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  • Eastern District Of New York Dismisses Putative Class Action Against Cannabis Operator For Failure To Plead Misrepresentation And Loss Causation
     
    02/23/2021

    On February 16, 2021, Judge Brian M. Cogan of the United States District Court for the Eastern District of New York dismissed a putative securities class action against a medical and wellness cannabis operator and certain of its officers alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. In re Curaleaf Holdings Inc. Securities Litigation, No. 19-cv-04486 (E.D.N.Y. 2021). Plaintiffs alleged the Company made false and misleading statements regarding the benefits and legality of its cannabinol (“CBD”) products. The Court dismissed the complaint, holding that the Company disclosed what plaintiffs claimed was not disclosed and that plaintiffs thus failed to plead falsity or, with respect to certain alleged misstatements, loss causation.
     
  • Southern District Of New York Grants Motion To Dismiss Securities Fraud Claims Against Restaurant Company, Finding Plaintiff Failed To Plead Material Misstatements
     
    02/11/2021

    On February 3, 2021, Judge Kimba M. Wood of the Southern District of New York granted a motion to dismiss claims under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder, as well as Section 20(a) of the Exchange Act against an international chain restaurant (the “Company”) and two of its senior former executives.  Okla. Law Enf’t Ret. Sys. v. Papa John’s International Inc. et al., No. 18-CV-7927 (KMW) (S.D.N.Y. Feb. 3, 2021).  In the First Amended Complaint (“FAC”), plaintiffs alleged the Company made materially false and misleading statements concerning the Company’s culture and failed to disclose material information concerning the Company’s workplace.  The Court granted the Company’s motion to dismiss the FAC with leave to amend, holding certain alleged misstatements were not actionable as mere puffery and that statements about the Company’s culture were too speculative to be actionable.  See Oklahoma Law Enf’t Ret. Sys. v. Papa John’s Int’l, Inc., 444 F. Supp. 3d 550 (S.D.N.Y. 2020) (“Papa John’s I”).  In addressing the sufficiency of plaintiffs’ Second Amended Complaint (“SAC”), the Court found that it “failed to plausibly allege that [defendants’] positive assurances about the Company’s toxic culture exceeded the protected bounds of generic puffery.”  The Court also found that allegations that the Company would face harmful consequences from the allegedly toxic workplace was not “so concrete and substantial that there arose an affirmative duty to disclose it.”  Accordingly, the Court granted defendants’ motions to dismiss with prejudice.
  • Southern District Of New York Grants Motion To Dismiss Securities Fraud Claims Against Global Logistics And Shipping Company, Finding Plaintiffs Failed To Adequately Plead Material Misstatements And Scienter
     
    02/11/2021

    On February 4, 2021, Judge Ronnie Abrams of the Southern District of New York granted a motion to dismiss putative class action claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5, against a global logistics and shipping company (the “Company”) and certain of its executives.  In re FedEx Securities Litigation, No. 19-cv-05990 (S.D.N.Y. Feb. 4, 2021).  Plaintiffs alleged defendants made materially false and misleading statements concerning the financial impacts to the Company resulting from a cyberattack affecting a recently acquired European shipping subsidiary (the “Subsidiary”).  The Court granted defendants’ motion to dismiss plaintiffs’ consolidated class action complaint (the “CAC”) with prejudice.
  • Second Circuit Affirms Dismissal Of Foreign Investor’s Claims Based On Private Offering For Failure To Plead Domestic Application Of Section 10(b)
     
    02/03/2021

    On January 25, 2021, the United States Court of Appeals for the Second Circuit affirmed the dismissal of claims under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) against a Bermudan capital investment company (the “Company”) and its Chief Executive Officer and Chairman.  Cavello Bay Reinsurance Ltd. v. Shubin Stein et al., No. 20-1371 (2d Cir. Jan. 25, 2021). 
     
    CATEGORIES: Exchange ActJurisdiction
  • Ninth Circuit Affirms Dismissal Of A Putative Securities Class Action Against An Electric Carmaker Related To Production Delays
     
    02/03/2021

    On January 26, 2021, the United States Court of Appeals for the Ninth Circuit affirmed the dismissal of a putative securities class action against an electric car manufacturer (the “Company”) and certain of its officers for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.
     
