May 28, 2021

Covid-Related Securities Actions: Plaintiffs Begin Bumping Up Against PSLRA Hurdle

A recent post from Alston & Bird attorneys Elizabeth Clark and Robert Long provides a summary of several initial court decisions involving Covid-19-related securities actions. In these cases, courts ruled on early-stage motions to dismiss and even though the decisions were mixed, the authors say plaintiffs will face major hurdles in bringing claims related to Covid-19’s impact on a company’s business operations.

Three initial decisions on motions to dismiss reflect that courts are going to closely scrutinize allegations related to COVID-19 and analyze challenged statements in view of the pandemic-related information available at the time, including scrutinizing what the company could have reasonably known at the time of its public statements.

The primary takeaway is that, even in the wake of a global pandemic and unprecedented volatility in the stock market, courts continue to recognize that the heightened pleading standard of the Private Securities Litigation Reform Act acts as a roadblock to ferret out thin and conclusory claims even at the earliest stage of a securities fraud case.

One case the authors discuss involved Norwegian Cruise Line and in that case, the court found certain company statements constituted nothing more than corporate puffery. The case emphasizes the importance of including a comprehensive safe harbor disclosure statement. In granting the motion to dismiss, the court said that many of the challenged statements were accompanied by specific, cautionary language and were protected by the PSLRA’s safe harbor provision.

Take Our Quick Surveys: Board Meeting Health Protocols & Insider Trading – COVID-19 Adjustments

We’re continuing to post memos about “return to work” and other pandemic issues in our “COVID-19” Practice Area – but one topic that isn’t getting as much attention is what companies are planning to do to keep their boards productive, cohesive & healthy. Please take a moment to participate in our anonymous “Quick Survey: Board Meeting Health Protocols”.

While you’re there, please also give your input on our “Quick Survey: Insider Trading – COVID-19 Adjustments”. Don’t forget to mark your calendars for our July 20th webcast, “Insider Trading Policies & Rule 10b5-1 Plans.”

Memorial Day Weekend

Many have made it through another long proxy season – as I blogged earlier this week, it’s been a wild ride this year. We wish each of you an enjoyable Memorial Day weekend, we’ll be back here on Tuesday.  Please take a moment to honor and remember those who have sacrificed for our country.

– Lynn Jokela