On April 18, 2025, Judge André Birotte Jr. of the Central District of California granted a motion to dismiss a putative 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 thereunder, against a healthcare technology company (the “Company”) and certain of its officers (the “Individual Defendants”).  Barsuli v. GoodRx Holdings, Inc., No. 2:24-cv-3282-AB (C.D. Cal. Apr. 18, 2025).

On April 4, 2025, Judge Gordon P. Gallagher of the United States District Court for the District of Colorado dismissed with prejudice a putative class action asserting claims under the Securities Act of 1933 and the Securities Exchange Act of 1934 against a software company and certain of its executives.  Cupat v. Palantir Techs., Inc., No. No. 22-cv-02384, slip op. (D. Colo. Apr. 4, 2025), ECF No. 123

On April 11, 2025, Judge Brian M. Cogan 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 class action alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) against a security products company (the “Company”) and certain of its officers and directors (the “Individual Defendants”), and violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”) against the Company, the Individual Defendants, and certain of the underwriters (the “Underwriter Defendants”) of the Company’s secondary public offering (the “SPO”).  Zornberg v. Napco Sec. Techs., Inc., No. 23-cv-6465-BMC (E.D.N.Y. Apr. 11, 2025).

On April 10, 2025, Judge Charles R. Breyer of the United States District Court for the Northern District of California granted a motion for summary judgment in favor of a software company (the “Company”) in a purported class action alleging that the Company violated Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”).  Sundaram v. Freshworks Inc., No. 22-cv-06750-CRB, 2025 WL 1083168 (N.D. Cal. Apr. 10, 2025).  

On April 8, 2025, the United States Court of Appeals for the Fourth Circuit affirmed the district court’s denial of a motion to amend a class action complaint against a quantum computing company (the “Company”) and the special purpose acquisition company (“SPAC”) that acquired it alleging violations of Sections 10(b) and 14(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5.  DeFeo et al. v. IonQ, Inc., No. 24-1709 (4th Cir. Apr. 8, 2025). 

On March 31, 2025, Judge Arun Subramanian of the United States District Court for the Southern District of New York denied a motion to dismiss a putative securities class action against a cosmetics company (the “Company”), its former CEO, and its CFO, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.  In re The Estée Lauder Co., Inc., 23-cv-10669 (S.D.N.Y. Mar. 31, 2025).  The Court held that plaintiffs sufficiently pled that defendants knowingly made misleading statements and omissions regarding the Company’s reliance on “gray market” sales of its products in Asia.  

On March 27, 2025, Judge John G. Koeltl of the United States District Court for the Southern District of New York granted a motion to dismiss a putative securities class action asserting claims against a software company and certain of its officers (the “Individual Defendants”) under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.  In re Adobe Inc., No. 23-cv-9260 (S.D.N.Y. Mar. 27, 2025).

On March 24, 2025, Judge Rita F. Lin 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 against a technology company (the “Company”) and certain of its officers.  Ami-Government Emps. Provident Fund Mgmt. Co. LTD., et al., v. Alphabet Inc., et al., No. 23-cv-01186-RFL (N.D. Cal. March 24, 2025).  

On March 20, 2025, Judge Gordon P. Gallagher of the United States District Court for the District of Colorado granted a motion to dismiss a proposed securities class action asserting claims against a satellite technology company (the “Company”) and certain of its executives (together, “defendants”) under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5.  Lingam, et al. v. Dish Network Corp., et al., No. 23-cv-00734-GPG-KAS (D. Colo. Mar. 20, 2025). 

On March 19, 2025, Judge Paul A. Engelmayer 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 technology company and certain of its officers.  Damri v. LivePerson, Inc., 2025 WL 863322 (S.D.N.Y. March 19, 2025).  Plaintiff alleged that defendants made misrepresentations concerning various aspects of the company’s performance.  The Court held that plaintiff failed to adequately allege any actionable misstatement or omission and failed to adequately plead scienter.

On March 19, 2025, Judge Charles E. Fleming of the United States District Court for the Northern District of Ohio dismissed a putative class action asserting claims under the Securities Exchange Act of 1934 and the Securities Act of 1933 against a medical services company, certain of its executives, the underwriters in its initial and secondary public offerings, and certain private equity firms alleged to have sold stock in those offerings.  

On March 14, 2025, Judge John P. Cronan of the United States District Court for the Southern District of New York granted summary judgment in favor of defendants in an action brought under Section 16(b) of the Securities Exchange Act against a broker-dealer and its CEO.  Clarus Corp. v. HAP Trading, LLC, —F. Supp. 3d—, 2025 WL 833453 (S.D.N.Y. 2025).  Plaintiff Clarus Corporation (“Clarus”) alleged that defendants’ so-called “packaged trades” for Clarus securities generated insider short‑swing profits in violation of Section 16(b) of the Exchange Act.  Addressing a question of first impression, the Court held that the transactions at issue fell within the exception in Section 16(d) for purchases and sales of securities incident to a dealer’s involvement in over-the-counter (“OTC”) market making.

On March 7, 2025, Judge John P. Cronan of the Southern District of New York granted a motion for judgment on the pleadings in a putative class action asserting claims under Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”) against a Chinese software company (the “Company”) and certain of its directors, officers, and underwriters.  Lian v. Tuya Inc., et al., 22-cv-6792 (JPC) (S.D.N.Y. Mar. 7, 2025).  

On February 7, 2025, Judge Brett H. Ludwig of the United States District Court for the Eastern District of Wisconsin dismissed a putative class action alleging that an energy product sales company (the “Company”) and its chief executive officer and chief financial officer (the “Officer Defendants”) violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.City Pension Fund for Firefighters & Police Officers in the City of Tampa Bay v. Generac Holdings, 22-cv-1436-bhl (E.D. Wis. Feb. 7, 2025).According to plaintiffs, defendants allegedly failed to disclose negative trends regarding the decrease in demand of the Company’s products post-pandemic as well as defects and risks with its solar energy products.The Court dismissed the complaint for failure to plausibly allege falsity, scienter, and materiality, noting that the pleading was “heavy in sheer number of its allegations and in its conclusory allegations of fraud” but “light on specific plausible factual allegations” supporting plaintiffs’ claims.

The United States Court of Appeals for the Ninth Circuit, on remand from the United States Supreme Court, unanimously reversed the district court’s denial of a technology company’s (the “Company”) motion to dismiss claims brought under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”).  Pirani v. Slack Techs., Inc., No. 20-16419 (9th Cir. Feb. 10, 2025).  The case turned on whether plaintiff sufficiently pleaded that he had standing to bring Securities Act claims in respect of a direct listing in which shares registered under an allegedly misleading registration statement were made available in the market alongside unregistered shares.  The Supreme Court, in a decision covered here, held that Section 11 requires plaintiffs to plead that they purchased securities traceable to the at-issue registration statement but did not address whether the complaint satisfied that requirement.  The Supreme Court also declined to address whether the complaint sufficiently alleged standing to pursue a claim under Section 12(a)(2).  We previously covered the Ninth Circuit’s now-vacated decision, the Supreme Court’s grant of the petition for certiorari to review the Ninth Circuit’s decision, and the parties’ oral argument before the Supreme Court.

On February 7, 2025, Judge Paul A. Engelmayer of the United States District Court for the Southern District of New York denied a motion for judgment on the pleadings in a putative class action against a cryptocurrency exchange company (the “Company”), its parent, and the parent’s CEO for alleged violations of Sections 12 and 15 of the Securities Act of 1933 (the “Securities Act”), Section 29(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), and securities laws of California, Florida, and New Jersey.  Underwood v. Coinbase Glob., Inc., No. 21 Civ. 8353 (PAE) (S.D.N.Y. Feb. 7, 2025).  

On February 14, 2025, Judge Margo Brodie of the United States District Court for the Eastern District of New York granted a motion to dismiss a putative class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) against an exercise equipment company (the “Company”) and certain of its officers and directors (the “Individual Defendants”).  Jia Tian, et al. v. Peloton Interactive, Inc., et al., 23-cv-4279-MKB (E.D.N.Y. Feb. 14, 2025).  Plaintiffs alleged that defendants made material misstatements and omissions regarding the safety of the Company’s products.  The Court granted defendants’ motion to dismiss with leave to amend, holding that plaintiffs failed to sufficiently allege any materially misleading statements or omissions, or scienter.

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.

On February 26, 2025, the United States Court of Appeals for the Second Circuit affirmed the dismissal of federal securities claims against the developers of a decentralized cryptocurrency exchange and the exchange’s venture capital investors.  Risley v. Universal Navigation Inc., 2025 WL 615185 (2d Cir. Feb. 26, 2025).  As discussed in our prior post, plaintiffs alleged that defendants were aware of the trading of allegedly fraudulent “scam tokens” on the exchange but ignored those “scam tokens” to profit from transaction fees, and further alleged that the “scam tokens” constituted unregistered securities.  

On February 25, 2025, Judge Jennifer L. Rochon of the United States District Court for the Southern District of New York granted in part and denied in part motions to dismiss amended complaints filed in a putative class action asserting claims under Sections 10(b) and 14(a) of the Securities Exchange Act against a special purpose acquisition company (“SPAC”), its former CEO, and former officers of the target company, an online lottery-sales company (the “Company”), as well as an individual action consolidated with the putative class action and asserting similar claims. In re Lottery.com, Inc. Sec. Litig., No. 1:22-cv-07111 (JLR) (S.D.N.Y. Feb. 25, 2025). 

On February 26, 2025, Circuit Judge Stephanos Bibas, sitting by designation in the District Court for the District of Delaware, granted a motion for summary judgment in a securities action brought by an investment firm against a racing game developer (the “Company”) and several of its officers after the firm sold shares in one of its portfolio companies to the Company.  Plaintiff alleged that the sale occurred at a lower price because of misstatements and omissions made by defendants regarding the profitability of the portfolio company in violation of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”).  The Court granted summary judgment for defendants, stating that “not every poor investment decision is due to securities fraud” and holding that plaintiff failed to establish any actionable misstatements or omissions.

On February 26, 2025, Judge Michael W. Fitzgerald of the United States District Court for the Central District of California granted a motion to dismiss a putative class action against a producer of plant-based meat substitutes (the “Company”) and one of its officers (together, the “defendants”).  Saskatchewan Healthcare Emps.’ Pension Plan v. Beyond Meat, Inc. et al., No. CV 23-03602-MWF (C.D. Cal. Feb. 26, 2025).  We previously covered the Court’s decision dismissing plaintiffs’ initial complaint without prejudice.  In their amended complaint, plaintiffs asserted claims for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and SEC Rule 10b-5 based on alleged misrepresentations regarding the Company’s ability to scale production to meet partner demands.  The Court held that plaintiffs failed to plead any actionable misstatements or omissions and dismissed the action with prejudice.

On January 27, 2025, Judge Jesse M. Furman of the United States District Court for the Southern District of New York partially 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 (the “Exchange Act”) and Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”) against an e-commerce platform (the “Company”), the underwriter of its IPO, and certain of its officers and directors.  In re Gigacloud Tech. Inc. Sec. Litig., 23-cv-10645-JMF (S.D.N.Y. Jan. 27, 2025).  

On January 29, 2025, Judge Robert Kirsch of the United States District Court for the District of New Jersey granted a motion to dismiss a securities action asserting claims under Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 against a financial technology company (the “Company”) and certain of its former officers.  In re PayPal Holdings Inc. Sec. Litig., 22-cv-5864-RK (D.N.J. Jan. 29, 2025).  Plaintiffs claimed that defendants misstated the Company’s growth and future prospects, through statements concerning its Net New Active Accounts (“NNAs”) and Total Payment Volume (“TPV”).  The Court dismissed the action, holding that plaintiffs failed to adequately allege any material false or misleading statement.

On January 16, 2025, Judge Trina L. Thompson of the United States District Court for the Northern District of California granted a motion to dismiss a securities action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 against a ridesharing company (the “Company”) and its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Chen v. Lyft, Inc., et al., No. 24-cv-01330-TLT (N.D. Cal. Jan. 16, 2025). Plaintiff claimed that defendants fraudulently misstated the Company’s earnings forecast and failed to correct the misstatement quickly enough. The Court held that (i) the alleged misstatements were inactionable forward-looking statements, (ii) plaintiff in any event failed to allege scienter despite purporting to support its allegations with expert opinions, and (iii) defendants’ update was sufficiently quick to discharge any claimed duty to update even though there is an open question as to whether such a duty exists. On this basis, the Court dismissed the action with leave to amend.

On January 23, 2025, Judge James C. Dever III of the United States District Court for the Eastern District of North Carolina dismissed a putative securities class action against an auto parts retailer (the “Company”) and certain of its former executives alleging violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder.  Suarez v. Advanced Auto Parts, Inc. et al., No. 5:23-cv-00563 (E.D.N.C., Jan. 23, 2025). The Court granted defendants’ motion to dismiss on the ground that plaintiff failed to plead facts giving rise to a strong inference of scienter, holding that a reasonable person would find the cogent, non-culpable explanations for the alleged misconduct more compelling.

On January 10, 2025, the United States Court of Appeals for the Ninth Circuit Court affirmed the dismissal of a putative securities class action brought by a pension plan alleging that a hearing aid manufacturer (the “Company”) violated the Securities Act of 1933 (the “Securities Act”) by issuing a prospectus for its initial public offering (“IPO”) that allegedly included false and misleading statements regarding revenue recognition, risk factors, and potential growth. Cai v. Eargo, Inc., No. 23-3470, 3:21-cv-08597-CRB (9th Cir. Jan. 10, 2025).  Plaintiffs also alleged violations of the Securities Exchange Act of 1934 (the “Exchange Act”) based on certain post-IPO statements concerning an audit by an insurance carrier, revenue recognition, risk factors, and the Company’s growth. The Court, in an unpublished opinion, affirmed the district court’s decision dismissing the complaint (which we previously covered here) holding that the alleged misstatements were not misleading or were puffery and thus not actionable under the securities laws and that plaintiffs failed to plead facts giving rise to a strong inference of scienter.

On December 31, 2024, the United States Court of Appeals for the Fifth Circuit and the New York Appellate Division, First Department, both issued decisions evaluating the validity of so-called “uptier” transactions under New York law. In re Serta Simmons Bedding, LLC, Excluded Lenders, No. 23-20181 (5th Cir. Dec. 31, 2024) (“Serta”); Ocean Trails CLO VII, et al. v. MLN TopCo Ltd., et al., No. 2024-00169 (N.Y. App. Div. 1st Dep’t Dec. 31, 2024) (“Mitel”).

On January 2, 2025, Judge Cathy Ann Bencivengo of the United States District Court for the Southern District of California granted a motion to dismiss a securities action asserting claims under Sections 10(b), 20(a), and 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) against a hardware company (the “Company”) and certain of its former and current officers.  HBK Master Fund L.P. v. MaxLinear Inc., et al., No. 3:24-cv-01033-CAB-VET (S.D. Cal. Jan. 2, 2025).

On January 10, 2025, Judge Reed O’Connor of the United States District Court for the Northern District of Texas ruled, following a four-day bench trial, that an airline breached ERISA fiduciary duties when investing employees’ 401(k) plan retirement assets utilizing investment managers and funds with environmental, social, and governance (“ESG”) objectives.  Spence v. American Airlines Inc., et al., No. 23-cv-00552, 2025 WL 225127 (N.D. Tex. Jan. 10, 2025). 

On December 12, 2024, Judge Lewis A. Kaplan of the United States District Court for the Southern District of New York 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 (the “Exchange Act”) against an insurance underwriter (the “Company”) and certain of its former and current executives (the “Individual Defendants” and, with the Company, the “Defendants”). Police & Fire Ret. Sys. City of Detroit, et al. v. Argo Grp. Int’l Holdings, Ltd., et al., 22-cv-8971 (S.D.N.Y. Dec. 12, 2024). 

On December 17, 2024, Judge Vince Chhabria of the United States District Court for the Northern District of California granted a renewed motion for class certification in a securities action against a majority shareholder of a biotechnology company (the “Company”) under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. In re Vaxart, Inc. Sec. Litig., 20-cv-05949 (N.D. Cal. Dec. 17, 2024). 

 

On December 4, 2024, Judge John L. Badalamenti of the United States District Court for the Middle District of Florida denied a motion to dismiss a putative securities fraud action against a retail company (the “Company”), its CEO, and its Board of Directors, alleging violations of Sections 10(b), 14(a), and 20(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14a-9 promulgated thereunder.  Craig v. Target Corp., et al., No. 2:23-cv-599-JLB-KCD (M.D. Fla. Dec. 4, 2024).  

On November 26, 2024, Judge Jon S. Tigar 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 subscription streaming services company (the “Company”), and its CEOs, CFO, and COO (the “Individual Defendants”).  Pirani v. Netflix, Inc., et al., No. 22-cv-02672-JST (N.D. Cal. Nov. 26, 2024). 

On 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.

On 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. 

On 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.”

On 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.”

On 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.

On 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. 

On 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.

On 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.

On 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. 

On 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.

On 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.

On 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.

On 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.

On 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.

On 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.

On 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). 

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. 

On 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.

On 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.

On 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.

On 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.

On 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.

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.

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.

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.

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.

On 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). 

On 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). 

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.

On 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.

On 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.

On 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.

On 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.

On 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.

On 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.

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.

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.” 

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?”

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.

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. 

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. 

On 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).

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.

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.

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.

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. 

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.

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.

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.

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.

On April 15, 2024, the United States Court of Appeals for the Second Circuit affirmed in a non-precedential summary order the summary judgment dismissal of securities fraud claims against a pharmaceutical company (the “Company”) under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder. In re Mylan N.V. Sec. Litig., No. 23-720-cv (2d Cir. Apr. 15, 2024). Reviewing the district court decision de novo, the Court held that appellants waived their argument related to scienter and that their failure to disaggregate the losses caused by the Company’s alleged omissions warranted summary judgment for defendants. 

On April 12, 2024, the United States Supreme Court unanimously reversed a decision of the United States Court of Appeals for the Second Circuit which held that Section 10(b) of the Securities Exchange Act of 1934 permitted a private right of action based solely on an issuer’s alleged failure to disclose a known trend or uncertainty required to be disclosed under Item 303 of Regulation S‑K. Macquarie Infrastructure Corp. v. Moab Partners, L.P., —U.S.—, 2024 WL 1588706 (2024). As explained in our prior post addressing the oral argument before the Supreme Court, the case concerned whether a company that operates a portfolio of infrastructure-related businesses needed to disclose that a proposed regulation by a United Nations agency would negatively impact one of its subsidiary’s businesses. Writing for a unanimous Court, Justice Sotomayor explained that the “pure omission” of information required to be disclosed by Item 303—i.e., a situation where there is no allegation that the omission rendered any affirmative statement misleading—is insufficient to support a claim under Section 10(b) of the Exchange Act.

On April 5, 2024, the United States Court of Appeals for the Ninth Circuit affirmed in part and reversed in part the dismissal of a putative class action asserting claims under the Securities Exchange Act of 1934 against a company that licenses children’s entertainment content and certain of its officers. In re Genius Brands Int’l, Inc. Sec. Litig., —F.4th—, 2024 WL 1473942 (9th Cir. 2024). Plaintiffs alleged that the company made actionable misstatements after it was told that its shares would be delisted from the NASDAQ exchange. The Court held that plaintiffs adequately alleged that the company’s conduct rendered certain challenged statements misleading, that plaintiffs adequately alleged loss causation for certain claims, and that one claim was appropriately dismissed for failure to plead loss causation.

On April 9, 2024, Judge Beth Labson Freeman of the United States District Court for the Northern District of California dismissed with prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a technology company, certain of its current and former officers and directors, and related corporate entities. Mehedi v. View, Inc., 2024 WL 1560009 (N.D. Cal. Apr. 9, 2024). Lead plaintiff alleged that the company materially misstated its financial results. The Court held that lead plaintiff could not establish loss causation and therefore lacked standing to pursue claims on behalf of the putative class, requiring the case to be dismissed in its entirety.

On March 30, 2024, Judge Araceli Martínez-Olguín of the Northern District of California granted a motion to dismiss a putative class action against a biotechnology company that develops and sells skin treatment drugs and certain of its officers. Aramic LLC, et al. v. Revance Therapeutics, Inc., No. 21-cv-0985-AMO (N.D. Cal. Mar. 30, 2024). Plaintiff, on behalf of a putative class of investors in the Company, alleged that defendants made false or misleading statements about the timing and likelihood of FDA approval of the Company’s drug in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The Court dismissed the amended complaint, finding that plaintiff failed to allege that most of the challenged statements were false or misleading and that plaintiff in any event failed to allege adequately scienter.

On March 30, 2024, Judge Victoria Marie Calvert of the United States District Court for the Northern District of Georgia granted a motion to dismiss a putative securities class action against an optical retail company and certain of its executive officers (the “Individual Defendants”). City of Southfield General Employees Retirement Sys. v. National Vision Holdings, et al., No. 23-cv-00425-VMC (N.D. Ga. Mar. 30, 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 and misleading statements and omissions regarding staffing and wage pressures faced by the Company leading up to and through the Covid-19 pandemic. The Court granted defendants’ motion to dismiss with prejudice, holding that plaintiff failed to adequately plead falsity and scienter. 

On April 4, 2024, the State of New York, Appellate Division, First Judicial Department (the “First Department”) affirmed dismissal of a securities class action against a mass media and entertainment company (the “Company”) and two of its executives (the “Individual Defendants”), and affirmed-in-part and reversed-in-part the denial of the motions to dismiss filed by the underwriters of the offerings at issue (the “Underwriters”). Camelot Event Driven Fund, et al. v. Morgan Stanley & Co. LLC, et al., No. 2023-00983 (1st Dep’t Apr. 4, 2024). Plaintiffs alleged defendants violated Sections 11, 12 and 15 of the Securities Act of 1933 (the “Securities Act”) by concealing certain information from the offering materials issued in connection with the Company’s March 2021 secondary and initial offerings (the “Offerings”).

On February 20, 2024, Judge Haywood S. Gilliam, Jr. of the United States District Court for the Northern District of California granted with leave to amend a motion to dismiss a putative securities class action against a manufacturer of laboratory instruments and other advanced automation systems (the “Company”), certain of its current and former officers and directors, several venture capital firms that invested in the Company, and the underwriters of the Company’s July 2020 IPO. Victor J. Ng, et al. v. Berkeley Lights, Inc., et al., No. 21-cv-09497-HSG (N.D. Cal. Feb. 20, 2024). Plaintiff alleged that defendants violated Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, by making false and misleading statements and omissions regarding the functionality of the Company’s flagship product (the “Product”).

On February 26, 2024, Judge Gregory H. Woods of the United States District Court for the Southern District of New York narrowed claims in a putative class action asserting claims under the Securities Exchange Act of 1934 and Securities Act of 1933 against a China-based real estate brokerage company, certain of its executives, and the underwriters in connection with a secondary offering by the company. Saskatchewan Healthcare Emps.’ Pension Plan v. KE Holdings Inc., 2024 WL 775195 (S.D.N.Y. Feb. 26, 2024). Plaintiff alleged, based largely on a short-seller report, that the company made misrepresentations that significantly overstated the gross transaction value (“GTV”) of real estate transactions facilitated by the company, the number of agents and stores using its online platform, and the commissions the company received. Id. at *3–7. The Court held that plaintiff adequately alleged misrepresentations with respect to certain statements but failed to adequately allege scienter, and therefore largely declined to dismiss the Securities Act claim but dismissed the Exchange Act claim with leave to replead.

On February 23, 2024, Judge Katherine Polk Failla 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 financial institution and certain of its executives. In re Barclays PLC Sec. Litig., 2024 WL 757385 (S.D.N.Y. Feb. 23, 2024). Plaintiff alleged that the company had issued securities in excess of what it had registered for with the U.S. Securities and Exchange Commission, which allegedly rendered misleading certain of its statements regarding compliance with securities laws and internal controls. Id. While the Court held that certain alleged misrepresentations were adequately pleaded to survive a motion to dismiss, the Court dismissed claims as to statements made after the alleged over-issuances were disclosed and rejected plaintiff’s control person liability theory as to certain defendants.

On March 5, 2024, Judge John P. Cronan 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 shareholders’ class action, alleging that a software company (the “Company”), several of its executives and directors (“Individual Defendants”), and three banks who underwrote the Company’s initial public offering (“IPO”) violated Sections 11 and 15 of the Securities Act of 1933. Lian v. Tuya Inc., 22 Civ. 6792 (JPC) (S.D.N.Y. Mar. 5, 2024). Plaintiff alleged that the Company failed to disclose at the time of its IPO, as required by Items 105 and 303 of Regulation S-K, that its sales and growth could be impacted by the involvement of a significant percentage of its customers in a pervasive and far-reaching fake customer reviews scheme. Furthermore, plaintiff alleged that the Company’s failure to disclose the scheme rendered several statements in the IPO registration statement (“Registration Statement”) false and misleading. The Court dismissed the claims predicated upon Items 105 and 303 but found the Section 11 claims based upon alleged misstatements in the Registration Statement to be sufficiently pled.

On March 1, 2024, Judge Marsha J. Pechman of the United States District Court for the Western District of Washington dismissed with prejudice a putative shareholders’ class action against a software company (the “Company”) and its Board of Directors (“Board”), alleging violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”). Sohovich v. Avalara, Inc., No. C22-1580 MJP (W.D. Wash. Mar. 1, 2024). Plaintiff alleged that the Company and its Board misled investors to vote to approve its $8.4 billion sale—priced at $93.50 per share—allegedly by deflating its financial projections and misrepresenting the Company’s performance and outlook in the proxy statement (“Proxy”). The Court found that plaintiff failed to adequately plead the falsity of any one of the four misstatements and dismissed it with prejudice. 

On March 11, 2024, Judge Haywood S. Gilliam, Jr. of the United States District Court for the Northern District of California granted in part and denied in part a motion to dismiss a putative securities class action brought against a biopharmaceutical company (the “Company”) and its CEO. Pardi et al., v. Tricida, Inc., et al., No. 21-cv-00076-HSG (N.D. Cal. Mar. 11, 2024). Plaintiff 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 making false and misleading statements and omissions regarding the likelihood that the Company’s new drug would receive accelerated FDA approval. The Company filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code and was voluntarily dismissed, and the CEO moved to dismiss.

On March 8, 2024, the United States Court of Appeals for the Second Circuit reversed a trial court decision dismissing a putative securities class action brought by purchasers of crypto assets against an international crypto exchange company (the “Company”) and certain of its officers, alleging violations of Section 12(a)(1) of the Securities Act of 1933 (the “Securities Act”), as well as various state securities laws (“Blue Sky” laws), and also seeking recission of the contracts they entered into with the Company, under Section 29(b) of the Securities Exchange Act (the “Exchange Act”). Williams v. Binance, No. 22-972 (2d Cir. Mar. 8, 2024). Plaintiffs alleged that the Company unlawfully promoted, offered, and sold billions of dollars’ worth of crypto-assets without registering these as securities and without registering themselves as a securities exchange or broker-dealer. The United States District Court for the Southern District of New York granted the Company’s motion to dismiss, holding that (1) plaintiffs’ claims constitute an impermissible extraterritorial application of securities law and (2) plaintiffs’ federal claims were untimely under the applicable statute of the limitations. On appeal, the Second Circuit reversed on both counts and remanded for further proceedings.

On March 14, 2024, Judge Lewis Kaplan of the United States District Court for the Southern District of New York denied defendants’ motions to dismiss a putative class action against a China-based ride hailing company, certain of its officers and directors, and the underwriters of the company’s IPO, asserting claims under the Securities Act of 1933 and the Securities Exchange Act of 1934. In re Didi Global Inc. Sec. Litig., 2024 WL 1119483 (S.D.N.Y. Mar. 14, 2024). Plaintiffs alleged that the company omitted from its filings in connection with its New York Stock Exchange (“NYSE”) IPO that the Chinese government had directed it to postpone its IPO, with the Chinese government imposing penalties after the company allegedly disregarded this directive. The Court held that plaintiffs’ allegations were adequate to state a claim with respect to nearly all of their asserted claims.

On March 25, 2024, the United States Court of Appeals for the Ninth Circuit unanimously affirmed a trial court decision dismissing a putative securities class action brought by investors against a biopharmaceutical company (“Company”) and certain of its officers and executives, alleging violations Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5. In re Sorrento Therapeutics, Inc. Securities Litigation, No. 22-55641 (9th Cir. Mar. 25, 2024). Plaintiff alleged that defendants made false statements about developments regarding the Company’s new COVID-19 antibody treatment, which allegedly misled investors and the public to believe that the Company had discovered a “cure” for the virus in order to boost the Company’s stock prices to improve its allegedly “dire financial situation.” Judge Anthony J. Battaglia of the United States District Court for the Southern District of California dismissed plaintiff’s claims without prejudice, holding that plaintiff had not plausibly pleaded falsity or scienter. The trial court entered judgment after plaintiff failed to file an amended pleading. Plaintiff appealed and the Ninth Circuit affirmed, holding that (1) the allegedly misleading statements were inactionable puffery and (2) standing alone, the Company’s allegedly poor financial position was not sufficient to warrant an inference of scienter.

On March 21, 2024, the United States Court of Appeals for the Third Circuit affirmed the dismissal of a putative class action against a biopharmaceutical company (the “Company”) and certain of its officers under Sections 10(b) and 20(a) of the Securities Exchange Act. In re Ocugen, Inc. Sec. Litig., No. 23-1570 (3d Cir. Mar. 21, 2024). Plaintiffs alleged that the Company’s statements and omissions about its partnership with an Indian biotechnology company to develop a COVID-19 vaccine for Emergency Use Authorization (“EUA”) with the U.S. Food and Drug Administration (“FDA”) were false and misleading. The Court affirmed the district court’s dismissal of the complaint with prejudice based on plaintiffs’ failure to allege a material misrepresentation.

On March 18, 2024, Judge Rachel P. Kovner of the United States District Court for the Eastern District of New York dismissed with prejudice a putative shareholders’ class action against a mobile game development company (the “Company”), its officers and directors, and its underwriters, alleging violations of Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”). In re Playtika Seg. Litig., No. 21-CV-06571-RPK-SJB (E.D.N.Y. Mar. 18, 2024). Plaintiff alleged that the Company failed to disclose an infrastructure overhaul of two of its most popular mobile games in its initial public offering (“IPO”) registration statement even though the overhaul was in progress at the time of the Company’s IPO. The Court held that plaintiff failed to adequately allege that omissions rendered the registration statement misleading, and that Item 105 did not impose a duty to disclose specific infrastructure projects that allegedly were omitted. Accordingly, the Court dismissed the action with prejudice.

On February 4, 2024, Judge Arun Subramanian of the United States District Court for the Southern District of New York dismissed a proposed securities class action against a biopharmaceutical company (the “Company”) alleging violations under Sections 11 and 15 of the Securities Exchange Act of 1934 (the “Exchange Act”).  Merritt v. Molecular Partners AG, 22-CV-5925 (AS) (S.D.N.Y. Feb. 4, 2024).

On January 30, 2024, Judge Susan Illston of the United States District Court for the Northern District of California granted with leave to amend a motion to dismiss a putative securities class action against a battery company and its directors and officers.  In Re Enovix Corp. Securities Litigation, No. 23-cv-00071-SI (N.D. Cal. Jan. 30, 2024).  Plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 and Rule 10b-5(b) promulgated thereunder by failing to disclose that the Company overlooked critical testing of its manufacturing equipment, which led to equipment failure that caused the Company to miss its performance targets.

On February 1, 2024, Judge Gerald J. Pappert of the United States District Court for the Eastern District of Pennsylvania granted a motion to dismiss a putative securities class action against an IT solutions company that provides digital communication, cybersecurity and IT consulting services, its CEO and current and former CFOs.  Connor v. Unisys Corp., et al., No. 22-4529 (E.D. Pa. Feb. 1, 2024).  Plaintiff alleged that defendants made false representations about the Company’s disclosure controls and procedures and internal control over financial reporting in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.  The Court dismissed the amended complaint, holding that plaintiff failed to adequately allege falsity, scienter and loss causation.

On February 5, 2024, Judge Arun Subramanian of the United States District Court for the Southern District of New York largely declined to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a manufacturer of medical tests and certain of its executives.  Stadium Capital LLC v. Co-Diagnostics, Inc., 2024 WL 456745 (S.D.N.Y. Feb. 5, 2024).  Plaintiff alleged that the company made misrepresentations regarding the prospect of future sales of the company’s medical tests as the COVID-19 pandemic subsided.  The Court held that plaintiff plausibly alleged actionable misrepresentations regarding comments made announcing earnings results for the first quarter of 2022, and plausibly alleged that defendants acted with scienter.

On February 6, 2024, Judge Jennifer L. Rochon of the United States District Court for the Southern District of New York dismissed with leave to amend a putative class action asserting claims under the Sections 10(b) and 14(a) of the Securities Exchange Act against a Special Purpose Acquisition Company (“SPAC”) and certain of its officers and directors, along with an individual action consolidated with the putative class action and asserting similar claims.  In re Lottery.com, Inc. Securities Litigation, No. 1:22-cv-07111 (S.D.N.Y. Feb. 6, 2024), slip op.  Plaintiffs alleged that defendants misrepresented certain financial information regarding the SPAC’s target company both before and after the merger.  The Court held that, while certain challenged statements were adequately alleged to be false, plaintiffs failed to sufficiently allege scienter with respect to any alleged misrepresentation.

On February 5, 2024, Judge Valerie Caproni 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 Act of 1933 against a media company and certain of its officers and directors.  Ohio Public Emps. Ret. Sys. v. Discovery, Inc., 2024 WL 446466 (S.D.N.Y. Feb. 5, 2024).  Plaintiffs alleged that the offering documents in connection with the merger that created the company contained misrepresentations that painted a misleadingly positive image of the strength of the combined company.  The Court held that none of the six categories of misrepresentations alleged by plaintiffs was actionable.

On January 19, 2024, Judge Orelia Merchant of the United States District Court for the Eastern District of New York dismissed a proposed securities class action against a lithium mining company (the “Company”) and certain of its officers and directors (the “Individual Defendants”) alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”). In re Piedmont Lithium Inc., Sec. Litig., 21-CV-4161 (OEM) (PK) (E.D.N.Y. Jan 18, 2024). Plaintiff alleged that the Company made misleading positive statements in connection with a North Carolina lithium mining project (the “Project”) and that the Individual Defendants subsequently sold Company stock prior to the release of a negative news article. The Court dismissed plaintiff’s claims, finding that plaintiff had failed to raise a strong inference of scienter.

On January 22, 2024, Judge William H. Orrick of the United States District Court for the Northern District of California dismissed a putative class action complaint alleging that a software company (the “Company”) and certain of its executives violated Section 10(b) and 20(a) of the Securities Exchange Act of 1934. City of Hollywood Firefighters Pension Fund v. Atlassian Corp., 3:23-cv-00519-WHO (N.D. Cal. Jan. 22, 2024). Plaintiffs alleged that the Company made false and misleading statements about the strength of its financial outlook. The Court dismissed the complaint with leave to amend, holding that plaintiffs failed to allege falsity with respect to most of the alleged misrepresentations or sufficient facts giving rise to a strong inference of scienter with respect to one omission that was alleged plausibly.

On January 16, 2024, the Supreme Court of the United States heard oral argument in Macquarie Infrastructure Corp. v. Moab Partners, No. 22-1165, a case considering whether a private plaintiff may plead a claim under Section 10(b) of the Securities Exchange Act based on an issuer’s failure to disclose a known trend or uncertainty required to be disclosed under Item 303 of Regulation S-K even without identifying a particular statement rendered misleading by the alleged omission.

On January 17, 2024, Judge Otis D. Wright, II of the United States District Court for the Central District of California dismissed a putative class action asserting claims under Section 10(b) of the Exchange Act and Sections 11 and 12(a)(2) of the Securities Act against a medical apparel company, certain of its officers, and the underwriters of its stock offerings.  Ryan v. FIGS, Inc., 2024 WL 187001 (C.D. Cal. Jan. 17, 2024). 

On January 5, 2024, Judge Jon S. Tigar of the United States District Court for the Northern District of California granted a motion to dismiss a proposed securities class action against an entertainment company that primarily operates a subscription-based streaming service, alleging that defendants made misrepresentations in public statements about the Company’s growth, customer retention, and challenges related to shared accounts in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.  

On December 28, 2023, Judge Zahid N. Quraishi of the United States District Court for the District of New Jersey granted class certification in a securities fraud class action, alleging violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) against a healthcare product company (the “Company”). Hall v. Johnson & Johnson, No. 18-1833 (ZNQ) (TJB) (D.N.J. Dec. 28, 2023). Specifically, plaintiff alleged that the Company inflated the value of its stock through false and misleading statements regarding the alleged contamination of the Company’s talc products. The Court certified the class after holding that plaintiff met the requirements of Rule 23(a) as well as the predominance and superiority requirements of Rule 23(b)(3).

On December 26, 2023, the United States Court of Appeals for the Second Circuit affirmed a district court’s dismissal of a putative class action asserting claims against a tobacco company (the “Company”) under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”). In re Philip Morris Int’l Inc. Sec. Litig., No. 21-2546 (2d Cir. Dec. 26, 2023). Plaintiffs alleged that the Company made false or misleading statements regarding both the scientific studies it conducted in support of an application to the Food and Drug Administration (“FDA”) and the outlook for the Company’s sales growth in Japanese markets. The district court held that plaintiffs failed to adequately plead falsity or scienter, in a decision previously covered here. The Second Circuit affirmed the dismissal, holding that plaintiffs failed to adequately plead falsity. In its decision, the Court decided two questions of first impression in the Second Circuit. First, it held a securities fraud defendant’s statement that its scientific studies comply with a methodological standard that is published and internationally recognized, but stated in general and inherently subjective terms, is properly analyzed as a statement of opinion, rather than a statement of fact. Second, the Court held that, where a securities fraud defendant’s statement expresses an interpretation of scientific data that is ultimately endorsed by the FDA, such a statement is per se “[]reasonable” (i.e., supported by “meaningful inquiry”) as a matter of law.

On December 28, 2023, Judge Jed S. Rakoff of the United States District Court for the Southern District of New York dismissed a putative class action alleging that a biopharmaceutical company (the “Company”) and certain of its officers and directors violated Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9 based on alleged misstatements in a proxy statement (the “Proxy”) filed in connection with the acquisition of the Company by its controlling shareholder. Zappia v. Movant Scis. Ltd., No. 23-cv-8097 (JSR) (S.D.N.Y. Dec. 28, 2023). Plaintiff alleged that the law firm engaged by the Company’s special committee (the “Special Committee”) to consider the acquisition had a conflict of interest and that this rendered the Proxy misleading. The Court held that the complaint failed to allege the existence of a conflict or a misrepresentation.

On December 11, 2023, Judge Charles Breyer of the United States District Court for the Northern District of California narrowed a putative class action asserting claims under the Securities Exchange Act of 1934 against the purchaser of a social media company. Pampena v. Musk, — F. Supp. 3d — 2023 WL 8588853 (N.D. Cal. 2023). Plaintiffs alleged that they sold shares in the target company at depressed prices after the purchaser allegedly made material misstatements suggesting that he would not go forward with the acquisition. The Court held that certain of the challenged statements were actionable and granted leave to replead with respect to the others.

On November 27, 2023, Judge Kathleen M. Williams of the United States District Court for the Southern District of Florida granted in part and denied in part a motion to dismiss a proposed securities class action alleging that an electric vehicle charging company and certain of its officers violated Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934.  Bush v. Blink Charging Co., No. 1:20-cv-23527-KMW (S.D. Fla. Nov. 27, 2023).  Plaintiffs allege that the Company made false and misleading statements and omissions concerning the size and functionality of the Company’s electric vehicle (“EV”) charging station network.  The Court dismissed plaintiffs’ claim as to the size of the EV charging station network, but permitted plaintiffs’ claim regarding its functionality.

On December 6, 2023, Judge John G. Koeltl of the U.S. District Court for the Southern District of New York granted a motion to dismiss a putative securities class action brought against an operator of private schools in Western China.  Dagan Invs., LLC v. First High-Sch. Educ. Grp. Co., 2023 BL 442686, No. 22-cv-3831 (S.D.N.Y. Dec. 6, 2023).  Plaintiff, on behalf of a purported class of U.S. investors, alleged that the Company violated Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 by making material misstatements and omissions about the likelihood and severity of impending Chinese government regulations impacting the private education sector.

On November 16, 2023, the United States Court of Appeals for the Ninth Circuit affirmed in part and reversed in part a motion to dismiss a derivative action brought by a shareholder of a publicly traded biotechnology company (the “Company”) under Section 16(b) of the Securities Exchange Act of 1934 against the Company, its beneficial owner (the “Beneficial Owner”), one of the Company’s directors (the “Director Defendant”) and his wife, and their trust (the “Trust”).  Andrew E. Roth v. Foris Ventures LLC, et al., 22-16632 (9th Cir. Nov. 13, 2023).

On November 3, 2023, Judge Rachel P. Kovner of the United States District Court for the Eastern District of New York granted a motion to dismiss a proposed putative securities class action alleging that a Russian electronic payments company (the “Company”) and certain of its officers violated Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”).  In re Qiwi PLC Sec. Litig., No. 1:20-cv-06054-RPK-CLP (E.D.N.Y. Nov. 3, 2023).

On November 6, 2023, Judge Jed S. Rakoff 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 class action alleging that a Chinese grocery delivery company (the “Company”) violated Sections 11, 12(a), and 15 of the Securities Act of 1933 (the “Securities Act”).  Chen v. Missfresh Ltd., 1:22-cv-09836 (JSR) (S.D.N.Y. Nov. 6, 2023).

On November 2, 2023, the New York Appellate Division, First Department, held that the automatic discovery stay in the Private Securities Litigation Reform Act (“PSLRA”) applies to actions brought in New York state court during the pendency of a motion to dismiss, although not during any interlocutory appeal from the denial of such a motion.  Camelot Event Driven Fund v. Morgan Stanley & Co., —N.Y.S.3d—, 2023 WL 7198938 (1st Dep’t Nov. 2, 2023).  Prior to this ruling, New York state trial courts had divided on the question of whether the PSLRA stay applies only to actions filed in federal court or also to actions filed in state court.  This decision resolves that split within the First Department, which includes New York County.

On October 11, 2023, a divided panel of the United States Court of Appeals for the Ninth Circuit dismissed for lack of standing an appeal from the dismissal of a putative class action asserting claims under the Securities Exchange Act of 1934 against a medical device company and its former CEO.  Habelt v. iRhythm Technologies, Inc., —F.4th—, 2023 WL 6614359 (9th Cir. 2023).  Lead plaintiff alleged that the Company made misrepresentations regarding the regulatory process prior to the company receiving a historically low Medicare reimbursement rate for one of its products.  After the district court granted defendants’ motion to dismiss, lead plaintiff declined to appeal.

On October 11, 2023, the United States Court of Appeals for the First Circuit affirmed in part and reversed in part the dismissal of a putative class action asserting claims under the Securities Exchange Act of 1934 against a pharmaceutical company and certain of its former executives.  Shash v. Biogen, Inc., —F.4th—, 2023 WL 6617278 (1st Cir. 2023).  Plaintiffs alleged that the company made misstatements and omissions regarding the clinical trial results of the company’s drug to treat Alzheimer’s.  The district court granted defendants’ motion to dismiss, but the First Circuit reversed the dismissal in part, holding that plaintiffs’ allegations were sufficient with respect to one challenged statement, while affirming that plaintiffs failed to adequately allege scienter with respect to other challenged statements.

On October 6, 2023, Judge Hector Gonzalez of the United States District Court for the Eastern District of New York granted a motion to dismiss a putative securities class action against a battery recycling company and the former officers and directors of the SPAC that merged with the Company in 2021, alleging violations of Sections 11 and 15 of the Securities Act of 1933 and Section 14(a) the Securities Exchange Act of 1934.  Lanigan Grp., Inc. v. Li-Cycle Holdings Corp., 22-cv-02222 (HG) (RML) (E.D.N.Y. Oct. 6, 2023).

On September 29, 2023, Judge Andrew L. Carter, Jr. of the United States District Court for the Southern District of New York denied in part and granted in part a motion to dismiss a putative securities class action against the owner of a social media company and his beneficial trust.  Oklahoma Firefighters Pension and Retirement System v. Musk, No. 22-cv-03026 (ALC) (S.D.N.Y. Sept. 29, 2023).  Plaintiff alleged that defendants violated Sections 10(b), 20A, and 20(a) of the Securities and Exchange Act of 1934 by allegedly concealing the owner’s ownership interests in the Company to investors who sold shares of the Company between March 25, 2022, and April 4, 2022, the putative class period.

On August 31, 2023, Judge Charles R. Breyer of the United States District Court for the Northern District of California granted a motion to dismiss a putative securities class action alleging that a hearing aid company, its officers, directors and underwriters, violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  In re Eargo, Inc. Sec. Litig., No. 21-cv-08597 (N.D. Cal. Aug. 31, 2023).  Plaintiffs alleged that the Company misrepresented the Company’s revenue and growth opportunities in its offering materials and allegedly downplayed an audit that allegedly led to a Department of Justice investigation in later SEC filings and public statements.

On September 18, 2023, Judge Manish S. Shah of the United States District Court for the Northern District of Illinois narrowed a putative class action asserting claims under the Securities Exchange Act of 1934 against an airplane manufacturer and its former CEO and CFO.  College Ret. Equities Fund v. Boeing Co., 2023 WL 6065260 (N.D. Ill. Sept. 18, 2023).  Plaintiffs alleged the company made misrepresentations regarding two crashes of a new model of plane and the company’s responsive measures in an effort to return the fleet to service.  The Court held that various challenged statements were not actionable because plaintiffs failed to adequately allege falsity or scienter.  With respect to the remaining challenged statements, the Court further pared the claims by holding that loss causation was not sufficiently alleged in connection with certain purported corrective disclosures.

On September 25, 2023, Judge Pamela K. Chen 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 alleging that an IT portfolio management services company, its CEO, and its CFO violated Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934.  Handal v. Tenet Fintech Grp. Inc., No. 1:21-cv-06461 (PKC) (RER) (E.D.N.Y. Sept. 25, 2023).  Plaintiffs alleged that defendants made material misstatements regarding several business transactions in the Company’s registration statement and the CEO’s subsequent public statements.  The Court denied the motion with respect to the Securities Act claims but granted it with respect to the Exchange Act claim because plaintiffs failed to adequately allege reliance.

