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Southern District Of New York Dismisses Securities Fraud Claims Against E-Commerce Company
09/16/2025On September 10, 2025, Judge Vernon S. Broderick of the Southern District of New York granted a motion to dismiss a putative securities fraud class action brought against an e-commerce company (the “Company”) and its founder, certain of its executive officers, board members, and IPO underwriters. N.Y.C. Pub. Pension Funds v. Coupang, Inc., et al., 22-CV-7309 (VSB) (S.D.N.Y. Sept. 10, 2025). Plaintiffs asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, as well as claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”), alleging that defendants made false and misleading statements about the propriety of the Company’s business practices.
According to the amended complaint, defendants made material misrepresentations and omissions in the Company’s IPO and Form S-8 registration statements and various post-IPO public statements made between March 11, 2021, and March 14, 2022, regarding the Company’s operations, which allegedly came to light through various investigations and enforcement actions by the Korea Fair Trade Commission (“KFTC”). The Court organized the alleged misstatements and omissions into five categories regarding the Company’s business: (i) statements regarding “positive” labor and employment relations despite reported workplace safety violations; (ii) alleged omissions regarding the Company’s dispute resolution procedures; (iii) statements regarding the Company’s price matching and its alleged coercion of third-party suppliers; (iv) statements touting that the platform “helps merchants compete” while allegedly misappropriating merchants’ intellectual property for its own economic gain; and (v) alleged manipulation of search algorithms and product reviews on its marketplace platform in order to promote the Company’s brand products to the detriment of its suppliers and merchants.
Because the Court found that plaintiff relied on the same failure-to-disclose theory for both the Exchange Act and Securities Act claims, and because plaintiff did not identify distinct factual allegations to support its Securities Act claims, the Court held that the Securities Act claims sounded in fraud and applied the heightened Rule 9(b) pleading standard.
The Court granted defendants’ motion to dismiss, holding that plaintiffs failed to plead with particularity that any statements related to the Company’s allegedly “illegal” business practices were actionable. The Court rejected plaintiff’s argument that defendants materially omitted rampant overwork and workplace safety violations, finding that language in the Company’s registration statements lauding a “positive” and “better workplace” were inactionable puffery and others “considering safety of workers as the Company’s core values” were generic risk disclosures that did not trigger an affirmative duty to disclose additional data on workplace violations. Similarly, the Court rejected plaintiffs’ arguments that defendants omitted information regarding its dispute resolution procedures, holding that none of the relevant alleged statements mentioned dispute resolution, and that most of them did not even discuss the Company’s procedures, so as to trigger any duty for the Company to discuss their dispute resolution. The Court further held that to the extent the Company referenced “policies and procedures to protect both merchants and consumers,” such references to “procedures” were simple and generic and therefore not materially misleading.
The Court also dismissed claims based on defendants’ alleged failure to disclose supplier coercion and misappropriation of the intellectual property of merchants selling on the Company’s platform, holding that these statements were inactionable opinions and additionally that investors had constructive notice of such behavior through statements in the public domain, including the Company’s IPO risk factors and its marketplace terms and conditions. Likewise, the Court dismissed plaintiffs’ claims based on a KFTC investigation into defendants’ alleged manipulation of the Company’s search algorithm and product reviews. In so holding, the Court noted that many of the alleged statements were too general to be actionable for omitting information about search results, and that plaintiffs failed to allege how certain statements made about search results were false when made. The Court also dismissed plaintiffs’ claims under Items 105 and 303 alleging liability regarding the Company’s risk disclosures. The Court emphasized that the Company’s registration statements had adequately disclosed the general risks that legal claims regarding workplace safety, KFTC investigations into its business operations, and industry disasters like factory fires would have on its bottom line.
Addressing scienter, the Court held that plaintiffs failed to allege specific facts showing that any of the individual defendants had knowledge of or participated in the alleged fraud. In addition, having found that plaintiffs failed to adequately allege any actionable misstatements or a strong inference of scienter, the Court declined to address loss causation.
Because the Court held that plaintiffs failed to sufficiently allege a primary violation of Section 10(b), it dismissed the derivative Section 20(a) control person claims. Similarly, because the Court held that none of the challenged statements were materially false or misleading under the Exchange Act, the Court held there was no primary violation under Sections 11 and 12(a) of the Securities Act, and therefore no control person liability under Section 15. Furthermore, the Court held that, even if misstatements were made, the Securities Act claims were time-barred by constructive notice through media coverage and KFTC disclosures. The Court dismissed with prejudice the complaint in its entirety.
