On July 26, 2017, Judge Claudia Wilken of the United States District Court for the Northern District of California denied a motion to dismiss a putative securities class action alleging that GoPro, Inc. (“GoPro”), its CEO, Nicholas Woodman, and other GoPro executives described in the Complaint but not named as defendants, had violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making false and misleading statements regarding the rollout of a new camera and line of airborne drones.  Bielousov v. GoPro, Inc., No. 16-CV-06654-CW, 2017 WL 3168522 (N.D. Cal. July 26, 2017).  In so doing, the Court found that plaintiff had adequately alleged that a statement by GoPro’s CFO that “we believe” GoPro is “on track to make” its 2016 revenue guidance, was not covered by the safe harbor provision of the Private Securities Litigation Reform Act of 1995 and, along with certain other representations, was false and mischaracterized the new drone’s availability and capabilities.

On July 19, 2017, Judge Charles R. Breyer of the United States District Court for the Northern District of California partially dismissed a putative class action 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. 2762 CRB (JSC) (N.D. Cal. July 19, 2017).  Plaintiffs are institutional investors who purchased bonds offered by VWGoAF.  VWGoAF is a wholly-owned subsidiary of VWGoA, and the bonds were guaranteed by VW AG, the ultimate parent of VWGoA and VWGoAF.  Plaintiffs 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 Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”).  The Court concluded that plaintiffs had plausibly alleged that the bond offering memorandum was misleading, and that some, but not all, of the defendants made statements and omissions in the offering memorandum with scienter.

Read more

On July 10, 2017, Judge John G. Koeltl of the United States District Court for the Southern District of New York dismissed a putative securities fraud class action 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., No. 16-cv-05891 (S.D.N.Y. July 10, 2017).  Plaintiff alleged that E*TRADE misled its clients by falsely representing that it would execute 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.”  Plaintiff brought claims under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder, as well as control person claims under Section 20(a) of the Exchange Act.  The Court granted defendants’ motion to dismiss, holding that plaintiff failed to adequately plead reliance or scienter, and also failed to plead culpable participation sufficient to state a control person claim.

Read more

On July 20, 2017, Judge J.P. Stadtmueller of the United States District Court for the Eastern District of Wisconsin dismissed claims brought by shareholders of Kohl’s Corporation (“Kohl’s”) against the company and two of its officers.  Pension Trust Fund for Operating Engineers et al. v. Kohl's Corp. et al., Case No. 2:13-cv-01159 (E.D. Wisc. July 20, 2017).  Plaintiffs alleged that defendants’ financial disclosures during the class period materially misrepresented and failed to disclose the extent of accounting errors related to Kohl’s leasing agreements.  Plaintiffs brought claims under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder, as well as control person claims under Section 20(a) of the Exchange Act.  The Court granted defendants’ motion to dismiss with prejudice, holding that plaintiffs failed to establish that any of the defendants acted with the requisite scienter to support a securities fraud claim.

Read more

On July 13, 2017, the United States Court of Appeals for the Second Circuit vacated a part of a district court decision denying a plaintiff’s motion to amend a complaint to add securities fraud claims based on a contractual release of claims on the ground that “blanket releases” from compliance with federal securities laws were barred by the anti-waiver provision of the Securities Exchange Act of 1934 (the “Exchange Act”).  Pasternack v. Shrader, et al. No. 16-217 (2d Cir. July 13, 2017).  This provision provides that “[a]ny condition, stipulation, or provision binding any person to waive compliance with any provision of [the Exchange Act] or any rule or regulation [promulgated] thereunder . . . shall be void.”  15 U.S.C. § 78cc(a).  

Read more

On July 7, 2017, in a decision making several significant rulings and clarifications, the United States Court of Appeals for the Second Circuit vacated in part an order certifying classes asserting claims under the Securities Exchange Act of 1934 (the “Exchange Act”) and the Securities Act of 1933 (the “Securities Act”) on the basis that the lower court had insufficiently considered whether individual determinations as to whether over-the-counter bond purchases were “domestic” would predominate over common issues of fact and law.  In re Petrobras Securities, -- 3d. -- (2d Cir. July 7, 2017).  The Court further clarified that, unlike the Third Circuit, the Second Circuit requires only that a class be “defined using objective criteria that establish a membership with definite boundaries” to meet the threshold ascertainability requirement under Rule 23 of the Federal Rules of Civil Procedure, and that, in Exchange Act cases, plaintiffs may be able to avail themselves of the “fraud on the market” theory presumption of reliance even if they do not establish statistically significant price changes in response to relevant news, provided that the entirety of the plaintiffs’ analysis supports market efficiency.    

Read more

On June 28, 2017, Judge Charles R. Breyer of the United States District Court for the Northern District of California ruled, among other things, that allegations of knowledge of “defeat devices” did not equate to knowledge of the probability of exposure from the devices and granted in part a motion to dismiss a putative securities class action against Volkswagen Aktiengesellschaft and certain of its affiliates (“VW”) and officers and directors, asserting claims under Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated thereunder, as well as additional “control person” claims against the officers and directors under Section 20(a) of the Exchange Act.  In re Volkswagen “Clean Diesel” Marketing, Sales Practices, and Products Liability Litigation, MDL No. 2672 CRB (JSC), 2017 WL 2798525 (N.D. Cal. June 28, 2017).  Plaintiffs alleged that VW’s financial statements and statements regarding its U.S. vehicles’ compliance with diesel emissions standards were misleading because VW had failed to disclose, in various manners, that it had been using “defeat device” software to manipulate emissions tests in vehicles sold in the United States.  After plaintiffs were given leave to replead following an earlier motion to dismiss, the Court held that the amended complaint’s allegations supported claims regarding financial statements after May 2014, but dismissed claims regarding earlier alleged misstatements.  In addition, the Court dismissed claims against one individual defendant for failure to sufficiently allege scienter and “control.”

