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

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

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

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

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

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

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

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

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

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

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

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

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

On March 31, 2023, Judge John P. Cronan of the United States District Court for the Southern District of New York dismissed a putative class action asserting claims under the Securities Exchange Act of 1934 against a financial institution that offered certain Exchange Traded Notes (the “ETN”) linked to a natural gas price index. Gomez v. Credit Suisse AG, No. 22 Civ. 115 (JPC) (BCM), 2023 WL 2744415 (S.D.N.Y. Mar. 31, 2023).

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

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

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

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

On March 2, 2023, the United States Court of Appeals for the Fourth Circuit affirmed the dismissal of a putative securities class action against a company that manufactures cancer drugs (the “Company”), its president and CEO, and its senior vice president and CFO, for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, and Sections 11, 12(a), and 15 of the Securities Act of 1933 (the “Securities Act”). Employees’ Retirement System of the City of Baton v. Macrogenics, Inc., No. 21-2238 (4th Cir. Mar. 2, 2023). Plaintiffs alleged that defendants made materially misleading statements or omissions concerning a clinical trial drug, which negatively affected the Company’s stock price. The Court affirmed the district court’s order granting defendants’ motion to dismiss, finding that plaintiffs failed to sufficiently allege any actionable misrepresentations or omissions that would give rise to a duty to disclose, and that most of defendants’ alleged statements also were immunized from suit.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

On January 10, 2023, Judge Paul Engelmayer of the United States District Court for the Southern District of New York dismissed with prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against an online sports gaming and betting company and certain of its executives.  In re DraftKings Inc. Sec. Litig., 2023 WL 145591 (S.D.N.Y. Jan. 10, 2023).  Plaintiffs alleged that the company made misrepresentations and omissions regarding whether a target company it acquired had gambling operations in jurisdictions where gambling was illegal.  The Court held that plaintiffs failed to adequately allege actionable misrepresentations or scienter.

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

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

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

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

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

On December 5, 2022, Judge Denise Cote of the United States District Court for the Southern District of New York dismissed a putative class action asserting claims under the Securities Exchange Act of 1934 against an alcoholic beverage manufacturer and certain of its executives.  Siegel v. Boston Beer Co., Inc., 2022 WL 17417111 (S.D.N.Y. Dec. 5, 2022). Plaintiff alleged that the company made misleading statements related to the performance of the company’s products in the hard seltzer market as the pandemic subsided and consumers returned to bars and restaurants. The Court assessed three categories of alleged misstatements and held that none was actionable.

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

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

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

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

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

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

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