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  • Sixth Circuit Affirms District Court’s Dismissal Of Putative Securities Class Action Against Car Insurance Company For Failure To State A Claim
    05/14/2024

    On April 29, 2024, the United States Court of Appeals for the Sixth Circuit affirmed the dismissal with prejudice of a putative class action asserting claims under the Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”) and Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, alleging that a car insurance technology company (the “Company”), certain of its officers, and the underwriters of the Company’s initial public offering (“IPO”) misled investors in the Company’s initial public offering materials. Kolominsky v. Root, Inc., No. 23-3392 (6th Cir. Apr. 29, 2024). Reviewing the district court decision de novo, the Court held that the complaint sounded in fraud and that the heightened pleading standard required by Rule 9(b) of the Federal Rules of Civil Procedure applied to the Securities Act claims and that the challenged statements were not actionable because they were based either on past performance and historical data or protected by the “Bespeaks Caution” doctrine. 

  • First Department Of New York Affirms Dismissal Of Securities Claims Against Mass Media And Entertainment Company
    04/09/2024

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

  • Northern District Of California Grants Motion To Dismiss Putative Class Action Against Biotechnology Instrument Company
    03/26/2024

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

  • Second Circuit Reverses Dismissal Of Putative Securities Class Action By Crypto Investors, Addressing Extraterritoriality And Timeliness Arguments
     
    03/26/2024

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

  • Southern District Of New York Grants Motion To Dismiss Putative Securities Class Action Against Chinese Private-Sector Education Company
     
    12/13/2023

    On December 6, 2023, Judge John G. Koeltl of the U.S. District Court for the Southern District of New York granted a motion to dismiss a putative securities class action brought against an operator of private schools in Western China.  Dagan Invs., LLC v. First High-Sch. Educ. Grp. Co., 2023 BL 442686, No. 22-cv-3831 (S.D.N.Y. Dec. 6, 2023).  Plaintiff, on behalf of a purported class of U.S. investors, alleged that the Company violated Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 by making material misstatements and omissions about the likelihood and severity of impending Chinese government regulations impacting the private education sector.
  • Second Circuit Affirms In Part And Vacates In Part Decision Dismissing Securities Class Action Against Insurance Company, Its Officers, Directors, Underwriters, And Outside Auditor
     
    09/06/2023

    On August 23, 2023, the United States Court of Appeals for the Second Circuit affirmed in part and vacated in part an order dismissing a putative securities class action against a property and casualty insurer (the “Company”), various corporate officers and board members of the Company, the Company’s outside auditor, and multiple underwriters of the Company’s sale of securities.  New England Carpenters Guaranteed Annuity and Pension Funds, et al. v. AmTrust Financial Services Inc., et al., 20-1643 (Aug. 23, 2023).  In vacating the district court’s dismissal in part, the Second Circuit held that in light of its more recent precedent, certain alleged misstatements of opinion were actionable as alleged in the complaint, and therefore reversed the district court’s dismissal of claims related to those alleged misstatements, but otherwise affirmed the district court’s decision dismissing the remaining claims.
  • Second Circuit Affirms District Court’s Decision Determining That Term Loan Notes Were Not “Securities” Subject To Securities Laws And Regulations
     
    09/06/2023

    On August 24, 2023, the United States Court of Appeals for the Second Circuit affirmed a decision by the United States District Court for the Southern District of New York dismissing claims brought under state securities laws against a group of banks which acted as arrangers (“Defendants” or the “Arrangers”) for a term loan on behalf of a California-based medical testing company (the “Company”), holding that term loan “notes” issued as part of a syndicated loan were not “securities” subject to securities laws and regulations.  Kirschner v. JP Morgan Chase Bank, N.A., et al., 21-2726-cv (2d Cir. Aug. 24, 2023).  The Second Circuit also affirmed that the district court had jurisdiction pursuant to the Edge Act.
  • Southern District Of New York Grants Software Company’s Motion To Dismiss In Proposed Investor Class Action
     
    06/21/2023

    On June 2, 2023, Judge Denise Cote of the United States District Court for the Southern District of New York granted a motion to dismiss a proposed class action against a software company (the “Company”), alleging violations of Sections 11 and 15 of the Securities Act of 1933.  In re Riskified Ltd. Sec. Litig., No. 1:22-cv-03545, 2023 WL 3791653 (S.D.N.Y. June 2, 2023).  The Company’s core product offering was a credit card fraud detection service for online merchants.  As part of this offering, the Company agreed to reimburse online merchants for any payment reversals or “chargebacks” resulting from fraudulent transactions that were disputed by cardholders.  Plaintiffs alleged that, in connection with the Company’s initial public offering (“IPO”) in July 2021, the Company made several misstatements and omissions concerning the Company increasingly taking on clients with higher chargeback rates, its ability to control chargeback rates, and COVID-19’s impact on its business.  The Court dismissed plaintiffs’ second amended complaint in its entirety, finding that plaintiffs failed to plead an actionable misstatement or omission.
  • United States Supreme Court Confirms That Section 11 Of The Securities Act Requires A Plaintiff To Plead And Prove Purchase Of Shares Traceable To The Allegedly False Or Misleading Registration Statement At Issue
     
