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  • Northern District Of California Grants Motion To Dismiss Securities Fraud Claims Against Battery Recycling Company, Finding Plaintiffs Failed To Plead Material Misstatements Or Scienter
     
    11/24/2020

    On November 16, 2020, Judge Haywood S. Gilliam, Jr. of the Northern District of California granted a motion to dismiss a Section 10(b) claim under the Securities Exchange Act of 1934 (the “Exchange Act”), as well as a Section 20(a) claim under the Exchange Act as it relates to the Section 10(b) claim, against a lead-acid battery recycler (the “Company”) and three of its senior officers.  In re Aqua Metals Inc. Securities Litigation, No. 17-cv-07142 (N.D. Cal. Nov. 16, 2020).  Plaintiffs alleged that defendants made materially false and misleading statements concerning the Company’s novel recycling technology and its commercialization process.  The Court granted defendants’ motion to dismiss, holding that plaintiffs failed to plead any actionable material misstatements or scienter.  Certain claims in the case addressed in connection with a prior motion to dismiss were not the subject of this decision and will survive.
     
  • Eastern District Of New York Dismisses A Putative Securities Class Action Against A South African Mining Company In Connection With Safety Incidents At Its Mines
     
    11/17/2020

    On November 10, 2020, Judge Kiyo Matsumoto of the United States District Court for the Eastern District of New York granted a motion to dismiss a putative securities class action asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against a South African precious metals mining company (the “Company”) and its CEO and CFO.  In re Sibanye Gold Ltd. Sec. Litig., No. 18-CV-3721 (E.D.N.Y. Nov. 10, 2020).  Plaintiffs alleged that the Company made false and misleading statements and omissions about its mine safety program and the reasons for miner fatalities.  The Court dismissed these claims for failure to allege plausible facts supporting plaintiffs’ conclusionary allegations.
     
  • Northern District of California Dismisses Putative Securities Class Action Against Customer Service Software Provider For Failure To Allege Falsity and Scienter
     
    11/17/2020

    On November 10, 2020, Judge Charles R. Breyer of the United States District Court for the Northern District of California dismissed without prejudice a putative class action against a software company (the “Company”) and several of its officers, for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  Reidinger v. Zendesk Inc. et al., No. 3:19-cv-06968 (N.D. Cal. Nov. 10, 2020).  Plaintiff alleged that defendants made false and misleading statements and omissions regarding the Company’s performance and sales capabilities in Europe, the Middle East, and Africa (“EMEA”) and the Asian Pacific (“APAC”) and the strength of its data security.  The Court dismissed the complaint with leave to amend because plaintiff failed to allege falsity or scienter, highlighting the formidable challenges plaintiffs face in pleading event-driven claims based on worse than expected earnings results.
     
  • Northern District Of California Pares Claims In Putative Class Action Against Technology Company
     
    11/10/2020

    On November 4, 2020, Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California granted in part and denied in part a motion to dismiss claims asserted under the Securities Exchange Act of 1934 against a technology company and certain of its executives.  In re Apple Inc. Sec. Litig., No. 19-cv-02033-YGR, slip. op. (N.D. Cal. Nov. 4, 2020), ECF No. 118.  Plaintiffs alleged that the company and its CEO made material misstatements relating to the company’s earnings guidance, which the company ultimately did not meet.  Slip. op. at 4.  The Court dismissed claims based on certain of the alleged misstatements, which it held were not false or misleading, but determined that falsity and scienter were sufficiently alleged as to other alleged misstatements.
     
  • Eastern District Of Virginia Denies Motions To Dismiss Exchange Act Claims Against Building Products Company In Connection With Its Pricing Strategy And Purported Anti-Competitive Conduct
     
    11/03/2020

    On October 26, 2020, Judge John A. Gibney, Jr. of the Eastern District of Virginia denied motions 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”) against a building products company (the “Company”), certain of its executives, and an institutional majority shareholder of the Company.  Cambridge Retirement System v. Jeld-Wen Holding, Inc., et al., No. 3:20-cv-112 (E.D. Va. Oct. 26, 2020).  Plaintiffs alleged defendants made material misstatements and omissions concerning the Company’s pricing strategy, alleged anti-competitive conduct, and the impact of a finding of liability in a separate antitrust private suit.  The Court denied defendants’ motions to dismiss the amended complaint, holding that plaintiffs adequately pled material misrepresentations or omissions, falsity, scienter and loss causation.
     
