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  • Northern District Of California Dismisses Putative Class Action For Failure To Adequately Allege Misrepresentations And Scienter
     
    07/28/2020

    On July 21, 2020, Judge Charles Breyer of the United States District Court for the Northern District of California dismissed a putative class action asserting claims under the Securities Act of 1933 and the Securities Exchange Act of 1934 against an information technology and software company, certain of its executives, and the underwriters for the company’s IPO.  In re Pivotal Sec. Litig., No. 3:19-cv-3589, slip op. (N.D. Cal. July 21, 2020), ECF No. 100.  Plaintiffs alleged that the company made misleading statements in IPO offering documents and in subsequent public statements regarding its financial and business condition.  The Court held that plaintiffs failed to adequately allege any actionable misstatement or omission, and further that plaintiffs failed to establish that the alleged misstatements with respect to the Exchange Act claims were made with scienter.  However, the Court granted leave to amend as to certain allegations.
     
  • Southern District Of New York Dismisses Putative Class Action Against Software Application Developer With Prejudice
     
    07/28/2020

    On July 16, 2020, Judge Jesse Furman of the United States District Court for the Southern District of New York dismissed a putative class action against a Chinese computer application developer and certain of its executives asserting claims under the Securities Exchange Act of 1934.  Marcu v. Cheetah Mobile Inc., No. 18-CV-11184 (JMF), 2020 WL 4016645 (S.D.N.Y. July 16, 2020).  Plaintiffs asserted an “omissions case”;  i.e., they alleged that the company made statements regarding its revenue, the popularity of its applications, and the importance of the Google Play store to its business model that were rendered misleading because the company did not disclose an alleged scheme through which the company earned improper referral bonuses on application downloads.  The Court held that plaintiffs failed to adequately allege that the challenged statements were false or misleading or made with scienter.  Because plaintiffs had previously been granted leave to amend their complaint, and the Court found nothing to suggest that the deficiencies identified could be cured, the Court denied leave to amend.
     
  • District of Massachusetts Dismisses Purported Class Action Against Online Home Goods Retailer
     
    07/14/2020

    On July 8, 2020, United States District Judge Douglas P. Woodlock of the United States District Court for the District of Massachusetts dismissed a putative securities fraud class action asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 against a large online home goods retailer (the “Company”) and its three most senior executives (collectively, “Defendants”).  In re Wayfair, Inc. Sec. Litig., Civ. No. 19-10062-DPW (D. Mass. July 8, 2020).  Plaintiffs alleged that defendants falsely implied that the Company was profitable and that it was experiencing positive advertising-revenue leverage—meaning that the Company was becoming more effective at generating revenue for every advertising dollar spent.  The Court granted defendants’ motion to dismiss because plaintiffs failed to adequately allege any material misstatements or omissions, scienter, or loss causation.  Notably, the Court repeatedly called attention to the absence of factual support for the allegations and described the complaint as “precisely the kind of pleading the Private Securities Litigation Reform Act was designed to prevent.”
     
  • District Of New Jersey Grants In Part And Denies In Part Motion To Dismiss Securities Class Action Alleging Misleading Disclosures And Market Manipulation Against A Chinese Manufacturer Of Commercial Vehicle Parts
     
    06/23/2020

    On June 12, 2020, Judge Kevin McNulty of the of United States District of New Jersey granted in part and denied in part a motion to dismiss a putative securities fraud class action asserting violations of Sections 9(a), 10(b), and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 against a Chinese manufacturer of wheels for commercial vehicles (the “Company”) as well as the Company’s CEO and CFO (collectively, “Defendants”).  He v. China Zenix Auto Int’l Ltd. et al., Civ. No. 2:18-cv-15530, 2020 WL 31695006 (D.N.J. June 12, 2020).  Plaintiffs alleged that, in an effort to prevent the Company from being de-listed by the New York Stock Exchange (the “NYSE”), certain of the Company’s employees engaged in improper trading that artificially inflated the Company’s stock price.  Plaintiffs further alleged that the Company’s ongoing statements regarding its compliance with NYSE listing requirements were materially misleading, because these statements did not disclose that it achieved compliance only as a result of improper trading.  The Court denied Defendants’ motion to dismiss as to the Section 10(b) claims against the Company and the CEO, but granted the motion to dismiss the Section 10(b) claims against the CFO for failure to adequately allege scienter.  The Court dismissed the Section 9(a) claims for failure to adequately allege a series of purportedly manipulative transactions.
     
  • Southern District Of New York Grants In Part And Denies In Part Motion To Dismiss A Securities Class Action Alleging A Biotech Company Mislead Shareholders About Likelihood Of FDA Approval For Drug Intended To Treat Rare Disease
     
    06/23/2020

    On June 16, 2020, Judge Gregory H. Woods of the United States District Court for the Southern District of New York granted in part and denied in part a motion to dismiss a putative securities fraud class action asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 against a biotech company (the “Company”) as well as certain of its officers (collectively, “Defendants”).  Skiadas v. Acer Therapeutics Inc. et al., Civ. No. 1:19-cv-6137, 2020 WL 3268495 (S.D.N.Y. June 16, 2020).  Plaintiffs alleged that Defendants falsely stated that the Food and Drug Administration (“FDA”) agreed that it would approve the Company’s New Drug Application for EDSIVO, a drug for the treatment of Vascular Ehlers-Danolos Syndrome (“vEDS”), a rare genetic connective tissue disorder.  The Court denied Defendants’ motion to dismiss as to most of the alleged misstatements, because plaintiffs adequately alleged falsity and scienter.
     
