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  • Southern District Of New York Largely Denies Motion To Dismiss Putative Class Action Against Dental Product Manufacturer
    05/07/2024

    On May 1, 2024, Judge Arun Subramanian of the United States District Court for the Southern District of New York largely denied a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a manufacturer of dental products and certain of its former executives. San Antonio Fire and Police Pension Fund v. Dentsply Sirona Inc., –—F. Supp. 3d—, 2024 WL 1898512 (S.D.N.Y. May 1, 2024). Plaintiffs alleged the company made misrepresentations regarding its inventory, supply chain, product quality, and overall financial health. The Court held that plaintiffs’ allegations were largely sufficient as to the required elements of falsity, scienter, and loss causation, but the Court dismissed allegations regarding certain alleged misrepresentations and claims against one former executive.

  • Ninth Circuit Affirms Dismissal Of Putative Securities Class Action Against Information Services Company For Failure To Adequately Plead Scienter Or Loss Causation
    05/07/2024

    On April 19, 2024, the United States Court of Appeals for the Ninth Circuit affirmed the dismissal of a consolidated putative securities class action alleging violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder against an information services company and certain of its executives. Espy v. J2 Global, Inc., et al., No. 22-55829 (9th Cir. Apr. 19, 2024). The United States District Court for the Central District of California dismissed plaintiff’s second amended complaint (“SAC”), holding that plaintiff failed to adequately plead scienter. The Ninth Circuit affirmed, holding that plaintiff failed to adequately plead scienter and loss causation.

  • Second Circuit Affirms District Court’s Summary Judgment Dismissal Of Securities Fraud Class Action Against Pharmaceutical Company
    04/23/2024

    On April 15, 2024, the United States Court of Appeals for the Second Circuit affirmed in a non-precedential summary order the summary judgment dismissal of securities fraud claims against a pharmaceutical company (the “Company”) under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder. In re Mylan N.V. Sec. Litig., No. 23-720-cv (2d Cir. Apr. 15, 2024). Reviewing the district court decision de novo, the Court held that appellants waived their argument related to scienter and that their failure to disaggregate the losses caused by the Company’s alleged omissions warranted summary judgment for defendants. 

  • Ninth Circuit Reinstates Putative Class Action Against Children’s Entertainment Company, Holding Actionable Misstatements And Loss Causation Adequately Alleged
    04/16/2024

    On April 5, 2024, the United States Court of Appeals for the Ninth Circuit affirmed in part and reversed in part the dismissal of a putative class action asserting claims under the Securities Exchange Act of 1934 against a company that licenses children’s entertainment content and certain of its officers. In re Genius Brands Int’l, Inc. Sec. Litig., —F.4th—, 2024 WL 1473942 (9th Cir. 2024). Plaintiffs alleged that the company made actionable misstatements after it was told that its shares would be delisted from the NASDAQ exchange. The Court held that plaintiffs adequately alleged that the company’s conduct rendered certain challenged statements misleading, that plaintiffs adequately alleged loss causation for certain claims, and that one claim was appropriately dismissed for failure to plead loss causation.

  • Northern District Of California Dismisses Putative Class Action With Prejudice For Failure To Adequately Allege Loss Causation And Standing
    04/16/2024

    On April 9, 2024, Judge Beth Labson Freeman of the United States District Court for the Northern District of California dismissed with prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a technology company, certain of its current and former officers and directors, and related corporate entities. Mehedi v. View, Inc., 2024 WL 1560009 (N.D. Cal. Apr. 9, 2024). Lead plaintiff alleged that the company materially misstated its financial results. The Court held that lead plaintiff could not establish loss causation and therefore lacked standing to pursue claims on behalf of the putative class, requiring the case to be dismissed in its entirety.

    Categories : Loss CausationStanding
  • Southern District Of New York Narrows Claims In Putative Class Action Against China Based Real Estate Brokerage Company
    03/26/2024

    On February 26, 2024, Judge Gregory H. Woods of the United States District Court for the Southern District of New York narrowed claims in a putative class action asserting claims under the Securities Exchange Act of 1934 and Securities Act of 1933 against a China-based real estate brokerage company, certain of its executives, and the underwriters in connection with a secondary offering by the company. Saskatchewan Healthcare Emps.’ Pension Plan v. KE Holdings Inc., 2024 WL 775195 (S.D.N.Y. Feb. 26, 2024). Plaintiff alleged, based largely on a short-seller report, that the company made misrepresentations that significantly overstated the gross transaction value (“GTV”) of real estate transactions facilitated by the company, the number of agents and stores using its online platform, and the commissions the company received. Id. at *3–7. The Court held that plaintiff adequately alleged misrepresentations with respect to certain statements but failed to adequately allege scienter, and therefore largely declined to dismiss the Securities Act claim but dismissed the Exchange Act claim with leave to replead.

