Pomerantz Defeats Motion to Dismiss in Wynn Resorts Sexual Misconduct Securities Litigation
On July 28, 2021, U.S. District Judge Andrew P. Gordon of the District of Nevada denied, in part, the defendants’ motions to dismiss the Second Amended Complaint in Ferris, et al. v. Wynn Resorts Ltd., et al., No. 2:18-cv-00479-APG-DJA (D. Nev.), a securities fraud class action suit arising from Wynn Resorts Limited’s (“Wynn Resorts”) concealment of a long-running pattern of alleged sexual misconduct by CEO and founder Stephen (“Steve”) Wynn against female employees of the company.
The alleged misconduct first came to light in January 2018 with the publication of a Wall Street Journal article detailing numerous Wynn employees’ complaints of abuse at the hands of Steve Wynn. Gaming regulators later confirmed that the company’s management had repeatedly turned a blind eye to allegations regarding Wynn’s conduct and failed to investigate reports of sexual assault. Wynn resigned soon after, and the company was forced to clean house and replace the management that had covered up Wynn’s misdeeds.
The district court granted the defendant’s motion to dismiss the complaint in May 2020, while granting the plaintiffs’ leave to amend. The plaintiffs’ Second Amended Complaint challenged four sets of misstatements: i) the Company’s Code of Conduct, which stated that the company enforced ethical and legal conduct among its employees; ii) statements that the company believed it was in compliance with all applicable legal regulations; iii) a 2016 press release by the company denying allegations by Steve Wynn’s ex-wife that Wynn had engaged in misconduct and that the company was withholding information from gaming regulators; and iv) statements issued by the company and Steve Wynn denying the Wall Street Journal’s allegations and claiming that the company had a hotline in place for reporting harassment and similar misconduct (and that no reports had been filed, thereby implying that no sexual misconduct had occurred).
The court denied, in part, the defendants’ motion to dismiss the Second Amended Complaint, upholding the plaintiffs’ claims based upon the 2016 and 2018 press releases, and the “hotline” statements, but dismissed the claims regarding the first two categories of statements.
"At this stage, the plaintiffs have sufficiently alleged that Wynn, Maddox, Sinatra and Cootey were aware of information contradicting their statements that denied misconduct allegations," according to Judge Gordon. "The inference that these defendants were aware of Wynn's alleged misconduct at the time of their statements is cogent and compelling."
Pomerantz Partner Murielle Steven Walsh, who leads the litigation, stated, "We are pleased that the court upheld claims that arose from statements made by the company and Steve Wynn that effectively denied any wrongdoing by Wynn. The court's decision underscores the fact that alleged sexual misconduct and harassment by corporate executives are material issues for investors, especially when management turns a blind eye to reports of wrongdoing. This type of misconduct poses a threat to a company's financial success."
“The decision sends a stark message to corporations and their boards,” according to Managing Partner Jeremy A. Lieberman, “that in the twenty-first century, the securities laws will be applied to all matters of import to investors, particularly relating to sexual harassment and ensuring a safe work environment for employees.”