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  • California District Court Grants With Prejudice Motion To Dismiss Securities Fraud Class Action Against Video Game Company, Finding Plaintiffs Failed To Plead Falsity And Scienter
     
    02/03/2023

    On January 22, 2023, Judge Percy Anderson of the United States District Court for the Central District of California granted a motion to dismiss the third amended class action complaint (“TAC”) in a putative class action alleging that a video game company (the “Company”) and four of its officers misled investors by making material misstatements and omissions concerning sexual harassment and discrimination at the Company.  Cheng v. Activision Blizzard Inc. et al., 2:21-cv-06240 (C.D. Cal. Jan. 22, 2023).  Plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder.  The Court dismissed plaintiffs’ TAC with prejudice, finding plaintiffs failed to plead falsity and scienter.
  • Eastern District Of New York Court Grants In Part Motion To Dismiss Putative Securities Class Action Brought Against Space Exploration Company
     
    11/15/2022

    On November 7, 2022, Judge Allyne R. Ross of the United States District Court for the Eastern District of New York granted in part a motion to dismiss a putative securities class action against a space exploration company (the “Company”), its founder, and certain of its current and former executives. Kusnier and Scheele v. Virgin Galactic Holdings, Inc., et al, No. 21-cv-03070-ARR (E.D.N.Y. Nov. 7, 2022). Plaintiffs alleged that defendants violated Section 10(b) of the Securities Exchange Act (the “Exchange Act”), Rule 10b-5 promulgated thereunder, and Sections 20(a) and 20A of the Exchange Act, by making materially false and misleading statements regarding the safety history and functioning capabilities of the Company’s spacecraft. The Court granted the motion in part but found sufficient at the pleading stage certain alleged misstatements.
     
  • District Court Of Massachusetts Denies Communications Infrastructure Company’s Motion To Dismiss Finding Plaintiffs Adequately Pled Scienter
     
    11/01/2022

    On October 20, 2022, Judge George A. O’Toole, Jr. of the United States District Court for the District of Massachusetts (the “Court”) denied a motion to dismiss a putative securities class action against a business communications infrastructure company (the “Company”) and three of its executives.  Miller v. Sonus Networks, Inc., et al, No. 18-12344-GAO (D. Mass Oct. 20, 2022).  Plaintiff alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, by making materially false and misleading statements regarding the Company’s projected sales and revenue forecast.  The Court denied the motion, finding that plaintiff adequately pled scienter.
  • Illinois District Court Grants In Part And Denies In Part Insurance Company’s Motion For Summary Judgment In Putative Securities Fraud Lawsuit
     
    08/03/2022

    On July 26, 2022, Judge Robert W. Gettleman of the United States District Court for the Northern District of Illinois Eastern Division granted in part and denied in part a motion for summary judgment in a securities fraud class action against an insurance company (the “Company”) and certain of its executives.  In re The Allstate Corp. Sec. Litig., No. 16-C-10510 (N.D. Ill. July 26, 2022).  Plaintiffs alleged that defendants violated Section 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, by making material misstatements and omissions regarding a spike in the frequency of automobile policy claims, which plaintiffs alleged had a negative impact on the Company’s financial condition and stock price.
  • Central District Of California Largely Denies Motion To Dismiss Putative Class Action Regarding Proposed Acquisition Of Space Industry Startup By SPAC
     
    07/20/2022

    On July 13, 2022, the United States District Court for the Central District of California largely denied a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a special purpose acquisition company (SPAC), a space industry startup that was the SPAC’s target, certain executives of both companies, and an investor that served as sponsor of the SPAC.  In re Stable Road Acquisition Sec. Litig., No. 2:21-cv-05744, slip op. (C.D. Cal. July 13, 2022), ECF No. 154.  Plaintiff alleged that the target company made misrepresentations regarding the viability of its technology and the immigration and national security status of its CEO, which the SPAC allegedly repeated without conducting adequate due diligence.  The Court held that plaintiff’s allegations were largely sufficient but that plaintiff failed to adequately allege scienter or control person liability with respect to certain executives.
  • Northern District Of California Grants Motion To Dismiss Securities And Exchange Act Claims Against Mobile Gaming Technology Company Holding That Plaintiffs Did Not Adequately Plead Falsity, Scienter, Loss Causation, Or Material Misstatements Or Omissions
     
