On August 10, 2021, the Seventh Circuit affirmed the dismissal with prejudice of a securities lawsuit brought against Zebra Technologies Corporation (Zebra). The lawsuit arose out of the multibillion dollar acquisition in 2014 by Zebra of a business unit of Motorola.
Plaintiffs alleged that Zebra failed to adequately disclose risks and additional costs associated with the integration of Zebra and the Motorola business unit acquired, which led to a stock price decline coinciding with when those additional costs were disclosed. The case is important since it involved the sufficiency of claims alleging that a company had an obligation to foresee and disclose the costs of integrating a business and the extent to which the disclosure of long-term synergies from a transaction may be false or misleading without such disclosure.
The Court held that plaintiffs failed to state a viable claim under the Securities Exchange Act and mistakenly sought to apply rules covering retrospective statements to ongoing developments. City of Taylor Police & Fire Ret. Sys. v. Zebra Techs. Corp., No. 20-3258 (7th Cir. Aug. 10, 2021).
The opinion clarifies the standards for alleging falsity and scienter, particularly in connection with projections and disclosures relating to an ongoing event.
The Sidley team included partners Walter Carlson, Jim Ducayet, Andrew Stern, and associate Zarine Alam.