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  • 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.
     
  • Connecticut State Court Grants Motion To Strike Securities Act Claims
     
    11/05/2019

    On October 24, 2019, Judge Charles T. Lee of the Connecticut Superior Court granted a motion to strike claims alleging violations of Sections 11, 12(a) and 15 of the Securities Act of 1933 (the “Securities Act”) in connection with an initial public offering brought against the issuer, certain of its officers, and the underwriters of the offering.  City of Livonia Retiree Health & Disability Benefits Plan v. Pitney Bowes Inc., No. X08 FST CV 18 6038160 S (Conn. Super. Ct. Oct. 24, 2019).  The Court had previously granted a protective order staying discovery pending the disposition of the motion to strike pursuant to the discovery stay provided in the Private Securities Litigation Reform Act, in one of the first state court decisions after the Supreme Court’s decision in Cyan Inc. v. Beaver Cty. Employees Ret. Fund, 138 S. Ct. 1061 (2018).  See State Court Stays Discovery Under the PSLRA During Pendency of Motion to Strike, Need to Know Litigation Newsletter (May 29, 2019), https://www.lit-sl.shearman.com/State-Court-Stays-Discovery-Under-The-PSLRA-During-Pendency.  In granting the motion to strike, the Court held that plaintiffs had failed to plead violations of the Securities Act because they did not identify any actionable misstatements or omissions from the relevant offering documents.
     
  • Northern District Of California Denies In Part Motion To Dismiss Securities Act Claims Against A Medical Technology Company, Finding That Plaintiff Adequately Alleged Material Misstatement
     
    10/29/2019

    On October 18, 2019, Judge Edward J. Davila of the United States District Court for the Northern District of California granted in part and denied in part a motion to dismiss a putative class action asserting claims under Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”) and Item 303 of Regulation S-K against a medical technology company (the “Company”) and certain of its executives and directors, venture capital firms, and underwriters.  In re Restoration Robotics, Inc. Securities Litigation, No. 18-cv-03712 (N.D. Cal. Oct. 18, 2019).  Plaintiff alleged that defendants made materially misleading statements and omissions concerning the Company’s marketing function, hair transplant technology, product sales and revenue in offering documents in connection with the Company’s initial public offering (“IPO”).  The Court granted in part and denied in part defendants’ motion to dismiss, and granted plaintiff leave to amend to cure the complaint’s deficiencies.
     
  • 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.

     
  • New York State Court Dismisses Securities Act Claims, Despite Holding That Claims Did Not “Sound In Fraud” And No Heightened Pleading Standard Therefore Applied
     
    10/17/2019

    On September 26, 2019, Justice Saliann Scarpulla of the New York State Supreme Court, County of New York, Commercial Division, dismissed a putative class action against a dental products and services company and certain of its executives and directors asserting claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933.  In re Densply Sirona, Inc. S’holders Litig., No. 155393/2018 (Sup. Ct. N.Y. Cnty., Sept. 26, 2019).  Plaintiffs alleged that defendants made material misrepresentations in a registration statement filed with the SEC in connection with a merger.  The crux of plaintiffs’ allegations was that the registration statement failed to disclose material information about an alleged “anticompetitive scheme” to control supply and distribution of the company’s products.  The Court held that, even though New York’s heightened pleading standard for fraud claims did not apply in the case at bar, the alleged misstatements were non-actionable statements of opinion or puffery or were not misleading when made.

     
  • 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.
  • 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. 
  • 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.
  • Southern District Of New York Dismisses Putative Class Action Against Digital Services Company For Failure To Adequately Allege Misstatements And Scienter
     
    09/04/2019

    On August 28, 2019, Judge Lorna G. Schofield of the United States District Court for the Southern District of New York dismissed a putative class action against the digital services and development company Synacor, Inc. and certain of its officers asserting claims under Section 10(b) of the Securities Exchange Act of 1934.  Lefkowitz, et al. v. Synacor, Inc., et al., 18-CV-2979 (LGS) (S.D.N.Y. Aug. 28, 2019).  Plaintiffs alleged misrepresentations regarding revenue projections relating to a contract with a major customer, the customer’s control over monetizing the contract and weaknesses in the company’s internal controls for financial reporting.  The Court held that the alleged misrepresentations in question were either not actionable or were inadequately pleaded with respect to scienter, and therefore dismissed the complaint in its entirety, but granted leave to replead. 
  • Southern District Of Florida Dismisses Putative Class Action Against Beverage Company For Failure To Adequately Allege Misstatements, Scienter And Loss Causation
     
