Introduction
Welcome to the third edition of Shearman & Sterling's Fifth Circuit Securities Litigation Quarterly. As public companies and financial institutions continue to migrate to Texas, our Texas-based securities litigation team continues to help our clients navigate the unique landscape for federal securities litigation in the Fifth Circuit and to monitor all developments.
In our Q3 2023 edition, we cover new case filings, settlements and decisions of note, including multiple motion to dismiss decisions and multiple class certification decisions.
New Securities Class Action Filings
APPLIED DIGITAL(N.D. TEX., 3:23-CV-01805, FILED AUG. 12, 2023)
Filed on behalf of a class of persons who purchased Applied Digital securities between April 13, 2022, and July 26, 2023
Asserts claims under the Securities Exchange Act of 1934
Alleges Defendants "made false and/or misleading statements and/or failed to disclose that: (i) Applied Digital had overstated the profitability of its datacenter hosting business and its ability to successfully transition into a low-cost AI Cloud services provider; (ii) Applied Digital's Board of Directors was not independent within the meaning of NASDAQ listing rules; (iii) accordingly, Applied Digital had overstated the efficacy of its business model and failed to maintain proper corporate governance standards; (iv) the foregoing, once revealed, was likely to subject the Company to significant financial and/or reputational harm; and (v) as a result, the Company's public statements were materially false and misleading at all relevant times."
LUMEN TECHNOLOGIES(W.D. LA., 3:23-CV-01290, FILED SEPT. 15, 2023)
Filed on behalf of a class of persons who purchased Lumen securities between March 11, 2019, and July 14, 2023
Asserts claims under the Securities Exchange Act of 1934
Alleges Defendants "made false and/or misleading statements and/or failed to disclose that: (i) Lumen owned and/or still owns thousands of miles of cables wrapped in lead, a known neurotoxin, within the U.S.; (ii) the foregoing has harmed and posed the risk of further harming the environment, exposed Company employees, and the general public, thereby posing a significant public health risk and environmental pollution risk; (iii) Lumen was on notice about the damage and risks presented by these leadcovered cables but did not disclose them as a potential threat to everyday people and communities, as well as failed to provide adequate lead training to employees; (iv) all the foregoing subjected the Company to a heightened risk of governmental and regulatory oversight and enforcement action, as well as legal and reputational harm; and (v) as a result, the Company's public statements were materially false and misleading at all relevant times."
Securities Class Action Settlements
EXELA TECHNOLOGIES(N.D. TEX., 3:20-CV-00691)
$5 million settlement of case asserting claims under the Securities Exchange Act of 1934.
Case initially filed on March 23, 2020. After dismissing an earlier version of the complaint, Judge Fitzwater denied Defendants' motion to dismiss on January 21, 2022. Case resolved during discovery prior to the completion of briefing on Plaintiffs' motion for class certification. Motion for preliminary approval of settlement filed on July 27, 2023.
BERRY CORPORATION (N.D. TEX., 3:20-CV-03464)
$2.55 million settlement of case asserting claims under the Securities Act of 1933 and Securities Exchange Act of 1934.
Case initially filed on November 20, 2020. Judge Scholer denied Defendants' motion to dismiss on September 13, 2022, and Defendants' motion for reconsideration on November 9, 2022. Case resolved during discovery following completion of briefing on Plaintiffs' motion for class certification. Motion for preliminary approval of settlement filed on September 18, 2023.
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