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Southern District Of Florida Grants In Part And Denies In Part Motion To Dismiss Proposed Securities Class Action Against Electric Vehicle Charging Company
12/13/2023On November 27, 2023, Judge Kathleen M. Williams of the United States District Court for the Southern District of Florida granted in part and denied in part a motion to dismiss a proposed securities class action alleging that an electric vehicle charging company and certain of its officers violated Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934. Bush v. Blink Charging Co., No. 1:20-cv-23527-KMW (S.D. Fla. Nov. 27, 2023). Plaintiffs allege that the Company made false and misleading statements and omissions concerning the size and functionality of the Company’s electric vehicle (“EV”) charging station network. The Court dismissed plaintiffs’ claim as to the size of the EV charging station network, but permitted plaintiffs’ claim regarding its functionality.
The Company owns and operates EV charging equipment and networked charging services. In press releases throughout 2020, marketing materials, and public filings with the SEC, the Company allegedly promoted its deployment of over 15,000 charging stations for EVs. An analyst published a report in August 2020 claiming that the Company exaggerated the size and functionality of its EV charging network. The author of the report alleged that many of the chargers were non-functional or publicly inaccessible, concluding that the Company’s network consisted of only approximately 2,200 chargers. The Company’s stock price allegedly fell from $10.23 per share to $7.94 per share after the report was published. The complaint included alleged statements from confidential witnesses who claimed that the Company declined to repair non-functional chargers in its network, overemphasized the size of its charging network, and did not address complaints about non-functioning chargers in a timely manner.
The Court first held that the Company did not make misleading statements regarding the size of its EV charging network. Although plaintiffs alleged that the Company’s network of charging stations was nearly seven times smaller than what the Company represented to the public, the Company argued that the complete numerical breakdown was publicly available at all relevant times. The Court agreed. The Court then held that plaintiffs sufficiently alleged misrepresentations regarding the functionality of the Company’s charging network because statements the company made allegedly “omitted that a significant percentage of the network was not functional.” While the Company argued that it never claimed all chargers in its network were functional and in working order at all times, the Court found that plaintiffs sufficiently stated a claim because the alleged “functionality issue [w]as severe, pervasive, and ‘systemic’” and the Company thus had “a duty to disclose such issues.”
The Court also held that plaintiffs alleged sufficient facts supporting a strong inference of scienter. The Court found that plaintiffs’ alleged confidential witnesses provided sufficient factual support for the inference that the Company and its officers knew about the systematic and pervasive functionality. The Court also held that plaintiffs adequately alleged loss causation because, based on the complaint, the analyst report appeared to provide new information about the functionality of the Company’s charging network.
