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  • District Of Massachusetts Dismisses Putative Class Action Against Biopharmaceutical Company For Failure To Allege Falsity
     
    08/04/2020

    On July 24, 2020, United States District Judge Allison D. Burroughs of the District of Massachusetts dismissed a putative securities class action against a biopharmaceutical company (the “Company”) and certain of its executives under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  Hackel v. Aveo Pharmaceuticals Inc. et al., No. 1:19-cv-10783, 2020 WL 4274542 (D. Mass. July 24, 2020).  Plaintiffs alleged that defendants misrepresented the status of clinical trials of a cancer drug required for approval from the U.S. Food and Drug Administration (“FDA”).  The Court granted defendants’ motion to dismiss because the statements at issue were forward-looking and because plaintiffs failed to allege falsity.
     
  • Second Circuit Affirms In Part Dismissal Of Securities Claims Against Cancer Drug Developer, Holding Certain Alleged Misstatements Inactionable As Corporate Puffery, But Allows Claims Concerning Other Alleged Misstatements To Proceed
     
    07/21/2020

    On July 13, 2020, the Second Circuit affirmed in part and vacated in part the dismissal of Exchange Act claims against a pharmaceutical company (the “Company”) and certain individual defendants in connection with alleged misstatements regarding the efficacy of its pancreatic cancer drug, the design of the Company’s clinical trial, and the scientific literature concerning pancreatic cancer.  Nguyen v. NewLink, No. 19-642 (2d Cir. July 13, 2020).  The Second Circuit held that while some alleged misstatements were inactionable puffery, others were statements of opinion as to which, under the United States Supreme Court’s decision in Omnicare, plaintiffs adequately pled falsity.  The Second Circuit also held that plaintiff sufficiently pled loss causation.
     
  • District of Massachusetts Dismisses Purported Class Action Against Online Home Goods Retailer
     
    07/14/2020

    On July 8, 2020, United States District Judge Douglas P. Woodlock of the United States District Court for the District of Massachusetts dismissed a putative securities fraud class action asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 against a large online home goods retailer (the “Company”) and its three most senior executives (collectively, “Defendants”).  In re Wayfair, Inc. Sec. Litig., Civ. No. 19-10062-DPW (D. Mass. July 8, 2020).  Plaintiffs alleged that defendants falsely implied that the Company was profitable and that it was experiencing positive advertising-revenue leverage—meaning that the Company was becoming more effective at generating revenue for every advertising dollar spent.  The Court granted defendants’ motion to dismiss because plaintiffs failed to adequately allege any material misstatements or omissions, scienter, or loss causation.  Notably, the Court repeatedly called attention to the absence of factual support for the allegations and described the complaint as “precisely the kind of pleading the Private Securities Litigation Reform Act was designed to prevent.”
     
  • Seventh Circuit Affirms Dismissal Of Exchange Act Claims Against A Biopharmaceutical Company In Connection With Its Tender Offer To Repurchase Its Stock
     
    06/30/2020

    On June 22, 2020, a Seventh Circuit panel of three judges affirmed a district court ruling dismissing securities fraud claims against a biopharmaceutical company (the “Company”) and one of its officers in connection with a Dutch auction tender offer the Company made to repurchase certain of the Company’s outstanding shares.  Walleye Trading LLC v. AbbVie Inc., et al., No. 19-3063 (7th Cir. June 22, 2020).  Plaintiff, a shareholder of the Company, alleged that the Company violated Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 (the “Exchange Act”) when the Company announced preliminary results of the tender offer and subsequently announced corrected results later that same day after trading closed.  Plaintiff also alleged that one of the Company’s officers violated section 20(a) of the Exchange Act.  The District Court dismissed the complaint for failure to state a claim and the Seventh Circuit affirmed.
     
  • Third Circuit Warns Of Proliferation Of Securities Class Actions, But Nevertheless Vacates District Court Decision Dismissing Certain Securities Fraud Claims In Putative Class Action Against Bank In Connection With Its Merger, Holding That Bank Failed To Adequately Disclose Known Regulatory Risks With Specificity
     
    06/30/2020

    On June 18, 2020, a Third Circuit panel of three judges partially reversed a district court ruling, reviving certain securities fraud claims against a bank (the “Bank”) and several individual defendants in connection with alleged statements made in a joint proxy statement issued to shareholders prior to the Bank’s merger.  Jaroslawicz v. M&T Bank Corp, et al., No. 17-3695 (3d Cir. June 18, 2020).  Plaintiffs, a putative class of shareholders, alleged violations of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 14(a)-9 promulgated thereunder, as well as breach of fiduciary duty under Delaware law.  Plaintiffs alleged defendants made misstatements or omissions in proxy statements in violation of Item 105 of Regulation S-K by inadequately disclosing the risks involved in the Bank’s compliance with federal anti-money laundering regulations (AML) and practices concerning its consumer checking program.
     
