News From the Chicago Office

By the Editors

$45 Million Settlement for Forescout Investors

In July 2025, Pomerantz achieved a $45 million settlement in a securities fraud class action against Forescout Technologies Inc. (“Forescout”) and its former Chief Executive Officer and Chief Financial Officer. The lawsuit was dismissed twice by the district court. The plaintiffs appealed to the United States Court of Appeals for the Ninth Circuit, which reversed the dismissal and revived the complaint’s core claims concerning misrepresentations the defendants made about the state of Forescout’s sales pipeline and the reasons for a shortfall in revenue between 2019 and 2020.

Backed by the accounts of twenty Confidential Witnesses (“CW”), the complaint alleged that the defendants orchestrated a pressure campaign to inflate Forescout’s sales pipeline while concealing an internal situation that was at odds with their positive representations to investors. Had investors known about the company’s internal state of affairs, including how Forescout’s sales pipeline was built and managed, they would have doubted the truth of those representations.

Published in March 2023, the Ninth Circuit’s opinion has been cited by federal courts throughout the country more than 110 times in the two years since it was decided. The reversal established important precedents favorable to the plaintiffs’ bar for all future securities cases filed in the Ninth Circuit. The appellate court clarified that a plaintiff needs to plead only a reasonable inference of falsity, overturning previous decisions that collapsed the inquiries into falsity and scienter into one, incorrectly subjecting both to a heightened pleading standard. It rejected claims that CWs must interact with an individual defendant for their testimony to be considered for pleading purposes. Instead, it credited the accounts of numerous CWs identified in the complaint, who had no interaction with any senior executive of Forescout. Many courts around the country had previously rejected CW accounts on the grounds that the CWs did not communicate with upper-level management. The Ninth Circuit’s decision also rejected the claim that a CW’s criticism of the defendants merely amounted to a disagreement with management that could not raise an inference of fraud. Instead, the Court held that it is improper to assume the existence of a difference of opinion when the CW reported facts that undermined a defendant’s positive representations, and nothing in the complaint suggested that any defendant voiced any disagreement.

Language in the opinion concerning the element of scienter is also favorable to the plaintiffs’ bar. The Ninth Circuit observed that the Private Securities Litigation Reform Act (“PSLRA”) was intended to prevent sham litigation, not actions of substance, and courts should refrain from imposing an impossible pleading burden on plaintiffs. The decision’s application of the PSLRA’s safe harbor is also favorable for plaintiffs. Unlike some courts that demand a plaintiff demonstrate defendants’ actual knowledge of the falsity of the specific misrepresentation at issue, the Ninth Circuit held that facts alerting a defendant to the apparent falsity of a representation are sufficient to overcome the PSLRA’s safe harbor for forward-looking or predictive statements.

On remand, following contested motion practice, the district court certified the Class as proposed by the plaintiffs. The defendants attempted to split the Class in two, to substantially reduce damages, arguing that an alleged false statement made towards the end of the Class Period concerning Forescout’s take-private transaction with a private equity firm was unrelated to its sales pipeline and internal problems that predated the merger. The plaintiffs countered that this was a disguised attempt to improperly attack the element of loss causation, a merits issue that the Supreme Court has long held is off-limits at the class certification stage. The district court agreed, rejected the defendants’ request to create two subclasses, and certified the Class as proposed by the plaintiffs in May 2024.

The case was litigated for more than five and a half years, including over two years of complex fact and expert discovery. The plaintiffs reviewed over 150,000 documents, took or defended 35 depositions, including international depositions, and won nearly every discovery dispute brought before the district court. Led by Partner Omar Jafri, the litigation team also included Of Counsel Brian P. O’Connell, Senior Counsel Patrick V. Dahlstrom, and Associates Genc Arifi, Diego Martinez-Krippner and Adam Jiang.

$6.5 Million Settlement for Playstudios Investors

On June 27, 2025, the United States District Court for the District of Nevada granted preliminary approval of a $6.5 million settlement in a securities class action against Playstudios, Inc. and its officers and directors. The case involved strict liability claims under Section 11 of the Securities Act of 1933, negligence claims under Section 14(a) of the Securities Exchange Act of 1934 (“Exchange Act”), and securities fraud claims under Section 10(b) of the Exchange Act and SEC Rule 10b-5 promulgated thereunder. The claims arose from alleged misrepresentations and omissions made in a defective Proxy/Registration Statement that Playstudios used to effect its initial public offering by merging with Acies Acquisition Corp., a Special Purpose Acquisition Company. Additional affirmative misrepresentations made by the company and its CEO after Playstudios went public gave rise to securities fraud claims for investors in a separate Class.

In the Proxy/Registration Statement, the defendants claimed that extensive due diligence showed that a new game called Kingdom Boss would support Playstudios’ expansion into role-playing games and cause revenues to skyrocket. However, the plaintiffs’ investigation revealed that hundreds of individuals in online gaming forums reported that Kingdom Boss was beset with bugs and glitches that rendered the game inoperable both before and during the Class Period. The complaint alleged that for these reasons, the defendants abandoned the game at the end of the Class Period. Key to the Court’s denial of the defendants’ motion to dismiss were the concealed bugs and glitches in Kingdom Boss that players reported in gaming forums, and which the plaintiffs discovered through investigation before the complaint was filed. With the exception of one alleged misrepresentation – the dismissal of which had no impact on the Class Period or the damages claimed by the Class – the Court allowed the case to proceed on all of the plaintiffs’ claims.

Following the denial of the defendants’ motion to dismiss, the case proceeded to discovery in March 2024. After mediation and additional negotiations, the parties agreed to settle in January 2025. The $6.5 million settlement represents nearly 15% of estimated damages for the Section 14 claims, 20% of aggregate statutory damages for the Section 11 claims, and over 50% of maximum estimated damages for the Section 10(b) claims brought on behalf of an independent Class. The litigation was led by Partner Omar Jafri with valuable assistance provided by Associate Diego Martinez-Krippner.

Pomerantz Refuses to Let Credit Suisse AT1 Bondholders Be Left Behind

By Brian Calandra

On July 7, 2025, Pomerantz secured a victory on behalf of a proposed class of investors in additional tier 1 bonds, or “AT1 bonds,” that had been issued by global financial services company Credit Suisse Group AG, when the United States District Court for the Southern District of New York denied in full the defendants’ motion to dismiss Core Capital v. Credit Suisse, et al. The investors allege that they were duped into purchasing the bank’s AT1 bonds by, among other things, false or misleading assurances from Credit Suisse and certain of its executives, including then-board chairman Axel P. Lehmann, then-CEO Ulrich Körner, and then-CFO Dixit Joshi, that customer and asset outflows had slowed or stopped. These statements allegedly concealed the risk that Credit Suisse would cease operations, which materialized when the Swiss Financial Market Supervisory Authority (“FINMA”) abruptly forced Credit Suisse to merge with fellow Swiss global financial services company UBS Group AG and, in the process, ordered Credit Suisse to write down its AT1 bonds from approximately $372 million to zero.

Background

Credit Suisse was founded in 1856, and for much of its history was a global financial giant. By 2021, however, its fortunes had been in decline for a decade as a result of corruption scandals, poor risk management, and governance control failures. Then, in March 2021, two new scandals came to light: the failure of funds the bank had structured in collaboration with financier Lex Greensill, and the collapse of hedge fund Archegos Capital Management, to which Credit Suisse was substantially exposed. As a result, the bank’s decline accelerated.

On October 27, 2022, Credit Suisse held a conference call with analysts and investors to discuss its third-quarter 2022 financial performance. During that call, the bank announced a massive increase in customer and/or asset outflows. As alleged in the plaintiffs’ complaint in this action (the “Core Capital Action”) and a parallel class action brought by investors in other Credit Suisse securities (the “Diabat Action”), rather than come clean, the defendants, including Lehmann, Körner, and Joshi, chose to downplay the outflows and conceal the true extent of risks to Credit Suisse. For example, during the October 27 call, Körner and Joshi attributed the outflows to “negative press,” “rumors,” and “social media coverage” and indicated they had “stabilized” and that Credit Suisse had plans to address the problem. Then, on December 1, 2022, Lehmann assured investors during a Financial Times interview that customer outflows had not only “completely flattened out,” but had, in fact, “partially reversed.” In addition, the following day, Lehmann said outflows “basically have stopped” and that “the situation has calmed.”

Investors were thus stunned on March 14, 2023, when the defendants admitted in Credit Suisse’s 2022 Annual Report that there were “material weaknesses” in its internal control over financial reporting. Although the defendants reassured investors they were “developing a remediation plan to address the material weaknesses,” they were instead discussing the company’s sale or liquidation with Swiss authorities. Five days later, on March 19, 2023, the other shoe dropped, and FINMA announced that it had approved a takeover of Credit Suisse by UBS via a merger, and that “[t]he extraordinary [Swiss] government support [for the Merger] will trigger a complete write-down of the nominal value of all AT1 debt of Credit Suisse in the amount of around CHF 16 billion.” Thereafter, on April 4, 2023, at Credit Suisse’s final Annual General Meeting, Lehmann admitted the company’s business had been plagued by “unhealthy developments, errant behaviors, and wrong incentive systems,” such that it engaged in “transactions that should not have been allowed to play out.” The merger closed on June 12, 2023, and a storied 166-year-old global financial institution ceased to exist.

The Diabat and Core Capital Actions

Multiple securities class action complaints were filed in the wake of Credit Suisse’s de facto collapse, and several investors moved to be appointed lead plaintiff in a consolidated action, including Ali Diabat and Pomerantz’s client, Core Capital Group, Ltd. Recognizing the massive losses incurred by AT1 bondholders, Core Capital amended its motion and sought to be appointed lead plaintiff on behalf of a class of bond investors, which it defines as separate from a class of equity investors.

On September 7, 2023, District Judge Colleen McMahon held a hearing to appoint a lead plaintiff. During that hearing, the Court acknowledged that Core Capital had the largest interest in Credit Suisse securities, but appointed Diabat as lead plaintiff on the grounds that Core Capital was likely subject to unique defenses. Specifically, the Court held that Core Capital owned AT1 bonds, which had been zeroed out at FINMA’s direction and thus were subject to the unique defense that any alleged misrepresentation by the defendants did not cause AT1 bond investors’ losses (the “AT1 Bonds”).

Diabat filed an amended complaint as the lead plaintiff in the consolidated action on October 5, 2023, on behalf of a class of “persons or entities who purchased or otherwise acquired Credit Suisse securities in domestic transactions.” Diabat’s complaint, however, did not contain any allegations concerning AT1 bonds, which strongly suggested that Diabat was not asserting claims on behalf of those investors. Accordingly, Pomerantz, on behalf of Core Capital, instituted the Core Capital action, which brought claims that substantially overlapped with claims in the Diabat action, but expressly on behalf of purchasers of AT1 bonds. Core Capital and the defendants agreed to stay their action until the Court ruled on the defendants’ motion to dismiss the Diabat action.

On September 19, 2024, the Court denied in part and granted in part the defendants’ motion to dismiss the Diabat action, holding that the defendants’ statements regarding customer outflows were sufficiently alleged to be knowingly or recklessly false or misleading and the cause of the Diabat plaintiffs’ losses, but dismissing all other claims. The following day, the Court issued an order in the Core Capital action stating that the Court would not permit any amendment of the Core Capital complaint, would rule “in this case [i.e., the Core Capital action] exactly in the same manner as I did in Diabat,” and set a schedule for a motion to dismiss.

Defendants’ Motion to Dismiss

Recognizing that the Court had already held that the defendants had made false or misleading statements regarding customer outflows, the defendants attacked the Core Capital complaint on the grounds that (i) it could not proceed as a separate action because the Court had already appointed Diabat to represent a putative class of all Credit Suisse securities holders, (ii) it did not include the allegations of a pending SEC investigation, which the Court had relied on to find that scienter adequately alleged in Diabat, and (iii) Core Capital’s losses were caused by FINMA’s order for the bank to write down the value of all AT1 bonds to zero, not the defendants’ alleged fraud.

In opposing the defendants’ motion, Pomerantz emphasized that prior rulings refusing to allow putative class actions like Core Capital to proceed in parallel to the consolidated action were under materially different circumstances because the lead plaintiffs in the prior actions had not abandoned classes of investors to pursue other claims, and in those actions, the lead plaintiff itself sought to eliminate the parallel action. Here, conversely, the defendants were asserting that the Core Capital action should be dismissed because it ostensibly interfered with Diabat’s ability to litigate the Diabat action, a highly questionable assertion given that Diabat had not complained of any prejudice from the Core Capital action and the defendants were clearly acting in their own self-interest, not in the interest of Diabat class members, in seeking to dismiss the Core Capital action. Pomerantz also asserted that the Court’s order stating that it would rule exactly as it had in Diabat applied to its scienter ruling, and thus the defendants’ scienter was sufficiently alleged, and that FINMA’s order to write down the AT1 bonds was a materialization of a concealed risk.

As the motion to dismiss the Core Capital action was pending, the plaintiff in the Diabat action moved for class certification. That motion specifically identified the securities on behalf of which Diabat sought to litigate, which did not include AT1 bonds. Recognizing that this development substantially undercut the linchpin of the defendants’ motion to dismiss, Pomerantz promptly alerted the Court to the import of the Diabat class certification motion.

The Court Sustains the Core Capital Complaint

On July 7, 2025, the Court rewarded Pomerantz’s efforts on behalf of AT1 bond investors by denying the defendants’ motion to dismiss in full and explicitly allowing the Core Capital action to proceed in parallel with Diabat. First, the Court found that the Diabat complaint’s allegations were incorporated by reference into the Core Capital complaint and held that scienter was thus adequately alleged. Second, the Court observed that, as Pomerantz argued, the defendants’ statements concealed the degree of risk that Credit Suisse would cease operating and AT1 bonds would be written down to zero, thus preventing investors from adequately assessing that risk. Accordingly, the Core Capital complaint adequately alleged that FINMA’s actions represented the materialization of a concealed risk. Third, the Court found that Diabat had abandoned claims by AT1 bondholders and allowed the Core Capital action to proceed in parallel because “the potential prejudice that the AT1 bondholders could face from being saddled with a lead plaintiff who has already abandoned them outweighs any yet-to-be-seen interest by Diabat in preventing Core Capital from picking up the claims he has dropped,” and “I refuse to disenfranchise claimants whose claims have already been abandoned by a lead plaintiff in the original action.”

