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  • Ninth Circuit Holds That Complaint Sufficiently Alleged Company Was “Statutory Seller” Under Section 12(a)(2) Based On Social Media Videos Even Though Plaintiff Was Not Specifically Solicited

    On December 21, 2022, the United States Court of Appeals for the Ninth Circuit affirmed in part and denied in part the dismissal of a purported class action suit against a real estate property management company (the “Company”) alleging the Company made material misstatements or omissions in social media posts, in violation Sections 12(a)(2) and 15 of the Securities Act of 1933 (the “Securities Act”).  Pino v. Cardone Capital, LLC, No. 21-55564, 2022 WL 17826876 (9th Cir. Dec. 21, 2022).  Plaintiff alleged that the Company misrepresented the returns investors could make by investing in the Company’s investment funds in videos posted on social media sites.  The district court found that the Company was not a “statutory seller” under Section 12 and dismissed the suit in its entirety.  In a unanimous opinion, the Ninth Circuit disagreed, finding that the Company did qualify as a statutory seller.  In a memorandum disposition filed on the same day, the Ninth Circuit held that some of the alleged misstatements were not actionable under the Securities Act and affirmed dismissal of claims based on those statements.
  • Southern District Of Ohio Declines To Dismiss Putative Class Action Against Energy Company Regarding Alleged Bribery Scheme

    On March 7, 2022, Judge Algenon L. Marbley of the Southern District of Ohio largely denied a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 (“Exchange Act”) and the Securities Act of 1933 (“Securities Act”) against an energy company, certain of its executives and directors, and certain underwriters of its bond offerings.  In re FirstEnergy Corp. Sec. Litig., No. 2:20-cv-3785 (S.D. Ohio Mar. 7, 2022).  Plaintiffs alleged that the company engaged in an anti-competitive scheme that included bribing state officials in exchange for a government bailout of its nuclear power facilities.  The lawsuit relates to the Ohio House Bill 6 scandal, in connection with which Ohio’s former Speaker of the House and others have been arrested on racketeering charges, political strategists and lobbyists have pleaded guilty to a racketeering conspiracy; the company fired certain executives for violating company policies and its code of conduct, and the company entered into a deferred prosecution agreement under which it paid a $230 million penalty and acknowledged having “conspired with public officials and other individuals and entities to pay millions of dollars to and for the benefit of public officials in exchange for specific official action” for the company’s benefit.  The Court held that plaintiffs had sufficiently alleged the various elements of their claims and declined to dismiss any defendant from the case, although the Court dismissed certain claims with respect to certain individual defendants.