New Developments in Federal Filings by Case and Decision


Securities Class Action Filings – Mid-Year Assessment 2021

Abstract

Overall filing activity declined significantly in the first half of 2021, falling to 112 filings from 150 filings in the second half of 2020. This decline is largely due to a substantial reduction in the number of M&A class actions and federal filings and state of the 1933 Act, although base filings with section 10 (b) claims also declined slightly.

Deposits in the first half of 2021 were generally smaller, resulting in lower MDL and DDL indices. DDL fell 50%, from $ 162 billion in H2 2020 to $ 80 billion in H1 2021. Likewise, MDL fell 64%, from $ 991 billion in H2 2020 to $ 361 billion. dollars in the first half of 2021.

IPOs of Special Purpose Acquisition Companies (SPACs) continued to explode. Deposits against entities related to PSPC increased sharply in the first half of 2021. There were also 10 filings related to COVID-19, largely concentrated in the first four months of the year.

Goldman Sachs Group v. Arkansas Teacher Retirement System

On June 21, 2021, the United States Supreme Court decided Goldman Sachs Group v. Arkansas Teacher Retirement System,1 setting aside the class certification and finding that the United States Court of Appeals for the Second Circuit should have considered the generic nature of the alleged inaccuracies of Goldman Sachs Group in determining whether these statements had an impact on the price of Goldman’s shares Sachs Group. The Court remanded the case “for the Second Circuit to consider all the evidence on record regarding the impact on prices, regardless of whether that evidence overlaps materiality or any other substantive issue.” “

The Court recognized that, in cases based on the theory of price maintenance or the maintenance of inflation, the generic nature of an alleged misrepresentation may be particularly important. The Court observed that an inference that “a downstream price drop equals upstream inflation begins to collapse when there is a mismatch between the content of the false declaration and the corrective disclosure”. In such cases, “there is less reason to infer upstream price inflation, ie the impact on prices, from the fall in downstream prices.”

Applicability of the Mandatory Suspension of Discovery of the PSLRA to Matters Under the 1933 Act

The United States Supreme Court has agreed to consider whether a provision of the Private Securities Litigation Reform Act (PSLRA) that requires any discovery to be suspended for the duration of a motion to dismiss applies to matters falling under the Act. of 1933 brought before a state court.

In Pivotal Software v. Tran,2 the investors have filed parallel claims under the 1933 Act in state and federal courts. Initially, the state’s legal action was suspended to allow the federal action to continue. The federal judge dismissed the federal action, finding that the plaintiffs had not plausibly alleged that the statements in the IPO documents were misleading. When the case in state court resumed, Pivotal proposed, pursuant to the PSSRA, that the discovery be put on hold while the court considers its motion to dismiss. However, the state court judge ruled that the PSLRA’s automatic stay of discovery provision was procedural and therefore only applied to cases in federal court, not state court. The Supreme Court has agreed to hear the case to resolve a division of powers between state courts given the applicability of the automatic and mandatory stay of discovery provision of the PSSRA in matters relating to the Act. 1933 filed in state courts.

Scope of Statements Protected by the Prospective Safe Harbor of the PSSRA

Several Ninth Circuit decisions have broadened the scope of statements protected by the prospective safe harbor of the PSLRA.

In Friedman v. Tesla Inc.,3 On January 26, 2021, the Ninth Circuit upheld the dismissal of the action, arguing that the plaintiffs had not identified any misrepresentation that could give rise to action because most of the relevant statements were simply “optimistic projections” of the action. production capabilities that may qualify for protection under the PSLRA Safe Harbor for forward-looking statements. The Ninth Circuit held that the Safe Harbor protects businesses and senior executives when they talk about future plans and projections, even when those statements relate to the current state of the business.

On May 24, 2021, in Murphy v. Precision Castparts,4 the District of Oregon issued summary judgment for the defendants and ruled, citing Tesla, that the defendants’ “relatively generic” statements “were not sufficiently concrete to qualify as a” concrete factual assertion on a present circumstance or specific past ”, nor precise enough for … the plaintiffs to establish the falsity.

These decisions make an important distinction between statements of present fact and statements of future opinion or aspirations and confirm that the Safe Harbor applies to mixed statements – forward-looking statements but also incorporating underlying assumptions relating to past or present facts.

FOOTNOTES

1. Goldman Sachs Group v. Arkansas Teacher Retirement System, # 20-222,
594 United States __ (2021).

2. Pivotal Software Inc. v. Tran, No. CGC-19-576750 (Cal. Super. Ct. March 4, 2021). See also In Re Pivotal Securities Litigation, n ° 3: 19-cv-03589 (ND Cal. July 21, 2020).

3. Friedman v. Tesla, # 3: 17-cv-05828-CRB (9th Cir. January 26, 2021).

4. Murphy v. Precision Castparts Corp., n ° 3: 16-cv-00521-SB (D. Or. May 24, 2021). See also Ferreira v. Funko Inc., # 2: 20-cv-02319-VAP-PJW (CD Cal. February 25, 2021).

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