Read more

On June 21, 2017, the United States Court of Appeals for the Second Circuit affirmed a lower court’s decision dismissing a putative class action asserting claims under the Securities Act of 1933 (the “Securities Act”) against Vivint Solar, Inc. (“Vivint”), certain of its officers and directors, and the underwriters of its October 2014 initial public offering (“IPO”).  Stadnick v. Vivint Solar, Inc., No. 16-65 (2d Cir. June 21, 2017).  On appeal, plaintiff relied on the decision of the United States Court of Appeals for the First Circuit in Shaw v. Digital Equipment Corp., 82 F.3d 1194 (1st Cir. 1996), to argue that Vivint was obligated to disclose in its IPO prospectus and registration statement financial information for the quarter that ended the day before the IPO because, according to plaintiff, the company’s performance during that time constituted an “extreme departure” from past performance.  In affirming the district court’s dismissal, the court declined to follow Shaw, holding instead that the issue of whether Vivint had an obligation to disclose the information should be based on whether the allegedly omitted information would have “significantly altered the total mix of information made available” at the time of the offering.

Read more

On June 14, 2017, Judge Ricardo S. Martinez of the United States District Court for the Western District of Washington denied a motion to dismiss a putative securities fraud class action against Juno Therapeutics, Inc. (“Juno” or the “Company”), a biopharmaceutical corporation, and certain of its senior officers.  In re Juno Therapeutics, Inc., No. 16 Civ. 1069 (W.D. Wash. June 14, 2017).  In their complaint, plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by repeatedly touting positive results from the first phase of a clinical trial for a new cancer treatment, while failing to disclose certain negative outcomes associated with the second phase of a clinical trial.  In denying the motion to dismiss, the Court ruled that plaintiffs had adequately alleged that the omitted information was material to investors and that the defendants were deliberately reckless in failing to disclose it. 

Read more

On June 12, 2017, Judge Richard Seeborg of the United States District Court for the Northern District of California dismissed without prejudice a putative securities class action against Charles Schwab & Co. (“Schwab”) under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.  Crago v. Charles Schwab & Co., Inc., 2017 WL 2540577 (N.D. Cal. June 12, 2017).  Plaintiffs, Schwab customers who placed trades through Schwab, alleged that Schwab’s stated commitment to securing best execution for its clients was false and misleading in light of Schwab’s bulk order routing through UBS Securities LLC (“UBS”), as a result of which plaintiffs allegedly suffered harm because they lost the opportunity for price improvement.  The Court held that although plaintiffs had standing to pursue their claims, they had insufficiently alleged falsity, scienter, economic loss, loss causation and reliance, and granted leave to replead.

Read more

On June 12, 2017, the United States Supreme Court, in an opinion authored by Justice Ginsburg, held that “[f]ederal courts of appeals lack jurisdiction under [28 U.S.C.] § 1291 to review an order denying class certification (or, as here, an order striking class allegations) after the named plaintiffs have voluntarily dismissed their claims with prejudice.”  Microsoft Corp. v. Baker, 582 U.S. ___ (2017).  The Court reversed and remanded the Ninth Circuit Court of Appeals’ decision and held that a voluntary dismissal with prejudice does not constitute a “final decision,” as required to bring an appeal under § 1291.  Therefore, the Court found that the plaintiffs, after voluntarily dismissing their claims with prejudice, did not have a right to appeal the district court’s order striking their class action allegations.

Read more

​On June 13, 2017, Judge Vernon S. Broderick of the United States District Court for the Southern District of New York dismissed a putative securities class action against gold mining and exploration company Pretium Resources, Inc. (“Pretium”) under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.  In re Pretium Resources Inc. Sec. Litig., No. 13-CV-7552 (VSB), 2017 WL 2560005 (S.D.N.Y. June 13, 2017).  Plaintiffs alleged that Pretium’s press releases were misleading because they contained statements regarding a major gold exploration site that were contrary to views expressed to the company by its consultants.  The Court held that plaintiffs had failed to identify actionable misrepresentations or omissions and to adequately plead scienter. 

Read more

On June 6, 2017, United States District Judge George A. O’Toole, Jr. of the United States District Court for the District of Massachusetts dismissed with prejudice a putative securities class action against Sonus Networks, Inc., its CEO and its CFO.  Sousa v. Sonus Networks, Inc., et al., No. 16-10657-GAO (D. Mass. June 6, 2017).  Plaintiffs alleged that defendants violated Sections 10(b) (and SEC Rule 10b-5 promulgated thereunder) of the Securities Exchange Act of 1934 (the “Exchange Act”), and separately alleged that the individual defendants violated Section 20(a) of the Exchange Act, by misleading investors regarding Sonus’ revenue projection for the first quarter of 2015.  The Court held that plaintiff had not met the heightened pleading standard for alleging securities fraud under the Private Securities Litigation Reform Act (“PSLRA”), finding that plaintiff had not sufficiently alleged a material misrepresentation or omission with respect to certain allegations and had not sufficiently alleged scienter with respect to other allegations.  

