Law stated as of 24 Jan 2022 • USA (National/Federal) |
Key Pleading Date | Case Name | Procedural History and Case Summary |
November 19, 2021 | Key Pleadings and Court Orders:
Summary: On Nov. 19, 2021, a shareholder filed a COVID-19-related securities class action against Citrix Systems, Inc., a software company that provides users with secure remote access to computer networks, and certain of its directors and officer in the Southern District of Florida. The plaintiff shareholder's complaint alleges that Citrix made materially false and misleading statements to investors regarding the company's ability to make permanent initial short-term gains it made during the COVID-19 pandemic. According to the Complaint, in 2019 Citrix announced two changes:
However, early in the pandemic, Citrix decided to offer a limited duration, on-premise license at a discounted rate. It told investors that it expected that most customers would transition to cloud accounts after the limited license expired. (Compl. at ¶¶ 3-4.) Citrix experienced an initial boost in sales and told its investors that the conversions from the limited licenses to the cloud-based accounts was going "smoothly and successfully." However, in announcements it made on April 29, 2021 and July 29, 2021, Citrix reported that, "despite prior assurances, the transition to cloud was not as successful as the Company had led its investors to believe." It also announced a major restructuring of its leadership and, in October, its CEO stepped down. As a result, Citrix stock dropped dramatically. (Compl. at ¶¶ 4-8.) The plaintiff class filed its complaint on Nov. 19, 2021, including counts for:
For more information on the availability of directors & officers insurance to cover third-party shareholder claims, see Practice Note, Directors and Officers Insurance Policies. For more information on shareholder derivative lawsuits, see Practice Note, Shareholder Derivative Litigation. | |
October 19, 2021 | Key Pleadings and Court Orders:
Summary: On October 19, 2021, the Northern District of Illinois denied Federal Insurance Co.'s (Federal) motion to dismiss the claims of its policyholder, Healthcare Information and Management Systems Society (HIMSS), who was seeking liability coverage for the costs of defending and settling underlying COVID-19-related third-party lawsuits under its D&O policy. HIMSS is a non-profit corporation in the global health systems and technology field. It hosts an annual tradeshow that attracts nearly 50,000 visitors and participants. HIMSS cancelled its 2020 trade show shortly before it was to start due to the COVID-19 pandemic. Two exhibitors sued HIMSS seeking damages for losses related to HIMSS's abrupt cancellation. HIMSS notified Federal of the underlying actions and sought coverage and defense under its D&O policy. Federal denied the claims, stating:
HIMSS filed counterclaims alleging:
The court held:
The court did, however, dismiss HIMSS' bad faith claims. | |
September 15, 2021 | Cody Dixon v. The Honest Company, Inc., Case No. 21-cv-07405 (C.D. Cal., Sept. 15, 2021) | Key Pleadings and Court Orders:
Summary: On September 15, 2021, a shareholder filed a COVID-19-related securities class action against The Honest Company, a personal care consumer products company, certain of its directors and officers, and its offering underwriters in the Central District of California. The plaintiff shareholder's complaint alleges that Honest made materially false and misleading statements in its IPO Registration Statement, including omitting relevant information regarding the pandemic's negative impact on its ability to remain profitable. The company completed its IPO in May 2021. According to the complaint, in its IPO Registration Statement, the company omitted that:
On August 13, 2021, the company issued its first financial report as a public company. The reported showed:
Honest's share price declined 28% the day of the financial report. Within a week, its stock price declined 43% from the IPO price. |
August 17, 2021 | Key Pleadings and Court Orders:
Summary: On August 17, 2021, the SEC filed a COVID-19-related civil enforcement action against Rising Biosciences, Inc., a biotech firm, and its CEO, Arthur Hall, in the Northern District of Ohio. Biosciences produces and sells health-products. The SEC's complaint alleges that Rising Biosciences made false claims about its disinfectants to convince the public and its investors that it was positioned to profit from the COVID-19 pandemic. According to the complaint, the company's stock price rose dramatically after Rising Biosciences made a series of false and misleading public pronouncements between April 2020 and October 2020, including that its disinfectants were:
In reality, the disinfectants were not CDC-approved or registered with the EPA; instead, the product was merely a repackaged pesticide. The complaint includes counts for:
This is the 10th COVID-19-related enforcement action the SEC filed since the pandemic began. | |
July 7, 2021 | Key Pleadings and Court Orders:
Summary: On July 7, 2021, the SEC filed a COVID-19-related civil enforcement action against Parallax Health Sciences, Inc., its CEO, Paul Arena, and its CTO, Nathaniel Bradley. The SEC alleges that Parallax issues of series of false press releases in March and April 2020 to boost its declining stock prices. The press releases claimed that Parallax had developed a COVID-19 screening test that would be "available soon" and that it had PPE for "immediate sale." The company's stock rose 20% at this news.
