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  • Third Circuit Affirms Dismissal Of Putative Class Action Without Leave To Amend
     
    11/20/2018

    On November 14, 2018, the United States Court of Appeals for the Third Circuit affirmed the dismissal of and denial of leave to amend a putative class action complaint against Altisource Asset Management Corporation (“AAMC”) and certain of its former directors and officers under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Plaintiffs alleged that AAMC — a provider of asset management and corporate governance advising services related to mortgage servicing — made material misstatements concerning its relationships with the mortgage servicing company Ocwen Financial Corporation (“Ocwen”) and certain affiliated companies. City of Cambridge Ret. Sys. v. Altisource Asset Mgmt. Corp., —F. Supp. 3d—, 2018 WL 5931509 (3d Cir. Nov. 14, 2018). The appealed order was a July 5, 2017 decision of the District Court of the Virgin Islands that rejected plaintiffs’ motion to amend for the reasons noted in the District Court’s April 6, 2017 motion to dismiss decision, as reviewed in our prior post.
  • Second Circuit Affirms Dismissal Of Securities Fraud Claims With Prejudice For Failure To Plead Reliance
     
    11/06/2018

    On October 26, 2018, the United States Court of Appeals for the Second Circuit affirmed the dismissal of a putative securities class action under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 against a financial services company, its broker-dealer (the “Company”), and one current and one former officer of the financial services company. Schwab v. E*TRADE Fin. Corp. et al, 1:18-cv-461 (2d Cir. Oct. 26, 2018). Plaintiff alleged that the Company failed to disclose that it was purportedly violating the duty of “best execution,” which requires broker-dealers to use “reasonable diligence” to obtain the most favorable price for a customer under “prevailing market conditions.” Earlier this year, the United States District Court for the Southern District of New York dismissed plaintiff’s third amended complaint with prejudice after finding that plaintiff had failed to adequately allege reliance, among other elements. The Second Circuit affirmed the judgment, reiterating that the Affiliated Ute presumption of reliance does not apply where the claim is primarily based on misrepresentations rather than on omissions.
    CATEGORY: Reliance
  • Putative Securities Class Action Dismissed Against Biopharmaceutical Company Where Statements Regarding Clinical Trials Were Not Actionable And Plaintiffs Failed To Plead Scienter
     
    11/06/2018

    On October 26, 2018, Judge Thomas D. Schroeder of the United States District Court for the Middle District of North Carolina dismissed a putative class action brought against a biopharmaceutical company (the “Company”) and certain of its officers and directors under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Hirtenstein v. Cempra, Inc., No. 16-cv-1303 (M.D.N.C. Oct. 26, 2018). Plaintiffs sought to recover for alleged stock losses occurring after the Company allegedly failed to disclose risks associated with an experimental antibiotic used to treat pneumonia. The Court dismissed the action, finding that the challenged statements about the drug’s safety constituted opinions and plaintiffs’ allegations of motive were insufficient to establish a strong inference of scienter.
  • Middle District Of Pennsylvania Dismisses Putative Class Action Based On Lead Plaintiff’s Loss Of Standing

     
    10/31/2018

    On October 24, 2018, Judge John E. Jones III of the United States District Court for the Middle District of Pennsylvania granted judgment on the pleadings and dismissed a putative securities class action against Rite Aid Corporation, Walgreens Boots Alliance, Inc., and certain of their executives under Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder relating to the ultimately unsuccessful merger between the two companies. Hering v. Walgreens Boots Alliance, Inc., —F. Supp. 3d—, 2018 WL 5276189 (M.D. Pa. 2018). This decision follows from a decision issued earlier this summer and reviewed in a prior post. In that earlier decision, Judge Jones dismissed claims with respect to Rite Aid’s statements and held that only Walgreens’ statements made after October 2016 were actionable. In its most recent decision, the Court held that, since the named plaintiff’s last alleged stock purchase predated October 2016, he no longer had standing. Further, the Court denied a motion to intervene filed by putative class members, but noted that the proposed intervenors were free to file their own actions.
    CATEGORY: Standing
  • Southern District Of New York Dismisses Putative Securities Class Action Against Electronics Manufacturer, Finding That The Alleged Misstatements Are Protected By The PSLRA’s Safe Harbor
     
    10/23/2018

    On October 10, 2018, Judge Paul G. Gardephe of the United States District Court for the Southern District of New York issued a memorandum opinion and order setting forth the reasoning for his September 30, 2018, dismissal of a putative securities class action against SuperCom Inc. (the “Company”), an Israeli manufacturer of electronic identification and location tracking products, and certain of its officers and directors.  In re SuperCom Inc. Sec. Litig., No. 20-cv-9650 (S.D.N.Y. Oct. 10, 2018).  Plaintiffs—purchasers of the Company’s common stock during a ten-month putative class period—alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) as a result of defendants allegedly making materially false and misleading statements regarding the Company’s revenue and earnings projections for 2015, which plaintiffs allege led to a 40% decline in the Company’s stock price when the Company subsequently announced lower-than-expected financial results.  The Court disagreed, finding that the alleged misstatements are protected by the Private Securities Litigation Reform Act of 1995 ( “PSLRA”) safe harbor because plaintiffs either failed to adequately allege material misstatements or failed to adequately allege the requisite scienter necessary to support their claims.
  • Exchange Act Claims Dismissed Against Solar Energy Company For Plaintiffs’ Failure To Allege Falsity Of Optimistic Projections Or Scienter
     
    10/16/2018

    On October 9, 2018, Judge Richard Seeborg of the United States District Court for the Northern District of California dismissed with prejudice a putative class action against a solar energy company (the “Company”) and certain of its officers under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. In re SunPower Corp. Secs. Litig., No. 16-cv-04710-RS (N.D. Cal. Oct. 9, 2018). Plaintiffs alleged the Company misrepresented demand for its projects by failing to report that an extension of an investment tax credit (“ITC”) and other tax rules would decrease demand in the near-term. Observing that the gravamen of the complaint is that the Company made bad predictions, the Court dismissed the action because plaintiffs failed to identify a material misrepresentation or omission and failed to plead facts sufficient to give rise to a strong inference of scienter, as required by the Private Security Litigation Reform Act (“PSLRA”).
  • Southern District Of Florida Dismisses Certain Securities Fraud Claims For Failure To Adequately Allege Scienter And Sustains Others
     

