Regular readers know that I have been documenting on this blog the recent rise in securities class action lawsuit filings relating to SPAC entities and transactions (most recently here). Along the way, I have suggested that given the sheer amount of SPAC IPO activity during 2020 and 2021, the volume of this type of litigation is likely to increase. The latest evidence supporting this possibility is the securities class action lawsuit filed on February 24, 2021 against MultiPlan Corporation, a health services company that in October 2020 merged into a SPAC. As discussed below, this latest lawsuit has several features that could be recur in future SPAC-related securities lawsuits. A copy of the February 24, 2021 complaint against MultiPlan and other defendants can be found here.
Continue Reading Insurance Services Firm, SPAC Sponsor, and SPAC Execs Hit with Post-deSPAC Securities Suit
Post-SPAC Acquired Biopharma Firm Hit with Securities Suit
In the latest SPAC-related securities class action lawsuit, a plaintiff shareholder has filed a securities class action lawsuit against a post-SPAC-acquisition biopharma company in which the plaintiff claims that the risk of the company’s post-merger clinical trial setback should have been unearthed in the pre-merger due diligence process. As discussed below, this lawsuit may prefigure some of the likely patterns for future SPAC-related securities litigation.
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Securities Suit Alleges Failure to Disclose DOJ Investigation Before De-SPAC Transaction
Barely six weeks into the new year, there have already been (according to the SPACInsider website) 127 Special Purpose Acquisition Company (SPAC) IPOs so far this year — that is, in less than a month and a half, there have already been more than 50% of the number of SPAC IPOs as there were in all 52 weeks of the record-setting 2020 SPAC offering year. The SPAC IPO extravaganza has many implications, but unquestionably among the many related consequences is that following-on to the wave of SPAC offerings is the possibility that we are about to see an increase in SPAC-related litigation.
Anyone interested in seeing what this coming litigation might look like will want to take review the securities class action complaint filed last week in the Middle District of Tennessee against Clover Health Investments, a health services firm became a publicly traded company in January 2021 through reverse merger with a SPAC from the SPAC IPO class of 2020. The February 5, 2021 complaint, a copy of which can be found here, alleges that the de-SPAC transaction-related documents and disclosures failed to disclose, among other things, that the acquisition target company was the subject of a DOJ investigation.
Continue Reading Securities Suit Alleges Failure to Disclose DOJ Investigation Before De-SPAC Transaction
FedEx “NotPetya” Cyberattack Securities Suit Dismissed
In my recent annual round-up of the top stories in the world of D&O liability, I noted that among the key D&O issues is the possibility of claims against corporate directors and officers arising out of cybersecurity incidents. One of the more interesting cybersecurity-related D&O claims in recent years is the securities class action lawsuit a plaintiff shareholder filed against FedEx in connection with the company’s disclosures concerning the “NotPetya” virus cyberattack on its European operations. What made the lawsuit interesting is that it involved not the company’s disclosures at the time of the cyber incident but rather concerned the company’s subsequent statements about the company’s recovery from the attack and the attack’s longer-term impact on its finances, operations, and business strategy. In a February 4, 2021 opinion (here), Southern District of New York Judge Ronnie Abrams granted the defendants’ motion to dismiss the FedEx NotPetya securities lawsuit, with prejudice. As I discuss below, the opinion has some interesting lessons on the importance of precautionary disclosure.
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Cornerstone Research: Both Federal and State Securities Suit Filings Declined in 2020
Securities class action lawsuit filings declined 22% in 2020 compared to the year prior but remained well above long-term annual averages, according to a February 3, 2021 report by Cornerstone Research published in conjunction with the Stanford Law School Securities Class Action Clearinghouse. The Cornerstone Research report’s analysis of the 2020 filings is consistent with prior reports on the topic; however, the Cornerstone Research report, unlike prior reports, includes data both for federal and for state securities class action lawsuit filings. The Cornerstone Research report can be found here. Cornerstone Research’s February 3, 2021 press release about the report can be found here.
Continue Reading Cornerstone Research: Both Federal and State Securities Suit Filings Declined in 2020
Second Circuit Affirms Dismissal of Securities Suit Involving “Predominantly Foreign” Transaction
It has been over ten years since the U.S. Supreme Court issued its landmark decision in Morrison v National Australia Bank – yet the lower courts continue to struggle with its application in specific situations. Morrison clarified that the U.S. securities laws apply to securities transactions on U.S. securities exchanges and to domestic transactions in other securities. It is Morrison’s second prong, relating to domestic transactions in other securities, that continues to vex the courts.
In a recent decision, the Second Circuit affirmed a district court’s dismissal of a securities lawsuit on the grounds that the underlying securities transaction, even if domestic, was so “predominantly foreign” as to be “impermissibly extraterritorial.” As discussed below, the Second Circuit’s decision underscores an ongoing question of how far beyond Morrison’s “domestic transaction” question courts should go in determining whether U.S. securities laws apply to a transaction. The Second Circuit’s January 25, 2021 decision in Cavello Bay Reinsurance Ltd v. Stein can be found here.
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Securities Suit Filed Against Exxon Mobil Based on SEC Whistleblower Allegations
Long-time readers know that I have a particular interest in the SEC whistleblower program. I have been interested in it since it was first put into effect now almost ten years ago. One reason I was interested in it from the very outset is that I thought that a pattern might emerge in which whistleblowers submitted their reports to the SEC, the SEC launched an investigation or enforcement action, and then company shareholders filed related securities class action lawsuits based on the circumstances revealed in the whistleblower’s report.
By and large, the third step in this anticipated pattern has not emerged. As far as I am aware, there have not been private securities suits filed after SEC whistleblower reports triggered SEC investigation or enforcement actions – until now, that is. On January 28, 2021, a plaintiff shareholder filed a securities class action against Exxon Mobil relating to news reports that the SEC has launched an investigation of the company based on whistleblower reports questioning the company’s asset valuations of its Permian basin oil fields. A copy of the plaintiff’s complaint can be found here.
Continue Reading Securities Suit Filed Against Exxon Mobil Based on SEC Whistleblower Allegations
Securities Litigation Against Life Sciences Companies Remained Elevated in 2020
Federal court securities class action litigation filings against life sciences companies declined slightly in 2020 relative to 2019 but remained above long-term historical levels, and remained a significant portion of overall securities class action lawsuit filings during the year, according to a new report from the Dechert law firm. The January 28, 2021 report, entitled “Dechert Survey: Developments in Securities Fraud Class Actions Against Life Sciences Companies 2020 Edition,” can be found here.
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NERA: 2020 Securities Suit Filings Down vs. 2019, But Above Long-Term Levels
Federal court securities class action lawsuit filings declined 22% in 2020 compared to 2019, but the 2020 filings were still above the long-term historical average annual numbers of filings, according to NERA Economic Consulting’s annual securities litigation report. The 2020 securities suit filing drop-off reflected a decline in the number of federal court merger objection class action lawsuits filed during the year, offset in part by the number of coronavirus-related securities suits. NERA’s January 25, 2021 report can be found here.
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Walmart Hit with Opioid-Related Securities Class Action Lawsuit
The opioid crisis is not anything new; it has been around for years. Indeed, more than three years ago I posted an item noting the outbreak at the time of a rash of opioid-related securities class action lawsuits. But while the opioid crisis has been around for years, plaintiff shareholders continue to file opioid-related securities suits. On January 20, 2021, a plaintiff shareholder filed a securities class action lawsuit against Walmart in the District of Delaware based on the U.S. Department of Justice’s December 2020 lawsuit against the company alleging a role in the opioid epidemic. A copy of the securities class action lawsuit complaint can be found here.
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