Read more

On May 23, 2017, the United States Court of Appeals for the Third Circuit, in a non-precedential opinion, affirmed the dismissal of a putative securities fraud class action against Amarin Plc., a biopharmaceutical corporation, and certain of its officers.  In re Amarin Corp. Plc. Sec. Litig., No. 16-2640 (3d Cir. May 23, 2017).  Plaintiff alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) by intentionally misrepresenting the risk that the U.S. Food and Drug Administration (“FDA”) would require Amarin to complete an “outcomes study” in order to obtain approval of its drug Vascepa for the treatment of patients with elevated triglyceride levels.  In affirming the district court, the Third Circuit found that none of defendants’ statements identified in the complaint were misleading in the context in which they were made because reasonable investors understand there is “a continuous dialogue between the FDA and the proponent of a new drug.”

On May 26, 2017, Judge Cynthia Rufe of the United States District Court for the Eastern District of Pennsylvania ruled that the plaintiffs’ state law claims against Vanguard Group, Inc. (“Vanguard”) were not preempted by the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”).  Taskir v. Vanguard Group, Inc., No. 16-5713 (E.D. Pa. May 26, 2017).  In reaching its decision, the Court ruled that SLUSA did not preempt the plaintiffs’ state law claims because Vanguard’s alleged misrepresentations and omissions did not make a significant difference in the plaintiffs’ decision to purchase or to sell their securities.

On May 23, 2017, Judge Victor Marrero 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 Inovalon Holdings, Inc. (“Inovalon”), six of Inovalon’s officers and directors (the “Individual Defendants”), and nine underwriters of Inovalon’s IPO (the “Underwriter Defendants”).  Xiang v. Inovalon Holdings, Inc., No. 16-CV-4923 (VM).  Plaintiffs asserted claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (“Securities Act”) on the basis of alleged misstatements in Inovalon’s IPO registration statement and prospectus.  The Court dismissed the Section 12 claims against the Individual Defendants and found the remaining claims to be adequately pleaded.

Read more

On May 23, 2017, the Acting Solicitor General (“ASG”) filed a brief on behalf of the United States as amicus curiae urging the Supreme Court to grant the petition for a writ of certiorari in Cyan, Inc. v. Beaver County Employees Retirement Fund, No. 15-1439, to resolve confusion in lower courts as to whether the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”) divests state courts of jurisdiction over cases that allege only claims under the Securities Act of 1933 (“Securities Act”).  The issue has been a significant one.  California state courts in particular have become a forum of choice for plaintiffs asserting claims under the Securities Act, and procedural bars on interlocutory review of decisions denying motions to dismiss or remand have precluded significant appellate review.  The Supreme Court had invited the ASG to share its views on the matter in October 2016.  In responding to that invitation, the ASG urged the Supreme Court to grant certiorari and to hold that SLUSA (i) does not preclude state court jurisdiction over such cases but (ii) renders them removable to federal court.

Read more

On May 12, 2017, the United States Court of Appeals for the First Circuit affirmed the dismissal of a putative securities class action against biopharmaceutical company Biogen Inc. and three of its officers.  In Re: Biogen Inc. Sec. Litig., No. 16-1976, 2017 WL 1963468 (1st Cir. May 12, 2017).  Plaintiffs alleged that Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) by concealing declining sales of multiple sclerosis drug Tecfidera following the death of a trial patient, leading to a stock drop when the company later reduced its growth forecasts for 2015.  The First Circuit, in affirming the prior ruling of United States District Judge F. Dennis Saylor, IV of the United States District Court for the District of Massachusetts dismissing the amended complaint with prejudice, held that although the amended complaint gave rise to a “plausible” inference of scienter on the part of defendants, it did not support a “strong” inference of scienter as required under the heightened pleading requirements of the Private Securities Litigation Reform Act (“PSLRA”).

Read more

On May 1, 2017, Judge Jon Tigar of the United States District Court for the Northern District of California dismissed a putative securities fraud class action against GoPro, Inc. (“GoPro” or the “Company”) and certain executives, in which plaintiffs alleged that defendants made material misrepresentations about the strength of GoPro’s camera sales.  Bodri v. GoPro, Inc., No. 16-cv-00232-JST (N.D. Cal. May 1, 2017).  The Court dismissed the claims, stating that plaintiffs had taken defendants’ statements out of context and failed to point to any facts that made the statements false, and that certain of the statements were non-actionable “corporate puffery.”  This decision adds to the body of cases that caution against taking statements out of context and serves as a reminder that conclusory allegations of falsity without supporting facts will not survive dismissal.  

