Orrick’s securities litigators recently prevailed in the Ninth Circuit for client TouchTunes Music Corporation in a securities fraud lawsuit alleging, at one time, $300 million in damages. TouchTunes is the largest in-venue interactive music and entertainment platform in North America, with interactive jukeboxes located in over 60,000 bars and restaurants.
The plaintiff, an early-stage investor in TouchTunes, alleged that his shares had been fraudulently diluted by TouchTunes’ business practices over the last decade. The Ninth Circuit rejected his appeal from the District Court’s dismissal of his lawsuit which had alleged damages against TouchTunes and former directors, officers and employees. TouchTunes had successfully moved to dismiss the complaint over five separate rounds of pleadings, each time demonstrating that the plaintiff failed to state a cognizable claim. In a series of motions to dismiss, Orrick obtained dismissal of the First Amended Complaint on statute of limitations grounds; the Second Amended Complaint because the plaintiff lacked derivative standing to pursue his claim of stock dilution; and the Third Amended Complaint for failure to plead his fraud claims with the specificity required under Federal Rule of Civil Procedure 9(b).
With the Fourth Amended Complaint, the plaintiff attempted to recant certain of his fraud allegations in an attempt to evade Rule 9(b)’s heightened pleading standards. Orrick not only showed that the plaintiff’s claims again sounded in fraud (and again failed to satisfy Rule 9(b)), but demonstrated that certain of plaintiff’s allegations were indisputably refuted by documents in the public record. In an order dated June 13, 2014, U.S. District Judge Beverly Reid O’Connell dismissed plaintiff’s case with prejudice. The plaintiff appealed the dismissal ruling to the Ninth Circuit. In a decision issued on May 6, 2016, U.S. Court of Appeals Judges Alex Kozinski, William Fletcher and Ronald Gould agreed with TouchTunes that the claims alleged a unified course of fraudulent conduct, was subject to the heightened pleading standard of Rule 9(b), and did not meet that standard.
The TouchTunes team was led by partner Michael Tu and senior associate Todd Scott, with additional assistance from senior associate Kevin Askew, associate Judy Kwan, and partner Jim Kramer.