Since the earliest outbreak of the coronavirus in the U.S. in March 2020, I have been tracking the coronavirus-related D&O litigation. There have been D&O suits filed throughout the intervening period, though the nature of the suits and the kinds of allegations have evolved over time. One recent aspect of the changes has been that, as pandemic-related circumstances have blended into general business conditions, it has become increasingly difficult to say with certainty whether certain new suits are or are not pandemic-related. A case in point is a lawsuit filed earlier this week against software company Everbridge, which experienced a recent stock price decline due to a number of circumstances including some that the company itself declared to be pandemic-related. I discuss below my reasons for including this new lawsuit in my tally of coronavirus-related lawsuits. A copy of the complaint filed on April 4, 2022 Central District of California can be found here.



Everbridge provides software applications designed to automate and accelerate client companies’ response to “critical events,” such as public safety threats, IT outages, cyber-attacks, and supply-chain interruptions. Before and during the class period in the subsequently filed securities lawsuit, the company acquired nine separate companies. The securities complaint alleges that during the class period, the company “misled investors” with respect to the “significant problems” the company was encountering due to the acquisitions and “the extent to which the revenues it obtained from those acquired companies were being used to mask increasingly stagnant organic growth.” The complaint also alleges that the company misled investors about the difficulties the company was having integrating its acquisitions.


Because of these interrelated courses of action, the “eventual result” was that a “drop off in organic sales … could no longer be camouflaged with revenues from revenues from additional acquisitions.” These developments were accompanied by “the collapse of the Defendants’ persistent effort to falsely portray the COVID pandemic as a ‘net-net’ positive for Everbridge, including the misrepresentation that the pandemic had not diminished the size of the deals that Everbridge was able to secure with customers, or, later, that such an effect had been reversed.”


According to the complaint, the “truth” about the company came out in a series of statements, the first of which was a press release on December 9, 2021 in which the company announced the unexplained departure of its CEO and the company lowered its guidance 2022 revenue guidance. The complaint alleges the company’s share price declined over 45% on this news.


The complaint further alleges that on February 4, 2021 the company announced its results for the fourth quarter and full year 2021 and also further lowered its guidance for the first quarter and full year of 2022. Among other things, the complaint alleges, one of the two new co-CEOs of the company refenced the acquisition integration difficulties the company was experiencing and also said that due to these challenges the company would “pause” further M&A activity. The other co-CEO also said that the company was seeing a “meaningful contraction in the size of deals”; the executive explained the decline in the deal size has been “exacerbated by lingering effects of COVID,” and would result a significant revenue loss. According to the complaint, the company’s share price declined another 34% on this news.



The above description shows that the impact of COVID on revenues was at least a part of the reason the company was lowering its earning guidance, which in turn led to at least part of the decline in the company’s share price. To be sure, the alleged difficulties the company was having integrating prior acquisitions, and possible effects from supposed declines in organic revenue, were also important factors in the company’s reduction of its revenue guidance that in turn caused the share price decline. But the impact of COVID on this size of the customer deals was at least a factor.


In thinking about the extent to which these allegations make this complaint “COVID-related,” it is important to note that there is an extensive, multi-page section of the complaint in which the claimants lay out the alleged “false and misleading statements about the impacts from COVID.”


The complaint cites numerous alleged statements during the class period in which the defendants rejected the suggestion that revenue gains the company was experiencing at the time were attributable to impacts of COVID, and instead characterized the pandemic as a catalyst that accelerated the company’s business strategy. Company executives are expressly quoted as saying that they didn’t think COVID had increased deal size. The complaint expressly alleges that these and other statements the complaint quotes were false and misleading because the “Defendants failed to disclose that the COVID pandemic did in fact have and continued to have … a material impact on the size of the deals that Everbridge was able to obtain, with a negative effect on revenue growth.”


Thus, while there clearly were multiple factors involved in the company’s reduction of its revenue guidance, the impact of COVID was at least one factor involved, and, at least as described by the complaint, it is an important one at that. For that reason, and even though multiple factors contributed to the company’s share price decline, I believe that this case should be classified as COVID-related. I have added the case to my running tally. However, the various factors taken collectively do show how it is going to become increasingly difficult to definitively identify incoming lawsuits as or as not COVID- related.


In any event, according to my tally, this lawsuit is the 49th COVID-related securities class action lawsuit to be filed since March 1, 2020, and the sixth COVID-related lawsuit to be filed so far in 2022. By any measure, COVID-related securities suits remain a significant securities litigation phenomenon; for now the signs are that this will continue to be true in the months ahead.


One final note, which has to do with the type of securities suits involved here. For most of the period since the initial pandemic outbreak, most of the lawsuits involved companies that fell into one of three categories: companies that had experienced a COVID outbreak in their facilities (cruise ships, private prison systems); companies that had position themselves as poised to profit from the outbreak (vaccine developers, diagnostic testing companies); and companies that experience a disruption in its operations or finances due to the pandemic (hospital systems, real estate developers). In mid-2021, a fourth category of cases emerged, involved companies that had initially prospered at the outset of the pandemic but whose fortunes flagged as the pandemic evolved. The lawsuit filed late last year against Peloton Interactive is an example of this kind of fourth-category case.


As nearly as I can discern, this new lawsuit against Everbridge would appear to be one of the fourth-category cases, as the company apparently experienced a revenue boost earlier in the pandemic that faded as the pandemic progressed. By my tally, this new Everbridge lawsuit is the seventh of these fourth-category cases to be filed.