  • Northern District Of Illinois Dismisses A Putative Securities Class Action Alleging Failure To Disclose Fraudulent Channel Stuffing In Connection With A Merger Of Two Large Packaged Foods Companies
     
    10/27/2020

    On October 15, 2020, Judge Martha M. Pacold of the United States District Court for the Northern District of Illinois granted a motion to dismiss a putative securities class action asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 against a large packaged foods company (the “Company”), as well as certain of its officers and directors, and its underwriters.  W. Palm Beach Firefighters’ Pension Fund v. Conagra Brands, Inc., No. 19-cv-101323, 2020 WL 6118605 (N.D. Ill. Oct. 15, 2020).  Plaintiffs alleged that, in connection with a secondary public offering (“SPO”) to finance the acquisition of another packaged foods company (the “Acquired Company”), the Company failed to disclose that the Acquired Company had engaged in channel stuffing—a form of accounting fraud—to disguise the fact its key brands were struggling.  The Court dismissed these claims in their entirety because, among other reasons, plaintiffs failed to allege adequately that the Acquired Company engaged in fraudulent channel stuffing.
     
  • Northern District Of California Dismisses Putative Securities Act Class Action Against Cloud-Based Storage Provider For Failure To Allege Falsity And As Time-Barred
     
    10/27/2020

    On October 21, 2020, Judge Beth Labson Freeman of the United States District Court for the Northern District of California dismissed a putative securities class action against a large online cloud-based storage provider (the “Company”), certain of its officers and directors, certain of its controlling shareholders, and the underwriters of its IPO, for alleged violations of Sections 11 and 15 of the Securities Act of 1933 and Item 303 of SEC Regulation S-K.  In re Dropbox Securities Litigation, No. 19-cv-06348 (N.D. Cal. Oct. 21, 2020).  Plaintiffs alleged that the offering materials filed in connection with the Company’s IPO omitted to disclose the decelerating rate at which the Company was converting non-paying registered users into paying subscription users, which gave investors a false impression of the Company’s revenue growth.  The Court dismissed the complaint with leave to amend because plaintiffs failed to allege the offering materials were false or misleading and because plaintiffs’ claims were time-barred.
     
  • Central District Of California Dismisses Putative Class Action Against Food Company For Failure To Adequately Allege Misrepresentations
     
    10/20/2020

    On October 8, 2020, Judge Michael W. Fitzgerald of the United States District Court for the Central District of California dismissed a putative class action asserting claims under the Securities Exchange Act of 1934 against a food company and certain of its executives.  Larry Tran v. Beyond Meat, Inc., et al., No. 20-CV-00963-MWF-AFM, slip op. (C.D. Cal. Oct. 8, 2020).  Plaintiffs alleged that the company made misleading statements in public filings falsely suggesting that litigation brought against the company by a supplier, after the company had terminated a manufacturing agreement with that supplier, was meritless.  The Court held that plaintiffs failed to adequately allege an actionable misstatement or omission.
     
  • Southern District Of New York Dismisses Putative Class Action Against Pharmaceutical Company For Failure To Allege Material Misstatement Or Omission
     
    10/20/2020

    On October 14, 2020, Judge Alison J. Nathan 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, certain of its executives, and investors that participated in a go-private merger with the company.  Altimeo Asset Management v. WuXi PharmaTech (Cayman) Inc., No. 19-cv-1654 (AJN), slip op. (S.D.N.Y. Oct. 14, 2020).  Plaintiff alleged that the company made misstatements about its long-term plans and future prospects in connection with the going-private transaction.  The Court held that plaintiff failed to plausibly allege that the company made a material misrepresentation or omission.
     
  • Southern District Of New York Dismisses Putative Class Action Against Lending Company For Failure To Adequately Allege Misrepresentations
     
    10/20/2020

    On October 14, 2020, Judge Alison J. Nathan 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 lending company and certain of its executives.  Burr v. Equity Bancshares, Inc., No. 19-cv-4346 (AJN), slip op. (S.D.N.Y. Oct. 14, 2020).  Plaintiffs alleged that the company failed to disclose problems with its largest credit relationship—involving two companies that ultimately declared Chapter 11 bankruptcy—and that its loan loss reserves in its disclosures to the SEC were false and misleading.  The Court held that plaintiffs failed to adequately allege any actionable misstatement or omission.
     
  • District Of Massachusetts Grants Motion To Dismiss Securities Fraud Claims Against Cloud-Based Remote Software Services Company In Connection With Its Acquisition Of A Competitor, Finding Plaintiffs Failed To Plead Material Misstatements Or Scienter
     
    10/13/2020

    On October 7, 2020, Judge Allison Burroughs of the District of Massachusetts granted in full 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”) against a cloud-based remote software services company (the “Company”) and certain of its executives.  Wasson v. LogMeIn Inc., No. 18-cv-12330 (D. Mass. Oct. 7, 2020).  Plaintiffs alleged defendants made materially false and misleading statements concerning the Company’s integration of a newly acquired competitor.  The Court granted defendants’ motion to dismiss plaintiffs’ amended complaint, holding that plaintiffs failed to plead any actionable material misstatements or scienter, but granted plaintiffs leave to amend.
     
