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  • Fifth Circuit Reverses District Court’s Dismissal Of Putative Securities Fraud Class Action Against Amusement Park Company For Lack Of Standing
    04/23/2024

    On April 18, 2024, the United States Court of Appeals for the Fifth Circuit reversed the dismissal of and reinstated a putative shareholders’ class action against an amusement park company (the Company”) and certain of its executives, asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated thereunder. Okla. Firefighters & Pension Ret. Sys. v. Six Flags Entm’t Corp., No. 23-10696 (5th Cir. Apr. 18, 2024). The district court granted the Company’s motion for judgment on the pleadings, holding that plaintiff lacked standing because it purchased Company shares too late to have relied on any actionable misstatements, and therefore dismissed the action with prejudice. Reviewing the district court’s decision de novo, the Court reversed, finding that plaintiffs’ economic loss was fairly traceable to the alleged misconduct because the Company’s alleged fraud had not been fully disclosed when plaintiff purchased the stock. We previously covered the district court’s decision here.

  • Second Circuit Affirms District Court’s Summary Judgment Dismissal Of Securities Fraud Class Action Against Pharmaceutical Company
    04/23/2024

    On April 15, 2024, the United States Court of Appeals for the Second Circuit affirmed in a non-precedential summary order the summary judgment dismissal of securities fraud claims against a pharmaceutical company (the “Company”) under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder. In re Mylan N.V. Sec. Litig., No. 23-720-cv (2d Cir. Apr. 15, 2024). Reviewing the district court decision de novo, the Court held that appellants waived their argument related to scienter and that their failure to disaggregate the losses caused by the Company’s alleged omissions warranted summary judgment for defendants. 

  • Northern District Of California Dismisses Putative Class Action With Prejudice For Failure To Adequately Allege Loss Causation And Standing
    04/16/2024

    On April 9, 2024, Judge Beth Labson Freeman of the United States District Court for the Northern District of California dismissed with prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a technology company, certain of its current and former officers and directors, and related corporate entities. Mehedi v. View, Inc., 2024 WL 1560009 (N.D. Cal. Apr. 9, 2024). Lead plaintiff alleged that the company materially misstated its financial results. The Court held that lead plaintiff could not establish loss causation and therefore lacked standing to pursue claims on behalf of the putative class, requiring the case to be dismissed in its entirety.

    CATEGORIES : Loss CausationStanding
  • Ninth Circuit Reinstates Putative Class Action Against Children’s Entertainment Company, Holding Actionable Misstatements And Loss Causation Adequately Alleged
    04/16/2024

    On April 5, 2024, the United States Court of Appeals for the Ninth Circuit affirmed in part and reversed in part the dismissal of a putative class action asserting claims under the Securities Exchange Act of 1934 against a company that licenses children’s entertainment content and certain of its officers. In re Genius Brands Int’l, Inc. Sec. Litig., —F.4th—, 2024 WL 1473942 (9th Cir. 2024). Plaintiffs alleged that the company made actionable misstatements after it was told that its shares would be delisted from the NASDAQ exchange. The Court held that plaintiffs adequately alleged that the company’s conduct rendered certain challenged statements misleading, that plaintiffs adequately alleged loss causation for certain claims, and that one claim was appropriately dismissed for failure to plead loss causation.

  • Supreme Court Unanimously Holds Item 303 Violation, Standing Alone, Cannot Support A “Pure Omission” Claim Under Section 10(b) Of The Exchange Act
    04/16/2024

    On April 12, 2024, the United States Supreme Court unanimously reversed a decision of the United States Court of Appeals for the Second Circuit which held that Section 10(b) of the Securities Exchange Act of 1934 permitted a private right of action based solely on an issuer’s alleged failure to disclose a known trend or uncertainty required to be disclosed under Item 303 of Regulation S‑K. Macquarie Infrastructure Corp. v. Moab Partners, L.P., —U.S.—, 2024 WL 1588706 (2024). As explained in our prior post addressing the oral argument before the Supreme Court, the case concerned whether a company that operates a portfolio of infrastructure-related businesses needed to disclose that a proposed regulation by a United Nations agency would negatively impact one of its subsidiary’s businesses. Writing for a unanimous Court, Justice Sotomayor explained that the “pure omission” of information required to be disclosed by Item 303—i.e., a situation where there is no allegation that the omission rendered any affirmative statement misleading—is insufficient to support a claim under Section 10(b) of the Exchange Act.

  • Northern District Of California Grants Motion To Dismiss Putative Class Action Against Biotech Company And Executives
    04/09/2024

    On March 30, 2024, Judge Araceli Martínez-Olguín of the Northern District of California granted a motion to dismiss a putative class action against a biotechnology company that develops and sells skin treatment drugs and certain of its officers. Aramic LLC, et al. v. Revance Therapeutics, Inc., No. 21-cv-0985-AMO (N.D. Cal. Mar. 30, 2024). Plaintiff, on behalf of a putative class of investors in the Company, alleged that defendants made false or misleading statements about the timing and likelihood of FDA approval of the Company’s drug in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The Court dismissed the amended complaint, finding that plaintiff failed to allege that most of the challenged statements were false or misleading and that plaintiff in any event failed to allege adequately scienter.