  • District Of New Jersey Grants In Part And Denies In Part Motion To Dismiss Securities Class Action Alleging Misleading Disclosures And Market Manipulation Against A Chinese Manufacturer Of Commercial Vehicle Parts
     
    06/23/2020

    On June 12, 2020, Judge Kevin McNulty of the of United States District of New Jersey granted in part and denied in part a motion to dismiss a putative securities fraud class action asserting violations of Sections 9(a), 10(b), and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 against a Chinese manufacturer of wheels for commercial vehicles (the “Company”) as well as the Company’s CEO and CFO (collectively, “Defendants”).  He v. China Zenix Auto Int’l Ltd. et al., Civ. No. 2:18-cv-15530, 2020 WL 31695006 (D.N.J. June 12, 2020).  Plaintiffs alleged that, in an effort to prevent the Company from being de-listed by the New York Stock Exchange (the “NYSE”), certain of the Company’s employees engaged in improper trading that artificially inflated the Company’s stock price.  Plaintiffs further alleged that the Company’s ongoing statements regarding its compliance with NYSE listing requirements were materially misleading, because these statements did not disclose that it achieved compliance only as a result of improper trading.  The Court denied Defendants’ motion to dismiss as to the Section 10(b) claims against the Company and the CEO, but granted the motion to dismiss the Section 10(b) claims against the CFO for failure to adequately allege scienter.  The Court dismissed the Section 9(a) claims for failure to adequately allege a series of purportedly manipulative transactions.
     
  • Southern District Of New York Grants In Part And Denies In Part Motion To Dismiss A Securities Class Action Alleging A Biotech Company Mislead Shareholders About Likelihood Of FDA Approval For Drug Intended To Treat Rare Disease
     
    06/23/2020

    On June 16, 2020, Judge Gregory H. Woods 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 fraud class action asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 against a biotech company (the “Company”) as well as certain of its officers (collectively, “Defendants”).  Skiadas v. Acer Therapeutics Inc. et al., Civ. No. 1:19-cv-6137, 2020 WL 3268495 (S.D.N.Y. June 16, 2020).  Plaintiffs alleged that Defendants falsely stated that the Food and Drug Administration (“FDA”) agreed that it would approve the Company’s New Drug Application for EDSIVO, a drug for the treatment of Vascular Ehlers-Danolos Syndrome (“vEDS”), a rare genetic connective tissue disorder.  The Court denied Defendants’ motion to dismiss as to most of the alleged misstatements, because plaintiffs adequately alleged falsity and scienter.
     
  • Northern District Of California Dismisses Purported Class Action Against Peer-To-Peer Lending Company For Failure To Adequately Allege Falsity And Scienter
     
    06/23/2020

    On June 12, 2020, Judge Beth Labson Freeman of the United States District Court for the Northern District of California dismissed a purported securities class action against a peer-to-peer lending company (the “Company”) and certain of its officers under Sections 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  Veal v. LendingClub Corporation, et. al., No. 5:18-cv-02599 (N.D. Cal. June 12, 2020).  Plaintiffs alleged that defendants made misstatements and omissions regarding an investigation by the Federal Trade Commission (“FTC”) into the Company’s allegedly deceptive conduct related to certain consumer practices.  The Court dismissed plaintiffs’ claims (mostly without prejudice), because plaintiffs failed to adequately allege falsity or scienter.
     
  • Southern District Of New York Grants In Part Motion To Dismiss Securities Fraud Claims Against European Airline For Failure To Adequately Allege Falsity, Materiality, And Scienter For Certain Alleged Misstatements
     
    06/09/2020

    On June 1, 2020, Judge Paul Oetken of the Southern District of New York granted in part and denied in part a motion to dismiss securities claims against an “ultra-low fare” airline company (the “Company”) and its chief executive.  City of Birmingham Firemen's and Policemen's Supplemental Pension System v. Ryanair Holdings plc et al., No. 18-cv-10330 (S.D.N.Y. June 1, 2020).  Plaintiffs alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, in connection with alleged misstatements concerning the Company’s labor practices and profitability.  The Court granted in part defendants’ motion to dismiss, finding plaintiffs failed to adequately plead falsity, materiality, and scienter for all but one category of alleged misstatements, but granted plaintiffs’ motion for leave to amend.
     
  • Northern District Of California Grants In Part Motion To Dismiss Securities Fraud Claims Against Multinational Technology Company, Holding That Plaintiffs Did Not Adequately Allege Falsity, Scienter, Or Loss Causation With Respect To Majority Of Alleged Misstatements
     
    06/09/2020

    On June 2, 2020, Judge Yvonne Gonzalez Rogers of the Northern District of California granted in part a motion to dismiss a putative securities class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, against a multinational technology company (the “Company”) and two of its senior executives.  In re Apple Securities Litigation, No. 4:19-cv-02033 (N.D. Cal. June 2, 2020).  Plaintiffs alleged that defendants made materially false and misleading statements and omissions concerning the Company’s flagship product and its China business.  The Court stripped away most of plaintiff’s allegations, holding that those alleged misrepresentations failed to sufficiently allege falsity, scienter, and loss causation, but let remain two alleged misstatements made by the Company’s CEO to analysts that it found to be sufficiently pled.
     
  • District Of Connecticut Dismisses Securities Class Action Against A Consumer Financial Services Company, Certain Of Its Officers And Directors And Its Underwriters, Holding That Plaintiffs Failed To Adequately Allege Any Material Misrepresentations
     
    04/07/2020

    On March 31, 2020, Judge Victor A. Bolden of the District of Connecticut dismissed a putative securities class action against a provider of private label credit cards (the “Company”), certain of its officers and directors, and its underwriters in connection with a notes offering.  In re Synchrony Financial Sec. Litig., No. 3:18-cv-1818 (VAB) (D. Conn. Mar. 31, 2020).  Plaintiffs alleged violations of Section 11 of the Securities Act of 1933 (the “Securities Act”) by all defendants, as well as Section 15 of the Securities Act against the individual defendants.  Plaintiffs also alleged violations of Sections 10(b), 20A, and 20(a) of the Securities and Exchange Act of 1934 (the “Exchange Act”) by the Company and certain of the individual defendants.  The Court granted defendants’ motion to dismiss the Amended Complaint in its entirety with prejudice.
     
