A class action complaint filed last week against online brokerage firm Robinhood accuses the company of manipulating the open market after it removed GameStop’s stock from its trading platform in the midst of volatile trading last month. GameStop (ticker symbol GME), a struggling retailer of video games and accessories, saw its stock rise almost 1,700% in one day as small investors drove up the price of the stock as part of an effort encouraged by the Reddit page Wall Street Bets (see full NYT coverage here). The Southern District complaint is one of 30 cases across the country, reports Law360.
In an opinion yesterday, Judge Wood dismissed a securities fraud case against Papa John’s that arose from two articles in Forbes in 2018 (see here and here), describing (among other things) an allegedly “toxic” culture of workplace sexual harassment. The stock price dropped after the articles were published, and the theory of the complaint was that investors had been deceived by various public statements portraying a different culture—such as the company Code of Ethics stating that Papa John’s was governed by “principles of honesty, fairness, mutual respect, trustworthiness, courage and personal and professional commitment.”
Judge Wood had dismissed an earlier version of the complaint, and in yesterday’s opinion, concluded that the amended version still failed to state a claim because the statements at issue were “vague, broad, and merely aspirational.” The amended complaint emphasized for the first time that the Code promised that employees who violated its terms would be subject to “corrective action,” but Judge Wood concluded that this statement was still not specific enough: Continue Reading Judge Wood: “Puffery” in Papa John’s Code of Ethics Cannot Support Securities Fraud Claims
In an opinion Friday, Judge Stanton dismissed, on jurisdictional grounds, a case accusing the promoters of an initial coin offering of fraud, because the plaintiffs’ transactions did not occur domestically, as required by Morrison v. National Australia Bank, Ltd., 561 U.S. 247 (2010).
The plaintiffs offered declarations from two putative class members who did not live in the U.S. One was from from the United Arab Emirates and the other from the United Kingdom. According to the plaintiffs, there was nonetheless a basis for personal jurisdiction because the servers that hosted the website through which the coin sales were made were physically located in Kansas, and because, in all likelihood, the relevant blockchain “nodes” that would record the transactions publicly were likely located in the United States, as well.
Judge Stanton rejected this reasoning, and found the relevant question to be where the “change in the legal relationship” between the parties occurred: Continue Reading Judge Stanton: Offering Virtual Currencies Via a Website Hosted on U.S. Servers Is Not Enough for Jurisdiction
Earlier today, the Attorney General of the State of New York brought an action to “end the pervasive use of excessive force and false arrests” by the NYPD in “suppressing overwhelmingly peaceful protests” following the police killings of George Floyd and Breonna Taylor. According to the complaint:
From May 28, 2020 to December 11, 2020, NYPD Officers of various ranks (“NYPD Officers”) repeatedly and without justification used batons, fist strikes, pepper spray, and other physical force against New York Residents at the Protests. Protesters—many of whom were never charged with any crime and were merely exercising their First Amendment rights—suffered concussions, broken bones, cuts, bruises, and other physical injuries.
In an opinion today in the long-running defamation case brought by Sarah Palin against the New York Times (see our coverage here), Judge Rakoff ruled that an expansion of New York’s anti-SLAPP law last month was retroactive, and hence was governing in the case.
Sate anti-SLAPP laws generally give special protections to defendants sued for exercising free speech rights, often by allowing for early dispositive motions, fee-shifting, and heightened standards of proof. New York’s anti-SLAPP law until recently applied only to cases involving public applications or permits, but a statute passed in November expanded the law – including the requirement of proving actual malice by clear and convincing evidence – to reach any claim arising from speech on matters of public interest.
Judge Rakoff concluded that the new law applied to case at hand because, under New York law, “remedial” legislation is given retroactive effect: Continue Reading Judge Rakoff: New York’s Expanded “anti-SLAPP” Law Is Retroactive
In a decision last week, Judge Cote ruled that the COVID-19 pandemic qualified as a “natural disaster” that fell within the scope of a contractual force majeure clause. The defendant auction house had agreed to auction a painting owned by the plaintiff and pay it a guaranteed minimum price, but invoked its right to terminate the agreement after the auction was postponed by the COVID-19 pandemic and related government restrictions.
The force majeure clause applied in the event of “circumstances beyond our or your reasonable control, including, without limitation, as a result of natural disaster, fire, flood, general strike, war, armed conflict, terrorist attack or nuclear or chemical contamination.” Judge Cote held that the pandemic was “a circumstance beyond the parties’ reasonable control” and a “natural disaster”:
In an opinion Friday, Judge Cronan dismissed with prejudice a suit brought by Sparks Steak House against its insurance company seeking to recover for business interruption losses arising from the COVID-19 pandemic. The policy covered, as is common in property insurance policies, “direct physical loss of or damage to property” at the premises, and Sparks argued that its inability to use the premises as a steakhouse fell within that language. Judge Cronan disagreed, using illustrations of how the policy language would be used in everyday experience: Continue Reading Judge Cronan: Sparks Steak House’s Business Interruption Insurance Policy Not Triggered by COVID-19 Because the Pandemic Did Not Cause “Direct Physical Loss” of Property
Chief Judge McMahon’s announcement, issued today and effective tomorrow, is here.
Last week, Judge Liman allowed certain claims against Peloton to proceed based on allegations that Peloton lured customers with promises of an “ever-growing” library of classes that had in reality been cut in half in the preceding months.
Peloton argued that its Terms of Service shielded it from the claim, but Judge Liman disagreed:
Defendant argues that because Plaintiffs agreed to these terms when they subscribed to Peloton’s service, Defendant cannot be held liable for deceptive practices for conduct authorized by the terms. According to Defendant, even if the “ever-growing” statement was deceptive, the Terms of Service overcome the deception because Peloton reserved the right to remove content at any time. Nor can Defendant be held liable for its failure to disclose the purportedly inevitable class removals, for the same reason. Defendant points to a number of cases that it argues support the proposition that New York courts dismiss claims under the NYGBL where the defendant expressly disclosed its right to take the actions of which a plaintiff complains.
Defendant’s arguments are based on a non-sequitur. Peloton’s Terms of Service may have protected it from a breach of contract or similar claim for the removal of a particular class or group of classes. However, the Terms of Service do not relieve Peloton from a deceptive marketing claim based on the allegation that Peloton advertised its library as ever-growing while knowing that it would be diminishing or shrinking in size.
This week, the Second Circuit issued two orders reversing in part the district court’s decision dismissing claims brought by former Knicks player Charles Oakley, all stemming from a 2017 incident at Madison Square Garden where Oakley was forcibly removed from the stands during a Knicks game by the arena’s security (see our previous coverage here).
The Second Circuit concluded that the allegations of excessive force were best left for a jury to decide: Continue Reading Second Circuit Allows Charles Oakley’s Assault and Battery Claims to Proceed, But Agrees Defamation Claims Should Be Dismissed