  • Northern District Of California Dismisses Purported Class Action Against Peer-To-Peer Lending Company For Failure To Adequately Allege Falsity And Scienter
     
    06/23/2020

    On June 12, 2020, Judge Beth Labson Freeman of the United States District Court for the Northern District of California dismissed a purported securities class action against a peer-to-peer lending company (the “Company”) and certain of its officers under Sections 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  Veal v. LendingClub Corporation, et. al., No. 5:18-cv-02599 (N.D. Cal. June 12, 2020).  Plaintiffs alleged that defendants made misstatements and omissions regarding an investigation by the Federal Trade Commission (“FTC”) into the Company’s allegedly deceptive conduct related to certain consumer practices.  The Court dismissed plaintiffs’ claims (mostly without prejudice), because plaintiffs failed to adequately allege falsity or scienter.
     
  • District Of New Jersey Declines To Dismiss Putative Class Action Against Government Services Company
     
    06/16/2020

    On June 5, 2020, Judge Susan D. Wigenton of the United States District Court for the District of New Jersey denied a motion to dismiss a putative securities class action against a government services company and certain of its executives under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.  Emps. Ret. Sys. of the Puerto Rico Elec. Power Auth. v. Conduent Inc., No. CV-19-8237-SDW-SCM, 2020 WL 3026536 (D.N.J. June 5, 2020).  Plaintiff alleged that the company had overstated the progress it was making in modernizing the IT infrastructure that supported its electronic toll collection business.  The Court held that plaintiff adequately alleged actionable misrepresentations, as well as scienter and loss causation.
     
  • District Of New Jersey Denies Motion To Dismiss Putative Class Action Against Information Technology Services Company, Holding Scheme Liability And Corporate Scienter Adequately Alleged
     
    06/16/2020

    On June 5, 2020, Judge Esther Salas of the United States District Court for the District of New Jersey sustained in part a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder against an information technology services company and certain of its current and former executives.  In re Cognizant Technology Solutions Corp. Sec. Lit., No. 16-6509 (D.N.J. June 5, 2020).  Plaintiffs alleged that the company made misrepresentations promoting the advantages of its facilities in India by failing to disclose an alleged scheme to bribe government officials to secure permits necessary to operate one such facility.  After portions of their prior complaint were dismissed by the late Judge Walls without prejudice, plaintiffs filed an amended complaint, and the case was transferred to Judge Salas.  Relying in part on the prior decision as law of the case, the Court held that plaintiffs’ allegations, which were drawn primarily from a government investigation, sufficiently alleged actionable misstatements and scienter.
     
  • Ninth Circuit Affirms Dismissal Of Putative Class Action Against Medical Device Company For Failure To Adequately Allege Scienter
     
    06/16/2020

    On June 10, 2020, the United States Court of Appeals for the Ninth Circuit affirmed the dismissal of a putative securities class action against a medical device company and certain of its executives under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.  Nguyen v. Endologix, Inc., ––F.3d––, 2020 WL 3069776 (9th Cir. 2020).  Plaintiff alleged that the company’s statements regarding the likelihood of Food and Drug Administration (“FDA”) approval of a new product were misleading because the device had allegedly experienced problems following its earlier introduction in the European market.  Explaining that implausible allegations cannot create a strong inference of scienter, the Ninth Circuit held that plaintiff’s allegations failed to satisfy the Private Securities Litigation Reform Act (“PSLRA”) because plaintiff’s core theory of the case had no basis in logic or common experience.  Because plaintiff had already had an opportunity to replead, the Court affirmed the dismissal with prejudice.
     
    CATEGORY: Scienter
  • Southern District Of New York Grants In Part Motion To Dismiss Securities Fraud Claims Against European Airline For Failure To Adequately Allege Falsity, Materiality, And Scienter For Certain Alleged Misstatements
     
    06/09/2020

    On June 1, 2020, Judge Paul Oetken of the Southern District of New York granted in part and denied in part a motion to dismiss securities claims against an “ultra-low fare” airline company (the “Company”) and its chief executive.  City of Birmingham Firemen's and Policemen's Supplemental Pension System v. Ryanair Holdings plc et al., No. 18-cv-10330 (S.D.N.Y. June 1, 2020).  Plaintiffs alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, in connection with alleged misstatements concerning the Company’s labor practices and profitability.  The Court granted in part defendants’ motion to dismiss, finding plaintiffs failed to adequately plead falsity, materiality, and scienter for all but one category of alleged misstatements, but granted plaintiffs’ motion for leave to amend.
     
  • Northern District Of California Grants In Part Motion To Dismiss Securities Fraud Claims Against Multinational Technology Company, Holding That Plaintiffs Did Not Adequately Allege Falsity, Scienter, Or Loss Causation With Respect To Majority Of Alleged Misstatements
     
    06/09/2020

    On June 2, 2020, Judge Yvonne Gonzalez Rogers of the Northern District of California granted in part 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 promulgated thereunder, against a multinational technology company (the “Company”) and two of its senior executives.  In re Apple Securities Litigation, No. 4:19-cv-02033 (N.D. Cal. June 2, 2020).  Plaintiffs alleged that defendants made materially false and misleading statements and omissions concerning the Company’s flagship product and its China business.  The Court stripped away most of plaintiff’s allegations, holding that those alleged misrepresentations failed to sufficiently allege falsity, scienter, and loss causation, but let remain two alleged misstatements made by the Company’s CEO to analysts that it found to be sufficiently pled.
     
