On April 10, 2020, Target secured a victory in the United States Court of Appeals for the Eighth Circuit, affirming dismissal of a securities fraud class action filed against the company and two of its executives. Faegre Drinker represented the retailer in the matter.
In 2011, Target announced plans to expand its presence into Canada through a subsidiary, “Target Canada.” By late 2013, Target Canada had opened 124 stores in Canada, developing a new supply chain and information technology support structure to support them.
Unfortunately, Target Canada had supply chain and information technology problems from the start. Some warehouses were overfilled while some warehouse shelves sat empty because merchandising systems did not properly convey what items needed to be replenished. Target attempted to fix these problems in real time, but ultimately decided to shutter its Canadian stores in 2015.
In 2016, several investors in Target brought securities fraud claims, alleging that Target and certain Target executives made false or misleading statements understating the seriousness of problems with Target Canada. The securities fraud class action was filed in the District of Minnesota, and Target immediately reached out to Faegre Drinker.
A team led by Minneapolis partner Wendy Wildung, and that included partner Jeff Justman, former associates Justin Krypel and Staci Perdue, and paralegal Margaret Flesher, jumped in to help. In 2017, they successfully moved to dismiss because the complaint had not (1) pleaded with specificity the alleged false or misleading statements; and (2) alleged a strong inference of “scienter” (that is, that Target and its executives made statements with the intent to deceive investors). In 2018, they successfully opposed the plaintiffs’ motion to reconsider the dismissal.
Plaintiffs then appealed to the Eighth Circuit. Jeff applied his Eighth Circuit experience, and Wendy, her decades of securities law experience, to persuade the Eighth Circuit to affirm. In an April 2020 order, the Court agreed. In a published opinion, it affirmed dismissal of the complaint because there were insufficient allegations showing fraudulent intent on the part of Target or its executives. The Court also held that some of the plaintiffs’ allegations were inactionable “puffery” and were not false or misleading.
Target is thrilled with the result.