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Ninth Circuit Affirms Dismissal Of Securities Class Action With Prejudice Against Enterprise Data Platform For Repeated Failure To Allege Falsity
11/26/2024On November 19, 2024, the United States Court of Appeals for the Ninth Circuit affirmed the dismissal of a putative class action complaint alleging that a data management and analytics software company (the “Company”) and certain of its officers and directors made misleading statements and omissions regarding the technical capabilities of the Company’s products and its financial outlook in violation of Sections 11(a), 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”) and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder. In re Cloudera Securities Litigation, No. 22-16807 (9th Cir. Nov. 19, 2024). The Court held that plaintiff failed to allege falsity and affirmed the dismissal with prejudice based on plaintiff’s failure to cure the deficiencies of which he had been warned.
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Southern District Of New York Dismisses Securities Act Claims As Untimely And Pares Claims In Putative Class Action Against Robotic Software Company
11/26/2024On November 4, 2024, Judge Denise L. Cote 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 class action brought under Sections 10b-5 and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5, as well as under Sections 11 and 15 of the Securities Act of 1933 (“Securities Act”), against a robotic process automation (“RPA”) software company (“Company”) and certain of its executives (“Individual Defendants”). In re UiPath, Inc. Sec. Litig., 23-cv-7908 (DLC) (S.D.N.Y. Nov. 4, 2024). Plaintiffs alleged that the Company misrepresented its financial condition and business operations. Although it dismissed all of plaintiffs’ Securities Act claims as time-barred and most of plaintiffs’ Exchange Act claims, the Court held that plaintiffs identified several actionable misstatements and adequately alleged scienter to support claims under the Exchange Act.
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United States Supreme Court Dismisses As “Improvidently Granted” A Putative Securities Class Action Against Meta For Alleged Misuse Of User Data
11/26/2024On November 22, 2024, the United States Supreme Court dismissed Meta’s appeal of the United States Court of Appeals for the Ninth Circuit’s decision to partially reinstate a putative class action asserting claims under the Securities Exchange Act of 1934 against the social media company, alleging that Meta (the “Company”) made misrepresentations relating to the misuse of user data by a third party. Facebook v. Amalgamated Bank, No. 23-980, 604 U.S. --- (2024). As we covered in a previous post, the Supreme Court granted the Company’s petition for certiorari to address the following question: “Are risk disclosures false or misleading when they do not disclose that a risk has materialized in the past, even if that past event presents no known risk of ongoing or future business harm.” The Court dismissed the Company’s appeal in a single-sentence, per curiam order, stating “The writ of certiorari is dismissed as improvidently granted.”
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Supreme Court Hears Oral Argument On Standard For Pleading Securities Fraud In Private Civil Suits
11/19/2024On November 13, 2024, the United States Supreme Court heard oral argument in an appeal from a decision of the United States Court of Appeals for the Ninth Circuit in a putative class action asserting claims under the Securities Exchange Act of 1934 against a technology company and certain of its officers. NVIDIA Corporation v. E. Ohman J:or Fonder AB, No. 23-970. Relevant to the appeal, plaintiffs allege that (a) expert analysis revealed that defendants had materially understated the extent to which the company’s graphics processing units were purchased by the volatile cryptocurrency mining industry and (b) the company’s CEO had known of the misrepresentations because he received internal reports reflecting the truth. As discussed in prior posts, the district court dismissed the case entirely and with prejudice, but the Ninth Circuit, in a 2-1 decision, partially reversed, holding that plaintiffs adequately alleged that statements by two executives had been misleading, and adequately alleged scienter as to the company’s CEO. The Supreme Court granted certiorari to address the following questions: “1. Whether plaintiffs seeking to allege scienter under the Private Securities Litigation Reform Act (“PSLRA”) based on allegations about internal company documents must plead with particularity the contents of those documents”; and “2. Whether plaintiffs can satisfy the PSLRA’s falsity requirement by relying on an expert opinion to substitute for particularized allegations of fact.”
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Western District Of Louisiana Grants Motion To Dismiss Putative Federal Securities Class Action Against Telecommunications Company For Failure To Allege Falsity, Loss Causation, Or Scienter
11/12/2024On October 30, 2024, Judge Terry A. Doughty of the United States District Court for the Western District of Louisiana adopted the September 30, 2024 Report and Recommendation of Magistrate Judge Kayla Dye McClusky and granted with prejudice a motion to dismiss a putative securities class action against a telecommunications company (the “Company”) and certain of its officers (the “Individual Defendants”). In re Lumen Techs., Inc. Sec. Litig., No. 3:23-00286 (W.D. La. Sept. 30, 2024). Plaintiffs alleged that defendants violated Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by allegedly making false statements regarding the Company’s fiber optics expansion project. The Court granted defendants’ motion to dismiss with prejudice, holding that plaintiffs failed to adequately plead any actionable misstatements or omissions or loss causation and that plaintiffs failed to plead a strong inference of scienter as to any defendant.
