Paul R.
Bessette

Significant Matters

Digital Turbine, Inc.: We represented the Company and its executives in a securities class action lawsuit arising out of a 2021 restatement of financial results following two acquisitions of companies in the digital advertising space. We secured a motion to dismiss victory in 2023, and then we won dismissal of the case with prejudice in 2024.

SolarWinds Corp.: We defended the Company and former executives in a securities class action lawsuit in the Western District of Texas alleging claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The lawsuit arose after SolarWinds’ December 2020 announcement that it had been victimized in a cutting-edge cyberattack seeking to compromise systems of SolarWinds’s U.S. Government and Fortune 500 clients that use its Orion software. The novel attack has been described as “the largest and most sophisticated” cyberoperation ever executed. It is estimated that more than 1,000 highly skilled engineers working on behalf of the Russian Foreign Intelligence Service took part in the attack. On March 30, 2022, the Court entered an order granting dismissal of plaintiff's Section 10(b) claims against SolarWinds’ former CEO, whom King & Spalding also represented, but allowing plaintiff's remaining claims to proceed to the discovery phase. The parties thereafter mediated the case and reached a settlement.

Phunware, Inc.: We represent the Company and its pre- and post-SPAC officer and director defendants in a shareholder suit alleging breaches of fiduciary duty, a Delaware corporate law statutory claim, statutory fraud under Texas law and Texas Securities Act claims. Originally filed in Texas, the suit was transferred to the Delaware Chancery Court after King & Spalding successfully moved to transfer the case. This case is an early example of litigation following the recent SPAC transaction boom. Plaintiffs are investors in the pre-SPAC target company that invested in various early rounds of financing while the Company was privately held. The lawsuit followed the de-SPAC merger; plaintiffs allege that Phunware should not have subjected their shares to a 180-day lock-up following the de-SPAC transaction. During the 180-day period following the de-SPAC transaction, Phunware’s stock price rose by hundreds of dollars per share but ultimately dropped significantly before the end of the lock-up period. Plaintiffs, who collectively owned more than 1 million Phunware shares, seek damages, including the lost value of their shares during the lock-up period, as well as costs and professional fees. Vice Chancellor Cook granted Phunware’s motion to dismiss on the Texas Securities Act and statutory fraud claims and denied plaintiffs’ partial motion for summary judgment on the Delaware statutory claim.

Shattuck Labs: We represented the Company, its CEO and founder, CFO, Executive Chairman of the Board and founder, and members of the Board in a securities class action in the Eastern District of New York. The Company is a clinical-stage biotechnology company developing a new class of biologic medicine. The initial drug product candidates are in immuno-oncology. Shattuck was conducting a Phase I dose escalation clinical trial to determine the safety of its drug in late-stage cancer patients. Based on a misreading of scientific results, Plaintiffs argued that Shattuck misled investors about the efficacy of the drug in that trial. After we filed a compelling motion to dismiss, Plaintiffs chose to settle the matter cheaply

In re PolatityTE: We represented the Company and its executives in a securities class action in the District of Utah. The lawsuit alleged that PolarityTE made false and misleading statements regarding the registration of its SkinTE product with the FDA, the Company's manufacturing facilities, and its new drug application for SkinTE. We won two motions to dismiss—the second with prejudice. We worked with the client to understand PolarityTE’s business and the applicable FDA regulations to be able to draft compelling motions to dismiss.

Evolent Health, Inc.: We represented the Company and several of its current and former executives in a securities class action lawsuit filed in the Eastern District of Virginia that asserted securities fraud claims arising from the Company's acquisition of its largest customer, a Kentucky Medicaid organization called Passport Health Plan. The operative complaint alleged that more than 20 statements were false or misleading, but after our compelling motion to dismiss, the court dismissed more than three quarters of the plaintiffs' allegations. This shortened the Class Period and significantly reduced the Company's exposure. Plaintiffs then filed a third amended complaint, and the third motion to dismiss was granted in part. Discovery into the remaining claims moved forward on a compressed “rocket docket” timeline, along with the class certification portion of the case. The parties reached a favorable settlement after a second mediation session.

