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Friday, September 20, 2019

Etsy defeats class action claims from investors

By Chandra Lye | Mar 30, 2017

NEW YORK (Legal Newsline) – A class action lawsuit against Etsy has been dismissed by a judge in the U.S. District Court for the Eastern District of New York.

On March 16, Judge Ann Donnelly ruled against plaintiffs who claimed Etsy falsely inflated the value of its stock leading up to the online marketplace’s initial public offering. They stated the company and some of its representatives violated section 10 (b) of the Exchange Act of 1934 and Rule 10b-5.

In their complaint, the plaintiffs, who were all initial investors when Etsy entered the stock market in April 2015, stated that the prospectus and registration statements filed for the IPO had false and misleading information about the value of the company.

They also claimed that there was false information about its company practices, including business operations and performance metrics.

To support their case, the plaintiffs had six confidential witnesses who were former employees of Etsy. They claimed the company failed to acknowledge that its online sales included producers of counterfeit goods.

However, the court failed to find any actionable behavior on behalf of Etsy. Donnelly stated that words the company used to define itself included opinion statements, such as genuine and authentic. Thus, it ruled that these did not support the claims made in the lawsuit. 

The court also ruled that Etsy had sufficiently explained its methodology for its financial calculations. In addition, Donnelly said the evidence did not prove that the defendants were lying and though the lawsuit “might show that Etsy’s compliance practices were imperfect – perhaps even awful – and that its managers knew of ongoing infringement problems,” there was not even evidence to show that the defendants deliberately falsified information.

Thus, the court decided that the plaintiffs were unable to back their claims against the company.

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U.S. District Court for the Eastern District of New York