Ninth Circuit Court of Appeals Affirms Dismissal of Securities Fraud Claims


On September 21, 2021 the Ninth Circuit Court of Appeals affirmed the dismissal of securities fraud claims against LendingClub and certain of its executives. The Court held that Plaintiffs failed to establish defendants possessed scienter, or an intent to defraud, when LendingClub generally disclosed an FTC Investigation (that was later revealed to concern transactions with borrowers) together with other regulatory investigations into investor-related issues. As the Court held, Plaintiffs did not specifically allege that Defendants “knew the focus of the FTC’s investigation at the time the challenged statements were made, let alone that they sought to hide that focus from shareholders,” and Defendants’ lack of stock sales raised an additional inference of their innocence.

Orrick’s team consisted of partners James Kramer and Alexander Talarides, senior associate Todd Scott and lead paralegal Lenny Patts. Orrick represented LendingClub at each stage of the lawsuit, and also in related shareholder derivative litigation, the dismissal of which was affirmed by the Delaware Supreme Court.