  • Southern District Of New York Declines To Dismiss Putative Class Action Against Financial Institution Regarding Alleged Misstatements About Internal Controls
    03/26/2024

    On February 23, 2024, Judge Katherine Polk Failla of the United States District Court for the Southern District of New York largely denied a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a financial institution and certain of its executives. In re Barclays PLC Sec. Litig., 2024 WL 757385 (S.D.N.Y. Feb. 23, 2024). Plaintiff alleged that the company had issued securities in excess of what it had registered for with the U.S. Securities and Exchange Commission, which allegedly rendered misleading certain of its statements regarding compliance with securities laws and internal controls. Id. While the Court held that certain alleged misrepresentations were adequately pleaded to survive a motion to dismiss, the Court dismissed claims as to statements made after the alleged over-issuances were disclosed and rejected plaintiff’s control person liability theory as to certain defendants.

  • Southern District Of New York Permits Putative Class Action Against Ride Hailing Company To Proceed
     
    03/26/2024

    On March 14, 2024, Judge Lewis Kaplan of the United States District Court for the Southern District of New York denied defendants’ motions to dismiss a putative class action against a China-based ride hailing company, certain of its officers and directors, and the underwriters of the company’s IPO, asserting claims under the Securities Act of 1933 and the Securities Exchange Act of 1934. In re Didi Global Inc. Sec. Litig., 2024 WL 1119483 (S.D.N.Y. Mar. 14, 2024). Plaintiffs alleged that the company omitted from its filings in connection with its New York Stock Exchange (“NYSE”) IPO that the Chinese government had directed it to postpone its IPO, with the Chinese government imposing penalties after the company allegedly disregarded this directive. The Court held that plaintiffs’ allegations were adequate to state a claim with respect to nearly all of their asserted claims.

  • Eastern District Of Pennsylvania Dismisses Purported Securities Fraud Class Action Against IT Services Company For Failure To Adequately Allege Falsity, Scienter And Loss Causation
     
    02/13/2024

    On February 1, 2024, Judge Gerald J. Pappert of the United States District Court for the Eastern District of Pennsylvania granted a motion to dismiss a putative securities class action against an IT solutions company that provides digital communication, cybersecurity and IT consulting services, its CEO and current and former CFOs.  Connor v. Unisys Corp., et al., No. 22-4529 (E.D. Pa. Feb. 1, 2024).  Plaintiff alleged that defendants made false representations about the Company’s disclosure controls and procedures and internal control over financial reporting in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.  The Court dismissed the amended complaint, holding that plaintiff failed to adequately allege falsity, scienter and loss causation.
  • Northern District Of California Pares Claims In Putative Class Action Regarding Purchase Of Social Media Platform
     
    12/19/2023


    On December 11, 2023, Judge Charles Breyer of the United States District Court for the Northern District of California narrowed a putative class action asserting claims under the Securities Exchange Act of 1934 against the purchaser of a social media company. Pampena v. Musk, — F. Supp. 3d — 2023 WL 8588853 (N.D. Cal. 2023). Plaintiffs alleged that they sold shares in the target company at depressed prices after the purchaser allegedly made material misstatements suggesting that he would not go forward with the acquisition. The Court held that certain of the challenged statements were actionable and granted leave to replead with respect to the others.

  • First Circuit Partially Revives Putative Class Action Against Pharmaceutical Company Alleging Misstatements About Clinical Trial Data
     
    11/01/2023

    On October 11, 2023, the United States Court of Appeals for the First Circuit affirmed in part and reversed in part the dismissal of a putative class action asserting claims under the Securities Exchange Act of 1934 against a pharmaceutical company and certain of its former executives.  Shash v. Biogen, Inc., —F.4th—, 2023 WL 6617278 (1st Cir. 2023).  Plaintiffs alleged that the company made misstatements and omissions regarding the clinical trial results of the company’s drug to treat Alzheimer’s.  The district court granted defendants’ motion to dismiss, but the First Circuit reversed the dismissal in part, holding that plaintiffs’ allegations were sufficient with respect to one challenged statement, while affirming that plaintiffs failed to adequately allege scienter with respect to other challenged statements.
  • Northern District Of Illinois Narrows Putative Class Action Against Airplane Manufacturer
     
    10/11/2023

    On September 18, 2023, Judge Manish S. Shah of the United States District Court for the Northern District of Illinois narrowed a putative class action asserting claims under the Securities Exchange Act of 1934 against an airplane manufacturer and its former CEO and CFO.  College Ret. Equities Fund v. Boeing Co., 2023 WL 6065260 (N.D. Ill. Sept. 18, 2023).  Plaintiffs alleged the company made misrepresentations regarding two crashes of a new model of plane and the company’s responsive measures in an effort to return the fleet to service.  The Court held that various challenged statements were not actionable because plaintiffs failed to adequately allege falsity or scienter.  With respect to the remaining challenged statements, the Court further pared the claims by holding that loss causation was not sufficiently alleged in connection with certain purported corrective disclosures.
  • Southern District Of New York Dismisses Proposed Securities Class Action Complaint Against Drug Manufacturer For Failure To Plead Loss Causation
     