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The Second Circuit Revives Exchange Act Claims Against Outside Auditor, Finding Alleged Misstatements In Audit Certification To Be Material
11/05/2024On October 31, 2024, the United States Court of Appeals for the Second Circuit revived claims brought under Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 against an outside auditor (the “Auditor”) that performed audit and assurance services for a property and casualty insurer (the “Company”), in which plaintiffs are investors. New England Carpenters Guaranteed Annuity & Pension Funds, et. al.v. AmTrust Fin. Servs. Inc., et. al., 20-1643 (Oct. 31, 2024). In an earlier opinion, dated August 23, 2023, which we previously covered here, the Second Circuit affirmed the district court’s conclusion that plaintiffs failed to plausibly allege that alleged misstatements in the Auditor’s 2013 audit opinion were sufficiently material to support a claim under the Exchange Act. However, the Second Circuit granted plaintiffs’ petition for reconsideration and held that it had erred in its materiality analysis. It, therefore, vacated and remanded the district court’s dismissal of plaintiffs’ Exchange Act claims against the Auditor.
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Northern District Of Texas Dismisses Putative Securities Class Action For Failure To Establish Standing
11/05/2024On October 24, 2024, Judge Jane J. Boyle of the United States District Court for the Northern District of Texas dismissed a putative securities class action alleging that a bond issuer (the “Company”) and certain of its directors and officers violated Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”). In re GWG Holdings, Inc. Sec. Litig., No. 3:22-CV-0410-B (N.D. Tex. Oct. 24, 2024). The Court found that lead plaintiff failed to establish it had statutory standing sufficient to assert claims under Sections 11 and 12—and by extension, also Section 15—of the Securities Act. The Court dismissed the case without prejudice with leave to amend.
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Tenth Circuit Court Of Appeals Affirms Dismissal Of Securities Class Action Against Online Retailer
10/22/2024On October 15, 2024, a three-judge panel of the United States Court of Appeals for the Tenth Circuit affirmed a decision by the United States District Court for the District of Utah granting a motion to dismiss a putative securities class action against an online retailer (the “Company”), its former CEO, and other senior management at the Company. The Mangrove Partners Master Fund, Ltd. v. Overstock.com, Inc., et al., No. 21-4126 (10th Cir. Oct. 15, 2024). Plaintiff asserted claims under Sections 10(b), 20(a), and 20A of the Securities Exchange Act, and Rule 10b-5 thereunder. -
Eastern District Of Wisconsin Dismisses Putative Securities Class Action Against Department Store Chain For Failing To Plead Falsity
10/16/2024On September 30, 2024, Judge Lynn Adelman of the United States District Court for the Eastern District of Wisconsin granted a motion to dismiss a putative securities class action asserting claims under Sections 10(b), 14(a), and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5 and 14a-9, against a retail department store chain (the “Company”) and certain of its officers and board members (“Individual Defendants” and, collectively, “Defendants”). Thomas Frame v. Kohl’s Corp., No. 22-CV-1016 (E.D. Wis. Sept. 30, 2024). Plaintiff alleged that Defendants made materially misleading statements and omissions in order to stave off a hostile takeover by an activist investment firm. The Court held that plaintiff failed to identify a single actionable misstatement or omission and, therefore, dismissed the action without prejudice.
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District Of New Jersey Dismisses Putative Securities Class Action Against Pool Equipment Company
10/16/2024On October 2, 2024, Judge William J. Martini of the United States District Court for the District of New Jersey dismissed a putative class action against a pool equipment company (the “Company”), its private equity majority shareholders, an investment advisor for one of the private equity firms, and two of the Company’s senior executives (the “Individual Defendants”) alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5. City of Southfield Fire & Police Ret. Sys. v. Hayward Holdings, Inc., No. 2:23-CV-04146 (WJM) (D.N.J. Oct. 2, 2024). The Court dismissed the complaint because it did not plead with specificity which portions of the Company’s or Individual Defendants’ statements were actionable, why they were actionable, or whether the Individual Defendants acted with the required state of mind.
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Southern District Of Florida Dismisses Putative Class Action Arising From Allegations Of Campaign Finance Violations For Failure To Adequately Plead Loss Causation
10/08/2024On September 27, 2024, Judge Aileen Cannon of the United States District Court for the Southern District of Florida dismissed a putative class action asserting claims under the Securities Exchange Act of 1934 against an electric utility, its parent company, and certain of their executives. Jastram v. NextEra Energy, Inc., No. 23-cv-80833, slip. op. (S.D. Fla. Sept. 27, 2024), ECF No. 118. Plaintiffs alleged that defendants made misrepresentations in response to claims in the media that the utility used corporate funds to influence state and local elections, targeted elected officials who opposed its initiatives, employed a news outlet to support its efforts against these officials, and intimidated journalists. The Court held that plaintiffs failed to adequately allege loss causation and therefore dismissed the action with prejudice.Category : Loss Causation
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Illinois District Court Narrows Claims In Putative Class Action Against Airplane Manufacturer
10/08/2024On September 30, 2024, Judge Franklin U. Valderrama of the United States District Court for the Northern District of Illinois granted in part a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against an airplane manufacturing company and certain of its executives. Seeks v. The Boeing Company, No. 19‑2394, 2024 WL 4367846 (N.D. Ill. Sept. 30, 2024). Plaintiffs alleged that the company had made misrepresentations in public statements regarding the safety of its airplanes and in connection with two accidents involving company airplanes. After prior claims were dismissed without prejudice, plaintiffs added detail in support of their claims. The Court held that plaintiffs had sufficiently alleged falsity as to certain statements but not others and that scienter was adequately alleged.