Conclusion

No one would fault an attendee of the September 2023 lead plaintiff hearing for concluding that the Court had expressed grave doubts about the viability of claims on behalf of AT1 bondholders. Rather than leave those investors to fend for themselves, however, Pomerantz recognized the viability of their claims and fought for the opportunity to vindicate them. The Court agreed, and Pomerantz is excited to pursue those claims on behalf of investors blindsided by the defendants’ alleged misrepresentations.

Ninth Circuit Expands Test for ERISA Claim Releases to Include Fiduciary Misconduct

By Gustavo F. Bruckner and Basya Bates

On June 5, 2025, the United States Court of Appeals for the Ninth Circuit issued a significant ruling in Schuman v. Microchip Tech. Inc., No. 24-2624, 2025 WL 1584981 (9th Cir.). The Court held that, when considering the enforceability of ERISA claim releases or waivers signed by employees, the Court must consider whether the fiduciary acted improperly in obtaining the release from the employee. This decision reversed a lower court ruling holding that claims releases signed by former employees bar them from leading a class action against their former employer.

What is ERISA?

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal statute that governs certain employer-sponsored employee retirement and benefit plans. ERISA protects workers’ retirement funds by ensuring that plan fiduciaries do not breach their duties or misuse plan assets. As defined by ERISA, plan fiduciaries refer to individuals or entities with discretionary authority over a plan’s management and funds. Fiduciaries can include employers, trustees and plan administrators.

A fiduciary’s principal responsibility is to manage the plan in the sole interest of the plan participants and beneficiaries for the purpose of furnishing benefits and paying plan expenses. ERISA requires that fiduciaries manage the plan and control plan assets with prudence and minimize risk by diversifying plan investments. They must also comply with the plan terms and guidelines outlined in the plan documents insofar as the plan terms are consistent with ERISA. Additionally, fiduciaries are obligated to disclose details regarding plan fees and benefits to participants. Importantly, ERISA provides plan participants the right to sue fiduciaries for benefits and for breaches of fiduciary duty.

Pomerantz represents plan beneficiaries in several ERISA cases. Most recently, Pomerantz defeated defendants’ motion to dismiss in Jacobsen et al. v. Long Island Community Hospital, where plaintiffs alleged that the plan fiduciary breached its fiduciary duties under ERISA by improperly investing plan funds and failing to perform proper due diligence before offering certain stable value funds to plan participants. This case is proceeding to trial in spring 2026.

Case Study: Schuman v. Microchip Tech. Inc.

Background

In 2015, prior to its merger with Microchip Technology Inc., Atmel Corporation implemented a benefits plan to ensure that employees would receive severance benefits if the acquiring company did not retain staff post-merger. Shortly after completing the merger in 2016, Microchip fired named plaintiffs Peter Schuman and William Coplin without cause, providing significantly fewer benefits than those outlined in the benefits plan in exchange for plaintiffs’ release of potential claims against Microchip. Microchip had informed Atmel employees that the Atmel benefits plan had expired and that the benefits were no longer available. Microchip offered the reduced benefits in exchange for signing the claims releases to “resolve any current disagreement or misunderstanding regarding severance benefits previously offered by [Atmel].” Schuman and Coplin signed the releases.

In 2016, Schuman and Coplin filed a class-action complaint against Microchip, Atmel Corp., and Atmel Corp. U.S. Severance Guarantee Benefit Program (collectively, “Microchip”), on behalf of nearly 200 former Atmel employees who had also signed releases, challenging the enforceability of the releases. Plaintiffs alleged that by misinterpreting the severance plan as having expired and by encouraging plaintiffs to sign releases in exchange for reduced severance benefits, Microchip breached its fiduciary duties.

District Court Decision

Microchip filed a motion for summary judgment, arguing that plaintiffs knowingly and voluntarily waived their right to pursue claims under the Atmel Plan. Schuman and Coplin countered that the claims releases were unenforceable because of Microchip’s violations of its fiduciary duties in obtaining claims releases in exchange for significantly reduced severance benefits. The district court granted summary judgment against Schuman and Coplin, applying a non-exhaustive six-factor test from the First and Second Circuits, determining that the releases were signed knowingly and voluntarily and therefore enforceable. The court refused to address allegations that Microchip violated its fiduciary duties in obtaining the releases.

Ninth Circuit Analysis

Schuman and Coplin appealed the decision in the Ninth Circuit. The Ninth Circuit wanted to know which legal test should be used to determine the enforceability of ERISA releases. The Court specifically questioned whether waivers or releases of ERISA claims should be treated with heightened scrutiny when there are allegations of fiduciary abuse. Because ERISA’s purpose is to protect employees and plan beneficiaries from potential employer or fiduciary abuse, the Court held that alleged improper misconduct by the fiduciary must be considered. In doing so, the Court rejected the First and Second Circuit’s limited test as applied by the district court and adopted language similar to that used by the Seventh and Eighth Circuits.

The Ninth Circuit broadened the test for ERISA claim releases to include consideration of any improper conduct by the fiduciary in its non-exhaustive nine-factor test. Specifically, a court must consider: (1) the employee’s education and business experience; (2) the employee’s input in negotiating the terms of the settlement; (3) the clarity of the release language; (4) the amount of time the employee had for deliberation before signing the release; (5) whether the employee actually read the release and considered its terms before signing it; (6) whether the employee knew of their rights under the plan and the relevant facts when they signed the release; (7) whether the employee had an opportunity to consult with an attorney before signing the release; (8) whether the consideration given in exchange for the release exceeded the benefits to which the employee was already entitled by contract or law; and (9) whether the employee’s release was induced by improper conduct on the fiduciary’s part.

In embracing the Seventh and Eighth Circuits’ tests, the Ninth Circuit found that their approach struck “the right balance between a strictly traditional voluntariness examination and an ERISA-based analysis.”

This case sends a powerful message to employers acting as fiduciaries over severance plans. The Ninth Circuit cautioned fiduciaries that providing fewer benefits than guaranteed under the plans in exchange for a release of ERISA claims can amount to a breach of fiduciary duties, resulting in the unenforceability of the releases. The Ninth Circuit’s broad test ensures that waivers and releases of claims under ERISA are met with “special scrutiny,” potentially providing greater protection for plaintiffs whose releases may have been “knowing” or “voluntary.” As the Ninth Circuit noted, the final factor considering fiduciary misconduct “warrants serious consideration and may weigh particularly heavily against finding that the release was ‘knowing’ or ‘voluntary’ or both.”

Pomerantz continues to track ERISA developments while vigorously representing plan beneficiaries in ERISA cases nationwide.

Pomerantz Secures $10.5 Million Settlement for ImmunityBio Investors

By the Editors

On June 16, 2025, the United States District Court for the Southern District of California granted final approval of a $10.5 million settlement secured by Pomerantz in a class action against San Diego-based biotechnology startup ImmunityBio, Inc. (“ImmunityBio”). The suit alleged that ImmunityBio’s senior executives concealed a series of pervasive manufacturing issues at the site used to manufacture its leading drug candidate, Anktiva, that began at the formation of the company in March 2021 and continued through May 2023, when the FDA denied approval of the drug. Partner Justin D. D’Aloia led the litigation, captioned In re ImmunityBio, Inc. Securities Litigation, No. 23-cv-01216 (S.D. Cal.).

ImmunityBio was formed through a merger between several clinical-stage biopharmaceutical companies in March 2021. At the time, ImmunityBio had no approved drugs, and its only product candidate close to gaining FDA approval, and beginning to generate income, was its cell fusion therapy, Anktiva, which was designed to treat bladder cancer. Accordingly, ImmunityBio’s near-term viability depended entirely on the success of Anktiva and, unsurprisingly, it received substantial attention from both ImmunityBio’s executives and the investment community.

At the time ImmunityBio was formed in March 2021, interim data from the pivotal Phase 3 trial showed that Anktiva had already achieved its primary endpoint before the study even concluded. Over the next year, ImmunityBio announced that complete data from the Phase 3 study confirmed those results and, on the basis of those results, it decided to apply for FDA approval to sell Anktiva commercially in the United States. By all accounts, Anktiva appeared to present a rare opportunity for significant growth for the company.

Notably, the FDA is prohibited from approving any new drug unless the facility where it is manufactured complies with its minimum standards for well-controlled drug manufacturing, codified in voluminous FDA regulations that are known as current good manufacturing practices (“CGMP”). Unlike for other compounds in its pipeline, however, ImmunityBio contracted with an external manufacturing firm—referred to as a contract manufacturing organization (“CMO”)—to produce Anktiva. Between its formation in March 2021 and March 2023, ImmunityBio and its senior executives assured in SEC filings and other public disclosures that the manufacturing facilities it used to make its products adhered to CGMP and that the CMO it used to manufacture Anktiva operated CGMP-compliant facilities with robust quality control. Thus, while there is never any guarantee that the FDA will agree with a pharmaceutical company’s interpretation of clinical trial data, ImmunityBio investors had no reason to believe that manufacturing issues posed a potential approval risk for Anktiva.

However, as alleged in the complaint filed by Pomerantz on behalf of aggrieved investors, the site where Anktiva was manufactured suffered from rampant and myriad CGMP violations. As alleged, ImmunityBio’s senior leaders were notified about each of these ongoing problems and repeatedly attempted to address the issues, but they remained unresolved by the time ImmunityBio submitted its application for FDA approval of Anktiva. This was noteworthy because the FDA application, by regulation, is required to include all data generated in connection with any prior manufacturing runs. Pomerantz’s investigation into the matter uncovered that this led the FDA to hold an unusually intensive mid-review pre-approval inspection, which resulted in a scathing 15-page report documenting the past and present substandard conditions at the site. ImmunityBio’s executives were fully aware of this new inspection, as they either flew overnight to attend it in person or demanded “real-time” updates and daily debriefs from relevant personnel. Nevertheless, they continued to inform investors that the CMO used to manufacture Anktiva operated CGMP-compliant facilities after the inspection concluded and made no mention of the FDA’s report, as companies typically do.

Investors did not learn about the manufacturing problems until it was too late. On May 11, 2023, ImmunityBio announced that the FDA rejected its application for Anktiva, not because of its risk-benefit profile or concerns with the clinical studies used to support the application but rather, because of deficiencies revealed at the FDA’s pre-approval inspection at the company’s CMO. On this news, the stock crashed, shedding over 55% of its market value in a single day.

In June 2024, the district court largely denied the defendants’ motion to dismiss, rejecting their challenge to 51 of the 62 alleged misstatements. In doing so, the Court swiftly dispensed with the defendants’ arguments that investors demand that every company involved in the pursuit of highly technical biopharmaceutical innovation must achieve manufacturing perfection at all times, stating “Defendants were entitled to their optimism; but they were not entitled to peddle that optimism to investors in a manner that materially misrepresented the facts.”

Following the decision, the parties proceeded to engage in discovery, during which Pomerantz continued to discuss the possibility of an early resolution. After several months of hard-fought discovery proceedings, but before incurring the significant costs of continued merits litigation, the parties agreed to settle the action for an all-cash settlement of $10.5 million. This represents a highly favorable recovery for the class and avoids the costs and uncertainty of continued litigation.

Lowering the Bar or Raising the Stakes? The Causes, Compromises and Consequences of the U.K.’s Listing Rules Reforms

By Dr. Daniel Summerfield

1. Introduction

Age and experience may allow us to learn from past mistakes. Unfortunately, this is not always the case for market regulators. In the U.K., we are once again reminded that no problem is so bad that government or regulatory intervention can’t make it worse.

In July 2024, the Financial Conduct Authority (FCA) introduced the most significant overhaul of the U.K.’s listing regime in more than 30 years, and in doing so, implemented reforms that weakened previously sacro-sanct investor protections. This shift risks encouraging companies with weaker governance standards to take advantage of the looser requirements and list in the U.K. Let’s not forget, we’ve been here before!

2. Background to changes

In 2024, the London Stock Exchange (LSE) witnessed a historic low in initial public offerings (IPOs), with only 18 companies making their debut. This figure represents a 22% decrease from 2023, and a 60% drop compared to 2022. The year also saw 88 companies delist or transfer their primary listings from the LSE, marking the largest exodus since the global financial crisis, with many citing declining liquidity and lower valuations in London com­pared to markets like the U.S.

This was accompanied – as a cause or consequence – by U.K. pension funds markedly reducing their allocations to domestic equities over recent decades. As of 2024, only 4.4% of U.K. pension assets were invested in U.K.-listed shares, a steep decline from over 50% in the early 2000s. This allocation is among the lowest compared to other developed pension systems, with only Canada, the Netherlands, and Norway having lower domestic equity exposures.

To counter these developments – and clearly encouraged by some stakeholders and government-backed strategic reviews – the FCA led a reform process to revitalise the U.K. capital markets by addressing “the overly-prescriptive regulation which was seen as stifling entrepreneurial risk-taking and deterring the very kind of innovative companies the U.K. needs to attract.”

3. Key changes in the listing rules Consolidation into a single listing category

The previous dual structure of ‘Premi-um’ and ‘Standard’ listing segments has been replaced with a unified category called Equity Shares of Commercial Companies (ESCC). This is designed to make the U.K. listing process more accessible, particularly for high-growth and founder-led companies.

Shift to a disclosure-based regime

The FCA has moved towards a more disclosure-oriented approach, reducing the need for mandatory shareholder votes on significant transactions and related party transactions.

Relaxed eligibility criteria

To encourage more companies to list in the U.K., the FCA has eased certain eligibility requirements:

• Free float requirement: Reduced from 25% to 10%, allowing founders and early investors to retain greater control post-IPO.

• Track record: Elimination of the three-year revenue track record requirement.

• Working capital statements: Removal of the need for a clean working capital statement at the time of listing.

Enhanced flexibility for dual-class share structures

The new rules permit greater flexibility around dual-class share structures, enabling founders and key stakeholders to maintain enhanced voting rights.

Introduction of additional listing categories

Beyond the ESCC, the FCA has introduced additional listing categories to address the varied needs of issuers, including a dedicated category for shell companies, specifically designed for special purpose acquisition companies (SPACs).

4. Why does this matter?

Investor rights are the cornerstone of a healthy and trans­parent financial market. These rights include access to accurate information, protection against undue influence, and the ability to hold corporations accountable for their decisions. Over the years, the U.K. has earned a rep­utation as a global leader in corporate governance and investor protection, supported by a stable regulatory framework and a highly developed financial services sector.

The protection of all investors, including minority share­holders, has been vital in maintaining the attractiveness and integrity of the U.K. markets. Confidence that inves­tors’ rights are protected, together with the high stan­dards inherent in a premium listing, served to lower the cost of capital for companies, and underpinned the U.K.’s attractiveness for raising capital. Central to the U.K.’s listing regime has always been the one-share, one-vote principle, which remains a sacrosanct, central tenet to accepted global corporate governance standards.