  • Eastern District Of New York Grants Motion To Dismiss Exchange Act Claims Against Life Insurance Company In Connection With Its Retirement And Income Solution Program
     
    01/20/2021

    On January 7, 2021, Judge Sterling Johnson, Jr. of the Eastern District of New York granted a motion to dismiss, with prejudice, in 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 SEC Regulation S-K, Item 303, against a life insurance company (the “Company”) and certain of its executives.  Parchmann v. Metlife, et al., No. 18-cv-00780-SJ-RLM (E.D.N.Y. Jan. 7, 2021).  Plaintiff alleged that defendants made materially misleading statements regarding the Company’s financial condition and internal controls with respect to one of the Company’s Retirement and Income Solution (“RIS”) programs.  The Court granted defendants’ motion to dismiss with prejudice, holding, among other things, that plaintiffs failed to adequately plead falsity, loss causation, and scienter.
     
  • Northern District Of California Dismisses A Putative Securities Class Action Against A Biopharmaceutical Company Related To Its Flagship Cancer Drug In Development
     
    01/13/2021

    On December 30, 2020, Judge Haywood S. Gilliam of the United States District Court for the Northern District of California granted a motion to dismiss a putative class action against a biopharmaceutical company (the “Company”) and certain of its officers for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  Malquin v. Nektar Therapeutics, No. 18-cv-06607 (N.D. Cal. Dec. 30, 2020).  Plaintiffs alleged that the Company made false and misleading statements and omissions about the efficacy of its flagship cancer drug in development.  The Court dismissed the amended complaint with prejudice, confirming that securities claims cannot be based on allegations that a company failed to use the best or preferred statistical methods for evaluating the effectiveness of a new drug and that short seller reports will not constitute corrective disclosures sufficient to allege loss causation unless the reports can be characterized plausibly as revealing new information to the market.
     
  • Northern District Of California Grants Motion To Dismiss Securities Fraud Claims Against Social Media Company, Finding Plaintiffs Failed To Plead Material Misstatements And Scienter
     
    12/15/2020

    On December 10, 2020, Judge Yvonne Gonzalez Rogers of the Northern District of California granted a motion to dismiss a claim under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder, as well as Section 20(a) of the Exchange Act, against a social media platform (the “Company”) and certain of its executives.  In re Twitter Securities Litigation, No. 19-cv-07149 (N.D. Cal. Dec. 10, 2020).  Plaintiffs alleged that defendants made materially false and misleading statements concerning the Company’s advertising products and revenue predictions that caused the Company’s stock price to drop more than 20% when the Company made purportedly corrective disclosures.  The Court granted defendants’ motion to dismiss plaintiffs’ consolidated class action complaint (the “CCAC”), but granted plaintiffs leave to replead.
     
  • District of New Jersey Dismisses A Putative Securities Class Action Against Food and Snack Company For Failure To Allege Scienter
     
    12/08/2020

    On November 30, 2020, Judge Noel L. Hillman of the United States District Court for the District of New Jersey dismissed without prejudice a putative securities class action against a food and snack company (the “Company”) and certain of its top executives for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  In Re Campbell Soup Co. Securities Litigation, No. 1:18-cv-14385 (D.N.J. Nov. 30, 2020).  Plaintiffs alleged that the Company made material misrepresentations and omissions concerning the profitability of its fresh foods division (the “Fresh Foods Division”).  The Court dismissed the complaint with leave to amend because plaintiffs failed to allege scienter.
     
    CATEGORIES: Exchange ActScienter
  • Southern District Of New York Dismisses A Putative Securities Class Action Against A Weight Loss Company Related To Its Strategic Rebranding Initiative
     
    12/08/2020

    On November 30, 2020, Judge William H. Pauley III of the United States District Court for the Southern District of New York granted a motion to dismiss a putative securities class action asserting violations of 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 against a weight loss company (the “Company”), certain of its officers and directors, and its largest shareholder.  In re Weight Watchers Int’l Inc. Sec. Litig., No. 19-cv-2005 (S.D.N.Y. Nov. 30, 2020).  Plaintiffs alleged that the Company made false and misleading statements and omissions about its strategic rebranding initiative.  The Court dismissed these claims because plaintiffs failed to allege falsity, observing that plaintiffs’ claims “have little bearing on disclosure . . . and are [instead] fundamentally about corporate mismanagement.”  Although the Court concluded that plaintiffs’ failure to allege an actionable misrepresentation was sufficient to dismiss the case, the Court addressed the parties’ remaining arguments, including two issues on which the Second Circuit has yet to weigh in, holding that:  (1) the exercise of stock options can be considered for the purpose of determining whether an individual’s stock sales are sufficient to allege scienter; and (2) a selling shareholder is not a “statutory seller” for purposes of Section 12(a)(2) simply because it signed the registration statement.  The Court also held that the selling shareholder was not a “maker” of the allegedly misleading statements and thus could not be held liable under Section 10(b).
     
