On March 21, 2024, the United States Court of Appeals for the Third Circuit affirmed the dismissal of a putative class action against a biopharmaceutical company (the “Company”) and certain of its officers under Sections 10(b) and 20(a) of the Securities Exchange Act. In re Ocugen, Inc. Sec. Litig., No. 23-1570 (3d Cir. Mar. 21, 2024). Plaintiffs alleged that the Company’s statements and omissions about its partnership with an Indian biotechnology company to develop a COVID-19 vaccine for Emergency Use Authorization (“EUA”) with the U.S. Food and Drug Administration (“FDA”) were false and misleading. The Court affirmed the district court’s dismissal of the complaint with prejudice based on plaintiffs’ failure to allege a material misrepresentation.

On July 24, 2023, the United States Court of Appeals for the Fourth Circuit affirmed the dismissal of claims under Sections 10(b), 14(a), and 20(a) of the Securities Exchange Act of 1934 against a biopharmaceutical company (the “Company”) and certain of its officers and directors.  San Antonio Fire & Police Pension Fund v. Syneos Health Inc., 2023 WL 4688178 (4th Cir. 2023).  Plaintiffs alleged that the Company misled investors about its projected growth following its merger with another company.  The Fourth Circuit held that plaintiffs failed to adequately allege scienter, and that they also failed to allege that the alleged misstatements were material, stating that “not every financial disappointment is actionable under federal law.”

On December 12, 2022, Judge Colleen McMahon of the United States District Court for the Southern District of New York granted summary judgment to a major pharmaceutical company (the “Company”) and dismissed class action claims that the Company failed to disclose a “serious and known link” between the Company’s breast implant products and a rare form of cancer, breast implant-associated anaplastic large cell lymphoma (BIA-ALCL), in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. In re Allergan PLC Securities Litigation, 2022 WL 17584155 (S.D.N.Y. 2022).  The Court held that the challenged statements were “literally true and not misleading” and that plaintiff failed to prove after extensive discovery that either scientific studies or the regulatory community had determined that the Company’s implants were in fact more closely associated with BIA-ALCL than other types of implants. Because discovery did not uncover any evidence of falsity and plaintiff failed to raise a genuine issue of fact with respect to the materiality of the alleged misrepresentations or as to loss causation, the Court granted the Company’s motion for summary judgment.

On April 25, 2022, U.S. District Judge Jesse M. Furman dismissed a putative securities class action alleging that a fintech company (the “Company”) misrepresented its internal control weaknesses and financial results in its prospectus and registration statement (collectively, the “Offering Materials”) in connection with its 2018 initial public offering (the “IPO”) of ADSs in violation of Sections 11 and 15 of the Securities Act of 1933.  Yaroni v. Pintec Technology Holdings Limited et al., No. 20-cv-08062 (S.D.N.Y. Apr. 25, 2022).  The Court held that the complaint failed to allege that defendants made misstatements and also that the claims based on certain statements were time-barred.  The Court dismissed the action with prejudice because “the problems with [p]laintiffs’ claims are substantive.”

On December 8, 2021, Judge Philip S. Gutierrez of the U.S. District Court for the Central District of California dismissed, with prejudice, a suit against a Canadian cannabis manufacturer (the “Company”), alleging that the Company failed to disclose material information about its facilities in Colombia and its transactions with other companies in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  In re Pharmacielo Ltd. Sec. Litig., No. 20-2182-PSG (C.D. Cal. Dec. 8, 2021).  Plaintiffs—whose complaint was once dismissed—amended their complaint to bolster their allegations based on an assortment of Company statements regarding its facilities and expansion plans that plaintiffs alleged were designed to artificially inflate the Company’s stock price.  The Court dismissed the amended complaint for failure to plead falsity or materiality and did so with prejudice because any amendments would be futile based on their “failed attempt to remedy” the deficiencies of the prior complaint.

