litigation trends

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For the last several years, securities class action lawsuits related to SPACs and de-SPACs have been a significant factor in the overall annual number of securities suit filings. SPAC-related suits remain a significant factor in the number of filings again this year, even though it has now been several years since the peak of the SPAC frenzy. In the latest example, on October 17, 2024, a plaintiff shareholder filed a securities suit against cannabis company WM Technology alleging that both prior to and following its predecessor company’s merger with a SPAC, the company misrepresented a key customer engagement metric. The new lawsuit has some interesting features, as discussed below. A copy of the complaint can be found here.Continue Reading Cannabis Company Hit With SPAC-Related Securities Suits

Among the most distinctive and important securities class action lawsuit filing trends this year has been the influx of new lawsuit based on alleged AI-related misrepresentations. In the latest example, on October 15, 2024, a plaintiff shareholder filed a securities class action lawsuit against China-based AI and robotics company, Xiao-I, in which the shareholder alleged financial reporting issues and also that the company overstated its AI capabilities. A copy of the October complaint against the company can be found here.Continue Reading China-Based Company Hit with AI-Related Securities Suit

Over the last several months, various SEC spokespeople, including SEC Chair Gary Gensler, have issued strong precautionary statements against so-called “AI-washing,” which Microsoft Co-Pilot, an AI-powered tool, defines as a “deceptive marketing tactic where a product or service is promoted by exaggerating or falsely claiming the use of artificial intelligence.” The SEC has even issued an advisory warning investors against exaggerated or fraudulent AI-related claims.  In several prior enforcement actions, the SEC has made it clear that it is prepared to pursue those whom it deems to have engaged in AI-washing.

In the latest example of the SEC’s AI-washing focused enforcement activity, late last week the SEC announced that it had entered settled charges against an investment advisor, its principals, and related entities, alleging that the parties engaged in misrepresentations concerning the firms’ alleged used of AI to perform automated trading in clients’ accounts. The SEC’s October 10, 2024, press release regarding the action against Rimar Capital USA and related entities and individuals can be found here. The SEC’s October 10, 2024, administrative order in the matter can be found here.Continue Reading Investment Advisory Firm Hit with AI-Washing SEC Enforcement Action

Every participant in the world economy currently faces an environment fraught with geopolitical risk, with a war in the Middle East showing a dangerous potential to expand, a war in Ukraine that continues to flame, tensions in the South China Sea, and many other concerns. While companies’ operating risks in these environments in many cases may seem apparent, it may not always be obvious how geopolitical risks can translate into corporate and securities litigation.  A recent securities class action lawsuit filed against technology company Super Micro Computer provides some insight into these litigation risks. Although the lawsuit involves a host of issues, among the principal concerns are allegations that the company misrepresented its compliance with trade control regulations restricting exports to Russia. These allegations illustrate how trade issues, for example, can contribute to securities litigation activity. A copy of the new complaint in the Super Micro Computer case can be found here.Continue Reading Geopolitics and Securities Litigation Risk

As readers know, since the initial outbreak of COVID-19 in the U.S. in March 2020, plaintiffs’ lawsuits have hit dozens of companies with pandemic-related securities suits; indeed, even though we are now well into the fifth year since the outbreak, plaintiffs’ lawyers continue to file COVID-related securities suits. But while these kinds of suits have proven to be popular with plaintiffs’ lawyers, how have they fared? Recent developments in two of these COVID-related securities suits underscore the fact that the results in these cases have been mixed.Continue Reading Yes, But How Have the COVID-19-Related Securities Suits Fared?

As I have noted in numerous posts on this site (most recently here), SPAC-related litigation has been a significant factor in the overall volume of corporate and securities litigation filings in recent years. But while I have been attentive to noting the lawsuits as they have been filed, it could be argued that I have not been as dutiful in noting how these cases are being resolved. One recent case resolution – the settlement of the various SPAC-related litigation involving ATI Physical Therapy – is particularly interesting. The court recently approved the settlement of these cases for a total of $31 million. As discussed below, there are several interesting features of these settlements. The court’s approval of the settlements is detailed in a September 24, 2024, Law360 article (here).Continue Reading ATI Physical Therapy Settles SPAC-Related Litigation for $31 Million

In recent months, many companies have found themselves under fire from conservative advocates for their stances on ESG-related issues. At the same time, other companies have found themselves facing litigation based on allegations that they have overstated their green credentials (a set of allegations sometimes called “greenwashing”). As two recent cases show, companies can face challenges and potential liability over their sustainability claims.Continue Reading Beverage Companies Face Scrutiny Over Their Green Claims

In my recent round-up of the top trends in the world of directors’ and officers’ insurance and liability, I noted that, even though we are now well into the fifth year since the initial outbreak of COVID-19 in the U.S., COVID-related securities suits continue to be filed. In the latest example of this kind of lawsuit, last week a plaintiff investor filed a securities class action lawsuit against customer contact data firm ZoomInfo Technologies, alleging that after COVID-related demand inflated the company’s results during the pandemic, the company allegedly strained to conceal subsequent declining demand from investors. A copy of the September 4, 2024, complaint can be found here.Continue Reading Customer Contact Data Company Hit with COVID-Related Securities Suit

SEC officials have for months been signaling their concerns about companies overstating their AI credentials, a phenomenon that the officials and others have called “AI washing.” As set out and partially transcribed in a September 5, 2024, TheCorporateCounsel.net post (here), SEC Chair Gary Gensler recently recorded a video in which he reiterated concerns about public company AI-related disclosures and the need for companies to match AI-related claims to their actual capabilities. Nor are concerns about companies’ AI-related disclosures limited to the SEC; the tech community is also concerned about companies that overhype their AI qualifications, as illustrated in a September 4, 2024 TechBrew post (here).  

Another audience is also monitoring public companies’ AI-related disclosures – the class action plaintiffs’ lawyers. The number of securities class action lawsuits based on allegedly misleading statements concerning AI continues to grow. In the latest example, on September 4, 2024, a plaintiff shareholder filed a securities suit against software development platform GitLab alleging that the company misled investors by overstating the company’s ability to develop AI software features that would increase market demand for the company’s software development platform. A copy of the complaint can be found here.Continue Reading Software Development Platform Hit with AI-Related Securities Suit

Here we are, well into the fifth year since the initial outbreak of COVID-19 in the U.S., and yet coronavirus-related securities lawsuits are still being filed. In the latest example, earlier this week plaintiffs’ lawyers filed a securities class action lawsuit against the electronics manufacturing firm Methode Electronics based in part on allegations concerning problems allegedly caused by the company’s loss of key personnel during the pandemic. A copy of the August 26, 2024, complaint can be found here.Continue Reading COVID-Related Securities Suit Filed Against Electronic Components Company