On March 25, 2024, the United States Court of Appeals for the Ninth Circuit unanimously affirmed a trial court decision dismissing a putative securities class action brought by investors against a biopharmaceutical company (“Company”) and certain of its officers and executives, alleging violations Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5. In re Sorrento Therapeutics, Inc. Securities Litigation, No. 22-55641 (9th Cir. Mar. 25, 2024). Plaintiff alleged that defendants made false statements about developments regarding the Company’s new COVID-19 antibody treatment, which allegedly misled investors and the public to believe that the Company had discovered a “cure” for the virus in order to boost the Company’s stock prices to improve its allegedly “dire financial situation.” Judge Anthony J. Battaglia of the United States District Court for the Southern District of California dismissed plaintiff’s claims without prejudice, holding that plaintiff had not plausibly pleaded falsity or scienter. The trial court entered judgment after plaintiff failed to file an amended pleading. Plaintiff appealed and the Ninth Circuit affirmed, holding that (1) the allegedly misleading statements were inactionable puffery and (2) standing alone, the Company’s allegedly poor financial position was not sufficient to warrant an inference of scienter.

On February 4, 2022, Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California granted in part and denied in part a motion for class certification in a putative class action against a multinational consumer electronics, software, and online services company (the “Company”) and two of its executives alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”).  In re Apple Inc. Securities Litigation, No. 4:19-cv-2033-TGR (N.D. Cal. Feb. 4, 2022).  Plaintiff, who sought to represent purchasers of the Company’s publicly traded securities, alleged that in late 2018, the Company made misrepresentations about the state of its business in China, the Company’s most important growth market at the time, which caused the Company’s stock price to fall.  After granting in part and denying in part a motion to dismiss the amended complaint in a decision covered here, the Court granted class certification except as to the inclusion of option holders in the class, finding that the option holders’ damages could not be calculated on a classwide basis with the remaining stockholders.

On January 7, 2022, Judge Dean D. Pregerson of the U.S. District Court for the Central District of California denied plaintiffs’ motion for class certification in a putative class action against a Japanese manufacturer of electronic and energy products and services (the “Company”) alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”).  Stoyas v. Toshiba Corp., No. 2:15-CV-04194 DDP-JC (C.D. Cal. Jan. 7, 2022).  Plaintiffs, purchasers of the Company’s unsponsored American Depositary Receipts (“ADRs”), alleged the Company concealed its deliberate use of improper accounting over a period of at least six years to inflate its pre-tax profits by more than $2.6 billion and conceal at least $1.3 billion in impairment losses at its U.S. nuclear business.  In a previous decision in the matter covered here, the Ninth Circuit held that a purchaser of unsponsored ADRs may maintain a cause of action under the Exchange Act so long as the purchaser incurred “irrevocable liability” within the United States to take and pay for a security.  After declining to dismiss an amended complaint in a decision covered here, the Court denied plaintiffs’ motion for class certification, finding that plaintiffs failed to satisfy the typicality requirement for class certification under Rule 23(a) because, unlike the members of the proposed class, plaintiffs acquired the Company’s securities in Japan.

On December 8, 2021, Judge Paul A. Crotty of the United States District Court for Southern District of New York granted a motion for class certification in a securities fraud class action against a global financial institution (the “Company”) under the Securities Exchange Act of 1934.  In re Goldman Sachs Group, Inc. Sec. Litig., No. 10-3461 (PAC) (Dec. 8, 2021).  This is the third time the District Court has granted plaintiffs’ motion for class certification in this case, following several decisions by the Second Circuit and the Supreme Court.

On August 26, 2021, the United States Court of Appeals for the Second Circuit vacated and remanded a district court order certifying a class of stockholders asserting securities fraud against a global financial institution (the “Company”) under the Securities Exchange Act of 1934 because it was “unclear” as to whether the district court considered the generic nature of the Company’s alleged misrepresentations in its price impact inquiry in accordance with the legal standard recently clarified by the United States Supreme Court.  Arkansas Tchr. Ret. Sys. v. Goldman Sachs Grp., Inc., No. 18-3667, 2021 WL 3776297 (2d Cir. Aug. 26, 2021).  The Second Circuit held that on remand, the district court should consider all record evidence relevant to price impact regardless of whether that evidence overlaps with materiality or any other merits issue, as instructed by the Supreme Court.

