In this memo: “Careful Review of Litigation Disclosure in Periodic Reports and Registrations Statement Required Following U.S. District Court’s Decision,” Goodwin discusses a recent case wherein, in the context of a securities fraud class action suit against an issuer, the court ruled that the issuer’s Form 10-K litigation disclosure, which asserted that certain claims in a suit described therein were “without merit,” was actionable because it didn’t align with the underlying facts. In light of this case, notwithstanding the unique facts that may limit its applicability, Goodwin suggests issuers avoid using the “without merit” language in their litigation disclosures and provides examples of alternative statements companies may wish to consider that focus largely on the company’s defense.
This post first appeared in the weekly Society Alert!