On September 25, 2023, Judge Lorna Schofield of the United States District Court for the Southern District of New York granted a motion to dismiss a proposed class action against a biopharmaceutical company alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  Gru v. Axsome Therapeutics, Inc., No. 22 CIV. 3925 (LGS), 2023 WL 6214581 (S.D.N.Y. Sept. 25, 2023).  Plaintiff alleged that the Company omitted details concerning its migraine drug development in its Form 10-Q, 10-K and 8-K filings with the SEC and in statements made during conference calls with investors and analysts.  Plaintiff further alleged that the Company’s statements discussing the timing and prospect of FDA approval of its new migraine drug were false or misleading as a result of these alleged omissions.  The Court dismissed the complaint, finding that plaintiffs failed to plead loss causation.

On August 21, 2023, Judge Paul A. Crotty of the United States District Court for the Southern District of New York granted a motion for reconsideration of his denial of an earlier motion to dismiss a putative securities class action against a pharmaceutical and cannabis company that sells cannabis, hemp, and related products (the “Company”) and certain of its officers (the “Individual Defendants”).  Kasilingam et al. v. Tilray Inc., et al., No. 1:20-cv-03459 (S.D.N.Y. Aug. 21, 2023).  Based on the Court’s reconsidered analysis, the Court granted defendants’ second motion to dismiss.  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 thereunder by making false and misleading statements to inflate the Company’s stock price.

On August 25, 2023, Judge Georgette Castner of the United States District Court for the District of New Jersey dismissed with prejudice a putative class action asserting claims under the Securities Exchange Act against a company that supports and operates blockchain technologies and certain of its executives and investors.  Takata v. Riot Blockchain, Inc., No. 18-cv-2293, slip op. (D.N.J. Aug. 25, 2023), ECF No. 251.  The Court’s prior decision dismissing the action with leave to amend was the subject of our prior post.  As this was plaintiff’s third amended complaint and the Court determined that plaintiff still failed to adequately allege misrepresentations or scienter, the Court dismissed the action with prejudice.

On August 29, 2023, Judge Katherine Polk Failla of the United States District Court for the Southern District of New York dismissed with prejudice a putative class action against a decentralized cryptocurrency trading platform and certain of its investors under Section 12(a)(1) of the Securities Act and Section 29(b) of the Securities Exchange Act.  Risley v. Universal Navigation Inc., 2023 WL 5609200 (S.D.N.Y. Aug. 29, 2023).  Plaintiffs alleged that they purchased fraudulent cryptocurrency tokens on the exchange.  The Court held, assuming but not deciding that the tokens were securities, that plaintiffs failed to state a claim for rescission.

On August 21, 2023, the United States Court of Appeals for the Tenth Circuit affirmed dismissal of a consolidated putative class action alleging violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, against a large aerostructures manufacturing company (the “Company”) and certain of its executives.  Meitav Dash Provident Funds and Pension Ltd., et al. v. Spirit AeroSystems Holdings, et al., No. 22-5013 (10th Cir. Aug. 21, 2023).  The Northern District of Oklahoma dismissed plaintiffs’ complaint, holding that plaintiffs failed to adequately plead scienter.  In a split decision, the Tenth Circuit affirmed.

On August 23, 2023, the United States Court of Appeals for the Second Circuit affirmed in part and vacated in part an order dismissing a putative securities class action against a property and casualty insurer (the “Company”), various corporate officers and board members of the Company, the Company’s outside auditor, and multiple underwriters of the Company’s sale of securities.  New England Carpenters Guaranteed Annuity and Pension Funds, et al. v. AmTrust Financial Services Inc., et al., 20-1643 (Aug. 23, 2023).  In vacating the district court’s dismissal in part, the Second Circuit held that in light of its more recent precedent, certain alleged misstatements of opinion were actionable as alleged in the complaint, and therefore reversed the district court’s dismissal of claims related to those alleged misstatements, but otherwise affirmed the district court’s decision dismissing the remaining claims.

On August 24, 2023, the United States Court of Appeals for the Second Circuit affirmed a decision by the United States District Court for the Southern District of New York dismissing claims brought under state securities laws against a group of banks which acted as arrangers (“Defendants” or the “Arrangers”) for a term loan on behalf of a California-based medical testing company (the “Company”), holding that term loan “notes” issued as part of a syndicated loan were not “securities” subject to securities laws and regulations.  Kirschner v. JP Morgan Chase Bank, N.A., et al., 21-2726-cv (2d Cir. Aug. 24, 2023).  The Second Circuit also affirmed that the district court had jurisdiction pursuant to the Edge Act.

On August 25, 2023, a sharply divided panel of the United States Court of Appeals for the Ninth Circuit affirmed in part and reversed in part the dismissal of a putative class action asserting claims under the Securities Exchange Act against a producer of graphics processing units and certain of its executives.  E. Ohman J:or Fonder AB v. NVIDIA Corp., —F.4th—, 2023 WL 5496507 (9th Cir. 2023).  As discussed in our prior post, plaintiffs alleged that the company made misrepresentations regarding the extent to which its revenues and growth depended on sales of graphics processing units to the volatile cryptocurrency mining industry.  The Ninth Circuit held that plaintiffs adequately alleged that statements by two executives were misleading, and adequately alleged scienter as to the company’s CEO.

On August 10, 2023, Judge Ronnie Abrams 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 class action alleging that a cryptocurrency mining company (the “Company”) and certain of its officers and directors violated Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”).  Winter v. Stronghold Digital Mining, Inc., No. 22-CV-3088 (RA), 2023 WL 5152177 (S.D.N.Y. Aug. 10, 2023).  Plaintiffs allege that the Company made false and misleading statements in its registration statement and prospectus filed in connection with the Company’s October 2021 initial public offering (“IPO”) regarding the Company’s supply chain risks.  The Court granted the motion to dismiss the Section 12(a)(2) claim of one plaintiff for lack of standing, but otherwise denied the motion to dismiss.

On August 8, 2023, the United States Court of Appeals for the Eleventh Circuit affirmed the dismissal of a putative class action asserting claims under the Securities Exchange Act of 1934 against a direct-to-consumer marketing company and certain of its officers.  In re Tupperware Brands Corp. Sec. Litig., 2023 WL 5091802 (11th Cir. Aug. 8, 2023).  Plaintiff alleged that the company misrepresented its financial performance as a result of a fraudulent sales scheme orchestrated at the company’s subsidiary.  The Eleventh Circuit affirmed the lower court’s dismissal of plaintiff’s third amended complaint with prejudice, holding that plaintiff failed to allege scienter on the part of the makers of the challenged statements and failed to allege scheme liability.

On August 10, 2023, the United States Court of Appeals for the Second Circuit reversed the district court’s class certification order in a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 against a global financial institution and certain of its officers.  Ark. Tchr. Ret. Sys. v. Goldman Sachs Grp., Inc.,—F.4th—, 2023 WL 5112157 (2d Cir. Aug. 10, 2023) (“ATRS III”).  This long-running litigation has been the subject of prior posts in this newsletter in 2018, 2020, and three times in 2021 (wherein we assessed decisions by the U.S. Supreme Court, the Second Circuit, and the district court).

On July 21, 2023, Judge Lewis J. Liman 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 class action alleging that an agriculture company (the “Company”) and certain of its officers (the “Individual Defendants”) violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder.  In Re Appharvest Sec. Litig., No. 21-cv-7985 (LJL), 2023 BL 261952 (S.D.N.Y. July 31, 2023).  Plaintiffs alleged that defendants made misleading statements about the impact of the Covid-19 pandemic on quality control, training, yield, and employee attrition at the Company’s main plant.

On July 24, 2023, Judge William G. Young of the United States District Court for the District of Massachusetts granted in part, and denied in part, a motion to dismiss a putative class action brought against a software company (the “Company”) and two of its executives for violations of Sections 10(b) and 20(A) of the Securities Exchange Act of 1934.  City of Fort Lauderdale Police & Firefighters’ Ret. Sys. V. Pegasystems Inc., No. CV 22-11220-WGY, 2023 WL 4706741 (D. Mass. July 24, 2023). The class action followed a decision in a separate civil trade secret case in which the Company was found to have maliciously misappropriated another software company’s trade secrets in violation of Virginia law.

On July 10, 2023, Chief Judge Patrick J. Schiltz of the United States District Court for the District of Minnesota granted a motion to dismiss a putative securities fraud class action against a mattress and bedding company (the “Company”) and two of its executives.  Steamfitters Local 449 Pension & Retirement Securities Funds v. Sleep Number Corp., et al, No. 21-CV-2669 (PJS/DTS) (D. Minn. July 10, 2010).  Plaintiffs alleged that defendants violated Section 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder by making material misstatements and omissions regarding an alleged disruption to the Company’s supply chain after a natural disaster that forced certain of the Company’s distributors to temporarily shut down.  The Court dismissed the amended complaint with prejudice, holding that plaintiffs failed to adequately plead falsity and scienter.

On July 10, 2023, the United States Court of Appeals for the Eleventh Circuit affirmed the dismissal of a consolidated putative class action alleging violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, against a biomedical company (the “Company”), certain of its executives, and its former auditor.  Carpenters Pension Fund of Ill. v. MiMedx Group, Inc., No. 22-10633 (11th Cir. July 10, 2023).  The United States District Court for the Northern District of Georgia dismissed plaintiff’s second amended complaint (“SAC”), holding that plaintiff lacked standing to bring the claim and further holding that plaintiff failed to plead loss causation.  While the Eleventh Circuit determined that the district court erred in holding that plaintiff lacked standing, it affirmed the district court’s holding that plaintiff failed to sufficiently plead loss causation.

On July 13, 2023, the United States Court of Appeals for the Tenth Circuit reversed the dismissal of a putative class action asserting claims against a poultry producer and certain of its officers under Section 10(b) of the Securities Exchange Act of 1934.  Hogan v. Pilgrim’s Pride Corp., —F.4th—, 2023 WL 4508545 (10th Cir. 2023).  Plaintiff alleged that the company made misrepresentations regarding its financial results, business operations, and a purported price-fixing scheme.  The district court dismissed plaintiff’s second amended complaint as barred by the Exchange Act’s statute of repose, but the Tenth Circuit reversed, holding that the statute of repose did not apply.

On July 25, 2023, Judge Jed S. Rakoff of the United States District Court for the Southern District of New York denied a motion to dismiss a putative securities class action against an online food ordering and delivery platform (the “Company”), alleging violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934.  Steamship Trade Ass’n of Baltimore-Int’l Longshoreman’s Ass’n Pension Fund v. Olo Inc., No. 22-CV-8228 (JSR), 2023 WL 4744197 (S.D.N.Y. July 25, 2023).  Plaintiff alleged that the Company and two of its officers misled investors by (1) failing to disclose that one of its restaurant partners intended to terminate its partnership with the Company; and (2) misrepresenting the number of “active” restaurant locations that utilized the Company’s product.

On July 24, 2023, the United States Court of Appeals for the Fourth Circuit affirmed the dismissal of claims under Sections 10(b), 14(a), and 20(a) of the Securities Exchange Act of 1934 against a biopharmaceutical company (the “Company”) and certain of its officers and directors.  San Antonio Fire & Police Pension Fund v. Syneos Health Inc., 2023 WL 4688178 (4th Cir. 2023).  Plaintiffs alleged that the Company misled investors about its projected growth following its merger with another company.  The Fourth Circuit held that plaintiffs failed to adequately allege scienter, and that they also failed to allege that the alleged misstatements were material, stating that “not every financial disappointment is actionable under federal law.”

On July 3, 2023, Judge Josephine L. Staton of the United States District Court for the Central District of California denied a motion to dismiss a putative class action against an electric automobile company (the “Company”), alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”), Sections 11, 12(a)(2), and 15 of the Securities Exchange Act of 1933 (“Securities Act”), and Regulation S-K.  Crews v. Rivian Auto., Inc., No. 2:22-CV-01524-JLS-E, 2023 WL 4361098 (C.D. Cal. July 3, 2023).  We previously covered the Court’s decision dismissing plaintiffs’ initial complaint without prejudice.  In their amended complaint, plaintiffs alleged that the company made various misleading statements relating to the pricing and profitability of its vehicles despite knowing for several years prior to the Company’s 2021 IPO that it would need to increase pricing to address higher-than-anticipated costs for materials needed for production.  The Court held that plaintiffs’ amended complaint sufficiently alleged actionable misrepresentations and raised a plausible inference of scienter.

On June 15, 2023, Judge Michael A. Shipp of the United States District Court for the District of New Jersey, in an unpublished opinion, adopted a Special Master’s Report and Recommendation denying a motion to dismiss claims under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, against an accounting firm (the “Firm”) in connection with an audit report it issued for a pharmaceutical company’s (the “Company”) financial statements in connection with the Company’s public offering.  In re Valeant Pharmaceuticals Intl., Inc. Securities Litigation, No. 15-7658 (MAS) (LHG) (D.N.J. June 15, 2023).  We previously covered the district court’s decision denying a motion for judgment on the pleadings in this action, as well as the district court’s decision denying a motion to dismiss by other defendants in the action.

On June 27, 2023, the Supreme Court of the United States held 5-4 that a Pennsylvania statute requiring an out-of-state company to submit to general personal jurisdiction within the Commonwealth when registering to do business there did not violate the Due Process Clause of the Fourteenth Amendment.  Mallory v. Norfolk S. Ry. Co.,—U.S.—, 2023 WL 4187749 (2023).  The Court left open, however, whether Pennsylvania’s statute might violate the dormant Commerce Clause doctrine, a question which will likely be considered by the Pennsylvania Supreme Court on remand.

On June 13, 2023, the United States Court of Appeals for the Third Circuit affirmed in part and reversed in part the dismissal of a putative class action against an insurance company (the “Company”) and certain of its executives under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  City of Warren Police & Fire Ret. Sys. v. Prudential Fin., Inc., No. 21-1147, 2023 WL 3961128 (3d Cir. June 13, 2023).  Plaintiffs alleged that the Company misled investors by misrepresenting the adequacy of their reserves, which are funds to pay for anticipated benefit claims by their policy holders.  The district court had held that plaintiffs failed to plead falsity with respect to all the alleged misstatements.  The Third Circuit affirmed the dismissal on all but one of the alleged misstatements, holding that plaintiffs adequately alleged falsity with respect to that statement including through allegations attributed to a confidential informant, and remanded to the district court to consider the elements of loss causation and scienter.

On June 2, 2023, Judge Denise Cote of the United States District Court for the Southern District of New York granted a motion to dismiss a proposed class action against a software company (the “Company”), alleging violations of Sections 11 and 15 of the Securities Act of 1933.  In re Riskified Ltd. Sec. Litig., No. 1:22-cv-03545, 2023 WL 3791653 (S.D.N.Y. June 2, 2023).  The Company’s core product offering was a credit card fraud detection service for online merchants.  As part of this offering, the Company agreed to reimburse online merchants for any payment reversals or “chargebacks” resulting from fraudulent transactions that were disputed by cardholders.  Plaintiffs alleged that, in connection with the Company’s initial public offering (“IPO”) in July 2021, the Company made several misstatements and omissions concerning the Company increasingly taking on clients with higher chargeback rates, its ability to control chargeback rates, and COVID-19’s impact on its business.  The Court dismissed plaintiffs’ second amended complaint in its entirety, finding that plaintiffs failed to plead an actionable misstatement or omission.

On June 2, 2023, the United States District Court for the Northern District of Texas dismissed a putative class action against an amusement park operator and certain of its executives asserting claims under Section 10(b) of the Securities Exchange Act of 1934.  Okla. Firefighters Pension & Ret. Sys. v. Six Flags Ent. Corp., —F. Supp. 3d—, 2023 WL 3781645 (N.D. Tex. June 2, 2023).  Plaintiff alleged that the company made misrepresentation about its plans to develop amusement parks in China.  The Court held that plaintiff lacked standing because it purchased shares too late to have relied on any actionable misstatements and therefore dismissed the action with prejudice.  The Court also denied a motion to intervene by another potential plaintiff that claimed to have purchased shares earlier.

On June 1, 2023, the United States Court of Appeals for the Fourth Circuit affirmed the grant of summary judgment dismissing claims under Sections 14(a) of the Securities Exchange Act of 1934 against a financial company and certain of its directors.  Karp v. First Connecticut Bancorp, Inc., —F.4th—, 2023 WL 3743604, at *1 (4th Cir. 2023).  Plaintiff alleged that the company in which he held stock made misrepresentations in a proxy solicitation in connection with a proposed stock-for-stock merger with another company.  The Fourth Circuit held that plaintiff failed to allege any material omission from the proxy statement and also failed to establish loss causation.

As we previously covered, 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 a syndicated term loan, holding that the term loan at issue was not a “security.”  2020 WL 2614765 (S.D.N.Y. May 22, 2020).  In October 2021, plaintiff filed an appeal to the Second Circuit challenging the issue of whether the syndicated loan in question was a security and therefore subject to securities laws and regulations.  No. 0:21-cv-02726 (2d Cir., Oct. 28, 2021).

On June 1, 2023, the United States Supreme Court held in a unanimous decision that, under Section 11 of the Securities Act of 1933 (the “Securities Act”), plaintiffs must plead and prove that they purchased securities that were traceable to the registration statement that plaintiffs claim contained a material misstatement or omission.  Slack Technologies, LLC v. Pirani, No. 22-200 (June 1, 2023).  At issue was whether a plaintiff who purchased shares of a company through a direct listing, in which shares that were registered under the alleged misleading registration statement were sold alongside unregistered shares, had standing to bring a Securities Act claim when plaintiff had not adequately pled that the shares it purchased were registered.  We previously covered the now-vacated Ninth Circuit’s decision, the Supreme Court’s grant of the petition for certiorari to review the Ninth Circuit’s decision and the parties’ oral argument before the Supreme Court.

On May 15, 2023, the Appellate Division of the Superior Court of New Jersey unanimously affirmed the dismissal with prejudice of a putative securities class action asserting claims under the Securities Act of 1933 against a bioelectric medicine company, its officers and directors, and the underwriters of its initial public offering. Kuehl v. electroCore, Inc., No. A-1539-21, 2023 WL 3444383 (N.J. App. Div. May 15, 2023). Plaintiffs alleged that the IPO offering documents did not disclose sufficient information about the company’s competitors or the challenges the company was facing in its business. The Court held that a federal forum selection provision in the Delaware-incorporated company’s charter was enforceable and had not been waived, and therefore affirmed the action’s dismissal with prejudice.

On May 25, 2023, the United States Supreme Court unanimously held that a post-trial motion under Federal Rule of Civil Procedure (“FRCP”) 50(b) is not required to preserve appellate review of a purely legal issue resolved at summary judgment.  Dupree v. Younger, No. 22-210, 2023 WL 3632755 (U.S. May 25, 2023).

On May 16, 2023, the United States Court of Appeals for the Second Circuit affirmed a district court’s dismissal of a putative class action asserting claims against a pharmaceutical company (the “Company”) under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  Nandkumar v. AstraZeneca PLC, No. 22-2704-CV, 2023 WL 3477164 (2d Cir. May 16, 2023).  Plaintiffs alleged that the Company made misstatements and omissions about the progress of their clinical trials for the COVID-19 vaccine.  The district court held that plaintiffs failed to plead falsity or scienter, a decision we previously covered.  The Second Circuit, in a summary order, affirmed the dismissal, holding that plaintiffs failed to plead with specificity facts that would explain why and how investors were misled.

On May 19, 2023, Judge Victor Marrero of the United States District Court for the Southern District of New York granted a motion to dismiss a putative securities class action against a solar equipment manufacturing company (the “Company”) alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act (the “Exchange Act”) and Sections 11 and 12(a)(2) of the Securities Act (the “Securities Act”).  Plymouth Cnty. Ret. Ass’n v. Array Techs., Inc., No. 21-cv-04390 (S.D.N.Y. May 19, 2023). Plaintiffs alleged that the Company failed to warn investors about the impact rising steel prices would have on its business and misled investors about its business prospects in filings associated with the Company’s October 2020 initial public offering (“IPO”) and subsequent secondary public offerings (“SPOs”).  The Court dismissed the complaint in its entirety with leave to amend.

On April 18, 2023, Judge William H. Orrick of the United States District Court for the Northern District of California denied a motion to dismiss a putative securities class action alleging a software company (the “Company”) and several of its officers (the “individual defendants”) violated Sections 10(b) and 20(a) of the Securities Exchange Act (the “Exchange Act”). Weston v. DocuSign, Inc. et al., No. 22-cv-00824 (Apr. 18, 2023).  Plaintiff claimed that defendants made false and misleading statements to investors about the sustainability of the Company’s COVID-19 pandemic-driven growth.  The Court denied defendants’ motion to dismiss, holding that at least some of the alleged material misstatements or omissions were not protected by the safe-harbor provision of the Private Securities Litigation Reform Act (“PSLRA”), and that plaintiff had sufficiently pled falsity, scienter, and loss causation as it related to those statements.

On April 17, 2023, the United States Supreme Court heard oral argument in a case addressing whether “tracing” a share to specific registration statement is required in order to have standing to sue under Sections 11 and 12(a)(2) of the Securities Act of 1933.  While the case arises out of a direct listing, the Court’s anticipated ruling may have a significant impact on standing issues in the context of traditional public offerings.  Slack Technologies, LLC, et al., v. Fiyyaz Pirani, No. 22-200.  Slack Technologies (the “Company”) went public through a direct listing in which, unlike in a traditional initial public offering, a company does not issue new shares and files a registration statement for the purpose of allowing existing shareholders to sell their shares directly to the public on an exchange.  Because of applicable exemptions, both registered and unregistered shares are available for public trading from the first day of a direct listing and are intermixed in the market. The Company argued that this prevented investors from showing that they had standing to sue under the Securities Act, which generally allows suits brought only by those who purchase “such security” issued pursuant to an allegedly misleading registration statement (Section 11) or by means of a misleading prospectus (Section 12(a)(2)).

On April 26, 2023, the United States Court of Appeals for the Second Circuit affirmed the dismissal of two actions brought by issuers of collateralized debt obligations (“CDOs”) against the trustee and master servicer of certain residential mortgage-backed securities (“RMBS”) that served as collateral for the CDOs.  Phoenix Light SF Ltd. v. Bank of New York Mellon, —F.4th—, 2023 WL 3082212 (2d Cir. 2023).  The Second Circuit affirmed the district courts’ holding that, even assuming plaintiffs had Article III standing, they were precluded from relitigating prudential standing because plaintiffs were previously found to lack prudential standing in a case they had brought against one of the same defendants.

On April 27, 2023, Judge Charles R. Breyer of the United States District Court for the Northern District of California granted a motion to dismiss a proposed securities class action suit against a financial technology company (the “Company”) and four executives, including its CEO and CFO, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5(b).  Huei-Ting Kang v. PayPal Holdings Inc., No. 3:21-cv-06468 (N.D. Cal. Apr. 27, 2023).  The Court dismissed the complaint with prejudice for failure to plead falsity and failure to plead a strong inference of scienter.  The Court had previously dismissed plaintiffs’ prior complaint without prejudice, in a decision covered here.

On March 31, 2023, Judge Edward J. Davila of the United States District Court for the Northern District of California granted a motion to dismiss a putative class action against a semiconductor company (the “Company”), alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. Specifically, the lawsuit alleged that the Company misled investors about its progress in creating a smaller, 7-nanometer microchip. In re Intel Corp. Sec. Litig., No. 5:20-cv-05194, 2023 WL 2767779 (N.D. Cal., Mar. 31, 2023). The Court granted the Company’s motion to dismiss, holding that plaintiffs failed to sufficiently plead falsity and scienter.

On March 29, 2023, Judge William G. Young of the United States District Court for the District of Massachusetts granted a motion to dismiss a putative securities class action alleging a pharmaceutical company (the “Company”), its former CEO, the president of its U.S. division, and its former Chief Medical Officer (“CMO”) made false and misleading statements regarding the efficacy of the Company’s new Alzheimer’s drug. Okla. Firefighters Pension and Ret. Sys. v. Biogen Inc., et al., No. 22-10200-WGY (D. Mass. Mar. 29, 2023). In granting defendants’ motion to dismiss, the Court held that plaintiffs failed to plead facts with particularity establishing that any of the challenged statements were false or misleading or that there was a strong inference of scienter.

On March 30, 2023, Judge Andrew L. Carter, Jr. of the United States District Court for the Southern District of New York granted a motion to dismiss a putative securities fraud class action brought against a fitness technology company (the “Company”) and certain of its executives. Robeco Capital Growth Funds SICAV – Robeco Global Consumer Trends v. Peloton Interactive, Inc., et al., No. 21-cv-9582 (ALC)(OTW) (S.D.N.Y. Mar. 30, 2023). Plaintiff alleged that defendants violated Section 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder, by making material misstatements and omissions about the demand for the Company’s product following the peak of the COVID-19 pandemic. The Court dismissed the amended complaint, holding that certain of defendants’ alleged statements were non-actionable under the PSLRA safe harbor, and that plaintiff had not alleged sufficient facts to demonstrate other statements were false when made.

On April 5, 2023, the United States Court of Appeals for the Third Circuit affirmed a determination of the United States District Court for the District of Delaware that plaintiffs violated Rule 11 of the Federal Rules of Civil Procedure but vacated the portion of the lower court’s order that declined to impose sanctions. Scott v. Vantage Corp., —F.4th—, 2023 WL 2780350 (3d Cir. 2023). The Third Circuit held that, for a claim governed by the Private Securities Litigation Reform Act (“PSLRA”), some form of sanctions must be imposed for a Rule 11 violation.

On March 31, 2023, Judge John P. Cronan 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 financial institution that offered certain Exchange Traded Notes (the “ETN”) linked to a natural gas price index. Gomez v. Credit Suisse AG, No. 22 Civ. 115 (JPC) (BCM), 2023 WL 2744415 (S.D.N.Y. Mar. 31, 2023).

On March 31, 2023, Judge Paul Crotty of the United States District Court for the Southern District of New York dismissed certain coordinated putative securities class actions asserting claims under the Securities Exchange Act of 1934 against two prime brokers after the collapse of a client family office affected stock prices of various publicly traded companies. Chew King Tan v. Goldman Sachs Grp. Inc., No. 21-cv-8413, slip op. (S.D.N.Y. Mar. 31, 2023). Plaintiffs alleged that defendants engaged in insider trading by using their knowledge of the family office’s financial condition to sell shares of certain companies in which the family office held concentrated interests before the price of those shares collapsed. The Court held that plaintiffs failed to establish insider trading either on a theory that defendants misappropriated material non-public information or on a tipper/tippee theory. However, the Court granted plaintiffs leave to file an amended complaint.

On March 31, 2023, Judge Ronnie Abrams of the United States District Court for the Southern District of New York dismissed a putative class action arising out of a SPAC transaction that resulted in a consignment-to-retail used car marketplace becoming publicly traded.  In re CarLotz, Inc. Sec. Litig., 2023 WL 2744064 (S.D.N.Y. Mar. 31, 2023).  Plaintiffs asserted claims under the Securities Act of 1933 and the Securities Exchange Act of 1934 against the marketplace, the SPAC entity, and certain related entities and individuals, alleging that they made misrepresentations regarding the marketplace’s business model.  Id. at *2.  The Court held that plaintiffs lacked standing to sue under either the Securities Act or Exchange Act, and accordingly dismissed the complaint while permitting plaintiffs leave to replead.

On March 14, 2023, Judge Zahid N. Quraishi of the United States District Court for the District of New Jersey dismissed a putative class action suit against a pharmaceutical company (the “Company”) and its executives alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act. Lewakowski v. Aquestive Therapeutics, Inc. et al., No. 3:21-cv-03751, 2023 WL 2496504 (D.N.J. Mar. 14, 2023). Plaintiffs alleged that defendants misled investors regarding the efficacy of a new drug and the likelihood of approval by the Food and Drug Administration. The Court dismissed the action without prejudice, holding that the complaint “cherry-pick[ed] out-of-context quotes from the Company’s disclosures” and failed to allege falsity or scienter.

On March 21, 2023, Judge Paul A. Engelmayer 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 against a Chinese internet company (the “Company”), its co-founder and chief executive officer (the “CEO”), and two other executives, alleging violations of Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 and Rule 10b-5.  Altimeo Asset Management v. Qihoo 360 Technology Co. Ltd. et al., 19 Civ. 10067, 2023 WL 2585942 (S.D.N.Y. Mar. 21, 2023).  Plaintiffs alleged that the Company engaged in a scheme to depress the price of the Company’s American Depositary Shares (“ADSs”) to enable them to pay shareholders an unfairly low price when they took the Company private as part of a merger in 2016 (the “Go-Private Merger”).  The Court held that two of the categories of alleged misstatements were actionable, while one category was not.  The Court further dismissed the claims of plaintiffs who tendered shares in connection with the Go-Private Merger (“Tenderer Shareholders”), but sustained the claims of plaintiffs who sold shares after the Go-Private Merger was announced but before the effective date (“Seller Shareholders”).  This decision follows the Court’s previous dismissal of plaintiffs’ claims, which we covered here, and the Second Circuit’s revival of those claims, which we covered here.

On March 2, 2023, the United States Court of Appeals for the Fourth Circuit affirmed the dismissal of a putative securities class action against a company that manufactures cancer drugs (the “Company”), its president and CEO, and its senior vice president and CFO, for 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, and Sections 11, 12(a), and 15 of the Securities Act of 1933 (the “Securities Act”). Employees’ Retirement System of the City of Baton v. Macrogenics, Inc., No. 21-2238 (4th Cir. Mar. 2, 2023). Plaintiffs alleged that defendants made materially misleading statements or omissions concerning a clinical trial drug, which negatively affected the Company’s stock price. The Court affirmed the district court’s order granting defendants’ motion to dismiss, finding that plaintiffs failed to sufficiently allege any actionable misrepresentations or omissions that would give rise to a duty to disclose, and that most of defendants’ alleged statements also were immunized from suit.

On March 1, 2023, Judge Jesse Furman of the United States District Court for the Southern District of New York granted a motion to dismiss a putative class action against a pharmaceutical company (the “Company”) and its executives (the “Individual Defendants”), alleging violations of Sections 10(b), 14(a), and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”), Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (“Securities Act”), and SEC Rules 10b-5 and 14a-9. In Re: Bristol-Myers Squibb Co. CVR Securities Litigation, No. 1:21-cv-08255 (S.D.N.Y. Mar. 1, 2023). Plaintiffs alleged that the Company secretly “slow rolled” the Food and Drug Administration (“FDA”) approval process for certain medications and made misrepresentations about its efforts to obtain timely FDA approval. Plaintiffs alleged that the Company did so to avoid having to pay $6.4 billion to the holders of Contingent Value Right securities (“CVRs”), which would expire and be worthless if the drugs were not approved by particular deadlines (the “CVR Deadlines”). The Court dismissed the complaint in its entirety but granted leave for plaintiffs to replead their claims under Section 10(b) and 20(a) of the Exchange Act.

On February 24, 2023, Judge Esther Salas of the United States District Court for the District of New Jersey granted a motion to dismiss a putative class action against a Beijing-based education company (the “Company”) and its CEO and CFO (the “Individual Defendants”). The lawsuit alleged that the Company misled investors about its student enrollment figures in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. Wu v. GSX Techedu Inc., No. 20-cv-04457, 2023 WL 2207422 (D.N.J. Feb. 24, 2023). Specifically, plaintiffs alleged that the Company artificially inflated its enrollment figures by creating fake student accounts. In dismissing the action, the Court discounted the import of several purported confidential witness statements, demonstrating the rigor courts apply to such allegations, and held that the complaint failed to allege facts sufficient to give rise to a strong inference of scienter.

On March 14, 2023, Judge Rossie D. Alston, Jr. of the United States District Court for the Eastern District of Virginia dismissed without prejudice a putative class action against an automobile manufacturer, its U.S. based based subsidiary, and certain of its officers, asserting claims under the Securities Exchange Act of 1934. In re Volkswagen AG Sec. Litig., 2023 WL 2505539 (E.D. Va. Mar. 14, 2023). Plaintiffs alleged that the company’s U.S. subsidiary misrepresented that the company would change its name to one suggesting an increased focus on electric vehicles, which the company later indicated had been intended as an April Fool’s joke. The Court held that plaintiffs adequately alleged falsity and scienter but failed to show that the challenged statements were sufficiently connected to the securities at issue to be actionable.

On March 13, 2023, Magistrate Judge James M. Wicks of the United States District Court for the Eastern District of New York dismissed a derivative action brought on behalf of an online flower company against certain of its beneficial owners, seeking disgorgement of profits from alleged short-swing transactions under Section 16(b) of the Securities Exchange Act of 1934. Packer ex rel. 1-800 Flowers.com, Inc. v. Raging Capital Mgmt., LLC,—F. Supp. 3d—, 2023 WL 2484442 (E.D.N.Y. 2023). The Court held that, because plaintiff failed to allege a concrete harm that the company suffered from the transactions in question, plaintiff lacked standing to pursue the claim.

On March 9, 2023, a panel of the Utah Court of Appeals affirmed a 2021 trial court decision dismissing a putative securities class action against a technology company (the “Company”), certain of its officers and directors and its underwriters for alleged violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”). Volonte v. Domo, Inc., No. 20210399-CA (Mar. 9, 2023). The unanimous decision affirmed the dismissal on the basis of a federal forum provision (“FFP”) in the Company’s bylaws; such provisions require that claims under the Securities Act of 1933 be filed in federal court as opposed to state court. Among other points, the decision emphasized the underwriters’ right to invoke the FFP and held that the matter was governed by Delaware, not Utah, law.

On February 14, 2023, Judge Charles R. Breyer of the United States District Court for the Northern District of California granted a motion to dismiss a putative securities class action alleging that a hearing aid company (the “Company”) and its officers, directors, and IPO underwriters falsely or misleadingly inflated the Company’s revenue and growth opportunities and allegedly downplayed an insurance audit, leading to a Department of Justice investigation for insurance fraud.  In re Eargo, Inc. Sec. Litig., No. 21-cv-08597 (N.D. Cal. Feb. 14, 2023).  Plaintiffs alleged violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”) against all defendants, and violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated thereunder against the Company and its officers.  The Court granted defendants’ motion to dismiss, holding that plaintiffs failed to sufficiently plead falsity and scienter.

On February 16, 2023, Judge Josephine L. Staton of the United States District Court for the Central District of California dismissed without prejudice a putative securities class action asserting claims under the Securities Exchange Act of 1934, the Securities Act of 1933, and Regulation S K against an electric automobile company, certain of its executives and directors, and underwriters in the company’s initial public offering. Crews v. Rivian Automotive, Inc., No. 2:22-cv-01524-JLS-E, slip op. (C.D. Cal. Feb. 16, 2023), ECF No. 149. Plaintiffs alleged that the company made various misrepresentations relating to the pricing and profitability of the company’s vehicles, while allegedly knowing that it would need to increase pricing to address rising costs. The Court held that plaintiffs failed to adequately allege any false statement or actionable omission.

On February 22, 2023, Judge Victor Marrero of the United States District Court for the Southern District of New York declined to dismiss a putative class action asserting claims under the Securities Act of 1933 against a blockchain technology company and its CEO.  Friel v. Dapper Labs, Inc., —F. Supp. 3d—, 2023 WL 2162747, at *1 (S.D.N.Y. 2023).  Plaintiffs alleged that the company’s offer and sale of non-fungible tokens (“NFTs”) constituted a sale of unregistered securities.  The Court held that plaintiffs adequately alleged that the NFTs in question were securities subject to SEC registration requirements.

On February 21, 2023, the United States Supreme Court formally dismissed the appeal of a case in which a settlement had been announced after certiorari was granted to review a decision by a California state court allowing plaintiffs to take discovery in an action under the Securities Act of 1933 (the “Securities Act”). Pivotal Software, Inc. v. Tran, No. 20-1541.  As noted in our prior post, the issue presented by the petition was whether the discovery-stay provision of the Private Securities Litigation Reform Act ( “PSLRA”)—which provides that “[i]n any private action arising under” the Securities Act, “all discovery and other proceedings shall be stayed during the pendency of any motion to dismiss”—applies in Securities Act cases filed in state court.

On February 2, 2023, Judge Steven P. Logan of the United States District of Arizona dismissed a putative class action alleging that manufacturer of hydrogen-electric vehicles (the “Company”), the Company’s former CEO (the “CEO”), and certain of its other senior executives (the “Individual Defendants”) misled investors about the Company’s hydrogen fuel cell technology and business prospects for its electric trucks in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  Borteanu v. Nikola Corporation et al., No. 20-cv-01797 WL 1472852 (D. Ariz. Feb. 2, 2023).   Although the Court held that plaintiff had adequately alleged the falsity of certain categories of alleged misstatements, the Court ruled that plaintiffs failed to plead a strong inference of scienter as to certain defendants and failed to plead loss causation generally.
 

​On February 1, 2023, Judge Anthony J. Trenga of the United States District Court for the Eastern District of Virginia dismissed a putative securities fraud action against a cybersecurity company (the “Company”) and several of its executives and directors alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Section 11 of the Securities Act.  Firemen’s Retirement System of St. Louis, et al. v. Telos Corp., et al., No. 1:22-cv-00135 (E.D. Va. Feb. 1, 2023).  Plaintiffs alleged that defendants misled investors about the status and prospects of key government contracts and falsely certified to having reasonable financial controls.  The court dismissed the action without prejudice, holding that plaintiffs failed to allege falsity or scienter. 
 

On February 1, 2023, Judge Paul A. Engelmayer of the United States District Court for the Southern District of New York dismissed a putative class action against a cryptocurrency exchange company, its parent, and the parent’s CEO, asserting claims under Section 12(a)(1) of the Securities Act of 1933, Section 29(b) of the Securities Exchange Act of 1934, and certain California, Florida, and New Jersey statutes.  Underwood v. Coinbase Global, Inc.,—F. Supp. 3d—, 2023 WL 1431965 (S.D.N.Y. 2023).  Plaintiffs alleged that the company sold or solicited securities, and entered into contracts to buy and sell securities, without registering as an exchange or broker-dealer.  The Court held that, even if cryptocurrencies were deemed securities, plaintiffs failed to adequately allege that the company itself sold or solicited cryptocurrency tokens to or from exchange participants, or that any contract with the company required plaintiffs to purchase or sell prohibited securities.
 

On January 18, 2023, the United States Court of Appeals for the Fifth Circuit reversed and remanded the district court’s order dismissing the putative securities class action with prejudice, holding that plaintiff sufficiently alleged that a major theme park operator (the “Company”) and two of its executives made material misstatements and omissions in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  Oklahoma Firefighter Pension and Retirement Systems v. Six Flags Entertainment Corporation, No. 21-10865, 2023 WL 228268 (5th Cir. 2023).  Largely on information from a former employee (“FE”), the complaint alleged that defendants misled investors by projecting unrealistic or impossible timelines for opening theme parks in China.  After significantly discounting the FE’s allegations, the district court dismissed the complaint with prejudice.  The Fifth Circuit reversed, holding that the complaint adequately alleged the FE’s personal knowledge of the relevant topics and that the FE’s allegations should be discounted “only minimally.”

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

On January 23, 2023, the United States Supreme Court dismissed the writ of certiorari as improvidently granted in a case that asked the Court to consider how to determine the application of attorney-client privilege to so-called “dual-purpose” communications, i.e., communications that reflect both legal and non-legal advice.  In re Grand Jury, No. 21-1397, slip op., 589 U.S. ___ (2023).  As we covered in a previous post, the Court granted a petition for certiorari to review a Ninth Circuit decision that held that the “primary purpose” should apply, which the Ninth Circuit stated requires the court to look to whether the primary purpose of the communication was to give or receive legal advice.  The Ninth Circuit had expressly left open whether the test should focus on determining whether “a primary purpose” or “the primary purpose” is seeking or providing legal advice.  In re Grand Jury, 23 F.4th 1088, 1091-92, 1094 (9th Cir. 2022).

On January 6, 2023, Judge John L. Sinatra, Jr. of the United States District Court for the Western District of New York denied a motion to dismiss claims against a cannabis and tobacco engineering company (the “Company”) alleging that the Company failed to disclose an investigation by the United States Securities and Exchange Commission (“SEC”) in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Noto v. 22nd Century Group Inc., No. 1:19-cv-01285, 2023 WL 122305 (W.D.N.Y. Jan. 6, 2023). Following a January 2021 dismissal of the complaint, and the Second Circuit’s reversal of that decision, the Company again moved to dismiss plaintiffs’ claims. The Court denied the Company’s motion and permitted plaintiffs’ Section 10(b) and 20(a) claims to proceed.

On January 11, 2023, the United States District Court for the Northern District of California dismissed a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(b) against an electric vehicle company and its CEO.  In re CCIV/Lucid Motors Sec. Litig., No. 4:21-cv-9323, slip op. (N.D. Cal. Jan. 11, 2023), ECF No. 151.  Plaintiffs, who allegedly purchased shares in a Special Purpose Acquisition Company (“SPAC”) that later merged with the electric vehicle company (with the electric vehicle company becoming the surviving entity of the merger), alleged that, prior to the merger, the company had made misrepresentations and omissions about its value.  Plaintiffs claimed to have invested in the SPAC after the press had announced the SPAC was “in talks” with the electric vehicle company, but before the merger was officially announced by the SPAC and the company themselves.  Following post-merger statements that allegedly contradicted the company’s pre-merger statements, plaintiffs sued, claiming that defendants’ alleged misrepresentations regarding the electric vehicle company’s value had caused them to pay an inflated price for the SPAC’s stock.  The Court held that plaintiffs had standing to sue the electric vehicle company, but dismissed their claims for failure to identify any material misrepresentations because the challenged statements were made before the SPAC and the electric vehicle company had announced or confirmed that they were in merger discussions.

On January 10, 2023, Judge Paul Engelmayer 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 an online sports gaming and betting company and certain of its executives.  In re DraftKings Inc. Sec. Litig., 2023 WL 145591 (S.D.N.Y. Jan. 10, 2023).  Plaintiffs alleged that the company made misrepresentations and omissions regarding whether a target company it acquired had gambling operations in jurisdictions where gambling was illegal.  The Court held that plaintiffs failed to adequately allege actionable misrepresentations or scienter.

On January 9, 2023, the United States Supreme Court heard oral argument in In re Grand Jury, No. 21-1397, a case with potentially far-reaching implications concerning the application of the attorney-client privilege to so-called “dual-purpose” communications, i.e., communications that reflect both legal and non-legal advice.

On December 21, 2022, the United States Court of Appeals for the Ninth Circuit affirmed in part and denied in part the dismissal of a purported class action suit against a real estate property management company (the “Company”) alleging the Company made material misstatements or omissions in social media posts, in violation Sections 12(a)(2) and 15 of the Securities Act of 1933 (the “Securities Act”).  Pino v. Cardone Capital, LLC, No. 21-55564, 2022 WL 17826876 (9th Cir. Dec. 21, 2022).  Plaintiff alleged that the Company misrepresented the returns investors could make by investing in the Company’s investment funds in videos posted on social media sites.  The district court found that the Company was not a “statutory seller” under Section 12 and dismissed the suit in its entirety.  In a unanimous opinion, the Ninth Circuit disagreed, finding that the Company did qualify as a statutory seller.  In a memorandum disposition filed on the same day, the Ninth Circuit held that some of the alleged misstatements were not actionable under the Securities Act and affirmed dismissal of claims based on those statements.

On December 13, 2022, the United States Supreme Court granted a petition for certiorari to review a split decision by the Ninth Circuit holding that plaintiff-investors had standing under the Securities Act of 1933 (the “Securities Act”) to sue a workplace communication software company (the “Company”) based on shares purchased through a direct listing.  Slack Technologies, LLC, et al., v Fiyyaz Pirani, No. 22-200 (U.S. Dec. 13, 2022).  The issue before the Supreme Court is whether Sections 11 and 12(a)(2) of the Securities Act require plaintiffs to plead and prove that they bought shares that were registered under the registration statement they claim was misleading.

On December 12, 2022, Judge Colleen McMahon of the United States District Court for the Southern District of New York granted summary judgment to a major pharmaceutical company (the “Company”) and dismissed class action claims that the Company failed to disclose a “serious and known link” between the Company’s breast implant products and a rare form of cancer, breast implant-associated anaplastic large cell lymphoma (BIA-ALCL), in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. In re Allergan PLC Securities Litigation, 2022 WL 17584155 (S.D.N.Y. 2022).  The Court held that the challenged statements were “literally true and not misleading” and that plaintiff failed to prove after extensive discovery that either scientific studies or the regulatory community had determined that the Company’s implants were in fact more closely associated with BIA-ALCL than other types of implants. Because discovery did not uncover any evidence of falsity and plaintiff failed to raise a genuine issue of fact with respect to the materiality of the alleged misrepresentations or as to loss causation, the Court granted the Company’s motion for summary judgment.

On December 7, 2022, the United States District Court for the Western District of Washington largely denied a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against an online real estate listing company and certain of its executives.  Jaeger v. Zillow Group, Inc., 2022 WL 17486297 (W.D. Wash. Dec. 7, 2022). Plaintiff alleged that the company made misrepresentations in connection with a real estate purchasing program.  While the Court dismissed one allegation as a non-actionable forward-looking statement, the Court held that the remainder of plaintiff’s allegations stated a claim.

On December 5, 2022, Judge Denise Cote 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 an alcoholic beverage manufacturer and certain of its executives.  Siegel v. Boston Beer Co., Inc., 2022 WL 17417111 (S.D.N.Y. Dec. 5, 2022). Plaintiff alleged that the company made misleading statements related to the performance of the company’s products in the hard seltzer market as the pandemic subsided and consumers returned to bars and restaurants. The Court assessed three categories of alleged misstatements and held that none was actionable.

 
On November 22, 2022, the United States Court of Appeals for the Fourth Circuit affirmed the dismissal of a putative class action against an online education platform (the “Company”) under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5. Boykin v. K12, Inc., No. 21-2351, 2022 WL 17097453 (4th Cir. 2022). Plaintiffs alleged that the Company artificially inflated the cost of its shares by misrepresenting the state of its business during the COVID-19 pandemic. The district court found that plaintiffs failed to plead falsity and scienter and granted the Company’s motion to dismiss with prejudice. The Fourth Circuit affirmed, holding that plaintiffs failed to allege actionable misrepresentations or facts giving rise to a strong inference of scienter.

