In the latest SPAC-related securities class action lawsuit filing, a plaintiff shareholder has filed a class action lawsuit against Katapult Holdings, an ecommerce firm providing online financing and product purchase options for non-prime consumers. The defendants named in the complaint include two former officers of the SPAC with which Katapult merged in June 2021. A copy of the August 27, 2021 complaint can be found here.
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49 Corporate Law Firms Trash SPACs-Are-Investment-Companies Lawsuits
As I noted in prior posts (here and here), in the last few days a group of plaintiffs’ lawyers that includes former SEC Commissioner Robert Jackson and Yale Law Professor John Morley filed shareholder derivative suits against the boards of three SPACs alleging that the SPACs had improperly failed to register as investment companies under the Investment Company Act of 1940. In response, a group of 49 corporate law firms has now issued a joint statement decrying the lawsuits and trashing the plaintiffs’ arguments that SPACs are investment companies merely because the SPACs invest their IPO proceeds in trust accounts while seeking a merger partner. The corporate law firms’ joint statement sheds interesting light on the legal theories asserted in the new lawsuits. A copy of the August 27, 2021 joint statement can be found here.
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Coming Soon: Sunday Arts
The purpose of this post is to announce a new feature I will be introducing to this site in September. The reason I am announcing the new feature in advance is to try to make the intention of the new feature clear from the outset, and also to let readers know that the new feature – which I am calling “Sunday Arts” – is open to all for readers’ own contributions, as I explain below.
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Guest Post: First There was Litigation; And Then There Was Standing
When companies are hit with cybersecurity incidents, class action privacy litigation often follows. However, claimants in these kinds of cases face a threshold challenge of showing they have suffered a sufficient “injury in fact” to establish that they have standing to assert their claims. The following guest post, written by Paul Ferrillo, Kristine Argentine, Emily Dorner, and Alexandra Drury of the Seyfarth Shaw law firm, provides a survey of the current state of play for the standing requirements in this type of litigation. I would like to thank the authors for allowing me to publish their 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 the authors’ article.
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Cornerstone Research: Bankruptcy Filings Returned Closer to Historic Levels in 1H21
There were more U.S. bankruptcy filings in 2020 than in any year since the global financial crisis, but the number of bankruptcy filings in the first half of 2021 returned closer to historical levels, according to a new report from Cornerstone Research. The report, entitled “Trends in Large Corporate Bankruptcy and Financial Distress: Midyear 2021 Update,” looks at bankruptcy filings involving private and public companies with assets over $100 million. The report can be found here, and Cornerstone Research’s August 25, 2021 press release about the report can be found here.
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More SPACs-Are-Really-Investment-Companies Derivative Suits Filed
Last week, when a group of plaintiffs’ attorneys filed a shareholder’s derivative suit against Bill Ackman’s SPAC seeking damages and alleging the company was really an Investment Company that should be registered under the Investment Company Act, I assumed the attorneys filed the suit because it was Ackman’s firm; because of the size and prominence of the SPAC; and because of Ackman’s unusual plan to invest the SPAC’s IPO proceeds in a minority interest. Well, it turns out, the plaintiffs’ lawyers involved were just getting started. They have now filed two more shareholders derivative suits against two other SPACs’ boards and sponsors, based on the same theory as in the Ackman SPAC suit that the SPACs involved are really Investment Companies that should be registered under the Investment Company Act. Looks like these SPACs-are-Investment-Companies suits are a thing now, and this could all get very interesting.
Continue Reading More SPACs-Are-Really-Investment-Companies Derivative Suits Filed
SEC Files COVID-19-Related Enforcement Suit Against Biotech Firm
As the pandemic has progressed and as time has passed, one question I am regularly asked is whether we will continue to see COVID-19 related legal actions being filed. If the latest SEC action is any indication, we have not yet seen the last of new COVID-19-related suit filings. On August 17, 2021, the agency filed a civil enforcement action against an Ohio biotech firm claiming that the firm made false claims about one of its products, as a way to suggest that the firm was positioned to profit from the coronavirus outbreak. A copy of the agency’s complaint can be found here.
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Court Challenge to Nasdaq Board Diversity Rules Filed
As I noted a prior post, on August 6, 2021, the SEC, in a split vote along party lines, approved Nasdaq’s proposed listing guidelines requiring companies listed on the exchange to comply with board diversity requirements or explain their failure to do so. On August 9, 2021 a nonprofit directors’ organization called the Alliance for Fair Board Recruitment filed a petition with the Fifth Circuit Court of Appeals seeking to have the appellate court review the SEC’s order. The organization explained its move in an August 18, 2021 press release, stating that it sought to challenge the order because it “will compel many of our nation’s largest publicly traded corporations to illegally discriminate on the basis of gender, race, and sexual orientation” in selecting directors. The appellate petition can be found here. The August 18 press release can be found here.
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SPAC-Related Securities Suit Hits Smart Building Products Tech Company
In my previous blog post, I noted that plaintiffs’ attorneys’ have been and are continuing to file SPAC-related securities class action suits, and I also noted that the latest filings are targeting SPAC and SPAC merger entities that completed their IPOs in the early stages of the SPAC IPO frenzy in late 2020 and early 2021. As if to underscore this point, yesterday a plaintiff shareholder filed a securities class action lawsuit against a post-SPAC-merger smart home products technology company, based on alleged misrepresentations in the company’s warranty accruals. The new lawsuit represents the latest example of the SPAC-related securities litigation trend. A copy of the complaint in the new lawsuit can be found here.
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Bill Ackman’s SPAC’s Directors Hit With Derivative Suit Over “Staggering” Compensation
Regular readers know that I have been tracking SPAC-related securities class action lawsuits and other SPAC-related litigation. As I discuss in the second item below, the SPAC-related class actions have continued to be filed as the year has progressed. There have also been SPAC-related shareholder derivative lawsuits filed as well, but none quite like the derivative lawsuit filed this week on behalf of Wall Street investor William Ackerman’s SPAC vehicle, Pershing Square Tontine Holdings Ltd. against the SPAC’s directors and other defendants. The suit claims that the defendants structured massive compensation arrangements for the SPAC sponsor and the SPAC directors in violation of the Investment Company Act of 1940 and the Investment Advisers Act of 1940. A copy of the complaint can be found here.
Continue Reading Bill Ackman’s SPAC’s Directors Hit With Derivative Suit Over “Staggering” Compensation