Tenth Circuit Affirms Dismissal in ZAGG Securities Class Action
On August 18, 2015, the U.S. Court of Appeals for the Tenth Circuit affirmed the dismissal of the complaint in a securities class action in which the plaintiffs alleged that mobile device accessory company ZAGG, its directors, and former CEO misled investors by failing to disclose in a proxy and 10-K that ZAGG's CEO at the time had pledged his shares of the company in a margin account. Wilson Sonsini Goodrich & Rosati represented ZAGG and the directors in the appellate matter.
In October 2014, the U.S. District Court for the Central District of Utah dismissed the plaintiffs' Section 10(b) and 14(a) claims, finding that the complaint did not plead facts giving rise to an inference of the CEO's intent to violate the securities laws. WSGR represented the directors in the matter before the district court.
On appeal, the parties did not dispute that a proxy and 10-K disclosure was required by Item 403(b) of Regulation S-K. The appeal was limited to the Section 10(b) claim against ZAGG and the CEO, but not the directors. The Tenth Circuit affirmed the dismissal, holding that intent could not be inferred from the CEO's position at the company and no particularized facts showed that he knew he was required to disclose his pledged shares in company filings.
The Wilson Sonsini Goodrich & Rosati team representing ZAGG and the directors in the appellate matter included Steve Schatz, David Berger, Gideon Schor, Naira Der Kiureghian, Anne Veldhuis, and Anthony DeNatale.
Please view the Tenth Circuit's opinion for more information.