    10/11/2023

    On September 25, 2023, Judge Lorna Schofield of the United States District Court for the Southern District of New York granted a motion to dismiss a proposed class action against a biopharmaceutical company alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  Gru v. Axsome Therapeutics, Inc., No. 22 CIV. 3925 (LGS), 2023 WL 6214581 (S.D.N.Y. Sept. 25, 2023).  Plaintiff alleged that the Company omitted details concerning its migraine drug development in its Form 10-Q, 10-K and 8-K filings with the SEC and in statements made during conference calls with investors and analysts.  Plaintiff further alleged that the Company’s statements discussing the timing and prospect of FDA approval of its new migraine drug were false or misleading as a result of these alleged omissions.  The Court dismissed the complaint, finding that plaintiffs failed to plead loss causation.
    Categories : Exchange ActLoss Causation
  • Southern District Of New York Grants In Part And Denies In Part Motion To Dismiss Class Action Against Cryptocurrency Mining Company
     
    08/22/2023

    On August 10, 2023, Judge Ronnie Abrams of the United States District Court for the Southern District of New York granted in part and denied in part a motion to dismiss a putative securities class action alleging that a cryptocurrency mining company (the “Company”) and certain of its officers and directors violated Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”).  Winter v. Stronghold Digital Mining, Inc., No. 22-CV-3088 (RA), 2023 WL 5152177 (S.D.N.Y. Aug. 10, 2023).  Plaintiffs allege that the Company made false and misleading statements in its registration statement and prospectus filed in connection with the Company’s October 2021 initial public offering (“IPO”) regarding the Company’s supply chain risks.  The Court granted the motion to dismiss the Section 12(a)(2) claim of one plaintiff for lack of standing, but otherwise denied the motion to dismiss.
  • Eleventh Circuit Affirms Dismissal Of Exchange Act Claims Against Biomedical Company, Finding Plaintiffs Did Not Adequately Plead Loss Causation
     
    08/01/2023

    On July 10, 2023, the United States Court of Appeals for the Eleventh Circuit affirmed the dismissal of a consolidated putative class action alleging violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, against a biomedical company (the “Company”), certain of its executives, and its former auditor.  Carpenters Pension Fund of Ill. v. MiMedx Group, Inc., No. 22-10633 (11th Cir. July 10, 2023).  The United States District Court for the Northern District of Georgia dismissed plaintiff’s second amended complaint (“SAC”), holding that plaintiff lacked standing to bring the claim and further holding that plaintiff failed to plead loss causation.  While the Eleventh Circuit determined that the district court erred in holding that plaintiff lacked standing, it affirmed the district court’s holding that plaintiff failed to sufficiently plead loss causation.
  • Fourth Circuit Affirms Dismissal Of Putative Class Action Under Section 14(a) For Failure To Adequately Allege Material Omissions And Loss Causation
     
    06/13/2023

    On June 1, 2023, the United States Court of Appeals for the Fourth Circuit affirmed the grant of summary judgment dismissing claims under Sections 14(a) of the Securities Exchange Act of 1934 against a financial company and certain of its directors.  Karp v. First Connecticut Bancorp, Inc., —F.4th—, 2023 WL 3743604, at *1 (4th Cir. 2023).  Plaintiff alleged that the company in which he held stock made misrepresentations in a proxy solicitation in connection with a proposed stock-for-stock merger with another company.  The Fourth Circuit held that plaintiff failed to allege any material omission from the proxy statement and also failed to establish loss causation.
  • Southern District Grants In Part, Denies In Part Chinese Internet Company’s Motion To Dismiss In Investor Class Action
     
    03/28/2023

    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.
  • District Of Arizona Grants Electric Vehicle Company’s Motion To Dismiss In Investor Class Action
     
    02/14/2023

    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.
     
  • Southern District Of New York Grants Summary Judgment To Pharmaceutical Company In Investor Class Action
     
    12/20/2022

    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.
  • Western District Of Washington Largely Declines To Dismiss Putative Class Action Against Online Real Estate Listing Company
     
    12/13/2022

    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.
  • Middle District Of Florida Dismisses Putative Class Action Against Recycling Company For Failure To Adequately Allege Misrepresentations Or Scienter
     
    08/16/2022

    On August 4, 2022, the United States District Court for the Middle District of Florida dismissed without prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a recycling services company, certain of its officers and directors, and the former CEO of a special purpose acquisition company (SPAC) that acquired the company.  Theodore v. PureCycle Tech. Inc., No. 6:21-cv-809-PGB-GJK, slip op. (M.D. Fla. Aug. 4, 2022), ECF No. 112.  Plaintiffs alleged that the company made misrepresentations with respect to its management team’s experience, the value of its patented recycling process, and its future production and financial projections, which were allegedly revealed in a short-seller report.  The Court held that the complaint on its face failed to state precisely which statements or omissions were at issue and where they were made, that plaintiffs adequately alleged certain misrepresentations but not others, and that plaintiffs adequately alleged loss causation but not scienter.
  • Central District Of California Dismisses With Prejudice Suit Against Children’s Cartoon Company And Finds That The Complaint Violated Rule 8 Of The Federal Rules Of Civil Procedure
     
