On May 10, 2024, Judge Araceli Martínez-Olguín of the United States District Court for the Northern District of California granted a motion to dismiss a putative class action against a global footwear and apparel company (“the Company”), certain of its officers and directors, and the underwriters involved in the Company’s initial public offering (“IPO”). Shnayder v. Allbirds, Inc., No. 23-cv-01811-AMO, 2024 BL 161312 (N.D. Cal. May 10, 2024). Plaintiffs brought claims under Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”) and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), alleging false and misleading statements in connection with the Company’s IPO. The Court granted defendants’ motion to dismiss, holding that plaintiffs failed to adequately allege which statements were allegedly false or misleading.
Plaintiffs alleged that there were material omissions in the Company’s Registration Statement filed in connection with its IPO. Specifically, plaintiffs alleged that the Company failed to disclose the extent to which it was emphasizing products beyond the Company’s core offerings and the alleged adverse effects this shift away from core offerings would have on the Company’s sales.
The Court granted the motion to dismiss, emphasizing plaintiffs’ lack of clarity in their complaint and briefing. Specifically, the Court held that plaintiffs failed to specify which statements, or portions of statements, were allegedly false or misleading. For example, the Court noted that plaintiffs quoted certain statements in the section of the complaint entitled “Materially False and Misleading Statements,” but subsequently claimed that these statements were introduced only to show defendants’ knowledge of certain facts, and not because the statements were alleged to be false or misleading. Similarly, the Court held that plaintiffs’ use of “bold and italicized font” to indicate “what portion of each statement is misleading” was insufficient to denote which statements or portions thereof were allegedly false or misleading. Accordingly, the Court granted the motion to dismiss but permitted plaintiffs to further amend the complaint within 30 days.
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