Pomerantz Clears Major Hurdle in Obtaining Justice for Credit Suisse AT1 Bondholders

By Brian Calandra

On November 13, 2025, Judge Colleen McMahon of the United States District Court for the Southern District of New York granted Pomerantz’s motion on behalf of Lead Plaintiff Core Capital Partners, Ltd. to certify a class of all individuals and entities that purchased or acquired additional tier-one bonds (“AT1 Bonds”) issued by failed bank Credit Suisse Group AG (“Credit Suisse”) within the U.S. between October 27, 2022 and March 20, 2023. in a securities fraud class action captioned Core Capital v. Credit Suisse, et al., No. 23-cv-9287 (CM) (S.D.N.Y.). Judge McMahon’s thoughtful and detailed opinion largely adopted Pomerantz’s arguments and could provide a roadmap to obtaining class certification for plaintiffs bringing class actions against foreign companies that issue securities overseas that do not trade on a domestic exchange.

Background

In the wake of the 2008 global financial crisis, new regulations required banks to hold more capital to provide a layer of protection when they run into trouble and prevent taxpayers from bailing them out. AT1 bonds, a type of contingent convertible bonds, were introduced at that time. In a World Economic Forum article in March 2023, Emma Charlton, reporting on Credit Suisse Group’s AT1 bonds, wrote:

When a bank goes bust, who pays? The decision to write down [Credit Suisse’s] AT1 bonds but pay some money to shareholders angered some investors, who said debt should always rank higher than equity when it comes to taking losses.

Core Capital alleges that investors were duped into purchasing Credit Suisse’s AT1 bonds by false or misleading assurances from the the bank and certain of its executives, the defendants in this case, including that customer and asset outflows had slowed or stopped and that the bank was in stable financial condition, when in reality the outflows had continued, and the bank had uncovered a material weakness in its internal financial reporting controls. 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.

On July 7, 2025, Judge McMahon denied the defendants’ motion to dismiss Core Capital’s claims and held that the action could proceed in parallel with Diabat v. Credit Suisse AG et al., a second securities fraud class action arising out of the same facts that was brought on behalf of Credit Suisse equity and corporate bond holders. Diabat had abandoned claims by AT1 bondholders. Rather than leave those disenfranchised investors to fend for themselves, Pomerantz recognized the viability of their claims and fought to have the opportunity to vindicate them. In that same July 2025 ruling, Judge McMahon granted the Diabat lead plaintiff’s motion for class certification largely on the ground that the market for the bank’s equity and corporate debt securities was efficient, and thus the class could rely on the “fraud on the market” presumption of reliance.

In the wake of the grant of class certification in Diabat, Pomerantz moved to certify a class of AT1 bondholders who purchased AT1 bonds in domestic transactions largely on the grounds that the market for the bonds was efficient and thus AT1 bondholders, like the Diabat class members, could rely on the fraud on the market presumption of reliance.

Unlike their opposition to class certification in Diabat, which contested the Diabat plaintiff’s evidence of market efficiency, the defendants’ opposition to Core Capital’s class certification motion focused on whether the need to show that a transaction occurred domestically and the availability of the affirmative defense of estoppel as to certain class members would mean that individualized issues “predominated” over class-wide issues. In the U.S., a party to multiple lawsuits arising out of the same facts is precluded, or “estopped,” from asserting inconsistent theories in the actions. For example, in their opposition to class certification, the defendants hypothesized that a class member who had brought claims in Switzerland could argue that their losses were caused by the Swiss government’s unlawful conduct, while at the same time could assert in the Core Capital case that those losses were caused by an undisclosed material weakness in Credit Suisse’s internal controls over financial reporting. According to the defendants, this hypothetical class member should be “estopped” from asserting the latter position in Core Capital, because the positions were inconsistent, and identifying and resolving potentially inconsistent positions would predominate over class-wide issues. The defendants further argued that Core Capital had failed to show that there were a sufficient number of purchasers of AT1 bonds in domestic transactions for the case to proceed as a class action. Finally, the defendants argued that the existence of thousands of individual actions in Switzerland concerning the write-down of AT1 bonds demonstrated that class members were capable of pursuing their own claims and thus that a class action was not a “superior” means of prosecuting AT1 bondholders’ claims. Judge McMahon considered and rejected each of these arguments and granted Core Capital’s motion.

Numerosity

Using data from Bloomberg, Core Capital identified at least 229 financial institutions holding AT1 bonds during the class period and thus asserted that the proposed class of AT1 bondholders was sufficiently numerous to warrant treatment as a class action. The defendants countered, however, that the data only identified holders of AT1 bonds, not purchasers of AT1 bonds during the class period. Although Judge McMahon noted that the defendants’ argument was “not without merit,” she rejected it on the grounds that “over 270 U.S. individuals or entities” had brought actions in Switzerland arising out of FINMA’s write-down of AT1 bonds and the evidence Core Capital had submitted of approximately $15.65 billion in AT1 bonds outstanding and actively traded during the Class Period.

Predominance

The defendants asserted that individual issues predominated over class-wide issues, and thus class certification was not appropriate because (1) Core Capital could not demonstrate that transaction domesticity was capable of class-wide proof, and (2) positions taken by certain AT1 bondholders in parallel litigation could create additional individualized issues, particularly regarding whether class members may be judicially estopped from advancing specific arguments in future proceedings.

Judge McMahon first held that “even if determining domesticity requires individualized inquiry, these inquiries do not predominate over class-wide issues” because Core Capital had identified multiple reliable methods of proving domesticity, including that U.S.-based purchasers placing orders in the U.S. and purchasing securities from U.S.-based brokers were clearly making domestic transactions, and for other purchasers domesticity could be established using ordinary trading documents, such as purchase orders, brokerage statements, or trade confirmations, supplemented by expert declarations. Judge McMahon then held that the defendants’ assertions regarding potential estoppel defenses “rest[s] on a chain of speculation concerning overlapping parties, hypothetical defenses, and uncertain rulings in foreign jurisdictions, rather than any concrete conflict or individualized issue that is presently before the Court,” and thus was insufficient to show that individual issues would predominate.

