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  • Eastern District Of New York Court Grants In Part Motion To Dismiss Putative Securities Class Action Brought Against Space Exploration Company
     
    11/15/2022

    On November 7, 2022, Judge Allyne R. Ross of the United States District Court for the Eastern District of New York granted in part a motion to dismiss a putative securities class action against a space exploration company (the “Company”), its founder, and certain of its current and former executives. Kusnier and Scheele v. Virgin Galactic Holdings, Inc., et al, No. 21-cv-03070-ARR (E.D.N.Y. Nov. 7, 2022). Plaintiffs alleged that defendants violated Section 10(b) of the Securities Exchange Act (the “Exchange Act”), Rule 10b-5 promulgated thereunder, and Sections 20(a) and 20A of the Exchange Act, by making materially false and misleading statements regarding the safety history and functioning capabilities of the Company’s spacecraft. The Court granted the motion in part but found sufficient at the pleading stage certain alleged misstatements.
     
  • District Court Of Massachusetts Denies Communications Infrastructure Company’s Motion To Dismiss Finding Plaintiffs Adequately Pled Scienter
     
    11/01/2022

    On October 20, 2022, Judge George A. O’Toole, Jr. of the United States District Court for the District of Massachusetts (the “Court”) denied a motion to dismiss a putative securities class action against a business communications infrastructure company (the “Company”) and three of its executives.  Miller v. Sonus Networks, Inc., et al, No. 18-12344-GAO (D. Mass Oct. 20, 2022).  Plaintiff alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, by making materially false and misleading statements regarding the Company’s projected sales and revenue forecast.  The Court denied the motion, finding that plaintiff adequately pled scienter.
  • Northern District Of Texas Dismisses Putative Class Action Against Oil And Gas Company For Failure To Allege Scienter
     
    10/11/2022

    On September 29, 2022, Chief Judge David C. Godbey of the United States District Court for the Northern District of Texas dismissed a putative class action asserting claims under the Securities Exchange Act of 1934 against an oil company and certain of its officers.  Yoshikawa v. Exxon Mobil Corp., No. 3:21-CV-00194-N, 2022 WL 4677621 (N.D. Tex. Sept. 29, 2022).  Plaintiffs alleged that the company made misrepresentations in connection with the company’s purchase of certain oil and gas assets and its expected production from those assets.  The Court held that plaintiffs failed to adequately allege scienter but granted plaintiffs’ request for leave to amend with respect to certain alleged misstatements as to which the Court held plaintiffs had alleged a plausible theory of falsity and materiality.
  • Southern District Of New York Dismisses Putative Class Action Against Pharmaceutical Company For Failure To Adequately Allege Misstatements, Scienter
     
    09/30/2022

    On September 12, 2022, Judge J. Paul Oetken of the United States District Court for the Southern District of New York dismissed with prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a pharmaceutical company and certain of its executives.  In re AstraZeneca plc Sec. Litig., 2022 WL 4133258 (S.D.N.Y. Sept. 12, 2022).  Plaintiffs alleged that the company made misstatements and omissions with respect to clinical trials of its COVID-19 vaccine.  The Court held that plaintiffs failed to identify any misleading statements and failed to adequately allege scienter.
  • Tenth Circuit Panel Revives Putative Class Action Against Online Education Company
     
    09/07/2022

    On August 23, 2022, the United States Court of Appeals for the Tenth Circuit unanimously reversed the dismissal of a putative securities class action against an online education company (the “Company”), alleging violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), SEC Rule 10b-5, Section 20A of the Exchange Act, and Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”).  Plaintiffs alleged that the Company made false and misleading statements about the size and productivity of the Company’s sales force.  The district court dismissed the Exchange Act claims because plaintiffs failed to plead a strong inference of scienter and dismissed both the Exchange Act and the Securities Act claims for failure to plead a violation of Item 303 of SEC Regulation S-K.  On appeal, the Tenth Circuit reversed and remanded, holding that (i) the Exchange Act allegations “support[ed] an inference of scienter at least as compelling as any nonculpable inference” and (ii) the district court relied on “erroneous reasoning” to dismiss the Exchange Act and Securities Act claims based on the alleged violation of Item 303.
    CATEGORIES : Item 303Scienter
  • Northern District Of California Dismisses Putative Class Action Suit Against Financial Technology Company That Underscores The Challenges Plaintiffs Face When Predicating Securities Claims On The Disclosure Of A Regulatory Investigation
     
    08/16/2022

    On August 8, 2022, Judge Charles R. Breyer of the United States District Court for the Northern District of California granted a motion to dismiss a proposed securities class action suit against a financial technology company (the “Company”) and four of its executives alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  Huei-Ting Kang v. PayPal Holdings Inc., No. 3:21-cv-06468 (N.D. Cal. Aug. 8, 2022).  Plaintiffs alleged that the Company misled investors about its compliance with (1) a Consumer Financial Protection Bureau (“CFPB”) Consent Order (the “Consent Order”) prohibiting deceptive marketing of the company’s revolving line of credit; and (2) the Federal Reserve Board’s Regulation II, which caps debit card interchange fees.  The Court’s dismissal of the complaint (with leave to amend) is a reminder of the challenges plaintiffs face when trying to assert securities claims in the wake of company announcements of regulatory investigations.
  • Middle District Of Florida Dismisses Putative Class Action Against Recycling Company For Failure To Adequately Allege Misrepresentations Or Scienter
     