    07/12/2022

    On July 5, 2022, Chief Judge Richard Seeborg of the Northern District of California granted motions to dismiss a putative securities class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), Rule 10b-5 thereunder, Section 20(a) of the Exchange Act, and Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (“Securities Act”), against a mobile gaming technology company (the “Company”), certain of its officers and directors, and its underwriters.  Jedrzejczyk, et al. v. Skillz Inc., et al., No. 21-cv-03450-RS (N.D. Cal. July 5, 2022).  Plaintiffs alleged that defendants made material misstatements and omissions regarding the Company’s financial condition, technical capabilities, and business prospects.  The Court granted defendants’ motions to dismiss, holding that plaintiffs failed to adequately plead falsity, scienter, or loss causation as to the Exchange Act claims, and that plaintiffs had not established standing or adequately pled material untrue statements or omissions as to the Securities Act claims.
  • Northern District Of California Dismisses Without Prejudice Putative Class Action Against Synthetic Biology Company For Failure To Allege Scienter
     
    06/07/2022

    On May 31, 2022, Judge Beth Labson Freeman of the Northern District of California dismissed without prejudice a putative class action asserting claims under the Securities Exchange Act against a synthetic biology company and certain of its executives.  Joseph v. Precigen, Inc., No. 20-cv-06936-BLF (N.D. Cal. May 31, 2022).  Plaintiff alleged that the company misrepresented the efficiency and economic viability of its methane conversion program.  The Court held that plaintiff failed to adequately allege scienter and failed to allege falsity with respect to certain alleged misrepresentations; however, the Court granted leave to replead.
  • Eastern District Of New York Grants Motion To Dismiss Exchange Act Claims Against Airline Company Holding Plaintiffs Did Not Adequately Plead Material Misstatements Or Omissions Or Scienter
     
    04/19/2022

    On April 12, 2022, Judge Rachel P. Kovner of the Eastern District of New York granted a motion to dismiss a putative securities class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder, as well as Section 20(a) of the Exchange Act against an airline company (the “Company”) and certain of its officers and directors.  In re GOL Linhas Aéreas Inteligentes S.A. Securities Litigation, No. 1:20-cv-04243-RPK-TAM (E.D.N.Y. Apr. 12, 2022).  Plaintiffs alleged that defendants made materially misleading statements and omissions regarding the Company’s financial strength in an earnings report issued in the early days of the COVID-19 pandemic, despite allegedly knowing that its auditor would be issuing a report emphasizing a going concern and raising material weaknesses concerning the Company’s internal controls.  The Court granted defendants’ motion to dismiss, holding that plaintiffs failed to adequately plead material misstatements or omissions as well as scienter.
  • Western District Of Texas Largely Denies Motion To Dismiss Putative Class Action Against Information Technology Company
     
    04/05/2022

    On March 30, 2022, Judge Robert Pitman of the Western District of Texas denied the majority of a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against an information technology company, certain of its executives, and private equity firms that owned the company’s securities.  In re SolarWinds Corp. Sec. Litig., No. 1:21-CV-138-RP (W.D. Tex. Mar. 30, 2022).  Plaintiffs alleged that company statements regarding its cybersecurity policies and practices were revealed to be false and misleading upon the disclosure of a security breach.  The Court held that plaintiffs adequately alleged falsity, scienter, and loss causation, except as to the company’s CEO, the allegations as to whom the Court granted plaintiffs leave to replead.
  • Southern District Of New York Pares Claims In Putative Class Action Against Energy Company
     
    03/15/2022

    On March 7, 2022, Judge P. Kevin Castel of the Southern District of New York granted in part and denied in part a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a coal mining company and certain of its executives.  In re Peabody Energy Corp. Sec. Litig., No. 20-cv-8024 (PKC), slip op. (S.D.N.Y. Mar. 7, 2022), ECF No. 50.  Plaintiff alleged that the company made misrepresentations concerning its safety practices, a fire that took place at one of its mines, and its ability to subsequently reopen that mine and resume operations.  The Court held that the complaint adequately alleged misrepresentations and scienter with respect to the mine fire but dismissed the remaining challenged statements as non-actionable puffery, protected forward-looking statements, or statements of opinion.
  • Northern District Of California Pares Claims In Putative Class Action Against Videoconferencing Company
     
