February 25, 2021
On February 25, 2021, Weil secured a decisive victory for Quad/Graphics, Inc. and two senior executives when the U.S. District Court for the Southern District of New York granted our clients’ motion to dismiss with prejudice in a putative securities class action. The court adopted all of Weil’s arguments in favor of dismissing the complaint, including, notably, that the plaintiffs failed to adequately plead loss causation – which is rarely decided at the dismissal stage in securities fraud cases.
In their complaint, the plaintiffs asserted claims for violations of Sections 10(b) and 20(a) of the Securities Exchange Act, alleging Quad and its executives made misrepresentations or omissions concerning a wide range of topics, including a strategic transformation plan, a proposed merger and a regulatory settlement.
In a 37-page opinion and order, the court granted the defendants’ motion to dismiss in its entirety, with prejudice. Among other things, the court found that the alleged misrepresentations the plaintiffs referenced in their complaint – more than 30 pages of excerpted statements from “nearly every public disclosure document and related investor call Quad conducted during the Class Period” -- amounted to “puzzle pleading” which the Second Circuit has long held fails to state a claim with particularity as required by the PSLRA and Federal Rule of Civil Procedure 9(b). For largely the same reason, the court also found that the plaintiffs failed both to adequately plead that the defendants made any material misstatements or omissions and acted with the requisite fraudulent intent (scienter), further dooming their claims under Section 10(b).
The court also noted that, as a “final, independent reason to dismiss the Complaint,” the plaintiffs failed to adequately plead loss causation, chiefly because they could not point to any corrective disclosures by the defendants that revealed the alleged fraud to the market.