Pomerantz Defeats Motion to Dismiss in In re Bed Bath and Beyond Sec. Litig.

In a significant victory for investors, Pomerantz defeated an attempt to dismiss a securities fraud complaint against Ryan Cohen (“Cohen”) and his investment entity, RC Ventures LLC, in connection with a scheme to pump and dump the securities of Bed Bath and Beyond, Inc. (“BBBY”). While the Firm often prevails at the pleading stage of securities fraud actions, this case is unique because we convinced a federal court that misleading emojis can be actionable misrepresentations under the federal securities laws. We also showed that claims for scheme liability are viable even if there is significant overlap between a defendant’s statements and his overt acts, and that liability for market manipulation under Section 9 of the Securities Exchange Act of 1934 can extend to professional traders.

Emoji and the Law

Pomerantz’s recent victory overcoming the defendants’ Motion to Dismiss in In re Bed Bath and Beyond Securities Litigation (discussed by Omar Jafri in this issue) constitutes a win not only for shareholders, but also for one of the most ubiquitous forms of modern communication: the emoji. A key point in the case turns on a tweet sent by the defendant, Ryan Cohen, in which Cohen allegedly used the “smiling moon” emoji to encourage his legions of followers to buy Bed Bath and Beyond stock before he sold his investment. In denying Cohen’s motion to dismiss, Washington DC district judge Trevor McFadden became the second federal judge to hold that an emoji could be considered an actionable misrepresentation. Emoji are a relatively new subject for the courts, and this ruling highlights the issues at play in bringing novel forms of digital communication in line with the U.S. legal system.