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

On October 25, 2022, Judge Maxine M. Chesney of the United States District Court for the Northern District of California granted a motion to dismiss a putative class action against an enterprise data cloud platform company (the “Company”). In re Cloudera, Inc. Securities Litigation, No. 19-CV-03221-MMC, 2022 WL 14813896 (N.D. Cal. Oct. 25, 2022). Plaintiffs alleged that the Company misled investors in its characterization of the Company’s platform in violation of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5. The Court, having dismissed an earlier complaint, dismissed the claims without further leave to amend, finding that the Company’s statements were not false or misleading.

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

On October 18, 2022, the United States Court of Appeals for the Second Circuit affirmed the dismissal by the United States District Court for the Southern District of New York of a putative class action against more than twenty banks and certain brokers alleging a conspiracy to manipulate Yen-LIBOR (“LIBOR”) and Euroyen TIBOR (“TIBOR”) rates.  Laydon v. Coöperatieve Rabobank U.A., et al., No. 20-3626 (2d Cir. Oct. 18, 2022).  Plaintiff brought claims under the Commodity Exchange Act (“CEA”), 7 U.S.C. § 1 et seq., and the Sherman Antitrust Act, 15 U.S.C. § 1 et seq., and sought leave to assert claims under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1962, 1964(c).  The Court affirmed the district court’s order dismissing the CEA and antitrust claims and denying leave to add the RICO claims, holding that the alleged conduct was impermissibly extraterritorial under the CEA, plaintiff lacked antitrust standing because he would not be an efficient enforcer of the antitrust laws, and plaintiff failed to allege proximate causation for a RICO claim.

On September 30, 2022, Judge Margo K. Brodie of the Unites States District Court for the Eastern District of New York granted in part and denied in part a motion to dismiss a securities fraud class action against a bedding company (the “Company”) alleging that the Company misled investors about the Company’s strength and potential for growth in violation of Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  Lematta v. Casper Sleep, Inc., et al., No. 20-CV-2744 (MKB), 2022 WL 4637795 (E.D.N.Y. Sept. 30, 2022).  The Court held that (i) alleged misstatements about optimizing pricing and promotional strategies in offering materials for the Company’s initial public offering (“IPO”) were not misleading and (ii) alleged misstatements about anticipated growth were puffery or forward-looking statements accompanied by sufficient cautionary language.  The Court otherwise denied the motion to dismiss.

On September 30, 2022, Judge Paul A. Engelmayer 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 Act of 1933 against an e-cigarette manufacturer, certain of its officers and directors, and the underwriters of the company’s initial public offering in the United States.  Garnett v. RLX Tech., Inc., No. 21-cv-5125, 2022 WL 4632323 (S.D.N.Y. Sept. 30, 2022).  Plaintiffs alleged that the China-based company failed to disclose the likelihood of increased e-cigarette regulations in China that would harm the company’s financial prospects.  The Court held that plaintiffs failed to adequately allege any actionable misrepresentation.

On September 29, 2022, Chief Judge David C. Godbey of the United States District Court for the Northern District of Texas dismissed a putative class action asserting claims under the Securities Exchange Act of 1934 against an oil company and certain of its officers.  Yoshikawa v. Exxon Mobil Corp., No. 3:21-CV-00194-N, 2022 WL 4677621 (N.D. Tex. Sept. 29, 2022).  Plaintiffs alleged that the company made misrepresentations in connection with the company’s purchase of certain oil and gas assets and its expected production from those assets.  The Court held that plaintiffs failed to adequately allege scienter but granted plaintiffs’ request for leave to amend with respect to certain alleged misstatements as to which the Court held plaintiffs had alleged a plausible theory of falsity and materiality.

On September 30, 2022, a panel of the United States Court of Appeals for the Second Circuit affirmed a decision of the United States District Court for the Southern District of New York dismissing a putative securities fraud class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated thereunder against a flavoring and fragrance products company (the “Company”) and several of its executives.  Menora Mivtachim Ins. Ltd., et al. v. Frutarom Indus. Ltd., et al., No 21-1076 (2d Cir. Sept. 30, 2022).  Plaintiffs alleged that, from 2002 to 2018, the Company engaged in a “long-running bribery scheme,” and that defendants made materially misleading statements about the Company’s compliance with anti-bribery laws and its business growth in public documents filed when the Company was acquired in 2018.  The district court granted the motion to dismiss as against the Company and its officers, holding that plaintiffs failed to sufficiently allege statutory standing to pursue their securities fraud claims.  The Second Circuit affirmed.

On September 12, 2022, Judge J. Paul Oetken of the United States District Court for the Southern District of New York dismissed with prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a pharmaceutical company and certain of its executives.  In re AstraZeneca plc Sec. Litig., 2022 WL 4133258 (S.D.N.Y. Sept. 12, 2022).  Plaintiffs alleged that the company made misstatements and omissions with respect to clinical trials of its COVID-19 vaccine.  The Court held that plaintiffs failed to identify any misleading statements and failed to adequately allege scienter.

On August 23, 2022, Judge Gerald Austin McHugh, Jr. of the United States District Court for the Eastern District of Pennsylvania granted class certification in a securities fraud class action against an energy company and its subsidiary (the “Company”) and its executives under the Securities Exchange Act of 1934.  The suit alleged that defendants made misstatements and omissions regarding the status of the construction of three natural gas pipelines and that the Company’s stock price dropped following certain corrective disclosures.  The Court certified the class after holding that plaintiffs met the requirements of Rule 23(a) as well as the predominance and superiority requirements of Rule 23(b)(3).

On August 23, 2022, the United States Court of Appeals for the Tenth Circuit unanimously reversed the dismissal of a putative securities class action against an online education company (the “Company”), alleging violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), SEC Rule 10b-5, Section 20A of the Exchange Act, and Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”).  Plaintiffs alleged that the Company made false and misleading statements about the size and productivity of the Company’s sales force.  The district court dismissed the Exchange Act claims because plaintiffs failed to plead a strong inference of scienter and dismissed both the Exchange Act and the Securities Act claims for failure to plead a violation of Item 303 of SEC Regulation S-K.  On appeal, the Tenth Circuit reversed and remanded, holding that (i) the Exchange Act allegations “support[ed] an inference of scienter at least as compelling as any nonculpable inference” and (ii) the district court relied on “erroneous reasoning” to dismiss the Exchange Act and Securities Act claims based on the alleged violation of Item 303.

On August 18, 2022, a unanimous panel of the United States Court of Appeals for the First Circuit affirmed a decision by the United States District Court for the District of Rhode Island granting a motion to dismiss a putative securities fraud class action asserting claims under Section 10(b) of the Securities Exchange Act (the “Exchange Act”), Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange against a health care and pharmaceutical company (the “Company”) and two of its senior executives. City of Miami Fire Fighters’ and Police Officers’ Retirement Trust, et. al. v. CVS Health Corporation, No. 21-1479 (1st Cir. Aug 18, 2022). Plaintiffs alleged that, following the Company’s 2015 acquisition of another health care company (the “Merger”), the Company’s executives issued false statements and misleading omissions about various post-Merger issues. In affirming dismissal of the amended complaint, the First Circuit held that the district court’s assessment was “right on the mark” and that “[p]laintiffs failed to allege that defendants made statements of fact that were false when made or misleadingly incomplete in light of the contemporaneous circumstances.”

On August 17, 2022, Judge Steven D. Grimberg of the United States District Court for the Northern District of Georgia granted a motion to dismiss a putative class action alleging an investment bank (the “Company”), certain of its advisors (the “Advisor Defendants”), and certain of its external accountants (the “Accounting Defendants”) aided and abetted one of the Company’s former advisors (the “Individual Defendant”) in facilitating an alleged decade-long Ponzi scheme.  6694 Dawson Blvd, LLC v. Oppenheimer & Co., Inc., et al., 1:21-cv-03625.  (N.D. Geo. Aug. 17, 2022).  Plaintiffs alleged that defendants misrepresented or concealed material facts that, had plaintiffs known, would have caused them not to purchase allegedly “bogus” securities from the Individual Defendant.

On August 18, 2022, a unanimous panel of the United States Court of Appeals for the First Circuit affirmed a decision by the United States District Court for the District of Rhode Island granting a motion to dismiss a putative securities fraud class action asserting claims under Section 10(b) of the Securities Exchange Act (the “Exchange Act”), Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange against a health care and pharmaceutical company (the “Company”) and two of its senior executives.  City of Miami Fire Fighters’ and Police Officers’ Retirement Trust, et. al. v. CVS Health Corporation, No. 21-1479 (1st Cir. Aug 18, 2022).  Plaintiffs alleged that, following the Company’s 2015 acquisition of another health care company (the “Merger”), the Company’s executives issued false statements and misleading omissions about various post-Merger issues.  In affirming dismissal of the amended complaint, the First Circuit held that the district court’s assessment was “right on the mark” and that “[p]laintiffs failed to allege that defendants made statements of fact that were false when made or misleadingly incomplete in light of the contemporaneous circumstances.”

On August 8, 2022, Judge Charles R. Breyer of the United States District Court for the Northern District of California granted a motion to dismiss a proposed securities class action suit against a financial technology company (the “Company”) and four of its executives alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  Huei-Ting Kang v. PayPal Holdings Inc., No. 3:21-cv-06468 (N.D. Cal. Aug. 8, 2022).  Plaintiffs alleged that the Company misled investors about its compliance with (1) a Consumer Financial Protection Bureau (“CFPB”) Consent Order (the “Consent Order”) prohibiting deceptive marketing of the company’s revolving line of credit; and (2) the Federal Reserve Board’s Regulation II, which caps debit card interchange fees.  The Court’s dismissal of the complaint (with leave to amend) is a reminder of the challenges plaintiffs face when trying to assert securities claims in the wake of company announcements of regulatory investigations.

On August 4, 2022, the United States District Court for the Middle District of Florida dismissed without prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a recycling services company, certain of its officers and directors, and the former CEO of a special purpose acquisition company (SPAC) that acquired the company.  Theodore v. PureCycle Tech. Inc., No. 6:21-cv-809-PGB-GJK, slip op. (M.D. Fla. Aug. 4, 2022), ECF No. 112.  Plaintiffs alleged that the company made misrepresentations with respect to its management team’s experience, the value of its patented recycling process, and its future production and financial projections, which were allegedly revealed in a short-seller report.  The Court held that the complaint on its face failed to state precisely which statements or omissions were at issue and where they were made, that plaintiffs adequately alleged certain misrepresentations but not others, and that plaintiffs adequately alleged loss causation but not scienter.

On August 4, 2022, the United States District Court for the District of New Jersey dismissed a putative securities class action asserting claims under the Securities Exchange Act of 1934 against a pharmaceutical company and certain of its executives.  Paxton v. Provention Bio, Inc., No. 3:21-cv-11613, slip op. (D.N.J. Aug. 4, 2022), ECF No. 57.  Plaintiffs alleged the company made misrepresentations in connection with the company’s candidate drug intended to delay or prevent the progression of Type One Diabetes.  The Court held that plaintiffs failed to adequately allege actionable misrepresentations, scienter, or loss causation.

On August 1, 2022, the United States Court of Appeals for the Eleventh Circuit affirmed the dismissal of a putative securities class action asserting claims under the Securities Act of 1933 against a medical technology company, certain of its officers and directors, and the underwriters of the company’s stock offerings.  Einhorn v. Axogen, Inc., —F.4th—, 2022 WL 3022297 (11th Cir. 2022).  The appeal solely concerned plaintiffs’ claim that the company had overstated the frequency of peripheral nerve injuries and repairs.  The Court held that these statements were forward-looking statements that were not actionable under the safe-harbor provision of the Securities Act.

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

On July 27, 2022, a unanimous panel of the United States Court of Appeals for the Seventh Circuit affirmed a decision of the United States District Court for the Northern District of Illinois dismissing a putative securities fraud class action asserting a claim under Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated thereunder, as well as claims under the Commodities Exchange Act, against an options and futures exchange company (the “Company”).  Brian Barry, et al. v. CBOE Global Markets, Inc., et al., No. 20-1843 (7th Cir. July 27, 2022).  Plaintiffs alleged that the Company violated the Exchange Act by trading options and futures based on an index it created (“VIX”) that was designed to estimate the near-term volatility in the S&P 500 Index, but allegedly was subject to market manipulation by unknown traders (the “Doe Defendants”) soon after its creation.  The Seventh Circuit affirmed the dismissal of the claims, holding that plaintiffs failed to plead scienter.

On July 15, 2022, Judge Edward M. Chen of the United States District Court for the Northern District of California largely denied a motion to dismiss a securities fraud class action against a biopharmaceutical company (the “Company”) and certain of its officers alleging violations of Sections 10(b) of the Securities Exchange Act of 1934.  In re FibroGen, Inc. Securities Litigation, No. 21-cv-02623-EMC (N.D. Cal. July 15, 2022).  Plaintiffs alleged that the Company made 96 false and misleading statements concerning the “safety and efficacy data of its flagship drug.”  Although the Court held that a handful of the misstatements were not actionable for failure to adequately allege falsity, the Court otherwise denied the motion to dismiss.

On July 15, 2022, the United States District Court for the Central District of California granted a motion to dismiss a putative class action against a children’s cartoon company (the “Company”) and certain of its officers alleging violations of Section 10(b) of the Securities Exchange Act of 1934.  In Re Genius Brands Int’l, Inc. Sec. Litig., CV 20-7457 DSF (RAOx) (C.D. Cal. July 15, 2022).  In a second amended complaint, plaintiffs alleged that the Company made materially false and misleading statements and omissions about the Company’s engagement of a stock promotion company, an impending acquisition by Disney or Netflix, and its economic resilience in the face of COVID-19, among other topics.  The Court dismissed the claims with prejudice for failure to adequately plead falsity or materiality, and further held that the complaint of 289 paragraphs and 84 pages violated Rule 8 of the Federal Rules of Civil Procedure that requires a “short and plain statement” of the claims.

On July 13, 2022, the United States District Court for the Central District of California largely denied a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a special purpose acquisition company (SPAC), a space industry startup that was the SPAC’s target, certain executives of both companies, and an investor that served as sponsor of the SPAC.  In re Stable Road Acquisition Sec. Litig., No. 2:21-cv-05744, slip op. (C.D. Cal. July 13, 2022), ECF No. 154.  Plaintiff alleged that the target company made misrepresentations regarding the viability of its technology and the immigration and national security status of its CEO, which the SPAC allegedly repeated without conducting adequate due diligence.  The Court held that plaintiff’s allegations were largely sufficient but that plaintiff failed to adequately allege scienter or control person liability with respect to certain executives.

On July 5, 2022, Chief Judge Richard Seeborg of the Northern District of California granted motions to dismiss a putative securities class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), Rule 10b-5 thereunder, Section 20(a) of the Exchange Act, and Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (“Securities Act”), against a mobile gaming technology company (the “Company”), certain of its officers and directors, and its underwriters.  Jedrzejczyk, et al. v. Skillz Inc., et al., No. 21-cv-03450-RS (N.D. Cal. July 5, 2022).  Plaintiffs alleged that defendants made material misstatements and omissions regarding the Company’s financial condition, technical capabilities, and business prospects.  The Court granted defendants’ motions to dismiss, holding that plaintiffs failed to adequately plead falsity, scienter, or loss causation as to the Exchange Act claims, and that plaintiffs had not established standing or adequately pled material untrue statements or omissions as to the Securities Act claims.

On July 7, 2022, a panel of the United States Court of Appeals for the Ninth Circuit affirmed the district court’s dismissal of a putative securities fraud class action against a medical device manufacturer company (the “Company”) and certain of its executives.  Macomb County Employees’ Retirement System et al. v. Align Technology Inc. et al., No. 21-15823 (9th Cir. July 7, 2022).  Plaintiff alleged that defendants violated Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, by misrepresenting the Company’s prospects about its future success in China.  The Court affirmed the district court’s order granting defendants’ motion to dismiss, holding that six of the challenged statements were non-actionable “puffery,” and the remaining six statements did not misrepresent the Company’s growth in China.

On June 28, 2022, Judge Kevin McNulty of the United States District Court for the District of New Jersey granted a motion to dismiss a putative class action against a retail clothing brand (the “Company”) and two of its executives (“Individual Defendants”) alleging violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  In re Ascena Retail Grp., Inc. Sec. Litig., No. CV1913529KMJBC, 2022 WL 2314890 (D.N.J. June 28, 2022).  Plaintiffs alleged that the Company knowingly or recklessly overstated the value and business prospects of the Company and its subsidiaries in public statements and SEC filings.  The Court dismissed plaintiffs’ complaint for failure to plead an actionable misrepresentation or allegations sufficient to support a strong inference of scienter.

On June 22, 2022, the United States Court of Appeals for the Second Circuit affirmed the dismissal of claims seeking recovery on defaulted bonds issued by the Republic of Argentina.  Bainbridge Fund Ltd. v. Republic of Argentina, —F.4th—, 2022 WL 2231401 (2d Cir. 2022).  Plaintiff held bonds issued by Argentina which went into default in 2001, but did not sue until 2016.  The Court held that plaintiff’s claims were time-barred under New York’s six-year statute of limitations for breach-of-contract claims.

On June 9, 2022, Judge David O. Carter of the United States District Court for the Central District of California granted a motion to dismiss a putative class action lawsuit alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act (the “Exchange Act”) and Rule 10b-5 thereunder, and Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”) against a healthcare company (the “Company”), its directors, and the underwriters of the Company’s initial public offering.  R. Brian Terenzini v. GoodRx Holdings, Inc. et al., No. 2:20-cv-11444, (C.D. Cal. June 9, 2022).  Plaintiffs alleged in their amended complaint that at the time of the Company’s IPO it failed to disclose in its Registration Statement and subsequent investor communications the significant risk of competition from a large online retailer.  The Court held that—as with the original complaint—plaintiffs failed to allege actionable misstatements or omissions as well as scienter and granted defendants’ motion to dismiss with prejudice.
 

On June 7, 2022, Judge Waverly D. Crenshaw, Jr. of the United States District Court for the Middle District of Tennessee granted a motion for class certification in a putative class action against a healthcare company (the “Company”) and its executives, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”).  Robert Strougo v. Tivity Health Inc. et al., No. 3:20-cv-00165 (M.D. Tenn. June 7, 2022).  Plaintiff alleged that the Company misled investors during and after the $1.3 billion acquisition of a well-known diet and nutrition company that closed in the second quarter of 2019 by announcing that the new division created by the merger (the “Nutrition Segment”) was “on track” even though it performed poorly from the time of the acquisition and had significant revenue problems.  The Court granted class certification.

On May 31, 2022, Judge Beth Labson Freeman of the Northern District of California dismissed without prejudice a putative class action asserting claims under the Securities Exchange Act against a synthetic biology company and certain of its executives.  Joseph v. Precigen, Inc., No. 20-cv-06936-BLF (N.D. Cal. May 31, 2022).  Plaintiff alleged that the company misrepresented the efficiency and economic viability of its methane conversion program.  The Court held that plaintiff failed to adequately allege scienter and failed to allege falsity with respect to certain alleged misrepresentations; however, the Court granted leave to replead.

On May 31, 2022, the United States Court of Appeals for the Eleventh Circuit affirmed the dismissal of a putative class action asserting claims under Georgia state law for breach of fiduciary duty against a brokerage firm and its parent company.  Cochran v. Penn Mut. Life Ins., No. 20-13477 (11th Cir. May 31, 2022).  Plaintiff alleged that the brokerage firm breached a fiduciary duty when it advised plaintiff to use funds in a retirement account to invest in a variable annuity, a product that allegedly resulted in higher fees for the broker and no benefit to plaintiff because his retirement account was already tax-advantaged.  The district court dismissed the class action allegations and the Eleventh Circuit affirmed, holding that the Securities Litigation Uniform Standards Act (“SLUSA”) precludes bringing such claims as a class action.

On May 20, 2022, the United States Court of Appeals for the First Circuit affirmed the district court’s dismissal of claims under Section 10(b) of the Securities Exchange Act (the “Exchange Act”) and Rule 10b-5 thereunder against a bank and its affiliates (the “Bank”).  Ponsa-Rabell v. Santander Sec. LLC, et al., No. 20-01857 (1st Cir. May 20, 2022).  Plaintiffs alleged the Bank devised a scheme to defraud investors into purchasing Puerto Rican government bonds by omitting material information about the state of the market and about its own alleged program to rid itself of those securities.  The appeal did not pertain to the district court’s dismissal of claims under Section 17(a) of the 1933 Securities Act or Plaintiffs’ claims brought under Puerto Rican law for which the district court declined to exercise supplemental jurisdiction after dismissing plaintiffs’ securities claims.

On May 24, 2022, the United States Court of Appeals for the Second Circuit affirmed and vacated in part the district court’s dismissal of claims under Sections 10(b) and 20(a) of the Securities Exchange Act (the “Exchange Act”) and Rule 10b-5 thereunder against a company that genetically engineers tobacco and cannabis products (the “Company”) and two of its former officers.  Noto, et al. v. 22nd Century Group Inc. et al., No. 21-347 (2d Cir. May 24, 2022).  Plaintiffs alleged the Company engaged in an illegal stock promotion scheme by paying authors to write promotional articles about the Company without revealing that the Company paid for the articles, and further failed to disclose an SEC investigation into the Company’s alleged financial control weaknesses.  The Court affirmed the district court’s order granting defendant’s motion to dismiss in part, holding that plaintiffs did not adequately plead a claim that the Company violated the Exchange Act by failing to disclose that it paid for the articles, but vacated the district court’s dismissal of claims related to the SEC investigation and remanded for further proceedings.

On May 10, 2022, Judge Edward Chen of the United States District Court for the District of Northern California unsealed an April 1, 2022 order granting in part a motion for summary judgment in a securities class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) against a designer and manufacturer of electric cars (the “Company”), its co-founder and CEO (the “Individual Defendant”), and its directors.  In re Tesla, Inc. Sec. Litig., No. 18-CV-04865-EMC, 2022 WL 1497559 (N.D. Cal. Apr. 1, 2022).  Plaintiff claims that the Individual Defendant inflated the Company’s stock price by posting false and misleading statements on Twitter regarding a potential take-private deal.  The case proceeded to summary judgment following the Court’s prior denial of the Company’s motion to dismiss in April 2020, which we covered here.  Nearly two years later, the Court granted plaintiff’s motion for summary judgment as to the Individual Defendant’s statements about securing funding and investor support for the potential take-private deal because he was aware at the time of the statements that the take-private deal remained subject to a number of contingencies.

On May 19, 2022, the United States Court of Appeals for the Ninth Circuit affirmed a district court’s dismissal of a putative class action against a pharmaceutical company (the “Company”) asserting claims under Section 10(b) of the Securities Exchange Act of 1934.  In re Nektar Therapeutics Inc. Sec. Litig., No. 21-15170 (9th Cir. May 19, 2022).  Plaintiffs alleged that the Company misled investors about the results of its preliminary trial of the Company’s flagship drug when it presented the information without disclosing that outlier data was included in the average.  In December 2020, the Northern District of California dismissed the complaint for failure to plead falsity, scienter, or loss causation, which we covered here.  The Ninth Circuit affirmed the dismissal, holding that plaintiffs failed to sufficiently explain how the inclusion of the outlier data misled investors, or how the announcement of subsequent trial results caused a loss.

On May 4, 2022, Judge Victor Marrero of the United States District Court for the Southern District of New York denied a motion to dismiss a putative class action alleging, among other things, violations of Sections 10(b) and 20(a) of the Securities Exchange Act (the “Exchange Act”) and Rule 10b-5 thereunder against an investment company (the “Company”), its related entities, and its president and co-founder.  Michael Tecku et al. v. YieldStreet Inc. et al., No. 1:20-cv-07327 (S.D.N.Y May 4, 2022).  Plaintiffs alleged that the Company “misrepresented material facts about the stability and attractiveness of their investment products in its offering documents” by making misleading statements or omissions in private placement memoranda (“PPMs”) and series notes supplements (“SNSs”).  The Court held that, accepting plaintiffs’ allegations as true, plaintiffs sufficiently alleged securities fraud violations for certain alleged misstatements and omissions.

On April 28, 2022, the First Appellate District Court of Appeals for the State of California affirmed the dismissal of putative securities class action against a hair transplant technology company (the “Company”) alleging violations of the Securities Act of 1933 (the “1933 Act”).  Wong v. Restoration Robotics, Inc., A161489 (Cal. Ct. App. Apr. 28, 2022).  Plaintiff initiated the action in California state court, alleging that the offering documents for the Company’s 2017 initial public offering (“IPO”) contained materially false and misleading statements in violation of the 1933 Act.  The trial court dismissed the complaint on the basis of a federal forum provision (“FFP”) in the Company’s certificate of incorporation.  The Court affirmed, holding that the FFP was enforceable and that the trial court would only have jurisdiction if the Company consented to a different forum, which it had not.

On April 21, 2022 the United States Court of Appeals for the Fourth Circuit unanimously affirmed a district Court’s dismissal of a putative class action against a major hotel chain (the “Company”) for violations of Section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5.  In re Marriott Int’l, Inc., No. 21-1802 (4th Cir. Apr. 21, 2022).  Plaintiff alleged that the Company failed to disclose data vulnerabilities of a rival hotel company that it acquired in 2016, which rendered the Company’s subsequent public statements regarding its cybersecurity systems and the importance of protecting customer data false or misleading.  Agreeing with the district court that none of the Company’s statements were false or misleading when made, the Fourth Circuit affirmed the district court’s dismissal.

On April 20, 2022, Justice Andrew Borrok, a justice of the New York Supreme Court, Commercial Division, dismissed a putative class action against an identity management platform (the “Company”), certain of its officers and directors, and its underwriters for violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (“Securities Act”).  Ret. Bd. of Allegheny Cty. v. Ping Identity Holding Corp., 74 Misc. 3d 1232(A) (N.Y. Sup. Ct. 2022).  Plaintiffs alleged that the Company made false and misleading statements and omissions with respect to alleged sales slowdown prior to the COVID-19 pandemic.  Justice Borrok dismissed the complaint for failure to allege falsity.  As discussed in a prior post, in December 2021, the Administrative Judge for the civil branch of the New York Supreme Court, New York County, issued an administrative order that required that all federal Securities Act cases currently pending or which may be commenced in the future in New York County be assigned to Justice Borrok. This is the first Securities Act case to be dismissed on the merits by Justice Borrok since the administrative order took effect.

On April 25, 2022, U.S. District Judge Jesse M. Furman dismissed a putative securities class action alleging that a fintech company (the “Company”) misrepresented its internal control weaknesses and financial results in its prospectus and registration statement (collectively, the “Offering Materials”) in connection with its 2018 initial public offering (the “IPO”) of ADSs in violation of Sections 11 and 15 of the Securities Act of 1933.  Yaroni v. Pintec Technology Holdings Limited et al., No. 20-cv-08062 (S.D.N.Y. Apr. 25, 2022).  The Court held that the complaint failed to allege that defendants made misstatements and also that the claims based on certain statements were time-barred.  The Court dismissed the action with prejudice because “the problems with [p]laintiffs’ claims are substantive.”

On April 18, 2022, the United States District Court for the Central District of California dismissed without prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a computer game development company and certain of its executives.  Cheng v. Activision Blizzard, Inc., No. 21-cv-6240, slip op. (C.D. Cal. Apr. 18, 2022), ECF No. 75.  Plaintiffs alleged the company made statements that were misleading because they failed to disclose certain government investigations and the prevalence of sexual harassment and gender-based discrimination at the company.  The Court held that plaintiffs failed to identify any actionable misrepresentations or to adequately raise an inference of scienter but granted plaintiffs leave to replead.

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

On March 25, 2022, Judge Mary Kay Vyskocil of the Southern District of New York granted in part and denied in part a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a telecommunications company and certain of its executives.  Solomon v. Sprint Corp., 1:19-cv-05272 (MKV) (S.D.N.Y. Mar. 25, 2022).  Plaintiffs primarily alleged that the company made misrepresentations regarding its reporting of new phone subscriptions and its participation in a government-subsidized discounted phone program.  The Court held that plaintiffs adequately alleged misrepresentations and scienter with respect to statements regarding new subscriptions but held that plaintiffs failed to adequately allege scienter with respect to statements regarding the discounted phone program and concluded that certain other challenged statements were mere puffery.

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

On March 25, 2022, the United States District Court for the Eastern District of Pennsylvania largely denied a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a pharmaceutical company and certain of its executives.  Halman Aldubi Provident & Pension Funds Ltd. v. Teva Pharm. Indus. Ltd., No. 20-cv-4660-KSM (E.D. Pa. Mar. 25, 2022).  Plaintiff alleged that the company made misrepresentations with respect to the reasons one of its drugs was commercially successful.  The Court held that except for allegations against the company’s CFO, plaintiff adequately alleged misrepresentations, scienter, and loss causation.

On March 30, 2022, the United States District Court for the Northern District of Illinois dismissed, without prejudice, a putative class action asserting claims under the Securities Exchange Act of 1934 against a cosmetics retailer and certain of its executives. Chandler v. Ulta Beauty, Inc., No. 18-CV-1577, 2022 WL 952441, at *1 (N.D. Ill. Mar. 30, 2022).  Plaintiffs alleged that the company made various statements that were misleading because they failed to disclose the company’s alleged practice of reselling used returned products.  The Court held that plaintiffs failed to identify any actionable misrepresentations and failed to adequately allege scienter, but granted plaintiffs leave to replead.

On March 21, 2022, Judge Lewis J. Liman of the Southern District of New York granted a motion to dismiss a claim under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder, as well as Section 20(a) of the Exchange Act against a pharmaceutical company (the “Company”) and certain of its executives.  Rice v. Intercept Pharmaceuticals, Inc., No. 1:21-cv-00036 (S.D.N.Y. Mar. 21, 2022).  Plaintiffs alleged that defendants omitted material information concerning the safety of the Company’s liver disease drug that resulted in a stock drop once alleged corrective disclosures were made.  The Court granted defendants’ motion to dismiss plaintiffs’ first amended complaint (the “FAC”), holding that plaintiffs failed to sufficiently allege material omissions, scienter, or loss causation, but granted plaintiffs leave to replead.

On March 23, 2022, Judge Kenneth K. Lee of the United States Court of Appeals for the Ninth Circuit affirmed the United States District Court for the Northern District of California’s dismissal of claims brought under Sections 10(b) and 20(a) of the Securities Exchange Act (the “Exchange Act”) and Rule 10b-5 thereunder against a social media company (the “Company”) and certain of its executive officers.  Weston Family Partnership LLLP et al. v. Twitter Inc. et al., No. 20-17465 (9th Cir. Mar. 23, 2022).  Plaintiffs alleged that the Company failed to disclose the scope of software issues that led to a loss in advertising revenue, which ultimately caused the Company’s share price to drop.  The Court affirmed the district court’s order granting defendants’ motion to dismiss, holding that plaintiffs failed to state a claim because the Company’s statements were not false or materially misleading.  The Court stated that “[s]ecurities laws . . . do not require real-time business updates or complete disclosure of all material information whenever a company speaks on a particular topic.  To the contrary, a company can speak selectively about its business so long as its statements do not paint a misleading picture.  [The Company]’s statements about its advertising program were not false or misleading because they were qualified and factually true.  The Company had no duty to disclose any more than it did under federal securities law.”

On March 15, 2022, Judge George B. Daniels of the Southern District of New York dismissed a putative class action against a global company that focuses on facilitating the adoption of commercial electronic vehicles (“EV”) through its China-based division (the “Company”) and certain of its directors and officers for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  In re Ideanomics Sec. Litig., No. 20 CIV. 4944 (GBD), 2022 WL 784812 (S.D.N.Y. Mar. 15, 2022).  Plaintiffs alleged that the Company’s executives made numerous misstatements about the China-based sales hub (the “Center”) in earnings calls, YouTube interviews, and the press.  The Court dismissed the complaint with leave to amend, holding that although the complaint plausibly alleged misstatements, it failed to allege scienter or loss causation.

On March 11, 2022, the United States Court of Appeals for the Second Circuit affirmed the dismissal of claims under Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 (“Exchange Act”) against a pharmaceutical company (the “Company”).  Arkansas Pub. Emps. Ret. Sys. v. Bristol-Myers Squibb Co., No. 20-3716-CV (2d Cir. Mar. 11, 2022).  Plaintiffs alleged that the Company made material misrepresentations and omissions in describing a clinical trial it conducted on a drug that treated specific types of cancer.  Following a dismissal of plaintiff’s initial complaint without prejudice, a decision previously covered here, the district court subsequently dismissed plaintiffs’ amended complaint with prejudice.  The Second Circuit affirmed, holding that plaintiffs failed to allege (i) material misrepresentations or omissions or (ii) facts giving rise to a strong inference of scienter.

On March 7, 2022, Judge Algenon L. Marbley of the Southern District of Ohio largely denied a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 (“Exchange Act”) and the Securities Act of 1933 (“Securities Act”) against an energy company, certain of its executives and directors, and certain underwriters of its bond offerings.  In re FirstEnergy Corp. Sec. Litig., No. 2:20-cv-3785 (S.D. Ohio Mar. 7, 2022).  Plaintiffs alleged that the company engaged in an anti-competitive scheme that included bribing state officials in exchange for a government bailout of its nuclear power facilities.  The lawsuit relates to the Ohio House Bill 6 scandal, in connection with which Ohio’s former Speaker of the House and others have been arrested on racketeering charges, political strategists and lobbyists have pleaded guilty to a racketeering conspiracy; the company fired certain executives for violating company policies and its code of conduct, and the company entered into a deferred prosecution agreement under which it paid a $230 million penalty and acknowledged having “conspired with public officials and other individuals and entities to pay millions of dollars to and for the benefit of public officials in exchange for specific official action” for the company’s benefit.  The Court held that plaintiffs had sufficiently alleged the various elements of their claims and declined to dismiss any defendant from the case, although the Court dismissed certain claims with respect to certain individual defendants.

On March 8, 2022, the United States District Court for the District of Colorado dismissed with prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a chicken producer and certain of its executives.  United Food & Com. Workers Int’l Union Local 464A v. Pilgrim’s Pride Corp., No. 20-CV-01966-RM-MEH, 2022 WL 684169 (D. Colo. Mar. 8, 2022).  The crux of plaintiff’s allegations was that the company made various statements touting its performance and attributing those positive results to factors such as its market position, product portfolio, customer base, and management team; when in fact those results were supposedly inflated by an alleged bid-rigging scheme that was revealed through an indictment by the Department of Justice, in connection with which the company later entered a plea agreement and agreed to pay a criminal fine.  The Court held that plaintiff failed to allege an actionable misrepresentation with respect to any of the challenged statements.

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

On February 25, 2022, Judge Gregory H. Woods of the Southern District of New York granted in part and denied in part a motion to dismiss claims under Sections 11 and 15 of the Securities Act of 1933 (“the Securities Act”) against a technology company (“the Company”) and certain of its officers and directors.  In re Tufin Software Techs. Ltd. Sec. Litig., No. 1:20-cv-05646 (S.D.N.Y. Feb. 25, 2022).  Plaintiff alleged that the registration statement the Company filed in connection with its IPO “included materially misleading misstatements related to, among other things, the length of its sales cycle” and “its training practices.”  The Court granted defendants’ motion to dismiss as to certain of the alleged statements, but denied defendants’ motion to dismiss as to others, finding that plaintiff sufficiently alleged that statements regarding the length of the Company’s sales cycle were “materially misleading to investors.”

On February 18, 2022, the United States Court of Appeals for the Eleventh Circuit unanimously reversed a district court’s dismissal of a putative securities class action against online promoters of a new cryptocurrency coin (the “Promoters”) for violations of Section 12 of the Securities Act of 1933 (the “Securities Act”).  Wildes v. BitConnect Int’l PLC, No. 20-11675 (11th Cir. Feb. 18, 2022).  Plaintiffs alleged that the cryptocurrency investment platform (the “Company”) that issued the new cryptocurrency was in fact a Ponzi scheme masquerading as an investment program, and that, as a result of the Company’s scheme, investors suffered more than $2 billion in losses.  In moving to dismiss, the Promoters argued that using online media and videos to make their sales pitches to the public at large—rather than to specific individuals—could not amount to solicitation under the Securities Act.  The district court agreed with the Promoters, dismissing the action with prejudice in November 2019.  On appeal, the Eleventh Circuit reversed, holding that “[a] seller cannot dodge liability through his choice of communications—especially when the [Securities] Act covers ‘any means’ of ‘communication.’”

On February 11, 2022, the United States District Court for the District of Connecticut denied a motion to dismiss a putative securities class action asserting claims under the Securities Exchange Act of 1934 (“Exchange Act”) against a consumer financial services company that issues private-label credit cards and certain of its executives.  In re Synchrony Fin. Sec. Litig., No. 3:18-CV-1818 (VAB), 2022 WL 427499 (D. Conn. Feb. 11, 2022).  As discussed in our prior post the Court had previously dismissed the action in its entirety, including with respect to claims under the Securities Act of 1933 (“Securities Act”).  The Court of Appeals for the Second Circuit upheld the dismissal of the Securities Act claims and certain of the Exchange Act claims but remanded for further proceedings regarding one challenged statement—that the company misrepresented the alleged “pushback” it had received from retail partners with respect to its underwriting standards.  Id. at *2.  On remand, the district court held that plaintiffs adequately alleged falsity, scienter, and loss causation with respect to the remaining challenged statement.

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

On February 9, 2022, Judge Lorna G. Schofield of the Southern District of New York denied in part and granted in part a motion to dismiss a securities fraud action asserting claims related to alleged spoofing and short selling under Sections 10(b) and 9(a)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 thereunder, against broker-dealers, their Canadian affiliates, and unidentified U.S. and Canadian entities, including market makers, subsidiaries, affiliates, sister companies, and customers of the named defendants (collectively, “defendants”).  Harrington Global Opportunity Fund v. CIBC World Markets Corp., 21-CV-761 (LGS) (S.D.N.Y. Feb. 9, 2022).  Plaintiff alleged that defendants engaged in spoofing and short selling that caused a healthcare company’s stock, which plaintiff owned, to drop almost 90% over a nine-month period.  The Court denied dismissal of plaintiff’s spoofing claims against certain defendants and granted dismissal of plaintiff’s short selling claims against other defendants.

On February 4, 2022, Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California granted in part and denied in part a motion for class certification in a putative class action against a multinational consumer electronics, software, and online services company (the “Company”) and two of its executives alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”).  In re Apple Inc. Securities Litigation, No. 4:19-cv-2033-TGR (N.D. Cal. Feb. 4, 2022).  Plaintiff, who sought to represent purchasers of the Company’s publicly traded securities, alleged that in late 2018, the Company made misrepresentations about the state of its business in China, the Company’s most important growth market at the time, which caused the Company’s stock price to fall.  After granting in part and denying in part a motion to dismiss the amended complaint in a decision covered here, the Court granted class certification except as to the inclusion of option holders in the class, finding that the option holders’ damages could not be calculated on a classwide basis with the remaining stockholders.

On January 14, 2022, Judge William H. Orrick of the Northern District of California denied a motion to dismiss a putative securities class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5, against a lithium battery development company (the “Company”) and certain of its executives (collectively, “defendants”).  In re Quantumscape Securities Class Action Litigation, No. 3:21-cv-00058-WHO (N.D. Cal. Jan. 14, 2022).  The Company’s “solid-state” battery is an aspiring competitor to conventional lithium-ion batteries for use in electric vehicles.  The Court denied defendants’ motion to dismiss, holding that the Complaint was adequately plead with the exception of one of the challenged statements that it dismissed.

On January 7, 2022, a split panel of the United States Court of Appeals for the Seventh Circuit reversed the dismissal of claims under Section 14(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) against the current and former officers and directors (the “Defendants”) of a major aerospace company (the “Company”).  Seafarers Pension Plan v. Bradway, No. 20-2244, 2022 WL 70841 (7th Cir. Jan. 7, 2022).  Relying on a bylaw that gave the Company the right to insist that any derivative actions be filed in the Delaware Court of Chancery, Defendants obtained a forum non conveniens dismissal in the United States District Court for the Northern District of Illinois.  The Seventh Circuit reversed, holding that the Company’s bylaw could not be applied to Section 14(a) claims, which are subject to exclusive federal jurisdiction.

On January 7, 2022, Judge Dean D. Pregerson of the U.S. District Court for the Central District of California denied plaintiffs’ motion for class certification in a putative class action against a Japanese manufacturer of electronic and energy products and services (the “Company”) alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”).  Stoyas v. Toshiba Corp., No. 2:15-CV-04194 DDP-JC (C.D. Cal. Jan. 7, 2022).  Plaintiffs, purchasers of the Company’s unsponsored American Depositary Receipts (“ADRs”), alleged the Company concealed its deliberate use of improper accounting over a period of at least six years to inflate its pre-tax profits by more than $2.6 billion and conceal at least $1.3 billion in impairment losses at its U.S. nuclear business.  In a previous decision in the matter covered here, the Ninth Circuit held that a purchaser of unsponsored ADRs may maintain a cause of action under the Exchange Act so long as the purchaser incurred “irrevocable liability” within the United States to take and pay for a security.  After declining to dismiss an amended complaint in a decision covered here, the Court denied plaintiffs’ motion for class certification, finding that plaintiffs failed to satisfy the typicality requirement for class certification under Rule 23(a) because, unlike the members of the proposed class, plaintiffs acquired the Company’s securities in Japan.

On December 20, 2021, the United States District Court for the Southern District of Ohio dismissed a putative class action against a public utility company and certain of its executives under the Securities Exchange Act.  Nickerson v. Am. Elec. Power Co., No. 2:20-cv-4243 (S.D. Ohio Dec. 20, 2021).  Plaintiffs alleged that defendants made various statements regarding prospective energy legislation in Ohio which were misleading because they omitted that the company was actively involved in an alleged lobbying scheme to create that legislation.  The Court held that plaintiffs failed to adequately allege any actionable misrepresentations.

On December 22, 2021, the United States District Court for the Northern District of California declined to dismiss most of the claims asserted in a putative class action against a biotechnology company, certain of its executives, and the company’s former majority investor under the Securities Exchange Act.  In re Vaxart, Inc. Sec. Litig., No. 20-cv-05949-VC (N.D. Cal. Dec. 22, 2021).  Plaintiffs alleged that the company made misrepresentations during the early months of the COVID-19 pandemic in 2020 regarding its efforts to develop a vaccine, and further alleged that the investor engaged in a scheme to inflate the company’s stock price in order to exit its position at a profit.  The Court held that plaintiffs adequately alleged misrepresentations and scienter as against the company and its executives named as individual defendants but dismissed the claims against the investor.

On December 20, 2021, the United States District Court for the Northern District of California dismissed a putative class action against a social media company and certain of its executives under the Securities Exchange Act.  In re Facebook, Inc. Sec. Litig., No. 5:18-CV-01725-EJD, 2021 WL 6000058 (N.D. Cal. Dec. 20, 2021).  Plaintiffs alleged that the company made misrepresentations relating to a data breach and with respect to users’ control of their data.  The Court previously dismissed plaintiffs’ prior two complaints but granted leave to replead.  Addressing plaintiffs’ third amended complaint, the Court held that plaintiffs still failed to adequately allege scienter for the data breach allegations and loss causation for the allegations about control of user data, and therefore dismissed the action without leave to replead.

On December 30, 2021, the Administrative Judge for the civil branch of the New York Supreme Court, New York County, issued an administrative order concerning actions filed in New York County pursuant to the federal Securities Act of 1933 (“Securities Act”).  The order requires that all such actions that are currently pending or which may be commenced in the future in New York County shall be assigned to Justice Andrew Borrok, a justice of the Commercial Division.

On December 22, 2021, the United States Court of Appeals for the First Circuit reversed the dismissal of a putative class action asserting claims against a software company and certain of its current and former executives under the Securities Exchange Act.  Constr. Indus. and Laborers Jt. Pension Tr. v. Carbonite, Inc., —F.4th—, 2021 WL 6062622 (1st Cir. 2021).  Plaintiffs alleged that the company misleadingly touted the capabilities of a new cloud-based data backup product, even though defendants knew that the product did not work.  The district court dismissed the action for failure to adequately allege scienter, but the First Circuit reversed, holding that plaintiffs adequately alleged scienter and that the challenged statements were actionable.

On December 8, 2021, Judge Paul A. Crotty of the United States District Court for Southern District of New York granted a motion for class certification in a securities fraud class action against a global financial institution (the “Company”) under the Securities Exchange Act of 1934.  In re Goldman Sachs Group, Inc. Sec. Litig., No. 10-3461 (PAC) (Dec. 8, 2021).  This is the third time the District Court has granted plaintiffs’ motion for class certification in this case, following several decisions by the Second Circuit and the Supreme Court.

On December 14, 2021, Judge Beth Labson Freeman of the Northern District of California granted a motion to dismiss claims brought under Sections 11 and 15 of the Securities Act of 1933 (“the Securities Act”) against a technology company (“the Company”), its controlling shareholder, and several of the Company’s and the controlling shareholder’s officers and directors.  Costanzo v. DXC Tech. Co., N.D. Cal., No. 19-cv-05794 (Dec. 14, 2021).  Plaintiffs alleged defendants made false and misleading statements, in the Company’s prospectus and registration statement (the “Registration Statement”), regarding expected budget cuts in light of an alleged internal goal at the Company to cut more than double the disclosed amount.  The Court granted defendants’ motion to dismiss plaintiffs’ Third Amended Complaint (“TAC”) without leave to amend, holding that plaintiffs’ addition of allegations of purported statements by confidential witnesses were insufficient to overcome the deficiencies in their pleadings.

On December 17, 2021, the Court of Appeals for the Second Circuit unanimously vacated and remanded for reconsideration the dismissal by the United States District Court for the Eastern District of New York of a putative securities class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5(b) promulgated thereunder, against a health food product manufacturing company (the “Company”) and certain of its executives, for alleged misstatements regarding the Company’s sales and internal controls.  In re: The Hain Celestial Group, Inc. Securities Litigation, No. 20-1517 (2d Cir. Dec. 17, 2021).  The late District Judge Arthur Spatt granted defendants’ motion to dismiss, with prejudice, the Second Amended Complaint (the “SAC”), holding that plaintiffs failed to allege a fraudulent scheme or business practice in violation of the terms of Rule 10b-5(a)-(c), and further failed to sufficiently plead scienter.  Plaintiffs appealed the district court’s dismissal with respect to their Rule 10b-5(b) claims.  The Second Circuit vacated the dismissal, holding that the district court erred in finding that plaintiffs’ Rule 10b-5(b) claim relied on plaintiffs’ pleading a fraudulent business scheme or plan.

