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Weil Defeats Securities Class Action Targeting Ascena Retail Group Executives

On June 28, 2022, Weil secured a victory in a putative securities class action brought against Ascena Retail Group and Ascena’s former CEO and CFO, David Jaffe and Rob Giammatteo, when the U.S. District Court for the District of New Jersey granted the defendants’ motion to dismiss all claims.

In its complaint, plaintiffs challenge Ascena’s decision to take an impairment of its goodwill and other intangible assets relating to its acquisition of ANN INC, and claim that defendants’ failure to take the charge earlier amounts to securities fraud. Weil moved to dismiss the complaint, and after the parties finished briefing the motion in July 2020, Ascena filed for bankruptcy. In March 2022, the bankruptcy court entered an order confirming chapter 11 bankruptcy for Ascena which, among other provisions, discharged Ascena from plaintiffs’ claims in this suit. While all claims against Ascena were dismissed, the action proceeded against the Individual Defendants, Mr. Jaffe and Mr. Giammatteo. Weil moved to renew its motion on behalf of the Individual Defendants and submitted supplemental briefing in support.

In its order granting the defendants’ motion to dismiss the claims brought against the Individual Defendants, the court agreed with Weil’s argument that plaintiffs failed to plead that the Individual Defendants made an actionable false statement. The court analyzed defendants’ goodwill statements under Omnicare, and concluded that plaintiffs failed to meet the standard for pleading an actionable opinion statement. It found: “Plaintiffs allege falsity, but cite no material fact embedded within Ascena’s SEC filings or Defendants’ public statements that is false (or knowingly so). Instead, Plaintiffs take greatest issue with the conclusions that Defendants drew from the facts known to them about Ascena’s business during the class period. Such facts, such as falling earnings, customer traffic, and share price, may indeed show that different corporate directors could have valued Ascena’s intangible assets differently. They do not, however, establish that Defendants’ statements about Ascena’s performance or the basis for their opinions were untruthful.” The court also agreed with Weil’s argument that plaintiffs failed to plead the requisite scienter.

The Weil team was led by Securities Litigation practice Co-Head Caroline Zalka, retired partner and former practice Co-Head Joseph Allerhand, and associates Anna Gordan, Tania Matsuoka, and Samin Mossavi.