Superiority

The defendants then asserted that Core Capital could not show that a class action was the superior method for vindicating AT1 bond holders’ claims because thousands of parallel lawsuits had been brought against the defendants in the U.S. and Switzerland. In rejecting this argument, Judge McMahon first held that putative class members could always opt out of Core Capital’s action, and thus the ability to pursue an independent action could not defeat superiority on its own. Judge McMahon then observed that the parallel actions cited by the defendants were distinct from Core Capital’s action because they were brought against the Swiss government and challenged the legality of FINMA’s write-down under Swiss law, did not assert U.S. securities fraud claims against Credit Suisse or its officers or directors, and thus presented no risk of conflicting judgments. Judge McMahon concluded by observing that only two cases had been brought in the U.S. that overlapped with Core Capital’s case, which were too few to demonstrate that a class action was not the superior means of litigating AT1 bondholder claims.

Conclusion

Core Capital’s motion for class certification presented the rare case of a securities class action certification motion that did not focus on market efficiency or price impact. Instead, the defendants seized on circumstances attendant to Core Capital’s case that arose out of the fact that Credit Suisse was a foreign issuer of securities and that the securities in question did not trade on a U.S. exchange. The defendants’ arguments concerning numerosity, predominance and superiority could be raised in every securities class action involving foreign issuers. By adopting Pomerantz’s arguments and resolving these issues in Core Capital’s favor, Judge McMahon’s ruling may substantially limit the effectiveness of these arguments in similar class actions going forward.

Pomerantz Scores a Win for Fastly Investors

By Murielle Steven Walsh

On September 24, 2025, Pomerantz won a victory for investors in Fastly, Inc. when Judge Tigar of the Northern District of California denied, in part, the defendants’ motion to dismiss securities claims against the company.

Fastly operates an edge cloud platform – a system that extends cloud computing services to the “edge” of a network, processing data closer to where it’s generated instead of sending it to a central data center – for processing, serving, and securing its customer’s applications. An edge cloud enables developers to build, secure, and deliver digital experiences. Fastly’s platform includes a Content Delivery Network (“CDN”), or a geographically distributed network of proxy servers and their data centers. Content owners, such as media companies and e-commerce vendors, pay CDN operators to deliver their content to their end users. In other words, Fastly’s customers are delivering web experiences, whether in the form of applications, websites, or streaming services.

The bulk of the company’s revenues are derived from use of its platform by its existing enterprise customers and its ten largest clients. Enterprise customers are those with annualized current quarter revenue in excess of $100,000 and include the company’s ten largest clients – referred to by a confidential witness as the “big whales” – among which are TikTok, Amazon Video, Apple, Twitter (X), Netflix, Paramount, and Disney. For the fiscal year ended December 31, 2023, roughly 95% of Fastly’s revenue was derived from its enterprise customers’ use of its platform, with new customers contributing less than 10%.

Thus, a decline in revenue from the company’s existing enterprise customers, especially the big whales, or a decline in retention of such customers, could create volatility in the company’s revenue and materially impact Fastly’s business.

During the class period, Fastly experienced a significant pullback from its customers due to various macroeconomic forces, such as rising interest rates, banking instability, and recession fears. As part of its investigation into securities claims against the company, Pomerantz spoke with several confidential witnesses who confirmed that, no later than 2023, customers had become increasingly price-conscious, were demanding aggressive price reductions in contract renewal negotiations, or were not renewing altogether. In addition, customers had begun allocating their business among several vendors instead of concentrating it all with Fastly. Sales personnel reported that they were regularly missing their sales quotas.

Significantly, Fastly’s former CEO, Todd Nightingale, acknowledged the customer pullback at an “all-hands” company meeting that occurred right before the first Class Period statement was made. [Nightingale resigned from Fastly on June 16, 2025, with his advisory role continuing until June 30, 2025. Charles ‘Kip’ Compton, previously Fastly’s Chief Product Officer, is the company’s new CEO.]

Pomerantz filed an amended complaint against Fastly and certain of its officers and directors, alleging that, despite being aware of this negative trend, when questioned at an earnings call in November 2023, Nightingale falsely denied seeing any macro-effect-driven slowdown in revenue growth from customers, stating that, “My competitors are seeing these effects, some slowing in growth, and we’re not seeing that.”

A few months later, during a February 2024 earnings call about Q4 2023 results, which reported Q4 2023 revenues on the lower end of expected guidance, Nightingale blamed the shortfall on “weaker than anticipated international traffic,” when in fact it resulted from the alleged general customer pullback. When pressed again on whether macro forces were negatively affecting the company, he again denied and downplayed any downturn. On that news, Fastly’s stock price fell 30.59%.

The amended complaint also alleges that the company’s 10-K failed to disclose the negative trend/uncertainty among Fastly’s customers, thereby violating Item 303, and that its risk disclosures were false and misleading because they only warned of the potential for harm to the business if customers did not continue to use and increase their usage of the platform, but left out material information about the current stagnation and decline in customer usage.

The court upheld all of the above statements on grounds of falsity and scienter. Judge Tigar ultimately dismissed all but one of the otherwise sufficiently alleged misstatements on loss causation grounds, finding that the alleged corrective disclosures were not corrective of the prior misstatements. However, he did not consider these statements under a materialization of the risk analysis. The court therefore granted plaintiffs leave to amend. Pomerantz is preparing a second amended complaint to further bolster its case for loss causation.

