Event Driven Litigation

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The July 19, 2024 CrowdStrike Outage, which has been called the “largest outage in the history of information technology,” disrupted airlines, hospital, hotels, banks, retail businesses, and many other critical cogs in the wheels of commerce. The disruption and adverse publicity surrounding the incident also caused CrowdStrike’s share price to decline as well – over the course of several days following the incident, its shares declined about 30%, representing a market capitalization drop of nearly $12.5 billion. In a world where “everything, everywhere is securities fraud,” this surely seemed like a situation that would produce a securities class action lawsuit. Yet, surprisingly, no securities suit was filed. That is, until now.  Continue Reading CrowdStrike Hit with Outage-Related Securities Suit

There was a time, not that long ago, when class action securities lawsuits were mostly about accounting and financial disclosure-related issues. In more recent years, securities suits increasingly are about operational issues, in which unfortunate business developments are the basis of securities fraud allegations — a phenomenon that has been called “event-driven litigation.” In the latest example of this kind of litigation, a plaintiff shareholder has filed a securities class action lawsuit against General Motors alleging that the company, which sustained a product recall related to its vehicle airbags and suffered a significant setback in its driverless vehicle development efforts when one of its driverless vehicles struck a pedestrian, misled investors about vehicle safety issues. A copy of the plaintiff’s December 8, 2023, complaint can be found here.Continue Reading Vehicle Safety Issues Trigger Securities Suit Against GM

Many of you may have read the recent series of Wall Street Journal articles raising the alarm about the sprawling U.S. network of lead telephone cables. The articles suggest not only that the lead cables represent a health hazard to workers and to nearby residents, but that the telephone companies (including AT&T) allegedly have known about these hazards but have failed to take corrective measures. The revelations in the Journal series have led to governmental investigations. And now a plaintiff shareholder has filed a securities class action lawsuit against AT&T alleging that the company misled investors about the allegedly known but undisclosed risks the companies faced as a result of the lead telephone cable hazards. This new event-driven lawsuit shows that dangers that unacknowledged environmental and health hazards may represent for reporting companies. A copy of the July 27, 2023, complaint can be found here.Continue Reading Lead Telecom Cables Exposé Leads to Securities Suit Filing

Long-time readers know that I have frequently commented on this site on the phenomenon of “event-driven” litigation (for example, here). These are securities lawsuits filed in the wake of a significant operational event or development that disrupts a company and tanks its share price, as opposed to securities suits that are premised on accounting or financial misrepresentations. I am far from the only observer that has commented on this phenomenon. Among others, the Bloomberg columnist Matt Levine, in an article provocatively entitled, “Everything Everywhere is Securities Fraud” (here) also weighed in on the event-driven litigation trend.

There are, of course, usually two sides to every story, and in a April 5, 2023 Law360 article entitled “Why Event-Driven Securities Class Actions Often Succeed” (here, subscription required), Daniel Barenbaum and Michael Dark of the Berman Tabacco firm provide a plaintiffs’ side view of event-driven securities litigation, and make out their case that these cases are not only not frivolous but provide securities investors important remedies and protections.Continue Reading Are Event-Driven Cases More Often “Frivolous” or “Successful”?

For several years now, one of the perennial questions in the corporate and securities arena has been the extent to which cybersecurity-related issues will contribute to D&O claims. There has never really been the volume of securities and derivative lawsuits that some observers expected, but there has been a small scattering of occasional suits filed from time to time. Now, in what is the latest cybersecurity-related D&O suit, a plaintiff shareholder has filed securities class action lawsuit against pay-TV services provider, Dish Networks, related to a network service disruption at the company caused by a cyber-security incident. A copy of the March 23, 2023, complaint can be found here.Continue Reading Dish Networks Hit with Cybersecurity-Related Securities Suit

       

The securities class action lawsuits filed last week against failing or troubled banks felt as if the plaintiffs’ attorneys filing the suits were typing their complaints directly from the text of the day’s newspapers. Another suit filed last week referred to a slightly earlier but even more dramatic news story, the tragic train derailment in East Palestine, Ohio, of a Norfolk Southern freight train. The events surrounding the train disaster undoubtedly will be the subject of personal and environmental lawsuits for years to come. Now, the high-profile event is also the subject of a securities class action lawsuit, in the most recent example of the ways that operational events, rather than financial disclosures, increasingly can lead to securities litigation. A copy of the March 16, 2023, complaint can be found here.Continue Reading Ripped from the Headlines: Norfolk Southern Hit with Securities Suit      

In what is the largest case dispositions of its type that I have ever seen, a court in Tokyo has ordered four executives of Tokyo Electric Power Holdings (Tepco) to pay the company 13.321 trillion yen – the equivalent of $97 billion — based on the court’s finding that the individuals had negligently failed to take steps that would have prevented the disaster at the Fukushima Daiichi nuclear plant after the March 2011 earthquake and tsunami. This verdict, which is described in a July 13, 2022 Wall Street Journal article (here), is noteworthy on many levels, as discussed below.
Continue Reading Massive $97 Billion Verdict Awarded Against Fukushima Utility Executives

If there is one current topic that commands the attention of investors and other corporate stakeholders these days, it is ESG. ESG-related issues have of course previously led to securities suits and other types of D&O claims. However, amidst the current heightened focus on ESG, there is still a great deal of uncertainty about what ESG-related D&O claims might look like.

For that reason, the enforcement action that the SEC filed last week against the Brazilian mining company Vale, S.A. in connection with alleged misrepresentations the company allegedly made before the January 2019 collapse of its Brumadinho dam is noteworthy. Of particular interest to observers focused on ESG concerns is the fact that the SEC specifically alleged that the company “regularly misled local governments, communities, and investors about the safety of the Brumadinho dam through its environmental, social, and governance (ESG) disclosures.” The SEC’s April 28, 2022 press release about the Vale action can be found here. The SEC’s complaint in the action can be found here.
Continue Reading SEC Action Against Brazilian Mining Company Alleges ESG Misrepresentations

In its June 21, 2021 decision in Goldman Sachs Group, Inc. v. Arkansas Teacher Retirement System (discussed here), the U.S. Supreme Court provided important guidance regarding price impact evidence at the class certification stage of securities class action litigation. In the following guest post, Nessim Mezrahi, Stephen Sigrist, and Carolina Doherty discuss class certification implications of price impact in securities class actions pursuant to the Goldman Sachs decision. Mezrahi is cofounder and CEO, Sigrist is VP of data science, and Doherty is VP of business development at SAR. A version of this article previously was published in Law360. 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.
Continue Reading Guest Post: Q2 Stock Drop Stats Buoy High Court’s Goldman Ruling

Jeffrey Lubitz

Elisa Mendoza

One of the most distinctive and interesting securities class action litigation phenomena in recent years has been the rise of event driven litigation. In the following guest post, Jeffrey Lubitz, Executive Director at ISS Securities Class Action Services, and Elisa Mendoza, Vice President of Operations at ISS Securities Class Action Services, take a detailed look at the event driven securities litigation phenomenon, which they describe as a new driver in the growth of securities suit filings. A complete version of this ISS SCAS white paper with footnotes, endnotes, and sources is available  on the ISS website. I would like to thank Jeff and Elisa 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 l like to submit a guest post. Here is Jeff and Elisa’s article.
Continue Reading Guest Post: Event Driven Securities Litigation: The New Driver in Class Action Growth