In recent posts (here and here), I have discussed new lawsuits that represent interesting new variants of coronavirus-related securities class action claims; these new kinds of suits involve defendant companies whose fortunes had prospered at the outset of the pandemic but that later saw their financial performance  decline after the initial surge eased. In the latest example of this new variant on the pandemic-related securities litigation theme, a plaintiff shareholder has filed a securities lawsuit against computer networking firm, Citrix Systems. The complaint alleges that the company misled investors about the company’s ability to initial short-term business success as the pandemic evolved. A copy of the plaintiff’s November 19, 2021 complaint can be found here.


The Lawsuit

On November 19, 2021, a plaintiff shareholder filed a securities class action lawsuit in the Southern District of Florida against Citrix and certain of its directors and officers. The complaint purports to be filed on behalf of investors who purchased the company’s securities between January 22, 2020 and October 6, 2021.


The complaint alleges that prior to the onset of the class period, the company had announced that it was going to be transitioning from a perpetual license model (meaning a purchaser would pay an upfront fee for lifetime access and support) to a subscription license model (meaning a purchaser would pay for a one-year license and support), as well as transitioning from a “on-premise model” (meaning the Citrix technology was installed directly on the user’s computer) to a cloud-based service.


The complaint alleges that early in the class period, after the initial coronavirus outbreak in early 2020, the company experienced a “boost in sales,” driven in part by the company’s decision to offer short-term licenses at a discounted rate with the expectation that most customers would transition to cloud accounts after the initial one-year license expired. The complaint alleges further that throughout the class period, the company claimed the transition to a cloud-based product and subscription-based pricing model was proceeding smoothly and successfully.


The “truth,” the complaint alleges, “began to emerge” on April 29, 2021, when the company announced that not as many customers were transitioning to long-term cloud contracts as expected. Instead, the complaint alleges, “many customers ‘rolled to another short-term’ on-premise license, citing the ongoing COVID-19 pandemic.” However, the company “continued to assure investors” that “transition to the cloud is progressing well.” According to the complaint, the companies share price declined 7.6% on this news.


On July 19, 2021, according to the complaint, the company reported that “despite prior assurances, the transition to the cloud was not as successful as the Company had led investors to believe.” The company allegedly referred to the “challenge associated with the transitioning the business to [the cloud] and the need to evolve our sales strategy to deliver more predictable results.” The company also announced a “major restructuring of its sales leadership” in order to “enhance” the focus on cloud migration. The company disclosed that these changes “were significant and may cause short-term disruption.” According to the complaint, the company’s share price declined a further 13.6% on this news.


Finally, on October 6, 2021, the company announced that its President and CEO was stepping down. The complaint alleges that the company’s share price declined a further 7.2% over the two days following this news.


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. The complaint seeks to recover damages on behalf of the class.



By my count, this latest lawsuit is the 40th coronavirus-related securities class action lawsuit to be filed since the initial coronavirus outbreak in the U.S. in March 2020. The new lawsuit is also the 16th coronavirus-related lawsuit to be filed during calendar year 2021. Just as the coronavirus outbreak has persisted much longer than anyone anticipated or imagined at the outset, the coronavirus-related litigation surge has also continued much longer than I think anyone anticipated or imagined. And just as with the passage of time the coronavirus itself has evolved, so too had the coronavirus-related litigation that has been filed.


For most of the time in which coronavirus-relates lawsuit have been being filed, the lawsuits fell into one of three categories: suits against companies that had experienced coronavirus outbreaks in their facilities (cruise ship lines, private prison systems); companies that had claimed that they would be able to profit from the pandemic (diagnostic testing companies, vaccine development companies; and companies whose financial results or operating performance were undermined by the coronavirus outbreak (real estate developers, private hospital systems).


Over the last several weeks, there have been several new coronavirus-related lawsuits filed that do not fall into these established categories. In these new lawsuits, the complaints allege not that the companies falsely claimed that the companies could profit from the pandemic, but rather that the companies had initially prospered at the pandemic outset and had claimed they would be able to sustain the business upturn even after the pandemic waned. Thus, as I discussed in blog posts at the time, plaintiffs’ lawyers had previously filed these kinds of boost-then-decline lawsuits against ON24 (discussed here), and Peleton Interactive (discussed here).


The onset of this new variant in the coronavirus-related securities litigation phenomenon at a minimum suggests that we likely will see further coronavirus-related suits filed in the weeks and months ahead, as the evolving pandemic circumstances continue to work their way through the economy. I also think there could be further litigation associated with secondary effects of the pandemic, such as supply chain disruption, labor force disruption and shortages, and even economic inflation.


The pandemic-related securities litigation was an important development in 2020; it was an important part of the corporate and securities litigation landscape in 2021; and it is likely to continue well into 2022 (and, who knows, perhaps beyond). Nobody saw the extent and duration of this phenomenon coming, but that is also true of the pandemic itself.