  • Second Circuit Affirms Dismissal Of Putative Class Action Against Manufacturers Of Medical Equipment Because Of Failure To Adequately Plead Corporate Scienter 
     
    06/01/2020

    On May 27, 2020, the United States Court of Appeals for the Second Circuit dismissed a putative class action brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 against two manufacturers of medical equipment (the “Companies”).  Jackson v. Abernathy, No. 19-1300-CV, 2020 WL 2755690 (2d Cir. May 27, 2020).  Plaintiff claimed that the Companies (one of which was spun off from the other, and both of which manufactured the product at issue) intentionally misled shareholders about the protective qualities of their surgical gown product.  The district court had dismissed the action with prejudice and subsequently denied plaintiff’s motion to set aside the judgment and for leave to file an amended complaint.  The Court affirmed the district court’s denial, holding that the proposed amendments failed to adequately plead corporate scienter.
     
    CATEGORY: Scienter
  • District Of New Jersey Largely Upholds Claims In Putative Class Action Alleging Misleading Asbestos-Related Liability Projections
     
    05/27/2020

    On May 18, 2020, Judge William J. Martini of the United States District Court for the District of New Jersey denied a motion to dismiss a putative class action asserting claims under Section 10(b) of the Securities Exchange Act and Rule 10b-5 promulgated thereunder against a consumer and industrial products company and certain of its executives.  Kanefsky v. Honeywell Int’l Inc., No. 18-cv-15536, slip op. (D.N.J. May 18, 2020), ECF No. 106.  Plaintiff alleged that the company made misrepresentations in SEC filings and public statements regarding the projected asbestos liability arising from its acquisition of a manufacturer of automobile brakes.  The Court held that plaintiff adequately alleged falsity, scienter, and loss causation as to certain alleged misstatements.
     
  • Northern District Of California Declines To Dismiss Putative Class Action Against Enterprise Software Company
     
    05/05/2020

    On April 28, 2020, Judge Susan Illston of the United States District Court for the Northern District of California denied a motion to dismiss a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder against an enterprise software company and certain of its executives.  Roberts v. Zuora, Inc., No. 19-cv-03422-SI, slip op. (N.D. Cal. Apr. 28, 2020), ECF No. 75.  Plaintiff alleged that, prior to its initial public offering, the company misstated that its two flagship products could be integrated together and that such integration was a key part of its business strategy, when in fact the product integration was not functional.  The Court held that plaintiff adequately alleged that such statements were false or misleading and made with the requisite scienter.
     
  • District Of New Jersey Dismisses Putative Class Action Against Blockchain Company For Failure To Adequately Allege Misstatements Or “Scheme” Liability
     
    05/05/2020

    On April 30, 2020, Chief Judge Freda L. Wolfson of the United States District Court for the District of New Jersey dismissed a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder against a company that supports and operates blockchain technologies and certain of its executives and investors.  Takata v. Riot Blockchain, Inc., No. 18-02293 (FLW), slip op. (D. N.J. Apr. 30, 2020).  Plaintiff alleged that defendants engaged in a “pump-and-dump” scheme to inflate the price of the company’s stock before selling to unsuspecting retail investors.  Id.  The Court held that plaintiff failed to adequately allege any actionable misrepresentations and otherwise failed to establish “scheme” liability, and dismissed the action without prejudice.
     
  • Southern District Of New York Dismisses Securities Fraud Claims Against Biopharmaceutical Company For Failure To Adequately Allege Misstatements Or Scienter
     
    05/05/2020

    On April 28, 2020, Judge Victor Marrero of the United States District Court for the Southern District of New York dismissed a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder against a biopharmaceutical company and certain of its executives.  Schaeffer v. Nabriva Therapeutics plc, No. 19-cv-4183, slip op. (S.D.N.Y. Apr. 28, 2020), ECF No. 40.  Plaintiffs alleged that the company made false or misleading statements suggesting that a drug it submitted to the FDA for marketing approval would be approved in 2019.  The Court held that the alleged misstatements were either non-actionable puffery, or were protected forward-looking statements, or were not sufficiently alleged to have been made with scienter.
     
  • Arizona Federal Court Upholds Rule 10b-5(b) Claims Against Renewable Energy Company And Its Executives, But Dismisses 10b-5(a) And (c) Claims
     
    04/21/2020

    On April 8, 2020, Chief Judge G. Murray Snow of the United States District Court for the District of Arizona granted in part and denied in part a motion to dismiss a putative securities class action filed against a renewable energy company (“Company”) and its executives, alleging violations of Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 and SEC Rule 10b-5.  Zhu v. Taronis Techs. Inc., 2020 WL 1703680 (D. Ariz. Apr. 8, 2020).  Plaintiffs alleged defendants misled investors about the existence of a contract with the City of San Diego.  The Court denied defendants’ motion to dismiss as to plaintiffs’ claims under Rule 10b-5(b) but granted the motion as to claims asserted under Rule 10b-5(a) and (c).
     
  • Eighth Circuit Affirms Dismissal Of Putative Class Action Against Major American Retailer For Failure To Adequately Plead Falsity And Scienter
     
    04/21/2020

    On April 10, 2020, the United States Court of Appeals for the Eighth Circuit affirmed the dismissal of a putative class action against a large American retailer (the “Company”) and certain of its current and former executives for violations of Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 (the “Exchange Act”) and SEC Rule 10b-5.  In re Target Corp. Sec. Litig., 2020 WL 1814268 (8th Cir. 2020).  Plaintiffs alleged that defendants made materially misleading statements about problems facing the Company’s Canadian subsidiary (“Canadian Subsidiary”), which filed for bankruptcy less than two years after opening in the Canadian market.  The district court dismissed the action, holding that plaintiffs failed to meet the pleading standards of the Private Securities Litigation Reform Act (“PSLRA”), and denied reconsideration and leave to amend.  The Eighth Circuit affirmed, holding that plaintiffs failed to plead scienter adequately for any of the alleged misleading statements and falsity for some of the alleged misstatements. 
     
