March 27, 2025
Willkie recently secured the dismissal of a securities class action lawsuit in the United States District Court for the Southern District of New York relating to the June 2020 IPO and follow on secondary offering of Vroom, Inc., an online automobile retail platform. Willkie represented the underwriters in the IPO and follow on offering.
On March 19, the Southern District of New York granted the dismissal of a consolidated securities class action against Vroom Automotive, an online car dealer, which alleged the online car dealer made misleading statements about its business during the COVID-19 pandemic. Vroom’s business—like many online retailers—was substantially impacted by the COVID-19 pandemic. Initially, its business severely contracted, amid supply shortages and other dislocations, but then surged as consumers gravitated towards online sellers, which created a new set of operational challenges for Vroom. Against this backdrop, the lawsuit alleged that Vroom misstated the company’s “true financial prospects and operating condition” in the lead-up to the IPO, particularly by concealing that Vroom was “plagued by a lack of adequate sales and support staff, resulting in degraded customer experiences, lost sales opportunities, and liquidation of inventory at fire sale prices.” The suit brought claims against Vroom, certain of its directors and officers, as well as the underwriters of the IPO and secondary offerings.
In early 2022, the defendants moved to dismiss. Notably, while the motion was pending, the Supreme Court issued its landmark decision in Macquarie Infrastructure v. Moab, which resulted in supplemental briefing on the viability of plaintiffs’ claims predicated on violations of Items 303 and 105 of the Securities Act of 1933.
U.S. District Judge Judge Gardephe granted the motion to dismiss, finding that “Plaintiffs’ core factual allegation . . . is speculative,” specifically because plaintiffs failed to plead particularized detail supporting that substantial customer service issues were occurring at Vroom at the time of the IPO. In addition, Judge Gardephe found that many of the challenged statements were literally true, protected risk disclosures, inactionable opinions, and/or puffery. Finally, he dismissed the claims to the extent resting on Item 303/105 violations, applying both pre and post Macquarie case law.
The underwriter defendants were represented by Willkie partners Todd Cosenza and Charles Dean Cording, along with associate Khara John.
On March 19, the Southern District of New York granted the dismissal of a consolidated securities class action against Vroom Automotive, an online car dealer, which alleged the online car dealer made misleading statements about its business during the COVID-19 pandemic. Vroom’s business—like many online retailers—was substantially impacted by the COVID-19 pandemic. Initially, its business severely contracted, amid supply shortages and other dislocations, but then surged as consumers gravitated towards online sellers, which created a new set of operational challenges for Vroom. Against this backdrop, the lawsuit alleged that Vroom misstated the company’s “true financial prospects and operating condition” in the lead-up to the IPO, particularly by concealing that Vroom was “plagued by a lack of adequate sales and support staff, resulting in degraded customer experiences, lost sales opportunities, and liquidation of inventory at fire sale prices.” The suit brought claims against Vroom, certain of its directors and officers, as well as the underwriters of the IPO and secondary offerings.
In early 2022, the defendants moved to dismiss. Notably, while the motion was pending, the Supreme Court issued its landmark decision in Macquarie Infrastructure v. Moab, which resulted in supplemental briefing on the viability of plaintiffs’ claims predicated on violations of Items 303 and 105 of the Securities Act of 1933.
U.S. District Judge Judge Gardephe granted the motion to dismiss, finding that “Plaintiffs’ core factual allegation . . . is speculative,” specifically because plaintiffs failed to plead particularized detail supporting that substantial customer service issues were occurring at Vroom at the time of the IPO. In addition, Judge Gardephe found that many of the challenged statements were literally true, protected risk disclosures, inactionable opinions, and/or puffery. Finally, he dismissed the claims to the extent resting on Item 303/105 violations, applying both pre and post Macquarie case law.
The underwriter defendants were represented by Willkie partners Todd Cosenza and Charles Dean Cording, along with associate Khara John.