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Michigan District Court Declines Class Certification, Holding Defendants Rebutted Basic Presumption Of Reliance
10/08/2024On September 30, 2024, the United States District Court for the Eastern District of Michigan denied class certification in a putative class action asserting claims under the Securities Exchange Act of 1934 against a mortgage company and certain of its executives. Shupe v. Rocket Cos. Inc., No. 1:21-cv-11528, slip op. (E.D. Mich. Sept. 30, 2024), ECF No. 227. Plaintiffs alleged that defendants made misrepresentations regarding the financial health of the company. The Court held that class certification was inappropriate for multiple reasons, but critically held that defendants had successfully rebutted the presumption of reliance afforded by Basic Inc.v. Levinson, 485 U.S. 224 (1988)—by demonstrating that the alleged misrepresentations did not impact the company’s stock price—and thus individual issues of reliance would predominate, precluding class certification.
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Northern District Of California Pares Claims In Putative Class Action Against Social Media Company
10/08/2024On September 30, 2024, Judge Araceli Martínez-Olguín of the United States District Court for the Northern District of California granted in part and denied in part a motion to dismiss a putative class action asserting claims under the Securities and Exchange Act of 1934 against a social media company and certain of its executives. Ohio Public Emps. Ret. Sys. v. Meta Platforms, Inc., et al., 2024 WL 4353049 (N.D. Cal. 2024). Plaintiffs alleged that the company made misrepresentations regarding various business operations. Although it dismissed claims relating to certain statements, the Court held that plaintiffs adequately alleged that others were false or misleading and that plaintiffs had adequately alleged scienter and loss causation.
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Eastern District Of New York Grants In Part And Denies In Part Motion To Dismiss Securities Class Action Against Online Clothing Rental Company
10/01/2024On September 25, 2024, Judge Orelia E. Merchant 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 class action against an online clothing rental company (the “Company”) and the Company’s underwriters and certain officers, directors and other related individuals. Rajat Sharma v. Rent the Runway, Inc., et al. (E.D.N.Y. Sept. 25, 2024).Plaintiffs asserted claims on behalf of a putative class of investors who allegedly purchased shares in the Company’s IPO, alleging violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, and Items 105 and 303 promulgated thereunder.
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Western District Of Texas Dismisses Putative Securities Class Action Against Cryptocurrency Exchange For Lack Of Personal Jurisdiction And Failure To Allege A Domestic Transaction
09/24/2024On September 6, 2024, Judge Robert Pitman of the United States District Court for the Western District of Texas dismissed a putative securities class action against a family of corporations (“Corporate Defendants”) that, together, control and operate a decentralized cryptocurrency exchange and blockchain protocol (the “Protocol”), and its individual founders (the “Individual Defendants” and together “Defendants”), asserting claims under Sections 5 and 12(a)(1) of the Securities Act of 1933 (“Securities Act”), Sections 5, 10(b), 15(a)(1) and 29(b) of the Exchange Act of 1934 (“Exchange Act”), and Rule 10b-5. Plaintiffs alleged that defendants touted complete protection from losses to investments in the Protocol in order to attract investors, which ultimately proved illusory when a surge of withdrawals from the Protocol’s exchange strained its liquidity and caused investors to suffer significant losses. S. Magistrate Judge Mark Lane found in a Report & Recommendation, dated July 31, 2024 (“R&R”), that the Court lacked personal jurisdiction over defendants and that the federal securities laws are inapplicable to the transactions at issue, and recommended that the suit be dismissed in its entirety. Reviewing the R&R de novo, Judge Pitman adopted its reasoning and dismissed the suit without prejudice. Basic et. al. v. BProtocol Foundation et. al., A-23-CV-533-RP, (W.D. Tex. Sept. 6, 2024).
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Southern District Of Florida Dismisses Securities Fraud Claim Against Equity Fund Alleging “Scheme” To Inflate Company Stock Price To Protect Majority Shareholder Personal Financial Interests
09/24/2024
On September 13, 2024, Judge K. Michael Moore of the United States District Court for the Southern District of Florida dismissed a complaint alleging that an equity fund (the “Company”), its affiliate companies, and several directors and officers violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5. Kosowsky v. Icahn Enterprises L.P., et al., 1:23-cv-21773-KMM (S.D.Fla. Sep 13, 2024). According to plaintiffs, defendants allegedly engaged in a scheme to artificially inflate the Company stock price by issuing dividends while supposedly concealing key financial information from investors to support the Company’s majority shareholder’s personal borrowing and financial interests. The Court dismissed the complaint without prejudice, holding that plaintiffs failed to allege any material misstatement or omission or facts giving rise to a strong inference of scienter.
