Court Opinion

ID: 9889780
Source: CourtListenerOpinion
Date Created: 2023-10-11 17:01:16.675938+00
Date Added: 2024-06-11T12:49:06.375997
License: Public Domain

FOR PUBLICATION

     UNITED STATES COURT OF APPEALS
          FOR THE NINTH CIRCUIT

MARK HABELT, individually and on
                                                       No. 22-15660
behalf of all others similarly situated,
                                                    D.C. No. 3:21-cv-
                  Plaintiff-Appellant, *
                                                      00776-EMC
and

PUBLIC EMPLOYEES’                                        OPINION
RETIREMENT SYSTEM OF
MISSISSIPPI,

                  Plaintiff,
    v.

IRHYTHM TECHNOLOGIES, INC.;
KEVIN M. KING; MICHAEL J.
COYLE; DOUGLAS J. DEVINE,

                  Defendants-Appellees.

         Appeal from the United States District Court
            for the Northern District of California
          Edward M. Chen, District Judge, Presiding

*
 The caption’s reference to Mark Habelt as “Plaintiff-Appellant” reflects
the caption as it appears on the documents with which this appeal was
initiated. As explained herein, Habelt is neither a plaintiff in this action
nor a proper appellant of the district court order at issue on appeal.
2             HABELT V. IRHYTHM TECHNOLOGIES, INC.

             Argued and Submitted July 13, 2023
                 San Francisco, California

                     Filed October 11, 2023

     Before: Carlos T. Bea, Mark J. Bennett, and Holly A.
                   Thomas, Circuit Judges.

               Opinion by Judge H.A. Thomas;
                  Dissent by Judge Bennett

                          SUMMARY **

          Securities Fraud / Appellate Jurisdiction

   The panel dismissed, for lack of jurisdiction due to
appellant’s lack of standing, an appeal from the district
court’s dismissal of a putative securities fraud class action.
    Appellant Mark Habelt filed the action, but, pursuant to
the procedures of the Private Securities Litigation Reform
Act of 1995, the district court appointed Public Employees’
Retirement System of Mississippi (PERSM) as lead
plaintiff. PERSM filed a first and then second amended
complaint, and the district court dismissed for failure to state
a claim. PERSM did not appeal.
   The panel held that Habelt lacked standing to appeal
because he was not a party to the action. Habelt’s filing of

**
  This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
            HABELT V. IRHYTHM TECHNOLOGIES, INC.          3

the initial complaint and his listing in the caption of the
second amended complaint were insufficient to confer party
status upon him. The body of the operative complaint made
clear that PERSM was the sole plaintiff, and Habelt’s status
as a putative class member did not give him standing to
appeal. The panel further held that Habelt failed to
demonstrate exceptional circumstances conferring upon him
standing to appeal as a non-party.
    Dissenting, Judge Bennett wrote that he would allow the
appeal by Habelt because he was a party, and even if he were
not, exceptional circumstances would allow him to appeal as
a non-party. On the merits, Judge Bennett would reverse the
district court’s dismissal as to three alleged
misrepresentations by defendants.

                       COUNSEL

Omar Jafri (argued), Joshua B. Silverman, and Christopher
Tourek, Pomerantz LLP, Chicago, Illinois; Jeffrey C. Block,
Jacob Walker, and Mark B. Byrne, Block & Leviton LLP,
Boston, Massachusetts; Jeremy A. Lieberman, Pomerantz
LLP, New York, New York; Jennifer Pafiti, Pomerantz LLP,
Los Angeles, California; for Plaintiffs-Appellant.
Ignacio E. Salceda (argued) and Evan L. Seite, Wilson
Sonsini Goodrich & Rosati, Palo Alto, California; John B.
Kenney, Wilson Sonsini Goodrich & Rosati, Washington,
D.C.; for Defendants-Appellees.
4            HABELT V. IRHYTHM TECHNOLOGIES, INC.

                          OPINION

H.A. THOMAS, Circuit Judge:

    In early 2021, iRhythm Technologies, Inc.’s (iRhythm)
stock price fell after it received a historically low Medicare
reimbursement rate for one of its products. Mark Habelt, an
investor in iRhythm, filed a putative securities fraud class
action against iRhythm and one of its former Chief
Executive Officers, alleging that investors were misled
during the regulatory process preceding this stock price
collapse. Pursuant to the procedures of the Private Securities
Litigation Reform Act of 1995 (PSLRA), the district court
appointed Public Employees’ Retirement System of
Mississippi (PERSM) as the lead plaintiff in the action.
PERSM filed a first and then second amended complaint
(SAC, the operative pleading) alleging securities fraud
claims against iRhythm and additional corporate officers
(together, Defendants). Defendants filed a motion to dismiss
PERSM’s SAC for failure to state a claim. PERSM did not
appeal the district court’s grant of this motion. Habelt filed a
timely notice of appeal.
    We now dismiss Habelt’s appeal for lack of jurisdiction.
Generally, only the parties to a lawsuit, “or those that
properly become parties, may appeal an adverse judgment.”
Devlin v. Scardelletti, 536 U.S. 1, 7 (2002) (quoting Marino
v. Ortiz, 484 U.S. 301, 304 (1988) (per curiam)). Habelt,
however, is not a party to the action. And while a non-party
may appeal under exceptional circumstances, see Hilao v.
Est. of Marcos, 393 F.3d 987, 992 (9th Cir. 2004), there are
no extraordinary circumstances here that confer upon Habelt
standing to appeal as a non-party. Dismissal is therefore
required.
               HABELT V. IRHYTHM TECHNOLOGIES, INC.                        5

                                     I.
     On February 1, 2021, Habelt filed a securities fraud
complaint on behalf of himself and a putative class of
persons who purchased iRhythm’s common stock between
August 4, 2020, and January 28, 2021. Pursuant to the
PSLRA, three putative class members moved to be
appointed lead plaintiff in the suit, including PERSM. 1 After
one of the lead plaintiff candidates filed a notice of non-
opposition to PERSM’s appointment as lead plaintiff and the
other withdrew his motion for appointment as lead plaintiff,
the district court granted PERSM’s motion. Habelt did not
make a motion for appointment as lead plaintiff and did not
oppose PERSM’s motion. And he did not participate in the
litigation after PERSM’s appointment as lead plaintiff.
    As lead plaintiff, PERSM gained “control over aspects
of litigation such as discovery, choice of counsel, [and]
assertion of legal theories.” In re BankAmerica Corp. Sec.
Litig., 263 F.3d 795, 801 (8th Cir. 2001). On September 24,
2021, PERSM filed the SAC, alleging that Defendants
committed violations of the Securities Exchange Act of

