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  • Eastern District Of New York Denies Motion To Dismiss Putative Class Action Against Subscription-Based Meal Kit Company But Rejects Claims Based On Alleged Omission Of Intra-Quarter Decline In Key Metric
     
    05/12/2020

    On April 22, 2020, Judge William F. Kuntz II, of the United States District Court for the Eastern District of New York granted in part and denied in part a motion to dismiss a putative securities fraud class action based on purportedly misleading statements in the prospectus and registration statement (the “Offering Materials”) filed by a subscription-based meal kit service (the “Company”) in connection with its initial public offering (“IPO”).  The complaint asserted claims under Sections 11 and 15 of the Securities Act of 1933 against the Company and certain of its officers.  In re Blue Apron Holdings, Inc. Sec. Litig., No. 17-CV-4846 (E.D.N.Y. Apr. 22, 2020).  Plaintiffs alleged that the Company, which provides meal kits to customers through a weekly subscription service, concealed known risks and made misleading statements concerning challenges the Company faced with one of its product fulfilment centers.  Although the Court denied defendants’ motion to dismiss claims that the Company had failed to disclose risks associated with the performance of this fulfillment center, it rejected plaintiffs’ claims based on the alleged non-disclosure of declines in a Company statistic for measuring the number of meal kits delivered on time with all of their ingredients, which were announced by the Company in the quarter immediately following the IPO.  Confirming that Section 11 claims generally cannot be based on disclosures in earnings announcements following an offering, even when the quarterly earnings announcements closely follow, the Court held that the complaint failed to allege sufficiently that the declines were known even though the quarter ended one day after the IPO.
     
  • Northern District Of California Dismisses Complaint Against A Ticketing Platform Provider For Failure To Plead Falsity
     
    05/12/2020

    On April 28, 2020, Judge Edward J. Davila of the United States District Court for the Northern District of California granted a motion to dismiss a putative securities fraud class action based on purportedly misleading statements in the prospectus and registration statement (the “Offering Materials”) filed by a ticketing platform provider (the “Company”) in connection with its initial public offering (“IPO”).  The complaint asserted claims under Sections 11 and 15 of the Securities Act of 1933 and Section 10(b) and 20(a) of the Securities Exchange Act of 1934 against the Company and certain of its officers, and violations of Section of 11 of the Securities Act against the underwriters for the IPO.  In re Eventbrite Inc. Sec. Litig., No. 5:18-CV-02019-EJD (N.D. Cal. Apr. 28, 2020).  In granting the motion to dismiss, the Court held that it could rely on documents incorporated into the complaint by reference to negate conclusory allegations in the complaint and for context, and further held that plaintiffs failed to adequately plead falsity and that the Company, in any event, sufficiently disclosed risks associated with the acquisition.  The Court also held that the heightened pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure applied to the Section 11 claims and that its risk disclosures were sufficient under Item 303.
     
  • Connecticut State Court Grants Motion To Strike Securities Act Claims
     
    11/05/2019

    On October 24, 2019, Judge Charles T. Lee of the Connecticut Superior Court granted a motion to strike claims alleging violations of Sections 11, 12(a) and 15 of the Securities Act of 1933 (the “Securities Act”) in connection with an initial public offering brought against the issuer, certain of its officers, and the underwriters of the offering.  City of Livonia Retiree Health & Disability Benefits Plan v. Pitney Bowes Inc., No. X08 FST CV 18 6038160 S (Conn. Super. Ct. Oct. 24, 2019).  The Court had previously granted a protective order staying discovery pending the disposition of the motion to strike pursuant to the discovery stay provided in the Private Securities Litigation Reform Act, in one of the first state court decisions after the Supreme Court’s decision in Cyan Inc. v. Beaver Cty. Employees Ret. Fund, 138 S. Ct. 1061 (2018).  See State Court Stays Discovery Under the PSLRA During Pendency of Motion to Strike, Need to Know Litigation Newsletter (May 29, 2019), https://www.lit-sl.shearman.com/State-Court-Stays-Discovery-Under-The-PSLRA-During-Pendency.  In granting the motion to strike, the Court held that plaintiffs had failed to plead violations of the Securities Act because they did not identify any actionable misstatements or omissions from the relevant offering documents.