  • California Federal Judge Holds That Claims Under Section 10(b) Require “Out-of-Pocket” Loss
     
    03/11/2020

    On February 28, 2020, Judge M. James Lorenz of the United States District Court for the Southern District of California dismissed a putative securities class action against an investment management company (“Company”) and its clearing bank (“Clearing Bank,” and collectively, “Defendants”) that alleged violations of Section 10(b) of the Securities and Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5.  Jiao v. Merrill Lynch, Pierce, Fenner & Smith, 17-cv-409-L (MDD) (S.D. Cal. Feb. 28, 2020).  Plaintiffs, who were customers of Defendants, brought the lawsuit after the Securities and Exchange Commission (“SEC”) entered into a consent and cease-and-desist order with Defendants (“SEC Order”) for violations of the Customer Protection Rule of the Exchange Act, 15 U.S.C. § 78aa; 17 C.F.R. § 240.15c3-3 (“CPR”), which required Defendants to maintain physical possession or control over customers’ fully paid and excess margin securities.  The Court dismissed the action with prejudice because claims under Section 10(b) require a plaintiff to plead and prove an “out-of-pocket” loss, which Plaintiffs failed to do.
     
    CATEGORIES: DamagesExchange Act
  • Northern District Of Ohio Grants Motion To Dismiss Securities Fraud Claims Against Aerospace Component Company, Finding That Plaintiffs Did Not Adequately Allege Materiality Or Loss Causation With Respect To Alleged Misstatements And Omissions
     
    02/25/2020

    On February 19, 2020, Judge Pamela A. Barker of the United States District Court for the Northern District of Ohio granted a motion to dismiss a putative securities class action, asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, against an aerospace component design and manufacturing company (the “Company”) and two of its executive officers.  In re TransDigm Group Inc., No. 17-cv-01677-PAB (N.D. Ohio Feb. 19, 2020).  Plaintiffs alleged that defendants made materially false and misleading statements and omissions concerning the Company’s operations, business, and prospects that resulted in a drop in the Company’s stock price when the Company made certain purported corrective disclosures.  The Court granted defendants’ motion to dismiss plaintiffs’ Third Amended Complaint, finding that plaintiffs failed to sufficiently allege materiality or loss causation, and denied leave to amend.
     
  • District Of Delaware Partially Sustains Securities Fraud Case Against Automotive Parts Distributor For False Sales Growth Projections
     
    02/19/2020

    On February 7, 2020, Judge Richard G. Andrews of the United States District Court for the District of Delaware granted in part and denied in part motions to dismiss a putative securities class action against an automotive aftermarket parts provider (the “Company”), certain members of its management (the “Company Individual Defendants”), a hedge fund that owned approximately four percent of the Company’s shares, and the fund’s Chief Executive Officer who was a member of the Company’s board of directors.  In re Advance Auto Parts, Inc., Sec. Litig., No. CV-18-212-RGA (D. Del. Feb. 7, 2020).  Plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making misleading misstatements and omissions about the Company’s projected growth and financial condition.  The Court dismissed the claims to the extent it found them to be puffery or lacking sufficient allegations of falsity, but denied the motion with respect to claims based on statements related to projections and opinions regarding the Company’s financial outlook. 
     
  • Central District Of California Allows Exchange Act Claims To Proceed Against Non-U.S. Corporate Issuer In Connection With ADRs, Holding That Plaintiffs Sufficiently Alleged A Domestic Transaction Under Morrison And Involvement Of Toshiba In The ADRs
     
    02/05/2020

    On January 28, 2020, Judge Dean D. Pregerson of the United States District Court for the Central District of California denied defendant’s motion to dismiss a putative securities class action brought against a multinational technology and communications corporation headquartered in Tokyo, Japan, in connection with American Depositary Receipts (“ADRs”) which were not sponsored by the foreign issuer and were traded on over-the-counter markets.  Stoyas v. Toshiba Corp., No. 15-cv-4194 (C.D. Cal. 2020).  The Court had previously dismissed plaintiffs’ first amended complaint and denied leave to amend.  The Court’s dismissal of plaintiffs’ claims under Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), and Rule 10b-5 promulgated thereunder, was based on the Supreme Court’s seminal decision in Morrison v. National Australia Bank Ltd., 561 U.S. 247 (2010), which held that Section 10(b) and SEC Rule 10b-5 only apply to (i) the purchase or sale of a security listed on a U.S. securities exchange, or (ii) the purchase or sale of any other security in the United States. 
     
    CATEGORIES: Exchange ActJurisdiction
  • Northern District Of California Grants Motion To Dismiss Securities Fraud Claims Against Pharmaceutical Company, Finding That Plaintiffs Did Not Adequately Allege Falsity And Scienter With Respect To Alleged Material Omissions
     
    02/05/2020

    On January 27, 2020, Judge Richard G. Seeborg of the United States District Court for the Northern District of California granted a motion to dismiss a putative securities class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, against a pharmaceutical company (the “Company”) and two of its executive officers.  Immanuel Lake, et al. v. Zogenix, Inc., et. al., No. 19-cv-01975-RS (N.D. Cal. Jan. 27, 2020).  Plaintiffs alleged that defendants made material omissions concerning the Company’s New Drug Application (“NDA”) it was submitting to the U.S. Food and Drug Administration (“FDA”) for a medication designed to treat seizures.  According to plaintiffs, the Company’s stock price fell approximately 20% when the alleged omission was revealed to the market through the FDA’s rejection of the NDA.  The Court granted defendants’ motion to dismiss, finding that plaintiffs failed to sufficiently allege a misstatement or omission of a material fact and scienter, but granted leave to amend.
     