1
 Before the passage of the PSLRA, “lead plaintiffs in securities litigation
cases were often selected by a race to the courthouse.” In re Cavanaugh,
306 F.3d 726, 729 (9th Cir. 2002). With the PSLRA, Congress took
“steps to curb abusive securities-fraud lawsuits,” Amgen Inc. v. Conn.
Ret. Plans & Tr. Funds, 568 U.S. 455, 476 (2013), including by requiring
the district court “to select as lead plaintiff the [putative class member]
‘most capable of adequately representing the interests of class
members.’” In re Cavanaugh, 306 F.3d at 729 (quoting 15 U.S.C. § 78u-
4(a)(3)(B)(i)). Under this statute, there is a rebuttable presumption that
the most adequate plaintiff (1) “has either filed the complaint or made a
motion” to be appointed lead plaintiff; (2) “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).
6            HABELT V. IRHYTHM TECHNOLOGIES, INC.

1934, 15 U.S.C. § 78a et seq. The caption of the SAC listed
Habelt as the “Plaintiff.” But the SAC otherwise made no
reference to Habelt, to his alleged losses, or to his individual
claims, including in a subsection titled “Parties.”
    In lieu of filing an answer, and before any class was
certified in the case, Defendants filed a Federal Rule of Civil
Procedure 12(b)(6) motion to dismiss for failure to state a
claim. The district court granted Defendants’ motion,
dismissed the SAC with prejudice, and, on March 31, 2022,
entered judgment in Defendants’ favor. PERSM did not
appeal the district court’s judgment. Habelt, represented by
PERSM’s counsel and his own additional counsel, filed a
timely notice of appeal.
                               II.
    “The rule that only parties to a lawsuit, or those that
properly become parties, may appeal an adverse judgment,
is well settled.” Marino, 484 U.S. at 304; see Fed. R. App.
P. 3(c)(1) (“The notice of appeal must: (A) specify the party
or parties taking the appeal . . . .”). This “standing to appeal”
rule echoes—but “is distinct from[—]the requirements of
constitutional standing.” United States ex rel. Alexander
Volkhoff, LLC v. Janssen Pharmaceutica N.V., 945 F.3d
1237, 1241 (9th Cir. 2020). “[E]ven if a person has an
interest in the outcome of the litigation, unless the person
intervenes in the suit or has a statutory right to appeal, the
person cannot appeal a suit to which it has not become a
party.” United States v. Kovall, 857 F.3d 1060, 1068 (9th
Cir. 2017).
    Habelt argues that he is a party to this lawsuit because he
filed the initial complaint and is listed in the caption of the
SAC. But, as we explain below, these facts do not suffice to
confer party status upon him.
               HABELT V. IRHYTHM TECHNOLOGIES, INC.                       7

     “[T]he caption of an action is only the handle to identify
it.” Hoffman v. Halden, 268 F.2d 280, 303 (9th Cir. 1959),
overruled in part on other grounds by Cohen v. Norris, 300
F.2d 24 (9th Cir. 1962) (en banc). For that reason, “[a]
person or entity can be named in the caption of a complaint
without necessarily becoming a party to the action.” United
States ex rel. Eisenstein v. City of New York, 556 U.S. 928,
935 (2009); see also 5A Charles Alan Wright et al., Federal
Practice and Procedure § 1321, at 242 (4th ed. 2018)
(“[T]he caption is not determinative as to the identity of the
parties to the action . . . .”). Indeed, the Federal Rules of
Civil Procedure expressly contemplate that the caption of a
complaint may be disconnected from the substance of the
proceedings. See, e.g., Fed. R. Civ. P. 25(c) (“If an interest
is transferred, the action may be continued by or against the
original party.”); Fed. R. Civ. P. 25(d) (“[W]hen a public
officer who is a party in an official capacity . . . ceases to
hold office while the action is pending[,] [t]he officer’s
successor is automatically substituted as a party . . . but any
misnomer not affecting the parties’ substantial rights must
be disregarded.”).
    Beyond an individual’s mere inclusion in the caption, the
more important indication of whether she is a party to the
case are the “allegations in the body of the complaint.” 2
Hoffman, 268 F.2d at 304. It is upon this ground that
Habelt’s argument falters. While it is true that Habelt filed
the initial complaint in this matter, that complaint has now
been extinguished. See Ramirez v. Cnty. of San Bernardino,

2
  That is not to say that the caption of a complaint is not probative of the
question whether an individual is a party to the action. See Williams v.
Bradshaw, 459 F.3d 846, 849 (8th Cir. 2006). But it is not dispositive of
that question.
8            HABELT V. IRHYTHM TECHNOLOGIES, INC.

806 F.3d 1002, 1008 (9th Cir. 2015) (“[A]n amended
complaint supersedes the original, the latter being treated
thereafter as non-existent.” (internal quotation mark and
citation omitted)). The body of the operative pleading—the
SAC—makes clear that PERSM is the sole plaintiff. The
SAC makes mention neither of Habelt nor of his individual
claims.
    Nor does Habelt’s status as a putative class member give
him standing to appeal. Although “an unnamed member of a
certified class may be considered a party for the [particular]
purpos[e] of appealing an adverse judgment,” the “definition
of the term ‘party’” does not cover an unnamed class
member “before the class is certified.” Smith v. Bayer Corp.,
564 U.S. 299, 313 (2011) (internal quotation marks omitted
and alterations in original) (quoting Devlin, 536 U.S. at 7, 16
n.1); see also Emps.-Teamsters Loc. Nos. 175 & 505 Pension
Tr. Fund v. Anchor Cap. Advisors, 498 F.3d 920, 923 (9th
Cir. 2007) (“[B]ecause the class was never certified,
Appellants were not parties to the district court action and
lack standing to bring this appeal.”).
                              III.
    Habelt also has failed to demonstrate exceptional
circumstances that confer upon him standing to appeal as a
non-party. A non-party may have standing to appeal when
she, “(1) . . . though not a party, participated in the district
court proceedings, and (2) the equities of the case weigh in
favor of hearing the appeal.” Hilao, 393 F.3d at 992 (quoting
S. Cal. Edison Co. v. Lynch, 307 F.3d 794, 804 (9th Cir.
2002)). “[W]hether a nonparty has the ability to appeal is a
jurisdictional question.” Volkhoff, 945 F.3d at 1241.
   We have allowed non-parties to appeal only “when they
were significantly involved in the district court
             HABELT V. IRHYTHM TECHNOLOGIES, INC.             9