  • Northern District Of California Denies Motion To Dismiss Putative Class Action Against Automaker Alleging Misstatements Based On CEO’s Social Media Posts
     
    04/21/2020

    On April 15, 2020, Judge Edward M. Chen of the United States District Court for the Northern District of California denied a motion to dismiss a putative securities fraud class action asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 against a designer and manufacturer of electric cars (the “Company”), its co-founder and CEO and its directors.  In re Tesla Inc. Securities Litigation, No. 3:18-cv-04865 (N.D. Cal. Apr. 15, 2020).  Plaintiff alleged that the statements made by the Company’s CEO on Twitter regarding securing funding for a going-private transaction were materially misleading.  The Court denied defendants’ motion to dismiss for failure to state a claim, finding that plaintiff adequately pleaded falsity, scienter, and loss causation.
     
  • Southern District Of New York Certifies Class After Again Paring Claims Against Pharmaceutical Company
     
    04/14/2020

    On April 6, 2020, Judge J. Paul Oetken of the United States District Court for the Southern District of New York partially granted a motion to dismiss claims under the Securities Exchange Act of 1934 against a pharmaceutical company and certain of its executives, and then granted plaintiffs’ unopposed motion for class certification.  In re Mylan N.V. Sec. Litig., No. 16-CV-7926 (JPO), 2020 WL 1673811 (S.D.N.Y. Apr. 6, 2020).  As noted in our prior posts regarding the company’s motions to dismiss the first and second amended complaints, plaintiffs alleged that defendants made misleading statements regarding, among other things, an alleged rebate scheme involving the company’s EpiPen, and that defendants engaged in an illegal conspiracy to inflate the prices for various of the company’s generic drugs.  After plaintiffs filed a third amended complaint attempting to address deficiencies identified by the Court in its prior opinions, the Court held that plaintiffs had met their burden to plead scienter with respect to some, but not all, of the alleged misstatements.
     
  • Southern District Of New York Dismisses Putative Class Action Against Automotive Seating Manufacturer For Failure To Adequately Allege Misrepresentations And Scienter
     
    04/14/2020

    On April 2, 2020, Judge Ronnie Abrams 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 manufacturer of automotive seating and certain of its executives.  In re Adient PLC Sec. Lit., No. 18-CV-9116 (RA) (S.D.N.Y. Apr. 2, 2020).  Plaintiffs alleged that the company made false and misleading statements with respect to improvements in the projected margin of “Adient,” a business spun off of its parent company, and in a particular Adient business segment (the “Metals” segment).  The Court held that plaintiffs failed to adequately allege an actionable misstatement or scienter, and, noting that plaintiffs had already voluntarily amended their complaint after defendants filed a previous motion to dismiss, denied leave to amend.
  • First Circuit Affirms Dismissal Of Putative Class Action Against Pharmaceutical Company For Failure To Adequately Allege Scienter
     
    04/14/2020

    On April 9, 2020, the United States Court of Appeals for the First Circuit affirmed the dismissal of a putative class action asserting claims under the Securities Exchange Act of 1934 against a pharmaceutical company and certain of its executives.  Gallagher v. Ocular Therapeutix, Inc., No. 19-1557 (1st Cir. Apr. 9, 2020).  Plaintiffs alleged that the company made misrepresentations regarding manufacturing processes that served as the basis for the FDA’s rejection of the company’s New Drug Application (“NDA”).  The lower court dismissed the action for failure to allege an actionable misstatement or omission or to sufficiently allege scienter.  The First Circuit affirmed, holding that plaintiffs failed to allege sufficient facts to support a strong inference of scienter. 
     
    CATEGORY: Scienter
  • Southern District Of New York Dismisses Putative Class Action Against Shoe Manufacturer For Failure To Adequately Allege Misrepresentations And Scienter
     
    03/24/2020


    On March 12, 2020, Judge Naomi Reice Buchwald of the United States District Court for the Southern District of New York dismissed a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 against a shoe manufacturer and certain of its executives.  In re Skechers USA, Inc. Sec. Lit., No. 18-CV-8039 (NRB) (S.D.N.Y. Mar. 12, 2020).  Plaintiffs alleged that the company made misstatements and omissions in earnings calls and SEC filings regarding the growth rate of expenses in comparison to the growth rate of sales.  The Court held that plaintiffs failed to adequately allege either an actionable misrepresentation or scienter, and denied leave to amend.

     
  • Northern District Of California Dismisses Putative Class Action Against Technology Company For Failure To Adequately Allege Falsity And Scienter
     
    03/24/2020


    On March 16, 2020, Judge Haywood S. Gilliam, Jr. of the United States District Court for the Northern District of California dismissed a putative class action against a technology company and its executives asserting claims under Section 10(b) of the Securities Exchange Act of 1934.  Iron Workers Loc. 580 Jt. Funds v. NVIDIA Corp., No. 18-CV-07669-HSG, 2020 WL 1244936 (N.D. Cal. Mar. 16, 2020).  Plaintiffs alleged that the company made misrepresentations regarding its sales of graphic processing units (“GPUs”) for computer gaming and the proportion of such sales that were actually made to cryptocurrency miners—for which demand was allegedly more volatile.  The Court dismissed the action, holding that plaintiffs failed to adequately plead that the alleged misstatements were materially false or made with scienter, while permitting plaintiffs to file an amended complaint to attempt to cure these deficiencies.