  • New York District Court Dismisses Securities Class Action Against Tax Services Provider Alleging Fraudulent Concealment Of CEO’s Misconduct On Materiality And Loss Causation Ground
     
    01/28/2020

    On January 17, 2017, Judge Nicholas G. Garaufis of the United States District Court for the Eastern District of New York dismissed a putative class action asserting claims under Sections 10(b), 14(a), and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5, against a tax preparation services provider (the “Company”) and its former CEO and CFO (collectively, “Defendants”).  In re Liberty Tax, Inc. Sec. Litig., No. 2:17-CV-07327 (NGG) (RML) (E.D.N.Y. Jan. 17, 2020).  Plaintiffs alleged that Defendants made false and misleading statements and omissions about the Company’s compliance efforts and internal controls, which concealed the CEO’s extensive misconduct that ultimately caused steep declines in the Company’s stock price.  The Court dismissed the action on the basis that the statements at issue were unrelated to the CEO’s misconduct or were mere puffery, and that plaintiffs failed to establish loss causation linked to any corrective disclosures. 
     
  • District Of Kansas Allows Exchange Act Claims Against Financial Services Company To Proceed, Finding That Plaintiffs Adequately Alleged Material Misstatements, Omissions And Scienter
     
    12/10/2019

    On December 3, 2019, Judge John W. Lungstrum of the United States District Court for the District of Kansas denied a motion to dismiss a putative securities class action involving claims brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, against a financial services company (the “Company”), three of its senior officers and several of its founder directors.  Yellowdog Partners, LP and Carpenters Pension Fund of Illinois v. CURO Group Holdings Corp. et al., 18-cv-02662 (D. Kan. Dec. 3, 2019).  Plaintiffs alleged that the Company and the three officer defendants made false and materially misleading statements concerning the Company’s business transition away from its most profitable product and its effect on the Company’s financial condition.  The Court denied defendants’ motion to dismiss, finding that plaintiffs sufficiently pleaded falsity and scienter.
     
  • Southern District Of California Denies Summary Judgment For Defendants, Ruling That There Are Triable Issues Of Fact Related To Loss Causation, Materiality, Scienter, And Damages
     
    12/03/2019
    On November 6, 2016, Judge Michael A. Anello of the United States District Court for the Southern District of California denied defendants’ motion for summary judgment in a securities class action against a theme park and entertainment company (“defendant” or the “Company”), certain members of its management, and its largest shareholder.  Baker v. SeaWorld Entm’t, Inc., No. 14CV2129-MMA (AGS), 2019 WL 6118448 (S.D. Cal. Nov. 18, 2019).  Plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making materially misleading misstatements and omissions about the effect of Blackfish, a documentary film concerning killer whales in captivity, on attendance at the theme park and its earnings.  The Court denied defendants’ motion for summary judgment on the basis that there were genuine issues of material fact with respect to each element of a securities fraud claim. 
  • Northern District Of Ohio Dismisses Securities Fraud Action Against REIT Based Upon Lack Of Scienter Of Healthcare Company-Lessee’s Alleged Billing Fraud
     
    12/03/2019

    On November 22, 2019, Judge Jeffrey J. Helmick of the United States District Court for the Northern District of Ohio dismissed a putative class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 against a real estate investment trust (“REIT”) and its former officers (collectively “Defendants”), along with a healthcare company with which the REIT transacted (the “Company”) and its officers.  Boynton Beach Firefighters' Pension Fund v. HCP, Inc., No. 3:16-CV-1106, 2019 WL 6251435 (N.D. Ohio Nov. 22, 2019).  Plaintiffs alleged Defendants made false or misleading statements about the Company’s future prospects, but knew or should have known that the Company was engaged in unlawful billing practices because of due diligence in connection with the transaction with the Company and a subsequent government investigation.  The Court held that plaintiffs’ allegations of scienter were based on impermissible hindsight pleading and dismissed the complaint.
     
    CATEGORIES: Exchange ActScienter
  • District Of Massachusetts Dismisses Exchange Act Claims For Failure To Adequately Allege A Material Misleading Statement Or Scienter
     
    11/19/2019

    On November 13, 2019, Judge Leo T. Sorokin of the United States District Court for the District of Massachusetts dismissed a putative securities class action involving claims brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, against a biopharmaceutical company (the “Company”) and two of its senior officers.  LSI Design and Integration Corp. v. Tesaro Inc. et al., 18-cv-12352 (D. Ma. Nov. 13, 2019).  Plaintiff alleged that the Company and its CEO and CFO made materially misleading statements in violation of the Exchange Act concerning the Company’s financial condition and drug sales.  The Court dismissed the amended complaint finding that plaintiff failed to sufficiently plead falsity or scienter.
     
  • Northern District Of California Allows Securities Class Action Based On Alleged Price-Fixing To Proceed Against Pharmaceutical Wholesaler
     
    11/05/2019

    On October 29, 2019, Judge Charles R. Breyer of the United States District Court for the Northern District of California denied a motion to dismiss a putative securities class action brought against a pharmaceutical wholesaler and two of its former executives.  Evanston Police Pension Fund v. McKesson Corp., et al., 18-cv-06525-CRB (N.D. Cal. Oct. 29, 2019).  Plaintiffs asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, alleging that defendants knew about and participated in a price-fixing conspiracy that allowed the company to profit from the inflated prices of generic drugs during the alleged class period and caused the company to suffer decreased earnings once reports revealed government investigations into alleged price-fixing and prices dropped.  The Court denied defendants’ motion to dismiss, holding that plaintiffs adequately alleged material misstatements, scienter, and loss causation at the pleading stage.
     