    08/16/2022

    On August 4, 2022, the United States District Court for the Middle District of Florida dismissed without prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a recycling services company, certain of its officers and directors, and the former CEO of a special purpose acquisition company (SPAC) that acquired the company.  Theodore v. PureCycle Tech. Inc., No. 6:21-cv-809-PGB-GJK, slip op. (M.D. Fla. Aug. 4, 2022), ECF No. 112.  Plaintiffs alleged that the company made misrepresentations with respect to its management team’s experience, the value of its patented recycling process, and its future production and financial projections, which were allegedly revealed in a short-seller report.  The Court held that the complaint on its face failed to state precisely which statements or omissions were at issue and where they were made, that plaintiffs adequately alleged certain misrepresentations but not others, and that plaintiffs adequately alleged loss causation but not scienter.
  • District Of New Jersey Dismisses Putative Securities Class Action Against Pharmaceutical Company For Failure To Adequately Allege Misrepresentations And Scienter
     
    08/16/2022

    On August 4, 2022, the United States District Court for the District of New Jersey dismissed a putative securities class action asserting claims under the Securities Exchange Act of 1934 against a pharmaceutical company and certain of its executives.  Paxton v. Provention Bio, Inc., No. 3:21-cv-11613, slip op. (D.N.J. Aug. 4, 2022), ECF No. 57.  Plaintiffs alleged the company made misrepresentations in connection with the company’s candidate drug intended to delay or prevent the progression of Type One Diabetes.  The Court held that plaintiffs failed to adequately allege actionable misrepresentations, scienter, or loss causation.
  • Illinois District Court Grants In Part And Denies In Part Insurance Company’s Motion For Summary Judgment In Putative Securities Fraud Lawsuit
     
    08/03/2022

    On July 26, 2022, Judge Robert W. Gettleman of the United States District Court for the Northern District of Illinois Eastern Division granted in part and denied in part a motion for summary judgment in a securities fraud class action against an insurance company (the “Company”) and certain of its executives.  In re The Allstate Corp. Sec. Litig., No. 16-C-10510 (N.D. Ill. July 26, 2022).  Plaintiffs alleged that defendants violated Section 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, by making material misstatements and omissions regarding a spike in the frequency of automobile policy claims, which plaintiffs alleged had a negative impact on the Company’s financial condition and stock price.
  • Seventh Circuit Affirms Dismissal Of Exchange Act Claim Against Owner Of Options Exchange, Finding Plaintiffs Failed To Adequately Plead Scienter
     
    08/03/2022

    On July 27, 2022, a unanimous panel of the United States Court of Appeals for the Seventh Circuit affirmed a decision of the United States District Court for the Northern District of Illinois dismissing a putative securities fraud class action asserting a claim under Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated thereunder, as well as claims under the Commodities Exchange Act, against an options and futures exchange company (the “Company”).  Brian Barry, et al. v. CBOE Global Markets, Inc., et al., No. 20-1843 (7th Cir. July 27, 2022).  Plaintiffs alleged that the Company violated the Exchange Act by trading options and futures based on an index it created (“VIX”) that was designed to estimate the near-term volatility in the S&P 500 Index, but allegedly was subject to market manipulation by unknown traders (the “Doe Defendants”) soon after its creation.  The Seventh Circuit affirmed the dismissal of the claims, holding that plaintiffs failed to plead scienter.
    CATEGORIES : CommoditiesExchange ActScienter
  • Northern District Of California Largely Denies Motion To Dismiss Securities Fraud Class Action Against Biopharmaceutical Company
     
    07/28/2022

    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.
    CATEGORIES : Exchange ActFalsityPSLRAScienter
  • Central District Of California Largely Denies Motion To Dismiss Putative Class Action Regarding Proposed Acquisition Of Space Industry Startup By SPAC
     
    07/20/2022

    On July 13, 2022, the United States District Court for the Central District of California largely denied a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a special purpose acquisition company (SPAC), a space industry startup that was the SPAC’s target, certain executives of both companies, and an investor that served as sponsor of the SPAC.  In re Stable Road Acquisition Sec. Litig., No. 2:21-cv-05744, slip op. (C.D. Cal. July 13, 2022), ECF No. 154.  Plaintiff alleged that the target company made misrepresentations regarding the viability of its technology and the immigration and national security status of its CEO, which the SPAC allegedly repeated without conducting adequate due diligence.  The Court held that plaintiff’s allegations were largely sufficient but that plaintiff failed to adequately allege scienter or control person liability with respect to certain executives.
  • Northern District Of California Grants Motion To Dismiss Securities And Exchange Act Claims Against Mobile Gaming Technology Company Holding That Plaintiffs Did Not Adequately Plead Falsity, Scienter, Loss Causation, Or Material Misstatements Or Omissions
     