  • Ninth Circuit Reverses Dismissal Of Exchange Act Claims Against Bank And Its Executives, Holding Plaintiffs Adequately Alleged Loss Causation For Certain Claims
     
    10/13/2020

    On October 8, 2020, the Court of Appeals for the Ninth Circuit reversed the dismissal of a putative securities class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, against a federally chartered savings bank and its holding company (collectively the “Bank”) and several of its executives, for alleged misstatements regarding the Bank’s underwriting standards, internal controls, and compliance program.  In re BofI Holding, Inc. Securities Litigation, No. 18-55415 (9th Cir. Oct. 8, 2020).  The district court granted defendants’ motion to dismiss the third amended complaint, holding that although plaintiffs adequately pled material misstatements and scienter, plaintiffs failed to sufficiently plead loss causation.  The Ninth Circuit (with Judge Paul J. Watford writing for the majority) vacated the dismissal, holding that plaintiffs sufficiently pled loss causation based on a whistleblower lawsuit filed by a former employee.  Judge Kenneth K. Lee concurred in part and dissented in part.
     
  • District of Utah Dismisses A Putative Class Action Alleging Market Manipulation In Connection With The Issuance Of A Digital Dividend As “Speculation And Fraud-By-Hindsight”
     
    10/08/2020

    On September 28, 2020, Judge Dale A. Kimball of the United States District Court for the District of Utah granted a motion to dismiss a putative securities fraud class action asserting violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 against an online home goods retailer (the “Company”) and certain of its current and former officers.  Mangrove Partners Master Fund, Ltd. v. Overstock.com, No. 2:19-CV-709-DAK-DAO (D. Utah Sept. 28, 2020).  Plaintiff, a short seller, alleged that the Company (i) manipulated the market by issuing a digital dividend through the Company’s newly developed alternative trading platform and triggering a “short squeeze,” and (ii) misrepresented the purpose of the digital dividend by not disclosing it would result in a short squeeze and the Company’s financial condition by adjusting its earnings guidance upwards.  The Court dismissed the claims because they were based on “speculation and fraud-by-hindsight.”
     
  • The Second Circuit Affirms The Dismissal Of A Putative Securities Fraud Class Action Against A Tax Services Provider In Connection With The Termination of Its CEO For Sexual Misconduct
     
    10/08/2020

    On September 30, 2020, the United States Court of Appeals for the Second Circuit affirmed the dismissal of a putative securities fraud class action asserting violations of Sections 10(b), 14(a), and 20(a) of the Securities Exchange Act of 1934 and Rules 10b-5, 14a-3, and 14a-9 against a company that provides tax preparation services (the “Company”) as well as certain of its officers.  In re Liberty Tax, Inc. Sec. Litig., No. 20-652, 2020 WL 5807566 (2d Cir. Sept. 30, 2020).  Plaintiffs alleged that the Company made false or misleading statements and omissions concerning its compliance efforts and the termination of its CEO and Chairman, in light of an ongoing internal investigation into allegations that he had engaged in sexual misconduct.  The district court dismissed the suit for failure to adequately allege material misrepresentations and loss causation.  The Second Circuit, in a summary order, affirmed the district’s courts dismissal of the claims for failure to adequately allege any material misrepresentations.
     
  • Eastern District Of New York Dismisses Putative Class Action Against Cosmetics Company For Failure To Allege Actionable Misstatements And Scienter
     
    09/29/2020

    On September 17, 2020, Judge Rachel P. Kovner of the United States District Court for the Eastern District of New York dismissed without prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a cosmetics company and certain of its executives.  Lachman v. Revlon, Inc., No. 19-CV-2859 RPK RER, 2020 WL 5577406 (E.D.N.Y. Sept. 17, 2020).  Plaintiffs alleged that the company made misrepresentations regarding a new software system that was supposed to combine the tracking of different areas of the company’s operations but allegedly led instead to production delays, lost sales, and a material weakness in the company’s internal controls with respect to financial reporting.  The Court held that plaintiffs failed to identify any actionable misstatement or to plead that defendants acted with scienter.
     
  • Northern District Of California Allows Certain Securities Fraud Claims To Proceed Against Cloud Services Company, Holding Plaintiffs Adequately Alleged Falsity And Scienter
     
    09/22/2020

    On September 11, 2020, 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 promulgated thereunder, against a software company (the “Company”) and two of its executive officers.  Scheller v. Nutanix Inc., No. 19-cv-01651 (N.D. Cal. Sept. 11, 2020).  This case was previously dismissed with leave to amend by Judge Orrick in March, and was covered in our newsletter.  Plaintiffs filed a Second Amended Complaint (“SAC”) in an attempt to cure the prior pleading defects.  The Court noted that the SAC “suffers from many of the same deficiencies as [the] prior complaint” and held that certain categories of allegations were insufficient, but the Court allowed certain claims to proceed.
     