Adeptus Health, Inc.: We defended the former CEO in breach of fiduciary duty actions in the Eastern District of Texas and in Delaware Chancery Court, brought by the Litigation Trustee appointed during Adeptus’s bankruptcy. The Trustee alleges that the CEO and various directors benefited from synthetic offerings at the expense of the Company, and also that the CEO pursued a reckless growth strategy that harmed the long-term prospects of the Company. We aggressively litigated and settled the Trustee action. We also defended the CEO in a related federal securities class action and a Texas State Court opt-out case, both brought by shareholders of Adeptus alleging that former officers knowingly or recklessly made misleading and untrue statements to investors in Adeptus’s registration statement for its IPO and in several secondary public offerings, and in subsequent press releases and SEC filings regarding its free-standing emergency room operations, and failed to disclose material weaknesses in its internal accounting practices. We reached favorable settlements in both shareholder actions as well.

FXCM, Inc.: Obtained a hard-won dismissal for FXCM, Inc., its CEO, and its CFO in a securities class action following the Swiss National Bank’s unprecedented decision to allow the Swiss franc to trade freely against the euro. The Southern District of New York dismissed the case holding that FXCM’s losses were attributable to an unforeseeable market event, not to any fraud or recklessness by FXCM and its management. The Second Circuit remanded to allow the District Court to consider evidence from a regulatory investigation that concluded after the case was dismissed. The District Court once again dismissed the case and the Second Circuit affirmed the judgment. 767 Fed. App’x 139 (2nd Cir. 2019).

In re Hanger, Inc.: Obtained dismissal of a case against Hanger and its CEO that involved a large, four-year restatement and an audit committee investigation that concluded that some members of management created “cookie jar” reserves to smooth earnings and set an inappropriate “tone at the top.” In a panel opinion in August 2018, the Fifth Circuit reversed and remanded for further proceedings. After filing for panel rehearing and rehearing en banc, the panel vacated its August 2018 opinion and replaced it with a decision that fully affirmed the district court’s dismissal with prejudice. The panel held that the plaintiffs’ allegations constituted the impermissible group pleading of scienter and did not adequately address the individual defendants’ state of mind. 768 Fed. App’x 175 (5th Cir. 2019).

Neiman v. Bulmahn, et al.: The Fifth Circuit affirmed an August 2015 district court dismissal of a putative class action filed by ATP shareholders under the Securities Exchange Act of 1934. The shareholders accused ATP’s former officers of committing securities fraud by misrepresenting various aspects of the company’s business prior to bankruptcy, including its production from a particular oil-and-gas well, its liquidity, and the resignation of its CEO. The Fifth Circuit held that the shareholders failed to satisfy the heightened standard for pleading scienter. 854 F.3d 741 (5th Cir. 2017).

In re SemCrude L.P.: Obtained a permanent injunction preventing investors in bankrupt oil-and-gas company from bringing derivative claims against former CEO in Oklahoma state court. A successful Third Circuit appeal won reversal of orders that had denied injunctive relief, with the court quoting the former CEO's brief in a published opinion on the distinction between derivative and direct claims. 796 F.3d 310 (3rd Cir. 2015).

Miyahira v. Vitacost.com, Inc.: Obtained a full dismissal of plaintiff’s claims under the Securities Act of 1933 for misleading statements in Vitacost’s IPO prospectus. The Eleventh Circuit affirmed the dismissal, holding that the complaint did not state a claim for relief despite reliance on ten confidential witnesses and over 100 pages of allegations. This decision is significant given the nearly strict-liability nature of plaintiff’s Securities Act claims. 715 F.3d 1257 (11th Cir. 2013).

Bell v. Ascendant Solutions, Inc.: Defeated class certification in a securities fraud class action involving alleged fraud in connection with an IPO. In a widely followed opinion, the Fifth Circuit upheld the denial of class certification based on argument that the company’s stock did not trade in an efficient market during the class period. 422 F.3d 307 (5th Cir. 2005).

In re Crossroads Systems, Inc. Securities Litigation: Obtained summary judgment in a securities fraud class action where the plaintiffs alleged that the company improperly accounted for inventory reserves and sought more than $800 million in damages. The Fifth Circuit affirmed in Greenberg v. Crossroads Sys., Inc., 364 F.3d 657 (5th Cir. 2004). This opinion is one of the key Fifth Circuit cases on what plaintiffs must show to demonstrate entitlement to the fraud-on-the-market presumption of reliance, a key element of a §10(b) securities-fraud claim.