    02/24/2022

    On February 16, 2022, Judge James Donato of the Northern District of California granted in part and denied in part a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a videoconferencing company and certain of its executives.  In re Zoom Sec. Litig., No. 20-cv-02353-JD (N.D. Cal. Feb. 16, 2022).  Plaintiff alleged that the company made misrepresentations concerning the level of encryption on its primary videoconferencing product.  The Court held that plaintiff sufficiently alleged falsity, scienter, and loss causation as to the CEO’s challenged statements regarding encryption, but it dismissed claims as to certain other alleged misstatements, and all claims against one executive, for failure to sufficiently allege scienter, while granting leave to amend.
  • Southern District Of Texas Denies Motion To Dismiss Securities Fraud Claims, Finding Plaintiffs Adequately Pled Material Misrepresentations And Scienter
     
    04/13/2021

    On March 31, 2021, Judge Alfred H. Bennett of the Southern District of Texas denied a motion to dismiss claims under Section 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) against a company that operates live adult entertainment businesses and bar-restaurants (the “Company”) and certain of its executives, as well as members of its audit, compensation, and nominating committees.  Hoffman, et al v. RCI Hospitality Holdings, Inc., et al, No. 4:19-cv-01841 (S.D. Tex. Mar. 31, 2021).  Plaintiffs alleged defendants made misleading statements or omissions concerning certain related-party transactions (RPTs), executive compensation, and other financial points in several of the Company’s Form 10-K annual reports.  The Court denied defendants’ motion to dismiss the amended complaint, holding that plaintiffs sufficiently pled material misstatements and scienter.
     
  • Northern District Of Illinois Denies Motion To Dismiss Securities Fraud Claims Against Surgical Implants Manufacturer, Finding Plaintiffs Adequately Alleged Material Misstatements And Scienter
     
    04/13/2021

    On April 1, 2021, Judge Matthew F. Kennelly of the Eastern District of Illinois denied a motion to dismiss a claim under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 thereunder, against a surgical implants manufacturer (the “Company”) and certain of its current and former officers.  Lowry v. RTI Surgical Holdings Inc., No. 20-cv-01939 (N.D. Ill. Apr. 1, 2021).  Plaintiffs alleged that defendants made materially false and misleading statements regarding the Company’s accounting and revenue recognition practices which caused a stock drop once corrective disclosures were made.  The Court denied defendants’ motion to dismiss the amended complaint, holding that plaintiffs sufficiently pled material misstatements and scienter.
     
  • Eastern District Of New York Grants Motion To Dismiss Exchange Act Claims Against Life Insurance Company In Connection With Its Retirement And Income Solution Program
     
    01/20/2021

    On January 7, 2021, Judge Sterling Johnson, Jr. of the Eastern District of New York granted a motion to dismiss, with prejudice, in 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 SEC Regulation S-K, Item 303, against a life insurance company (the “Company”) and certain of its executives.  Parchmann v. Metlife, et al., No. 18-cv-00780-SJ-RLM (E.D.N.Y. Jan. 7, 2021).  Plaintiff alleged that defendants made materially misleading statements regarding the Company’s financial condition and internal controls with respect to one of the Company’s Retirement and Income Solution (“RIS”) programs.  The Court granted defendants’ motion to dismiss with prejudice, holding, among other things, that plaintiffs failed to adequately plead falsity, loss causation, and scienter.
     
  • 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.
     
  • 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.
     
  • 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.
     
  • 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.
     
  • District Of Delaware Partially Sustains Securities Fraud Case Against Automotive Parts Distributor For False Sales Growth Projections
     
    02/19/2020

    On February 7, 2020, Judge Richard G. Andrews of the United States District Court for the District of Delaware granted in part and denied in part motions to dismiss a putative securities class action against an automotive aftermarket parts provider (the “Company”), certain members of its management (the “Company Individual Defendants”), a hedge fund that owned approximately four percent of the Company’s shares, and the fund’s Chief Executive Officer who was a member of the Company’s board of directors.  In re Advance Auto Parts, Inc., Sec. Litig., No. CV-18-212-RGA (D. Del. Feb. 7, 2020).  Plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making misleading misstatements and omissions about the Company’s projected growth and financial condition.  The Court dismissed the claims to the extent it found them to be puffery or lacking sufficient allegations of falsity, but denied the motion with respect to claims based on statements related to projections and opinions regarding the Company’s financial outlook. 
     
