Justia Class Action Opinion SummariesArticles Posted in Securities Law
Ark. Tchr. Ret. Sys. v. Goldman Sachs Grp., Inc.
Shareholders of Defendant-Appellant Goldman Sachs Group, Inc. brought this class action lawsuit against Goldman and several of its former executives, claiming defendants committed securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b–5 promulgated thereunder by misrepresenting Goldman’s ability to manage conflicts of interest in its business practices. After a number of appeals and subsequent remand, including an appeal to the Supreme Court, the district court once again certified a shareholder class under Federal Rule of Civil Procedure 23(b)(3). The Second Circuit reversed the district court’s class certification decision with instructions to decertify the class. The court held that the district court clearly erred in finding that Goldman failed to rebut the Basic presumption by a preponderance of the evidence and, therefore, abused its discretion by certifying the shareholder class. The court explained that there is an insufficient link between the corrective disclosures and the alleged misrepresentations. Defendants have demonstrated, by a preponderance of the evidence, that the misrepresentations did not impact Goldman’s stock price and, by doing so, rebutted Basic’s presumption of reliance. Thus, the district court clearly erred in concluding otherwise and therefore abused its discretion in certifying the shareholder class. View "Ark. Tchr. Ret. Sys. v. Goldman Sachs Grp., Inc." on Justia Law
Hogan, et al. v. Pilgrim’s Pride Corporation, et al.
Plaintiff Patrick Hogan brought a putative federal securities-fraud class action against poultry producer Pilgrim’s Pride Corp., Pilgrim’s former chief executive officer and president William Lovette, and Pilgrim’s then chief financial officer Fabio Sandri (collectively, Defendants). Plaintiff accused Defendants of violating § 10(b) of the Securities Exchange Act of 1934, and Securities and Exchange Commission Rule 10b–5, 17 C.F.R. § 240.10b–5. Plaintiff also accused Lovette and Sandri of violating § 20(a) of the Act, 15 U.S.C. § 78t(a). Plaintiff appealed four decisions by the district court: (1) the grant of Defendants’ motion to dismiss the first amended complaint (the FAC) for failure to adequately plead a claim; (2) the denial of Plaintiff’s motion to reconsider "Hogan I" (but granting leave to amend the complaint without setting a deadline); (3) the grant of Defendants’ motion to dismiss the second amended complaint (the SAC) as barred by the applicable statute of repose; and (4) the denial of Plaintiff’s motion to reconsider "Hogan III." After review, the Tenth Circuit Court of Appeals reversed the district court’s order in Hogan III, dismissed as moot Plaintiff’s challenges to the orders in Hogan I, Hogan II, and Hogan IV, and remanded for further proceedings at the district court. Because (1) the SAC did not raise new claims or add any defendants and (2) the district court did not enter a final order after Hogan I and Hogan II (so Defendants’ right to repose had not vested), the SAC was not barred by the statute of repose. Because the SAC superseded the FAC, the Court found the sufficiency of the FAC was a moot issue. And because the district court did not address the sufficiency of the SAC, the case was remanded for the district court to address this issue in the first instance. View "Hogan, et al. v. Pilgrim's Pride Corporation, et al." on Justia Law
Carpenters Pension Fund of Illinois v. MiMedx Group, Inc., et al.
MiMedx is a Florida corporation headquartered in Marietta, Georgia. Carpenters Pension Fund of Illinois is the lead plaintiff in this consolidated securities class action. Carpenters purchased 41,080 shares of MiMedx common stock in three separate transactions between August 2017 and October 2017 and later sold those shares in December 2017. The district court dismissed Carpenters’s action, finding that none of the complaint’s allegations occurring before the date Carpenters sold its MiMedx stock constituted a partial corrective disclosure sufficient to demonstrate loss causation. Carpenters contend that the district court erred in its loss causation analysis. Carpenters further argued that the district court erred in denying its post-judgment motion for relief from judgment, as well as its post-judgment request for leave to amend its complaint. The Eleventh Circuit concluded that the district court erred in finding that Carpenters lacked standing to bring its Exchange Act claims against Defendants and vacated that portion of the district court’s order. The court affirmed the district court’s order dismissing Carpenters’ second amended complaint for failure to plead loss causation. The court explained that as to Rule 59(e), the district court did not abuse its discretion in determining that Carpenters sought to relitigate arguments it had already raised before the entry of judgment. As to Rule 60(b)(1) the court found no mistake in the district court’s application of the law in this case that would change the outcome of this case. And, as to Rule 60(b)(6), the district court found that Carpenters’ motion primarily focused on the court’s purported “mistakes in the application of the law,” which fall squarely under Rule 60(b)(1). View "Carpenters Pension Fund of Illinois v. MiMedx Group, Inc., et al." on Justia Law
City of Warren Police and Fire v. Prudential Financial Inc
A municipal retirement system that had purchased the company’s common stock before the announcement now alleges that the company knew beforehand of problems with its reserves and misled investors about those issues. The retirement system filed a putative class action against the company and three of its corporate executives, alleging securities fraud under Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934. The insurance company and the executives moved to dismiss for failure to state a claim for relief. They argued that, under the heightened pleading standard for securities-fraud claims, the retirement system’s complaint failed to plausibly allege three necessary elements of its claims: false or misleading statements; loss causation, and scienter. The district court granted that motion and dismissed the complaint with prejudice. The Third Circuit partially vacated the district court’s judgment. It remanded the case to the district court to consider, in the first instance, the adequacy of the amended complaint’s allegations of loss causation and scienter concerning the CFO’s statement. The court explained that based on information from a confidential former employee, who qualifies as credible at the pleading stage, the complaint alleged that the insurance company was already contemplating a significant increase in reserves due to negative mortality experience at the time of the CFO’s statements. And the magnitude of the company’s reserve charge and its temporal proximity to the CFO’s statements further undercut the CFO’s assertion that recent mortality experience was within a normal range. Those particularized allegations satisfy the heightened standard for pleading falsity, and they plausibly allege the falsity of the CFO’s statement. View "City of Warren Police and Fire v. Prudential Financial Inc" on Justia Law
Ohio Public Employees Retirement System v. Federal Home Loan Mortgage Corp.