  • Northern District Of California Grants Motion To Dismiss Securities Fraud Claims Against Battery Recycling Company, Finding Plaintiffs Failed To Plead Material Misstatements Or Scienter
     
    11/24/2020

    On November 16, 2020, Judge Haywood S. Gilliam, Jr. of the Northern District of California granted a motion to dismiss a Section 10(b) claim under the Securities Exchange Act of 1934 (the “Exchange Act”), as well as a Section 20(a) claim under the Exchange Act as it relates to the Section 10(b) claim, against a lead-acid battery recycler (the “Company”) and three of its senior officers.  In re Aqua Metals Inc. Securities Litigation, No. 17-cv-07142 (N.D. Cal. Nov. 16, 2020).  Plaintiffs alleged that defendants made materially false and misleading statements concerning the Company’s novel recycling technology and its commercialization process.  The Court granted defendants’ motion to dismiss, holding that plaintiffs failed to plead any actionable material misstatements or scienter.  Certain claims in the case addressed in connection with a prior motion to dismiss were not the subject of this decision and will survive.
     
  • Eastern District Of New York Dismisses A Putative Securities Class Action Against A South African Mining Company In Connection With Safety Incidents At Its Mines
     
    11/17/2020

    On November 10, 2020, Judge Kiyo Matsumoto of the United States District Court for the Eastern District of New York granted a motion to dismiss a putative securities class action asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against a South African precious metals mining company (the “Company”) and its CEO and CFO.  In re Sibanye Gold Ltd. Sec. Litig., No. 18-CV-3721 (E.D.N.Y. Nov. 10, 2020).  Plaintiffs alleged that the Company made false and misleading statements and omissions about its mine safety program and the reasons for miner fatalities.  The Court dismissed these claims for failure to allege plausible facts supporting plaintiffs’ conclusionary allegations.
     
  • Northern District of California Dismisses Putative Securities Class Action Against Customer Service Software Provider For Failure To Allege Falsity and Scienter
     
    11/17/2020

    On November 10, 2020, Judge Charles R. Breyer of the United States District Court for the Northern District of California dismissed without prejudice a putative class action against a software company (the “Company”) and several of its officers, for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  Reidinger v. Zendesk Inc. et al., No. 3:19-cv-06968 (N.D. Cal. Nov. 10, 2020).  Plaintiff alleged that defendants made false and misleading statements and omissions regarding the Company’s performance and sales capabilities in Europe, the Middle East, and Africa (“EMEA”) and the Asian Pacific (“APAC”) and the strength of its data security.  The Court dismissed the complaint with leave to amend because plaintiff failed to allege falsity or scienter, highlighting the formidable challenges plaintiffs face in pleading event-driven claims based on worse than expected earnings results.
     
  • Eastern District Of Virginia Denies Motions To Dismiss Exchange Act Claims Against Building Products Company In Connection With Its Pricing Strategy And Purported Anti-Competitive Conduct
     
    11/03/2020

    On October 26, 2020, Judge John A. Gibney, Jr. of the Eastern District of Virginia denied motions 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”) against a building products company (the “Company”), certain of its executives, and an institutional majority shareholder of the Company.  Cambridge Retirement System v. Jeld-Wen Holding, Inc., et al., No. 3:20-cv-112 (E.D. Va. Oct. 26, 2020).  Plaintiffs alleged defendants made material misstatements and omissions concerning the Company’s pricing strategy, alleged anti-competitive conduct, and the impact of a finding of liability in a separate antitrust private suit.  The Court denied defendants’ motions to dismiss the amended complaint, holding that plaintiffs adequately pled material misrepresentations or omissions, falsity, scienter and loss causation.
     
  • Northern District Of Illinois Dismisses A Putative Securities Class Action Alleging Failure To Disclose Fraudulent Channel Stuffing In Connection With A Merger Of Two Large Packaged Foods Companies
     
    10/27/2020

    On October 15, 2020, Judge Martha M. Pacold of the United States District Court for the Northern District of Illinois granted a motion to dismiss a putative securities class action asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 against a large packaged foods company (the “Company”), as well as certain of its officers and directors, and its underwriters.  W. Palm Beach Firefighters’ Pension Fund v. Conagra Brands, Inc., No. 19-cv-101323, 2020 WL 6118605 (N.D. Ill. Oct. 15, 2020).  Plaintiffs alleged that, in connection with a secondary public offering (“SPO”) to finance the acquisition of another packaged foods company (the “Acquired Company”), the Company failed to disclose that the Acquired Company had engaged in channel stuffing—a form of accounting fraud—to disguise the fact its key brands were struggling.  The Court dismissed these claims in their entirety because, among other reasons, plaintiffs failed to allege adequately that the Acquired Company engaged in fraudulent channel stuffing.
     