    09/04/2019

    On August 29, 2019, Judge K. Michael Moore of the United States District Court for the Southern District of Florida dismissed a putative class action against National Beverage Corporation and certain of its officers asserting claims under Section 10(b) of the Securities Exchange Act of 1934.  Luczak v. National Beverage Corporation, et al., 18-cv-61631-KMM (S.D. Fla. Aug. 29, 2019).  Plaintiff alleged that defendants’ public statements contained misrepresentations regarding the company’s main product (a brand of sparkling water), the use of purportedly unique proprietary methods to drive growth, and sexual harassment allegations with respect to the company’s CEO.  The Court held that the alleged misrepresentations were inadequately pleaded with respect to either falsity, scienter or loss causation, and therefore dismissed the complaint in its entirety.
  • District Of Maryland Dismisses Exchange Act Claims For Failure To Adequately Allege Scienter
     
    08/27/2019

    ​On August 19, 2019, Judge Richard Bennett of the United States District Court for the District of Maryland dismissed a putative securities class action involving claims brought under Sections 10(b), 20(a) and 20A of the Securities Exchange Act of 1934 (the “Exchange Act”) against a sports apparel company (the “Company”) and one of its executives.  In re Under Armour Securities Litigation, No. 17-cv-00388 (D. Md. Aug. 19, 2019).  Plaintiffs alleged that the Company misrepresented its financial health by concealing that consumer demand had declined and the Company had resorted to discounting to prop up its sales.  In a prior decision, the Court had dismissed plaintiffs’ claims but permitted plaintiffs to replead the Exchange Act claims to attempt to plead scienter.  The Court held, however, that plaintiffs’ further amended complaint suffered from the same defects as their prior complaint, and therefore dismissed the action with prejudice.
  • Fifth Circuit Affirms Dismissal Of Putative Securities Class Action Against Home Furnishings Retailer For Failure To Adequately Allege Scienter
     
    08/27/2019

    On August 19, 2019, the United States Court of Appeals for the Fifth Circuit affirmed the dismissal by a Northern District of Texas court of a putative securities class action asserting a Section 10(b) claim under the Securities Exchange Act of 1934 (the “Exchange Act”) against a home furnishings retailer (the “Company”) and two of its senior officers.  Municipal Employees’ Retirement System of Michigan v. Pier 1 Imports Inc. et al., No. 18-10998 (5th Cir. Aug. 19, 2019).  Plaintiff alleged that defendants failed to disclose that the Company’s inventory was too high and was subject to significant “markdown risk” because it had too much inventory that was too “seasonal” and “subject to changing consumer tastes.”  The Court affirmed the district court’s decision that plaintiff’s allegations did not adequately support the required strong inference of scienter.
  • Northern District Of California Dismisses Putative Securities Class Action For The Second Time Against Generic Drug Maker For Inadequate Pleading, This Time Without Leave To Amend
     
    08/20/2019

    On August 12, 2019, Judge Haywood S. Gilliam, Jr. of the United States District Court for the Northern District of California dismissed without leave to amend a putative securities class action against a pharmaceutical company, and certain of its officers, under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5.  New York Hotel Trades Council & Hotel Assoc. of N.Y.C., Inc. Pension Fund v. Impax Laboratories Inc., No. 16 Civ. 6577 (N.D. Cal. Aug. 12, 2019).  As to alleged misrepresentations regarding alleged price fixing, the Court held that the announcement of a government investigation cannot, as a matter of law, amount to a “corrective disclosure” sufficient to allege loss causation.  As to other alleged misrepresentations regarding price erosion as to certain drugs, the Court held that plaintiff failed to plead a false statement, materiality, and/or scienter.    
  • District Of New Jersey Allows Class Action Based On Alleged Price-Fixing To Proceed Against Pharmaceutical Company
     
    08/13/2019

    On August 6, 2019, Judge Katherine S. Hayden of the United States District Court for the District of New Jersey denied a motion to dismiss a putative securities class action asserting claims under Sections 10(b) and 14(a) of the Securities Exchange Act of 1934, and Rules 10b-5 and 14a-9 promulgated thereunder.  In re Allergan Generic Drug Pricing Sec. Litig., No. 16- CV-9449, 2019 WL 3562134 (D.N.J. Aug. 6, 2019).  Plaintiffs alleged that a pharmaceutical company and several of its executives participated in a price-fixing conspiracy that caused the prices of six generic drugs sold by the company to increase dramatically during the alleged class period—as ultimately revealed through a U.S. Department of Justice investigation—and that defendants made material misstatements and omissions regarding the alleged conspiracy.  The Court held that plaintiffs adequately pleaded their claims, including with respect to material misstatements, scienter and loss causation.
  • Eastern District Of New York Dismisses Putative Class Action Against Pharmaceutical Company For Failure To Adequately Allege Misstatements And Scienter
     
    08/13/2019

    On August 6, 2019, Judge Edward R. Korman of the United States District Court for the Eastern District of New York dismissed a putative securities class action asserting claims against a pharmaceutical company and certain of its officers under Section 10(b) of the Securities Exchange Act of 1934.  In re Aceto Corp. Sec. Litig., No. 18-CV-2425 (ERK-AYS) (E.D.N.Y. Aug. 6, 2019).  Plaintiff alleged that defendants made misrepresentations in connection with disclosures concerning the company’s compliance with internal controls, earnings forecasts, and regarding the valuation of goodwill and intangible assets.  The Court held that the complaint failed to plead an actionable misstatement or scienter, but granted leave to replead.
  • Southern District Of New York Dismisses Putative Class Action Against Building Materials Company For Failure To Adequately Allege Misstatements And Scienter
     