    06/06/2023

    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.
    Categories : Securities ActStanding
  • Southern District Of New York Grants Motion To Dismiss Putative Class Action Against Solar Equipment Manufacturing Company
     
    06/01/2023

    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.
    Categories : Exchange ActSecurities Act
  • United States Supreme Court Hears Oral Argument In Securities Act Case Raising Questions Of Standing
     
    05/09/2023

    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)).
    Categories : Securities ActStanding
  • Fourth Circuit Affirms Dismissal Of Securities Fraud Class Action Against Cancer Drug Manufacturer For Failure To Allege False Or Misleading Statements
     
    03/24/2023

    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.
  • Southern District Of New York Grants Pharmaceutical Company’s Motion To Dismiss Putative Class Action Alleging Misrepresentations About Contingent Value Right Securities
     
    03/24/2023

    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.
  • Utah Court Of Appeals Affirms Dismissal Based On Federal Forum Provision Of Putative Securities Class Action Against Technology Company For Allegedly Misleading Omissions
     
    03/24/2023

    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.
    Categories : Securities ActVenue/Forum
  • Eastern District Of Virginia Dismisses Putative Securities Fraud Class Action Against Cybersecurity Company For Failure To Allege Falsity Or Scienter
     
    02/14/2023

    ​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. 
     
  • Ninth Circuit Holds That Complaint Sufficiently Alleged Company Was “Statutory Seller” Under Section 12(a)(2) Based On Social Media Videos Even Though Plaintiff Was Not Specifically Solicited
     
    01/12/2023

    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.
  • The United States Supreme Court Will Hear Case Presenting Question Of Whether Investors Have Standing To Bring Securities Act Claims In Connection With Shares They Cannot Prove Were Registered Under The Registration Statement They Allege Is False Or Misleading, Such As Shares Purchased Through Direct Listings
     
    01/12/2023

    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.
  • Northern District Of California Dismisses Putative Class Action Against Enterprise Data Platform
     
    11/08/2022

    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.
  • Eastern District Of New York Grants In Part And Denies In Part Motion To Dismiss Securities Fraud Class Action Against Mattress Company
     
    10/18/2022

    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.
  • Northern District Of California Grants Motion To Dismiss Securities And Exchange Act Claims Against Mobile Gaming Technology Company Holding That Plaintiffs Did Not Adequately Plead Falsity, Scienter, Loss Causation, Or Material Misstatements Or Omissions
     
    07/12/2022

    On July 5, 2022, Chief Judge Richard Seeborg of the Northern District of California granted motions to dismiss a putative securities class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), Rule 10b-5 thereunder, Section 20(a) of the Exchange Act, and Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (“Securities Act”), against a mobile gaming technology company (the “Company”), certain of its officers and directors, and its underwriters.  Jedrzejczyk, et al. v. Skillz Inc., et al., No. 21-cv-03450-RS (N.D. Cal. July 5, 2022).  Plaintiffs alleged that defendants made material misstatements and omissions regarding the Company’s financial condition, technical capabilities, and business prospects.  The Court granted defendants’ motions to dismiss, holding that plaintiffs failed to adequately plead falsity, scienter, or loss causation as to the Exchange Act claims, and that plaintiffs had not established standing or adequately pled material untrue statements or omissions as to the Securities Act claims.
  • California District Court Grants Motion To Dismiss With Prejudice Putative Securities Class Action Against Healthcare Company, Finding That Plaintiffs Failed To Allege False Statements Or Misleading Omissions In The Company’s IPO Offering Documents
     
    06/23/2022

    On June 9, 2022, Judge David O. Carter of the United States District Court for the Central District of California granted a motion to dismiss a putative class action lawsuit alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act (the “Exchange Act”) and Rule 10b-5 thereunder, and Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”) against a healthcare company (the “Company”), its directors, and the underwriters of the Company’s initial public offering.  R. Brian Terenzini v. GoodRx Holdings, Inc. et al., No. 2:20-cv-11444, (C.D. Cal. June 9, 2022).  Plaintiffs alleged in their amended complaint that at the time of the Company’s IPO it failed to disclose in its Registration Statement and subsequent investor communications the significant risk of competition from a large online retailer.  The Court held that—as with the original complaint—plaintiffs failed to allege actionable misstatements or omissions as well as scienter and granted defendants’ motion to dismiss with prejudice.
     