  • District Of Massachusetts Grants Motion To Dismiss Securities Fraud Claims Against Cloud-Based Remote Software Services Company In Connection With Its Acquisition Of A Competitor, Finding Plaintiffs Failed To Plead Material Misstatements Or Scienter
     
    10/13/2020

    On October 7, 2020, Judge Allison Burroughs of the District of Massachusetts granted in full 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”) against a cloud-based remote software services company (the “Company”) and certain of its executives.  Wasson v. LogMeIn Inc., No. 18-cv-12330 (D. Mass. Oct. 7, 2020).  Plaintiffs alleged defendants made materially false and misleading statements concerning the Company’s integration of a newly acquired competitor.  The Court granted defendants’ motion to dismiss plaintiffs’ amended complaint, holding that plaintiffs failed to plead any actionable material misstatements or scienter, but granted plaintiffs leave to amend.
     
  • Ninth Circuit Reverses Dismissal Of Exchange Act Claims Against Bank And Its Executives, Holding Plaintiffs Adequately Alleged Loss Causation For Certain Claims
     
    10/13/2020

    On October 8, 2020, the Court of Appeals for the Ninth Circuit reversed the dismissal of 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 federally chartered savings bank and its holding company (collectively the “Bank”) and several of its executives, for alleged misstatements regarding the Bank’s underwriting standards, internal controls, and compliance program.  In re BofI Holding, Inc. Securities Litigation, No. 18-55415 (9th Cir. Oct. 8, 2020).  The district court granted defendants’ motion to dismiss the third amended complaint, holding that although plaintiffs adequately pled material misstatements and scienter, plaintiffs failed to sufficiently plead loss causation.  The Ninth Circuit (with Judge Paul J. Watford writing for the majority) vacated the dismissal, holding that plaintiffs sufficiently pled loss causation based on a whistleblower lawsuit filed by a former employee.  Judge Kenneth K. Lee concurred in part and dissented in part.
     
  • District of Utah Dismisses A Putative Class Action Alleging Market Manipulation In Connection With The Issuance Of A Digital Dividend As “Speculation And Fraud-By-Hindsight”
     
    10/08/2020

    On September 28, 2020, Judge Dale A. Kimball of the United States District Court for the District of Utah granted a motion to dismiss a putative securities fraud class action asserting violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 against an online home goods retailer (the “Company”) and certain of its current and former officers.  Mangrove Partners Master Fund, Ltd. v. Overstock.com, No. 2:19-CV-709-DAK-DAO (D. Utah Sept. 28, 2020).  Plaintiff, a short seller, alleged that the Company (i) manipulated the market by issuing a digital dividend through the Company’s newly developed alternative trading platform and triggering a “short squeeze,” and (ii) misrepresented the purpose of the digital dividend by not disclosing it would result in a short squeeze and the Company’s financial condition by adjusting its earnings guidance upwards.  The Court dismissed the claims because they were based on “speculation and fraud-by-hindsight.”
     
  • The Second Circuit Affirms The Dismissal Of A Putative Securities Fraud Class Action Against A Tax Services Provider In Connection With The Termination of Its CEO For Sexual Misconduct
     
    10/08/2020

    On September 30, 2020, the United States Court of Appeals for the Second Circuit affirmed the dismissal of a putative securities fraud class action asserting violations of Sections 10(b), 14(a), and 20(a) of the Securities Exchange Act of 1934 and Rules 10b-5, 14a-3, and 14a-9 against a company that provides tax preparation services (the “Company”) as well as certain of its officers.  In re Liberty Tax, Inc. Sec. Litig., No. 20-652, 2020 WL 5807566 (2d Cir. Sept. 30, 2020).  Plaintiffs alleged that the Company made false or misleading statements and omissions concerning its compliance efforts and the termination of its CEO and Chairman, in light of an ongoing internal investigation into allegations that he had engaged in sexual misconduct.  The district court dismissed the suit for failure to adequately allege material misrepresentations and loss causation.  The Second Circuit, in a summary order, affirmed the district’s courts dismissal of the claims for failure to adequately allege any material misrepresentations.
     
