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  • Northern District Of California Holds That SPAC Investors Have Standing To Sue Regarding Alleged Misstatements About A Different Entity, But Dismisses Putative Class Action For Failure To Allege Material Misstatements
     
    01/18/2023

    On January 11, 2023, the United States District Court for the Northern District of California dismissed a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(b) against an electric vehicle company and its CEO.  In re CCIV/Lucid Motors Sec. Litig., No. 4:21-cv-9323, slip op. (N.D. Cal. Jan. 11, 2023), ECF No. 151.  Plaintiffs, who allegedly purchased shares in a Special Purpose Acquisition Company (“SPAC”) that later merged with the electric vehicle company (with the electric vehicle company becoming the surviving entity of the merger), alleged that, prior to the merger, the company had made misrepresentations and omissions about its value.  Plaintiffs claimed to have invested in the SPAC after the press had announced the SPAC was “in talks” with the electric vehicle company, but before the merger was officially announced by the SPAC and the company themselves.  Following post-merger statements that allegedly contradicted the company’s pre-merger statements, plaintiffs sued, claiming that defendants’ alleged misrepresentations regarding the electric vehicle company’s value had caused them to pay an inflated price for the SPAC’s stock.  The Court held that plaintiffs had standing to sue the electric vehicle company, but dismissed their claims for failure to identify any material misrepresentations because the challenged statements were made before the SPAC and the electric vehicle company had announced or confirmed that they were in merger discussions.
  • Southern District Of New York Dismisses Putative Class Action Against Online Sports Gaming Company For Failure To Allege Actionable Misrepresentations Or Scienter
     
    01/18/2023

    On January 10, 2023, Judge Paul Engelmayer 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 an online sports gaming and betting company and certain of its executives.  In re DraftKings Inc. Sec. Litig., 2023 WL 145591 (S.D.N.Y. Jan. 10, 2023).  Plaintiffs alleged that the company made misrepresentations and omissions regarding whether a target company it acquired had gambling operations in jurisdictions where gambling was illegal.  The Court held that plaintiffs failed to adequately allege actionable misrepresentations or scienter.
  • Western District Of Washington Largely Declines To Dismiss Putative Class Action Against Online Real Estate Listing Company
     
    12/13/2022

    On December 7, 2022, the United States District Court for the Western District of Washington largely denied a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against an online real estate listing company and certain of its executives.  Jaeger v. Zillow Group, Inc., 2022 WL 17486297 (W.D. Wash. Dec. 7, 2022). Plaintiff alleged that the company made misrepresentations in connection with a real estate purchasing program.  While the Court dismissed one allegation as a non-actionable forward-looking statement, the Court held that the remainder of plaintiff’s allegations stated a claim.
  • Southern District Of New York Dismisses Putative Class Action Against Beverage Manufacturer For Failure To Adequately Allege Misrepresentations
     
    12/13/2022

    On December 5, 2022, Judge Denise Cote 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 an alcoholic beverage manufacturer and certain of its executives.  Siegel v. Boston Beer Co., Inc., 2022 WL 17417111 (S.D.N.Y. Dec. 5, 2022). Plaintiff alleged that the company made misleading statements related to the performance of the company’s products in the hard seltzer market as the pandemic subsided and consumers returned to bars and restaurants. The Court assessed three categories of alleged misstatements and held that none was actionable.
  • 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.
  • Eastern District Of New York Grants In Part And Denies In Part Motion To Dismiss Securities Fraud Class Action Against Mattress Company
     
    10/18/2022

    On September 30, 2022, Judge Margo K. Brodie of the Unites States District Court for the Eastern District of New York granted in part and denied in part a motion to dismiss a securities fraud class action against a bedding company (the “Company”) alleging that the Company misled investors about the Company’s strength and potential for growth in violation of Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  Lematta v. Casper Sleep, Inc., et al., No. 20-CV-2744 (MKB), 2022 WL 4637795 (E.D.N.Y. Sept. 30, 2022).  The Court held that (i) alleged misstatements about optimizing pricing and promotional strategies in offering materials for the Company’s initial public offering (“IPO”) were not misleading and (ii) alleged misstatements about anticipated growth were puffery or forward-looking statements accompanied by sufficient cautionary language.  The Court otherwise denied the motion to dismiss.
  • Southern District Of New York Dismisses Putative Class Action Against E‑Cigarette Manufacturer
     