  • Eastern District Of New York Grants Motion To Dismiss Securities Fraud Claims Against Steel Manufacturer Related To Purported Argentinian Bribery Scheme Uncovered In “Notebooks Case” Investigation
     
    09/22/2020

    On September 14, 2020, Judge Pamela K. Chen of the Eastern District of New York granted in full 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”) against a steel products manufacturer (the “Company”) and certain of its executives and former employees.  Ulbricht v. Ternium S.A. et al., No. 18-cv-06801-PKC (E.D.N.Y. Sept. 14, 2020).  Plaintiffs, investors of the Company’s American Depository Shares (“ADSs”), alleged that defendants made materially false and misleading statements and omissions in connection with the purchase of the Company’s subsidiary by the Venezuelan government by failing to disclose the alleged bribery scheme that helped facilitate the transaction.  The Court granted defendants’ motion to dismiss plaintiffs’ consolidated amended complaint, and—although “skeptical” of plaintiffs’ likelihood of success—the Court granted plaintiffs leave to amend.
     
  • Northern District Of California Grants In Part And Denies In Part Motion To Dismiss A Putative Securities Fraud Class Action Against Rideshare Company
     
    09/15/2020

    On September 8, 2020, Judge Haywood S. Gilliam, Jr. 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 fraud class action against a ridesharing company (the “Company”) and certain of its directors under Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”). In re Lyft Inc. Securities Litigation, No. 19 Civ. 2690 (HSG), 2020 WL 5366325 (N.D. Cal. Sept. 8, 2020).  Plaintiff alleged that the Company’s prospectus and registration statement (the “Registration Statement”) contained numerous false or misleading statements and omissions, including those concerning reported sexual assaults by the Company’s drivers and defects with bicycles that were part of the Company’s bikeshare fleet.  Although the Court found that certain statements and omissions regarding rider safety were actionable, the Court dismissed plaintiff’s remaining claims for failure to allege falsity or because the statements constituted non-actionable puffery.
     
  • Northern District Of California Dismisses With Prejudice Most Exchange Act Claims Against Medical Device Company, Holding Plaintiff Failed To Plead Falsity For Material Misrepresentations And Contemporaneity Requirement For Insider Trading Liability
     
    09/15/2020

    On September 9, 2020, Judge Lucy H. Koh 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 a medical device company (the “Company”) and certain of its executive officers under Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5.  SEC Investment Mgmt. AB, et al. v. Align Technology, Inc., et al., No. 18-cv-06720-LHK (N.D. Cal. Sept. 9, 2020).  Plaintiff alleged that the Company made false or misleading statements regarding its strategies to curb competition in the market.  Plaintiff also asserted an insider trading claim against the Company’s CEO.  The Court largely granted defendants’ motion to dismiss, holding that plaintiff failed to adequately plead falsity for all but one alleged misrepresentation and, for the insider trading claim, that the trading activities of plaintiff and the CEO were not “contemporaneous.”
     
  • Northern District Of Illinois Denies Motion To Dismiss Putative Securities Class Action Against Pharmaceutical Company Relating To Alleged Kickback Scheme
     
    09/09/2020

    On September 1, 2020, Judge Charles R. Norgle of the United States District Court for the Northern District of Illinois denied a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a pharmaceutical company and certain of its executives.  Holwill v. AbbVie Inc., No. 1:18-cv-6790, slip. op. (N.D. Ill. Sept. 1, 2020).  Plaintiffs alleged that the company made material misstatements regarding the reasons for the success of the company’s principal drug that were rendered misleading because the company failed to disclose a kickback scheme that allegedly contributed to the drug’s success.  The Court held that the complaint adequately alleged actionable misrepresentations as well as the elements of scienter and loss causation.
     
  • Eastern District Of Pennsylvania Denies Motions To Dismiss Putative Class Action Against Biopharmaceutical Company, Including For Overreliance On Documents Outside Of The Pleadings
     
    09/09/2020

    On August 28, 2020, Judge Cynthia Rufe of the United States District Court for the Eastern District of Pennsylvania denied three separate motions to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a biopharmaceutical company, its CEO, and its Chief Medical Officer.  Tomaszewski v. Trevena, Inc., No. 18-cv-4378, slip op. (E.D. Pa. Aug. 28, 2020).  Plaintiffs alleged that the company and its executives made various misrepresentations and omissions regarding interactions with the FDA concerning a drug candidate.  The Court denied the motions of the company and CEO, after granting plaintiffs’ motion to strike certain documents on which those motions relied, and further held that plaintiffs adequately alleged actionable misstatements and scienter with respect to the Chief Medical Officer (“CMO”).
     