Read more

On May 5, 2017, the United States Court of Appeals for the Ninth Circuit affirmed a lower court’s decision dismissing a putative securities fraud class action against orthodontics and dental products maker Align Technology, Inc., finding that plaintiff’s allegations failed to meet the falsity standard for statements of opinion established by the Supreme Court in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, 135 S. Ct. 1318 (2015).  City of Dearborn Heights Act 345 Policy & Fire Retirement Sys. v. Align Tech. Inc., No. 14-16814 (9th Cir. May 5, 2017).  Plaintiff alleged that Align and certain of its officers violated Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) by misleading investors about the goodwill valuation of a business unit of a company that it had recently purchased.  In affirming the district court’s decision that Align’s statements regarding goodwill were inactionable statements of opinion, the Ninth Circuit joined the Second Circuit in applying the Omnicare standard to Section 10(b) claims.

Read more

On April 27, 2017, Judge Madeline Cox Arleo of the United States District Court for the District of New Jersey dismissed a putative securities fraud class action against Hertz Global Holdings, Inc. and certain of its executives, in which plaintiffs alleged that the company knew or consciously disregarded that statements made in multiple financial reports between 2011 and 2013 were false, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”).  In re Hertz Global Holdings, Inc. Sec. Litig., 2017 WL 1536223 (D.N.J. Apr. 27, 2017).  The Court had already dismissed this case twice without prejudice.  This time the Court dismissed the claims with prejudice.  

Read more

On May 1, 2017, Judge Edward Davila of the United States District Court for the Northern District of California denied a motion to dismiss a putative securities fraud class action against Finisar Corporation and certain executives, in which plaintiffs alleged that the company had falsely denied an inventory build-up of key telecom products by Finisar’s customers, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”).  In re Finisar Corp. Sec. Litig., 2017 WL 1549485 (N.D. Cal. May 1, 2017).  The Court had previously dismissed the case for failure to allege a material misrepresentation, but the United States Court of Appeals for the Ninth Circuit reversed, holding that plaintiffs had adequately alleged a false statement in that they asserted that defendants had denied knowledge of an inventory build-up by customers in the face of evidence that they knew of the issue.  On remand, the District Court found the complaint also adequately alleged scienter and loss causation. 

Read more

On April 26, 2017, District Judge John F. Keenan of the United States District Court for the Southern District of New York granted in part and denied in part motions to dismiss brought by defendants Investment Technology Group, Inc. (“ITG” or “the company”), and three of its current and former executives.  In re: Investment Technology Group Inc., Case No. 1:15-cv-06369 (S.D.N.Y. April 26, 2017).  Plaintiff’s amended complaint alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5.  While the Court dismissed the claims against two individual defendants—ITG’s CFO and its General Counsel—on the ground that plaintiff failed to plead a strong inference of scienter as to those defendants, the Court allowed the plaintiff’s Section 10(b) claim against ITG and its former CEO to proceed, narrowing the claims to a five-month period in 2011 and holding that the alleged misstatements outside of the class period were not actionable.
​
Read more

On April 21, 2017, the United States Court of Appeals for the Fifth Circuit affirmed the dismissal of a shareholder class action lawsuit against certain officers and directors of ATP Oil & Gas Corporation (“ATP”).  Neiman et al. v. Buhlman et al., Case No. 15-31094 (5th Cir. Apr. 21, 2017).  Plaintiffs, who alleged that defendants misrepresented the production of a new oil well, the liquidity of the company, and the reason that the former CEO had resigned, brought claims under Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5, as well as control-person claims under Section 20(a) of the Exchange Act.  The Fifth Circuit affirmed the Louisiana district court’s dismissal of plaintiffs’ Second Amended Complaint, holding that plaintiffs had failed to adequately plead scienter in support of each of their claims.

Read more

On April 7, 2017, the United States Court of Appeals for the First Circuit affirmed the dismissal of a putative securities fraud class action against the biopharmaceutical developer Zafgen, Inc. (“Zafgen”) and its CEO.  Brennan v. Zafgen, Inc., No. 16-2057, 2017 WL 1291194 (1st Cir. Apr. 7, 2017).  Plaintiffs had asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, alleging that in Zafgen’s IPO registration statement and other public statements defendants omitted information regarding adverse events during clinical trials for Zafgen’s only drug in development, the obesity drug Beloranib.  The Court held that plaintiffs did not adequately plead scienter under the heightened requirements of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), stressing that a defendant’s mere knowledge of omitted information is not sufficient to support a cogent and compelling inference of fraudulent intent.

Read more

On April 6, 2017, Judge Harvey Bartle III, sitting by designation in the United States District Court for the District of the Virgin Islands, dismissed a putative class action 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.  City of Cambridge Ret. Sys. v. Altisource Asset Mgmt. Corp., No. 1:15-cv-00004, slip op. (D.V.I. Apr. 6, 2017), ECF No. 74.  Plaintiffs alleged that AAMC—a provider of asset management and corporate governance advising services related to mortgage servicing—made material misstatements in SEC filings and other disclosures relating to services it provided to the mortgage servicing company Ocwen Financial Corporation (“Ocwen”) and certain related companies.  The Court held that plaintiffs’ allegations were insufficient to demonstrate that the alleged misstatements were false or misleading, and further that plaintiffs failed to show that their claimed losses were caused by the alleged misstatements at issue. 

