On April 5, 2023, the United States Court of Appeals for the Third Circuit affirmed a determination of the United States District Court for the District of Delaware that plaintiffs violated Rule 11 of the Federal Rules of Civil Procedure but vacated the portion of the lower court’s order that declined to impose sanctions. Scott v. Vantage Corp., —F.4th—, 2023 WL 2780350 (3d Cir. 2023). The Third Circuit held that, for a claim governed by the Private Securities Litigation Reform Act (“PSLRA”), some form of sanctions must be imposed for a Rule 11 violation.

On March 14, 2023, Judge Zahid N. Quraishi of the United States District Court for the District of New Jersey dismissed a putative class action suit against a pharmaceutical company (the “Company”) and its executives alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act. Lewakowski v. Aquestive Therapeutics, Inc. et al., No. 3:21-cv-03751, 2023 WL 2496504 (D.N.J. Mar. 14, 2023). Plaintiffs alleged that defendants misled investors regarding the efficacy of a new drug and the likelihood of approval by the Food and Drug Administration. The Court dismissed the action without prejudice, holding that the complaint “cherry-pick[ed] out-of-context quotes from the Company’s disclosures” and failed to allege falsity or scienter.

On February 21, 2023, the United States Supreme Court formally dismissed the appeal of a case in which a settlement had been announced after certiorari was granted to review a decision by a California state court allowing plaintiffs to take discovery in an action under the Securities Act of 1933 (the “Securities Act”). Pivotal Software, Inc. v. Tran, No. 20-1541.  As noted in our prior post, the issue presented by the petition was whether the discovery-stay provision of the Private Securities Litigation Reform Act ( “PSLRA”)—which provides that “[i]n any private action arising under” the Securities Act, “all discovery and other proceedings shall be stayed during the pendency of any motion to dismiss”—applies in Securities Act cases filed in state court.

On July 15, 2022, Judge Edward M. Chen of the United States District Court for the Northern District of California largely denied a motion to dismiss a securities fraud class action against a biopharmaceutical company (the “Company”) and certain of its officers alleging violations of Sections 10(b) of the Securities Exchange Act of 1934.  In re FibroGen, Inc. Securities Litigation, No. 21-cv-02623-EMC (N.D. Cal. July 15, 2022).  Plaintiffs alleged that the Company made 96 false and misleading statements concerning the “safety and efficacy data of its flagship drug.”  Although the Court held that a handful of the misstatements were not actionable for failure to adequately allege falsity, the Court otherwise denied the motion to dismiss.

On July 15, 2022, the United States District Court for the Central District of California granted a motion to dismiss a putative class action against a children’s cartoon company (the “Company”) and certain of its officers alleging violations of Section 10(b) of the Securities Exchange Act of 1934.  In Re Genius Brands Int’l, Inc. Sec. Litig., CV 20-7457 DSF (RAOx) (C.D. Cal. July 15, 2022).  In a second amended complaint, plaintiffs alleged that the Company made materially false and misleading statements and omissions about the Company’s engagement of a stock promotion company, an impending acquisition by Disney or Netflix, and its economic resilience in the face of COVID-19, among other topics.  The Court dismissed the claims with prejudice for failure to adequately plead falsity or materiality, and further held that the complaint of 289 paragraphs and 84 pages violated Rule 8 of the Federal Rules of Civil Procedure that requires a “short and plain statement” of the claims.

On December 14, 2021, Judge Beth Labson Freeman of the Northern District of California granted a motion to dismiss claims brought under Sections 11 and 15 of the Securities Act of 1933 (“the Securities Act”) against a technology company (“the Company”), its controlling shareholder, and several of the Company’s and the controlling shareholder’s officers and directors.  Costanzo v. DXC Tech. Co., N.D. Cal., No. 19-cv-05794 (Dec. 14, 2021).  Plaintiffs alleged defendants made false and misleading statements, in the Company’s prospectus and registration statement (the “Registration Statement”), regarding expected budget cuts in light of an alleged internal goal at the Company to cut more than double the disclosed amount.  The Court granted defendants’ motion to dismiss plaintiffs’ Third Amended Complaint (“TAC”) without leave to amend, holding that plaintiffs’ addition of allegations of purported statements by confidential witnesses were insufficient to overcome the deficiencies in their pleadings.