  • Northern District Of California Allows Certain Securities Fraud Claims To Proceed Against Cloud Services Company, Holding Plaintiffs Adequately Alleged Falsity And Scienter
     
    09/22/2020

    On September 11, 2020, Judge William H. Orrick of the Northern District of California denied 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 software company (the “Company”) and two of its executive officers.  Scheller v. Nutanix Inc., No. 19-cv-01651 (N.D. Cal. Sept. 11, 2020).  This case was previously dismissed with leave to amend by Judge Orrick in March, and was covered in our newsletter.  Plaintiffs filed a Second Amended Complaint (“SAC”) in an attempt to cure the prior pleading defects.  The Court noted that the SAC “suffers from many of the same deficiencies as [the] prior complaint” and held that certain categories of allegations were insufficient, but the Court allowed certain claims to proceed.
     
  • Eastern District Of New York Grants Motion To Dismiss Securities Fraud Claims Against Steel Manufacturer Related To Purported Argentinian Bribery Scheme Uncovered In “Notebooks Case” Investigation
     
    09/22/2020

    On September 14, 2020, Judge Pamela K. Chen of the Eastern District of New York granted in full 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”) against a steel products manufacturer (the “Company”) and certain of its executives and former employees.  Ulbricht v. Ternium S.A. et al., No. 18-cv-06801-PKC (E.D.N.Y. Sept. 14, 2020).  Plaintiffs, investors of the Company’s American Depository Shares (“ADSs”), alleged that defendants made materially false and misleading statements and omissions in connection with the purchase of the Company’s subsidiary by the Venezuelan government by failing to disclose the alleged bribery scheme that helped facilitate the transaction.  The Court granted defendants’ motion to dismiss plaintiffs’ consolidated amended complaint, and—although “skeptical” of plaintiffs’ likelihood of success—the Court granted plaintiffs leave to amend.
     
  • Northern District Of California Dismisses With Prejudice Most Exchange Act Claims Against Medical Device Company, Holding Plaintiff Failed To Plead Falsity For Material Misrepresentations And Contemporaneity Requirement For Insider Trading Liability
     
    09/15/2020

    On September 9, 2020, Judge Lucy H. Koh 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 against a medical device company (the “Company”) and certain of its executive officers under Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5.  SEC Investment Mgmt. AB, et al. v. Align Technology, Inc., et al., No. 18-cv-06720-LHK (N.D. Cal. Sept. 9, 2020).  Plaintiff alleged that the Company made false or misleading statements regarding its strategies to curb competition in the market.  Plaintiff also asserted an insider trading claim against the Company’s CEO.  The Court largely granted defendants’ motion to dismiss, holding that plaintiff failed to adequately plead falsity for all but one alleged misrepresentation and, for the insider trading claim, that the trading activities of plaintiff and the CEO were not “contemporaneous.”
     
  • First Circuit Affirms The Dismissal Of A Putative Securities Fraud Class Action Against Medical Robotics Company In Connection With The FDA’s Issuance Of A Warning Letter
     
    09/01/2020

    On August 25, 2020, the United States Court of Appeals for the First Circuit affirmed the dismissal of a putative securities fraud class action asserting violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”) as well as Section 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 against a medical robotics company (the “Company”) as well as certain of its officers.  Yan v. ReWalk Robotics Ltd., et al., No. 19-1614, 2020 WL 5014858 (1st Cir. Aug. 25, 2020).  Plaintiffs alleged that the Company made false or misleading statements and omissions in its IPO registration statement (the “Registration Statement”) and subsequent quarterly and annual disclosures concerning its dealings with the Food and Drug Administration (the “FDA”) regarding one of the Company’s devices.  The First Circuit affirmed the district court’s dismissal of the Securities Act claims, finding that plaintiffs failed to allege a material misstatement or omission.  Although it disagreed with the district court’s reasoning in dismissing the Exchange Act claims for lack of standing, the First Circuit nevertheless found that the Exchange Act claims were properly dismissed because plaintiffs failed to sufficiently allege a material misstatement or scienter.
     