5. Back to the future: Governance Groundhog Day?

In 2007, Eurasian Natural Resources Corporation (ENRC) was allowed to list on the London Stock Exchange with an 18% free float. Six years’ later, the company exited the stock market amidst criticism over its governance and was subsequently investigated by the Serious Fraud Office.

In 2013, under pressure from investors, the FCA updated the listing rules to better protect minority shareholders from companies listing with small free floats. This was to promote market integrity and empower minority share­holders to hold the companies they invest in accountable.

Are we now heading backwards in terms of investor protections?

6. If we build it, will they come?

While it was clear that action was needed to address the decline in IPO activity in London, many institutional investors and their representative bodies have raised concerns that the FCA may have gone too far, risking the erosion of investor protections in an effort to boost market competitiveness. There is also a broader concern that, although the diagnosis of the problem is largely accurate, the jury is still out on the proposed remedies.

There are reasons to be cynical. For example, in an effort to attract Saudi Aramco’s anticipated $2 trillion IPO to London, the FCA implemented significant changes to its listing rules in 2018, but Saudi Aramco ultimately chose to instead list on the Saudi stock exchange.

There are, indeed, many reasons why the U.K. has been unsuccessful in attracting IPOs, particularly from innova­tive and high growth companies, which are unlikely to be addressed by the recent reforms:

• Companies often achieve higher valuations in the U.S., particularly in tech and high-growth sectors. U.K. markets are perceived as more conservative, with investors favouring dividends and profitability over growth potential.

• The U.K.’s departure from the EU reduced its appeal as a gateway to European capital. London is now seen as less central to global finance than it once was.

• Compared to the U.S., the U.K. has a relatively risk-averse investment culture, with less retail participation in IPOs. Pension funds and institutional investors in the U.K. have also shifted away from equities towards bonds and alternative assets.

• Recent high-profile de-listings (e.g., Armaco choosing Nasdaq over LSE) have damaged sentiment. The market is seen by some founders and advisers as in decline, making it a self-reinforcing cycle.

• U.S. markets, with deep capital pools, greater liquidity, and a supportive investor base, are seen as more attractive.

• The LSE is heavily weighted toward traditional sectors (finance, mining, energy) rather than growth and tech industries. This limits peer benchmarking and can discourage tech firms from listing in London.

7. The law of unintended consequences

In a market that was once a beacon of corporate governance, the road ahead for U.K. – and indeed global – governance standards and investor protections now appears uncertain and potentially at risk.

As the U.K. embarks on these listing rule reforms, it could set in motion a potential ‘race to the bottom’ as compe­tition increases amongst jurisdictions seeking to attract new listings. This could result in corporate governance standards and investor protections to be further diluted, not only in the U.K., but globally.

With the demise of the premium listing, which was a prerequisite for index inclusion for many U.K. index providers, there is a risk that companies with alterna­tive governance and voting structures may now appear, unbeknownst, in the portfolios of index fund investors’ portfolios.

Despite earlier hopes of an IPO revival in 2025, signs of a positive turnaround in the U.K. appear premature. Iron­ically, the most high-profile potential listing is also one of the most controversial from a governance perspective. Online fast-fashion giant Shein is now eyeing London after facing pushback from U.S. regulators. This raises a fundamental question: is the drive to reinvigorate the U.K.’s capital markets coming at the expense of gover­nance standards?

Time will tell whether the trade-off between competitive­ness and governance was worth it.

Dr. Summerfield is Pomerantz’s Director of ESG & U.K. Client Services.

Pomerantz Achieves Victory in Litigation Against Avalara

By Tamar A. Weinrib

On March 31, 2025, Pomerantz won a significant victory for investors when the Ninth Circuit Court of Appeals reversed in part Judge Pechman’s (W.D. Wa.) ruling dis­missing plaintiff’s Sections 14(a) and 20(a) claims in a securities class action against Avalara, Inc., CEO Scott McFarlane, and the other members of the Avalara Board of Directors. Pomerantz is lead counsel for the class.

Avalara provides cloud-based tax compliance software that automates the routine tax work traditionally per­formed by a company’s tax or legal department. Instead of independently researching tax rules, manually com­puting taxes, and submitting individual checks to numer­ous jurisdictions, Avalara’s customers make a single ACH payment to a single account, and Avalara’s system then handles the tax returns and remittances. Additionally, Avalara is expanding into related business services such as regulatory compliance and e-invoicing.

Plaintiffs’ second amended complaint (“SAC”) alleges that for well over a year before announcing Avalara’s merger with Vista Equity Partners Management, Avalara’s senior executives publicly conveyed extraordinary op­timism regarding the company’s future potential, which they backed up with hard data. For example, they pro­vided numeric substantiation for their positive statements and touted Avalara’s expected international growth due to diversification of its customer base and government mandates requiring e-invoicing, Avalara’s insulation from macroeconomic risk due to its business model, and its stellar growth and opportunities in upsell bookings. Avalara’s senior management did not voice or even allude to any concerns that Avalara faced any challenges, weaknesses, or likely risks that would negatively impact or in any way stall the company’s exceptional growth in the coming years.

Despite the strength of Avalara’s fundamentals and its consistently stalwart growth from strategic acquisitions, both organically and inorganically, plaintiffs allege that defendants agreed to and subsequently recommended to shareholders a deficient deal price for the merger. The merger share price was depressed from macroeconom­ic trends rather than from the company’s actual robust performance or prospects. In fact, the $93.50 per share price defendants agreed upon with Vista fell 17% below the $109 target price set only a month prior by Goldman Sachs (“Goldman”), the financial advisor that issued the fairness opinion for the merger.

To solicit shareholder approval of the inadequate and un­fair price at which it had agreed to sell Avalara to Vista, the Board presented a narrative in the Proxy that was completely inconsistent with Avalara senior manage­ment’s particularized optimistic public statements for the exact same timeframes, and, to a reasonable investor, would appear to describe an entirely different company.

Plaintiffs allege that, to legitimize the artificially depressed projections Avalara provided to financial advisor, Goldman so it could justify the low price Vista paid to Avalara shareholders, the Proxy painted a falsely pessimistic pic­ture of operational challenges and weaknesses, failing partnerships, and decelerating growth. It also included inaccurate revenue projections—which Goldman relied upon in deeming the deficient merger price fair—that did not factor in inorganic growth from M&A activity even though acquisitions had always been a material part of Avalara’s growth story and management made clear that they would continue to be part of the company’s DNA going forward.

The SAC also alleges that defendants issued a mislead­ing Schedule 14A, touting that Institutional Shareholder Services (“ISS”) had recommended the merger but omit­ting that the ISS explicitly stated that its recommendation was cautionary and made clear that it found scathing crit­icism of the deal by several large investors to be credible.

The district court dismissed plaintiffs’ case against Ava­lara, ruling that the SAC had not alleged objective falsity as to any of defendants’ misstatements. The court based its ruling on, among other things, inferences drawn in defendants’ favor, resolutions of questions of fact that should not have been addressed at the pleading stage, and findings of “puffery”—vague, optimistic statements that a reasonable investor would not rely on when mak­ing investment decisions—even though each alleged misstatement included or accompanied hard metrics.

The district court also ruled that the SAC had not alleged subjective falsity or negligence as to any defendant except for CEO defendant McFarlane. However, the court conceded that the SAC had plausibly alleged that McFarlane had transmitted all the same data he pos­sessed, which underpinned the finding of subjective falsity as to him, to the other director defendants during nine separate meetings.

The Ninth Circuit reversed the district court’s ruling in part. It found that the district court had erred in ruling that the omission of inorganic growth from the projec­tions was not objectively false or misleading because the SAC claimed that “acquisitions have always been a material part of Avalara’s growth story and management made clear that they would continue to be a part of the Company’s DNA going forward;” the SAC “underscore[d] how Avalara had always included inorganic growth in its guidance, and when it did not, it “explicitly stated as such;”” and the SAC included “uncontested allegations that Avalara acquired “twenty eight companies from 2007 to 2021, including twelve between 2018 to 2021.” The Court stated that the “plethora of particularized allega­tions plausibly suggests that the omission—and the lack of notice about such omission—could materially mislead a reasonable investor.” The Ninth Circuit concluded that “Requiring more detail than those presently al­leged would transform the PSLRA’s formidable pleading requirement into an impossible one.”

The Ninth Circuit also found that the district court had erred in holding that statements about the ISS recom­mendation were not objectively false and misleading because defendants had omitted numerous statements from the ISS report demonstrating “that ISS’s recom­mendation was not as approbatory as Avalara touted. ... Indeed, it was “cautionary.” The Ninth Circuit rejected defendants’ argument that certain of the unfavorable ex­cerpts had been included in a separate SEC filing by a third party because “Ordinarily, omissions by corporate insiders are not rendered immaterial by the fact that the omitted facts are otherwise available to the public.”” The Court further rejected defendants’ argument that it is true that ISS did in fact issue a recommendation for the sale because “statements literally true on their face may nonetheless be misleading when considered in context.”

Furthermore, the Ninth Circuit confirmed that the district court’s “meticulous analysis” was correct that the PLSRA safe harbor does not apply to statements regarding the preparation of the projections because “statements that the projections were “prepared on a reasonable basis” or “reflected the best currently available estimates and judgments” are “not forward looking.” They are instead statements about the preparation of, and basis for, the pro­jections that incorporated then existing, verifiable facts.”

Pomerantz continues to vigorously pursue plaintiffs’ securities claims against Avalara.

Q&A with Partner Brenda Szydlo

By Katarina Marcial

Editor Katarina Marcial sat down with Brenda Szydlo, a Partner in Pomerantz’s New York office, to discuss her career journey, passion for mentorship, and advice for lawyers looking to make their mark in the field.

Monitor: Can you share a little about your background and interests?

Brenda Szydlo: I grew up in Brooklyn and moved to Long Island, where I now live. I attended Binghamton University as an undergraduate and earned a law degree at St. John’s School of Law. I have known I wanted to be a lawyer since the age of ten, and I have consistently followed that path, making choices to achieve that goal. I gained experience early on at mid-sized to giant firms representing both plaintiffs and defendants in complex civil litigation in federal and state courts. After spending much of my career in New York Big Law defense firms, I truly enjoy representing plaintiffs at Pomerantz.

Monitor: What brought you to Pomerantz, and what do you enjoy most about being a Partner here?

Brenda Szydlo: I came to Pomerantz when an opportunity arose to work on a securities class action against Brazil’s largest oil company, Petrobras, in which Pomerantz was Lead Counsel and which was heading to trial. The allegations stemmed from a multi-billion-dollar, decades-long kickback and bribery scheme. I was hired, as Senior Counsel, to play a leading role in the case. After several years of hard-fought litigation, we secured a historic $3 billion settlement for the class. I enjoyed taking fact and expert depositions and the writing opportunities. Our use of jury focus groups, which enabled our trial team to gain insight into jury reasoning and analysis, was fascinating. The entire experience was very rewarding. I chose to stay at Pomerantz and became a Partner, running my own cases and mentoring other attorneys.

I have never been as happy at a law firm as I am at Pomerantz. I have deep re­spect for the attorneys at the firm. I appreciate the work culture at Pomerantz: a high level of intelligence, expertise and professionalism within a supportive, collaborative atmosphere. I can bounce ideas off my colleagues for a fresh perspective on my cases, and there is camaraderie here that I appreciate. That’s important, considering how much time attorneys spend working together in the office.

Monitor: Why is mentorship important to you?

Brenda Szydlo: My first job out of law school was at a mid-sized firm that handled various areas of litigation, including securities litigation. A senior partner asked me to work with him to defend a major accounting firm in two high-profile cases involving securities fraud and other wrongdoing with respect to companies controlled by automobile magnate John DeLorean. Depositions were obtained from secretaries and ministers of state, including former Prime Minister Margaret Thatcher, along with unprecedented discovery of documents from the British government, including secret cabinet

minutes. That senior partner became my mentor. His guidance helped me greatly, and throughout my career, I have wanted to pay it forward to the next group of young attorneys, as he did for me. Mentoring is a great and rewarding bonding experience, helping someone hone their skills and gain new experiences to grow as an attorney.

Monitor: Can you identify any ways that mentorship helped you?

Brenda Szydlo: Yes. Because I had a mentor, I was able to take depositions early in my career. In fact, I wish my mentor had been with me the first time I took a deposition. I recall being in the room with well-seasoned attorneys from two large firms and having to learn on the fly. Back then, there was no time limit for depositions, and this one dragged on well into the evening. Now, had my mentor been with me, I would have had the wisdom to say, “Oh no, we’re cutting this off at six o’clock and we’ll regroup on another day.” Though he was not physically by my side during that first deposition, I was given the opportunity to take a deposition as a junior associate because of him. I am thankful for the opportunities and valuable lessons he gave me.

Monitor: Can you share your mentoring experience at Pomerantz?

Brenda Szydlo: One of my first mentees here was associate Villi Shteyn. He joined the firm directly out of law school. I exposed him to depositions -- how to take them and how to handle witnesses. After he shadowed me on depositions, I had him draft an outline to depose three doctors for a case. How you phrase questions in a deposition is very important. If not properly phrased, a question can evoke an objection by the other side. We refined his questions together and then he took the three depositions. I sat in and observed, passing him notes to help him through the proceedings, but he conducted them. My goal is to prepare attorneys to lead cases on their own and to give them as many opportunities as possible.

Monitor: What qualities make a good mentor?

Brenda Szydlo: It’s important to be mindful of the skills the mentee wants to learn and work together with them to find a way of getting there. Why not expose the person if you can? Also, building trust with mentees so that they feel comfortable enough to speak to you about issues they are facing is key. My door is always open to any mentee who wants to confer about cases. Sharing stories is a helpful way to pass down wisdom. Hearing stories of your experiences, and the lessons that you learned from them, can be valuable.

Monitor: Do you have advice for associates looking to grow their careers?

Brenda Szydlo: Ask for opportunities. Make it known that you want certain experience and are eager to learn. For example, because I know that Dean Ferrogari, another associate, wants to participate in more discovery, I am looking for those opportunities for him. Associates just need to speak up.

Plaintiffs Defeat Motion to Dismiss Claims Against Axsome Therapeutics

By Michael Grunfeld

On March 31, 2025, Pomerantz secured a victory on behalf of a proposed class of investors in Axsome Therapeutics, Inc., defeating defendants’ motion to dismiss securities fraud claims related to Axsome’s New Drug Application (“NDA”) for one of its core products, AXS-07.

