Key COVID-19-Related Securities Cases Implicating the Availability of D&O Insurance: 2020 and 2021 Tracker | Practical Law

Key COVID-19-Related Securities Cases Implicating the Availability of D&O Insurance: 2020 and 2021 Tracker | Practical Law

A table of key cases filed in 2020 and 2021 that implicate the availability of directors and officers (D&O) insurance for corporate defendants in securities litigation (direct and derivative securities claims) and class actions related to the ongoing 2019 novel coronavirus disease (COVID-19) pandemic. The table lists the cases in reverse chronological order, summarizes each case, and contains links to the complaints and other key pleadings.

Key COVID-19-Related Securities Cases Implicating the Availability of D&O Insurance: 2020 and 2021 Tracker

by Practical Law Commercial Transactions
Law stated as of 24 Jan 2022 • USA (National/Federal)
A table of key cases filed in 2020 and 2021 that implicate the availability of directors and officers (D&O) insurance for corporate defendants in securities litigation (direct and derivative securities claims) and class actions related to the ongoing 2019 novel coronavirus disease (COVID-19) pandemic. The table lists the cases in reverse chronological order, summarizes each case, and contains links to the complaints and other key pleadings.
Many businesses are reviewing their insurance policies to determine whether insurance coverage is available to recover losses related to the ongoing 2019 novel coronavirus disease (COVID-19) pandemic. In the immediate aftermath of the COVID-19 outbreak, the most pressing insurance issue was whether business interruption coverage was available to reimburse companies for slowdowns, shutdowns, and reopening expenses. Now businesses are dealing with a broader range of COVID-19-related losses that implicate a similarly broad range of insurance coverages, including whether directors and officers (D&O) insurance provides coverage for lawsuits brought by company stakeholders (shareholders, investors, creditors, or trustees) against company officers and directors alleging that business decisions they made in response to the COVID-19 pandemic caused the company to incur losses and liabilities.
This tracker includes key cases filed in 2020 and 2021 that implicate whether (and under what circumstances) D&O insurance coverage is available for:
  • Securities lawsuits arising out of:
    • misleading disclosures related to the company's performance or expected performance during the COVID-19 pandemic; or
    • mismanagement during the COVID-19 pandemic.
  • Claims made by shareholder and other company stakeholders that:
    • directors, officers, executives, or other company employees breached their duties to the company during the COVID-19 pandemic; or
    • corporate mismanagement led to insolvency or bankruptcy during the COVID-19 pandemic.
The tracker:
  • Lists cases in reverse chronological order based on filing date.
  • Provides a summary and procedural history.
  • Links to the complaint and, if applicable, other key pleadings.
For more information on D&O insurance, including D&O insurance for shareholder derivative suits, see Practice Note, Directors and Officers Insurance Policies and Criminal and Civil Liability for Corporations, Officers, and Directors: Shareholder Derivative Actions.
For additional guidance on the availability of insurance coverage for COVID-19 losses, see:
For additional guidance on the commercial impacts of COVID-19, see Commercial Global Coronavirus Toolkit and Practical Law's COVID-19: Pandemic Response page.
Key Pleading Date
Case Name
Procedural History and Case Summary
November 19, 2021
City of Hollywood Police Officers' Retirement System v. Citrix Systems, Inc., et. al., Case No. 0:21-CV-62380 (S.D. Fla., Nov. 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:
  • Transition from a life-time license model to a subscription license payment model.
  • Transition from providing on-premise software installation and support to providing cloud-based services. 
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:
  • Violations of Section 10(b) of the Securities Exchange Act and Rule 10b-5 (against all defendants).
  • Violation of Section 20(a) of the Securities Exchange Act (against the individual defendant).
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
Federal Insurance Company et al v. Healthcare Information and Management Systems Society, Inc., Case No. 1:20-CV-06797 (N.D. Ill., Oct. 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:
  • The policy's "Professional Services Exclusion" and "Contract Exclusion" barred coverage.
  • HIMSS damages didn't meet the policy's definition of "Loss" (because the costs of settling the underlying lawsuits was uninsurable restation damages).
HIMSS filed counterclaims alleging:
  • The underlying suits were covered.