Read more

On March 29, 2017, Chief District Judge Lee Rosenthal of the United States District Court for the Southern District of Texas, Houston Division dismissed a putative class action against Plains All American Pipeline, a major national oil and gas pipeline operator, and its holding companies (collectively, “Plains Defendants”), as well as individual officer and director defendants of Plains All American Pipeline, L.P. (collectively, “Individual Defendants”), and financial institutions which acted as underwriters in the securities offerings at issue (collectively, “Underwriter Defendants”).  In re Plains All American Pipeline, L.P. Sec. Litig., Case No. H:15-2404 (S.D.T.X. Mar. 29, 2017).  Plaintiffs, individuals and institutional investors who purchased equity and debt instruments issued by entities affiliated with Plains All American Pipeline in seven different public offerings, brought claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder, and Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”).  The claims were brought after a May 2015 oil spill allegedly caused by a ruptured Plains pipeline that resulted in approximately 101,000 gallons of oil spilling into the Pacific Ocean.  Plaintiffs alleged that, prior to and after the spill, the company falsely claimed to have a comprehensive, effective environmental and regulatory compliance program to prevent oil spills and, if such spills occurred, to quickly remediate the effects.

Read more

On April 1, 2017, District Judge John G. Koeltl of the United States District Court for the Southern District of New York dismissed a putative class action against brokerage firm E*TRADE Financial Corporation and E*TRADE Securities LLC (collectively, “E*Trade”).  Rayner v. E*TRADE Financial Corporation et al, No. 1:16-cv-7129 (S.D.N.Y. Apr. 1, 2017).  Plaintiff brought claims for breach of fiduciary duty, unjust enrichment, and declaratory judgment, alleging that E*Trade selected third-party trading venues for the execution of trading orders based on the amount of rebates those venues paid or “kicked back” to E*Trade rather than selecting the most efficient or cost-effective trading venue for E*Trade’s clients that plaintiff contends is required by the duty of best execution.  The Court dismissed all of the claims, holding that they were precluded by the Securities Litigation Uniform Standards Act (the “SLUSA”), which prohibits class actions based on state law claims that rely on allegations that defendant made a misrepresentation or omission of material fact, or employed any manipulative or deceptive device, in connection with the purchase or sale of a covered security.  

Read more

On March 9, 2017, the U.S. House of Representatives voted to approve the Fairness in Class Action Litigation Act of 2017 (“H.R. 985” or the “Bill”), a bill that, if signed into law, would significantly modify class action practice.  

Read more

On March 27, 2017, the United States Supreme Court granted a petition for a writ of certiorari to resolve a circuit split on whether corporate issuers’ disclosure obligation under Item 303 of S.E.C. Regulation S-K can be an independent source of liability under Section 10(b) of the Securities Exchange Act of 1934.  Leidos, Inc. v. Ind. Pub. Ret. Sys., No. 16-581.  The appeal concerns a March 2016 decision by the United States Court of Appeals for the Second Circuit which, in a departure from earlier decisions by the Third and Ninth Circuits, held that an issuer’s failure to disclose “known trends or uncertainties” under Item 303 could give rise to a securities fraud claim under Section 10(b).  The Supreme Court’s consideration of the question could result in either a significant expansion or a significant narrowing of registrants’ potential exposure to securities fraud claims.

Read more

On March 23, 2017, Judge Kimba Wood of the United States District Court for the Southern District of New York dismissed a putative securities fraud class action against Shiloh Industries, Inc. (“Shiloh” or the “Company”), and certain of its officers and directors.  Thomas v. Shiloh Indus. Inc., 15-cv-7449 (KMW) (S.D.N.Y. Mar. 23, 2017).  Plaintiffs, purported shareholders of Shiloh, alleged that defendants violated Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) when they allowed misallocated surcharges on the Company’s balance sheet to remain uncorrected, which thereby understated the cost of goods sold and inflated inventory.  The Court granted defendants’ motion to dismiss, holding that plaintiffs had failed to plead with particularity facts supporting their claim that defendants were aware of or recklessly disregarded indications of accounting issues that ultimately resulted in a restatement of Shiloh’s financial results for the first two fiscal quarters of 2015.      

Read more

On March 17, 2017, Judge Michael Watson of the United States District Court for the Southern District of Ohio certified a securities class action brought against Big Lots, Inc. (“Big Lots”) and various current and former officers for alleged misrepresentations in SEC filings in violation of the antifraud provisions of the Securities Exchange Act of 1934 (the “Exchange Act”).  Willis v. Big Lots, Inc., No. 2:12-cv-00604 (S.D. Ohio Mar. 17, 2017).  Plaintiffs alleged misleading statements concerning the company’s performance and ability to meet various sales targets.  In holding that the requirements for class certification were satisfied, the court held notably that (i) being a value investor—including using investment advisors that made their own assessments of Big Lots’ intrinsic value—is insufficient, particularly at the class certification stage, to show that the lead plaintiffs were not typical representatives of the class; and (ii) where the stock price did not rise as the result of alleged misrepresentations, defendants still bore the burden of establishing a lack of price impact under the price maintenance theory.

