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  • Northern District Of California Dismisses Putative Class Action Against Large IT Services Provider
     
    08/04/2020

    On July 27, 2020, United States District Judge Beth Labson Freeman of the United States District Court for the Northern District of California dismissed, with leave to amend, a putative class action asserting violations of Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”) against a large IT services provider (the “Company”), certain of its officers, and its largest shareholder.  Costanzo v. DXC Tech. Co., No. 19-cv-05794-BLF, 2020 WL 4284838 (N.D. Cal. July 27, 2020).  Plaintiffs alleged that the Company’s prospectus and registration statement (the “Registration Statement”), issued in connection with the merger that created the Company, mislead investors about the true scale of, and the risks associated with, the Company’s plan to reduce its workforce costs.  The Court granted defendants’ motion to dismiss because plaintiffs failed to allege that the statements in the Company’s Registration Statement were false and because the alleged misstatements were protected by the Private Securities Litigation Reform Act’s (“PSLRA”) safe harbor.
     
    CATEGORIES: FalsityPSLRASecurities Act
  • 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.
     
  • Seventh Circuit Vacates Decision To Certify Class, Holding That District Court Must Consider Sufficiency Of Defendants’ Evidence To Rebut Fraud-On-The-Market Presumption Of Reliance, As Required Under Halliburton II
     
    07/21/2020

    On July 16, 2020, the United States Court of Appeals for the Seventh Circuit unanimously vacated the Northern District of Illinois, Eastern Division’s decision to grant class certification to plaintiffs bringing securities fraud claims against a national insurance provider (the “Company”), holding that the district court decision to exclude certain evidence at the class certification stage was based in part on a legal error.  Carpenters Pension Trust Fund, et al. v. Allstate Corp., et al., No. 19-1830 (7th Cir. July 16, 2020).  The Court remanded to the district court for further proceedings, providing guidance as to what should be considered when applying Rule 23(b)(3)’s predominance requirement in the class certification process. 
     
  • 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.”
     
  • Eleventh Circuit Affirms Dismissal of Derivative Action Against Israeli Company For Failure To Make Pre-Suit Demand
     
    07/14/2020

    On June 25, 2020, the United States Court of Appeals for the Eleventh Circuit affirmed the dismissal of a putative class action against an Israeli Voice over Internet Protocol (“VoIP”) services provider (“the Company”) and certain of its current and former directors for violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 (“the Exchange Act”).  Freedman v. magicJack Vocaltec Ltd., No. 18-15303, 2020 WL 3467396 (11th Cir. June 25, 2020).  Plaintiff claimed that two of the Company’s proxy statements contained misrepresentations designed to influence shareholder votes in a board of directors election and on changes to executive compensation packages.  The district court dismissed the action, holding that plaintiff’s claims were derivative in nature under Israeli law and that plaintiff failed to satisfy the demand requirement under Federal Rule of Civil Procedure 23.1.  The Court affirmed the district court’s dismissal in all respects.  In doing so, the Eleventh Circuit for the first time joined many other Circuit Courts that have held that the law of the place a company is incorporated is controlling on the issue of whether a claim is direct or derivative in nature.
     
    CATEGORY: Derivative Claims
  • Supreme Court Concludes That Dodd-Frank’s “For Cause” CFPB Director Removal Provision Violates Separation Of Powers, But Finds Provision Severable And Thus Leaves CFPB’s Authority Intact
     
    07/07/2020

    On June 29, 2020, the United States Supreme Court, in a 5-4 decision authored by Chief Justice Roberts, held that the structure of the Consumer Financial Protection Bureau (“CFPB”), which permitted the President to remove the CFPB’s Director only for “inefficiency, neglect of duty, or malfeasance in office,” violated the Constitution’s separation of powers.  The Court further concluded, however, that the provision was severable from the remainder of Title X of the Dodd-Frank Act (which created the CFPB), and thus the Court left the CFPB’s rulemaking, enforcement, and adjudicative powers intact.  Seila Law LLC v. CFPB, —U.S.—, 2020 WL 3492641 (June 29, 2020).  The background of this case was further discussed in our prior post.
     
    CATEGORY:
  • 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.
     