    10/09/2018

    On October 4, 2018, Magistrate Judge Bruce Reinhart of the United States District Court for the Southern District of Florida granted in part and denied in part a motion to dismiss claims asserted under Rule 10b-5 of the Securities Exchange Act of 1934 by certain investment funds against Ocwen Financial Corporation.  Owl Creek I, L.P. v. Ocwen Financial Corp., No. 18-80506-CIV (Oct. 4, 2018).  Plaintiffs alleged that Ocwen and certain of its executives induced plaintiffs to invest by making inaccurate statements regarding Ocwen’s financial statements, its purported regulatory compliance, and the effectiveness of its internal controls and procedures.  The Court dismissed claims based on statements in one conference call due to lack of scienter, but otherwise denied defendants’ motion.
  • Northern District Of Illinois Dismisses Securities Class Action For Failure To Adequately Allege Misstatements and Scienter
     

    10/09/2018

    On September 30, 2018, Judge Andrea R. Wood of the United States District Court for the Northern District of Illinois dismissed a putative shareholder class action against VASCO Data Security International, Inc. and certain of its officers. Plaintiff asserted claims under Sections 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Rossbach v. VASCO Data Sec., Int’l, 2018 WL 4699796, (N.D. Ill. Sept. 30, 2018). Plaintiff alleged that VASCO made a number of misstatements suggesting that revenue sources other than the company’s largest client were stronger than they really were. When the company disclosed that the revenue associated with those other products and services remained essentially flat, the stock price allegedly fell. The Court held that plaintiff’s amended complaint failed to adequately allege a false statement or scienter. Plaintiff was, however, granted leave to file a second amended complaint.
  • Western District Of Washington Dismisses Securities Class Action For Failure To Adequately Allege Material Misstatements And Scienter
     

    10/09/2018

    On October 2, 2018, Judge John C. Coughenour of the United States District Court for the Western District of Washington dismissed a putative class action against Zillow Group, Inc. and certain of its executives asserting claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.  In re Zillow Group, Inc. Securities Litigation, No. C17-1387-JCC (W.D. Wash. Oct. 2, 2018).  Plaintiffs alleged misstatements by defendants regarding a Consumer Financial Protection Bureau (“CFPB”) investigation into, among other things, potential violations of the Real Estate Settlement Procedures Act (“RESPA”) arising out of Zillow’s “co-marketing” program between real estate agents and mortgage lenders.  The Court dismissed the action for failure to adequately allege material misstatements or scienter, but granted plaintiffs leave to amend.
  • Fifth Circuit Affirms Dismissal Of Securities Class Action For Failure To Adequately Allege Material Misstatements And Loss Causation
     

    10/09/2018
     

    On October 3, 2018, the United States Court of Appeals for the Fifth Circuit affirmed the dismissal of a putative securities class action against Whole Foods Market, Inc. and certain of its executives under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.  Emps.’ Ret. Sys. of the State of Haw. v. Whole Foods Mkt., Inc., —F.3d—, 2018 WL 4770729 (5th Cir. Oct. 3, 2018).  In connection with various regulatory investigations, Whole Foods admitted to mislabeling prepackaged foods such that it charged consumers for more food than the packages actually contained.  Plaintiffs alleged that, by virtue of those “weights and measures” violations, the company had made three categories of misstatements to investors:  (1) statements touting the company’s price competitiveness or efforts to increase its price competitiveness; (2) statements about the company’s commitment to transparency, quality, and corporate responsibility; and (3) statements announcing the company’s revenues, which plaintiffs alleged were artificially inflated as a result of the mislabeled packaging.  The Court held that the first two categories of allegations did not constitute material representations, and the third did not cause plaintiffs’ alleged loss.

  • Sixth Circuit Reverses Dismissal Of Putative Securities Class Action Against Pharmaceutical Company, Finding That Statements About Future Events Were Not Covered By The PSLRA Safe Harbor Provisions
     
    10/02/2018

    On September 27, 2018, the United States Court of Appeals for the Sixth Circuit reversed the dismissal of a putative securities class action against pharmaceutical company Esperion Therapeutics, Inc. (the “Company”) and its CEO.  Dougherty v. Esperion Therapeutics, Inc., et al., No. 17-1701 (6th Cir. Sept. 27, 2018).  Plaintiffs, investors in the Company, alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) by falsely stating that, based on feedback received by the Company at a meeting with the Food and Drug Administration (the “FDA”), the FDA would not require additional testing of the Company’s pre-approval anti-cholesterol drug ETC-1002.  The Company’s stock price allegedly plummeted when, over a month later, the Company issued a press release indicating that, according to the FDA’s own final meeting minutes which had just been provided to the Company, additional testing would be required prior to any approval of the drug.  The United States District
    Court for the Eastern District of Michigan had dismissed plaintiffs’ complaint, finding that plaintiffs failed to adequately plead a strong inference of scienter because they failed to identify facts demonstrating that defendants actually understood the FDA’s communications in a way that was different than what the Company publicly disclosed, and that defendants had not been reckless.  Plaintiffs appealed, and the Sixth Circuit reversed.
  • Northern District Of California Dismisses Securities Class Action Against Media Services Provider For Failure To Adequately Allege Material Misstatements
     
    10/02/2018

    On September 25, 2018, Judge Haywood S. Gilliam, Jr. of the United States District Court for the Northern District of California dismissed a putative securities class action against Netflix, Inc. (the “Company”), its CEO and CFO.  Ziolkowski v. Netflix, Inc., et al., No. 17-cv-01070 (N.D. Cal Sept. 25, 2018).  Plaintiffs—purchasers of the Company’s common stock during the proposed class period—claimed that the Company violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making materially false and misleading statements and omissions in order to minimize the effects of a recently enacted pricing increase on subscription figures.  In dismissing the complaint without prejudice, the Court held that plaintiffs failed to adequately allege any untrue statement of material fact and also failed to adequately allege scienter.
  • Ninth Circuit Affirms District Court’s Dismissal Of State Law Claims Based On Alleged Misrepresentations And Omissions As Barred Under SLUSA
     