On July 8, 2021, Judge J. Paul Oetken of the United States District Court for the Southern District of New York dismissed a putative securities class action against a Chinese manufacturer of cryptocurrency mining hardware (the “Company”) alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Sections 11 and 15 of the Securities Act of 1933.  Boluka Garment Co. v. Canaan Inc., No. 20-cv-07139 (S.D.N.Y. July 8, 2021).  Plaintiffs alleged that the Company failed to disclose material information regarding alleged related-party transactions in its registration statement.  The Court dismissed the complaint with leave to amend because plaintiffs failed to allege loss causation and materiality.

On March 29, 2021, Judge David O. Carter of the United States District Court for the Central District of California denied a motion to dismiss a consolidated putative class action complaint against a medical device manufacturer and marketer (the “Company”) and certain of its officers, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  In re Merit Med. Sys., Inc. Sec. Litig., No. 8:19-02326 DOC (ADSx) (C.D. Cal. Mar. 29, 2021).  Plaintiffs alleged that the Company issued misleading statements regarding its acquisitions of two companies in late 2018 including with respect to the integration of those companies and their products sales.  The Court denied defendants’ motion to dismiss, adopting a report and recommendation by Magistrate Judge Autumn D. Spaeth, which found that most of the challenged statements were not forward-looking statements protected by the PSLRA’s safe harbor provisions and that plaintiffs had adequately pled all elements of their claims. 

On March 31, 2020, Judge Victor A. Bolden of the District of Connecticut dismissed a putative securities class action against a provider of private label credit cards (the “Company”), certain of its officers and directors, and its underwriters in connection with a notes offering.  In re Synchrony Financial Sec. Litig., No. 3:18-cv-1818 (VAB) (D. Conn. Mar. 31, 2020).  Plaintiffs alleged violations of Section 11 of the Securities Act of 1933 (the “Securities Act”) by all defendants, as well as Section 15 of the Securities Act against the individual defendants.  Plaintiffs also alleged violations of Sections 10(b), 20A, and 20(a) of the Securities and Exchange Act of 1934 (the “Exchange Act”) by the Company and certain of the individual defendants.  The Court granted defendants’ motion to dismiss the Amended Complaint in its entirety with prejudice.
 

On February 19, 2020, Judge Pamela A. Barker of the United States District Court for the Northern District of Ohio granted 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 an aerospace component design and manufacturing company (the “Company”) and two of its executive officers.  In re TransDigm Group Inc., No. 17-cv-01677-PAB (N.D. Ohio Feb. 19, 2020).  Plaintiffs alleged that defendants made materially false and misleading statements and omissions concerning the Company’s operations, business, and prospects that resulted in a drop in the Company’s stock price when the Company made certain purported corrective disclosures.  The Court granted defendants’ motion to dismiss plaintiffs’ Third Amended Complaint, finding that plaintiffs failed to sufficiently allege materiality or loss causation, and denied leave to amend.
 

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. 
 

On January 17, 2017, Judge Nicholas G. Garaufis of the United States District Court for the Eastern District of New York dismissed a putative class action asserting claims under Sections 10(b), 14(a), and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5, against a tax preparation services provider (the “Company”) and its former CEO and CFO (collectively, “Defendants”).  In re Liberty Tax, Inc. Sec. Litig., No. 2:17-CV-07327 (NGG) (RML) (E.D.N.Y. Jan. 17, 2020).  Plaintiffs alleged that Defendants made false and misleading statements and omissions about the Company’s compliance efforts and internal controls, which concealed the CEO’s extensive misconduct that ultimately caused steep declines in the Company’s stock price.  The Court dismissed the action on the basis that the statements at issue were unrelated to the CEO’s misconduct or were mere puffery, and that plaintiffs failed to establish loss causation linked to any corrective disclosures. 
 