On June 29, 2021, the United States Court of Appeals for the Eleventh Circuit vacated a decision by the Southern District of Florida denying a class certification motion. Jacob Rensel, et al. v. Centra Tech, Inc., No. 20-10894 (11th Cir. 2021).  Plaintiffs, investors in a cryptocurrency digital products company (the “Company”), alleged in their amended complaint violations of Sections 12(a)(1) and 15(a) of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against the Company, its co-founders, former executives, and celebrity promoters.  The district court denied plaintiffs’ motion for class certification as untimely, and alternatively for failure to establish an administratively feasible method for class identification.  The Eleventh Circuit held that, on both issues, the district court abused its discretion.

On April 23, 2021, the United States Court of Appeals for the Eighth Circuit reversed the certification of a class pursuing securities fraud claims against a brokerage firm for retail investors (“the Company”).  Ford v. TD Ameritrade Holding Corp., et al., No. 18-3689 (8^th Cir. April 23, 2021).  Plaintiff, on behalf of a putative class of investors who purchased and sold securities through the Company, brought securities fraud claims under the Securities Exchange Act of 1934, alleging the Company’s order routing practices violated its “duty of best execution” by systematically sending orders to trading venues that benefited the Company, rather than to venues that provided the best outcome for customers.  The Court held that the predominance and superiority requirements of Federal Rule of Civil Procedure 23(b)(3) were not satisfied because determining economic loss, in this case, would entail a trade-by-trade individualized inquiry.  Having found that the district court abused its discretion in certifying the class, the Court reversed the district court’s order and remanded for further proceedings.

Looking ahead, we preview cases currently pending before the Supreme Court—which have already been accepted for review by the Court, and in some cases have already been argued—that may be of particular interest to readers of the Need-to-Know Litigation Weekly.  These cases pertain to various topics in Securities Litigation, Antitrust, IP Litigation, and jurisdictional questions of broad interest.
 

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.
 

On July 16, 2020, the United States Court of Appeals for the Seventh Circuit unanimously vacated the Northern District of Illinois, Eastern Division’s decision to grant class certification to plaintiffs bringing securities fraud claims against a national insurance provider (the “Company”), holding that the district court decision to exclude certain evidence at the class certification stage was based in part on a legal error.  Carpenters Pension Trust Fund, et al. v. Allstate Corp., et al., No. 19-1830 (7th Cir. July 16, 2020).  The Court remanded to the district court for further proceedings, providing guidance as to what should be considered when applying Rule 23(b)(3)’s predominance requirement in the class certification process. 
 

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.
 

On June 22, 2020, the Second Circuit reinstated its judgment entered pursuant to its initial opinion in an Employment Retirement Income Security Act of 1974 (“ERISA”) class action after the Supreme Court vacated the decision.  Jander v. Ret. Plans Comm. of IBM, No. 17-3518 (2d Cir. June 22, 2020).  The Supreme Court remanded the action earlier this year in order for the Second Circuit to decide whether to consider in the first instance certain arguments raised for the first time before the Supreme Court.  On remand, the Second Circuit reviewed additional submissions from the parties as well as amici and reinstated its original decision, holding that the arguments raised in the supplemental briefs either were previously considered or were not properly raised and thus forfeited.  Accordingly, the Second Circuit’s prior opinion stands, holding that plaintiffs adequately pled that employee stock option plan (“ESOP”) fiduciaries violated their duty of prudence by not disclosing, earlier, insider information they allegedly possessed that, when subsequently disclosed, allegedly led to a stock price drop.
 

On June 1, 2020, the United States Supreme Court, in an opinion by Justice Kavanaugh and joined by Chief Justice Roberts and Justices Alito and Gorsuch, held that plaintiffs—participants of a defined-benefit pension plan—lacked Article III standing to seek restoration of alleged plan losses or injunctive relief, under the Employee Retirement Income Security Act of 1974 (“ERISA”), because they had no “concrete stake” in the lawsuit.  Thole v. U.S. Bank, N.A., et al., No. 17-1712 (June 1, 2020).  The case was on appeal from the Eighth Circuit, and was previously previewed in our weekly newsletter at the beginning of this year.  Plaintiffs alleged that the defined-benefit plan’s fiduciaries mismanaged the plan, causing about $750 million in losses.  The Court affirmed the Eight Circuit’s dismissal of the case, after holding that, insofar as whether plaintiffs won or lost the outcome “would not change the plaintiffs’ monthly pension benefits” under their defined-benefit plan, they had not suffered any concrete injury sufficient to satisfy Article III standing.
 