    07/28/2022

    On July 15, 2022, the United States District Court for the Central District of California granted a motion to dismiss a putative class action against a children’s cartoon company (the “Company”) and certain of its officers alleging violations of Section 10(b) of the Securities Exchange Act of 1934.  In Re Genius Brands Int’l, Inc. Sec. Litig., CV 20-7457 DSF (RAOx) (C.D. Cal. July 15, 2022).  In a second amended complaint, plaintiffs alleged that the Company made materially false and misleading statements and omissions about the Company’s engagement of a stock promotion company, an impending acquisition by Disney or Netflix, and its economic resilience in the face of COVID-19, among other topics.  The Court dismissed the claims with prejudice for failure to adequately plead falsity or materiality, and further held that the complaint of 289 paragraphs and 84 pages violated Rule 8 of the Federal Rules of Civil Procedure that requires a “short and plain statement” of the claims.
  • Northern District Of California Dismisses Without Prejudice Putative Class Action Against Synthetic Biology Company For Failure To Allege Scienter
     
    06/07/2022

    On May 31, 2022, Judge Beth Labson Freeman of the Northern District of California dismissed without prejudice a putative class action asserting claims under the Securities Exchange Act against a synthetic biology company and certain of its executives.  Joseph v. Precigen, Inc., No. 20-cv-06936-BLF (N.D. Cal. May 31, 2022).  Plaintiff alleged that the company misrepresented the efficiency and economic viability of its methane conversion program.  The Court held that plaintiff failed to adequately allege scienter and failed to allege falsity with respect to certain alleged misrepresentations; however, the Court granted leave to replead.
  • Ninth Circuit Affirms Dismissal Of Complaint Against Pharmaceutical Company For Failure To Allege Falsity And Loss Causation
     
    05/24/2022

    On May 19, 2022, the United States Court of Appeals for the Ninth Circuit affirmed a district court’s dismissal of a putative class action against a pharmaceutical company (the “Company”) asserting claims under Section 10(b) of the Securities Exchange Act of 1934.  In re Nektar Therapeutics Inc. Sec. Litig., No. 21-15170 (9th Cir. May 19, 2022).  Plaintiffs alleged that the Company misled investors about the results of its preliminary trial of the Company’s flagship drug when it presented the information without disclosing that outlier data was included in the average.  In December 2020, the Northern District of California dismissed the complaint for failure to plead falsity, scienter, or loss causation, which we covered here.  The Ninth Circuit affirmed the dismissal, holding that plaintiffs failed to sufficiently explain how the inclusion of the outlier data misled investors, or how the announcement of subsequent trial results caused a loss.
  • New York District Court Denies Motion To Dismiss Putative Securities Class Action Against Investment Company, Finding Plaintiffs Sufficiently Alleged Misleading Statements And Omissions In The Company’s Offering Documents
     
    05/17/2022

    On May 4, 2022, Judge Victor Marrero of the United States District Court for the Southern District of New York denied a motion to dismiss a putative class action alleging, among other things, violations of Sections 10(b) and 20(a) of the Securities Exchange Act (the “Exchange Act”) and Rule 10b-5 thereunder against an investment company (the “Company”), its related entities, and its president and co-founder.  Michael Tecku et al. v. YieldStreet Inc. et al., No. 1:20-cv-07327 (S.D.N.Y May 4, 2022).  Plaintiffs alleged that the Company “misrepresented material facts about the stability and attractiveness of their investment products in its offering documents” by making misleading statements or omissions in private placement memoranda (“PPMs”) and series notes supplements (“SNSs”).  The Court held that, accepting plaintiffs’ allegations as true, plaintiffs sufficiently alleged securities fraud violations for certain alleged misstatements and omissions.
  • Western District Of Texas Largely Denies Motion To Dismiss Putative Class Action Against Information Technology Company
     
    04/05/2022

    On March 30, 2022, Judge Robert Pitman of the Western District of Texas denied the majority of a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against an information technology company, certain of its executives, and private equity firms that owned the company’s securities.  In re SolarWinds Corp. Sec. Litig., No. 1:21-CV-138-RP (W.D. Tex. Mar. 30, 2022).  Plaintiffs alleged that company statements regarding its cybersecurity policies and practices were revealed to be false and misleading upon the disclosure of a security breach.  The Court held that plaintiffs adequately alleged falsity, scienter, and loss causation, except as to the company’s CEO, the allegations as to whom the Court granted plaintiffs leave to replead.
  • Eastern District Of Pennsylvania Declines To Dismiss Putative Class Action Against Pharmaceutical Company
     
    04/05/2022

    On March 25, 2022, the United States District Court for the Eastern District of Pennsylvania largely denied a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a pharmaceutical company and certain of its executives.  Halman Aldubi Provident & Pension Funds Ltd. v. Teva Pharm. Indus. Ltd., No. 20-cv-4660-KSM (E.D. Pa. Mar. 25, 2022).  Plaintiff alleged that the company made misrepresentations with respect to the reasons one of its drugs was commercially successful.  The Court held that except for allegations against the company’s CFO, plaintiff adequately alleged misrepresentations, scienter, and loss causation.
  • Southern District Of New York Grants Motion To Dismiss Exchange Act Claims Against Pharmaceutical Company For Alleged Omissions About Drug’s Safety
     
