SAN FRANCISCO (Legal Newsline) - Lawyers have failed to turn a hacking incident into a securities class action, cybersecurity company Okta is claiming.
The company on Dec. 1 filed a motion to dismiss litigation brought in California federal court by major class action firms, arguing similar cases against other defendants in the past have been dismissed.
Okta calls the case, filed on behalf of shareholders who lost money when Okta's stock dropped, "meritless."
"These suits rest on formulaic assertions that a company should have disclosed an incident faster and publicly declared its security vulnerabilities, and that warning investors about the risk of a security incident amounts to securities fraud when one had already occurred," the motion says.
Judge Susan Ilston is handling the case, which was filed May 20. It hopes to compensate all who bought stock in the company between March 5, 2021, and March 22, 2022.
The company - which sells cybersecurity products and services to small and medium-sized businesses, universities, nonprofits and government agencies - merged with Auth0 two days before that class period began.
The complaint says the company had inadequate safety measures during the class period, which led to hackers known as LAPSUS$ posting screenshots of Okta's internal company environment.
The company on March 22 declared 2.5% of customers had potentially been impacted. News coverage noted the company had more than 15,000 customers at the time.
Raymond James downgraded the company from "strong buy" to "market perform," citing concerns over the security incident. Its stock price fell $17.88 per share - nearly 11% - to $148.55 after the downgrade.
Okta said it promptly reported everything it knew about the cyberattack, but litigants "reflexively" sued despite the company claiming the incident had no impact on its financial state.
"Although its themes are well worn, Plaintiff faced particularly unfavorable facts because the security incident at the heart of this case never even breached Okta's or its customers' systems, caused minimal harm, and was broadly disclosed soon after Okta learned about it," the motion to dismiss says.
Okta is represented by Brian Lutz of Gibson, Dunn & Crutcher.