On December 8, 2021, Judge Philip S. Gutierrez of the U.S. District Court for the Central District of California dismissed, with prejudice, a suit against a Canadian cannabis manufacturer (the “Company”), alleging that the Company failed to disclose material information about its facilities in Colombia and its transactions with other companies in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  In re Pharmacielo Ltd. Sec. Litig., No. 20-2182-PSG (C.D. Cal. Dec. 8, 2021).  Plaintiffs—whose complaint was once dismissed—amended their complaint to bolster their allegations based on an assortment of Company statements regarding its facilities and expansion plans that plaintiffs alleged were designed to artificially inflate the Company’s stock price.  The Court dismissed the amended complaint for failure to plead falsity or materiality and did so with prejudice because any amendments would be futile based on their “failed attempt to remedy” the deficiencies of the prior complaint.

On December 2, 2021, Judge Cormac J. Carney of the United Stated District Court for the Central District of California denied, in substantial part, a motion to dismiss a putative securities class action against an electric truck manufacturer (the “Company”) for allegedly misleading investors by overhyping its production capabilities and its prospects for winning a multibillion-dollar contract to revamp the U.S. Postal Service’s (“USPS”) delivery fleet in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  Farrar v. Workhorse Grp., Inc., No. 2:21-cv-02072 (C.D. Cal. Dec. 2, 2021).   Plaintiff alleged the Company made false and misleading statements in 2020 and early 2021 about the viability of the Company’s bid for the USPS contract and the Company’s “backlog” of customer orders.  Plaintiff also alleged the Company made misrepresentations regarding its use of Payroll Protection Program (“PPP”) funds provided by the federal government during the COVID-19 pandemic.  The Court denied the Company’s motion to dismiss on all but the PPP claims.

On November 24, 2021, the United States Court of Appeals for the Second Circuit vacated the dismissal of a putative class action asserting claims under the Securities Exchange Act of 1934 against an internet company and one of its directors.  Altimeo Asset Mgmt. v. Qihoo 360 Tech. Co. Ltd., —F.4th—, 2021 WL 5499455 (2d Cir. 2021).  Plaintiffs alleged that the company, which was headquartered in China and had previously had depository shares listed in the United States, made misrepresentations and omissions in connection with the shareholder buyout that took the company private by failing to disclose the company’s alleged intent to relist in China.  The district court dismissed the action but the Second Circuit vacated that dismissal, holding that plaintiffs adequately alleged facts from which an inference could be drawn that the company “must have been planning to relist [in China] at the time of the shareholder vote.”  Id. at *1.

On December 1, 2021, the United States Court of Appeals for the Fourth Circuit affirmed the dismissal of a putative class action asserting claims under the Securities Exchange Act of 1934 against an information technology company and certain of its executives.  KBC Asset Mgt. NV v. DXC Tech. Co., —F.4th—, 2021 WL 5626377 (4th Cir. 2021).  Plaintiffs claimed that the company made misrepresentations regarding its financial health, which plaintiffs alleged were false because the company had undertaken cost-cutting measures that undermined its ability to meet its revenue projections.  The district court dismissed the action and the Fourth Circuit affirmed, holding that plaintiffs failed to adequately allege scienter.

On November 15, 2021, Judge Richard G. Andrews of the United States District Court for the District of Delaware dismissed a derivative suit against a company that provides hardware, software, and services for wireless technology (the “Company”), alleging the Company violated Section 14(a) of the Securities Exchange Act of 1934 and breached its fiduciary duty by allegedly allowing “unlawful and discriminatory practices to proliferate at the Company.”  Kiger v. Mollenkopf, No. 21-409-RGA (D. Del. Nov. 15, 2021).  Plaintiffs alleged that the Company made misrepresentations in 2019 and 2020 proxy statements about its commitment to diversify its board of directors (the “Board”).  The Court dismissed the complaint for failure to plead an actionable misstatement or omission and for failure to plead demand futility.

On November 2, 2021, Judge Sharon Johnson Coleman of the Northern District of Illinois Eastern Division granted in part defendants’ motion for summary judgment and denied plaintiff’s partial motion for summary judgment in a securities class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) against a retail drugstore chain (the “Company”) and two of its former senior executives.  Washtenaw County Employees' Retirement System v. Walgreen Co. et al., No. 15-cv-03187 (N.D. Ill. Nov. 2, 2021).  Plaintiff alleged defendants made materially false and misleading statements concerning the Company’s earnings before interest and taxes (“EBIT”) projections and its ability to meet it.  The Court granted in part defendants’ motion for summary judgment, holding that one of the alleged misstatements was a non-actionable forward-looking statement under the Private Securities Litigation Reform Act’s (“PSLRA”) safe harbor, that defendants proved the truth of certain alleged misstatements, but that triable issues of material fact remained with respect to a number of other alleged misstatements.  The Court denied plaintiff’s motion for partial summary judgment regarding one of the individual defendant’s intent to deceive, holding that there was a genuine issue of material fact as to the falsity of that defendant’s statements and is therefore a question for the jury.

On October 27, 2021, Judge Richard Seeborg of the United States District Court for the Northern District of California denied plaintiffs’ motion for class certification in a putative class action against a major financial services company (the “Company”) alleging violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  Crago v. Charles Schwab & Co., Inc., No. 16-CV-03938-RS (N.D. Cal. Oct. 27, 2021).  Plaintiffs alleged that the Company stated that it adhered to the duty of “best execution” without disclosing key information about an agreement (the “Agreement”) to route most of its customers' retail trade orders to a particular vendor (the “Vendor”) without verifying that the Vendor was providing best execution.  The Court previously dismissed an earlier complaint in this action, in a decision that was covered here.  After declining to dismiss an amended complaint, the Court denied plaintiffs’ motion for class certification, finding that plaintiffs were not entitled to a presumption of reliance and that individualized proof of reliance was therefore required.  This defeated the commonality requirements of Rule 23(a).

On October 19, 2021, Chief Judge Richard Seeborg of the United States District Court for the Northern District of California narrowed the claims in a putative securities class action asserting claims under the Securities Exchange Act of 1934 against a pharmaceutical company and certain of its executives.  Sheet Metal Works Nat’l Pension Fund v. Bayer AG, No. 20-cv-4737, slip op. (N.D. Cal. Oct. 19, 2021), ECF No. 90.  Plaintiffs alleged that the company made misrepresentations relating to its acquisition of Monsanto.  The Court held that plaintiffs adequately alleged actionable misrepresentations and scienter with respect to only some of the challenged statements, and further held that plaintiffs adequately alleged loss causation for those statements.

On October 18, 2021, the United States Court of Appeals for the Eighth Circuit affirmed a decision of the United States District Court for the Southern District of Iowa dismissing a putative securities class action asserting claims under the Securities Exchange Act of 1934 against a media company and certain of its executives.  City of Plantation Police Officers Pension Fund v. Meredith Corp., –F.4th–, 2021 WL 4823411 (8th Cir. 2021).  Plaintiff alleged that the company made misrepresentations in connection with the expected benefits from its acquisition of a magazine publisher.  The district court dismissed the action with prejudice, holding that all but one of the challenged statements was not sufficiently alleged to be false, and that scienter was not adequately alleged for the remaining statement.  The Eighth Circuit affirmed.

On September 30, 2021, Judge Nancy E. Brasel of the United States District Court for the District of Minnesota granted a motion to dismiss a putative class action against an industrial chemical manufacturer (the “Company”) and certain of its officers alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  In re 3M Co. Sec. Litig., No. 19-CV-2488 (D. Minn. Sept. 30, 2021).  Plaintiffs alleged that the Company downplayed its potential legal and financial exposure over its production and disposal of toxic per- and poly-fluoroalkyl substances (“PFAS”) by failing to estimate the contingent losses associated with the Company’s PFAS liabilities.  The Court dismissed plaintiffs’ complaint for failure to plead an actionable misrepresentation or allegations sufficient to support a strong inference of scienter.

On September 30, 2021, Judge Katherine S. Hayden of the United States District Court for the District of New Jersey denied a motion to dismiss an “opt-out” action arising from a pending class action that asserts claims under the Securities Exchange Act of 1934 against a pharmaceutical company, certain of its executives, and alleged “co-conspirators,” in connection with an alleged price-fixing scheme for generic drugs.  TIAA-CREF Large-Cap Growth Fund v. Allergan PLC, No. 17-CV-11089-KSH-CLW, 2021 WL 4473156 (D.N.J. Sept. 30, 2021).  The opt-out action also added claims under the Securities Act of 1933 and related to an illegal “market allocation” scheme.  The Court denied defendants’ motion to dismiss the opt-out action, holding that the action was timely and that scienter was adequately alleged.

On September 29, 2021, Judge George J. Hazel of the District of Maryland dismissed a putative class action asserting claims under the Securities Act of 1933 and Securities Exchange Act of 1934 against a pharmaceutical company and certain of its executives.  Employees’ Retirement System of the City of Baton Rouge and Parish of East Baton Rouge v. Macrogenics, Inc., No. GJH-19-2713, slip op. (D. Md. Sept. 29, 2021).  Plaintiff alleged that defendants made misrepresentations regarding clinical trials for a drug that was “critically important” to the company.  The Court dismissed the action for failure to adequately allege misrepresentations or scienter.

On September 27, 2021, Judge Paul Crotty 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 cannabis company and its CEO and CFO.  Kasilingam v. Tilray, Inc., No. 20-CV-03459 (PAC), 2021 WL 4429788 (S.D.N.Y. Sept. 27, 2021).  Plaintiffs alleged defendants made material misrepresentations that inflated the company’s stock price ahead of a planned share exchange.  The Court held that plaintiffs failed to adequately allege scienter and dismissed the action but granted plaintiffs leave to amend to attempt to cure the deficiencies in their complaint.

On September 30, 2021, Judge Andrew L. Carter, Jr. of the Southern District of New York dismissed an action asserting claims under the Securities Act of 1933, the Securities Exchange Act of 1934, and common law claims for breach of contract, fraud in the inducement, and negligent misrepresentation against a cannabis company and certain of its executives.  SUN, A Series Of E Squared Investment Fund, LLC, et al. v. Sundial Growers Inc., et al., No. 1:20-cv-03579 (ALC), slip op. (Sept. 30, 2021).  Plaintiffs were investors that allegedly acquired convertible notes prior to the company’s initial public offering (“IPO”) and later converted those notes into shares shortly after the IPO, with one also purporting to receive shares in the IPO itself.  Plaintiffs alleged that defendants provided misleading information about a target entity that the company was on the verge of acquiring.  The Court dismissed the action, holding that plaintiffs failed to adequately allege that the challenged statements were materially misleading in context at the time they were made, and that plaintiffs also failed to adequately allege scienter.

On September 21, 2021, Judge Michael A. Shipp of the District of New Jersey overruled an objection to a special master’s report and recommendation to deny a motion for judgment on the pleadings concerning claims under Section 11 of the Securities Act of 1933 (the “Securities Act”) against an accounting firm (the “Firm”).  In re Valeant Pharmaceuticals Intl., Inc. Securities Litigation, No. 15-7658 (MAS) (LHG) (D. N.J. Sept. 21, 2021).  We previously covered the district court’s decision denying a motion to dismiss by other defendants in this action.  The Firm is the only defendant left in a purported class action lawsuit related to a pharmaceutical company’s public offering in 2015.  The Court agreed with the special master’s findings, among other things, that plaintiff was not required to plead damages for a Section 11 claim at the pleading stage.

On September 20, 2021, the Ninth Circuit, in a split decision, held that plaintiff—a shareholder who allegedly purchased shares through a direct listing by a technology company (the “Company”)—had standing to bring claims under Sections 11, 12(a)(2), and 15(a) of the Securities Act of 1933 (the “Securities Act”).  Fiyyaz Pirani v. Slack Technologies, Inc., et al, No. 20-16419 (9th Cir. Sept. 20, 2021).  The Ninth Circuit affirmed the district court’s order denying in part a motion to dismiss securities fraud claims.  The Company challenged plaintiff’s standing to sue under Sections 11 and 12(a)(2) of the Securities Act for failure to prove his shares were registered under the alleged misleading registration statement.  The Court held that plaintiff had standing to bring Securities Act claims because, whether registered or unregistered, his shares could not have been purchased without the issuance of the Company’s registration statement.  The Court concluded that the shares purchased by plaintiff were governed by Sections 11 and 12 of the Securities Act and affirmed the district court’s partial denial of the Company’s motion to dismiss.

On September 13, 2021, Judge Edward M. Chen of the United States District Court for the Northern District of California dismissed with prejudice a putative class action against a cybersecurity company (the “Company”) and its CEO for violations of Section 14(e) and 20(a) of the Securities Exchange Act of 1934.  In re Finjan Holdings, Inc. Sec. Litig., No. 20-cv-04289 (N.D. Cal. Sep. 13, 2021).  Plaintiff alleged that defendants made material misrepresentations about the value of the Company in connection with the sale of the Company through a tender offer (the “Merger”) and that the CEO was motivated by his desire to retain his position at the Company.  The Court dismissed the claims, holding that (i) the sales process indicated that the offer price reflected the market value of the Company’s stock, and (ii) plaintiff failed to present particularized evidence that the CEO had a motive to mislead shareholders.

On September 15, 2021, Judge Stanley R. Chesler of the United States District Court for the District of New Jersey dismissed a putative class action against a medical device manufacturer (the “Company”) and certain of its officers alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  Industriens Pensionsforsikring A/S v. Becton Dickinson & Co., No. 20-cv-02155 (D.N.J. Sept. 15, 2021).  Plaintiff alleged the Company made misleading statements concerning regulatory approval of one of its medical devices, its regulatory compliance program, and financial projections.  The Court dismissed plaintiff’s claims without prejudice in an unpublished opinion confirming the many challenges to pleading securities fraud claims based on alleged misrepresentations regarding U.S. Food and Drug Administration (“FDA”) approval processes.

On September 7, 2021, Judge Charles Ronald Norgle of the United States District Court for the Northern District of Illinois denied a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against an online food delivery company and certain of its executives.  Azar v. Grubhub, Inc., No. 1:19-CV-07665, 2021 WL 4077327 (N.D. Ill. Sept. 7, 2021).  Plaintiff alleged that the company made misrepresentations regarding the success of its marketing and expansion initiatives.  The Court held that plaintiff adequately alleged actionable misrepresentations and scienter.

On September 7, 2021, Judge Vernon S. Broderick 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 and the Securities Exchange Act of 1934 against an infrastructure management company, certain of its executives, and the underwriter of its stock offering.  City of Riviera Beach Gen. Emps. Ret. Sys. v. Macquarie Infrastructure Corp., et al., 2021 WL 4084572 (S.D.N.Y. Sept. 7, 2021).  Plaintiff alleged that the company made misstatements and omissions concerning decreased demand for a particular form of fuel oil that the company stored for customers, which plaintiff alleged allowed the company to maintain an artificially high stock price while the company completed a secondary stock offering and acquired a competitor.  The Court held that plaintiff failed to adequately allege any misrepresentation or scienter and, therefore, dismissed the action.

On September 2, 2021, the United States Court of Appeals for the Third Circuit affirmed the decision by a district court to permit plaintiffs to file a third amended complaint, on behalf of a putative class, against a bank (the “Company”) and certain of its former officers, its underwriters, and its independent auditors, alleging violations of Sections 11, 12(a) and 15 of the Securities Act of 1933, as well as Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  Southeastern Penn. Trans. Authority v. Orrstown Financial, No. 20-2829 (3d Cir. Sept. 2, 2021).  Plaintiffs’ Third Amended Complaint was filed after the applicable repose period had expired, and after certain defendants had successfully moved for dismissal.  Defendants argued the relation back doctrine under Rule 15(c) of the Federal Rules of Procedure—which allows an amended pleading under certain circumstances to be treated as if filed on the date of an initial pleading despite any applicable statute of limitations—should not similarly apply against the statute of repose, which bars claims after a certain period of time.  The Third Circuit held the district court did not err in granting plaintiffs leave to amend under Rule 15(a)(2), because the relation back doctrine was not in conflict with the statute of repose, and because defendants had not yet had a vested substantive right to repose as the action was still ongoing and plaintiffs sought only to amend to reassert claims they originally brought against the same parties.

On August 30, 2021, Judge Lewis A. Kaplan of the Southern District of New York granted a motion to dismiss a claim under Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder against a cannabis company (“Company”), its senior secured lender (“Financing Company”), and certain executives at both companies.  In re iAnthus Capital Holdings Inc. Securities Litigation, 1:20-cv-03135 (S.D.N.Y. Aug. 30, 2021).  Plaintiffs, in consolidated purported class actions and an individual action brought by a shareholder, alleged the Company failed to disclose the nature of its relationship with the Financing Company, which allegedly obtained approximately half of the equity of the Company after the Company defaulted on its loan.  The Court granted defendants’ motion to dismiss plaintiffs’ first amended class action complaint (“Amended Complaint”), holding that plaintiffs failed to allege their transactions with the Company satisfied the jurisdictional limitations of the Exchange Act established by the Supreme Court in Morrison v. Nat’l Australia Bank Ltd., 561 U.S. 247, 267 (2010).  The Court permitted plaintiffs to move for leave to further amend.

On August 17, 2021 and August 20, 2021, a purported shareholder of certain special purpose acquisition companies (“SPACs”) filed three derivative lawsuits in the United States District Court for the Southern District of New York asserting that the SPACs are investment companies under the Investment Company Act of 1940, because proceeds from their initial public offerings are invested in short-term treasuries and qualifying money market funds.  Assad v. Pershing Square Tontine Holdings, Ltd., No. 21-cv-6907 (S.D.N.Y Aug. 17, 2021); Assad v. E.Merge Technology Acquisition Corp., No. 21-cv-7072 (S.D.N.Y Aug. 20, 2021); Assad v. GO Acquisition Corp., No. 21-cv-7076 (S.D.N.Y Aug. 20, 2021).

On August 26, 2021, the United States Court of Appeals for the Second Circuit vacated and remanded a district court order certifying a class of stockholders asserting securities fraud against a global financial institution (the “Company”) under the Securities Exchange Act of 1934 because it was “unclear” as to whether the district court considered the generic nature of the Company’s alleged misrepresentations in its price impact inquiry in accordance with the legal standard recently clarified by the United States Supreme Court.  Arkansas Tchr. Ret. Sys. v. Goldman Sachs Grp., Inc., No. 18-3667, 2021 WL 3776297 (2d Cir. Aug. 26, 2021).  The Second Circuit held that on remand, the district court should consider all record evidence relevant to price impact regardless of whether that evidence overlaps with materiality or any other merits issue, as instructed by the Supreme Court.

On August 25, 2021, the United States Court of Appeals for the Second Circuit unanimously affirmed the dismissal of a putative class action against a Danish bank (the “Company”) and certain of its former officers and directors alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  Plaintiffs alleged misstatements and omissions concerning the Company’s anti-money laundering (“AML”) controls and protocols.  Plumbers & Steamfitters Local v. Danske Bank, No. 20-3231 (2d Cir. Aug. 25, 2021).  The Second Circuit affirmed the dismissal for failure to allege an actionable misrepresentation or a scheme to defraud investors.

On August 17, 2021, Judge Beth Labson Freeman of the United States District Court for the Northern District of California dismissed a putative class action asserting claims under the Securities Exchange Act of 1934 against an energy technology company and certain of its executives.  Hurst v. Enphase Energy, Inc., et al., No. 5:20-cv-04036-BLF, slip op. (N.D. Cal. Aug. 17, 2021).  Plaintiff alleged, based on a short seller report released the same day plaintiff’s complaint was filed, that the company misrepresented its revenues, engaged in improper deferred revenue accounting practices, and overstated the growth in its gross margins.  The Court held that plaintiff failed to adequately allege any misrepresentation or scienter and, therefore, dismissed the action, while granting plaintiff leave to amend to attempt to “rectify the defects” identified by the Court.

On August 4, 2021, Judge Marilyn L. Huff of the United States District Court for the Southern District of California denied a motion to dismiss a putative class action lawsuit against a biopharmaceutical company (the “Company”) and certain of its officers for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.  Kendall v. Odonate Therapeutics, Inc., et al., No. 3:20-cv-01828-H-LL (S.D. Cal. Aug. 4, 2021).  The Court held that plaintiff’s Second Amended Complaint (the “SAC”) adequately alleged material misstatements and omissions by defendants concerning the efficacy and safety of the Company’s flagship cancer drug (tesetaxel) during the course of a Phase 3 clinical trial, and further held that plaintiff adequately alleged scienter.

On August 10, 2021, the United States Court of Appeals for the Seventh Circuit affirmed a decision of the United States District Court for the Northern District of Illinois, Eastern Division that dismissed a putative securities fraud class action asserting claims under Rule 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder.  City of Taylor Police and Fire Retirement System v. Zebra Technologies Corp., et al, No. 20-3258 (7th Cir. Aug. 10, 2021).  Plaintiff alleged that defendants, a commercial electronics manufacturer (the “Company”) and two of its executives, misled investors by issuing false statements about the integration of assets following the Company’s acquisition of a separate commercial electronics company.  The district court dismissed the claims, holding that plaintiff failed to adequately allege scienter and falsity.  The Seventh Circuit affirmed the dismissal.

On July 28, 2021, Judge Andrew P. Gordon of the United States District Court for the District of Nevada granted in part and denied in part a motion to dismiss a putative securities class action against a resort and casino operator (the “Company”) and its current and former officers alleging violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), Rule 10b-5, and Section 20(a) of the Exchange Act.  Ferris v. Wynn Resorts Ltd., No. 18-CV-00479 (D. Nev. July 28, 2021).  Plaintiffs alleged that the Company made material misstatements and omissions concerning allegations that its CEO engaged in sexual misconduct.  The Court denied the Company’s motion to dismiss plaintiffs’ claims relating to alleged misstatements made directly in response to a newspaper article and lawsuit concerning the CEO’s alleged misconduct, but granted the motion to dismiss with respect to the alleged misstatements that concerned the Company’s code of conduct, compliance with laws and regulations, and corporate culture.

On August 5, 2021, the United States Court of Appeals for the Third Circuit, in a non-precedential opinion, affirmed the dismissal of a putative class action against a multinational telecommunications company (the “Company”) and certain of its officers and directors for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  PAMCAH-UA Local 675 Pension Fund v. BT Group PLC, No. 20-2016 (3d Cir. 2021).  Plaintiffs alleged that the Company made false and misleading statements about its financial performance as a result of a complex, decade-long accounting fraud that occurred at its Italian subsidiary (the “Subsidiary”).  The Third Circuit affirmed dismissal on the grounds that the stronger inference from the factual allegations in the complaint as to the Company’s executives was a lack of scienter and, even if scienter was sufficiently alleged as to executives at the Subsidiary, that could not be imputed to the Company.

On July 19, 2021, Judge Vernon S. Broderick of the Southern District of New York granted a motion to dismiss claims alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder against a clothing company (the “Company”), its executives, and its majority shareholder.  Cheng v. Can. Goose Holdings Inc., No. 19-cv-08204 (S.D.N.Y. July 19, 2021).  Plaintiffs alleged defendants made materially false and misleading statements concerning the shifting timeframe of sales in its direct-to-consumer (“DTC”) channel (the “Timing Shift” allegations), and inventory growth rates.  The Court granted defendants’ motion to dismiss plaintiffs’ Consolidated First Amended Complaint (“CFAC”).

On July 20, 2021, a panel of the United States Court of Appeals for the Ninth Circuit unanimously affirmed a decision of the United States District Court for the Western District of Washington dismissing with prejudice a putative class action lawsuit asserting claims under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) against a wholesale retailer (the “Company”) and certain of its executives, as well as Section 20(a) claims against those individual defendants.  Davoli, et al. v. Costco Wholesale Corp., et al., No. 20-35821 (9th Cir. July 20, 2021).  Plaintiff alleges that defendants made false statements regarding the strength of the Company’s internal controls over financial reporting.  The district court dismissed plaintiff’s Second Consolidated Amended Complaint (the “SAC”) for failure to adequately plead scienter and the Ninth Circuit affirmed.  The Panel’s unpublished opinion cannot be cited as precedent except as provided by Ninth Circuit rules.

On July 8, 2021, Judge J. Paul Oetken of the United States District Court for the Southern District of New York dismissed a putative securities class action against a Chinese manufacturer of cryptocurrency mining hardware (the “Company”) alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Sections 11 and 15 of the Securities Act of 1933.  Boluka Garment Co. v. Canaan Inc., No. 20-cv-07139 (S.D.N.Y. July 8, 2021).  Plaintiffs alleged that the Company failed to disclose material information regarding alleged related-party transactions in its registration statement.  The Court dismissed the complaint with leave to amend because plaintiffs failed to allege loss causation and materiality.

On July 6, 2021, Judge John Michael Vazquez of the U.S. District Court for the District of New Jersey dismissed a putative class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against a Canadian company that manufactures and distributes cannabis products (the “Company”) and certain of its executives.  In re Aurora Cannabis, Inc. Sec. Litig., No. 19-cv-20588 (JMV) (JBC), slip op. (D.N.J. July 6, 2021).  Plaintiffs alleged that defendants made material misstatements and omissions relating to the Company’s earnings projections that allegedly failed to disclose certain headwinds in the industry.  The Court held that plaintiffs failed to identify any materially false or misleading statements, and also noted weaknesses in plaintiffs’ allegations with respect to the scienter and loss causation requirements.  Accordingly, the Court dismissed the first amended complaint in its entirety, but granted plaintiffs leave to replead to cure the identified defects.

On June 25, 2021, a divided panel of the United States Court of Appeals for the Ninth Circuit reversed a decision of the United States District Court for the Northern District of California denying summary judgment to defendants in a putative securities fraud class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder against an automobile manufacturer and its wholly owned subsidiary. In re Volkswagen “Clean Diesel” Marketing, Sales Practices, and Products Liability Litigation, —F.3d—, 2021 WL 2621171 (9th Cir. 2021) (“In re Volkswagen”).  Plaintiff alleged that, in connection with bonds issued through three private placements, defendants made omissions and affirmative misrepresentations related to the use of emissions “defeat devices” in their vehicles.  Defendants moved for summary judgment on the reliance element of plaintiff’s claims, but the district court denied the motion, reasoning that plaintiff’s claims were based primarily on defendants’ alleged omissions rather than affirmative misstatements, and a presumption of reliance therefore applied.  Considering the issue on interlocutory appeal, a divided panel of the Ninth Circuit reversed and remanded.

On June 29, 2021, the United States Court of Appeals for the Eleventh Circuit vacated a decision by the Southern District of Florida denying a class certification motion. Jacob Rensel, et al. v. Centra Tech, Inc., No. 20-10894 (11th Cir. 2021).  Plaintiffs, investors in a cryptocurrency digital products company (the “Company”), alleged in their amended complaint violations of Sections 12(a)(1) and 15(a) of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against the Company, its co-founders, former executives, and celebrity promoters.  The district court denied plaintiffs’ motion for class certification as untimely, and alternatively for failure to establish an administratively feasible method for class identification.  The Eleventh Circuit held that, on both issues, the district court abused its discretion.

On July 2, 2021, the United States Supreme Court granted a petition for certiorari to review a decision by a California state court allowing plaintiffs to take discovery in a private action under the Securities Act of 1933 (the “Securities Act”). Pivotal Software, Inc. v. Tran, No. 20-1541 (U.S. July 2, 2021).  The issue presented by the petition is whether the Private Securities Litigation Reform Act’s (the “PSLRA”) discovery-stay provision—which provides that “[i]n any private action arising under” the Securities Act, “all discovery and other proceedings shall be stayed during the pendency of any motion to dismiss”—applies in Securities Act cases filed in state court.

On June 21, 2021, the United States Supreme Court, in a decision delivered by Justice Amy Coney Barrett, vacated and remanded a decision of the United States Court of Appeals for the Second Circuit upholding a certification of a shareholder class asserting securities fraud against a global financial institution (the “Company”) under the Securities Exchange Act of 1934, on the basis that there was “sufficient doubt” as to whether the Second Circuit properly considered the generic nature of the Company’s alleged misrepresentations in its price impact inquiry.  Goldman Sachs Grp., Inc. et al. v. Arkansas Teacher Ret. Sys. et al., 594 U.S. ____ (2021).  The Court held that, in the context of class certification in a case involving claims under Section 10(b) of the Exchange Act:  (i) the generic nature of a misrepresentation is important evidence of price impact that courts should consider at the class certification stage, regardless of whether that evidence overlaps with materiality and any other merits issue, and (ii) defendants bear the burden of persuasion to prove a lack of price impact by a preponderance of the evidence in order to rebut the presumption of classwide reliance established under the Supreme Court’s decision in Basic Inc. v. Levinson.

On June 21, 2021, the United States Court of Appeals for the Eleventh Circuit affirmed the dismissal of claims under Sections 12(a)(1) and 15(a) of the Securities Act of 1933 (the “Securities Act”) against the co-owners of a company (the “Company”) that sold cryptographic tokens in an initial coin offering to fund its nascent movie streaming platform.  Fedance v. Felton, No. 20-12222 (11th Cir. 2021).  Although plaintiffs brought the action after the one-year statute of limitations period had elapsed, they argued that the Company’s fraudulent concealment equitably tolled the limitations period.  The district court held that the claims were untimely because the doctrine of equitable tolling did not apply to claims brought under Sections 12(a)(1) and 15(a).  Although the Eleventh Circuit agreed that plaintiffs’ claims were untimely, the Court rejected the district court’s conclusion that equitable tolling is inapplicable to Section 12(a)(1) and 15(a) claims.  The Eleventh Circuit instead held that plaintiffs had not adequately alleged that the Company’s fraudulent concealment prevented them from bringing claims within the limitations period.

On June 16, 2021, the United States Court of Appeals for the Third Circuit reinstated a securities fraud action brought under Section 10(b) of the Securities Exchange Act of 1934 that had been dismissed as untimely.  Aly v. Valeant Pharm. Int’l Inc., –F.3d–, 2021 WL 2448108 (3d Cir. 2021).  The Third Circuit joined the Second, Ninth, and Tenth Circuits in holding that the doctrine of equitable tolling established by the United States Supreme Court  in American Pipe & Construction Company v. Utah, 414 U.S. 538 (1974), applies to individual claims that are subject to a pending putative class action and are asserted in an opt-out case prior to a decision on class certification.

On June 16, 2021, the United States Court of Appeals for the Ninth Circuit reversed in part the dismissal of a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder against a technology company and certain of its executives.  In re Alphabet, Inc. Sec. Litig., –F.3d–, 2021 WL 2448223 (9th Cir. 2021).  Plaintiffs alleged that the company failed to disclose a security flaw that risked exposing customer data on its social networking site to third-party developers without customer consent.  The district court granted a motion to dismiss, determining that the complaint failed to allege any misrepresentation or omission and failed to adequately allege scienter.  The Ninth Circuit reversed, holding that plaintiffs had adequately alleged actionable misrepresentations and scienter.  However, the Court affirmed the dismissal of certain allegations that it held were too vague to be actionable.

On June 3, 2021, Justice Andrew Borrok of the Supreme Court of the State of New York, Commercial Division, granted a motion to dismiss a putative securities class action against a Canadian cannabis company (the “Company”), certain of its officers and directors, and its underwriters, alleging violations of Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”).  Leung v. Hexo Corp., et al., No. 20-cv-150444 (N.Y. Sup. Ct. Jun. 3, 2021).  Plaintiff alleged that the Company’s offering documents misled investors regarding one of the Company’s key supply agreements.  In dismissing the complaint, the Court held that plaintiff failed to adequately allege contemporaneous facts indicating that the Company knew at the time of the offering that issues would arise with respect to that agreement.  In so holding, the Court cited a March 9, 2021 decision by Judge Naomi Reice Buchwald of the Southern District of New York, in which Judge Buchwald granted a motion to dismiss a first-filed action in federal court asserting similar claims against the Company, certain of its officers and directors, and its underwriters, relying on the same allegations.

On May 28, 2021, Judge K. Michael Moore of the United States District Court for the Southern District of Florida granted a motion to dismiss a putative securities class action against a cruise line (the “Company”) and its CEO for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  Plaintiffs alleged that the Company made false and misleading statements and omissions about the risks posed by COVID-19 and the Company’s health and safety protocols during the early stages of the pandemic.  Consistent with another recent decision covered here, the Court dismissed plaintiffs’ claims for failure to adequately plead falsity and scienter, but granted leave to amend.

On May 20, 2021, Judge Dora L. Irizarry of the United States District Court for the Eastern District of New York dismissed with prejudice a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 against a car manufacturer and certain of its current and former Board members.  Mucha v. Volkswagen Aktiengesellschaft, — F. Supp. 3d —, 2021 WL 2006079 (E.D.N.Y. May 20, 2021).  Plaintiffs alleged the company engaged in anticompetitive conduct which rendered a number of statements in the company’s SEC filings false or misleading.  The Court held that plaintiffs failed to sufficiently allege that the alleged misstatements were false, and therefore dismissed the complaint in its entirety.

On May 24, 2021, United States Magistrate Judge Stacie F. Beckerman of the United States District Court for the District of Oregon granted summary judgment in favor of defendants upon a motion for reconsideration in a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 against an industrial manufacturing company and certain of its executives.  Murphy v. Precision Castparts Corp., No. 3:16-CV-00521-SB, 2021 WL 2080016 (D. Or. May 24, 2021).  Plaintiffs primarily alleged that defendants made misrepresentations that the company remained on target to meet earnings projections.  The Court had previously granted summary judgment for defendants with respect to certain alleged misstatements, but had determined that certain statements regarding the company’s progress toward its projections contained an element of present fact and were therefore actionable.  On a motion for reconsideration based on the decision of the Ninth Circuit Court of Appeals in Wochos v. Tesla, Inc., 985 F.3d 1180 (9th Cir. 2021), the Court dismissed these remaining allegations, holding that the challenged statements did not contain the “concrete” description of present facts that is required for such statements to be actionable.

On May 19, 2021, the United States District Court for the District of Maryland denied a motion to dismiss a putative securities class action involving claims brought under Sections 10(b), 20(a) and 20A of the Securities Exchange Act of 1934 (the “Exchange Act”) against a sports apparel company (the “Company”) and one of its executives.  In re Under Armour Securities Litigation, No. 17-cv-00388 (D. Md. May 19, 2021).  Plaintiffs alleged that defendants misrepresented the Company’s financial health and the demand for its products by engaging in “channel stuffing”—the practice of pulling forward sales from a future quarter, thereby shifting earnings into earlier quarters—relying in part on a settlement between the Company and the SEC and the $9 million civil penalty paid in connection with the settlement to resolve similar allegations.

On May 6, 2021, Judge Kevin McNulty of the United States District Court for the District of New Jersey granted a motion to dismiss a putative securities class action against the largest cannabis company in Canada (the “Company”) and several of its officers for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  Ortiz v. Canopy Growth Corp., No. 19-cv-20543 (D.N.J. May 6, 2021).  Plaintiffs alleged the Company made numerous false and misleading statements and omissions about the Company’s inventory levels.  Although the Court held that certain of the Company’s representations regarding inventory and revenue in its financial statements were statements of opinion that were actionable, the Court ultimately dismissed these claims because plaintiffs failed to adequately allege scienter.

​On April 26, 2021, Judge Sara L. Ellis of the Northern District of Illinois 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 (the “Exchange Act”) against a financial services provider (the “Company”) and two of its executives.  Heavy & General Laborers’ Local 472 & 172 Pension and Annuity Funds v. Fifth Third Bancorp, et. al., No. 20-C-2176 (N.D. Ill. Apr. 26, 2021).  Plaintiff, on behalf of herself and a putative class of investors who allegedly purchased and sold securities of the Company during the putative class period, alleged that defendants made materially misleading statements regarding the Company’s business practices that were the subject of a federal investigation.  The Court granted defendants’ motion to dismiss the consolidated complaint without prejudice, holding that plaintiff failed to adequately plead scienter.

On April 23, 2021, the United States Court of Appeals for the Eighth Circuit reversed the certification of a class pursuing securities fraud claims against a brokerage firm for retail investors (“the Company”).  Ford v. TD Ameritrade Holding Corp., et al., No. 18-3689 (8^th Cir. April 23, 2021).  Plaintiff, on behalf of a putative class of investors who purchased and sold securities through the Company, brought securities fraud claims under the Securities Exchange Act of 1934, alleging the Company’s order routing practices violated its “duty of best execution” by systematically sending orders to trading venues that benefited the Company, rather than to venues that provided the best outcome for customers.  The Court held that the predominance and superiority requirements of Federal Rule of Civil Procedure 23(b)(3) were not satisfied because determining economic loss, in this case, would entail a trade-by-trade individualized inquiry.  Having found that the district court abused its discretion in certifying the class, the Court reversed the district court’s order and remanded for further proceedings.

On April 20, 2021, the United States Court of Appeals for the Ninth Circuit affirmed the dismissal of a putative securities class action against an information technology security company (the “Company”), its chief executive officer, and Board of Directors (the “Directors”), alleging that a proxy statement issued in connection with a sale of the Company violated Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 14a-9.  Golub v. Gigamon Inc., No. 19-16975 (9th Cir. Apr. 20, 2021).  In a unanimous decision, the Ninth Circuit, joining the Fourth Circuit (Paradise Wire & Cable Defined Benefit Pension Plan v. Weil, 918 F.3d 312 (4th Cir. 2019)), held that the standard articulated in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, 575 U.S. 175 (2015) governing whether a plaintiff has sufficiently alleged the falsity of a statement of opinion under Section 11 of the Securities Act of 1933 (the “Securities Act”), also applies to claims under Section 14(a) of the Exchange Act and Rule 14a-9, and affirmed the district court’s dismissal of the complaint for failure to allege falsity.  The Court further explained its application of the Omnicare standard to Section 14(a) in an accompanying summary opinion.

On April 21, 2021, Judge Virginia M. Kendall of the United States District Court for the Northern District of Illinois denied a motion to dismiss a putative securities class action against a large Illinois-based electric company (the “Company) for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 as well as Items 105 and 303 of Regulation S-K.  Flynn v. Exelon Corp., No. 19-C-8209 (N.D. Ill. April 21, 2021).  Plaintiff alleged that the Company made false and misleading statements and omissions about an eight-year scheme to bribe Illinois state lawmakers, which, when finally disclosed to the market, caused substantial losses to investors.  The Court denied the motion to dismiss with respect to most claims.  Significantly, although the Court recognized that the Seventh Circuit has not held that Items 105 and 303 impose a general duty to disclose regulatory non-compliance, the Court nevertheless found that the Company violated Items 105 and 303 because it knew of and attempted to conceal the bribery scheme, all while making public statements that it was in compliance with its internal anti-bribery guidelines.

On April 10, 2021, Judge Robert N. Scola, Jr. of the United States District Court for the Southern District of Florida dismissed with prejudice a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 against a cruise line and certain of its executives.  Douglas v. Norwegian Cruise Lines, No. 20-21107-CIV, 2021 WL 1378296 (S.D. Fla. Apr. 12, 2021).  Plaintiff alleged the company made misrepresentations in February 2020 regarding the impact of COVID-19 on its business.  The Court held that plaintiff failed to adequately allege any actionable misrepresentations or scienter.

​On April 8, 2021, the United States Court of Appeals for the Ninth Circuit affirmed the Central District of California’s dismissal with prejudice of a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 against an investment bank, certain of its executives, and one of its research analysts.  Prodanova v. H.C. Wainwright & Co., LLC,—F.3d—, 2021 WL 1307882 (9th Cir. 2021).  Plaintiff alleged that defendants had attempted to increase a company’s stock price by publishing a bullish analyst report shortly before the company announced that the bank would serve as the exclusive placement agent for an offering of the company’s shares.  The Ninth Circuit held that plaintiff failed to adequately allege a strong inference of scienter.

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

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

On March 29, 2021, Judge David O. Carter of the United States District Court for the Central District of California denied a motion to dismiss a consolidated putative class action complaint against a medical device manufacturer and marketer (the “Company”) and certain of its officers, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  In re Merit Med. Sys., Inc. Sec. Litig., No. 8:19-02326 DOC (ADSx) (C.D. Cal. Mar. 29, 2021).  Plaintiffs alleged that the Company issued misleading statements regarding its acquisitions of two companies in late 2018 including with respect to the integration of those companies and their products sales.  The Court denied defendants’ motion to dismiss, adopting a report and recommendation by Magistrate Judge Autumn D. Spaeth, which found that most of the challenged statements were not forward-looking statements protected by the PSLRA’s safe harbor provisions and that plaintiffs had adequately pled all elements of their claims. 

On March 29, 2021, Judge Andrew L. Carter of the United States District Court for the Southern District of New York granted a motion to dismiss a putative securities class action against a Finnish telecommunications company (the “Company”) and its former CEO for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  In re Nokia Corp. Sec. Litig., No. 19-cv-3982 (S.D.N.Y. Mar. 29, 2021).  Plaintiff alleged the Company made false and misleading statements and omissions regarding (i) the success of its post-merger integration with another telecommunications company (the “Acquired Company”); and (ii) the Company’s readiness to transition to 5G wireless cellular network technology (“5G”).  The Court dismissed the claims for failure to plead an actionable misstatement or omission.

On March 29, 2021, the United States Supreme Court heard oral argument in Goldman Sachs Group Inc. v. Arkansas Teacher Retirement System, which we have discussed in prior updates.  The case raises two questions in the context of class certification in a Section 10(b) case:  (i) whether a court can take into account the generic nature of alleged misstatements in a securities fraud class action in assessing whether they had any impact on the price of the stock, and (ii) who bears the burden of persuasion concerning reliance on the alleged misstatements, after a plaintiff has invoked the presumption of classwide reliance (under the Supreme Court’s decision in Basic Inc. v. Levinson) and the defendant has come forward with evidence to rebut that presumption.  

On March 25, 2021, the United States Supreme Court unanimously affirmed decisions by the Montana and Minnesota Supreme Courts holding that their lower courts had properly exercised specific personal jurisdiction over an automobile company in product liability suits arising from accidents in those states involving the company’s vehicles, even though those particular vehicles had not been designed, manufactured, or sold in those states.  Ford Motor Co. v. Montana Eighth Jud. Dist. Ct., Nos. 19-368, 19-369, 2021 WL 1132515 (U.S. Mar. 25, 2021).  In a consolidated appeal, the company challenged the State supreme court decisions, arguing that specific personal jurisdiction is only proper where there is a strict causal relationship between the defendant’s activities in the forum state and the plaintiff’s claim.  The Court rejected the company’s argument, holding that the exercise of personal jurisdiction in those states was proper under the circumstances.

On March 22, 2021, Judge Beth Labson Freeman of the United States District Court for the Northern District of California dismissed certain of the claims asserted in a putative class action brought under the Securities Exchange Act of 1934 against a technology company and certain of its executives.  City of Sunrise Firefighters’ Pension Fund, et al. v. Oracle Corporation, et al., No. 18-cv-04844-BLF, slip op. (N.D. Cal. Mar. 22, 2021).  Plaintiffs alleged that the company made misrepresentations regarding its transition from locally installed software to cloud-based products, which plaintiffs alleged was driven through undisclosed “coercive sales practices.”  After the Court dismissed an earlier iteration of the complaint without prejudice for failure to allege any actionable misstatements, plaintiffs filed an amended complaint.  The Court held that a number of allegations failed to establish falsity or scienter, but permitted some claims to go forward against certain defendants on a limited theory of liability.

On March 19, 2021, Judge Stefan R. Underhill of the United States District Court for the District of Connecticut dismissed with prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a transportation and logistics company and certain of its executives.  Labul, et al. v. XPO Logistics, et al., No. 3:18-cv-2062 (SRU), slip op. (D. Conn. Mar. 19, 2021).  Plaintiffs alleged that the company misrepresented the extent to which it relied on a single customer to drive revenue growth and the financial impact of declining business from that customer.  The Court held that plaintiffs failed to adequately allege the existence of material misrepresentations, scienter, or loss causation, and therefore dismissed the action.

On March 13, 2021, Judge John G. Koeltl of the Southern District of New York granted a motion to dismiss claims brought under Sections 10b and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b5-1 promulgated thereunder, as well as Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”), against a Norwegian browser services company (the “Company”), its individual directors, and the underwriters of its initial public offering (the “IPO”). Lau v. Opera Limited et al., No. 1:2020-cv-00674 (S.D.N.Y. Mar. 13, 2021).  Plaintiffs alleged that the Company’s IPO offering materials contained materially false and misleading statements and omissions, and defendants made false or misleading statements in other documents and analyst calls regarding the Company’s market share and entry into the “fintech” market.  The Court granted defendants’ motion to dismiss plaintiffs’ consolidated class action complaint (the “CCAC”), with leave to amend.
 

On March 12, 2021, Judge Denise Casper of the District of Massachusetts granted a motion to dismiss a claim under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder, as well as Section 20(a) of the Exchange Act, against a robot vacuum cleaner (“RVC”) manufacturer (the “Company”) and certain of its executives.  In re iRobot Corporation Securities Litigation, No. 19-cv-12536-DJC (D. Mass. Mar. 12, 2021). Plaintiffs alleged that defendants made materially false and misleading statements regarding the Company’s ability to compete within the RVC market.  The Court granted defendants’ motion to dismiss plaintiffs’ consolidated class action complaint (the “CAC”), holding that plaintiffs failed to sufficiently plead material misstatements and scienter.
 

On March 9, 2021, Judge Naomi Reice Buchwald of the United States District Court for the Southern District of New York granted a motion to dismiss a putative class action complaint against a Canadian cannabis producer (the “Company”), certain of its officers and directors, and its underwriters that asserted claims under Sections 11, 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.  In re HEXO Corp. Sec. Litig., No. 19-CV-10965 (S.D.N.Y. Mar. 9, 2021).  Plaintiffs alleged the Company made misrepresentations about one of its key supply agreements, a new production facility, and its expected revenue.  The Court dismissed the claims under the Securities Act because they were based on impermissible hindsight pleading and the Exchange Act claims for failure to plead falsity and scienter. 
 