     
  • Southern District Of New York Dismisses Securities Fraud Complaint Against An Insurance Company, Finding That Confidential Witness Statements And Short-Seller Reports Were Not Sufficiently Particularized To Allege An Actionable Misstatement Or Omission
     
    03/11/2020

    On March 2, 2020, Judge Paul A. Engelmayer of the United States District Court for the Southern District of New York dismissed a putative securities fraud class action asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 against a foreign insurance company (the “Company”) and certain current and former officers (the “individual defendants,” and collectively, “defendants”).  Long v. Fanhua Inc. et al., No. 1:18-CV-08183 (S.D.N.Y. Mar. 2, 2020).  Plaintiff, who commenced the action on behalf of all persons who purchased the Company’s American Depository Shares (“ADSs”), alleged that defendants failed to disclose certain related-party dealings and that the Company’s stock price declined once those dealings were disclosed to the market.  The Court dismissed plaintiff’s complaint and held that plaintiff’s reliance on uncorroborated short-seller reports was insufficient to state a claim. 
     
  • Tenth Circuit Affirms Dismissal Of Putative Class Action For Failure To Adequately Allege Scienter
     
    03/03/2020

    On February 25, 2020, the United States Court of Appeals for the Tenth Circuit affirmed the dismissal of a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 against a money-transfer services company and certain of its former executives.  Smallen v. W. Union Co.,—F.3d—, 2020 WL 893826 (10th Cir. 2020).  Plaintiff alleged that the company made misrepresentations in SEC filings and public statements concerning its compliance with anti-money laundering and anti-fraud laws.  The lower court determined that plaintiff failed to adequately allege scienter.  Id. at *1.  The Tenth Circuit affirmed, holding that, although the complaint “may give rise to some plausible inference of culpability,” it fell short of the heightened standard imposed by the Private Securities Litigation Reform Act (“PSLRA”).  Id.

     
    CATEGORY: Scienter
  • Southern District Of New York Dismisses Putative Class Action Against Mining Company For Failure To Adequately Allege Actionable Omissions Or Scienter
     
    03/03/2020

    On February 27, 2020, Judge Loretta A. Preska of the United States District Court for the Southern District of New York dismissed a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 against a precious metals mining company and certain of its executives.  In Re Pretium Resources Inc. Sec. Lit., No. 18-CV-08199 (S.D.N.Y. Feb. 27, 2020).  Plaintiffs alleged that the company made misleading public statements expressing confidence in an existing plan for a particular gold mine, notwithstanding substantially increased excavation costs the mine was facing.  As noted by the Court and discussed in our prior post, the Southern District of New York previously dismissed another action filed against the company regarding alleged misrepresentations relating to its projections for the same mine.  Here, too, the Court held that plaintiffs failed to allege an actionable omission or scienter.
     
  • Middle District Of Florida Dismisses Securities Fraud Action Against Foodservice Equipment Company For Failure To Plead Scienter
     
    02/19/2020

    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 Delaware Partially Sustains Securities Fraud Case Against Automotive Parts Distributor For False Sales Growth Projections
     
    02/19/2020

    On February 7, 2020, Judge Richard G. Andrews of the United States District Court for the District of Delaware granted in part and denied in part motions to dismiss a putative securities class action against an automotive aftermarket parts provider (the “Company”), certain members of its management (the “Company Individual Defendants”), a hedge fund that owned approximately four percent of the Company’s shares, and the fund’s Chief Executive Officer who was a member of the Company’s board of directors.  In re Advance Auto Parts, Inc., Sec. Litig., No. CV-18-212-RGA (D. Del. Feb. 7, 2020).  Plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making misleading misstatements and omissions about the Company’s projected growth and financial condition.  The Court dismissed the claims to the extent it found them to be puffery or lacking sufficient allegations of falsity, but denied the motion with respect to claims based on statements related to projections and opinions regarding the Company’s financial outlook. 
     
  • Northern District Of California Pares Claims In Putative Class Action Against Food Supplement Manufacturer
     
    02/11/2020

    On February 4, 2020, Judge James Donato of the United States District Court for the Northern District of California partially dismissed a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 against a food supplement company and certain of its former executives.  In Re TerraVia Holdings, Inc. Sec. Litig., No. 16-CV-06633-JD, 2020 WL 553939 (N.D. Cal. Feb. 4, 2020).  Plaintiffs alleged that the company made misrepresentations regarding the health benefits and commercial viability of certain ingredients it created and sourced for its food manufacturing partners, based on the company having received reports that these ingredients were causing illnesses, ultimately leading to product recalls.  The Court held that certain of the alleged misstatements were non-actionable, but that plaintiffs’ allegations respecting certain other alleged misstatements were sufficient to state a claim.
  • Maryland District Court Dismisses Majority Of Claims In Putative Class Action Against Media Company
     
    02/11/2020

    On February 4, 2020, Judge Catherine C. Blake of the United States District Court for the District of Maryland dismissed certain claims in a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 against a media company and certain of its executives.  In re Sinclair Broadcast Group, Inc. Sec. Litig., slip op., No. 18-cv-2445 (D. Md. Feb. 4, 2020).  Plaintiffs alleged that the company made various misstatements to the FCC in connection with an ultimately unsuccessful merger with another media company, and that the company had engaged in an illegal price-fixing conspiracy regarding advertising rates.  The Court dismissed most of plaintiffs’ claims, but held that plaintiffs had sufficiently alleged falsity and scienter with respect to certain specific statements concerning proposed divestitures in connection with the merger.
  • Southern District Of New York Dismisses Putative Class Action Against Tobacco Company For Failure To Adequately Allege Falsity And Scienter
     