Axsome is a small pharmaceutical company that develops therapies for central nervous system disorders. AXS-07, a migraine medication, was one of the company’s two main products and the one that it represented as clos­est to commercialization during the period from May 10, 2021 to April 22, 2022 (the “Class Period”).

Plaintiffs allege in their Second Amended Complaint (“Complaint”) that throughout the Class Period, Axsome and its senior executives misrepresented the compa­ny’s ability to manufacture AXS-07 and the strength of its NDA that was required for the drug to be approved by the Food and Drug Administration (“FDA”). Then, on April 25, 2022, Axsome announced that it expected that the FDA would not approve the AXS-07 NDA because of “unresolved” issues with chemistry, manufacturing and controls (“CMC”), sending Axsome’s stock price plum­meting by 22% and causing its investors to suffer signifi­cant financial losses.

The Complaint supported the allegation that defendants misrepresented the status of AXS-07 and its NDA sub­mission based on several sources, including a confi­dential witness who worked on a study of AXS-07 and reported that Axsome’s third-party contract manufac­turing organization (“CMO”) was completely unable to manufacture the drug during the Class Period because of equipment problems at the manufacturer. Plaintiffs also cited defendants’ subsequent admissions, when discussing their resubmission of the NDA after the Class Period, that Axsome still needed to manufacture additional batches of AXS-07 for certain studies that were needed for the submission.

The court upheld nearly all of the alleged misstatements in the Complaint and held that scienter — defendants’ intent — was adequately alleged as to two of the individ­ual defendants, Axsome’s CEO and its Chief Operating Officer, as well as for the company itself. The Complaint thus adequately alleges claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against these defendants.

There are several notable aspects of the court’s deci­sion denying defendants’ motion to dismiss, including its rejection of defendants’ arguments concerning the elements of falsity, scienter, and loss causation.

Falsity

Even with strong allegations that Axsome experienced the manufacturing problems with AXS-07 alleged in the Complaint, plaintiffs had to overcome defendants’ argu­ments that their statements would not have misled inves­tors about the status of AXS-07 and its NDA submission.

The court rejected defendants’ arguments, holding that their “statements about AXS-07 were misleading be­cause they created an impression that the Company was not facing supply issues, when, in reality, the [Com­plaint] alleges that Axsome was unable to produce sufficient AXS-07 for at least a year” and that statements about the NDA submission “were misleading because they implied that Axsome actually was conducting, or at least was able to conduct, stability testing” when in fact “Axsome could not obtain sufficient AXS-07 to conduct the necessary stability studies,” which “would result in an inadequate NDA filing.”

The court therefore rejected nearly all of defendants’ argu­ments that their alleged misstatements were nonactionable opinion statements, were otherwise not material (or signifi­cant) to investors, or were not inconsistent with the under­lying facts alleged. Rather, the allegations in the Complaint “support the inference that Axsome was experiencing man­ufacturing and supplier issues that Defendants were obli­gated to disclose to make other statements not misleading.” The court also agreed with plaintiffs that Axsome’s alleged equipment problems were material to investors since they “impacted the likelihood of NDA approval because they were delaying AXS-07’s stability testing timeline.”

In addition, the court held that defendants’ purportedly for-ward-looking statements were not protected by a safe harbor for such statements because when these statements were made, Axsome was “already facing supply issues that were delaying ‘the development and commercialization’ of AXS-07,” the Complaint adequately alleged “actual knowl­edge” of falsity, and the safe harbor “does not protect material omissions.”

More fundamentally, the court agreed with plaintiffs’ theory of falsity, holding that the Complaint was not alleging “that Defendants ‘promise[d]’ FDA approval, but instead that Defendants ‘promote[d] the likely approval of AXS-07’ while being aware of facts that materially decreased the likelihood of such approval.” This ruling shows that defendants cannot evade liability by contending that they cannot predict the future when their positive statements are inconsistent with the underlying facts that they are aware of at the time that reduce the probability of a positive outcome for the company.

Scienter

The court’s scienter ruling helpfully shows how several different scienter allegations “taken together” can plead the requisite showing of intent, that a confidential witness’s “information need not be based on direct contact with the Individual Defendants to be reliable,” and that post-Class Period statements can support inferences about defendants’ state of mind during the Class Period.

In particular, the Complaint adequately alleges the scienter of Axsome’s CEO and COO — and by extension, of Axsome itself — because AXS-07 was a “core product” for Axsome, which “is a small pharmaceutical company with only about 100 full-time employees as of early 2022”; these defendants’ “public statements evinced a strong familiarity with AXS-07’s manufacturing process”; an FDA inspection report related to Axsome’s other main product described these defendants’ responsibilities for the relevant functions at the company; the confidential witness reported to the COO’s report; and defendants’ post-Class Period statements “ illustrate that Defendants knew that AXS-07’s June 2021 NDA would likely be defi­cient due to supply delays that limited stability testing.”

In other words, plaintiffs may adequately plead the defendants’ scienter based on the circumstances as a whole. The court will not accept the defendants’ alternative explanation of events when a commonsense interpretation of the relevant information dictates that individual defen­dants, such as a company’s top executives responsible for the topic at issue, knew or recklessly disregarded the underlying facts that made their statements false and misleading to investors.

Loss Causation

The court also ruled that the Complaint adequately alleges loss causation — i.e., that that defendants’ misstatements caused plaintiffs’ losses. This ruling also confirms the importance of common sense in interpreting the course of events.

In their motion to dismiss, defendants attempted to argue that loss causation was not adequately alleged because the Complaint did not sufficiently “allege that the basis for the FDA’s denial of the NDA was Axsome’s inability to manufacture AXS-07.” The court rejected this argument because even though Axsome did not disclose the specific CMC issues that caused the FDA to reject the NDA for AXS-07, the “allegations give rise to the reasonable inference that the CMC issues to which the FDA referred [when rejecting the NDA for AXS-07] were the manufacturing issues described throughout” the Complaint and the Complaint “alleges that undisclosed manufacturing issues created a particular risk that the FDA would reject the AXS-07 NDA.”

Here too, as with the Court’s earlier rulings, plaintiffs prevailed because their interpretation of the available information was far more reasonable than defendants’ attempt to avoid liability through a farfetched reading of those events.

The case is In re Axsome Therapeutics, Inc., No. 1:22-cv-3925 (S.D.N.Y.)

Pomerantz $40 Million Emergent Biosolutions Settlement Granted Final Approval

By the Editors

Pomerantz was pleased to recently resolve its securities class action lawsuit against Emergent BioSolutions Inc. (NYSE: EBS) and certain of its executives, which sought to recover investment losses stemming from alleged misrepresentations of the markets relating to Emergent’s disastrous COVID-19 vaccine manufacturing failures. After four years of hard-fought litigation led by Pomerantz Partner Matthew Tuccillo, the court granted final approval to the $40 million class-wide settlement in late February 2025.

When the COVID-19 pandemic struck, Emergent seemed uniquely positioned to capitalize, as the U.S. government had designated Emergent’s Bayview facility in Baltimore, Maryland, as one of just three in the U.S. pre-authorized to ensure a supply of vaccines in a pandemic. In short order, Emergent signed over $1 billion in contracts with the U.S. government, Johnson & Johnson, and AstraZeneca to manufacture the raw material – bulk drug substance – for the two companies’ COVID-19 vaccines, which, due to simpler dosing and refrigeration needs than mRNA alternatives, were poised to be a significant element of the U.S. global response to the pandemic.

Unbeknownst to investors, Emergent’s Bayview facility had serious, longstanding deficiencies in equipment, personnel, training, and processes, particularly in regards to its anti-contamination capabilities, which materially increased the risks of catastrophic errors that could derail its COVID-19 manufacturing work. These flaws, which rendered the Bayview facility unsuited for the urgent COVID-19 vaccine manufacturing role, were later revealed by The New York Times and the Associated Press, multiple Congressional reports, and Pomerantz’s interviews of numerous former employees and review of extensive regulatory documentation.

Contrary to these concealed, negative facts, during the class period at issue, Emergent and its executives touted Bayview’s readiness to rapidly engage in large-scale manufacturing of both the J&J and AstraZeneca COVID- 19 vaccine bulk drug substances. Emergent raised funds via a public offering, while its CEO revised his Rule 10b5-1 stock trading plan, which had not sold a single share in four years, to sell over 88,000 shares in a three-week period near class period high trading prices, reaping him over $11 million in sales during the alleged fraud. When The New York Times reported that Emergent had cross-contaminated a batch of J&J bulk drug substance with AstraZeneca material, Emergent and its CEO initially denied that any cross-contamination had occurred.

Ensuing revelations of incidents where deficient procedures, insufficient training, and lack of compliance at Bayview resulted in batches of J&J or AstraZeneca bulk drug substance being discarded due to bacterial or other contamination, suffocation of cells, and other failures caused Emergent’s stock price to plummet. The U.S. government halted production of the AstraZeneca vaccine at Bayview and handed control of the facility to J&J before finally ending all COVID-19 vaccine manufacturing there, as Emergent’s lucrative contracts were terminated. Ultimately, Emergent’s failures resulted in the destruction of 400 million out of the 500 million COVID-19 vaccine dose-equivalents ever produced at the Bayview facility, a stunning failure. Investors suffered huge losses.

Pomerantz’s clients, the Nova Scotia Health Employees’ Pension Plan and the City of Fort Lauderdale Police & Firefighters’ Retirement System, were appointed Co-Lead Plaintiffs to oversee this important litigation. Under their oversight, Pomerantz pled a robust amended complaint, supplemented by extensive judicial notice materials, that synthesized a sweeping factual record into a compelling securities fraud narrative.

Pomerantz litigated and overcame a hard-fought, voluminous motion to dismiss after a lengthy oral argument. Thereafter, Pomerantz zealously built the evidentiary record by pursuing written and document discovery from defendants, subpoenaing third parties like J&J and AstraZeneca and serving records requests (FOIA and international equivalents) to U.S. and foreign regulators. Pomerantz secured and reviewed nearly 120,000 documents and deposed a dozen Emergent executives and employees. Pomerantz also filed a motion for class certification, supported by an expert report on market efficiency and damages, which the court granted.

Meanwhile, as authorized by our clients, Pomerantz also pursued a negotiated resolution, mindful of Emergent’s troubled operations and ongoing concern warnings in its SEC filings. Pomerantz conducted a full-day, in-person mediation and a follow-up virtual session with an experienced JAMS mediator. Thereafter, Pomerantz engaged in six months of regular telephonic negotiations while advancing discovery before an agreement in principle to settle was reached. After the court granted preliminary settlement approval, Pomerantz oversaw a robust, class-wide notice program, which resulted in over 130,000 mailed notices, 27,000 settlement webpage visits, and 64,000 class member claims submitted – without a single class member objecting to any part of the settlement. The overwhelmingly positive response is not surprising. The settlement represented a recovery as high as 12.75% of class-wide damages and compared extremely favorably both to comparable settlements within the judicial Circuit and to national settlements data from 2014-2023 as compiled by NERA and Cornerstone Research.

Asked for comment, Attorney Tuccillo said: “We are so pleased that the court granted final approval of this important settlement. Judge Boardman ordered a brisk litigation schedule, carefully oversaw our progress, and closely scrutinized our settlement. The settlement is an outstanding result and secured the vast majority of available insurance coverage for the benefit of Emergent’s damaged shareholders. Credit goes to our clients, who produced documents, oversaw our work and authorized a strong settlement for the benefit of the entire class.” Pomerantz is now working with a claims administrator to efficiently process and validate the submitted class member claims and looks forward to filing a distribution motion to seek court approval to send recovery checks later this year.

Pomerantz’s litigation team on the Emergent matter also included Of Counsel Jennifer Banner Sobers and Associates Zachary Denver, Jessica Dell, Villi Shteyn, and Brandon Cordovi.

Pomerantz Prevails Against Motion to Dismiss Claims Against Alphabet and Google

By the Editors

On March 24, 2025, U.S. District Judge Rita F. Lin of the Northern District of California sustained investors’ securities fraud claims against Alphabet and Google in a high-profile litigation that involves allegedly false and misleading statements made by Google to investors concerning Google’s digital advertising technology. Google’s allegedly improper practices are the subject of several lawsuits alleging antitrust violations by the Attorneys General of two dozen states and the Department of Justice. Pomerantz serves as sole lead counsel in the litigation.

Alphabet’s subsidiary Google is the dominant player in the field of digital advertising. According to plaintiffs’ second amended complaint, “Google’s dominance in the entire ad tech industry has been questioned by its own digital advertising executives, at least one of whom aptly asked: “[I]s there a deeper issue with us owning the platform, the exchange, and a huge network? The analogy would be if Goldman or Citibank owned the NYSE.””

The ABCs of Digital Advertising

Display ads are image-based ads on websites, which may contain images, text or multimedia. A single display ad shown to a single user on a single occasion is an impression. A website’s owner or an online media company is a publisher. Publishers of news articles usually monetize their content with targeted display ads shown alongside the article. Internet advertisers may include businesses, government agencies, charities, political candidates, and other entities.

Online publishers sell their inventory of display ads to advertisers either directly or indirectly. For example, The New York Times, as an online publisher, could negotiate directly with Apple, as an advertiser, to display Apple’s ads atop the NYT homepage one million times in a particular month. However, a publisher cannot always predict how many of its ad spaces will be available to sell directly to advertisers because its inventory depends on how many users visit its website. Publishers can, therefore, find themselves with unsold, surplus inventory.

Publishers use software known as an ad server to make their impressions available for sale. Since 2008, Google has owned the industry’s leading ad server, Google Ad Manager (GAM), which is often still referred to by its former name, DoubleClick for Publishers (DFP).

Indirect sales occur through centralized electronic trading hubs, or ad exchanges (a/k/a supply-side platforms or SSPs) and through networks of publishers and advertisers. Publishers can use an ad exchange to auction off some or all of their inventory to buyers in real time for a percentage fee, or sell their inventory to a network, which in turn will resell it to an advertiser for an undisclosed markup. Google owns the industry’s leading ad exchange, Google AdX, now packaged with DFP as part of GAM. GAM currently controls over 90 percent of the digital advertising market in the United States.

In 2000, Google launched Google Ads, a tool that allowed businesses to buy ads that would be seen by Google search users alongside their search engine results. Advertisers, drawn by the power of such instantaneous, highly targeted advertising, flocked to Google Ads.

