Duane Morris Class Action Review - 2023 - Report - Page 352
allowed per the relevant statute, and dismissed those claims without prejudice. Id. at
*19.
Tennessee
In another securities class action, Tennessee courts applied their own procedural rules
related to class certification while analyzing the underlying claims under federal law
analysis.
For instance, in In Re SmileDirectClub, Inc. Securities Litigation, 2022 Tenn. App.
LEXIS 103 (Tenn. App. Mar. 18, 2022), the plaintiffs filed a class action seeking to
represent all purchasers of SmileDirectClub, Inc. Class A common stock issued
pursuant to the company’s registration statement and prospectus filed with the SEC in
connection with the company’s IPO. Id. at *2. The plaintiffs alleged that the IPO
documents contained materially untrue and misleading statements because they falsely
overstated the caliber and scope of dental services and understated the regulatory and
legislative risks in numerous states, and made misleading statements about customer
satisfaction, among other allegations. Id. at *3-4. The plaintiffs asserted that a class
action was necessary because there were numerous potential class members who were
damaged by their purchase of common stock during the IPO, and sought class
certification pursuant to Tennessee Rule of Civil Procedure 23, which closes tracks the
federal rule. The trial court certified the class on the grounds that the common question
of whether the offering documents were materially misleading predominated over any
secondary issues related to individuals’ purchasing and selling stock during the class
period, or the fact that damages may have to be ascertained on an individual basis. Id.
at *10-11. The appellate court agreed with the trial court’s analysis and upheld the
certification decision, but closely examined the federal Securities Act, which
distinguishes between securities purchased directly from a defendant and those
purchased through third-parties. However, the appellate court disagreed with the trial
court regarding class members who purchase securities via a third party and not directly
from the defendant and found that the named plaintiffs did not have standing to
represent those class members and therefore dismissed that part of plaintiffs’ lawsuit
while allowing the remainder of the case to proceed on a class-wide basis. Id. at *30-31.
Texas
In USAA Casualty Insurance Co., et al. v. Letot, 2022 Tex. App. LEXIS 1019 (Tex. App.
Feb. 10, 2022), the plaintiff was the owner of a restored Mercedes Benz and had an
accident with another car causing extensive damage. The defendant, an insurance
company, determined that the Mercedes was a “total loss” and offered the plaintiff much
less than the plaintiff’s valuation. The plaintiff rejected the defendant’s payment check
for damages. In response, the defendant filed with the Texas Department of
Transportation (TXDOT) an “owner retained report” which notified the TXDOT that a
claim was paid on a vehicle that is beyond repair. Id. at *2. The TXDOT then
automatically entered this finding in its system, which prevented further transfer of the
vehicle by the owner without applying for a new “salvage” title. Id. at *3. The defendant
filed between 80 and 100 of such reports per week with the TXDOT, and the plaintiff
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Duane Morris Class Action Review – 2023
