Third Circuit Affirms Dismissal Of Securities Fraud Class Action For Failure To Plead Scienter In Fourth Amended Complaint
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.