  • Federal denied its claim in bad faith.
  • Federal filed a motion to dismiss the counterclaims. 
The court held:
  • The cost of settling the underlying lawsuits constituted a "loss" under the policy because the settlement payments at issue involved a combination of restitution and damages, therefore Federal is liable for a portion of the damages.
  • Neither coverage exclusion applied because:
    • the underlying lawsuits were not confined solely to either negligent supervision of services claims or breach of contract claims; and 
    • the settlement agreements at issue settled all the claims, not just potentially excluded claims.
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:
  • September 15, 2021: Complaint.
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:
  • Prior to the IPO, Honest's results were significantly impacted by a COVID-19 stock-up for diapers, wipes, and health and wellness products.
  • At the time of the IPO:
    • demand for products in those categories was going down; and
    • the company knew its financial results would likely be adversely impacted.
  • As a result, positive statements in the IPO about the company's prospects were materially misleading and lacked a reasonable basis.
On August 13, 2021, the company issued its first financial report as a public company. The reported showed:
  • A net loss of $20M for the second quarter of 2021 (compared to a net loss of $.4 million for the second quarter of 2020).
  • Only 3% revenue growth, which Honest attributed to a $3.7M COVID-19 stock-up in Diapers and Wipes.
  • A 6% decline in Household and Wellness revenue, which Honest attributed to reduced demand for sanitization products "as consumers became vaccinated and customers managed heavy levels of inventory."
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
SEC v. Arthur Hall and Rising Biosciences, Inc., Case No. 21-cv-1597 (N.D. Ohio, 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:
  • Launched in response to COVID-19.
  • Approved by the CDC.
  • Registered with the EPA.
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:
  • Violations of Section 10(b) of the Securities Exchange Act and Rule 10b-5 (against all defendants).
  • Violation of Section 20(a) of the Securities Exchange Act (against the individual defendant).
This is the 10th COVID-19-related enforcement action the SEC filed since the pandemic began. 
July 7, 2021
SEC v. Parallax Health Sciences, Inc., et. al., Case No. 21-cv-05812 (S.D.N.Y. July 7, 2021)
Key Pleadings and Court Orders:
  • July 7, 2021: Complaint.
  • July 9, 2021: Final judgment. 
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.
  • According to the SEC, Parallax:
  • Did not develop a screening test (the company was insolvent).
  • Even if it had the funds, could not have developed the test on the publicized timeline.
  • Never had PPE for sale.
The complaint alleges the defendants violated:
  • Section 10(b) of the Securities Exchange Act and (Parallax and Arena).
  • Sections 17(a)(1) and (3) of the Securities Act (Parallax and Arena).
  • Section 17(a)(3) (Bradley).
Parallax, Arena, and Bradley consented to judgments:
  • Enjoining them from future violations of the Securities Act (all defendants).
  • Requiring them to pay civil penalties (all defendants).
  • Prohibiting them from acting as a public company officer or director (Arena only).
  • Prohibiting them from participating in an offering of penny stock (Arena and Bradley).
The Southern District approved the settlements and entered final judgment on July 9, 2021.
December 17, 2020
Kevin Alperstein, et. al. v. Sona Nanotech Inc., David Regan, and Robert Randal, No. 20-11405 (C.D. Cal. Dec. 17, 2020)
Key Pleadings and Court Orders:
  • December 17, 2020: Complaint.
  • April 19, 2021: First Amended Complaint.
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:
  • August 6, 2020, when the company announced a delay in the results of its evaluation studies.
  • October 29, 2020, when the FDA deprioritized its review of the company's rapid COVID-19 antigen test.
  • November 25, 2020, when the company announced it had withdrawn its application for authorization from Health Canada to market its rapid COVID-19 antigen test.
    (Compl. at ¶¶ 15-23.)
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: 
  • Made false or misleading statements about their rapid COVID-19 antigen test, including failing to disclose that the company could not receive results from field studies or get approval to market its rapid COVID-19 antigen test in the promised time frame. 
  • Lacked a reasonable basis for their positive statements about the company's prospects and business operations.
    (Compl. at ¶¶ 36-38.)