    07/12/2022

    On July 5, 2022, Chief Judge Richard Seeborg of the Northern District of California granted motions to dismiss a putative securities class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), Rule 10b-5 thereunder, Section 20(a) of the Exchange Act, and Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (“Securities Act”), against a mobile gaming technology company (the “Company”), certain of its officers and directors, and its underwriters.  Jedrzejczyk, et al. v. Skillz Inc., et al., No. 21-cv-03450-RS (N.D. Cal. July 5, 2022).  Plaintiffs alleged that defendants made material misstatements and omissions regarding the Company’s financial condition, technical capabilities, and business prospects.  The Court granted defendants’ motions to dismiss, holding that plaintiffs failed to adequately plead falsity, scienter, or loss causation as to the Exchange Act claims, and that plaintiffs had not established standing or adequately pled material untrue statements or omissions as to the Securities Act claims.
  • District Of New Jersey Dismisses Putative Class Action Against Women’s Clothing Retailer For Failure To Allege Material Misstatement And Scienter
     
    07/06/2022

    On June 28, 2022, Judge Kevin McNulty of the United States District Court for the District of New Jersey granted a motion to dismiss a putative class action against a retail clothing brand (the “Company”) and two of its executives (“Individual Defendants”) alleging violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  In re Ascena Retail Grp., Inc. Sec. Litig., No. CV1913529KMJBC, 2022 WL 2314890 (D.N.J. June 28, 2022).  Plaintiffs alleged that the Company knowingly or recklessly overstated the value and business prospects of the Company and its subsidiaries in public statements and SEC filings.  The Court dismissed plaintiffs’ complaint for failure to plead an actionable misrepresentation or allegations sufficient to support a strong inference of scienter.
  • California District Court Grants Motion To Dismiss With Prejudice Putative Securities Class Action Against Healthcare Company, Finding That Plaintiffs Failed To Allege False Statements Or Misleading Omissions In The Company’s IPO Offering Documents
     
    06/23/2022

    On June 9, 2022, Judge David O. Carter of the United States District Court for the Central District of California granted a motion to dismiss a putative class action lawsuit alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act (the “Exchange Act”) and Rule 10b-5 thereunder, and Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”) against a healthcare company (the “Company”), its directors, and the underwriters of the Company’s initial public offering.  R. Brian Terenzini v. GoodRx Holdings, Inc. et al., No. 2:20-cv-11444, (C.D. Cal. June 9, 2022).  Plaintiffs alleged in their amended complaint that at the time of the Company’s IPO it failed to disclose in its Registration Statement and subsequent investor communications the significant risk of competition from a large online retailer.  The Court held that—as with the original complaint—plaintiffs failed to allege actionable misstatements or omissions as well as scienter and granted defendants’ motion to dismiss with prejudice.
     
  • Northern District Of California Dismisses Without Prejudice Putative Class Action Against Synthetic Biology Company For Failure To Allege Scienter
     
    06/07/2022

    On May 31, 2022, Judge Beth Labson Freeman of the Northern District of California dismissed without prejudice a putative class action asserting claims under the Securities Exchange Act against a synthetic biology company and certain of its executives.  Joseph v. Precigen, Inc., No. 20-cv-06936-BLF (N.D. Cal. May 31, 2022).  Plaintiff alleged that the company misrepresented the efficiency and economic viability of its methane conversion program.  The Court held that plaintiff failed to adequately allege scienter and failed to allege falsity with respect to certain alleged misrepresentations; however, the Court granted leave to replead.
  • New York District Court Denies Motion To Dismiss Putative Securities Class Action Against Investment Company, Finding Plaintiffs Sufficiently Alleged Misleading Statements And Omissions In The Company’s Offering Documents
     
    05/17/2022

    On May 4, 2022, Judge Victor Marrero of the United States District Court for the Southern District of New York denied a motion to dismiss a putative class action alleging, among other things, violations of Sections 10(b) and 20(a) of the Securities Exchange Act (the “Exchange Act”) and Rule 10b-5 thereunder against an investment company (the “Company”), its related entities, and its president and co-founder.  Michael Tecku et al. v. YieldStreet Inc. et al., No. 1:20-cv-07327 (S.D.N.Y May 4, 2022).  Plaintiffs alleged that the Company “misrepresented material facts about the stability and attractiveness of their investment products in its offering documents” by making misleading statements or omissions in private placement memoranda (“PPMs”) and series notes supplements (“SNSs”).  The Court held that, accepting plaintiffs’ allegations as true, plaintiffs sufficiently alleged securities fraud violations for certain alleged misstatements and omissions.
  • Central District Of California Dismisses Putative Class Action Against Software Developer For Failure To Adequately Allege Falsity Or Scienter
     
    04/27/2022

    On April 18, 2022, the United States District Court for the Central District of California dismissed without prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a computer game development company and certain of its executives.  Cheng v. Activision Blizzard, Inc., No. 21-cv-6240, slip op. (C.D. Cal. Apr. 18, 2022), ECF No. 75.  Plaintiffs alleged the company made statements that were misleading because they failed to disclose certain government investigations and the prevalence of sexual harassment and gender-based discrimination at the company.  The Court held that plaintiffs failed to identify any actionable misrepresentations or to adequately raise an inference of scienter but granted plaintiffs leave to replead.
  • Eastern District Of New York Grants Motion To Dismiss Exchange Act Claims Against Airline Company Holding Plaintiffs Did Not Adequately Plead Material Misstatements Or Omissions Or Scienter
     
