Shearman & Sterling obtained a dismissal for client Altice USA, its board of directors and Altice Europe, in a putative securities class action pending in New York Supreme Court, Queens County.

The case, which consolidated seven different state court actions, arose from alleged misstatements and omissions in Altice USA’s initial public offering prospectus about the strength and application of an Altice business strategy called the “Altice Way.” The plaintiffs claimed that, contrary to the optimistic statements in the prospectus, one component of the “Altice Way” strategy had not been fully implemented by Altice Europe in France. Plaintiffs argued that the financial performance of the French and Portuguese subsidiaries of Altice Europe cast doubt on the viability of the “Altice Way” strategy. They also alleged that the performance of the European subsidiaries was a trend that should have been disclosed to investors and that it impacted Altice USA’s stock price.

Shearman & Sterling argued that there were no material misstatements or omissions in Altice’s prospectus. In granting our motion, Justice Risi adopted virtually all of our arguments, ruling that:

1. The challenged statements describing the “Altice Way” as a successful business model were non-actionable expressions of general corporate optimism;
2. The prospectus contained extensive risk factors regarding Altice USA’s commercial prospects;
3. The allegation that one component of the “Altice Way” was not yet fully implemented in France could not support a cognizable claim against Altice USA because the prospectus did not claim the Altice Way had been perfectly executed in all countries, and that the fact that one aspect of the Altice Way was not fully implemented in France did not constitute a material omission as to Altice USA; and
4. Plaintiffs’ “trend” allegations—based on Item 303 and 503 of Regulation S-K—were defective because plaintiffs failed to allege that the poor financial performance in France and Portugal was occurring or known at the time of Altice USA’s IPO. In addition, the court held that alleged trends at Altice USA’s foreign counterparts in France and Portugal did not directly impact Altice USA, and that the prospectus did not contain any information or statements regarding Altice Europe’s financial performance. 

The plaintiffs immediately filed a motion to modify the order to allow the filing of another amended complaint. Shearman & Sterling is currently drafting opposition papers.

This dismissal is significant given the limited Securities Act jurisprudence in New York state courts. Indeed, this is one of the few cases decided in the wake of United States Supreme Court’s Cyan, Inc. v. Beaver County Employees Retirement Fund decision in which a New York state court has dismissed federal Securities Act claims. This dismissal is the second this year secured by Shearman & Sterling in a Securities Act litigation pending in New York state court (the earlier dismissal was In re Sundial Growers Inc. Securities Litigation, 655178/2019, dismissed in May). The ruling may also influence a nearly identical case proceeding before Judge DeArcy Hall in the Eastern District of New York, where defendants’ motion to dismiss is currently pending. In the wake of Cyan, defendants and their counsel may be forced to litigate securities claims in multiple jurisdictions contemporaneously and weigh all strategic considerations that come with such a procedural posture.

The Team