Brazilian Airline GOL Secures Dismissal of COVID-19-Related Securities Class Action

Paul, Weiss achieved a significant victory for GOL Linhas Aéreas Inteligentes, an airline based in Brazil, and its directors and officers, securing the dismissal of all claims in a securities class action over alleged misstatements in earnings reports issued during the pandemic.

In orders dated March 31 and April 12, U.S. District Judge Rachel P. Kovner of the Eastern District of New York dismissed all claims against the defendants. In their complaint, the plaintiffs had alleged that GOL made misleadingly “upbeat” statements in earning reports issued during the COVID-19 pandemic despite being aware of forthcoming adverse findings by an auditor. The later-released auditor’s report found material weaknesses in GOL’s internal financial controls and a “going concern” qualification about the company’s ability to continue into the future stemming from the COVID-19 pandemic.

Judge Kovner held that, because the plaintiffs had failed to plead with particularity that anyone at GOL was actually aware of its auditor’s conclusions at the time the statements were made, the plaintiffs had therefore failed to plead that GOL had made any material misstatement or omission, or that any defendant acted with scienter. Indeed, the court concluded that the allegation that the auditor advised GOL of its findings before the challenged statements were made “rest[ed] on little more than speculation.” The court dismissed all claims without prejudice and gave the plaintiffs 30 days to amend the complaint.

The Paul, Weiss team included litigation partners Andrew Gordon and Audra Soloway.