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Second Circuit Dismisses Rule 10b-5 Claims Based On Pure Omissions Theory Following Remand From The United States Supreme Court
09/17/2024On August 19, 2024, the United States Court of Appeals for the Second Circuit dismissed, on remand from the United States Supreme Court, putative class action claims brought under Section 10(b) of the Securities Exchange Act of 1934 because they were based on a “pure omissions” theory. Moab Partners, L.P., v. Macquarie Infrastructure Corp., No. 21-2524, 2024 WL 3867669 (2d Cir. Aug. 19, 2024). As addressed in our prior post, the Supreme Court held that, contrary to prior authority in the Second Circuit, Section 10(b) and Rule 10b-5 promulgated thereunder do not impose an affirmative duty to disclose information but rather only require information to be disclosed if necessary to make other statements clear and complete.Category : Misstatement/Omission
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Florida District Court Pares Claims In Putative Class Action Against NFT Companies And Their Celebrity Promoter
09/17/2024On August 16, 2024, Judge Federico A. Morena of the United States District Court for the Southern District of Florida granted in part and denied in part a motion to dismiss a putative class action asserting claims under Sections 5, 12(a)(1), and 15 of the Securities Act of 1933 against an NFT company, certain of its affiliates, and their celebrity promoter. Harper v. O’Neal, No. 23-21912, 2024 WL 3845444 (S.D. Fla. Aug. 16, 2024). Plaintiffs alleged that defendants had impermissibly engaged in the offer and sale of unregistered securities when they promoted a collection of non-fungible tokens (“NFTs”) allegedly designed to be used in a virtual world (or “metaverse”) that the company planned to build. The Court held that plaintiffs had sufficiently alleged that a celebrity promoter of the NFTs was a “seller” under Section 12 of the Securities Act, but that certain allegations were time-barred, and the promoter was not a “control person” under Section 15 of the Securities Act.
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Eighth Circuit Reverses Jury Verdict For Aiding And Abetting Ponzi Scheme, Holding That In Pari Delicto Defense Barred Bankruptcy Trustee’s Claims
09/17/2024On September 12, 2024, the United States Court of Appeals for the Eighth Circuit reversed a trial court decision that had rejected a bank’s assertion of the in pari delicto defense to aiding and abetting claims brought by the bankruptcy trustee for a debtor that had allegedly perpetrated a Ponzi scheme. Kelley v. BMO Harris Bank Nat’l Ass’n, 2024 WL 4158179 (8th Cir. Sept. 12, 2024). The trustee alleged various claims under Minnesota law against the bank, including a claim for aiding and abetting breach of fiduciary duty, alleging that employees of the bank’s predecessor-in-interest knew about the Ponzi scheme, ignored money‑laundering alerts, and allowed the company to overdraft more money than permitted under bank policy. The trial court held that the in pari delicto defense was unavailable because the company had previously been placed in receivership before filing for bankruptcy; the jury then found the bank liable and awarded more than $550 million in compensatory and punitive damages. The Eighth Circuit reversed, holding that the bankruptcy trustee stood in the shoes of the debtor, including with respect to the in pari delicto defense, even if under Minnesota law the defense could not have been asserted against a receiver while the company was in receivership.Category : Uncategorized -
Northern District Of Texas Allows Claims Alleging “Scheme” Liability Securities Fraud To Proceed Against Oil Company
09/17/2024On August 12, 2024, Judge David C. Godbey of the United States District Court for the Northern District of Texas denied a motion for judgment on the pleadings in an action alleging that an oil company (the “Company”) and a former senior manager violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. Yoshikawa v. Exxon Mobil Corp., No. 3:21-CV-0194-N (N.D. Tex. Aug. 12, 2024). According to plaintiffs, the former manager allegedly artificially inflated the net present value (“NPV”) of certain oil and gas assets by using impossible drilling assumptions so that the valuation could support publicly-stated production forecasts. The Court denied defendants’ motion for judgment on the pleadings, holding, among other things, that the complaint adequately alleged that the inflated valuation was incorporated into public statements.
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Northern District Of California Grants Motion To Dismiss Putative Class Action Against Financial Technology Company For Failure To Adequately Allege Scienter
09/17/2024On August 26, 2024, Judge Araceli Martínez-Olguin of the United States District Court for the Northern District of California granted 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 and Rule 10b-5 against a financial technology company (the “Company”) and certain of its officers. In re Affirm Holdings, Inc. Sec. Litig., 22-cv-07770-AMO (N.D. Cal. Aug. 26, 2024). Plaintiff alleged that the Company made false and misleading statements regarding its ability to manage interest rate risks and the impact of rising interest rates on its business. The Court held that plaintiff failed to allege facts that raised a strong inference that defendants made those alleged misstatements with scienter and dismissed plaintiff’s claims without prejudice.
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Eastern District Of Pennsylvania Denies In Part Motion To Dismiss Putative Securities Class Action Against Pharmaceutical Company
09/17/2024
On September 3, 2024, Judge Mitchell S. Goldberg of the United States District Court for the Eastern District of Pennsylvania granted in part and denied in part a motion to dismiss a putative securities class action against a pharmaceutical company (the “Company”) and its CEO and CFO. Kranthi Gorlamari v. Verrica Pharm., Inc., et al., No. 22-cv-2226 (E.D. Pa. Sept. 3, 2024). Plaintiff asserted claims on behalf of a putative class of investors in the Company under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 thereunder. The Court denied in part the motion to dismiss the second amended complaint and allowed certain claims to proceed on the basis of confidential witness allegations. In doing so, the Court refused to consider at the motion to dismiss stage declarations from those purported confidential witnesses, submitted by defendants, in which the witnesses recanted the purported statements attributed to them in the complaint, and the Court credited those allegations in finding that a strong inference of scienter was sufficiently alleged by the complaint.
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Northern District Of California Grants Motion To Dismiss Putative Securities Fraud Class Action Against Technology Company For Failure To Adequately Plead Falsity And Scienter
09/17/2024
On September 3, 2024, Judge Rita F. Lin of the United States District Court for the Northern District of California granted a motion to dismiss a putative securities fraud class action against a technology and digital advertising company (the “Company”) and certain of its officers. Ami-Government Employees Provident Fund Mgmt. Company LTD., et al., v. Alphabet Inc., et al., No. 23-cv-01186-RFL (N.D. Cal. Sept. 3, 2024). Plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act, and Rule 10b-5 promulgated thereunder, by making false and misleading statements about the Company’s digital advertising technology products and the competitiveness of the advertising technology market in general. The Court granted defendants’ motion to dismiss, holding that plaintiffs failed to adequately plead falsity and scienter.
