Securities Litigation

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Readers of this blog well know that in recent years there has been unprecedented levels of securities class action litigation activity, and that even in the midst of the current global health crisis plaintiffs’ lawyers have filed what one law firm has characterized as a “wave” of COVID-19-related securities litigation. The heightened pace of securities filings over the last several years has already triggered calls for another round of securities litigation reform. Now, organizations representing business interests have filed a petition with the SEC seeking to have the agency implement a number of reforms to protect businesses from “unjustified COVID-19 lawsuits.”
Continue Reading Petition to SEC Seeks Protection for Companies from Pandemic-Related Securities Suits

When the news circulated in February that the Equifax data breach securities lawsuit had settled for $149 million, I wondered whether the sizeable settlement might further encourage plaintiffs’ lawyers to file more securities suits against companies that had experienced cybersecurity incidents. As it has turned out, there have been no new cybersecurity incident-related securities suits filed since then – until now. Earlier this week, a plaintiff shareholder filed a securities suit against title insurance and insurance services company First American Financial Corp., which experienced a significant cybersecurity incident in May 2019. As discussed below, the filing of this complaint is noteworthy in several respects. A copy of the complaint in the recently filed First American securities lawsuit can be found here.
Continue Reading Title Insurance Company Hit with Cybersecurity Incident-Related Securities Suit

I know from conversations with D&O insurance professionals outside the United States that they find it somewhere between astounding and incomprehensible that a company whose unsponsored level 1 ADRs trade over-the-counter in the U.S. can be subject to a U.S. securities lawsuit – but, as discussed in prior posts (here and here), that is what the Ninth Circuit and District Court held in the Toshiba securities lawsuit. However, a recent ruling in a securities suit involving global mining company Glencore plc suggests a means by which non-U.S. companies with unsponsored Level I ADRs in the U.S. nevertheless may still be able to avoid litigation in the U.S. In a July 31, 2020 ruling, District of New Jersey Judge Susan Wigenton granted the company’s motion to dismiss ADR investors’ securities suit against the company on forum non conveniens grounds.
Continue Reading Unsponsored ADR Investors’ Securities Suit Dismissed on Forum Non Conveniens Grounds

It has been ten years since the U.S. Supreme Court issued its landmark opinion in Morrison v. National Australia Bank, in which the Court clarified that the U.S. securities laws applies only to securities transactions that take place in the United States, either on an exchange or otherwise. While the decision has had a significant impact on a wide range of cases, it has not yet “brought the predictability and consistency it promised” and it has “spawned a number of unintended consequences,” according to a recent memo from the Cleary Gottlieb firm. The September 24, 2020 memo, entitled “Foreign Securities Class Actions 10 Years After Morrison,” which details three specific problem areas that have emerged as the lower courts have interpreted and applied Morrison over the last decade, can be found here.
Continue Reading The Impact of the Morrison Decision After Ten Years

Nessim Mezrahi

In the following guest post, Nessim Mezrahi discusses the need for transparency in third-party litigation funding arrangements and judicial scrutiny on short-seller reports relied on by plaintiff securities class action attorneys. Nessim is cofounder and CEO of SAR, a securities class action data analytics and software company. A version of this article previously was published on Law360. I would like to thank Nessim for allowing me to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Nessim’s article.
Continue Reading Guest Post: Funder, Short-Seller Use Undermines Securities Class Actions

Securities class action lawsuits involving tech companies increased for the fourth consecutive year in 2019, according to the latest report from Cornerstone Research. The report, examining securities litigation activity against tech companies, supplements Cornerstone Research’s previously released report on 2019 securities litigation filing activity generally. The most recent report, which is entitled “Tech Company Securities Class Action Lawsuit Filings and Settlements: 2015 – Q1 2020 Review and Analysis,” and which examines securities filings and settlements related to tech companies between 2015 and Q1 2020, can be found here. Cornerstone Research’s August 20, 2020 press release about the report can be found here.
Continue Reading Securities Suit Filings Against Tech Companies at Record High Levels in 2019

The plaintiffs alleged that when a real estate investment trust (REIT) disclosed that a financially troubled key tenant was making “partial monthly rent payments” — but omitted to mention that the tenant’s rent payments had been funded by an undisclosed loan from the REIT, not from the tenant’s own revenues — the REIT committed securities fraud. The district court dismissed the plaintiffs’ complaint, concluding that the plaintiffs had failed to plead a strong inference that the REIT had acted with the requisite scienter. However, in an interesting August 3, 2020 opinion (here), the Second Circuit reversed the district court, concluding that the plaintiffs’ allegations were sufficient to satisfy the scienter pleading requirements. The opinion includes an interesting analysis of the scienter pleading requirements in an omission case alleging recklessness.
Continue Reading Second Circuit Reverses District Court, Concludes Plaintiffs Adequately Pled Scienter

In a study that analyzes both federal and state securities suit filings during the first half of 2020  (unlike other prior first half reports that analyzed only federal court filings), Cornerstone Research reports that combined state and federal suits in the year’s first six months were down 18% compared to the second half of 2019 and at the lowest level since 2016.  The report, which was published in conjunction with the Stanford Law School Securities Class Action Clearinghouse, is entitled “Securities Class Action Filings: 2020 Midyear Assessment,” can be found here. Cornerstone Research’s July 29, 2020 press release about the report can be found here.
Continue Reading Cornerstone Research: Federal and State Securities Suit Filings Down in Year’s First Half

There were a record number of securities class action lawsuits filed against tech companies in 2019, according to a new report from Cornerstone Research. The report, entitled “Tech Company Securities Class Action Filings and Settlements: 2015-Q1 2020 Review and Analysis” (here) also shows that the number of securities suit filings against tech companies increased each year compared to the prior year during the four-year period from 2016-2019. Cornerstone Research’s July 15, 2020 press release about the new report can be found here.
Continue Reading Cornerstone Research: Tech Companies Hit with Record Number of Securities Suit in 2019