    CATEGORIES : Control PersonFalsityScienter
  • Northern District Of Georgia Court Dismisses With Prejudice Putative Securities Class Action Against Optical Retailer For Failure To Plead Falsity Or Scienter
    04/09/2024

    On March 30, 2024, Judge Victoria Marie Calvert of the United States District Court for the Northern District of Georgia granted a motion to dismiss a putative securities class action against an optical retail company and certain of its executive officers (the “Individual Defendants”). City of Southfield General Employees Retirement Sys. v. National Vision Holdings, et al., No. 23-cv-00425-VMC (N.D. Ga. Mar. 30, 2024). Plaintiff alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making false and misleading statements and omissions regarding staffing and wage pressures faced by the Company leading up to and through the Covid-19 pandemic. The Court granted defendants’ motion to dismiss with prejudice, holding that plaintiff failed to adequately plead falsity and scienter. 

  • First Department Of New York Affirms Dismissal Of Securities Claims Against Mass Media And Entertainment Company
    04/09/2024

    On April 4, 2024, the State of New York, Appellate Division, First Judicial Department (the “First Department”) affirmed dismissal of a securities class action against a mass media and entertainment company (the “Company”) and two of its executives (the “Individual Defendants”), and affirmed-in-part and reversed-in-part the denial of the motions to dismiss filed by the underwriters of the offerings at issue (the “Underwriters”). Camelot Event Driven Fund, et al. v. Morgan Stanley & Co. LLC, et al., No. 2023-00983 (1st Dep’t Apr. 4, 2024). Plaintiffs alleged defendants violated Sections 11, 12 and 15 of the Securities Act of 1933 (the “Securities Act”) by concealing certain information from the offering materials issued in connection with the Company’s March 2021 secondary and initial offerings (the “Offerings”).

  • Northern District Of California Grants Motion To Dismiss Putative Class Action Against Biotechnology Instrument Company
    03/26/2024

    On February 20, 2024, Judge Haywood S. Gilliam, Jr. of the United States District Court for the Northern District of California granted with leave to amend a motion to dismiss a putative securities class action against a manufacturer of laboratory instruments and other advanced automation systems (the “Company”), certain of its current and former officers and directors, several venture capital firms that invested in the Company, and the underwriters of the Company’s July 2020 IPO. Victor J. Ng, et al. v. Berkeley Lights, Inc., et al., No. 21-cv-09497-HSG (N.D. Cal. Feb. 20, 2024). Plaintiff alleged that defendants violated Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, by making false and misleading statements and omissions regarding the functionality of the Company’s flagship product (the “Product”).

  • Southern District Of New York Narrows Claims In Putative Class Action Against China Based Real Estate Brokerage Company
    03/26/2024

    On February 26, 2024, Judge Gregory H. Woods of the United States District Court for the Southern District of New York narrowed claims in a putative class action asserting claims under the Securities Exchange Act of 1934 and Securities Act of 1933 against a China-based real estate brokerage company, certain of its executives, and the underwriters in connection with a secondary offering by the company. Saskatchewan Healthcare Emps.’ Pension Plan v. KE Holdings Inc., 2024 WL 775195 (S.D.N.Y. Feb. 26, 2024). Plaintiff alleged, based largely on a short-seller report, that the company made misrepresentations that significantly overstated the gross transaction value (“GTV”) of real estate transactions facilitated by the company, the number of agents and stores using its online platform, and the commissions the company received. Id. at *3–7. The Court held that plaintiff adequately alleged misrepresentations with respect to certain statements but failed to adequately allege scienter, and therefore largely declined to dismiss the Securities Act claim but dismissed the Exchange Act claim with leave to replead.

  • Southern District Of New York Declines To Dismiss Putative Class Action Against Financial Institution Regarding Alleged Misstatements About Internal Controls
    03/26/2024

    On February 23, 2024, Judge Katherine Polk Failla of the United States District Court for the Southern District of New York largely denied a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a financial institution and certain of its executives. In re Barclays PLC Sec. Litig., 2024 WL 757385 (S.D.N.Y. Feb. 23, 2024). Plaintiff alleged that the company had issued securities in excess of what it had registered for with the U.S. Securities and Exchange Commission, which allegedly rendered misleading certain of its statements regarding compliance with securities laws and internal controls. Id. While the Court held that certain alleged misrepresentations were adequately pleaded to survive a motion to dismiss, the Court dismissed claims as to statements made after the alleged over-issuances were disclosed and rejected plaintiff’s control person liability theory as to certain defendants.

  • Southern District Of New York Grants In Part And Denies In Part Motion To Dismiss Putative Class Action Complaint Against Software Company For Failing To Disclose A Fake Customer-Review Scheme
    03/26/2024

    On March 5, 2024, Judge John P. Cronan of the United States District Court for the Southern District of New York granted in part, and denied in part, a motion to dismiss a putative shareholders’ class action, alleging that a software company (the “Company”), several of its executives and directors (“Individual Defendants”), and three banks who underwrote the Company’s initial public offering (“IPO”) violated Sections 11 and 15 of the Securities Act of 1933. Lian v. Tuya Inc., 22 Civ. 6792 (JPC) (S.D.N.Y. Mar. 5, 2024). Plaintiff alleged that the Company failed to disclose at the time of its IPO, as required by Items 105 and 303 of Regulation S-K, that its sales and growth could be impacted by the involvement of a significant percentage of its customers in a pervasive and far-reaching fake customer reviews scheme. Furthermore, plaintiff alleged that the Company’s failure to disclose the scheme rendered several statements in the IPO registration statement (“Registration Statement”) false and misleading. The Court dismissed the claims predicated upon Items 105 and 303 but found the Section 11 claims based upon alleged misstatements in the Registration Statement to be sufficiently pled.