The complaint alleges the defendants violated:
Parallax, Arena, and Bradley consented to judgments:
The Southern District approved the settlements and entered final judgment on July 9, 2021. | |
December 17, 2020 | Key Pleadings and Court Orders:
Summary: On December 17, 2020, a group of shareholders filed a securities class action against Sona Nanotech Inc., Canadian diagnostic medical testing company. The company's stock price declined sharply after it failed to obtain regulatory approvals for its COVID-19 rapid detection antigen test despite public statements assuring shareholders that by the end of July it would submit the results of clinical in-field evaluations to the FDA and to regulatory authorities in multiple jurisdictions for emergency use authorization to market its test. According to the complaint, the company's stock share prices fell sharply on the dates of three key announcements:
On December 17, 2020, a shareholder filed a securities class action lawsuit against the company, its CEO, and its CFO on behalf of a class of investors that purchased securities between July 7, 2020 and November 25, 2020. The Complaint alleges the defendants:
The complaint includes counts for:
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November 19, 2020 | Key Pleadings and Court Orders:
Case Summary: On November 19, 2020, a group of shareholders filed a securities class action against K12, Inc., an online learning company. K12's stock price declined sharply after the several news outlets revealed that the company misled investors, educators, and school systems about its ability to service and administer online learning programs during the COVID-19 pandemic. According to the Complaint, K12 embarked upon a "self-promoting campaign" to "convince the market that it was well positioned and technologically capable to accommodate and service the massive surge of students, parents, and teachers" who turned to online education during the COVID-19 pandemic. "In reliance on K12's false and misleading statements," including K12 executives' "commentary regarding present enrollment trends," securities analysts increased K12's rating and the and the price of K12 shares surged. (Compl. at ¶¶ 3-4.) The marketing campaign worked, but K12 lacked the infrastructure and technological capabilities to support and service the huge increase in traffic on its website and its learning platforms. News reports uncovered severe issues related to "the functionality and support of K12's platforms," the "ineffective and unacceptable" training K12 provided to school systems that purchases its services, and "weak cybersecurity measures and protocols" that left K12's network susceptible to hackers and crippled its platform. The price of K12 shares dropped drastically and continued to drop as reports of K12's failures mounted. (Compl. at ¶¶ 5-13.) On November 19, 2020, a shareholder filed a securities class action lawsuit against K12, its CEO, and its CFO on behalf of a class of K12 investors that purchases securities between April 27, 2020 and Sept. 18, 2020. The Complaint alleges:
The Complaint includes counts for:
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August 24, 2020 | Key Pleadings and Court Orders:
Case Summary: Kurt Himmelberg, a shareholder of a clinical-stage company engaged in the development of vaccines called Vaxart, sued Vaxart, certain of its officers and directors, and Armistice Capital LLC ("Armistice"), a hedge fund that held 30% of Vaxart stock, in a securities class action filed in the Northern District of California. Vaxart's stock price declined sharply after news that, despite the company's public statements to the contrary, it was not part of the government's "Operation Warp Speed" to find a COVID-19 vaccine. The complaint alleges that Vaxart's directors and officers misled investors about Vaxart's involvement in Operation Warp Speed and that Armistice made the problem worse by engaging in a pump and dump scheme. These actions cost investors millions of dollars. Specifically, the complaint alleges:
The plaintiff alleges that Vaxart's June 25, 2020 and June 26, 2020 public statements were:
The complaint includes counts for:
The defendants filed a motion to dismiss that is currently pending. | |
August 21, 2020 | Key Pleadings and Court Orders:
Case Summary: Josstyn Richter, a shareholder of a software company called SCWorx, sued certain SCWorx officers and directors (and SCWorx as a nominal defendant) in a securities class action filed in the Southern District of New York. SCWorx's stock price declined sharply after several news outlets revealed that the company's officers misled investors about alleged multi-million dollar deals it had entered to provide COVID-19 testing kits. Specifically, the complaint alleges:
SCWorx's stock fell sharply on this news. Additionally:
