Securities Litigation

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As a result of  the U.S. Supreme Court’s March 2018 Cyan decision, in which the Court ruled that state courts retain concurrent jurisdiction over ’33 Act liability actions, companies issuing shares now face the risk of having to face parallel securities litigation in state and federal court. Among the many problems this risk poses is the possibility that, due to the differing pleading standards between state and federal court, Securities Act liability suits that would be dismissed in federal court might survive a dismissal motion in state court. New York is among the states where many post-Cyan securities suits are being filed and where differences in pleading standards might lead to a fewer state court lawsuit dismissals relative to the dismissal rate in state court. However, notwithstanding these concerns, a New York state court judge recently entered an order dismissing a post-Cyan securities suit, raising the possibility that defendants may be able to dismiss securities suits filed in New York state court after all.  
Continue Reading New York State Court Dismisses Post-Cyan State Court Securities Suit

One of the things that happened both in the lead up to and in the wake of the October 2018 legalization of cannabis-based products in Canada is that a number of Canada-based cannabis companies listed their shares on U.S. securities exchanges. From the outset, D&O insurers have regarded the cannabis companies as a distinct risk and as a tough class of business. Earlier on, there were relatively few claims to substantiate these concerns. However, there have now been a number of securities class action lawsuits filed against U.S.-listed Canadian companies, with the latest lawsuit filed just this week.
Continue Reading Ontario-Based Firm is Latest Canadian Cannabis Company Hit with U.S. Securities Suit

During the first six months of 2019, federal court securities class action lawsuit filings remained well above historical levels and roughly on pace with the elevated filing levels in 2018. The number of federal court securities suit filings was significantly increased by the number of federal court merger objection lawsuit filings; however, even disregarding the merger objection lawsuit filings, the number of new lawsuits remains well above historical averages. The total securities suit filings during the years first six months were even further raised by significant numbers of state court securities class action lawsuit filings, as well.
Continue Reading Securities Suit Filings Remain at Heightened Pace in Year’s First Half

One of the most watched and commented on corporate and securities litigation trends over the last several years has been the rise of management liability related lawsuits arising from cybersecurity-related incidents. While there has never been the volume of cases that some commentators expected, there have been a number of cases filed. The latest of these lawsuits is the securities class action lawsuit filed this week against FedEx, in which the plaintiff shareholder alleges the company did not fully disclose the extent of the disruption at its European operation after it was hit with the NotPetya malware virus in June 2017. A number of the allegations in the new FedEx complaint are similar to those raised in prior cybersecurity-related securities suit, suggesting some of the factors that might lead to this type of cybersecurity follow-on lawsuit. A copy of the complaint, filed in the Southern District of New York on June 26, 2019, can be found here.
Continue Reading FedEx Hit with Cyber Attack-Related Securities Suit

As I noted in a recent post, the securities class action lawsuit pending against Toshiba raises the question of whether or not the U.S. securities laws apply to transactions in unsponsored American Depository Receipts (ADRs). The company’s petition to the U.S. Supreme Court posed the larger question of whether there are exceptions to the second-prong of the Morrison standard holding that the U.S. securities laws apply to domestic transactions in securities. A number of organizations and even governments filed amicus briefs urging the Court to take up the case. However, in a June 24, 2019, the Court denied the company’s petition, sending the case back to the lower courts and, as discussed below, leaving behind several unanswered questions.
Continue Reading U.S. Supreme Court Denies Cert in Toshiba Unsponsored ADRs Securities Suit

Nessim Mezrahi

In the following guest post, Nessim Mezrahi, cofounder and CEO of SAR, a securities class action data analytics and software company, takes a look at possible defenses to securities class action lawsuits that corporate defendants may have based on analysis of the claimed stock price declines involved. A version of this article previously appeared on Law 360. 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 blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Nessim’s article.
Continue Reading Guest Post: An Analytical Approach To Defending Securities Class Claims

Priya Cherian Huskins

In a recent post, I took a look at the rise in the number of state court securities class action lawsuits that have been filed in the wake of the U.S. Supreme Court’s decision in the Cyan case. In the following guest post, Priya Cherian Huskins of Woodruff Sawyer & Co. takes a deeper look at the state court securities class action data to assess the extent of the threat of state court securities class action litigation relating to follow-on offerings. A version of this article was previously published in Woodruff-Sawyer’s D&O Notebook.  I would like to thank Priya for her willingness to allow me to publish her article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Priya’s article.
Continue Reading Guest Post: Is it Really that Bad? Follow-On Offerings and Section 11 Suits in State Court

I have been fortunate in recent years to be able to travel around the world and to speak to D&O insurance professionals in a wide variety of different countries. One recurring question I get in these meetings has to do with non-U.S. companies that have Level I American Depository Receipts (ADRs) trading in the U.S. The question is usually something along the lines of – “these Level 1 ADR companies don’t have U.S. securities litigation exposure, right?” This question always puzzles me, given the several high profile cases in recent years (discussed below) demonstrating that —  while there may be  an interesting question between sponsored and unsponsored ADRs — transactions in Level 1 ADRs certainly can be subject to the U.S. securities litigation.  
Continue Reading The U.S. Securities Litigation Exposure of Non-U.S. Companies with Level I ADRs

Regular readers of this blog know that the statistics surrounding U.S. securities litigation in recent years are nothing short of alarming, including, for example, both record numbers of lawsuits and record percentages of listed companies sued. Severity trends are concerning as well. All of these trends are exacerbated by the impact of the U.S. Supreme Court’s 2018 Cyan decision, which opens companies conducting securities offerings to multiple, conflicting lawsuits in state and federal court. Given these trends, it is hardly surprising that there have been renewed calls from business groups for securities class action litigation reform. Now, Chubb, a leading global insurer, has added its voice to the calls for reform. In an interesting June 11, 2019 paper entitled “From Nuisance to Menace: The Rising Tide of Securities Class Action Litigation” (here), the company details the extent of the current securities litigation mess and sets forth a number of proposals for securities litigation reform. 
Continue Reading Chubb Sounds Securities Litigation Alarm, Calls for Reform

In a little noticed-development last week, the U.S. Supreme Court denied the petition for a writ of certiorari in Hagan v. Khoja, in which former officials of a bankrupt pharmaceutical company sought to have the Court review a decision by the Ninth Circuit to revive a securities class action lawsuit against them. Had the petition been granted, the Court would have been called upon to consider the controversial question of whether public companies have a duty to update prior disclosures that were accurate when made. The Court’s cert denial leaves the Ninth Circuit’s ruling standing and the questions surrounding the existence and requirements of a duty to update remain unsettled. The Court’s May 20, 2019 order can be found here.  
Continue Reading Supreme Court Denies Cert Petition in Duty to Update Case