S&C Wins Appeal in Dismissal of Investor Lawsuit Against UnumJuly 8, 2021
The U.S. Court of Appeals for the Sixth Circuit affirmed on June 28 the dismissal with prejudice of all claims brought by a putative class of investors against S&C clients Unum Group and certain of its current and former executives.
Pittman v. Unum Group was filed in 2018 after Unum announced a reserve review that led to a $750 million increase to its long-term care reserves and its stock dipped. Plaintiffs alleged that Unum materially misled shareholders about adverse experiences suffered by its closed block of long-term care insurance policies, a product Unum maintains but no longer markets. They claimed that Unum made inaccurate statements about its long-term care insurance reserves and its progress in securing rate increase approvals from state regulators, among other things.
In June 2020, Judge Clifton Corker of the Eastern District of Tennessee agreed with defendants that plaintiffs had pled neither an actionable misstatement nor scienter.
In a unanimous opinion authored by Judge Amul Thapar, the Sixth Circuit affirmed Judge Corker's dismissal and his finding that plaintiffs failed to adequately plead scienter, stating, “any whiff of scienter is not at least as compelling as any opposing inference of nonfraudulent intent.” Echoing S&C's arguments, the Sixth Circuit found that Unum disclosed accurate information about its reserves to investors, along with guidance about when a reserve reassessment might be necessary. The court also found that Unum acted in accordance with that guidance when, as had happened to other long term care insurance providers, market forces began to put pressure on the sufficiency of Unum's reserves. As the court concluded, “[t]his is hardly the sort of behavior one would expect from the perpetrator of securities fraud.” (The court did not reach whether plaintiffs pled an actionable misstatement.)
The S&C team that represented Unum includes Brian Frawley, Christopher Weldon and Martin Erreich.