Following a 29% drop in Federal Home Loan Mortgage Corporation (Freddie Mac) stock prices in 2007, OPERS, a state pension fund, filed a securities fraud case against Freddie Mac. The district court dismissed, concluding that OPERS failed to adequately plead loss causation because the theory OPERS pursued (materialization of the risk) had not been adopted in the circuit. The Sixth Circuit reversed, “join[ing] our fellow circuits in recognizing the viability of alternative theories of loss causation and apply[ing] materialization of the risk.” On remand, the district court denied OPERS’ motion for class certification, granted Freddie Mac’s motion to exclude OPERS’ expert, and denied OPERS’ motion to exclude Freddie Mac’s experts.The Sixth Circuit denied OPERS’s petition for leave to appeal. OPERS asked the district court to enter “sua sponte” summary judgment for Freddie Mac, arguing that the class certification decision prevented OPERS’ case from proceeding, as it doomed OPERS’ ability to prove loss causation. The district court summarily agreed and entered summary judgment for Freddie Mac. The Sixth Circuit reversed and remanded, citing its lack of jurisdiction. The summary judgment decision was manufactured by OPERS in an apparent attempt to circumvent the requirements of Federal Rule 23(f). The decision was not final. View "Ohio Public Employees Retirement System v. Federal Home Loan Mortgage Corp." on Justia Law
GLAZER CAPITAL MANAGEMENT, L.P, ET AL V. FORESCOUT TECHNOLOGIES, INC., ET AL
Plaintiffs alleged that during the class period, Defendants made false or misleading statements about Forescout’s past financial performance, presently confirmed sales, and prospects for future sales. They alleged that Defendants misled investors with respect to (1) the strength of Forescout’s sales pipeline, meaning its presently booked sales and prospects for future sales; (2) the experience of Forescout’s sales force; (3) the business Forescout lost with certain business partners, or “channel partners,” when it announced a merger with Advent International, Inc.; and (4) the likelihood that the merger would close. The Ninth Circuit affirmed in part and reversed in part the district court’s dismissal of a securities fraud class action under Sections 10(b) and 20(a) of the Securities and Exchange Act and Rule 10b-5. The panel held that Plaintiffs adequately pleaded both falsity and scienter as to some of the challenged statements and that the Private Securities Litigation Reform Act’s safe harbor for forward-looking statements did not preclude liability as to some of these statements. The panel affirmed the district court’s dismissal as to certain statements, and it reversed and remanded for further proceedings as to other challenged statements regarding the sales pipeline and the Advent acquisition. View "GLAZER CAPITAL MANAGEMENT, L.P, ET AL V. FORESCOUT TECHNOLOGIES, INC., ET AL" on Justia Law
Employees’ Retirement System of the City of Baton v. Macrogenics, Inc.
