• Southern District Of New York Dismisses Securities Act Claims Against Railroad Company For Failure To Adequately Allege Actionable Misstatements

  03/11/2025
  On February 27, 2025, Judge Lewis A. Kaplan of the United States District Court for the Southern District of New York dismissed a putative class action asserting claims under the Securities Act of 1933 against a railroad company, certain of its officers and directors, and the underwriters of senior notes the company issued.  In re Norfolk Southern Corp. Bond/Note Sec. Litig., 2025 WL 641089 (S.D.N.Y. Feb. 27, 2025).  Plaintiffs alleged that offering materials for the notes contained misrepresentations relating to:  (i) improving safety; (ii) the company’s financial and operational metrics; and (iii) the company’s implementation strategy to reduce operation expenses and increase efficiencies, as allegedly revealed following a train derailment which received widespread media attention.  The Court held that plaintiffs failed to sufficiently allege any actionable false or misleading statements.
  
  The Court held that:  (i) some statements were non-actionable puffery (id. at *3–4); (ii) data allegedly omitted from other statements was available on a regulator’s website, and Section 11 does not require disclosure of publicly available information (id. at *4–5); (iii) the company did not have a duty to disclose alleged issues underlying its performance because it accurately reported its financial metrics (id. at *5–8); and (iv) the company was under no obligation to disclose allegedly illegal conduct or alleged regulatory noncompliance because plaintiffs failed to sufficiently allege that such disclosure was necessary to prevent other statements by the company from being misleading (id. at *9).
  
  The Court also dismissed plaintiffs’ claims asserting violations of Items 303 and 105 of Regulation S-K.  The Court held that plaintiffs failed to adequately allege a significant risk to the company’s financial condition and that, even if plaintiffs could allege such a risk, they had not alleged that senior management knew of that risk.  Id. at *9–10.
  
  Finally, the Court rejected plaintiffs’ control person liability claim for failure to adequately allege a primary Securities Act violation.  Id. at *11.
  Category: Misstatement/Omission
  

Links & Downloads

• In re Norfolk Southern Corp. Bond/Note Sec. Litig.