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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.

Shutterfly Wins Appeal Affirming Dismissal of Securities Class Action

Paul, Weiss achieved a victory for Shutterfly, Inc. when the U.S. Court of Appeals for the Third Circuit unanimously affirmed dismissal of a securities lawsuit against Shutterfly and certain of its officers and directors challenging statements in a proxy statement issued in connection with the 2019 acquisition of Shutterfly by funds managed by Apollo Global Management.

The complaint filed by a Shutterfly shareholder took issue with the proxy’s references to two separate sets of financial projections: a “management case” reflecting management’s view about Shutterfly’s likely future performance, and a lower “sensitivity case” based on fully disclosed assumptions that were concededly more pessimistic than management anticipated. Plaintiff alleged that only the management case was accurate, and that the sensitivity case had been manufactured in order to obtain a fairness opinion supporting the consideration offered by Apollo. Plaintiff therefore claimed that the sensitivity case and the valuation ranges based on those projections were misleading in violation of Section 14(a) of the Securities and Exchange Act of 1934. In May 2020, Chief Judge Stark of the District of Delaware dismissed the action with prejudice, reasoning that the alleged misrepresentations were not false or misleading and were immaterial as a matter of law.

A Third Circuit panel unanimously affirmed in a 23-page unpublished opinion written by Judge Anthony Scirica. It held that the only purported misstatements plaintiff challenged on appeal—valuation ranges prepared by Shutterfly’s financial advisor based on the sensitivity case—were not misleading, and that they were immaterial based on abundant cautionary disclosures in the proxy. The panel also held that plaintiff had failed to satisfy the enhanced pleading requirements of Rule 9(b) and the PSLRA.

The Paul, Weiss litigation team included litigation partner Lew Clayton, who argued the appeal and the motion to dismiss before the district court, and counsel Daniel Mason and Paul Paterson.

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