On July 11, 2019, Justice Andrew Borrok of the New York State Supreme Court, County of New York, Commercial Division, dismissed a putative securities class action against a Brazilian based online retailer (the “Company”), certain of its executives and directors, and its underwriters in connection with the Company’s initial public offering (“IPO”).  In re Netshoes Sec. Litig., Index No. 157435/2018 (Sup. Ct., N.Y. Cty., July 11, 2019).  Plaintiffs—purchasers of the Company’s stock—brought claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”), claiming that defendants made materially false and misleading statements in a registration statement filed with the SEC in connection with the IPO.  The Court dismissed the Securities Act claims without prejudice, finding that the allegations were inactionable opinions under the Supreme Court’s decision in Omnicare, Inc. v. Laborers Dist. Council Const. Indus., 135 S. Ct. 1318 (2015), or were inactionable because they were about past performance, were forward-looking, or were expressions of puffery.

On March 1, 2019, the United States Court of Appeals for the Eighth Circuit reversed the dismissal of a class action arising from the merger of a biotechnical company (“Biotech Company”) and a cancer-diagnostics company (“Diagnostics Company”) against the Biotech Company, its former president, and the company that was formed by the merger (“Post-Merger Company”).  Campbell v. Transgenomic, Inc., No. 18-2198, 2019 WL 983676 (8th Cir. Mar. 1, 2019).  Plaintiffs, former shareholders of the Biotech Company, allege that defendants violated Sections 14(a) and 20(a) of the Securities Exchange Act (“Exchange Act”), and Rule 14a-9 promulgated thereunder, by providing a materially false and misleading proxy statement to shareholders that failed to accurately convey the value of the Diagnostics Company.  Judge John M. Gerrard of the United States District Court for the District of Nebraska dismissed the case and held that the alleged misstatements and omissions were immaterial as a matter of law.  Plaintiffs appealed and the Eighth Circuit reversed the judgment, holding that whether the alleged misstatements and omissions were material was a question for the trier of fact.

On December 13, 2018, Judge Manuel L. Real of the United States District Court for the Central District of California granted defendants’ motion to dismiss plaintiffs’ first amended complaint asserting claims for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”).  Steamfitters Local 449 Pension Plan v. Molina Healthcare, Inc., No. CV 18-3579-R, 2018 WL 6787349, at *1 (C.D. Cal. Dec. 13, 2018).  Defendants are a company that provides managed health care services (“the Company”) and certain of its senior executives.  Plaintiffs alleged that defendants repeatedly claimed that their existing administrative infrastructure was scalable and could handle an increase in business generated from its entry into the Affordable Care Act (“ACA”) marketplace, even though they allegedly knew that this statement was not true.  The Court dismissed the action, holding that the alleged misstatements were protected as a matter of law by the Private Securities Litigation Reform Act’s (“PSLRA”) safe harbor for forward-looking statements.

On December 6, 2018, Chief Judge Patti Saris of the United States District Court for the District of Massachusetts dismissed a putative class action asserting claims under the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder against the early-stage biopharmaceutical company Genocea Biosciences, Inc. and certain of its officers and directors. Emerson v. Genocea Biosciences, Inc., No. 17-12137-PBS (D. Mass. Dec. 6, 2018). Plaintiffs alleged that Genocea omitted to disclose to investors certain six-month post-dosing clinical trial test results because it knew the results to be negative, thereby causing class members to purchase Genocea stock at an inflated price. The Court dismissed the action, holding that the alleged omissions were not material and that other disclosures weighed against finding the required strong inference of scienter.

On August 23, 2018, Judge F. Dennis Saylor IV of the United States District Court for the District of Massachusetts dismissed the claims asserted in a putative class action against ReWalk Robotics and its officers, directors, and IPO underwriters under the Securities Act of 1933 (“Securities Act”) for misrepresentations made in a registration statement with prejudice, but dismissed the claims asserted under the Securities Exchange Act of 1934 (“Exchange Act”) for alleged post-IPO misstatements without prejudice.  Yan v. ReWalk Robotics Ltd., No. 17 Civ. 10169, slip op. (D. Mass. Aug. 23, 2018), ECF No. 107.