Unbeknownst to Investors, Google Favors Itself

Google began requiring publishers who chose to use Google Ads to also use its ad server DFP and its ad exchange AdX. Google did not disclose that it programmed DFP to give Google’s own ad exchange, AdX, the first chance to buy impressions before they were offered to other ad exchanges, and often to do so at artificially low prices.

Google then profited by charging high fees on AdX, while neither advertisers nor publishers could leave for other ad exchanges, having no access to one another. Publishers fought back with “header bidding,” which involved inserting code into their webpages that allowed other non-Google ad exchanges to bid on their impressions before Google’s hard-coded preference for AdX was triggered. Google saw header bidding as a major threat to its digital advertising dominance.

Pomerantz’s complaint alleges that even before header bidding emerged, Google had singled out Facebook— one of the biggest ad buyers on the internet—as a competitive threat. In March 2017, Facebook announced that its Facebook Advertising Network (FAN) would participate in header bidding, permitting its advertisers to bypass Google’s platform and chipping away at its revenues. Crushing the “existential threat” posed by header bidding and Facebook became a major priority for Google. Securing Facebook’s participation in Google’s open bidding system was so critical that Pichai personally negotiated a deal to convince Facebook to abandon header bidding. Enticing Facebook required significant concessions, with Google agreeing to give Facebook the same benefits it maintained over other bidding participants. Those perks included additional time to bid for ads, auction matching advantages, the ability to detect which impressions were targeted to bots, and a predetermined “win rate.”

Pomerantz and Plaintiffs Prevail

Judge Lin found that Pomerantz adequately alleged that the advertising auctions favored bids submitted through Google-owned platforms or FAN, which had an agreement with Google:

“Allegedly, bidders operating through those channels received extra time, additional nonpublic information, and other advantages. Plaintiffs have further adequately alleged that Pichai was sufficiently involved in the negotiation regarding FAN that he was well-aware of these advantages when he represented otherwise in his September 2020 statement.”

According to Partner Emma Gilmore, who co-leads the litigation with Jeremy A. Lieberman, “The court sustained plaintiffs’ claim that CEO Pichai made a false representation to Congress with the intent to deceive the market when he testified that “the channel through which a bid is received does not otherwise affect the determination of the winning bidder.” This is a significant win for investors, paving the way for them to recoup their losses in Google, an advertising juggernaut.”

Q&A with Of Counsel Samantha Daniels

By Katarina Marcial

Editor Katarina Marcial chatted with Of Counsel Samantha Daniels, based in the Firm’s New York office.

Monitor: Can you share a little about your background and interests?

Samantha Daniels: I grew up in Daytona Beach, Florida, known for its lively spring break scene, NASCAR, and Bike Week. Aspiring to be a lawyer, I attended Cornell in Ithaca as an undergrad and the University of Chicago for law school, and even¬tually worked in Washington, DC at Gibson Dunn & Crutcher as an associate. After stints in Gibson’s DC, LA, and NY offices, I finally found my home in NYC. Disillu¬sioned by working for the defense side (solely for large corporations), I realized I wanted to represent those who would hold those corporations accountable. I did not want to sacrifice the quality of the people and work product I became accustomed to at Gibson, and Pomerantz fit the bill.

I love ‘70s, ‘80s, and ‘90s rock, funk, and soul. I also enjoy art, visiting museums and painting. Taking painting classes is my way of relaxing, clearing my mind, and gaining inspiration.

Monitor: What inspired you to pursue a career in law, particularly in securities litigation?

Samantha Daniels: My dad is a lawyer, which inspired my respect for the profes¬sion, especially securities law. I studied political science and history to prepare for a career in DC politics or a government agency. But my experience in DC left me jaded. At Gibson’s appellate group, I discovered a passion for storytelling. In securities law, storytelling is essential for presenting facts in a compelling manner to engage judges. I worked with inspiring colleagues, such as the late, great Ted Olson, who taught me how to make judges care about a case by highlighting its public policy implications. I enjoy using my storytelling skills – finding the right angle and packaging it well – to highlight wrongdoing and the harm it’s caused, as the key to crafting a narrative that resonates with judges. I love this aspect of litigation.

Monitor: You recently successfully overcame two Motions to Dismiss. Can you tell us about the cases?

Samantha Daniels: The case against Golden Heaven involved clear-cut fraud by a Chinese company that went public in the U.S., falsely claiming high demand and revenue for its amusement parks. Upon investigation by Hindenburg (and confirmed by our own investigator abroad), it was discovered that the parks were virtually deserted. The hearing for defendants’ motion to dismiss went well, and we felt confident we would win. However, before the judge issued a decision on the case, the Slack decision (Pirani v. Slack Techs., Inc.) was handed down in the Ninth Circuit, which could have severely limited Pomerantz’s case. The Slack decision essentially stated that if plaintiffs can’t trace their shares directly to the IPO’s registration statement, then there is no standing for their claims. The Golden Heaven defendants cited that decision as a reason to dismiss our case. I argued, however, that this was dicta -- in other words, that the judge’s statements in the Slack decision were not binding as precedent -- and the judge, already convinced by my argument about the severity of the fraud, agreed that Slack didn’t apply. Consequently, the judge denied the defendants’ motion to dismiss our case, which was a significant victory.

The SunPower case involved more subtle deception by a reputable U.S.-based solar company. We alleged that SunPower misled investors about its financial health and capabilities while secretly approaching bankruptcy. SunPower was delaying the release of its financials, relying on future cash it would receive from a majority shareholder. Behind the scenes, it was in a cash freefall. The challenge was to demonstrate this pattern of deceit to Judge Rita Lin and to secure confidential witnesses who would attest to SunPower’s lack of cash flow. Despite rigorous counterarguments from opposing counsel, the judge recognized the fraudulent implications of SunPower’s actions. Although not all our claims were upheld, enough were maintained to allow us to proceed. This case posed the challenge of proving fraud without concrete financial disclosures. However, I ultimately established a pattern of wrongdoing and advanced the case.

Monitor: Do you feel that there is an unspoken expectation for women in law to do it all, excel at their careers, while finding balance?

Samantha Daniels: Yes, I do. I balance these expectations with confidence by maintaining my boundaries and addressing issues head-on. For example, I recently had to work on a case with another firm. They sent me an incomplete draft of the complaint, despite our agreement that they’d handle the complaint and I’d handle the opposition. Instead of fixing their draft, I pushed back and sent a strongly worded email with corrections, emphasizing my deadlines and their responsibilities. Sometimes, people will test what they can get away with, and it’s essential to stand up for oneself, especially for women, who often feel pressured to do it all. In your personal life, you can do the same thing. Once you recognize your worth, this becomes a lot easier.

Monitor: Do you have any female mentors or role models who have shaped your career?

Samantha Daniels: During my time at Gibson in DC, Helgi Walker, an appellate partner, involved me in cases with intriguing constitutional issues, emphasizing the importance of argument and presentation and understanding judges’ perspectives. Her mentorship taught me to embrace ambiguity, present it clearly, and act as a PR agent when defending a corporation, crafting a well-researched argument that considers all stakeholders. Similarly, working with Perlette Jura in Los Angeles was invaluable due to her extensive experience in appellate and transnational litigation. She shared with me a memorable story about leading a meeting as a female associate in a room full of men. Despite knowing that beautiful young women are not always taken seriously, she had confidence in her case knowledge and owned her power. This continues to inspire me. At Pomerantz, I am grateful to be managing my own cases, gaining confidence and confirmation of something I already knew – I can do this. I am fortunate to work with highly accomplished women like Emma Gilmore, Murielle Steven Walsh and Brenda Szydlo and learn from them all.

Monitor: What advice would you offer to younger attorneys seeking to succeed in their careers?

Samantha Daniels: Always speak up. If you have a great idea, or if you see a legal route that hasn’t been pursued, or a legal theory or argument, share it. As a junior associate, I recall hesitating to voice my thoughts, assuming others had already considered my ideas or doubting them due to potential counterarguments. However, your strength comes from being closest to the facts and law, especially when preparing partners for hearings or drafting briefs. If you see something, say something.

Pomerantz Secures Landmark Governance Reforms in Qurate Retail Settlement

 By Gustavo F. Bruckner and Danielle Sharon

On December 6, 2024, Vice Chancellor Sam Glasscock III of the Delaware Court of Chancery granted final approval to a groundbreaking settlement in In re Qurate Retail, Inc. Derivative Litigation, C.A. No. 2021-1116-SG (Del. Ch.). This stockholder derivative action, brought on behalf of Qurate Retail, Inc., alleged that certain senior executives and board members engaged in self-dealing transactions that benefited company insiders at the expense of stock­holders. Pomerantz, serving as Co-Counsel, helped ne­gotiate a settlement that implements critical governance reforms designed to restore corporate accountability at Qurate.

Class action securities litigations are brought by stockhold­ers on behalf of a group, or “class,” of similarly defrauded investors and usually seek recovery of financial losses due to fraud. They often result in direct monetary compen­sation for stockholders. Stockholder derivative actions, on the other hand, are brought on behalf of the corpora­tion by stockholders against the directors of a corporation for the benefit of the corporation and its stockholders in order to remedy a harm to the corporation. Often, these suits seek to compel changes in corporate governance. The Qurate case aimed to rectify structural governance failures that allowed insiders to extract unfair benefits. The settlement delivered significant corporate governance changes, including the reinstatement of a critical call right that Qurate’s predecessor had originally paid $150 million for in 1998, along with new safeguards against unchecked insider control. These reforms will provide lasting benefits to the company and its investors, ensuring greater oversight and preventing similar issues in the future.

What Makes This Case Unique

The case centered around a rare and impactful series of transactions that raised fundamental questions about the corporate governance of Qurate, a leading multi-platform retailer. Specifically, it involved the controversial 2021 transactions between Qurate senior executives, Gregory B. Maffei, CEO and President, and Dr. John C. Malone, a controlling stockholder, which effectively consolidated control of the company in the hands of insiders by strip­ping Qurate of a crucial call right that had been acquired for $150 million in 1998. This eliminated Qurate’s ability to reclaim control of shares, representing a major shift in corporate control dynamics.

What attracted Pomerantz to the case was the opportunity to challenge this blatant conflict of interest and restore fundamental governance mechanisms that protect stockholders. The case was also emblematic of broader corporate governance concerns, particularly in companies with dual-class stock structures where insiders have disproportionate control, leaving public stockholders at a disadvantage. The case offered a significant opportunity not only to seek justice for stockholders but also to establish important reforms that would serve as a model for good governance.

Understanding Derivative Suits and Books and Records Demands

A derivative lawsuit is brought by a stockholder on behalf of a corporation against its executives, board members, or other insiders when they have allegedly engaged in misconduct that harms the company. These cases seek remedies that benefit the company directly when its board of directors fails to take appropriate action to address alleged wrongdoing.

Before filing a derivative suit, stockholders frequently issue a books and records demand, a legal request under most states’ laws that grants stockholders the right to inspect certain internal corporate documents to investigate potential misconduct. In this case, stockholders obtained valuable internal documents that strengthened their claims against Qurate’s leadership.

The Case: How Pomerantz Took Action

Pomerantz pursued this case after uncovering a series of transactions that raised serious concerns about cor¬porate governance at Qurate. The litigation focused on a 2021 transaction in which Malone, Qurate’s controlling stockholder, transferred his super-voting Series B shares to his long-time business associate, Maffei. This move, plaintiffs alleged, was orchestrated to consolidate control in the hands of insiders and effectively deprived Qurate of the ability to reclaim those shares through an existing call right. Specifically, the 2021 transaction involving Qurate triggered an accelerated vesting of Maffei’s options under his employment agreement, which would have provided him with substantial benefits unavailable to other stock¬holders.

The complaint alleged that these transactions:

• Eliminated a Valuable Corporate Right – Qurate’s predecessor had paid $150 million in 1998 for the ability to repurchase the controlling Series B shares under certain conditions. The 2021 transactions stripped Qurate of this right without adequate stockholder consideration.

• Benefited Insiders at the Expense of Stockholders – The transfer of control from Malone to Maffei did not provide any benefit to the company or its investors but instead entrenched management’s authority and en¬riched Maffei.

• Violated Fiduciary Duties – By approving and facilitat¬ing these transactions, certain Qurate board members breached their fiduciary duties by prioritizing insider interests over those of public stockholders.

Procedural History: A Complex and Hard-Fought Case

After making a books and records request and reviewing confidential internal documents, the action was initiated on December 28, 2021, when plaintiffs filed a derivative complaint on behalf of Qurate in the Delaware Court of Chancery.

• Motion to Dismiss Granted in Part and Denied in Part – Defendants moved to dismiss the case, arguing that the board’s actions were legally permissible. While the Court dismissed claims against certain directors who were found not to have been directly involved in the alleged misconduct, it upheld the claims against the key figures, including Malone and Maffei, ruling that plaintiffs had sufficiently alleged breaches of fiduciary duty as to those directors.

• Demand Futility Argument – In derivative suits, plain¬tiffs must typically demonstrate demand futility, meaning they must show that asking the company’s board for per¬mission to take action would have been pointless be¬cause members of the board were likely conflicted. One particularly unusual but helpful development in the case was the appearance of a photo on social media depict¬ing Malone on a private cruise alongside a purportedly uninterested board member. This evidence played a pivotal role in establishing demand futility, as it visually demonstrated the influence of conflicted insiders over the board. The image provided tangible proof that key decision-makers were not independent, further sup¬porting claims that insiders improperly influenced the transactions. This allowed the case to proceed without requiring plaintiffs to first seek board permission before taking action.

• Extensive Discovery and Negotiations – Over the course of litigation, Pomerantz engaged in rigorous discovery, uncovering key evidence that supported the claims of self-dealing and improper governance. This included obtaining internal communications, board meeting minutes and financial records that demonstrated the potential conflicts of interest inherent in the transactions.

The Settlement: Major Wins for Stockholders

The settlement delivered meaningful governance reforms to protect Qurate’s stockholders and ensure that similar improper interested transactions do not occur in the future.

Key settlement terms include:

• Restoration of the Call Right

1. Qurate successfully reinstated a call right over Maffei’s Series B shares, ensuring the company has a mechanism to reclaim control in certain circumstances.

2. The new call right closely mirrors the original 1998 agreement, allowing Qurate to recapture these shares under defined conditions.

3. This provision restores balance to Qurate’s corporate structure, preventing insiders from consolidating excessive control.

• Independent Oversight of Insider Transactions

4. Future material transactions involving Malone or Maffei must be reviewed and approved by an independent board committee.

5. This ensures that stockholder interests are prioritized over insider benefits and enhances overall corporate transparency.