    04/05/2022

    On March 21, 2022, Judge Lewis J. Liman of the Southern District of New York granted a motion to dismiss a claim under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder, as well as Section 20(a) of the Exchange Act against a pharmaceutical company (the “Company”) and certain of its executives.  Rice v. Intercept Pharmaceuticals, Inc., No. 1:21-cv-00036 (S.D.N.Y. Mar. 21, 2022).  Plaintiffs alleged that defendants omitted material information concerning the safety of the Company’s liver disease drug that resulted in a stock drop once alleged corrective disclosures were made.  The Court granted defendants’ motion to dismiss plaintiffs’ first amended complaint (the “FAC”), holding that plaintiffs failed to sufficiently allege material omissions, scienter, or loss causation, but granted plaintiffs leave to replead.
  • Southern District Of New York Dismisses Putative Class Action Against Global Commercial Electronic Vehicle Company For Failure To Plead Scienter And Loss Causation
     
    03/23/2022

    On March 15, 2022, Judge George B. Daniels of the Southern District of New York dismissed a putative class action against a global company that focuses on facilitating the adoption of commercial electronic vehicles (“EV”) through its China-based division (the “Company”) and certain of its directors and officers for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  In re Ideanomics Sec. Litig., No. 20 CIV. 4944 (GBD), 2022 WL 784812 (S.D.N.Y. Mar. 15, 2022).  Plaintiffs alleged that the Company’s executives made numerous misstatements about the China-based sales hub (the “Center”) in earnings calls, YouTube interviews, and the press.  The Court dismissed the complaint with leave to amend, holding that although the complaint plausibly alleged misstatements, it failed to allege scienter or loss causation.
  • Southern District Of Ohio Declines To Dismiss Putative Class Action Against Energy Company Regarding Alleged Bribery Scheme
     
    03/15/2022

    On March 7, 2022, Judge Algenon L. Marbley of the Southern District of Ohio largely denied a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 (“Exchange Act”) and the Securities Act of 1933 (“Securities Act”) against an energy company, certain of its executives and directors, and certain underwriters of its bond offerings.  In re FirstEnergy Corp. Sec. Litig., No. 2:20-cv-3785 (S.D. Ohio Mar. 7, 2022).  Plaintiffs alleged that the company engaged in an anti-competitive scheme that included bribing state officials in exchange for a government bailout of its nuclear power facilities.  The lawsuit relates to the Ohio House Bill 6 scandal, in connection with which Ohio’s former Speaker of the House and others have been arrested on racketeering charges, political strategists and lobbyists have pleaded guilty to a racketeering conspiracy; the company fired certain executives for violating company policies and its code of conduct, and the company entered into a deferred prosecution agreement under which it paid a $230 million penalty and acknowledged having “conspired with public officials and other individuals and entities to pay millions of dollars to and for the benefit of public officials in exchange for specific official action” for the company’s benefit.  The Court held that plaintiffs had sufficiently alleged the various elements of their claims and declined to dismiss any defendant from the case, although the Court dismissed certain claims with respect to certain individual defendants.
  • District Of Connecticut, On Remand, Denies Motion To Dismiss Putative Class Action Against Consumer Financial Services Company
     
    02/24/2022

    On February 11, 2022, the United States District Court for the District of Connecticut denied a motion to dismiss a putative securities class action asserting claims under the Securities Exchange Act of 1934 (“Exchange Act”) against a consumer financial services company that issues private-label credit cards and certain of its executives.  In re Synchrony Fin. Sec. Litig., No. 3:18-CV-1818 (VAB), 2022 WL 427499 (D. Conn. Feb. 11, 2022).  As discussed in our prior post the Court had previously dismissed the action in its entirety, including with respect to claims under the Securities Act of 1933 (“Securities Act”).  The Court of Appeals for the Second Circuit upheld the dismissal of the Securities Act claims and certain of the Exchange Act claims but remanded for further proceedings regarding one challenged statement—that the company misrepresented the alleged “pushback” it had received from retail partners with respect to its underwriting standards.  Id. at *2.  On remand, the district court held that plaintiffs adequately alleged falsity, scienter, and loss causation with respect to the remaining challenged statement.
  • Northern District Of California Pares Claims In Putative Class Action Against Videoconferencing Company
     
    02/24/2022

    On February 16, 2022, Judge James Donato of the Northern District of California granted in part and denied in part a motion to dismiss a putative class action asserting claims under the Securities Exchange Act of 1934 against a videoconferencing company and certain of its executives.  In re Zoom Sec. Litig., No. 20-cv-02353-JD (N.D. Cal. Feb. 16, 2022).  Plaintiff alleged that the company made misrepresentations concerning the level of encryption on its primary videoconferencing product.  The Court held that plaintiff sufficiently alleged falsity, scienter, and loss causation as to the CEO’s challenged statements regarding encryption, but it dismissed claims as to certain other alleged misstatements, and all claims against one executive, for failure to sufficiently allege scienter, while granting leave to amend.
  • Northern District Of California Denies Motion To Dismiss Exchange Act Claims Against Electric Vehicle Battery Development Company, Holding Plaintiff Adequately Pleaded Misleading Statements, Scienter, And Loss Causation
     