proceedings.” Id. at 1241–42. Habelt’s participation in this
case does not meet that high bar. His involvement in the
matter below “all but ceased with the filing of the” initial
complaint. Id. at 1242. He did not apply to be appointed lead
plaintiff, challenge PERSM’s motion for appointment as
lead plaintiff, or otherwise participate in the suit after
PERSM’s appointment. Cf. S.E.C. v. Wencke, 783 F.2d 829,
834–35 (9th Cir. 1986) (holding that non-party appellant had
standing to appeal when he made a special appearance, filed
briefs, and was treated by the district court “as if he were a
party”); Keith v. Volpe, 118 F.3d 1386, 1391 (9th Cir. 1997)
(considering non-party appellant’s participation in oral
argument).
    Nor do the equities favor our hearing Habelt’s appeal.
Unlike matters where “a party has haled the non-party into
the proceeding against his will, and then has attempted to
thwart the nonparty’s right to appeal by arguing that he lacks
standing,” Volkhoff, 945 F.3d at 1242 (quoting Hilao, 393
F.3d at 992), Habelt willingly filed the initial complaint. And
Defendants agreed at oral argument that Habelt is not bound
by the district court’s judgment.
    The Supreme Court, moreover, has cautioned against
reliance on exceptions to the rule that only parties can
appeal. Instead, non-parties should follow the “better
practice” of “seek[ing] intervention for purposes of appeal.”
Marino, 484 U.S. at 304; see also United States v. City of
Oakland, 958 F.2d 300, 302 (9th Cir. 1992) (“[D]enial of
intervention as of right is an appealable final order.”). Habelt
filed no motion to intervene.
                       *       *       *
    Habelt lacks standing to appeal. We therefore dismiss
this appeal for lack of jurisdiction.
10          HABELT V. IRHYTHM TECHNOLOGIES, INC.

     DISMISSED.

BENNETT, Circuit Judge, dissenting:

    As the majority notes, the right to appeal generally
extends only to parties. Op. at 4 (citing Devlin v.
Scardelletti, 536 U.S. 1, 7 (2002)). Habelt was a party, so
he has the right to appeal. Moreover, in “exceptional
circumstances,” we even permit non-parties to appeal. Id. at
3 (citing Hilao v. Est. of Marcos, 393 F.3d 987, 992 (9th Cir.
2004)). In my view, even were Habelt not a party, such
exceptional circumstances are present here. Thus, I
respectfully dissent.
    Because I would allow the appeal by Habelt, I would
reach the merits. On the merits, I would reverse the district
court’s dismissal as to three alleged misrepresentations.
                              I.
      First, Habelt was a party. “Party status does not depend
on being present in the district court litigation from the
moment it began or at the moment it ended. All ‘those that
properly become parties may appeal an adverse judgment.’”
Campbell v. City of Los Angeles, 903 F.3d 1090, 1105 (9th
Cir. 2018) (brackets removed) (quoting Marino v. Ortiz, 484
U.S. 301, 304 (1988) (per curiam)). “A ‘party’ to litigation
is ‘[o]ne by or against whom a lawsuit is brought.’” United
States ex rel. Eisenstein v. City of New York, 556 U.S. 928,
933 (2009) (brackets in original) (quoting Black’s Law
Dictionary 1154 (8th ed. 2004)).             “[O]rdinarily the
determination of whether or not a [party] is properly in the
case hinges upon the allegations in the body of the complaint
. . . .” Hoffman v. Halden, 268 F.2d 280, 304 (9th Cir. 1959),
               HABELT V. IRHYTHM TECHNOLOGIES, INC.                      11

overruled in part on other grounds by Cohen v. Norris, 300
F.2d 24, 29-30 (9th Cir. 1962) (en banc).
    Here, four factors show that Habelt is a party. First,
Habelt initiated the lawsuit by filing the first complaint.
Eisenstein, 556 U.S. at 933. Second, Habelt remained in the
caption of the operative Second Amended Complaint (SAC)
filed by the Public Employees’ Retirement System of
Mississippi (PERSM). See Williams v. Bradshaw, 459 F.3d
846, 849 (8th Cir. 2006). Third, Habelt’s claims are clearly
covered by the substantive “allegations in the body of the”
SAC. Hoffman, 268 F.2d at 304. And fourth, Habelt never
evinced any intent to remove himself as a party, and the
district court never provided notice that it was doing so. Cf.
Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306,
314 (1950).
    The majority insists that Habelt’s party status was
extinguished when PERSM was appointed lead Plaintiff and
filed a series of amended complaints. 1 But nothing in the
Private Securities Litigation Reform Act (PSLRA) or
otherwise provides that the appointment of a lead plaintiff
automatically extinguishes the involvement of other
plaintiffs in the suit. See 15 U.S.C. § 78u-4(a)(3). 2

1
  The majority does not aver, however, that any court order expressly
removed Habelt as a party or informed him that he had lost his rights as
a party. Nor did any filing in the district court claim that Habelt’s status
as a party was extinguished.
2
  Some courts have held that appointment of a lead plaintiff under the
PSLRA does not even require the filing of a new complaint. See, e.g.,
Billhofer v. Flamel Techs., S.A., No. 07 Civ. 9920, 2010 WL 3703838,
at *2-3 (S.D.N.Y. Sept. 21, 2010) (collecting cases). And as discussed
in more detail below, we have suggested that filing a complaint is an
12             HABELT V. IRHYTHM TECHNOLOGIES, INC.

