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Restaurant Brands International Wins Appellate Dismissal of Putative Securities Class Action
- Client News
- November 10, 2022
Paul, Weiss obtained an appellate victory on behalf of Restaurant Brands International (RBI), 3G Capital, and certain of their executives and board members in a ’33 Act securities class action in New York state court. The New York Supreme Court Appellate Division, First Department, unanimously reversed the Supreme Court, New York County, Commercial Division’s order denying RBI’s motion to dismiss.
In the putative class action filed in October 2020, the plaintiff, an RBI shareholder, took aim at the registration statement that accompanied RBI’s secondary stock offering in the third quarter of 2019. The case focused on two long-term growth initiatives of RBI brand Tim Hortons: the “Winning Together” plan to improve restaurant experience, product quality and brand communications; and the “Tims Rewards” loyalty program. The plaintiff alleged that, although the Company had touted Winning Together and Tims Rewards as growth strategies, in the third quarter of 2019, Tim Hortons same-store sales declined by 1.4% compared to the same quarter the previous year. Relying on that metric, the plaintiff claimed that the registration statement’s generic representations about RBI’s growth potential, new product development and risks became misleading by omission because RBI did not disclose that Winning Together and Tims Rewards were not working.
In February 2021, RBI moved in the Supreme Court to dismiss the complaint. RBI maintained, among other things, that the statements at issue were not actionable because they were immaterial puffery, honestly held opinions and not false when made. The Supreme Court denied the motion.
On appeal, the Appellate Division unanimously reversed that decision, adopting RBI’s position that the statements were immaterial puffery and/or non-actionable opinions. The Appellate Division held that the alleged non-disclosure of same-store sales for the quarter of the offerings for one of RBI’s three brands did not render the statements misleading by omission, and that such limited sales data was not a known material trend at the time of the offering under Regulation S-K, Items 303 and 105. The Appellate Division directed the Supreme Court to enter judgment dismissing the complaint.
The Paul, Weiss team was led by litigation partner Audra Soloway, who argued the appeal on behalf of RBI, and included partners Daniel Kramer and Kannon Shanmugam.