On August 21, 2018, Judge Kevin McNulty of the United States District Court for the District of New Jersey dismissed a putative class action against Galena Biopharma Inc. and several of its officers and employees that alleged defendants failed to make appropriate disclosures about the source of revenues associated with an opioid pain medication manufactured by Galena.  In re Galena Biopharma, Inc. Sec. Litig., 2018 WL 3993453 (D.N.J. Aug. 21, 2018).  Plaintiffs alleged that these omissions violated Item 303 of SEC Regulation S-K or, in the alternative, Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder.  The Court held that, although plaintiffs had “identified several troubling practices regarding Galena,” the complaint failed to state a securities fraud claim and dismissed the complaint with leave to replead.

​On May 11, 2018, the United States Court of Appeals for the Tenth Circuit affirmed the district court’s dismissal of a putative class action asserting claims under Sections 10(b) and 20(a) of the Exchange Act against Williams Companies, Inc. (“Williams” or the “Company”), its CEO, CFO, and certain affiliates.  Emps.’ Ret. Sys. of R.I. v. Williams Cos., et al., No. 17-5034 (10th Cir. May 11, 2018).  The claims alleged in the complaint related to an unconsummated merger between Williams, an energy company, and its affiliate, Williams Partners L.P. (“WPZ”), and the Company’s subsequent agreement to merge with a competing energy company, Energy Transfer Equity L.P. (“ETE”).  Plaintiff alleged that the Company misled investors by describing its proposed merger with WPZ, of which Williams held 60% of the units, as “no risk,” and by failing to disclose its merger discussions with ETE.  The Court rejected both arguments and affirmed the district court’s dismissal, reasoning that plaintiff had taken the alleged misstatement out of context, and that it otherwise failed to allege a basis for requiring the disclosure of the merger discussions with ETE. 

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On Monday, April 30, 2018, Judge Robin L. Rosenberg of the United States District Court for the Southern District of Florida dismissed a consolidated putative securities class action against financial services company Ocwen Financial Corporation (the “Company”) and two of its officers.  Carvelli et al. v. Ocwen Financial Corp. et al., No. 9:17-cv-80500 (S.D. Fla. April 30, 2018).  Plaintiffs—shareholders of the Company—alleged that defendants violated Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and SEC Rule 10b-5, and that the individual defendants violated Section 20(a) of the Exchange Act, by making materially false and misleading statements and omissions regarding operational and technological deficiencies within the Company’s mortgage servicing software platform, causing losses to plaintiffs when the deficiencies were revealed and the Company’s stock declined.  The Court disagreed, finding that the statements in question were non-actionable puffery or opinion, forward-looking statements accompanied by meaningful cautionary statements, or statements on their face not false, and therefore dismissed the action with prejudice.

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On September 22, 2017, United States District Judge Alison J. Nathan of the United States District Court for the Southern District of New York dismissed with prejudice an amended consolidated putative class action complaint asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 against Eros International Plc (“Eros”) and certain of its current and former executives.  In re Eros Int’l Sec. Litig., No. 15-cv-8956-AJN (S.D.N.Y. Sept. 22, 2017).  The complaint alleged that defendants deceived investors by touting growth in the number of “registered users” of Eros’s video streaming service, many of whom could not actually use the service, and also by overstating the number of annual releases in its video library.  In dismissing the action, the Court found that plaintiffs’ own definition of an otherwise undefined term could not make a statement actionable when other definitions of those terms were equally plausible.