    Instead, the majority relies on the assertion that
PERSM’s amended complaints rendered Habelt’s initial
complaint nonexistent. Op. at 7 (citing Ramirez v. County of
San Bernadino, 806 F.3d 1002, 1008 (9th Cir. 2015)). But
this view ignores that Habelt remains a party under the
operative SAC because he is listed in the caption and
covered by its substantive allegations. Though the mere
inclusion of Habelt’s name in the SAC’s caption is not
dispositive, Op. at 7 (citing Hoffman, 268 F.2d at 303), it is
at least probative because, as the Eighth Circuit has
explained, the caption “is entitled to considerable weight
when determining who the plaintiffs to a suit are since
plaintiffs draft complaints.” William, 459 F.3d at 849. 3
    The majority discounts that Habelt’s claims remain
covered by substantive allegations in the SAC, suggesting
that Habelt was no different from any unnamed putative

indicator of party status notwithstanding subsequent events. See Emps.-
Teamsters Loc. Nos. 175 & 505 Pension Tr. Fund v. Anchor Capital
Advisors (“Anchor Capital”), 498 F.3d 920, 922 (9th Cir. 2007) (finding
would-be appellant was not a party below in part because they “never
filed a complaint”).
3
  Hoffman is factually distinct from this case. There, we found that two
litigants were properly defendants in a case even though they were not
listed in the caption of the amended complaint. 268 F.2d at 303–04. We
relied on the principle that the substance of a complaint determines who
the proper defendants are. Id. This rule—you may be a defendant even
if you’re not in the caption—however, doesn’t inform the circumstance
here, where Habelt initiated the lawsuit by filing the first complaint, was
in the original caption, and always remained in the caption. Indeed, the
first two words in the caption of the majority opinion are still “Mark
Habelt.” My view doesn’t mean that form will triumph over substance,
because here we have the form—Habelt was always part of the caption,
and the substance—every complaint described putative wrongs that
included Habelt among the putative victims.
            HABELT V. IRHYTHM TECHNOLOGIES, INC.            13

member of the uncertified class because he was not
specifically named in the body of the SAC. Op. at 6, 8. But
this ignores that the SAC encompasses all the factual
allegations and legal claims raised in the original complaint,
brought by Habelt. Indeed, the “Parties” section of the SAC
refers to PERSM as the “Lead Plaintiff,” but nowhere claims
PERSM is the only Plaintiff, nor gives any indication that
Habelt is no longer a Plaintiff. And the SAC does not tie its
substantive allegations to PERSM’s claims in particular,
rather the alleged injuries apply equally to all Plaintiffs and
putative class members. When paired with Habelt’s
inclusion in the caption, the substance of the SAC clearly
incorporates Habelt’s claims. And nothing states anyone’s
intent to remove Habelt as a Plaintiff.
     The majority cites no authority suggesting that a PSLRA
litigant who files an original class-action complaint as the
named plaintiff and remains in the caption of later
complaints is indistinguishable from unnamed members of
the putative class simply because that litigant/named
plaintiff was not designated the lead plaintiff or named in the
body of the operative complaint. Instead, the majority
appears to create a new rule that a litigant’s name must be
specifically listed in the body of the operative complaint to
be considered a party, regardless of the history of the
litigation. We have never elevated form over substance to
such an extent.
    In one analogous case, a private company filed a class-
action complaint under the PSLRA, alleging that a defendant
pharmaceutical company committed securities fraud.
Empls.-Teamsters Loc. Nos. 175 & 505 Pension Tr. Fund v.
Anchor Capital Advisors (“Anchor Capital”), 498 F.3d 920,
922 (9th Cir. 2007). After the district court ultimately
dismissed the suit, the lead plaintiff declined to amend its
14           HABELT V. IRHYTHM TECHNOLOGIES, INC.

complaint or file an appeal. Id. at 922–23. Instead, several
unnamed members of the putative class attempted to appeal.
Id. But in rejecting this attempt, we explained that the
would-be appellants were not parties to the lawsuit because
“[d]espite ample opportunity to do so, Appellants never filed
a complaint, moved to intervene, objected to the requested
dismissal, or filed an amended complaint after [lead
plaintiff] notified the district court that it” would not further
pursue its claims. Id. at 923 (emphasis added). Although we
acknowledged that mere status as an unnamed putative class
member was insufficient to confer standing to appeal, our
holding implied that even unnamed members of a putative
class can have standing to bring an appeal if they were
sufficiently involved in the district court proceedings,
including by filing a complaint. Id. Because Habelt filed the
original complaint and remained covered by the substance of
the eventual lead Plaintiff’s SAC, our logic in Anchor
Capital suggests that he remained a party below (there is, of
course, no allegation he wasn’t a party at the start, and there
is similarly no allegation that any filing explicitly removed
that status).
    In another case, we explained that “a party may be
properly in a case if the allegations in the body of the
complaint make it plain that the party is intended as a
defendant.” Rice v. Hamilton Air Force Base Commissary,
720 F.2d 1082, 1085 (9th Cir. 1983) (emphasis added).
There, we found that even though a pro se employment
discrimination plaintiff failed to include the name or title of
the proper defendant in his original filing, it was clear from
the context of the filing that he intended to sue the proper
defendant. Id. Although Rice involved a distinct issue—
whether a complaint sufficiently named the proper
               HABELT V. IRHYTHM TECHNOLOGIES, INC.                       15

defendant—it reveals at least two relevant principles. 4 First,
that the substance of a complaint’s allegations, rather than
its form, controls whether a particular litigant is a party. See
id. Here, the SAC’s failure to specifically name Habelt as
plaintiff a second time 5—like plaintiff’s failure to name the
proper defendant in Rice—is not dispositive of party status,
particularly when the substance of the operative complaint
clearly incorporates Habelt’s original claims. Second, the
parties’ intent is relevant to the question of whether a
particular litigant is a party to the lawsuit. See id.; see also
Barsten v. Dep’t of Interior, 896 F.2d 422, 423 (9th Cir.
1990). 6 Here, PERSM’s inclusion of Habelt as a named
Plaintiff in the caption of the SAC indicates that it did not
intend to replace Habelt as the sole named Plaintiff when it