    01/25/2022

    On January 14, 2022, Judge William H. Orrick of the Northern District of California denied 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, against a lithium battery development company (the “Company”) and certain of its executives (collectively, “defendants”).  In re Quantumscape Securities Class Action Litigation, No. 3:21-cv-00058-WHO (N.D. Cal. Jan. 14, 2022).  The Company’s “solid-state” battery is an aspiring competitor to conventional lithium-ion batteries for use in electric vehicles.  The Court denied defendants’ motion to dismiss, holding that the Complaint was adequately plead with the exception of one of the challenged statements that it dismissed.
  • Northern District Of California Dismisses Putative Class Action Against Social Media Company For Failure To Adequately Allege Scienter, Loss Causation
     
    01/11/2022

    On December 20, 2021, the United States District Court for the Northern District of California dismissed a putative class action against a social media company and certain of its executives under the Securities Exchange Act.  In re Facebook, Inc. Sec. Litig., No. 5:18-CV-01725-EJD, 2021 WL 6000058 (N.D. Cal. Dec. 20, 2021).  Plaintiffs alleged that the company made misrepresentations relating to a data breach and with respect to users’ control of their data.  The Court previously dismissed plaintiffs’ prior two complaints but granted leave to replead.  Addressing plaintiffs’ third amended complaint, the Court held that plaintiffs still failed to adequately allege scienter for the data breach allegations and loss causation for the allegations about control of user data, and therefore dismissed the action without leave to replead.
    Categories : Loss CausationScienter
  • Northern District Of California Narrows Claims In Putative Securities Class Action Against Pharmaceutical Company
     
    10/26/2021

    On October 19, 2021, Chief Judge Richard Seeborg of the United States District Court for the Northern District of California narrowed the claims in a putative securities class action asserting claims under the Securities Exchange Act of 1934 against a pharmaceutical company and certain of its executives.  Sheet Metal Works Nat’l Pension Fund v. Bayer AG, No. 20-cv-4737, slip op. (N.D. Cal. Oct. 19, 2021), ECF No. 90.  Plaintiffs alleged that the company made misrepresentations relating to its acquisition of Monsanto.  The Court held that plaintiffs adequately alleged actionable misrepresentations and scienter with respect to only some of the challenged statements, and further held that plaintiffs adequately alleged loss causation for those statements.
  • Northern District Of California Dismisses Putative Class Action For Failure To Adequately Allege Actionable Misrepresentations Or Scienter
     
    08/26/2021

    On August 17, 2021, Judge Beth Labson Freeman of the United States District Court for the Northern District of California dismissed a putative class action asserting claims under the Securities Exchange Act of 1934 against an energy technology company and certain of its executives.  Hurst v. Enphase Energy, Inc., et al., No. 5:20-cv-04036-BLF, slip op. (N.D. Cal. Aug. 17, 2021).  Plaintiff alleged, based on a short seller report released the same day plaintiff’s complaint was filed, that the company misrepresented its revenues, engaged in improper deferred revenue accounting practices, and overstated the growth in its gross margins.  The Court held that plaintiff failed to adequately allege any misrepresentation or scienter and, therefore, dismissed the action, while granting plaintiff leave to amend to attempt to “rectify the defects” identified by the Court.
  • Southern District Of New York Dismisses Putative Class Action Against Cryptocurrency Mining Hardware Manufacturer For Failure To Allege Loss Causation And Materiality
     
    07/20/2021

    On July 8, 2021, Judge J. Paul Oetken of the United States District Court for the Southern District of New York dismissed a putative securities class action against a Chinese manufacturer of cryptocurrency mining hardware (the “Company”) alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Sections 11 and 15 of the Securities Act of 1933.  Boluka Garment Co. v. Canaan Inc., No. 20-cv-07139 (S.D.N.Y. July 8, 2021).  Plaintiffs alleged that the Company failed to disclose material information regarding alleged related-party transactions in its registration statement.  The Court dismissed the complaint with leave to amend because plaintiffs failed to allege loss causation and materiality.
    Categories : Loss CausationMateriality
  • District Of New Jersey Dismisses Putative Class Action Against Cannabis Company For Failure To Adequately Allege Misrepresentations
     
    07/13/2021

    On July 6, 2021, Judge John Michael Vazquez of the U.S. District Court for the District of New Jersey dismissed a putative class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against a Canadian company that manufactures and distributes cannabis products (the “Company”) and certain of its executives.  In re Aurora Cannabis, Inc. Sec. Litig., No. 19-cv-20588 (JMV) (JBC), slip op. (D.N.J. July 6, 2021).  Plaintiffs alleged that defendants made material misstatements and omissions relating to the Company’s earnings projections that allegedly failed to disclose certain headwinds in the industry.  The Court held that plaintiffs failed to identify any materially false or misleading statements, and also noted weaknesses in plaintiffs’ allegations with respect to the scienter and loss causation requirements.  Accordingly, the Court dismissed the first amended complaint in its entirety, but granted plaintiffs leave to replead to cure the identified defects.
  • Central District Of California Denies Motion To Dismiss A Securities Fraud Complaint Against Medical Device Manufacturer Based On Statements Regarding Post-Acquisition Integration And Sales
     