  • Western District Of Washington Grants Motion To Dismiss Proposed Class Action Against Software Company And Its Board Of Directors
    03/26/2024

    On March 1, 2024, Judge Marsha J. Pechman of the United States District Court for the Western District of Washington dismissed with prejudice a putative shareholders’ class action against a software company (the “Company”) and its Board of Directors (“Board”), alleging violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”). Sohovich v. Avalara, Inc., No. C22-1580 MJP (W.D. Wash. Mar. 1, 2024). Plaintiff alleged that the Company and its Board misled investors to vote to approve its $8.4 billion sale—priced at $93.50 per share—allegedly by deflating its financial projections and misrepresenting the Company’s performance and outlook in the proxy statement (“Proxy”). The Court found that plaintiff failed to adequately plead the falsity of any one of the four misstatements and dismissed it with prejudice. 

  • Northern District Of California Court Partially Grants Motion To Dismiss Putative Securities Class Action Against Pharmaceutical Company’s CEO
     
    03/26/2024

    On March 11, 2024, Judge Haywood S. Gilliam, Jr. of the United States District Court for the Northern District of California granted in part and denied in part a motion to dismiss a putative securities class action brought against a biopharmaceutical company (the “Company”) and its CEO. Pardi et al., v. Tricida, Inc., et al., No. 21-cv-00076-HSG (N.D. Cal. Mar. 11, 2024). 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 promulgated thereunder by making false and misleading statements and omissions regarding the likelihood that the Company’s new drug would receive accelerated FDA approval. The Company filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code and was voluntarily dismissed, and the CEO moved to dismiss.

    CATEGORIES : Exchange ActFalsityScienter
  • Second Circuit Reverses Dismissal Of Putative Securities Class Action By Crypto Investors, Addressing Extraterritoriality And Timeliness Arguments
     
    03/26/2024

    On March 8, 2024, the United States Court of Appeals for the Second Circuit reversed a trial court decision dismissing a putative securities class action brought by purchasers of crypto assets against an international crypto exchange company (the “Company”) and certain of its officers, alleging violations of Section 12(a)(1) of the Securities Act of 1933 (the “Securities Act”), as well as various state securities laws (“Blue Sky” laws), and also seeking recission of the contracts they entered into with the Company, under Section 29(b) of the Securities Exchange Act (the “Exchange Act”). Williams v. Binance, No. 22-972 (2d Cir. Mar. 8, 2024). Plaintiffs alleged that the Company unlawfully promoted, offered, and sold billions of dollars’ worth of crypto-assets without registering these as securities and without registering themselves as a securities exchange or broker-dealer. The United States District Court for the Southern District of New York granted the Company’s motion to dismiss, holding that (1) plaintiffs’ claims constitute an impermissible extraterritorial application of securities law and (2) plaintiffs’ federal claims were untimely under the applicable statute of the limitations. On appeal, the Second Circuit reversed on both counts and remanded for further proceedings.

  • Southern District Of New York Permits Putative Class Action Against Ride Hailing Company To Proceed
     
    03/26/2024

    On March 14, 2024, Judge Lewis Kaplan of the United States District Court for the Southern District of New York denied defendants’ motions to dismiss a putative class action against a China-based ride hailing company, certain of its officers and directors, and the underwriters of the company’s IPO, asserting claims under the Securities Act of 1933 and the Securities Exchange Act of 1934. In re Didi Global Inc. Sec. Litig., 2024 WL 1119483 (S.D.N.Y. Mar. 14, 2024). Plaintiffs alleged that the company omitted from its filings in connection with its New York Stock Exchange (“NYSE”) IPO that the Chinese government had directed it to postpone its IPO, with the Chinese government imposing penalties after the company allegedly disregarded this directive. The Court held that plaintiffs’ allegations were adequate to state a claim with respect to nearly all of their asserted claims.

