Here at The D&O Diary, we read everything so you don’t have to. One item that crossed my desk this week particularly resonated with me. The specific item was the court’s dismissal motion grant in the securities class action lawsuit pending against the footwear and apparel company Allbirds.

The plaintiffs had tried to argue that by their use in their complaint of bold and italicized font they had indicated which of the defendants’ statements they (the plaintiffs) alleged to be false and misleading. The court said it could not discern from the plaintiffs’ typography what statements or portions or statements were supposed to be misleading and granted the defendants’ dismissal motion with leave for the plaintiffs to attempt to replead. While the ruling could be only a setback for the plaintiffs, there arguably are some lessons here for all of us that should not be overlooked.Continue Reading Boldface and Italics Not Enough to Identify Misleading Statements

One of the more distinctive developments in the capital markets in recent years has been the rise in the number of very large private companies. These companies are sometimes referred to as “unicorns,” as if they are very rare creatures — but the reality is that worldwide there over 1,230 of them.  Because the rise of so many large private companies is relatively recent, many of the legal principles and procedures relevant to these companies are just forming – giving rise to what University of Illinois Law Professor Verity Winship describes as the “gaps between private-market reality and legal structures that were designed for public companies.”

Among the “uncharted areas” is shareholder litigation; in a new paper, Professor Winship considers what shareholder litigation has meant in the context of these unicorn companies. What she found is that shareholder litigation involving these companies is rare, and that the procedural mechanisms available to investors are limited, at least by comparison to the mechanisms available to public company investors. Professor Winship describes her paper in an April 25, 2024,  Harvard Law School Forum on Corporate Governance post entitled “Unicorn Shareholder Suits” (here). The paper itself can be found here.  Continue Reading Unicorn Companies and Securities Litigation

As readers of this blog well know, life sciences companies are frequent targets of securities class action lawsuits. Interestingly, at least according to the latest annual report from the Sidley law firm, in recent years the number of lawsuits filed against life sciences companies has declined, although the lawsuit frequency against life sciences companies still remains elevated by comparison to the frequency of litigation against the universe of public companies. Perhaps even more importantly, motions to dismiss in securities lawsuits filed against life sciences companies are granted more than half of the time. A copy of the law firm’s April 2024 memo, entitled “Securities Class Actions in the Life Sciences Sector: 2023 Annual Survey,” can be found here. A two-page summary of the report can be found here.Continue Reading A Detailed Look at the 2023 Securities Litigation Against Life Sciences Companies

Justice Sonia Sotomayor

On April 12, 2023, in a short, unanimous opinion written by Justice Sonja Sotomayor, the U.S. Supreme Court held that a failure to disclose information required under Item 303 of Regulation S-K is, standing alone, not an actionable omission under Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Supreme Court said that in the absence of affirmative statement that is rendered misleading by the omission, an Item 303 violation alone is not sufficient to state a claim under Rule 10b-5. As the Supreme Court opinion put it in summarizing its decision, “pure omissions are not actionable under Rule 10b–5.” The Court’s opinion in Macquarie Infrastructure Corp. v. Moab Partners L.P. can be found here.Continue Reading U.S. Supreme Court: Item 303 Omissions Alone Not Actionable

The number of securities class action lawsuit filings involving accounting allegations increased in 2023 compared to 2022, but the 2023 accounting-related filings remained below the long-term annual average number of such filings, according to the latest annual report from Cornerstone Research. The number of accounting-related settlements decreased during 2023, as did the median settlement value, though the aggregate and average value of accounting related settlements increased. The Cornerstone Research Report, which is entitled “Accounting Class Action Filings and Settlements: 2023 Review and Analysis,” can be found here. Cornerstone Research’s April 3, 2024, press release about the report can be found here.Continue Reading Cornerstone Research: Accounting-Related Securities Suit Filings Increased in 2023

The number of securities class action lawsuits filed against life sciences companies in 2023 remained steady compared to 2022, as suits against life sciences companies represented almost one in five of the securities class action lawsuits filed during the year, according to a new report from the Dechert law firm. The report, entitled “Dechert Survey: Developments in Securities Fraud Class Actions Against U.S. Life Sciences Companies: 2023 Edition,” states that there were a total of 43 securities suits filed against life sciences companies in 2023, the same number as were filed in 2022. The Dechert law firm’s March 27, 2024 press release, which links to the full report,  can be found here.Continue Reading Life Sciences Companies Remained Frequent Securities Suit Targets in 2023

Last week, when I wrote about two recent AI-related SEC enforcement actions, I noted that the SEC’s public statements when it announced the enforcement action settlements not only underscored the SEC’s AI-related concerns but also illustrated the kinds of issues that could lead to private securities litigation brought by investors who claim they were misled by companies’ AI-related disclosures. In the latest example showing how company disclosures relating to artificial intelligence can lead to securities litigation, a plaintiff shareholder has filed a securities suit against a security screening company alleging that the company’s public statements about its AI-enabled products and services were misleading. A copy of the March 25, 2024, complaint can be found here.Continue Reading Security Screening Company Hit with AI-Related Securities Suit

SPACs were back in the business headlines again last Friday, as the news circulated that shareholders of Digital World Acquisition Corp., a special purpose acquisition company, had approved the proposed business combination with Trump Media & Technology Group, the corporate parent of Truth Social, Donald Trump’s social media company. On the same day, in a reminder of what has happened to all too many companies that merged with SPACs during the peak of the SPAC frenzy in 2020 and 2021, shareholders of a SPAC that merged with an electric vehicle company sued the directors and officers of the SPAC as well as the EV company, alleging that in the merger proxy statement the defendants failed to disclose multiple business problems at the target company. The lawsuit is the latest SPAC-related securities suit to be filed after the collapse of the SPAC surge.Continue Reading EV Company Hit With SPAC-Related Securities Suit

We have all seen the various league tables showing which plaintiffs’ firms have had the highest average securities class action settlements. But do these firms wind up at the top of the tables because they produce better outcomes for the plaintiff class, or do they produce these results simply because they are better at winning the race to become lead counsel in the better cases? As three academics put it in their recent paper, “do the plaintiffs’ lawyers matter”?

In their paper, New York Law Professor Stephen J. Choi, University of Richmond Law Professor Jessica M. Erickson, and University of Michigan Law Professor Adam C. Pritchard survey securities class action lawsuit settlements in order to determine whether the “top tier” plaintiffs’ firms actually produce better outcomes for the plaintiff class. Interestingly, the authors conclude that while the top firms produce better outcomes in a narrow subset of cases, in most other cases they do not. The authors suggest these observations have important implications for both claimants and courts. The authors’ paper can be found here. The authors’ March 12, 2024, column in the CLS Blue Sky Blog about their paper can be found here.  Continue Reading Does the Plaintiff Law Firm Matter in Securities Suit Outcomes?