  • New York Supreme Court’s Commercial Division Dismisses Securities Act Case
     
    05/04/2022

    On April 20, 2022, Justice Andrew Borrok, a justice of the New York Supreme Court, Commercial Division, dismissed a putative class action against an identity management platform (the “Company”), certain of its officers and directors, and its underwriters for violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (“Securities Act”).  Ret. Bd. of Allegheny Cty. v. Ping Identity Holding Corp., 74 Misc. 3d 1232(A) (N.Y. Sup. Ct. 2022).  Plaintiffs alleged that the Company made false and misleading statements and omissions with respect to alleged sales slowdown prior to the COVID-19 pandemic.  Justice Borrok dismissed the complaint for failure to allege falsity.  As discussed in a prior post, in December 2021, the Administrative Judge for the civil branch of the New York Supreme Court, New York County, issued an administrative order that required that all federal Securities Act cases currently pending or which may be commenced in the future in New York County be assigned to Justice Borrok. This is the first Securities Act case to be dismissed on the merits by Justice Borrok since the administrative order took effect.
    Category : Securities Act
  • Southern District Of New York Dismisses With Prejudice Securities Act Claims For Failure To Allege Actionable Misstatement Or Omission
     
    05/04/2022

    On April 25, 2022, U.S. District Judge Jesse M. Furman dismissed a putative securities class action alleging that a fintech company (the “Company”) misrepresented its internal control weaknesses and financial results in its prospectus and registration statement (collectively, the “Offering Materials”) in connection with its 2018 initial public offering (the “IPO”) of ADSs in violation of Sections 11 and 15 of the Securities Act of 1933.  Yaroni v. Pintec Technology Holdings Limited et al., No. 20-cv-08062 (S.D.N.Y. Apr. 25, 2022).  The Court held that the complaint failed to allege that defendants made misstatements and also that the claims based on certain statements were time-barred.  The Court dismissed the action with prejudice because “the problems with [p]laintiffs’ claims are substantive.”
  • Southern District Of New York Denies In Part Motion To Dismiss Securities Act Claims Against Technology Company For Allegedly Misleading Statements About Sales Cycle
     
    03/08/2022

    On February 25, 2022, Judge Gregory H. Woods of the Southern District of New York granted in part and denied in part a motion to dismiss claims under Sections 11 and 15 of the Securities Act of 1933 (“the Securities Act”) against a technology company (“the Company”) and certain of its officers and directors.  In re Tufin Software Techs. Ltd. Sec. Litig., No. 1:20-cv-05646 (S.D.N.Y. Feb. 25, 2022).  Plaintiff alleged that the registration statement the Company filed in connection with its IPO “included materially misleading misstatements related to, among other things, the length of its sales cycle” and “its training practices.”  The Court granted defendants’ motion to dismiss as to certain of the alleged statements, but denied defendants’ motion to dismiss as to others, finding that plaintiff sufficiently alleged that statements regarding the length of the Company’s sales cycle were “materially misleading to investors.”
  • Eleventh Circuit Overturns Dismissal Of Cryptocurrency Ponzi Scheme Class Action Suit
     
    03/01/2022

    On February 18, 2022, the United States Court of Appeals for the Eleventh Circuit unanimously reversed a district court’s dismissal of a putative securities class action against online promoters of a new cryptocurrency coin (the “Promoters”) for violations of Section 12 of the Securities Act of 1933 (the “Securities Act”).  Wildes v. BitConnect Int’l PLC, No. 20-11675 (11th Cir. Feb. 18, 2022).  Plaintiffs alleged that the cryptocurrency investment platform (the “Company”) that issued the new cryptocurrency was in fact a Ponzi scheme masquerading as an investment program, and that, as a result of the Company’s scheme, investors suffered more than $2 billion in losses.  In moving to dismiss, the Promoters argued that using online media and videos to make their sales pitches to the public at large—rather than to specific individuals—could not amount to solicitation under the Securities Act.  The district court agreed with the Promoters, dismissing the action with prejudice in November 2019.  On appeal, the Eleventh Circuit reversed, holding that “[a] seller cannot dodge liability through his choice of communications—especially when the [Securities] Act covers ‘any means’ of ‘communication.’”
    Category : Securities Act
  • All New York County Federal Securities Act Cases Assigned To Justice Andrew Borrok
     
    01/11/2022

    On December 30, 2021, the Administrative Judge for the civil branch of the New York Supreme Court, New York County, issued an administrative order concerning actions filed in New York County pursuant to the federal Securities Act of 1933 (“Securities Act”).  The order requires that all such actions that are currently pending or which may be commenced in the future in New York County shall be assigned to Justice Andrew Borrok, a justice of the Commercial Division.
    Category : Securities Act
  • Northern District Of California Grants Motion To Dismiss With Prejudice Securities Act Claims Against Technology Company, Holding Plaintiffs Failed To Adequately Plead Misleading Disclosures In Company’s Registration Statement Related To Merger
     
