When Congress enacted the Private Securities Litigation Reform Act (PSLRA) in 1995, it aimed to address perceived abuses in securities class action litigation. Among the ills Congress sought to address was the prevalence in securities litigation at the time of “professional plaintiffs” — that is, repeat players who lent their names to lawyer-driven lawsuits without performing any oversight or monitoring of the litigation or of the lawyers. In the PSLRA, Congress put limits in place to try to curb these frequent filers. The reality is that these limits have not worked. As is well documented in a new paper from the U.S. Chamber of Commerce’s Institute for Legal Reform entitled “Frequent Filers Revisited: Professional Plaintiffs in Securities Class Actions,” repeat plaintiffs remain an unfortunate feature of securities litigation today, with many of the same ill effects Congress intended to remedy.

 

The paper, which was written by New York University Law School Professor Stephen Choi, University of Richmond Law School Professor Jessica Erikson, and University of Michigan Law School Professor Adam Pritchard, details the extent of the frequent filer problem in current securities litigation, and proposes a number of reforms to address the issue. The April 21, 2022 paper can be found here. Continue Reading The Continuing Problem of Frequent Filers in Securities Litigation

Jorge Luis Borges

At one level, all of life is the accumulation of memories, a building toward the inevitable moment when we can bore a younger generation (just as we were bored when younger) by stories that have grown threadbare in the retelling. But at another level, all of life is a process of forgetting, a building toward the inevitable moment when the joke about “early Alzheimer’s” isn’t really funny anymore. Or more simply, when the names and faces from our youth can no longer be recalled simply because too much time has passed. Continue Reading Speak Not, Memory

Over the last several years and In the wake of the #MeToo movement, plaintiff shareholders have filed D&O claims against many companies, as well as against the companies’ executives, involving underlying allegations of sexual misconduct or sexual harassment. The highest profile of these cases to be filed within the last year was the securities class action lawsuit filed against Activision Blizzard and several of its officers based on allegations that the company knew about and failed to disclose governmental investigations of employees’ sexual harassment allegations. In a recent order, the court overseeing the securities suit granted the defendants’ motion to dismiss the complaint, holding that the plaintiffs had failed to sufficiently allege both falsity and scienter. The dismissal was granted without prejudice. The court’s ruling illustrates the difficulty plaintiffs sometimes face in trying to bootstrap underlying sexual misconduct allegations into D&O claims. The Court’s April 18, 2022 order in the case can be found here. Continue Reading Court Dismisses Activision Blizzard Sexual Harassment-Related Securities Suit

In a new lawsuit that closely mirrors the features of many recent SPAC-related securities lawsuits, and that indeed almost entirely replicates the most recent suits, a plaintiff shareholder has initiated a securities class action against Canadian-based lithium battery recycler, Li-Cycle Holdings Corp. Li-Cycle completed a merger with a publicly traded SPAC in August 2021 and was the subject of a short-seller report in March 2022. The lawsuit against Li-Cycle is the latest in the development of what is becoming an increasingly significant securities litigation phenomenon this year. A copy of the April 19, 2022 lawsuit against Li-Cycle can be found here. Continue Reading After Short Seller Report, Lithium Battery Recycler Hit with SPAC-Related Securities Suit

In the latest SPAC-related securities suits filing, electric aviation company Lilium N.V. has been sued by an investor after a short-seller published a report questioning the company’s technological and regulatory readiness, its development prospects, and its financial resources. Lilium became a publicly traded company in September 2021, when it merged with Qell Acquisition Corp., a special purpose acquisition company (SPAC). This lawsuit is the latest in a series of securities class action lawsuits filed since the beginning of 2021 against post-SPAC-merger companies, as discussed below. A copy of the April 18, 2022 lawsuit against Lilium can be found here. Continue Reading Electric Aircraft Company Hit With SPAC-Related Securities Suit

Readers will recall that at the peak of the #MeToo movement, several companies were hit with securities lawsuits and other types of D&O claims relating to underlying allegations of sexual misconduct or sexual harassment. Among these lawsuits was the #MeToo-related securities class action lawsuit filed against CBS. The CBS lawsuit was largely dismissed; however, one allegation survived the dismissal motion. Now, the parties to the CBS lawsuit have agreed to settle the case, as discussed below. The settlement is subject to court approval. The parties’ April 15, 2022 stipulation of settlement can be found here. Continue Reading CBS Settles #Me-Too-Related Securities Class Action Lawsuit

Regular readers know that a recurring topic I have explored on this site is the scope of the contractual liability exclusion found in many professional liability and management liability insurance policies. In prior posts I have argued that insurers sometimes apply the exclusion over-broadly so as to exclude matters that I believe should otherwise be covered under the policy. However, in a recent appellate ruling, in which the Ontario Court of Appeal concluded that as a result of the application of the contractual liability exclusion, a solar panel engineering company’s E&O insurer did not have a duty to defend the company in an underlying arbitration proceeding. As discussed below, I believe the appellate court’s reasoning is sound and that the case represents an example not only of when the exclusion may be applied appropriately but also of the appropriate limits of the exclusion’s reach. A copy of the Ontario court’s September 10. 2021 opinion can be found here. Continue Reading Thinking About the Contractual Liability Exclusion

The hard part about maintaining a blog is finding interesting topics. It isn’t always easy coming up with things I want to write about. But when all else fails, I can always count on Elon Musk to come up with something. At regular intervals, Musk is out there saying and doing things that are not only interesting and provocative but that are solidly blogworthy. In the last few days, Musk has been at it again, not only making himself the largest shareholder of the social media company Twitter and thereby putting himself on the front pages of the business pages, but, as discussed below, drawing a securities class action lawsuit, as well. Continue Reading Musk’s Twitter Play Draws Securities Suit

Nessim Mezrahi

As I have noted in prior posts (most recently here), plaintiffs’ lawyers recently have attempted to rely on statements in social media posts as the basis on which to assert liability under the securities laws. In the following guest post, Nessim Mezrahi considers whether statements in posts on Twitter can support liability for securities law violations. Mezrahi is co-founder 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 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: Why Tweets May Not Validate Securities Class Action Liability

Francis Kean

For those of you who may not be following the unfolding news in the U.K. involving P&O Ferries and its firing of 800 of its sailors, it is quite a story. (Background here.) In the following guest post, Francis Kean considers the D&O insurance issues that the P&O Ferries situation could present. Francis is a Partner in the Financial Lines team at McGill and Partners. This article was previously published as a post on the Airmic website. I would like to thank Francis 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 Francis’s article. Continue Reading Guest Post: Would the Board of P&O Ferries be Covered under a D&O Policy?