  • Ninth Circuit Affirms Dismissal Of Putative Securities Class Action Against Biopharmaceutical Company Over Statements It Had Developed A COVID “Cure”
    03/25/2024
    On March 25, 2024, the United States Court of Appeals for the Ninth Circuit unanimously affirmed a trial court decision dismissing a putative securities class action brought by investors against a biopharmaceutical company (“Company”) and certain of its officers and executives, alleging violations Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5. In re Sorrento Therapeutics, Inc. Securities Litigation, No. 22-55641 (9th Cir. Mar. 25, 2024). Plaintiff alleged that defendants made false statements about developments regarding the Company’s new COVID-19 antibody treatment, which allegedly misled investors and the public to believe that the Company had discovered a “cure” for the virus in order to boost the Company’s stock prices to improve its allegedly “dire financial situation.” Judge Anthony J. Battaglia of the United States District Court for the Southern District of California dismissed plaintiff’s claims without prejudice, holding that plaintiff had not plausibly pleaded falsity or scienter. The trial court entered judgment after plaintiff failed to file an amended pleading. Plaintiff appealed and the Ninth Circuit affirmed, holding that (1) the allegedly misleading statements were inactionable puffery and (2) standing alone, the Company’s allegedly poor financial position was not sufficient to warrant an inference of scienter.
  • Third Circuit Affirms District Court’s Dismissal Of Suit Against Vaccine Developer
    03/21/2024
    On March 21, 2024, the United States Court of Appeals for the Third Circuit affirmed the dismissal of a putative class action against a biopharmaceutical company (the “Company”) and certain of its officers under Sections 10(b) and 20(a) of the Securities Exchange Act. In re Ocugen, Inc. Sec. Litig., No. 23-1570 (3d Cir. Mar. 21, 2024). Plaintiffs alleged that the Company’s statements and omissions about its partnership with an Indian biotechnology company to develop a COVID-19 vaccine for Emergency Use Authorization (“EUA”) with the U.S. Food and Drug Administration (“FDA”) were false and misleading. The Court affirmed the district court’s dismissal of the complaint with prejudice based on plaintiffs’ failure to allege a material misrepresentation.
  • Eastern District Of New York Grants Motion To Dismiss Proposed Class Action Against Mobile Game Development Company
    03/18/2024

    On March 18, 2024, Judge Rachel P. Kovner of the United States District Court for the Eastern District of New York dismissed with prejudice a putative shareholders’ class action against a mobile game development company (the “Company”), its officers and directors, and its underwriters, alleging violations of Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”). In re Playtika Seg. Litig., No. 21-CV-06571-RPK-SJB (E.D.N.Y. Mar. 18, 2024). Plaintiff alleged that the Company failed to disclose an infrastructure overhaul of two of its most popular mobile games in its initial public offering (“IPO”) registration statement even though the overhaul was in progress at the time of the Company’s IPO. The Court held that plaintiff failed to adequately allege that omissions rendered the registration statement misleading, and that Item 105 did not impose a duty to disclose specific infrastructure projects that allegedly were omitted. Accordingly, the Court dismissed the action with prejudice.

  • Southern District Of New York Dismisses Proposed Securities Class Action Against Biopharmaceutical Company Alleging Failure To Disclose Progress Of Competitor
    02/21/2024

    On February 4, 2024, Judge Arun Subramanian of the United States District Court for the Southern District of New York dismissed a proposed securities class action against a biopharmaceutical company (the “Company”) alleging violations under Sections 11 and 15 of the Securities Exchange Act of 1934 (the “Exchange Act”).  Merritt v. Molecular Partners AG, 22-CV-5925 (AS) (S.D.N.Y. Feb. 4, 2024).
  • California District Court Grants Motion To Dismiss Investor Class Action Against Lithium-Ion Battery Company
     
    02/13/2024

    On January 30, 2024, Judge Susan Illston of the United States District Court for the Northern District of California granted with leave to amend a motion to dismiss a putative securities class action against a battery company and its directors and officers.  In Re Enovix Corp. Securities Litigation, No. 23-cv-00071-SI (N.D. Cal. Jan. 30, 2024).  Plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 and Rule 10b-5(b) promulgated thereunder by failing to disclose that the Company overlooked critical testing of its manufacturing equipment, which led to equipment failure that caused the Company to miss its performance targets.
    CATEGORIES : Exchange ActFalsityScienter
  • Eastern District Of Pennsylvania Dismisses Purported Securities Fraud Class Action Against IT Services Company For Failure To Adequately Allege Falsity, Scienter And Loss Causation
     
    02/13/2024

    On February 1, 2024, Judge Gerald J. Pappert of the United States District Court for the Eastern District of Pennsylvania granted a motion to dismiss a putative securities class action against an IT solutions company that provides digital communication, cybersecurity and IT consulting services, its CEO and current and former CFOs.  Connor v. Unisys Corp., et al., No. 22-4529 (E.D. Pa. Feb. 1, 2024).  Plaintiff alleged that defendants made false representations about the Company’s disclosure controls and procedures and internal control over financial reporting in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.  The Court dismissed the amended complaint, holding that plaintiff failed to adequately allege falsity, scienter and loss causation.
  • Southern District Of New York Declines To Dismiss Claims In Putative Class Action Against Medical Test Manufacturer
     
    02/13/2024

    On February 5, 2024, Judge Arun Subramanian of the United States District Court for the Southern District of New York largely declined to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a manufacturer of medical tests and certain of its executives.  Stadium Capital LLC v. Co-Diagnostics, Inc., 2024 WL 456745 (S.D.N.Y. Feb. 5, 2024).  Plaintiff alleged that the company made misrepresentations regarding the prospect of future sales of the company’s medical tests as the COVID-19 pandemic subsided.  The Court held that plaintiff plausibly alleged actionable misrepresentations regarding comments made announcing earnings results for the first quarter of 2022, and plausibly alleged that defendants acted with scienter.
  • Southern District Of New York Dismisses Putative Class Action Regarding SPAC Acquisition Of Online Lottery Company
     