    07/23/2019

    On July 12, 2019, Judge Valerie Caproni of the United States District Court for the Southern District of New York dismissed a putative securities class action brought against the building materials company Cemex and certain of its officers, asserting claims under the Securities Exchange Act of 1934.  Schiro v. Cemex, S.A.B. de C.V., No. 18-CV-2352 (VEC), 2019 WL 3066487 (S.D.N.Y. July 12, 2019).  Plaintiffs alleged that defendants misrepresented the company’s internal controls and compliance with anti-bribery laws and failed to disclose an alleged bribery scheme involving the company’s Colombian subsidiary.  The Court held the misrepresentations in question were either not actionable or were inadequately pleaded with respect to scienter, and therefore dismissed the complaint in its entirety, while granting leave for plaintiffs to amend.
  • New York Supreme Court Dismisses Securities Act Of 1933 Claims, Holding That Plaintiffs’ Allegations Of Misleading Statements Are Inactionable Forward-Looking Statements Or Opinions Under Omnicare
     
    07/23/2019

    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.
  • Fifth Circuit Affirms Dismissal Of Class Action Against Pipeline Operator For Failure To Adequately Allege Misstatements Or Scienter
     
    07/23/2019

    On July 16, 2019, the United States Court of Appeals for the Fifth Circuit affirmed a decision by the United States District Court for the Northern District of Texas that dismissed a putative class action against the oil and gas pipeline operator Plains All American Pipeline, certain of its officers, directors and related parties, and the underwriters for the securities offerings at issue.  Police & Fire Ret. Sys. of the City of Detroit v. Plains All Am. Pipeline, L.P., —Fed. App’x—, 2019 WL 3213543, slip. op. (5th Cir. 2019).  As discussed in our prior post, plaintiffs, investors who purchased equity and debt instruments issued by entities affiliated with Plains All American Pipeline in seven different public offerings, brought claims under the Securities Exchange Act of 1934 and the Securities Act of 1933, alleging that statements regarding the company’s compliance program were false in light of events surrounding a May 2015 oil spill.  The district court dismissed plaintiffs’ second amended complaint with prejudice, finding that plaintiffs either did not allege an actionable misstatement or did not sufficiently plead scienter.  The Fifth Circuit affirmed.
  • Eastern District Of New York Dismisses Putative Class Action Regarding Mutual Fund Disclosures For Failure To Adequately Allege Misstatements And Omissions
     
    07/02/2019

    On June 25, 2019, Judge Arthur Spatt of the United States District Court for the Eastern District of New York dismissed with prejudice a putative securities class action brought by investors in a mutual fund asserting violations of the Securities Act of 1933 (“Securities Act”) against the fund’s registrant, certain executives, investment advisor, and underwriter.  Emerson v. Mutual Fund Series Trust, No. 2:17-CV-02565 (ADS) (GRB), 2019 WL 2601664 (E.D.N.Y. June 25, 2019).  Plaintiffs alleged that the fund’s offering materials misrepresented that the fund was low-risk, when in fact it engaged in speculative investments that exposed the fund to substantial downside risk in rising markets.  Id. at *1.  The Court held that the complaint alleged “no actionable misstatements or omissions,” and dismissed the complaint with prejudice.  Id. at *15.
  • Northern District Of California Dismisses Putative Class Action Against Cybersecurity Company Based On Failure To Adequately Allege Misrepresentations And Scienter
     
    06/25/2019

    On June 14, 2019, Judge William Alsup of the United States District Court for the Northern District of California dismissed a putative class action against a cybersecurity company (the “Company”) and certain of its executives. SEB Inv. Mgmt. AB v. Symantec Corp., No. 18-02902 (N.D. Cal. June 14, 2019). After the Company announced that its audit committee had commenced an internal investigation and had voluntarily contacted the SEC after a former employee raised unspecified concerns, plaintiff, an investor in the Company, alleged that defendants made misrepresentations in connection with the Company’s growth as a result of its acquisition of two security firms, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder. The Court held that plaintiff failed to allege actionable material misrepresentations and/or scienter as to various categories of alleged misstatements, and dismissed the complaint without prejudice.
     