Board Composition Reform

6. Malone agreed not to seek reelection after his term ends in 2025,

which alleviates concerns about concentrated control and potential conflicts of interest.

7. This reform reduces the likelihood of corporate decisions being

unduly influenced by a single controlling stockholder.

These reforms, while non-monetary, are significant governance changes, ensuring a more equitable decision-making process for all Qurate stockholders.

Court Commentary on the Settlement

Vice Chancellor Glasscock praised the settlement, stating:

• “The chances of a really lucrative cash award after trial were limited, and so it appears to me to be not only fair, but a very commendable settlement.”

• “These [therapeutic benefits] are so neatly tailored to the situation that brought us all here that I have got to congratulate the parties for coming up with them.”

Pomerantz’s Commitment to Stockholders

Pomerantz’s Corporate Governance team has long been at the forefront of stockholder rights litigation, advocating for corporate accountability and transparency.

The Qurate settlement establishes a precedent for corporate governance reforms in similar cases. The requirement that insider transactions undergo independent scrutiny is an essential safeguard, ensuring that public companies remain accountable to all stockholders, not just controlling insiders.

Q&A with Associate Ankita Sangwan

By Katarina Marcial

Editor Katarina Marcial chatted with Associate Ankita Sangwan, a member of the Firm’s Corporate Governance Team in its New York office, to learn about her career journey, the motivations behind her pursuit of corporate governance, her most rewarding case, and what advice she has for aspiring lawyers.

Monitor: Can you share a little about your background and interests?

Ankita Sangwan: I grew up in multiple cities across India, as my dad was in the military. I attended law school there. During the pandemic, I decided to pursue my master’s degree and applied to universities across the globe. I was accepted at Columbia, which brought me to New York. As for my interests, I enjoy reading science fiction and dystopian novels. I was a fan of “Dune” before it gained widespread popularity. I’m also conscious of health, nutrition and fitness, and I enjoy hiking and Pilates on the weekends.

Monitor: Was it challenging to transition to a new country and assimilate to a new work environment, customs, and differences in the legal fields?

Ankita Sangwan: Graduate school was not particularly difficult. Fortunately, I did not face many challenges adapting. The teaching methods at my master’s program were similar to those we had at my law school in India, which made the transition smooth. Naturally, there were cultural differences that required me to step out of my comfort zone when I first met people. In Columbia’s masters program, we had students from around the world. It helped to have many people trying to assimilate together, which facilitated a good support system for me. Overall, the experience was new and exciting. Starting in a new place can be daunting, particularly when making friends in a new city. However, once I overcame my initial nerves, it was a great experience. Starting at any new workplace is always different, and because I worked at a law firm in India for around four years, I had to adjust to the differences in the U.S. legal system. The biggest difference was that the U.S. has a parallel court system at the state and federal levels. They don’t have that in India. I had to get used to different procedures and ways of doing certain things, which required me to unlearn and be open to new processes.

Monitor: What got you into corporate governance, and why do you think it’s important?

Ankita Sangwan: I took a class on securities law at Columbia, which led me to the field of corporate governance. Class actions are unique to the United States and aren’t something we have back in India or that I’ve encountered in my studies of different jurisdictions. What’s interesting about it is that it’s a way for stockholders and individual investors to enforce their rights and seek reforms that wouldn’t otherwise be on the table. It’s also a way to keep corporate fiduciaries in check. Through that class, I came across a #MeToo case that Pomerantz was part of. I reached out to Gustavo Bruckner, the head of the Corporate Governance Team, because of that case. The remedies that the action pursued were interesting, not just in monetary compensation but also in terms of governance and policy reforms at organizations. Corporate governance is important because it’s really about what’s right and wrong, and it inserts checks and balances to prevent future misconduct.

Monitor: What has been the most rewarding case you’ve worked on?

Ankita Sangwan: The Lordstown Motors case was highly rewarding. It was a novel case against a SPAC – a public, “empty shell” Special Purpose Acquisition Company created with the sole intention of acquiring another company to take it public. Unlike the traditional method of going public via an initial public offering, SPACs bypass traditional initial public offerings and can be driven by conflicting incentives. In this case, we filed a class action where we alleged that the SPAC fiduciaries were conflicted by their own interests to get a deal done and close the transaction and, in the process, hid red flags about the company. It was later revealed that fiduciaries failed to disclose material facts on the vehicle’s production deadlines, pre-orders, etc. We conducted extensive discovery and researched a unique area of law, which was a valuable learning experience. When I joined Pomerantz, we were at the beginning of the discovery phase. It was fascinating to discuss this case with all counsel, understand the key focus points and observe negotiations between parties. The case lasted approximately 7 to 8 months from the start of my involvement until it settled favorably for stockholders in June 2024, a notable achievement given that the company had filed for bankruptcy.

Monitor: What advice do you have for younger lawyers looking to get into corporate governance?

Ankita Sangwan: Keep an open mind because cases may not pan out the way you think they should. Justice has various forms. When you start out, you are passionate about a particular point or case, but managing expectations is important. Ligation is a marathon, it’s not a race. You’re in it for the long haul. Sometimes, you’ll get great wins out of the gate, and sometimes, you won’t. It’s important to have patience and learn from all the victories and losses along the way.

Monitor: Have there been any influential mentors or anyone who has shaped your career as a lawyer?

Ankita Sangwan: Everyone I have met throughout my career is someone I have learned from. I worked under an amazing female partner in India, from whom I learned a great deal. I’ve also had many inspiring professors at law school. For instance, I took a class on the intersection between constitutional law and socioeconomic rights, and I was inspired to view constitutional law differently. I also took a seminar on securities law and got valuable insights from my professors, who were defense attorneys, about how they managed and strategized for cases. In my current role, the learning never stops. I’ve learned from both Gustavo and Sam [Adams] about when to push and pull back in negotiations, how to strategize cases, and just how to be a reasonable and good lawyer. I am very fortunate to have met the people I have, and I’ve learned from all of them.

The Most Magical Proxy Battle

By Stephanie Weaver

The biggest story of the 2024 proxy season was the thwarted attempt of activist investor Nelson Peltz and Trian Fund Management LLP (“Trian”), an alternative investment management fund that he co-found­ed, to secure two board seats on the Walt Disney Company (“Disney”) board of directors.

The $600-million battle between Peltz and Disney management was the most expensive proxy fight in corporate history. Analyzing the strate­gies employed by each party provides insights for future proxy battles at major public companies. While not all possess Disney’s financial re­sources or media prowess, they can adapt lessons from this conflict to tailor their fighting style to their specific strengths and the needs of their retail investors. Although Peltz did not succeed in obtaining the board seats, ultimately this battle gave Disney a push to institute changes that could enhance its stock performance.

On March 4, 2024, Trian published a 133-page white paper manifesto entitled Restore the Magic at The Walt Disney Company, calling for significant reform at Disney. A group put together by Trian held roughly $3.5 billion in Disney stock at the time. Trian aimed to have Peltz and Jay Rasulo, a former CFO at Disney, appointed to the company’s board. Its manifesto demanded an overhaul of the board and a reimagining of Disney’s business strategy. One of Peltz’s main criticisms was that the company did not have a succession plan for CEO Bob Iger’s eventual replacement. This was evidenced by the revolving-door tenure of Bob Chapek, who was appointed as Iger’s successor in 2020 and ousted in 2022, after which Iger returned to his old job.

 Trian had launched a previous campaign advocating for numerous changes at Disney in 2023. While Trian eventually withdrew from that proxy contest, it spurred Disney to launch a series of initiatives that aligned with Train’s suggestions and caused its stock to rise significantly. By proactively and preemptively responding to potential criticisms from Trian’s 2024 campaign, Disney positioned itself to effectively counter some of the expected negative feedback. While other companies may not have the advantage of foreseeing a detailed preview into a future campaign, maintaining regular meetings with shareholders, especially activist ones, being open to feedback and responsive to calls for change can significantly bolster a company’s defense against future proxy fights.

 As the battle unfolded, both sides launched campaigns to garner support from institutional and retail investors. In a typical proxy fight, institutional investors are crucial, as they hold the majority of the shares. Individual retail investors often side with management if they vote at all. However, Disney’s sub­stantial retail shareholder base, which accounts for up to 40% of its shares, primarily consists of investors who are passionate about the brand. This loyalty translates into strong opinions about the company’s management, making it important to meaningfully engage with these investors.

Peltz reached out to large institutional investors with targeted influence campaigns while using mass media to engage Disney’s enormous retail investor base. His strat­egy included promoting Trian’s RestoreTheMagic.com website and coordinating online interviews with Peltz and Rasulo alongside lengthy profiles of Peltz in the New York Times and the Financial Times. Peltz attempted to attract retail investors unhappy with the company’s recent con­tent and political stances. He received endorsements from influential entities such as Institutional Sharehold­er Services (“ISS”), a shareholder advisory firm, current and former directors of firms including Mondelez Interna­tional Inc., Procter & Gamble Co. and Janus Henderson Group Plc, proxy advisor Egan-Jones and Disney investor Neuberger Berman. Although not a shareholder, Elon Musk expressed support, indicating that he would invest in the company if Peltz joined Disney’s board.

Disney shelled out tens of millions of dollars to advertise on financial news websites and popular Hollywood pod­casts and secured endorsements from high-profile, influ­ential investors, including the legendary Hollywood film­maker and largest individual shareholder in the company, George Lucas, the shareholder advisory firm Glass Lewis & Co., activist investor ValueAct Capital Management, JPMorgan Chase & Co. CEO Jamie Dimon, Laurene Powell Jobs and members of the Disney family. Disney also garnered support from its biggest share­holders, institutional investors Vanguard Group, Inc. and BlackRock, Inc.

Disney launched a website providing updates on the implementation of its strategic plan, which was initiated after Trian’s first proxy contest in 2023. This website featured a video starring iconic Disney characters en­couraging shareholders to use Disney’s white proxy card and only vote for Disney’s nominees. With Mickey Mouse and other icons at its disposal, Disney played to its strengths with lifelong fans of its media and theme parks. Ultimately, 75% of Disney’s retail shareholders supported the company’s slate.

As retail investment continues to grow, companies and activist investors alike can benefit from forming strate­gies for creative engagement with retail investors. Disney effectively engaged with its shareholders by leveraging its expertise and lovable characters. It will be interesting to see what areas of expertise other large public companies might be able to bring to the table in future proxy battles.

 Previously, shareholders would choose between two slates of board candidates proposed by companies or activist investors. A new SEC “universal proxy rule” that allows shareholders to more easily vote for a mix of nominees from both sides may have played a role in the Disney outcome. According to the April 4, 2024 Dealbook News- letter from the New York Times, “because each side was fighting against specific individuals, instead of against an entire slate, attacks became more personal. … The new system also enabled another activist investor in Disney’s stock, Blackwell Capital, to campaign against Peltz, dividing the opposition.”

 Disney’s proxy contest was conducted under a plurality voting standard, meaning the nominees with the greatest number of votes would win the available board seats. Trian recommended that shareholders vote for its two nominees and withhold on two Disney nominees, Michael Froman and Maria Elena Lagomasino, while labeling the remaining Disney nominees as acceptable. Despite Lagomasino and Froman receiving the lowest support among the Disney nominees,ultimately Trian’s strategy did not garner enough support to secure enough votes for Peltz and Rasulo. A better strategy may have been to have shareholders vote for both Trian’s nominees while not voting for any company nominees.

 While Peltz seemed to be gaining momentum in the lead- up to the vote, his efforts were ultimately unsuccessful. On April 3, 2024, he lost, garnering only 31% of votes cast. Meanwhile, Iger received 94% support, and every one of Disney’s 12 nominees was elected.

 In the end, it’s not all bad news for activist investors like Pelz, particularly if their ultimate goal is to spur change in the company and drive up the stock. While he lost the proxy battle, Disney did implement a number of meaningful changes, and its stock rose 30% post vote. In a post-vote statement, Trian said it is “proud of the impact we have had in refocusing this company on value creation and good governance.” Perhaps the magic was (at least in part) restored after all.

Nikola Investors Win Class Certification in Securities Fraud Litigation

By Michael J. Wernke

On January 6, 2025, Judge Steven P. Logan of the District of Arizona granted Pomerantz’s motion for certi­fication of a class in its securities fraud litigation against Nikola Corporation and certain of its officers and direc­tors. The action is brought on behalf of investors who purchased stock in Nikola, an electric vehicle manu­facturer that went public on June 4, 2020 via a special purpose acquisition company (SPAC) transaction. The complaint alleges that Nikola, its founder and chairman, Trevor Milton, and other officers and directors violated section 10(b) of the Securities Exchange Act as well as section 20(a), the “control person” provision, by issuing false statements concerning essentially every aspect of the company’s business.

During the relevant period, Nikola claimed that it pro­duced zero emissions vehicles, including hydrogen fuel cell electric vehicles (FCEVs) and battery electric vehicles (BEVs), as well as hydrogen fuel for FCEVs. While Pomerantz’s complaint alleges that Defendants’ fraud spanned numerous topics touching on every aspect of Nikola’s business, in essence the fraud can be broken down into three main categories of misrepresentations.

First, Nikola claimed it had developed a fully operational “zero-emissions” Nikola One tractor trailer truck as well as a FCEV/BEV pick-up truck, the Badger. In truth, the Nikola One was an empty shell that was incapable of moving under its own power and the company had long-ago abandoned production of the vehicle. Moreover, the Badger was nothing more than a preliminary digital ren­dering of a vehicle. Second, Nikola claimed it had over 14,000 binding purchase orders for its trucks, represent­ing “billions and billions” in revenue. In truth, essentially all the orders were non-binding and were for the inop­erable, and since abandoned, Nikola One. Third, Milton repeatedly asserted that Nikola was producing hydrogen at less than a quarter of the cost industry experts be­lieved was possible. In truth, Nikola had never produced any hydrogen at all, let alone at the low prices claimed.

 Plaintiffs allege that Defendants were motivated by greed. Milton – the architect of the fraud – aimed to inflate the expectations and stock price of Nikola and to benefit from the resulting excitement to secure partnerships with top auto companies, which would further inflate Nikola’s share price. As Nikola’s single largest shareholder, Milton openly admitted within the company that he planned to dump his shares as soon as he was contractually permitted to do so, which was only six months after Nikola went public and before the market could dis­cover that the company, like the Nikola One, was an empty vessel. The other Defendants encouraged Milton to uti­lize social media to directly engage with retail investors. Despite know­ing of his fraudulent scheme, they championed his self-described “media blitzes” of misinformation because they, too, were large shareholders who stood to gain millions, if not billions, from Milton’s fraud.

