As I have noted on this site, for the last several years (going back at least to 2021, and arguably even further than that), one of the significant factors contributing to securities class action lawsuit filings has been the number of SPAC-related securities suits. In the latest sign that the trend of SPAC-related securities suit filings is continuing, on August 23, 2023, a plaintiff shareholder filed a securities suit in the Southern District of Florida against medical payments collection firm MSP Recovery and certain of its executives, as well as against the directors and officers of the SPAC into which the company merged in 2022. A copy of the plaintiff’s complaint can be found here. PLEASE ALSO SEE THE UPDATE, below.


Lionheart Acquisition Corp. II was a special purpose acquisition company (SPAC). Lionheart completed an IPO on August 14, 2020. On July 12, 2021, the SPAC announced its plan to merge with the private company predecessor of MSP (Legacy MSP). The parties completed the merger on May 23, 2022, following a shareholder meeting on May 18, 2022, in which the SPAC shareholders approved the merger. Following the completion of the merger, MSP, as a public company, made numerous statements in its periodic reports filed with the SEC about its business model and operations, as well as about the vulnerabilities and uncertainties in its model and operations.

On April 14, 2023, MSP announced that financial statements for several prior reporting periods were going to have to be restated and should not be relied upon.

On July 31, 2023, the Miami Herald newspaper published an article entitled “Red Flags on Top of Red Flags” about MSP and its CEO, John H. Ruiz. Among other things, the Herald article reported that MSP and Ruiz were the target of federal civil and criminal investigations. The article also detailed Ruiz’s lavish lifestyle and spending habits. According to the subsequently filed complaint, MSP’s share price, which had already declined significantly from the price at which the shares traded immediately after the merger, fell nearly 6% on this news.

On August 1, 2023, MSP filed a report with the SEC on Form 8-K, in which the company disclosed that it had received SEC subpoenas in March and May 2023. The filing also stated that the SEC had requested documents pertaining to financial statements that the company had previously announced would have to be restated.

On August 10, 2023, Cano Health, one of the largest health care companies for which MSP provided its collection services, sued MSP, alleging that MSP is a “sham” and that it “fraudulently induced business partners to give up valuable assets for worthless shares and rights to future shares of MSP.” The Cano complaint expressly alleged that MSP’s business practices, which among other things Cano alleged involved efforts to inflate the share price of MSP, constituted “fraud.”

On August 17, 2023, MSP filed an additional 8-K in which the company disclosed that it had received an additional subpoena, which, the 8-K disclosed, related to “certain funding sources of the Company prior to the Business Combination, as well as various statements and disclosures by the Company in connection with and following the Business Combination.”

The Complaint

On August 23, 2023, a plaintiff shareholder filed a securities class action lawsuit in the Southern District of Florida against MSP; against certain of MSP’s directors and officers, including Ruiz; and against the former directors and officers of the SPAC. The complaint purports to be filed on behalf of three classes of investors: (1) investors who purchased shares of MSP or of the pre-merger SPAC between April 28, 2022 and August 17, 2023; (2) investors who held shares of the SPAC and who were entitled to vote at the special shareholder’s meeting on  May 18, 2022; and (3) investors who purchased MSP shares traceable to the company’s registration statement effective August 15, 2022.

The complaint alleges that during the class period, the defendants made false or misleading statements or failed to disclose that: “(1) MSP Recovery did not disclose that it was under active investigation by the SEC and federal prosecutors; (2) certain financial information give to investors by MSP Recovery was materially false and misleading; (3) MSP did not fully disclose the extent of its issues when it admitted that its financial results would need to be restated; (4) MSP Recovery was unable to afford the assigned claims on which it depends, and defrauded a major healthcare provider that sold or assigned it its claims; (5) the Registration Statement contained various false and misleading statements and was negligently prepared; (6) the Proxy contained false or misleading statements; and (7) as a result, Defendants’ statements about its business, operations and prospects, were materially false and misleading and/or lacked a reasonable basis at all relevant times and/or were negligently prepared.”