  • Southern District Of New York Denies Motion For Judgment On The Pleadings, Rejecting Argument That Code Of Conduct Statements Were Inactionable Puffery
     
    06/18/2019

    On June 11, 2019, Judge Colleen McMahon of the United States District Court for the Southern District of New York denied defendants’ motion for judgment on the pleadings in a putative securities class action asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) against a jewelry retailer (the “Company”) and certain of its senior executives.  In re Signet Jewelers Limited Sec. Litig., No. 16-cv-6728, 2019 WL 2428529 at *1 (S.D.N.Y. Nov. 26, 2018).  Plaintiff alleged that certain declarations filed in connection with a separate gender discrimination case rendered false and misleading the Company’s public statements about its commitment to preventing gender discrimination.  Rejecting defendants’ argument that the Company’s statements were inactionable puffery, the Court ruled that plaintiff had adequately pleaded that the statements were material because, among other things, they appeared to be directly and specifically at odds with the conduct alleged in the complaint.
     
  • Southern District Of New York Dismisses Putative Class Action Against Mining Company As Time-Barred And For Failure To Adequately Allege Misrepresentations And Scienter
     
    06/11/2019

    On June 3, 2019, Judge Analisa Torres of the United States District Court for the Southern District of New York dismissed a putative class action against the mining company Rio Tinto and certain of its executives.  Colbert v. Rio Tinto plc, 17 Civ. 8169 (AT) (DCF) (S.D.N.Y. June 3, 2019).  Plaintiff—purportedly on behalf of a class of purchasers of Rio Tinto’s American Depositary Receipts (“ADRs”)—alleged that defendants made misrepresentations regarding Rio Tinto’s investment and mining operations in Mozambique, in violation of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder.  The Court held that certain of plaintiff’s claims were time-barred and the remaining claims failed to adequately allege an actionable misrepresentation or scienter.
  • Fifth Circuit Revives Securities Fraud Claims In Suit Between Former Business Associates
     
    05/23/2019

    On May 15, 2019, the United States Court of Appeals for the Fifth Circuit partially revived a securities fraud suit brought by a doctor and his business partner against two former business associates under the Securities Exchange Act of 1934 (the “Exchange Act”).  Masel v. Villarreal, —F.3d—, 2019 WL 2120536 (5th Cir. May 15, 2019).  Plaintiffs alleged that defendants induced them to enter into a joint business enterprise through material misrepresentations and omissions about the effectiveness of defendants’ medical billing service.  The Court held that the complaint adequately stated a claim against one of the individual defendants and her associated business entities, but that it was properly dismissed as to another individual defendant.
  • District Court Dismisses Putative Class Action Asserting Securities Fraud, Holding That Plaintiffs Failed To Adequately Allege Actionable Material Misstatements Or Omissions And Scienter
     
    05/14/2019

    On April 30, 2019, the United States District Court for the District of Massachusetts granted a motion to dismiss a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder against a biopharmaceutical company (the “Company”) and certain of its executives, and claims under Section 20(a) of the Exchange Act against the executives.  In re Ocular Therapeutix, Inc. Securities Litigation, No. 17-CV-12288 (D. Mass. Apr. 30, 2019).  Plaintiffs alleged that defendants made misstatements regarding manufacturing issues with respect to an ocular pain drug developed by the Company.  The Court held that plaintiffs failed to adequately allege actionable misstatements or omissions and scienter, and granted the motion to dismiss.
  • Second Circuit Summarily Affirms Dismissal Of Putative Securities Fraud Class Action Against Pharmacy Benefits Manager Company, Finding That Plaintiffs Failed To Adequately Allege Material Misstatements And Scienter

     
    05/14/2019

    On May 7, 2019, the United States Court of Appeals for the Second Circuit summarily affirmed the judgment by Judge Edgardo Ramos of the United States District Court for the Southern District of New York granting defendants’ motion to dismiss in a putative securities class action.  In re Express Scripts Holdings Co. Securities Litigation No. 18-cv-1850 (2d Cir. May 7, 2019).  Plaintiffs alleged that defendants—a pharmacy benefit manager (“the Company”) and certain of its officers—violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) by making materially false or misleading statements in connection with the purchase or sale of securities.  As discussed in our prior post, the District Court granted defendants’ motion to dismiss, finding that plaintiffs did not adequately plead that defendants made any misleading statements or that defendants acted with the requisite scienter.  On appeal, plaintiffs argued that the District Court incorrectly held that the Amended Complaint failed to adequately allege that defendants made materially false and misleading statements and omission and acted with scienter.  The Second Circuit affirmed in a summary order.  Summary orders do not have binding precedential effect.
  • The Second Circuit Affirms Denial Of Plaintiffs’ Motion For Leave To Amend Securities Class Action On The Ground That Any Such Amendment Would Be Futile
     
    05/07/2019

    On April 29, 2019, the United States Court of Appeals for the Second Circuit affirmed the denial of plaintiffs’ motion for leave to file an amended complaint alleging securities fraud against an international pharmaceutical corporation (the “Company”) and several of its past and present executives.  Steamfitters’ Indus. Pension Fund v. Endo Int’l PLC, 18-1669-cv (2d Cir. Apr. 29, 2019).  Upon reviewing the district court’s decision de novo, the Second Circuit concluded that an amendment would be futile because the alleged misrepresentations and omissions contained in plaintiffs’ proposed amended complaint (the “Proposed Amended Complaint”) failed to allege any plausible violation of Section 10(b) and 20(a) of the Securities and Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5.
  • After Oral Argument, Supreme Court Dismisses Emulex Appeal, Prompting Speculation As To Court’s View Regarding Existence Of Private Right Of Action Under Section 14(e), While Leaving In Place Circuit Split Regarding Section 14(e)’s Required Mental State
     
