Welcome to Shearman & Sterling LLP’s Need-To-Know Litigation Weekly, which analyzes notable U.S. decisions, orders and developments each week in areas of Securities Litigation, M&A Litigation, Government/Regulatory Enforcement, Antitrust Litigation and IP Litigation. This weekly newsletter is intended to supplement our various publications and thought leadership concerning these important substantive areas.
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New York Supreme Court Dismisses Securities Act Of 1933 Claims, Holding That Plaintiffs’ Allegations Of Misleading Statements Are Inactionable Forward-Looking Statements Or Opinions Under Omnicare
On July 11, 2019, Justice Andrew Borrok of the New York State Supreme Court, County of New York, Commercial Division, dismissed a putative securities class action against a Brazilian based online retailer (the “Company”), certain of its executives and directors, and its underwriters in connection with the Company’s initial public offering (“IPO”). In re Netshoes Sec. Litig., Index No. 157435/2018 (Sup. Ct., N.Y. Cty., July 11, 2019). Plaintiffs—purchasers of the Company’s stock—brought claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”), claiming that defendants made materially false and misleading statements in a registration statement filed with the SEC in connection with the IPO. The Court dismissed the Securities Act claims without prejudice, finding that the allegations were inactionable opinions under the Supreme Court’s decision in Omnicare, Inc. v. Laborers Dist. Council Const. Indus., 135 S. Ct. 1318 (2015), or were inactionable because they were about past performance, were forward-looking, or were expressions of puffery.
FINRA Releases New Guidance On Extraordinary Cooperation Credit
On July 11, 2019, FINRA provided additional guidance on obtaining extraordinary cooperation credit to supplement its prior enforcement guidance. FINRA Regulatory Notice 19-23, FINRA Investigations: FINRA Supplements Prior Guidance on Credit for Extraordinary Cooperation (July 11, 2019). The new guidance does not represent a significant expansion or material change from previous guidance, but rather seeks to clarify areas of potential uncertainty.
Delaware Court Of Chancery Approves $3 Million In Attorneys’ Fees For Successful Challenge To Forum-Selection Charter Provisions
On July 8, 2019, Vice Chancellor J. Travis Laster of the Delaware Court of Chancery awarded $3 million to plaintiffs’ lawyers in Sciabacucchi v. Salzberg, C.A. No. 2017-0931-JTL (Del. Ch. July 8, 2019). As we discussed in a prior post, Vice Chancellor Laster had previously granted summary judgment to a shareholder challenging the validity of forum-selection charter provisions adopted by three corporations requiring shareholders to litigate claims under the Securities Act of 1933 in federal courts. Sciabacucchi v. Salzberg, C.A. No. 2017-0931-JTL (Del. Ch. Dec. 18, 2018). Even though the relief awarded—the invalidation of the provisions—was non-monetary and non-quantifiable, plaintiff’s counsel argued that $3 million in aggregate fees was warranted because of the significance of the result achieved. The Court agreed.
Companies With Effective Antitrust Compliance Programs Could Get Relief From Criminal Prosecution Under New DOJ Policy
The Antitrust Division of the U.S. Department of Justice (“Division”) finally will consider the existence of effective antirust compliance programs at the charging stage of criminal antitrust investigations, opening up the possibility that cartel participants could avoid prosecution even if they are not a first-in leniency applicant. The Division’s previous, and longstanding, approach had been not to consider compliance programs at the charging stage, on the theory that a compliance program is by definition ineffective if it failed to prevent a criminal violation of the antitrust laws. The most important practical effect of this new policy is likely to be that the Antitrust Division will be more willing to consider the use of Deferred Prosecution Agreements to resolve criminal cartel matters—an option it has strongly resisted before now. The new policy was announced on July 11, 2019 by Makan Delrahim, Assistant Attorney General in charge of the Division in a speech at the Program on Corporate Compliance and Enforcement at the New York University School of Law. The policy is reflected in revisions to the Department of Justice and Division Manuals and in the publication of a guidance document that Division prosecutors will use to evaluate corporate compliance programs. Following a public workshop in 2018 and evolving approaches at the Division, AAG Delrahim announced that the time had come to “recognize the efforts of companies that invest significantly in robust compliance programs.” These programs should deter violations in the first place, and increase early detection when a violation does occur.
Eastern District Of Pennsylvania Dismisses Claims Against Generic Drug Distributor In Multi-District Price-Fixing Suit
On June 26, 2019, Judge Cynthia M. Rufe of the Eastern District of Pennsylvania dismissed claims that McKesson Corporation and McKesson Medical Surgical, Inc. (collectively the “Company”) engaged in a conspiracy to fix prices of generic pharmaceuticals. Marion Diagnostic Center, LLC, et al. v. McKesson Corporation, et al., No. 16-MD-2724 (June 26, 2019). The Court held that the plaintiffs had not plausibly alleged that the Company’s conduct as a generic drug distributor was the result of an agreement with co-defendant generic drug manufacturers.
Federal Circuit Finds That Direct Competitor Lacks Standing To Appeal Unfavorable IPR Decision
On July 10, 2019, the Court of Appeals for the Federal Circuit (CAFC) issued an opinion dismissing for lack of standing an appeal of a Patent Trial and Appeal Board (PTAB) inter partes review (IPR) decision finding certain patent claims not unpatentable. General Electric Co. v. United Technologies Corp., —F.3d—, (Fed. Cir. July 10, 2019). The CAFC ruled that the patent challenger lacked standing to appeal the adverse decision even though, among other things, it is a direct competitor of the patent owner.