Cross-Office Team Secures Victory in Multimillion-Dollar Securities Lawsuit Involving Brett Favre
Sacramento, Calif. (April 26, 2021) - Sacramento Partners Greg L. Johnson and Timothy J. Nally, along with New Orleans Partner Karen M. Dicke and Sacramento Associate John R. Ternieden, recently secured a significant and decisive victory in a multimillion-dollar securities lawsuit when the U.S. District Court for the Eastern District of Louisiana dismissed all causes of action against Lewis Brisbois’ clients. Ultimately, Lewis Brisbois’ team successfully established that (1) the court did not have personal jurisdiction over one of the client defendants, a German resident, and that (2) the plaintiff venture capital firm had failed adequately to allege federal and state securities fraud claims arising from the plaintiff’s investments in the company. The court dismissed all causes of action brought by the plaintiff, most with prejudice. The court’s decision, which was reported in Law360, comes after more than three years of hard-fought litigation, involving a protracted stay of merits discovery under the Private Securities Litigation Reform Act (PSLRA), which was partially lifted to permit the plaintiff to conduct extensive discovery into the forum contacts of the German resident/client to oppose the jurisdictional motion.
The Underlying Case
In this matter, Lewis Brisbois defended the officers and directors (including NFL Hall of Fame Quarterback Brett Favre) of a now-defunct sports-centered social media company against claims levied by a Louisiana-based venture capital firm. The venture capital firm, which filed suit in 2017, alleged that a series of acts and omissions by the social media company’s directors and managers misleadingly induced it to invest millions of dollars. After the Lewis Brisbois team moved to dismiss for lack of personal jurisdiction and failure to state a claim, the plaintiff filed a first amended complaint, which led to a second set of motions to dismiss. The court denied those motions without prejudice and permitted the plaintiff to conduct jurisdictional discovery as to a former board member who was a German resident. Once jurisdictional discovery concluded, the defendants again renewed their motions to dismiss.
The Court’s Analyses
With respect to the motion to dismiss for lack of personal jurisdiction, the court determined that the board member who was a German resident lacked sufficient contacts for either general or specific jurisdiction. The court further held that exercising personal jurisdiction over this board member would be “unfair and unreasonable” given current pandemic travel restrictions as well as the significant burden associated with forcing a defendant to “defend against a suit in a foreign country with which he or she has limited contacts.”
The court also granted the defendants’ motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure (Rules) for failure to state a claim. Although it concluded that the instruments at issue were notes, and therefore potentially securities, the court agreed that the plaintiff had nevertheless failed “to meet the heightened pleading standards of the PSLRA and Rule 9(b).” The court reasoned that many of the defendants named by the plaintiff were “essentially absent from [its] allegations” and that the plaintiff had engaged in impermissible group pleading “without any analysis as to who drafted, edited, or approved” the corporate documents alleged to contain false statements. Because the plaintiff had failed to comply with the requirements of Rule 9(b) and the PSLRA, the court did not reach the defendants' additional arguments regarding scienter, reasonable reliance, or loss causation. The court further concluded that the venture capital firm had been provided sufficient opportunity to present its best set of allegations, and denied it the opportunity for further amendment.