Second Circuit Dismisses all Claims in Top Ships Victory
- 4.6.2020
A team of WilmerHale lawyers achieved a significant victory for Top Ships Inc. and certain of its officers when the Court of Appeals for the Second Circuit affirmed the district court’s decision granting with prejudice the defendants’ motion to dismiss all claims in a shareholder class action lawsuit alleging violations of Sections 9(a), 10(b), and 20(a) of the Securities Exchange Act of 1934.
The lawsuit primarily concerned Top Ships’ sale of large quantities of securities to outside institutional investors in order to raise capital to purchase ships, and its use of reverse stock splits to maintain its Nasdaq listing. Plaintiffs alleged that the activities constituted a “death spiral,” claiming that the continued use of this method of financing during the class period wiped out shareholder value.
On August 5, 2019, Judge Brian Cogan of the United States District Court for the Eastern District of New York issued an Order granting defendants’ motion to dismiss and denying Plaintiffs’ request for leave to amend the complaint. In his decision, Judge Cogan found that the challenged transactions were all disclosed to the market, and that Plaintiffs had not adequately alleged either market manipulation or false or misleading statements.
On appeal, Plaintiffs argued that Judge Cogan ignored relevant precedents and made impermissible factual inferences when he dismissed Plaintiffs’ claims. The Second Circuit disagreed, dispensing with each of Plaintiffs’ arguments and affirming the District Court’s decision in all respects, awarding Top Ships and the other defendants a complete victory.
The WilmerHale team included Mike Bongiorno (who argued the appeal), Peter Kolovos, Felicia Ellsworth, Peter Spaeth, Jeremy Adler, and Matthew Tymann.
