June 22, 2023
On June 21, 2023, Weil secured a decisive win for Telos Corporation, several of its current and former senior executives, and certain members of its Board of Directors in a securities fraud class action in the U.S. District Court for the Eastern District of Virginia, which granted the defendants’ motion to dismiss the plaintiffs’ amended complaint, with prejudice.
In both the original complaint and amended complaint, the plaintiffs challenged statements concerning the status and prospects of Telos’ government contracts, and asserted numerous claims under the federal securities laws, including claims for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 as well as violations of Sections 11 and 15 of the Securities Act of 1933. The plaintiffs alleged that the statements were false and misleading because Telos’ predictions about its future revenue and operational growth later proved to be overly optimistic in light of unprecedented events, including the COVID-19 pandemic and cyberattacks on federal agencies.
Earlier this year, the court granted the defendants’ initial motion to dismiss. In its order, the court found that, among other things, the plaintiffs failed to plead that the challenged statements were false or misleading and failed to plead scienter. In particular, the court held that there was “no plausible inference to be drawn from anything alleged that any of the defendants could or would have knowledge of how a global pandemic would unfold, how government agencies would react to unprecedented cyberattacks, or how any of these world-changing events would impact future operations of the company.” After additional briefing and oral argument on the amended complaint, the court again dismissed the complaint in its entirety, this time with prejudice.