Read more

On March 13, 2017, the United States District Court for the District of Delaware rejected LRR Energy L.P. (“LRR”) and Vanguard Natural Resources, LLC’s (“Vanguard”) motion to dismiss, allowing the putative shareholder class action suit against them and various current and former directors to proceed.  Robert Hurwitz v. LRR Energy, L.P., et al., Civ. No. 15-711-SLR (D. Del. March 13, 2017).  Plaintiff asserted claims under Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”) and Sections 14(a) and 20(a) of the Securities and Exchange Act of 1934 (the “Exchange Act”), alleging that Vanguard and LRR Energy failed to disclose material information related to Vanguard’s debt agreements in the proxy statement and registration statement issued by LRR and Vanguard, respectively, in connection with Vanguard’s acquisition of LRR in 2015.  In denying the motion to dismiss, the Court held that plaintiffs had sufficiently pled that the proxy and registration statement failed to disclose material information as to Vanguard’s ability to service its debt, and the consequences of such debt servicing issues.

Read more

On March 16, 2017, District Judge Ann M. Donnelly of the United States District Court for the Eastern District of New York dismissed with prejudice a putative class action against Etsy, Inc., its CEO, CFO, certain of its directors, and the underwriters of its initial public offering (“IPO”).  Altayyar, et al., v. Etsy, Inc., et al., No. 1:15-cv-2785 (E.D.N.Y. March 16, 2017).  Plaintiffs alleged that the company and the individual defendants violated Section 10(b) of the Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, by artificially inflating Etsy’s stock price through misrepresentations leading up to Etsy’s IPO, causing plaintiffs to suffer losses when additional information was revealed and the company’s stock price dropped.  Plaintiffs also brought claims under Sections 11 and 12(a)(2) of the Securities Act of 1933 (the “Securities Act”) against all defendants, as well as claims under Section 15 of the Securities Act and Section 20(a) of the Exchange Act against the individual defendants.  In dismissing the complaint in its entirety, the Court found that plaintiffs had failed to establish that the company’s statements were objectively false, intentionally inaccurate, or materially misleading when made.

Read more

On March 3, 2017, the First Department of the Appellate Division of New York Supreme Court reversed a lower court’s ruling and ordered summary judgment to be entered in favor of the defendant, TCW Asset Management Company (“TCW”), because plaintiffs failed to meet their burden of showing loss causation.  Basis Pac-Rim Opportunity Fund (Master) v. TCW Asset Management Co., No. 654033/12 (N.Y. App. Div. Mar. 3, 2017).  Plaintiffs asserted fraud claims against TCW alleging that it misled investors about the quality of the securities backing the collateralized debt obligation (“CDO”) at issue.  In reversing the trial court’s decision denying TCW’s motion for summary judgment, the First Department concluded that plaintiffs failed to produce any evidence demonstrating that “it was TCW’s misrepresentations, rather than market forces, which caused the investment losses.”

Read more

On March 6, 2017, Judge Robert Sweet of the United States District Court for the Southern District of New York dismissed a putative class action against 6D Global Technologies, Inc. (“6D” or the “Company”) and certain of its officers and directors.  Puddu v. 6D Glob. Techs., Inc., No. 15-cv-8061 (RWS) (S.D.N.Y. Mar. 6, 2017).  Plaintiffs—purported shareholders of 6D—alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 when they failed to disclose the Company’s association with an individual whom United States regulators have charged in connection with stock manipulation schemes.  The decision illustrates the challenges plaintiffs face when making claims based on alleged omissions because often there is no duty to disclose the omitted information.   

Read more

On February 27, 2017, Judge Katherine Polk Failla of the United States District Court for the Southern District of New York dismissed with prejudice a putative class action brought on behalf of purchasers of Wal-Mart de México SAB de CV (“Wal-Mex”) American Depositary Shares (“ADRs”) against Wal-Mex, Wal-Mart Stores, Inc. (“Wal-Mart”), and two Wal-Mex executives.  Fogel v. Wal-Mart de México Sab de CV, — F. Supp. 3d —, 2017 WL 751155 (S.D.N.Y. 2017).  The complaint alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder based on allegations that Wal-Mex’s annual reports for 2004 through 2011 failed to disclose an alleged bribery scheme.  In a detailed and thorough opinion that provides an overview of the state of Rule 10b-5 jurisprudence in the Second Circuit, the Court held that many of plaintiff’s claims were time barred, and that plaintiff failed to state a claim with respect to those claims that were timely.

Read more

On February 24, 2017, Judge Edward 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 Leapfrog Enterprises, its current CEO, and its former CFO.  The complaint alleged that Leapfrog violated the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by falsely representing in its financial disclosures that it did not need to take write-offs related to the value of its goodwill and long-lived assets.  In re Leapfrog Enterprise, Inc. Sec. Litig., No. 15-cv-00347-EMC, 2017 WL 732909 (N.D. Cal. Feb. 24, 2017).  Considering the difference in the relevant disclosures, the Court dismissed plaintiffs’ claims related to the goodwill write-off, but not the claims related to the write-off of long-lived assets.

Read more

On February 22, 2017, Judge J. Paul Oetken of the United States District Court for the Southern District of New York denied a motion to dismiss a putative class action lawsuit brought against Chinese mobile game developer iDreamSky Technology Ltd. (“iDreamSky”), its officers and directors and four underwriters.  In re: iDreamSky Technology Limited Securities Litigation, No. 15-CV-2514 (S.D.N.Y. Feb. 22, 2017).  The complaint alleged violations of Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), Rule 10b-5 and Section 20(a) of the Exchange Act, as well as Sections 11, 12(a)(1), 12(a)(2), and 15 of the Securities Act of 1933 (“Securities Act”), based on allegations that the Company omitted to disclose the adverse financial impact of delays in the release of iDreamSky’s Cookie Run game in China, as well as the alleged lack of an adequate third-party billing platform.  