4
  Rice concerned the same issue as Hoffman, 268 F.2d at 303, which the
majority relies on for the principle that inclusion of a litigant in the case
caption is not dispositive of case status. Op. at 7–8.
5
 As noted, every caption, including in this court, specifically lists Habelt
as “plaintiff.”
6
  Several other courts have expressly adopted an intent-based approach
to determining party status. See, e.g., Jones v. Griffith, 870 F.2d 1363,
1365–66 (7th Cir. 1989) (“The sensible approach, it strikes us, is to
regard the pleading’s caption, service of process, and perhaps other
indications of intention to bring or not to bring a person into a lawsuit as
evidence upon which the district court must decide, in cases of doubt,
whether someone is a party.”); Nationwide Mut. Ins. Co. v. Kaufman,
896 F.Supp. 104, 109 (E.D.N.Y. 1995) (same); Cooper v. Trs. of Coll. of
Holy Cross, 2014 WL 2738545, at *6–7 (S.D.N.Y. June 17, 2014)
(same); Deaville v. Capital One Bank, 425 F.Supp.2d 744, 750 (W.D. La
2006) (“[A] party may be properly in a case if the allegations in the body
of the complaint make it plain that the party is intended as a defendant.”
(internal quotation marks and citation omitted)). The Seventh Circuit
explained that an intent-based approach is consistent with Rule 17’s
requirement that “federal suits . . . be maintained in the name of the real
party in interest.” Jones, 870 F.2d at 1336 (citing Fed. R. Civ. P. 17(a)).
16             HABELT V. IRHYTHM TECHNOLOGIES, INC.

sought appointment as lead Plaintiff. No party took any
action in the district court to suggest a deliberate
relinquishment by Habelt of his status as a Plaintiff in the
case. Cf. United States ex rel. Alexander Volkhoff, LLC v.
Janssen Pharmaceutica N.V., 945 F.3d 1237, 1242 (9th Cir.
2020) (holding that appellant was a nonparty because it
made a “strategic choice” to be “substituted out of the
lawsuit” by a different plaintiff). 7
    Adding to Habelt’s lack of intent to withdraw as a party
is the lack of any notice that Habelt’s party status was
terminated.      The Supreme Court has explained that
procedural due process requires “notice reasonably
calculated, under all the circumstances, to apprise interested
parties of the pendency of [an] action and afford them an
opportunity to present their objections.” Mullane, 339 U.S.
at 314. Habelt became a party when he filed the lawsuit, and
he never subsequently expressed any intent to withdraw as a
party. Given that he was a named Plaintiff in the SAC and
remained covered by its substantive allegations, it was
reasonable for Habelt to assume that he was still a party to
the district court proceeding even after PERSM’s
appointment as lead Plaintiff. Cf. Peralta v. Heights Med.
Ctr., Inc., 485 U.S. 80, 84 (1988) (holding that procedural

7
  Even if the district court had found a lack of intent for Habelt to remain
a party at the summary judgment stage, I would have no trouble
reversing: In the light most favorable to Habelt, he initiated the lawsuit
by filing the first complaint, remained a named Plaintiff in subsequent
complaints, and remained covered by the substantive allegations in the
operative SAC. Moreover, he never filed anything suggesting an intent
to withdraw as a party, his counsel never withdrew their appearance, and
the district court never purported to end his involvement in the case. At
the very least, there would be a triable issue of fact as to whether Habelt
intended to remain a party.
                 HABELT V. IRHYTHM TECHNOLOGIES, INC.                17

due process prevents a court from entering judgment against
a party “without notice or service”).
     I believe due process likely required pre-termination
notice, not post-termination notice. But even if I am
incorrect, if the district court (or anyone else) had given
Habelt post-termination notice that his party status may have
been or was terminated, Habelt would have had the
opportunity to move to intervene in the district court,
individually oppose Defendants’ 8 motion to dismiss, or even
file a separate complaint. See SEC v. McCarthy, 322 F.3d
650, 659–60 (9th Cir. 2003) (explaining how proper notice
could have allowed a party to avoid or at least respond to an
application for judicial enforcement of an SEC order); cf.
Memphis Light, Gas & Water Div. v. Craft, 436 U.S. 1, 14
(1978) (“The purpose of notice under the Due Process
Clause is to apprise the affected individual of, and permit
adequate preparation for, an impending ‘hearing.’” (footnote
omitted)). The majority’s holding post facto deprives Habelt
of the opportunity to preserve his substantive claims for
appellate review, in a manner I believe is inconsistent with
due process. 9 See Feuntes v. Shevin, 407 U.S. 67, 81 (1972)
(“If the right to notice and a hearing is to serve its full
purpose, then, it is clear that it must be granted at a time

8
    “Defendants” refers to iRhythm and certain of its executives.
9
  Were we required to formulate a simple rule addressing all future
factual scenarios, I might well adopt a rule that such “express removal”
was the sine qua non of stripping a party of party status. But here, I
would simply hold that lacking express removal, there must be notice of
such nature as to reasonably convey the information that a party will
henceforth no longer be a party. Such notice is lacking here. See Wright
v. Beck, 981 F.3d 719, 728 (9th Cir. 2020) (“[O]utright failures to even
attempt to provide notice violate due process.”).
18             HABELT V. IRHYTHM TECHNOLOGIES, INC.

when the deprivation [of an opportunity to pursue claims]
can still be prevented.”).
    Taken together, the facts that: (1) Habelt filed the initial
complaint; (2) Habelt remained a named Plaintiff in the
caption of later complaints, including the operative SAC; (3)
the substantive allegations of the operative SAC cover
Habelt’s claims; and (4) Habelt never evinced intent to
withdraw as a Plaintiff nor received notice of termination of
his party status, all demonstrate that Habelt was sufficiently
involved in the district court proceedings to remain a party.
                                   II.
    But even if Habelt were not a party, he still qualifies for
nonparty appellate standing under our caselaw. Generally,
nonparties are allowed to appeal “when (1) [they]
participated in the district court proceedings, and (2) the
equities of the case weigh in favor of hearing the appeal.”
Hilao v. Est. of Marcos, 393 F.3d 987, 992 (9th Cir. 2004)
(internal quotation marks and citation omitted). Although
this rule applies “only in exceptional circumstances,” id., the
dearth of caselaw addressing whether a litigant is properly a
plaintiff under the circumstances of this case illustrates that
Habelt’s situation is exceptional. 10