    09/25/2018

    On September 14, 2018, the United States Court of Appeal for the Ninth Circuit affirmed the District Court’s dismissal of class claims brought by a financial advisor on behalf of itself and shareholders of a bond fund (the “Fund”) against defendants an investment company and its board, on the basis that the claims were barred by the Securities Litigation Uniform Standards Act (“SLUSA”).  Northstar Fin. Advisors v. Schwab Invs., No. 16-15303 (9th Cir. Sept. 14, 2018).  Plaintiff alleged that defendants made certain investments in the Fund that deviated from the investment policies and objectives that resulted in negative returns for the Fund.  Based on those deviations, plaintiff asserted claims of breaches of fiduciary duty, contract, and covenant of good faith and fair dealing against defendants.  The Ninth Circuit affirmed the District Court’s dismissal, agreeing with the District Court that the claims were preempted by SLUSA because the essence of plaintiff’s allegations related to misstatements or omissions in connection with a sale of a security, and that plaintiff could not “avoid preclusion through artful pleading that removes the covered words . . . but leaves in the covered concepts.”
    CATEGORY: SLUSA
  • Exchange Act Claim Survives Because Sarbanes-Oxley’s Two Year Statute Of Limitations Extended The Time For Plaintiffs To Initiate Section 18 Claim
     
    09/25/2018

    On September 14, 2018, United States District Court Judge Michael Shipp of the District of New Jersey declined to dismiss as untimely plaintiffs’ claim against a major pharmaceutical company (the “Company”) and certain of its executives under Section 18 of the Securities Exchange Act of 1934.  Pentwater Equity Opportunities Master Fund Ltd v. Valeant Pharmaceuticals International, Inc., No. 1707552 (D.N.J. Sep’t 14, 2018).  In denying defendants’ motion to dismiss, the Court deepened a split among courts over whether the Sarbanes-Oxley Act of 2002 (“SOX”) extends the time to file a Section 18 claim to two years of when the violation is discovered.
  • Third Circuit Affirms Dismissal Of Securities Fraud Class Action For Failure To Plead Scienter In Fourth Amended Complaint
     
    09/25/2018

    On September 20, 2018, the United States Court of Appeals for the Third Circuit affirmed dismissal of a putative securities fraud class action brought against Hertz Global Holdings Inc. (the “Company”) and several of its executives for failure to plead a strong inference of scienter.  In Re Hertz Global Holdings Inc., No. 17-2200 (3d Cir. Sep’t 20, 2018).  Plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 by making materially false and misleading statements concerning the Company’s financial results, internal controls, and future earnings projections.  The panel found that plaintiffs’ allegations more plausibly suggested defendants were “just bad leaders,” confirming that claims of mismanagement cannot be converted into a claim of securities fraud, and that the complaint failed to allege factual allegations sufficient to give rise to a strong inference of scienter.
  • Northern District Of California Dismisses Putative Securities Class Action For Failure To Adequately Allege Misstatements, Scienter, And Loss Causation
     
    09/17/2018

    On September 7, 2018, Judge Haywood S. Gilliam, Jr. of the United States District Court for the Northern District of California dismissed a putative class action against Impax Laboratories and certain of its officers under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder alleging that the company made material misstatements regarding (1) the cause of substantial price increases for two generic drugs and (2) trends associated with other drugs.  Fleming v. Impax Labs. Inc., No. 16 Civ. 6577 (N.D. Cal. Sept. 7, 2018).  The Court held that (a) the allegations regarding drug price increases adequately pleaded a material misstatement, but insufficiently alleged scienter or loss causation, and (b) the allegations regarding trends failed to plead either a material misstatement or scienter.  Plaintiff was, however, granted leave to replead.
  • Northern District Of Texas Dismisses With Prejudice Accounting-Related Claims For Failure To Adequately Allege Scienter
     
    09/17/2018

    On September 11, 2018, Judge Barbara M. G. Lynn of the United States District Court for the Northern District of Texas dismissed with prejudice a third amended putative class action complaint against Global Power Equipment Group, Inc. and certain of its former officers asserting claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder based on allegations that defendants filed false and misleading financial statements.  Budde v. Global Power Equip. Grp., Inc., No. 3:15-CV-1679-M, 2018 WL 4335670 (N.D. Tex. Sept. 11, 2018).  Global Power issued restated financials and acknowledged that it had recognized certain revenues and expenses in the wrong period for its Electrical Solutions (“ES”) Segment, had deficiencies in internal controls over financial reporting, and incorrectly accounted for goodwill upon the sale of a subsidiary.  Nevertheless, the Court held that plaintiffs failed to adequately allege scienter with respect to any individual defendant and dismissed the complaint with prejudice.
    CATEGORY: Scienter
  • Northern District Of California Finds Scienter And Individual Reliance Adequately Pleaded, But Stresses That Issues Respecting Class-Wide Reliance Remain To Be Considered
     
    09/17/2018

    On September 7, 2018, Judge Charles Breyer of the United States District Court for the Northern District of California denied a motion to dismiss a second amended putative class action complaint on behalf of Volkswagen bondholders asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against Volkswagen and certain of its former executives alleging that defendants failed to disclose Volkswagen’s use of “defeat device” software to mask emissions in the company’s diesel engines.  In re Volkswagen “Clean Diesel” Marketing, Sales Practices, and Products Liability Litigation, MDL No. 2672 CRB (JSC) (N.D. Cal. Sept. 7, 2018).  In its previous July 19, 2017 and March 2, 2018 orders, as discussed in our prior posts, the Court had first dismissed certain claims for failure to adequately plead scienter and then, reconsidering its prior holding that plaintiff was entitled to a presumption of reliance under Affiliated Ute, dismissed plaintiff’s first amended complaint in its entirety for failure to plead reliance.  In considering the second amended complaint, the Court held that scienter and individual, direct reliance were adequately alleged, but raised questions about plaintiff’s ability to prove class-wide reliance.
    CATEGORIES: RelianceScienterControl Person
  • Third Circuit Allows Putative Class Action To Proceed Against Investment Services Provider, Finding Breach Of Contract Claim Not Barred Under SLUSA Where Alleged Misrepresentations Were Objectively Immaterial To Plaintiffs And The Claim Asserted
     
