Another Wynn Win

POMERANTZ MONITOR | MARCH APRIL 2023

By the Editors

Pomerantz is Lead Counsel in a high-profile securities fraud class action against Wynn Resorts alleging a decades-long pattern of sexual abuse and harassment by the company’s founder and former Chief Executive Officer, Stephen (Steve) Wynn that was unchecked, tacitly permitted, and eventually covered up by defendants. Partner Murielle Steven Walsh leads the litigation.

Wynn Resorts owns and operates luxury hotels and destination casino resorts, including Wynn Las Vegas and Encore in Las Vegas, Nevada, Wynn Boston Harbor in Everett, Massachusetts, and Wynn Macau and Wynn Palace in Macau, China.

When, in July 2021, U.S. District Judge Andrew P. Gordon of the District of Nevada denied, in part, the defendants’ motions to dismiss the Second Amended Complaint, he stated:

At this stage, the plaintiffs have sufficiently alleged that Wynn, Maddox, Sinatra and Cootey were aware of information contradicting their statements that denied misconduct allegations. The inference that these defendants were aware of Wynn’s alleged misconduct at the time of their statements is cogent and compelling.

On March 2, 2023, Pomerantz secured a major victory for defrauded Wynn investors when Judge Gordon granted plaintiffs’ motion for class certification.

Particularly noteworthy is the court’s analysis of the defendants’ price impact arguments. First, defendants claimed that there was no front-end price impact because the stock price did not increase after the fraudulent statements. The court agreed with Pomerantz that front-end price impact is irrelevant in a price maintenance case such as ours. The theory of price maintenance, or inflation maintenance as it is also called, asserts that defendants’ fraud prevented the stock price from falling by misrepresenting or concealing bad news. In 2021, in Arkansas Teacher Retirement System, et al. v. Goldman Sachs Group, Inc., a Second Circuit panel endorsed the inflation-maintenance theory of securities fraud. Second, defendants raised “mismatch” arguments, i.e., that there is a “mismatch” between the alleged misstatements and the corrective disclosures. The court rejected these arguments too, noting that a corrective disclosure need not be a mirror image of the prior fraudulent statements, and that it is sufficient that the disclosure renders “some aspect” of the prior statements false or misleading. This decision is therefore a clear plaintiffs’ win. Also highly important is the court’s rejection of defendants’ efforts to narrow the class period.

Finally, the court rejected the defendants’ garden-variety attacks on the lead plaintiffs and found our proposed representatives to be typical and adequate. Two of the lead plaintiffs are a married couple; only one of them actually executed the trades. The court, however, found that the other spouse was nonetheless typical and adequate to represent the class.

The first complaint was dismissed by Judge Navarro, who granted Pomerantz leave to replead. Our second amended complaint was later upheld in part by Judge Gordon.

The case suffered a slight setback when Magistrate Judge Youchah effectively stayed merits discovery until class certification was decided. Pomerantz subsequently discovered that Judge Youchah had previously represented the Wynn defendants in a case arising out of the same allegations as in our case but did not disclose that fact. Pomerantz moved for her recusal, which she reluctantly granted.

On March 16, 2023, defendants petitioned the district court for permission to file an appeal of the court’s Order Granting Plaintiffs’ Motion to Certify Class.

“We are gratified that the court granted our certification motion,” stated Murielle Steven Walsh. “Plaintiffs will now proceed with merits discovery into the alleged misconduct by Stephen Wynn against Wynn’s female employees and the enabling actions by Wynn management that allowed it to go on for years. This case continues to demonstrate that corporate integrity and accountability are important issues to investors.”