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On September 28, 2017, the United States Court of Appeals for the Second Circuit affirmed a judgment, entered after a bench trial by Judge Denise Cote of the United States District Court for the Southern District of New York, awarding $806 million for claims brought under Sections 12(a)(2) and 15 of the Securities Act of 1933 (the “Securities Act”) and provisions of the D.C. and Virginia “blue sky” laws in connection with the sale of residential mortgage backed securities (“RMBS”) to the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae).  Fed. Hous. Fin. Agency for Fed. Nat’l Mortg. Ass’n v. Nomura Holding Am., Inc., —F.3d—, 2017 WL 4293322 (2d Cir. 2017).  The trial court found that the RMBS prospectus supplements falsely stated that the underlying loans had been originated generally in accordance with the mortgage originators’ loan underwriting guidelines.  In a 151-page opinion, the Second Circuit affirmed Judge Cote’s legal rulings and factual findings.  Many of the issues addressed in the opinion relate specifically to RMBS and the RMBS securitization process and are beyond the scope of this summary.  Several of the Second Circuit’s key holdings regarding the interpretation and application of the Securities Act may be of broader applicability and are highlighted below, although many such holdings also appear to have been informed to some degree by the specific context of the decision.

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On August 4, 2017, United States District Judge David O. Carter of the United States District Court for the Central District of California denied a motion to dismiss a putative securities fraud class action against El Pollo Loco Holdings, Inc. (“EPL”), certain of its directors and officers, and EPL’s controlling shareholders.  Turocy, et al. v. El Pollo Loco Holdings, Inc., et al., No. SACV-15-1343-DOC (C.D. Cal. Aug. 4, 2017).  Plaintiffs alleged that defendants violated Sections 10(b), 20(a) and/or 20A of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5, by failing to disclose material facts and making materially false or misleading statements as part of a scheme to artificially inflate the stock price of EPL between May 15, 2015 and August 13, 2015, and/or selling their personally held shares in EPL shortly after making the alleged false or misleading statements despite having not sold any shares during the previous six months and not selling the shares pursuant to any Rule 10b5-1 trading plan.  After dismissing without prejudice the original and amended complaints in this action, the Court held that plaintiffs sufficiently alleged misstatements and a strong inference that defendants were aware of the falsity of such statements, and denied defendants’ motion to dismiss the third amended complaint.

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On June 21, 2017, the United States Court of Appeals for the Second Circuit affirmed a lower court’s decision dismissing a putative class action asserting claims under the Securities Act of 1933 (the “Securities Act”) against Vivint Solar, Inc. (“Vivint”), certain of its officers and directors, and the underwriters of its October 2014 initial public offering (“IPO”).  Stadnick v. Vivint Solar, Inc., No. 16-65 (2d Cir. June 21, 2017).  On appeal, plaintiff relied on the decision of the United States Court of Appeals for the First Circuit in Shaw v. Digital Equipment Corp., 82 F.3d 1194 (1st Cir. 1996), to argue that Vivint was obligated to disclose in its IPO prospectus and registration statement financial information for the quarter that ended the day before the IPO because, according to plaintiff, the company’s performance during that time constituted an “extreme departure” from past performance.  In affirming the district court’s dismissal, the court declined to follow Shaw, holding instead that the issue of whether Vivint had an obligation to disclose the information should be based on whether the allegedly omitted information would have “significantly altered the total mix of information made available” at the time of the offering.

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On April 7, 2017, the United States Court of Appeals for the First Circuit affirmed the dismissal of a putative securities fraud class action against the biopharmaceutical developer Zafgen, Inc. (“Zafgen”) and its CEO.  Brennan v. Zafgen, Inc., No. 16-2057, 2017 WL 1291194 (1st Cir. Apr. 7, 2017).  Plaintiffs had asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, alleging that in Zafgen’s IPO registration statement and other public statements defendants omitted information regarding adverse events during clinical trials for Zafgen’s only drug in development, the obesity drug Beloranib.  The Court held that plaintiffs did not adequately plead scienter under the heightened requirements of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), stressing that a defendant’s mere knowledge of omitted information is not sufficient to support a cogent and compelling inference of fraudulent intent.