  • Second Circuit Reinstates Judgment Reversing Dismissal Of ERISA Class Action After Supreme Court Vacated And Remanded For Additional Consideration
     
    06/30/2020

    On June 22, 2020, the Second Circuit reinstated its judgment entered pursuant to its initial opinion in an Employment Retirement Income Security Act of 1974 (“ERISA”) class action after the Supreme Court vacated the decision.  Jander v. Ret. Plans Comm. of IBM, No. 17-3518 (2d Cir. June 22, 2020).  The Supreme Court remanded the action earlier this year in order for the Second Circuit to decide whether to consider in the first instance certain arguments raised for the first time before the Supreme Court.  On remand, the Second Circuit reviewed additional submissions from the parties as well as amici and reinstated its original decision, holding that the arguments raised in the supplemental briefs either were previously considered or were not properly raised and thus forfeited.  Accordingly, the Second Circuit’s prior opinion stands, holding that plaintiffs adequately pled that employee stock option plan (“ESOP”) fiduciaries violated their duty of prudence by not disclosing, earlier, insider information they allegedly possessed that, when subsequently disclosed, allegedly led to a stock price drop.
     
    CATEGORY: Class Actions
  • 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.
     
  • Northern District Of Illinois Bankruptcy Court Holds That Executive Order Barring Restaurant Operations On-Premises In Light Of COVID-19 Is A Force Majeure Event That Partially Excuses Debtor Restaurant’s Payment Under The Lease
     
    06/23/2020

    On June 2, 2020, Judge Donald R. Cassling of the United States Bankruptcy Court for the Northern District of Illinois held that a state executive order suspending dine-in services to address the COVID-19 pandemic (the “Executive Order”) constituted a force majeure event that partially excused performance under the applicable lease agreement.  In re Hitz Restaurant Group, No. 20-B-05012, 2020 WL 2924523 (Bankr. N.D. Ill. June 2, 2020).  The creditor, a property management company, sought to enforce the obligation of the debtor, a restaurant group that leased property from the creditor and filed for bankruptcy, to pay post-petition rent under Section 365(d)(3) of the Bankruptcy Code.  11 U.S.C. §§ 365(d)(3).  Applying contract principles under Illinois law, the Court held that the force majeure clause of the lease agreement excused the debtor’s lease payments, but only to the extent the debtor’s operations were impacted by the Executive Order. 
     
    CATEGORY:
  • 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.
     
  • Ninth Circuit Affirms Dismissal Of Putative Class Action Against Medical Device Company For Failure To Adequately Allege Scienter
     
    06/16/2020

    On June 10, 2020, the United States Court of Appeals for the Ninth Circuit affirmed the dismissal of a putative securities class action against a medical device company and certain of its executives under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.  Nguyen v. Endologix, Inc., ––F.3d––, 2020 WL 3069776 (9th Cir. 2020).  Plaintiff alleged that the company’s statements regarding the likelihood of Food and Drug Administration (“FDA”) approval of a new product were misleading because the device had allegedly experienced problems following its earlier introduction in the European market.  Explaining that implausible allegations cannot create a strong inference of scienter, the Ninth Circuit held that plaintiff’s allegations failed to satisfy the Private Securities Litigation Reform Act (“PSLRA”) because plaintiff’s core theory of the case had no basis in logic or common experience.  Because plaintiff had already had an opportunity to replead, the Court affirmed the dismissal with prejudice.
     
    CATEGORY: Scienter
  • U.S. Supreme Court Holds That Convention On The Recognition And Enforcement Of Foreign Arbitral Awards Does Not Prohibit Non-Signatories To Arbitration Agreements From Compelling Arbitration Based On Domestic Equitable Estoppel Doctrines
     
    06/09/2020

    On June 1, 2020, the United States Supreme Court, in a unanimous decision by Justice Thomas, held that allowing non-signatories to an arbitration agreement to compel arbitration under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention” or “Convention”) through domestic equitable estoppel doctrines does not conflict with the Convention’s signatory requirement.  GE Energy Power Conversion France SAS Corp. v. Outokumpu Stainless USA LLC, et al., No. 18-1048 (June 1, 2020).  The case was on appeal from the Eleventh Circuit, and was previously previewed in our weekly newsletter at the beginning of this year.  The Court reversed the decision by the Eleventh Circuit, noting that the text of the Convention does not address whether parties that are not signatories may enforce arbitration agreements under domestic doctrines and holding that “nothing in the Convention’s text could be read to conflict with the application of domestic equitable estoppel doctrines.”
     