  • Delaware District Court Grants Class Certification With Modifications In Suit Against Student Loan Processor
     
    09/01/2020

    On August 25, 2020, U.S. District Judge Maryellen Noreika certified two classes of investors bringing claims against a student loan servicing company (the “Company”), certain of its executives, and the underwriters of two of the Company’s debt offerings.  Lord Abbett Affiliated Fund Inc., et al. v. Navient Corp., et al., No. 1:16-cv-00112 (D. Del. Aug. 25, 2020).  Plaintiffs asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“the Exchange Act”) and Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (“the Securities Act”) alleging that defendants inflated the price of the Company’s securities by concealing problems in its loan servicing practices and other risks.  The Court granted plaintiffs’ motion for class certification in part, certifying one class of investors with alleged claims under the Securities Act and a second narrowed class with alleged claims under the Exchange Act.
     
  • Southern District Of New York Dismisses Securities Fraud Action Against Chinese Internet Company Based On Confidential Witness Statements
     
    08/25/2020

    On August 14, 2020, United States District Judge Paul A. Engelmayer dismissed with prejudice a putative securities class action against a Chinese internet company (the “Company”) and its co-founders and a director under Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 and Rule 10b-5.  Altimeo Asset Mgmt. v. Qihoo 360 Tech. Co., et al., 19 Civ. 10067 (PAE) (S.D.N.Y. Aug. 14, 2020).  Plaintiffs, relying on statements from a confidential witness (the “CW”) and several media reports, alleged that defendants deliberately withheld the Company’s plans to relist on a Chinese stock exchange after they took the Company private in a merger transaction.  The Court granted defendants’ motion to dismiss because the CW statements and newspaper articles failed to provide the type of particularized facts needed to state a claim under the securities laws.
     
  • Southern District Of New York Grants In Part And Denies In Part Motion To Dismiss A Putative Securities Fraud Class Action Against An Insurance Company In Connection With Delisting Of Preferred Stock
     
    08/25/2020

    On August 14, 2020, United States District Judge Katherine Polk Failla 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 (the “Exchange Act”) and Rule 10b-5 against an insurance company (the “Company”) as well as certain of its officers, who were members of the family that founded the Company and were long-time controlling stockholders.  Martinek v. Amtrust Fin. Serv., Inc., No. 19 Civ. 8030 (KPF), 2020 WL 4735189 (S.D.N.Y. August 14, 2020).  Plaintiff alleged that the Company made false or misleading statements and omissions about whether the Company’s preferred stock would continue to trade on the New York Stock Exchange (“NYSE”) following a proposed buyout of the common stock by the controlling stockholders.  The Court largely denied defendants’ motion to dismiss, holding that plaintiff had adequately alleged scienter and the falsity of two categories of alleged misstatements. 
     
  • Second Circuit Reverses Dismissal Of Exchange Act Claims Against REIT, Holding Plaintiffs Adequately Alleged Scienter
     
    08/11/2020

    On August 3, 2020, the Second Circuit reversed the dismissal of Exchange Act claims against a real estate investment trust (the “Company”) and several of its senior officers for alleged misstatements regarding the financial health of one of the Company’s healthcare facility operators (the “Operator”).  In re Omega Healthcare Investors, Inc. Securities Litigation, No. 19-1095 (2d Cir. Aug. 3, 2020).  The district court had granted defendants’ motion to dismiss the amended complaint, finding that although plaintiffs adequately pled material misstatements, they failed to sufficiently plead scienter.  The Second Circuit vacated the dismissal, holding that plaintiffs sufficiently pled scienter based on defendants’ alleged consciously reckless omission of certain material information that made certain statements in public filings and conference calls regarding the financial health of the Operator misleading.
     
  • Second Circuit Summarily Affirms District Court’s Dismissal Of Certain Securities Fraud Claims Against Mining Company, But Vacates District Court’s Decision To Reject Motion For Reconsideration Of Plaintiff’s “Abandoned” Claim
     
    08/11/2020

    On August 6, 2020, the United States Court of Appeals for the Second Circuit affirmed in a summary order the judgment of the district court that granted defendants’ motion to dismiss certain claims in a putative securities class action, while vacating the district court’s decision on plaintiff’s motion for reconsideration.  Colbert v. Rio Tinto PLC, et al., No. 19-2711 (2d Cir. Aug. 6, 2020).  Plaintiff alleged that defendants—a mining company (“the Company”) and certain of its officers—violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated thereunder, by making materially false or misleading statements with respect to certain business investments.  The Second Circuit affirmed the dismissal in a summary order, but reversed the denial of the motion for reconsideration, holding that the district court incorrectly refused to reconsider the determination that plaintiff had abandoned his claim by not explicitly opposing dismissal of the claim.  Summary orders do not have binding precedential effect.
     
  • 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.
     
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