    04/30/2019

    On April 23, 2019, the Supreme Court dismissed the writ of certiorari as “improvidently granted” in a closely-watched appeal raising the question whether an assertion of mere negligence is sufficient to plead and prove a claim under Section 14(e) of the Securities Exchange Act of 1934 and—perhaps—whether a private right of action exists under Section 14(e) at all.  Emulex Corporation, et al. v. Varjabedian, —U.S.—, slip op. (Apr. 23, 2019).  As discussed in our prior post, most of the oral argument concerned whether a private right of action under Section 14(e) exists, but some justices expressed concern over whether the Court should weigh in on that question because it was not presented below.
  • Western District Of Washington Revives Securities Class Action Previously Dismissed For Failure To Adequately Allege Material Misstatements And Scienter
     
    04/30/2019

    On April 19, 2019, Judge John C. Coughenour of the United States District Court for the Western District of Washington 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 thereunder against Zillow Group, Inc. and certain of its executives.  In re Zillow Group, Inc. Securities Litig., No. C17-1387-JCC, 2019 WL 1755293 (W.D. Wash. Apr. 19, 2019).  Plaintiffs alleged misstatements by defendants regarding a Consumer Financial Protection Bureau (“CFPB”) investigation into, among other things, potential violations of the Real Estate Settlement Procedures Act (“RESPA”) that allegedly arose out of Zillow’s “co-marketing” program between real estate agents and mortgage lenders.  As discussed in our prior post, the Court had previously granted defendants’ motion to dismiss plaintiffs’ first amended complaint, but allowed plaintiffs leave to file a second amended complaint.  In considering the second amended complaint, the Court explained how plaintiffs had cured the defects the Court noted in its prior ruling regarding allegations of material misstatements and scienter.
  • Central District Of California Sustains Putative Class Action Against Canadian Silver Company And Its Auditor For Failing To Disclose Major Potential Tax Liability In Its Public Financial Statements
     
    04/16/2019

    On March 25, 2019, Judge Christina A. Snyder of the United States District Court for the Central District of California denied a motion to dismiss a class action filed against a Canadian silver company (the “Company”), current and former executives of the Company, and its auditor and tax consultant (the “Auditor”), alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  In Re Silver Wheaton Corp. Secs. Lit., No. 2:15-cv-05146; 2:15-cv-5173 (C.D. Cal. Mar. 25, 2019).  Plaintiffs allege defendants failed to disclose USD$207 million in Canadian tax liabilities and that the Auditor wrongfully issued clean audit opinions.  The Court held that plaintiffs sufficiently pleaded claims against all defendants.  Of particular note, while the Court acknowledged several hurdles that generally result in the dismissal of claims against auditors, it held that those hurdles had been surmounted by plaintiffs given the unique circumstances of the case.
  • District of Colorado Dismisses Putative Class Action Against Restaurant Chain For Failure To Adequately Allege Misstatements Or Omissions
    04/09/2019

    On March 29, 2019, Judge Wiley Y. Daniel of the United States District Court for the District of Colorado dismissed with prejudice a putative securities class action asserting claims under the Securities Exchange Act of 1934 and Rule 10b-5 thereunder against the restaurant chain Chipotle and certain of its executives.  Nardy v. Chipotle Mexican Grill, Inc., No. 1:17-cv-1760 (WYD) (STV), slip op. (D. Colo. Mar. 29, 2019), ECF No. 64.  Plaintiffs alleged that, in the wake of foodborne illness outbreaks at Chipotle restaurants, defendants made misrepresentations and omissions regarding the company’s compliance with food safety regulations and its implementation and training of employees on food safety practices.  The Court held that plaintiffs’ various allegations failed to assert actionable misrepresentations, or in certain cases did not adequately allege scienter, or loss causation.
  • Southern District Of New York Dismisses Putative Class Action Against Pharmaceutical Company For Failure To Adequately Allege Misstatements And Scienter
     
    04/09/2019

    On March 28, 2019, Judge William H. Pauley of the United States District Court for the Southern District of New York granted a motion to dismiss a putative securities class action asserting claims under the Securities Exchange Act of 1934 and Rule 10b-5 thereunder against a pharmaceutical company and certain of its executives.  Gagnon v. Alkermes PLC, —F. Supp. 3d—, 2019 WL 1388700 (S.D.N.Y. Mar. 28, 2019).  Plaintiff alleged that defendants made misleading statements in investor and analyst calls and public filings concerning the efficacy of the company’s opioid-dependence drug Vivitrol and the reasons for increased revenue from Vivitrol, which plaintiff alleged actually resulted from deceptive marketing and lobbying tactics.  Id. at *2.  The Court held that all but one of the alleged misstatements were not actionable, and as to the one actionable misstatement, plaintiff had failed to adequately allege scienter.  Because the Court had previously given plaintiff an opportunity to replead, the action was dismissed with prejudice.
  • Southern District Of New York Holds Scienter Adequately Alleged In Putative Class Action Against Forex Services Company
     