Pomerantz Prevails Against Amylyx Pharmaceuticals

By Samantha Daniels

On September 30, 2025, Pomerantz secured a victory on behalf of a proposed class of investors in Amylyx Pharmaceuticals, Inc. (“Amylyx”), defeating the defendants’ motion to dismiss securities fraud claims related to Amylyx’s commercial launch of its drug, Relyvrio, a purported answer to the unmet need to address amyotrophic lateral sclerosis (“ALS”).

Judge Gordon (D. Mass.) denied the defendants’ motion to dismiss on the papers, without a hearing.

The Unmet Need for an ALS Cure

What began in 2014 as a simple call for participants to pour ice water over themselves soon became one of the most viral global social media challenges of the decade. The “ALS Ice Bucket Challenge” spread rapidly across social media, combining humor with advocacy and yielding a remarkable increase in public awareness to find a cure for ALS.

Fast forward to 2025, and there is still no cure for ALS—or even a drug that can mitigate the severe and life-threatening symptoms of this rare disease. The initial manifestations range from muscle weakness of the limbs to difficulty with speech and swallowing. Over time, patients develop muscle paralysis, inability to speak or swallow, and respiratory failure leading to certain death in only 2 to 5 years.

About 30,000 people in the U.S., and more than 200,000 worldwide, suffer from this debilitating disease. And universally, diagnosis is a shock: more than 90% of people living with ALS have no family history of the disease, and it can strike adults at nearly any age.

Amylyx Misleads the Market About Offering Unprecedented Hope for Addressing ALS

In October 2022, Amylyx—a biotechnology company developing treatment for ALS—commercially launched its flagship drug agent, Relyvrio, offering unprecedented hope for those suffering from ALS. Amylyx touted that “[Relyvrio] is the first drug candidate to show both a functional and survival benefit in a large-scale clinical trial.”

Typically, drugs that require approval from the Food and Drug Administration (“FDA”) must pass three challenging clinical trials, called “phases,” before they become commercially available. Due to the unmet need in the market for an effective ALS treatment, the FDA approved Relyvrio for commercial use while it was still undergoing its Phase III trial. The FDA approved Relyvrio in September 2022, and the drug went on the market the following month. The Phase III trial was to assess whether the drug was effective as compared to a placebo.

Given the devastating nature of ALS—and the lack of any viable treatment options—when Relyvrio was first launched, it was understood there would be an initial rush (or “bolus”) in demand and new patient subscriptions. Publicly, the defendants appeared to make good on the promise to help those with ALS. Throughout the launch, from October 2022 to over a year later, in November 2023, the defendants lauded the launch’s success and the near- and long-term ability for Relyvrio’s growth.

But as pled in the Amended Complaint, behind the scenes, the defendants failed to warn of an early, sharp decline in both new subscribers and patient discontinuations that would tank the posited hope for those suffering from ALS. Rather, the defendants were reporting the “net patient subscribers,” a metric that misleadingly omitted the high rate of discontinuations. For instance, at the peak “bolus” of demand around February and March 2023, a former employee revealed that there were 9,000 patients on Relyvrio. However, by May and August 2023, Defendants were reporting “net patients” on therapy at 3,000 and 3,800 respectively and assured the market that “strong demand” for therapy remained given 30,000 people suffer from ALS, and that it was still “too early to tell” the rate of discontinuation. Indeed, when asked about any discontinuations, the defendants responded that their metrics reported net patients on therapy, which they claimed was inclusive of any discontinuations, and that it was still a little early to identify long-term trends. In truth, as pled in the Amended Complaint, Relyvrio was causing significant side effects (including uncontrolled GI issues) while failing to manage or ameliorate the disease.

The truth began to emerge on November 9, 2023, when the defendants issued a press release reporting that a slowdown in new subscribers and an increase in discontinuations had resulted in a failure to meet anticipated Q3 2023 earnings. The defendants admitted that only 60% of patients remained in treatment after six months; corporate share value fell more than 30% in response to that news.

In March 2024, the defendants reported that the drug had failed to produce meaningful results in its Phase III trials, revealing that Relyvrio “failed to slow the progression of the disease,” and “made no significant difference versus a placebo in terms of helping patients perform daily living tasks such as walking and breathing.” The share price fell another 80% and, shortly thereafter, the Defendants announced that they would withdraw Relyvrio from the market.

Judge Gordon denied the defendants’ motion to dismiss, upholding May and August 2023 misstatements cited in the plaintiffs’ pleadings about the number of net patients on therapy, the rates of discontinuation, and growth opportunities for the drug.

This Court found that “plaintiffs have adequately alleged material misrepresentations with respect to forward-looking statements made in May and August 2023 that discuss growth opportunities within the ALS community.” As the Court reasoned, “[t]aking all well-pled factual allegations as true, 9,000 patients had been prescribed Relyvrio by the time of the peak of the bolus,” meaning that by the time Defendants were reporting on net subscribers in May and August, “more than 5,000 of the total 9,000 subscribers had discontinued treatment,” which “represents a discontinuation rate of over 50% and indicates that there was significantly less potential for new subscribers.” As such, “[t]he omission of this data could therefore be found to have rendered defendants' assertions regarding Relyvrio's growth potential materially misleading.”

Judge Gordon also concluded that the plaintiffs met the burden of pleading scienter. “Because the net subscriber metric was inclusive of all discontinuations, defendants would have been aware of those negative indications when calculating and reporting that metric.” Over the defendants’ objection, the Court credited the former employee’s statement that 9,000 patients were on the drug at the bolus given “the particular employee oversaw the company’s entire West Coast business operation and was responsible for 25% of the company’s revenue,” and “[i]t is plausible that such an employee would know what management knew with respect to the market status of their product.” The plaintiffs “also pled that defendants were tracking discontinuations in real time, which would establish that management had direct knowledge of the high number of discontinuations.” The plaintiffs continue pursuing recovery for Amylyx investors.