    04/06/2021

    On March 29, 2021, Judge David O. Carter of the United States District Court for the Central District of California denied a motion to dismiss a consolidated putative class action complaint against a medical device manufacturer and marketer (the “Company”) and certain of its officers, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  In re Merit Med. Sys., Inc. Sec. Litig., No. 8:19-02326 DOC (ADSx) (C.D. Cal. Mar. 29, 2021).  Plaintiffs alleged that the Company issued misleading statements regarding its acquisitions of two companies in late 2018 including with respect to the integration of those companies and their products sales.  The Court denied defendants’ motion to dismiss, adopting a report and recommendation by Magistrate Judge Autumn D. Spaeth, which found that most of the challenged statements were not forward-looking statements protected by the PSLRA’s safe harbor provisions and that plaintiffs had adequately pled all elements of their claims. 
  • District Of Connecticut Dismisses Putative Class Action For Failure To Adequately Allege Material Misrepresentations, Scienter, and Loss Causation
     
    03/31/2021

    On March 19, 2021, Judge Stefan R. Underhill of the United States District Court for the District of Connecticut dismissed with prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a transportation and logistics company and certain of its executives.  Labul, et al. v. XPO Logistics, et al., No. 3:18-cv-2062 (SRU), slip op. (D. Conn. Mar. 19, 2021).  Plaintiffs alleged that the company misrepresented the extent to which it relied on a single customer to drive revenue growth and the financial impact of declining business from that customer.  The Court held that plaintiffs failed to adequately allege the existence of material misrepresentations, scienter, or loss causation, and therefore dismissed the action.
  • Southern District Of New York Dismisses Putative Class Action Against Browser Services Company, Holding Plaintiffs Failed To Plead Material Misrepresentations And Scienter
     
    03/23/2021

    On March 13, 2021, Judge John G. Koeltl of the Southern District of New York granted a motion to dismiss claims brought under Sections 10b and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b5-1 promulgated thereunder, as well as Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”), against a Norwegian browser services company (the “Company”), its individual directors, and the underwriters of its initial public offering (the “IPO”). Lau v. Opera Limited et al., No. 1:2020-cv-00674 (S.D.N.Y. Mar. 13, 2021).  Plaintiffs alleged that the Company’s IPO offering materials contained materially false and misleading statements and omissions, and defendants made false or misleading statements in other documents and analyst calls regarding the Company’s market share and entry into the “fintech” market.  The Court granted defendants’ motion to dismiss plaintiffs’ consolidated class action complaint (the “CCAC”), with leave to amend.
     
  • Southern District Of New York Dismisses Putative Class Action Against Midstream Oil Company For Failure To Plead A Misrepresentation Or Omission
     
    03/17/2021

    On March 8, 2021, Judge Lewis J. Liman of the United States District Court for the Southern District of New York dismissed a putative securities class action against a midstream oil company (the “Company”), its general partner, and an infrastructure firm that was an affiliate of the general partner and acquired the Company (the “Firm”), as well as certain of the Company’s officers and directors, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  Kraft v. Third Coast Midstream, No. 19-cv-9398 (S.D.N.Y. Mar. 8, 2021).  Plaintiffs alleged that the Company and the Firm orchestrated a scheme to manipulate the price of the Company’s common units (“CUs”) through a series of misstatements and omissions so that the Firm could acquire the Company at a deflated price.  The Court dismissed the claims for failure to plead any actionable misstatement or omission or a manipulative act, as well as loss causation or scienter.
     
  • Eastern District Of New York Dismisses Putative Class Action Against Cannabis Operator For Failure To Plead Misrepresentation And Loss Causation
     
    02/23/2021

    On February 16, 2021, Judge Brian M. Cogan of the United States District Court for the Eastern District of New York dismissed a putative securities class action against a medical and wellness cannabis operator and certain of its officers alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. In re Curaleaf Holdings Inc. Securities Litigation, No. 19-cv-04486 (E.D.N.Y. 2021). Plaintiffs alleged the Company made false and misleading statements regarding the benefits and legality of its cannabinol (“CBD”) products. The Court dismissed the complaint, holding that the Company disclosed what plaintiffs claimed was not disclosed and that plaintiffs thus failed to plead falsity or, with respect to certain alleged misstatements, loss causation.
     
  • Ninth Circuit Affirms Dismissal Of A Putative Securities Class Action Against An Electric Carmaker Related To Production Delays
     
    02/03/2021

    On January 26, 2021, the United States Court of Appeals for the Ninth Circuit affirmed the dismissal of a putative securities class action against an electric car manufacturer (the “Company”) and certain of its officers for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.
     
  • Eastern District Of New York Grants Motion To Dismiss Exchange Act Claims Against Life Insurance Company In Connection With Its Retirement And Income Solution Program
     
    01/20/2021

    On January 7, 2021, Judge Sterling Johnson, Jr. of the Eastern District of New York granted a motion to dismiss, with prejudice, in 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 SEC Regulation S-K, Item 303, against a life insurance company (the “Company”) and certain of its executives.  Parchmann v. Metlife, et al., No. 18-cv-00780-SJ-RLM (E.D.N.Y. Jan. 7, 2021).  Plaintiff alleged that defendants made materially misleading statements regarding the Company’s financial condition and internal controls with respect to one of the Company’s Retirement and Income Solution (“RIS”) programs.  The Court granted defendants’ motion to dismiss with prejudice, holding, among other things, that plaintiffs failed to adequately plead falsity, loss causation, and scienter.
     