    04/19/2022

    On April 12, 2022, Judge Rachel P. Kovner of the Eastern District of New York granted a motion to dismiss a putative securities class action asserting claims 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 an airline company (the “Company”) and certain of its officers and directors.  In re GOL Linhas Aéreas Inteligentes S.A. Securities Litigation, No. 1:20-cv-04243-RPK-TAM (E.D.N.Y. Apr. 12, 2022).  Plaintiffs alleged that defendants made materially misleading statements and omissions regarding the Company’s financial strength in an earnings report issued in the early days of the COVID-19 pandemic, despite allegedly knowing that its auditor would be issuing a report emphasizing a going concern and raising material weaknesses concerning the Company’s internal controls.  The Court granted defendants’ motion to dismiss, holding that plaintiffs failed to adequately plead material misstatements or omissions as well as scienter.
  • Southern District Of New York Pares Claims In Putative Class Action Against Telecommunications Company
     
    04/05/2022

    On March 25, 2022, Judge Mary Kay Vyskocil of the Southern District of New York granted in part and denied in part a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a telecommunications company and certain of its executives.  Solomon v. Sprint Corp., 1:19-cv-05272 (MKV) (S.D.N.Y. Mar. 25, 2022).  Plaintiffs primarily alleged that the company made misrepresentations regarding its reporting of new phone subscriptions and its participation in a government-subsidized discounted phone program.  The Court held that plaintiffs adequately alleged misrepresentations and scienter with respect to statements regarding new subscriptions but held that plaintiffs failed to adequately allege scienter with respect to statements regarding the discounted phone program and concluded that certain other challenged statements were mere puffery.
  • Western District Of Texas Largely Denies Motion To Dismiss Putative Class Action Against Information Technology Company
     
    04/05/2022

    On March 30, 2022, Judge Robert Pitman of the Western District of Texas denied the majority of a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against an information technology company, certain of its executives, and private equity firms that owned the company’s securities.  In re SolarWinds Corp. Sec. Litig., No. 1:21-CV-138-RP (W.D. Tex. Mar. 30, 2022).  Plaintiffs alleged that company statements regarding its cybersecurity policies and practices were revealed to be false and misleading upon the disclosure of a security breach.  The Court held that plaintiffs adequately alleged falsity, scienter, and loss causation, except as to the company’s CEO, the allegations as to whom the Court granted plaintiffs leave to replead.
  • Eastern District Of Pennsylvania Declines To Dismiss Putative Class Action Against Pharmaceutical Company
     
    04/05/2022

    On March 25, 2022, the United States District Court for the Eastern District of Pennsylvania largely denied a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a pharmaceutical company and certain of its executives.  Halman Aldubi Provident & Pension Funds Ltd. v. Teva Pharm. Indus. Ltd., No. 20-cv-4660-KSM (E.D. Pa. Mar. 25, 2022).  Plaintiff alleged that the company made misrepresentations with respect to the reasons one of its drugs was commercially successful.  The Court held that except for allegations against the company’s CFO, plaintiff adequately alleged misrepresentations, scienter, and loss causation.
  • Northern District Of Illinois Dismisses Putative Class Action Against Cosmetics Retailer For Failure To Adequately Allege Falsity And Scienter
     
    04/05/2022

    On March 30, 2022, the United States District Court for the Northern District of Illinois dismissed, without prejudice, a putative class action asserting claims under the Securities Exchange Act of 1934 against a cosmetics retailer and certain of its executives. Chandler v. Ulta Beauty, Inc., No. 18-CV-1577, 2022 WL 952441, at *1 (N.D. Ill. Mar. 30, 2022).  Plaintiffs alleged that the company made various statements that were misleading because they failed to disclose the company’s alleged practice of reselling used returned products.  The Court held that plaintiffs failed to identify any actionable misrepresentations and failed to adequately allege scienter, but granted plaintiffs leave to replead.
  • Southern District Of New York Grants Motion To Dismiss Exchange Act Claims Against Pharmaceutical Company For Alleged Omissions About Drug’s Safety
     
    04/05/2022

    On March 21, 2022, Judge Lewis J. Liman of the Southern District of New York 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 pharmaceutical company (the “Company”) and certain of its executives.  Rice v. Intercept Pharmaceuticals, Inc., No. 1:21-cv-00036 (S.D.N.Y. Mar. 21, 2022).  Plaintiffs alleged that defendants omitted material information concerning the safety of the Company’s liver disease drug that resulted in a stock drop once alleged corrective disclosures were made.  The Court granted defendants’ motion to dismiss plaintiffs’ first amended complaint (the “FAC”), holding that plaintiffs failed to sufficiently allege material omissions, scienter, or loss causation, but granted plaintiffs leave to replead.
  • Southern District Of New York Dismisses Putative Class Action Against Global Commercial Electronic Vehicle Company For Failure To Plead Scienter And Loss Causation
     
    03/23/2022

    On March 15, 2022, Judge George B. Daniels of the Southern District of New York dismissed a putative class action against a global company that focuses on facilitating the adoption of commercial electronic vehicles (“EV”) through its China-based division (the “Company”) and certain of its directors and officers for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  In re Ideanomics Sec. Litig., No. 20 CIV. 4944 (GBD), 2022 WL 784812 (S.D.N.Y. Mar. 15, 2022).  Plaintiffs alleged that the Company’s executives made numerous misstatements about the China-based sales hub (the “Center”) in earnings calls, YouTube interviews, and the press.  The Court dismissed the complaint with leave to amend, holding that although the complaint plausibly alleged misstatements, it failed to allege scienter or loss causation.
  • Second Circuit Affirms Dismissal Of Suit Against Pharmaceutical Company After Failed Clinical Trial
     
