The shareholder derivative lawsuit filed against the directors of Danaher Corporation is the latest board diversity lawsuit to fail to survive initial pleading hurdles. In a June 28, 2021 order (here), District of Columbia District Court Judge Trevor N. McFadden granted the defendants’ motion to dismiss the shareholders’ claims, based on his determination that the plaintiffs had failed to establish that pre-suit demand on the board would have been futile. In making his rulings on the motion, Judge McFadden made several interesting and noteworthy observations about the plaintiffs’ board diversity allegations.
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Federal Court Securities Lawsuit Filings Decline in Year’s First Half
Federal court securities class action lawsuit filings declined in the first half of 2021 to the lowest semiannual levels in several years. Several factors contributed to this relative decline, most significantly the shift by plaintiffs’ lawyers toward filing federal court merger objection lawsuits as individual actions rather than as class actions. In addition, as discussed further below, other factors contributed to the relative decline. The filing levels in the year’s first six months puts the filing for the full year 2021 on pace for the lowest annual filing levels since 2015, after several intervening years in which filings were at historically high levels.
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Guest Post: Ninth Circuit Invokes Lorenzo to Revive Scheme Liability Claims
As I discussed in a recent post (here), the Ninth Circuit recently reversed in part the district court’s dismissal of the Google+ user data-related securities class action lawsuit. One feature of the decision that perhaps did not attract as much attention is the appellate court’s reversal of district court’s dismissal of the plaintiff’s scheme liability claims. In the following guest post, Bruce Vanyo and Jonathan Rotenberg discuss the significance of the scheme liability portion of the Ninth Circuit’s opinion. Bruce and Jonathan are partners in the Securities Litigation practice at Katten Muchin Rosenman LLP, resident in the New York office. I would like to thank Bruce and Jonathan 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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Guest Post: IPO Litigation Risk
Securities class action litigation activity involving IPO companies recently has been a significant concern, for the companies themselves as well as for their insurers. In the following guest post, Stanford Law School Professor Michael Klausner and Jason Hegland, Stone Kalisa, and Sam Curry of Stanford Securities Litigation Analytics take a look at the data surrounding IPO-related securities 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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Opt-Out Action Held Interrelated with Underlying Securities Class Action Suit
In a June 23, 2021 opinion (here), a Delaware Superior Court Judge held that a subsequent opt-out action is interrelated with the prior securities class action lawsuit; that the opt-out action claim is deemed made at the time of class action suit’s filing; and therefore that the D&O insurers whose policies were in force at the time the opt-out action was filed do not have coverage for the opt-out action. The court’s conclusion that an opt-out action is interrelated with the underlying class action lawsuit arguably is unremarkable, but, as discussed below, there are features of this dispute and of the court’s ruling that make the court’s decision noteworthy.
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Guest Post: Analyzing Securities Class Actions by Size
One of the key considerations related securities class action litigation risk is company size as measured by market capitalization. In the following guest post, John Cheffers details this relation between company size and securities class action litigation risk. John is Associate Counsel and Director of Research for Watchdog Research. I would like to thank John 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 John’s article.
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Will SPAC Warrant Accounting Restatements Result in Further Securities Class Action Litigation?
On April 12, 2021, when John Coates, the acting director of the SEC Division of Corporate Finance, and Paul Munter, the SEC’s acting chief accountant, issued a statement noting their concerns about the way that SPACs were accounting for warrants issued in connection with SPAC IPOs, they also noted that some entities may need to reclassify the warrants from equity to liabilities, and that the change in accounting treatment might require some entities to restate prior financial statements. As it has turned out, many SPACs have in fact reclassified their warrants and many have in fact restated their financials, as discussed below. In at least one case, discussed in earlier post on this site (here), a SPAC-acquired company that restated its financial based on the warrant accounting issue has been hit with a securities class action lawsuit – which raises the question whether other restatements by other SPACs and de-SPACs will trigger further securities class action litigation.
That is the question asked in a June 22, 2021 Law360 article by Elaine Harwood, Steven McBridge and Laura Simmons of Cornerstone Research entitled “Will SPAC Restatement Wave Trigger Shareholder Litigation?” (here). As discussed below, the authors’ article addresses several interesting and important questions about the warrant accounting issue and the possibility for further litigation.
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9th Circ. Revives Legal Challenge to California Board Gender Diversity Statute
Last summer, when California adopted a new law requiring corporations based in the state to add board members from “underrepresented communities,” it modeled the statute on the board gender diversity statute the state had enacted two years before. The constitutionality of the board gender diversity law itself had been challenged in a federal court lawsuit, but the court hearing the suit had dismissed it based on the named plaintiff’s lack of standing. However, in a June 21, 2021 opinion (here), the Ninth Circuit reversed the district court, finding that the claimant had sufficient standing to pursue the claim. The appellate court’s action has implications both for the board gender diversity statute and the more recently adopted board racial diversity statute, which has also been challenged in court.
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Supreme Court Vacates Class Certification in Goldman Sachs Securities Suit on Narrow Grounds
When the U.S. Supreme Court granted the petition for a writ of certiorari to take up class certification questions raised in the long-running Goldman Sachs securities class action lawsuit, some commentators thought the case might give the Court the opportunity to reconsider fundamental issues about the presumption of reliance under the “fraud on the market” theory in connection with class certification in securities suits. However, as the case has turned out, the Court’s consideration of the case has not produced any fundamental recasting of any key issues; instead, the Court on June 21, 2021 issued a narrow decision that the majority opinion itself acknowledged, with respect to the most significant substantive part of the Court’s opinion, will not be “outcome determinative” in many cases. The Court’s June 21, 2021 decision can be found here.
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Biopharma Company Hit with COVID-19-Related Securities Suit
We are now well into the second year of the COVID-19 pandemic, yet at this late date the COVID-19-related securities class action lawsuits continue to come in. In the latest example, Ocugen, a U.S.-based gene therapy development company that hoped to develop a COVID-19 vaccine, was hit with a securities class action law after a setback in its regulatory approval efforts. A copy of the plaintiff’s June 17, 2021 complaint against Ocugen can be found here.
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