    09/10/2018

    On September 4, 2018, the United States Court of Appeals for the Third Circuit affirmed the partial denial of a motion to dismiss a putative class action against investment services provider Vanguard Group (the “Company”).  Alex Taksir, et al. v. The Vanguard Group, No. 17-3585 (3d. Cir. Sept. 4, 2018).  Plaintiffs alleged that the Company violated Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (“UTPCPL”) and breached its contract with plaintiffs by overcharging on per-trade commissions.  According to the Complaint, the Company’s website represented that commissions were $2 per stock trade for customers who maintained account balances of between $500,000 and $1,000,000, but the Company allegedly charged plaintiffs—who met the prerequisite balance requirements—$7 per trade.  The United States District Court for the Eastern District of Pennsylvania dismissed the UTPCPL claim, but held that the breach of contract claim was not barred by the Securities Litigation Uniform Standards Act (“SLUSA”)—which precludes parties from bringing class actions based on state law claims relating to “a misrepresentation or omission of a material fact in connection with the purchase or sales of a covered security”—because no misrepresentations were made “in connection with” a covered security.  The Company sought leave to file an interlocutory appeal, which the Third Circuit granted.
    CATEGORY: SLUSA
  • Northern District Of Texas Dismisses Securities Class Action Against Educational Services Company For Failure To Adequately Allege Material Misrepresentations Or Omissions
     
    09/05/2018

    On August 24, 2018, Judge Karen Gren Scholer of the United States District Court for the Northern District of Texas dismissed with prejudice a putative securities class action against an educational services company (“the Company”), certain of its officers and directors, and the underwriters of its November 2015 initial public offering (the “IPO”).  David M. Stein v. Match Group Inc., No. 3:16-cv-00549 (N.D. Tex.).  Plaintiffs—investors in the IPO—claimed that defendants violated Sections 11 and 15 of the Securities Act of 1933 because the offering documents for the IPO allegedly contained material misstatements and omissions concerning expected sales and revenues from one of the Company’s business segments and failed to disclose certain information as required by Items 303 and 503 of Regulation S-K.  The Court held that plaintiffs had failed to plausibly allege any untrue statement of material fact because the alleged misrepresentations were accurate statements of historical results.  The Court also held that plaintiffs failed to allege a known trend that was required to be disclosed under Item 303 and failed to allege a significant risk factor that was required to be disclosed under Item 503.
  • Northern District Of California Dismisses Securities Class Action Against Electric Car Manufacturer, Finding Production Projections Were Forward-Looking Statements
     
    09/05/2018

    On August 24, 2018, Judge Charles Breyer of the United States District Court for the Northern District of California dismissed with leave to amend a putative class action against an electric car manufacturer (the “Company”), its Chief Executive Officer, and its Chief Financial Officer for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5.  Wochos v. Tesla, Inc., et al., No. 17-cv-05828 (N.D. Cal. Aug. 24, 2018).  Plaintiffs alleged that defendants made false and misleading statements regarding production projections for the Company’s Model 3 that it failed to meet.  Stating that “[f]ederal securities laws do not punish companies for failing to achieve targets,” the Court held that the challenged statements were protected by the safe harbor provision of the Private Security Litigation Reform Act of 1995 (“PSLRA”) because they were forward-looking and accompanied by meaningful cautionary language.
  • In Action Asserting Parallel Securities Act And Exchange Act Claims, Massachusetts District Court Dismisses IPO-Based Securities Act Claims With Prejudice For Failure To Plead A Misstatement, And Post-IPO Exchange Act Claims Without Prejudice For Lack Of Standing
     
    08/28/2018

    On August 23, 2018, Judge F. Dennis Saylor IV of the United States District Court for the District of Massachusetts dismissed the claims asserted in a putative class action against ReWalk Robotics and its officers, directors, and IPO underwriters under the Securities Act of 1933 (“Securities Act”) for misrepresentations made in a registration statement with prejudice, but dismissed the claims asserted under the Securities Exchange Act of 1934 (“Exchange Act”) for alleged post-IPO misstatements without prejudice.  Yan v. ReWalk Robotics Ltd., No. 17 Civ. 10169, slip op. (D. Mass. Aug. 23, 2018), ECF No. 107.
  • New Jersey District Court Dismisses Putative Securities Class Action Alleging Inappropriate Disclosures Regarding Sources Of Drug Revenue
     
    08/28/2018

    On August 21, 2018, Judge Kevin McNulty of the United States District Court for the District of New Jersey dismissed a putative class action against Galena Biopharma Inc. and several of its officers and employees that alleged defendants failed to make appropriate disclosures about the source of revenues associated with an opioid pain medication manufactured by Galena.  In re Galena Biopharma, Inc. Sec. Litig., 2018 WL 3993453 (D.N.J. Aug. 21, 2018).  Plaintiffs alleged that these omissions violated Item 303 of SEC Regulation S-K or, in the alternative, Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder.  The Court held that, although plaintiffs had “identified several troubling practices regarding Galena,” the complaint failed to state a securities fraud claim and dismissed the complaint with leave to replead.
  • Second Circuit Affirms Dismissal Of Putative Class Action As Precluded By SLUSA
     
    08/28/2018

    On August 17, 2018, the United States Court of Appeals for the Second Circuit affirmed the dismissal of a putative class action asserting breach of contract and tort claims against the managers, auditors, consultant, and administrator of two feeder funds for Bernard L. Madoff Investment Securities arising out of defendants’ management and oversight of the funds.  In re Kingate Mgmt. Ltd. Litig., No. 16-3450 (2d. Cir. Aug. 17, 2018) (summary order).  The decision marks a second trip of the case through the Circuit.  The district court had previously dismissed all of plaintiffs’ claims as precluded by the Securities Litigation Uniform Standards Act of 1988 (“SLUSA”), but had its decision vacated by the Second Circuit, which held that SLUSA precluded only state law claims “predicated on conduct of the defendant specified in SLUSA’s operative provisions.”  Slip op. at 5 (citing In re Kingate Mgmt. Ltd. Litig., 784 F.3d 128, 149 (2d Cir. 2015)).  On remand, the district court dismissed certain claims as precluded by SLUSA and dismissed the rest for lack of standing and failure to state a claim under British Virgin Islands/Bermuda law.  The Second Circuit affirmed this second decision, holding in relevant part that certain negligent misrepresentation claims were preempted by SLUSA because they concerned statements that were material to a decision to buy or sell a covered security.
    CATEGORY: SLUSA
  • Northern District Of California Denies Motion To Remand Putative Class Action Asserting Both Securities Act And State Law Claims
     