    02/11/2020

    On February 4, 2020, Judge Ronnie Abrams of the United States District Court for the Southern District of New York dismissed a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 against a tobacco company and certain of its executives.  In re Philip Morris Int’l Inc. Sec. Litig., No. 18-CV-08049 (S.D.N.Y. Feb. 4, 2020).  Plaintiffs alleged that the company made misrepresentations in securities filings and public statements regarding clinical studies it published in connection with its application to the U.S. Food and Drug Administration to sell its vapor-based product in the United States and to market it as presenting a lower risk than traditional tobacco products.  Plaintiffs also alleged that the company made misrepresentations regarding sales growth in Japan for the same product.  The Court held that plaintiffs failed to allege an actionable misstatement or omission or to establish scienter, but granted leave to amend with respect to certain allegations.
  • District Of New Jersey Upholds Securities Fraud Action Against Major Student Loan Servicer Based Upon Alleged Forbearance Scheme Harming Borrowers
     
    01/07/2020

    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.
    CATEGORIES: CausationFraudScienter
  • District Of Nevada Denies Motion To Dismiss Putative Class Action Against Life Science Company Alleging Misstatements Regarding Patentability Of Key Product
     
    12/19/2019

    On December 10, 2019, Judge Jennifer A. Dorsey of the United States District Court for the District of Nevada denied a motion to dismiss a putative securities class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 against a life science company specializing in cannabidiols (“CBD”) and certain of the company’s executives.  In re CV Sciences, Inc. Sec. Litig., 2019 WL 6718086 (D. Nev. Dec. 10, 2019).  Plaintiffs alleged that the company made misleading statements that a CBD product was proprietary and had a patent application pending by failing to disclose that the U.S. Patent and Trademark Office (“USPTO”) had rejected its patent application twice, including a “final rejection” on the ground that the proposed invention was obvious.  Id. at *1.  The Court held that plaintiffs had sufficiently alleged the falsity of the alleged misrepresentations at the motion-to-dismiss stage, and therefore declined to dismiss the complaint.
  • District Of Kansas Allows Exchange Act Claims Against Financial Services Company To Proceed, Finding That Plaintiffs Adequately Alleged Material Misstatements, Omissions And Scienter
     
    12/10/2019

    On December 3, 2019, Judge John W. Lungstrum of the United States District Court for the District of Kansas denied a motion to dismiss a putative securities class action involving claims brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, against a financial services company (the “Company”), three of its senior officers and several of its founder directors.  Yellowdog Partners, LP and Carpenters Pension Fund of Illinois v. CURO Group Holdings Corp. et al., 18-cv-02662 (D. Kan. Dec. 3, 2019).  Plaintiffs alleged that the Company and the three officer defendants made false and materially misleading statements concerning the Company’s business transition away from its most profitable product and its effect on the Company’s financial condition.  The Court denied defendants’ motion to dismiss, finding that plaintiffs sufficiently pleaded falsity and scienter.
     
  • Southern District Of California Denies Summary Judgment For Defendants, Ruling That There Are Triable Issues Of Fact Related To Loss Causation, Materiality, Scienter, And Damages
     
    12/03/2019
    On November 6, 2016, Judge Michael A. Anello of the United States District Court for the Southern District of California denied defendants’ motion for summary judgment in a securities class action against a theme park and entertainment company (“defendant” or the “Company”), certain members of its management, and its largest shareholder.  Baker v. SeaWorld Entm’t, Inc., No. 14CV2129-MMA (AGS), 2019 WL 6118448 (S.D. Cal. Nov. 18, 2019).  Plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making materially misleading misstatements and omissions about the effect of Blackfish, a documentary film concerning killer whales in captivity, on attendance at the theme park and its earnings.  The Court denied defendants’ motion for summary judgment on the basis that there were genuine issues of material fact with respect to each element of a securities fraud claim. 
  • Northern District Of Ohio Dismisses Securities Fraud Action Against REIT Based Upon Lack Of Scienter Of Healthcare Company-Lessee’s Alleged Billing Fraud
     
    12/03/2019

    On November 22, 2019, Judge Jeffrey J. Helmick of the United States District Court for the Northern District of Ohio dismissed a putative class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 against a real estate investment trust (“REIT”) and its former officers (collectively “Defendants”), along with a healthcare company with which the REIT transacted (the “Company”) and its officers.  Boynton Beach Firefighters' Pension Fund v. HCP, Inc., No. 3:16-CV-1106, 2019 WL 6251435 (N.D. Ohio Nov. 22, 2019).  Plaintiffs alleged Defendants made false or misleading statements about the Company’s future prospects, but knew or should have known that the Company was engaged in unlawful billing practices because of due diligence in connection with the transaction with the Company and a subsequent government investigation.  The Court held that plaintiffs’ allegations of scienter were based on impermissible hindsight pleading and dismissed the complaint.
     
    CATEGORIES: Exchange ActScienter
  • Southern District Of New York Denies Motion To Revive Exchange Act Claims Against Underwriter Of Regulation A+ Offering, Based On Failure To Adequately Allege Scienter
     
    11/26/2019

    On November 15, 2019, Judge Denise Cote of the United States District Court for the Southern District of New York denied a motion seeking to revive claims under the Securities Exchange Act of 1934 against the underwriter of a Regulation A+ offering.  In Re Longfin Corp. Sec. Class Action Litig., No. 18 CV 2933(DLC), 2019 WL 6045308 (S.D.N.Y. Nov. 15, 2019).  As noted in our prior post, on July 29, 2019, the Court granted the underwriter’s motion for reconsideration and dismissed the claims against it with prejudice for failure to adequately allege scienter.  In response to that ruling, plaintiffs filed a motion for relief from the prior order under Rule 60(a)(2) of the Federal Rules of Civil Procedure and sought to file a new amended complaint, based on the contention that plaintiffs had identified new evidence.  Judge Cote held, however, that the proposed new allegations still failed to adequately allege scienter.

