S&C Obtains Appellate Victory for Ericsson in Securities Litigation Over Disclosure of Internal Investigation

Ericsson prevailed before the U.S. Court of Appeals for the Second Circuit, which affirmed the dismissal with prejudice of a proposed securities class action against the company, its CEO, and its former CFO and chief legal officer. The proposed multiyear class of plaintiffs, which held American Depository Shares of Ericsson, claimed that the defendants made false or misleading statements from 2017 through 2022 by describing their anti-corruption program and 2019 resolution of FCPA claims with the U.S. Department of Justice without also disclosing an internal investigation into the activities of Ericsson subcontractors in Iraq. Following a highly publicized media leak of the internal investigation in 2022, the DOJ declared a breach of its earlier deferred prosecution agreement.

The Second Circuit held that Ericsson's statements about its anti-corruption policies were not actionable. The court held that the company's statements to investors about its commitment to ethics and compliance were too general and non-specific for an investor to rely upon in making an investment decision. And the company had put investors on notice of the risk that employees might fail to comply with its policies.

Ericsson's 2019 statements about its FCPA resolution also were not misleading, the court found, because the company never assured investors that there were no internal investigations. The appeals court also agreed that the company's expressions of optimism following the DOJ settlement could not form the basis of a securities claim, especially when coupled with warnings to investors about potential future violations.

The S&C team, which also prevailed for Ericsson in the district court, included Robert Giuffra Jr., David Rein and Nikko Price.