On March 8, 2021, Judge Lewis J. Liman of the United States District Court for the Southern District of New York dismissed a putative securities class action against a midstream oil company (the “Company”), its general partner, and an infrastructure firm that was an affiliate of the general partner and acquired the Company (the “Firm”), as well as certain of the Company’s officers and directors, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  Kraft v. Third Coast Midstream, No. 19-cv-9398 (S.D.N.Y. Mar. 8, 2021).  Plaintiffs alleged that the Company and the Firm orchestrated a scheme to manipulate the price of the Company’s common units (“CUs”) through a series of misstatements and omissions so that the Firm could acquire the Company at a deflated price.  The Court dismissed the claims for failure to plead any actionable misstatement or omission or a manipulative act, as well as loss causation or scienter.
 

On March 1, 2021, Judge Ann M. Donnelly of the United States District Court for the Eastern District of New York dismissed with prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a telecommunications company and certain of its executives.  Salim v. Mobile Telesystems PJSC, No. 19-CV-1589 (AMD) (RLM), slip op. (E.D.N.Y. Mar. 1, 2021).  Plaintiffs alleged that the company made misrepresentations with respect to an alleged scheme to bribe foreign officials.  The Court held that plaintiffs failed to adequately allege any misrepresentations or scienter and therefore dismissed the complaint.
 

On March 2, 2021, Judge Haywood S. Gilliam, Jr. of the United States District Court for the Northern District of California dismissed with prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a technology company and certain of its executives.  Iron Workers Loc. 580 Jt. Funds v. NVIDIA Corp., No. 18-CV-07669-HSG, slip op. (N.D. Cal. Mar. 2, 2021).  Plaintiffs alleged that the company made misrepresentations regarding its sales of graphic processing units (“GPUs”) for computer gaming and the proportion of such sales that were actually made to cryptocurrency miners—for which demand was allegedly more volatile.  As discussed in our prior post, the Court dismissed plaintiffs’ original complaint for failure to adequately allege misrepresentations or scienter, but granted leave to replead.  After plaintiffs amended their complaint, defendants moved again to dismiss and also moved to strike certain allegations attributed to a confidential witness.  The Court denied the motion to strike but concluded that the amended complaint failed to cure the prior deficiencies with respect to scienter, and therefore dismissed the complaint with prejudice.
 

On February 26, 2021, Judge LaShann DeArcy Hall, of the United States District Court for the Eastern District of New York, dismissed with prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a pharmaceutical company and certain of its officers.  In re Alkermes Public Ltd. Co. Sec. Litig., No. 18-CV-7410 (LDH) (RML), slip op. (E.D.N.Y. Feb 26, 2021).  Plaintiff alleged defendants made misstatements concerning clinical trials for a drug that ultimately did not secure FDA approval.  The Court held that plaintiff failed to allege facts giving rise to a strong inference of scienter and therefore dismissed the complaint in its entirety.
 

On February 22, 2021, the United States Court of Appeals for the Fourth Circuit unanimously affirmed the dismissal of a putative class action asserting claims under Sections 10(b) and 20(a) the Securities Exchange Act of 1934 against a business development financing company (the “Company”) and three of its executives.  In re Triangle Capital Corporation Sec. Lit., No. 19-2162 (4th Cir. Feb. 22, 2021).  Plaintiffs alleged that the Company persisted in a risky investment strategy without adequately disclosing its risks.  The District Court for the Eastern District of North Carolina dismissed the first amended complaint for failure to adequately allege scienter and denied as futile plaintiffs’ motion for leave to amend again.  The Fourth Circuit affirmed and dismissed the action with prejudice, holding that the factual allegations related to “legitimate, subjective business judgments” and that, “to the extent we can make any inference of scienter from these allegations, it is exceptionally weak.”
 

On February 16, 2021, the Appellate Division of the New York Supreme Court, First Judicial Department, unanimously affirmed the dismissal of a putative class action against a Canadian cannabis producer (the “Company”), certain of its officers and directors, and its underwriters for violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 and Item 303 and Item 105 of Regulations S-K.
 

On February 16, 2021, Judge Brian M. Cogan of the United States District Court for the Eastern District of New York dismissed a putative securities class action against a medical and wellness cannabis operator and certain of its officers alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. In re Curaleaf Holdings Inc. Securities Litigation, No. 19-cv-04486 (E.D.N.Y. 2021). Plaintiffs alleged the Company made false and misleading statements regarding the benefits and legality of its cannabinol (“CBD”) products. The Court dismissed the complaint, holding that the Company disclosed what plaintiffs claimed was not disclosed and that plaintiffs thus failed to plead falsity or, with respect to certain alleged misstatements, loss causation.
 

On February 3, 2021, Judge Kimba M. Wood of the Southern District of New York granted a motion to dismiss claims under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder, as well as Section 20(a) of the Exchange Act against an international chain restaurant (the “Company”) and two of its senior former executives.  Okla. Law Enf’t Ret. Sys. v. Papa John’s International Inc. et al., No. 18-CV-7927 (KMW) (S.D.N.Y. Feb. 3, 2021).  In the First Amended Complaint (“FAC”), plaintiffs alleged the Company made materially false and misleading statements concerning the Company’s culture and failed to disclose material information concerning the Company’s workplace.  The Court granted the Company’s motion to dismiss the FAC with leave to amend, holding certain alleged misstatements were not actionable as mere puffery and that statements about the Company’s culture were too speculative to be actionable.  See Oklahoma Law Enf’t Ret. Sys. v. Papa John’s Int’l, Inc., 444 F. Supp. 3d 550 (S.D.N.Y. 2020) (“Papa John’s I”).  In addressing the sufficiency of plaintiffs’ Second Amended Complaint (“SAC”), the Court found that it “failed to plausibly allege that [defendants’] positive assurances about the Company’s toxic culture exceeded the protected bounds of generic puffery.”  The Court also found that allegations that the Company would face harmful consequences from the allegedly toxic workplace was not “so concrete and substantial that there arose an affirmative duty to disclose it.”  Accordingly, the Court granted defendants’ motions to dismiss with prejudice.

On February 4, 2021, Judge Ronnie Abrams of the Southern District of New York granted a motion to dismiss putative class action claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5, against a global logistics and shipping company (the “Company”) and certain of its executives.  In re FedEx Securities Litigation, No. 19-cv-05990 (S.D.N.Y. Feb. 4, 2021).  Plaintiffs alleged defendants made materially false and misleading statements concerning the financial impacts to the Company resulting from a cyberattack affecting a recently acquired European shipping subsidiary (the “Subsidiary”).  The Court granted defendants’ motion to dismiss plaintiffs’ consolidated class action complaint (the “CAC”) with prejudice.

On January 25, 2021, the United States Court of Appeals for the Second Circuit affirmed the dismissal of claims under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) against a Bermudan capital investment company (the “Company”) and its Chief Executive Officer and Chairman.  Cavello Bay Reinsurance Ltd. v. Shubin Stein et al., No. 20-1371 (2d Cir. Jan. 25, 2021). 
 

On January 26, 2021, the United States Court of Appeals for the Ninth Circuit affirmed the dismissal of a putative securities class action against an electric car manufacturer (the “Company”) and certain of its officers for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.
 

On January 21, 2021, Judge Stanley R. Chesler of the United States District Court for the District of New Jersey dismissed with prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a real estate services company and certain of its current and former executives.  Tanaskovic v. Realogy Holdings Corp., No. 19-cv-15053, slip op. (D.N.J. Jan. 21, 2021).  Plaintiff alleged that the company made misrepresentations concerning:  (1) the effect of increased commissions paid to its agents; (2) technology offerings; (3) the company’s acquisition strategy; and (4) allegedly anticompetitive behavior that inflated the company’s average commissions.  The Court held that the alleged misstatements were either not alleged to be false with the required particularity or were otherwise not actionable.
 

On January 7, 2021, Judge Sterling Johnson, Jr. of the Eastern District of New York granted a motion to dismiss, with prejudice, in a putative securities class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and SEC Regulation S-K, Item 303, against a life insurance company (the “Company”) and certain of its executives.  Parchmann v. Metlife, et al., No. 18-cv-00780-SJ-RLM (E.D.N.Y. Jan. 7, 2021).  Plaintiff alleged that defendants made materially misleading statements regarding the Company’s financial condition and internal controls with respect to one of the Company’s Retirement and Income Solution (“RIS”) programs.  The Court granted defendants’ motion to dismiss with prejudice, holding, among other things, that plaintiffs failed to adequately plead falsity, loss causation, and scienter.
 

On January 11, 2021, the Ninth Circuit in an unpublished decision affirmed in part and reversed in part the dismissal at the pleading stage of Section 10(b) claims under the Exchange Act of 1934 against a pharmaceutical manufacturer (the “Company”) and several of its officers for alleged misstatements regarding an alleged price fixing scheme and the performance of one of its generic drugs.  N.Y. Hotels Trades Council & Hotel Association of NYC Inc. Pension Fund et al. v. Impax Laboratories, Inc., et al., No. 19-16744 (9th Cir. Jan. 11, 2021).  The Court held that plaintiffs’ Second Amended Complaint (the “SAC”) adequately alleged falsity with respect to statements allegedly made by defendants concerning the performance of one of the Company’s drugs (diclofenac) as well forward-looking statements regarding earnings projections and revenue guidance, and further held that plaintiffs adequately alleged loss causation.  Our prior analysis of the district court’s decision can be found here.
 

On January 5, 2021, Judge Jesse M. Furman 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 class action against a data analytics company (the “Company”) for alleged violations of Section 10(b), Rule 10b-5, and Section 20(a) of the Securities Exchange Act of 1934, and Item 303 of Regulation S-K (“Item 303”).  In re Nielsen Holdings PLC Securities Litigation, No. 1:18-cv-07143 (S.D.N.Y. Jan. 5, 2021).  Plaintiffs alleged the Company made misstatements about the financial performance of some of its business segments and the impact of the enactment of the General Data Protection Regulation (“GDPR”) in the European Union on the Company’s measurement and analytics services.  The Court dismissed some of plaintiffs’ claims, pared down others based on the Company’s knowledge at the time of certain alleged misstatements, and granted plaintiffs’ request for leave to amend.
 

On December 30, 2020, 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 against a biopharmaceutical company (the “Company”) and certain of its officers for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  Malquin v. Nektar Therapeutics, No. 18-cv-06607 (N.D. Cal. Dec. 30, 2020).  Plaintiffs alleged that the Company made false and misleading statements and omissions about the efficacy of its flagship cancer drug in development.  The Court dismissed the amended complaint with prejudice, confirming that securities claims cannot be based on allegations that a company failed to use the best or preferred statistical methods for evaluating the effectiveness of a new drug and that short seller reports will not constitute corrective disclosures sufficient to allege loss causation unless the reports can be characterized plausibly as revealing new information to the market.
 

Looking ahead, we preview cases currently pending before the Supreme Court—which have already been accepted for review by the Court, and in some cases have already been argued—that may be of particular interest to readers of the Need-to-Know Litigation Weekly.  These cases pertain to various topics in Securities Litigation, Antitrust, IP Litigation, and jurisdictional questions of broad interest.
 

On December 10, 2020, Judge Lucy Koh of the United States District Court for the Northern District of California dismissed with prejudice a putative securities class action asserting claims under the Securities Exchange Act of 1934 against a manufacturing and design company and certain of its officers.  Kipling v. Flex Ltd., No. 18-CV-02706-LHK, 2020 WL 7261314 (N.D. Cal. Dec. 10, 2020).  Plaintiff alleged that the company made misrepresentations concerning a major contract to manufacture shoes for a shoe company.  The Court held that plaintiff failed to adequately allege actionable misstatements or omissions and, because the Court had already granted plaintiff an opportunity to replead in a prior order, dismissed the case with prejudice.
 

On December 11, 2020, the United States Supreme Court granted a petition for certiorari to review a decision from the United States Court of Appeals for the Second Circuit to address whether a defendant in a securities class action may rebut the presumption of classwide reliance recognized in Basic Inc. v. Levinson, 485 U.S. 224 (1988), by pointing to the generic nature of the alleged misstatements in showing that the statements had no impact on the price of the security (and whether, in seeking to do so, a defendant has the burden of persuasion).  Goldman Sachs Group, Inc. v. Arkansas Teacher Ret. Sys., No. 20-222 (U.S. Dec. 11, 2020).
 

On December 10, 2020, Judge Yvonne Gonzalez Rogers of the Northern District of California granted a motion to dismiss a claim under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder, as well as Section 20(a) of the Exchange Act, against a social media platform (the “Company”) and certain of its executives.  In re Twitter Securities Litigation, No. 19-cv-07149 (N.D. Cal. Dec. 10, 2020).  Plaintiffs alleged that defendants made materially false and misleading statements concerning the Company’s advertising products and revenue predictions that caused the Company’s stock price to drop more than 20% when the Company made purportedly corrective disclosures.  The Court granted defendants’ motion to dismiss plaintiffs’ consolidated class action complaint (the “CCAC”), but granted plaintiffs leave to replead.
 

On December 3, 2020, the Appellate Division of the New York Supreme Court, First Judicial Department, reversed an order that denied defendants’ motion to dismiss a securities action complaint against a Chinese e-commerce marketing company (the “Company”) under Section 11 of the Securities Act of 1933, and directed that a judgment be entered dismissing the complaint.  Lyu v. Ruhnn Holdings Ltd., No. 12553, 2020 WL 7062118 (1st Dep’t Dec. 3, 2020).  This is the first substantive Securities Act ruling from a New York appeals court since the United States Supreme Court’s decision in Cyan Inc. v. Beaver County Employees Retirement Fund, 138 S. Ct. 1061 (2018), which held that state courts have jurisdiction to adjudicate class actions brought under the Securities Act and that such actions generally cannot be removed from state to federal court.
 

On November 30, 2020, Judge Noel L. Hillman of the United States District Court for the District of New Jersey dismissed without prejudice a putative securities class action against a food and snack company (the “Company”) and certain of its top executives for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  In Re Campbell Soup Co. Securities Litigation, No. 1:18-cv-14385 (D.N.J. Nov. 30, 2020).  Plaintiffs alleged that the Company made material misrepresentations and omissions concerning the profitability of its fresh foods division (the “Fresh Foods Division”).  The Court dismissed the complaint with leave to amend because plaintiffs failed to allege scienter.
 

On November 30, 2020, Judge William H. Pauley III of the United States District Court for the Southern District of New York granted a motion to dismiss a putative securities class action asserting violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against a weight loss company (the “Company”), certain of its officers and directors, and its largest shareholder.  In re Weight Watchers Int’l Inc. Sec. Litig., No. 19-cv-2005 (S.D.N.Y. Nov. 30, 2020).  Plaintiffs alleged that the Company made false and misleading statements and omissions about its strategic rebranding initiative.  The Court dismissed these claims because plaintiffs failed to allege falsity, observing that plaintiffs’ claims “have little bearing on disclosure . . . and are [instead] fundamentally about corporate mismanagement.”  Although the Court concluded that plaintiffs’ failure to allege an actionable misrepresentation was sufficient to dismiss the case, the Court addressed the parties’ remaining arguments, including two issues on which the Second Circuit has yet to weigh in, holding that:  (1) the exercise of stock options can be considered for the purpose of determining whether an individual’s stock sales are sufficient to allege scienter; and (2) a selling shareholder is not a “statutory seller” for purposes of Section 12(a)(2) simply because it signed the registration statement.  The Court also held that the selling shareholder was not a “maker” of the allegedly misleading statements and thus could not be held liable under Section 10(b).
 

On November 22, 2020, Judge Howard C. Nielson, Jr. of the United States District Court for the District of Utah dismissed with prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a biotechnology company and certain of its executives.  In re PolarityTE, Inc. Sec. Litig., No. 2:18-cv-00510, 2020 WL 6873798 (D. Utah Nov. 22, 2020).  Plaintiffs alleged that the company made material misstatements in the course of a reverse merger and in subsequent SEC filings.  The Court held that plaintiffs failed to adequately allege falsity with respect to certain challenged statements and failed to establish loss causation for the remainder.
 

On November 23, 2020, the United States Court of Appeals for the Second Circuit vacated a grant of summary judgment to the plaintiff in a derivative action seeking disgorgement of alleged “short-swing profits” in an action under Section 16(b) of the Securities Exchange Act of 1934 against a registered investment advisor, its customer, and the individual defendant who held positions at both entities.  Packer v. Raging Cap. Mgmt., LLC, —F.3d—, 2020 WL 6844063 (2d Cir. 2020).  Plaintiff alleged that the customer was the “beneficial owner” of more than ten percent of a certain company’s shares and, therefore, was required to return profits it earned from buying and selling the company’s shares within a six-month period.  The district court granted summary judgment in plaintiff’s favor, but the Second Circuit vacated the judgment.  The Court held that factual issues remained regarding whether the customer was the beneficial owner of the shares in question and therefore remanded the matter for further proceedings.
 

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

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

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

On November 4, 2020, Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California granted in part and denied in part a motion to dismiss claims asserted under the Securities Exchange Act of 1934 against a technology company and certain of its executives.  In re Apple Inc. Sec. Litig., No. 19-cv-02033-YGR, slip. op. (N.D. Cal. Nov. 4, 2020), ECF No. 118.  Plaintiffs alleged that the company and its CEO made material misstatements relating to the company’s earnings guidance, which the company ultimately did not meet.  Slip. op. at 4.  The Court dismissed claims based on certain of the alleged misstatements, which it held were not false or misleading, but determined that falsity and scienter were sufficiently alleged as to other alleged misstatements.
 

On October 26, 2020, Judge John A. Gibney, Jr. of the Eastern District of Virginia denied motions to dismiss a putative securities class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) against a building products company (the “Company”), certain of its executives, and an institutional majority shareholder of the Company.  Cambridge Retirement System v. Jeld-Wen Holding, Inc., et al., No. 3:20-cv-112 (E.D. Va. Oct. 26, 2020).  Plaintiffs alleged defendants made material misstatements and omissions concerning the Company’s pricing strategy, alleged anti-competitive conduct, and the impact of a finding of liability in a separate antitrust private suit.  The Court denied defendants’ motions to dismiss the amended complaint, holding that plaintiffs adequately pled material misrepresentations or omissions, falsity, scienter and loss causation.
 

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

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

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

On October 14, 2020, Judge Alison J. Nathan of the United States District Court for the Southern District of New York dismissed with prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a pharmaceutical company, certain of its executives, and investors that participated in a go-private merger with the company.  Altimeo Asset Management v. WuXi PharmaTech (Cayman) Inc., No. 19-cv-1654 (AJN), slip op. (S.D.N.Y. Oct. 14, 2020).  Plaintiff alleged that the company made misstatements about its long-term plans and future prospects in connection with the going-private transaction.  The Court held that plaintiff failed to plausibly allege that the company made a material misrepresentation or omission.
 

On October 14, 2020, Judge Alison J. Nathan of the United States District Court for the Southern District of New York dismissed with prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a lending company and certain of its executives.  Burr v. Equity Bancshares, Inc., No. 19-cv-4346 (AJN), slip op. (S.D.N.Y. Oct. 14, 2020).  Plaintiffs alleged that the company failed to disclose problems with its largest credit relationship—involving two companies that ultimately declared Chapter 11 bankruptcy—and that its loan loss reserves in its disclosures to the SEC were false and misleading.  The Court held that plaintiffs failed to adequately allege any actionable misstatement or omission.
 

On October 7, 2020, Judge Allison Burroughs of the District of Massachusetts granted in full a motion to dismiss a putative securities class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) against a cloud-based remote software services company (the “Company”) and certain of its executives.  Wasson v. LogMeIn Inc., No. 18-cv-12330 (D. Mass. Oct. 7, 2020).  Plaintiffs alleged defendants made materially false and misleading statements concerning the Company’s integration of a newly acquired competitor.  The Court granted defendants’ motion to dismiss plaintiffs’ amended complaint, holding that plaintiffs failed to plead any actionable material misstatements or scienter, but granted plaintiffs leave to amend.
 

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

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

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

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

On September 11, 2020, Judge William H. Orrick of the Northern District of California denied a motion to dismiss a putative securities class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, against a software company (the “Company”) and two of its executive officers.  Scheller v. Nutanix Inc., No. 19-cv-01651 (N.D. Cal. Sept. 11, 2020).  This case was previously dismissed with leave to amend by Judge Orrick in March, and was covered in our newsletter.  Plaintiffs filed a Second Amended Complaint (“SAC”) in an attempt to cure the prior pleading defects.  The Court noted that the SAC “suffers from many of the same deficiencies as [the] prior complaint” and held that certain categories of allegations were insufficient, but the Court allowed certain claims to proceed.
 

On September 14, 2020, Judge Pamela K. Chen of the Eastern District of New York granted in full a motion to dismiss a putative securities class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) against a steel products manufacturer (the “Company”) and certain of its executives and former employees.  Ulbricht v. Ternium S.A. et al., No. 18-cv-06801-PKC (E.D.N.Y. Sept. 14, 2020).  Plaintiffs, investors of the Company’s American Depository Shares (“ADSs”), alleged that defendants made materially false and misleading statements and omissions in connection with the purchase of the Company’s subsidiary by the Venezuelan government by failing to disclose the alleged bribery scheme that helped facilitate the transaction.  The Court granted defendants’ motion to dismiss plaintiffs’ consolidated amended complaint, and—although “skeptical” of plaintiffs’ likelihood of success—the Court granted plaintiffs leave to amend.
 

On September 8, 2020, Judge Haywood S. Gilliam, Jr. of the United States District Court for the Northern District of California granted in part and denied in part a motion to dismiss a putative securities fraud class action against a ridesharing company (the “Company”) and certain of its directors under Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”). In re Lyft Inc. Securities Litigation, No. 19 Civ. 2690 (HSG), 2020 WL 5366325 (N.D. Cal. Sept. 8, 2020).  Plaintiff alleged that the Company’s prospectus and registration statement (the “Registration Statement”) contained numerous false or misleading statements and omissions, including those concerning reported sexual assaults by the Company’s drivers and defects with bicycles that were part of the Company’s bikeshare fleet.  Although the Court found that certain statements and omissions regarding rider safety were actionable, the Court dismissed plaintiff’s remaining claims for failure to allege falsity or because the statements constituted non-actionable puffery.
 

On September 9, 2020, Judge Lucy H. Koh of the United States District Court for the Northern District of California granted in part and denied in part a motion to dismiss a putative securities class action against a medical device company (the “Company”) and certain of its executive officers under Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5.  SEC Investment Mgmt. AB, et al. v. Align Technology, Inc., et al., No. 18-cv-06720-LHK (N.D. Cal. Sept. 9, 2020).  Plaintiff alleged that the Company made false or misleading statements regarding its strategies to curb competition in the market.  Plaintiff also asserted an insider trading claim against the Company’s CEO.  The Court largely granted defendants’ motion to dismiss, holding that plaintiff failed to adequately plead falsity for all but one alleged misrepresentation and, for the insider trading claim, that the trading activities of plaintiff and the CEO were not “contemporaneous.”
 

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

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

On September 1, 2020, Judge Marie S. Weiner of the Superior Court of California, County of San Mateo, addressing “an issue of first impression in the United States,” dismissed certain defendants from a putative class action asserting claims under the Securities Act of 1933 on the basis of a federal forum selection provision in the Delaware company’s certificate of incorporation.  Wong v. Restoration Robotics, Inc., No. 18-cv-2609, slip op. (Cal. Super. Ct. Sept. 1, 2020).  The decision is not citable precedent under California law, but it is summarized here because it is the first decision addressing the substantive enforceability of such provisions since they were held facially valid by the Delaware Supreme Court.
 

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

On August 25, 2020, U.S. District Judge Maryellen Noreika certified two classes of investors bringing claims against a student loan servicing company (the “Company”), certain of its executives, and the underwriters of two of the Company’s debt offerings.  Lord Abbett Affiliated Fund Inc., et al. v. Navient Corp., et al., No. 1:16-cv-00112 (D. Del. Aug. 25, 2020).  Plaintiffs asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“the Exchange Act”) and Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (“the Securities Act”) alleging that defendants inflated the price of the Company’s securities by concealing problems in its loan servicing practices and other risks.  The Court granted plaintiffs’ motion for class certification in part, certifying one class of investors with alleged claims under the Securities Act and a second narrowed class with alleged claims under the Exchange Act.
 

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

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

On August 6, 2020, Judge Jed S. Rakoff of the United States District Court for the Southern District of New York denied a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a sports entertainment company and certain of its executives.  City of Warren Police & Fire Ret. Sys., v. World Wrestling Ent. Inc., No. 20-CV-2031 (JSR), 2020 WL 4547217, at *1 (S.D.N.Y. Aug. 6, 2020).  Plaintiff alleged that the company made misrepresentations about its media contracts in the Middle East and North Africa (“MENA”).  The Court held that the complaint, “while not a model of clarity, adequately alleges an overall claim of securities fraud,” including with respect to actionable misrepresentations, scienter, and loss causation.
 

On August 12, 2020, the United States Court of Appeals for the Second Circuit affirmed a decision by the United States District Court for the Southern District of New York denying a motion for relief from judgment filed by plaintiffs in a putative class action asserting claims against a restaurant chain and certain of its executives under the Securities Exchange Act of 1934.  Metzler Inv. Gmbh v. Chipotle Mexican Grill, Inc., —F.3d—, 2020 WL 4644799 (2d Cir. 2020).  As discussed in our prior post, the district court dismissed plaintiffs’ second amended complaint with prejudice, holding that plaintiffs had not adequately alleged actionable misstatements and denying plaintiffs’ request for leave to amend.  Id. at *6.  Following that decision, plaintiffs moved for relief from the judgment and again sought leave to file a third amended complaint.  Id.  The district court denied plaintiffs’ post-judgment motion, concluding that plaintiffs had failed to demonstrate newly-discovered facts that would justify vacating the judgment, and that, in any event, further amendment would be futile.  Id.  The Second Circuit affirmed, holding that the district court applied the correct legal standard in adjudicating the post-judgment motion and did not abuse its discretion.  The Second Circuit thus did not need to reach the question of futility.
 

On August 3, 2020, the Second Circuit reversed the dismissal of Exchange Act claims against a real estate investment trust (the “Company”) and several of its senior officers for alleged misstatements regarding the financial health of one of the Company’s healthcare facility operators (the “Operator”).  In re Omega Healthcare Investors, Inc. Securities Litigation, No. 19-1095 (2d Cir. Aug. 3, 2020).  The district court had granted defendants’ motion to dismiss the amended complaint, finding that although plaintiffs adequately pled material misstatements, they failed to sufficiently plead scienter.  The Second Circuit vacated the dismissal, holding that plaintiffs sufficiently pled scienter based on defendants’ alleged consciously reckless omission of certain material information that made certain statements in public filings and conference calls regarding the financial health of the Operator misleading.
 

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

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.
 

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.
 

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.
 

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.
 

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.
 

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. 
 

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.
 

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.”
 

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.
 

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.
 

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.
 

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.
 

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.
 

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. 
 

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.
 

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.
 

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.
 

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.
 

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.
 

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.
 

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.”
 

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.
 

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.
 

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.
 

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.
 

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.
 

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.
 

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.
 

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.
 

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.
 

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.
 

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.
 

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.
 

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.
 

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.
 

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.
 

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.
 

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.”
 

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.
 

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).
 

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.
 

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. 
 

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.
 

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.

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. 
 

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.
 

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.
 

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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.”
 

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.
 

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.
 

On March 12, 2020, Judge Naomi Reice Buchwald 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 against a shoe manufacturer and certain of its executives.  In re Skechers USA, Inc. Sec. Lit., No. 18-CV-8039 (NRB) (S.D.N.Y. Mar. 12, 2020).  Plaintiffs alleged that the company made misstatements and omissions in earnings calls and SEC filings regarding the growth rate of expenses in comparison to the growth rate of sales.  The Court held that plaintiffs failed to adequately allege either an actionable misrepresentation or scienter, and denied leave to amend.

 

On March 13, 2020, Judge Philip S. Gutierrez of the United States District Court for the Central District of California denied class certification in an action against a restaurant franchising company and certain of its executives asserting claims under Section 12(a)(2) of the Securities Act of 1933 in connection with the company’s IPO.  Vignola v. FAT Brands, Inc., No. CV 18-7469 PSG (C.D. Cal. Mar. 13, 2020), ECF No. 94.  The Court previously determined at the motion to dismiss stage that allegations based on a statement in an SEC filing expressing confidence in the “track record and vision” of the management team was potentially misleading because it allegedly omitted that certain subsidiaries had entered bankruptcy and the involvement of a company executive in managing those subsidiaries.  Slip op. at 3, 6-7.  However, the Court denied the motion for class certification, holding that the predominance and superiority requirements were not satisfied because individualized inquiries would be necessary to establish putative class members’ knowledge (or lack of knowledge) of the bankruptcies and the executive’s involvement with those subsidiaries.  Id. at 7, 9.
 

On March 16, 2020, Judge Haywood S. Gilliam, Jr. of the United States District Court for the Northern District of California dismissed a putative class action against a technology company and its executives asserting claims under Section 10(b) of the Securities Exchange Act of 1934.  Iron Workers Loc. 580 Jt. Funds v. NVIDIA Corp., No. 18-CV-07669-HSG, 2020 WL 1244936 (N.D. Cal. Mar. 16, 2020).  Plaintiffs alleged that the company made misrepresentations regarding its sales of graphic processing units (“GPUs”) for computer gaming and the proportion of such sales that were actually made to cryptocurrency miners—for which demand was allegedly more volatile.  The Court dismissed the action, holding that plaintiffs failed to adequately plead that the alleged misstatements were materially false or made with scienter, while permitting plaintiffs to file an amended complaint to attempt to cure these deficiencies.

 

On March 16, 2020, Judge Kimba Wood 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 against a restaurant chain and certain of its executives.  Oklahoma Law Enforcement Ret. Sys. v. Papa John’s Int’l, Inc., No. 18-CV-7927 (KMW), 2020 WL 1243808 (S.D.N.Y. Mar. 16, 2020).  Plaintiff alleged that the company made misleading public statements regarding the company’s culture while at the same time enabling workplace sexual harassment.  The Court held that plaintiff had failed to adequately allege any actionable misstatements or omissions but granted plaintiff leave to amend to attempt to cure the deficiencies.

 

On March 18, 2020, the Supreme Court of Delaware reversed a decision of the Delaware Court of Chancery and affirmatively endorsed the enforceability of federal forum-selection provisions, in a Delaware corporation’s certificate of incorporation, that require claims under the Securities Act of 1933 be filed in federal court as opposed to state court.  Salzberg v. Sciabacucchi, No. 346, 2019 (Del. Mar. 18, 2020).  The decision should help to stem the tide of, or even substantially eliminate, state court Securities Act filings that have increasingly proliferated since the March 2018 decision of the United States Supreme Court in Cyan Inc. v. Beaver County Employees Retirement Fund, 138 S. Ct. 1061 (2018), which held that state courts have jurisdiction to adjudicate class actions brought under the Securities Act, notwithstanding the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”), and that such actions generally cannot be removed from state to federal court.
 

On March 9, 2020, Judge William H. Orrick 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 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, against a software company (the “Company”) and two of its executive officers.  Ryan Scheller, et. al. v. Nutanix, Inc., et. al., No. 19-cv-01651-WHO (N.D. Cal. Mar. 9, 2020).  Plaintiffs alleged—based primarily on statements allegedly made by seven confidential witnesses (the “CWs”)—that defendants made false and misleading statements and omissions concerning, among other things, the Company’s internal operations, business relationships, product quality, and sales performance.  The Court granted defendants’ motion to dismiss, finding that plaintiffs failed to allege that the Company’s public statements were false or misleading, and that plaintiffs failed to sufficiently allege scienter.
 

On March 9, 2020, Justice Andrew Borrok of the Supreme Court of the State of New York, New York County, Commercial Division, granted in part a motion to dismiss a putative securities class action asserting claims under Sections 11, 12 and 15 of the Securities Act of 1933 (the “Securities Act”) against a used car e-commerce company (the “Company”), certain of its executives and directors, and the underwriters for its initial public offering (“IPO”) of American Depository Shares (“ADSs”).  In re Uxin Limited Securities Litigation, No. 650427/2019 (N.Y. Sup. Ct. Mar. 9, 2020).  Plaintiffs alleged that the Company made materially false and misleading statements and omissions concerning changes to the Company’s business model and certain financial and operational data reported by the Company in connection with its IPO.  The Court granted in part and denied in part defendants’ motion to dismiss.
 

On March 2, 2020, Judge Paul A. Engelmayer of the United States District Court for the Southern District of New York dismissed 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 foreign insurance company (the “Company”) and certain current and former officers (the “individual defendants,” and collectively, “defendants”).  Long v. Fanhua Inc. et al., No. 1:18-CV-08183 (S.D.N.Y. Mar. 2, 2020).  Plaintiff, who commenced the action on behalf of all persons who purchased the Company’s American Depository Shares (“ADSs”), alleged that defendants failed to disclose certain related-party dealings and that the Company’s stock price declined once those dealings were disclosed to the market.  The Court dismissed plaintiff’s complaint and held that plaintiff’s reliance on uncorroborated short-seller reports was insufficient to state a claim. 
 

On February 28, 2020, Judge M. James Lorenz of the United States District Court for the Southern District of California dismissed a putative securities class action against an investment management company (“Company”) and its clearing bank (“Clearing Bank,” and collectively, “Defendants”) that alleged violations of Section 10(b) of the Securities and Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5.  Jiao v. Merrill Lynch, Pierce, Fenner & Smith, 17-cv-409-L (MDD) (S.D. Cal. Feb. 28, 2020).  Plaintiffs, who were customers of Defendants, brought the lawsuit after the Securities and Exchange Commission (“SEC”) entered into a consent and cease-and-desist order with Defendants (“SEC Order”) for violations of the Customer Protection Rule of the Exchange Act, 15 U.S.C. § 78aa; 17 C.F.R. § 240.15c3-3 (“CPR”), which required Defendants to maintain physical possession or control over customers’ fully paid and excess margin securities.  The Court dismissed the action with prejudice because claims under Section 10(b) require a plaintiff to plead and prove an “out-of-pocket” loss, which Plaintiffs failed to do.
 

On February 21, 2020, Judge George H. Wu of the United States District Court for the Central District of California adopted as final its tentative ruling, dated February 20, dismissing a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 against a real estate investment trust and certain of its executives.  Brian Barry v. Colony NorthStar, Inc. et al., No. 18-CV-02888 (C.D. Cal. Feb. 21, 2020).  Plaintiff alleged that the company made misrepresentations in public statements regarding financial projections and fundraising that were misleading because those projections had become unreachable.  The Court held that plaintiff failed to allege an actionable misstatement or omission and, because plaintiff had already amended its complaint twice before, the Court denied leave to amend.
 

On February 25, 2020, the United States Court of Appeals for the Tenth Circuit affirmed the dismissal of a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 against a money-transfer services company and certain of its former executives.  Smallen v. W. Union Co.,—F.3d—, 2020 WL 893826 (10th Cir. 2020).  Plaintiff alleged that the company made misrepresentations in SEC filings and public statements concerning its compliance with anti-money laundering and anti-fraud laws.  The lower court determined that plaintiff failed to adequately allege scienter.  Id. at *1.  The Tenth Circuit affirmed, holding that, although the complaint “may give rise to some plausible inference of culpability,” it fell short of the heightened standard imposed by the Private Securities Litigation Reform Act (“PSLRA”).  Id.

 

On February 27, 2020, Judge Loretta A. Preska 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 against a precious metals mining company and certain of its executives.  In Re Pretium Resources Inc. Sec. Lit., No. 18-CV-08199 (S.D.N.Y. Feb. 27, 2020).  Plaintiffs alleged that the company made misleading public statements expressing confidence in an existing plan for a particular gold mine, notwithstanding substantially increased excavation costs the mine was facing.  As noted by the Court and discussed in our prior post, the Southern District of New York previously dismissed another action filed against the company regarding alleged misrepresentations relating to its projections for the same mine.  Here, too, the Court held that plaintiffs failed to allege an actionable omission or scienter.
 

On February 26, 2020, Judge Phyllis J. Hamilton of the United States District Court for the Northern District of California dismissed certain claims in a putative class action asserting violations of the Securities Act of 1933 and California state law by a cryptocurrency firm and certain of its executives.  Vladi Zakinov, et al. v. Ripple Labs, Inc., et al., No. 18-CV-06753-PJH (N.D. Cal. Feb. 26, 2020).  Plaintiff alleged that the cryptocurrency created by the company was an unregistered security and, further, that the company had misrepresented the cryptocurrency’s long-term value.  The Court held that plaintiff had sufficiently alleged that the cryptocurrency was an unregistered security, but dismissed the misrepresentation claims for failure to allege an actionable misstatement or omission.
 

On February 26, 2020, the United States Supreme Court, in a unanimous decision by Justice Samuel Alito, held that for purposes of assessing the appropriate statute of limitations for a breach of fiduciary duty claim under the Employee Retirement Income Security Act of 1974 (“ERISA”), a plaintiff does not gain “actual knowledge” of allegedly improper investments disclosed in documents that he receives but does not read or cannot recall reading.  Intel Corp. Inv. Policy Comm. v. Sulyma,—U.S.—, 2020 WL 908881 (2020).  Thus, under such circumstances, the applicable statute of limitations is ERISA’s general six-year statute of repose, which begins to run from “the date of the last action which constituted a part of the breach or violation,” rather than the three-year limitations period, which begins to run from the earliest date on which a plaintiff gains “actual knowledge” of the breach or violation.  Id. at *2.
 

On February 19, 2020, Judge Pamela A. Barker of the United States District Court for the Northern District of Ohio 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 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, against an aerospace component design and manufacturing company (the “Company”) and two of its executive officers.  In re TransDigm Group Inc., No. 17-cv-01677-PAB (N.D. Ohio Feb. 19, 2020).  Plaintiffs alleged that defendants made materially false and misleading statements and omissions concerning the Company’s operations, business, and prospects that resulted in a drop in the Company’s stock price when the Company made certain purported corrective disclosures.  The Court granted defendants’ motion to dismiss plaintiffs’ Third Amended Complaint, finding that plaintiffs failed to sufficiently allege materiality or loss causation, and denied leave to amend.
 

On February 6, 2020, Judge James S. Moody, Jr. of the United States District Court for the Middle District of Florida dismissed a putative class action asserting violations of Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated thereunder against a foodservice equipment company (the “Company”) and certain of its former officers.  Metropolitan Transportation Authority Defined Benefit Pension Plan Master Trust v. Welbilt Inc., No. 8:18-cv-03007 (M.D. Fl. Feb. 6, 2020).  Plaintiffs alleged that the Company made misleading statements about its disclosure controls in quarterly and annual reports from February 2017 to November 2018, and that its share price fell after it revealed that its financial statements should not be relied upon because of various accounting and reporting errors.  The Court dismissed the complaint without prejudice, holding that plaintiffs failed to plead sufficient facts to give rise to a strong inference of scienter.
 

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

On February 4, 2020, Judge James Donato of the United States District Court for the Northern District of California partially dismissed a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 against a food supplement company and certain of its former executives.  In Re TerraVia Holdings, Inc. Sec. Litig., No. 16-CV-06633-JD, 2020 WL 553939 (N.D. Cal. Feb. 4, 2020).  Plaintiffs alleged that the company made misrepresentations regarding the health benefits and commercial viability of certain ingredients it created and sourced for its food manufacturing partners, based on the company having received reports that these ingredients were causing illnesses, ultimately leading to product recalls.  The Court held that certain of the alleged misstatements were non-actionable, but that plaintiffs’ allegations respecting certain other alleged misstatements were sufficient to state a claim.

On February 4, 2020, Judge Catherine C. Blake of the United States District Court for the District of Maryland dismissed certain claims in a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 against a media company and certain of its executives.  In re Sinclair Broadcast Group, Inc. Sec. Litig., slip op., No. 18-cv-2445 (D. Md. Feb. 4, 2020).  Plaintiffs alleged that the company made various misstatements to the FCC in connection with an ultimately unsuccessful merger with another media company, and that the company had engaged in an illegal price-fixing conspiracy regarding advertising rates.  The Court dismissed most of plaintiffs’ claims, but held that plaintiffs had sufficiently alleged falsity and scienter with respect to certain specific statements concerning proposed divestitures in connection with the merger.

On February 5, 2020, Judge Matthew F. Kennelly of the United States District Court for the Northern District of Illinois sustained some but not all claims in a putative class action asserting violations of Sections 10(b) and 18 of the Securities Exchange Act of 1934 against a pharmaceutical company and certain of its executives.  Twin Master Fund, Ltd. v. Akorn, Inc., No. 19-CV-3648 (N.D. Ill. Feb. 05, 2020).  Plaintiffs alleged that the company knowingly made false statements and omissions regarding the company’s compliance with FDA regulations governing data integrity and manufacturing in public statements and filings and in a publicly filed merger agreement.  The Court held that plaintiffs had adequately alleged misrepresentations as to a number of statements, but dismissed plaintiffs’ claims with respect to certain others.

On February 4, 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 Section 10(b) of the Securities Exchange Act of 1934 against a tobacco company and certain of its executives.  In re Philip Morris Int’l Inc. Sec. Litig., No. 18-CV-08049 (S.D.N.Y. Feb. 4, 2020).  Plaintiffs alleged that the company made misrepresentations in securities filings and public statements regarding clinical studies it published in connection with its application to the U.S. Food and Drug Administration to sell its vapor-based product in the United States and to market it as presenting a lower risk than traditional tobacco products.  Plaintiffs also alleged that the company made misrepresentations regarding sales growth in Japan for the same product.  The Court held that plaintiffs failed to allege an actionable misstatement or omission or to establish scienter, but granted leave to amend with respect to certain allegations.

On January 28, 2020, Judge Dean D. Pregerson of the United States District Court for the Central District of California denied defendant’s motion to dismiss a putative securities class action brought against a multinational technology and communications corporation headquartered in Tokyo, Japan, in connection with American Depositary Receipts (“ADRs”) which were not sponsored by the foreign issuer and were traded on over-the-counter markets.  Stoyas v. Toshiba Corp., No. 15-cv-4194 (C.D. Cal. 2020).  The Court had previously dismissed plaintiffs’ first amended complaint and denied leave to amend.  The Court’s dismissal of plaintiffs’ claims under Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), and Rule 10b-5 promulgated thereunder, was based on the Supreme Court’s seminal decision in Morrison v. National Australia Bank Ltd., 561 U.S. 247 (2010), which held that Section 10(b) and SEC Rule 10b-5 only apply to (i) the purchase or sale of a security listed on a U.S. securities exchange, or (ii) the purchase or sale of any other security in the United States. 
 

On January 27, 2020, Judge Richard G. Seeborg 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 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, against a pharmaceutical company (the “Company”) and two of its executive officers.  Immanuel Lake, et al. v. Zogenix, Inc., et. al., No. 19-cv-01975-RS (N.D. Cal. Jan. 27, 2020).  Plaintiffs alleged that defendants made material omissions concerning the Company’s New Drug Application (“NDA”) it was submitting to the U.S. Food and Drug Administration (“FDA”) for a medication designed to treat seizures.  According to plaintiffs, the Company’s stock price fell approximately 20% when the alleged omission was revealed to the market through the FDA’s rejection of the NDA.  The Court granted defendants’ motion to dismiss, finding that plaintiffs failed to sufficiently allege a misstatement or omission of a material fact and scienter, but granted leave to amend.
 

On January 21, 2020, the Court of Appeals of Texas dismissed for lack of personal jurisdiction a putative class action against a chemical products manufacturer (the “Company”), certain of its officers and directors, and underwriters of the Company’s initial public offering (“IPO”) and secondary public offering (“SPO”) (the “Underwriters”).  The Court remanded claims against the remaining defendants, companies from which the Company was spun off in the IPO (“Predecessors”), for the trial court to transfer the venue from Dallas County to Montgomery County.  Venator Materials PLC v. Macomb Cnty. Employees’ Retirement Sys. & Firemen’s Retirement Sys. of St. Louis, No. 05-19-01177-CV, 2020 WL 289296 (Tex. App. Jan. 21, 2020).  Plaintiffs allege that defendants violated sections 11, 12(a)(2), and 15 of the Securities Act of 1933 by failing to disclose the effects of a fire at one of the Company’s facilities.  The Court held that the Texas contacts of the Company, the individual defendants, and the Underwriters were insufficient to confer general or specific personal jurisdiction.
 

On January 17, 2017, Judge Nicholas G. Garaufis of the United States District Court for the Eastern District of New York dismissed a putative class action asserting claims under Sections 10(b), 14(a), and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5, against a tax preparation services provider (the “Company”) and its former CEO and CFO (collectively, “Defendants”).  In re Liberty Tax, Inc. Sec. Litig., No. 2:17-CV-07327 (NGG) (RML) (E.D.N.Y. Jan. 17, 2020).  Plaintiffs alleged that Defendants made false and misleading statements and omissions about the Company’s compliance efforts and internal controls, which concealed the CEO’s extensive misconduct that ultimately caused steep declines in the Company’s stock price.  The Court dismissed the action on the basis that the statements at issue were unrelated to the CEO’s misconduct or were mere puffery, and that plaintiffs failed to establish loss causation linked to any corrective disclosures. 
 

On January 3, 2020, Judge Edmond E. Chang of the United States District Court for the Northern District of Illinois Eastern Division granted Plaintiffs’ motion to certify a class of investors in an action alleging that two major food companies (“Defendants”) manipulated the wheat futures market.  Plaintiffs asserted claims against Defendants under Sections 6(c)(1) and 9(a)(2) of the Commodity Exchange Act (“CEA”), under Section 2 of the Sherman Antitrust Act (“Sherman Act”), and for common law unjust enrichment.  Harry Ploss v. Kraft Foods Group Inc. et al., No. 1:15-cv-02937 (N.D. Ill. Jan. 3, 2020).     

Looking ahead, we preview cases currently pending before the Supreme Court—which have already been accepted for review by the Court—that may be of particular interest to readers of the Need-to-Know Litigation Weekly.  These cases pertain to various topics in Securities, Enforcement, and, as to one, arbitration.

