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.