On February 26, 2026, Judge Araceli Martínez-Olguín of the United States District Court for the Northern District of California granted a motion to dismiss a purported securities class action brought against a footwear and apparel company (the “Company”) and certain of its officers, directors, and underwriters.
Shnayder v. Allbirds, Inc., No. 23-cv-01811 (N.D. Cal. Feb. 26, 2026). Plaintiffs asserted claims under Sections 11 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”), alleging that defendants made false or misleading statements in connection with the Company’s IPO and in subsequent public disclosures. We previously covered
here the District Court’s dismissal of the Second Amended Complaint (“SAC”), with leave to amend, for lack of statutory standing on the Securities Act claims and for failing to adequately plead scienter on the Exchange Act claims. The Court dismissed plaintiffs’ Third Amended Complaint (“TAC”) with prejudice for the same reasons and for failure to plead falsity for the category of alleged misrepresentations for which plaintiffs cured their defective scienter allegations.
In the TAC, plaintiffs alleged that defendants made 60 false or misleading statements and omissions in the Company’s IPO registration statement and public disclosures related to five categories: (i) core products; (ii) investments in new product offerings; (iii) expansion of the retail store fleet; (iv) inventory shortage or excess; and (v) commitment to brand awareness.
The Court first dismissed the Securities Act claims, holding that plaintiffs failed to sufficiently allege statutory standing in light of the Supreme Court’s decision in
Slack Technologies, LLC v. Pirani. Plaintiffs alleged three theories that their alleged stock purchases were issued under, and therefore traceable to, the IPO registration statement. First, plaintiffs alleged the IPO registration statement did not exclude the shares sold by the Company’s employees “during the first seven days of trading post-IPO,” thereby eliminating the requirement for plaintiffs to distinguish between those shares and those purchased under the registration statement. The Court rejected this argument, holding that even though plaintiffs argued there was no indication in the text of the registration statement that it did not apply to employee-sold shares, “the reverse is true” and there is “no reasonable basis” to infer the registration statement applies to such shares, particularly because there was no guarantee that the full amount of employee shares would be sold at the time the registration statement became effective. Second, plaintiffs alleged that, even if the employee-sold shares were not traceable, it was “mathematically negligible and thus effectively impossible” that the lead plaintiffs did not purchase at least one share issued under the registration statement given the statistical improbability of purchasing only unregistered shares out of the total shares on the market. The Court rejected this argument, holding that “statistical tracing” is barred under Ninth Circuit precedent. Third, plaintiffs alleged that, upon discovery, the Depository Trust Company could provide IPO tracking services that would reveal where the shares originated. The Court rejected this argument and held that plaintiffs must plausibly allege that their shares are traceable to the registration statement
now, not after some uncertain amount of discovery. Having found that plaintiffs failed to plausibly allege an underlying primary violation of the Securities Act under Section 11, the Court also dismissed plaintiffs Section 15 claim.
The Court next addressed the Exchange Act claims. The TAC asserted two new allegations for scienter: (i) confidential witness allegations regarding monthly real estate meetings in which the individual defendants allegedly reviewed struggling profit projections and approved new retail stores despite projected unprofitability; and (ii) allegations regarding the individual defendants’ performance-based stock awards during the period of alleged fraud. The Court, assuming
arguendo that the allegations regarding the Company’s retail fleet were false or misleading, held that the new allegations regarding monthly meetings could support a strong inference of scienter as to those alleged statements. However, the Court held that the new allegations could not support a strong inference of scienter as to the remaining four categories of alleged statements and granted the motion to dismiss as to each.
Turning to falsity with respect to the retail fleet statements, the Court held that plaintiffs failed to plausibly allege any actionable misrepresentations. The Court held that several alleged statements referencing “strong” economics, “strong” returns, and a “strong pipeline of new stores” fell “within the bounds of corporate optimism” under established Ninth Circuit law, and therefore constituted inactionable puffery. The Court further held that alleged statements expressing defendants’ belief that retail performance would improve based on pre-COVID performance were inactionable corporate opinion, and the Court rejected plaintiffs’ argument that defendants did not reasonably hold these beliefs because plaintiffs “cannot advance a material misrepresentation theory by alleging there is no reasonable basis for the defendant’s belief.” Finally, the Court held that certain alleged statements regarding the use of stores to acquire new customers were not actionable misrepresentations about the profitability of any individual store, rejecting plaintiffs’ theory that such statements were misleading because the Company’s expansion approach was allegedly unprofitable and “led to market saturation and cannibalization.”
Having found that plaintiffs failed to plead an actionable underlying claim under Section 10(b), the Court also held that plaintiffs failed to plead control person liability under Section 20(a). The Court granted the motion to dismiss with prejudice.