    12/21/2021

    On December 14, 2021, Judge Beth Labson Freeman of the Northern District of California granted a motion to dismiss claims brought under Sections 11 and 15 of the Securities Act of 1933 (“the Securities Act”) against a technology company (“the Company”), its controlling shareholder, and several of the Company’s and the controlling shareholder’s officers and directors.  Costanzo v. DXC Tech. Co., N.D. Cal., No. 19-cv-05794 (Dec. 14, 2021).  Plaintiffs alleged defendants made false and misleading statements, in the Company’s prospectus and registration statement (the “Registration Statement”), regarding expected budget cuts in light of an alleged internal goal at the Company to cut more than double the disclosed amount.  The Court granted defendants’ motion to dismiss plaintiffs’ Third Amended Complaint (“TAC”) without leave to amend, holding that plaintiffs’ addition of allegations of purported statements by confidential witnesses were insufficient to overcome the deficiencies in their pleadings.
    Categories : PSLRASecurities Act
  • District Of New Jersey Denies Motion For Judgment On The Pleadings Involving Securities Act Claims Against Accounting Firm, Holding Plaintiffs Are Not Required To Plead Damages As An Element Of A Section 11 Claim
     
    09/29/2021

    On September 21, 2021, Judge Michael A. Shipp of the District of New Jersey overruled an objection to a special master’s report and recommendation to deny a motion for judgment on the pleadings concerning claims under Section 11 of the Securities Act of 1933 (the “Securities Act”) against an accounting firm (the “Firm”).  In re Valeant Pharmaceuticals Intl., Inc. Securities Litigation, No. 15-7658 (MAS) (LHG) (D. N.J. Sept. 21, 2021).  We previously covered the district court’s decision denying a motion to dismiss by other defendants in this action.  The Firm is the only defendant left in a purported class action lawsuit related to a pharmaceutical company’s public offering in 2015.  The Court agreed with the special master’s findings, among other things, that plaintiff was not required to plead damages for a Section 11 claim at the pleading stage.
  • Ninth Circuit Affirms District Court’s Order Holding Plaintiff Had Standing To Sue Defendants Based On Shares Purchased Through Direct Listing
     
    09/29/2021

    On September 20, 2021, the Ninth Circuit, in a split decision, held that plaintiff—a shareholder who allegedly purchased shares through a direct listing by a technology company (the “Company”)—had standing to bring claims under Sections 11, 12(a)(2), and 15(a) of the Securities Act of 1933 (the “Securities Act”).  Fiyyaz Pirani v. Slack Technologies, Inc., et al, No. 20-16419 (9th Cir. Sept. 20, 2021).  The Ninth Circuit affirmed the district court’s order denying in part a motion to dismiss securities fraud claims.  The Company challenged plaintiff’s standing to sue under Sections 11 and 12(a)(2) of the Securities Act for failure to prove his shares were registered under the alleged misleading registration statement.  The Court held that plaintiff had standing to bring Securities Act claims because, whether registered or unregistered, his shares could not have been purchased without the issuance of the Company’s registration statement.  The Court concluded that the shares purchased by plaintiff were governed by Sections 11 and 12 of the Securities Act and affirmed the district court’s partial denial of the Company’s motion to dismiss.
    Categories : Securities ActStanding
  • Eleventh Circuit Affirms Dismissal Of Untimely Putative Class Action Relating To Celebrity-Backed Cryptocurrency Offering
     
    06/29/2021

    On June 21, 2021, the United States Court of Appeals for the Eleventh Circuit affirmed the dismissal of claims under Sections 12(a)(1) and 15(a) of the Securities Act of 1933 (the “Securities Act”) against the co-owners of a company (the “Company”) that sold cryptographic tokens in an initial coin offering to fund its nascent movie streaming platform.  Fedance v. Felton, No. 20-12222 (11th Cir. 2021).  Although plaintiffs brought the action after the one-year statute of limitations period had elapsed, they argued that the Company’s fraudulent concealment equitably tolled the limitations period.  The district court held that the claims were untimely because the doctrine of equitable tolling did not apply to claims brought under Sections 12(a)(1) and 15(a).  Although the Eleventh Circuit agreed that plaintiffs’ claims were untimely, the Court rejected the district court’s conclusion that equitable tolling is inapplicable to Section 12(a)(1) and 15(a) claims.  The Eleventh Circuit instead held that plaintiffs had not adequately alleged that the Company’s fraudulent concealment prevented them from bringing claims within the limitations period.
  • New York State Court Dismisses Putative Securities Class Action Lawsuit Against Canadian Cannabis Producer For Failure To Plead Contemporaneous Misleading Statements
     