10
  See generally Jones, 870 F.2d at 1365 (“The question whether serving
someone makes him a party, even when the complaint doesn’t designate
him as party . . . is one of those fundamental legal questions on which
there is a curious dearth of authority or discussion.”); Steinmetz v.
Danbury Visiting Nurse Ass’n, No. 3:19-CV-01819 (JCH), 2021 WL
4193070 at *4 (D. Conn. Sept. 15, 2021) (“And in the anomalous
circumstances where a Complaint does not clearly identify the defendant
parties, there is scant legal authority on how courts should determine if
a particular entity has been made a party to the action.”).
             HABELT V. IRHYTHM TECHNOLOGIES, INC.            19

     The majority first concludes that Habelt was not
sufficiently involved in the proceedings below to satisfy the
first prong of this test. Op. at 9. The majority relies on the
fact that Habelt “did not apply to be appointed lead plaintiff,
challenge PERSM’s motion for appointment as lead
plaintiff, or otherwise participate in the suit after PERSM’s
appointment.” Id. But they cite no authority requiring him
to do any of those things to maintain sufficient involvement
for purposes of appellate standing. And again, we are not
dealing with a putative class member; we are dealing with
the named Plaintiff who initiated the lawsuit and who was
never dismissed from the case. When nothing in the PSLRA
provides that appointment of a lead plaintiff extinguishes the
involvement of other named plaintiffs (indeed the only one),
there is no reason Habelt would think he had to do anything
more than he did to remain in the suit. But even if that were
untrue, and the PSLRA is a trap for the unwary, Habelt
wasn’t unwary—he wasn’t a silent voice who should have
assumed his silence equaled non-party status. He was the
Plaintiff, who had the right to assume that a plaintiff (i.e., a
party) who is never dismissed, remains a party absent
something (like a statute, a court order, or a very clear
binding case) telling him that some event or series of events
stripped that status from him. Cf. Mullane, 339 U.S. at 314.
    In SEC v. Wencke, 783 F.2d 829 (9th Cir. 1986), we
found that a nonparty had appellate standing in part because
he “made a special appearance and raised all the . . . claims
that he is now raising on appeal” before the district court. Id.
at 834. “Throughout its proceedings, the district court
treated [the appellant] as if he were a party.” Id. Here,
Habelt’s counsel entered an appearance that was never
withdrawn and raised the claims he now presents on appeal
both in his original complaint and as a named Plaintiff in the
20             HABELT V. IRHYTHM TECHNOLOGIES, INC.

operative SAC. 11 And although the district court may not
have solicited input from Habelt when appointing the lead
Plaintiff or at later stages of the litigation, see id. at 834–35
(district court solicited input of nonparty), nothing in the
record suggests that Habelt was not adequately represented
by PERSM’s advocacy. See Devlin v. Scardelletti, 536 U.S.
1, 11 (2002) (“Although [the Supreme] Court has never
addressed the issue, nonnamed parties in privity with a
named party are often allowed by other courts to appeal from
the order that affects them.”). 12

11
   The majority faults Habelt for not participating after the appointment
of PERSM as lead Plaintiff. Op. at 8–9. But the district court’s order
appointing PERSM specifically provided that other than PERSM’s
counsel, “no other law firm shall work on this action for the putative
class without prior approval of the Court.” “Motions for approval of
additional Plaintiffs’ counsel shall identify the additional Plaintiffs’
counsel and their background, the specific proposed tasks, and why
[PERSM’s counsel] cannot perform these tasks.” Notably, no other
Plaintiff or putative class member filed anything in the suit after
PERSM’s appointment as lead Plaintiff. But the district court never
indicated any intent to remove Habelt as a party from the action. Thus,
Habelt’s failure to participate further is more an effort to comply with
the district court’s order to avoid unnecessarily delaying proceedings
rather than a sign of intentionally abandoning his participation in the suit.
But even if both of those alternatives were equally reasonable, it is not
our role as an appellate court to choose between them in the first instance.
12
  See also United States v. Osage Wind, LLC, 871 F.3d 1078, 1085 (10th
Cir. 2017) (finding that a nonparty Native American tribe had standing
to appeal even though it “did not attempt to intervene below until the
eleventh hour” in part “because the United States . . . was representing
[the tribe’s] interests all along.”). Indeed, the district court is not
required to permit intervention by a nonparty whose interest is
“adequately represent[ed]” by another party. Fed. R. Civ. P. 24(a)(2).
And in any event, Habelt was not required to seek intervention in order
                 HABELT V. IRHYTHM TECHNOLOGIES, INC.          21

     By contrast, when we have declined to find nonparty
standing to appeal, we have faulted would-be appellants for
failing to take basic steps that Habelt took here. See, e.g.,
Citibank Int’l v. Collier-Traino, Inc., 809 F.2d 1438, 1441
(9th Cir. 1987) (noting nonparty’s “prejudgment activity . . .
was nonexistent”); S. Cal. Edison Co. v. Lynch, 307 F.3d
794, 804 (9th Cir. 2002) (“Apart from their applications for
intervention, the [nonparties] did not participate in the
district court proceedings.”). And contrary to the majority’s
assertion, this case is easily distinguishable from Volkhoff.
Op. at 9. There, a nonparty’s involvement in the district
court “all but ceased with the filing of [a first amended
complaint],” 954 F.3d at 1242, that expressly removed the
nonparty from the litigation in favor of a substituted plaintiff,
based on a “tactical decision aimed at avoiding . . .
dismissal,” id. at 1240. Habelt wasn’t expressly removed, 13
and Habelt didn’t act tactically to avoid dismissal.
    Second, the majority concludes that the equities weigh
against allowing Habelt to appeal. The majority points out
that unlike some cases in which we have recognized
nonparty standing, Habelt was not “haled . . . into the
proceeding against his will.” Op. at 9 (quoting Volkhoff, 945
F.3d at 1242). Putting aside that in the circumstances here,
the most important “equity” is the lack of actual and clear
notice to Habelt that, at some unknown point, he lost his
party status and thus his right to appeal, we have never held
that a nonparty must be brought into proceedings
involuntarily in order to appeal.

to establish appellate standing. See Wencke, 783 F.2d 829, 834-35
(motion for intervention was not necessary to establish nonparty
appellate standing).
13
     And Habelt’s attorneys never withdrew their appearance.
22          HABELT V. IRHYTHM TECHNOLOGIES, INC.