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On February 9, 2017, Judge Charles Breyer of the United States District Court for the Northern District of California dismissed a putative class action lawsuit against Sunrun Inc. (“Sunrun” or the “Company”), its officers and directors, and the underwriters of its initial public offering (“IPO”).  Greenberg v. Sunrun Inc., No. 16 Civ. 2480 (N.D. Cal. Feb. 9, 2017).  Plaintiffs alleged that the offering documents for Sunrun’s IPO contained misleading representations and omissions in violation of sections 11, 12(a)(2), and 15 of the Securities Act of 1933.  In granting defendants’ motion to dismiss, Judge Breyer found that the offering materials were not misleading, stating that “at worst the Prospectus warned that the devil is in the details without describing precisely where in the details the devil might lurk.”

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On February 13, 2017, Judge Laura Taylor Swain of the United States District Court for the Southern District of New York dismissed with prejudice a putative class action against MaxPoint Interactive, Inc. (“MaxPoint” or the “Company”), several of its officers and directors, and the underwriters of its initial public offering.  Nguyen v. MaxPoint Interactive, Inc., No. 15-cv-6680-LTS, 2017 WL 570939 (S.D.N.Y. Feb. 13, 2017).  Plaintiff, who sought to bring this action on behalf of investors who purchased MaxPoint common stock that was issued in its initial public offering in March 2015 (the “IPO”), alleged that the registration statement for the IPO contained material misstatements and omissions in violation of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933.  In granting MaxPoint’s motion to dismiss with prejudice, Judge Swain held that MaxPoint had no duty to disclose that at the time of its IPO it was signing smaller contracts with customers than it had in the past, and further held that the IPO registration statement gave investors sufficient information about the Company’s customer base. 

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On February 1, 2017, United States District Judge Lewis A. Kaplan of the United States District Court for the Southern District of New York dismissed a putative securities class action against Party City Holdco Inc., a global party goods retailer and supplier, two of its officers, the underwriters of its 2015 initial public offering, and two beneficial owners of Party City’s common stock who had purchased a majority of the company in a private transaction prior to the IPO.  Jones, et al. v. Party City Holdco, Inc. et al., No. 1:15-cv-9080 (S.D.N.Y. Feb. 1, 2017).  Plaintiffs alleged that the registration statement filed by Party City with the Securities Exchange Commission in advance of its IPO misled investors by failing to disclose that Party City’s success was heavily dependent on revenues from one particular license—in connection with sales of products related to Disney’s 2013 movie, Frozen—thereby causing Party City’s stock to drop more than 30% from the $17 per share IPO price to $11.80 per share when the materiality of that license allegedly was later disclosed.  Plaintiffs brought claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (the “Securities Act”).

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On January 19, 2017, the U.S. Court of Appeals for the Ninth Circuit affirmed the district court’s decision to dismiss a securities class action against Hewlett-Packard Co. (“HP”) and its former chief executive officer.  Retail Wholesale & Department Store Union Local 338 Retirement Fund v. Hewlett-Packard Co., No. 14-16433, 2017 WL 218026 (9th Cir. Jan. 19, 2017).  Plaintiffs alleged that HP and its former CEO violated Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) when the CEO breached HP’s code of ethics after he and the company had publicly promoted HP’s high ethical standards.  The court concluded that plaintiffs failed to allege an actionable fraud because, among other reasons, the alleged statements about HP’s code of ethics were not objectively false, but were instead “transparently aspirational.”

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On October 18, 2016, Judge Christina A. Snyder of the United States District Court for the Central District of California dismissed a putative securities class action brought against defendant SouFun Holdings Ltd.“ —a Chinese online real estate business—and certain of its officers Maresca v. SouFun Holdings Ltd., No. 15 Civ. 8508 (C.D. Cal. Oct. 18, 2016).  Plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making materially misleading statements and omissions regarding the scale and success of SouFun’s new rental brokerage business.  The Court dismissed plaintiffs’ claims, concluding that plaintiffs failed to adequately plead materiality or scienter because (i) the brokerage activity at issue was not a significant portion of the company’s overall business and (ii) plaintiffs failed to plead facts from which to infer that senior officers in the company knew about the allegedly fraudulent transactions.   