     
    CATEGORY: Scienter
  • Middle District Of Tennessee Pares Claims In Putative Class Action Against Healthcare Company And Its Previous Owner
     
    11/26/2019

    On November 19, 2019, Judge William M. Campbell of the United States District Court for the Middle District of Tennessee granted in part and denied in part motions to dismiss a putative class action under the Securities Act of 1933 and the Securities Exchange Act of 1934 against a healthcare company, certain of its officers and directors, and a private equity firm that previously owned the company.  Plaintiffs alleged that the company failed to disclose that allegedly improper business practices were responsible for its revenue growth.  In re Envision Healthcare Corp. Sec. Litig., No. 3:17-CV-01112, 2019 WL 6168254 (M.D. Tenn. Nov. 19, 2019).  The Court held that certain of the claims against the company and the individual defendants were adequately pleaded and others were not, but dismissed all claims against the private equity firm for failure to adequately allege scienter.
     
  • District Of Massachusetts Dismisses Exchange Act Claims For Failure To Adequately Allege A Material Misleading Statement Or Scienter
     
    11/19/2019

    On November 13, 2019, Judge Leo T. Sorokin of the United States District Court for the District of Massachusetts dismissed a putative securities class action involving claims brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, against a biopharmaceutical company (the “Company”) and two of its senior officers.  LSI Design and Integration Corp. v. Tesaro Inc. et al., 18-cv-12352 (D. Ma. Nov. 13, 2019).  Plaintiff alleged that the Company and its CEO and CFO made materially misleading statements in violation of the Exchange Act concerning the Company’s financial condition and drug sales.  The Court dismissed the amended complaint finding that plaintiff failed to sufficiently plead falsity or scienter.
     
  • Northern District Of California Allows Securities Class Action Based On Alleged Price-Fixing To Proceed Against Pharmaceutical Wholesaler
     
    11/05/2019

    On October 29, 2019, Judge Charles R. Breyer of the United States District Court for the Northern District of California denied a motion to dismiss a putative securities class action brought against a pharmaceutical wholesaler and two of its former executives.  Evanston Police Pension Fund v. McKesson Corp., et al., 18-cv-06525-CRB (N.D. Cal. Oct. 29, 2019).  Plaintiffs asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, alleging that defendants knew about and participated in a price-fixing conspiracy that allowed the company to profit from the inflated prices of generic drugs during the alleged class period and caused the company to suffer decreased earnings once reports revealed government investigations into alleged price-fixing and prices dropped.  The Court denied defendants’ motion to dismiss, holding that plaintiffs adequately alleged material misstatements, scienter, and loss causation at the pleading stage.
     
  • Northern District Of Illinois Dismisses Putative Class Action Against In-Flight Internet Provider For Failure To Adequately Allege Falsity And Scienter
     
    10/29/2019

    On October 16, 2019, Judge Jorge L. Alonso of the United States District Court for the Northern District of Illinois Eastern Division dismissed a putative securities class action against an in-flight internet connectivity services provider (the “Company”) and some of its current and former executives.  Pierrelouis v. Gogo Inc., et al., No. 18-cv-04473 (N.D. Ill. Oct. 16, 2019).  Plaintiffs, who brought claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, alleged that defendants misrepresented the Company’s financial health and the performance and reliability of its in-flight internet services by failing to disclose the extent of a de-icing fluid issue that was affecting its ability to provide those services, and that the eventual disclosure of the issue caused the Company’s stock price to decline.  The Court held that plaintiffs failed to plead a material misrepresentation or omission and also failed to adequately allege a strong inference of scienter, and therefore dismissed the amended complaint without prejudice.
     
  • Western District Of Washington Partially Dismisses Exchange Act Claims Against Technology Company
     
    10/17/2019

    On October 4, 2019, Judge Robert Lasnik of the United States District Court for the Western District of Washington granted in part and denied in part a motion to dismiss a putative securities class action asserting claims under the Securities Exchange Act of 1934 against a technology company and certain of its executives.  In re Impinj, Inc., Sec. Litig., No. C18-5704 RSL, 2019 WL 4917101 (W.D. Wash. Oct. 4, 2019).  The Court held that plaintiffs failed to alleged falsity as to certain alleged misrepresentations and dismissed claims against one of the company’s executives for failure to adequately allege scienter, but otherwise upheld plaintiffs’ claims.

     
  • Eastern District Of Pennsylvania Dismisses Putative Class Action Against Semiconductor Equipment Manufacturer For Failure To Adequately Allege Falsity And Scienter
     
    10/17/2019

    On October 9, 2019, Judge C. Darnell Jones, II of the United States District Court for the Eastern District of Pennsylvania dismissed a putative securities class action asserting claims under the Securities Exchange Act of 1934 against a manufacturer of equipment and tools used to assemble semiconductors and its CEO and CFO.  Kumar v. Kulicke & Soffa Indus., Inc., No. CV 19-0362, 2019 WL 5081896 (E.D. Pa. Oct. 9, 2019).  Based on the company’s disclosure of control deficiencies, improper transactions by an unnamed “senior finance employee,” the resignation of the company’s CFO, and amended financial statements, plaintiffs alleged that the company’s SEC filings and SOX certifications contained material misrepresentations.  Id. at *2.  The Court held that plaintiffs had identified actionable misstatements as to the CFO but had not adequately alleged scienter and, therefore, dismissed the case, while allowing plaintiffs leave to file an amended complaint.