    CATEGORY: Arbitration
  • 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.
     
  • U.S. Supreme Court Holds That ERISA Plan Participants Must Demonstrate Actual Or Imminent Risk Of Loss To Establish Article III Standing To Pursue Statutory Claims Regarding The Alleged Mismanagement Of Plan Funds
     
    06/09/2020

    On June 1, 2020, the United States Supreme Court, in an opinion by Justice Kavanaugh and joined by Chief Justice Roberts and Justices Alito and Gorsuch, held that plaintiffs—participants of a defined-benefit pension plan—lacked Article III standing to seek restoration of alleged plan losses or injunctive relief, under the Employee Retirement Income Security Act of 1974 (“ERISA”), because they had no “concrete stake” in the lawsuit.  Thole v. U.S. Bank, N.A., et al., No. 17-1712 (June 1, 2020).  The case was on appeal from the Eighth Circuit, and was previously previewed in our weekly newsletter at the beginning of this year.  Plaintiffs alleged that the defined-benefit plan’s fiduciaries mismanaged the plan, causing about $750 million in losses.  The Court affirmed the Eight Circuit’s dismissal of the case, after holding that, insofar as whether plaintiffs won or lost the outcome “would not change the plaintiffs’ monthly pension benefits” under their defined-benefit plan, they had not suffered any concrete injury sufficient to satisfy Article III standing.
     
    CATEGORIES: Class ActionsStanding
  • Second Circuit Affirms Dismissal Of Putative Class Action Against Manufacturers Of Medical Equipment Because Of Failure To Adequately Plead Corporate Scienter 
     
    06/01/2020

    On May 27, 2020, the United States Court of Appeals for the Second Circuit dismissed a putative class action brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 against two manufacturers of medical equipment (the “Companies”).  Jackson v. Abernathy, No. 19-1300-CV, 2020 WL 2755690 (2d Cir. May 27, 2020).  Plaintiff claimed that the Companies (one of which was spun off from the other, and both of which manufactured the product at issue) intentionally misled shareholders about the protective qualities of their surgical gown product.  The district court had dismissed the action with prejudice and subsequently denied plaintiff’s motion to set aside the judgment and for leave to file an amended complaint.  The Court affirmed the district court’s denial, holding that the proposed amendments failed to adequately plead corporate scienter.
     
    CATEGORY: Scienter
  • California Appellate Court Holds Secondary Market Purchasers of ETFs Lack Standing To Bring Securities Act Claims
     
    06/01/2020

    On January 23, 2020, the Court of Appeal of the First Appellate District of California affirmed a lower court’s judgment holding that investors lacked standing to pursue claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 against an open-end management investment company (the “Company”), its investment advisor, the investment advisor’s parent company, and certain members of the board of trustees of the Company.  Jensen v. iShares Tr., 44 Cal. App. 5th 618 (Ct. App. 2020), review denied (May 27, 2020).  Plaintiffs, who purchased shares of exchanged-traded funds (“ETFs”) on the secondary market, claimed that the Company failed to adequately disclose the risks associated with “flash crashes” that were known to occur in the ETF market.  The Court affirmed the lower court’s dismissal, holding that plaintiffs lacked standing under Section 11 because they could not satisfy the tracing requirement and that plaintiffs lacked standing under Section 12(a)(2) because they failed to allege direct contract with defendants.
     
  • New York State Trial Courts Remove COVID-19 Emergency Restriction On Filing New Commercial Actions
     
    05/27/2020

    On May 20, 2020, in light of evolving circumstances with respect to the COVID-19 health emergency, the Chief Administrative Judge of the New York State Courts issued a Memorandum lifting some of the restrictions previously put in place concerning court filings and other activities in New York State trial courts.  The most significant change is that certain electronic filings will now be permitted again.
     
    CATEGORY:
  • Southern District Of New York Holds Syndicated Term Loan Notes Sold To Buyers Are Not “Securities”
     
    05/27/2020

    On May 22, 2020, Judge Paul G. Gardephe of the United States District Court for the Southern District of New York dismissed a complaint asserting claims under state blue-sky laws as well as common-law claims against financial institutions that acted as arrangers on syndicated Term Loan B notes (“TLBs”), holding that the notes at issue are not “securities.”  See Kirschner v. JPMorgan Chase Bank, N.A., No. 17-cv-6334 (PGG) (May 22, 2020).  This is an important decision in that it is the first case of which we are aware to address whether TLBs are securities.  Plaintiff was granted leave to amend, although the basis for an amendment is not apparent.
     
