Introduction
Welcome to the Q1 2025 edition of A&O Shearman's Fifth Circuit Securities Litigation Quarterly. As public companies and financial institutions continue to migrate to Texas, our Texas-based securities litigation team continues to monitor all developments and help our clients navigate the unique landscape for federal securities litigation in the Fifth Circuit.
In our Q1 2025 edition, we cover two new case filings, a settlement in a rare securities class action that went to trial, five district court decisions on pleading stage and class certification issues, and other decisions of note.
New securities class action filings
ENCORE ENERGY (S.D. TEX., 4:25-CV01234, FILED MAR. 14, 2025)
Filed on behalf of a putative class of investors who purchased or otherwise acquired enCore securities between March 28, 2024 and March 2, 2025, inclusive
Asserts claims under the Securities Exchange Act of 1934
Alleges Defendants "failed to disclose to investors: (1) that enCore lacked effective internal controls over financial reporting; (2) that enCore could not capitalize certain exploratory and development costs under GAAP; (3) that, as a result, its net losses had substantially increased; and (4) that, as a result of the foregoing, Defendants' positive statements about the Company's business, operations, and prospects were materially misleading and/or lacked a reasonable basis."
New securities class action filings
SOLARIS ENERGY INFRASTRUCTURE (S.D. TEX., 4:25-CV-01455, FILED MAR. 28, 2025)
Filed on behalf of a putative class of investors who purchased or otherwise acquired Solaris securities between July 9, 2024 and March 17, 2025, inclusive
Asserts claims under the Securities Exchange Act of 1934
Alleges Defendants "misrepresented and/or failed to disclose: (1) [a company Solaris acquired, Mobile Energy Rentals LLC] had little to no corporate history in the mobile turbine leasing space; (2) MER did not have a diversified earnings stream; (3) MER's co-owner was a convicted felon associated with multiple allegations of turbine-related fraud; (4) as a result, Solaris overstated the commercial prospects posed by the Acquisition; (5) Solaris inflated profitability metrics by failing to properly depreciate its turbines; and (6) that, as a result of the foregoing, Defendants' positive statements about the Company's business, operations, and prospects were materially misleading and/or lacked a reasonable basis."
New securities class action settlement
ALTA MESA (S.D. TEX., 4:19-CV-00957)
$126.3 million settlement of case asserting claims under the Securities Exchange Act of 1934, inclusive of settlements previously announced with a subset of the defendants totaling $11.3 million
Case initially filed March 2019. In March 2021, the court denied Defendants' motions to dismiss. The court granted class certification in January 2022. The court granted in part and denied in part Defendants' motions for summary judgment on August 12, 2024, and denied the parties' Daubert motions without prejudice to reasserting them at trial. A motion for preliminary approval covering the settlement as to all defendants, superseding previously-filed motions related to partial settlements, was filed on January 6, 2025. The parties agreed to the settlement in principle during trial
Decisions of note
Sunnova: S.D. Tex. Grants Motions to Dismiss Without Prejudice for Failure to Plead a Material Misstatement
Natera: W.D. Tex. Grants Class Certification, Rejecting Arguments That Alleged Truth Was Disclosed Earlier Than Plaintiffs Alleged
CS Disco: W.D. Tex. Grants-in-Part and Denies-in-Part Motion to Dismiss, Allowing One Category of Alleged Misstatements to Survive
F45 Training: W.D. Tex. Grants Motion to Dismiss Exchange Act Claims and Allows Some Securities Act Claims to Survive
Lumen: W.D. La. Grants Motion to Dismiss for Failure to Plead a Material Misstatement
Other Cases of Note: N.D. Tex denies motion for leave to file third amended complaint in Exxon case; S.D. Tex. adopts magistrate recommendation denying class certification as to certain claims in McDermott case; W.D. Tex refers securities class action to bankruptcy court for resolution of third-party release issue; W.D. Tex. dismisses Tesla derivative case in sealed order; S.D. Tex. dismisses merger-related fiduciary duty claims against CEO and controlling shareholder of Camber Energy
Trindade v. Sunnova Energy Int'l, 2025 WL 849405 (S.D. Tex. Jan. 28, 2025), adopted, 2025 WL 848288 (S.D. Tex. Mar. 18, 2025)
- Judge Ellison adopted Magistrate Judge Palermo's recommendation that Defendants' motion to dismiss be granted with leave to amend.
- Plaintiffs brought Exchange Act claims alleging defendants' public statements were false and misleading because the company allegedly engaged in predatory sales practices and provided inadequate service to customers.
- The court held that Plaintiffs failed to plead a materially false or misleading statement.
- Plaintiffs failed to adequately allege that customerrelated operating expenses were increasing at the time of an alleged misstatement. With respect to other statements, Plaintiffs failed to explain how the allegedly omitted information would have significantly altered the total mix of information. Other statements about the company's commitment to and quality of its customer service were held to be too general to be actionable.
Schneider v. Natera, 2025 WL 369243 (W.D. Tex. Jan. 28, 2025), adopted, 2025 WL 880256 (W.D. Tex. Mar. 21, 2025)
- Judge Ezra adopted Magistrate Judge Howell's recommendation that plaintiffs' motion for class certification be granted.
- Plaintiffs sought to certify a class of stockholders who purchased Natera stock between February 27, 2020 and March 8, 2022, the day before a short seller report allegedly revealed the truth about the company's allegedly deceptive business practices.
- Defendants opposed class certification by primarily arguing that the information disclosed by the short seller report was known to the market much earlier in time and, importantly, before the plaintiffs purchased their stock. As a result, Defendants argued that Plaintiffs could not invoke the fraud-on-the-market presumption of reliance and also were atypical and inadequate class representatives and lacked standing to assert Securities Act claims.
- The court viewed this as a "truth-on-the-market" argument that was not appropriate for resolution at the class certification stage and raised questions common to class members.
- The court also held that Plaintiffs had adequately shown standing to assert Securities Act claims because the earlier disclosures identified by Defendants were likely only partially corrective, and Plaintiffs adequately showed a purchase in the stock offering at issue.
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