    08/21/2018

    On August 10, 2018, United States District Judge Phyllis J. Hamilton of the United States District Court for the Northern District of California denied a motion to remand to state court a putative securities class action against digital currency issuer Ripple Labs, Inc., one of its subsidiaries, and its Chief Executive Officer.  Coffey v. Ripple Labs Inc., No. 18-cv-03286-PJH (N.D. Cal. Aug. 10, 2018).  Plaintiff, a purchaser of XRP, Ripple’s digital currency, sued defendants in California state court, alleging violations of the Securities Act of 1933 (the “Securities Act”) and California’s blue sky statute.  Plaintiff alleges that defendants’ sale of XRP to investors in an initial coin offering (in which digital assets are sold to consumers in exchange for legal tender or other cryptocurrencies) constituted an unregistered sale of securities in violation of the Securities Act and the California Corporations Code.  Defendants removed the action to federal court pursuant to Section 1453 of the Class Action Fairness Act (“CAFA”), and plaintiff moved to remand the action to state court.  The Court denied plaintiff’s motion, holding that Section 1453 of CAFA provides an independent right to removal that is not precluded by the anti-removal provision in Section 22(a) of the Securities Act, at least in cases not involving a “covered security” as defined in the Securities Litigation Uniform Standards Act (“SLUSA”).
    CATEGORY: Jurisdiction
  • Southern District Of New York Dismisses Securities Class Action Against Brokerage Firm For Failure To Adequately Allege Material Misrepresentations And Scienter
     
    08/21/2018

    On August 10, 2018, Judge Kimba M. Wood of the United States District Court for the Southern District of New York dismissed a putative securities class action against foreign exchange trading company FXCM Inc. (“FXCM” or the “Company”) and its CEO.  Ret. Bd. of the Policemen’s Annuity and Benefit Fund of Chicago v. FXCM, No. 15-cv-03599 (S.D.N.Y. Aug. 10, 2018).  Plaintiff alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 by making material misstatements and omissions concerning certain risks associated with the Company’s business model.  The Court held that the alleged misrepresentations were inactionable “puffery,” too vague to be actionable, or were not misleading because the alleged risks were adequately disclosed when the Company’s disclosures were viewed as a whole.  The Court also held that plaintiff had failed to allege a strong inference of scienter.
  • Eastern District Of Michigan Holds That Exchange Act Statute Of Repose Starts To Run From Date Of Last Fraudulent Misrepresentation
     
    08/14/2018

    On August 3, 2018, Judge George C. Steeh of the United States District Court for the Eastern District of Michigan dismissed with leave to amend an individual action asserting, among other things, Section 10(b) of the Securities Exchange Act and Rule 10b-5 claims.  Equity Trust Co., et al., v. Kopacka, et al., No. 17-12275 (E.D. Mich. Aug. 3, 2018).  Defendant argued that plaintiffs’ Exchange Act claims were barred by the applicable five-year statute of repose, which he argued was triggered no later than plaintiffs’ final purchase of securities.  Noting that the Sixth Circuit had not ruled on when the Exchange Act repose period begins to run, the Court sided with plaintiffs, the Third Circuit, and district courts in the First and Second Circuits in ruling that the period begins to run with the last alleged misrepresentation, even if it is made after the last alleged security purchase.
    CATEGORY: Statute of Repose
  • Third Circuit Upholds Customer’s Right To FINRA Arbitration Despite Brokerage Agreements’ Forum-Selection Clause Providing Right To Litigate In Federal Court
     
    08/14/2018

    On August 7, 2018, the U.S. Court of Appeals for the Third Circuit affirmed a district court order compelling defendant, a broker-dealer and member of the Financial Industry Regulatory Authority (FINRA), to submit to FINRA arbitration, even though the broker-dealer agreements with plaintiff contained a forum-selection clause providing that all actions and proceedings arising out of the agreements and underlying transactions had to be filed in federal court in New York.  See Reading Health Sys. v. JPM Secs., No. 16-4234 (3d Cir. Aug. 7, 2018).  The Court held that, because the forum-selection clauses in broker-dealer agreements did not explicitly reference arbitration, it lacked the specificity required to advise plaintiff that it was waiving its affirmative right to arbitrate under FINRA’s rules.
    CATEGORY:
  • Tennessee District Court Pares Exchange Act Claims Against Accounting Company, Dismissing Scheme Liability Claims
     
    08/07/2018

    On August 2, 2018, Chief Judge Thomas A. Varlan of the United States District Court for the Eastern District of Tennessee dismissed in part a putative securities class action against KPMG, LLP asserting claims under Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder.  Plaintiffs alleged that defendant KPMG, as independent auditor to Miller Energy Resources, Inc., allowed Miller Energy to file financial statements with the SEC that were not in compliance with generally accepted accounting principles (“GAAP”), generally accepted auditing standards (“GAAS”), and standards set by the Public Company Accounting Oversight Board (“PCAOB”), because the statements overstated the value of Miller Energy’s Alaskan energy interests.  Cosby v. KPMG, LLP, No. 3:16-cv-121 (E.D. Tenn. Aug. 2, 2018).  Of note, the Court held that while plaintiffs’ allegations stated a claim under Rule 10b-5(b), they did not support a claim for “scheme liability” under Rule 10b-5(a) and (c) because KPMG’s claimed role in the scheme was too remote.
  • New Jersey District Court Dismisses Securities Class Action For Failure To Adequately Allege Scienter
     
