The U.S. Supreme Court – in a short, concise, unanimous opinion – has ruled that to assert Section 11 claims against Slack in connection with the company’s June 2019 direct listing, the plaintiff must plead and prove that he purchased shares pursuant to Slack’s allegedly misleading registration statement. Slack had offered both registered and unregistered shares in the direct listing. Even though the plaintiff had not alleged that the shares he purchased were registered shares, the Ninth Circuit had allowed the plaintiff’s claims to stand. The Supreme Court vacated the Ninth Circuit’s order and remanded the case to the district court. At a minimum, the Supreme Court’s ruling means Section 11 plaintiffs must plead that their shares are traceable to the offering. The practical implication of the Court’s ruling may be that the companies conducting direct listings cannot be sued under Section 11. A copy of the Court’s June 1, 2023, opinion can be found here.Continue Reading Even in Direct Listing, Section 11 Plaintiff Must Trace Shares to Registration Statement
Earlier this week, the U.S. Supreme Court heard oral argument in the Slack case, the high-profile securities law case the Court is considering this term. In the following guest post, Joseph Gross of the Wiley firm provides a detailed overview of the legal issues in the case and summarizes the parties’ oral arguments. I would like to thank Joe 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 Joe’s article.Continue Reading Guest Post: Will the Supreme Court Cut Securities Plaintiffs Some Slack?
In the following guest post, Nessim Mezrahi and Stephen Sigrist take a look at a variety of economic and marketplace factors that they suggest may lead to securities litigation lawsuit filings in 2023, particularly with respect to IPO companies. Mezrahi is co-founder and CEO and Sigrist is Senior Vice President of Data Science at SAR LLC. A version of this article previously was published on Law360. I would like to thank the authors for allowing me 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 the authors’ article.Continue Reading Guest Post: Securities Class Actions May Spur IPO Investigations in 2023
On December 13, 2022, the U.S. Supreme Court granted the petition of Slack Technologies to have the court take up the question of the plaintiff’s standing to pursue ’33 Act liability claims against the company. The standing question arises because the plaintiff bought his Slack shares in connection with the June 2019 transaction in which Slack went public through a direct listing rather than through a traditional IPO. Though the standing questions arises in the relatively narrow context of the company’s direct listing, the standing questions at issue potentially could affect ’33 Act liability claims in other contexts as well. A copy of the U.S. Supreme Court’s December 13, 2022 order in the Slack case can be found here.
Continue Reading Supreme Court Agrees to Take Up Question of ’33 Act Standing in Slack Direct Listing Case
Securities class action litigation activity involving IPO companies recently has been a significant concern, for the companies themselves as well as for their insurers. In the following guest post, Stanford Law School Professor Michael Klausner and Jason Hegland, Stone Kalisa, and Sam Curry of Stanford Securities Litigation Analytics take a look at the data surrounding IPO-related securities litigation. 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: IPO Litigation Risk
A third California state court has ruled that a provision specifying that federal courts are the exclusive forum for the resolution of ‘33 act liability actions is valid and enforceable. This latest decision — in a state court securities class action lawsuit pending against Dropbox — suggests that a broad consensus is emerging in California court to enforce federal forum provisions. But while the Dropbox decision is largely consistent with the prior California state court decisions enforcing FFP, there are certain features of the Dropbox decision that make it noteworthy and interesting in its own right. A copy of the December 4, 2020 decision in the Dropbox case can be found here. A December 8, 2020 memo from the Seyfarth Shaw law firm about the ruling can be found here.
Continue Reading Third California State Court Upholds Enforceability of Federal Forum Provision
A recent guest post on this site opined that because of the volume of Section 11 litigation being filed in New York state court, New York’s courts “will have a major role in shaping the standards applied in Securities Act litigation going forward.” If that is the case, then the recent New York appellate court ruling reversing a trial court’s dismissal motion denial in a state court Section 11 action could be significant. According to a December 4, 2020 Law360 article (here), the ruling represents the first time the New York appellate division has addressed the merits of a federal ’33 Act claim since the U.S. Supreme Court’s decision in Cyan. The New York appellate court’s December 3, 2020 ruling can be found here.
Continue Reading NY Appellate Court Reverses Trial Court’s Dismissal Denial in State Court Securities Suit
In reliance on the federal forum provision (FFP) in the company’s corporate charter, a California Superior Court judge has granted the defendants’ motion to dismiss the state court ’33 Act liability action pending against Uber. The ruling represents the second occasion on which a California state court has dismissed a state court ’33 Act liability action in reliance on an FFP in the corporate defendant’s charter, providing further hope that the adoption of FFPs may help companies address the Cyan problem – that is, the possibility of having to face identical ’33 Act liability actions in both state and federal court. The California Superior Court’s November 16, 2020 order in the Uber case can be found here.
Continue Reading State Court Securities Suit Against Uber Dismissed Based on Federal Forum Provision
In recent months, IPO activity has reached levels “not seen since the dot-com era,” according to a recent report on the IPO market. On November 3, 2020, the IPO Tracker reported that October was the busiest month for IPOs in 20 years. As discussed below, all this IPO activity may foretell the possibility of increased IPO-related securities litigation ahead.
According to the IPO Tracker, there were 85 IPOs completed in October 2020, which is “the busiest single month for IPOs in 20 years” – surpassing even September 2020’s totals, which had been the busiest month in that period. The October surge brings the 2020 YTD total through year’s first ten months to 351 completed offerings, which surpasses “every yearly total since 2000.”
Continue Reading Does Increased IPO Activity Foreshadow Increased IPO-Related Securities Litigation Ahead?
After the Delaware Supreme Court’s March 2020 decision in Salzberg v. Sciabacucchi upholding the facial validity of corporate charter provisions designating federal court as the forum for Securities Act liability claims, several questions remained. Among the questions is whether others’ states courts will recognize and enforce federal forum provisions in Delaware corporations’ charters. This issue has been teed up for decision in a Section 11 lawsuit pending in San Mateo County court in California, in a case involving Dropbox. Dropbox has filed a motion urging the California state court to dismiss the action, in reliance on the federal forum provision in its corporate charter.
As discussed Alison Frankel’s July 13 post on her On the Case blog (here), a group of six ex-judges from Delaware has now entered an amicus brief on the issue in the case, urging the California court to recognize Delaware legal authority and enforce the federal forum provision in Dropbox’s charter. The Dropbox case, according to Frankel, is “shaping up as an early test of the application of the [Sciabacucchi decision] that forum selection clauses requiring shareholders to litigate Securities Act claims in federal court are facially valid because they concern the corporation’s internal affairs.”
Continue Reading California Court to Address Enforceability of Delaware Corporation’s Federal Forum Provision