Paul, Weiss is widely recognized as having one of the nation’s preeminent securities litigation and regulatory practices. For two decades, our lawyers have guided global corporations and financial institutions through a series of “bet-the-company” securities-related crises, consistently reducing or eliminating their most damaging claims and negotiating favorable resolutions.
Eleventh Circuit Affirms Dismissal of Securities Class Action Suit Against ADT
- Client News
- September 7, 2016
Practices
The U.S. Court of Appeals for the Eleventh Circuit affirmed the dismissal of a consolidated securities action against Paul, Weiss client The ADT Corporation that challenged the company's disclosures concerning its stock repurchase program in 2012 and 2013, the impact of competition on the company's performance, and the company's buyback of stock from an activist investor.
The Eleventh Circuit appeal involved an August 2014 securities class action complaint alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The U.S. District Court for the Southern District of Florida dismissed the complaint in June 2015, holding that the plaintiffs failed to identify any material omissions or materially misleading statements, failed to plead scienter on the part of any defendant, and failed to state a claim for "scheme liability." In their appeal, the plaintiffs argued that the district court erred in ruling that: (i) ADT was not required to disclose that its directors' "motivation" in approving the stock repurchase program was purportedly to appease an activist shareholder; (ii) the plaintiffs had not adequately alleged material misrepresentations concerning the impact of competition on ADT's financial results; and (iii) they had not adequately alleged scheme liability.
The Eleventh Circuit's opinion affirmed the district court's decision in all respects. The appeals court ruled that, as a matter of law, ADT was not required to disclose its directors' alleged "entrenchment motive" for the stock repurchase program. The appeals court also agreed with the district court that the plaintiffs' allegations of misrepresentations concerning the impact of competition were vague and not sufficiently particularized and that the scheme liability claim failed to plead deceptive conduct sufficient to sustain such a claim.
The Paul, Weiss team in the district court and the Eleventh Circuit included litigation partner Daniel Kramer and counsel Robert Kravitz. Previously, the same Paul, Weiss team, together with litigation partner Stephen Lamb, successfully defended ADT and its directors in four separate derivative actions involving the same underlying issues, including two actions in Delaware that were dismissed by the Court of Chancery, with the first such dismissal affirmed on appeal by the Supreme Court of Delaware.