     Next, the majority cites Defendants’ concession at oral
argument that Habelt is not bound by the district court’s
judgment, so he theoretically could pursue a separate lawsuit
against Defendants. Op. at 9. But the preclusive effect of a
prior judgment is a determination generally made by the
subsequent court. Sonner v. Premier Nutrition Corp., 49
F.4th 1300, 1304 (9th Cir. 2022). Thus, a future court is not
bound by Defendants’ concession and may conclude that the
district court’s judgment bars Habelt from pursuing a
separate suit. Moreover, even if Habelt is not bound by the
district court’s judgment, Habelt notes that his claims may
be time-barred by applicable statutes of limitation. Oral Arg.
at 20:10-20:22 (Defendants suggesting that they would
move to dismiss claims barred by the statute of limitations).
So to the extent that Habelt relied on his belief that he
remained a party in this case, he may have declined to timely
file a second lawsuit because he thought he could continue
asserting his claims here. Because Habelt’s claims are
possibly precluded or time-barred, he could be effectively
bound by the district court’s judgment, resulting in further
equities in his favor. Cf. Buffin v. California, 23 F.4th 951,
958 n.3 (9th Cir. 2022) (“The equities weigh in favor of
hearing an appeal ‘when judgment has been entered against
the nonparty.’” (quoting Volkhoff, 945 F.3d at 1242)); Bank
of Am. v. M/V Exec., 797 F.2d 772, 774 (9th Cir. 1986)
(“[T]he equities weigh in favor of hearing [nonparty’s]
appeal because this is the only avenue to obtain appellate
review of the issue.”).
    Other circuits have reached similar results. For example,
the Second Circuit allows nonparties to appeal when they
have “a plausible affected interest” impacted by the
judgment of the district court. Off. Comm. of Unsecured
Creditors of WorldCom, Inc. v. SEC, 467 F.3d 73, 78 (2d
            HABELT V. IRHYTHM TECHNOLOGIES, INC.            23

Cir. 2006) (finding nonparty standing even though nonparty
was not “bound by the district court’s judgment”). The court
discussed a previous decision in which it concluded a
nonparty had standing when, as here, “it was possible,
although not certain, that the nonparty’s [claims] would be
barred by” proceedings in the district court. Id. (discussing
SEC v. Certain Unknown Purchasers of the Common Stock
of and Call Options for the Common Stock of Santa Fe Int’l
Corp., 817 F.2d 1018, 1021 n.1 (2d Cir. 1987)). Other
circuits also examine a nonparty’s stake in the litigation
when assessing standing to appeal. See, e.g., Doe v. Pub.
Citizen, 749 F.3d 246, 259–62 (4th Cir. 2014); SEC v. Forex
Asset Mgmt. LLC, 242 F.3d 325, 328–30 (5th Cir. 2001);
Northview Motors, Inc. v. Chrysler Motors Corp., 186 F.3d
346, 349–50 (3d Cir. 1999). To the extent Habelt is time-
barred or precluded from bringing a separate suit because he
erroneously (but surely reasonably) believed he was a party,
the district court’s ruling had a similar substantial effect on
his interests, counseling in favor of hearing his appeal.
   Thus, whether or not Habelt was a party below, I would
conclude that he has standing to bring this appeal.
                             III.
    Moving to the merits, the crux of the SAC’s allegations
is that Defendants deliberately misled investors about a
rulemaking proceeding by the Centers for Medicare and
Medicaid Services (CMS) to establish a uniform
reimbursement rate for its core product, the Zio XT patch.
On several calls with investors, iRhythm and its executives
expressed optimism that CMS would adopt a proposed rule
setting a reimbursement rate of about $380, with some
variation to account for different specifications in the
product line. During the rulemaking process, external
24          HABELT V. IRHYTHM TECHNOLOGIES, INC.

analysts and iRhythm’s own investors expressed concerns
that the company was not providing CMS with the usual
types of cost data that the agency generally relies on when
setting reimbursement rates. iRhythm attempted to dispel
these concerns by noting that it was advocating for a novel
reimbursement rate calculation methodology because—
unlike the products of its competitors and other medical
device manufacturers—its Zio XT patch represented a
vertically integrated service. However, in part based on the
methodological concerns raised by third parties, CMS
declined to adopt a uniform national reimbursement rate.
Instead, pricing authority reverted to a regional CMS
contractor, Novitas, which slashed reimbursement rates for
the Zio XT to about $115 (from the then-current rate of
$311), causing a steep decline in iRhythm’s share price and
the resignation of several executives.
    The SAC alleges that various statements made by
iRhythm executives expressing confidence that CMS would
adopt its preferred reimbursement rate amounted to
securities fraud. The district court dismissed the SAC,
primarily on two grounds. First, the district court found that
some alleged misrepresentations fell within the PSLRA’s
safe harbor provision, which precludes liability for certain
“forward-looking statement[s].” See 15 U.S.C. § 78u-
5(c)(1). Second, relying on our decision in Epstein v.
Washington Energy Co., 83 F.3d 1136 (9th Cir. 1996), the
district court ruled that some alleged misrepresentations
were not actionable because they amounted to predictions
about the outcome of a regulatory proceeding. See id. at
1141 (“[R]eliance on predictive statements in the context of
               HABELT V. IRHYTHM TECHNOLOGIES, INC.                   25

regulatory proceedings is inherently unreasonable.”). 14 We
review dismissal of a complaint for failure to state a claim
de novo, taking all facts in the light most favorable to
plaintiffs. Wochos v. Tesla, Inc., 985 F.3d 1180, 1188 (9th
Cir. 2021).      In my view, three of the alleged
misrepresentations were improperly dismissed because they
were neither forward-looking statements nor predictions
about the outcome of the CMS rate setting process.
    First, Habelt alleges that when answering a question on
an earnings call about whether iRhythm had submitted
traditional types of cost data to CMS to facilitate the
rulemaking process, then Chief Executive Officer (CEO)
King stated that CMS “ha[s] everything they can get from
us.” While it is undisputed that iRhythm provided certain
types of cost data to CMS, Habelt also alleges that iRhythm,
with King’s knowledge, deliberately withheld certain cost
information that it feared might undercut its proposed rate.
If true, this allegation supports Habelt’s contention that
King’s statement that iRhythm had submitted all available
cost data was factually false and a deliberate attempt to