    CATEGORY:
  • 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.
     
  • Second Circuit Affirms Dismissal Of Actions Seeking Disgorgement Of “Short-Swing” Profits From Investment Advisors’ Clients, Holding That Clients’ Delegation Of Discretionary Investment Authority Did Not Render Them Members Of A “Group” With Their Investment Advisors
     
    05/27/2020

    On May 20, 2020, the United States Court of Appeals for the Second Circuit issued two decisions affirming, on substantially similar grounds, the dismissal of two actions asserting claims under Section 16(b) of the Securities Exchange Act against clients of investment advisors.  Rubenstein v. International Value Advisers, LLC, No. 19-560-cv (2d Cir. May 20, 2020) (“IVA”); Rubenstein v. Rofam Inv. LLC, No. 19‑796‑cv (2d Cir. May 20, 2020).  Plaintiff alleged that certain investment advisors’ clients earned improper “short-swing” profits from equity trades because the advisors, who were statutory insiders of the issuers of the stock, bought and sold securities on their clients’ behalf within a six-month period; plaintiff, a shareholder of the issuers in question, thus sought disgorgement of the clients’ profits.  Affirming the lower courts’ decisions, the Second Circuit held that plaintiff failed to establish that the clients formed a “group” with their investment advisors such as to impute insider status on the clients, and therefore failed to show that the trades were prohibited under the Exchange Act.
     
  • 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.
     
  • Central District Of California Dismisses Putative Class Action Against Yoga Instruction Provider As Time-Barred
     
    05/05/2020

    On April 23, 2020, Judge Cormac J. Carney of the United States District Court for the Central District of California dismissed with prejudice a putative class action asserting claims under Sections 11 and 12(a)(2) of the Securities Act of 1933 against a yoga instruction company, certain of its officers, and the underwriters for the company’s initial public offering.  In re YogaWorks, Inc. Sec. Litig., No. CV 18-10696, slip op. (C.D. Cal. Apr. 23, 2020), ECF No. 70.  The Court had dismissed plaintiff’s prior complaint as time-barred under the Securities Act because plaintiff had alleged that the truth about purported misrepresentations regarding the company’s financial metrics had been disclosed no later than the publication of the company’s disclosures for the second quarter of 2017 (the “Q2 2017 Disclosures”), which occurred more than one year before the suit was filed.  Although plaintiff’s amended complaint removed references to those Q2 2017 Disclosures, the Court held that this did not cure the statute of limitations issue and dismissed the action with prejudice.
     
  • 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.
     
  • New York State Trial Courts Loosen COVID-19 Emergency Restrictions On Court Filings
     
    05/05/2020

    On April 30, 2020, the Chief Administrative Judge of the New York State Courts issued a Memorandum lifting some of the prior restrictions put in place concerning court filings and other activities in New York State trial courts, in light of evolving circumstances with respect to the COVID-19 health emergency.  The most significant change is that certain electronic filings will now be permitted again.
     
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  • Eastern District Of New York Sua Sponte Orders Transfer Of Action To Southern District Of New York, Finding Parties Failed To Establish Proper Venue 
     
    04/28/2020

    On April 22, 2020, Judge Kiyo Matsumoto of the Eastern District of New York issued an order and notice of venue to parties in a securities action against a foreign coffee chain (the “Company”), placing parties on notice of the Court’s decision to transfer the action to the Southern District of New York if the parties failed to present compelling legal and factual reasons against the transfer; the transfer order went into effect two days later.  Sterckx v. Luckin Coffee Inc. et al., No. 20-cv-01677 (E.D.N.Y. April 22, 2020).  The Court rejected plaintiffs’ argument against transfer based on a provision in a governing agreement pursuant to which the Company consented and submitted to the “jurisdiction of any state or federal court in the State of New York.”
     
    CATEGORIES: JurisdictionVenue/Forum
  • 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. 
     