    03/23/2022

    On March 11, 2022, the United States Court of Appeals for the Second Circuit affirmed the dismissal of claims under Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 (“Exchange Act”) against a pharmaceutical company (the “Company”).  Arkansas Pub. Emps. Ret. Sys. v. Bristol-Myers Squibb Co., No. 20-3716-CV (2d Cir. Mar. 11, 2022).  Plaintiffs alleged that the Company made material misrepresentations and omissions in describing a clinical trial it conducted on a drug that treated specific types of cancer.  Following a dismissal of plaintiff’s initial complaint without prejudice, a decision previously covered here, the district court subsequently dismissed plaintiffs’ amended complaint with prejudice.  The Second Circuit affirmed, holding that plaintiffs failed to allege (i) material misrepresentations or omissions or (ii) facts giving rise to a strong inference of scienter.
  • Southern District Of Ohio Declines To Dismiss Putative Class Action Against Energy Company Regarding Alleged Bribery Scheme
     
    03/15/2022

    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.
  • Southern District Of New York Pares Claims In Putative Class Action Against Energy Company
     
    03/15/2022

    On March 7, 2022, Judge P. Kevin Castel of the Southern District of New York granted in part and denied in part a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a coal mining company and certain of its executives.  In re Peabody Energy Corp. Sec. Litig., No. 20-cv-8024 (PKC), slip op. (S.D.N.Y. Mar. 7, 2022), ECF No. 50.  Plaintiff alleged that the company made misrepresentations concerning its safety practices, a fire that took place at one of its mines, and its ability to subsequently reopen that mine and resume operations.  The Court held that the complaint adequately alleged misrepresentations and scienter with respect to the mine fire but dismissed the remaining challenged statements as non-actionable puffery, protected forward-looking statements, or statements of opinion.
  • District Of Connecticut, On Remand, Denies Motion To Dismiss Putative Class Action Against Consumer Financial Services Company
     
    02/24/2022

    On February 11, 2022, the United States District Court for the District of Connecticut denied a motion to dismiss a putative securities class action asserting claims under the Securities Exchange Act of 1934 (“Exchange Act”) against a consumer financial services company that issues private-label credit cards and certain of its executives.  In re Synchrony Fin. Sec. Litig., No. 3:18-CV-1818 (VAB), 2022 WL 427499 (D. Conn. Feb. 11, 2022).  As discussed in our prior post the Court had previously dismissed the action in its entirety, including with respect to claims under the Securities Act of 1933 (“Securities Act”).  The Court of Appeals for the Second Circuit upheld the dismissal of the Securities Act claims and certain of the Exchange Act claims but remanded for further proceedings regarding one challenged statement—that the company misrepresented the alleged “pushback” it had received from retail partners with respect to its underwriting standards.  Id. at *2.  On remand, the district court held that plaintiffs adequately alleged falsity, scienter, and loss causation with respect to the remaining challenged statement.
  • Northern District Of California Pares Claims In Putative Class Action Against Videoconferencing Company
     
    02/24/2022

    On February 16, 2022, Judge James Donato of the Northern District of California granted in part and denied in part a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a videoconferencing company and certain of its executives.  In re Zoom Sec. Litig., No. 20-cv-02353-JD (N.D. Cal. Feb. 16, 2022).  Plaintiff alleged that the company made misrepresentations concerning the level of encryption on its primary videoconferencing product.  The Court held that plaintiff sufficiently alleged falsity, scienter, and loss causation as to the CEO’s challenged statements regarding encryption, but it dismissed claims as to certain other alleged misstatements, and all claims against one executive, for failure to sufficiently allege scienter, while granting leave to amend.
  • Southern District Of New York Dismisses Securities Short Selling Claims Against Broker-Dealers, Allowing Spoofing Claims To Proceed
     
    02/17/2022

    On February 9, 2022, Judge Lorna G. Schofield of the Southern District of New York denied in part and granted in part a motion to dismiss a securities fraud action asserting claims related to alleged spoofing and short selling under Sections 10(b) and 9(a)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 thereunder, against broker-dealers, their Canadian affiliates, and unidentified U.S. and Canadian entities, including market makers, subsidiaries, affiliates, sister companies, and customers of the named defendants (collectively, “defendants”).  Harrington Global Opportunity Fund v. CIBC World Markets Corp., 21-CV-761 (LGS) (S.D.N.Y. Feb. 9, 2022).  Plaintiff alleged that defendants engaged in spoofing and short selling that caused a healthcare company’s stock, which plaintiff owned, to drop almost 90% over a nine-month period.  The Court denied dismissal of plaintiff’s spoofing claims against certain defendants and granted dismissal of plaintiff’s short selling claims against other defendants.
    CATEGORIES : Exchange ActScienter
  • Northern District Of California Denies Motion To Dismiss Exchange Act Claims Against Electric Vehicle Battery Development Company, Holding Plaintiff Adequately Pleaded Misleading Statements, Scienter, And Loss Causation
     
