In re Vertiv Holdings Co Securities Litigation

Background

Magistrate Judge Ona T. Wang issued a Report and Recommendation on November 6, 2023, concerning Defendants’ motion to dismiss the securities-litigation case. The recommendation concluded that some statements identified in Plaintiffs’ complaint survived the heightened pleading requirements under Federal Rule of Civil Procedure 9(b) and the Private Securities Litigation Reform Act. Those statements concerned escalation clauses in large contracts and raising list prices and controlling discounts.

The recommendation also concluded that Plaintiffs adequately pleaded scienter—the required mental state for their securities-fraud claims—based on allegations of conscious misbehavior or recklessness. It recommended denying dismissal of Plaintiffs’ claims under Securities Exchange Act Section 10(b) and Rule 10b-5, as well as Plaintiffs’ Section 20(a) claims against the Officer Defendants. The recommendation did not evaluate every allegedly misleading statement.

The recommendation separately concluded that Plaintiffs’ claims under Securities Act Sections 11, 12(a)(2), and 15 should be dismissed. Defendants objected to the recommendation’s conclusions about statements that were found actionable and argued that the other statements should also be evaluated and dismissed. Plaintiffs responded. Plaintiffs did not object to the recommendation concerning the Securities Act claims.

Court’s analysis

Judge Gregory H. Woods reviewed the unchallenged portions of the recommendation for clear error and found none. The court therefore adopted those portions concerning the Securities Act claims.

The court declined at that time to adopt or reject the recommendation concerning Plaintiffs’ other claims. Instead, it determined that each allegedly false or misleading statement supporting the remaining claims should be evaluated individually. The court cited several reasons, including disagreements about which statements fell within the categories discussed in the recommendation, the number of statements not addressed there, and the need to identify the statements specifically when evaluating whether Plaintiffs adequately pleaded scienter.

Disposition

The court adopted the Report and Recommendation in part and dismissed Plaintiffs’ claims under Sections 11, 12(a)(2), and 15 of the Securities Act. The court returned the remaining matter to Magistrate Judge Wang with instructions to evaluate each allegedly false or misleading statement individually and provide an amended Report and Recommendation. The court also directed the Clerk of Court to terminate the motion pending at Dkt. No. 53.

As a result of the dismissed claims, the Offering Defendants, Underwriter Defendants, and Selling Shareholders identified in the order were no longer defendants in the case. The order did not resolve the remaining claims or finally rule on Defendants’ objections concerning the other allegedly misleading statements.