  • First Circuit Affirms The Dismissal Of A Putative Securities Fraud Class Action Against Medical Robotics Company In Connection With The FDA’s Issuance Of A Warning Letter
     
    09/01/2020

    On August 25, 2020, the United States Court of Appeals for the First Circuit affirmed the dismissal of a putative securities fraud class action asserting violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”) as well as Section 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 against a medical robotics company (the “Company”) as well as certain of its officers.  Yan v. ReWalk Robotics Ltd., et al., No. 19-1614, 2020 WL 5014858 (1st Cir. Aug. 25, 2020).  Plaintiffs alleged that the Company made false or misleading statements and omissions in its IPO registration statement (the “Registration Statement”) and subsequent quarterly and annual disclosures concerning its dealings with the Food and Drug Administration (the “FDA”) regarding one of the Company’s devices.  The First Circuit affirmed the district court’s dismissal of the Securities Act claims, finding that plaintiffs failed to allege a material misstatement or omission.  Although it disagreed with the district court’s reasoning in dismissing the Exchange Act claims for lack of standing, the First Circuit nevertheless found that the Exchange Act claims were properly dismissed because plaintiffs failed to sufficiently allege a material misstatement or scienter.
     
  • Southern District Of New York Dismisses Securities Fraud Action Against Chinese Internet Company Based On Confidential Witness Statements
     
    08/25/2020

    On August 14, 2020, United States District Judge Paul A. Engelmayer dismissed with prejudice a putative securities class action against a Chinese internet company (the “Company”) and its co-founders and a director under Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 and Rule 10b-5.  Altimeo Asset Mgmt. v. Qihoo 360 Tech. Co., et al., 19 Civ. 10067 (PAE) (S.D.N.Y. Aug. 14, 2020).  Plaintiffs, relying on statements from a confidential witness (the “CW”) and several media reports, alleged that defendants deliberately withheld the Company’s plans to relist on a Chinese stock exchange after they took the Company private in a merger transaction.  The Court granted defendants’ motion to dismiss because the CW statements and newspaper articles failed to provide the type of particularized facts needed to state a claim under the securities laws.
     
  • Southern District Of New York Grants In Part And Denies In Part Motion To Dismiss A Putative Securities Fraud Class Action Against An Insurance Company In Connection With Delisting Of Preferred Stock
     
    08/25/2020

    On August 14, 2020, United States District Judge Katherine Polk Failla of the United States District Court for the Southern District of New York granted in part and denied in part a motion to dismiss a putative securities fraud class action asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 against an insurance company (the “Company”) as well as certain of its officers, who were members of the family that founded the Company and were long-time controlling stockholders.  Martinek v. Amtrust Fin. Serv., Inc., No. 19 Civ. 8030 (KPF), 2020 WL 4735189 (S.D.N.Y. August 14, 2020).  Plaintiff alleged that the Company made false or misleading statements and omissions about whether the Company’s preferred stock would continue to trade on the New York Stock Exchange (“NYSE”) following a proposed buyout of the common stock by the controlling stockholders.  The Court largely denied defendants’ motion to dismiss, holding that plaintiff had adequately alleged scienter and the falsity of two categories of alleged misstatements. 
     
  • Southern District Of New York Denies Motion To Dismiss Putative Class Action Against Sports Entertainment Company
     
    08/18/2020

    On August 6, 2020, Judge Jed S. Rakoff of the United States District Court for the Southern District of New York denied a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a sports entertainment company and certain of its executives.  City of Warren Police & Fire Ret. Sys., v. World Wrestling Ent. Inc., No. 20-CV-2031 (JSR), 2020 WL 4547217, at *1 (S.D.N.Y. Aug. 6, 2020).  Plaintiff alleged that the company made misrepresentations about its media contracts in the Middle East and North Africa (“MENA”).  The Court held that the complaint, “while not a model of clarity, adequately alleges an overall claim of securities fraud,” including with respect to actionable misrepresentations, scienter, and loss causation.
     
  • Second Circuit Summarily Affirms District Court’s Dismissal Of Certain Securities Fraud Claims Against Mining Company, But Vacates District Court’s Decision To Reject Motion For Reconsideration Of Plaintiff’s “Abandoned” Claim
     
    08/11/2020

    On August 6, 2020, the United States Court of Appeals for the Second Circuit affirmed in a summary order the judgment of the district court that granted defendants’ motion to dismiss certain claims in a putative securities class action, while vacating the district court’s decision on plaintiff’s motion for reconsideration.  Colbert v. Rio Tinto PLC, et al., No. 19-2711 (2d Cir. Aug. 6, 2020).  Plaintiff alleged that defendants—a mining company (“the Company”) and certain of its officers—violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated thereunder, by making materially false or misleading statements with respect to certain business investments.  The Second Circuit affirmed the dismissal in a summary order, but reversed the denial of the motion for reconsideration, holding that the district court incorrectly refused to reconsider the determination that plaintiff had abandoned his claim by not explicitly opposing dismissal of the claim.  Summary orders do not have binding precedential effect.
     