  • Northern District Of California Denies Motion To Dismiss Putative Class Action Against Automaker Alleging Misstatements Based On CEO’s Social Media Posts
     
    04/21/2020

    On April 15, 2020, Judge Edward M. Chen of the United States District Court for the Northern District of California denied 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 designer and manufacturer of electric cars (the “Company”), its co-founder and CEO and its directors.  In re Tesla Inc. Securities Litigation, No. 3:18-cv-04865 (N.D. Cal. Apr. 15, 2020).  Plaintiff alleged that the statements made by the Company’s CEO on Twitter regarding securing funding for a going-private transaction were materially misleading.  The Court denied defendants’ motion to dismiss for failure to state a claim, finding that plaintiff adequately pleaded falsity, scienter, and loss causation.
     
  • Southern District Of New York Certifies Class After Again Paring Claims Against Pharmaceutical Company
     
    04/14/2020

    On April 6, 2020, 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 against a pharmaceutical company and certain of its executives, and then granted plaintiffs’ unopposed motion for class certification.  In re Mylan N.V. Sec. Litig., No. 16-CV-7926 (JPO), 2020 WL 1673811 (S.D.N.Y. Apr. 6, 2020).  As noted in our prior posts regarding the company’s motions to dismiss the first and second amended complaints, plaintiffs alleged that defendants made misleading statements regarding, among other things, an alleged rebate scheme involving the company’s EpiPen, and that defendants engaged in an illegal conspiracy to inflate the prices for various of the company’s generic drugs.  After plaintiffs filed a third amended complaint attempting to address deficiencies identified by the Court in its prior opinions, the Court held that plaintiffs had met their burden to plead scienter with respect to some, but not all, of the alleged misstatements.
     
  • Southern District Of New York Dismisses Putative Class Action Against Automotive Seating Manufacturer For Failure To Adequately Allege Misrepresentations And Scienter
     
    04/14/2020

    On April 2, 2020, Judge Ronnie Abrams of the United States District Court for the Southern District of New York dismissed a putative class action asserting claims under the Securities Exchange Act of 1934 against a manufacturer of automotive seating and certain of its executives.  In re Adient PLC Sec. Lit., No. 18-CV-9116 (RA) (S.D.N.Y. Apr. 2, 2020).  Plaintiffs alleged that the company made false and misleading statements with respect to improvements in the projected margin of “Adient,” a business spun off of its parent company, and in a particular Adient business segment (the “Metals” segment).  The Court held that plaintiffs failed to adequately allege an actionable misstatement or scienter, and, noting that plaintiffs had already voluntarily amended their complaint after defendants filed a previous motion to dismiss, denied leave to amend.
  • First Circuit Affirms Dismissal Of Putative Class Action Against Pharmaceutical Company For Failure To Adequately Allege Scienter
     
    04/14/2020

    On April 9, 2020, the United States Court of Appeals for the First Circuit affirmed the dismissal of a putative class action asserting claims under the Securities Exchange Act of 1934 against a pharmaceutical company and certain of its executives.  Gallagher v. Ocular Therapeutix, Inc., No. 19-1557 (1st Cir. Apr. 9, 2020).  Plaintiffs alleged that the company made misrepresentations regarding manufacturing processes that served as the basis for the FDA’s rejection of the company’s New Drug Application (“NDA”).  The lower court dismissed the action for failure to allege an actionable misstatement or omission or to sufficiently allege scienter.  The First Circuit affirmed, holding that plaintiffs failed to allege sufficient facts to support a strong inference of scienter. 
     
    CATEGORY: Scienter
  • Second Circuit Holds That Price Impact Can Be Established For Class Certification Based On “Inflation Maintenance” Theory Even Where Inflation Is Not “Fraud-Induced,” And Affirms, In A Split Panel, District Court’s Determination That Defendants Failed To Rebut The Basic Presumption Of Reliance
     
    04/14/2020

    On April 7, 2020, the United States Court of Appeals for the Second Circuit upheld certification of a shareholder class asserting claims under the Securities Exchange Act of 1934 against a financial institution and certain of its executives.  Arkansas Teacher Ret. Sys. v. Goldman Sachs Group, Inc., ––F.3d––, 2020 WL 1682772 (2d Cir. 2020).  Plaintiffs alleged that the company made misrepresentations about its practices with respect to collateralized debt obligations (“CDOs”) and failed to disclose alleged conflicts of interest involving the selection of the subprime mortgages underlying the CDOs.  As discussed in our prior post, in 2018 the Second Circuit vacated the district court’s prior class certification order and remanded with instructions to apply a “preponderance of the evidence” standard in determining whether the company had rebutted the presumption of reliance under Basic Inc. v. Levinson, 485 U.S. 224 (1988), and to consider certain of defendants’ evidence of lack of price impact from the alleged misrepresentations in assessing whether the presumption had been rebutted.  Arkansas Teacher Ret. Sys. v. Goldman Sachs Group, Inc., 879 F.3d 474, 484–85 (2d Cir. 2018).  On remand, the district court again certified a class.  On an interlocutory appeal pursuant to Rule 23(f), the Second Circuit affirmed.  The Court unanimously held that the “inflation-maintenance” theory was properly applied, rejecting defendants’ argument that the theory should not apply where the inflation resulted from “general statements” about the company’s business practices.
     