14
   The district court appears to read Epstein as shielding all statements
about a regulatory proceeding. But Epstein held only that: (1) companies
generally have no affirmative duty to disclose the progress of regulatory
proceedings; and (2) PSLRA claims can’t be based on mere predictions
about the outcome of regulatory proceedings. 83 F.3d at 1141–42.
Nothing in Epstein suggests that companies can lie about their
cooperation with regulators or about concerns expressed by regulators.
For the reasons discussed below, even if companies have no obligation
to disclose the extent of their cooperation or known regulatory risks,
Epstein does not displace the general rule that companies must speak
truthfully when they choose to speak on voluntary matters, even on
matters as to which they have no obligation to speak.
26          HABELT V. IRHYTHM TECHNOLOGIES, INC.

mislead investors about the company’s cooperation with
regulators.
    King’s alleged misrepresentation was not forward
looking because it concerned cost data that iRhythm had
previously submitted. Thus, it is not covered by the
PSLRA’s safe harbor. Moreover, King’s statement was not
merely a prediction about the outcome of the rate-setting
process. If Habelt’s allegations are true, King may have
intended to project false confidence that iRhythm’s proposed
rate would be adopted. But in so doing, King not only
implied a favorable prediction about the outcome of the
proceeding, he also allegedly lied about a factual issue—the
extent of iRhythm’s cooperation with regulators and the
information that iRhythm provided to regulators. Even after
Epstein, we have held that similar statements are actionable.
In Berson v. Applied Signal Technology., Inc., 527 F.3d 982
(9th Cir. 2008), we reversed dismissal of a securities fraud
claim related to a government contractor’s statement that its
backlog of work favorably impacted revenue forecasts, even
though much of the backlog was due to the agencies’
decisions to stop work on government contracts that would
likely never result in future revenue. Id. at 985–87.
Specifically, we held that “once defendants chose to tout the
company’s backlog, they were bound to do so in a manner
that wouldn’t mislead investors as to what that backlog
consisted of.” Id. at 987. So too here, as alleged. Although
iRhythm may not have had a duty to affirmatively disclose
the extent of its cooperation with CMS, once it chose to
speak on that issue, it had an obligation to tell the truth.
    Second, King stated on a separate investor call that
“there [was not] really a basis” for CMS to “lower[ the
proposed rate] if there isn’t any new data that would suggest
that the price of our service would be less.” In essence, King
               HABELT V. IRHYTHM TECHNOLOGIES, INC.                   27

claimed that in the absence of new data, there would be no
reason for CMS to reject iRhythm’s proposed rate for the Zio
XT. But Habelt alleges that King knew this was factually
untrue because: (1) an independent market research firm had
submitted a comment to the CMS raising issues with
iRhythm’s cost methodology; and (2) iRhythm deliberately
withheld data from CMS indicating that the true cost of the
product was much lower than the proposed rate.
    Taking these allegations in the light most favorable to
Plaintiffs, King’s statement can be read as an attempt to
mislead investors about facts regarding existing evidence
about the true cost of the Zio XT. Again, the alleged false
statement is not forward looking because it concerned the
state of market evidence that existed when King made the
statement. And again, it is not merely a prediction about the
outcome of the ratemaking process because King allegedly
lied about a material component of the regulatory process.
See Berson, 527 F.3d at 985–87.
    Finally, then CEO Coyle stated on an investor call that
Novitas had not “spoken to [iRhythm] about how pricing
was being established” following CMS’s decision not to
adopt iRhythm’s proposed rate in a nationwide final rule. 15
Habelt alleges this statement was untrue because Novitas
had directly expressed concerns about iRhythm’s pricing
methodology to Coyle personally about two months before
Coyle made this statement. If Habelt’s allegations are true,
then Coyle also may have deliberately attempted to mislead
investors as to facts relevant to the state of the regulatory
process.

15
  After CMS declined to adopt a national rate, pricing authority reverted
back to Novitas.
28          HABELT V. IRHYTHM TECHNOLOGIES, INC.

    This statement was not forward looking because it
concerned conversations that iRhythm may or may not have
had with the CMS contractor. And it is not protected by
Epstein, because it is another alleged lie about facts relevant
to a material component of the regulatory process. See
Berson, 527 F.3d at 985–87. In that respect, this alleged
misrepresentation is almost identical to another we
confronted in Schueneman v. Arena Pharmaceuticals, Inc.,
840 F.3d 698 (9th Cir. 2016). There, we reversed dismissal
of a securities fraud claim against a company that
represented that all available studies supported its
application for approval of a new drug to the Food and Drug
Administration (FDA). Id. at 702–03. Plaintiffs alleged,
however, that the FDA had expressed concerns to the
company that some of the underlying studies weighed in
favor of rejecting the drug. Id. We explained that once the
company chose to speak about the studies, it was “bound to
do so in a manner that wouldn’t mislead investors as to
potentially negative information within their possession.”
Id. at 707–08 (brackets omitted) (quoting Berson, 527 F.3d
at 987). The company “did more than just express its
confidence in [the product’s] future. It affirmatively
represented that ‘all the animal studies that had been
completed’ supported [the company’s] case for approval”
even though the company “knew that the animal studies
were the sticking point with the FDA.” Id. at 708 (brackets
omitted). Although iRhythm had no duty to reference its
discussions with Novitas, once it chose to, it could not
misrepresent concerns expressed by Novitas.
   I agree with the district court that all other alleged
misrepresentations were properly dismissed as either
forward-looking statements protected by the PSLRA’s safe
harbor or predictions about the outcome of the CMS rate-
               HABELT V. IRHYTHM TECHNOLOGIES, INC.                       29

making process that are properly shielded by our decision in
Epstein. 16
                                    IV.
    For all these reasons, I would conclude that Habelt has
standing to appeal and reverse the district court’s dismissal
as to the three alleged misrepresentations discussed above.
Thus, I respectfully dissent.

16
   In the alternative, the district court dismissed the complaint for failure
to allege scienter with the required particularity. In relevant part, this
conclusion was based on the premise that “[t]he SAC contains no . . .
allegations that Defendants ‘affirmatively represented’ information
about studies, analyses, or other predicate requirements for regulatory
approval that had not, in fact, been completed.” But for the reasons
explained above, I would find that portions of the alleged
misrepresentations did exactly that. Thus, I would remand for the district
court to reevaluate its scienter holding.