  • District Of Massachusetts Dismisses Putative Class Action Against Biopharmaceutical Company For Failure To Allege Falsity
     
    08/04/2020

    On July 24, 2020, United States District Judge Allison D. Burroughs of the District of Massachusetts dismissed a putative securities class action against a biopharmaceutical company (the “Company”) and certain of its executives under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  Hackel v. Aveo Pharmaceuticals Inc. et al., No. 1:19-cv-10783, 2020 WL 4274542 (D. Mass. July 24, 2020).  Plaintiffs alleged that defendants misrepresented the status of clinical trials of a cancer drug required for approval from the U.S. Food and Drug Administration (“FDA”).  The Court granted defendants’ motion to dismiss because the statements at issue were forward-looking and because plaintiffs failed to allege falsity.
     
  • Southern District Of New York Dismisses Putative Class Action Against Recreational Vehicle Manufacturer For Failure To Adequately Allege Material Misrepresentations
     
    07/28/2020

    On July 20, 2020, Judge Denise Cote 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 manufacturer of recreational vehicles and certain of its executives.  In re Textron, Inc. Sec. Litig., No. 19-CV-7881 (DLC), 2020 WL 4059179 (S.D.N.Y. July 20, 2020).  Plaintiff generally alleged the company made misleading statements suggesting that it was successfully integrating an acquired company when in fact it allegedly was struggling to do so.  Id. at *3.  The Court held that none of the alleged misstatements were materially false or misleading.
     
  • Northern District Of California Dismisses Putative Class Action For Failure To Adequately Allege Misrepresentations And Scienter
     
    07/28/2020

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

    On July 16, 2020, Judge Jesse Furman of the United States District Court for the Southern District of New York dismissed a putative class action against a Chinese computer application developer and certain of its executives asserting claims under the Securities Exchange Act of 1934.  Marcu v. Cheetah Mobile Inc., No. 18-CV-11184 (JMF), 2020 WL 4016645 (S.D.N.Y. July 16, 2020).  Plaintiffs asserted an “omissions case”;  i.e., they alleged that the company made statements regarding its revenue, the popularity of its applications, and the importance of the Google Play store to its business model that were rendered misleading because the company did not disclose an alleged scheme through which the company earned improper referral bonuses on application downloads.  The Court held that plaintiffs failed to adequately allege that the challenged statements were false or misleading or made with scienter.  Because plaintiffs had previously been granted leave to amend their complaint, and the Court found nothing to suggest that the deficiencies identified could be cured, the Court denied leave to amend.
     
  • Second Circuit Affirms In Part Dismissal Of Securities Claims Against Cancer Drug Developer, Holding Certain Alleged Misstatements Inactionable As Corporate Puffery, But Allows Claims Concerning Other Alleged Misstatements To Proceed
     
    07/21/2020

    On July 13, 2020, the Second Circuit affirmed in part and vacated in part the dismissal of Exchange Act claims against a pharmaceutical company (the “Company”) and certain individual defendants in connection with alleged misstatements regarding the efficacy of its pancreatic cancer drug, the design of the Company’s clinical trial, and the scientific literature concerning pancreatic cancer.  Nguyen v. NewLink, No. 19-642 (2d Cir. July 13, 2020).  The Second Circuit held that while some alleged misstatements were inactionable puffery, others were statements of opinion as to which, under the United States Supreme Court’s decision in Omnicare, plaintiffs adequately pled falsity.  The Second Circuit also held that plaintiff sufficiently pled loss causation.
     
  • District of Massachusetts Dismisses Purported Class Action Against Online Home Goods Retailer
     
    07/14/2020

    On July 8, 2020, United States District Judge Douglas P. Woodlock of the United States District Court for the District of Massachusetts dismissed a putative securities fraud class action asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 against a large online home goods retailer (the “Company”) and its three most senior executives (collectively, “Defendants”).  In re Wayfair, Inc. Sec. Litig., Civ. No. 19-10062-DPW (D. Mass. July 8, 2020).  Plaintiffs alleged that defendants falsely implied that the Company was profitable and that it was experiencing positive advertising-revenue leverage—meaning that the Company was becoming more effective at generating revenue for every advertising dollar spent.  The Court granted defendants’ motion to dismiss because plaintiffs failed to adequately allege any material misstatements or omissions, scienter, or loss causation.  Notably, the Court repeatedly called attention to the absence of factual support for the allegations and described the complaint as “precisely the kind of pleading the Private Securities Litigation Reform Act was designed to prevent.”
     
