Fourth Circuit Affirms Dismissal Of Putative Class Action Under Section 14(a) For Failure To Adequately Allege Material Omissions And Loss Causation

On June 1, 2023, the United States Court of Appeals for the Fourth Circuit affirmed the grant of summary judgment dismissing claims under Sections 14(a) of the Securities Exchange Act of 1934 against a financial company and certain of its directors. Karp v. First Connecticut Bancorp, Inc., 'F.4th', 2023 WL 3743604, at *1 (4th Cir. 2023). Plaintiff alleged that the company in which he held stock made misrepresentations in a proxy solicitation in connection with a proposed stock-for-stock merger with another company. The Fourth Circuit held that plaintiff failed to allege any material omission from the proxy statement and also failed to establish loss causation.

Plaintiff alleged that the proxy statement summarized different financial analyses performed by the company's financial advisor, which issued a fairness opinion, but omitted a prior analysis by that financial advisor that'although prepared without input from company management'had yielded more optimistic cash-flow projections. Id. at *1. Plaintiff thus contended that the company's...