backOn May 28th, 2026, King & Spalding secured a win for The Gap, Inc. (“Gap”) in an appeal before the U.S. Court of Appeals for the Second Circuit. The original claims brought against our clients, Gap, and its former CEO and CFO, under Sections 10(b) and 20(a) of the Securities and Exchange Act, were successfully dismissed by Judge Diane Gujarati in the Eastern District of New York on March 31st, 2025. In that decision, the Court held that plaintiffs failed to adequately allege a material misstatement or omission and failed to adequately plead scienter with respect to statements about a size inclusivity campaign for Gap’s Old Navy brand, BODEQUALITY. The Court made the dismissal with prejudice and denied plaintiffs any leave to replead.
In the appeal, the Court rejected plaintiffs' theory that Gap's incorporation and reiteration of generic risk warnings from its 2020 Annual Report became misleading once BODEQUALITY problems materialized and reaffirmed that § 10(b) and Rule 10b-5(b) do not impose a freestanding duty to disclose all material information. The Court also reiterated that the Second Circuit has not definitively endorsed the "core operations doctrine" post-PSLRA and, in any event, plaintiffs failed to quantify BODEQUALITY's importance to Gap's core operations. Because no primary violation was adequately pleaded, the § 20(a) control-person claim was also properly dismissed.
Our clients were represented by a cross-office team of K&S lawyers that includes Paul Mezzina, Israel Dahan, Samantha Kavanaugh, Jenny Pelaez and Michael Roth.