Seventh Circuit Vacates Decision To Certify Class, Holding That District Court Must Consider Sufficiency Of Defendants’ Evidence To Rebut Fraud-On-The-Market Presumption Of Reliance, As Required Under Halliburton II
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.
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.