Nikola Wins Dismissal of Securities Class Action

Paul, Weiss won the dismissal of a high-stakes putative shareholder class action against electric vehicle manufacturer Nikola Corporation and certain of its current and former officers and directors.

In their lawsuit, filed in the District of Arizona in September 2020, shareholders alleged securities fraud claims arising out of alleged misstatements relating to Nikola’s technological capabilities before and shortly after the company went public via a de-SPAC transaction. The conduct underlying plaintiffs’ claims was initially brought to light by an activist short-seller that claimed to expose Nikola and its former CEO for fraudulently misrepresenting all aspects of the company. Nikola ultimately settled related charges with the SEC, and while the motion was pending, the company’s former CEO was convicted of criminal securities fraud following a jury trial in the Southern District of New York.

In dismissing the case without prejudice, U.S. District Court Judge Steven Logan held that, though shareholder plaintiffs had adequately alleged certain misstatements, largely on the part of the former CEO, they had failed to sufficiently allege that any of individual defendants whom Paul, Weiss represents had committed a deceptive act in furtherance of the alleged scheme, or that any of our clients had the required intent to commit fraud. Moreover, Judge Logan held that plaintiffs had failed to make the case that there was a sufficient connection between the alleged misconduct and harm to shareholders, because they didn’t specify which misstatements or omissions were implicated by each purported corrective disclosure.

The Paul, Weiss team includes litigation partners Brad Karp, Susanna Buergel and Gregory Laufer, and counsel Matthew Stachel.