New York Supreme Court’s Commercial Division Dismisses Securities Act Case | Shearman & Sterling LLP

On April 20, 2022, Justice Andrew Borrok, a justice of the New York Supreme Court, Commercial Division, dismissed a putative class action against an identity management platform (the “Company”), certain of its officers and directors, and its underwriters for violations of Sections 11, 12 (a) (2), and 15 of the Securities Act of 1933 (“Securities Act”). Ret. Bd. of Allegheny Cty. v. Ping Identity Holding Corp., 74 Misc. 3d 1232 (A) (NY Sup. Ct. 2022). Plaintiffs alleged that the Company made false and misleading statements and omissions with respect to alleged sales slowdown prior to the COVID-19 pandemic. Justice Borrok dismissed the complaint for failure to allege falsity. As discussed in a prior post, in December 2021, the Administrative Judge for the civil branch of the New York Supreme Court, New York County, issued an administrative order that required that all federal Securities Act cases currently pending or which may be commenced in the future in New York County be assigned to Justice Borrok. This is the first Securities Act case to be dismissed on the merits by Justice Borrok since the administrative order took effect.

The Company provides customers, employees, and partners with secure access to any service, application, or application programming interface (“API”), while also managing identity and profile data at scale. The Company provided access to cloud, mobile, Software-as-a-Service (“SaaS”) and on-premise applications across enterprises. In 2020, the Company launched its secondary public offering (“SPO”). Plaintiff alleged that the offering documents prepared in connection with the SPO contained misstatements primarily by attributing a sales slowdown to the COVID-19 pandemic when it allegedly had been caused by the Company’s transition to SaaS solutions and for filing to disclose adequately the impact was pandemic having.

The Court held that the complaint was “doomed” because the offering documents in fact disclosed “the very performance” that plaintiffs alleged was not disclosed. Specifically, the Court held that the complaint did not allege that the Company’s disclosed actual historical results were false, and acknowledged that these results, which identified the amounts by which the Company’s revenue had shifted from term licenses to SaaS, were accurate. Further, the Court noted that the Company disclosed that it might experience additional disruptions due to the COVID-19 pandemic. Although the confidential witness allegations identified certain downturn events that had occurred, the Court noted that such events were disclosed in the offering documents. Finally, to the extent plaintiffs alleged that the offering documents failed to disclose a slowdown due to COVID-19, the Court held that the Company made a financial projection which it met.

The Court dismissed the complaint, with leave to amend within 45 days of the decision.

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Ret. Bd. of Allegheny Cty. v. Ping Identity Holding Corp.

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