As I have noted in prior posts (most recently here), one of the most significant recent securities litigation trends has been the number of filings against post-SPAC-merger publicly traded companies. In the latest of these SPAC-related suit filings, last week a plaintiff shareholder filed a securities class action lawsuit against Arquit Quantum, a U.K.-based cybersecurity firm that merged with a SPAC in September 2021. Though this latest lawsuit is in many ways representative of the emerging SPAC-related securities litigation, it also has some distinct features as well, as discussed further below. A copy of the May 6, 2022 complaint in the case can be found here.
Continue Reading U.K-Based Cybersecurity Firm Hit with SPAC-Related Securities Suit

In the wake of the U.S. Supreme Court’s Cyan decision, corporate defendants faced the risk of wasteful and duplicative federal and state court securities litigation. In order to address this concern, corporate reformers suggested that companies should adopt provisions in their corporate charters designating an exclusive federal forum for securities litigation. The Delaware Supreme Court upheld the facial validity under Delaware law of federal forum provisions in the Sciabacucchi decision, but the question remained whether the courts in other jurisdictions would enforce the provisions. A number of courts in California and New York did subsequently uphold the provisions, but these were all trial court rulings.

Now, in an important legal development, a California intermediate appellate court has upheld the enforcement of the provisions, the first appellate decision on the issue outside Delaware. The California appellate court’s ruling in the Restoration Robotics case could represent a significant milestone in the development of post-Cyan litigation. A copy of the California appellate court’s April 28, 2022 decision can be found here. An April 29, 2022 memo from the Latham & Watkins law firm about the appellate court’s decision can be found here.
Continue Reading California Appellate Court Upholds and Enforces Federal Forum Provision

If there is one current topic that commands the attention of investors and other corporate stakeholders these days, it is ESG. ESG-related issues have of course previously led to securities suits and other types of D&O claims. However, amidst the current heightened focus on ESG, there is still a great deal of uncertainty about what ESG-related D&O claims might look like.

For that reason, the enforcement action that the SEC filed last week against the Brazilian mining company Vale, S.A. in connection with alleged misrepresentations the company allegedly made before the January 2019 collapse of its Brumadinho dam is noteworthy. Of particular interest to observers focused on ESG concerns is the fact that the SEC specifically alleged that the company “regularly misled local governments, communities, and investors about the safety of the Brumadinho dam through its environmental, social, and governance (ESG) disclosures.” The SEC’s April 28, 2022 press release about the Vale action can be found here. The SEC’s complaint in the action can be found here.
Continue Reading SEC Action Against Brazilian Mining Company Alleges ESG Misrepresentations

One of the reasons there have not been as many cybersecurity-related securities lawsuits as some commentators (including me) expected is that the plaintiffs’ track record in the cases that have been filed has been decidedly mixed. To be sure, there have been some very noteworthy successes for the plaintiffs, including the Equifax cybersecurity-related securities suit, which settled for $149 million. But though there have been some noteworthy successes, many of the other cybersecurity related securities suits have ended in dismissal.

Among the more significant recent cybersecurity-related securities suit dismissals was the ruling  in the securities lawsuit relating to the massive Marriott data breach. Now, on appeal, the Fourth Circuit has affirmed the district court’s dismissal in the Marriott case, the latest in a series of high-profile setbacks plaintiffs have experienced in cybersecurity-related securities suits. A copy of the Fourth Circuit’s April 21, 2022 opinion can be found here.
Continue Reading Fourth Circuit Affirms Dismissal of Marriott Data Breach-Related Securities Suit

Consistent with what is already a well-established current securities class action litigation filing trend, plaintiff shareholders last week filed two more SPAC-related securities suits. Although the two new suits are somewhat different from each other, they share the common feature that they both involve corporate defendants that recently became publicly traded through merger with a SPAC. The SPAC-related lawsuits, including the two most recently filed examples, represent a significant securities litigation phenomenon this year. The two new lawsuits are discussed below.
Continue Reading Two More SPAC-Related Securities Suits Launched

