After more than a year of lockdowns, social distancing, and sheer disruptions of life, we are all more than ready to be done with the coronavirus outbreak and to move on. Unfortunately, the virus is not done with us yet. In places like Brazil and India, COVID-19 continues to exact a grim toll. Just as I, like all of the rest of you, had assumed in the early stages of the outbreak that we would be done with the coronavirus by now, I also thought we would be done with coronavirus-related litigation by now as well. However like COVID-19 itself, coronavirus-related litigation continues on despite our expectations. As discussed below, in the past week, two more coronavirus-related securities class action lawsuits were filed, as the pandemic-related litigation phenomenon continues.


The Emergent Biosciences Lawsuit

The first of the two new coronavirus-related lawsuits was filed in the District of Maryland on April 19, 2021 against Emergent Biosolutions, Inc. and certain of its officers. A copy of the complaint can be found here. Emergent is a biopharmaceutical company that develops vaccines and antibody therapies. Following the initial coronavirus outbreak last year, the company signed vaccine deals with Johnson & Johnson and AstraZeneca to provide contract development and manufacturing of the drug companies’ COVID-19 vaccines. The company also obtained substantial government funding as part of Operation Warp Speed to support the manufacturing operations. According to the securities lawsuit complaint, the news of the deals and of the government funding “sent the Company’s stock soaring.”


After the deals were signed, the company’s CEO was quoted as saying that the Company was “uniquely prepared to answer the call for COVID-19” because of its “proven manufacturing capabilities.” The securities lawsuit complaint alleged that the company and its executive “repeatedly assured investors” of the company’s “ability and capacity to mass manufacture COVID-19 vaccines.”


The complaint alleges that the company failed to disclose to investors that it was experiencing numerous manufacturing issues. The complaint alleges that “investors began to learn the truth” on March 31, 2021, when news media reported that employees at one of the company’s manufacturing facilities had “mixed-up” vaccine ingredients, contaminating millions of doses. Further reports highlighted “longstanding contamination risks and quality control issues at the Company’s facilities,” including reports that in December 2020, the company had been forced to discard the equivalent of millions of vaccine doses spoiled by contamination. According to the lawsuit complaint, the company’s share price fell over 15% in the two trading days following these news reports.


The complaint was filed on behalf of a class of investors who purchased the company’s shares between July 6, 2020 (the day the company’s deal with J&J was announced) and March 31, 2021 (the day that the news reports about vaccine contamination at the company’s facilities first began circulating). The complaint names as defendants the company; its CEO; its CFO; and the head of its manufacturing operations. The complaint alleges that the defendants violated Sections 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks to recover damages on behalf of the class.


The Verus International Lawsuit

The second of the latest COVID-19 related securities lawsuits was filed in the District of Maryland on April 23, 2021 against Verus International, Inc. and certain of its executives. A copy of the complaint can be found here. Verus is a consumer products company selling branded food products. The company entered 2020 with an upbeat assessment that 2020 would be “the year when all of the elements come together and record setting growth will become the central theme.”


However, in February 2020, the company announced that its auditor has advised the Company that it would need to restate its financials due to errors in prior annual and interim period filings. The Complaint alleges that “instead of restating its financials” to account for “irregularities,” the Company “permitted its auditor to resign just weeks after touting the auditor’s retention as a significant milestone”


Shortly after that, the COVID-19 emerged. The complaint alleges that “in order to stem the Company’s reeling stock price,” the Company represented to investors that it had “seized the opportunity presented by COVID-19.” On April 3, 2020, the company announced that it had acquired a controlling interest of ZTAM, a Philippine manufacturer of face mases and other personal protective equipment (PPE). The company’s CEO made a statement at the time that the ZTAM partnership was a “transformative moment for our company,” adding that “we expect this to be a very profitable enterprise within the first months of operation, with a positive impact on our future projections.” The company’s share price nearly doubled over the course of the next few trading days.


In the weeks and months that followed, the company’s share price began to decline as various problems with the ZTAM relationship emerged. Among other things, “logistical issues” slowed the rollout of sample masks. ZTAM ran into issues securing manufacturing facilities in Vietnam. Finally, on October 8, 2020, Versus announced that it had rescinded the transaction with ZTAM, as a result of “failure of contractual performance and breach of contract.” According to the complaint, Versus’s share price fell on this news, to a point more than 90% below where the share price had stood when the ZTAM transaction had been announced.


The complaint purports to be filed on behalf of investors who purchased Verus securities between June 17, 2019 to October 8, 2020. The complaint names as defendants the Company; its CEO; and its CFO. The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks damages on behalf of the plaintiff class.



By my count, these lawsuits are the 31st and 32nd coronavirus outbreak-related securities class action lawsuits to be filed since the first of the pandemic-related suits first appeared last March. Although most of the lawsuits were filed in 2020, a significant number have also been filed this year – these two new lawsuits are the seventh and eights COVID-19-related securities suits to be filed in 2021.


In prior posts, I have noted that the coronavirus-related securities lawsuits generally fall into one of three categories: first, suits against companies that had experienced outbreaks in their facilities (such as cruise ships, food plants, and private prison systems); second, suits against companies that tried to represent themselves as positioned to profit from the pandemic (such as vaccine developers, PPE manufacturers, and diagnostic testing companies); and third, suits against companies that had their operations or financial performance disrupted by the pandemic (such as real estate development firms).


Both of these two new lawsuits fall squarely in the second category, as both of the suits involve companies that claimed to have positioned themselves to prosper as a result of the pandemic. The fact that these lawsuits are being filed now, more than a year into the pandemic, underscores the fact that even though the pandemic has been going on for a while, pandemic winners and losers continue to emerge. These lawsuits also serve as a reminder that as the results continue to play out, lawsuits are going to continue to be filed as well.


The timing of the Verus lawsuit is interesting. By contrast to the Verus lawsuit,  the Emergent Biolsolutions lawsuit was filed relatively quickly after the company’s bad news emerged. However, the bad news for Verus came out last October. The six month lag between the company’s bad news and the lawsuit filing raises the possibility that there might be other companies out there that experienced pandemic-related problems and that as a result are prospective targets for future pandemic related lawsuits – which in turn suggests that the coronavirus-related securities litigation phenomenon could have further to run. I suspect that we will continue to see coronavirus-related securities suits to be filed for some time to come.