Southern District Deals Blow to FCPA-Based Securities Class Actions

April 16, 2018

When a public company resolves a Foreign Corrupt Practices Act (FCPA) investigation by either the U.S. Department of Justice (DOJ) or Securities and Exchange Commission (SEC), private litigation by investors under the Securities Exchange Act (Exchange Act) often follows. Such litigation can be extremely difficult to defeat at the motion to dismiss stage given the Second Circuit’s stated preference against finding alleged misstatements or omissions immaterial as a matter of law unless they were “so obviously unimportant to a reasonable investor.” Once these suits survive a motion to dismiss, the expense of litigating or settling them can mirror the magnitude of the initial criminal penalties. Last month, however, the U.S. District Court for the Southern District of New York demonstrated that an early victory in FCPA-based Exchange Act class actions is possible by dismissing with prejudice the claims in Emps. Ret. Sys. of the City of Providence v. Embraer S.A., No. 16-cv-6277, 2018 U.S. Dist.
LEXIS 56895 (S.D.N.Y. Mar. 30, 2018).

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