On November 2, 2021, Judge Sharon Johnson Coleman of the Northern District of Illinois Eastern Division granted in part defendants’ motion for summary judgment and denied plaintiff’s partial motion for summary judgment in a securities class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) against a retail drugstore chain (the “Company”) and two of its former senior executives.  Washtenaw County Employees' Retirement System v. Walgreen Co. et al., No. 15-cv-03187 (N.D. Ill. Nov. 2, 2021).  Plaintiff alleged defendants made materially false and misleading statements concerning the Company’s earnings before interest and taxes (“EBIT”) projections and its ability to meet it.  The Court granted in part defendants’ motion for summary judgment, holding that one of the alleged misstatements was a non-actionable forward-looking statement under the Private Securities Litigation Reform Act’s (“PSLRA”) safe harbor, that defendants proved the truth of certain alleged misstatements, but that triable issues of material fact remained with respect to a number of other alleged misstatements.  The Court denied plaintiff’s motion for partial summary judgment regarding one of the individual defendant’s intent to deceive, holding that there was a genuine issue of material fact as to the falsity of that defendant’s statements and is therefore a question for the jury.

On July 20, 2021, a panel of the United States Court of Appeals for the Ninth Circuit unanimously affirmed a decision of the United States District Court for the Western District of Washington dismissing with prejudice a putative class action lawsuit asserting claims under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) against a wholesale retailer (the “Company”) and certain of its executives, as well as Section 20(a) claims against those individual defendants.  Davoli, et al. v. Costco Wholesale Corp., et al., No. 20-35821 (9th Cir. July 20, 2021).  Plaintiff alleges that defendants made false statements regarding the strength of the Company’s internal controls over financial reporting.  The district court dismissed plaintiff’s Second Consolidated Amended Complaint (the “SAC”) for failure to adequately plead scienter and the Ninth Circuit affirmed.  The Panel’s unpublished opinion cannot be cited as precedent except as provided by Ninth Circuit rules.

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 July 2, 2021, the United States Supreme Court granted a petition for certiorari to review a decision by a California state court allowing plaintiffs to take discovery in a private action under the Securities Act of 1933 (the “Securities Act”). Pivotal Software, Inc. v. Tran, No. 20-1541 (U.S. July 2, 2021).  The issue presented by the petition is whether the Private Securities Litigation Reform Act’s (the “PSLRA”) discovery-stay provision—which provides that “[i]n any private action arising under” the Securities Act, “all discovery and other proceedings shall be stayed during the pendency of any motion to dismiss”—applies in Securities Act cases filed in state court.

On May 19, 2021, the United States District Court for the District of Maryland denied a motion to dismiss a putative securities class action involving claims brought under Sections 10(b), 20(a) and 20A of the Securities Exchange Act of 1934 (the “Exchange Act”) against a sports apparel company (the “Company”) and one of its executives.  In re Under Armour Securities Litigation, No. 17-cv-00388 (D. Md. May 19, 2021).  Plaintiffs alleged that defendants misrepresented the Company’s financial health and the demand for its products by engaging in “channel stuffing”—the practice of pulling forward sales from a future quarter, thereby shifting earnings into earlier quarters—relying in part on a settlement between the Company and the SEC and the $9 million civil penalty paid in connection with the settlement to resolve similar allegations.

On March 29, 2021, Judge David O. Carter of the United States District Court for the Central District of California denied a motion to dismiss a consolidated putative class action complaint against a medical device manufacturer and marketer (the “Company”) and certain of its officers, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  In re Merit Med. Sys., Inc. Sec. Litig., No. 8:19-02326 DOC (ADSx) (C.D. Cal. Mar. 29, 2021).  Plaintiffs alleged that the Company issued misleading statements regarding its acquisitions of two companies in late 2018 including with respect to the integration of those companies and their products sales.  The Court denied defendants’ motion to dismiss, adopting a report and recommendation by Magistrate Judge Autumn D. Spaeth, which found that most of the challenged statements were not forward-looking statements protected by the PSLRA’s safe harbor provisions and that plaintiffs had adequately pled all elements of their claims. 

