Former board members secure dismissal from securities class action lawsuit
Client(s) Former members of Board of Directors and former Audit Committee Chair
Jones Day successfully defended two former members of the Board of Directors of a technology company, including the former Chair of the Audit Committee, in a securities class action lawsuit in the United States District Court for the Northern District of California.
The plaintiff alleged that the two former Board members, among other defendants, violated Sections 14(a) and 20(a) of the Securities Exchange Act and Section 11 of the Securities Act by purportedly making material misrepresentations to investors in filings with the SEC regarding warranty accruals and related accounting issues in connection with a merger with a special purpose acquisition company ("SPAC"). In May 2023, the district court granted the defendants' motions to dismiss the plaintiff's complaint with leave to amend. Among other reasons, the district court found that the plaintiff (1) failed to adequately allege negligence with particularity for its Section 14(a) claim, (2) failed to demonstrate statutory standing and could not prove loss causation with respect to its Section 11 claim, and (3) failed to allege an underlying violation of the securities laws to support its Section 20(a) claim. When the plaintiff filed an amended complaint in August 2023, it did not bring any claims against the two former Board members and no longer named them as defendants.