  • Northern District Of Illinois Dismisses Putative Class Action Against In-Flight Internet Provider For Failure To Adequately Allege Falsity And Scienter
     
    10/29/2019

    On October 16, 2019, Judge Jorge L. Alonso of the United States District Court for the Northern District of Illinois Eastern Division dismissed a putative securities class action against an in-flight internet connectivity services provider (the “Company”) and some of its current and former executives.  Pierrelouis v. Gogo Inc., et al., No. 18-cv-04473 (N.D. Ill. Oct. 16, 2019).  Plaintiffs, who brought claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, alleged that defendants misrepresented the Company’s financial health and the performance and reliability of its in-flight internet services by failing to disclose the extent of a de-icing fluid issue that was affecting its ability to provide those services, and that the eventual disclosure of the issue caused the Company’s stock price to decline.  The Court held that plaintiffs failed to plead a material misrepresentation or omission and also failed to adequately allege a strong inference of scienter, and therefore dismissed the amended complaint without prejudice.
     
  • Eastern District Of New York Dismisses Exchange Act Claims For Failure To Adequately Allege Falsity Or Scienter
     
    10/08/2019

    On September 30, 2019, Judge Ann M. Donnelly of the United States District Court for the Eastern District of New York dismissed a putative securities class action asserting claims brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) against a footwear retailer (the “Company”) and several of its executives.  City of Warren Police and Fire Retirement System v. Foot Locker Inc. et al., 18-cv-01492 (E.D.N.Y. Sept. 30, 2019).  Plaintiffs alleged that the Company and its executives made materially misleading statements and omissions in violation of the Exchange Act concerning its competitive position in the market, the strength of the Company’s relationship with its vendors, and its product allocation and inventory.  The Court dismissed the complaint without prejudice, holding that plaintiffs failed to sufficiently plead falsity and scienter, and granted plaintiffs leave to amend.
  • Southern District Of New York Dismisses Putative Securities Class Action Against Pharmaceutical Company For Failure To Adequately Allege Scienter
     
    10/08/2019

    On September 30, 2019, Judge J. Paul Oetken of the United States District Court for the Southern District of New York dismissed a putative securities class action brought against a pharmaceutical company and certain of its current and former executives.  Tung v. Bristol-Myers Squibb Co., et al., 18-cv-1611 (S.D.N.Y. Sept. 30, 2019).  Plaintiffs allege that the pharmaceutical company (the “Company”) and defendant executives made materially misleading statements and omissions concerning the design of the Company’s clinical trial that tested the efficacy of a newly-developed anticancer drug in violation of Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder.  The Court dismissed the claims finding that plaintiffs failed to sufficiently plead scienter, but granted plaintiffs leave to amend to address the pleading deficiencies.
    CATEGORIES: Exchange ActScienter
  • Southern District Of New York Dismisses Federal Securities Claims Against Asset Management Company For Failure To Adequately Allege Reliance Or Causation
     
    10/08/2019

    On September 30, 2019, Judge Loretta A. Preska of the United States District Court for the Southern District of New York dismissed federal securities claims brought against a Japanese investment advisor and asset manager (the “Company”), its parent, and its former CEO.  Alfandary, et al. v. Nikko Asset Management, et al., 17-cv-05137 (S.D.N.Y. Sept. 30, 2019).  Plaintiffs, former senior executives of the Company or one of its subsidiaries, alleged that defendants engaged in a scheme to devalue plaintiffs’ stock acquisition rights (“SARs”) and to force them to sell their SARs back to the Company at the artificially deflated price, in violation of section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder.  The Court dismissed the Exchange Act claims finding that most plaintiffs failed to sufficiently allege a sale, and that all plaintiffs failed to allege reliance or loss causation.
  • District Of Massachusetts Holds That Plaintiff Who Purchased Stock After Corrective Disclosure Lacks Standing To Pursue Putative Securities Class Action
     
    10/01/2019

    On September 23, 2019, Judge Denise J. Casper of the United States District Court for the District of Massachusetts denied class certification in a securities fraud action brought against a biopharmaceutical company (the “Company”) and several of its current and former officers and directors, and granted defendants’ motion for judgment on the pleadings in connection with plaintiff’s individual claim.  Karth v. Keryx Biopharmaceuticals, Inc., C.A. No. 16-11745-DJC (D. Mass. Sept. 23, 2019).  Plaintiff alleged that the Company misled investors about the number of entities that manufactured its FDA-approved drug and that its stock price declined when it revealed that it only had a single manufacturer, which was experiencing issues that affected the drug’s availability for sale.  The Court declined to certify the putative class, finding that plaintiff was an inadequate representative because the timing of his stock purchases made his claims atypical from those of the proposed class.  As to his individual claim, the Court granted defendants’ judgment on the pleadings, finding that plaintiff could not plead loss causation because the Company’s disclosures about the single manufacturer pre-dated the alleged stock drop by six months, and finding that plaintiff could not plead reliance because plaintiff purchased his shares two months after the curative disclosures.
  • District Of Nevada Grants In Part And Denies In Part Motion To Dismiss Exchange Act Claims Against Airline Company And Its Executives, Finding That Plaintiffs Adequately Alleged Scienter With Respect To Certain Alleged Statements Regarding The Airline’s Safety And Mechanical Reliability
     