     
  • Eastern District Of New York Dismisses Exchange Act Claims For Failure To Adequately Allege Falsity Or Scienter
     
    10/08/2019

    On September 30, 2019, Judge Ann M. Donnelly of the United States District Court for the Eastern District of New York dismissed a putative securities class action asserting claims brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) against a footwear retailer (the “Company”) and several of its executives.  City of Warren Police and Fire Retirement System v. Foot Locker Inc. et al., 18-cv-01492 (E.D.N.Y. Sept. 30, 2019).  Plaintiffs alleged that the Company and its executives made materially misleading statements and omissions in violation of the Exchange Act concerning its competitive position in the market, the strength of the Company’s relationship with its vendors, and its product allocation and inventory.  The Court dismissed the complaint without prejudice, holding that plaintiffs failed to sufficiently plead falsity and scienter, and granted plaintiffs leave to amend.
  • Southern District Of New York Dismisses Putative Securities Class Action Against Pharmaceutical Company For Failure To Adequately Allege Scienter
     
    10/08/2019

    On September 30, 2019, Judge J. Paul Oetken of the United States District Court for the Southern District of New York dismissed a putative securities class action brought against a pharmaceutical company and certain of its current and former executives.  Tung v. Bristol-Myers Squibb Co., et al., 18-cv-1611 (S.D.N.Y. Sept. 30, 2019).  Plaintiffs allege that the pharmaceutical company (the “Company”) and defendant executives made materially misleading statements and omissions concerning the design of the Company’s clinical trial that tested the efficacy of a newly-developed anticancer drug in violation of Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder.  The Court dismissed the claims finding that plaintiffs failed to sufficiently plead scienter, but granted plaintiffs leave to amend to address the pleading deficiencies.
    CATEGORIES: Exchange ActScienter
  • Northern District Of Illinois Dismisses Putative Class Action Against Pharmaceutical Company For Failure To Adequately Allege Falsity Or Scienter
     
    09/24/2019

    On September 18, 2019, Judge Charles P. Kocoras of the United States District Court for the Northern District of Illinois dismissed a putative class action against a pharmaceutical company asserting claims under Section 10(b) of the Securities Exchange Act and Section 14(e) of the Williams Act.  Walleye Trading LLC v. AbbVie, Inc., No. 18 C 05114, 2019 WL 4464392 (N.D. Ill. Sept. 18, 2019).  Plaintiff alleged that the company’s statement announcing the preliminary results of a tender offer contained misrepresentations regarding the number of shares tendered and the price per share at which the tendered shares would be acquired, which later had to be corrected in a revised statement.  The Court held that plaintiff failed to allege that the alleged misrepresentation was false when made or to adequately allege a strong inference of scienter.
  • Northern District Of California Dismisses Putative Class Action Against Digital Payments Company For Failure To Adequately Allege Scienter
     
    09/24/2019

    On September 18, 2019, Judge Edward M. Chen of the United States District Court for the Northern District of California dismissed a putative class action against a digital payment services company and certain of its officers asserting claims under Section 10(b) of the Securities Exchange Act.  Sgarlata v. PayPal Holdings, Inc., 17-CV-06956-EMC (N.D. Cal. Sept. 18, 2019).  Plaintiffs alleged that the company made misrepresentations in a series of press releases regarding a data breach.  The Court held that plaintiffs’ allegations were insufficient to raise a strong inference of scienter. 
  • District Of Nevada Grants In Part And Denies In Part Motion To Dismiss Exchange Act Claims Against Airline Company And Its Executives, Finding That Plaintiffs Adequately Alleged Scienter With Respect To Certain Alleged Statements Regarding The Airline’s Safety And Mechanical Reliability
     
    09/17/2019

    On September 9, 2019, Judge Andrew P. Gordon of the United States District Court for the District of Nevada partially dismissed a putative securities class action brought against an airline company and certain of its current and former executives.  Brendon et al. v. Allegiant Travel Co. et al., 2:18-cv-01758 (D. Nev. Sept. 9, 2019).  Plaintiffs alleged in their first amended complaint (“FAC”) that the airline and its parent company (collectively, the “Airline”) and certain of its executives made materially misleading statements and omissions concerning the safety and mechanical reliability of its aircrafts and the competency of its maintenance staff in violation of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), Rule 10b-5 promulgated thereunder, and Section 20(a).  The Court allowed claims related to certain alleged false statements by defendants to proceed, dismissed certain of the claims that plaintiffs failed to sufficiently plead falsity and scienter, and granted plaintiffs leave to amend to address certain of the pleading deficiencies.
    CATEGORIES: Exchange ActScienter
  • Southern District Of New York Dismisses In Part Securities Fraud Claims Against Major Industrial Conglomerate, Allowing Claims Based Upon Factoring In Financial Filings To Proceed
     
    09/10/2019

    On August 29, 2019, Judge Jesse M. Furman of the U.S. District Court for the Southern District of New York dismissed most of the securities fraud claims in a putative class action against a major industrial conglomerate (the “Company”), and certain of its current and former executives, brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5.  AP-Fonden v. Gen. Elec. Co., 2019 BL 325702 (S.D.N.Y. Aug. 29, 2019).  Plaintiffs alleged defendants concealed performance problems in the Company’s insurance and power divisions.  The Court found, among other things, that plaintiffs did not adequately plead claims based upon allegedly misrepresented liabilities in the Company’s long-term care (“LTC”) insurance portfolio.  The Court did not, however, dismiss plaintiffs’ claim that the Company failed to disclose that it used “factoring” arrangements to generate current revenue by selling future revenues to third parties.
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