Dexit Averted? Corporate (Re-) Domestication After SB 21

By Ankita Sangwan and Arsalan Jamal

Since mid-2024, several high-profile companies left Delaware, citing a series of rulings from the Court of Chancery that they perceive as insufficiently protective of corporate decision-making. Those include SpaceX and Tesla, which both reincorporated in Texas, and Dropbox, which moved to Nevada.

In response, Delaware recently amended the Delaware General Corporation Law (“DGCL”) with what is commonly referred to as Senate Bill 21 (“SB 21”). The most consequential corporate law reform in decades, SB 21 claims to provide greater clarity and predictability to corporate fiduciaries.

Responses to SB 21 have been decidedly mixed, with some dubbing it “the billionaire’s bill.” Further, while some Chancery Court watchers characterize the defections, or “Dexit,” as a trend, others are confident that the Delaware Court, with its many strengths, will continue to dominate corporate incorporations.

On November 11, 2025, the Benjamin N. Cardozo School of Law’s Heyman Center for Corporate Governance hosted a CLE program titled “Dexit Averted? Corporate (Re-) Domestication After SB21.” Moderated by Gustavo Bruckner of Pomerantz, the panel featured leading attorneys and corporate governance scholars to discuss the long-term implications of SB 21, whether corporations are truly “fleeing” Delaware, the potential impact of SB 21 on shareholder litigation, and how other states such as Nevada and Texas have positioned themselves as alternative business-friendly jurisdictions. Following is a summary of the program.

What is SB 21?

SB 21 amends two key sections of the DGCL.

• Section 144: SB 21 amends this section to establish three safe harbors for conflicted transactions that, if met, insulate a director or officer from equitable relief and awards of damages for claims based on alleged breaches of fiduciary duties. These provide a far less demanding standard of judicial review than Delaware’s “entire fairness” standard. The points below are excerpted from the Original Synopsis of SB 21 by the Delaware General Assembly. The amendments:

o provide safe harbor procedures for acts or transactions in which one or more directors or officers as well as controlling stockholders and members of control groups have interests or relationships that might render them interested or not independent with respect to the act or transaction.

o define what parties constitute a controlling stockholder or control group and provide safe harbor procedures that can be followed to insulate from challenge specified acts or transactions from which a controlling stockholder or control group receives a unique benefit.

o provide that controlling stockholders and control groups, in their capacity as such, cannot be liable for monetary damages for breach of the duty of care. The amendments do not displace any safe harbor procedures or other protections available at common law.

• Section 220: This section has been amended so that the materials available to shareholders pursuant to books-and-records demands are more narrowly circumscribed outside of certain specific exceptions.

Are Companies Really Leaving Delaware?

During the 2025 proxy season, 18 of 28 companies (64.3%) with reincorporation proposals on their ballots proposed leaving Delaware (vs 23.5% in 2024) – most for Nevada, and a few for Texas. Many of these proposals involved companies with controlling shareholders.

Still, the panel agreed that despite headline-grabbing moves like Tesla’s departure, the predicted wave of reincorporation did not materialize. Delaware’s deep precedent and specialized courts continue to be the leading factors behind its enduring dominance for corporate incorporation.

Has SB 21 impacted or changed corporate decision-making?

The panelists were split. While Edward Rock of NYU and Eric Talley of Columbia called SB 21 a major shift expanding corporation discretion, Phil Richter of Fried Frank noted that real-world impact may remain modest until Delaware courts weigh in.

How Are Other States Responding?

Texas and Nevada, in recent developments and in reaction to SB 21, have updated their statutes to appear more “corporate friendly,” with Nevada even moving toward a business court modeled on the Court of Chancery. Several public companies—including Fidelity National Financial, Roblox, AMC Networks, Sphere Entertainment, and Tempus AI—have recently relocated to Nevada.

However, Richter highlighted two reasons Delaware continues to dominate: (1) extensive legal precedent; and (2) document precedent. He emphasized that Delaware’s extensive and well-developed body of case law provides attorneys with consistency and predictability when novel issues arise—an essential foundation for informed corporate decision-making. Richter also noted that Delaware leads in what he termed “document precedence,” referring to the widespread standardization and “Delawarization” of corporate documents. This uniformity enables lawyers to prepare materials for courts and opposing counsel with greater accuracy and efficiency.

Together, these make relocating a riskier and costlier proposition.

Case to Watch: Rutledge v. Clearway Energy Group LLC (2025)

A pending Delaware Supreme Court case – the first major test of SB 21 – may determine the statute’s constitutionality and the broad nature of its safe harbor provisions.

In Clearway, the Court will decide whether the safe harbors created by SB 21 violate the Delaware Constitution by improperly stripping the Court of Chancery of its equitable jurisdiction.

Final Thoughts

Panelists noted that Delaware corporate law evolved incrementally through landmark cases, and SB 21’s impact will only become clear as courts apply it in practice. By comparison, states like Nevada and Texas lack the depth of precedent that provides predictability in Delaware, making it harder for them to attract companies considering reincorporation.

As Delaware courts begin shaping SB 21 through cases like Clearway, Pomerantz continues to monitor developments. Says Gustavo Bruckner, Partner and head of the firm’s Corporate Governance practice, “Pomerantz remains committed to protecting the rights of our stockholder clients and will continue to be vigilant at legislative efforts seeking to limit those rights.”

SEC Policy Change Diminishes Investor Protections of the Securities Laws

On September 17, 2025, the Securities and Exchange Commission issued a policy statement that allows companies to conduct initial public offerings even if there are mandatory arbitration provisions in their governing documents.

This policy statement reverses the SEC’s longstanding opposition to mandatory arbitration provisions. These provisions, if adopted by companies and found valid by the courts, would force shareholders to bring claims of violations of the federal securities laws through arbitration rather than in court, and individually rather than as class actions. While mandatory arbitration severely curtails shareholder rights, it remains to be determined whether companies will actually adopt such unpopular provisions and, if so, whether they are legally valid. Pomerantz has been, and will continue to be, at the forefront of protecting the crucial right of investors to seek redress through securities class actions.