    04/09/2019

    On March 28, 2019, Judge Ronnie Abrams of the United States District Court for the Southern District of New York largely denied a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.  In re Global Brokerage, Inc., 17-cv-00916 (RA) (S.D.N.Y. Mar. 28, 2019).  Plaintiffs principally alleged that defendants, a foreign exchange trading and services company and certain of its executives, made misleading statements or omissions regarding (a) the company’s reliance on an agency-trading model and (b) the nature of payments the company received from another company, “Effex,” that had been spun-off from the defendant company.  The Court had dismissed plaintiffs’ prior amended complaint without prejudice, holding, inter alia, that plaintiffs had not adequately alleged scienter.  The Court held, however, that plaintiffs’ second amended complaint adequately alleged actionable misrepresentations and scienter as to the majority of claims and all but one individual defendant.
  • Southern District Of New York Pares Claims In Putative Class Action Against Pharmaceutical Company
     
    04/09/2019

    On March 29, 2019, 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 and Rule 10b-5 thereunder in a putative class action against a pharmaceutical company and certain of its executives.  In re Mylan N.V. Securities Litigation, No. 16-cv-7926 (JPO) (S.D.N.Y. Mar. 29, 2019).  Plaintiffs alleged that defendants made misleading statements regarding, among other things, an alleged rebate scheme involving the company’s EpiPen, and the alleged inflation of prices for various generic drugs.  After the Court dismissed in part plaintiffs’ first amended complaint as noted in our prior post, plaintiffs filed a second amended complaint that added an executive as a defendant, new allegations to support scienter for previously dismissed claims, a new alleged corrective disclosure in support of loss causation arguments, and additional claims asserting fraud based on the failure to disclose illegal anticompetitive misconduct.  The Court held certain of plaintiffs’ new allegations based on anticompetitive behavior were inadequately pleaded but permitted one claim to go forward, and also held that certain new allegations of scienter were sufficient.
  • District Court Dismisses Putative Class Action, Holding That Company’s Optimistic Guidance Fell Within PSLRA Safe Harbor Provision
     
    03/26/2019

    On March 15, 2019, Judge Edward M. Chen of the United States District for the Northern District of California dismissed a putative class action asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 against a camera technology company (“Company”), along with its officers and executives.  Park v. GoPro, Inc., et. al., 18-cv-00193-EMC (N.D. Cal. Mar. 15, 2019).  Plaintiffs claimed defendants made false statements during an earnings call following the announcement of the Company’s results for the third quarter of the 2017 fiscal year (“Q3 2017”), and engaged in suspicious stock transactions.  The Court dismissed the action on the ground that plaintiffs did not adequately plead falsity or scienter.
  • Southern District Of New York Dismisses Action Against Automobile Logistics Company For Failure To Adequately Allege Misstatements Or Scienter
     
    03/19/2019

    On March 8, 2019, Judge William H. Pauley of the United States District Court for the Southern District of New York granted a motion to dismiss an action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder against a provider of logistics to automobile manufacturers and certain of the company’s officers.  River Birch Capital, LLC, v. Jack Cooper Holdings Corp., No. 17-CV-9193, 2019 WL 1099943 (S.D.N.Y. Mar. 8, 2019).  The Court held that plaintiff failed to allege any actionable misstatements or omissions and, further, that plaintiff failed to adequately allege scienter.  Because the Court had previously given plaintiff an opportunity to replead, the action was dismissed with prejudice.
  • Second Circuit Affirms Dismissal Of Putative Securities Class Action, Holding That The Occurrence Of Regulatory Problems Do Not Render Materially Misleading Generic Positive Statements Regarding A Corporation’s Compliance Efforts
     
    03/12/2019

    On March 5, 2019, the United States Court of Appeals for the Second Circuit affirmed the dismissal of a putative securities class action against Cigna and several of its officers.  Minohor Singh v. Cigna Corporation, et al., No. 17-CV-3484 (2d Cir. Mar. 5, 2019).  Plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by making a series of materially misleading statements concerning Cigna’s compliance with regulatory requirements.  Defendants filed a motion to dismiss.  Judge Vanessa L. Bryant of the United States District Court for the District of Connecticut granted the motion, holding that plaintiffs did not adequately allege material misstatements and scienter.  Plaintiffs appealed.  The Second Circuit affirmed, emphatically, agreeing that plaintiffs failed to adequately plead actionable material misrepresentations. 
  • Eighth Circuit Reverses Dismissal Of Securities Class Action Resulting From Merger, Finding Question of Materiality Of Alleged Misstatements And Omissions In Proxy Statement Could Not Be Resolved As A Matter Of Law
     
