Paul, Weiss is widely recognized as having one of the nation’s preeminent securities litigation and regulatory practices. For two decades, our lawyers have guided global corporations and financial institutions through a series of “bet-the-company” securities-related crises, consistently reducing or eliminating their most damaging claims and negotiating favorable resolutions.
HCP Wins Dismissal of Securities Fraud Class Action
- Client News
- November 30, 2020
Practices
Paul, Weiss prevailed against a bid to revive a previously dismissed securities fraud class action against real estate investment trust HCP, Inc. (now Healthpeak Properties, Inc.), and three of its former executives.
The central theory of the complaint was that HCP made misstatements or omissions about its minority interest in ManorCare, its then-largest tenant. The first amended complaint alleged that HCP overstated various line items in its financial statements and made false and misleading statements by failing to disclose that ManorCare, which was allegedly engaged in unlawful Medicare billing practices, was not financially viable. On November 22, 2019, Judge Jeffrey Helmick of the Northern District of Ohio granted our motion to dismiss for failure to adequately plead scienter. In response, the lead plaintiffs moved for leave to amend the complaint to bolster their scienter allegations using certain documents they obtained from ManorCare while discovery was stayed under the Private Securities Litigation Reform Act (PSLRA). It appears that ManorCare produced those documents in exchange for its dismissal from the case as a defendant.
Paul, Weiss opposed the request for leave to replead, arguing that the internal documents had been taken out of context, and were not actually inconsistent with HCP’s public statements. In his opinion, Judge Helmick denied the lead plaintiffs’ request for leave to amend on the ground that the new proposed complaint failed to remedy the deficiencies that previously warranted dismissal. The district court concluded that, even with the benefit of the documents obtained from ManorCare, the lead plaintiffs had failed to allege sufficient facts to create a strong inference of scienter for purposes of § 10(b) and Rule 10b-5, a defect fatal to their proposed complaint. The court also concluded that the lead plaintiffs had failed to plead that certain challenged statements, when viewed in context, were false and misleading, and rejected the lead plaintiffs’ renewed attempts to use information disclosed in financial reports to suggest that the disclosures should have been made earlier.
The Paul, Weiss team included litigation partners Daniel Kramer and Audra Soloway and counsel Robert Kravitz.