    08/07/2018

    On August 1, 2018, Judge Kevin McNulty of the United States District Court for the District of New Jersey dismissed without prejudice a putative securities class action asserting claims under Section 10(b) of the Securities Exchange Act against the telecommunications company BT Group PLC and certain of its officers.  Plaintiffs, who purchased BT Group American Depository Receipts (“ADRs”), based their claims on allegations that defendants made a series of misstatements between 2013 and 2017 relating to control problems at a BT Group subsidiary in Italy.  Christian v. BT Group plc, No. 17-cv-497 (KM-JBC) (D.N.J. Aug. 1, 2018).  The Court held that plaintiffs failed to adequately allege scienter and therefore dismissed the action.
    CATEGORY: Scienter
  • Second Circuit Affirms Dismissal Of Putative Class Action Against E*TRADE As Precluded By SLUSA
     
    08/07/2018

    On July 31, 2018, the United States Court of Appeals for the Second Circuit unanimously affirmed the dismissal of a putative class action asserting state-law claims for breach of fiduciary duty, unjust enrichment, and declaratory relief. As discussed in our prior post, plaintiff’s claims were all based on the allegation that defendant violated its duty of best execution by routing customer trades—specifically, limit orders—to trading venues that were willing to pay the largest rebates to E*TRADE. Rayner v. E*TRADE Fin. Corp., --.3d--, 2018 WL 3625378 (2d Cir. 2018). The Second Circuit held that plaintiff’s claims were precluded by the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”) because they alleged fraudulent misrepresentations even though framed as claims for breach of fiduciary duty.
    CATEGORY: SLUSA
  • Northern District Of California Certifies Class In Securities Stock Drop Suit, Finding That “In-and-Out” Traders Should Not Be Excluded From The Class Definition
     
    07/31/2018

    On July 17, 2018, Judge Jon S. Tigar of the United States District Court for the Northern District of California granted plaintiffs’ motion to certify a class in a securities class action against Twitter, Inc. (the “Company”) and two of its officers.  In re Twitter Inc. Securities Litigation, No. 3:16-cv-05314 (N.D. Cal. July 17, 2018).  Plaintiffs allege that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) by making materially false and misleading statements regarding user growth and engagement,  resulting in a 15 percent stock drop when the Company later disclosed that user engagement was “slowing quite dramatically.”  The Court previously had granted in part and denied in part defendants’ motion to dismiss.
  • Ninth Circuit Reverses Dismissal Of Securities Fraud Class Action And Rules That The Purchase And Sale Of American Depository Receipts Traded On An Over-The-Counter Market Could Be A Domestic Transaction Under Morrison
     
    07/24/2018

    On July 17, 2018, the United States Court of Appeals for the Ninth Circuit reversed the dismissal of a putative securities class action, which alleged that a technology company (the “Company”) and its current and former chief executive officers engaged in fraudulent accounting in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as well as Japanese securities law. Automotive Industries Pension Trust Fund, et al. v. Toshiba Corp., No. 16-56058 (9th Cir. July 17, 2018). In its ruling, the Ninth Circuit analyzed the second prong of the transaction test articulated in Morrison v. National Australia Bank, 561 U.S. 247 (2010) and adopted the Second and Third Circuits’ “irrevocable liability” test, which evaluates where the purchasers incurred the liability to take and pay for securities, and where the seller incurred the liability to deliver the securities. The Ninth Circuit remanded the case to the district court so that plaintiffs could amend their complaint to try to meet this standard.
    CATEGORIES: JurisdictionExchange Act
  • Pennsylvania District Court Limits Claims In Putative Class Action Concerning Walgreens–Rite Aid Merger
    07/17/2018
    On July 11, 2018, Judge John E. Jones III of the United States District Court for the Middle District of Pennsylvania dismissed certain claims in a putative securities fraud class action against Rite Aid Corporation and Walgreens Boots Alliance, Inc.  Plaintiff brought claims under Sections 10(b) and 20(a) of the Securities Exchange Act, alleging that Rite Aid, Walgreens, and certain executives at each company made various misstatements over the course of the failed merger between the two companies, which was announced in October 2015 and ultimately terminated in June 2017.  Hering v. Rite Aid Corp., —F. Supp. 3d—, 2018 WL 3373033 (M.D. Pa. July 11, 2018).  The Court held that the majority of the alleged misstatements were optimistic forward-looking statements that were immaterial and/or protected by the safe harbor provided by the Private Securities Litigation Reform Act of 1995, but that certain statements by the Walgreens defendants expressing confidence that the transaction would close based on purported inside information, made in response to negative reports in the press, were sufficiently pleaded with respect to falsity and scienter to state a claim for fraud.
    CATEGORY: Scienter
  • Seventh Circuit Affirms Dismissal With Prejudice Of Putative Class Action Alleging Misleading Statements Concerning Accounting Corrections`
    07/17/2018
    On July 12, 2018, the United States Court of Appeals for the Seventh Circuit affirmed the dismissal of a putative class action brought against Kohl’s Corporation and certain of its executives asserting claims pursuant to Sections 10(b) and 20(a) of the Securities Exchange Act. Pension Tr. Fund for Operating Eng’rs v. Kohl's Corp., —F.3d—, 2018 WL 3385278 (7th Cir. July 12, 2018). Plaintiffs alleged that defendants made false and misleading statements prior to an announcement that Kohl’s would be correcting several years of financial statements due to lease accounting errors. The Court, affirming the district court’s dismissal with prejudice, held that plaintiffs’ complaint failed to adequately allege scienter under the Private Securities Litigation Reform Act (PSLRA) and that plaintiffs were not entitled to an opportunity to replead because they had not provided any basis to infer they could plead a viable claim.
    CATEGORY: Scienter
  • Central District Of California Certifies Class In Securities Stock Drop Action Against Restaurant Chain, Finding Insider Trades With Private Counterparty Did Not Preclude Certification Under Section 20A
     
    07/10/2018

    On July 3, 2018, Judge David O. Carter of the United States District Court for the Central District of California granted plaintiffs’ motion to certify a class in a securities fraud action against Tex-Mex restaurant chain El Pollo Loco Holdings, Inc. (the “Company”) and certain of its officers and directors. Turocy, et al. v. El Pollo Loco Holdings Inc. et al., No. 8:15-cv-01343 (C.D. Cal. July 3, 2018).
  • Southern District Of Texas Dismisses Securities Class Action Against Oil And Gas Exploration Company Based On Alleged Misstatements Regarding Compliance With Safety Standards
     
