Second Circuit Affirms Dismissal of Complaint Against Olshan Client and Offers Important Guidance on Section 13D

Bloomberg Law (subscription required) reported on the decision by the US Court of Appeals for the Second Circuit in Nano Dimension Ltd. v. Murchinson Ltd. affirming the district court’s dismissal of claims that Olshan client Murchinson Ltd. had failed to disclose that it had formed a “group” with another institutional investor in its effort to elect a slate of directors to the board of plaintiff Nano Dimension Ltd. Applying the Avnet rule, the district court had held that defendants mooted plaintiff’s claim when they disclosed the lawsuit and appended the complaint to amended Schedule 13Ds. The Second Circuit affirmed, noting that Section 13(d) serves an “information purpose,” and when required disclosures are made, that purpose is satisfied. Moreover, where there was a genuine factual dispute about the existence of a group, “the law requires only that the disputed facts and the possible outcomes be disclosed,” and defendants’ Schedule 13D/As satisfied this requirement. The Second Circuit made a second important ruling regarding the scope of injunctive relief available under Section 13(d). Plaintiff had sought to “sterilize” votes solicited by Murchinson Ltd. at a special meeting held before the complaint was filed and to prevent defendants from voting shares acquired after they had allegedly formed a group at future shareholder meetings. Noting longstanding Supreme Court guidance that Section 13(d) is not “a weapon for management,” the Second Circuit affirmed the district court’s holding that injunctive relief “is not available under Section 13(d), at least where corrective disclosures have been made and the vote in question did not effect a change in control over the issuer.” Olshan litigation partners Thomas J. Fleming and Adrienne Ward and associate Sahand Farahati and Shareholder Activism partner Meagan Reda represented Murchinson Ltd. in this matter.