    02/13/2024

    On February 6, 2024, Judge Jennifer L. Rochon of the United States District Court for the Southern District of New York dismissed with leave to amend a putative class action asserting claims under the Sections 10(b) and 14(a) of the Securities Exchange Act against a Special Purpose Acquisition Company (“SPAC”) and certain of its officers and directors, along with an individual action consolidated with the putative class action and asserting similar claims.  In re Lottery.com, Inc. Securities Litigation, No. 1:22-cv-07111 (S.D.N.Y. Feb. 6, 2024), slip op.  Plaintiffs alleged that defendants misrepresented certain financial information regarding the SPAC’s target company both before and after the merger.  The Court held that, while certain challenged statements were adequately alleged to be false, plaintiffs failed to sufficiently allege scienter with respect to any alleged misrepresentation.
  • Southern District Of New York Dismisses Putative Class Action Against Media Company For Failure To Adequately Allege Misrepresentations
     
    02/13/2024

    On February 5, 2024, Judge Valerie Caproni of the United States District Court for the Southern District of New York dismissed with prejudice a putative class action asserting claims under the Securities Act of 1933 against a media company and certain of its officers and directors.  Ohio Public Emps. Ret. Sys. v. Discovery, Inc., 2024 WL 446466 (S.D.N.Y. Feb. 5, 2024).  Plaintiffs alleged that the offering documents in connection with the merger that created the company contained misrepresentations that painted a misleadingly positive image of the strength of the combined company.  The Court held that none of the six categories of misrepresentations alleged by plaintiffs was actionable.
  • Eastern District Of New York Dismisses Proposed Securities Class Action Against Lithium Mining Company For Failure To Sufficiently Plead Scienter
     
    01/31/2024


    On January 19, 2024, Judge Orelia Merchant of the United States District Court for the Eastern District of New York dismissed a proposed securities class action against a lithium mining company (the “Company”) and certain of its officers and directors (the “Individual Defendants”) alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”). In re Piedmont Lithium Inc., Sec. Litig., 21-CV-4161 (OEM) (PK) (E.D.N.Y. Jan 18, 2024). Plaintiff alleged that the Company made misleading positive statements in connection with a North Carolina lithium mining project (the “Project”) and that the Individual Defendants subsequently sold Company stock prior to the release of a negative news article. The Court dismissed plaintiff’s claims, finding that plaintiff had failed to raise a strong inference of scienter.

    CATEGORIES : Exchange ActScienter
  • Northern District of California Dismisses Securities Class Action Against Software Company
     
    01/31/2024


    On January 22, 2024, Judge William H. Orrick of the United States District Court for the Northern District of California dismissed a putative class action complaint alleging that a software company (the “Company”) and certain of its executives violated Section 10(b) and 20(a) of the Securities Exchange Act of 1934. City of Hollywood Firefighters Pension Fund v. Atlassian Corp., 3:23-cv-00519-WHO (N.D. Cal. Jan. 22, 2024). Plaintiffs alleged that the Company made false and misleading statements about the strength of its financial outlook. The Court dismissed the complaint with leave to amend, holding that plaintiffs failed to allege falsity with respect to most of the alleged misrepresentations or sufficient facts giving rise to a strong inference of scienter with respect to one omission that was alleged plausibly.

  • Supreme Court Considers Whether An Item 303 Violation, Standing Alone, Can Support An Exchange Act Claim
     
    01/23/2024

    On January 16, 2024, the Supreme Court of the United States heard oral argument in Macquarie Infrastructure Corp. v. Moab Partners, No. 22-1165, a case considering whether a private plaintiff may plead a claim under Section 10(b) of the Securities Exchange Act based on an issuer’s failure to disclose a known trend or uncertainty required to be disclosed under Item 303 of Regulation S-K even without identifying a particular statement rendered misleading by the alleged omission.
  • Northern District Of California Dismisses Purported Securities Fraud Class Action Against Entertainment Streaming Company For Failure To Plead Falsity
     
    01/23/2024

    On January 5, 2024, Judge Jon S. Tigar of the United States District Court for the Northern District of California granted a motion to dismiss a proposed securities class action against an entertainment company that primarily operates a subscription-based streaming service, alleging that defendants made misrepresentations in public statements about the Company’s growth, customer retention, and challenges related to shared accounts in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.  
    CATEGORIES : Exchange ActFalsity
  • Central District Of California Dismisses Putative Class Action Against Medical Apparel Company For Failure To Adequately Allege Scienter And Falsity
     
    01/23/2024


    On January 17, 2024, Judge Otis D. Wright, II of the United States District Court for the Central District of California dismissed a putative class action asserting claims under Section 10(b) of the Exchange Act and Sections 11 and 12(a)(2) of the Securities Act against a medical apparel company, certain of its officers, and the underwriters of its stock offerings.  Ryan v. FIGS, Inc., 2024 WL 187001 (C.D. Cal. Jan. 17, 2024). 