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Central District Of California Grants Motion To Dismiss Putative Securities Class Action Against Plant-Based Meat Substitute Company For Failure To Allege Falsity Or Scienter
08/20/2024
On August 9, 2024, Judge Michael W. Fitzgerald of the United States District Court for the Central District of California granted a motion to dismiss a putative securities class action against a producer of plant-based meat substitutes (the “Company”) and three of its officers. Saskatchewan Healthcare Emp.s’ Pension Plan v. Beyond Meat, Inc., et al., 23-03602-MWF (C.D. Cal. Aug. 9, 2024). Plaintiff asserted claims for violations of Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 (the “Exchange Act”) and SEC Rule 10b-5 thereunder, based on defendants’ alleged misrepresentations regarding the Company’s ability to scale production to meet its partners’ demands. The Court granted defendants’ motion to dismiss, holding that plaintiff failed to sufficiently allege falsity and scienter.
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District Of Arizona Grants Motion To Dismiss Shareholder Derivative Suit Against Residential Property Dealer In Connection With De-SPAC Merger
08/20/2024
On August 14, 2024, Judge Michael T. Liburdi of the United States District Court for the District of Arizona granted with leave to amend a motion to dismiss a shareholder derivative suit brought in the name of the company, a buyer and seller of residential properties (the “Company”), against numerous current and former directors and officers of the Company as well as directors of the special purpose acquisition company—or SPAC—through which the Company went public (the “Individual Defendants”). Gera v. Palihapitiya, et al., CV-23-02164-PHX-MTL (D. Ariz. Aug. 14, 2024). Plaintiff asserted a claim under Section 14(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and SEC Rule 14a-9 thereunder.
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Northern District of California Denies Motion To Dismiss Putative Class Action Based On Financial Services Company’s Alleged Misstatements About Diverse Hiring Practice
08/13/2024On July 29, 2024, Judge Trina L. Thompson of the United States District Court for the Northern District of California denied a motion to dismiss a putative securities class action brought by investors against a financial services company (the “Company”) and certain of its officers (the “Individual Defendants” and, collectively “Defendants”) asserting claims under Section 10(b) of the Securities and Exchange Act of 1934 (“Exchange Act”), as well as Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange Act. SEB Inv. Mgmt., AB v. Wells Fargo & Co., Case No. 22-cv-03811-TLT (N.D. Cal. July 29, 2024).
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Ninth Circuit Affirms Dismissal Of Exchange Act Claims Against Post deSPAC Company, Holding That Shareholders Of The SPAC Lack Standing To Pursue Claims Based On Target Company’s Alleged Pre-Transaction Misstatements
08/13/2024On August 8, 2024, the United States Court of Appeals for the Ninth Circuit affirmed United States District Judge Yvonne Gonzalez Rogers’s dismissal of a putative securities class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 against an electric vehicle company (the “Company”) and certain of its executives. In re CCIV / Lucid Motors Sec. Litig., No. 23-16049 (9th Cir. Aug. 8, 2023).
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Southern District Of New York Grants Motion To Dismiss Putative Securities Class Action Against Cannabis Company For Failure To Adequately Plead Scienter
07/30/2024
On July 17, 2024, Judge Paul A. Engelmayer of the U.S. District Court for the Southern District of New York granted a motion to dismiss a putative securities class action against a cannabis company and three of its officers. In re Canopy Growth Securities Litigation, 23 Civ. 4302 (PAE) (S.D.N.Y. July 17, 2024). Plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act, and Rule 10b-5 promulgated thereunder, by making false and misleading statements about the financial prospects of the Company’s newly acquired sports drink subsidiary (the “Subsidiary”). The Court granted defendants’ motion to dismiss with prejudice, holding that plaintiffs failed to adequately plead scienter.
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New Jersey District Court Denies Motion To Dismiss Putative Securities Class Action Against Education Company, Finding Plaintiff Sufficiently Alleged Misstatements, Scienter, And Loss Causation
07/17/2024On June 25, 2024, Judge Michael E. Farbiarz of the United States District Court for the District of New Jersey denied in large part a motion to dismiss a putative securities class action against an internet-based educational platform that sells online classes and certain of its senior officers. Zequi Wu, et al. v. GSX Techedu Inc., et al., No. 20-4457 (MEF) (JRA) (D.N.J. June 25, 2024). Plaintiff alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making false statements that misled investors about defendants’ inclusion of fake “bot” students in enrollment numbers to inflate the company’s revenue. The Court in large part denied defendants’ motion to dismiss, finding that plaintiff sufficiently alleged numerous false statements and scienter.