This new policy reverses the SEC’s previous position, under which its Division of Corporation Finance refused to accelerate the effective date of registration statements for companies that included mandatory arbitration provisions in their governing documents because such provisions are inconsistent with “the public interest and protection of investors.” The SEC reaffirmed its prior
stance in 2018, when then-Chairman Jay Clayton stated in a letter to Congress that the Division of Corporation Finance would maintain its prior approach. Later that year, when the SEC continued to express interest in the issue, Pomerantz organized a coalition of important institutional investors from around the world to meet with Chairman Clayton and later, with a bipartisan group of Senate staffers. These meetings culminated in to a letter, signed by numerous State Treasurers and the State Financial Officers Foundation, urging the SEC to maintain its stance against forced arbitration.

The SEC’s decades-old position, shared by the investor community, was that forced arbitration harms investors by curtailing their ability to hold companies accountable for securities fraud. Its new policy statement is a drastic reversal of course that is inconsistent with the role of securities class actions as the primary method for investors to protect their rights.

Mandatory arbitration provisions are extremely harmful to shareholder rights for several reasons, as Senators Elizabeth Warren and Jack Reed wrote in a September 16, 2025 letter to SEC Chairman Paul Atkins, urging the SEC not to adopt this policy change. Commissioner Caroline Crenshaw, the lone Democratic commissioner on the SEC and the only one to oppose this policy change, raised similar concerns when dissenting from its approval of the policy statement and questioned whether the SEC even has the authority to issue the policy change without allowing for public comment, as it did.

By precluding class actions, mandatory arbitration provisions prevent most individual investors from recovering for the harm caused when companies commit securities fraud, because it is generally economically unfeasible for any but the largest shareholders to sue corporations. Securities class actions are an essential way to hold companies accountable to investors since the SEC lacks the resources to pursue all claims. Indeed, the Supreme Court has “long recognized that meritorious private actions to enforce federal antifraud securities laws are an essential supplement to criminal prosecutions and civil enforcement actions brought, respectively, by the Department of Justice and the Securities and Exchange Commission.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007). In addition, by requiring disputes to take place in private arbitration, which are often subject to confidentiality agreements, rather than in public judicial proceedings, the facts of individual cases will not come to light and there will be a dearth of new precedent to guide future cases.

Changes that weaken enforcement of the federal securities laws have significant, widespread repercussions by removing public accountability, eviscerating a key deterrent on companies and their executives from committing misconduct, and decreasing investor confidence in the U.S. markets. As Senators Warren and Reed wrote, “allowing shareholders to waive their litigation rights not only harms individual shareholders but also confidence in the market and the ability to deter future misconduct.”

There is a long history of public opposition to mandatory arbitration provisions within the investor community, and even by companies themselves. For example, in 2018, an activist shareholder sought to have Johnson & Johnson’s shareholders vote on adding such a provision into the company’s bylaws. Pomerantz represented the Colorado Public Employees’ Retirement Association as an intervenor in litigation that ensued, seeking to ensure that investors’ rights were protected. Several years of legal
maneuvering followed. First, the SEC granted J&J’s request for a no-action letter concerning the company’s exclusion of the provision from its proxy ballot based on the position that the proposal violated state and federal law. Then, after the company expressed its willingness to include the proposal in its proxy materials, apparently to avoid further litigation, in 2022, the federal district court in New Jersey dismissed the shareholder’s request for declaratory relief as not presenting a justiciable controversy. The Third Circuit Court of Appeals affirmed that decision in 2023. Although the company allowed the proposal to be included, it recommended that shareholders vote against it because J&J did “not believe that this proposal [was] in the best interests of Johnson & Johnson or its shareholders,” noting that no “other shareholders have expressed to us an interest in having us adopt”
such a bylaw. The activist investor ultimately withdrew the proposal before the shareholder votes in both 2022 and 2023, confirming J&J’s assessment that the shareholder was merely pursuing his longstanding “academic interest” in seeking a favorable court ruling on this issue, rather than focusing on whether shareholders actually favored the provision.

Similarly, in 2020, Intuit, another prominent public company, recommended against a similar proposal by the same activist shareholder, stating that it was “not in the best interest of Intuit or its shareholders.” Over 97.6% of Intuit’s shareholders agreed, and rejected the proposal, confirming that institutional and retail investors oppose provisions that curtail important shareholder rights.

Further, mandatory individual arbitration is not in companies’ best interests because, while small shareholders may be excluded from the process, large investors will seek to recover their substantial losses in arbitration. The proliferation of multiple separate arbitrations will strain company resources and the attention of executives, remove certain procedural benefits afforded to defendants in court proceedings, and take away the efficiencies of resolving many claims through a single action.

If any companies nonetheless do choose to move forward with mandatory arbitration provisions, litigation over the propriety of these provisions will inevitably follow. The legality of such provisions will be subject to challenge on numerous grounds, including whether they are prohibited by the federal securities laws and applicable state law, and whether they are enforceable from a contractual perspective, among other objections.

The widespread disapproval of mandatory arbitration provisions, along with the need to address contentious litigation alongside a company’s carefully planned and highly anticipated initial public offering — which companies will not want obstructed by litigation or diminished investor interest — is likely to deter most companies from including such provisions in the first place. Corporations that still insist on adopting these provisions are likely to get more than they bargained for, as investors and their counsel, such as Pomerantz, will be prepared to hold companies to account — including through arbitration, if necessary.

The SEC’s policy reversal marks the beginning of what will likely be a long process. Much uncertainty lies ahead regarding whether companies will actually adopt mandatory arbitration provisions, how their investor base will respond, and the legality of these provisions. Pomerantz will continue, at every step of the way, to lead efforts to protect shareholders’ rights to seek recompense for violations of the securities laws.