The complaint alleges that the defendants violated Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b), 14(a) 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 classes.

UPDATE: In an August 24, 2024 order, entered on the Court’s own motion, the Court dismissed the plaintiff’s complaint without prejudice on the grounds that the complaint was an impermissible “shotgun pleading.” The court’s order gives the plaintiff leave until August 28, 2023 to file an amended complaint. I will update the post if and when the plaintiff files an amended pleading. A copy of the Court’s August 24, 2023 order can be found here.

FURTHER UPDATE: On August 28, 2023, the plaintiff filed with the Court a Notice of Voluntary Dismissal indicating that the plaintiff was dismissing his action without prejudice. A copy of the plaintiff’s Notice of Voluntary Dismissal can be found here.


As I noted at the outset, the filing of SPAC-related securities lawsuit has been a significant securities litigation phenomenon over the last several years, and the phenomenon has continued this year. By my count, there have been a total of 63 SPAC-related securities lawsuits filed since January 1, 2021, including a total of nine so far this year.

As most readers of this blog well know, the bloom went off the SPAC IPO boom beginning in mid-2021, and the number of new SPACs after that dwindled to almost zero. The SPAC involved in this lawsuit completed its IPO in August 2020, just as the SPAC boom was really getting ramped up.

The fact pattern in this lawsuit, and the fact that the lawsuit is only just now being filed against a SPAC from the IPO class of 2020, does suggest that the significant levels of SPAC activity in the 2020-2021 time-frame could continue to be a factor in securities class action filings for some time to come. The fact that the executives of the SPAC are defendants in this proceeding also suggests that the liability risks for directors and offices of SPACs that launched during the boom could continue for some time to come, as well. The SPAC boom and its aftermath are also a big risk cloud hanging over the D&O insurance industry as well.

It Isn’t Just Securities Litigation Risk for SPACs: Although I have, as reported above, been closely tracking SPAC-related securities lawsuit filings, the possibility of securities litigation is not the only continuing SPAC-related litigation risk.

Another ongoing risk is, as I have noted in previous posts on this site (for example, here),  the possibility of Delaware state court breach of fiduciary duty litigation alleging that the executives of the SPAC breached their duties and misled investors in connection with information provided to allow investors to decide whether or not they would retain their SPAC shares through and beyond the merger, or would redeem their shares and recoup the amount of their initial investment. Plaintiffs’ lawyers have achieved some significant success in these breach of fiduciary duty cases, arguably even greater than with respect to securities lawsuits. Indeed, the Delaware SPAC-related breach of fiduciary duty lawsuit involving MultiPlan settled for $33.75 million.

Plaintiffs’ lawyers do seem to be attracted to filing these types of lawsuits; in the latest example of this, on August 23, 2023, a plaintiff shareholder filed a breach of fiduciary duty lawsuit in Delaware Chancery Court against the directors and officers of Swedish EV company Polestar Holdings, as well as the directors and officers of the SPAC into which Polestar merged, as well as the SPAC’s sponsor. As discussed in a Law360 article about the lawsuit filing (here, subscription required), the plaintiffs allege that the defendants breached their fiduciary duties to investors in connection with the disclosures on which the investors would rely in deciding whether or not to redeem their shares in connection with the proposed merger or retain their shares through the merger.

A number of these SPAC-related Delaware breach of fiduciary duty lawsuits have been filed this year as well. This litigation vehicle appears to be an attractive alternative for plaintiffs’ lawyer seeking to pursue SPAC-related claims, particularly given the relatively plaintiffs’ relatively attractive track record in surviving dismissal motions for these kinds of claims. Indeed, at the time of a favorable dismissal motion ruling earlier this year, some commentators suggested there could be a “deluge” of these kinds of claims. And while to this point the feared volume of these kinds of cases has not materialized, the lawsuits – as this new Polestar suit illustrates – are continuing to be filed.

Just as it seems that there are likely to continue to be SPAC-related securities suit filings for some time to come, it seems likely that there will continue to be SPAC-related Delaware breach of fiduciary duty lawsuits as well.