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United States Supreme Court Issues Landmark Decision Overturning Chevron Doctrine
07/17/2024On June 28, 2024, the Supreme Court of the United States issued a landmark decision overturning its prior decision Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., et al., 467 U.S. 837 (1984) (“Chevron”). Loper Bright Enterprises, et al. v. Raimondo Secretary of Commerce, et al., and Relentless Inc., et al. v. Department of Commerce, et al., 603 U.S. ___ (2024). For the past 40 years, Chevron mandated that, when a statute does not expressly delegate authority to an administrative agency on a particular issue or question, courts defer to a federal agency’s interpretation of ambiguous statutes which the agency is charged with administering, if such interpretation was “permissible,” which has generally been interpreted to mean reasonable. There has been some subsequent narrowing of the scope of Chevron deference by the Supreme Court, for example to agency interpretations reached through formal proceedings with the force of law (see United States v. Mead Corp., 533 U. S. 218, 230 (2001)). In a 6-3 ruling delivered by Chief Justice Roberts, the Supreme Court expressly overruled Chevron, holding that the Administrative Procedure Act (“APA”) requires courts to exercise independent judgment in determining whether a federal agency has acted within its statutory authority, and that courts may not defer to an agency’s interpretation of the law merely because a statute is ambiguous. Justices Thomas, Alito, Gorsuch, Kavanaugh, and Barrett joined the Chief Justice’s opinion.Category : Supreme Court
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Northern District Of California Dismisses Putative Class Action Without Prejudice Against Cybersecurity Company
07/17/2024On July 2, 2024, Judge Haywood S. Gilliam of the United States District Court for the Northern District of California granted a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a cybersecurity company and certain of its officers. In re SentinelOne, Inc. Sec. Litig., No. 23-cv-2786-HSG (N.D. Cal. July 2, 2024). Plaintiff alleged that defendants artificially inflated key business metrics in its SEC filings, necessitating a downward revision of revenue and projection figures. The Court dismissed plaintiff’s claims without prejudice, primarily for lack of scienter.
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District Of Massachusetts Dismisses Putative Class Action Against Drug Development Company
07/17/2024On July 1, 2024, Judge Denise J. Casper of the United States District Court for the District of Massachusetts granted a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a drug-development company and certain of its officers. State Teachers Ret. Sys. v. Charles River Lab. Int’l, Inc., No. 23-cv-11132-DJC (D. Mass. July 1, 2024). Plaintiff alleged that defendants misled investors to believe that the company complied with all applicable laws in its importation of endangered non-human primates (“NHPs”) for animal testing of biologic pharmaceuticals. The Court dismissed the action, holding that plaintiff failed to identify any actionable statement or omission in the company’s filings or to adequately allege that defendants acted with the requisite scienter.
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Southern District Of New York Grants Motion To Dismiss Putative Class Action Against Coffee Chain For Failure To Adequately Allege Materially False Or Misleading Statements And Scienter
07/17/2024On June 24, 2024, the United States District Court for the Southern District of New York granted with prejudice a motion to dismiss a putative securities class action against a coffee chain and two of its executive officers.Rein v. Dutch Bros, Inc., et al., No. 23-cv-1794 (PAE) (S.D.N.Y. June 24, 2024).Plaintiff alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by making a series of false and misleading statements touting the company’s performance in a manner that understated the threat to sales and profitability presented by rising inflation affecting the cost of commodities key to the company’s success.The Court granted defendants’ motion to dismiss the amended complaint with prejudice, holding that plaintiff failed to allege materially false or misleading statements and scienter.
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First Circuit Affirms Dismissal Of Putative Class Action Against Biotech Company For Failure To Adequately Allege Scienter
07/17/2024On July 2, 2024, the United States Court of Appeals for the First Circuit affirmed the dismissal with prejudice of a putative class action asserting claims under the Securities Exchange Act of 1934 against a biotechnology company, its CEO, and its Chief Development Officer (“CDO”). Quinones v. Frequency Therapeutics, Inc., —F.4th—, 2024 WL 3275030 (1st Cir. 2024). Plaintiffs alleged the company made misrepresentations regarding clinical trials for the company’s treatment for severe sensorineural hearing loss. The district court determined that plaintiffs’ amended complaint adequately alleged certain misstatements but failed to demonstrate that those statements were made with the required degree of scienter, and on that basis dismissed the amended complaint. The First Circuit affirmed both rulings.
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Second Circuit Affirms District Court’s Dismissal Of Putative Securities Fraud Class Action Against China-Based Real Estate Company For Lack Of Falsity
06/25/2024
On June 10, 2024, the United States Court of Appeals for the Second Circuit affirmed the dismissal of a putative shareholders’ class action against a real estate company (the “Company”) and several of its directors (the “Individual Defendants”), asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated thereunder. Maso Cap. Invs. Ltd. v. E-House (China) Holdings Ltd., No. 22-355 (2d Cir. June 10, 2024). Plaintiffs alleged the Company made false and misleading statements and omissions to entice approval of a go-private merger with a buyer group comprised of the Individual Defendants. The district court granted the Company’s motion to dismiss. Reviewing the district court’s decision de novo, the Court affirmed finding that plaintiffs failed to identify a single actionable statement or omission.
Category : Misstatement/Omission -
United States Supreme Court Grants Certiorari To Consider The Application Of Heightened Pleading Standards Of The PLSRA For Falsity And Scienter
06/25/2024
On June 17, 2024, the Supreme Court granted certiorari to review a decision of the United States Court of Appeals for the Ninth Circuit reversing the dismissal of a putative class action asserting claims under the Securities Exchange Act of 1934 and to address the following questions: “1. Whether plaintiffs seeking to allege scienter under the Private Securities Litigation Reform Act (“PSLRA”) based on allegations about internal company documents must plead with particularity the contents of those documents”; and “2. Whether plaintiffs can satisfy the PSLRA’s falsity requirement by relying on an expert opinion to substitute for particularized allegations of fact.”