    CATEGORIES : Misstatement/OmissionScienter
  • District Of New Jersey Certifies Class Of Investors In Suit Against Healthcare Product Company
     
    01/09/2024


    On December 28, 2023, Judge Zahid N. Quraishi of the United States District Court for the District of New Jersey granted class certification in a securities fraud class action, alleging violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) against a healthcare product company (the “Company”). Hall v. Johnson & Johnson, No. 18-1833 (ZNQ) (TJB) (D.N.J. Dec. 28, 2023). Specifically, plaintiff alleged that the Company inflated the value of its stock through false and misleading statements regarding the alleged contamination of the Company’s talc products. The Court certified the class after holding that plaintiff met the requirements of Rule 23(a) as well as the predominance and superiority requirements of Rule 23(b)(3).

    CATEGORY : Class Certification
  • Second Circuit Affirms Dismissal Of Putative Class Action Against Tobacco Company Alleging False Statements About Scientific Studies and Sales Outlook
     
    01/09/2024

    On December 26, 2023, the United States Court of Appeals for the Second Circuit affirmed a district court’s dismissal of a putative class action asserting claims against a tobacco company (the “Company”) under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”). In re Philip Morris Int’l Inc. Sec. Litig., No. 21-2546 (2d Cir. Dec. 26, 2023). Plaintiffs alleged that the Company made false or misleading statements regarding both the scientific studies it conducted in support of an application to the Food and Drug Administration (“FDA”) and the outlook for the Company’s sales growth in Japanese markets. The district court held that plaintiffs failed to adequately plead falsity or scienter, in a decision previously covered here. The Second Circuit affirmed the dismissal, holding that plaintiffs failed to adequately plead falsity. In its decision, the Court decided two questions of first impression in the Second Circuit. First, it held a securities fraud defendant’s statement that its scientific studies comply with a methodological standard that is published and internationally recognized, but stated in general and inherently subjective terms, is properly analyzed as a statement of opinion, rather than a statement of fact. Second, the Court held that, where a securities fraud defendant’s statement expresses an interpretation of scientific data that is ultimately endorsed by the FDA, such a statement is per se “[]reasonable” (i.e., supported by “meaningful inquiry”) as a matter of law.

    CATEGORIES : Exchange ActFalsity
  • Southern District Of New York Dismisses With Prejudice Claims Against Pharmaceutical Company Alleging Material Misstatements And Omissions In A Proxy Statement
     
    01/09/2024


    On December 28, 2023, Judge Jed S. Rakoff of the United States District Court for the Southern District of New York dismissed a putative class action alleging that a biopharmaceutical company (the “Company”) and certain of its officers and directors violated Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9 based on alleged misstatements in a proxy statement (the “Proxy”) filed in connection with the acquisition of the Company by its controlling shareholder. Zappia v. Movant Scis. Ltd., No. 23-cv-8097 (JSR) (S.D.N.Y. Dec. 28, 2023). Plaintiff alleged that the law firm engaged by the Company’s special committee (the “Special Committee”) to consider the acquisition had a conflict of interest and that this rendered the Proxy misleading. The Court held that the complaint failed to allege the existence of a conflict or a misrepresentation.

  • Northern District Of California Pares Claims In Putative Class Action Regarding Purchase Of Social Media Platform
     
    12/19/2023


    On December 11, 2023, Judge Charles Breyer of the United States District Court for the Northern District of California narrowed a putative class action asserting claims under the Securities Exchange Act of 1934 against the purchaser of a social media company. Pampena v. Musk, — F. Supp. 3d — 2023 WL 8588853 (N.D. Cal. 2023). Plaintiffs alleged that they sold shares in the target company at depressed prices after the purchaser allegedly made material misstatements suggesting that he would not go forward with the acquisition. The Court held that certain of the challenged statements were actionable and granted leave to replead with respect to the others.

  • Southern District Of Florida Grants In Part And Denies In Part Motion To Dismiss Proposed Securities Class Action Against Electric Vehicle Charging Company
     
    12/13/2023

    On 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.
  • Southern District Of New York Grants Motion To Dismiss Putative Securities Class Action Against Chinese Private-Sector Education Company
     
    12/13/2023

    On December 6, 2023, Judge John G. Koeltl of the U.S. District Court for the Southern District of New York granted a motion to dismiss a putative securities class action brought against an operator of private schools in Western China.  Dagan Invs., LLC v. First High-Sch. Educ. Grp. Co., 2023 BL 442686, No. 22-cv-3831 (S.D.N.Y. Dec. 6, 2023).  Plaintiff, on behalf of a purported class of U.S. investors, alleged that the Company violated Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 by making material misstatements and omissions about the likelihood and severity of impending Chinese government regulations impacting the private education sector.
  • Ninth Circuit Affirms In Part And Reverses In Part Decision Dismissing Section 16(b) Complaint
     
    11/21/2023

    On November 16, 2023, the United States Court of Appeals for the Ninth Circuit affirmed in part and reversed in part a motion to dismiss a derivative action brought by a shareholder of a publicly traded biotechnology company (the “Company”) under Section 16(b) of the Securities Exchange Act of 1934 against the Company, its beneficial owner (the “Beneficial Owner”), one of the Company’s directors (the “Director Defendant”) and his wife, and their trust (the “Trust”).  Andrew E. Roth v. Foris Ventures LLC, et al., 22-16632 (9th Cir. Nov. 13, 2023).
  • Eastern District Of New York Grants Motion To Dismiss Proposed Securities Class Action Against Russian Electronic Payments Company
     