The complaint alleges that the individual defendants not only made false and misleading statements and omissions of material fact, but also caused the company to "fail to maintain an adequate system of oversight" which subjected the company to:
The complaint includes counts against the individual defendants for:
The defendants filed a motion to dismiss that is currently pending. | |
July 7, 2020 | Key Pleadings and Court Orders:
Case Summary: Steve Hartel, a shareholder of a private prison firm called The GEO Group (GEO), sued GEO and certain of its officers and directors in a securities class action filed in the Southern District of Florida. GEO's stock price declined sharply after news of COVID-19 outbreaks in GEO-run halfway houses became public. The complaint alleges that GEO's directors and officers misled investors about the effectiveness of its COVID-19 response and caused investors to lose millions of dollars. Specifically, the complaint alleges:
The complaint alleges that these statements we materially false and misleading and that GEO failed to disclose material facts about GEO's "business, operations, and compliance policies," specifically regarding its "woefully ineffective COVID-19 response procedures" that "subjected residents of the Company's halfway houses to significant health risk" (Compl. at ¶ 33). On June 17, 2020, the Intercept published an article reporting details of a COVID-19 outbreak at one of GEO's halfway houses and detailing GEO's "blundering response to the pandemic," including that GEO "continued to keep its residents in overcrowded conditions without enforcing personal protective measures even as COVID-19 diagnoses at the facility increased" (Compl. at ¶ 34). The company's stock declined sharply after this news. The plaintiff filed this lawsuit on behalf of the class of investors that purchased GEO shares between February 27, 2020 and June 16, 2020. The complaint includes counts for:
The defendants filed a motion to dismiss that is currently pending. | |
June 15, 2020 | Key Pleadings and Court Orders:
Case Summary: After purchasing shares of Co-Diagnostics, Inc., a medical diagnostic testing company, Gelt Trading Ltd. (Gelt) sued Co-Diagnostics and certain of its officers and directors in a securities class action filed in the District of Utah. Co-Diagnostics developed a COVID-19 test in early 2020. In February it received approval to sell the test in Europe. By April, it had also received approval to sell the test in the United States. The complaint alleges that Co-Diagnostics' directors and officers engaged in a pump and dump scheme that caused investors to lose millions of dollars. Specifically:
The complaint includes counts for:
The defendants filed a motion to dismiss that is currently pending. | |
June 4, 2020 | Key Pleadings and Court Orders:
Case Summary: This is the first securities class action implicating the Paycheck Protection Program (PPP) (the fiscal stimulus program Congress enacted as part of the Coronavirus Aid, Relief and Economic Security Act (CARES Act). The named Plaintiff, Guofeng Ma, alleges that Wells Fargo unfairly allocated government-backed loans under the PPP and made materially false and misleading statements about those loans, which caused significant damage to shareholders that bought Wells Fargo securities between April 5, 2020 and May 5, 2020. Specifically, the Complaint alleges:
The complaint includes counts for:
The parties filed a stipulation of voluntary dismissal on November 12, 2020. | |
April 24, 2020 | Key Pleadings and Court Orders:
Case Summary: After purchasing American Depository Shares (ADS) of Phoenix Tree Holding, Limited (Phoenix), a Chinese real estate company, Katherine Wandel sued Phoenix and certain of its officers and directors in a securities class action filed in the Southern District of New York. The complaint alleges that the offering materials Phoenix prepared in conjunction with its January 22, 2020 initial public offering (IPO) contained untrue statements of material fact and failed to disclose material facts, including omitting or otherwise misrepresenting:
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March 12, 2020 | Key Pleadings and Court Orders:
The Complaint alleged that Inovio and its CEO made these false and misleading claims both in press releases and in public filings. Inovio filed a motion to dismiss on November 5, 2020. On February 16, 2021, the Court granted its motion in part, and denied it in part. Specifically, the court:
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March 12, 2020 | Key Pleadings and Court Orders:
Case Summary: A Norwegian Cruise Lines (NCL) shareholder filed a securities class action claiming NCL's CEO and CFO caused a steep drop in NCL's stock price when they made false and misleading statements that:
Norwegian Cruise Lines moved to dismiss the complaint. On April 12, 2021, the Court granted Norwegian Cruise Line's Motion to Dismiss with prejudice. It held:
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