As the pandemic has progressed and as time has passed, one question I am regularly asked is whether we will continue to see COVID-19 related legal actions being filed. If the latest SEC action is any indication, we have not yet seen the last of new COVID-19-related suit filings. On August 17, 2021, the agency filed a civil enforcement action against an Ohio biotech firm claiming that the firm made false claims about one of its products, as a way to suggest that the firm was positioned to profit from the coronavirus outbreak. A copy of the agency’s complaint can be found here.
Rising Biosciences, Inc. produces and sells health-related products and services. Arthur Hall is the company’s CEO. According to the SEC’s complaint, which was filed in the Northern District of Ohio, between April 2020 and October 2020, Rising Sun made a series of statements in press releases, on its websites, and in social media videos that its disinfectant products, which “were launched purportedly in response to COVID-19,” were approved by the CDC and registered with the EPA. According to the complaint, the product was not CDC- approved or EPA-registered. In addition, the EPA alleges that the product was simply a repackaged pesticide produced by another company; the pesticide itself “is not registered for use in killing viruses.”
The SEC’s complaint alleges that “investors reacted enthusiastically to defendants’ false and misleading public pronouncements.” Among other things, the complaint alleges that following statements by the company in July 2020, the company’s stock price increased 1,260% from a week earlier. The SEC suspended trading on the Rising Sun’s securities from August 25, 2020 to September 8, 2020 “because of questions regarding the accuracy and adequacy of information in the marketplace about the company.” The SEC says in the complaint that it filed the lawsuit “to prevent further harm to investors and to hold defendants accountable for their misdeeds.”
The complaint alleges that the defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks to have the defendants enjoined from further violations; to have the defendants disgorge ill-gotten gains; to have the defendants ordered to pay civil penalties; and to have an officer and director bar imposed on Hall.
By my count, this new enforcement action is the 10th COVID-19-related enforcement action the SEC has filed since the coronavirus outbreak last March. These enforcement action go along with 34 coronavirus-related securities class action lawsuits and at least 12 shareholder derivative suits that also have been filed. Clearly, the pandemic has been the source of a significant amount of corporate and securities litigation and enforcement activity.
As I noted at the outset, as the pandemic has progressed and as time has gone along, one recurring question is whether we will continue to see further coronavirus-related litigation filed. The pace of litigation filings has slowed, for sure. For example, there have not been any new COVID-19 related securities class actions filed since June 2021. However, with the arrival of this latest enforcement action, the answer for now seems to be that we have not seen the last of the COVID-19-related suit filings. Just as with the pandemic itself, what will happen next remains to be seen.