Michigan Pension Fund Files Complaint Against ZoomInfo

The City of Pontiac Police and Fire Retirement System, a Pontiac, Michigan-based pension fund, has filed a lawsuit against Vancouver, Washington-based software company ZoomInfo Technologies Inc., alleging the company made misleading statements. ZoomInfo is unrelated to Zoom Video Communications Inc.

Purchasers of ZoomInfo Class A common stock between November 5, 2020, and August 5, 2024, have until November 4 to seek appointment as lead plaintiff in the complaint, which is seeking class-action status.

The case, City of Pontiac Police and Fire Retirement System v. ZoomInfo Technologies Inc., was filed in U.S. District Court for the Western District of Washington. The pension fund is represented by Robbins Geller Rudman & Dowd LLP.

TA Associates Management, the Carlyle Group and DO Holdings were also named as defendants in the case; the three companies combined to control approximately 80% of the voting power of ZoomInfo shareholders following a secondary registered public offering in August 2021, according to the complaint.

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ZoomInfo CEO Henry Schuck and chief financial officer Cameron Hyzer were also named as defendants.

The complaint alleges that the defendants made materially false and misleading statements and omissions about the company’s customer retention and financial position. It alleges that ZoomInfo’s financial and operational results were boosted by the effects of the pandemic, pulling forward demand for the company’s software and artificially inflating the price of the company’s stock.

ZoomInfo stock had rallied nearly 100% from its initial public offering in June 2020, when the stock was $21 per share, and peaked in November 2021 at $77.35 a share. Shares have declined nearly 90% since then. Shares closed September 5 at $9.94.

The fund had purchased shares of ZoomInfo during the class period.

The complaint alleges that ZoomInfo used coercive tactics, including threats of litigation and manipulative auto-renewal policies, to retain customers. The plaintiffs argue that in a November 2022 earnings call, Hyzer pointed to increased “scrutiny” from customers during the contract renewal process. The company reported a decline in net revenue retention, resulting in a 29% decline in share price the next day.

“ZoomInfo’s coercive customer retention tactics had materially damaged the Company’s customer relationships, client franchise, and competitive advantages, and created a hidden demand cliff for customer contract renewals in future periods; and that as a result of above, ZoomInfo’s reported revenues, operating income, and customer and retention metrics were materially overstated,“ the complaint states.

Pontiac PFRS had $219 million in assets under management at the end of 2021 and a funded ratio of 88.9%. The fund reported annualized one-, three-, five- and 10-year returns of 16.26%, 14.82%, 10.57% and 9.80%, respectively, as of December 31, 2021.

A spokesperson for ZoomInfo declined to comment on any pending litigation.