    10/11/2022

    On September 30, 2022, Judge Paul A. Engelmayer 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 Act of 1933 against an e-cigarette manufacturer, certain of its officers and directors, and the underwriters of the company’s initial public offering in the United States.  Garnett v. RLX Tech., Inc., No. 21-cv-5125, 2022 WL 4632323 (S.D.N.Y. Sept. 30, 2022).  Plaintiffs alleged that the China-based company failed to disclose the likelihood of increased e-cigarette regulations in China that would harm the company’s financial prospects.  The Court held that plaintiffs failed to adequately allege any actionable misrepresentation.
  • 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.
  • Second Circuit Affirms Dismissal Of Exchange Act Claims Against Acquired Public Company, Holding That Shareholders Of An M&A Acquiror Do Not Have Standing To Pursue Claims Based On Acquired Company’s Alleged Pre-Transaction Misstatements
     
    10/11/2022

    On September 30, 2022, a panel of the United States Court of Appeals for the Second Circuit affirmed a decision of the United States District Court for the Southern District of New York dismissing a putative securities fraud class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated thereunder against a flavoring and fragrance products company (the “Company”) and several of its executives.  Menora Mivtachim Ins. Ltd., et al. v. Frutarom Indus. Ltd., et al., No 21-1076 (2d Cir. Sept. 30, 2022).  Plaintiffs alleged that, from 2002 to 2018, the Company engaged in a “long-running bribery scheme,” and that defendants made materially misleading statements about the Company’s compliance with anti-bribery laws and its business growth in public documents filed when the Company was acquired in 2018.  The district court granted the motion to dismiss as against the Company and its officers, holding that plaintiffs failed to sufficiently allege statutory standing to pursue their securities fraud claims.  The Second Circuit affirmed.
  • 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.
  • First Circuit Affirms Denial Of Motion To Dismiss Securities Fraud Class Action, Finding Plaintiffs Failed To Allege Any Actionable False Statements Or Misleading Omissions By Healthcare Company In Connection With Its Merger
     
    08/23/2022

    On August 18, 2022, a unanimous panel of the United States Court of Appeals for the First Circuit affirmed a decision by the United States District Court for the District of Rhode Island granting a motion to dismiss a putative securities fraud class action asserting claims under Section 10(b) of the Securities Exchange Act (the “Exchange Act”), Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange against a health care and pharmaceutical company (the “Company”) and two of its senior executives. City of Miami Fire Fighters’ and Police Officers’ Retirement Trust, et. al. v. CVS Health Corporation, No. 21-1479 (1st Cir. Aug 18, 2022). Plaintiffs alleged that, following the Company’s 2015 acquisition of another health care company (the “Merger”), the Company’s executives issued false statements and misleading omissions about various post-Merger issues. In affirming dismissal of the amended complaint, the First Circuit held that the district court’s assessment was “right on the mark” and that “[p]laintiffs failed to allege that defendants made statements of fact that were false when made or misleadingly incomplete in light of the contemporaneous circumstances.”
  • First Circuit Affirms Denial Of Motion To Dismiss Securities Fraud Class Action, Finding Plaintiffs Failed To Allege Any Actionable False Statements Or Misleading Omissions By Healthcare Company In Connection With Its Merger
     
