Georgia District Court Grants Motion To Dismiss Class Action Against Investment Bank For Aiding And Abetting Fraud, Finding That Alleged Investments At Issue Were A “Covered Security” Under SLUSA
On August 17, 2022, Judge Steven D. Grimberg of the United States District Court for the Northern District of Georgia granted a motion to dismiss a putative class action alleging an investment bank (the “Company”), certain of its advisors (the “Advisor Defendants”), and certain of its external accountants (the “Accounting Defendants”) aided and abetted one of the Company’s former advisors (the “Individual Defendant”) in facilitating an alleged decade-long Ponzi scheme. 6694 Dawson Blvd, LLC v. Oppenheimer & Co., Inc., et al., 1:21-cv-03625. (N.D. Geo. Aug. 17, 2022). Plaintiffs alleged that defendants misrepresented or concealed material facts that, had plaintiffs known, would have caused them not to purchase allegedly “bogus” securities from the Individual Defendant.
New York Appellate Court Affirms Dismissal Of Securities Act Claim Against Canadian Cannabis Producer Alleging Material Misstatements Regarding Product Quality
On February 16, 2021, the Appellate Division of the New York Supreme Court, First Judicial Department, unanimously affirmed the dismissal of a putative class action against a Canadian cannabis producer (the “Company”), certain of its officers and directors, and its underwriters for violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 and Item 303 and Item 105 of Regulations S-K.
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
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.
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”
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.”
Middle District Of Florida Dismisses Securities Fraud Action Against Foodservice Equipment Company For Failure To Plead Scienter
On February 6, 2020, Judge James S. Moody, Jr. of the United States District Court for the Middle District of Florida dismissed a putative class action asserting violations of Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated thereunder against a foodservice equipment company (the “Company”) and certain of its former officers. Metropolitan Transportation Authority Defined Benefit Pension Plan Master Trust v. Welbilt Inc., No. 8:18-cv-03007 (M.D. Fl. Feb. 6, 2020). Plaintiffs alleged that the Company made misleading statements about its disclosure controls in quarterly and annual reports from February 2017 to November 2018, and that its share price fell after it revealed that its financial statements should not be relied upon because of various accounting and reporting errors. The Court dismissed the complaint without prejudice, holding that plaintiffs failed to plead sufficient facts to give rise to a strong inference of scienter.
District Of New Jersey Upholds Securities Fraud Action Against Major Student Loan Servicer Based Upon Alleged Forbearance Scheme Harming Borrowers
On December 30, 2019, Judge Robert B. Kugler of the United States District Court for the District of New Jersey denied a motion to dismiss a putative class action raised under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 against a student loan servicer (the “Company”) and certain of its officers (collectively “Defendants”). In Re Navient Corp. Secs. Litig., No. CV 17-8373 (RBK/AMD), 2019 WL 7288881 (D.N.J. Dec. 30, 2019). Plaintiff claimed that Defendants made false or misleading statements about lawsuits brought against the Company by the Consumer Financial Protection Bureau (“CFPB”) and several State Attorneys Generals (“AGs”) for a “forbearance scheme” that allegedly harmed student borrowers in the repayment process. The Court denied Defendants’ motion to dismiss for failure to state a claim, finding that plaintiff adequately pleaded falsity, scienter, and loss causation.