    03/12/2019

    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.
  • District Of New Jersey Dismisses Putative Securities Class Action Against Technology Company Based On Its Statements About Its International Distributor Agreement
     
    03/05/2019

    On February 22, 2019, Judge Kevin McNulty of the United States District Court for the District of New Jersey granted defendants’ motion to dismiss a putative class action against an Israeli-based technology company (“Company”) and its senior officers, asserting violations of Sections 10(b) and 20(a) of the Exchange Act of 1934, and Rule 10b-5. Padgett v. RIT Techs. Ltd., No. 2:16-cv-4579, 2019 WL 913154 (D.N.J. Feb. 22, 2019). Plaintiffs alleged defendants failed to disclose the extent of the Company’s reliance on an agreement with a non-exclusive distributor to provide its products and services in the Commonwealth of Independent States region (“CIS”). The Court dismissed the amended complaint without prejudice, holding that plaintiffs failed to adequately allege how defendants’ public statements and failure to use specific adjectives to characterize the distributor were misleading to investors.
  • Southern District Of New York Dismisses Putative Securities Fraud Class Action Against Biopharmaceutical Company, Finding Interpretations Of Clinical Studies To Be Nonactionable Statements Of Opinion
     
    02/20/2019

    On February 13, 2019, United States District Judge William H. Pauley III of the United States District Court for the Southern District of New York dismissed a putative securities class action against clinical stage biopharmaceutical company New Link Genetics Corporation (the “Company”) and its co-founders.  Nguyen and Nguyen v. New Link Genetics Corp., et al., No. 16-cv-03545 (S.D.N.Y. Feb. 13, 2019).  Plaintiffs contended that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making a series of alleged misrepresentations regarding the development of the Company’s flagship pancreatic cancer drug that “painted a rosier picture for investors, who were misled into thinking the drug would obtain FDA approval.”  The Court dismissed without prejudice plaintiffs’ initial complaint, finding that, although plaintiffs adequately pled falsity concerning one alleged misstatement, plaintiffs had not sufficiently pled falsity as to any other statement and, in any event, failed to sufficiently plead loss causation for any of the alleged misstatements.  Having reviewed plaintiffs’ amended complaint and defendants’ motion to dismiss that complaint, the Court again dismissed plaintiffs’ claims, holding that plaintiffs’ new allegations regarding misstatements failed to sufficiently plead falsity and that plaintiffs’ loss causation allegations “merely parrot” the defective allegations in their previous complaint. 
  • California District Court Dismisses Exchange Act Claims Based On The PSLRA Safe Harbor For Forward Looking Statements
     
    01/23/2019

    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.
  • Third Circuit Affirms In Part And Vacates In Part Dismissal Of Putative Securities Class Action Resulting From Merger, Finding Sufficient Certain Allegations That Bank Failed To Adequately Disclose Non-Compliant Practices In Proxy Materials
     
    01/08/2019

    On December 26, 2018, the United States Court of Appeals for the Third Circuit affirmed in part and vacated in part the dismissal of a putative securities class action against M&T Bank Corporation (the “Company”) and certain of its officers and directors.  Jaroslawicz v. M&T Bank Corp., et al., No. 17-3695 (3d Cir. Dec. 26, 2018).  Plaintiffs alleged that defendants violated Section 14(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and SEC Rule 14a-9 by making misleading omissions in joint proxy statement materials (“Joint Proxy”) leading up to the merger of the Company with another consumer bank.  The alleged omissions concerned two non-compliant practices: “(1) M&T’s having advertised no-fee checking accounts but later switching those accounts to fee-based accounts (the ‘consumer violations’); and (2) deficiencies in M&T’s Bank Secrecy Act/anti-money laundering compliance program, particularly its ‘Know Your Customer’ program (the ‘BSA/AML deficiencies’).”  The United States District Court for the District of Delaware dismissed plaintiffs’ first and second amended complaints for failing to plausibly allege an actionable omission.  Plaintiffs appealed to the Third Circuit.
  • Eastern District Of Pennsylvania Denies In Part And Grants In Part Motion To Dismiss Stock Drop Suit, Finding Plaintiffs Adequately Pled Global Pharmaceutical Company Misrepresented The Safety Of Its Opioid
     