Read more

On February 21, 2017, the United States Court of Appeals for the Sixth Circuit affirmed the dismissal of a putative shareholder suit brought against officers, directors, principal shareholders and underwriters of EveryWare Global, Inc. (“EveryWare”), a now-bankrupt Ohio-based manufacturer of kitchenware.  IBEW Local No. 58 Annuity Fund v EveryWare Glob., Inc., No. 16-3445, 2017 WL 677487 (6th Cir. Feb. 21, 2017).  Plaintiffs alleged that EveryWare’s officers violated Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), Securities Exchange Commission Rule 10b-5 promulgated thereunder and Section 20(a) of the Exchange Act by knowingly providing false and misleading financial projections. Plaintiffs also alleged that various defendants violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (“Securities Act”) because the registration statement and prospectus purportedly contained material misrepresentations.  The Court dismissed both the Exchange Act and Securities Act claims, finding that plaintiffs failed to adequately plead that EveryWare’s officers acted with the requisite intent to deceive shareholders or that the registration statement and prospectus contained material misrepresentations.

Read more

On February 17, 2017, the United States Court of Appeals for the Ninth Circuit affirmed the dismissal of a putative securities class action brought against DreamWorks Animation SKG Inc. (“DreamWorks”), its CEO and CFO.  Roofers Local No. 149 Pension Fund v. DreamWorks Animation SKG, Inc., et al., No. 15-55945, 2017 WL 655789 (9th Cir Feb. 17, 2017).  Plaintiff had alleged that defendants violated Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Securities and Exchange Commission Rule 10b-5 promulgated thereunder, along with Section 20(a) of the Exchange Act, by knowingly making false or misleading statements regarding the profitability of DreamWorks’ animated movie “Turbo” during announcements of second- and third-quarter results in 2013.  The Court affirmed the dismissal of the claims, holding that plaintiff failed to adequately allege a false or misleading statement or loss causation, underscoring that complaints filed in response to poorer-than-expected results and/or the mere announcement of a regulatory investigation are not likely to succeed.

Read more

On February 9, 2017, Judge Charles Breyer of the United States District Court for the Northern District of California dismissed a putative class action lawsuit against Sunrun Inc. (“Sunrun” or the “Company”), its officers and directors, and the underwriters of its initial public offering (“IPO”).  Greenberg v. Sunrun Inc., No. 16 Civ. 2480 (N.D. Cal. Feb. 9, 2017).  Plaintiffs alleged that the offering documents for Sunrun’s IPO contained misleading representations and omissions in violation of sections 11, 12(a)(2), and 15 of the Securities Act of 1933.  In granting defendants’ motion to dismiss, Judge Breyer found that the offering materials were not misleading, stating that “at worst the Prospectus warned that the devil is in the details without describing precisely where in the details the devil might lurk.”

Read more

On February 13, 2017, Judge Laura Taylor Swain of the United States District Court for the Southern District of New York dismissed with prejudice a putative class action against MaxPoint Interactive, Inc. (“MaxPoint” or the “Company”), several of its officers and directors, and the underwriters of its initial public offering.  Nguyen v. MaxPoint Interactive, Inc., No. 15-cv-6680-LTS, 2017 WL 570939 (S.D.N.Y. Feb. 13, 2017).  Plaintiff, who sought to bring this action on behalf of investors who purchased MaxPoint common stock that was issued in its initial public offering in March 2015 (the “IPO”), alleged that the registration statement for the IPO contained material misstatements and omissions in violation of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933.  In granting MaxPoint’s motion to dismiss with prejudice, Judge Swain held that MaxPoint had no duty to disclose that at the time of its IPO it was signing smaller contracts with customers than it had in the past, and further held that the IPO registration statement gave investors sufficient information about the Company’s customer base. 

Read more

On February 8, 2017, Judge Robin Rosenberg of the United States District Court for the Southern District of Florida dismissed with prejudice a putative shareholder class action against KLX Inc. and certain of its senior officers under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder.  In re KLX Inc. Sec. Litig., No. 9:16-CV-80023, slip op. (S.D. Fla. Feb. 8, 2017).  Plaintiffs alleged that KLX made misstatements and omissions (i) regarding the financial health of KLX’s energy services division and its employment figures and (ii) as a result of recognizing a good will and long-term asset impairment charge later than it should have.  In a complete and thorough opinion, the Court reiterated that neither puffery nor optimism provides grounds for a fraud claim, that forward looking statements are entitled to safe-harbor protection even when combined with representations that arguably refer to current facts, that GAAP violations alone are not sufficient for fraud, and that scienter should be judged with consideration of indications of non-fraudulent intent.   