  • Seventh Circuit Affirms Dismissal Of Exchange Act Claims Against A Biopharmaceutical Company In Connection With Its Tender Offer To Repurchase Its Stock
     
    06/30/2020

    On June 22, 2020, a Seventh Circuit panel of three judges affirmed a district court ruling dismissing securities fraud claims against a biopharmaceutical company (the “Company”) and one of its officers in connection with a Dutch auction tender offer the Company made to repurchase certain of the Company’s outstanding shares.  Walleye Trading LLC v. AbbVie Inc., et al., No. 19-3063 (7th Cir. June 22, 2020).  Plaintiff, a shareholder of the Company, alleged that the Company violated Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 (the “Exchange Act”) when the Company announced preliminary results of the tender offer and subsequently announced corrected results later that same day after trading closed.  Plaintiff also alleged that one of the Company’s officers violated section 20(a) of the Exchange Act.  The District Court dismissed the complaint for failure to state a claim and the Seventh Circuit affirmed.
     
  • Third Circuit Warns Of Proliferation Of Securities Class Actions, But Nevertheless Vacates District Court Decision Dismissing Certain Securities Fraud Claims In Putative Class Action Against Bank In Connection With Its Merger, Holding That Bank Failed To Adequately Disclose Known Regulatory Risks With Specificity
     
    06/30/2020

    On June 18, 2020, a Third Circuit panel of three judges partially reversed a district court ruling, reviving certain securities fraud claims against a bank (the “Bank”) and several individual defendants in connection with alleged statements made in a joint proxy statement issued to shareholders prior to the Bank’s merger.  Jaroslawicz v. M&T Bank Corp, et al., No. 17-3695 (3d Cir. June 18, 2020).  Plaintiffs, a putative class of shareholders, alleged violations of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 14(a)-9 promulgated thereunder, as well as breach of fiduciary duty under Delaware law.  Plaintiffs alleged defendants made misstatements or omissions in proxy statements in violation of Item 105 of Regulation S-K by inadequately disclosing the risks involved in the Bank’s compliance with federal anti-money laundering regulations (AML) and practices concerning its consumer checking program.
     
  • District Of New Jersey Grants In Part And Denies In Part Motion To Dismiss Securities Class Action Alleging Misleading Disclosures And Market Manipulation Against A Chinese Manufacturer Of Commercial Vehicle Parts
     
    06/23/2020

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

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

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

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

    On June 5, 2020, Judge Esther Salas of the United States District Court for the District of New Jersey sustained in part a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder against an information technology services company and certain of its current and former executives.  In re Cognizant Technology Solutions Corp. Sec. Lit., No. 16-6509 (D.N.J. June 5, 2020).  Plaintiffs alleged that the company made misrepresentations promoting the advantages of its facilities in India by failing to disclose an alleged scheme to bribe government officials to secure permits necessary to operate one such facility.  After portions of their prior complaint were dismissed by the late Judge Walls without prejudice, plaintiffs filed an amended complaint, and the case was transferred to Judge Salas.  Relying in part on the prior decision as law of the case, the Court held that plaintiffs’ allegations, which were drawn primarily from a government investigation, sufficiently alleged actionable misstatements and scienter.
     
  • Southern District Of New York Grants In Part Motion To Dismiss Securities Fraud Claims Against European Airline For Failure To Adequately Allege Falsity, Materiality, And Scienter For Certain Alleged Misstatements
     
    06/09/2020

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

    On June 2, 2020, Judge Yvonne Gonzalez Rogers of the Northern District of California granted in part a motion to dismiss a putative securities class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, against a multinational technology company (the “Company”) and two of its senior executives.  In re Apple Securities Litigation, No. 4:19-cv-02033 (N.D. Cal. June 2, 2020).  Plaintiffs alleged that defendants made materially false and misleading statements and omissions concerning the Company’s flagship product and its China business.  The Court stripped away most of plaintiff’s allegations, holding that those alleged misrepresentations failed to sufficiently allege falsity, scienter, and loss causation, but let remain two alleged misstatements made by the Company’s CEO to analysts that it found to be sufficiently pled.
     
  • District Of New Jersey Largely Upholds Claims In Putative Class Action Alleging Misleading Asbestos-Related Liability Projections
     
    05/27/2020

    On May 18, 2020, Judge William J. Martini of the United States District Court for the District of New Jersey denied a motion to dismiss a putative class action asserting claims under Section 10(b) of the Securities Exchange Act and Rule 10b-5 promulgated thereunder against a consumer and industrial products company and certain of its executives.  Kanefsky v. Honeywell Int’l Inc., No. 18-cv-15536, slip op. (D.N.J. May 18, 2020), ECF No. 106.  Plaintiff alleged that the company made misrepresentations in SEC filings and public statements regarding the projected asbestos liability arising from its acquisition of a manufacturer of automobile brakes.  The Court held that plaintiff adequately alleged falsity, scienter, and loss causation as to certain alleged misstatements.
     