    08/23/2022

    On August 18, 2022, a unanimous panel of the United States Court of Appeals for the First Circuit affirmed a decision by the United States District Court for the District of Rhode Island granting a motion to dismiss a putative securities fraud class action asserting claims under Section 10(b) of the Securities Exchange Act (the “Exchange Act”), Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange against a health care and pharmaceutical company (the “Company”) and two of its senior executives.  City of Miami Fire Fighters’ and Police Officers’ Retirement Trust, et. al. v. CVS Health Corporation, No. 21-1479 (1st Cir. Aug 18, 2022).  Plaintiffs alleged that, following the Company’s 2015 acquisition of another health care company (the “Merger”), the Company’s executives issued false statements and misleading omissions about various post-Merger issues.  In affirming dismissal of the amended complaint, the First Circuit held that the district court’s assessment was “right on the mark” and that “[p]laintiffs failed to allege that defendants made statements of fact that were false when made or misleadingly incomplete in light of the contemporaneous circumstances.”
  • 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.
  • Eleventh Circuit Affirms Dismissal Of Putative Class Action Against Medical Technology Company For Failure To Adequately Allege Misrepresentations
     
    08/16/2022

    On August 1, 2022, the United States Court of Appeals for the Eleventh Circuit affirmed the dismissal of a putative securities class action asserting claims under the Securities Act of 1933 against a medical technology company, certain of its officers and directors, and the underwriters of the company’s stock offerings.  Einhorn v. Axogen, Inc., —F.4th—, 2022 WL 3022297 (11th Cir. 2022).  The appeal solely concerned plaintiffs’ claim that the company had overstated the frequency of peripheral nerve injuries and repairs.  The Court held that these statements were forward-looking statements that were not actionable under the safe-harbor provision of the Securities Act.
  • 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.
  • 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.
  • 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.
  • Eleventh Circuit Affirms Dismissal Of State-Law Class Action Claims Against Brokerage Firm As Barred By SLUSA
     
    06/07/2022

    On May 31, 2022, the United States Court of Appeals for the Eleventh Circuit affirmed the dismissal of a putative class action asserting claims under Georgia state law for breach of fiduciary duty against a brokerage firm and its parent company.  Cochran v. Penn Mut. Life Ins., No. 20-13477 (11th Cir. May 31, 2022).  Plaintiff alleged that the brokerage firm breached a fiduciary duty when it advised plaintiff to use funds in a retirement account to invest in a variable annuity, a product that allegedly resulted in higher fees for the broker and no benefit to plaintiff because his retirement account was already tax-advantaged.  The district court dismissed the class action allegations and the Eleventh Circuit affirmed, holding that the Securities Litigation Uniform Standards Act (“SLUSA”) precludes bringing such claims as a class action.
    CATEGORIES : Misstatement/OmissionSLUSA
  • 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 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.
  • District Of Colorado Dismisses Putative Class Action Against Chicken Producer For Failure To Adequately Allege Misrepresentations
     
    03/15/2022

    On March 8, 2022, the United States District Court for the District of Colorado dismissed with prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a chicken producer and certain of its executives.  United Food & Com. Workers Int’l Union Local 464A v. Pilgrim’s Pride Corp., No. 20-CV-01966-RM-MEH, 2022 WL 684169 (D. Colo. Mar. 8, 2022).  The crux of plaintiff’s allegations was that the company made various statements touting its performance and attributing those positive results to factors such as its market position, product portfolio, customer base, and management team; when in fact those results were supposedly inflated by an alleged bid-rigging scheme that was revealed through an indictment by the Department of Justice, in connection with which the company later entered a plea agreement and agreed to pay a criminal fine.  The Court held that plaintiff failed to allege an actionable misrepresentation with respect to any of the challenged statements.
  • 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.
  • 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.
  • Southern District Of Ohio Dismisses Putative Class Action Against Public Utility Company For Failure To Adequately Allege Misrepresentations
     
    01/11/2022

    On December 20, 2021, the United States District Court for the Southern District of Ohio dismissed a putative class action against a public utility company and certain of its executives under the Securities Exchange Act.  Nickerson v. Am. Elec. Power Co., No. 2:20-cv-4243 (S.D. Ohio Dec. 20, 2021).  Plaintiffs alleged that defendants made various statements regarding prospective energy legislation in Ohio which were misleading because they omitted that the company was actively involved in an alleged lobbying scheme to create that legislation.  The Court held that plaintiffs failed to adequately allege any actionable misrepresentations.
  • 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.
  • 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.
  • Central District Of California Dismisses With Prejudice Putative Class Action Against Canadian Cannabis Manufacturer
     
