Litigation partners David Friedman and Alison Benedon and counsel Daniel Sinnreich published an expert analysis in Law360 on the impact of the U.S. District Court for the Northern District of California’s summary judgement ruling for the defendants in Sundaram v. Freshworks Inc. In “Defense Lessons From Freshworks’ Win In Post-IPO Case,” published on July 17, the authors discuss the Sundaram decision, which was based on the issuer’s evidence that the market had absorbed any impact from a disclosure before the issuer’s stock price dropped below the initial public offering price nearly two weeks later.
The lawsuit was brought under Section 11 of the Securities Act, which provides defendants with an affirmative defense, commonly called a negative causation defense, that can limit or eliminate damages if a defendant proves that factors other than the alleged misstatements or omissions caused the plaintiff’s losses. The summary judgment decision clarifies that Section 11 plaintiffs cannot recover investment losses based on share price declines above the offering price; and that defendants are not required to affirmatively identify the actual cause of a stock price decline to support a negative causation defense.
Litigation associate Thomas Bounds contributed to the preparation of the article.
»
Related Insights