    06/15/2021

    On June 3, 2021, Justice Andrew Borrok of the Supreme Court of the State of New York, Commercial Division, granted a motion to dismiss a putative securities class action against a Canadian cannabis company (the “Company”), certain of its officers and directors, and its underwriters, alleging violations of Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”).  Leung v. Hexo Corp., et al., No. 20-cv-150444 (N.Y. Sup. Ct. Jun. 3, 2021).  Plaintiff alleged that the Company’s offering documents misled investors regarding one of the Company’s key supply agreements.  In dismissing the complaint, the Court held that plaintiff failed to adequately allege contemporaneous facts indicating that the Company knew at the time of the offering that issues would arise with respect to that agreement.  In so holding, the Court cited a March 9, 2021 decision by Judge Naomi Reice Buchwald of the Southern District of New York, in which Judge Buchwald granted a motion to dismiss a first-filed action in federal court asserting similar claims against the Company, certain of its officers and directors, and its underwriters, relying on the same allegations.
  • Southern District Of New York Dismisses Putative Class Action Against Canadian Cannabis Producer For Failure To Plead Falsity And Scienter
     
    03/17/2021

    On March 9, 2021, Judge Naomi Reice Buchwald of the United States District Court for the Southern District of New York granted a motion to dismiss a putative class action complaint against a Canadian cannabis producer (the “Company”), certain of its officers and directors, and its underwriters that asserted claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”) and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5.  In re HEXO Corp. Sec. Litig., No. 19-CV-10965 (S.D.N.Y. Mar. 9, 2021).  Plaintiffs alleged the Company made misrepresentations about one of its key supply agreements, a new production facility, and its expected revenue.  The Court dismissed the claims under the Securities Act because they were based on impermissible hindsight pleading and the Exchange Act claims for failure to plead falsity and scienter. 
     
  • New York Appellate Court Affirms Dismissal Of Securities Act Claim Against Canadian Cannabis Producer Alleging Material Misstatements Regarding Product Quality
     
    02/23/2021

    On February 16, 2021, the Appellate Division of the New York Supreme Court, First Judicial Department, unanimously affirmed the dismissal of a putative class action against a Canadian cannabis producer (the “Company”), certain of its officers and directors, and its underwriters for violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 and Item 303 and Item 105 of Regulations S-K.
     
  • New York Appellate Court Reverses Denial Of Motion To Dismiss Securities Act Claim And Dismisses Complaint Against Chinese E-Commerce Company Alleging Material Omissions
     
    12/08/2020

    On December 3, 2020, the Appellate Division of the New York Supreme Court, First Judicial Department, reversed an order that denied defendants’ motion to dismiss a securities action complaint against a Chinese e-commerce marketing company (the “Company”) under Section 11 of the Securities Act of 1933, and directed that a judgment be entered dismissing the complaint.  Lyu v. Ruhnn Holdings Ltd., No. 12553, 2020 WL 7062118 (1st Dep’t Dec. 3, 2020).  This is the first substantive Securities Act ruling from a New York appeals court since the United States Supreme Court’s decision in Cyan Inc. v. Beaver County Employees Retirement Fund, 138 S. Ct. 1061 (2018), which held that state courts have jurisdiction to adjudicate class actions brought under the Securities Act and that such actions generally cannot be removed from state to federal court.
     
    Categories : OmissionSecurities Act
  • Southern District Of New York Dismisses A Putative Securities Class Action Against A Weight Loss Company Related To Its Strategic Rebranding Initiative
     
    12/08/2020

    On November 30, 2020, Judge William H. Pauley III of the United States District Court for the Southern District of New York granted a motion to dismiss a putative securities class action asserting violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against a weight loss company (the “Company”), certain of its officers and directors, and its largest shareholder.  In re Weight Watchers Int’l Inc. Sec. Litig., No. 19-cv-2005 (S.D.N.Y. Nov. 30, 2020).  Plaintiffs alleged that the Company made false and misleading statements and omissions about its strategic rebranding initiative.  The Court dismissed these claims because plaintiffs failed to allege falsity, observing that plaintiffs’ claims “have little bearing on disclosure . . . and are [instead] fundamentally about corporate mismanagement.”  Although the Court concluded that plaintiffs’ failure to allege an actionable misrepresentation was sufficient to dismiss the case, the Court addressed the parties’ remaining arguments, including two issues on which the Second Circuit has yet to weigh in, holding that:  (1) the exercise of stock options can be considered for the purpose of determining whether an individual’s stock sales are sufficient to allege scienter; and (2) a selling shareholder is not a “statutory seller” for purposes of Section 12(a)(2) simply because it signed the registration statement.  The Court also held that the selling shareholder was not a “maker” of the allegedly misleading statements and thus could not be held liable under Section 10(b).
     
