Partners Doug Greene, Genevieve York-Erwin, Zachary Taylor and Chardaie Charlemagne, plus Associate Juan Gascon, secured affirmance in the Ninth Circuit of the district court’s dismissal with prejudice of a putative securities class action brought against Las Vegas-based PlayAGS, Inc., a designer and supplier of gaming products and services. The Ninth Circuit panel heard oral argument on March 4, 2025, and issued a memorandum order affirming the dismissal on March 27, 2025.
Plaintiff alleged that PlayAGS and its CEO, CFO and certain directors misrepresented the company’s economic performance and prospects in connection with two secondary public offerings, and made similar false and misleading statements during earnings calls throughout the alleged class period in violation of Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 and Sections 11, 12(a)(2) and 15 of the Securities Act of 1933. Plaintiff also brought similar claims against the underwriters of the secondary public offerings and against certain third-party entities, which were separately represented.
This case involved significant legal and strategic complexities, as well as behind-the-scenes coordination, due to the interplay of 1933 and 1934 Act claims against multiple groups of defendants. It also exemplified a recent frustrating trend of securities plaintiffs alleging “scheme liability” claims under §10(b) without breaking them out into a separate count in the complaint. This makes it difficult for defendants to tell if plaintiffs are in fact asserting a scheme claim in addition to a misrepresentation claim and raises the question as to whether and how to respond to the potential scheme claim in the motion to dismiss.
In this case, the Court dismissed all claims on the motion to dismiss except for the scheme claim, on which it reserved decision because it felt the issue had not been adequately briefed. Plaintiff chose not to amend and instead moved forward solely with respect to the scheme claim, at which point the team immediately filed a motion for judgment on the pleadings and to stay discovery pending that decision. The Court ultimately granted that motion with prejudice, disposing of the entire case on the pleadings. Plaintiff’s appeal to the 9th Circuit raised a laundry list of purported “clear errors,” including the procedural argument that it was improper for the Court to allow a motion for judgment on the pleadings after ruling on defendants’ 12(b)(6) motion. The team was able to address each while staying focused on the insufficiency of Plaintiffs’ claims. York-Erwin argued the case before the panel. Plaintiff has indicated that it intends to file a petition for rehearing en banc.
Original source can be found here.