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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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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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 November 21, 2017, the United States Court of Appeals for the Ninth Circuit affirmed a dismissal by Judge Jon S. Tigar of the United States District Court for the Northern District of California of a putative class action against Yelp, Inc. (“Yelp”) and three of its senior executives.  Curry, et al. v. Yelp, Inc., et al., Case No. 16-15104 (9th Cir. Nov. 21, 2017).  Plaintiffs brought claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”), alleging that Yelp made material misstatements regarding the authenticity and independence of the reviews posted by users on its website, and that those misstatements, when brought to light in media reports, caused Yelp’s stock value to drop.  The district court dismissed with prejudice plaintiffs’ amended complaint, finding that plaintiffs failed to sufficiently allege material false statements, loss causation, and scienter.  The Ninth Circuit affirmed the district court’s decision, concluding that plaintiffs failed to adequately allege loss causation and scienter and holding that the amended complaint fell short of the “demanding standards set for claims of federal securities law violations.”

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On November 15, 2017, the United States Court of Appeals for the Fourth Circuit affirmed the dismissal of a putative securities fraud class action against PowerSecure International, Inc. (the “Company” or “PowerSecure”), and Sidney Hinton, its president and CEO.  Maguire Fin. LP v. PowerSecure Int’l Inc., No. 16-2163 (4th Cir. Nov. 15, 2017).  Plaintiffs alleged that defendants defrauded investors by knowingly making misrepresentations about the renewal of a major contract in violation of Section 10(b) of the Securities Exchange Act of 1934.  The district court dismissed the complaint after finding that plaintiffs failed to adequately allege scienter.  The Fourth Circuit affirmed, stating that “[a] plaintiff may not stack inference upon inference” to satisfy the PSLRA’s heightened pleading requirements for scienter. 

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On October 20, 2017, Judge Michael M. Anello of the United States District Court for the Southern District of California denied in part and granted in part a motion to dismiss brought by Qualcomm, Inc. (the “Company”), its CEO, and four directors, in response to a shareholder lawsuit.  3226701 Canada, Inc. v. Qualcomm, Inc., Case No. 15-cv-2678-MMA (WVG) (S.D. Cal. Oct. 20, 2017).  Plaintiff alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”), as well as violations of SEC Rule 10b-5, in connection with statements made by the Company and its directors regarding one of its microprocessors used in smartphones and other mobile devices.  The Court held that plaintiff had adequately pleaded falsity and scienter in connection with some of the alleged statements, but that other statements were not actionable.  The Court allowed the claims against the CEO and the Company to proceed, but dismissed the claims against the four directors.

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On October 18, 2017, Judge Ricardo S. Martinez of the United States District Court for the Western District of Washington dismissed with leave to amend a consolidated amended complaint asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 against Seattle Genetics, Inc. (the “Company”) and certain of its current and former executives (the “Individual Defendants”).  Patel v. Seattle Genetics Inc., No. C17-41RSM (W.D. Wash. Oct. 18, 2017).  Based largely on information obtained from a confidential witness, the complaint alleged that defendants misled investors by claiming that the Company’s cancer treatment drug did not cause a toxic side effect on a patient’s liver, while failing to disclose that certain patients in a clinical trial had already experienced liver toxicity (hepatotoxicity).  Although the Court found that plaintiff adequately alleged a material omission, it dismissed the complaint for failure to plead scienter because, in the Court’s opinion, the Individual Defendants’ general knowledge of the Company’s day-to-day business was insufficient to impute to them knowledge about potential problems with hepatotoxicity in a clinical trial. 

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​On Monday, October 16, 2017, Judge Jon S. Tigar of the United States District Court for the Northern District of California granted in part and denied in part a motion to dismiss a shareholder class action alleging violations of the Securities Exchange Act of 1934 by Twitter Inc. (“Twitter”) and certain of its executives.  Shenwick v. Twitter, Inc., No. 16-CV-05314-JST, 2017 WL 4642001 (N.D. Cal. Oct. 16, 2017).  Plaintiffs alleged that Twitter and its executives made false and/or misleading statements regarding Twitter’s user metrics that painted a misleading picture of Twitter’s financial health and growth.  The Court permitted many of plaintiffs’ claims to proceed, even while dismissing certain allegations as non-actionable “puffery,” and discounting allegations in the complaint attributed to confidential witnesses.

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On October 4, 2017, United States District Judge Stephen V. Wilson of the United States District Court for the Central District of California dismissed without prejudice a putative class action against Facebook, Inc., and three of its senior executives.  Anshen v. Facebook, No. 2:17-cv-00679-SVW-AGR (C.D. Cal., Oct. 4, 2017).  Plaintiffs alleged that defendants violated Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange Act by fraudulently inflating Facebook’s “average duration of video view” advertisement efficacy metric, leading to a decrease in expected revenue and a drop in the company’s share price when the inaccuracy of the metric was later disclosed.  The company maintained that it inadvertently had overstated this key metric by 60—80% for two years because only advertisements that were viewed for more than three seconds were included in the calculation.  The Court rejected plaintiffs’ claims, finding that plaintiffs had failed to adequately plead scienter or causation.

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On September 19, 2017, Judge Andrew L. Carter, Jr. of the United States District Court for the Southern District of New York allowed a putative securities fraud class action to proceed against VEON Ltd. (“VEON”), a telecommunications company formerly known as VimpelCom, and several of its current and former executives, denying in large part the company’s motion to dismiss.  In re VEON Ltd. Sec. Litig., 15-cv-08672 (ALC) (S.D.N.Y. Sept. 19, 2017).  Plaintiffs brought claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) asserting that VEON’s failure to disclose in its SEC filings its admitted bribery scheme in Uzbekistan made the company’s statements about its growth materially misleading.  While VEON argued that plaintiffs’ claims were an impermissible attempt to enforce the Foreign Corrupt Practices Act (“FCPA”), for which there is no private right of action, the Court disagreed, holding that plaintiffs’ allegations were sufficiently distinct and sufficient to plead violations of Sections 10(b) and 20(a) of the Exchange Act.

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On September 6, 2017, Judge Fernando M. Olguin of the Central District of California granted in part and denied in part a motion by defendants to dismiss a putative securities fraud class action against Goldcorp, Inc., a gold mining company, its former CEO Charles A. Jeannes, and other current and former officers of Goldcorp.  Cowan v. Goldcorp, No. 16-CV-6391 (C.D. Cal. Sept. 6, 2017).  The complaint asserted that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by misleading investors about pollution levels at one of Goldcorp’s major mines in Mexico.  In denying in part and granting in part the motion to dismiss, the Court ruled that—with the exception of a statement by Goldcorp’s former CEO—the complaint failed to adequately allege a materially false or misleading statement, noting that the complaint relied extensively on allegations raised in a Reuters article and lacked any corroboration.