On December 30, 2019, Judge Robert B. Kugler of the United States District Court for the District of New Jersey denied a motion to dismiss a putative class action raised under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 against a student loan servicer (the “Company”) and certain of its officers (collectively “Defendants”).  In Re Navient Corp. Secs. Litig., No. CV 17-8373 (RBK/AMD), 2019 WL 7288881 (D.N.J. Dec. 30, 2019).  Plaintiff claimed that Defendants made false or misleading statements about lawsuits brought against the Company by the Consumer Financial Protection Bureau (“CFPB”) and several State Attorneys Generals (“AGs”) for a “forbearance scheme” that allegedly harmed student borrowers in the repayment process.  The Court denied Defendants’ motion to dismiss for failure to state a claim, finding that plaintiff adequately pleaded falsity, scienter, and loss causation.

On December 10, 2019, Judge Jennifer A. Dorsey of the United States District Court for the District of Nevada denied a motion to dismiss a putative securities class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 against a life science company specializing in cannabidiols (“CBD”) and certain of the company’s executives.  In re CV Sciences, Inc. Sec. Litig., 2019 WL 6718086 (D. Nev. Dec. 10, 2019).  Plaintiffs alleged that the company made misleading statements that a CBD product was proprietary and had a patent application pending by failing to disclose that the U.S. Patent and Trademark Office (“USPTO”) had rejected its patent application twice, including a “final rejection” on the ground that the proposed invention was obvious.  Id. at *1.  The Court held that plaintiffs had sufficiently alleged the falsity of the alleged misrepresentations at the motion-to-dismiss stage, and therefore declined to dismiss the complaint.

On December 10, 2019, the United States Court of Appeals for the Second Circuit affirmed the dismissal of a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 against a chicken producing company and certain of its executives.  Gamm v. Sanderson Farms, Inc., —F.3d—, 2019 WL 6704666 (2d Cir. 2019).  Plaintiffs alleged that defendants’ SEC filings contained misrepresentations because they failed to disclose an illegal antitrust conspiracy to drive up chicken prices by reducing supply and to manipulate a chicken price index.  The Court held that the complaint was properly dismissed because plaintiffs failed to plead with sufficient particularity facts supporting the alleged antitrust conspiracy, explaining that “when a securities fraud complaint claims that statements were rendered false or misleading through the nondisclosure of illegal activity, the facts of the underlying illegal acts must be pleaded with particularity in accordance with the requirements of Rule 9 and the PSLRA.”  Id. at *9.

On December 3, 2019, Judge John W. Lungstrum of the United States District Court for the District of Kansas denied a motion to dismiss a putative securities class action involving claims brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, against a financial services company (the “Company”), three of its senior officers and several of its founder directors.  Yellowdog Partners, LP and Carpenters Pension Fund of Illinois v. CURO Group Holdings Corp. et al., 18-cv-02662 (D. Kan. Dec. 3, 2019).  Plaintiffs alleged that the Company and the three officer defendants made false and materially misleading statements concerning the Company’s business transition away from its most profitable product and its effect on the Company’s financial condition.  The Court denied defendants’ motion to dismiss, finding that plaintiffs sufficiently pleaded falsity and scienter.
 

On November 6, 2016, Judge Michael A. Anello of the United States District Court for the Southern District of California denied defendants’ motion for summary judgment in a securities class action against a theme park and entertainment company (“defendant” or the “Company”), certain members of its management, and its largest shareholder.  Baker v. SeaWorld Entm’t, Inc., No. 14CV2129-MMA (AGS), 2019 WL 6118448 (S.D. Cal. Nov. 18, 2019).  Plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making materially misleading misstatements and omissions about the effect of Blackfish, a documentary film concerning killer whales in captivity, on attendance at the theme park and its earnings.  The Court denied defendants’ motion for summary judgment on the basis that there were genuine issues of material fact with respect to each element of a securities fraud claim. 

On November 22, 2019, Judge Jeffrey J. Helmick of the United States District Court for the Northern District of Ohio dismissed a putative class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 against a real estate investment trust (“REIT”) and its former officers (collectively “Defendants”), along with a healthcare company with which the REIT transacted (the “Company”) and its officers.  Boynton Beach Firefighters' Pension Fund v. HCP, Inc., No. 3:16-CV-1106, 2019 WL 6251435 (N.D. Ohio Nov. 22, 2019).  Plaintiffs alleged Defendants made false or misleading statements about the Company’s future prospects, but knew or should have known that the Company was engaged in unlawful billing practices because of due diligence in connection with the transaction with the Company and a subsequent government investigation.  The Court held that plaintiffs’ allegations of scienter were based on impermissible hindsight pleading and dismissed the complaint.
 

On November 15, 2019, Judge Denise Cote of the United States District Court for the Southern District of New York denied a motion seeking to revive claims under the Securities Exchange Act of 1934 against the underwriter of a Regulation A+ offering.  In Re Longfin Corp. Sec. Class Action Litig., No. 18 CV 2933(DLC), 2019 WL 6045308 (S.D.N.Y. Nov. 15, 2019).  As noted in our prior post, on July 29, 2019, the Court granted the underwriter’s motion for reconsideration and dismissed the claims against it with prejudice for failure to adequately allege scienter.  In response to that ruling, plaintiffs filed a motion for relief from the prior order under Rule 60(a)(2) of the Federal Rules of Civil Procedure and sought to file a new amended complaint, based on the contention that plaintiffs had identified new evidence.  Judge Cote held, however, that the proposed new allegations still failed to adequately allege scienter.

 

On November 15, 2019, Judge Robert F. Rossiter, Jr. of the United States District Court for the District of Nebraska dismissed a putative class action brought by investors who maintained investment accounts at a brokerage company.  Plaintiffs asserted claims for breach of contract and negligence under Nebraska state law against the brokerage company and its affiliates, alleging that they failed to properly manage a tax-loss harvesting feature of certain investment portfolios.  Knowles v. TD Ameritrade Holding Corp., No. 8:19-cv-47, slip op. (D. Neb. Nov. 15, 2019), ECF No. 36.  The Court held that these claims were precluded by the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”) and dismissed the action with prejudice.
 

On November 19, 2019, Judge William M. Campbell of the United States District Court for the Middle District of Tennessee granted in part and denied in part motions to dismiss a putative class action under the Securities Act of 1933 and the Securities Exchange Act of 1934 against a healthcare company, certain of its officers and directors, and a private equity firm that previously owned the company.  Plaintiffs alleged that the company failed to disclose that allegedly improper business practices were responsible for its revenue growth.  In re Envision Healthcare Corp. Sec. Litig., No. 3:17-CV-01112, 2019 WL 6168254 (M.D. Tenn. Nov. 19, 2019).  The Court held that certain of the claims against the company and the individual defendants were adequately pleaded and others were not, but dismissed all claims against the private equity firm for failure to adequately allege scienter.
 

On November 13, 2019, Judge Leo T. Sorokin of the United States District Court for the District of Massachusetts dismissed a putative securities class action involving claims brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, against a biopharmaceutical company (the “Company”) and two of its senior officers.  LSI Design and Integration Corp. v. Tesaro Inc. et al., 18-cv-12352 (D. Ma. Nov. 13, 2019).  Plaintiff alleged that the Company and its CEO and CFO made materially misleading statements in violation of the Exchange Act concerning the Company’s financial condition and drug sales.  The Court dismissed the amended complaint finding that plaintiff failed to sufficiently plead falsity or scienter.
 

On October 24, 2019, Judge Charles T. Lee of the Connecticut Superior Court granted a motion to strike claims alleging violations of Sections 11, 12(a) and 15 of the Securities Act of 1933 (the “Securities Act”) in connection with an initial public offering brought against the issuer, certain of its officers, and the underwriters of the offering.  City of Livonia Retiree Health & Disability Benefits Plan v. Pitney Bowes Inc., No. X08 FST CV 18 6038160 S (Conn. Super. Ct. Oct. 24, 2019).  The Court had previously granted a protective order staying discovery pending the disposition of the motion to strike pursuant to the discovery stay provided in the Private Securities Litigation Reform Act, in one of the first state court decisions after the Supreme Court’s decision in Cyan Inc. v. Beaver Cty. Employees Ret. Fund, 138 S. Ct. 1061 (2018).  See State Court Stays Discovery Under the PSLRA During Pendency of Motion to Strike, Need to Know Litigation Newsletter (May 29, 2019), https://www.lit-sl.shearman.com/State-Court-Stays-Discovery-Under-The-PSLRA-During-Pendency.  In granting the motion to strike, the Court held that plaintiffs had failed to plead violations of the Securities Act because they did not identify any actionable misstatements or omissions from the relevant offering documents.
 

On October 29, 2019, Judge Charles R. Breyer of the United States District Court for the Northern District of California denied a motion to dismiss a putative securities class action brought against a pharmaceutical wholesaler and two of its former executives.  Evanston Police Pension Fund v. McKesson Corp., et al., 18-cv-06525-CRB (N.D. Cal. Oct. 29, 2019).  Plaintiffs asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, alleging that defendants knew about and participated in a price-fixing conspiracy that allowed the company to profit from the inflated prices of generic drugs during the alleged class period and caused the company to suffer decreased earnings once reports revealed government investigations into alleged price-fixing and prices dropped.  The Court denied defendants’ motion to dismiss, holding that plaintiffs adequately alleged material misstatements, scienter, and loss causation at the pleading stage.
 

On October 16, 2019, Judge Jorge L. Alonso of the United States District Court for the Northern District of Illinois Eastern Division dismissed a putative securities class action against an in-flight internet connectivity services provider (the “Company”) and some of its current and former executives.  Pierrelouis v. Gogo Inc., et al., No. 18-cv-04473 (N.D. Ill. Oct. 16, 2019).  Plaintiffs, who brought claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, alleged that defendants misrepresented the Company’s financial health and the performance and reliability of its in-flight internet services by failing to disclose the extent of a de-icing fluid issue that was affecting its ability to provide those services, and that the eventual disclosure of the issue caused the Company’s stock price to decline.  The Court held that plaintiffs failed to plead a material misrepresentation or omission and also failed to adequately allege a strong inference of scienter, and therefore dismissed the amended complaint without prejudice.
 

On October 18, 2019, Judge Edward J. Davila 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 Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”) and Item 303 of Regulation S-K against a medical technology company (the “Company”) and certain of its executives and directors, venture capital firms, and underwriters.  In re Restoration Robotics, Inc. Securities Litigation, No. 18-cv-03712 (N.D. Cal. Oct. 18, 2019).  Plaintiff alleged that defendants made materially misleading statements and omissions concerning the Company’s marketing function, hair transplant technology, product sales and revenue in offering documents in connection with the Company’s initial public offering (“IPO”).  The Court granted in part and denied in part defendants’ motion to dismiss, and granted plaintiff leave to amend to cure the complaint’s deficiencies.
 

On October 4, 2019, Judge Robert Lasnik of the United States District Court for the Western District of Washington granted in part and denied in part a motion to dismiss a putative securities class action asserting claims under the Securities Exchange Act of 1934 against a technology company and certain of its executives.  In re Impinj, Inc., Sec. Litig., No. C18-5704 RSL, 2019 WL 4917101 (W.D. Wash. Oct. 4, 2019).  The Court held that plaintiffs failed to alleged falsity as to certain alleged misrepresentations and dismissed claims against one of the company’s executives for failure to adequately allege scienter, but otherwise upheld plaintiffs’ claims.

 

On September 26, 2019, Justice Saliann Scarpulla of the New York State Supreme Court, County of New York, Commercial Division, dismissed a putative class action against a dental products and services company and certain of its executives and directors asserting claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933.  In re Densply Sirona, Inc. S’holders Litig., No. 155393/2018 (Sup. Ct. N.Y. Cnty., Sept. 26, 2019).  Plaintiffs alleged that defendants made material misrepresentations in a registration statement filed with the SEC in connection with a merger.  The crux of plaintiffs’ allegations was that the registration statement failed to disclose material information about an alleged “anticompetitive scheme” to control supply and distribution of the company’s products.  The Court held that, even though New York’s heightened pleading standard for fraud claims did not apply in the case at bar, the alleged misstatements were non-actionable statements of opinion or puffery or were not misleading when made.

 

On October 9, 2019, Judge C. Darnell Jones, II of the United States District Court for the Eastern District of Pennsylvania dismissed a putative securities class action asserting claims under the Securities Exchange Act of 1934 against a manufacturer of equipment and tools used to assemble semiconductors and its CEO and CFO.  Kumar v. Kulicke & Soffa Indus., Inc., No. CV 19-0362, 2019 WL 5081896 (E.D. Pa. Oct. 9, 2019).  Based on the company’s disclosure of control deficiencies, improper transactions by an unnamed “senior finance employee,” the resignation of the company’s CFO, and amended financial statements, plaintiffs alleged that the company’s SEC filings and SOX certifications contained material misrepresentations.  Id. at *2.  The Court held that plaintiffs had identified actionable misstatements as to the CFO but had not adequately alleged scienter and, therefore, dismissed the case, while allowing plaintiffs leave to file an amended complaint.

 

On September 30, 2019, Judge Ann M. Donnelly of the United States District Court for the Eastern District of New York dismissed a putative securities class action asserting claims brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) against a footwear retailer (the “Company”) and several of its executives.  City of Warren Police and Fire Retirement System v. Foot Locker Inc. et al., 18-cv-01492 (E.D.N.Y. Sept. 30, 2019).  Plaintiffs alleged that the Company and its executives made materially misleading statements and omissions in violation of the Exchange Act concerning its competitive position in the market, the strength of the Company’s relationship with its vendors, and its product allocation and inventory.  The Court dismissed the complaint without prejudice, holding that plaintiffs failed to sufficiently plead falsity and scienter, and granted plaintiffs leave to amend.

On September 30, 2019, Judge J. Paul Oetken of the United States District Court for the Southern District of New York dismissed a putative securities class action brought against a pharmaceutical company and certain of its current and former executives.  Tung v. Bristol-Myers Squibb Co., et al., 18-cv-1611 (S.D.N.Y. Sept. 30, 2019).  Plaintiffs allege that the pharmaceutical company (the “Company”) and defendant executives made materially misleading statements and omissions concerning the design of the Company’s clinical trial that tested the efficacy of a newly-developed anticancer drug in violation of Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder.  The Court dismissed the claims finding that plaintiffs failed to sufficiently plead scienter, but granted plaintiffs leave to amend to address the pleading deficiencies.

On September 30, 2019, Judge Loretta A. Preska of the United States District Court for the Southern District of New York dismissed federal securities claims brought against a Japanese investment advisor and asset manager (the “Company”), its parent, and its former CEO.  Alfandary, et al. v. Nikko Asset Management, et al., 17-cv-05137 (S.D.N.Y. Sept. 30, 2019).  Plaintiffs, former senior executives of the Company or one of its subsidiaries, alleged that defendants engaged in a scheme to devalue plaintiffs’ stock acquisition rights (“SARs”) and to force them to sell their SARs back to the Company at the artificially deflated price, in violation of section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder.  The Court dismissed the Exchange Act claims finding that most plaintiffs failed to sufficiently allege a sale, and that all plaintiffs failed to allege reliance or loss causation.

On September 23, 2019, Judge Denise J. Casper of the United States District Court for the District of Massachusetts denied class certification in a securities fraud action brought against a biopharmaceutical company (the “Company”) and several of its current and former officers and directors, and granted defendants’ motion for judgment on the pleadings in connection with plaintiff’s individual claim.  Karth v. Keryx Biopharmaceuticals, Inc., C.A. No. 16-11745-DJC (D. Mass. Sept. 23, 2019).  Plaintiff alleged that the Company misled investors about the number of entities that manufactured its FDA-approved drug and that its stock price declined when it revealed that it only had a single manufacturer, which was experiencing issues that affected the drug’s availability for sale.  The Court declined to certify the putative class, finding that plaintiff was an inadequate representative because the timing of his stock purchases made his claims atypical from those of the proposed class.  As to his individual claim, the Court granted defendants’ judgment on the pleadings, finding that plaintiff could not plead loss causation because the Company’s disclosures about the single manufacturer pre-dated the alleged stock drop by six months, and finding that plaintiff could not plead reliance because plaintiff purchased his shares two months after the curative disclosures.

On September 18, 2019, Judge Charles P. Kocoras of the United States District Court for the Northern District of Illinois dismissed a putative class action against a pharmaceutical company asserting claims under Section 10(b) of the Securities Exchange Act and Section 14(e) of the Williams Act.  Walleye Trading LLC v. AbbVie, Inc., No. 18 C 05114, 2019 WL 4464392 (N.D. Ill. Sept. 18, 2019).  Plaintiff alleged that the company’s statement announcing the preliminary results of a tender offer contained misrepresentations regarding the number of shares tendered and the price per share at which the tendered shares would be acquired, which later had to be corrected in a revised statement.  The Court held that plaintiff failed to allege that the alleged misrepresentation was false when made or to adequately allege a strong inference of scienter.

On September 18, 2019, Judge Edward M. Chen of the United States District Court for the Northern District of California dismissed a putative class action against a digital payment services company and certain of its officers asserting claims under Section 10(b) of the Securities Exchange Act.  Sgarlata v. PayPal Holdings, Inc., 17-CV-06956-EMC (N.D. Cal. Sept. 18, 2019).  Plaintiffs alleged that the company made misrepresentations in a series of press releases regarding a data breach.  The Court held that plaintiffs’ allegations were insufficient to raise a strong inference of scienter. 

On September 9, 2019, Judge Andrew P. Gordon of the United States District Court for the District of Nevada partially dismissed a putative securities class action brought against an airline company and certain of its current and former executives.  Brendon et al. v. Allegiant Travel Co. et al., 2:18-cv-01758 (D. Nev. Sept. 9, 2019).  Plaintiffs alleged in their first amended complaint (“FAC”) that the airline and its parent company (collectively, the “Airline”) and certain of its executives made materially misleading statements and omissions concerning the safety and mechanical reliability of its aircrafts and the competency of its maintenance staff in violation of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), Rule 10b-5 promulgated thereunder, and Section 20(a).  The Court allowed claims related to certain alleged false statements by defendants to proceed, dismissed certain of the claims that plaintiffs failed to sufficiently plead falsity and scienter, and granted plaintiffs leave to amend to address certain of the pleading deficiencies.

On September 12, 2019, the United States Court of Appeals for the Third Circuit reversed the dismissal of state law securities actions by individual investors who elected to opt out of a related class action against a pharmaceutical company (the “Company”).  North Sound Capital LLC v. Merck & Co. Inc., Nos. 18-2317 (3d Cir. Sept. 12, 2019).  Opt-out plaintiffs—individual investors who opted out of the class action and who filed separate state law actions against the Company—brought individual actions asserting claims under New Jersey common law, and included allegations that the District Court noted “track, sometimes verbatim, those filed in the class actions.”  The District Court held that such opt-out actions were precluded by the Securities Litigation Uniform Standards Act (“SLUSA”) and dismissed the individual actions.  The Third Circuit reversed, finding that SLUSA does not prohibit investors who opt out of a class action from bringing individual actions under state law.

On August 29, 2019, Judge Jesse M. Furman of the U.S. District Court for the Southern District of New York dismissed most of the securities fraud claims in a putative class action against a major industrial conglomerate (the “Company”), and certain of its current and former executives, brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5.  AP-Fonden v. Gen. Elec. Co., 2019 BL 325702 (S.D.N.Y. Aug. 29, 2019).  Plaintiffs alleged defendants concealed performance problems in the Company’s insurance and power divisions.  The Court found, among other things, that plaintiffs did not adequately plead claims based upon allegedly misrepresented liabilities in the Company’s long-term care (“LTC”) insurance portfolio.  The Court did not, however, dismiss plaintiffs’ claim that the Company failed to disclose that it used “factoring” arrangements to generate current revenue by selling future revenues to third parties.

On August 29, 2019, the United States Court of Appeals for the Second Circuit affirmed the dismissal of an action under the Commodities Exchange Act (“CEA”) alleging that defendants manipulated the foreign benchmark for the price of Brent crude oil by using fraudulent bids, offers and transactions.  Prime International Trading Ltd, et al., v. BP PLC, et al., No. 17-2233 (2d Cir. Aug. 29, 2019).  The Court held that the CEA provisions at issue did not apply extraterritorially because they lacked a “clear statement of extraterritorial effect” and the alleged misconduct was predominantly foreign.

Rejecting a widely-held consensus, on August 5, 2019, the United States Court of Appeals for the Second Circuit held that Section 47(b)(2) of the Investment Company Act (“ICA”) creates an implied private right of action for rescission in favor of a party to a contract that allegedly violates the ICA (or whose performance allegedly violates the ICA).  Oxford University Bank v. Lansuppe Feeder, Inc., No. 16-4061 (2d Cir. Aug. 5, 2019).

On August 28, 2019, Judge Lorna G. Schofield of the United States District Court for the Southern District of New York dismissed a putative class action against the digital services and development company Synacor, Inc. and certain of its officers asserting claims under Section 10(b) of the Securities Exchange Act of 1934.  Lefkowitz, et al. v. Synacor, Inc., et al., 18-CV-2979 (LGS) (S.D.N.Y. Aug. 28, 2019).  Plaintiffs alleged misrepresentations regarding revenue projections relating to a contract with a major customer, the customer’s control over monetizing the contract and weaknesses in the company’s internal controls for financial reporting.  The Court held that the alleged misrepresentations in question were either not actionable or were inadequately pleaded with respect to scienter, and therefore dismissed the complaint in its entirety, but granted leave to replead. 

On August 29, 2019, Judge K. Michael Moore of the United States District Court for the Southern District of Florida dismissed a putative class action against National Beverage Corporation and certain of its officers asserting claims under Section 10(b) of the Securities Exchange Act of 1934.  Luczak v. National Beverage Corporation, et al., 18-cv-61631-KMM (S.D. Fla. Aug. 29, 2019).  Plaintiff alleged that defendants’ public statements contained misrepresentations regarding the company’s main product (a brand of sparkling water), the use of purportedly unique proprietary methods to drive growth, and sexual harassment allegations with respect to the company’s CEO.  The Court held that the alleged misrepresentations were inadequately pleaded with respect to either falsity, scienter or loss causation, and therefore dismissed the complaint in its entirety.

​On August 19, 2019, Judge Richard Bennett of the United States District Court for the District of Maryland dismissed a putative securities class action involving claims brought under Sections 10(b), 20(a) and 20A of the Securities Exchange Act of 1934 (the “Exchange Act”) against a sports apparel company (the “Company”) and one of its executives.  In re Under Armour Securities Litigation, No. 17-cv-00388 (D. Md. Aug. 19, 2019).  Plaintiffs alleged that the Company misrepresented its financial health by concealing that consumer demand had declined and the Company had resorted to discounting to prop up its sales.  In a prior decision, the Court had dismissed plaintiffs’ claims but permitted plaintiffs to replead the Exchange Act claims to attempt to plead scienter.  The Court held, however, that plaintiffs’ further amended complaint suffered from the same defects as their prior complaint, and therefore dismissed the action with prejudice.

On August 19, 2019, the United States Court of Appeals for the Fifth Circuit affirmed the dismissal by a Northern District of Texas court of a putative securities class action asserting a Section 10(b) claim under the Securities Exchange Act of 1934 (the “Exchange Act”) against a home furnishings retailer (the “Company”) and two of its senior officers.  Municipal Employees’ Retirement System of Michigan v. Pier 1 Imports Inc. et al., No. 18-10998 (5th Cir. Aug. 19, 2019).  Plaintiff alleged that defendants failed to disclose that the Company’s inventory was too high and was subject to significant “markdown risk” because it had too much inventory that was too “seasonal” and “subject to changing consumer tastes.”  The Court affirmed the district court’s decision that plaintiff’s allegations did not adequately support the required strong inference of scienter.

On August 12, 2019, Judge Haywood S. Gilliam, Jr. of the United States District Court for the Northern District of California dismissed without leave to amend a putative securities class action against a pharmaceutical company, and certain of its officers, under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5.  New York Hotel Trades Council & Hotel Assoc. of N.Y.C., Inc. Pension Fund v. Impax Laboratories Inc., No. 16 Civ. 6577 (N.D. Cal. Aug. 12, 2019).  As to alleged misrepresentations regarding alleged price fixing, the Court held that the announcement of a government investigation cannot, as a matter of law, amount to a “corrective disclosure” sufficient to allege loss causation.  As to other alleged misrepresentations regarding price erosion as to certain drugs, the Court held that plaintiff failed to plead a false statement, materiality, and/or scienter.    

On August 6, 2019, Judge Katherine S. Hayden of the United States District Court for the District of New Jersey denied a motion to dismiss a putative securities class action asserting claims under Sections 10(b) and 14(a) of the Securities Exchange Act of 1934, and Rules 10b-5 and 14a-9 promulgated thereunder.  In re Allergan Generic Drug Pricing Sec. Litig., No. 16- CV-9449, 2019 WL 3562134 (D.N.J. Aug. 6, 2019).  Plaintiffs alleged that a pharmaceutical company and several of its executives participated in a price-fixing conspiracy that caused the prices of six generic drugs sold by the company to increase dramatically during the alleged class period—as ultimately revealed through a U.S. Department of Justice investigation—and that defendants made material misstatements and omissions regarding the alleged conspiracy.  The Court held that plaintiffs adequately pleaded their claims, including with respect to material misstatements, scienter and loss causation.

On August 7, 2019, New York State Supreme Court Justice Andrew Borrok issued a stay of discovery, pending resolution of a motion to dismiss, in a putative class action asserting claims under the Securities Act of 1933.  In re Everquote, Inc. Sec. Litig., Index No. 651177/2019, 2019 WL 3686065 (Sup. Ct. N.Y. Cnty. Aug. 7, 2019).  Justice Borrok held that the automatic discovery stay under the Private Securities Litigation Reform Act of 1995 (“PSLRA”) applied to Securities Act claims brought in state court.

On August 6, 2019, Judge Edward R. Korman of the United States District Court for the Eastern District of New York dismissed a putative securities class action asserting claims against a pharmaceutical company and certain of its officers under Section 10(b) of the Securities Exchange Act of 1934.  In re Aceto Corp. Sec. Litig., No. 18-CV-2425 (ERK-AYS) (E.D.N.Y. Aug. 6, 2019).  Plaintiff alleged that defendants made misrepresentations in connection with disclosures concerning the company’s compliance with internal controls, earnings forecasts, and regarding the valuation of goodwill and intangible assets.  The Court held that the complaint failed to plead an actionable misstatement or scienter, but granted leave to replead.

On July 12, 2019, Judge Valerie Caproni of the United States District Court for the Southern District of New York dismissed a putative securities class action brought against the building materials company Cemex and certain of its officers, asserting claims under the Securities Exchange Act of 1934.  Schiro v. Cemex, S.A.B. de C.V., No. 18-CV-2352 (VEC), 2019 WL 3066487 (S.D.N.Y. July 12, 2019).  Plaintiffs alleged that defendants misrepresented the company’s internal controls and compliance with anti-bribery laws and failed to disclose an alleged bribery scheme involving the company’s Colombian subsidiary.  The Court held the misrepresentations in question were either not actionable or were inadequately pleaded with respect to scienter, and therefore dismissed the complaint in its entirety, while granting leave for plaintiffs to amend.

On July 11, 2019, Justice Andrew Borrok of the New York State Supreme Court, County of New York, Commercial Division, dismissed a putative securities class action against a Brazilian based online retailer (the “Company”), certain of its executives and directors, and its underwriters in connection with the Company’s initial public offering (“IPO”).  In re Netshoes Sec. Litig., Index No. 157435/2018 (Sup. Ct., N.Y. Cty., July 11, 2019).  Plaintiffs—purchasers of the Company’s stock—brought claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”), claiming that defendants made materially false and misleading statements in a registration statement filed with the SEC in connection with the IPO.  The Court dismissed the Securities Act claims without prejudice, finding that the allegations were inactionable opinions under the Supreme Court’s decision in Omnicare, Inc. v. Laborers Dist. Council Const. Indus., 135 S. Ct. 1318 (2015), or were inactionable because they were about past performance, were forward-looking, or were expressions of puffery.

On July 16, 2019, the United States Court of Appeals for the Fifth Circuit affirmed a decision by the United States District Court for the Northern District of Texas that dismissed a putative class action against the oil and gas pipeline operator Plains All American Pipeline, certain of its officers, directors and related parties, and the underwriters for the securities offerings at issue.  Police & Fire Ret. Sys. of the City of Detroit v. Plains All Am. Pipeline, L.P., —Fed. App’x—, 2019 WL 3213543, slip. op. (5th Cir. 2019).  As discussed in our prior post, plaintiffs, investors who purchased equity and debt instruments issued by entities affiliated with Plains All American Pipeline in seven different public offerings, brought claims under the Securities Exchange Act of 1934 and the Securities Act of 1933, alleging that statements regarding the company’s compliance program were false in light of events surrounding a May 2015 oil spill.  The district court dismissed plaintiffs’ second amended complaint with prejudice, finding that plaintiffs either did not allege an actionable misstatement or did not sufficiently plead scienter.  The Fifth Circuit affirmed.

On July 1, 2019, Judge Michael A. Shipp of the United States District Court for the District of New Jersey denied a motion to dismiss a complaint alleging insider trading in violation of Section 20A of the Securities Exchange Act of 1934.  In re Valeant Pharma. Int’l Inc. Sec. Litig., 15-7685 (MAS) (LHG) (D.N.J. July 1, 2019).  The complaint asserts the Section 20A claims against a board member of a large pharmaceutical corporation (the “Company”) and an investment advisory firm and affiliates co-founded by that board member that traded in the Company’s stock.  The Court, which had already considered and denied a motion to dismiss the Section 10(b) and Rule 10b-5 claims in a prior ruling, concluded that the complaint adequately alleged Section 20A claims and denied the motion to dismiss.

On June 21, 2019, Judge Michael P. Shea of the United States District Court for the District of Connecticut granted plaintiffs’ motion to certify a class of investors in an action alleging that two cryptocurrency companies falsely represented that they were using investors’ money to mine for cryptocurrency when, in fact, they were engaged in a Ponzi scheme.  Plaintiffs asserted claims against the companies and their owners under Section 10(b) of the Securities Exchange Act of 1934, Connecticut securities law, and for common law fraud.  Audet v. Fraser, No. 3:16-CV-0940 (MPS), 2019 WL 2562628 (D. Conn. June 21, 2019).  The Court held that each of the requirements for class certification was satisfied and, in particular, that even though no presumption of reliance was available, reliance on misrepresentations could be established on a class-wide basis based on common proof. 

On June 25, 2019, Judge Arthur Spatt of the United States District Court for the Eastern District of New York dismissed with prejudice a putative securities class action brought by investors in a mutual fund asserting violations of the Securities Act of 1933 (“Securities Act”) against the fund’s registrant, certain executives, investment advisor, and underwriter.  Emerson v. Mutual Fund Series Trust, No. 2:17-CV-02565 (ADS) (GRB), 2019 WL 2601664 (E.D.N.Y. June 25, 2019).  Plaintiffs alleged that the fund’s offering materials misrepresented that the fund was low-risk, when in fact it engaged in speculative investments that exposed the fund to substantial downside risk in rising markets.  Id. at *1.  The Court held that the complaint alleged “no actionable misstatements or omissions,” and dismissed the complaint with prejudice.  Id. at *15.

On June 24, 2019, the United States Supreme Court, in an opinion by Justice Gorsuch, held that information that “is both customarily and actually treated as private by its owner and provided to the government under an assurance of privacy” is protected from disclosure under the Freedom of Information Act (“FOIA”) pursuant to Exemption 4 thereto, which protects “commercial or financial information obtained from a person and privileged or confidential.”  Food Mktg. Inst. v. Argus Leader Media, —U.S.—, 2019 WL 2570624 (June 24, 2019).  The Court thus reversed a decision of the Eighth Circuit that had required an additional showing that disclosure would cause “substantial competitive harm.” 

On June 24, 2019, the United States Supreme Court denied a petition for certiorari to review a decision from the United States Court of Appeals for the Ninth Circuit, which held that a foreign issuer that has no involvement in establishing or selling ADRs can be subject to liability under Section 10(b) of the Securities Exchange Act of 1934 as long as plaintiff purchased or sold the ADRs in a domestic transaction.  Toshiba Corp. v. Auto. Indus. Pension Trust Fund, et al., No. 18-486 (U.S. June 24, 2019).  Pursuant to its typical practice, the Court did not comment on its reasons for denying certiorari. 

On June 18, 2019, Judge Richard Berman of the United States District Court for the Southern District of New York dismissed a putative securities class action brought by a Cayman Islands branch of a Brazilian bank against a Brazilian mining company (the “Company”) and its Brazilian parent companies on behalf of investors in certain of the Company’s bonds. Banco Safra S.A. - Cayman Islands Branch v. Samarco Mineracao S.A., et al, 1:16-cv-08800 (S.D.N.Y. June 18, 2019). Plaintiff alleged that defendants made misrepresentations about the safety of the Company’s mining operations in the wake of an “environmental disaster” in Brazil involving the bursting of one of the Company’s dams in violation of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder. Plaintiff also alleged violations of Section 20(a) of the Exchange Act, along with claims for common law fraud, aiding and abetting fraud, and negligent misrepresentation. The bonds at issue were not listed on a U.S. securities exchange and had been initially offered only outside the United States, and plaintiff’s alleged purchases were largely made in the secondary market. The Court, in dismissing the amended complaint, held that plaintiff failed to allege a U.S. domestic securities transaction as required to overcome the presumption against the extraterritorial application of the U.S. securities laws.

On June 14, 2019, Judge William Alsup of the United States District Court for the Northern District of California dismissed a putative class action against a cybersecurity company (the “Company”) and certain of its executives. SEB Inv. Mgmt. AB v. Symantec Corp., No. 18-02902 (N.D. Cal. June 14, 2019). After the Company announced that its audit committee had commenced an internal investigation and had voluntarily contacted the SEC after a former employee raised unspecified concerns, plaintiff, an investor in the Company, alleged that defendants made misrepresentations in connection with the Company’s growth as a result of its acquisition of two security firms, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder. The Court held that plaintiff failed to allege actionable material misrepresentations and/or scienter as to various categories of alleged misstatements, and dismissed the complaint without prejudice.
 

On June 11, 2019, Judge Colleen McMahon of the United States District Court for the Southern District of New York denied defendants’ motion for judgment on the pleadings in a putative securities class action asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) against a jewelry retailer (the “Company”) and certain of its senior executives.  In re Signet Jewelers Limited Sec. Litig., No. 16-cv-6728, 2019 WL 2428529 at *1 (S.D.N.Y. Nov. 26, 2018).  Plaintiff alleged that certain declarations filed in connection with a separate gender discrimination case rendered false and misleading the Company’s public statements about its commitment to preventing gender discrimination.  Rejecting defendants’ argument that the Company’s statements were inactionable puffery, the Court ruled that plaintiff had adequately pleaded that the statements were material because, among other things, they appeared to be directly and specifically at odds with the conduct alleged in the complaint.
 

On June 3, 2019, Judge Analisa Torres of the United States District Court for the Southern District of New York dismissed a putative class action against the mining company Rio Tinto and certain of its executives.  Colbert v. Rio Tinto plc, 17 Civ. 8169 (AT) (DCF) (S.D.N.Y. June 3, 2019).  Plaintiff—purportedly on behalf of a class of purchasers of Rio Tinto’s American Depositary Receipts (“ADRs”)—alleged that defendants made misrepresentations regarding Rio Tinto’s investment and mining operations in Mozambique, in violation of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder.  The Court held that certain of plaintiff’s claims were time-barred and the remaining claims failed to adequately allege an actionable misrepresentation or scienter.

On May 28, 2019, the Supreme Court held in a 5-4 decision authored by Justice Thomas that a third-party counterclaim defendant was not permitted to remove class action claims against it under the general removal statute, 28 U.S.C. § 1441 (“Section 1441”), or the Class Action Fairness Act, 28 U.S.C. § 1453 (“CAFA”).  Home Depot U. S. A., Inc. v. Jackson, No. 17-1471, 587 U.S. ___ (2019).  The Court held that the term “defendant” in the two removal provisions at issue applies only to “the party sued by the original plaintiff” and should not be expanded to include third-party counterclaim defendants.  As noted in our prior post when the case was argued before the Supreme Court, this decision is the first time the Supreme Court has discussed the scope of Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100 (1941), which addressed analogous language in Section 1441’s predecessor and held that a plaintiff who originally filed an action in state court would not be permitted to later remove it to federal court as a “defendant” once counterclaims were filed against it.

On May 24, 2019, the United States Court of Appeals for the Fifth Circuit affirmed in a unanimous decision the dismissal of a putative securities class action against a major financial services company and several of its subsidiaries in relation to their alleged involvement in Enron’s “financial manipulation.”  Lampkin et al. v. UBS PaineWebber Inc. et al., No. 17-20608 (5th Cir. May 24, 2019).  Plaintiffs—(i) individual retail-brokerage customers of defendants, and (ii) former Enron employees who acquired Enron stock options through Enron’s stock option plan—alleged defendants violated Section 11 and Section 12 of the Securities Act of 1933 (the “Securities Act”) by acting as an underwriter and seller of Enron securities and were liable for materially false and misleading statements contained in Enron’s prospectuses and registration statements.  Plaintiffs also alleged defendants violated Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder by failing to disclose their alleged knowledge of Enron’s alleged manipulation of its “public financial appearance.” 

On May 15, 2019, Judge Charles T. Lee of the Connecticut Superior Court at Stamford granted a protective order staying discovery pending a motion to strike in an action alleging violations of the Securities Act of 1933 (the “Securities Act”) against an issuer, certain officers and the underwriters (“Defendants”) in connection with an initial public offering.  City of Livonia Retiree Health & Disability Benefits Plan v. Pitney Bowes Inc., No. X08 FST CV 18 6038160 S (Conn. Super. Ct. May 15, 2019).  In Cyan Inc. v. Beaver Cty. Employees Ret. Fund, 138 S. Ct. 1061 (2018) (“Cyan”), the Supreme Court of the United States held that the substantive protections of the Private Securities Litigation Reform Act (“PSLRA”) necessarily apply “wherever” an action proceeds.  Relying on this, the Connecticut court determined that 15 U.S.C. § 77z-1(b)(1) of the Securities Act, which provides for a stay of discovery during the pendency of a motion to dismiss, applies to actions filed in state court.  Though there have been decisions going both ways on the issue of whether the PSLRA discovery stay applies in state court, this is the first opinion to analyze the issue thoroughly in the wake of Cyan and should serve as persuasive authority in other jurisdictions.

On May 13, 2019, Judge Robert N. Scola, Jr., of the United States District Court for the Southern District of Florida dismissed all claims asserted against four individual defendants under Sections 12(a)(1) of the Securities Act of 1933 (the “Securities Act”) and Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) in an action against the cryptocurrency company Centra Tech, Inc. and certain of its officers and celebrity promoters.  Rensel v. Centra Tech, Inc., et al., No. 17-24500-Civ-Scola (S.D. Fla. May 13, 2019).  Plaintiffs alleged that the company made a series of misrepresentations while marketing an initial coin offering, and that the individual defendants were responsible as “sellers,” because they encouraged the purchase of unregistered securities.  Addressing the individual defendants’ motions to dismiss, the Court dismissed plaintiffs’ Securities Act claims for failure to adequately allege that the individual defendants were “sellers” within the meaning of the Securities Act and dismissed plaintiffs’ Exchange Act claims for failure to adequately allege reliance.

On May 13, 2019, Judge Charles P. Kocoras of the United States District Court for the Northern District of Illinois dismissed with prejudice a putative class action against TD Ameritrade and an investment advisory company as barred by the Securities Litigation and Uniform Standards Act (“SLUSA”).  Gray v. TD Ameritrade, Inc., No. 18 C 00419, 2019 WL 2085136 (N.D. Ill. May 13, 2019).  Plaintiffs asserted state common law and statutory claims based on allegations that defendants had placed investors into trading strategies that had been misrepresented as conservative.  The Court held that because plaintiffs’ claims coincided with a covered securities transaction, they were prohibited under SLUSA.

On May 16, 2019, Judge F. Dennis Saylor IV of the United States District Court for the District of Massachusetts dismissed a putative class action against the medical device company ReWalk Robotics and certain of its officers and directors under the Securities Exchange Act of 1934 (“Exchange Act”).  Yan v. ReWalk Robotics Ltd., No. 17 Civ. 10169 (D. Mass. May 16, 2019).  As discussed in our prior post, the Court previously dismissed, with prejudice, claims under the Securities Act of 1933 (“Securities Act”) related to an IPO registration statement for failure to identify a false or misleading statement in the registration statement.  The Court also dismissed, for lack of standing, Exchange Act claims based on alleged post-IPO misstatements, because the sole lead plaintiff only purchased stock in the IPO.  The prior dismissal of the Exchange Act claims, however, was without prejudice.  The lead plaintiff then moved for leave to amend the complaint to add a plaintiff who purportedly had standing to bring the Exchange Act claims.  The Court again held that plaintiff lacked standing, and further held that the lack of standing was fatal to the putative class action and could not be cured by amendment.

On May 15, 2019, the United States Court of Appeals for the Fifth Circuit partially revived a securities fraud suit brought by a doctor and his business partner against two former business associates under the Securities Exchange Act of 1934 (the “Exchange Act”).  Masel v. Villarreal, —F.3d—, 2019 WL 2120536 (5th Cir. May 15, 2019).  Plaintiffs alleged that defendants induced them to enter into a joint business enterprise through material misrepresentations and omissions about the effectiveness of defendants’ medical billing service.  The Court held that the complaint adequately stated a claim against one of the individual defendants and her associated business entities, but that it was properly dismissed as to another individual defendant.

On April 30, 2019, the United States District Court for the District of Massachusetts granted a motion to dismiss a putative class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder against a biopharmaceutical company (the “Company”) and certain of its executives, and claims under Section 20(a) of the Exchange Act against the executives.  In re Ocular Therapeutix, Inc. Securities Litigation, No. 17-CV-12288 (D. Mass. Apr. 30, 2019).  Plaintiffs alleged that defendants made misstatements regarding manufacturing issues with respect to an ocular pain drug developed by the Company.  The Court held that plaintiffs failed to adequately allege actionable misstatements or omissions and scienter, and granted the motion to dismiss.

On May 7, 2019, the United States Court of Appeals for the Second Circuit summarily affirmed the judgment by Judge Edgardo Ramos of the United States District Court for the Southern District of New York granting defendants’ motion to dismiss in a putative securities class action.  In re Express Scripts Holdings Co. Securities Litigation No. 18-cv-1850 (2d Cir. May 7, 2019).  Plaintiffs alleged that defendants—a pharmacy benefit manager (“the Company”) and certain of its officers—violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) by making materially false or misleading statements in connection with the purchase or sale of securities.  As discussed in our prior post, the District Court granted defendants’ motion to dismiss, finding that plaintiffs did not adequately plead that defendants made any misleading statements or that defendants acted with the requisite scienter.  On appeal, plaintiffs argued that the District Court incorrectly held that the Amended Complaint failed to adequately allege that defendants made materially false and misleading statements and omission and acted with scienter.  The Second Circuit affirmed in a summary order.  Summary orders do not have binding precedential effect.

On April 10, 2019, Judge Loretta A. Preska of the United States District Court for the Southern District of New York dismissed an action asserting violations of Section 10(b) of the Securities and Exchange Act of 1934 and claims under state law against a broker-dealer (the “Broker-Dealer”) and several individuals who participated in a bond offering facilitated by the Broker-Dealer.  Palm Beach Maritime Museum v. Hapoalim Sec. USA, Inc., 19 Civ. 908 (LAP), 2019 WL 1950139 (S.D.N.Y. Apr. 10, 2019).  Plaintiff, a non-profit corporation approved as a charter school in Florida, alleged that defendants made materially false statements in connection with a bond purchase agreement to finance plaintiff’s purchase and expansion of property.  The Court held that plaintiff lacked standing to pursue its Section 10(b) claim because it was not the buyer or seller of a security. 
 

On April 29, 2019, the United States Court of Appeals for the Second Circuit affirmed the denial of plaintiffs’ motion for leave to file an amended complaint alleging securities fraud against an international pharmaceutical corporation (the “Company”) and several of its past and present executives.  Steamfitters’ Indus. Pension Fund v. Endo Int’l PLC, 18-1669-cv (2d Cir. Apr. 29, 2019).  Upon reviewing the district court’s decision de novo, the Second Circuit concluded that an amendment would be futile because the alleged misrepresentations and omissions contained in plaintiffs’ proposed amended complaint (the “Proposed Amended Complaint”) failed to allege any plausible violation of Section 10(b) and 20(a) of the Securities and Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5.

On April 23, 2019, the Supreme Court dismissed the writ of certiorari as “improvidently granted” in a closely-watched appeal raising the question whether an assertion of mere negligence is sufficient to plead and prove a claim under Section 14(e) of the Securities Exchange Act of 1934 and—perhaps—whether a private right of action exists under Section 14(e) at all.  Emulex Corporation, et al. v. Varjabedian, —U.S.—, slip op. (Apr. 23, 2019).  As discussed in our prior post, most of the oral argument concerned whether a private right of action under Section 14(e) exists, but some justices expressed concern over whether the Court should weigh in on that question because it was not presented below.

On April 19, 2019, Judge John C. Coughenour of the United States District Court for the Western District of Washington 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 thereunder against Zillow Group, Inc. and certain of its executives.  In re Zillow Group, Inc. Securities Litig., No. C17-1387-JCC, 2019 WL 1755293 (W.D. Wash. Apr. 19, 2019).  Plaintiffs alleged misstatements by defendants regarding a Consumer Financial Protection Bureau (“CFPB”) investigation into, among other things, potential violations of the Real Estate Settlement Procedures Act (“RESPA”) that allegedly arose out of Zillow’s “co-marketing” program between real estate agents and mortgage lenders.  As discussed in our prior post, the Court had previously granted defendants’ motion to dismiss plaintiffs’ first amended complaint, but allowed plaintiffs leave to file a second amended complaint.  In considering the second amended complaint, the Court explained how plaintiffs had cured the defects the Court noted in its prior ruling regarding allegations of material misstatements and scienter.

On April 24, 2019, the United States Supreme Court, in a 5-4 decision authored by Chief Justice Roberts, held that an agreement ambiguous as to whether arbitration had been agreed for class claims as well as individual claims could not provide a contractual basis for class arbitration.  Lamps Plus, Inc. v. Varela, 587 U.S. ___, 2019 WL 1780275 (2019).  The Court addressed two questions:  (i) whether the Court had jurisdiction, given that the district court had compelled arbitration in connection with its dismissal of the underlying claims; and (ii) whether state contract law principles could be applied to interpret an arbitration clause that was ambiguous with regard to the authorization of class arbitration as authorizing such arbitration.  The Court held that it had jurisdiction because dismissal of the underlying claims qualified as a “final decision” under the Federal Arbitration Act (“FAA”).  On the merits issue, the Court held that a contract that was ambiguous as to whether class arbitration was permitted lacked the explicit “consent” to such arbitration required under the FAA.