    12/21/2021

    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.
  • Second Circuit Revives Putative Class Action, Finding Material Misstatements Adequately Alleged In Connection With Going-Private Transaction
     
    12/08/2021

    On November 24, 2021, the United States Court of Appeals for the Second Circuit vacated the dismissal of a putative class action asserting claims under the Securities Exchange Act of 1934 against an internet company and one of its directors.  Altimeo Asset Mgmt. v. Qihoo 360 Tech. Co. Ltd., —F.4th—, 2021 WL 5499455 (2d Cir. 2021).  Plaintiffs alleged that the company, which was headquartered in China and had previously had depository shares listed in the United States, made misrepresentations and omissions in connection with the shareholder buyout that took the company private by failing to disclose the company’s alleged intent to relist in China.  The district court dismissed the action but the Second Circuit vacated that dismissal, holding that plaintiffs adequately alleged facts from which an inference could be drawn that the company “must have been planning to relist [in China] at the time of the shareholder vote.”  Id. at *1.
  • District Of Delaware Dismisses Suit Against Wireless Technology Company For Failure To Plead Actionable Misstatement
     
    11/24/2021

    On November 15, 2021, Judge Richard G. Andrews of the United States District Court for the District of Delaware dismissed a derivative suit against a company that provides hardware, software, and services for wireless technology (the “Company”), alleging the Company violated Section 14(a) of the Securities Exchange Act of 1934 and breached its fiduciary duty by allegedly allowing “unlawful and discriminatory practices to proliferate at the Company.”  Kiger v. Mollenkopf, No. 21-409-RGA (D. Del. Nov. 15, 2021).  Plaintiffs alleged that the Company made misrepresentations in 2019 and 2020 proxy statements about its commitment to diversify its board of directors (the “Board”).  The Court dismissed the complaint for failure to plead an actionable misstatement or omission and for failure to plead demand futility.
  • 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 Denies Class Certification For Failure To Demonstrate Commonality As To Reliance
     
    11/03/2021

    On October 27, 2021, Judge Richard Seeborg of the United States District Court for the Northern District of California denied plaintiffs’ motion for class certification in a putative class action against a major financial services company (the “Company”) alleging violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  Crago v. Charles Schwab & Co., Inc., No. 16-CV-03938-RS (N.D. Cal. Oct. 27, 2021).  Plaintiffs alleged that the Company stated that it adhered to the duty of “best execution” without disclosing key information about an agreement (the “Agreement”) to route most of its customers' retail trade orders to a particular vendor (the “Vendor”) without verifying that the Vendor was providing best execution.  The Court previously dismissed an earlier complaint in this action, in a decision that was covered here.  After declining to dismiss an amended complaint, the Court denied plaintiffs’ motion for class certification, finding that plaintiffs were not entitled to a presumption of reliance and that individualized proof of reliance was therefore required.  This defeated the commonality requirements of Rule 23(a).
  • 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 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 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 Denies Motion For Judgment On The Pleadings Involving Securities Act Claims Against Accounting Firm, Holding Plaintiffs Are Not Required To Plead Damages As An Element Of A Section 11 Claim
     
    09/29/2021

    On September 21, 2021, Judge Michael A. Shipp of the District of New Jersey overruled an objection to a special master’s report and recommendation to deny a motion for judgment on the pleadings concerning claims under Section 11 of the Securities Act of 1933 (the “Securities Act”) against an accounting firm (the “Firm”).  In re Valeant Pharmaceuticals Intl., Inc. Securities Litigation, No. 15-7658 (MAS) (LHG) (D. N.J. Sept. 21, 2021).  We previously covered the district court’s decision denying a motion to dismiss by other defendants in this action.  The Firm is the only defendant left in a purported class action lawsuit related to a pharmaceutical company’s public offering in 2015.  The Court agreed with the special master’s findings, among other things, that plaintiff was not required to plead damages for a Section 11 claim at the pleading stage.
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