  • Northern District Of Illinois Dismisses A Putative Securities Class Action Alleging Failure To Disclose Fraudulent Channel Stuffing In Connection With A Merger Of Two Large Packaged Foods Companies
     
    10/27/2020

    On October 15, 2020, Judge Martha M. Pacold of the United States District Court for the Northern District of Illinois granted a motion to dismiss a putative securities class action asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 against a large packaged foods company (the “Company”), as well as certain of its officers and directors, and its underwriters.  W. Palm Beach Firefighters’ Pension Fund v. Conagra Brands, Inc., No. 19-cv-101323, 2020 WL 6118605 (N.D. Ill. Oct. 15, 2020).  Plaintiffs alleged that, in connection with a secondary public offering (“SPO”) to finance the acquisition of another packaged foods company (the “Acquired Company”), the Company failed to disclose that the Acquired Company had engaged in channel stuffing—a form of accounting fraud—to disguise the fact its key brands were struggling.  The Court dismissed these claims in their entirety because, among other reasons, plaintiffs failed to allege adequately that the Acquired Company engaged in fraudulent channel stuffing.
     
  • Northern District Of California Dismisses Putative Securities Act Class Action Against Cloud-Based Storage Provider For Failure To Allege Falsity And As Time-Barred
     
    10/27/2020

    On October 21, 2020, Judge Beth Labson Freeman of the United States District Court for the Northern District of California dismissed a putative securities class action against a large online cloud-based storage provider (the “Company”), certain of its officers and directors, certain of its controlling shareholders, and the underwriters of its IPO, for alleged violations of Sections 11 and 15 of the Securities Act of 1933 and Item 303 of SEC Regulation S-K.  In re Dropbox Securities Litigation, No. 19-cv-06348 (N.D. Cal. Oct. 21, 2020).  Plaintiffs alleged that the offering materials filed in connection with the Company’s IPO omitted to disclose the decelerating rate at which the Company was converting non-paying registered users into paying subscription users, which gave investors a false impression of the Company’s revenue growth.  The Court dismissed the complaint with leave to amend because plaintiffs failed to allege the offering materials were false or misleading and because plaintiffs’ claims were time-barred.
     
  • Northern District Of California Grants In Part And Denies In Part Motion To Dismiss A Putative Securities Fraud Class Action Against Rideshare Company
     
    09/15/2020

    On September 8, 2020, Judge Haywood S. Gilliam, Jr. of the United States District Court for the Northern District of California granted in part and denied in part a motion to dismiss a putative securities fraud class action against a ridesharing company (the “Company”) and certain of its directors under Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”). In re Lyft Inc. Securities Litigation, No. 19 Civ. 2690 (HSG), 2020 WL 5366325 (N.D. Cal. Sept. 8, 2020).  Plaintiff alleged that the Company’s prospectus and registration statement (the “Registration Statement”) contained numerous false or misleading statements and omissions, including those concerning reported sexual assaults by the Company’s drivers and defects with bicycles that were part of the Company’s bikeshare fleet.  Although the Court found that certain statements and omissions regarding rider safety were actionable, the Court dismissed plaintiff’s remaining claims for failure to allege falsity or because the statements constituted non-actionable puffery.
     
  • California State Court Dismisses Securities Act Claims Based On Federal Forum Selection Provision In Company’s Certificate Of Incorporation
     
    09/09/2020

    On September 1, 2020, Judge Marie S. Weiner of the Superior Court of California, County of San Mateo, addressing “an issue of first impression in the United States,” dismissed certain defendants from a putative class action asserting claims under the Securities Act of 1933 on the basis of a federal forum selection provision in the Delaware company’s certificate of incorporation.  Wong v. Restoration Robotics, Inc., No. 18-cv-2609, slip op. (Cal. Super. Ct. Sept. 1, 2020).  The decision is not citable precedent under California law, but it is summarized here because it is the first decision addressing the substantive enforceability of such provisions since they were held facially valid by the Delaware Supreme Court.
     
    Category : Securities Act
  • First Circuit Affirms The Dismissal Of A Putative Securities Fraud Class Action Against Medical Robotics Company In Connection With The FDA’s Issuance Of A Warning Letter
     
    09/01/2020

    On August 25, 2020, the United States Court of Appeals for the First Circuit affirmed the dismissal of a putative securities fraud class action asserting violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”) as well as Section 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 against a medical robotics company (the “Company”) as well as certain of its officers.  Yan v. ReWalk Robotics Ltd., et al., No. 19-1614, 2020 WL 5014858 (1st Cir. Aug. 25, 2020).  Plaintiffs alleged that the Company made false or misleading statements and omissions in its IPO registration statement (the “Registration Statement”) and subsequent quarterly and annual disclosures concerning its dealings with the Food and Drug Administration (the “FDA”) regarding one of the Company’s devices.  The First Circuit affirmed the district court’s dismissal of the Securities Act claims, finding that plaintiffs failed to allege a material misstatement or omission.  Although it disagreed with the district court’s reasoning in dismissing the Exchange Act claims for lack of standing, the First Circuit nevertheless found that the Exchange Act claims were properly dismissed because plaintiffs failed to sufficiently allege a material misstatement or scienter.
     