Investors began to learn the truth when Nikola’s stock price plummeted following a September 10, 2020 Hindenburg Research report. Having gathered “extensive evidence—including recorded phone calls, text messages, private emails and behind-the-scenes photographs,” Hindenburg identified “dozens of false statements by [Milton],” which had led Hindenburg to conclude that Nikola “is an intricate fraud built on dozens of lies over the course of . . . Milton’s career.” There-after, the DOJ and SEC began investigations, Nikola’s partners pulled out and Milton was forced to resign. He was later indicted for, and convicted of, fraud. Nikola’s stock price plummeted 76% over the course of time that these facts were disclosed.

One requirement for class certification is that issues common to the class predominate over individualized issues. Many fraudulent misrepresentation claims do not obtain class certification because the issue of whether a class member actually relied on the alleged misrepresen­tation is an individualized inquiry. However, the United States Supreme Court has held that when federal secu­rities fraud plaintiffs establish that the securities at issue traded in an efficient market they are entitled to a “fraud-on-the-market” presumption of reliance. In other words, it is presumed that investors relied on the Defendants’ misrepresentations when purchasing the security at the market price. The presumption is founded on the theory that in an efficient market the price of a stock incorporates all available public information. Therefore, any person who purchases shares relies on the integrity of the market price and, consequently, any misrepre­sentations made by the company. This presumption, if obtained, largely eliminates an individualized inquiry of reliance that would prevent class certification.

Here, Pomerantz explained to the Court that all of the market efficiency factors traditionally analyzed by courts supported a finding that Nikola securities traded in an efficient market. For example, Nikola securities traded on the NASDAQ, a large national exchange. Moreover, factors such as the weekly trading volume, analyst coverage and the stock price’s quick response to news all indicated that the market was efficient.

Nevertheless, Defendants argued that because Nikola was a pre-revenue company that had gone public through a SPAC, the market was not efficient in the early weeks of public trading. For example, Defendants as­serted that pursuant to the company going public, large portions of Nikola stock could not be traded because of “lock-up” agreements that prohibited insiders from trad­ing their shares, which Defendants claimed placed sig­nificant constraints on short-trading and that therefore, Nikola’s stock price did not fully reflect downside pessi­mistic views. Defendants also argued that the high vola­tility of Nikola’s stock price and the lack of significance of financial results for a pre-revenue company rendered the traditional indicators of market efficiency that Plaintiffs proffered unreliable.

The Court rejected Defendants’ arguments. Notably, the Court found that Plaintiffs sufficiently addressed Defen­dants’ argument about lock-up constraints on shares. Specifically, even when taking into consideration that cer­tain shares could not be traded, the short interest trading in Nikola securities compared favorably to other securi­ties that trade in efficient markets. Moreover, the short interest in Nikola securities increased as more negative news about the company was released, which would be expected in an efficient market. Finally, not a single ana­lyst covering Nikola expressed any concern about a short sale constraint during the period. The Court thus found that Nikola securities traded in an efficient market.

The Court’s inquiry did not end there. The “fraud-on-the-market” presumption of reliance is just that – a presump­tion. It can be rebutted if the defendants demonstrate that, despite the market being efficient, the misrepresen­tations at issue were not reflected in the market price. Here, Defendants argued that the fraud-related infor­mation contained in the Hindenburg Report was already publicly known to the market prior to the publication of the Report. Because an efficient market quickly incorporates all publicly available information into the market price of the security, Defendants argued that the stock price decline following the Report must have been a result of non-fraud related information in the Report.

The Court rejected this argument as well, finding that Pomerantz had demonstrated that much of the fraud-related information contained in the Hindenburg Report had not been revealed before, and to the extent some of it had been made public, Defendants had denied any wrongdoing and assured investors that their prior state­ments were true, preventing the disclosure of the infor­mation from being fully reflected in Nikola’s stock price.

The Nikola opinion is particularly significant because it provides a roadmap for class certification where the defendant company had gone public through a SPAC, which has become a much more prevalent scenario. Although a company that goes public via a SPAC has unique features that may differ from those that go public via traditional IPOs, this decision holds that they are distinctions without a difference when analyzing market efficiency for the purposes of class certification, an important precedent for future investors.

Q&A with Of Counsels Brian O’Connell and Christopher Tourek

By Katarina Marcial

The Editors had the opportunity to chat with Brian O’ Connell and Christopher Tourek, both based in the Firm’s Chicago office, to learn about their career journeys, the motivations behind their pursuit of securities litigation, their most rewarding cases and what advice they have for aspiring lawyers. Last year, both Brian and Christopher achieved the significant milestone of being promoted from Associate to Of Counsel.

Monitor: Can you share a little about your background and interests?

Brian O’Connell: I grew up in the Chicago suburbs, attended Stanford for my undergrad, went to Northwestern for law school and I’ve remained in Chicago ever since. My wife and I have an infant daughter, which is my main “interest” right now. I’m a long-suffering Chicago sports fan of the White Sox, Bulls and Bears. My hobbies include golf and participating in a shuffleboard league. I’m licensed in both Illinois and California, which has proved beneficial, as Pomerantz’s cases span the country. Last year, I went to eight different states in four different time zones for either court appearances or depositions.

Christopher Tourek: I was born and raised in Pittsburgh, Pennsylvania. I attended Lafayette College in Easton, PA for undergrad and the University of Illinois College of Law for law school. The Windy City has been my home since 2013. Class action law has been my path from the start, a field that I love deeply. With twelve other attorneys in my family, you could say it runs in the blood. Our reunions are loud, heated, and never dull. I now live in Lincoln Park with my fiancée. Life here is good. I dive into books, explore the world through travel, hit the pavement running, carve down ski slopes, and train in Brazilian jiu-jitsu. Each pursuit, in its own way, keeps me grounded and focused.

 Monitor: What got you interested in securities litigation?

 Brian O’Connell: My interest in securities law comes from my interest in financial markets. My first real exposure to the financial markets was during an internship with the Chicago Board Options Exchange (CBOE) during undergrad. That internship and the 2008 financial crash and Dodd-Frank regula­tions led me to financial services litigation, which I’ve been doing essentially my entire career, either on the securities or commodities litigation sides, which is what I worked in before I came to Pomerantz.

 Christopher Tourek: In law school, I took a class called Perspectives on Debt. It wasn’t just theory—it was history and consequence. We traced the arc of financial markets, from the Dutch Tulip Bubble in 1637 to the railroad manias of the 19th century, and on to the crash of 2008. What stayed with me wasn’t just the mechanics of securities fraud, but its cost—real and devastating. This class changed how I saw the law.

Monitor: Why is this work so important to you?

 Brian O’Connell: I wanted to represent the victims rather than protect well-capitalized wrongdoers, and that’s exactly what I get to do at Pomerantz. Securities litigation is unique, requiring creative approaches since every case is different and lacks formal discovery before filing. Sometimes, we need to act like TV detectives speaking with former employees to crack a case and other times, we can use math and logic to catch powerful CEOs in fraud. The variety makes the work exciting.

 Christopher Tourek: Fraud doesn’t just gut the market; it ripples outward. It fuels bubbles and crashes, triggers recessions, shrinks economies. Businesses cut back, jobs vanish, homes are lost. The harm isn’t confined to traders or investors. It hits everyone, even those far from the market. Graduates stepping into a recession face years of harder roads, lower earnings, and deeper struggles. Protecting against the sweeping, lasting dam­age of unchecked securities fraud felt urgent—necessary. So, when the chance came to join Pomerantz LLP and take up that fight, I didn’t hesitate. This work matters. It always will.

Monitor: What have been the most rewarding cases you have worked on at Pomerantz?

Brian O’Connell: My favorite Pomerantz work has been on SPAC cases. We recently had a de-SPAC case against Grab Holdings, Inc., which is known as the Uber of Southeast Asia. I gave the oral argument that successfully sustained claims under Section 11 of the Securities Act and Section 14(a) of the Securities Exchange Act claims. In another de-SPAC case against Ginkgo Bioworks, we successfully advanced novel legal issues relating to SPACs. Outside of SPAC cases, we’ve recently had some cases go deep into discovery, which helps our approach for future cases. In total, my cases reached settlement agreements exceeding $100 million in 2024.

Christopher Tourek: The most rewarding case I’ve worked on, In Re Bed Bath & Beyond Corporation Securities Litigation, is still unfolding. In this case, we built something bold—a legal theory rooted in a pump-and-dump scheme orchestrated through emojis on social media. We pursued novel claims under Section 9 of the Exchange Act. It took grit and clarity to unravel the fraud and present it to the Court. Drafting the Amended Complaint, countering the Motion to Dismiss—each step was a battle. But we stood firm, and the Court ultimately sided with us. That victory wasn’t just about the law; it was about the challenge, the complexity, and the collective drive of our team to push forward into discovery. Another case that holds a place in my memory is Gong v. Neptune Wellness. It was my first at Pomerantz, and though the $4.25 million settlement in cash and stock wasn’t revolutionary, it was meaningful. I worked closely with the Lead Plaintiff, and when it was over, his gratitude—the sense of justice restored, even in part—reminded me why I do this work. The law can be a long road, but moments like that make the miles worth it.

 Monitor: What is your best advice to younger attorneys looking to succeed in securities litigation?

Brian O’Connell: Being the smartest person in the room isn’t as important as being the best prepared. Take the time to research the judge overseeing the case as their past experiences and rulings can guide your arguments.

Christopher Tourek: Never stop learning. My work on fraud cases spans various industries, including marijuana, home robotics, and banking, each one demanding something new—a deep dive into an industry until I could not only see the fraud but lay it out clearly for a court. Success depends on it. To do this work, you need more than skill; you need an unrelenting drive to learn, to dig deeper, and to keep going until the picture is clear. That urge to learn never ends—and it shouldn’t.

Pomerantz: A Dedication to Education

By Katarina Marcial

Pomerantz takes pride in being a thought leader in the ever-evolving fields of securities litigation and corporate governance. The firm’s philosophy is that education is a keystone of community, problem-solving and innovation. Through its educational initiatives, Pomerantz actively engages with institutional investors and corporate governance experts, bringing them together through various platforms, including panels, conferences and the firm’s signature Corporate Roundtable events. Pomerantz personnel also regularly participate in events organized by others, frequently as featured speakers. The final quarter of 2024 was no exception, as Jeremy A. Lieberman, Jennifer Pafiti and Dr. Daniel Summerfield participated in educational events worldwide.

Jeremy, Pomerantz’s Managing Partner, has been crisscrossing the globe for decades to meet institutional investors where they are based, educate them on their rights within and beyond the U.S. and listen to their needs. A font of legal knowledge and gifted speaker, Jeremy is frequently invited to share his insights at investor events. On November 13, 2024, he participated in a dynamic fireside chat with Leonor Martins Machado, Managing Associate at Morais Leitão, at the Global Class Actions Symposium hosted by Global Legal Group in Lisbon, Portugal. During their one-on-one conversation, Jeremy offered his perspective on the U.S. class action system, addressing topics such as securities fraud cases, the impact of the Morrison ruling – which barred recovery for losses in foreign-traded securities under the U.S. federal securities laws – and the appeal of class actions in the U.S. for investors worldwide.

Jennifer Pafiti, Partner and Head of Client Services, is dually qualified to practice law in the U.S. and the U.K. She spearheads the firm’s educational initiatives, including its Corporate Governance Roundtables, which gather some of the most influential institutional investors and corporate governance experts worldwide to discuss real-time matters that affect the value of the funds they represent.

In June 2024, Jennifer organized a Roundtable in London with special guest Sir Tony Blair, who provided an insightful assessment of the state of global affairs. Another guest speaker was Dame Laura Kenny, the U.K.’s most decorated Olympian.

Jennifer is based in Pomerantz’s Los Angeles office and co-manages its London office with Dr. Daniel Summerfield, Director of ESG and UK Client Services. Daniel joined Pomerantz in October 2022 after 20 years at the Universities Superannuation Scheme (“USS”), the United Kingdom’s largest private pension fund. Most recently, Daniel was Head of Corporate Affairs of USS, following a period of 16 years as head of Responsible Investment.

Pomerantz was a sponsor of the 2024 International Corporate Governance Network Conference held on November 12-14, 2024 in Melbourne, Australia, where Jennifer and Daniel participated in a panel on governance challenges facing investors. Their dialogue offered valuable strategies for long-term investor engagement with policymakers. They had the honor of speaking alongside Kate Griffiths from ACSI, Massimo Menchini from Assogestioni, and Luz Rodriguez from the Colorado Public Employees' Retirement Association. This panel of experts weighed in on the appropriate timing, issues to address and channels and tools that institutional investors may utilize for effective engagement, giving conference attendees actionable takeaways to implement. Additionally, Pomerantz hosted a dinner at The Society Restaurant in Melbourne, where Jennifer engaged in a spirited debate with Amy D’Eugenio, Sustainability Director at Federated Hermes Ltd., on the role of securities litigation for institutional investors.

The end of the year proved to be busy for Daniel. On November 20, 2024, he participated in a panel discussion at Assogestioni’s Board-Shareholder Dialogue Conference in Rome, where he explored the evolution of board-shareholder dialogues and examined case studies highlighting the successes and challenges of facilitating effective engagements.

Back in London, on December 5, Daniel co-hosted a breakfast event for UK pension fund trustees with QuietRoom, a pension fund communication consultancy business. During the event, insights from both pension lawyers’ and trustees’ perspectives were shared, including best practices and common pitfalls to avoid in order to ensure meaningful reporting and beneficial outcomes for pension fund beneficiaries.

Later that day, Daniel gave an in-house training session to a group of professional trustees in London. He discussed the increase in ESG and climate litigation cases in many markets, including the UK, and outlined some of the reasons behind this development, pointing to some important case studies. Daniel also looked towards the future, highlighting some issues of which trustees should be aware, including greenwashing and the importance of both evidence-based reporting and having a securities litigation monitoring program in place.

Pomerantz kicked off December by hosting a private lunch for institutional investors in London, featuring Lord Peter Mandelson as Guest of Honor. During the gathering, Lord Mandelson, a key architect of the UK Labour Party's transformation and a trusted advisor to Prime Minister Keir Starmer, discussed the new UK government agenda, the challenges facing British politics and the UK's changing role on the global stage. Jeremy, Jennifer and Daniel presided over the event.

Pomerantz reaffirmed its dedication to education in Q4 2024 and is already scheduling events for 2025. For information on where you can engage with the Pomerantz team, be sure to check out “Notable dates on the Pomerantz horizon” in each issue of the Monitor.  