  • District Of Kansas Allows Exchange Act Claims Against Financial Services Company To Proceed, Finding That Plaintiffs Adequately Alleged Material Misstatements, Omissions And Scienter
     
    12/10/2019

    On December 3, 2019, Judge John W. Lungstrum of the United States District Court for the District of Kansas denied a motion to dismiss a putative securities class action involving claims brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, against a financial services company (the “Company”), three of its senior officers and several of its founder directors.  Yellowdog Partners, LP and Carpenters Pension Fund of Illinois v. CURO Group Holdings Corp. et al., 18-cv-02662 (D. Kan. Dec. 3, 2019).  Plaintiffs alleged that the Company and the three officer defendants made false and materially misleading statements concerning the Company’s business transition away from its most profitable product and its effect on the Company’s financial condition.  The Court denied defendants’ motion to dismiss, finding that plaintiffs sufficiently pleaded falsity and scienter.
     
  • Southern District Of California Denies Summary Judgment For Defendants, Ruling That There Are Triable Issues Of Fact Related To Loss Causation, Materiality, Scienter, And Damages
     
    12/03/2019
    On November 6, 2016, Judge Michael A. Anello of the United States District Court for the Southern District of California denied defendants’ motion for summary judgment in a securities class action against a theme park and entertainment company (“defendant” or the “Company”), certain members of its management, and its largest shareholder.  Baker v. SeaWorld Entm’t, Inc., No. 14CV2129-MMA (AGS), 2019 WL 6118448 (S.D. Cal. Nov. 18, 2019).  Plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making materially misleading misstatements and omissions about the effect of Blackfish, a documentary film concerning killer whales in captivity, on attendance at the theme park and its earnings.  The Court denied defendants’ motion for summary judgment on the basis that there were genuine issues of material fact with respect to each element of a securities fraud claim. 
  • Middle District Of Tennessee Pares Claims In Putative Class Action Against Healthcare Company And Its Previous Owner
     
    11/26/2019

    On November 19, 2019, Judge William M. Campbell of the United States District Court for the Middle District of Tennessee granted in part and denied in part motions to dismiss a putative class action under the Securities Act of 1933 and the Securities Exchange Act of 1934 against a healthcare company, certain of its officers and directors, and a private equity firm that previously owned the company.  Plaintiffs alleged that the company failed to disclose that allegedly improper business practices were responsible for its revenue growth.  In re Envision Healthcare Corp. Sec. Litig., No. 3:17-CV-01112, 2019 WL 6168254 (M.D. Tenn. Nov. 19, 2019).  The Court held that certain of the claims against the company and the individual defendants were adequately pleaded and others were not, but dismissed all claims against the private equity firm for failure to adequately allege scienter.
     
  • District Of New Jersey Denies Motion To Dismiss Class Action Against Blockchain-Based Company, Finding That Plaintiff Adequately Pled Defendants’ Initial Coin Offering Constituted The Offer And Sale Of Unregistered Securities
     
    12/18/2018

    On December 10, 2018, Judge Susan D. Wigenton of the United States District Court for the District of New Jersey denied defendants’ motion to dismiss a putative class action asserting violations of Sections 12(a)(1) and 15 of the Securities Act of 1933 (the “Securities Act”).  Solis v. Latium Network, Inc., et al., No. 18-10255 (D. N.J. Dec. 10, 2018).  Plaintiff alleged that the defendants, a blockchain-based tasking platform (the “Company”) and its co-founders and officers, sold over $17 million in cryptocurrency tokens in an initial coin offering (“ICO”) without registering the tokens.  The Court held that plaintiff sufficiently alleged that the Company’s tokens were securities that should have been registered under the Securities Act prior to the ICO.
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  • Southern District Of New York Dismisses Putative Securities Class Action Against Electronics Manufacturer, Finding That The Alleged Misstatements Are Protected By The PSLRA’s Safe Harbor
     