    11/14/2023

    On November 3, 2023, Judge Rachel P. Kovner of the United States District Court for the Eastern District of New York granted a motion to dismiss a proposed putative securities class action alleging that a Russian electronic payments company (the “Company”) and certain of its officers violated Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”).  In re Qiwi PLC Sec. Litig., No. 1:20-cv-06054-RPK-CLP (E.D.N.Y. Nov. 3, 2023).
  • Southern District Of New York Grants In Part And Denies In Part Motion To Dismiss Securities Class Action Against Chinese Grocery Delivery Company
     
    11/14/2023

    On November 6, 2023, Judge Jed S. Rakoff of the United States District Court for the Southern District of New York granted in part and denied in part a motion to dismiss a putative securities class action alleging that a Chinese grocery delivery company (the “Company”) violated Sections 11, 12(a), and 15 of the Securities Act of 1933 (the “Securities Act”).  Chen v. Missfresh Ltd., 1:22-cv-09836 (JSR) (S.D.N.Y. Nov. 6, 2023).
  • New York Appellate Court Holds That PSLRA Discovery Stay Applies To Securities Act Actions Initiated In New York State Court
     
    11/07/2023

    On November 2, 2023, the New York Appellate Division, First Department, held that the automatic discovery stay in the Private Securities Litigation Reform Act (“PSLRA”) applies to actions brought in New York state court during the pendency of a motion to dismiss, although not during any interlocutory appeal from the denial of such a motion.  Camelot Event Driven Fund v. Morgan Stanley & Co., —N.Y.S.3d—, 2023 WL 7198938 (1st Dep’t Nov. 2, 2023).  Prior to this ruling, New York state trial courts had divided on the question of whether the PSLRA stay applies only to actions filed in federal court or also to actions filed in state court.  This decision resolves that split within the First Department, which includes New York County.
    CATEGORY : Discovery
  • Ninth Circuit Dismisses For Lack Of Jurisdiction Non-Lead Plaintiff’s Appeal From The Dismissal Of A Putative Class Action Against Medical Device Company
     
    11/01/2023

    On October 11, 2023, a divided panel of the United States Court of Appeals for the Ninth Circuit dismissed for lack of standing an appeal from the dismissal of a putative class action asserting claims under the Securities Exchange Act of 1934 against a medical device company and its former CEO.  Habelt v. iRhythm Technologies, Inc., —F.4th—, 2023 WL 6614359 (9th Cir. 2023).  Lead plaintiff alleged that the Company made misrepresentations regarding the regulatory process prior to the company receiving a historically low Medicare reimbursement rate for one of its products.  After the district court granted defendants’ motion to dismiss, lead plaintiff declined to appeal.
    CATEGORY : Standing
  • First Circuit Partially Revives Putative Class Action Against Pharmaceutical Company Alleging Misstatements About Clinical Trial Data
     
    11/01/2023

    On October 11, 2023, the United States Court of Appeals for the First Circuit affirmed in part and reversed in part the dismissal of a putative class action asserting claims under the Securities Exchange Act of 1934 against a pharmaceutical company and certain of its former executives.  Shash v. Biogen, Inc., —F.4th—, 2023 WL 6617278 (1st Cir. 2023).  Plaintiffs alleged that the company made misstatements and omissions regarding the clinical trial results of the company’s drug to treat Alzheimer’s.  The district court granted defendants’ motion to dismiss, but the First Circuit reversed the dismissal in part, holding that plaintiffs’ allegations were sufficient with respect to one challenged statement, while affirming that plaintiffs failed to adequately allege scienter with respect to other challenged statements.
  • Eastern District Of New York Grants Motion To Dismiss Proposed Securities Class Action Complaint Against Battery Recycling Company That Went Public Through A Merger With A SPAC
     
    11/01/2023

    On October 6, 2023, Judge Hector Gonzalez of the United States District Court for the Eastern District of New York granted a motion to dismiss a putative securities class action against a battery recycling company and the former officers and directors of the SPAC that merged with the Company in 2021, alleging violations of Sections 11 and 15 of the Securities Act of 1933 and Section 14(a) the Securities Exchange Act of 1934.  Lanigan Grp., Inc. v. Li-Cycle Holdings Corp., 22-cv-02222 (HG) (RML) (E.D.N.Y. Oct. 6, 2023).
  • Southern District Of New York Denies In Part And Grants In Part Motion To Dismiss Securities Class Action Against Social Media Company Owner
     
    10/11/2023

    On September 29, 2023, Judge Andrew L. Carter, Jr. of the United States District Court for the Southern District of New York denied in part and granted in part a motion to dismiss a putative securities class action against the owner of a social media company and his beneficial trust.  Oklahoma Firefighters Pension and Retirement System v. Musk, No. 22-cv-03026 (ALC) (S.D.N.Y. Sept. 29, 2023).  Plaintiff alleged that defendants violated Sections 10(b), 20A, and 20(a) of the Securities and Exchange Act of 1934 by allegedly concealing the owner’s ownership interests in the Company to investors who sold shares of the Company between March 25, 2022, and April 4, 2022, the putative class period.
  • Northern District Of California Grants Motion To Dismiss Amended Securities Class Action Complaint Against Hearing Aid Company
     
