On
Plaintiff, representing a putative class of stockholders who allegedly purchased Company stock between
Plaintiff identified four overlapping categories of statements that were allegedly misleading due to omitted facts regarding the extent of the account sharing issue: (1) statements about the Company's market penetration, (2) statements about the Company's metrics and long-term growth, (3) statements that attributed the Company's slow growth to COVID and its aftereffects, and (4) statements that specifically addressed account sharing. Defendants moved to dismiss, arguing that the complaint failed to plausibly allege that the Company knew about the extent of the account sharing problem at the time the alleged misstatements were made, and that the challenged statements were otherwise nonactionable statements of opinion, corporate optimism, and/or forward-looking statements.
The Court agreed with defendants, holding that plaintiff failed to allege with particularity what level of monitoring the Company was doing for account sharing, or what was known regarding the extent of account sharing at the time the alleged misleading statements were made. In particular, the Court found that except for an internal memorandum from early 2020 showing that the Company would pause efforts to "crack down" on account sharing, plaintiff did not specify what confidential witnesses or anyone at the Company discussed about account sharing or when it was discussed. In so holding, the Court rejected plaintiff's argument that the Company's awareness of the account sharing issue was enough to survive the pleading stage, holding that "without more, the allegations do not establish at what level the [Company] monitored account sharing during the Class Period, or that [the Company was] aware of the extent of the account sharing problem."
Having found no primary liability under Section 10(b), the Court dismissed plaintiff's derivative claim under Section 20(a) against the individual defendants. The Court did, however, grant plaintiff leave to amend, finding that it appears that the pleading could be cured by the allegation of other facts. In anticipation of such further amendment, the Court did not address in its opinion the various other defenses raised by defendants, including safe harbor protection and the failure to allege scienter and loss causation.
In re
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10022
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