    01/25/2022

    On January 14, 2022, Judge William H. Orrick of the Northern District of California denied 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”) and Rule 10b-5, against a lithium battery development company (the “Company”) and certain of its executives (collectively, “defendants”).  In re Quantumscape Securities Class Action Litigation, No. 3:21-cv-00058-WHO (N.D. Cal. Jan. 14, 2022).  The Company’s “solid-state” battery is an aspiring competitor to conventional lithium-ion batteries for use in electric vehicles.  The Court denied defendants’ motion to dismiss, holding that the Complaint was adequately plead with the exception of one of the challenged statements that it dismissed.
  • Northern District Of California Declines To Dismiss Putative Class Action Against Biotechnology Company Because Challenged Statements, Even If “Literally True,” Could Have Misled A Reasonable Investor
     
    01/11/2022

    On December 22, 2021, the United States District Court for the Northern District of California declined to dismiss most of the claims asserted in a putative class action against a biotechnology company, certain of its executives, and the company’s former majority investor under the Securities Exchange Act.  In re Vaxart, Inc. Sec. Litig., No. 20-cv-05949-VC (N.D. Cal. Dec. 22, 2021).  Plaintiffs alleged that the company made misrepresentations during the early months of the COVID-19 pandemic in 2020 regarding its efforts to develop a vaccine, and further alleged that the investor engaged in a scheme to inflate the company’s stock price in order to exit its position at a profit.  The Court held that plaintiffs adequately alleged misrepresentations and scienter as against the company and its executives named as individual defendants but dismissed the claims against the investor.
  • Northern District Of California Dismisses Putative Class Action Against Social Media Company For Failure To Adequately Allege Scienter, Loss Causation
     
    01/11/2022

    On December 20, 2021, the United States District Court for the Northern District of California dismissed a putative class action against a social media company and certain of its executives under the Securities Exchange Act.  In re Facebook, Inc. Sec. Litig., No. 5:18-CV-01725-EJD, 2021 WL 6000058 (N.D. Cal. Dec. 20, 2021).  Plaintiffs alleged that the company made misrepresentations relating to a data breach and with respect to users’ control of their data.  The Court previously dismissed plaintiffs’ prior two complaints but granted leave to replead.  Addressing plaintiffs’ third amended complaint, the Court held that plaintiffs still failed to adequately allege scienter for the data breach allegations and loss causation for the allegations about control of user data, and therefore dismissed the action without leave to replead.
    CATEGORIES : Loss CausationScienter
  • First Circuit Revives Putative Class Action Against Software Company
     
    01/11/2022

    On December 22, 2021, the United States Court of Appeals for the First Circuit reversed the dismissal of a putative class action asserting claims against a software company and certain of its current and former executives under the Securities Exchange Act.  Constr. Indus. and Laborers Jt. Pension Tr. v. Carbonite, Inc., —F.4th—, 2021 WL 6062622 (1st Cir. 2021).  Plaintiffs alleged that the company misleadingly touted the capabilities of a new cloud-based data backup product, even though defendants knew that the product did not work.  The district court dismissed the action for failure to adequately allege scienter, but the First Circuit reversed, holding that plaintiffs adequately alleged scienter and that the challenged statements were actionable.
  • Second Circuit Vacates And Remands Dismissal Of Exchange Act Claims Against Food Manufacturer, Holding The District Court Erred In Its Interpretation Of Exchange Act Claim Requirements
     
    12/21/2021

    On December 17, 2021, the Court of Appeals for the Second Circuit unanimously vacated and remanded for reconsideration the dismissal by the United States District Court for the Eastern District of New York of a putative securities class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5(b) promulgated thereunder, against a health food product manufacturing company (the “Company”) and certain of its executives, for alleged misstatements regarding the Company’s sales and internal controls.  In re: The Hain Celestial Group, Inc. Securities Litigation, No. 20-1517 (2d Cir. Dec. 17, 2021).  The late District Judge Arthur Spatt granted defendants’ motion to dismiss, with prejudice, the Second Amended Complaint (the “SAC”), holding that plaintiffs failed to allege a fraudulent scheme or business practice in violation of the terms of Rule 10b-5(a)-(c), and further failed to sufficiently plead scienter.  Plaintiffs appealed the district court’s dismissal with respect to their Rule 10b-5(b) claims.  The Second Circuit vacated the dismissal, holding that the district court erred in finding that plaintiffs’ Rule 10b-5(b) claim relied on plaintiffs’ pleading a fraudulent business scheme or plan.
  • Fourth Circuit Affirms Dismissal Of Putative Class Action For Failure To Adequately Allege Scienter
     
    12/08/2021

    On December 1, 2021, the United States Court of Appeals for the Fourth Circuit affirmed the dismissal of a putative class action asserting claims under the Securities Exchange Act of 1934 against an information technology company and certain of its executives.  KBC Asset Mgt. NV v. DXC Tech. Co., —F.4th—, 2021 WL 5626377 (4th Cir. 2021).  Plaintiffs claimed that the company made misrepresentations regarding its financial health, which plaintiffs alleged were false because the company had undertaken cost-cutting measures that undermined its ability to meet its revenue projections.  The district court dismissed the action and the Fourth Circuit affirmed, holding that plaintiffs failed to adequately allege scienter.
    CATEGORY : Scienter
  • Northern District Of Illinois Eastern Division Grants In Part Drugstore Chain’s Motion For Summary Judgment In Connection With Securities Class Action Lawsuit
     
