A federal appeals court has upheld the dismissal of a securities class action lawsuit against Alston & Bird client AmTrust Financial Services, Inc., a multinational insurance holding company.
The May 16 ruling was issued by a three-judge panel of the U.S. Second Circuit Court of Appeals, which affirmed a lower-court’s decision dismissing the lawsuit, holding that the plaintiff’s arguments made in the appeal were “without merit.”
The suit was originally filed in U.S. District Court for the Southern District of New York in 2014 on the heels of a false short report asserting that AmTrust senior executives purposefully manipulated the company’s loss reserves and deferred tax liabilities and underestimated the discount rate for its life insurance policies.
Seeking to manufacture a lawsuit out of losses caused solely by the short report, the AmTrust complaint mirrored the report’s contents while quoting at length the company’s public filings and liberally referencing catchphrases of fraud.
The district court made clear, however, that the law requires more than a simple copy-and-paste job to plead a cognizable claim.
Writing for the court, U.S. Judge Valerie Caproni rejected the plaintiff’s attempt to abuse the securities laws in this manner, saying the suit relied almost entirely on the short report – which was later proven wrong – and holding that the repackaged allegations failed “to allege actionable misstatements or omissions” necessary to state claims pursuant to the Securities Exchange Act of 1934 and Securities Act of 1933.
In appealing the decision, the plaintiff asserted that the district court erred in holding that the lawsuit lacked details about false statements allegedly made by AmTrust.
The Second Circuit affirmed the district court's holding that the plaintiff’s allegations “were wholly conclusory” and did not adequately show that AmTrust's financial statements were false.
Representing AmTrust Financial Services are partner Jessica Corley and senior associate Joe Tully of the firm’s Securities Litigation Group.
The case is Harris v. AmTrust Financial Services, No. 15-3342, 2016 WL 2848685 (2d Cir. May 16, 2016).