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.

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.
 

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.
 

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.
 

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.
 

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.
 

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.
 

On July 27, 2020, United States District Judge Beth Labson Freeman of the United States District Court for the Northern District of California dismissed, with leave to amend, a putative class action asserting violations of Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”) against a large IT services provider (the “Company”), certain of its officers, and its largest shareholder.  Costanzo v. DXC Tech. Co., No. 19-cv-05794-BLF, 2020 WL 4284838 (N.D. Cal. July 27, 2020).  Plaintiffs alleged that the Company’s prospectus and registration statement (the “Registration Statement”), issued in connection with the merger that created the Company, mislead investors about the true scale of, and the risks associated with, the Company’s plan to reduce its workforce costs.  The Court granted defendants’ motion to dismiss because plaintiffs failed to allege that the statements in the Company’s Registration Statement were false and because the alleged misstatements were protected by the Private Securities Litigation Reform Act’s (“PSLRA”) safe harbor.
 

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.
 

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.
 

On July 11, 2019, Justice Andrew Borrok of the New York State Supreme Court, County of New York, Commercial Division, dismissed a putative securities class action against a Brazilian based online retailer (the “Company”), certain of its executives and directors, and its underwriters in connection with the Company’s initial public offering (“IPO”).  In re Netshoes Sec. Litig., Index No. 157435/2018 (Sup. Ct., N.Y. Cty., July 11, 2019).  Plaintiffs—purchasers of the Company’s stock—brought claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”), claiming that defendants made materially false and misleading statements in a registration statement filed with the SEC in connection with the IPO.  The Court dismissed the Securities Act claims without prejudice, finding that the allegations were inactionable opinions under the Supreme Court’s decision in Omnicare, Inc. v. Laborers Dist. Council Const. Indus., 135 S. Ct. 1318 (2015), or were inactionable because they were about past performance, were forward-looking, or were expressions of puffery.

On May 15, 2019, Judge Charles T. Lee of the Connecticut Superior Court at Stamford granted a protective order staying discovery pending a motion to strike in an action alleging violations of the Securities Act of 1933 (the “Securities Act”) against an issuer, certain officers and the underwriters (“Defendants”) in connection with an initial public offering.  City of Livonia Retiree Health & Disability Benefits Plan v. Pitney Bowes Inc., No. X08 FST CV 18 6038160 S (Conn. Super. Ct. May 15, 2019).  In Cyan Inc. v. Beaver Cty. Employees Ret. Fund, 138 S. Ct. 1061 (2018) (“Cyan”), the Supreme Court of the United States held that the substantive protections of the Private Securities Litigation Reform Act (“PSLRA”) necessarily apply “wherever” an action proceeds.  Relying on this, the Connecticut court determined that 15 U.S.C. § 77z-1(b)(1) of the Securities Act, which provides for a stay of discovery during the pendency of a motion to dismiss, applies to actions filed in state court.  Though there have been decisions going both ways on the issue of whether the PSLRA discovery stay applies in state court, this is the first opinion to analyze the issue thoroughly in the wake of Cyan and should serve as persuasive authority in other jurisdictions.

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.

On March 25, 2019, Judge Christina A. Snyder of the United States District Court for the Central District of California denied a motion to dismiss a class action filed against a Canadian silver company (the “Company”), current and former executives of the Company, and its auditor and tax consultant (the “Auditor”), alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  In Re Silver Wheaton Corp. Secs. Lit., No. 2:15-cv-05146; 2:15-cv-5173 (C.D. Cal. Mar. 25, 2019).  Plaintiffs allege defendants failed to disclose USD$207 million in Canadian tax liabilities and that the Auditor wrongfully issued clean audit opinions.  The Court held that plaintiffs sufficiently pleaded claims against all defendants.  Of particular note, while the Court acknowledged several hurdles that generally result in the dismissal of claims against auditors, it held that those hurdles had been surmounted by plaintiffs given the unique circumstances of the case.