The Employees’ Retirement System of the City of Baton Rouge and Parish of East Baton Rouge represents the class of persons and entities who acquired shares of common stock in MacroGenics, Inc. (“MacroGenics”) between February 6, 2019, and June 4, 2019 (the “Class Period”). Plaintiffs initiated an action against MacroGenics, its president and CEO, and its senior vice president and CFO (collectively “Defendants”) for alleged violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934, Securities and Exchange Commission (“SEC”) Rule 10b–5, and sections 11, 12(a), and 15 of the Securities Act of 1933. In their Amended Complaint, Plaintiffs alleged that after purchasing MacroGenics’ stock, they experienced economic harm proximately caused by Defendants’ material misrepresentations, misleading statements, or omissions concerning MacroGenics’ clinical trial drug, Margetuximab. The district court granted Defendants’ motion to dismiss after concluding that Plaintiffs had failed to sufficiently allege any actionable misrepresentations or omissions that would give rise to Defendants’ duty to disclose and that most of Defendants’ statements were also immunized from suit. The Fourth Circuit affirmed. The court explained that Plaintiffs have failed to demonstrate any materially false, misleading representations or omissions in Defendants’ statements. Because Plaintiffs’ Sections 11 and 12(a)(2) claims are inextricably intertwined with the alleged misstatements and omissions raised under their Exchange Act claims, their Securities Act claims cannot prevail. Further, because Plaintiffs have failed to plead a primary violation of the Securities Act, they have consequently failed to plead a Section 15 violation View "Employees' Retirement System of the City of Baton v. Macrogenics, Inc." on Justia Law
OK Firefighters Pension v. Six Flags Entmt
Plaintiff, Oklahoma Firefighters Pension and Retirement System (“Oklahoma Firefighters”) is a purchaser of Six Flags Entertainment Corporation common stock and brought suit against the company and two of its executive officers. Plaintiffs alleged that Six Flags executives made material misrepresentations and omissions regarding the development of several Six Flags theme parks in China, thereby violating federal securities laws. The district court dismissed the claims with prejudice for failure to state a claim. Plaintiff sought a reversal of the district court’s two primary rulings: the dismissal of the complaint and the refusal to allow post-judgment amendments to the complaint. As to the dismissal, Plaintiff argued it sufficiently pled (1) actionable misstatements, (2) scienter, and (3) control person liability. As to the failure to allow an amendment, Plaintiff alleged it timely and sufficiently corrected the claimed deficiencies in the complaint. The Fifth Circuit reversed and remanded the district court’s ruling. The court held that the complaint adequately alleges that Six Flags improperly recognized revenue on the China parks in its Class Period financial statements due to Defendants’ misleading statements regarding the parks’ construction progress and the admission of $15 million in overstated revenue in 2018. However, the court remanded to consider whether the complaint adequately alleges a Section 20(a) claim. View "OK Firefighters Pension v. Six Flags Entmt" on Justia Law
Menora Mivtachim Ins. Ltd. v. Frutarom Indus. Ltd.
International Flavors & Fragrances Inc. (“IFF”), a U.S.-based seller of flavoring and fragrance products, acquired Frutarom Industries Ltd. (“Frutarom”), an Israeli firm in the same industry. Leading up to the merger, Frutarom allegedly made material misstatements about its compliance with anti-bribery laws and the source of its business growth. Plaintiffs, who bought stock in IFF, sued Frutarom, alleging that those misstatements violated Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder. The Second Circuit affirmed the district court’s dismissal of Plaintiffs’ complaint. The court concluded that Plaintiffs lack statutory standing to sue. Under the purchaser-seller rule, standing to bring a claim under Section 10(b) is limited to purchasers or sellers of securities issued by the company about which a misstatement was made. Plaintiffs here lack standing to sue based on alleged misstatements that Frutarom made about itself because they never bought or sold shares of Frutarom. View "Menora Mivtachim Ins. Ltd. v. Frutarom Indus. Ltd." on Justia Law
Indiana Public Retirement, et al. v. Pluralsight, et al.
Defendant Pluralsight was a software company offering a cloud-based technology skills platform. Defendant Aaron Skonnard was Pluralsight’s Chief Executive Officer; defendant James Budge was the Chief Financial Officer. Plaintiffs purchased Pluralsight stock between January 16, 2019, and July 31, 2019. Beginning on January 16, 2019, Skonnard and Budge allegedly made materially false and misleading statements about the size and productivity of Pluralsight’s sales force, which Plaintiffs claim artificially inflated Pluralsight’s stock price, including during a secondary public offering (“SPO”) in March 2019. Pluralsight announced disappointing second-quarter earnings on July 31, 2019. Defendants attributed the low earnings to a shortage of sales representatives earlier in the year—but this explanation contradicted representations Pluralsight made in the first quarter of 2019 about the size of its sales force. Lead Plaintiffs Indiana Public Retirement System (“INPRS”) and Public School Teachers’ Pension and Retirement Fund of Chicago (“CTPF”) brought claims on behalf of a putative class of Pluralsight stock holders under the Securities Exchange Act of 1934 (“Exchange Act”), and the Securities Act of 1933 (“Securities Act”) in federal district court in Utah. Defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), contending Plaintiffs failed to adequately allege: (1) any materially false or misleading statements or omissions; and (2) that Defendants acted with the requisite scienter. The district court found one statement (of eighteen alleged) was materially false or misleading but dismissed Plaintiffs’ Exchange Act claims because the complaint failed to allege a strong inference of scienter. The district court dismissed Plaintiffs’ Securities Act claims because none of the statements in Pluralsight’s SPO documents were materially false or misleading. The Tenth Circuit concluded the district court erred in dismissing Plaintffs’ Exhcange Act claims. “Although the district court correctly determined that Plaintiffs sufficiently alleged only one materially false or misleading statement, the district court’s scienter determination was erroneous.” The Court also concluded the district court relied on erroneous reasoning to dismiss the alleged violation of Item 303 of SEC Regulation S–K, so the case was remanded for further consideration. The judgment was affirmed in all other respects. View "Indiana Public Retirement, et al. v. Pluralsight, et al." on Justia Law