Keith Hollingsworth v. Nextdoor Holdings, Inc., et al.

Summary

The United States District Court for the Northern District of California grants defendants’ motions to dismiss a securities-fraud class action brought by Keith Hollingsworth against Nextdoor Holdings, Inc. and related defendants. The court holds that the plaintiff lacks standing to challenge statements about Nextdoor Private made before the merger because he purchased securities of the acquiring SPAC, not Nextdoor Private, and also lacks standing to challenge statements made after his final purchase. The court dismisses the claims with leave to amend.

Holdings

1. A plaintiff lacks standing under Section 10(b) and Rule 10b-5 to challenge misrepresentations about a security that the plaintiff never purchased or sold. Hollingsworth therefore lacked standing to assert claims based on statements about Nextdoor Private made before the merger because he purchased KV Acquisition securities, not Nextdoor Private securities.
2. A plaintiff may not pursue Rule 10b-5 claims based on allegedly false statements made after the plaintiff's last purchase of the securities. Hollingsworth therefore lacked standing to challenge statements made after his final purchase of Nextdoor securities on May 11, 2022, including the August 2022 statements.
3. The complaint failed to adequately allege that Nextdoor's May 10, 2022, statement about active users was materially misleading. Nextdoor had expressly defined an active user to include a person who engaged with an email containing monetizable content, so the complaint did not plausibly show that investors would reasonably understand the term to exclude such users.
4. The Section 20(a) claim failed because the complaint did not adequately plead a predicate violation of the securities laws.
5. Dismissal was entered with leave to amend because the court did not determine that the pleading could not possibly be cured by alleging additional facts.

Questions Presented

1. Whether Hollingsworth had standing under Section 10(b) and Rule 10b-5 to challenge statements about Nextdoor Private made before the merger when he purchased KV Acquisition securities rather than Nextdoor Private securities.
2. Whether Hollingsworth had standing to challenge statements made after his last purchase of Nextdoor securities.
3. Whether the May 10, 2022, statement concerning Nextdoor's active users adequately alleged a material misstatement or omission under Section 10(b) and Rule 10b-5.
4. Whether the Section 20(a) control-person claim could proceed without a well-pleaded predicate securities-law violation.
5. Whether dismissal should be with leave to amend.

Disposition

other