    07/03/2018

    On June 19, 2018, Judge Lee H. Rosenthal of the United States District Court for the Southern District of Texas dismissed with leave to amend a putative securities class action against Anadarko Petroleum Corporation (“Anadarko” or the “Company”) and certain of its officers. Edgar v. Anadarko Petroleum Corp., et al., No. 17-1372 (S.D. Tex., June 19, 2018). Plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act and Rule 10b-5 by allegedly making material misstatements about the safety of its gas wells and compliance with regulatory requirements. The Court found all but one of the alleged misstatements was not actionable because they amounted to opinions and “corporate cheerleading.” Although the Court found one alleged misstatement actionable, it held that the complaint failed to establish scienter, and granted leave to amend the complaint.
  • Southern District Of California Dismisses Shareholder Class Action Alleging Exchange Act Claims For Failure To Allege Falsity And Loss Causation
     
    07/03/2018

    On June 19, 2018, Judge Gonzalo P. Curiel of the United States District Court for the Southern District of California dismissed a securities class action alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against BofI Holding, Inc. (“BofI” or “Company”), an online bank, and certain of its officers and directors. Mandalevy v. BofI Holding Inc. et al., No. 3:17-cv-00667 (S.D. Cal., June 19, 2018). The complaint’s allegations were based on public articles and a whistleblower complaint accusing the Company of making loans to “criminals and politically exposed persons” and announced regulatory activities. The Court dismissed the complaint, among other reasons, for failure to allege loss causation. Relying on the principles of the efficient market theory, the Court held that corrective disclosures generally cannot be based on already public information and that even information available only through Freedom of Information Act (“FOIA”) requests to regulators is considered to be publicly available.
  • District Of Massachusetts Dismisses Putative Securities Class Action For Failure Adequately To Allege A Material Misstatement Or Omission
    06/26/2018
    On June 18, 2018, Judge William G. Young of the United States District Court for the District of Massachusetts dismissed with prejudice a putative securities class action against Acacia Communications, Inc. (the “Company”), certain of its officers, certain sellers of the Company’s common stock in connection with its secondary offering, and the underwriters for the Company’s secondary offering.
  • Second Circuit Underscores That Contractual Obligations Reached In The United States Can Establish That A Transaction Is “Domestic” Under The Securities Exchange Act Of 1934
    06/26/2018
    On Tuesday, June 19, 2018, the United States Court of Appeals for the Second Circuit held that allegations that parties had reached an agreement within the United States for the sale of foreign securities established a “domestic transaction” sufficient to bring related fraud claims within the scope of U.S. securities laws under Morrison v. National Australia Bank Ltd.
    CATEGORY: Exchange Act
  • Southern District Of New York Dismisses Putative Securities Fraud Class Action With Prejudice, Finding Individual Defendants’ Retention Of Zero-Cost Stock And Vested Options Undermined Inference Of Scienter
    06/19/2018
    On June 11, 2018, Judge Paul A. Engelmayer of the United States District Court for the Southern District of New York dismissed with prejudice a putative securities fraud class action against veterinary pharmaceutical company Aratana Therapeutics Inc.

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  • New York Court Of Appeals Holds That Claims Under New York’s Martin Act Are Subject To A Three-Year Statute Of Limitations
    06/19/2018
    On June 12, 2018, a 4-1 majority of the New York Court of Appeals held that claims under New York’s Martin Act are not governed by the six-year statute of limitations generally applicable to common law fraud claims, but rather by the three-year limitations period applicable to actions to recover based on liabilities created by statute.

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  • Northern District Of California Dismisses Class Action Against Biopharmaceutical Company Alleging Fraud Based On Undisclosed Problems With Hepatitis B Vaccine In Trials And FDA Approval Process
    06/13/2018

    On June 4, 2018, Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California dismissed with prejudice a class action alleging that Dynavax Technologies Corporation (“Dynavax” or the “Company”) and its executives violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 by alleging omitting information about its hepatitis B vaccine.  In re Dynavax Securities Litigation, No. 4:16-cv-06690-YGR (N.D. Cal. June 4, 2018).  The Court’s decision is another in a long line of decisions declining to find a securities violation when a pharmaceutical company is alleged to have concealed adverse developments in clinical trials.

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  • Supreme Court Rules That Successive Class Actions Are Not Tolled Under American Pipe
    06/13/2018

    On June 11, 2018, the Supreme Court of the United States held that the tolling rule first stated in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974) cannot salvage otherwise-untimely successive class claims.  China Agritech, Inc. v. Resh, No. 17-432, __ S. Ct. __, 2018 WL 2767565.  In American Pipe, the Court held that the timely filing of a class action tolls the applicable statute of limitations for all persons encompassed by the class complaint.  The issue presented in China Agritech was whether American Pipe tolling can salvage an untimely successive class claim.  The Sixth Circuit and the Ninth Circuit ruled that American Pipe tolling applied to successive class action lawsuits, while certain other circuits, including the First, Second, Fifth, and Eleventh, held that American Pipe tolling did not apply.  In China Agritech, the Court resolved the circuit split and unanimously held that, upon denial of class certification, a putative class member may only intervene as an individual plaintiff or commence an individual suit, but may not commence a new class action beyond the time allowed by the applicable statute of limitations.

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  • Southern District Of New York Dismisses With Prejudice Putative Securities Fraud Class Action Against Pharmacy Benefits Manager Company, Finding Amended Complaint Failed To Allege New Facts That Company Misled Investors Regarding Contract Negotiations With Largest Customer
     
    05/30/2018

    On May 22, 2018, Judge Edgardo Ramos of the United States District Court for the Southern District of New York dismissed with prejudice a putative securities fraud class action against pharmacy benefits manager Express Scripts Holding Company (“Express Scripts” or “Company”) and several of its current and former officers.  In re Express Scripts Holding Co. Secs. Litig., No. 1:16-cv-03338 (S.D.N.Y. May 22, 2018).  Plaintiff—a shareholder of Express Scripts—alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making affirmative misstatements concerning negotiations to renew the contract with its largest customer, Anthem, Inc. (“Anthem”), allegedly causing Plaintiff to suffer losses when the truth was revealed and Company’s stock price declined.  The Court disagreed, finding that plaintiff failed to plausibly allege that the Company did not believe its statements regarding its relationship with Anthem, and as a result dismissed the second amended complaint with prejudice. 

