Almost from the very outset of COVID-19 in early 2020, investors and others have filed pandemic-related securities suits and other claims against companies and their executives. Even though the initial outbreak is now nearly 27 months in the past, claims activity continues. In the latest development, a grand jury has returned an indictment against a health care company’s former CEO concerning statements the CEO made in April 2020 about the company’s ability to profit from sales of COVID-19 rapid tests. The SEC filed a parallel enforcement action against the company and the CEO as well.
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Coronavirus
A Detailed Look at the 2021 Securities Litigation Against Life Sciences Companies
In the latest edition of its annual report, the Sidley Austin law firm takes a detailed look at important securities litigation developments in 2021 relating to life sciences companies. The report includes not only a review of life sciences companies’ securities litigation class action filings trends but also examines life sciences companies’ track record in the courts, both with respect to motions to dismiss in the district courts and on appeal. The law firm’s report, entitled “Securities Class Actions in the Life Sciences Sector: 2021 Annual Survey” can be found here. The same site also includes a link to a short summary of the report.
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COVID-19-Related Securities Suit Against Diagnostic Testing Company Dismissed
As I have noted in numerous prior posts on this site, over the course of the last two years plaintiffs’ lawyers have filed a host of COVID-19-related securities claims. With the passage of time, many of these cases have now worked their way to the motion to dismiss stage. Although the results have been mixed, the dismissal motions have been granted in several cases. In the latest example of favorable outcome for a COVID-19-related lawsuit defendant, the court in the COVID-19-related securities suit pending against Chembio Diagnostics and its executives recently granted the corporate defendants’ dismissal motion. However, in an odd twist, the court denied the dismissal motion of the company’s offering underwriters. A copy of the court’s February 23, 2022 order in the case can be found here.
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Global Semiconductor Shortage Leads to Securities Lawsuit
In my recent year-end wrap up of directors’ and officers’ liability and insurance issues that arose during 2021, I conjectured that several current economic circumstances – including in particular supply chain disruptions – could lead to D&O claims in 2022. The way that D&O claims might arise out of these economic conditions is illustrated in a new securities class action lawsuit filed against the software company Cerence, which experienced a reduction in automobile industry demand for its products and services due to the global semiconductor shortage. A copy of the complaint filed against Cerence on February 25, 2022 can be found here.
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Post-SPAC-Merger Company Hit with COVID-Related Securities Suit
In a lawsuit that captures two of the top current securities class action lawsuit trends, a plaintiff shareholder has filed a securities class action lawsuit against health technology company Butterfly Network. The new lawsuit is both SPAC-related and COVID-related. Butterfly merged with Longview Acquisition Corp., a special purpose acquisition company (SPAC), in February 2021. The allegations included, among other things, a contention that the defendant company failed to take into account pandemic’s “broad consequences” in its operations and reporting. A copy of the plaintiff’s February 16, 2022 complaint can be found here.
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New Lawsuit Reflects Cybersecurity and Coronavirus-Related Litigation Trends
Readers of this blog know that two important current litigation trends involve the filing of claims relating to cybersecurity incidents and the filing of COVID-19-related claims. A new securities class action lawsuit filed this week touched on both of these securities suit filing trends. Secure technology company Telos Corporation was hit with a securities suit following a decline in the price of its shares after the company experienced revenue delays owing to cybersecurity and coronavirus related “headwinds” that postponed the company’s performance of two key contracts. A copy of the plaintiffs’ complaint filed on February 7, 2022 against Telos can be found here.
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COVID-19-Related Securities Suit Filed Against Pharma Company
In the latest COVID-related securities class action lawsuit, a shareholder plaintiff has filed a securities suit against a clinical-stage pharmaceutical company whose application for emergency use authorization (EUA) for a COVID-19-related treatment therapy was rejected by the FDA. Among other things, this latest filing shows that the wave of coronavirus-related securities lawsuit filings, like the coronavirus itself, show few signs of abatement. A copy of complaint filed on January 18, 2022 against NRx Pharmaceuticals can be found here.
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First Coronavirus-Related Securities Suits of 2022 Filed
As I have noted on this site, even though it has now been nearly 22 months since the initial coronavirus outbreak in the U.S., coronavirus D&O lawsuits have continued to be filed continuously since the initial outbreak. Coronavirus-related securities suits were in fact a significant securities litigation phenomenon in 2021 as well as in 2020. In an early sign that the coronavirus related litigation could remain a significant securities litigation factor in 2022, late last week plaintiffs’ lawyers filed two new securities lawsuits against a health insurance and services company and against a diagnostic testing company. Both companies had completed IPOs earlier in 2021. A copy of the new securities lawsuit against Bright Health Group can be found here and a copy of the new securities suit against Talis Biomedical Corporation can be found here.
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The Top Ten D&O Stories of 2021
The directors’ and officers’ liability environment is always changing, but 2021 was a particularly eventful year, with important consequences for the D&O insurance marketplace. The past year’s many developments also have significant implications for what may lie ahead in 2022 – and possibly for years to come. I have set out below the Top Ten D&O Stories of 2021, with a focus on the future implications. Please note that on Thursday, January 13, 2022 at 11:00 AM EST, my colleague Marissa Streckfus and I will be conducting a free, hour-long webinar in which we will discuss The Top Ten D&O Stories of 2021. Registration for the webinar can be found here. I hope you will please join us for the webinar.
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Coronavirus-Related Securities Suit Against Vaccine Company Survives Dismissal Motion
In an opinion written in unusually direct language, a federal district court has denied the motion to dismiss in a coronavirus-related securities class action lawsuit filed against a vaccine development company. However, the motion to dismiss was granted with leave to amend as to the vaccine company’s major outside shareholder. The significant context of the pandemic itself and the swirl of media coverage surrounding it proved to be a significant factor in the court’s denial of the motion to dismiss as to the company defendants. The court’s December 22, 2021 opinion in the Vaxart securities litigation can be found here.
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