  • Ninth Circuit Reverses In Part Dismissal Of Exchange Act Claims Against Pharmaceutical Manufacturer, Holding That Plaintiffs Adequately Pled Certain Alleged Misstatements And Loss Causation
     
    01/20/2021

    On January 11, 2021, the Ninth Circuit in an unpublished decision affirmed in part and reversed in part the dismissal at the pleading stage of Section 10(b) claims under the Exchange Act of 1934 against a pharmaceutical manufacturer (the “Company”) and several of its officers for alleged misstatements regarding an alleged price fixing scheme and the performance of one of its generic drugs.  N.Y. Hotels Trades Council & Hotel Association of NYC Inc. Pension Fund et al. v. Impax Laboratories, Inc., et al., No. 19-16744 (9th Cir. Jan. 11, 2021).  The Court held that plaintiffs’ Second Amended Complaint (the “SAC”) adequately alleged falsity with respect to statements allegedly made by defendants concerning the performance of one of the Company’s drugs (diclofenac) as well forward-looking statements regarding earnings projections and revenue guidance, and further held that plaintiffs adequately alleged loss causation.  Our prior analysis of the district court’s decision can be found here.
     
  • Northern District Of California Dismisses A Putative Securities Class Action Against A Biopharmaceutical Company Related To Its Flagship Cancer Drug In Development
     
    01/13/2021

    On December 30, 2020, Judge Haywood S. Gilliam of the United States District Court for the Northern District of California granted a motion to dismiss a putative class action against a biopharmaceutical company (the “Company”) and certain of its officers for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.  Malquin v. Nektar Therapeutics, No. 18-cv-06607 (N.D. Cal. Dec. 30, 2020).  Plaintiffs alleged that the Company made false and misleading statements and omissions about the efficacy of its flagship cancer drug in development.  The Court dismissed the amended complaint with prejudice, confirming that securities claims cannot be based on allegations that a company failed to use the best or preferred statistical methods for evaluating the effectiveness of a new drug and that short seller reports will not constitute corrective disclosures sufficient to allege loss causation unless the reports can be characterized plausibly as revealing new information to the market.
     
  • Utah District Court Dismisses Putative Securities Class Action Against Biotechnology Firm For Failure To Allege Falsity And Loss Causation
     
    12/01/2020

    On November 22, 2020, Judge Howard C. Nielson, Jr. of the United States District Court for the District of Utah dismissed with prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a biotechnology company and certain of its executives.  In re PolarityTE, Inc. Sec. Litig., No. 2:18-cv-00510, 2020 WL 6873798 (D. Utah Nov. 22, 2020).  Plaintiffs alleged that the company made material misstatements in the course of a reverse merger and in subsequent SEC filings.  The Court held that plaintiffs failed to adequately allege falsity with respect to certain challenged statements and failed to establish loss causation for the remainder.
     
  • Eastern District Of Virginia Denies Motions To Dismiss Exchange Act Claims Against Building Products Company In Connection With Its Pricing Strategy And Purported Anti-Competitive Conduct
     
    11/03/2020

    On October 26, 2020, Judge John A. Gibney, Jr. of the Eastern District of Virginia denied motions 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”) against a building products company (the “Company”), certain of its executives, and an institutional majority shareholder of the Company.  Cambridge Retirement System v. Jeld-Wen Holding, Inc., et al., No. 3:20-cv-112 (E.D. Va. Oct. 26, 2020).  Plaintiffs alleged defendants made material misstatements and omissions concerning the Company’s pricing strategy, alleged anti-competitive conduct, and the impact of a finding of liability in a separate antitrust private suit.  The Court denied defendants’ motions to dismiss the amended complaint, holding that plaintiffs adequately pled material misrepresentations or omissions, falsity, scienter and loss causation.
     
  • Ninth Circuit Reverses Dismissal Of Exchange Act Claims Against Bank And Its Executives, Holding Plaintiffs Adequately Alleged Loss Causation For Certain Claims
     
    10/13/2020

    On October 8, 2020, the Court of Appeals for the Ninth Circuit reversed the dismissal of 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 federally chartered savings bank and its holding company (collectively the “Bank”) and several of its executives, for alleged misstatements regarding the Bank’s underwriting standards, internal controls, and compliance program.  In re BofI Holding, Inc. Securities Litigation, No. 18-55415 (9th Cir. Oct. 8, 2020).  The district court granted defendants’ motion to dismiss the third amended complaint, holding that although plaintiffs adequately pled material misstatements and scienter, plaintiffs failed to sufficiently plead loss causation.  The Ninth Circuit (with Judge Paul J. Watford writing for the majority) vacated the dismissal, holding that plaintiffs sufficiently pled loss causation based on a whistleblower lawsuit filed by a former employee.  Judge Kenneth K. Lee concurred in part and dissented in part.
     
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