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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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, 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 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 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 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 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 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 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 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 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.