Katarina Marcial is Pomerantz’s Senior Marketing Manager.

$12 Million Settlement for PureCycle Investors

By the Editors

While efforts to protect and preserve the environment are certainly commendable, issuing false and misleading statements to unwary investors regarding the viability and efficacy of such efforts are not. Pomerantz LLP, as sole Lead Counsel, recently achieved a $12 million settlement in a securities class action against PureCycle Technologies, Inc. arising from false and misleading statements PureCycle and its top executives issued regarding their plastics recycling technology. The United States District Court for the Middle District of Florida granted final approval of the settlement on October 8, 2024. Partner Tamar A. Weinrib led the litigation, Theodore v. PureCycle Technologies, Inc., et al., No. 6:21-cv-809 (M.D. Fla.). 

PureCycle went public via a de-SPAC reverse merger with Roth CH Acquisition I Co., a SPAC formed by Byron Roth. PureCycle had the dubious honor of being merely one in a long line of questionable reverse mergers Byron Roth has brought public while misleading investors regarding the underlying business, only to slap a “buy” rating on the stock and collect millions in compensation, leaving unknowing investors to suffer the consequences. Prior to taking on SPAC mergers, defendant Roth was well known for his role in facilitating numerous suspect reverse mergers involving Chinese companies, raising approximately $3.1 billion for China-based clients from 2003 to 2012. Indeed, defendant Roth was prominently featured in the 2017 documentary “The China Hustle,” detailing the nearly decades-long Chinese reverse merger scandal, which Vanity Fair called “the biggest financial scandal you’ve never heard of.”

Since its inception, PureCycle has never earned any meaningful revenue, has incurred recurring losses and has sustained negative cash flows. Its only product is a process for recycling polypropylene (“PP”), a common plastic used in multiple applications including packaging, manufacturing and consumer goods. Despite their best efforts, the world’s scientists and chemical companies have found it impossible to effectively or economically recycle PP since its invention in 1951.

However, as the complaint Pomerantz filed on behalf of aggrieved investors alleged, defendants issued false and misleading statements throughout the class period claiming to have achieved the impossible.  Specifically, the complaint alleged that defendants represented in proxy statements, a registration statement and in press releases that their recycling process was “proven” to convert waste polypropylene (called feedstock) into virgin polypropylene resin more cost effectively than manufacturing virgin polypropylene traditionally and utilizing a broader range of feedstock than traditional recycling. In reality (as multiple industry experts attested), the technology underlying the process was unproven and presented serious issues even at lab scale, the economics of conducting the process at commercial scale are cost prohibitive and the process could not cost effectively utilize a broader range of feedstock than traditional recycling. Defendants further touted the PureCycle management team that claimed to have solved the previously unsolvable polypropylene recycling problem as having “broad experience across plastics,” decades of experience scaling early-stage companies in public markets and having led transformational projects, though they in fact had no background in plastics recycling and previously brought six other early-stage companies public that subsequently imploded, causing substantial investor losses.

In May 2021, Hindenburg Research published a report entitled “PureCycle: The Latest Zero-Revenue ESG SPAC Charade, sponsored by the Worst of Wall Street,” which challenged defendants’ claims regarding the efficacy and safety of PureCycle’s recycling technology and the PureCycle management team’s professional experience. The report quoted PureCycle as claiming, “Up to this point it’s been impossible to recycle plastic into pure, virgin-like form. But here’s the thing. At PureCycle Technologies, the word impossible is not in our vocabulary.”

The Hindenburg Research report emphasized the persistent obstacles that historically stymied efforts to effectively and economically recycle polypropylene, setting the backdrop against which PureCycle claimed to have achieved a previously unattainable feat:

While [Purecycle’s claim] makes for a great sounding “green” story, plastics recycling has been a perpetual challenge from an economic standpoint. The industry has struggled with the economics of even the most basic plastic recycling for decades, as documented in a 2020 NPR exposé titled “How Big Oil Misled The Public Into Believing Plastic Would Be Recycled”.

Within plastics recycling, PP has been particularly uneconomical. PP represents 28% of the world’s plastic, yet currently only ~0.8% of it is recycled today. This is because a sizable amount of PP requires expensive sorting and cleaning due to its use in food packaging. It is also commonly found in products that use mixed plastics that can be difficult to separate. 

The allegations of the Hindenburg Research report caused PureCycle’s stock price to plummet about 40% in a single day, damaging investors. Though PureCycle issued a press release in response to the Hindenburg Research report, defendants did not actually challenge, much less negate, any of the underlying allegations. Just a few months later, defendants revealed that the SEC had issued an investigative subpoena to defendant Otworth “requesting testimony in connection with a non-public, fact-finding investigation of the Company” pertaining to “among other things, statements made in connection with PCT’s technology, financial projections, key supply agreements, and management.”

After nearly three years of hard-fought litigation during which the court denied defendants’ motion to dismiss, with discovery well underway and plaintiffs’ class certification motion pending, the parties agreed to settle the action for $12 million.

“Though we maintain confidence in the strength and merits of the claim, the settlement is an excellent result for the settlement class,” states Tamar. “The all-cash settlement provides certain recovery now, whereas there are sizable risks of recovering any judgment at trial given the complexities of this type of litigation, the company’s tenuous financial condition and the fact that PureCycle has yet to earn any meaningful revenue from its sole product.”

$7.5 Million Settlement for Faraday Investors

By the Editors

On March 18, 2024, the United States District Court for the Central District of California granted final approval of a $7.5 million settlement in a shareholder action against Los Angeles-based luxury electric vehicle company Faraday Future Intelligent Electric, Inc. (“Faraday”). The suit alleged that Faraday misled investors regarding its reservations and financial outlook prior to going public via a de-SPAC merger. Partner Austin P. Van led the litigation, Zhou v. Faraday Future Intelligent Electric Inc., et al., No. 2:21- cv-09914 (C.D. Cal.).

Faraday was formed in 2021 through the de-SPAC merger of the SPAC, Property Solutions Acquisition Corp. (“PSAC”), with FF Intelligent Mobility Global Holdings Ltd., (“Legacy FF”), a private startup electric vehicle company. Legacy FF was founded in 2014 by defendant Yueting Jia, known as “China’s best-known securities fraudster.” On July 21, 2021, with the merger completed, Faraday began publicly trading on the NASDAQ.

Legacy FF first showcased its FF91 – the company’s first production car, at a “very big event in Las Vegas,” in 2017, according to Matthew Lynley of Techcrunch.com, who live-blogged from the event. According to Lynley, “Faraday Future has thus far been very flashy, but has yet to get a product in the hands of consumers — and it needs to get there. But at least part of the way is finally showing a production car, which Faraday Future tried to do with bravado at the event.”

The lawsuit against Faraday stems from the company's assertions regarding its innovative technologies, production capabilities, and market potential, which generated significant investor interest and financial backing. Over time, it became clear that Faraday’s promises were not being met. The company experienced numerous production delays, missed financial targets, and repeatedly postponed the launch of its much-anticipated vehicles. It was later revealed that Faraday had allegedly overstated its production capabilities and the operational readiness of its facilities. Reports revealed that the flagship factory was far from being operational, allegedly contradicting the positive outlook presented by company executives.

Plaintiffs alleged that Faraday wildly misrepresented the level of committed reservations it had for its flagship car by repeatedly telling investors that “its first flagship model, the FF 91, ha[d] received over 14,000 reservations.” In fact, Faraday had obtained only several hundred paid reservations for the FF 91 at the time of these misstatements.

This gross exaggeration was highly material to investors. Under reasonable assumptions using the company’s claimed selling price for the FF 91 of approximately $200,000, Faraday repeatedly claimed in effect that it would achieve revenue of $2.52 billion soon after producing its first vehicle, which overstates by orders of magnitude the approximately $54 million in revenue the company would have achieved from the few hundred paid reservations it actually held. In February 2022, following an internal investigation using outside auditors, Faraday admitted in a report on Form 8-K that:

The Company’s statements leading up to the Business Combination that it had received more than 14,000 reservations for the FF 91 vehicle were potentially misleading because only several hundred of those reservations were paid, while the others (totaling 14,000) were unpaid indications of interest.

That is, Faraday effectively admitted to the core of the securities law violations under Section 14(a) of the Exchange Act and Sections 11 and 15 of the Securities Act pleaded in the complaint.

As stated in plaintiffs’ amended complaint, Faraday also repeatedly misled investors about its ability to bring the FF 91 to market within twelve months of the business combination, i.e., the de-SPAC merger. For example, in soliciting votes in support of the business combination, defendants boasted, “FF . . . is positioned to launch a production try-out in 9 months and commercial production of FF 91 series within 12 months after the Business Combination.”

While the federal securities laws permit a company to be optimistic about its future, they do not permit a company to mislead investors about goals known to be impossible to achieve. During Pomerantz’s litigation, multiple confidential witnesses confirmed that at no point during the class period was Faraday even close to being in a position in its design and manufacturing of the FF 91 to claim that it could bring that model to market within one year of the SPAC merger. That achievement was impossible, and Faraday knew as much. Accordingly, Faraday’s statements that it could bring the FF 91 to market within one year of the de-SPAC merger violated Section 10(b) and 14(a) of the Exchange Act, and Section 11 of the Securities Act.

The truth began to emerge on October 7, 2021, when J Capital Research published a report explaining that Faraday’s claimed 14,000 deposits were likely fabricated, because 78% of those reservations were made by a single undisclosed company that was likely an affiliate. The report further explained that contrary to representations of progress toward manufacturing made by Faraday, former engineering executives did not believe that the car was close to being ready for production.

On November 15, 2021, Faraday disclosed that its board of directors “formed a special committee of independent directors to review allegations of inaccurate disclosures,” including the claims in the J Capital Report. Among other things, the special committee identified “certain inconsistencies in statements to investors and certain weaknesses in its corporate controls and culture, as detailed in the Form 8-K.”

On April 14, 2022, Faraday announced that “additional investigative and remedial work in connection with the independent investigation has now been completed and on April 12, 2022, the Board approved certain additional remedial actions, effective immediately.” In particular, Faraday announced that Jia would be removed as an executive officer, along with other disciplinary actions and terminations of employment with respect to other Faraday employees.

In moving for approval of the settlement, lead plaintiffs told the court, "The settlement provides a substantial recovery to the settlement class despite several obstacles that plaintiffs faced, including the amount of potentially recoverable damages, defendants' potential defenses, defendants' ability to pay a larger amount and the risks of prosecuting this litigation through trial and appeals."

Pomerantz Finalizes Settlement on Behalf of Ginkgo Bioworks Investors

By the Editors

On December 13, 2024, the United States District Court for the Northern District of California granted final approval to a $17.75 million settlement on behalf of investors in a securities class action against Ginkgo Bioworks Holdings, Inc. and several officers of Ginkgo and the predecessor SPAC. It was alleged that Ginkgo and its leadership distorted the company’s finances to gain shareholder approval of a SPAC merger that would take the company public. Joshua B. Silverman and Brian P. O’Connell led the litigation.  Bernstein v. Ginkgo Bioworks Holdings Inc et al., No. 4:21-cv-08943 (N.D. Cal.).

In its SPAC merger filings, which valued Ginkgo at $15 billion, the company stated that it makes money "in much the same way that cloud computing companies charge usage fees for utilization of computing capacity or contract research organizations charge for services."

However, as Lead Plaintiff alleged in her complaint, Ginkgo’s largest outside investors, whose collective stake in the company totaled nearly 43%, provided the overwhelming majority of funds that were then recirculated back to Ginkgo in “round-trip transactions,” in some cases as purported prepayments for Ginkgo's services.

Shareholders overwhelmingly approved the merger between Ginkgo and the SPAC Soaring Eagle. On September 17, 2021, following the merger, shares of Ginkgo’s common stock began trading on the NYSE under the ticker symbol “DNA.”

On October 6, 2021, market research Scorpion Capital released a short-seller report in which it alleged that Ginkgo is a “colossal scam,” describing the company as a “shell game” whose revenue was highly dependent on related party transactions. According to the report, Scorpion Capital based its findings on an “intensive investigation into Ginkgo’s business model and practices, with a particular focus on the related-party entities that drive the bulk of its revenue.”  Another short-seller, Citron, came out with a brief report that same day that largely agreed with Scorpion Capital’s findings. Lead Plaintiff’s complaint alleges that on this news,  Ginkgo’s share price plunged approximately 12%, damaging investors.

A securities lawsuit was filed in November 2021, and Pomerantz was appointed lead counsel on behalf of the proposed class of investors. The case was initially brought as a Section 10(b) action but was expanded in the amended complaint to include Section 11 and Section 14(a) claims. 

A Section 10(b) claim applies to a material misstatement or omission made in connection with the purchase or sale of a security and requires proof of scienter (the intent to deceive). A Section 11 claim specifically targets false or misleading information within a registration statement for a public offering. A Section 14(a) claim focuses on misleading statements made in proxy materials related to shareholder votes.

In March 2023, the district court denied Defendants’ motion to dismiss Lead Plaintiff’s Section 10(b) and 14(a) claims. Importantly, it found that Lead Plaintiff had alleged that the short-seller reports were corrective disclosures. The Court opined that since the Scorpion Capital report involved 21 research interviews encompassing a broad sample of former employees and executives of Ginkgo, as well as individuals who were then employed at its related-party customers, it “provided new information that was not previously reflected in the stock price.”

The Court found that Lead Plaintiff had alleged falsity, noting that “the fact that the company’s primary customers … operated out of Ginkgo’s headquarters, that many listed Ginkgo’s phone number as their own, and that Ginkgo used intertwined employees, managers, and directors to control these ‘customers’ would surely satisfy the falsity requirement given that Defendants disclosed that it lacked control over these entities.”

The Court also sustained Lead Plaintiff’s 14(a) claims, agreeing with Pomerantz’s position that only allegations of a false or misleading statement made with negligence, not scienter, were required.

For Section 11, the Court dismissed Lead Plaintiff’s claims but granted Lead Plaintiff leave to amend the complaint to expressly include the detailed tracing arguments made in the motion to dismiss briefing. The Court noted that it “finds that the assertions made in the opposition would satisfy the registration requirement, so amendment is certainly not futile.” Pomerantz refiled an amended complaint to address the limited portion of the complaint that the Court had dismissed. The Section 11 claims proceeded to discovery along with the Sections 10(b) and 14(a) claims.

The $17.75 million settlement represents a favorable recovery for the class and involved novel legal issues related to SPACs. Additionally, the Pomerantz litigation team secured important rulings in the evolving area of the law concerning short-seller reports.