Pomerantz Again Prevails Against Avalara

Building on its significant appellate victory earlier this year, Pomerantz achieved another important win for investors in the securities class action against tax software company Avalara, Inc., its CEO Scott McFarlane, and Avalara’s Board of Directors.

The plaintiffs allege that Avalara misled investors ahead of an $8.4 billion deal to take the company private. On remand from the Ninth Circuit, Judge Marsha Pechman of the U.S. District Court for the Western District of Washington denied in part the defendants’ renewed motion to dismiss, allowing key claims to proceed and paving the way for discovery.

As previously reported in The Pomerantz Monitor, on March 31, 2025, the Ninth Circuit reversed in part the district court’s dismissal of the plaintiffs’ Section 14(a) and 20(a) claims. The Ninth Circuit held that the plaintiffs’ Second Amended Complaint (“SAC”) adequately alleges that the projections included in Avalara’s Proxy were false and misleading because they improperly excluded inorganic growth from mergers and acquisitions (“M&A”) activity, despite M&A being a significant aspect of Avalara’s growth strategy and a stated ongoing priority for management. Additionally, the Ninth Circuit was persuaded by Pomerantz’s argument that the defendants cherry-picked positive information from a report issued by Institutional Shareholder Services (“ISS”) while failing to disclose that its recommendation of the merger was “cautionary” rather than an unqualified endorsement, and that the report validated scathing criticism of the deal by several large investors.

Following the Ninth Circuit’s decision, the case returned to the district court with three narrow issues remaining: (i) whether the SAC sufficiently alleges subjective falsity and negligence for the Avalara Board members aside from CEO McFarlane; (ii) whether the alleged misstatement concerning the ISS recommendation was material; and (iii) whether the SAC adequately demonstrates loss causation.

On remand, the district court held that the SAC plausibly alleges subjective falsity and negligence as to all of the defendants, crediting allegations that McFarlane had shared with the Board the same data he possessed about Avalara’s projections across nine separate meetings. This included the omission of inorganic growth from the projections and the fact that the Proxy’s narrative of “risks and weaknesses” contradicted management’s own contemporaneous public statements about Avalara’s strong prospects.

The district court further ruled that the SAC sufficiently alleges the materiality of misstatements concerning the ISS recommendation because the Proxy’s selective presentation of ISS’s recommendation could reasonably have led shareholders to wrongly believe that ISS had unequivocally endorsed the merger. The district court ruled that these omissions were significant enough that a reasonable investor would have considered them important in deciding how to vote on the proposed merger.

Finally, the district court held that the SAC adequately alleges loss causation because the $93.50-per-share merger price was significantly below both the $109 target price set by Avalara’s financial advisor, Goldman Sachs, only one month prior, and Avalara’s share price closed at $95.50 per share the day before the merger announcement. The defendants had argued that leaks regarding the impending deal artificially inflated Avalara’s stock price pre-merger announcement. However, the district court rejected that argument, explaining that if the investing public believed Avalara would soon be sold, a $95.50 trading price would reasonably reflect investor expectations that Avalara would command at least that amount in a sale.

Following the plaintiffs’ win in the district court, the case will now proceed into discovery. This latest decision represents another significant step forward for investors seeking accountability.

Pomerantz Rallies Support Against Mandatory Arbitration

Pomerantz was deeply involved in drafting a November 3, 2025 letter to the SEC opposing the agency’s abrupt reversal of its longstanding mandatory arbitration policy.

The more than 60 signatories to the letter include many of the firm’s institutional investor clients as well as other public pension funds, Taft-Hartley funds, corporate governance organizations, and public servants such as Brad Lander, Comptroller of the City of New York and investment advisor to and custodian of the funds of the New York City Retirement Systems, James A. Diossa, General Treasurer, State of Rhode Island Office of the General Treasurer, Thomas P. DiNapoli, as Trustee of the New York State Common Retirement Fund, and Universities Superannuation Scheme Limited.

The letter, sent to SEC Chairman Paul Atkins, states in part:

The SEC made this drastic change without hearing from investors and corporations in any public comment process which would have revealed widespread opposition to this policy change.
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We encourage the Commission to consider returning to public consultation processes on matters that substantively alter policy. We feel that the absence of public consultations on important announcements which may negatively affect shareholder rights, risks lowering the quality of the highly regarded due process and governance standards in the United States, thereby presenting a risk to the attractiveness of U.S. capital markets. [T]his radical departure from the Commission’s decades of precedent will destabilize confidence in U.S. markets. Under the new policy, companies that violate federal securities laws will be shielded from public accountability, putting investments at risk and stripping investors of their well-established rights to recover losses on a class-wide basis and in a proceeding that provides them with full due process.
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By greenlighting this forced arbitration policy change, the SEC is countenancing companies’ efforts to cut off shareholder class action lawsuits—which are the key means by which both federal and state investor protection laws have been enforced and investor losses have been recouped when securities fraud has been committed—to be replaced by a costly, unproven, and unwieldy system of private arbitration. Class action lawsuits also provide the mechanism through which a corporation can efficiently resolve such litigation allowing all investors, institutional and retail, to participate in any recovery; no such mechanism exists under a private arbitration system. Importantly, history has shown that private shareholder legal actions have proved to be a far better mechanism than government enforcement to hold corporations accountable for wrongdoing and enable investors to recover funds.

The International Corporate Governance Network (ICGN), of which Pomerantz is a member, sent its own letter to the SEC in which it stated:

We feel that the absence of public consultations on important announcements which may negatively affect shareholder rights, risks lowering the quality of the highly regarded due process and governance standards in the United States, thereby presenting a risk to the attractiveness of U.S. capital markets.