The complaint includes counts for:
  • Violations of Section 10(b) of the Exchange Act and Rule 10b-5 (against all defendants).
  • Violation of Section 20(a) of the Exchange Act (against the individual defendants).
November 19, 2020
Yun Chau Lee, et. al. v. K12 Inc., Nathaniel A. Davis, and Timothy Medina, No. 20-cv-01419 (E.D.Va. Nov. 19, 2020)
Key Pleadings and Court Orders:
  • November 19, 2020: Complaint.
  • April 5, 2021: Amended Complaint.
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 defendants:
    • made false or misleading statements;
    • failed to disclose to investors that it lacked the technological capabilities, infrastructure, cyberattack protocols, and necessary levels of administrative support to support the increased demand for on-line education during the COVID-19 pandemic; and
    • lacked a reasonable basis for their positive statements about the Company's prospects and business operations.
  • Plaintiff and other class members suffered significant losses and damages as a result of the defendants' wrongful acts and omissions and the drastic drop in the market value of K12 shares.
    (Compl. at ¶¶ 14-15.)
The Complaint includes counts for:
  • Violations of Section 10(b) of the Exchange Act and Rule 10b-5 (against all defendants).
  • Violation of Section 20(a) of the Exchange Act (against the individual defendants).
August 24, 2020
Himmelberg v. Vaxart, Inc., 20-cv-05949, Complaint (N.D. Cal., August 24, 2020)
Key Pleadings and Court Orders:
  • April 23, 2020: Complaint.
  • January 29, 2021: Amended Complaint.
  • March 12, 2021: Defendants’ Motion to Dismiss Plaintiffs’ Consolidated Class Action Complaint.
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: 
  • Armistice owned 30% of Vaxart's stock as of June 3, 2020. Armistice's Managing Member and Managing Director were on Vaxart's Board of Directors, and convinced Vaxart to amend its warrant agreements with Armistice to allow it to exercise its warrants on approximately 21 million shares of Vaxart's stock immediately (Compl. at ¶¶ 5-6).
  • On June 25, 2020, Vaxart announced it had the capacity to produce a billion COVID-19 vaccine doses annually, and its stock price "nearly doubled" overnight (Compl. at ¶ 7).
  • On June 26, 2020, Vaxart issued a press release stating it was selected to participate in the U.S. Government's Operation Warp Speed program, including receiving government funding to get its vaccine to market, and Vaxart's stock price jumped again (Compl. at ¶ 8).
  • During two days of trading, Friday, June 26, 2020 and Monday June 29, 2020, Armistice exercised all its warrants and reduced its ownership from nearly 30% to .2%, reaping profits of $200 million (Compl. at ¶ 9). 
  • On July 25, 2020, a New York Times article revealed that Vaxart had not actually been selected to receive government funding from operation warp speed, and that Vaxart senior executives and board members had generated huge profits via a pump and dump scheme. In response to this news Vaxart shares dropped sharply. (Compl. at ¶ 10.) 
The plaintiff alleges that Vaxart's June 25, 2020 and June 26, 2020 public statements were:
  • False and misleading. 
  • Allowed Armistice to engage in an illicit pump and dump scheme. 
  • Positioned Vaxart board members and executives for "big pay-days" via stock options that vested before the stock increased in value. 
    (Compl. at ¶¶ 33-35.)
The complaint includes counts for:
  • Violations of Section 10(b) of the Exchange Act and Rule 10b-5 (against all defendants).
  • Violation of Section 20(a) of the Exchange Act (against the individual defendants).
The defendants filed a motion to dismiss that is currently pending.
August 21, 2020
Richter v. Marc S. Schessel and SCWorx Corp., 20-cv-06760, Complaint (S.D.N.Y., August 21, 2020)
Key Pleadings and Court Orders:
  • August 21, 2020: Complaint.
  • August 27, 2020: Joint Stipulation and Order Consolidating Related Shareholder Derivative Actions under Case No. 1:20-CV-4554-JGK, In re Scworx Corp. Derivative Litigation.
