Shearman & Sterling secured a litigation victory for its client Sundial Growers Inc. by obtaining a dismissal in an action brought in federal court in the Southern District of New York by several investment firms that invested in Sundial convertible notes. This is the second dismissal with prejudice that Shearman & Sterling has won for Sundial in connection with its securities in 2021.
Sundial, which is based and operates in Canada and trades on the NASDAQ, launched its initial public offering (IPO) on August 1, 2019. The litigation alleged that misleading information was provided to plaintiffs with respect to a company that Sundial was on the verge of acquiring at the time of their initial investment in advance of the IPO. The complaint purported to assert claims for alleged violations of the Securities Act of 1933 and the Securities Exchange Act of 1934, as well as non-federal claims for breach of contract, fraudulent inducement, and negligent misrepresentation. On September 30, 2021, Judge Andrew L. Carter, Jr. granted our clients’ motion to dismiss, concluding that the complaint did not adequately allege that the challenged statements to the investors were materially misleading. The Court further concluded that plaintiffs’ assertions failed to raise a strong inference of scienter (or fraudulent intent). The Court thus dismissed the federal securities claims with prejudice and declined to exercise supplemental jurisdiction over the non-federal claims.