On January 23, 2020, the Court of Appeal of the First Appellate District of California affirmed a lower court’s judgment holding that investors lacked standing to pursue claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 against an open-end management investment company (the “Company”), its investment advisor, the investment advisor’s parent company, and certain members of the board of trustees of the Company.  Jensen v. iShares Tr., 44 Cal. App. 5th 618 (Ct. App. 2020), review denied (May 27, 2020).  Plaintiffs, who purchased shares of exchanged-traded funds (“ETFs”) on the secondary market, claimed that the Company failed to adequately disclose the risks associated with “flash crashes” that were known to occur in the ETF market.  The Court affirmed the lower court’s dismissal, holding that plaintiffs lacked standing under Section 11 because they could not satisfy the tracing requirement and that plaintiffs lacked standing under Section 12(a)(2) because they failed to allege direct contract with defendants.
 

On January 3, 2020, Judge Edmond E. Chang of the United States District Court for the Northern District of Illinois Eastern Division granted Plaintiffs’ motion to certify a class of investors in an action alleging that two major food companies (“Defendants”) manipulated the wheat futures market.  Plaintiffs asserted claims against Defendants under Sections 6(c)(1) and 9(a)(2) of the Commodity Exchange Act (“CEA”), under Section 2 of the Sherman Antitrust Act (“Sherman Act”), and for common law unjust enrichment.  Harry Ploss v. Kraft Foods Group Inc. et al., No. 1:15-cv-02937 (N.D. Ill. Jan. 3, 2020).     

On May 28, 2019, the Supreme Court held in a 5-4 decision authored by Justice Thomas that a third-party counterclaim defendant was not permitted to remove class action claims against it under the general removal statute, 28 U.S.C. § 1441 (“Section 1441”), or the Class Action Fairness Act, 28 U.S.C. § 1453 (“CAFA”).  Home Depot U. S. A., Inc. v. Jackson, No. 17-1471, 587 U.S. ___ (2019).  The Court held that the term “defendant” in the two removal provisions at issue applies only to “the party sued by the original plaintiff” and should not be expanded to include third-party counterclaim defendants.  As noted in our prior post when the case was argued before the Supreme Court, this decision is the first time the Supreme Court has discussed the scope of Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100 (1941), which addressed analogous language in Section 1441’s predecessor and held that a plaintiff who originally filed an action in state court would not be permitted to later remove it to federal court as a “defendant” once counterclaims were filed against it.

On April 24, 2019, the United States Supreme Court, in a 5-4 decision authored by Chief Justice Roberts, held that an agreement ambiguous as to whether arbitration had been agreed for class claims as well as individual claims could not provide a contractual basis for class arbitration.  Lamps Plus, Inc. v. Varela, 587 U.S. ___, 2019 WL 1780275 (2019).  The Court addressed two questions:  (i) whether the Court had jurisdiction, given that the district court had compelled arbitration in connection with its dismissal of the underlying claims; and (ii) whether state contract law principles could be applied to interpret an arbitration clause that was ambiguous with regard to the authorization of class arbitration as authorizing such arbitration.  The Court held that it had jurisdiction because dismissal of the underlying claims qualified as a “final decision” under the Federal Arbitration Act (“FAA”).  On the merits issue, the Court held that a contract that was ambiguous as to whether class arbitration was permitted lacked the explicit “consent” to such arbitration required under the FAA.

On January 15, 2019, the Supreme Court heard argument on an appeal from a unanimous decision of the U.S. Court of Appeals for the Fourth Circuit holding that a third-party defendant against whom class action counter-claims are asserted in state court is not a “defendant” for purposes of the general removal statute, 28 U.S.C. § 1441 (“Section 1441”) or the Class Action Fairness Act, 28 U.S.C. § 1453 (“CAFA”).  The third-party defendant to the class action counterclaims therefore could not rely on those statutes to remove the case.  Home Depot U.S.A., Inc., v. Jackson, No. 17-1471.