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United States Supreme Court Grants Certiorari To Consider When Already-Materialized Risks Must Be Disclosed
06/18/2024
On June 10, 2024, the United States Supreme Court granted certiorari to review a decision of the United States Court of Appeals for the Ninth Circuit that partially reinstated a putative class action asserting claims under the Securities Exchange Act against a social media company. Facebook v. Amalgamated Bank, —S. Ct.—, 2024 WL 2883752 (2024). Plaintiffs alleged that the company made misrepresentations relating to the misuse of user data by a third party. The Supreme Court granted certiorari to address the following question: “Are risk disclosures false or misleading when they do not disclose that a risk has materialized in the past, even if that past event presents no known risk of ongoing or future business harm?”
Category : Misstatement/Omission -
Middle District Of Florida Grants Motion To Dismiss Putative Securities Class Action Against Autonomous Vehicle Technology Company For Failure To Allege Falsity And Scienter
06/11/2024
On May 31, 2024, Judge Julie S. Sneed of the United States District Court for the Middle District of Florida granted a motion to dismiss a putative securities class action against an autonomous vehicle technology company (the “Company”), certain of its officers, and an officer of one of the Company’s subsidiaries. Alms v. Luminar Technologies, Inc., et al, No. 6:23-cv-982-JSS-LHP (M.D. Fla. May 31, 2024). Plaintiff alleged that defendants violated Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by allegedly making false statements in an investor presentation regarding plans to economize its newly developed technology. The Court dismissed plaintiff’s amended complaint, holding that plaintiff failed to adequately plead a false statement of a material fact and scienter.
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Southern District Of Florida Dismisses Suit Against French Content Moderation Company And Previews Acceptable Amended Complaint
06/04/2024
On May 22, 2024, Judge Cecilia M. Altonoga of the United States District Court for the Southern District of Florida granted a motion to dismiss a putative shareholder action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against a French company that provides outsourced content-moderation services for social media platforms (the “Company”) and certain of its former executives (the “Individual Defendants”). City of Warren Gen. Emps.’ Ret. Sys. v. Teleperformance SE, No. 23-cv-24580 (S.D. Fla. May 22, 2024). The complaint alleged that defendants made false and misleading statements about the treatment and training of the Company’s content moderators and the Company’s plan to exit the “highly egregious portion” of the content-moderation business. Judge Altonoga dismissed the complaint without prejudice, holding that plaintiffs did not adequately plead as a threshold matter that they purchased the Company’s shares within the United States and that plaintiffs had engaged in improper “puzzle pleading” in violation of Federal Rule of Civil Procedure 8(a)(1). Nevertheless, construing the complaint generously and relying on the parties’ briefing to organize the alleged misstatements, the Court identified several alleged misstatements that would be actionable, as pled, in an amended complaint with the noted deficiencies cured.
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Western District Of Washington Dismisses Securities Fraud Claims Against Manufacturer Of Pop Culture Collectibles For Lack Of Falsity And Scienter
06/04/2024
On May 16, 2024, Judge James L. Robart of the United States District Court for the Western District of Washington granted a motion to dismiss a putative securities class action against a manufacturer of pop culture collectibles (the “Company”) and certain of its former executives (the “Individual Defendants”). Studen v. Funko, Inc., No. C23-0824JLR (W.D. Wash. May 16, 2024). The complaint alleged that the Company failed to disclose accurate information regarding the risks associated with its infrastructure projects and inventory in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”). Judge Robart dismissed the complaint, holding that plaintiffs did not adequately plead falsity or offer any particularized allegations showing that defendants knew that the risks could or did occur.
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Supreme Court Holds That A Court—Not An Arbitrator—Must Decide Which Of Two Contracts Controls For Purposes Of Determining Whether A Dispute Is Subject To Arbitration
05/29/2024On May 23, 2024, the United States Supreme Court held that if parties’ agreements conflict as to whether a dispute is subject to arbitration, then a court (not an arbitrator) must decide which contract controls. Coinbase, Inc. v. Suski, --- S.Ct. ----, 2024 WL 2333424 (2024).Category : Uncategorized
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Northern District Of California Grants Motion To Dismiss Putative Securities Class Action Against Apparel Company For Failing To Clearly Identify The Alleged False Or Misleading Statement
05/23/2024
On May 10, 2024, Judge Araceli Martínez-Olguín of the United States District Court for the Northern District of California granted a motion to dismiss a putative class action against a global footwear and apparel company (“the Company”), certain of its officers and directors, and the underwriters involved in the Company’s initial public offering (“IPO”). Shnayder v. Allbirds, Inc., No. 23-cv-01811-AMO, 2024 BL 161312 (N.D. Cal. May 10, 2024). Plaintiffs brought claims under Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”) and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), alleging false and misleading statements in connection with the Company’s IPO. The Court granted defendants’ motion to dismiss, holding that plaintiffs failed to adequately allege which statements were allegedly false or misleading.