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On October 26, 2016, the United States Court of Appeals for the Ninth Circuit reversed a district court’s dismissal of a putative securities class action against Arena Pharmaceuticals (“Arena” or the “Company”) where the district court ruled that plaintiffs failed to adequately plead scienter.  Schueneman v. Arena Pharmaceuticals, Inc., No. 14-55633, -- F.3d ---- (9th Cir. Oct. 26, 2016).  This reversal sheds light on how courts sometimes evaluate scienter when an issuer comes under “an affirmative duty to disclose” adverse information because it has disclosed positive information, and the disclosure of the adverse information is found to be necessary to make the disclosures that have been made not misleading.  

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On September 30, 2016, Judge Richard J. Sullivan of the United States District Court for the Southern District of New York dismissed with prejudice a putative securities class action brought against MDC Partners, Inc. (“MDC”)—an advertising agency holding company—and several of its current and former officers and directors.  N. Collier Fire & Rescue Dist. Firefighter Pension Plan v. MDC Partners, Inc., No. 15 Civ. 6034 (S.D.N.Y. Sept. 30, 2016).  Plaintiffs claimed that defendants violated Section 10(b) of the Securities Exchange Actmisstating the amount of compensation paid to MDC’s founder and former CEO. The Court held that the alleged misrepresentations regarding the CEO’s compensation were not qualitatively material and dismissed the claims.   

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On July 6, 2016, Judge William H. Pauley III of the United States District Court for the Southern District of New York dismissed with prejudice a federal securities class action filed against Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (“Volaris”), a low-cost airline, and certain other participants in its September 2013 initial public offering (“IPO”).  See Dekalb Cnty. Emps.’ Ret. Sys. v. Controladora Vuela Compania de Aviacion, S.A.B. de C.V., No. 15 Civ. 1337 (S.D.N.Y. July 6, 2016).  In dismissing plaintiffs’ claims under Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”), the Court found that the alleged misstatements were not material because they affected less than 5% of Volaris’s overall revenue and also because the drop in stock price could not be attributed solely to the alleged misstatement but rather a “host of negative market-moving facts.”  Judge Pauley’s decision serves as a reminder that the materiality standard remains a “meaningful pleading obstacle” in Securities Act claims.

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On June 21, 2016, Chief Judge Colleen McMahon of the United States District Court for the Southern District of New York dismissed with prejudice a consolidated securities fraud class action filed against Alibaba Group Holding Ltd. (“Alibaba” or the “Company”) and several of its officers and directors.  See Christine Asia Co., Ltd. v. Alibaba Gr. Holding Ltd., No. 15 MDL 2631 (S.D.N.Y. June 21, 2016).  The court ruled that Alibaba’s failure to disclose a meeting with a Chinese regulator and certain administrative guidance from that regulator was not material because the disclosure of such information would not have significantly altered the “total mix” of information available to investors.

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On June 20, 2016, Judge Lorna Schofield of the United States District Court for the Southern District of New York dismissed a securities class action against Seadrill Limited (“Seadrill”), a Bermudan company that owns and operates sea-based oil rigs, and related parties.  See In re Seadrill Ltd. Sec. Litig., No. 14 Civ. 9642 (S.D.N.Y. June 20, 2016).  The Court granted the motion to dismiss because the alleged misrepresentations were either too vague to be actionable or were inactionable statements of opinion or optimism that were not inconsistent with the privately expressed concerns of company executives.

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On June 8, 2016, the United States Court of Appeals for the Ninth Circuit and the United States District Court for the Southern District of New York issued decisions as to separate securities class action lawsuits, dismissing complaints against defendants Peregrine Pharmaceuticals, Inc. and Cellceutrix Corporation, in Fahey v. Peregrine Pharmaceuticals, Inc., et al., No. 14-5582, slip op. (9th Cir. Jun. 8, 2016) and Zagami v. Cellceutrix Corporation, et al., No. 15 Civ. 7194, slip op. (S.D.N.Y. Jun. 8, 2016).  

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