Here at The D&O Diary, we read everything so you don’t have to. One item that crossed my desk this week particularly resonated with me. The specific item was the court’s dismissal motion grant in the securities class action lawsuit pending against the footwear and apparel company Allbirds.

The plaintiffs had tried to argue that by their use in their complaint of bold and italicized font they had indicated which of the defendants’ statements they (the plaintiffs) alleged to be false and misleading. The court said it could not discern from the plaintiffs’ typography what statements or portions or statements were supposed to be misleading and granted the defendants’ dismissal motion with leave for the plaintiffs to attempt to replead. While the ruling could be only a setback for the plaintiffs, there arguably are some lessons here for all of us that should not be overlooked.Continue Reading Boldface and Italics Not Enough to Identify Misleading Statements

Nessim Mezrahi
Stephen Sigrist

One of the perennial securities class action litigation issues is the question of how courts should view plaintiff’s allegations made in reliance on short seller reports. In the following guest post, Nessim Mezrahi and Stephen Sigrist take a look at the conflicted role that short seller reports play in securities class action litigation. Nessim is co-founder and CEO, and Stephen Sigrist is a senior vice president, at SAR LLC. A version of this article previously was published on Law360. I would like to thank Nessim and Stephen for allowing me to publish their article 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 and Stephen’s article.Continue Reading Guest Post: Conflicts Abound When Activist Short-Sellers Publish Reports

You all know the pattern: a short seller publishes a splashy report with attention-grabbing revelations about the operations or financial results of a listed company; the company’s shares decline; and a plaintiffs’ securities class action law firm files a securities class action lawsuit, often based solely on the accusations in the short seller’s report. The defendant company will of course file a motion to dismiss – but how will the court assess the accusations in the short seller’s report for purposes of determining the sufficiency of the plaintiffs’ allegations? In a November 2, 2023, Law360 article (here), Richard Zelichov of the DLA Piper law firm considers the way that courts should consider allegations based on short-seller reports.Continue Reading Short-Seller Reports and Securities Class Action Lawsuits

Nessim Mezrahi

In the following guest post, Nessim Mezrahi takes a look at the Second Circuit’s November 25, 2020 Summary Order in Lea v. TAL Education Group, in which the appellate court reversed the trial court’s dismissal of a securities class action complaint. Many of the plaintiff’s allegations in the complaint were based on matters first raised in a short seller report, a consideration about which Mezrahi has concerns, as discussed below. Mezrahi is co-founder and CEO of SAR, a securities class action data analytics and software company. 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 site’s readers. Please contact me directly if you would like to submit a guest post. Here is Nessim’s article.
Continue Reading Guest Post: Second Circuit Ruling Exposes D&Os to Exchange Act Claims Based on Biased Short-Seller Research

The motion to dismiss phase is a critical stage in the life cycle of a securities class action lawsuit. If a case survives the dismissal motion, it likely will move toward settlement, as so few cases actually go to trial. The motion to dismiss in intended to test the sufficiency of the allegations in the plaintiff’s complaint. According to the rules, the court’s inquiry should be limited to the matter within the complaint. However, over time, rules have developed permitting courts to consider matter from outside the complaint, pursuant to the doctrines of judicial notice and incorporation by reference.

In a detailed August 13, 2018 opinion in which it largely reversed the dismissal of securities class action lawsuit involving the developmental stage pharmaceutical company Orexigen Therapeutics, the Ninth Circuit noted a “concerning pattern in securities cases” in which “overuse” of the doctrines has resulted in improper dismissal of securities suits at the pleading stage based on extraneous matter. The Ninth Circuit’s analysis of the judicial notice and incorporation by reference doctrines is interesting and could have a significant impact on courts’ consideration of matter outside of the complaint in future cases. The Ninth Circuit’s opinion in the Khoja v. Orexigen Therpeutics case can be found here.
Continue Reading Ninth Circuit Decries Consideration of Extraneous Matter, Reverses Securities Suit Dismissal

supct2014In its March 2015 decision in the Omnicare v. Laborers District Council Construction Industry Pension Fund (here), the U.S. Supreme Court held that an issuer may be liable for opinions set forth in a registration statement if the issuer did not genuinely hold the stated opinion, or if the issuer failed to disclose material facts relating to the foundation for the opinion, as discussed here. Because the Omnicare decision was made with respect to claims under the liability provisions of the Securities Act of 1933, one of the questions that arose following the Court’s decision was whether and to what extent the principles the Court enunciated are applicable to securities fraud actions under the Securities Exchange Act of 1934. In an interesting article entitled “False Statements of Belief as Securities Fraud” (here), University of Idaho Law Professor Wendy Gerwick Couture takes a look at these questions and argues that the Omnicare’s holding with respect to statements of opinion analytically should apply equally to securities fraud claims under Section 10 of the ’34 Act as to prospectus liability claims under Section 11 of the ’33 Act. A summary version of Professor Couture’s article appeared on October 28, 2015 on the CLS Blue Sky Blog (here).  
Continue Reading Does the Omnicare’s Holding Regarding Opinion Apply to Securities Fraud Claims?

Jack Clabby

Avi Kaufman

One of the recurring issues with which federal district courts wrestle is the right way to assess securities complaint allegations based on confidential issues. Another recurring issue has to do with the assessment of trading in company securities by corporate insiders pursuant to Rule 10b5-1 trading plans. A recent decision by Second Circuit addressed both of these issues. The Second Circuit’s opinion in Employees’ Retirement System of Government of the V.I. v. Blanford, Case No. 14-cv-199 (2d Cir. July 24, 2015), can be found here.


In the following guest post, John E. Clabby and Avi R. Kaufman of the Carlton Fields Jorden Burt law firm review the Second Circuit’s opinion and in particular consider the appellate courts consideration of the confidential witness and Rule 10b5-1 trading plan issues. The authors’ bios appear at the end of the post.


I would like to thanks Jack and Avi for their willingness to publish their article on my 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 Jack and Avi’s guest post.


Late last week, the U.S. Court of Appeals for the Second Circuit reversed the dismissal of a shareholder class action against the makers of Keurig coffeemakers and their ubiquitous “K-Cups.” In so doing, the Second Circuit further described the standard for stating claims for securities fraud based on confidential witnesses and in the face of a 10b5-1 trading plan.
Continue Reading Guest Post: Second Circuit Revives Securities Fraud Class Action Against the Manufacturer of the Keurig Coffeemaker