Securities Fraud Claims Against Warburg Pincus Dismissed

August 10, 2016

On August 10, 2016, Cleary Gottlieb won in the Central District of California a motion to dismiss in its entirety a complaint alleging federal securities fraud claims against Warburg Pincus and one of its managing directors.

The plaintiff hedge funds, including Oaktree Capital Management and affiliates of Brevan Howard, DG Capital Management and Visium Asset Management, purchased in the secondary market notes issued by Rural/Metro—an ambulance-services company acquired by Warburg—and claimed that, as Rural/Metro approached bankruptcy, the defendants made fraudulent misrepresentations about Rural/Metro’s financial condition on five of Rural/Metro’s quarterly investor calls.  Plaintiffs alleged that they purchased their notes in reliance on the alleged misrepresentations and have claimed damages of over $100 million.

In dismissing the complaint, the court agreed with the Warburg defendants’ arguments and held that, as alleged, the purported misrepresentations on four of the five calls were made by Rural/Metro management and could not be attributed to the Warburg defendants, and that, as to the fifth call, plaintiffs had failed to adequately plead falsity or scienter with respect to the statements at issue.

Having rejected plaintiffs’ federal claims, the court declined to exercise supplemental jurisdiction over plaintiffs’ remaining related state law claims and dismissed the complaint in full.