Case dismissed for Lucid Motors in California securities fraud action
We secured a complete victory for Lucid
On June 29, 2023, Davis Polk secured dismissal with prejudice for its clients, Lucid Motors and its CEO, Peter Rawlinson, of a putative securities class action in the Northern District of California.
Lucid Motors is a U.S. electric vehicle manufacturer that produces the Lucid Air, the longest range, fastest charging luxury electric car in the world and the 2022 MotorTrend Car of the Year. On February 22, 2021, Lucid announced a merger with Churchill Capital Corp IV (CCIV), a special purpose acquisition company (SPAC). After the merger, plaintiffs, who had invested in CCIV stock, brought claims against Lucid and Rawlinson under sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 and rule 10b-5, alleging that, prior to the merger announcement, they made false or misleading statements in certain media interviews about the start of production date for the Lucid Air and the number of vehicles that Lucid expected to produce in 2021.
Davis Polk moved to dismiss the complaint on February 14, 2022, arguing, among other things, that the alleged statements made by Lucid and Rawlinson before the announcement of the merger were immaterial as a matter of law to investors in CCIV, then a wholly separate company. On the January 11, 2023, the court agreed and dismissed the complaint, but granted lead plaintiffs leave to file a motion to amend to supplement their materiality allegations. Lead plaintiffs filed their motion on January 30, 2023, which Davis Polk opposed, arguing, among other things, that the motion (i) was an improper motion for reconsideration, (ii) misconstrued the correct materiality standard and (iii) alleged no additional facts demonstrating materiality. On June 29, 2023, Judge Gonzalez Rodgers denied the motion to amend on those grounds, and further agreed with Davis Polk’s argument that lead plaintiffs’ position has concerning public policy implications and would effectively create an affirmative duty on companies to constantly monitor and correct any unsubstantiated rumors from third parties to avoid securities fraud liability.
The Davis Polk litigation team included partner Brian M. Burnovski, counsel Daniel J. Schwartz and associates Chui-Lai Cheung, Andrei Gribakov Jaffe, Micayla Hardisty, Alyssa Metcalf and Claire Creighton. Partner Neal Potischman also provided advice. The members of the Davis Polk team are based in the Northern California, New York and Washington DC offices.