The Council of Institutional Investors (CII) (of which Pomerantz is also a member), in response to the SEC’s policy statement states on its website:

For over a decade, the Council of Institutional Investors has stood firmly against the use of forced arbitration clauses in corporate charters and bylaws. These provisions undermine shareholder rights by restricting access to judicial forums.

On December 4, 2025, CII will host a webinar about the SEC’s policy statement on mandatory arbitration and its implications for institutional investors.

Pomerantz Defeats Motion to Dismiss in In re STMicroelectronics Inc. Sec. Litig.

On September 15, 2025, U.S. District Judge Alvin K. Hellerstein of the Southern District of New York sustained investors’ securities fraud claims against semiconductor manufacturer STMicroelectronics N.V. (“STM”), denying the defendants’ motion to dismiss the case in its entirety.

The decision allows the lawsuit, which alleges that STM, its CEO Jean-Marc Chery, and its CFO Lorenzo Grandi misled the public about STM’s financial health, to proceed into discovery.

This victory is noteworthy as it stands in contrast to the two other recent securities cases brought against semiconductor companies that were dismissed at the pleading stage. The result underscores the strength of the firm’s investigation and its ability to marshal compelling facts from multiple sources, including confidential witnesses and financial analysis.

A Tale of a False Rosy Picture

Headquartered in Switzerland, STM is a publicly-traded company on the New York Stock Exchange that manufactures semiconductor chips and other electronics used in automotive, computer, and industrial applications. The automotive market drives the plurality of STM’s revenue.

Following a temporary, pandemic-induced surge in demand, the global semiconductor market began to cool down in late 2022. Despite this industry-wide trend and bleaker reports from industry groups, competitors, and suppliers, the defendants continued to paint a rosy picture for investors. Throughout 2023 and 2024, the defendants routinely stated that market demand was solid and strengthening, driven by the automotive sector, when in fact, it was deteriorating. The defendants claimed that
they had strong visibility into market demand, and the company’s inventory backlog was declining. An inventory backlog is a key indicator of strong demand when it is low.

However, the complaint alleges that these public representations were profoundly at odds with the internal reality at STM. The company actually faced a significant deterioration in its business, characterized by weakening demand and a growing inventory glut. To mask this decline, the defendants allegedly resorted to “channel stuffing”— providing excessive discounts to customers to artificially inflate sales, decrease inventory on the books, and conceal the true state of demand. The truth began to emerge in April 2024, when STM started announcing decreased revenue targets, causing its stock price to plummet from over $42 per share to under $40 following the announcements. However, the company never came clean and instead continued to tell investors that the financial picture in its industrial and automotive segments would improve as the year progressed. But on July 25, 2024, the company disclosed that it had experienced lower than expected revenue in the automotive segment and a decline in industrial, and revised its fiscal year revenue guidance downward, causing the stock price to drop to just over $33. On October 31, 2024, the company announced cost-cutting measures and again guided revenue below analyst consensus. On this news, the stock dropped to under $26.

Pomerantz’s Investigation Uncovered Internal Reality 

Pomerantz’s success in defeating the motion to dismiss hinged on its ability to present a compelling narrative that directly contradicted STM’s public statements. The complaint detailed how senior executives, including the Chief Executive Officer, were repeatedly warned that the market
was slowing globally, that STM was not immune to this trend, and not to misrepresent information to the contrary to investors.

The investigation also uncovered that objections were raised internally by a former senior executive, serving as a confidential witness, regarding the company’s use of channel stuffing to conceal weakening demand by providing excessive discounts to customers to artificially inflate sales. This account was corroborated by other confidential witnesses who confirmed a rapid decline in customer
orders, an increase in inventory, and the hiring freeze in response to the worsening financial reality. Furthermore, Pomerantz’s analysis of STM’s financial results also showed indicators of channel stuffing, including a drastic decrease in revenues from distributors relative to revenue from original equipment manufacturers.

The defendants attempted to sidestep these powerful allegations by attacking the credibility of the confidential witnesses. Judge Hellerstein rejected these arguments, finding that the attacks are inappropriate at this stage of the litigation and cannot serve as a valid basis to dismiss a complaint.

Pomerantz and Plaintiffs Prevail

In his ruling, Judge Hellerstein systematically dismantled the defendants’ primary legal shields. The defendants argued that their misleading statements were protected by the Private Securities Litigation Reform Act’s (PSLRA) “safe harbor” for forward-looking statements. The Court disagreed for two critical reasons. First, it found that many of the challenged statements were about then-resent- day facts, such as market conditions at the time of the statement, which are not covered by the safe harbor. Second, the Court held that the plaintiffs alleged plausibly that the defendants’ statements as to STM’s growth and inventory were made with actual knowledge of their falsity.

The Court also agreed with Pomerantz that the company’s risk disclosures in its SEC filings were themselves misleading. STM warned investors of hypothetical risks, such as reduced demand and high inventory levels, without disclosing that these risks had, in fact, already materialized. Citing well-established precedent, the Court affirmed that “a company’s purported risk disclosures are misleading where the company warns only that a risk may impact its business when that risk has already materialized.” The boilerplate, “kitchen-sink” disclaimers accompanying STM’s annual report were found to be insufficient to protect the defendants.

Compared to the two other semiconductor manufacturer cases that were dismissed recently, Judge Hellerstein found the confidential witness allegations in the STM action to be much stronger and that STM provided less meaningful disclaimers and disclosures. The denial of the motion to dismiss in full paves the way for the case to move forward, allowing Pomerantz to seek recovery for harmed STM investors. Led by Partner Omar Jafri, the litigation team also includes Of Counsel Brian P. O’Connell and Associate Adam Jiang.

Pomerantz Prevails Against MTD in VNET

On September 15, 2025, Pomerantz secured a victory on behalf of a proposed class of investors in VNET Group, Inc.’s American Depositary Shares (“ADSs”), by defeating, in large part, the defendants’ motion to dismiss securities fraud claims.