    10/23/2018

    On October 10, 2018, Judge Paul G. Gardephe of the United States District Court for the Southern District of New York issued a memorandum opinion and order setting forth the reasoning for his September 30, 2018, dismissal of a putative securities class action against SuperCom Inc. (the “Company”), an Israeli manufacturer of electronic identification and location tracking products, and certain of its officers and directors.  In re SuperCom Inc. Sec. Litig., No. 20-cv-9650 (S.D.N.Y. Oct. 10, 2018).  Plaintiffs—purchasers of the Company’s common stock during a ten-month putative class period—alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) as a result of defendants allegedly making materially false and misleading statements regarding the Company’s revenue and earnings projections for 2015, which plaintiffs allege led to a 40% decline in the Company’s stock price when the Company subsequently announced lower-than-expected financial results.  The Court disagreed, finding that the alleged misstatements are protected by the Private Securities Litigation Reform Act of 1995 ( “PSLRA”) safe harbor because plaintiffs either failed to adequately allege material misstatements or failed to adequately allege the requisite scienter necessary to support their claims.
  • Northern District Of California Finds Scienter And Individual Reliance Adequately Pleaded, But Stresses That Issues Respecting Class-Wide Reliance Remain To Be Considered
     
    09/17/2018

    On September 7, 2018, Judge Charles Breyer of the United States District Court for the Northern District of California denied a motion to dismiss a second amended putative class action complaint on behalf of Volkswagen bondholders asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against Volkswagen and certain of its former executives alleging that defendants failed to disclose Volkswagen’s use of “defeat device” software to mask emissions in the company’s diesel engines.  In re Volkswagen “Clean Diesel” Marketing, Sales Practices, and Products Liability Litigation, MDL No. 2672 CRB (JSC) (N.D. Cal. Sept. 7, 2018).  In its previous July 19, 2017 and March 2, 2018 orders, as discussed in our prior posts, the Court had first dismissed certain claims for failure to adequately plead scienter and then, reconsidering its prior holding that plaintiff was entitled to a presumption of reliance under Affiliated Ute, dismissed plaintiff’s first amended complaint in its entirety for failure to plead reliance.  In considering the second amended complaint, the Court held that scienter and individual, direct reliance were adequately alleged, but raised questions about plaintiff’s ability to prove class-wide reliance.
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  • Southern District Of New York Dismisses Securities Fraud Claims For Failure To Plead Reliance And Scienter 
     
    07/25/2017

    On July 10, 2017, Judge John G. Koeltl of the United States District Court for the Southern District of New York dismissed a putative securities fraud class action against E*TRADE Securities LLC (“E*TRADE”), E*TRADE Financial Corporation (“E*TRADE Financial), and one current and one former officer of E*TRADE Financial.  Schwab v. E*TRADE Fin. Corp., No. 16-cv-05891 (S.D.N.Y. July 10, 2017).  Plaintiff alleged that E*TRADE misled its clients by falsely representing that it would execute orders consistent with its duty of “best execution,” which requires it to use “reasonable diligence” to obtain the most favorable price for a customer under “prevailing market conditions.”  Plaintiff brought claims under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder, as well as control person claims under Section 20(a) of the Exchange Act.  The Court granted defendants’ motion to dismiss, holding that plaintiff failed to adequately plead reliance or scienter, and also failed to plead culpable participation sufficient to state a control person claim.

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  • Northern District Of California Partially Dismisses Securities Claims For Failure To Sufficiently Allege Misstatements And Control Person Liability
     
    07/11/2017

    On June 28, 2017, Judge Charles R. Breyer of the United States District Court for the Northern District of California ruled, among other things, that allegations of knowledge of “defeat devices” did not equate to knowledge of the probability of exposure from the devices and granted in part a motion to dismiss a putative securities class action against Volkswagen Aktiengesellschaft and certain of its affiliates (“VW”) and officers and directors, asserting claims under Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated thereunder, as well as additional “control person” claims against the officers and directors under Section 20(a) of the Exchange Act.  In re Volkswagen “Clean Diesel” Marketing, Sales Practices, and Products Liability Litigation, MDL No. 2672 CRB (JSC), 2017 WL 2798525 (N.D. Cal. June 28, 2017).  Plaintiffs alleged that VW’s financial statements and statements regarding its U.S. vehicles’ compliance with diesel emissions standards were misleading because VW had failed to disclose, in various manners, that it had been using “defeat device” software to manipulate emissions tests in vehicles sold in the United States.  After plaintiffs were given leave to replead following an earlier motion to dismiss, the Court held that the amended complaint’s allegations supported claims regarding financial statements after May 2014, but dismissed claims regarding earlier alleged misstatements.  In addition, the Court dismissed claims against one individual defendant for failure to sufficiently allege scienter and “control.”

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