    09/17/2019

    On September 9, 2019, Judge Andrew P. Gordon of the United States District Court for the District of Nevada partially dismissed a putative securities class action brought against an airline company and certain of its current and former executives.  Brendon et al. v. Allegiant Travel Co. et al., 2:18-cv-01758 (D. Nev. Sept. 9, 2019).  Plaintiffs alleged in their first amended complaint (“FAC”) that the airline and its parent company (collectively, the “Airline”) and certain of its executives made materially misleading statements and omissions concerning the safety and mechanical reliability of its aircrafts and the competency of its maintenance staff in violation of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), Rule 10b-5 promulgated thereunder, and Section 20(a).  The Court allowed claims related to certain alleged false statements by defendants to proceed, dismissed certain of the claims that plaintiffs failed to sufficiently plead falsity and scienter, and granted plaintiffs leave to amend to address certain of the pleading deficiencies.
    CATEGORIES: Exchange ActScienter
  • District Of New Jersey Allows Class Action Based On Alleged Price-Fixing To Proceed Against Pharmaceutical Company
     
    08/13/2019

    On August 6, 2019, Judge Katherine S. Hayden of the United States District Court for the District of New Jersey denied a motion to dismiss a putative securities class action asserting claims under Sections 10(b) and 14(a) of the Securities Exchange Act of 1934, and Rules 10b-5 and 14a-9 promulgated thereunder.  In re Allergan Generic Drug Pricing Sec. Litig., No. 16- CV-9449, 2019 WL 3562134 (D.N.J. Aug. 6, 2019).  Plaintiffs alleged that a pharmaceutical company and several of its executives participated in a price-fixing conspiracy that caused the prices of six generic drugs sold by the company to increase dramatically during the alleged class period—as ultimately revealed through a U.S. Department of Justice investigation—and that defendants made material misstatements and omissions regarding the alleged conspiracy.  The Court held that plaintiffs adequately pleaded their claims, including with respect to material misstatements, scienter and loss causation.
  • Eastern District Of New York Dismisses Putative Class Action Against Pharmaceutical Company For Failure To Adequately Allege Misstatements And Scienter
     
    08/13/2019

    On August 6, 2019, Judge Edward R. Korman of the United States District Court for the Eastern District of New York dismissed a putative securities class action asserting claims against a pharmaceutical company and certain of its officers under Section 10(b) of the Securities Exchange Act of 1934.  In re Aceto Corp. Sec. Litig., No. 18-CV-2425 (ERK-AYS) (E.D.N.Y. Aug. 6, 2019).  Plaintiff alleged that defendants made misrepresentations in connection with disclosures concerning the company’s compliance with internal controls, earnings forecasts, and regarding the valuation of goodwill and intangible assets.  The Court held that the complaint failed to plead an actionable misstatement or scienter, but granted leave to replead.
  • Southern District Of New York Grants Reconsideration And Dismisses Exchange Act Claims Against Underwriter Of Regulation A+ Offering, Finding Plaintiffs Failed To Adequately Allege Scienter
     
    08/06/2019

    On July 29, 2019, Judge Denise Cote of the United States District Court for the Southern District of New York granted reconsideration of her prior decision and dismissed securities fraud claims brought against an underwriter in a putative securities class action.  In re Longfin Corp. Securities Class Action Litigation, 1:18-cv-02933 (DLC) (S.D.N.Y. July 29, 2019).  As discussed in our prior post, plaintiffs filed securities law claims against a financial and technological services company (the “Company”), its executives, and the lead underwriter (“Underwriter”) of the Company’s Regulation A+ (“Reg A+”) offering in 2017 (the “Offering”).  On April 11, 2019, the Court granted the Underwriter’s motion to dismiss claims brought under the Securities Act of 1933, but denied its motion to dismiss plaintiffs’ claim that the Underwriter committed fraud in violation of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder.  In granting the Underwriter’s motion for reconsideration and dismissing the Exchange Act claims, the Court found that plaintiffs’ Second Amended Complaint (“SAC”) failed to plausibly allege the Underwriter knew and participated in an alleged fraudulent “scheme” and that the more compelling inference was that the Company lied to the Underwriter to secure its participation in the Offering.
    CATEGORIES: Exchange ActSchemeScienter
  • Southern District Of New York Dismisses Putative Class Action Against Brazilian Mining Company For Failure To Allege A Domestic U.S. Securities Transaction

    06/25/2019

    On June 18, 2019, Judge Richard Berman of the United States District Court for the Southern District of New York dismissed a putative securities class action brought by a Cayman Islands branch of a Brazilian bank against a Brazilian mining company (the “Company”) and its Brazilian parent companies on behalf of investors in certain of the Company’s bonds. Banco Safra S.A. - Cayman Islands Branch v. Samarco Mineracao S.A., et al, 1:16-cv-08800 (S.D.N.Y. June 18, 2019). Plaintiff alleged that defendants made misrepresentations about the safety of the Company’s mining operations in the wake of an “environmental disaster” in Brazil involving the bursting of one of the Company’s dams in violation of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder. Plaintiff also alleged violations of Section 20(a) of the Exchange Act, along with claims for common law fraud, aiding and abetting fraud, and negligent misrepresentation. The bonds at issue were not listed on a U.S. securities exchange and had been initially offered only outside the United States, and plaintiff’s alleged purchases were largely made in the secondary market. The Court, in dismissing the amended complaint, held that plaintiff failed to allege a U.S. domestic securities transaction as required to overcome the presumption against the extraterritorial application of the U.S. securities laws.