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: 
  • On April 13, 2020, SCWorx's officers and directors announced publicly that they made a huge deal with a healthcare provider to deliver 48 million COVID-19 tests, and that this deal would "have an appreciable impact on the U.S.'s overall COVID-19 testing capacity." Following this announcement, the company's stock quintupled in value. (Compl. at ¶¶  4-5.)
  • The next day, April 14, 2020, the company's stock lost 30% of its value after a short seller firm called the company's announcement "difficult to believe" (Compl. at ¶¶  6-7).
  • On April 17, 2020, a forensic financial research firm published a report highly critical report that concluded that deal for 48 million COVID-19 tests was "completely bogus" and that SCWorx officers and directors had a long history of "fraudulent acts" and "misrepresentations" (Compl. at ¶¶  8-9).
SCWorx's stock fell sharply on this news. Additionally:
  • The SEC suspended trading in SCWorx stock.
  • The company disclosed that it was only going forward with a deal to deliver 500,000 testing kits (not 48 million).
  • The COO stepped down.
  • NASDAQ announced an investigation into SCWorx.
  • SCWorx's 10-K revealed that it had been under investigation by the U.S. Attorney for the District of New Jersey since April 2020.
    (Compl. at ¶¶  12-15.) 
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:
  • Three federal securities fraud class action lawsuits.
  • Losses from waste of corporate assets and the unjust enrichment of the individual defendants.
  • Losses of millions of dollars going forward to undertake internal investigations and defend itself in court.
    (Compl. at ¶¶  16-19.)
The complaint includes counts against the individual defendants for:
  • Breach of fiduciary duties.
  • Unjust enrichment.
  • Abuse of control.
  • Gross mismanagement.
  • Waste of corporate assets. 
  • Contribution under Section 10(b) and 21D of the Exchange Act.
The defendants filed a motion to dismiss that is currently pending.
July 7, 2020
Hartel v. The Geo Group, Inc., George C. Zoley, and Brian R. Evans, No. 9:20-cv-81063 (S.D. Fla., July 7, 2020)
Key Pleadings and Court Orders:
  • July 7, 2020: Complaint.
  • November 18, 2020: Amended Complaint.
  • December 18, 2020: Defendant's Motion to Dismiss.
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: 
  • On an April 30, 2020 earnings call GEO's CEO, one of the individually named defendants, "touted the Company's COVID-19 response procedures," including that GEO:
    • took "comprehensive steps to address and mitigate the risk of COVID-19" across all its facilities; and
    • updated its policies and procedures "to include best practices for the prevention, assessment, and management of COVID-19, relying on the guidance issued by the CDC." The CEO went on to recite a comprehensive list of those practices.
    (Compl. at ¶¶ 26-27.)
  • On June 1, 2020, GEO released a public statement again touting its response to COVID-19 including a long list of the "best practices" it implemented "for the prevention, assessment, and management of infectious diseases" from the outset of the COVID-19 pandemic through the date of the statement (Compl. at ¶¶ 31-32). 
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:
  • Violations of Section 10(b) of the Exchange Act and Rule 10b-5 (against all defendants).
  • Violation of Section 20(a) of the Exchange Act (against the individual defendants).
The defendants filed a motion to dismiss that is currently pending.
June 15, 2020
Gelt Trading Ltd. v. Co-Diagnostics, Inc., No. 2:20-cv-00368 (D. Utah, June 15, 2020)
Key Pleadings and Court Orders:
  • June 15, 2020: Complaint.
  • July 15, 2020: Amended Complaint.
  • September 14, 2020: Defendants’ Motion to Dismiss.
  • April 7, 2021: Second-Amended Complaint.
  • May 5, 2021: Second Motion to Dismiss for Failure to State a Claim.
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: 
  • From February 25, 2020 through May 15, 2020, Co-Diagnostics "made continual, knowing and willful misstatements" about its COVID-19 tests, including that the tests were 100% accurate (Compl. at ¶ 7).
  • These claims allowed Co-Diagnostics to "sign lucrative contracts with state governments in the U.S. and governments around the world," and its stock soared to $29.72 a share (Compl. at ¶ 7).