When Congress enacted the Private Securities Litigation Reform Act (PSLRA) in 1995, it aimed to address perceived abuses in securities class action litigation. Among the ills Congress sought to address was the prevalence in securities litigation at the time of “professional plaintiffs” — that is, repeat players who lent their names to lawyer-driven lawsuits without performing any oversight or monitoring of the litigation or of the lawyers. In the PSLRA, Congress put limits in place to try to curb these frequent filers. The reality is that these limits have not worked. As is well documented in a new paper from the U.S. Chamber of Commerce’s Institute for Legal Reform entitled “Frequent Filers Revisited: Professional Plaintiffs in Securities Class Actions,” repeat plaintiffs remain an unfortunate feature of securities litigation today, with many of the same ill effects Congress intended to remedy.

The paper, which was written by New York University Law School Professor Stephen Choi, University of Richmond Law School Professor Jessica Erikson, and University of Michigan Law School Professor Adam Pritchard, details the extent of the frequent filer problem in current securities litigation, and proposes a number of reforms to address the issue. The April 21, 2022 paper can be found here.
Continue Reading The Continuing Problem of Frequent Filers in Securities Litigation

Over the last several years and In the wake of the #MeToo movement, plaintiff shareholders have filed D&O claims against many companies, as well as against the companies’ executives, involving underlying allegations of sexual misconduct or sexual harassment. The highest profile of these cases to be filed within the last year was the securities class action lawsuit filed against Activision Blizzard and several of its officers based on allegations that the company knew about and failed to disclose governmental investigations of employees’ sexual harassment allegations. In a recent order, the court overseeing the securities suit granted the defendants’ motion to dismiss the complaint, holding that the plaintiffs had failed to sufficiently allege both falsity and scienter. The dismissal was granted without prejudice. The court’s ruling illustrates the difficulty plaintiffs sometimes face in trying to bootstrap underlying sexual misconduct allegations into D&O claims. The Court’s April 18, 2022 order in the case can be found here.
Continue Reading Court Dismisses Activision Blizzard Sexual Harassment-Related Securities Suit

In a new lawsuit that closely mirrors the features of many recent SPAC-related securities lawsuits, and that indeed almost entirely replicates the most recent suits, a plaintiff shareholder has initiated a securities class action against Canadian-based lithium battery recycler, Li-Cycle Holdings Corp. Li-Cycle completed a merger with a publicly traded SPAC in August 2021 and was the subject of a short-seller report in March 2022. The lawsuit against Li-Cycle is the latest in the development of what is becoming an increasingly significant securities litigation phenomenon this year. A copy of the April 19, 2022 lawsuit against Li-Cycle can be found here.
Continue Reading After Short Seller Report, Lithium Battery Recycler Hit with SPAC-Related Securities Suit

In the latest SPAC-related securities suits filing, electric aviation company Lilium N.V. has been sued by an investor after a short-seller published a report questioning the company’s technological and regulatory readiness, its development prospects, and its financial resources. Lilium became a publicly traded company in September 2021, when it merged with Qell Acquisition Corp., a special purpose acquisition company (SPAC). This lawsuit is the latest in a series of securities class action lawsuits filed since the beginning of 2021 against post-SPAC-merger companies, as discussed below. A copy of the April 18, 2022 lawsuit against Lilium can be found here.
Continue Reading Electric Aircraft Company Hit With SPAC-Related Securities Suit

The hard part about maintaining a blog is finding interesting topics. It isn’t always easy coming up with things I want to write about. But when all else fails, I can always count on Elon Musk to come up with something. At regular intervals, Musk is out there saying and doing things that are not only interesting and provocative but that are solidly blogworthy. In the last few days, Musk has been at it again, not only making himself the largest shareholder of the social media company Twitter and thereby putting himself on the front pages of the business pages, but, as discussed below, drawing a securities class action lawsuit, as well.
Continue Reading Musk’s Twitter Play Draws Securities Suit