    11/09/2021

    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.
  • Northern District Of California Narrows Claims In Putative Securities Class Action Against Pharmaceutical Company
     
    10/26/2021

    On October 19, 2021, Chief Judge Richard Seeborg of the United States District Court for the Northern District of California narrowed the claims in a putative securities class action asserting claims under the Securities Exchange Act of 1934 against a pharmaceutical company and certain of its executives.  Sheet Metal Works Nat’l Pension Fund v. Bayer AG, No. 20-cv-4737, slip op. (N.D. Cal. Oct. 19, 2021), ECF No. 90.  Plaintiffs alleged that the company made misrepresentations relating to its acquisition of Monsanto.  The Court held that plaintiffs adequately alleged actionable misrepresentations and scienter with respect to only some of the challenged statements, and further held that plaintiffs adequately alleged loss causation for those statements.
  • Eighth Circuit Affirms Dismissal Of Putative Securities Class Action For Failure To Adequately Allege Falsity And Scienter
     
    10/26/2021

    On October 18, 2021, the United States Court of Appeals for the Eighth Circuit affirmed a decision of the United States District Court for the Southern District of Iowa dismissing a putative securities class action asserting claims under the Securities Exchange Act of 1934 against a media company and certain of its executives.  City of Plantation Police Officers Pension Fund v. Meredith Corp., –F.4th–, 2021 WL 4823411 (8th Cir. 2021).  Plaintiff alleged that the company made misrepresentations in connection with the expected benefits from its acquisition of a magazine publisher.  The district court dismissed the action with prejudice, holding that all but one of the challenged statements was not sufficiently alleged to be false, and that scienter was not adequately alleged for the remaining statement.  The Eighth Circuit affirmed.
  • District Of Minnesota Dismisses Putative Class Action Against Industrial Chemical Manufacturer Related To Environmental Litigation
     
    10/13/2021

    On September 30, 2021, Judge Nancy E. Brasel of the United States District Court for the District of Minnesota granted a motion to dismiss a putative class action against an industrial chemical manufacturer (the “Company”) and certain of its officers alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  In re 3M Co. Sec. Litig., No. 19-CV-2488 (D. Minn. Sept. 30, 2021).  Plaintiffs alleged that the Company downplayed its potential legal and financial exposure over its production and disposal of toxic per- and poly-fluoroalkyl substances (“PFAS”) by failing to estimate the contingent losses associated with the Company’s PFAS liabilities.  The Court dismissed plaintiffs’ complaint for failure to plead an actionable misrepresentation or allegations sufficient to support a strong inference of scienter.
    CATEGORIES : Exchange ActFalsityScienter
  • New Jersey District Court Denies Motion To Dismiss Opt-Out Action
     
    10/06/2021

    On September 30, 2021, Judge Katherine S. Hayden of the United States District Court for the District of New Jersey denied a motion to dismiss an “opt-out” action arising from a pending class action that asserts claims under the Securities Exchange Act of 1934 against a pharmaceutical company, certain of its executives, and alleged “co-conspirators,” in connection with an alleged price-fixing scheme for generic drugs.  TIAA-CREF Large-Cap Growth Fund v. Allergan PLC, No. 17-CV-11089-KSH-CLW, 2021 WL 4473156 (D.N.J. Sept. 30, 2021).  The opt-out action also added claims under the Securities Act of 1933 and related to an illegal “market allocation” scheme.  The Court denied defendants’ motion to dismiss the opt-out action, holding that the action was timely and that scienter was adequately alleged.
  • District Of Maryland Dismisses Putative Class Action Against Pharmaceutical Company For Failure To Adequately Allege Misrepresentations And Scienter
     
    10/06/2021

    On September 29, 2021, Judge George J. Hazel of the District of Maryland dismissed a putative class action asserting claims under the Securities Act of 1933 and Securities Exchange Act of 1934 against a pharmaceutical company and certain of its executives.  Employees’ Retirement System of the City of Baton Rouge and Parish of East Baton Rouge v. Macrogenics, Inc., No. GJH-19-2713, slip op. (D. Md. Sept. 29, 2021).  Plaintiff alleged that defendants made misrepresentations regarding clinical trials for a drug that was “critically important” to the company.  The Court dismissed the action for failure to adequately allege misrepresentations or scienter.
  • Southern District Of New York Dismisses Putative Class Action Against Cannabis Company For Failure To Allege Scienter
     
    10/06/2021

    On September 27, 2021, Judge Paul Crotty of the United States District Court for the Southern District of New York dismissed a putative class action asserting claims under the Securities Exchange Act of 1934 against a cannabis company and its CEO and CFO.  Kasilingam v. Tilray, Inc., No. 20-CV-03459 (PAC), 2021 WL 4429788 (S.D.N.Y. Sept. 27, 2021).  Plaintiffs alleged defendants made material misrepresentations that inflated the company’s stock price ahead of a planned share exchange.  The Court held that plaintiffs failed to adequately allege scienter and dismissed the action but granted plaintiffs leave to amend to attempt to cure the deficiencies in their complaint.
    CATEGORY : Scienter
  • Southern District Of New York Dismisses Action Against Cannabis Company For Failure To Sufficiently Allege Misrepresentations, Scienter
     
