S&C Prevails for AT&T as Second Circuit Rejects Shareholder Suit

December 16, 2022

AT&T secured an appellate win in securities litigation relating to its former DirecTV Now streaming service. On December 13, the U.S. Court of Appeals for the Second Circuit unanimously affirmed the dismissal with prejudice of a putative securities class action against AT&T and 14 of its current and former directors and officers.
The plaintiffs in Steamfitters Local 449 Pension Plan v. AT&T claimed that from 2016 to 2018, AT&T artificially inflated the number of DirecTV Now subscribers that it publicly reported in its periodic SEC filings, citing confidential witnesses. They alleged violations of the Exchange Act and also raised Securities Act strict liability claims for Time Warner shareholders who received AT&T stock in the companies' 2018 merger.
The Second Circuit rejected the plaintiffs' attempt to generate securities fraud from alleged misconduct by former members of the AT&T salesforce. “Accurately reported data does not become an actionable misrepresentation merely because underlying misconduct may have contributed to the reported numbers,” the panel wrote. In the lower court, the judge found that AT&T's response to these fraud allegations, which included an internal investigation and employee firings, indicated that the company had “no tolerance for rogue employees who engage in unethical behavior,” and that AT&T “values its integrity and reputation above employee retention.” 
The S&C team was led by Bob Sacks, Bill Monahan and Lenny Traps. The three also represented AT&T in the district court. The team included Colin Hill and Austin Mayron.