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California District Court Grants Motion To Dismiss Investor Class Action Against Rideshare Company
05/23/2024
On May 14, 2024, Judge Rita F. Lin of the United States District Court for the Northern District of California granted a motion to dismiss a putative securities class action against a ridesharing company (the “Company”) and its CEO and former CFO (collectively, “defendants”). Cao et al. v. Uber Techs., Inc., et al., No. 22-cv-04688-RFL (N.D. Cal. May 14, 2024). 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 by allegedly making false statements in the Company’s post-IPO Sarbanes-Oxley Act (“SOX”) certifications attached to the Company’s quarterly and annual reports for 2019 and 2020, and during its annual general meeting on May 11, 2020.
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Northern District Of California Dismisses With Prejudice Putative Class Action Against Pharmaceutical Company
05/14/2024
On May 7, 2024, Judge Beth Labson Freeman of the United States District Court for the Northern District of California dismissed with prejudice a putative shareholders’ class action against a pharmaceutical company (“Company”) and certain of its executives (“Individual Defendants”), alleging claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”), as well as Rule 10b-5 promulgated thereunder. Sneed v. AcelRx Pharms., Inc., No. 21-cv-4353-BLF (N.D. Cal. May 7, 2024). Plaintiffs alleged the Company made false or misleading statements in marketing materials of one of its products in order to expand the target market, putting the Company at risk to adverse action by the Food and Drug Administration (“FDA”). The Court granted the motion to dismiss with prejudice, finding that plaintiffs failed to adequately plead scienter and that further amendment would be futile.
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Sixth Circuit Affirms District Court’s Dismissal Of Putative Securities Class Action Against Car Insurance Company For Failure To State A Claim
05/14/2024
On April 29, 2024, the United States Court of Appeals for the Sixth Circuit affirmed the dismissal with prejudice of a putative class action asserting claims under the Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”) and Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, alleging that a car insurance technology company (the “Company”), certain of its officers, and the underwriters of the Company’s initial public offering (“IPO”) misled investors in the Company’s initial public offering materials. Kolominsky v. Root, Inc., No. 23-3392 (6th Cir. Apr. 29, 2024). Reviewing the district court decision de novo, the Court held that the complaint sounded in fraud and that the heightened pleading standard required by Rule 9(b) of the Federal Rules of Civil Procedure applied to the Securities Act claims and that the challenged statements were not actionable because they were based either on past performance and historical data or protected by the “Bespeaks Caution” doctrine.
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Southern District Of California Dismisses Putative Class Action Against Medical Device Company For Failure To Adequately Allege Misrepresentations And Scienter
05/07/2024
On April 30, 2024, Judge Marilyn L. Huff of the United States District Court for the Southern District of California dismissed with leave to amend a putative class action asserting claims under the Securities Exchange Act of 1934 against a medical device company and certain of its former officers. Lowe v. Tandem Diabetes Care Inc., 2024 WL 1898473 (S.D. Cal. Apr. 30, 2024). Plaintiffs alleged that the company made misrepresentations regarding the demand for its products. The Court held plaintiffs failed to adequately allege that any challenged statement was false at the time it was made and also failed to adequately allege scienter.
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Southern District Of New York Largely Denies Motion To Dismiss Putative Class Action Against Dental Product Manufacturer
05/07/2024
On May 1, 2024, Judge Arun Subramanian of the United States District Court for the Southern District of New York largely denied a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a manufacturer of dental products and certain of its former executives. San Antonio Fire and Police Pension Fund v. Dentsply Sirona Inc., –—F. Supp. 3d—, 2024 WL 1898512 (S.D.N.Y. May 1, 2024). Plaintiffs alleged the company made misrepresentations regarding its inventory, supply chain, product quality, and overall financial health. The Court held that plaintiffs’ allegations were largely sufficient as to the required elements of falsity, scienter, and loss causation, but the Court dismissed allegations regarding certain alleged misrepresentations and claims against one former executive.
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Ninth Circuit Affirms Dismissal Of Putative Securities Class Action Against Information Services Company For Failure To Adequately Plead Scienter Or Loss Causation
05/07/2024
On April 19, 2024, the United States Court of Appeals for the Ninth Circuit affirmed the dismissal of a consolidated putative securities class action alleging violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder against an information services company and certain of its executives. Espy v. J2 Global, Inc., et al., No. 22-55829 (9th Cir. Apr. 19, 2024). The United States District Court for the Central District of California dismissed plaintiff’s second amended complaint (“SAC”), holding that plaintiff failed to adequately plead scienter. The Ninth Circuit affirmed, holding that plaintiff failed to adequately plead scienter and loss causation.
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Fifth Circuit Reverses District Court’s Dismissal Of Putative Securities Fraud Class Action Against Amusement Park Company For Lack Of Standing
04/23/2024
On April 18, 2024, the United States Court of Appeals for the Fifth Circuit reversed the dismissal of and reinstated a putative shareholders’ class action against an amusement park company (the Company”) and certain of its executives, asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated thereunder. Okla. Firefighters & Pension Ret. Sys. v. Six Flags Entm’t Corp., No. 23-10696 (5th Cir. Apr. 18, 2024). The district court granted the Company’s motion for judgment on the pleadings, holding that plaintiff lacked standing because it purchased Company shares too late to have relied on any actionable misstatements, and therefore dismissed the action with prejudice. Reviewing the district court’s decision de novo, the Court reversed, finding that plaintiffs’ economic loss was fairly traceable to the alleged misconduct because the Company’s alleged fraud had not been fully disclosed when plaintiff purchased the stock. We previously covered the district court’s decision here.
Category : Misstatement/Omission