Inside the Courts – An Update From Skadden Securities Litigators - March 2021 | Skadden, Arps, Slate, Meagher & Flom LLP jdsupra.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from jdsupra.com Daily Mail and Mail on Sunday newspapers.
Below are high-level takeaways on each topic.
Securities Filings Remain Elevated Despite the Pandemic
Despite unprecedented disruptions to the court system from the COVID-19 pandemic, plaintiffs continued to bring securities class actions at elevated levels in 2020 a sign that filings will remain high in the year ahead. Based on data from Cornerstone Research through September 30, 2020, plaintiffs were on pace to file approximately 375 federal and state securities class actions through the end of the year. Although lower than the more than 400 actions filed in each of the previous three years, this figure substantially exceeds the 261 cases brought, on average, between 2010 and 2019.
As New York commercial practitioners will recall, the U.S. Supreme Court in
Cyan, Inc. v. Beaver Cty. Emps. Ret. Fund held that state and federal courts have concurrent jurisdiction over class actions alleging violations of only the Securities Act of 1933 (the “1933 Act”) and, further, that defendants in such suits filed in state court cannot remove those actions to federal court to avoid state-court jurisdiction.[1] Not surprisingly, this development has led to an increase in the filing of securities claims in state courts.
In the nearly two-and-a-half years since
Cyan, New York courts and the Commercial Division in particular have asserted their role in securities litigation under the 1933 Act. For example, as this blog previously covered here and here, Commercial Division justices have denied motions filed by defendants seeking to stay state-court actions pending resolution of later-filed federal securities actions. Those decisions reasoned,
IN THIS ISSUE
In First Ever SEC Sanction for Allegedly Misleading COVID Related Disclosures, Cheesecake Factory Pays $125,000 Civil Penalty; New York State Appellate Court Dismisses Putative Securities Act Class Action on Merits for First Time Since 2018 U.S. Supreme Court Decision; Goodwin Secures Third Circuit Victory in Securities Class Action Against Former Officers and Directors of Lionbridge Technologies; Hemp Inc. and CEO Sign Consent Decrees Settling SEC Lawsuit over Unregistered Securities.
On December 4, 2020, the Cheesecake Factory Incorporated (the “Cheesecake Factory”) agreed to pay a $125,000 civil penalty to settle Securities and Exchange Commission (“SEC”) allegations that the company’s March 23, 2020 and April 3, 2020 Forms 8-K contained material misstatements concerning COVID-19’s impact on its business.