  • Delaware District Court Grants Class Certification With Modifications In Suit Against Student Loan Processor
     
    09/01/2020

    On August 25, 2020, U.S. District Judge Maryellen Noreika certified two classes of investors bringing claims against a student loan servicing company (the “Company”), certain of its executives, and the underwriters of two of the Company’s debt offerings.  Lord Abbett Affiliated Fund Inc., et al. v. Navient Corp., et al., No. 1:16-cv-00112 (D. Del. Aug. 25, 2020).  Plaintiffs asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“the Exchange Act”) and Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (“the Securities Act”) alleging that defendants inflated the price of the Company’s securities by concealing problems in its loan servicing practices and other risks.  The Court granted plaintiffs’ motion for class certification in part, certifying one class of investors with alleged claims under the Securities Act and a second narrowed class with alleged claims under the Exchange Act.
     
  • Northern District Of California Dismisses Putative Class Action Against Large IT Services Provider
     
    08/04/2020

    On July 27, 2020, United States District Judge Beth Labson Freeman of the United States District Court for the Northern District of California dismissed, with leave to amend, a putative class action asserting violations of Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”) against a large IT services provider (the “Company”), certain of its officers, and its largest shareholder.  Costanzo v. DXC Tech. Co., No. 19-cv-05794-BLF, 2020 WL 4284838 (N.D. Cal. July 27, 2020).  Plaintiffs alleged that the Company’s prospectus and registration statement (the “Registration Statement”), issued in connection with the merger that created the Company, mislead investors about the true scale of, and the risks associated with, the Company’s plan to reduce its workforce costs.  The Court granted defendants’ motion to dismiss because plaintiffs failed to allege that the statements in the Company’s Registration Statement were false and because the alleged misstatements were protected by the Private Securities Litigation Reform Act’s (“PSLRA”) safe harbor.
     
    Categories : FalsityPSLRASecurities Act
  • California Appellate Court Holds Secondary Market Purchasers of ETFs Lack Standing To Bring Securities Act Claims
     
    06/01/2020

    On January 23, 2020, the Court of Appeal of the First Appellate District of California affirmed a lower court’s judgment holding that investors lacked standing to pursue claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 against an open-end management investment company (the “Company”), its investment advisor, the investment advisor’s parent company, and certain members of the board of trustees of the Company.  Jensen v. iShares Tr., 44 Cal. App. 5th 618 (Ct. App. 2020), review denied (May 27, 2020).  Plaintiffs, who purchased shares of exchanged-traded funds (“ETFs”) on the secondary market, claimed that the Company failed to adequately disclose the risks associated with “flash crashes” that were known to occur in the ETF market.  The Court affirmed the lower court’s dismissal, holding that plaintiffs lacked standing under Section 11 because they could not satisfy the tracing requirement and that plaintiffs lacked standing under Section 12(a)(2) because they failed to allege direct contract with defendants.
     
  • Northern District Of California Denies In Part Motion To Dismiss Securities Act Claims Against Software Company, Finding That Plaintiff Met Section 11 “Tracing” Requirements In Connection With Direct Listing Of Preexisting Shares
     
    04/28/2020

    On April 21, 2020, Judge Susan Illston of the United States District Court for the Northern District of California granted in part and denied in part a motion to dismiss a putative class action lawsuit asserting claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”) against a software company (the “Company”), certain of its executives and directors, and three venture capital firms (the “VC Defendants”) that held a significant percentage of the Company’s voting power.  Fiyyaz Pirani v. Slack Technologies, Inc., et. al., No. 19-cv-05857-SI (N.D. Cal. Apr. 21, 2020).  Plaintiff alleged that defendants were liable for materially misleading statements and omissions concerning the Company’s service outages, competition, scalability, and growth strategy in offering materials in connection with the Company’s direct listing of preexisting shares to the public.  The Court granted in part and denied in part defendants’ motion to dismiss, and granted plaintiff leave to amend to cure the amended complaint’s deficiencies.
     
  • District Of Connecticut Dismisses Securities Class Action Against A Consumer Financial Services Company, Certain Of Its Officers And Directors And Its Underwriters, Holding That Plaintiffs Failed To Adequately Allege Any Material Misrepresentations
     
    04/07/2020

    On March 31, 2020, Judge Victor A. Bolden of the District of Connecticut dismissed a putative securities class action against a provider of private label credit cards (the “Company”), certain of its officers and directors, and its underwriters in connection with a notes offering.  In re Synchrony Financial Sec. Litig., No. 3:18-cv-1818 (VAB) (D. Conn. Mar. 31, 2020).  Plaintiffs alleged violations of Section 11 of the Securities Act of 1933 (the “Securities Act”) by all defendants, as well as Section 15 of the Securities Act against the individual defendants.  Plaintiffs also alleged violations of Sections 10(b), 20A, and 20(a) of the Securities and Exchange Act of 1934 (the “Exchange Act”) by the Company and certain of the individual defendants.  The Court granted defendants’ motion to dismiss the Amended Complaint in its entirety with prejudice.
     
