In the latest SPAC-related securities class action lawsuit, a plaintiff shareholder has filed a securities class action lawsuit against a post-SPAC-acquisition biopharma company in which the plaintiff claims that the risk of the company’s post-merger clinical trial setback should have been unearthed in the pre-merger due diligence process. As discussed below, this lawsuit may prefigure some of the likely patterns for future SPAC-related securities litigation.
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Dismissal Motion Largely Denied in COVID-19-Related Securities Suit Against Vaccine Company
As I have detailed in a series of post on this blog (most recently here), over the last year plaintiffs’ lawyers have filed nearly 30 COVID-19-related securities class action lawsuits. While the plaintiffs’ lawyers’ have been quick to file these cases, it remains to be seen how the claims will fare. Indeed, in January, in the first case to reach initial pleading hurdles, the Court granted the defendants’ motion to dismiss (as discussed here). However, in a more recent ruling one of the first of the COVID-19-related securities suits to be filed, the Court has denied the defendants’ motion to dismiss in significant part. The February 16, 2021 opinion of Eastern District of Pennsylvania Judge Gerald J. Pappert in the securities lawsuit pending against Inovio Pharmaceuticals can be found here.
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Biotech Firm Hit With COVID-19-Related Securities Suit
It has been nearly a year since the coronavirus outbreak in the U.S. first led to widespread closures and disruptions. Throughout that time, plaintiffs’ lawyers have continued to file securities class actions and other claims against companies affected by the pandemic. On February 12, 2021, in the latest of these COVID-19-related securities lawsuits, a plaintiff shareholder filed a securities class action lawsuit against the biotechnology firm bluebird bio alleging that the company misrepresented the pandemic’s foreseeable impact on the company’s FDA application plans. A copy of the complaint can be found here.
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Micron Technology Hit with Board Diversity Law Suit
Last summer and early fall there was a rash of shareholder derivative lawsuits – mostly filed in California, mostly filed against tech companies – based on allegations that the target companies’ boards had breached their duties by failing to include African American board members. The filings of these kinds of lawsuits trickled off after the California legislature adopted a bill requiring companies based in California to meet specified board diversity requirements. However, if a recent lawsuit filied is any indication, the board diversity lawsuit filing trend may not have entirely played out after all.
On February 9, 2021, a plaintiff shareholder launched a new board diversity lawsuit, this time against the board of Micron Technology. As discussed below, this most recent lawsuit is different than the earlier lawsuits in certain key ways. A copy of the complaint against the Micron Technology board can be found here.
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Securities Suit Alleges Failure to Disclose DOJ Investigation Before De-SPAC Transaction
Barely six weeks into the new year, there have already been (according to the SPACInsider website) 127 Special Purpose Acquisition Company (SPAC) IPOs so far this year — that is, in less than a month and a half, there have already been more than 50% of the number of SPAC IPOs as there were in all 52 weeks of the record-setting 2020 SPAC offering year. The SPAC IPO extravaganza has many implications, but unquestionably among the many related consequences is that following-on to the wave of SPAC offerings is the possibility that we are about to see an increase in SPAC-related litigation.
Anyone interested in seeing what this coming litigation might look like will want to take review the securities class action complaint filed last week in the Middle District of Tennessee against Clover Health Investments, a health services firm became a publicly traded company in January 2021 through reverse merger with a SPAC from the SPAC IPO class of 2020. The February 5, 2021 complaint, a copy of which can be found here, alleges that the de-SPAC transaction-related documents and disclosures failed to disclose, among other things, that the acquisition target company was the subject of a DOJ investigation.
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Cornerstone Research: Both Federal and State Securities Suit Filings Declined in 2020
Securities class action lawsuit filings declined 22% in 2020 compared to the year prior but remained well above long-term annual averages, according to a February 3, 2021 report by Cornerstone Research published in conjunction with the Stanford Law School Securities Class Action Clearinghouse. The Cornerstone Research report’s analysis of the 2020 filings is consistent with prior reports on the topic; however, the Cornerstone Research report, unlike prior reports, includes data both for federal and for state securities class action lawsuit filings. The Cornerstone Research report can be found here. Cornerstone Research’s February 3, 2021 press release about the report can be found here.
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Securities Suit Filed Against Exxon Mobil Based on SEC Whistleblower Allegations
Long-time readers know that I have a particular interest in the SEC whistleblower program. I have been interested in it since it was first put into effect now almost ten years ago. One reason I was interested in it from the very outset is that I thought that a pattern might emerge in which whistleblowers submitted their reports to the SEC, the SEC launched an investigation or enforcement action, and then company shareholders filed related securities class action lawsuits based on the circumstances revealed in the whistleblower’s report.
By and large, the third step in this anticipated pattern has not emerged. As far as I am aware, there have not been private securities suits filed after SEC whistleblower reports triggered SEC investigation or enforcement actions – until now, that is. On January 28, 2021, a plaintiff shareholder filed a securities class action against Exxon Mobil relating to news reports that the SEC has launched an investigation of the company based on whistleblower reports questioning the company’s asset valuations of its Permian basin oil fields. A copy of the plaintiff’s complaint can be found here.
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Securities Litigation Against Life Sciences Companies Remained Elevated in 2020
Federal court securities class action litigation filings against life sciences companies declined slightly in 2020 relative to 2019 but remained above long-term historical levels, and remained a significant portion of overall securities class action lawsuit filings during the year, according to a new report from the Dechert law firm. The January 28, 2021 report, entitled “Dechert Survey: Developments in Securities Fraud Class Actions Against Life Sciences Companies 2020 Edition,” can be found here.
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AstraZeneca Hit with Securities Suit Over COVID-19 Vaccine Development Setbacks
In what is the third coronavirus-related securities class action lawsuit filed so far in 2021, a plaintiff shareholder has filed a securities class action lawsuit against the U.K.-based biopharma firm AstraZeneca plc relating to the setbacks the company encountered late last year in connection with the company’s efforts to develop a COVID-19 vaccine. The complaint also relies heavily on the way that the company communicated to investors and the general public concerning anomalies in the vaccine’s interim clinical trial results. A copy of the January 26, 2021 complaint against the company can be found here.
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First Dismissal of Coronavirus-Related Securities Class Action Lawsuit
As I have noted on this site as the cases have accumulated (most recently here), since March 2020 plaintiffs’ lawyers’ have filed over two dozen coronavirus-related securities class action lawsuits. But even as the plaintiffs’ lawyers appeared eager to pursue these types of claims, the question has remained about how these lawsuits will fare. Now, in first dismissal motion ruling in a coronavirus-related securities suit, the court has granted the defendants’ motion to dismiss, in the coronavirus-related securities suit filed last July against Velocity Financial. A copy of Central District of California Judge Gary Klausner’s January 25, 2021 order can be found here.
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