    12/18/2018

    On December 10, 2018, Judge Timothy J. Savage of the United States District Court for the Eastern District of Pennsylvania denied in large part defendants’ motion to dismiss a putative class action asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Sections 11 and 20 of the Securities Act of 1933 (the “Securities Act”).  SEB Inv. Mgmt. AB v. Endo Int’l, PLC, No. 17-cv-03711 (E.D. Pa. Dec. 10, 2018).  The Court held that plaintiffs adequately pled that the corporate defendant, a global pharmaceutical company (the “Company”), and five of the ten officers against whom plaintiffs asserted Exchange Act claims (collectively, the “Exchange Act Defendants”), misrepresented and omitted material facts regarding the abuse-deterrent properties of the opioid pills manufactured by the Company, such that plaintiffs could maintain an action under Section 10(b).  Furthermore, the Court concluded that plaintiffs also adequately alleged Securities Act claims against the Company and nine of its officers (the “Securities Act Defendants”) on largely similar grounds.
  • Massachusetts District Court Dismisses Putative Class Action For Failure To Adequately Allege Material Misstatements And Scienter
     
    12/11/2018

    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.
  • Supreme Court Hears Argument On “Scheme Liability” Under Section 10(b) And Rule 10b-5
     
    12/05/2018

    On December 3, 2018, the Supreme Court heard argument on an appeal in a case where a divided panel of the D.C. Circuit held that a defendant who did not “make” a misstatement within the meaning of Janus Capital Group v. First Derivative Traders, 564 U.S. 135, 142 (2011), nonetheless could be liable for participating in a “scheme” to defraud under Section 10(b) of the Exchange Act, SEC Rule 10-b5 promulgated thereunder, and Section 17(a) of the Securities Act, by disseminating with fraudulent intent a misstatement made by someone else.  See Lorenzo v. S.E.C., No. 17-1077. 
  • Southern District Of New York Denies Motion To Dismiss Putative Securities Class Action Against Diamond Jewelry Retailer, Finding Sufficient Allegations Of False Misstatements Regarding Credit Portfolio And Sexual Harassment Litigation
     
    12/05/2018

    On November 26, 2018, Judge Colleen McMahon of the United States District Court for the Southern District of New York denied a motion to dismiss a putative securities class action against Signet Jewelers Limited (the “Company”) and certain of its officers and directors.  In re Signet Jewelers Limited Sec. Litig., No. 16-cv-6728 (S.D.N.Y. Nov. 26, 2018).  Plaintiffs—purchasers of the Company’s shares between August 2013 and March 2018—claimed that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making materially false and misleading statements relating to (1) the health and management of the Company’s credit portfolio and (2) the Company’s corporate culture of “pervasive” sexual harassment, leading to a sharp drop in the Company’s share price when the truth allegedly was revealed.  The Court held that plaintiffs adequately alleged false and misleading statements, scienter and loss causation, and denied defendants’ motion to dismiss.
  • Northern District Of California Grants In Part And Denies In Part Motion To Dismiss Class Action Against Online Platform Devoted To Reviews Of Businesses, Finding Certain Statements Regarding Company’s Advertising Program Inactionable Under PSLRA
     
    12/05/2018

    On November 27, 2018, Judge Edward M. Chen of the United States District Court for the Northern District of California granted in part and denied in part a motion to dismiss a putative securities class action against Yelp, Inc. (the “Company”) and several of its senior officers.  Azar v. Yelp, Inc., No. 18-cv-00400 (N.D. Cal. Nov. 27, 2018).  Plaintiffs—purchasers of Company stock between February 10, 2017 and May 9, 2017—alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making materially false and misleading statements regarding the Company’s expected revenues in relation to its advertising program with local businesses, leading to a drop in the Company’s stock price when the Company subsequently made downward adjustments to its projections in May 2017.  The Court held that while certain of the Company’s statements were protected by safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), other alleged statements were actionable misrepresentations.  The Court also held that plaintiffs adequately pleaded scienter and loss causation.  The Court thus granted in part and denied in part defendants’ motion to dismiss.
  • Second Circuit Summarily Affirms Grant Of Summary Judgment In Section 11 Securities Class Action, Finding That Defendants-Appellees Established Negative Causation As A Matter Of Law
     
    11/27/2018

    On November 19, 2018, the United States Court of Appeals for the Second Circuit summarily affirmed the grant of summary judgment in a securities class action in favor of a financial institution (the “Company”), several of its officer and directors, and the underwriters of the Company’s April 2008 offering.  In re Barclays Bank PLC Sec. Litig., No. 17-3293-CV, 2018 WL 6040846 (2d Cir. Nov. 19, 2018), as amended (Nov. 20, 2018).  Plaintiff, on behalf of purchasers of the Company’s April 8, 2008 Series 5 offering of American Depository Shares (“ADS”), alleged that those securities were issued pursuant to materially false and misleading offering materials, and brought claims against a group of defendants under Sections 11 and 15 of the Securities Act of 1933 (“Securities Act”).  Judge Paul A. Crotty of the United States District Court for the Southern District of New York granted summary judgment in favor of defendants-appellees, finding that (i) the Company had no duty to disclose the allegedly omitted information and (ii) the Company established its negative causation affirmative defense—i.e., that the alleged omissions did not cause plaintiff’s losses.  Plaintiff appealed and the Second Circuit affirmed in a summary order.   Summary orders do not have binding precedential effect.
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