On April 15, 2019, the Supreme Court heard argument in a closely-watched case asking whether mere negligence is sufficient to plead and prove a claim under Section 14(e) of the Securities Exchange Act of 1934 (the “Exchange Act”) in connection with a tender offer and – perhaps – whether a private right of action exists under Section 14(e) at all.  Emulex Corporation, et al. v. Varjabedian, No. 18-459 (Apr. 15, 2019).  The argument was particularly lively, with the Justices posing numerous questions about both a defendant’s required mental state, as well as whether an implied right of action ought to be recognized – although it remains unclear whether the Court will actually decide the latter question.

On March 25, 2019, Judge Christina A. Snyder of the United States District Court for the Central District of California denied a motion to dismiss a class action filed against a Canadian silver company (the “Company”), current and former executives of the Company, and its auditor and tax consultant (the “Auditor”), alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  In Re Silver Wheaton Corp. Secs. Lit., No. 2:15-cv-05146; 2:15-cv-5173 (C.D. Cal. Mar. 25, 2019).  Plaintiffs allege defendants failed to disclose USD$207 million in Canadian tax liabilities and that the Auditor wrongfully issued clean audit opinions.  The Court held that plaintiffs sufficiently pleaded claims against all defendants.  Of particular note, while the Court acknowledged several hurdles that generally result in the dismissal of claims against auditors, it held that those hurdles had been surmounted by plaintiffs given the unique circumstances of the case.

On March 29, 2019, Judge Wiley Y. Daniel of the United States District Court for the District of Colorado dismissed with prejudice a putative securities class action asserting claims under the Securities Exchange Act of 1934 and Rule 10b-5 thereunder against the restaurant chain Chipotle and certain of its executives.  Nardy v. Chipotle Mexican Grill, Inc., No. 1:17-cv-1760 (WYD) (STV), slip op. (D. Colo. Mar. 29, 2019), ECF No. 64.  Plaintiffs alleged that, in the wake of foodborne illness outbreaks at Chipotle restaurants, defendants made misrepresentations and omissions regarding the company’s compliance with food safety regulations and its implementation and training of employees on food safety practices.  The Court held that plaintiffs’ various allegations failed to assert actionable misrepresentations, or in certain cases did not adequately allege scienter, or loss causation.

On March 28, 2019, Judge William H. Pauley of the United States District Court for the Southern District of New York granted a motion to dismiss a putative securities class action asserting claims under the Securities Exchange Act of 1934 and Rule 10b-5 thereunder against a pharmaceutical company and certain of its executives.  Gagnon v. Alkermes PLC, —F. Supp. 3d—, 2019 WL 1388700 (S.D.N.Y. Mar. 28, 2019).  Plaintiff alleged that defendants made misleading statements in investor and analyst calls and public filings concerning the efficacy of the company’s opioid-dependence drug Vivitrol and the reasons for increased revenue from Vivitrol, which plaintiff alleged actually resulted from deceptive marketing and lobbying tactics.  Id. at *2.  The Court held that all but one of the alleged misstatements were not actionable, and as to the one actionable misstatement, plaintiff had failed to adequately allege scienter.  Because the Court had previously given plaintiff an opportunity to replead, the action was dismissed with prejudice.

On March 28, 2019, Judge Ronnie Abrams 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 and Rule 10b-5 thereunder.  In re Global Brokerage, Inc., 17-cv-00916 (RA) (S.D.N.Y. Mar. 28, 2019).  Plaintiffs principally alleged that defendants, a foreign exchange trading and services company and certain of its executives, made misleading statements or omissions regarding (a) the company’s reliance on an agency-trading model and (b) the nature of payments the company received from another company, “Effex,” that had been spun-off from the defendant company.  The Court had dismissed plaintiffs’ prior amended complaint without prejudice, holding, inter alia, that plaintiffs had not adequately alleged scienter.  The Court held, however, that plaintiffs’ second amended complaint adequately alleged actionable misrepresentations and scienter as to the majority of claims and all but one individual defendant.

On March 29, 2019, 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 and Rule 10b-5 thereunder in a putative class action against a pharmaceutical company and certain of its executives.  In re Mylan N.V. Securities Litigation, No. 16-cv-7926 (JPO) (S.D.N.Y. Mar. 29, 2019).  Plaintiffs alleged that defendants made misleading statements regarding, among other things, an alleged rebate scheme involving the company’s EpiPen, and the alleged inflation of prices for various generic drugs.  After the Court dismissed in part plaintiffs’ first amended complaint as noted in our prior post, plaintiffs filed a second amended complaint that added an executive as a defendant, new allegations to support scienter for previously dismissed claims, a new alleged corrective disclosure in support of loss causation arguments, and additional claims asserting fraud based on the failure to disclose illegal anticompetitive misconduct.  The Court held certain of plaintiffs’ new allegations based on anticompetitive behavior were inadequately pleaded but permitted one claim to go forward, and also held that certain new allegations of scienter were sufficient.

On March 26, 2019, the United States Court of Appeals for the Second Circuit affirmed the removal and dismissal of claims brought against two pharmaceutical companies.  Gibbons v. Bristol-Myers Squibb Company and Pfizer Inc., No. 17-2638 (2d. Cir. Mar. 26, 2019).  Plaintiffs asserted over a dozen claims across multidistrict litigation (“MDL”) against defendants alleging that plaintiffs or their decedents suffered injuries as a result of the allegedly improper design of and insufficient warning labels for a certain blood-thinning drug used to reduce the risk of stroke in patients with atrial fibrillation that was manufactured and distributed by defendants.

On March 15, 2019, Judge Edward M. Chen of the United States District for the Northern District of California dismissed a putative class action asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 against a camera technology company (“Company”), along with its officers and executives.  Park v. GoPro, Inc., et. al., 18-cv-00193-EMC (N.D. Cal. Mar. 15, 2019).  Plaintiffs claimed defendants made false statements during an earnings call following the announcement of the Company’s results for the third quarter of the 2017 fiscal year (“Q3 2017”), and engaged in suspicious stock transactions.  The Court dismissed the action on the ground that plaintiffs did not adequately plead falsity or scienter.

On March 13, 2019, Judge Lee H. Rosenthal of the United States District Court for the Southern District of Texas granted a motion to dismiss claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder in a putative class action against an oil and gas exploration and production company and certain of its officers.  Edgar v. Anadarko Petroleum Corporation, et al., No. 17-cv-01372 (S.D. Tex. Mar. 13, 2019).  After the Court dismissed the prior amended complaint as noted in our prior post, plaintiff filed a second amended complaint attempting to add allegations supporting an inference of scienter.  The Court held, however, that the amended complaint still failed to adequately allege scienter, and therefore dismissed the action with prejudice.

On March 8, 2019, Judge William H. Pauley of the United States District Court for the Southern District of New York granted a motion to dismiss an action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder against a provider of logistics to automobile manufacturers and certain of the company’s officers.  River Birch Capital, LLC, v. Jack Cooper Holdings Corp., No. 17-CV-9193, 2019 WL 1099943 (S.D.N.Y. Mar. 8, 2019).  The Court held that plaintiff failed to allege any actionable misstatements or omissions and, further, that plaintiff failed to adequately allege scienter.  Because the Court had previously given plaintiff an opportunity to replead, the action was dismissed with prejudice.

On March 5, 2019, the United States Court of Appeals for the Second Circuit affirmed the dismissal of a putative securities class action against Cigna and several of its officers.  Minohor Singh v. Cigna Corporation, et al., No. 17-CV-3484 (2d Cir. Mar. 5, 2019).  Plaintiffs 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 materially misleading statements concerning Cigna’s compliance with regulatory requirements.  Defendants filed a motion to dismiss.  Judge Vanessa L. Bryant of the United States District Court for the District of Connecticut granted the motion, holding that plaintiffs did not adequately allege material misstatements and scienter.  Plaintiffs appealed.  The Second Circuit affirmed, emphatically, agreeing that plaintiffs failed to adequately plead actionable material misrepresentations. 

On March 1, 2019, the United States Court of Appeals for the Eighth Circuit reversed the dismissal of a class action arising from the merger of a biotechnical company (“Biotech Company”) and a cancer-diagnostics company (“Diagnostics Company”) against the Biotech Company, its former president, and the company that was formed by the merger (“Post-Merger Company”).  Campbell v. Transgenomic, Inc., No. 18-2198, 2019 WL 983676 (8th Cir. Mar. 1, 2019).  Plaintiffs, former shareholders of the Biotech Company, allege that defendants violated Sections 14(a) and 20(a) of the Securities Exchange Act (“Exchange Act”), and Rule 14a-9 promulgated thereunder, by providing a materially false and misleading proxy statement to shareholders that failed to accurately convey the value of the Diagnostics Company.  Judge John M. Gerrard of the United States District Court for the District of Nebraska dismissed the case and held that the alleged misstatements and omissions were immaterial as a matter of law.  Plaintiffs appealed and the Eighth Circuit reversed the judgment, holding that whether the alleged misstatements and omissions were material was a question for the trier of fact.

On February 22, 2019, Judge Kevin McNulty of the United States District Court for the District of New Jersey granted defendants’ motion to dismiss a putative class action against an Israeli-based technology company (“Company”) and its senior officers, asserting violations of Sections 10(b) and 20(a) of the Exchange Act of 1934, and Rule 10b-5. Padgett v. RIT Techs. Ltd., No. 2:16-cv-4579, 2019 WL 913154 (D.N.J. Feb. 22, 2019). Plaintiffs alleged defendants failed to disclose the extent of the Company’s reliance on an agreement with a non-exclusive distributor to provide its products and services in the Commonwealth of Independent States region (“CIS”). The Court dismissed the amended complaint without prejudice, holding that plaintiffs failed to adequately allege how defendants’ public statements and failure to use specific adjectives to characterize the distributor were misleading to investors.

On February 25, 2019, the U.S. Chamber of Commerce’s Institute of Legal Reform (the “ILR”) published a report entitled “Containing the Contagion: Proposals to Reform the Broken Securities Class Action System” (the “Report”). The Report describes various trends and problems affecting the securities class action system, which have led to the filing of securities cases “reaching levels not seen since before the enactment of the Private Securities Litigation Reform Act (PSLRA) in 1995.” According to the Report, the three main drivers of the steep increase in securities litigation filings are: (1) cases alleging misstatements in connection with M&A activity; (2) so-called “event-driven litigation,” whereby securities class actions are triggered by unexpected adverse events, such as fires, explosions, data breaches, and the like; and (3) the U.S. Supreme Court’s decision in Cyan Inc. v. Beaver County Employees Retirement Fund (138 S. Ct. 1061 (2018)), which confirmed that state courts retain non-removable (with limited exceptions) concurrent jurisdiction over Securities Act of 1933 class actions. The Report also describes perceived abuses and the need to curb such practices. Finally, the Report urges action from different parts of the federal government including the SEC, federal courts, and Congress, calling on each to do its part in curbing non-meritorious lawsuits that can ultimately harm investors and the U.S. capital markets system.

On February 26, 2019, the United States Supreme Court unanimously reversed a decision from the United States Court of Appeals for the Ninth Circuit, which had held that Rule 23(f) of the Federal Rules of Civil Procedure is subject to equitable tolling in appropriate circumstances. Nutraceutical Corp. v. Lambert, No. 17-1094, -- S.Ct. -- (2019). The Supreme Court ruled that the deadline in Rule 23(f) is mandatory and not subject to equitable tolling.
 

On February 13, 2019, United States District Judge William H. Pauley III of the United States District Court for the Southern District of New York dismissed a putative securities class action against clinical stage biopharmaceutical company New Link Genetics Corporation (the “Company”) and its co-founders.  Nguyen and Nguyen v. New Link Genetics Corp., et al., No. 16-cv-03545 (S.D.N.Y. Feb. 13, 2019).  Plaintiffs contended that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making a series of alleged misrepresentations regarding the development of the Company’s flagship pancreatic cancer drug that “painted a rosier picture for investors, who were misled into thinking the drug would obtain FDA approval.”  The Court dismissed without prejudice plaintiffs’ initial complaint, finding that, although plaintiffs adequately pled falsity concerning one alleged misstatement, plaintiffs had not sufficiently pled falsity as to any other statement and, in any event, failed to sufficiently plead loss causation for any of the alleged misstatements.  Having reviewed plaintiffs’ amended complaint and defendants’ motion to dismiss that complaint, the Court again dismissed plaintiffs’ claims, holding that plaintiffs’ new allegations regarding misstatements failed to sufficiently plead falsity and that plaintiffs’ loss causation allegations “merely parrot” the defective allegations in their previous complaint. 

On January 31, 2019, Judge Madeline Cox Arleo of the United States District Court for the District of New Jersey granted with leave to amend defendants’ motion to dismiss a putative securities fraud class action against a digital printing company (the “Company”) and two of its officers.  In Re:  Electronics For Imaging, Inc. Securities Litigation, No. 17-5592 (D. N.J. Jan. 31, 2019).  Plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder by intentionally misrepresenting the adequacy of the Company’s internal controls.  The Court disagreed, finding that because the complaint did not allege facts sufficient to show that the deficiencies were “‘so obvious’ that defendants must have known about them . . . , or allegations that defendants ignored ‘red flags,’” it failed to plead scienter.

On January 24, 2019, the United States Court of Appeals for the Seventh Circuit affirmed the dismissal of a putative securities class action against several investment advisory and financial services firms for allegedly mismanaging the accounts of the putative class plaintiffs and failing to act in their best interests.  Susan Nielen-Thomas v. Concorde Investment Services LLC, et al., No. 18-cv-00229 (7th Cir. Jan. 24, 2019).  Plaintiff brought claims under Wisconsin and Nebraska securities laws, common law claims under Wisconsin and Nebraska law for breach of contract, fraud, fraudulent misrepresentation, negligence, failure to supervise, and breach of fiduciary duty, and a claim for breach of the Securities Act of 1933 that the district court dismissed with prejudice for failure to state a claim that plaintiff did not appeal.  Defendants removed the case to federal court pursuant to the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”), and thereafter moved to dismiss the state law claims on the basis that the suit constituted a “covered class action” that was precluded by SLUSA.  Plaintiff, in moving to remand and in opposing the motion to dismiss, argued that the case is not governed by SLUSA because the proposed class action contained fewer than fifty members and therefore could not be a covered class action as defined by SLUSA.  Chief District Judge James D. Peterson of the United States District Court for the Western District of Wisconsin agreed with defendants, finding that the suit was a covered class action, denying plaintiff’s motion to remand, and dismissing plaintiff’s state law claims with prejudice.  Plaintiff appealed and the Seventh Circuit affirmed.

On December 13, 2018, Judge Manuel L. Real of the United States District Court for the Central District of California granted defendants’ motion to dismiss plaintiffs’ first amended complaint asserting claims for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”).  Steamfitters Local 449 Pension Plan v. Molina Healthcare, Inc., No. CV 18-3579-R, 2018 WL 6787349, at *1 (C.D. Cal. Dec. 13, 2018).  Defendants are a company that provides managed health care services (“the Company”) and certain of its senior executives.  Plaintiffs alleged that defendants repeatedly claimed that their existing administrative infrastructure was scalable and could handle an increase in business generated from its entry into the Affordable Care Act (“ACA”) marketplace, even though they allegedly knew that this statement was not true.  The Court dismissed the action, holding that the alleged misstatements were protected as a matter of law by the Private Securities Litigation Reform Act’s (“PSLRA”) safe harbor for forward-looking statements.

On January 15, 2019, the Supreme Court heard argument on an appeal from a unanimous decision of the U.S. Court of Appeals for the Fourth Circuit holding that a third-party defendant against whom class action counter-claims are asserted in state court is not a “defendant” for purposes of the general removal statute, 28 U.S.C. § 1441 (“Section 1441”) or the Class Action Fairness Act, 28 U.S.C. § 1453 (“CAFA”).  The third-party defendant to the class action counterclaims therefore could not rely on those statutes to remove the case.  Home Depot U.S.A., Inc., v. Jackson, No. 17-1471.

On January 8, 2019, in a unanimous opinion authored by Justice Kavanaugh, the United States Supreme Court held that courts must enforce as written arbitration agreements that require the “gateway” question of arbitrability to be decided through arbitration.  In so doing, the Court reversed a decision of the United States Court of Appeals for the Fifth Circuit which had held (as had other Courts of Appeals) that, when a motion to compel arbitration is “wholly groundless,” the court may resolve whether the dispute is properly subject to arbitration — even if the parties’ agreement requires that such determinations shall be made by the arbitrator.  Henry Schein, Inc., v. Archer & White Sales, Inc., —U.S.—, 2019 WL 122164 (2019).

On January 14, 2019, the United States Supreme Court invited the Solicitor General to file a brief expressing the views of the United States in connection with a pending petition for writ of certiorari regarding whether, in determining if Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) may apply to a securities transaction—including one involving American Depositary Receipts (“ADRs”) which are not sponsored by the foreign issuer and are traded on over-the-counter markets—it is sufficient to show that the transaction itself was domestic.  Toshiba Corp. v. Auto. Indus. Pension Trust Fund, et al., No. 16-56058 (Jan. 14, 2019).  Under the Ninth Circuit decision for which review is being sought, a foreign issuer that has no involvement in establishing or selling the ADRs can be subject to Section 10(b) as long as the plaintiff purchased or sold the ADRs in a domestic transaction.  As noted by the defendant and various amici in support of the petition for certiorari, the Ninth Circuit’s holding significantly extends the extraterritorial application of Section 10(b) to non-U.S. companies which have not elected to avail themselves of the U.S. capital markets.
 

On January 4, 2019, the United States Supreme Court granted a petition for writ of certiorari concerning whether Section 14(e) of the Securities Exchange Act of 1934 includes an implied private right of action for negligent misrepresentation or omission made in connection with a tender offer.  Emulex Corporation, et al. v. Varjabedian, No. 18-459 (Jan. 4, 2019). 

On December 26, 2018, the United States Court of Appeals for the Third Circuit affirmed in part and vacated in part the dismissal of a putative securities class action against M&T Bank Corporation (the “Company”) and certain of its officers and directors.  Jaroslawicz v. M&T Bank Corp., et al., No. 17-3695 (3d Cir. Dec. 26, 2018).  Plaintiffs alleged that defendants violated Section 14(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and SEC Rule 14a-9 by making misleading omissions in joint proxy statement materials (“Joint Proxy”) leading up to the merger of the Company with another consumer bank.  The alleged omissions concerned two non-compliant practices: “(1) M&T’s having advertised no-fee checking accounts but later switching those accounts to fee-based accounts (the ‘consumer violations’); and (2) deficiencies in M&T’s Bank Secrecy Act/anti-money laundering compliance program, particularly its ‘Know Your Customer’ program (the ‘BSA/AML deficiencies’).”  The United States District Court for the District of Delaware dismissed plaintiffs’ first and second amended complaints for failing to plausibly allege an actionable omission.  Plaintiffs appealed to the Third Circuit.

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

On December 10, 2018, Judge Timothy J. Savage of the United States District Court for the Eastern District of Pennsylvania denied in large part defendants’ motion to dismiss a putative class action asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Sections 11 and 20 of the Securities Act of 1933 (the “Securities Act”).  SEB Inv. Mgmt. AB v. Endo Int’l, PLC, No. 17-cv-03711 (E.D. Pa. Dec. 10, 2018).  The Court held that plaintiffs adequately pled that the corporate defendant, a global pharmaceutical company (the “Company”), and five of the ten officers against whom plaintiffs asserted Exchange Act claims (collectively, the “Exchange Act Defendants”), misrepresented and omitted material facts regarding the abuse-deterrent properties of the opioid pills manufactured by the Company, such that plaintiffs could maintain an action under Section 10(b).  Furthermore, the Court concluded that plaintiffs also adequately alleged Securities Act claims against the Company and nine of its officers (the “Securities Act Defendants”) on largely similar grounds.

On December 6, 2018, Chief Judge Patti Saris of the United States District Court for the District of Massachusetts dismissed a putative class action asserting claims under the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder against the early-stage biopharmaceutical company Genocea Biosciences, Inc. and certain of its officers and directors. Emerson v. Genocea Biosciences, Inc., No. 17-12137-PBS (D. Mass. Dec. 6, 2018). Plaintiffs alleged that Genocea omitted to disclose to investors certain six-month post-dosing clinical trial test results because it knew the results to be negative, thereby causing class members to purchase Genocea stock at an inflated price. The Court dismissed the action, holding that the alleged omissions were not material and that other disclosures weighed against finding the required strong inference of scienter.

On December 3, 2018, the Supreme Court heard argument on an appeal in a case where a divided panel of the D.C. Circuit held that a defendant who did not “make” a misstatement within the meaning of Janus Capital Group v. First Derivative Traders, 564 U.S. 135, 142 (2011), nonetheless could be liable for participating in a “scheme” to defraud under Section 10(b) of the Exchange Act, SEC Rule 10-b5 promulgated thereunder, and Section 17(a) of the Securities Act, by disseminating with fraudulent intent a misstatement made by someone else.  See Lorenzo v. S.E.C., No. 17-1077. 

On November 26, 2018, Judge Colleen McMahon of the United States District Court for the Southern District of New York denied a motion to dismiss a putative securities class action against Signet Jewelers Limited (the “Company”) and certain of its officers and directors.  In re Signet Jewelers Limited Sec. Litig., No. 16-cv-6728 (S.D.N.Y. Nov. 26, 2018).  Plaintiffs—purchasers of the Company’s shares between August 2013 and March 2018—claimed that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making materially false and misleading statements relating to (1) the health and management of the Company’s credit portfolio and (2) the Company’s corporate culture of “pervasive” sexual harassment, leading to a sharp drop in the Company’s share price when the truth allegedly was revealed.  The Court held that plaintiffs adequately alleged false and misleading statements, scienter and loss causation, and denied defendants’ motion to dismiss.

On November 27, 2018, Judge Edward M. Chen of the United States District Court for the Northern District of California granted in part and denied in part a motion to dismiss a putative securities class action against Yelp, Inc. (the “Company”) and several of its senior officers.  Azar v. Yelp, Inc., No. 18-cv-00400 (N.D. Cal. Nov. 27, 2018).  Plaintiffs—purchasers of Company stock between February 10, 2017 and May 9, 2017—alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making materially false and misleading statements regarding the Company’s expected revenues in relation to its advertising program with local businesses, leading to a drop in the Company’s stock price when the Company subsequently made downward adjustments to its projections in May 2017.  The Court held that while certain of the Company’s statements were protected by safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), other alleged statements were actionable misrepresentations.  The Court also held that plaintiffs adequately pleaded scienter and loss causation.  The Court thus granted in part and denied in part defendants’ motion to dismiss.

On September 5, 2018, Judge Marie Weiner of California Superior Court, San Mateo County, granted defendants’ motion to stay a putative class action on grounds of forum non conveniens in order for plaintiff to pursue the action in New York.  Plaintiff asserted claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”) against an early childhood education service provider in the People’s Republic of China (the “Company”), several of its officers and directors, and the underwriters based on the Company’s initial public offering of American Depository Shares (“ADSs”).  Relying largely on a mandatory forum selection clause contained in a deposit agreement that set the terms for the deposit of the non-U.S. securities so that they could be traded on the New York Stock Exchange as ADS, the Court held New York was a more convenient forum and stayed the action in California

On November 19, 2018, the United States Court of Appeals for the Second Circuit summarily affirmed the grant of summary judgment in a securities class action in favor of a financial institution (the “Company”), several of its officer and directors, and the underwriters of the Company’s April 2008 offering.  In re Barclays Bank PLC Sec. Litig., No. 17-3293-CV, 2018 WL 6040846 (2d Cir. Nov. 19, 2018), as amended (Nov. 20, 2018).  Plaintiff, on behalf of purchasers of the Company’s April 8, 2008 Series 5 offering of American Depository Shares (“ADS”), alleged that those securities were issued pursuant to materially false and misleading offering materials, and brought claims against a group of defendants under Sections 11 and 15 of the Securities Act of 1933 (“Securities Act”).  Judge Paul A. Crotty of the United States District Court for the Southern District of New York granted summary judgment in favor of defendants-appellees, finding that (i) the Company had no duty to disclose the allegedly omitted information and (ii) the Company established its negative causation affirmative defense—i.e., that the alleged omissions did not cause plaintiff’s losses.  Plaintiff appealed and the Second Circuit affirmed in a summary order.   Summary orders do not have binding precedential effect.

On November 14, 2018, the United States Court of Appeals for the Third Circuit affirmed the dismissal of and denial of leave to amend a putative class action complaint against Altisource Asset Management Corporation (“AAMC”) and certain of its former directors and officers under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Plaintiffs alleged that AAMC — a provider of asset management and corporate governance advising services related to mortgage servicing — made material misstatements concerning its relationships with the mortgage servicing company Ocwen Financial Corporation (“Ocwen”) and certain affiliated companies. City of Cambridge Ret. Sys. v. Altisource Asset Mgmt. Corp., —F. Supp. 3d—, 2018 WL 5931509 (3d Cir. Nov. 14, 2018). The appealed order was a July 5, 2017 decision of the District Court of the Virgin Islands that rejected plaintiffs’ motion to amend for the reasons noted in the District Court’s April 6, 2017 motion to dismiss decision, as reviewed in our prior post.

On October 26, 2018, the United States Court of Appeals for the Second Circuit affirmed the dismissal of a putative securities class action under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 against a financial services company, its broker-dealer (the “Company”), and one current and one former officer of the financial services company. Schwab v. E*TRADE Fin. Corp. et al, 1:18-cv-461 (2d Cir. Oct. 26, 2018). Plaintiff alleged that the Company failed to disclose that it was purportedly violating the duty of “best execution,” which requires broker-dealers to use “reasonable diligence” to obtain the most favorable price for a customer under “prevailing market conditions.” Earlier this year, the United States District Court for the Southern District of New York dismissed plaintiff’s third amended complaint with prejudice after finding that plaintiff had failed to adequately allege reliance, among other elements. The Second Circuit affirmed the judgment, reiterating that the Affiliated Ute presumption of reliance does not apply where the claim is primarily based on misrepresentations rather than on omissions.

On October 26, 2018, Judge Thomas D. Schroeder of the United States District Court for the Middle District of North Carolina dismissed a putative class action brought against a biopharmaceutical company (the “Company”) and certain of its officers and directors under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Hirtenstein v. Cempra, Inc., No. 16-cv-1303 (M.D.N.C. Oct. 26, 2018). Plaintiffs sought to recover for alleged stock losses occurring after the Company allegedly failed to disclose risks associated with an experimental antibiotic used to treat pneumonia. The Court dismissed the action, finding that the challenged statements about the drug’s safety constituted opinions and plaintiffs’ allegations of motive were insufficient to establish a strong inference of scienter.

On October 24, 2018, Judge John E. Jones III of the United States District Court for the Middle District of Pennsylvania granted judgment on the pleadings and dismissed a putative securities class action against Rite Aid Corporation, Walgreens Boots Alliance, Inc., and certain of their executives under Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder relating to the ultimately unsuccessful merger between the two companies. Hering v. Walgreens Boots Alliance, Inc., —F. Supp. 3d—, 2018 WL 5276189 (M.D. Pa. 2018). This decision follows from a decision issued earlier this summer and reviewed in a prior post. In that earlier decision, Judge Jones dismissed claims with respect to Rite Aid’s statements and held that only Walgreens’ statements made after October 2016 were actionable. In its most recent decision, the Court held that, since the named plaintiff’s last alleged stock purchase predated October 2016, he no longer had standing. Further, the Court denied a motion to intervene filed by putative class members, but noted that the proposed intervenors were free to file their own actions.

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

On October 9, 2018, Judge Richard Seeborg of the United States District Court for the Northern District of California dismissed with prejudice a putative class action against a solar energy company (the “Company”) and certain of its officers under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. In re SunPower Corp. Secs. Litig., No. 16-cv-04710-RS (N.D. Cal. Oct. 9, 2018). Plaintiffs alleged the Company misrepresented demand for its projects by failing to report that an extension of an investment tax credit (“ITC”) and other tax rules would decrease demand in the near-term. Observing that the gravamen of the complaint is that the Company made bad predictions, the Court dismissed the action because plaintiffs failed to identify a material misrepresentation or omission and failed to plead facts sufficient to give rise to a strong inference of scienter, as required by the Private Security Litigation Reform Act (“PSLRA”).

On October 4, 2018, Magistrate Judge Bruce Reinhart of the United States District Court for the Southern District of Florida granted in part and denied in part a motion to dismiss claims asserted under Rule 10b-5 of the Securities Exchange Act of 1934 by certain investment funds against Ocwen Financial Corporation.  Owl Creek I, L.P. v. Ocwen Financial Corp., No. 18-80506-CIV (Oct. 4, 2018).  Plaintiffs alleged that Ocwen and certain of its executives induced plaintiffs to invest by making inaccurate statements regarding Ocwen’s financial statements, its purported regulatory compliance, and the effectiveness of its internal controls and procedures.  The Court dismissed claims based on statements in one conference call due to lack of scienter, but otherwise denied defendants’ motion.

On September 30, 2018, Judge Andrea R. Wood of the United States District Court for the Northern District of Illinois dismissed a putative shareholder class action against VASCO Data Security International, Inc. and certain of its officers. Plaintiff asserted claims under Sections 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Rossbach v. VASCO Data Sec., Int’l, 2018 WL 4699796, (N.D. Ill. Sept. 30, 2018). Plaintiff alleged that VASCO made a number of misstatements suggesting that revenue sources other than the company’s largest client were stronger than they really were. When the company disclosed that the revenue associated with those other products and services remained essentially flat, the stock price allegedly fell. The Court held that plaintiff’s amended complaint failed to adequately allege a false statement or scienter. Plaintiff was, however, granted leave to file a second amended complaint.

On October 2, 2018, Judge John C. Coughenour of the United States District Court for the Western District of Washington dismissed a putative class action against Zillow Group, Inc. and certain of its executives asserting claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.  In re Zillow Group, Inc. Securities Litigation, No. C17-1387-JCC (W.D. Wash. Oct. 2, 2018).  Plaintiffs alleged misstatements by defendants regarding a Consumer Financial Protection Bureau (“CFPB”) investigation into, among other things, potential violations of the Real Estate Settlement Procedures Act (“RESPA”) arising out of Zillow’s “co-marketing” program between real estate agents and mortgage lenders.  The Court dismissed the action for failure to adequately allege material misstatements or scienter, but granted plaintiffs leave to amend.

 

On October 3, 2018, the United States Court of Appeals for the Fifth Circuit affirmed the dismissal of a putative securities class action against Whole Foods Market, Inc. and certain of its executives under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.  Emps.’ Ret. Sys. of the State of Haw. v. Whole Foods Mkt., Inc., —F.3d—, 2018 WL 4770729 (5th Cir. Oct. 3, 2018).  In connection with various regulatory investigations, Whole Foods admitted to mislabeling prepackaged foods such that it charged consumers for more food than the packages actually contained.  Plaintiffs alleged that, by virtue of those “weights and measures” violations, the company had made three categories of misstatements to investors:  (1) statements touting the company’s price competitiveness or efforts to increase its price competitiveness; (2) statements about the company’s commitment to transparency, quality, and corporate responsibility; and (3) statements announcing the company’s revenues, which plaintiffs alleged were artificially inflated as a result of the mislabeled packaging.  The Court held that the first two categories of allegations did not constitute material representations, and the third did not cause plaintiffs’ alleged loss.

On September 27, 2018, the United States Court of Appeals for the Sixth Circuit reversed the dismissal of a putative securities class action against pharmaceutical company Esperion Therapeutics, Inc. (the “Company”) and its CEO.  Dougherty v. Esperion Therapeutics, Inc., et al., No. 17-1701 (6th Cir. Sept. 27, 2018).  Plaintiffs, investors in the Company, alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) by falsely stating that, based on feedback received by the Company at a meeting with the Food and Drug Administration (the “FDA”), the FDA would not require additional testing of the Company’s pre-approval anti-cholesterol drug ETC-1002.  The Company’s stock price allegedly plummeted when, over a month later, the Company issued a press release indicating that, according to the FDA’s own final meeting minutes which had just been provided to the Company, additional testing would be required prior to any approval of the drug.  The United States District
Court for the Eastern District of Michigan had dismissed plaintiffs’ complaint, finding that plaintiffs failed to adequately plead a strong inference of scienter because they failed to identify facts demonstrating that defendants actually understood the FDA’s communications in a way that was different than what the Company publicly disclosed, and that defendants had not been reckless.  Plaintiffs appealed, and the Sixth Circuit reversed.

On September 25, 2018, Judge Haywood S. Gilliam, Jr. of the United States District Court for the Northern District of California dismissed a putative securities class action against Netflix, Inc. (the “Company”), its CEO and CFO.  Ziolkowski v. Netflix, Inc., et al., No. 17-cv-01070 (N.D. Cal Sept. 25, 2018).  Plaintiffs—purchasers of the Company’s common stock during the proposed class period—claimed that the Company violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making materially false and misleading statements and omissions in order to minimize the effects of a recently enacted pricing increase on subscription figures.  In dismissing the complaint without prejudice, the Court held that plaintiffs failed to adequately allege any untrue statement of material fact and also failed to adequately allege scienter.

On September 14, 2018, the United States Court of Appeal for the Ninth Circuit affirmed the District Court’s dismissal of class claims brought by a financial advisor on behalf of itself and shareholders of a bond fund (the “Fund”) against defendants an investment company and its board, on the basis that the claims were barred by the Securities Litigation Uniform Standards Act (“SLUSA”).  Northstar Fin. Advisors v. Schwab Invs., No. 16-15303 (9th Cir. Sept. 14, 2018).  Plaintiff alleged that defendants made certain investments in the Fund that deviated from the investment policies and objectives that resulted in negative returns for the Fund.  Based on those deviations, plaintiff asserted claims of breaches of fiduciary duty, contract, and covenant of good faith and fair dealing against defendants.  The Ninth Circuit affirmed the District Court’s dismissal, agreeing with the District Court that the claims were preempted by SLUSA because the essence of plaintiff’s allegations related to misstatements or omissions in connection with a sale of a security, and that plaintiff could not “avoid preclusion through artful pleading that removes the covered words . . . but leaves in the covered concepts.”

On September 14, 2018, United States District Court Judge Michael Shipp of the District of New Jersey declined to dismiss as untimely plaintiffs’ claim against a major pharmaceutical company (the “Company”) and certain of its executives under Section 18 of the Securities Exchange Act of 1934.  Pentwater Equity Opportunities Master Fund Ltd v. Valeant Pharmaceuticals International, Inc., No. 1707552 (D.N.J. Sep’t 14, 2018).  In denying defendants’ motion to dismiss, the Court deepened a split among courts over whether the Sarbanes-Oxley Act of 2002 (“SOX”) extends the time to file a Section 18 claim to two years of when the violation is discovered.

On September 20, 2018, the United States Court of Appeals for the Third Circuit affirmed dismissal of a putative securities fraud class action brought against Hertz Global Holdings Inc. (the “Company”) and several of its executives for failure to plead a strong inference of scienter.  In Re Hertz Global Holdings Inc., No. 17-2200 (3d Cir. Sep’t 20, 2018).  Plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 by making materially false and misleading statements concerning the Company’s financial results, internal controls, and future earnings projections.  The panel found that plaintiffs’ allegations more plausibly suggested defendants were “just bad leaders,” confirming that claims of mismanagement cannot be converted into a claim of securities fraud, and that the complaint failed to allege factual allegations sufficient to give rise to a strong inference of scienter.

On September 7, 2018, Judge Haywood S. Gilliam, Jr. of the United States District Court for the Northern District of California dismissed a putative class action against Impax Laboratories and certain of its officers under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder alleging that the company made material misstatements regarding (1) the cause of substantial price increases for two generic drugs and (2) trends associated with other drugs.  Fleming v. Impax Labs. Inc., No. 16 Civ. 6577 (N.D. Cal. Sept. 7, 2018).  The Court held that (a) the allegations regarding drug price increases adequately pleaded a material misstatement, but insufficiently alleged scienter or loss causation, and (b) the allegations regarding trends failed to plead either a material misstatement or scienter.  Plaintiff was, however, granted leave to replead.

On September 11, 2018, Judge Barbara M. G. Lynn of the United States District Court for the Northern District of Texas dismissed with prejudice a third amended putative class action complaint against Global Power Equipment Group, Inc. and certain of its former officers asserting claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder based on allegations that defendants filed false and misleading financial statements.  Budde v. Global Power Equip. Grp., Inc., No. 3:15-CV-1679-M, 2018 WL 4335670 (N.D. Tex. Sept. 11, 2018).  Global Power issued restated financials and acknowledged that it had recognized certain revenues and expenses in the wrong period for its Electrical Solutions (“ES”) Segment, had deficiencies in internal controls over financial reporting, and incorrectly accounted for goodwill upon the sale of a subsidiary.  Nevertheless, the Court held that plaintiffs failed to adequately allege scienter with respect to any individual defendant and dismissed the complaint with prejudice.

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

On September 4, 2018, the United States Court of Appeals for the Third Circuit affirmed the partial denial of a motion to dismiss a putative class action against investment services provider Vanguard Group (the “Company”).  Alex Taksir, et al. v. The Vanguard Group, No. 17-3585 (3d. Cir. Sept. 4, 2018).  Plaintiffs alleged that the Company violated Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (“UTPCPL”) and breached its contract with plaintiffs by overcharging on per-trade commissions.  According to the Complaint, the Company’s website represented that commissions were $2 per stock trade for customers who maintained account balances of between $500,000 and $1,000,000, but the Company allegedly charged plaintiffs—who met the prerequisite balance requirements—$7 per trade.  The United States District Court for the Eastern District of Pennsylvania dismissed the UTPCPL claim, but held that the breach of contract claim was not barred by the Securities Litigation Uniform Standards Act (“SLUSA”)—which precludes parties from bringing class actions based on state law claims relating to “a misrepresentation or omission of a material fact in connection with the purchase or sales of a covered security”—because no misrepresentations were made “in connection with” a covered security.  The Company sought leave to file an interlocutory appeal, which the Third Circuit granted.

On August 24, 2018, Judge Karen Gren Scholer of the United States District Court for the Northern District of Texas dismissed with prejudice a putative securities class action against an educational services company (“the Company”), certain of its officers and directors, and the underwriters of its November 2015 initial public offering (the “IPO”).  David M. Stein v. Match Group Inc., No. 3:16-cv-00549 (N.D. Tex.).  Plaintiffs—investors in the IPO—claimed that defendants violated Sections 11 and 15 of the Securities Act of 1933 because the offering documents for the IPO allegedly contained material misstatements and omissions concerning expected sales and revenues from one of the Company’s business segments and failed to disclose certain information as required by Items 303 and 503 of Regulation S-K.  The Court held that plaintiffs had failed to plausibly allege any untrue statement of material fact because the alleged misrepresentations were accurate statements of historical results.  The Court also held that plaintiffs failed to allege a known trend that was required to be disclosed under Item 303 and failed to allege a significant risk factor that was required to be disclosed under Item 503.

On August 24, 2018, Judge Charles Breyer of the United States District Court for the Northern District of California dismissed with leave to amend a putative class action against an electric car manufacturer (the “Company”), its Chief Executive Officer, and its Chief Financial Officer for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5.  Wochos v. Tesla, Inc., et al., No. 17-cv-05828 (N.D. Cal. Aug. 24, 2018).  Plaintiffs alleged that defendants made false and misleading statements regarding production projections for the Company’s Model 3 that it failed to meet.  Stating that “[f]ederal securities laws do not punish companies for failing to achieve targets,” the Court held that the challenged statements were protected by the safe harbor provision of the Private Security Litigation Reform Act of 1995 (“PSLRA”) because they were forward-looking and accompanied by meaningful cautionary language.

On August 23, 2018, Judge F. Dennis Saylor IV of the United States District Court for the District of Massachusetts dismissed the claims asserted in a putative class action against ReWalk Robotics and its officers, directors, and IPO underwriters under the Securities Act of 1933 (“Securities Act”) for misrepresentations made in a registration statement with prejudice, but dismissed the claims asserted under the Securities Exchange Act of 1934 (“Exchange Act”) for alleged post-IPO misstatements without prejudice.  Yan v. ReWalk Robotics Ltd., No. 17 Civ. 10169, slip op. (D. Mass. Aug. 23, 2018), ECF No. 107.

On August 21, 2018, Judge Kevin McNulty of the United States District Court for the District of New Jersey dismissed a putative class action against Galena Biopharma Inc. and several of its officers and employees that alleged defendants failed to make appropriate disclosures about the source of revenues associated with an opioid pain medication manufactured by Galena.  In re Galena Biopharma, Inc. Sec. Litig., 2018 WL 3993453 (D.N.J. Aug. 21, 2018).  Plaintiffs alleged that these omissions violated Item 303 of SEC Regulation S-K or, in the alternative, Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder.  The Court held that, although plaintiffs had “identified several troubling practices regarding Galena,” the complaint failed to state a securities fraud claim and dismissed the complaint with leave to replead.

On August 17, 2018, the United States Court of Appeals for the Second Circuit affirmed the dismissal of a putative class action asserting breach of contract and tort claims against the managers, auditors, consultant, and administrator of two feeder funds for Bernard L. Madoff Investment Securities arising out of defendants’ management and oversight of the funds.  In re Kingate Mgmt. Ltd. Litig., No. 16-3450 (2d. Cir. Aug. 17, 2018) (summary order).  The decision marks a second trip of the case through the Circuit.  The district court had previously dismissed all of plaintiffs’ claims as precluded by the Securities Litigation Uniform Standards Act of 1988 (“SLUSA”), but had its decision vacated by the Second Circuit, which held that SLUSA precluded only state law claims “predicated on conduct of the defendant specified in SLUSA’s operative provisions.”  Slip op. at 5 (citing In re Kingate Mgmt. Ltd. Litig., 784 F.3d 128, 149 (2d Cir. 2015)).  On remand, the district court dismissed certain claims as precluded by SLUSA and dismissed the rest for lack of standing and failure to state a claim under British Virgin Islands/Bermuda law.  The Second Circuit affirmed this second decision, holding in relevant part that certain negligent misrepresentation claims were preempted by SLUSA because they concerned statements that were material to a decision to buy or sell a covered security.

On August 10, 2018, Judge Kimba M. Wood of the United States District Court for the Southern District of New York dismissed a putative securities class action against foreign exchange trading company FXCM Inc. (“FXCM” or the “Company”) and its CEO.  Ret. Bd. of the Policemen’s Annuity and Benefit Fund of Chicago v. FXCM, No. 15-cv-03599 (S.D.N.Y. Aug. 10, 2018).  Plaintiff alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 by making material misstatements and omissions concerning certain risks associated with the Company’s business model.  The Court held that the alleged misrepresentations were inactionable “puffery,” too vague to be actionable, or were not misleading because the alleged risks were adequately disclosed when the Company’s disclosures were viewed as a whole.  The Court also held that plaintiff had failed to allege a strong inference of scienter.

On August 10, 2018, United States District Judge Phyllis J. Hamilton of the United States District Court for the Northern District of California denied a motion to remand to state court a putative securities class action against digital currency issuer Ripple Labs, Inc., one of its subsidiaries, and its Chief Executive Officer.  Coffey v. Ripple Labs Inc., No. 18-cv-03286-PJH (N.D. Cal. Aug. 10, 2018).  Plaintiff, a purchaser of XRP, Ripple’s digital currency, sued defendants in California state court, alleging violations of the Securities Act of 1933 (the “Securities Act”) and California’s blue sky statute.  Plaintiff alleges that defendants’ sale of XRP to investors in an initial coin offering (in which digital assets are sold to consumers in exchange for legal tender or other cryptocurrencies) constituted an unregistered sale of securities in violation of the Securities Act and the California Corporations Code.  Defendants removed the action to federal court pursuant to Section 1453 of the Class Action Fairness Act (“CAFA”), and plaintiff moved to remand the action to state court.  The Court denied plaintiff’s motion, holding that Section 1453 of CAFA provides an independent right to removal that is not precluded by the anti-removal provision in Section 22(a) of the Securities Act, at least in cases not involving a “covered security” as defined in the Securities Litigation Uniform Standards Act (“SLUSA”).

On August 3, 2018, Judge George C. Steeh of the United States District Court for the Eastern District of Michigan dismissed with leave to amend an individual action asserting, among other things, Section 10(b) of the Securities Exchange Act and Rule 10b-5 claims.  Equity Trust Co., et al., v. Kopacka, et al., No. 17-12275 (E.D. Mich. Aug. 3, 2018).  Defendant argued that plaintiffs’ Exchange Act claims were barred by the applicable five-year statute of repose, which he argued was triggered no later than plaintiffs’ final purchase of securities.  Noting that the Sixth Circuit had not ruled on when the Exchange Act repose period begins to run, the Court sided with plaintiffs, the Third Circuit, and district courts in the First and Second Circuits in ruling that the period begins to run with the last alleged misrepresentation, even if it is made after the last alleged security purchase.

On August 7, 2018, the U.S. Court of Appeals for the Third Circuit affirmed a district court order compelling defendant, a broker-dealer and member of the Financial Industry Regulatory Authority (FINRA), to submit to FINRA arbitration, even though the broker-dealer agreements with plaintiff contained a forum-selection clause providing that all actions and proceedings arising out of the agreements and underlying transactions had to be filed in federal court in New York.  See Reading Health Sys. v. JPM Secs., No. 16-4234 (3d Cir. Aug. 7, 2018).  The Court held that, because the forum-selection clauses in broker-dealer agreements did not explicitly reference arbitration, it lacked the specificity required to advise plaintiff that it was waiving its affirmative right to arbitrate under FINRA’s rules.

