Cleary Gottlieb represented Sue Gove, the CEO of Bed Bath & Beyond Inc. (Bed Bath), in successfully obtaining the dismissal of a putative securities class action in the U.S. District Court for the District of Columbia.
The operative complaint alleged that investor Ryan Cohen, a purported leader of the “meme stock” movement, misled Bed Bath investors by posting a smiling-moon emoji on social media and making untimely SEC filings concerning his holdings, which allegedly caused retail investors to drive up the company’s stock price and allowed him to sell his holdings for a profit of over $68 million. The complaint also alleged that the company and its CEO Gove made material misstatements concerning the company’s relationship with Mr. Cohen.
In a decision issued on July 27, 2023, the District Court dismissed all claims asserted against Gove, finding that the complaint failed to adequately allege both falsity and scienter. In particular, the District Court held that the challenged statement by Bed Bath “was not false, misleading, or actionable” because it accurately discussed the company’s agreement with Cohen months earlier, and that the complaint’s attempts to plead scienter were “a bridge too far” because Gove and Bed Bath were not “reckless [in] mention[ing] an old agreement in a generic corporate statement without first checking to make sure that the party to the agreement still held stock in the company.” The District Court further stayed proceedings against Bed Bath in light of the company’s bankruptcy and permitted various claims against Cohen to proceed to discovery.