    CATEGORIES: Exchange ActJurisdiction
  • Northern District Of California Dismisses Putative Class Action Against Cybersecurity Company Based On Failure To Adequately Allege Misrepresentations And Scienter
     
    06/25/2019

    On June 14, 2019, Judge William Alsup of the United States District Court for the Northern District of California dismissed a putative class action against a cybersecurity company (the “Company”) and certain of its executives. SEB Inv. Mgmt. AB v. Symantec Corp., No. 18-02902 (N.D. Cal. June 14, 2019). After the Company announced that its audit committee had commenced an internal investigation and had voluntarily contacted the SEC after a former employee raised unspecified concerns, plaintiff, an investor in the Company, alleged that defendants made misrepresentations in connection with the Company’s growth as a result of its acquisition of two security firms, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder. The Court held that plaintiff failed to allege actionable material misrepresentations and/or scienter as to various categories of alleged misstatements, and dismissed the complaint without prejudice.
     
  • Fifth Circuit Affirms Dismissal Of Putative Class Action, Holding That Grant Of Employee Stock Option Did Not Constitute A Sale, And That Plaintiffs Failed To Adequately Plead A Duty To Disclose
     
    06/03/2019

    On May 24, 2019, the United States Court of Appeals for the Fifth Circuit affirmed in a unanimous decision the dismissal of a putative securities class action against a major financial services company and several of its subsidiaries in relation to their alleged involvement in Enron’s “financial manipulation.”  Lampkin et al. v. UBS PaineWebber Inc. et al., No. 17-20608 (5th Cir. May 24, 2019).  Plaintiffs—(i) individual retail-brokerage customers of defendants, and (ii) former Enron employees who acquired Enron stock options through Enron’s stock option plan—alleged defendants violated Section 11 and Section 12 of the Securities Act of 1933 (the “Securities Act”) by acting as an underwriter and seller of Enron securities and were liable for materially false and misleading statements contained in Enron’s prospectuses and registration statements.  Plaintiffs also alleged defendants violated Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder by failing to disclose their alleged knowledge of Enron’s alleged manipulation of its “public financial appearance.” 
  • District Court Dismisses Putative Class Action Asserting Securities Fraud, Holding That Plaintiffs Failed To Adequately Allege Actionable Material Misstatements Or Omissions And Scienter
     
    05/14/2019

    On April 30, 2019, the United States District Court for the District of Massachusetts granted a motion to dismiss a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder against a biopharmaceutical company (the “Company”) and certain of its executives, and claims under Section 20(a) of the Exchange Act against the executives.  In re Ocular Therapeutix, Inc. Securities Litigation, No. 17-CV-12288 (D. Mass. Apr. 30, 2019).  Plaintiffs alleged that defendants made misstatements regarding manufacturing issues with respect to an ocular pain drug developed by the Company.  The Court held that plaintiffs failed to adequately allege actionable misstatements or omissions and scienter, and granted the motion to dismiss.
  • Second Circuit Summarily Affirms Dismissal Of Putative Securities Fraud Class Action Against Pharmacy Benefits Manager Company, Finding That Plaintiffs Failed To Adequately Allege Material Misstatements And Scienter

     
    05/14/2019

    On May 7, 2019, the United States Court of Appeals for the Second Circuit summarily affirmed the judgment by Judge Edgardo Ramos of the United States District Court for the Southern District of New York granting defendants’ motion to dismiss in a putative securities class action.  In re Express Scripts Holdings Co. Securities Litigation No. 18-cv-1850 (2d Cir. May 7, 2019).  Plaintiffs alleged that defendants—a pharmacy benefit manager (“the Company”) and certain of its officers—violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) by making materially false or misleading statements in connection with the purchase or sale of securities.  As discussed in our prior post, the District Court granted defendants’ motion to dismiss, finding that plaintiffs did not adequately plead that defendants made any misleading statements or that defendants acted with the requisite scienter.  On appeal, plaintiffs argued that the District Court incorrectly held that the Amended Complaint failed to adequately allege that defendants made materially false and misleading statements and omission and acted with scienter.  The Second Circuit affirmed in a summary order.  Summary orders do not have binding precedential effect.
  • New York Federal Court Dismisses Charter School’s Section 10(b) Claims For Lack Of Standing, Rejecting Plaintiff’s Constructive Seller Theory
     
    05/07/2019

    On April 10, 2019, Judge Loretta A. Preska of the United States District Court for the Southern District of New York dismissed an action asserting violations of Section 10(b) of the Securities and Exchange Act of 1934 and claims under state law against a broker-dealer (the “Broker-Dealer”) and several individuals who participated in a bond offering facilitated by the Broker-Dealer.  Palm Beach Maritime Museum v. Hapoalim Sec. USA, Inc., 19 Civ. 908 (LAP), 2019 WL 1950139 (S.D.N.Y. Apr. 10, 2019).  Plaintiff, a non-profit corporation approved as a charter school in Florida, alleged that defendants made materially false statements in connection with a bond purchase agreement to finance plaintiff’s purchase and expansion of property.  The Court held that plaintiff lacked standing to pursue its Section 10(b) claim because it was not the buyer or seller of a security. 
     