    10/06/2021

    On September 30, 2021, Judge Andrew L. Carter, Jr. of the Southern District of New York dismissed an action asserting claims under the Securities Act of 1933, the Securities Exchange Act of 1934, and common law claims for breach of contract, fraud in the inducement, and negligent misrepresentation against a cannabis company and certain of its executives.  SUN, A Series Of E Squared Investment Fund, LLC, et al. v. Sundial Growers Inc., et al., No. 1:20-cv-03579 (ALC), slip op. (Sept. 30, 2021).  Plaintiffs were investors that allegedly acquired convertible notes prior to the company’s initial public offering (“IPO”) and later converted those notes into shares shortly after the IPO, with one also purporting to receive shares in the IPO itself.  Plaintiffs alleged that defendants provided misleading information about a target entity that the company was on the verge of acquiring.  The Court dismissed the action, holding that plaintiffs failed to adequately allege that the challenged statements were materially misleading in context at the time they were made, and that plaintiffs also failed to adequately allege scienter.
  • District Of New Jersey Dismisses Putative Class Action Against Medical Device Manufacturer For Failure To Allege Falsity And Scienter
     
    09/21/2021

    On September 15, 2021, Judge Stanley R. Chesler of the United States District Court for the District of New Jersey dismissed a putative class action against a medical device manufacturer (the “Company”) and certain of its officers alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  Industriens Pensionsforsikring A/S v. Becton Dickinson & Co., No. 20-cv-02155 (D.N.J. Sept. 15, 2021).  Plaintiff alleged the Company made misleading statements concerning regulatory approval of one of its medical devices, its regulatory compliance program, and financial projections.  The Court dismissed plaintiff’s claims without prejudice in an unpublished opinion confirming the many challenges to pleading securities fraud claims based on alleged misrepresentations regarding U.S. Food and Drug Administration (“FDA”) approval processes.
    CATEGORIES : Exchange ActFalsityScienter
  • Illinois District Court Denies Motion To Dismiss Putative Class Action Against Food Delivery Company
     
    09/15/2021

    On September 7, 2021, Judge Charles Ronald Norgle of the United States District Court for the Northern District of Illinois denied a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against an online food delivery company and certain of its executives.  Azar v. Grubhub, Inc., No. 1:19-CV-07665, 2021 WL 4077327 (N.D. Ill. Sept. 7, 2021).  Plaintiff alleged that the company made misrepresentations regarding the success of its marketing and expansion initiatives.  The Court held that plaintiff adequately alleged actionable misrepresentations and scienter.
  • Southern District Of New York Dismisses Putative Class Action Against Infrastructure Company For Failure To Adequately Allege Misrepresentations Or Scienter
     
    09/15/2021

    On September 7, 2021, Judge Vernon S. Broderick of the United States District Court for the Southern District of New York dismissed a putative class action asserting claims under the Securities Act of 1933 and the Securities Exchange Act of 1934 against an infrastructure management company, certain of its executives, and the underwriter of its stock offering.  City of Riviera Beach Gen. Emps. Ret. Sys. v. Macquarie Infrastructure Corp., et al., 2021 WL 4084572 (S.D.N.Y. Sept. 7, 2021).  Plaintiff alleged that the company made misstatements and omissions concerning decreased demand for a particular form of fuel oil that the company stored for customers, which plaintiff alleged allowed the company to maintain an artificially high stock price while the company completed a secondary stock offering and acquired a competitor.  The Court held that plaintiff failed to adequately allege any misrepresentation or scienter and, therefore, dismissed the action.
  • Northern District Of California Dismisses Putative Class Action For Failure To Adequately Allege Actionable Misrepresentations Or Scienter
     
    08/26/2021

    On August 17, 2021, Judge Beth Labson Freeman of the United States District Court for the Northern District of California dismissed a putative class action asserting claims under the Securities Exchange Act of 1934 against an energy technology company and certain of its executives.  Hurst v. Enphase Energy, Inc., et al., No. 5:20-cv-04036-BLF, slip op. (N.D. Cal. Aug. 17, 2021).  Plaintiff alleged, based on a short seller report released the same day plaintiff’s complaint was filed, that the company misrepresented its revenues, engaged in improper deferred revenue accounting practices, and overstated the growth in its gross margins.  The Court held that plaintiff failed to adequately allege any misrepresentation or scienter and, therefore, dismissed the action, while granting plaintiff leave to amend to attempt to “rectify the defects” identified by the Court.
  • Southern District Of California Denies Motion To Dismiss Securities Fraud Claims Against Pharmaceutical Company, Holding Plaintiff Adequately Pled Material Misstatements And Scienter
     
    08/19/2021

    On August 4, 2021, Judge Marilyn L. Huff of the United States District Court for the Southern District of California denied a motion to dismiss a putative class action lawsuit against a biopharmaceutical company (the “Company”) and certain of its officers for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.  Kendall v. Odonate Therapeutics, Inc., et al., No. 3:20-cv-01828-H-LL (S.D. Cal. Aug. 4, 2021).  The Court held that plaintiff’s Second Amended Complaint (the “SAC”) adequately alleged material misstatements and omissions by defendants concerning the efficacy and safety of the Company’s flagship cancer drug (tesetaxel) during the course of a Phase 3 clinical trial, and further held that plaintiff adequately alleged scienter.
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