Second Circuit Splits With First Over Securities Disclosure Test
A U.S. Court of Appeals for the Second Circuit panel Wednesday rejected attempts by a plaintiff to assert a First Circuit standard for securities fraud cases dealing with the disclosure of information to investors.
June 21, 2017 at 03:58 PM
3 minute read
A U.S. Court of Appeals for the Second Circuit panel Wednesday rejected attempts by a plaintiff to assert a First Circuit standard for securities fraud cases dealing with the disclosure of information to investors.
In its decision in Stadnick v. Vivint Solar, 16-65, the panel said the “extreme departure” standard under Shaw v. Digital Equipment, 82 F.3d 1194, “is not the operative test in this circuit.” Circuit Judge John Walker Jr., writing for the panel, said the “operative test remains” the “total mix” standard in DeMaria v. Andersen, 318 F.3d 170, setting up a circuit split on the issue.
The lead plaintiff, Robby Shawn Stadnick, sued Vivint Solar, along with its underwriters, after its stock prices dropped shortly after it issued a $330.8 million initial public offering. The company announced the results of its third-quarter earnings a month after the IPO, which also happened to be the day after Vivint's third quarter closed, showing a net income loss of $40.8 million for shareholders from the previous quarter.
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