not a party, exceptional circumstances existed to justify finding that he had standing to appeal (and, on the merits, would have reversed the district court's dismissal of the action).

The majority opinion explained that, as a general rule, only parties to a lawsuit have the statutory right to appeal from an adverse judgment. Id. at *2. The majority noted that this rule was distinct from constitutional standing and applied to exclude non-parties that may nevertheless have an interest in the outcome of the litigation. Id.

The majority rejected appellant's argument that he was a "party" because he had previously filed a complaint and that his name appeared in the caption of the operative amended complaint. The majority explained that the caption is merely "the handle to identify" an action, and that a person can appear in the caption "without necessarily becoming a party to the action." Id. at *3. Moreover, the majority emphasized that the filing of an amended complaint extinguished appellant's prior complaint, and the body of the operative complaint further made clear that lead plaintiff was the only plaintiff. Id. The majority also observed that, while unnamed members of a certified class may be considered a party for the purpose of appealing an adverse judgment, no class had yet been certified here. Id.

In addition, the majority held that...