On August 2, 2018, Chief Judge Thomas A. Varlan of the United States District Court for the Eastern District of Tennessee dismissed in part a putative securities class action against KPMG, LLP asserting claims under Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder.  Plaintiffs alleged that defendant KPMG, as independent auditor to Miller Energy Resources, Inc., allowed Miller Energy to file financial statements with the SEC that were not in compliance with generally accepted accounting principles (“GAAP”), generally accepted auditing standards (“GAAS”), and standards set by the Public Company Accounting Oversight Board (“PCAOB”), because the statements overstated the value of Miller Energy’s Alaskan energy interests.  Cosby v. KPMG, LLP, No. 3:16-cv-121 (E.D. Tenn. Aug. 2, 2018).  Of note, the Court held that while plaintiffs’ allegations stated a claim under Rule 10b-5(b), they did not support a claim for “scheme liability” under Rule 10b-5(a) and (c) because KPMG’s claimed role in the scheme was too remote.

On August 1, 2018, Judge Kevin McNulty of the United States District Court for the District of New Jersey dismissed without prejudice a putative securities class action asserting claims under Section 10(b) of the Securities Exchange Act against the telecommunications company BT Group PLC and certain of its officers.  Plaintiffs, who purchased BT Group American Depository Receipts (“ADRs”), based their claims on allegations that defendants made a series of misstatements between 2013 and 2017 relating to control problems at a BT Group subsidiary in Italy.  Christian v. BT Group plc, No. 17-cv-497 (KM-JBC) (D.N.J. Aug. 1, 2018).  The Court held that plaintiffs failed to adequately allege scienter and therefore dismissed the action.

On July 31, 2018, the United States Court of Appeals for the Second Circuit unanimously affirmed the dismissal of a putative class action asserting state-law claims for breach of fiduciary duty, unjust enrichment, and declaratory relief. As discussed in our prior post, plaintiff’s claims were all based on the allegation that defendant violated its duty of best execution by routing customer trades—specifically, limit orders—to trading venues that were willing to pay the largest rebates to E*TRADE. Rayner v. E*TRADE Fin. Corp., --.3d--, 2018 WL 3625378 (2d Cir. 2018). The Second Circuit held that plaintiff’s claims were precluded by the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”) because they alleged fraudulent misrepresentations even though framed as claims for breach of fiduciary duty.

On July 17, 2018, Judge Jon S. Tigar of the United States District Court for the Northern District of California granted plaintiffs’ motion to certify a class in a securities class action against Twitter, Inc. (the “Company”) and two of its officers.  In re Twitter Inc. Securities Litigation, No. 3:16-cv-05314 (N.D. Cal. July 17, 2018).  Plaintiffs allege that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) by making materially false and misleading statements regarding user growth and engagement,  resulting in a 15 percent stock drop when the Company later disclosed that user engagement was “slowing quite dramatically.”  The Court previously had granted in part and denied in part defendants’ motion to dismiss.

On July 17, 2018, the United States Court of Appeals for the Ninth Circuit reversed the dismissal of a putative securities class action, which alleged that a technology company (the “Company”) and its current and former chief executive officers engaged in fraudulent accounting in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as well as Japanese securities law. Automotive Industries Pension Trust Fund, et al. v. Toshiba Corp., No. 16-56058 (9th Cir. July 17, 2018). In its ruling, the Ninth Circuit analyzed the second prong of the transaction test articulated in Morrison v. National Australia Bank, 561 U.S. 247 (2010) and adopted the Second and Third Circuits’ “irrevocable liability” test, which evaluates where the purchasers incurred the liability to take and pay for securities, and where the seller incurred the liability to deliver the securities. The Ninth Circuit remanded the case to the district court so that plaintiffs could amend their complaint to try to meet this standard.

On July 11, 2018, Judge John E. Jones III of the United States District Court for the Middle District of Pennsylvania dismissed certain claims in a putative securities fraud class action against Rite Aid Corporation and Walgreens Boots Alliance, Inc.  Plaintiff brought claims under Sections 10(b) and 20(a) of the Securities Exchange Act, alleging that Rite Aid, Walgreens, and certain executives at each company made various misstatements over the course of the failed merger between the two companies, which was announced in October 2015 and ultimately terminated in June 2017.  Hering v. Rite Aid Corp., —F. Supp. 3d—, 2018 WL 3373033 (M.D. Pa. July 11, 2018).  The Court held that the majority of the alleged misstatements were optimistic forward-looking statements that were immaterial and/or protected by the safe harbor provided by the Private Securities Litigation Reform Act of 1995, but that certain statements by the Walgreens defendants expressing confidence that the transaction would close based on purported inside information, made in response to negative reports in the press, were sufficiently pleaded with respect to falsity and scienter to state a claim for fraud.

On July 12, 2018, the United States Court of Appeals for the Seventh Circuit affirmed the dismissal of a putative class action brought against Kohl’s Corporation and certain of its executives asserting claims pursuant to Sections 10(b) and 20(a) of the Securities Exchange Act. Pension Tr. Fund for Operating Eng’rs v. Kohl's Corp., —F.3d—, 2018 WL 3385278 (7th Cir. July 12, 2018). Plaintiffs alleged that defendants made false and misleading statements prior to an announcement that Kohl’s would be correcting several years of financial statements due to lease accounting errors. The Court, affirming the district court’s dismissal with prejudice, held that plaintiffs’ complaint failed to adequately allege scienter under the Private Securities Litigation Reform Act (PSLRA) and that plaintiffs were not entitled to an opportunity to replead because they had not provided any basis to infer they could plead a viable claim.

On July 3, 2018, Judge David O. Carter of the United States District Court for the Central District of California granted plaintiffs’ motion to certify a class in a securities fraud action against Tex-Mex restaurant chain El Pollo Loco Holdings, Inc. (the “Company”) and certain of its officers and directors. Turocy, et al. v. El Pollo Loco Holdings Inc. et al., No. 8:15-cv-01343 (C.D. Cal. July 3, 2018).

On June 19, 2018, Judge Lee H. Rosenthal of the United States District Court for the Southern District of Texas dismissed with leave to amend a putative securities class action against Anadarko Petroleum Corporation (“Anadarko” or the “Company”) and certain of its officers. Edgar v. Anadarko Petroleum Corp., et al., No. 17-1372 (S.D. Tex., June 19, 2018). Plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act and Rule 10b-5 by allegedly making material misstatements about the safety of its gas wells and compliance with regulatory requirements. The Court found all but one of the alleged misstatements was not actionable because they amounted to opinions and “corporate cheerleading.” Although the Court found one alleged misstatement actionable, it held that the complaint failed to establish scienter, and granted leave to amend the complaint.

On June 19, 2018, Judge Gonzalo P. Curiel of the United States District Court for the Southern District of California dismissed a securities class action alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against BofI Holding, Inc. (“BofI” or “Company”), an online bank, and certain of its officers and directors. Mandalevy v. BofI Holding Inc. et al., No. 3:17-cv-00667 (S.D. Cal., June 19, 2018). The complaint’s allegations were based on public articles and a whistleblower complaint accusing the Company of making loans to “criminals and politically exposed persons” and announced regulatory activities. The Court dismissed the complaint, among other reasons, for failure to allege loss causation. Relying on the principles of the efficient market theory, the Court held that corrective disclosures generally cannot be based on already public information and that even information available only through Freedom of Information Act (“FOIA”) requests to regulators is considered to be publicly available.

On June 18, 2018, Judge William G. Young of the United States District Court for the District of Massachusetts dismissed with prejudice a putative securities class action against Acacia Communications, Inc. (the “Company”), certain of its officers, certain sellers of the Company’s common stock in connection with its secondary offering, and the underwriters for the Company’s secondary offering.

On Tuesday, June 19, 2018, the United States Court of Appeals for the Second Circuit held that allegations that parties had reached an agreement within the United States for the sale of foreign securities established a “domestic transaction” sufficient to bring related fraud claims within the scope of U.S. securities laws under Morrison v. National Australia Bank Ltd.

On June 11, 2018, Judge Paul A. Engelmayer of the United States District Court for the Southern District of New York dismissed with prejudice a putative securities fraud class action against veterinary pharmaceutical company Aratana Therapeutics Inc.

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On June 12, 2018, a 4-1 majority of the New York Court of Appeals held that claims under New York’s Martin Act are not governed by the six-year statute of limitations generally applicable to common law fraud claims, but rather by the three-year limitations period applicable to actions to recover based on liabilities created by statute.

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On June 4, 2018, Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California dismissed with prejudice a class action alleging that Dynavax Technologies Corporation (“Dynavax” or the “Company”) and its executives violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 by alleging omitting information about its hepatitis B vaccine.  In re Dynavax Securities Litigation, No. 4:16-cv-06690-YGR (N.D. Cal. June 4, 2018).  The Court’s decision is another in a long line of decisions declining to find a securities violation when a pharmaceutical company is alleged to have concealed adverse developments in clinical trials.

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On June 11, 2018, the Supreme Court of the United States held that the tolling rule first stated in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974) cannot salvage otherwise-untimely successive class claims.  China Agritech, Inc. v. Resh, No. 17-432, __ S. Ct. __, 2018 WL 2767565.  In American Pipe, the Court held that the timely filing of a class action tolls the applicable statute of limitations for all persons encompassed by the class complaint.  The issue presented in China Agritech was whether American Pipe tolling can salvage an untimely successive class claim.  The Sixth Circuit and the Ninth Circuit ruled that American Pipe tolling applied to successive class action lawsuits, while certain other circuits, including the First, Second, Fifth, and Eleventh, held that American Pipe tolling did not apply.  In China Agritech, the Court resolved the circuit split and unanimously held that, upon denial of class certification, a putative class member may only intervene as an individual plaintiff or commence an individual suit, but may not commence a new class action beyond the time allowed by the applicable statute of limitations.

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On May 22, 2018, Judge Edgardo Ramos of the United States District Court for the Southern District of New York dismissed with prejudice a putative securities fraud class action against pharmacy benefits manager Express Scripts Holding Company (“Express Scripts” or “Company”) and several of its current and former officers.  In re Express Scripts Holding Co. Secs. Litig., No. 1:16-cv-03338 (S.D.N.Y. May 22, 2018).  Plaintiff—a shareholder of Express Scripts—alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making affirmative misstatements concerning negotiations to renew the contract with its largest customer, Anthem, Inc. (“Anthem”), allegedly causing Plaintiff to suffer losses when the truth was revealed and Company’s stock price declined.  The Court disagreed, finding that plaintiff failed to plausibly allege that the Company did not believe its statements regarding its relationship with Anthem, and as a result dismissed the second amended complaint with prejudice. 

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​On May 11, 2018, the United States Court of Appeals for the Tenth Circuit affirmed the district court’s dismissal of a putative class action asserting claims under Sections 10(b) and 20(a) of the Exchange Act against Williams Companies, Inc. (“Williams” or the “Company”), its CEO, CFO, and certain affiliates.  Emps.’ Ret. Sys. of R.I. v. Williams Cos., et al., No. 17-5034 (10th Cir. May 11, 2018).  The claims alleged in the complaint related to an unconsummated merger between Williams, an energy company, and its affiliate, Williams Partners L.P. (“WPZ”), and the Company’s subsequent agreement to merge with a competing energy company, Energy Transfer Equity L.P. (“ETE”).  Plaintiff alleged that the Company misled investors by describing its proposed merger with WPZ, of which Williams held 60% of the units, as “no risk,” and by failing to disclose its merger discussions with ETE.  The Court rejected both arguments and affirmed the district court’s dismissal, reasoning that plaintiff had taken the alleged misstatement out of context, and that it otherwise failed to allege a basis for requiring the disclosure of the merger discussions with ETE. 

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On May 10, 2018, the Unites States Court of Appeals for the Eighth Circuit affirmed the dismissal of putative class actions against TD Ameritrade, Inc. and certain related entities and individuals, asserting violations of various state laws including breach of defendant’s uniform client agreement, fraud, negligent misrepresentation, breach of fiduciary duty, and violations of the Nebraska Consumer Protection Act.  Zola v. TD Ameritrade, Inc., No. 16-3016 (8th Cir. May 10, 2018).  Plaintiffs alleged that defendant failed to direct its retail clients’ securities orders to trading venues that offered the best price, speed of execution, and likelihood of execution; instead, it allegedly directed orders to venues that catered to high-frequency traders who also paid defendant rebates for order flow.  Slip op. at 3.  The Court held that the “best execution” allegations were effectively claims of misrepresentations or omissions in connection with the purchase or sale of covered securities and were therefore precluded by the Securities Litigation Uniform Standards Act (“SLUSA”).

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In a March 29, 2018 decision, amended on May 9, 2018, the United States Court of Appeals for the Second Circuit vacated the dismissal of claims against defendants Tower Research Capital LLC (a New York based high-frequency trading firm) and its founder under the Commodity Exchange Act (“CEA”) by five Korean citizens who traded Korea Exchange (“KRX”) futures contracts on the KRX “night market.”  Choi v. Tower Research Capital LLC, No. 17-648, 2018 WL 2168642 (2d Cir. 2018).  Plaintiffs alleged that defendants engaged in manipulative “spoofing” transactions on the KRX night market—which operated by matching after-hours orders in Korea with anonymous counterparties on CME Globex, an electronic trading platform on the Chicago Mercantile Exchange.  The district court dismissed the action on the ground that the CEA did not apply extraterritorially, but the Second Circuit vacated and remanded, finding that plaintiffs’ allegations made it plausible that the trades were “domestic transactions” under Morrison v. National Australia Bank Ltd., 561 U.S. 247 (2010), and so within the reach of the CEA, and further that plaintiffs stated a claim for unjust enrichment.

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On May 8, 2018, Judge Claudia Wilken of the United States District Court for the Northern District of California granted class certification in an action asserting claims under Section 10(b) of the Securities Exchange Act based on allegations that the medical device manufacturer Thoratec and certain of its officers misrepresented the performance of its primary product.  Cooper v. Thoratec Corp., 2018 WL 2117337 (N.D. Cal. May 8, 2018).  Plaintiffs alleged that defendants made false and misleading statements about the rate of thrombosis suffered by users of its product, first in 2011 and continuing after a New England Journal of Medicine study revealed in November 2013 that thrombosis rates had increased since the clinical trials (which caused Thoratec’s stock to drop by six percent).  After the company disclosed the impact of higher thrombosis rates in 2014, the stock lost a quarter of its value.

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On Monday, April 30, 2018, Judge Robin L. Rosenberg of the United States District Court for the Southern District of Florida dismissed a consolidated putative securities class action against financial services company Ocwen Financial Corporation (the “Company”) and two of its officers.  Carvelli et al. v. Ocwen Financial Corp. et al., No. 9:17-cv-80500 (S.D. Fla. April 30, 2018).  Plaintiffs—shareholders of the Company—alleged that defendants violated Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and SEC Rule 10b-5, and that the individual defendants violated Section 20(a) of the Exchange Act, by making materially false and misleading statements and omissions regarding operational and technological deficiencies within the Company’s mortgage servicing software platform, causing losses to plaintiffs when the deficiencies were revealed and the Company’s stock declined.  The Court disagreed, finding that the statements in question were non-actionable puffery or opinion, forward-looking statements accompanied by meaningful cautionary statements, or statements on their face not false, and therefore dismissed the action with prejudice.

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On April 20, 2018, the United States Court of Appeals for the Ninth Circuit held that scienter is not required for securities claims brought under Section 14(e) of the Securities Exchange Act of 1934.  Varjabedian v. Emulex Corporation, et al., No. 16-55088 (9th Cir. Apr. 20, 2018).  In so holding, the Ninth Circuit rejected the decisions of five other circuit courts and ruled Section 14(e) claims require only a showing of negligence.

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On April 20, 2018, Judge William H. Pauley III of the United States District Court for the Southern District of New York dismissed a class action against defendants GFI Group, Inc. (“GFI”) and certain executives of GFI, alleging securities fraud claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5.  Gross v. GFI Group, Inc. et al., No. 1:14-cv-09438 (S.D.N.Y. Apr. 20, 2018).  Plaintiffs alleged that the defendants deceived shareholders by falsely representing in a press release that a takeover bid by CME Group (“CME”) was a “singular and unique” opportunity and implying that the CME deal was the best possible deal for GFI shareholders when it knew there were alternative potential bidders.  In fact, another bidder later waged a hostile takeover, which led GFI’s stock price to surge after plaintiffs sold their stock.  The Court granted defendants’ motion for summary judgment, holding that a proxy statement related to the proposed CME deal defeated plaintiffs’ ability to prove scienter.

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On April 13, 2018, the United States Court of Appeals for the Second Circuit, in a summary order, affirmed the dismissal of a putative class action against Deutsche Bank and certain of its officers asserting claims under Section 10(b) of the Securities Exchange Act of 1934.  In re Deutsche Bank Aktiengesellschaft Sec. Litig., No. 17-2560, 2018 WL 1773502 (2d Cir. 2018).  Plaintiffs alleged that defendants misrepresented the effectiveness of the bank’s anti-money laundering controls, and that weaknesses in those controls were subsequently revealed in the public fallout surrounding the bank’s use of so-called “mirror trades” to move funds out of Russia.  Applying the “more stringent rule for inferences involving scienter” under the Private Securities Litigation Reform Act, the Second Circuit affirmed the dismissal of plaintiffs’ complaint for failure to adequately plead scienter.

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On April 17, 2018, Judge Katherine Polk Failla of the United States District Court for the Southern District of New York denied class certification in an action asserting claims for breach of contract and breach of trust against Wells Fargo Bank, N.A.  Royal Park Investments SA/NV v. Wells Fargo Bank NA, 1:14-cv-09764 (S.D.N.Y. Apr. 17, 2018).  Plaintiff alleged that defendant disregarded contractual duties arising out of its role as trustee of two RMBS trusts by failing to protect RMBS Certificate holders and breached its common law duty of trust to avoid conflicts of interest by putting its own interests ahead of the beneficiaries’ and failing to take necessary action to the detriment of beneficiaries.  Adopting in its entirety Magistrate Judge Sarah Netburn’s Report and Recommendation (“R&R”), see Southern District Of New York Magistrate Judge Recommends Denial Of Class Certification In Action Against RMBS Trustee at https://www.lit-sl.shearman.com/southern-district-of-new-york-magistrate-judge-re, the Court denied class certification on the basis that individual questions affecting proposed class members predominated over common issues.

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On April 10, 2018, the United States Court of Appeals for the Second Circuit revived and remanded to state court a putative class action brought against AXA Equitable Life Insurance Company.  O’Donnell v. AXA Equitable Life Ins. Co., No. 17-1085, 2018 WL 1720808 (2d Cir. 2018).  Plaintiff, a holder of a variable deferred annuity policy from defendant, brought a putative class action against defendant in Connecticut state court alleging breach of contract based on defendant’s alleged failure to obtain prior written approval before implementing a “volatility management strategy” that affected the performance of the annuity.  Defendant removed the case to the United States District Court of Connecticut, where it successfully moved to transfer the action to the United States District Court for the Southern District of New York (“SDNY”).  The district court denied plaintiff’s motion to remand the action to state court and granted defendant’s cross-motion to dismiss the case as being precluded under the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”).  The Second Circuit reversed, holding that a security holder’s passive retention of a security following an alleged misrepresentation of which the holder is unaware does not meet the requirement that an alleged misstatement be made “in connection with” the purchase or sale of a security under SLUSA, and instructed the district court to remand the action to Connecticut state court.

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On March 30, 2018, the United States District Court for the Southern District of New York dismissed a class action against Halyard Health, Inc. (“Halyard”) and its executives, along with Kimberly-Clark Corporation (“Kimberly-Clark”) and its executives, that alleged securities fraud under Sections 10(b) and 20(a) of Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5.  Jackson v. Halyard Health Inc., et al., 1:16-cv-05093 (S.D.N.Y. Mar. 30, 2018).  Halyard sells health and healthcare supplies and solutions.  Plaintiff alleged that he acquired Halyard securities at inflated prices and suffered losses when Halyard disclosed that one of its products, the MicroCool Breathable High Performance Surgical Gown (“MicroCool”), intended to protect healthcare providers from contact with highly infectious diseases, was ineffective during the 2014 Ebola virus outbreak.  The Court dismissed the action on the ground that the plaintiff failed to adequately plead facts sufficient to give rise to a strong inference of scienter as required by the Private Securities Litigation Reform Act of 1995.
 

On March 30, 2018, the United States District Court for the Southern District of New York dismissed with prejudice a class action complaint against Embraer S.A. (“Embraer” or the “Company”) and several of its officers, alleging securities fraud under Sections 10(b) and 20(a) of Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5.  Employees Retirement System of the City of Providence, et al. v. Embraer S.A., et al., No. 16-cv-06277 (S.D.N.Y. Mar. 30, 2018).  Plaintiff alleged that the Company made false or misleading statements about and/or failed to disclose violations of the Foreign Corrupt Practices Act (“FCPA”).  The Court dismissed the claims, finding that the Company did not have a duty to disclose uncharged, unadjudicated wrongdoing and that the Company’s disclosures about the government investigation adequately addressed the risks that could result from a finding of unlawful conduct.
 

On Monday, March 26, 2018, the United States Supreme Court heard oral argument in an appeal that presents the question whether American Pipe tolling—which provides that the pendency of a class action generally tolls the statute of limitations for claims of individual members of the putative class—applies not just to subsequent individual actions but also to subsequent class actions.  Transcript, China Agritech, Inc. v. Resh, No. 17-432 (U.S. argued Mar. 26, 2018).  Plaintiffs, alleged owners of shares in China Agritech, filed a putative securities fraud class action following the filing of two other similar class actions for which class certification had been denied.  There was no dispute that the claims of the individual named plaintiffs were timely under the tolling rule of American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974).  The district court, however, dismissed the class claims as time-barred, only to be later reversed by the Ninth Circuit.  The Circuit Courts of Appeals have reached varying conclusions regarding whether, or the circumstances in which, the filing of a putative but ultimately not certified class action will operate to toll subsequently-asserted class claims, thereby allowing for the seriatim filing of otherwise time-barred class actions in the hope that a class may eventually be certified.  The China Agritech case provides an opportunity for the Supreme Court to resolve the conflict.

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On Tuesday, March 27, 2018, Chief Justice John Roberts announced a unanimous decision of the United States Supreme Court that allows immediate appeals from final decisions issued in any action that has been consolidated with other actions for proceedings under Rule 42(a) of the Federal Rules of Civil Procedure.  Hall v. Hall, --U.S.—, 2018 WL 1472897 (2018).  This decision provides important optionality for parties, including in securities actions (which are often consolidated under Rule 42(a)), to be able to appeal an adverse final decision while continuing to address pending cases within the consolidated proceeding.
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On March 28, 2018, Judge J. Paul Oetken 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 against Mylan N.V. and several of its officers asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Section 1 of the Israeli Securities Law of 1968.  In re Mylan N.V. Securities Litigation, 16 Civ. 7926 (JPO) (S.D.N.Y. Mar. 28, 2018).  Plaintiffs alleged that Mylan (which is dual listed on NASDAQ and the Tel Aviv Stock Exchange) misclassified its drug EpiPen for purposes of Medicaid rebates; entered into anticompetitive agreements to inflate drug prices; and made materially misleading statements to investors about its conduct.  While the Court dismissed the Israeli securities law claims “in the interests of international comity,” the Court found that most of the Exchange Act claims were adequately pleaded.

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On March 22, 2018, Chief Judge Colleen McMahon of the United States District Court for the Southern District of New York granted in part and denied in part class certification in a putative class action alleging breach of contract claims against Citibank, N.A.  Merryman et al. v. Citigroup Inc. et al., 15 Civ. 9185 (CM) (S.D.N.Y. Mar. 22, 2018).  Plaintiffs, former holders of American Depositary Receipts (“ADRs”) in three separate companies, brought this putative class action on behalf of a proposed class who currently or previously held any of 35 separate ADRs for which defendant served as depositary bank.  Plaintiffs alleged that defendant breached the contracts governing these ADRs by converting cash distributions received from foreign issuers at one foreign exchange rate and then supposedly using a less favorable rate when remitting the proceeds to ADR holders and retaining the difference (the “spread”).  The Court granted class certification with respect to the securities previously owned by plaintiffs, but held that plaintiffs lacked class standing to bring claims on behalf of holders of other securities.

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On March 27, 2018, Judge F. Dennis Saylor IV of the United States District Court for the District of Massachusetts dismissed a putative class action alleging claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against Biogen Inc. and certain executives.  Metzler Asset Management GmbH et al. v. Kingsley et al., 16 Civ. 12101 (D. Mass. Mar. 27, 2018).  Plaintiffs, investors in Biogen stock, had alleged that Biogen made false and misleading statements regarding the safety and sales of Tecfidera, a leading multiple sclerosis drug.  Tecfidera’s sales had declined following the death of a patient in a clinical study, causing Biogen to cut its guidance for revenue growth in half, and Biogen’s stock price subsequently declined by more than 20%.  The Court held that, while several alleged misrepresentations and omissions were plausibly misleading or false, Plaintiffs had “fail[ed] to clear the relatively high hurdle” under the PSLRA to adequately allege a “strong inference” of scienter.

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On March 20, 2018, the Supreme Court of the United States, in a unanimous decision delivered by Justice Kagan, ruled that state courts have jurisdiction to adjudicate class actions brought under the Securities Act of 1933 (the “Securities Act”) and that such actions cannot be removed from state to federal court.  Cyan, Inc. et al. v. Beaver County Employees Retirement Fund et al., 583 U.S. ___ (2018).  The Securities Act authorized both federal and state courts to exercise jurisdiction over private causes of action relating to securities offerings and barred removal of such suits from state to federal court.  In 1995, in order to stem perceived abuses of the class-action vehicle in securities litigation, Congress enacted the Private Securities Litigation Reform Act (“PSLRA”).  The PSLRA amended the Securities Act by introducing procedural reforms for securities class actions in federal court.  When plaintiffs began filing securities class actions in state courts instead, to avoid the federal procedural standards, Congress passed the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”).  Cyan, Inc. (“Cyan”), a telecommunications company, and its officers and directors, argued that the SLUSA amendments gave federal courts exclusive jurisdiction over class actions brought under the Securities Act.  The Supreme Court disagreed, holding that those amendments did not divest state courts of concurrent jurisdiction over class actions pursuant to the Securities Act.  The Court also rejected the separate argument regarding removal of such actions, advanced by the U.S. Solicitor General, as amicus curiae, and held that SLUSA does not permit defendants to remove class actions alleging only Securities Act claims from state to federal court.

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On March 22, 2018, Judge Katherine Polk Failla of the United States District Court for the Southern District of New York dismissed a putative securities class action against Chipotle Mexican Grill, Inc. (“Chipotle”), its two former co-CEOs, and its CFO.  Ong v. Chipotle Mexican Grill, Inc. et al., No. 1:16-cv-141-KPF (S.D.N.Y. March 22, 2018).  Plaintiffs—shareholders of Chipotle who allegedly purchased the company’s shares between February 5, 2015 and February 2, 2016—alleged that the company and the individual defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) by failing to disclose in securities filing and press releases certain attendant risks in the fast-food chain’s produce processing and food-safety procedures, allegedly causing plaintiffs to suffer losses when Chipotle’s stock dropped after a series of food-borne illness outbreaks occurred in 2014 and 2015.  The Court disagreed, finding that while it was “as concerned as the parties about food-borne illness outbreaks,” plaintiffs had not adequately pleaded securities fraud, and dismissed plaintiffs’ second amended complaint (“SAC”) with prejudice.

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On March 8, 2018, the United States District Court for the Middle District of Tennessee dismissed a consolidated class action alleging securities fraud claims under Section 10(b) and 20(a) of the Securities Exchange Act against Dollar General Corporation (“Dollar General”), and certain of its executives.  Iron Worker Local Union No. 405 Annuity Fund, et al. v. Dollar General Corporation, et al., No. 3:17-cv-00063 (M.D. Tenn., Mar. 8, 2018).  Plaintiffs alleged defendants misled investors about the negative impact reductions to government benefits, including Supplemental Nutrition Assistance Program (“SNAP”) benefits, would have on Dollar General’s business.  The Court held, among other things, that defendants sufficiently disclosed the importance of SNAP recipients to Dollar General’s business, the impact of an earlier reduction in SNAP benefits did not render the impact of a later change to benefits foreseeable, and that risk factors accompanying optimistic projections rendered certain forward-looking statements inactionable.

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On March 12, 2018, the United States Court of Appeals for the Fifth Circuit affirmed the dismissal of a shareholder’s claims to recover on behalf of Dynegy, Inc. (“Dynegy”) alleged short-swing profits from insiders in violation of Section 16(b) of the Securities Exchange Act of 1934 (“Exchange Act”). Jordan v. Flexton, et al., No. 17-20346 (5th Cir. Mar. 12, 2018). Plaintiff alleged that defendants, Dynegy’s officers, received short-swing insider trading profits from a series of dispositions of equity securities that violated Section 16(b) because the dispositions occurred less than six months after they received the equity securities. Plaintiff maintained that the purchases were not exempt under SEC Rule 16b-3(e) because they were neither pre-approved nor automatic. The district court dismissed the action and held that the transactions were exempt under Rule 16b-3(e). On appeal, the Fifth Circuit affirmed the dismissal on the ground that plaintiff failed to allege facts showing that the dispositions were discretionary or were not pre-approved.

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On March 2, 2018, Judge Charles R. Breyer of the United States District Court for the Northern District of California granted defendants’ request for reconsideration of a motion to dismiss a putative class action brought against Volkswagen Aktiengesellschaf (“VW AG”), Volkswagen Group of America, Inc. (“VWGoA”), Volkswagen Group of America Finance, LLC (“VWGoAF”), and former executives of VW AG and VWGoA.  In re: Volkswagen “Clean Diesel” Marketing, Sales Practices, and Products Liability Litigation, MDL No. 2672 CRB (JSC) (N.D. Cal. Mar. 2, 2018).  Plaintiff had alleged that defendants failed to disclose Volkswagen’s use of “defeat device” software to mask emissions in the company’s diesel engines, in violation of Section 10(b) of the Securities Exchange Act of 1934.  In its previous July 19, 2017 order, the Court dismissed certain claims but found that plaintiff could rely on a presumption of reliance under Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128 (1972), because plaintiff primarily alleged omissions as opposed to misstatements.  Defendants asked the Court to reconsider that ruling in light of the Second Circuit’s November 2017 decision in Waggoner v. Barclays PLC, 875 F.3d 79 (2d Cir. Nov. 6, 2017)—which held that the Affiliated Ute presumption does not apply when the only omission alleged is the omission of the truth that an affirmative misstatement misrepresented.  The Court did so, agreed with Waggoner, and dismissed plaintiff’s remaining claims for failure to adequately plead reliance.

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On February 28, 2018, Judge Peter Sheridan of the United States District Court for the District of New Jersey granted class certification in an action against Aeterna Zentaris, Inc. and certain of its executives.  Li V. Aeterna Zentaris, Inc., No. 3:14-CV-07081 (D.N.J. Feb. 28, 2018), ECF No. 144.  Plaintiffs asserted claims under Section 10(b) of the Securities Exchange Act of 1934, based on allegations that Aeterna made false or misleading statements about the progress of certain clinical trials involving the drug Macrilen, a growth hormone stimulator intended to diagnose whether a person has adult growth hormone deficiency (“AGHD”). 

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On February 26, 2018, the United States Court of Appeals for the Fifth Circuit affirmed in a per curiam unpublished decision the dismissal of a putative securities class action against UBS AG and certain affiliated entities.  Giancarlo, et al. v. UBS Financial Services Inc., et al., No. 16-20663 (5th Cir. Feb. 26, 2018).  Plaintiffs—former clients of a defendant UBS affiliate who invested in former energy giant Enron using the UBS affiliate as their broker—alleged that defendants violated Section 10(b) of the Securities Exchange Act by failing to disclose information purportedly revealing problems with Enron’s accounting, leading to alleged losses when Enron’s precarious financial position was uncovered in November 2001.  The United States District Court for the Southern District of Texas dismissed plaintiffs’ claims, finding that plaintiffs failed to plead facts demonstrating that defendants’ separate corporate status should be disregarded, and thus had failed to adequately plead their “single, fully integrated entity” theory of liability.  The District Court further found that plaintiffs had failed to identify specific brokers or allege facts demonstrating that each broker had an intent to deceive, manipulate, or defraud.  The Fifth Circuit agreed, holding that plaintiffs had failed to meet the heightened specificity requirements for pleading securities fraud under Federal Rule of Civil Procedure 9(b), noting that plaintiffs had not adequately alleged that defendants had knowledge of Enron’s practices, nor a duty to disclose such information to plaintiffs.   

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On February 27, 2018, Judge Naomi Reice Buchwald of the United States District Court for the Southern District of New York dismissed with prejudice a putative securities fraud action brought against Chinese mobile internet service provider NQ Mobile, Inc. (“NQ”) and its CEO and Vice President.  Finocchiaro, et al v. NQ Mobile Inc., et al., No. 1:15-cv-06385 (S.D.N.Y. Feb. 27, 2018).  Plaintiffs—shareholders of NQ—alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act by making affirmative misstatements about NQ’s value and failing to disclose to investors certain material facts relating to NQ’s corporate acquisition strategy, allegedly causing plaintiffs to suffer losses when the truth was revealed and NQ’s stock dropped.  The Court held that the alleged affirmative misrepresentation was mere puffery which plaintiffs could not have reasonably relied upon and that the alleged material omissions were in fact properly disclosed.  Accordingly, the Court dismissed the complaint with prejudice. 

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On February 9, 2018, Judge Charles E. Breyer of the United States District Court for the Northern District of California held that “newly discovered evidence” regarding the basis for an auditor’s resignation and the scope of improper expense reimbursements did not justify reconsidering the Court’s prior dismissal of claims under Section 10(b) of the Securities Exchange Act of 1934 for failure to sufficiently allege scienter and loss causation.  Rok v. Identiv, Inc., 2018 WL 807147 (N.D. Cal. Feb. 9, 2018).

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On February 12, 2018, Judge Samuel Der-Yeghiayan of the United States District Court for the Northern District of Illinois denied a motion to dismiss a putative class action under the Securities Exchange Act of 1934 against Treehouse Foods, Inc. (“TreeHouse”) and certain TreeHouse executives.  Public Employees’ Retirement System of Mississippi v. TreeHouse Foods, Inc. et al., 16 C 10632 (N.D. Ill. Feb. 12, 2018).  Plaintiff alleged that TreeHouse, a manufacturer of store brand food products for grocery stores, materially misrepresented that its acquisitions of Flagstone Foods and the “Private Brands” business of ConAgra Foods, Inc. were successful.  The Court denied the motion to dismiss, holding among other things that plaintiff adequately alleged that defendants made actionable misstatements.

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On January 30, 2018, Judge John R. Tunheim of the United States District Court for the District of Minnesota granted class certification in a consolidated securities fraud class action against Medtronic and certain of its officers and employees.  West Virginia Pipe Trades Health & Welfare Fund v. Medtronic, Inc., et al., No. 13-cv-01686-JRT-FLN (D. Minn. Jan. 30, 2018).  Plaintiffs—institutional investors who purchased Medtronic stock during the proposed class period—allege that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by manipulating early clinical studies of INFUSE, an alternative to replacement bone-tissue graft, by knowingly concealing adverse side effects observed in clinical trials, and by failing to sufficiently disclose that it paid physician authors a total of $210 million to publish positive articles about INFUSE in medical journals.  Plaintiffs allege that Medtronic’s deception artificially inflated the company’s stock price, causing a large stock drop in August 2011, when the truth was revealed through a corrective disclosure.  Plaintiffs sought to certify a class of all purchasers of Medtronic stock between September 8, 2010 and August 3, 2011.  The Court certified the class, but shortened the class period end date to June 3, 2011, which is the date of the initial corrective disclosure.

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​On February 9, 2018, the United States Court of Appeals for the Second Circuit affirmed the dismissal of aiding and abetting claims against UBS AG, AIA LLC, and their affiliated entities and individuals.  SPV Osus Ltd. v. UBS AG, et al., No. 16-2173-cv (2d Cir. Feb. 9, 2018).  Plaintiff alleged defendants aided and abetted a Ponzi scheme orchestrated by Bernard L. Madoff Investment Securities LLC (“BLMIS”), by sponsoring and providing support for two European-based feeder funds despite being aware of fraudulent activity.  Plaintiff further alleged it suffered losses of approximately $2.9 billion when the scheme was uncovered.  The United States District Court for the Southern District of New York had denied plaintiff’s motion to remand the case to New York Supreme Court, where plaintiff had originally filed, and had granted defendants’ motion to dismiss the complaint for lack of personal jurisdiction.  On appeal, plaintiff argued that the district court erred by:  (1) denying plaintiff’s motion to remand because the instant litigation was not “related to” the Madoff/BLMIS bankruptcies and thus the federal court lacked subject-matter jurisdiction; (2) holding that the court lacked personal jurisdiction over defendants; and (3) holding that plaintiff failed to adequately plead proximate cause.  The Second Circuit rejected plaintiff’s arguments and affirmed the dismissal of the action based on lack of personal jurisdiction over defendants and failure to plead proximate cause.

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On January 31, 2018, the United States Court of Appeals for the Ninth Circuit affirmed in a per curiam decision a district court decision denying in part defendants’ motion for summary judgment on claims brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by investors in First Solar, Inc., one of the world’s largest producers of solar panels.  Mineworkers’ Pension Scheme et al. v. First Solar Inc., No. 15-17282 (9th Cir. Jan. 31, 2018).  After partially denying summary judgment, the district court certified for interlocutory appeal a question as to the correct test for loss causation under the Exchange Act in the Ninth Circuit.  In addressing this question, the Ninth Circuit resolved a perceived ambiguity between two lines of decisions in the Circuit by affirming the district court’s holding that a plaintiff can establish loss causation by proving that “the defendant misrepresented or omitted the very facts that were a substantial factor in causing the plaintiff’s economic loss” even if the alleged fraud was not itself disclosed to the market before the plaintiff suffered the loss.  In so doing, the Ninth Circuit rejected the defendants’ argument that “[s]ecurities fraud plaintiffs can recover only if the market learns of the defendants’ fraudulent practices” before the claimed loss.

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On January 20, 2018, Judge John Koeltl of the United States District Court for the Southern District of New York dismissed a putative class action under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder filed against E*TRADE Securities LLC (“E*TRADE”), E*TRADE Financial Corporation (“E*TRADE Financial”), and one current and one former officer of E*TRADE Financial.  Schwab v. E*TRADE Fin. Corp., --F. Supp. 3d --, 2018 WL 502787 (S.D.N.Y. 2018).  Plaintiff alleged that E*TRADE falsely represented that it would execute clients’ orders consistent with its duty of “best execution”—which requires it to use “reasonable diligence” to obtain the most favorable price for a customer under “prevailing market conditions”—because E*TRADE allegedly executed orders in consideration of only two factors—its order-handling agreements with venues and the maximization of payments for order flow.  In prior decisions, the Court dismissed common law claims as precluded by the Securities Litigation Uniform Standards Act (“SLUSA”), and dismissed without prejudice the second amended complaint for failure to adequately allege reliance or scienter.  Addressing plaintiff’s third amended complaint, the Court again determined that plaintiff had failed to adequately plead reliance or scienter, and dismissed the action with prejudice.

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In a January 10, 2018 ruling unsealed on January 19, Magistrate Judge Sarah Netburn of the United States District Court for the Southern District of New York recommended denial of Royal Park Investments’ request for class certification in an action against Wells Fargo Bank, N.A. (“Wells Fargo”).  Royal Park Investments SA/NV v. Wells Fargo Bank, N.A., 14-CV-09764-KPF-SN (S.D.N.Y. Jan. 10, 2018).  Plaintiff asserts claims for breach of contract and breach of trust in connection with Wells Fargo’s role as trustee of two RMBS trusts, alleging that Wells Fargo disregarded contractual duties by failing to protect RMBS Certificateholders and breached its common law duty of trust to avoid conflicts of interest by putting its own interests ahead of the beneficiaries’ and failing to take necessary action to the detriment of beneficiaries.  Concluding that individual questions affecting proposed class members predominated over common issues, Magistrate Judge Netburn recommended that plaintiff’s motion be denied.

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On December 29, 2017 and January 9, 2018, respectively, the United States Court of Appeals for the Ninth Circuit and the United States Court of Appeals for the Eighth Circuit each affirmed district court dismissals of putative securities class actions asserting violations of various state laws based on securities brokerage firm defendants’ alleged violation of the “duty of best execution” in executing client trades.  Fleming v. Charles Schwab Corp., No. 16-15179 (9th Cir. Dec. 29, 2017); Lewis v. Scottrade, Inc., No. 16-3808 (8th Cir. Jan. 9, 2018).  In affirming the district courts’ dismissals of these clams, both the Ninth Circuit and the Eighth Circuit reasoned that the alleged “best execution” violations were, in substance, allegations of deceptive conduct “in connection with the purchase or sale of” a security and thus barred by the Securities Litigation Uniform Standards Act (“SLUSA”).  

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On January 12, 2018, the United States Court of Appeals for the Second Circuit vacated a district court order certifying a securities fraud class action brought by purchasers of common stock in The Goldman Sachs Group, Inc. (“Goldman” or the “Company”).  Arkansas Teachers Ret. Sys. v. Goldman Sachs, No. 16-250 (Jan. 12, 2018).  The district court certified the class, ruling that defendants failed to rebut the presumption of reliance first articulated in Basic Inc. v. Levinson, 485 U.S. 224 (1988) because defendants did not “conclusively” prove a “complete absence of price impact.”  On appeal, the Second Circuit ruled that, consistent with its precedent, defendants seeking to rebut the Basic presumption of reliance must do so by a preponderance of the evidence.  Because it was unclear if the district court applied a more demanding standard than preponderance of the evidence, the Second Circuit vacated the district court’s decision and remanded it to consider the defendants’ evidence under the proper standard.

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On December 18, 2017, Judge Aleta A. Trauger of the United States District Court for the Middle District of Tennessee denied a motion to dismiss a putative class action under Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) filed against CoreCivic—a publicly traded real estate investment trust that operates private prisons—and certain CoreCivic executives.  Grae v. Corr. Corp. of Am., No. 3:16-CV-2267, 2017 WL 6442145 (M.D. Tenn. Dec. 18, 2017).  Plaintiffs alleged that CoreCivic and the individual defendants made and authorized numerous false and misleading statements concerning the quality of CoreCivic’s operations and how those operations complied with standards set by the U.S. Federal Bureau of Prisons (“BOP”) despite being on notice that their operations failed to so comply in numerous instances, and that defendants’ statements were later contradicted by a United States Department of Justice Office of Inspector General (“OIG”) audit report and a memorandum by then–Deputy Attorney General Sally Q. Yates critical of the private prison industry, causing CoreCivic’s stock price to plummet more than 50% in eight days.  In denying defendants’ motion to dismiss, the Court held that the totality of plaintiffs’ allegations sufficiently supported their “central theory of liability.”

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​On December 13, 2017, the United States Court of Appeals for the Sixth Circuit reversed the dismissal of a consolidated putative class action against Community Health Systems, Inc. (“Community”), its CEO, and CFO.  Norfolk Cty. Ret. Sys. et al. v. Cmty. Health Sys., Inc. et al., No. 16-6059 (6th Cir. Dec. 13, 2017).  Plaintiffs—shareholders of Community—alleged that Community and certain of its officers had violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by fraudulently inflating Community’s share price through false and misleading statements regarding Community’s operating model.  Plaintiffs alleged that the value of Community’s shares fell immediately in April 2011 after a Community competitor, Tenet Healthcare Corporation, publicly disclosed in a civil complaint against Community expert analyses alleging that Community’s profits depended largely on Medicare fraud, and fell further in October 2011 after one of Community’s officers admitted to certain of Tenet’s allegations.  Judge Kevin H. Sharp of the United States District Court for the Middle Division of Tennessee dismissed the putative class action complaint, finding that while plaintiffs had sufficiently pled that defendants intentionally made misleading statements, they had not adequately alleged that the misleading statements had caused plaintiffs’ losses because the disclosures came in the form of Tenet’s complaint—and was therefore regarded by the market as mere “allegations” rather than truth.  The Sixth Circuit reversed.

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On December 12, 2017, the New York Court of Appeals dismissed certain breach of contract claims brought by HSBC Bank USA, N.A. (“HSBC”) against Nomura Credit & Capital, Inc. (“Nomura”), in four separate actions related to Nomura’s role as a sponsor in residential mortgage-backed securities (“RMBS”) transactions.  Nomura Home Equity Loan, Inc., Series 2006-FM2, by HSBC Bank USA, Nat’l Ass’n, solely in its capacity as Trustee, et al. v. Nomura Credit & Capital, Inc. (And Three Other Actions), No. 39 (N.Y. Dec. 12, 2017).  The Court of Appeals dismissed HSBC’s claims for general contract damages—based on alleged breaches of a “no untrue statement” provision contained in the Mortgage Loan Purchase Agreement (“MLPA”)—for each transaction, finding that HSBC’s claims relate to the characteristics of the underlying mortgage loans, and are therefore subject to the contract’s provision mandating cure or loan repurchase as the sole remedy for breaches of mortgage loan-specific representations.

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On December 5, 2017, the United States District Court for the Northern District of California denied class certification in a putative securities fraud class action against Finisar Corporation (“Finisar”), a technology company focused on fiber optic subsystems, and its current chairman/CEO and former CEO, in which plaintiffs alleged that defendants misled investors by denying that Finisar’s revenue growth was the result of inventory build-up by customers.  In re Finisar Corporation Securities Litigation, No. 5:11-cv-01252-EJD (N.D. Cal. Dec. 5, 2017).  In denying plaintiffs’ motion for class certification, the Court ruled that defendants successfully rebutted the fraud-on-the-market presumption of reliance by demonstrating that defendants’ statements had no statistically significant impact on Finisar’s stock price.

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On December 6, 2017, the United States District Court for the Northern District of Illinois dismissed a securities fraud lawsuit brought against DeVry Education Group, Inc. and several of its executives (“DeVry”), with leave to amend, because plaintiffs failed to sufficiently plead that DeVry executives knowingly misrepresented the employment rates and placement statistics of DeVry University (“DVU”) graduates in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  Pension Trust Fund for Operating Engineers v. DeVry Education Group, Inc., No. 16 Civ. 5198 (N.D. Ill. Dec. 6, 2017).  The Court held that the Private Securities Litigation Reform Act of 1995 (“PSLRA”) requires plaintiffs to set forth “particularized factual allegations” that do more than show the “plausibility or reasonableness” of scienter allegations and that the complaint, which relied heavily on earlier lawsuits by regulators, failed to meet this standard.  The decision serves as a reminder that securities lawsuits often fail when they attempt to piggy-back on lawsuits filed by government regulators or other stakeholders.

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