  • ARRC Releases Summary Of Proposed New York Law Aimed At Amending Legacy Transactions Referencing USD LIBOR
     
    04/07/2020

    On March 6, 2020, the Alternative Rate Reference Committee (ARRC), the Federal Reserve’s LIBOR-transition working group comprised of private-sector entities and industry regulators, issued a press release of its New York State legislative proposal for amending financial contracts that lack adequate fallback language.  The proposed New York law would apply to certain LIBOR-based financial contracts executed prior to LIBOR’s discontinuation and amend them, by operation of law, to include ARRC’s recommended fallback rate plus a spread adjustment.  ARRC drafted the law to provide legal certainty and to minimize the potentially adverse economic consequences associated with the industry’s transition away from LIBOR.
     
    CATEGORY:
  • The Second Circuit Holds That New York Business Registration Does Not Constitute Consent To General Personal Jurisdiction
     
    04/07/2020

    On March 30, 2020, the United States Court of Appeals for the Second Circuit held that business registration under the New York Business Corporation Law (the “BCL”) Section 1301 does not “constitute consent to general personal jurisdiction in New York.”  Chen v. Dunkin’ Brands, Inc., No. 18-cv-3087 (2d Cir. Mar. 30, 2020).  The Court accordingly affirmed the dismissal of a putative class action asserting various state consumer protection law claims against a fast food franchise chain (the “Company”).  The Court’s opinion was based in part on a consideration of the Supreme Court’s decision in Daimler AG v. Bauman, 571 U.S. 117 (2014), which held that a state’s exercise of general personal jurisdiction over foreign corporations would be unconstitutional if it did not establish that the corporation had “continuous and systematic” contact with the state rendering it “essentially at home in the forum.”
     
    CATEGORY: Jurisdiction
  • District Of Connecticut Dismisses Securities Class Action Against A Consumer Financial Services Company, Certain Of Its Officers And Directors And Its Underwriters, Holding That Plaintiffs Failed To Adequately Allege Any Material Misrepresentations
     
    04/07/2020

    On March 31, 2020, Judge Victor A. Bolden of the District of Connecticut dismissed a putative securities class action against a provider of private label credit cards (the “Company”), certain of its officers and directors, and its underwriters in connection with a notes offering.  In re Synchrony Financial Sec. Litig., No. 3:18-cv-1818 (VAB) (D. Conn. Mar. 31, 2020).  Plaintiffs alleged violations of Section 11 of the Securities Act of 1933 (the “Securities Act”) by all defendants, as well as Section 15 of the Securities Act against the individual defendants.  Plaintiffs also alleged violations of Sections 10(b), 20A, and 20(a) of the Securities and Exchange Act of 1934 (the “Exchange Act”) by the Company and certain of the individual defendants.  The Court granted defendants’ motion to dismiss the Amended Complaint in its entirety with prejudice.
     
  • District Of Delaware Dismisses Putative Securities Class Action Against Energy Company Based On Failure To Adequately Plead Materiality And Loss Causation
     
    04/02/2020

    On March 18, 2020, Judge Richard G. Andrews of the United States District Court for the District of Delaware dismissed a putative class action claiming violations of Sections 14(a) and 20(a) of the Securities and Exchange Act of 1934, SEC Rule 14a-9 and Regulation G, and breach of fiduciary duty, in connection with the acquisition of an oil and gas exploration company (the “Company”).  Mack v. Resolute Energy Corp., No. CV 19-77-RGA, 2020 WL 1286175 (D. Del. Mar. 18, 2020).  Plaintiffs alleged, among other things, that the proxy statement omitted certain financial projections.  The Court dismissed the complaint, holding that it did not adequately plead materiality or loss causation.
     
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