    CATEGORIES: Exchange ActStanding
  • The Second Circuit Affirms Denial Of Plaintiffs’ Motion For Leave To Amend Securities Class Action On The Ground That Any Such Amendment Would Be Futile
     
    05/07/2019

    On April 29, 2019, the United States Court of Appeals for the Second Circuit affirmed the denial of plaintiffs’ motion for leave to file an amended complaint alleging securities fraud against an international pharmaceutical corporation (the “Company”) and several of its past and present executives.  Steamfitters’ Indus. Pension Fund v. Endo Int’l PLC, 18-1669-cv (2d Cir. Apr. 29, 2019).  Upon reviewing the district court’s decision de novo, the Second Circuit concluded that an amendment would be futile because the alleged misrepresentations and omissions contained in plaintiffs’ proposed amended complaint (the “Proposed Amended Complaint”) failed to allege any plausible violation of Section 10(b) and 20(a) of the Securities and Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5.
  • Supreme Court Hears Argument On Whether Mere Negligence Is Sufficient To Sustain Investor Claims Under Section 14(e) Of The Exchange Act In Connection With A Tender Offer And—Perhaps—Whether A Private Right of Action Exists Under Section 14(e) At All
     
    04/23/2019

    On April 15, 2019, the Supreme Court heard argument in a closely-watched case asking whether mere negligence is sufficient to plead and prove a claim under Section 14(e) of the Securities Exchange Act of 1934 (the “Exchange Act”) in connection with a tender offer and – perhaps – whether a private right of action exists under Section 14(e) at all.  Emulex Corporation, et al. v. Varjabedian, No. 18-459 (Apr. 15, 2019).  The argument was particularly lively, with the Justices posing numerous questions about both a defendant’s required mental state, as well as whether an implied right of action ought to be recognized – although it remains unclear whether the Court will actually decide the latter question.
    CATEGORIES: Exchange ActScienter
  • District Court Dismisses Putative Class Action, Holding That Company’s Optimistic Guidance Fell Within PSLRA Safe Harbor Provision
     
    03/26/2019

    On March 15, 2019, Judge Edward M. Chen of the United States District for the Northern District of California dismissed a putative class action asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 against a camera technology company (“Company”), along with its officers and executives.  Park v. GoPro, Inc., et. al., 18-cv-00193-EMC (N.D. Cal. Mar. 15, 2019).  Plaintiffs claimed defendants made false statements during an earnings call following the announcement of the Company’s results for the third quarter of the 2017 fiscal year (“Q3 2017”), and engaged in suspicious stock transactions.  The Court dismissed the action on the ground that plaintiffs did not adequately plead falsity or scienter.
  • District Of New Jersey Dismisses Putative Securities Class Action Against Technology Company Based On Its Statements About Its International Distributor Agreement
     
    03/05/2019

    On February 22, 2019, Judge Kevin McNulty of the United States District Court for the District of New Jersey granted defendants’ motion to dismiss a putative class action against an Israeli-based technology company (“Company”) and its senior officers, asserting violations of Sections 10(b) and 20(a) of the Exchange Act of 1934, and Rule 10b-5. Padgett v. RIT Techs. Ltd., No. 2:16-cv-4579, 2019 WL 913154 (D.N.J. Feb. 22, 2019). Plaintiffs alleged defendants failed to disclose the extent of the Company’s reliance on an agreement with a non-exclusive distributor to provide its products and services in the Commonwealth of Independent States region (“CIS”). The Court dismissed the amended complaint without prejudice, holding that plaintiffs failed to adequately allege how defendants’ public statements and failure to use specific adjectives to characterize the distributor were misleading to investors.
  • Supreme Court Seeks Solicitor General’s Input On Granting Certiorari For Case Raising The Question Of Whether A Non-U.S. Corporate Issuer With No Involvement In Establishing Or Selling ADRs Can Be Subject To Section 10(b) As Long As Plaintiff’s Alleged Securities Transaction Was “Domestic”
     
    01/15/2019


    On January 14, 2019, the United States Supreme Court invited the Solicitor General to file a brief expressing the views of the United States in connection with a pending petition for writ of certiorari regarding whether, in determining if Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) may apply to a securities transaction—including one involving American Depositary Receipts (“ADRs”) which are not sponsored by the foreign issuer and are traded on over-the-counter markets—it is sufficient to show that the transaction itself was domestic.  Toshiba Corp. v. Auto. Indus. Pension Trust Fund, et al., No. 16-56058 (Jan. 14, 2019).  Under the Ninth Circuit decision for which review is being sought, a foreign issuer that has no involvement in establishing or selling the ADRs can be subject to Section 10(b) as long as the plaintiff purchased or sold the ADRs in a domestic transaction.  As noted by the defendant and various amici in support of the petition for certiorari, the Ninth Circuit’s holding significantly extends the extraterritorial application of Section 10(b) to non-U.S. companies which have not elected to avail themselves of the U.S. capital markets.
     

    CATEGORIES: Exchange ActJurisdiction
  • Eastern District Of Pennsylvania Denies In Part And Grants In Part Motion To Dismiss Stock Drop Suit, Finding Plaintiffs Adequately Pled Global Pharmaceutical Company Misrepresented The Safety Of Its Opioid
     
    12/18/2018

    On December 10, 2018, Judge Timothy J. Savage of the United States District Court for the Eastern District of Pennsylvania denied in large part defendants’ motion to dismiss a putative class action asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Sections 11 and 20 of the Securities Act of 1933 (the “Securities Act”).  SEB Inv. Mgmt. AB v. Endo Int’l, PLC, No. 17-cv-03711 (E.D. Pa. Dec. 10, 2018).  The Court held that plaintiffs adequately pled that the corporate defendant, a global pharmaceutical company (the “Company”), and five of the ten officers against whom plaintiffs asserted Exchange Act claims (collectively, the “Exchange Act Defendants”), misrepresented and omitted material facts regarding the abuse-deterrent properties of the opioid pills manufactured by the Company, such that plaintiffs could maintain an action under Section 10(b).  Furthermore, the Court concluded that plaintiffs also adequately alleged Securities Act claims against the Company and nine of its officers (the “Securities Act Defendants”) on largely similar grounds.
  • 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 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 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.
  • 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.
  • 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