Lyft Gets Investor Claims Trimmed in 2019 IPO Statements Suit

Lyft Inc. beat portions of a would-be class suit alleging it misled investors about safety, driver dissatisfaction, and other problems ahead of its 2019 initial public offering, after a federal judge in California partially dismissed the case.

The ridehailing platform’s investors sufficiently alleged that Lyft didn’t tell them that its reputation was already at risk due to driver sexual assault allegations and that its bike fleet already experienced dangerous defects, but their other claims can’t go forward, the U.S. District Court for the Northern District of California said Tuesday.

Lyft’s registration statement filed as part of the IPO emphasized its commitment to rider safety but didn’t disclose allegations that drivers had physically and sexually assaulted riders, the investors said. The complaint sufficiently alleged that Lyft shouldn’t have omitted its potential liability for driver assaults, Judge Haywood S. Gilliam Jr.'s order said.

But “allegations regarding the ‘scores of sexual assaults and lawsuits’” don’t directly contradict “generalized assertions about Lyft’s commitment to safety, its safety measures, and the role safety plays in the rideshare market,” Gilliam said. The registration statement didn’t “state that Lyft guaranteed safety, but instead emphasized its belief in the importance of trust and safety and its commitment to both.”

The investors also challenged statements on market share. But “Lyft disclosed precisely the issue” the investors “claim was obscured” when it cautioned them that third parties might estimate market share differently, the order said.

Lyft also operates a bikeshare program. Most of the statements about the program challenged in the complaint constitute inactionable puffery, though the investors can pursue allegations that Lyft warned them of risks that had already occurred, Gilliam said.

The investors also alleged that Lyft misled them about driver satisfaction. “The driver-related statements make no representation about the classification of Lyft drivers as employees or contractors, and instead highlight attributes that Lyft believes are ‘key benefits’ to drivers,” the order said. The complaint didn’t “allege that the description of any of these ‘benefits’ is misleading.”

The investors have 28 days to file any amended complaint. They voluntarily dismissed their claims against Lyft’s underwriters in June.

Latham & Watkins LLP represented Lyft. Block & Leviton LLP served as lead counsel to the investors.

The case is In re Lyft Inc. Sec. Litig., 2020 BL 342190, N.D. Cal., No. 19-cv-02690, motion to dismiss granted in part and denied in part 9/8/20.