  • Eastern District Of New York Denies Motion To Dismiss Putative Class Action Against Subscription-Based Meal Kit Company But Rejects Claims Based On Alleged Omission Of Intra-Quarter Decline In Key Metric
     
    05/12/2020

    On April 22, 2020, Judge William F. Kuntz II, of the United States District Court for the Eastern District of New York granted in part and denied in part a motion to dismiss a putative securities fraud class action based on purportedly misleading statements in the prospectus and registration statement (the “Offering Materials”) filed by a subscription-based meal kit service (the “Company”) in connection with its initial public offering (“IPO”).  The complaint asserted claims under Sections 11 and 15 of the Securities Act of 1933 against the Company and certain of its officers.  In re Blue Apron Holdings, Inc. Sec. Litig., No. 17-CV-4846 (E.D.N.Y. Apr. 22, 2020).  Plaintiffs alleged that the Company, which provides meal kits to customers through a weekly subscription service, concealed known risks and made misleading statements concerning challenges the Company faced with one of its product fulfilment centers.  Although the Court denied defendants’ motion to dismiss claims that the Company had failed to disclose risks associated with the performance of this fulfillment center, it rejected plaintiffs’ claims based on the alleged non-disclosure of declines in a Company statistic for measuring the number of meal kits delivered on time with all of their ingredients, which were announced by the Company in the quarter immediately following the IPO.  Confirming that Section 11 claims generally cannot be based on disclosures in earnings announcements following an offering, even when the quarterly earnings announcements closely follow, the Court held that the complaint failed to allege sufficiently that the declines were known even though the quarter ended one day after the IPO.
     
  • Northern District Of California Dismisses Complaint Against A Ticketing Platform Provider For Failure To Plead Falsity
     
    05/12/2020

    On April 28, 2020, Judge Edward J. Davila of the United States District Court for the Northern District of California granted a motion to dismiss a putative securities fraud class action based on purportedly misleading statements in the prospectus and registration statement (the “Offering Materials”) filed by a ticketing platform provider (the “Company”) in connection with its initial public offering (“IPO”).  The complaint asserted claims under Sections 11 and 15 of the Securities Act of 1933 and Section 10(b) and 20(a) of the Securities Exchange Act of 1934 against the Company and certain of its officers, and violations of Section of 11 of the Securities Act against the underwriters for the IPO.  In re Eventbrite Inc. Sec. Litig., No. 5:18-CV-02019-EJD (N.D. Cal. Apr. 28, 2020).  In granting the motion to dismiss, the Court held that it could rely on documents incorporated into the complaint by reference to negate conclusory allegations in the complaint and for context, and further held that plaintiffs failed to adequately plead falsity and that the Company, in any event, sufficiently disclosed risks associated with the acquisition.  The Court also held that the heightened pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure applied to the Section 11 claims and that its risk disclosures were sufficient under Item 303.
     
  • Northern District Of California Declines To Dismiss Putative Class Action Against Enterprise Software Company
     
    05/05/2020

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

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

    On April 28, 2020, Judge Victor Marrero of the United States District Court for the Southern District of New York dismissed a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder against a biopharmaceutical company and certain of its executives.  Schaeffer v. Nabriva Therapeutics plc, No. 19-cv-4183, slip op. (S.D.N.Y. Apr. 28, 2020), ECF No. 40.  Plaintiffs alleged that the company made false or misleading statements suggesting that a drug it submitted to the FDA for marketing approval would be approved in 2019.  The Court held that the alleged misstatements were either non-actionable puffery, or were protected forward-looking statements, or were not sufficiently alleged to have been made with scienter.
     
  • Northern District Of California Denies In Part Motion To Dismiss Securities Act Claims Against Software Company, Finding That Plaintiff Met Section 11 “Tracing” Requirements In Connection With Direct Listing Of Preexisting Shares
     
    04/28/2020

    On April 21, 2020, Judge Susan Illston 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 lawsuit asserting claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”) against a software company (the “Company”), certain of its executives and directors, and three venture capital firms (the “VC Defendants”) that held a significant percentage of the Company’s voting power.  Fiyyaz Pirani v. Slack Technologies, Inc., et. al., No. 19-cv-05857-SI (N.D. Cal. Apr. 21, 2020).  Plaintiff alleged that defendants were liable for materially misleading statements and omissions concerning the Company’s service outages, competition, scalability, and growth strategy in offering materials in connection with the Company’s direct listing of preexisting shares to the public.  The Court granted in part and denied in part defendants’ motion to dismiss, and granted plaintiff leave to amend to cure the amended complaint’s deficiencies.
     
  • Arizona Federal Court Upholds Rule 10b-5(b) Claims Against Renewable Energy Company And Its Executives, But Dismisses 10b-5(a) And (c) Claims
     
    04/21/2020

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

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