Read more

On February 1, 2017, United States District Judge Lewis A. Kaplan of the United States District Court for the Southern District of New York dismissed a putative securities class action against Party City Holdco Inc., a global party goods retailer and supplier, two of its officers, the underwriters of its 2015 initial public offering, and two beneficial owners of Party City’s common stock who had purchased a majority of the company in a private transaction prior to the IPO.  Jones, et al. v. Party City Holdco, Inc. et al., No. 1:15-cv-9080 (S.D.N.Y. Feb. 1, 2017).  Plaintiffs alleged that the registration statement filed by Party City with the Securities Exchange Commission in advance of its IPO misled investors by failing to disclose that Party City’s success was heavily dependent on revenues from one particular license—in connection with sales of products related to Disney’s 2013 movie, Frozen—thereby causing Party City’s stock to drop more than 30% from the $17 per share IPO price to $11.80 per share when the materiality of that license allegedly was later disclosed.  Plaintiffs brought claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (the “Securities Act”).

Read more

On January 19, 2017, the U.S. Court of Appeals for the Ninth Circuit affirmed the district court’s decision to dismiss a securities class action against Hewlett-Packard Co. (“HP”) and its former chief executive officer.  Retail Wholesale & Department Store Union Local 338 Retirement Fund v. Hewlett-Packard Co., No. 14-16433, 2017 WL 218026 (9th Cir. Jan. 19, 2017).  Plaintiffs alleged that HP and its former CEO violated Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) when the CEO breached HP’s code of ethics after he and the company had publicly promoted HP’s high ethical standards.  The court concluded that plaintiffs failed to allege an actionable fraud because, among other reasons, the alleged statements about HP’s code of ethics were not objectively false, but were instead “transparently aspirational.”

Read more

On January 23, 2017, a panel of the U.S. Court of Appeals for the Seventh Circuit affirmed a district court’s decision to dismiss a proposed shareholder class action against Bank of America, N.A. and LaSalle Bank, N.A. (the “Bank”).   Richek v. Bank of America, N.A. and LaSalle Bank, N.A., 2017 WL 279498 (7th Cir. Jan. 23, 2017).  Plaintiffs alleged that the Bank was collecting a fee on their custodial accounts without informing customers, and, on this basis, brought a putative class action in state court alleging state law claims for breach of contract and breach of fiduciary duty.  The Bank removed the suit to federal court and successfully argued that the Securities Litigation Uniform Standards Act (“SLUSA”) preempted their state law claims.  The Seventh Circuit affirmed and held that SLUSA preempted the state law claims because they necessarily required consideration of whether there had been an omission in connection with the purchase or sale of a security based on plaintiffs’ claim that the Bank had not disclosed its collection of the fee.  A dissenting opinion criticized the majority’s approach, noting that the panel’s reasoning deepened a split among the Circuits over how courts should apply SLUSA to class actions alleging breach of contract or breach of fiduciary duty claims, and that this split requires resolution by the Supreme Court. 

Read more

On January 17, 2017, Judge Beth Labson Freeman of the United States District Court for the Northern District of California dismissed with leave to amend a putative securities class action against TriNet Group, Inc. (“TriNet”), its officers and directors, a former controlling shareholder, and the underwriters of TriNet’s initial public offering (“IPO”) and a secondary offering (“SPO”).  Welgus v. TriNet, — F. Supp. 3d —, 2017 WL 167708 (N.D.Cal. 2017).  The Court held that plaintiff had not adequately alleged facts showing that the officer defendants knowingly made false statements in violation of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) or facts sufficient to establish control person liability against TriNet’s controlling shareholder under Section 20 of the Exchange Act.  Nor had plaintiff stated a claim under Sections 11 and 12(a)(2) of the Securities Act of 1933 (the “Securities Act”) because, among other things, plaintiff had not sufficiently alleged that its shares were traceable to the IPO or SPO.

Read more

On January 9, 2017, the United States Court of Appeals for the First Circuit affirmed the dismissal of a putative securities class action against InVivo Therapeutics Holdings Corporation and its former CEO, Frank Reynolds.  Battle Const. Co., Inc. v InVivo Therapeutics Holdings Corp., No. 15-1544, 2017 WL 74702 (1st Cir Jan. 9, 2017).  The Court held that InVivo’s press releases that allegedly failed to identify caveats and conditions imposed by the Food and Drug Administration (FDA) on clinical trials of a particular medical device did not constitute false or misleading statements under federal securities law.  Plaintiff alleged that defendants violated Sections 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and SEC Rule 10b-5, and that Reynolds violated Section 20(a) of the Exchange Act pursuant to control person liability, by failing to disclose in the company’s press releases the FDA’s conditions that may impact the timing of the clinical trials.

Read More

On December 29, 2016, Judge Haywood S. Gilliam of the United States District Court for the Northern District of California dismissed a putative securities class action against Solazyme, Inc. (“Solazyme”), certain of its officers and directors, and the underwriters of two of its securities offerings.  Norfolk Cty. Ret. Sys. v. Solazyme, Inc., et al., No. 15-cv-02938 (N.D. Ca. Dec. 29, 2016).  Plaintiffs, investors who allegedly purchased Solazyme securities traceable to public offerings of notes and common stock that were both made on March 27, 2014, claimed that defendants made false statements about Solazyme’s oil production facility in Moema, Brazil (the “Moema Facility”), in violation of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (“Securities Act”) and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”).  The Court granted defendants’ motion to dismiss, in part, because plaintiffs failed to plead with particularity that the challenged statements were false or misleading at the time they were made.  

Read more