Friedman Kaplan Secures Dismissal of Putative Securities Class Action and Subsequent Appellate Victory
Friedman Kaplan obtained a decisive victory on behalf of certain former directors and officers of generic pharmaceutical distributor Aceto Corp. by obtaining the dismissal of a putative shareholder class action lawsuit in the U.S. District Court for the Eastern District of New York, which was then upheld on appeal. The lawsuit involved allegations relating to a drop in Aceto’s stock price and whether our clients had been sufficiently thorough in public statements about supply chain issues leading up to Aceto’s February 2019 announcement that it was filing for bankruptcy due in part to problems with one of its key suppliers.
In August 2020, Judge Edward R. Korman dismissed the complaint with prejudice, finding that our clients had no clear duty to disclose more about the supply chain issues than they already had, and thus the plaintiff had failed to plead a strong inference of scienter. In March 2021, the court denied the plaintiff’s motions for reconsideration and to vacate the dismissal based on (1) a decision issued by the U.S. Court of Appeals for the Second Circuit on the same day the dismissal was issued; and (2) a subsequent guilty plea by an officer of Aceto for insider trading. The plaintiff then appealed all of these decisions. Following oral argument by partner Stan Chiueh in December 2021, the Second Circuit panel recently affirmed Judge Korman’s dismissal of the complaint with prejudice.