  • So Long, Cyan?—Delaware Supreme Court Endorses Federal Forum-Selection Provisions For Securities Act Claims
     
    03/24/2020

    On March 18, 2020, the Supreme Court of Delaware reversed a decision of the Delaware Court of Chancery and affirmatively endorsed the enforceability of federal forum-selection provisions, in a Delaware corporation’s certificate of incorporation, that require claims under the Securities Act of 1933 be filed in federal court as opposed to state court.  Salzberg v. Sciabacucchi, No. 346, 2019 (Del. Mar. 18, 2020).  The decision should help to stem the tide of, or even substantially eliminate, state court Securities Act filings that have increasingly proliferated since the March 2018 decision of the United States Supreme Court in Cyan Inc. v. Beaver County Employees Retirement Fund, 138 S. Ct. 1061 (2018), which held that state courts have jurisdiction to adjudicate class actions brought under the Securities Act, notwithstanding the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”), and that such actions generally cannot be removed from state to federal court.
     
    Category : Securities Act
  • Northern District Of California Grants Motion To Dismiss Securities Fraud Claims Against Software Company, Finding That Plaintiffs Did Not Adequately Allege Falsity Or Scienter With Respect To Alleged Material Omissions
     
    03/17/2020

    On March 9, 2020, Judge William H. Orrick of the United States District Court for the Northern District of California granted a motion to dismiss a putative securities class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, against a software company (the “Company”) and two of its executive officers.  Ryan Scheller, et. al. v. Nutanix, Inc., et. al., No. 19-cv-01651-WHO (N.D. Cal. Mar. 9, 2020).  Plaintiffs alleged—based primarily on statements allegedly made by seven confidential witnesses (the “CWs”)—that defendants made false and misleading statements and omissions concerning, among other things, the Company’s internal operations, business relationships, product quality, and sales performance.  The Court granted defendants’ motion to dismiss, finding that plaintiffs failed to allege that the Company’s public statements were false or misleading, and that plaintiffs failed to sufficiently allege scienter.
     
  • New York State Supreme Court Grants In Part Motion To Dismiss Securities Act Claims, Holding That Plaintiffs Did Not Adequately Allege Falsity With Respect To Alleged Omissions Regarding Changes To The Company’s Business Model, But Holding That An Issue Of Fact Exists Concerning Alleged Misstatements Regarding The Company’s Financial And Operational Data
     
    03/17/2020

    On March 9, 2020, Justice Andrew Borrok of the Supreme Court of the State of New York, New York County, Commercial Division, granted in part a motion to dismiss a putative securities class action asserting claims under Sections 11, 12 and 15 of the Securities Act of 1933 (the “Securities Act”) against a used car e-commerce company (the “Company”), certain of its executives and directors, and the underwriters for its initial public offering (“IPO”) of American Depository Shares (“ADSs”).  In re Uxin Limited Securities Litigation, No. 650427/2019 (N.Y. Sup. Ct. Mar. 9, 2020).  Plaintiffs alleged that the Company made materially false and misleading statements and omissions concerning changes to the Company’s business model and certain financial and operational data reported by the Company in connection with its IPO.  The Court granted in part and denied in part defendants’ motion to dismiss.
     
  • Northern District Of California Grants Motion To Dismiss Securities Fraud Claims Against Pharmaceutical Company, Finding That Plaintiffs Did Not Adequately Allege Falsity And Scienter With Respect To Alleged Material Omissions
     
    02/05/2020

    On January 27, 2020, Judge Richard G. Seeborg of the United States District Court for the Northern District of California granted a motion to dismiss a putative securities class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, against a pharmaceutical company (the “Company”) and two of its executive officers.  Immanuel Lake, et al. v. Zogenix, Inc., et. al., No. 19-cv-01975-RS (N.D. Cal. Jan. 27, 2020).  Plaintiffs alleged that defendants made material omissions concerning the Company’s New Drug Application (“NDA”) it was submitting to the U.S. Food and Drug Administration (“FDA”) for a medication designed to treat seizures.  According to plaintiffs, the Company’s stock price fell approximately 20% when the alleged omission was revealed to the market through the FDA’s rejection of the NDA.  The Court granted defendants’ motion to dismiss, finding that plaintiffs failed to sufficiently allege a misstatement or omission of a material fact and scienter, but granted leave to amend.
     
  • Middle District Of Tennessee Pares Claims In Putative Class Action Against Healthcare Company And Its Previous Owner
     
    11/26/2019

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