The claims arise from a loan taken out by VNET’s Co-Founder and Chairman of the Board, Josh Sheng Chen, Mr. Sheng Chen’s default of that loan, and the impact of that default on VNET’s business.

VNET is a holding company that, through its subsidiaries, provides hosting and related services, including data center, cloud, and virtual private network services through which customers can connect to the internet in China.

The plaintiffs allege in their First Amended Complain (“Complaint”) that in August 2021, Mr. Sheng Chen took out a $50.25 million loan from Bold Ally (Cayman) Limited, using his stake in VNET as collateral. This loan agreement stipulated that if VNET’s share price fell below $8.50 for two consecutive days, Bold Ally could cancel the loan and demand full repayment. Additionally, it specified that if the worth of Mr. Sheng Chen’s Class A shares fell below a threshold of $63 million, he would immediately be in default. Within two months of Mr. Sheng Chen entering into the loan, both provisions were triggered, giving Bold Ally the ability to terminate the loan and seize Mr. Sheng Chen’s shares. The seizure of Mr. Sheng Chen’s shares could have been catastrophic for VNET, as the company has just entered into financing agreements for hundreds of millions of dollars with Blackstone Tactical Opportunities. These financing agreements allowed Blackstone to redeem its convertible notes early if, among other things, Mr. Sheng Chen ceased to be the largest holder of VNET’s voting power and if he resigned or was removed from the Board of Directors. Essentially, the default of Mr. Sheng Chen’s personal loan, and subsequent seizure of his shares by Bold Ally, directly threatened the continued stability of VNET.

Critically, from the start of the Class Period (March 30, 2022 to February 17, 2023), Mr. Sheng Chen was in default of his loan agreement with Bold Ally, making the potential seizure of his shares an ever-present threat, wholly dependent on Bold Ally’s actions.

Nevertheless, throughout 2022 and into 2023, Mr. Sheng Chen hid this risk from VNET investors. The defendants discussed the Blackstone loan with investors without ever mentioning the growing risk posed by Mr. Sheng Chen’s default. More egregiously, Mr. Sheng Chen actually filed his financing agreement with Bold Ally in a Form Schedule 13D but redacted all provisions that would let investors discover that he was already in default of the financing agreement. The plaintiffs also allege that the defendants further misled investors later in the Class Period by discussing VNET, its ADSs, and the company’s plans while failing to disclose Mr. Sheng Chen’s default and the growing risk it posed.

On February 13, 2023, Bold Ally announced that Mr. Sheng Chen had officially defaulted on his loan and that Bold Ally had decided to enforce the terms of the loan and seize his shares. On this news, VNET’s share price fell 17.8%. On February 15, 2023, VNET announced that its Board of Directors had created 555,000 new shares, entitled to 500 votes per share, to be issued to Mr. Sheng Chen upon the seizure of any shares by Bold Ally. This move would ensure that Mr. Sheng Chen would retain his position as largest holder of VNET voting power and prevent the Blackstone loan from defaulting. On this news, VNET’s share price fell an additional 8.07%. Finally, on February 17, 2023, the defendants disclosed a letter between VNET and Bold Ally admitting that Mr. Sheng Chen had been notified at least five times of his default throughout the Class Period. On this news, VNET’s share price fell 9.47%.

The Court upheld all of the alleged misstatements in the Complaint and held that scienter – i.e., defendants’ fraudulent intent – was adequately alleged as to all of the individual defendants. The Complaint thus adequately alleges claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.

There are several notable aspects of the Court’s decision denying the 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 Mr. Sheng Chen and VNET purposefully omitted key information, which would have alerted investors to the risks associated with Mr. Sheng Chen’s default, from their statements about Mr. Sheng Chen’s loan, the plaintiffs still had to overcome the defendants’ arguments that their statements would not have misled investors.

The Court rejected the defendants’ argument that this was a pure omission claim, and instead held that because the defendants made affirmative statements about Mr. Sheng Chen’s loan with Bold Ally, VNET’s financings, and the associated risks to VNET’s ADSs, they “did so in a deceptively incomplete fashion.” Essentially, the Court reaffirmed the principle that omitting critical information that “creates a misleading impression about information that is material to investors” is actionable.

The Court also rejected the defendants’ argument that the risk of a default did not need to be disclosed because “there was never a real risk” of Mr. Sheng Chen losing his shares and being removed from the Board. According to the Court, because the risk of Mr. Sheng Chen losing his shares had materialized due to his default, the fact that Bold Ally never actually seized his shares and removed Mr. Sheng Chen from the Board was immaterial. Ultimately, the Court found that a risk does not have to completely materialize for it to need to be disclosed, but rather that plaintiffs need only show that it was present or increased and was not disclosed.

Scienter

The Court rejected the defendants’ argument that scienter cannot be established by the defendants’ positions alone, holding that the plaintiffs instead plead that, by virtue of the defendants’ positions, they had access to specific information – namely, the terms of the Bold Ally and Blackstone loans – that were withheld from the public. In essence, the Court affirmed that scienter can be established by a defendants’ access to contradictory information, especially when the complaint specifically identifies the contradictory information.

Loss Causation

The Court rejected the defendants’ argument that the disclosures in February 2023 did not constitute revelations of concealed information, but rather reflected new developments. The Court held that Mr. Sheng Chen’s default, Bold Ally seizing shares, and VNET creating new shares were fully matured risks that revealed existing facts that had been previously concealed. Therefore, the Court’s ruling reaffirmed the principle that a development of a risk can be used to establish loss causation, especially when those developments reveal the existence of facts previously hidden from investors.

The case is In re VNET Group, Inc. Securities Litigation, No. 1:23-cv-11187 (S.D.N.Y.)

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.