    10/11/2023

    On August 31, 2023, Judge Charles R. Breyer of the United States District Court for the Northern District of California granted a motion to dismiss a putative securities class action alleging that a hearing aid company, its officers, directors and underwriters, violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  In re Eargo, Inc. Sec. Litig., No. 21-cv-08597 (N.D. Cal. Aug. 31, 2023).  Plaintiffs alleged that the Company misrepresented the Company’s revenue and growth opportunities in its offering materials and allegedly downplayed an audit that allegedly led to a Department of Justice investigation in later SEC filings and public statements.
  • Northern District Of Illinois Narrows Putative Class Action Against Airplane Manufacturer
     
    10/11/2023

    On September 18, 2023, Judge Manish S. Shah of the United States District Court for the Northern District of Illinois narrowed a putative class action asserting claims under the Securities Exchange Act of 1934 against an airplane manufacturer and its former CEO and CFO.  College Ret. Equities Fund v. Boeing Co., 2023 WL 6065260 (N.D. Ill. Sept. 18, 2023).  Plaintiffs alleged the company made misrepresentations regarding two crashes of a new model of plane and the company’s responsive measures in an effort to return the fleet to service.  The Court held that various challenged statements were not actionable because plaintiffs failed to adequately allege falsity or scienter.  With respect to the remaining challenged statements, the Court further pared the claims by holding that loss causation was not sufficiently alleged in connection with certain purported corrective disclosures.
  • Eastern District Of New York Sustains Securities Act Claims And Dismisses Exchange Act Claims In A Putative Class Action Against An International Portfolio Management Company
     
    10/11/2023

    On September 25, 2023, Judge Pamela K. Chen of the United States District Court for the Eastern District of New York granted in part and denied in part a motion to dismiss a putative securities class action alleging that an IT portfolio management services company, its CEO, and its CFO violated Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934.  Handal v. Tenet Fintech Grp. Inc., No. 1:21-cv-06461 (PKC) (RER) (E.D.N.Y. Sept. 25, 2023).  Plaintiffs alleged that defendants made material misstatements regarding several business transactions in the Company’s registration statement and the CEO’s subsequent public statements.  The Court denied the motion with respect to the Securities Act claims but granted it with respect to the Exchange Act claim because plaintiffs failed to adequately allege reliance.
  • Southern District Of New York Dismisses Proposed Securities Class Action Complaint Against Drug Manufacturer For Failure To Plead Loss Causation
     
    10/11/2023

    On September 25, 2023, Judge Lorna Schofield of the United States District Court for the Southern District of New York granted a motion to dismiss a proposed class action against a biopharmaceutical company alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  Gru v. Axsome Therapeutics, Inc., No. 22 CIV. 3925 (LGS), 2023 WL 6214581 (S.D.N.Y. Sept. 25, 2023).  Plaintiff alleged that the Company omitted details concerning its migraine drug development in its Form 10-Q, 10-K and 8-K filings with the SEC and in statements made during conference calls with investors and analysts.  Plaintiff further alleged that the Company’s statements discussing the timing and prospect of FDA approval of its new migraine drug were false or misleading as a result of these alleged omissions.  The Court dismissed the complaint, finding that plaintiffs failed to plead loss causation.
    CATEGORIES : Exchange ActLoss Causation
  • Southern District Of New York Grants Motion For Reconsideration And Motion To Dismiss Class Action Against Pharmaceutical And Cannabis Company
     
    09/06/2023

    On August 21, 2023, Judge Paul A. Crotty of the United States District Court for the Southern District of New York granted a motion for reconsideration of his denial of an earlier motion to dismiss a putative securities class action against a pharmaceutical and cannabis company that sells cannabis, hemp, and related products (the “Company”) and certain of its officers (the “Individual Defendants”).  Kasilingam et al. v. Tilray Inc., et al., No. 1:20-cv-03459 (S.D.N.Y. Aug. 21, 2023).  Based on the Court’s reconsidered analysis, the Court granted defendants’ second motion to dismiss.  Plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder by making false and misleading statements to inflate the Company’s stock price.
    CATEGORIES : Exchange ActFalsityScienter
  • District Of New Jersey Dismisses Securities Fraud Claims Against Blockchain Support Company With Prejudice After Twice Granting Leave To Amend
     
    09/06/2023

    On August 25, 2023, Judge Georgette Castner of the United States District Court for the District of New Jersey dismissed with prejudice a putative class action asserting claims under the Securities Exchange Act against a company that supports and operates blockchain technologies and certain of its executives and investors.  Takata v. Riot Blockchain, Inc., No. 18-cv-2293, slip op. (D.N.J. Aug. 25, 2023), ECF No. 251.  The Court’s prior decision dismissing the action with leave to amend was the subject of our prior post.  As this was plaintiff’s third amended complaint and the Court determined that plaintiff still failed to adequately allege misrepresentations or scienter, the Court dismissed the action with prejudice.
    CATEGORIES : Misstatement/OmissionScheme
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