On June 2, 2023, the United States District Court for the Northern District of Texas dismissed a putative class action against an amusement park operator and certain of its executives asserting claims under Section 10(b) of the Securities Exchange Act of 1934. Okla. Firefighters Pension & Ret. Sys. v. Six Flags Ent. Corp., —F. Supp. 3d—, 2023 WL 3781645 (N.D. Tex. June 2, 2023). Plaintiff alleged that the company made misrepresentation about its plans to develop amusement parks in China. The Court held that plaintiff lacked standing because it purchased shares too late to have relied on any actionable misstatements and therefore dismissed the action with prejudice. The Court also denied a motion to intervene by another potential plaintiff that claimed to have purchased shares earlier.
The Court previously dismissed this action, finding that plaintiff failed to identify any actionable misrepresentations. Id. at *1. As discussed in our prior post, however, that decision was reversed in part by the United States Court of Appeals for the Fifth Circuit, which held that certain challenged statements made prior to October 2019 were sufficiently alleged at the pleadings stage to be actionable. On remand, defendants moved for judgment on the pleadings, arguing that plaintiff lacked standing because it only claimed to have purchased company stock after October 2019, by which time, the Fifth Circuit held, defendants had already made a corrective disclosure. Id.
The Court explained that the question of plaintiff’s standing turned on whether it could sufficiently allege that it reasonably relied on actionable misstatements when it purchased stock after the October 2019 corrective disclosure. Id. at *3. Plaintiff argued that the Fifth Circuit’s determination that a corrective disclosure occurred in October 2019 applied only with respect to statements regarding the timeline for the company’s amusement park openings, whereas plaintiff claimed it relied on alleged misstatements regarding the company’s financial condition. Id. After carefully reviewing the Fifth Circuit’s opinion, however, the Court determined that the Fifth Circuit’s “holding applies to all the alleged misrepresentations or omissions on or before [October 2019], closing the purported class period.” Id. at *5. The Court thus concluded that plaintiff could not have reasonably relied on any alleged pre-October 2019 misstatements when it made its post-October 2019 purchases. Id. Moreover, the Court held that plaintiff’s lack of standing was a jurisdictional defect that could not be cured either by amending its complaint or substituting a new plaintiff, observing that “a plaintiff in line at this Court without standing is too short to ride.” Id. at *7.
The Court also denied a motion by another entity to intervene and substitute itself as lead plaintiff of the purported class. The Court noted that the named plaintiff’s lack of standing meant there was no “case” or “controversy” in which the movant could intervene. The Court also rejected the movant’s argument that intervention was permissible based on the supposed “class action” nature of the lawsuit, noting that no class had ever been certified. As a result, the movant was merely an “unnamed, independent third party.” Id. at *8. Thus, the Court rejected movant’s attempt to “manufacture Article III jurisdiction” by casting itself as a “member” of a class that did not exist. Id. As the Court observed, “the ride … has left the station.” Id.
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Okla. Firefighters Pension & Ret. Sys. v. Six Flags Ent. Corp.
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