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  • Tenth Circuit Affirms Dismissal Of Exchange Act Claims Based On Undisclosed Merger Discussions
     
    05/22/2018

    ​On May 11, 2018, the United States Court of Appeals for the Tenth Circuit affirmed the district court’s dismissal of a putative class action asserting claims under Sections 10(b) and 20(a) of the Exchange Act against Williams Companies, Inc. (“Williams” or the “Company”), its CEO, CFO, and certain affiliates.  Emps.’ Ret. Sys. of R.I. v. Williams Cos., et al., No. 17-5034 (10th Cir. May 11, 2018).  The claims alleged in the complaint related to an unconsummated merger between Williams, an energy company, and its affiliate, Williams Partners L.P. (“WPZ”), and the Company’s subsequent agreement to merge with a competing energy company, Energy Transfer Equity L.P. (“ETE”).  Plaintiff alleged that the Company misled investors by describing its proposed merger with WPZ, of which Williams held 60% of the units, as “no risk,” and by failing to disclose its merger discussions with ETE.  The Court rejected both arguments and affirmed the district court’s dismissal, reasoning that plaintiff had taken the alleged misstatement out of context, and that it otherwise failed to allege a basis for requiring the disclosure of the merger discussions with ETE. 

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  • Eighth Circuit, Applying Lewis v. Scottrade, Dismisses State Law Claims Under SLUSA
     
    05/15/2018

    On May 10, 2018, the Unites States Court of Appeals for the Eighth Circuit affirmed the dismissal of putative class actions against TD Ameritrade, Inc. and certain related entities and individuals, asserting violations of various state laws including breach of defendant’s uniform client agreement, fraud, negligent misrepresentation, breach of fiduciary duty, and violations of the Nebraska Consumer Protection Act.  Zola v. TD Ameritrade, Inc., No. 16-3016 (8th Cir. May 10, 2018).  Plaintiffs alleged that defendant failed to direct its retail clients’ securities orders to trading venues that offered the best price, speed of execution, and likelihood of execution; instead, it allegedly directed orders to venues that catered to high-frequency traders who also paid defendant rebates for order flow.  Slip op. at 3.  The Court held that the “best execution” allegations were effectively claims of misrepresentations or omissions in connection with the purchase or sale of covered securities and were therefore precluded by the Securities Litigation Uniform Standards Act (“SLUSA”).

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    CATEGORY: SLUSA
  • Second Circuit Finds Commodity Exchange Act Claims Based On Korea Exchange Futures Contracts Adequately Pleaded Under Morrison’s “Domestic Transactions” Test
     
    05/15/2018

    In a March 29, 2018 decision, amended on May 9, 2018, the United States Court of Appeals for the Second Circuit vacated the dismissal of claims against defendants Tower Research Capital LLC (a New York based high-frequency trading firm) and its founder under the Commodity Exchange Act (“CEA”) by five Korean citizens who traded Korea Exchange (“KRX”) futures contracts on the KRX “night market.”  Choi v. Tower Research Capital LLC, No. 17-648, 2018 WL 2168642 (2d Cir. 2018).  Plaintiffs alleged that defendants engaged in manipulative “spoofing” transactions on the KRX night market—which operated by matching after-hours orders in Korea with anonymous counterparties on CME Globex, an electronic trading platform on the Chicago Mercantile Exchange.  The district court dismissed the action on the ground that the CEA did not apply extraterritorially, but the Second Circuit vacated and remanded, finding that plaintiffs’ allegations made it plausible that the trades were “domestic transactions” under Morrison v. National Australia Bank Ltd., 561 U.S. 247 (2010), and so within the reach of the CEA, and further that plaintiffs stated a claim for unjust enrichment.

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    CATEGORY: Jurisdiction
  • Northern District Of California Certifies Class In Securities Fraud Action Against Medical Device Manufacturer
     
    05/15/2018

    On May 8, 2018, Judge Claudia Wilken of the United States District Court for the Northern District of California granted class certification in an action asserting claims under Section 10(b) of the Securities Exchange Act based on allegations that the medical device manufacturer Thoratec and certain of its officers misrepresented the performance of its primary product.  Cooper v. Thoratec Corp., 2018 WL 2117337 (N.D. Cal. May 8, 2018).  Plaintiffs alleged that defendants made false and misleading statements about the rate of thrombosis suffered by users of its product, first in 2011 and continuing after a New England Journal of Medicine study revealed in November 2013 that thrombosis rates had increased since the clinical trials (which caused Thoratec’s stock to drop by six percent).  After the company disclosed the impact of higher thrombosis rates in 2014, the stock lost a quarter of its value.

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  • Southern District Of Florida Dismisses Putative Securities Class Action, Finding Vague And Generalized Statements Regarding Company’s Mortgage Servicing Compliance Non-Actionable Puffery And Opinion
     
    05/08/2018

    On Monday, April 30, 2018, Judge Robin L. Rosenberg of the United States District Court for the Southern District of Florida dismissed a consolidated putative securities class action against financial services company Ocwen Financial Corporation (the “Company”) and two of its officers.  Carvelli et al. v. Ocwen Financial Corp. et al., No. 9:17-cv-80500 (S.D. Fla. April 30, 2018).  Plaintiffs—shareholders of the Company—alleged that defendants violated Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and SEC Rule 10b-5, and that the individual defendants violated Section 20(a) of the Exchange Act, by making materially false and misleading statements and omissions regarding operational and technological deficiencies within the Company’s mortgage servicing software platform, causing losses to plaintiffs when the deficiencies were revealed and the Company’s stock declined.  The Court disagreed, finding that the statements in question were non-actionable puffery or opinion, forward-looking statements accompanied by meaningful cautionary statements, or statements on their face not false, and therefore dismissed the action with prejudice.

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