  • On May 14, 2020 public reports began casting doubt on Co-Diagnostics' claims of 100% accuracy. That same day the stock fell to a low of $18.43 before NASDAQ intervened to stop trading. It never recovered, and now trades between $15-$16 a share (and trending downward) (Compl. at ¶ 11).
  • During this time Co-Diagnostics' officers and directors "have been rapidly exercising stock options for pennies per share" and selling their shares on the market, "reaping millions of dollars from the fraud-inflated price of the stock" (Compl. at ¶ 16).
The complaint includes counts for:
  • Violations of Section 10(b) of the Exchange Act and Rule 10b-5 (against all defendants).
  • Violation of Section 20(a) of the Exchange Act (against the individual defendants).
The defendants filed a motion to dismiss that is currently pending.
June 4, 2020
Ma v. Wells Fargo & Co., No. 3:20-cv-03697 (N.D. Cal., June 4, 2020)
Key Pleadings and Court Orders:
  • June 4, 2020: Complaint.
  • November 12, 2020: Stipulation of Voluntary Dismissal (without prejudice).
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:
  • "Wells Fargo planned to, and did, improperly allocate government-backed loans under PPP, and/or had inadequate controls in place to prevent such misallocation" (Compl. at ¶ 6).
  • "The foregoing foreseeably increased the Company’s litigation risk with respect to PPP allocation, as well as increased its regulatory scrutiny and/or potential enforcement actions" (Compl. at ¶ 6).
  • "After at least one lawsuit was filed against the Company, reports emerged that Wells Fargo may have unfairly allocated government-backed loans under the PPP," and following this news, Wells Fargo's stock price fell more than 5% over two trading days and continued to drop (Compl. at ¶¶ 7-10).
The complaint includes counts for:
  • Violations of Section 10(b) of the Exchange Act and Rule 10b-5 (against all defendants).
  • Violation of Section 20(a) of the Exchange Act (against the individual defendants).
The parties filed a stipulation of voluntary dismissal on November 12, 2020.
April 24, 2020
Wandel v. Gao, No. 1:20-cv-03259 (S.D.N.Y., April 24, 2020)
Key Pleadings and Court Orders:
  • April 27, 2020: Complaint.
  • January 15, 2021: Amended Complaint.
  • May 3, 2021: Defendants' Motion to Dismiss Amended Complaint.
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:
  • The nature and level of rental complaints Phoenix received before the IPO.
  • Demand in the Chinese rental market.
  • Phoenix's exposure to significant adverse developments related to the onset of COVID-19 in China at the time of the IPO.
March 12, 2020
McDermid v. Inovio Pharms., Inc., Case No. 2:20-CV-01402 (E.D. Pa., March 12, 2020)
Key Pleadings and Court Orders:
  • March 12, 2020: Complaint.
  • September 21: First Amended Complaint.
  • November 5, 2020: Defendants' Motion to Dismiss.
  • February 16, 2021: Order granting Defendants' Motion to Dismiss in part, denying in part.
  • Case Summary: An Inovio Pharmaceuticals (Inovio) shareholder filed a securities class action claiming that Inovio and its CEO caused a steep drop in Inovio' s stock prices by making false and misleading claims, including that Inovio: 
  • Developed a COVID-19 vaccine.
  • Would begin human testing in April 2020.
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:
  • Dismissed with prejudice the claims in Counts I and II based on the Defendants' April 30 and June 30 press releases.
  • Denied the motion to dismiss as to all other statements.  
March 12, 2020
Douglas v. Norwegian Cruise Lines, Case No. 1:20-CV-21107 (S.D. Fla., 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:
  • Minimized the impact that COVID-19 was likely to have on NCL's business and operations. 
  • Omitted information about allegedly deceptive sales practices used to deceive customers regarding the safety of its cruises despite the COVID-19 outbreak.
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: 
  • Norwegian Cruise Lines' statements were neither fraudulent nor intentionally deceptive; instead, they were: 
    • "nothing more than corporate puffery"; and
    • aligned with contemporaneous pronouncements President Trump made regarding COVID-19.
      (Order at pp. 6 and 7-8.)
  • No reasonable investor would believe that one optimistic statement made regarding one brief moment in time implied that "all was well" regarding the effect of COVID-19 on the business (Order at pg. 9).