Connecticut State Court Grants Motion To Strike Securities Act Claims

On October 24, 2019, Judge Charles T. Lee of the Connecticut Superior Court granted a motion to strike claims alleging violations of Sections 11, 12(a) and 15 of the Securities Act of 1933 (the "Securities Act") in connection with an initial public offering brought against the issuer, certain of its officers, and the underwriters of the offering. City of Livonia Retiree Health & Disability Benefits Plan v. Pitney Bowes Inc., No. X08 FST CV 18 6038160 S (Conn. Super. Ct. Oct. 24, 2019). The Court had previously granted a protective order staying discovery pending the disposition of the motion to strike pursuant to the discovery stay provided in the Private Securities Litigation Reform Act, in one of the first state court decisions after the Supreme Court's decision in Cyan Inc. v. Beaver Cty. Employees Ret. Fund, 138 S. Ct. 1061 (2018). See State Court Stays Discovery Under the PSLRA During Pendency of Motion to Strike, Need to Know Litigation Newsletter (May 29, 2019), https://www.lit-sl.shearman.com/State-Court-Stays-Discovery-Under-The-PSLRA-During-Pendency. In granting the motion to strike, the Court held that plaintiffs had failed to plead violations of the Securities Act because they did not identify any actionable misstatements or omissions from the relevant offering documents.

The lawsuit was brought by purchasers of two series of notes offered in connection with the initial public offering. Plaintiffs claimed that various financial documents incorporated by reference in the prospectus of the IPO contained misleading statements concerning the company's third quarter performance during 2017, which quarter was ongoing at the time of the IPO. Slip op. at 2-3. More specifically, Plaintiffs alleged that defendants failed to disclose that the company had, over the course of the third quarter, experienced decreasing revenues and sales for several of its services, and that the decrease affected the company's net income and earnings before interest and taxation. Id. at 5. Plaintiffs also alleged that the declines were "'trends' or 'uncertainties' that triggered" an obligation to make additional disclosures pursuant to Item 303 of Regulation S-K ("Item 303"). Id. at 6. Plaintiffs further alleged that defendants were aware of these issues at the time of the IPO, and that the securities issued through the IPO were trading well below their offering price at the time the litigation was initiated. Id.

Noting that the Securities Act does not require...