Litigation Team Secures Dismissal of All Claims Against Forescout Technologies, Inc. in California Federal Court

On March 25, 2021, the Northern District of California dismissed all claims in a consolidated securities class action against Ropes & Gray client Forescout Technologies, Inc., and two former executives. Forescout provides device visibility and control solutions that protect organizations’ computer networks from cyberattacks. Forescout was acquired last year by Ropes & Gray client Advent International. 

Plaintiffs had alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and SEC Rule 10b-5. Relying mostly on fifteen confidential witnesses, plaintiffs claimed that over the course of 2019 and early 2020, Forescout and the individual defendants made false and misleading statements about Forescout’s revenue projections, sales force, pipeline, and its then-upcoming merger with Advent. 

On behalf of Forescout, Ropes & Gray moved to dismiss, arguing that the Private Securities Litigation Reform Act of 1995 barred certain forward-looking statements and that the plaintiffs failed to adequately plead falsity, scienter, and loss causation. Ropes & Gray argued that the defendants’ optimistic predictions about unexpected headwinds’ impact on the business and about a merger signed right before the onset of a global pandemic did not amount to securities fraud. 

Less than a week after oral argument, Judge Susan Illston issued an order granting Forescout’s and the executives’ motions to dismiss. Judge Illston agreed with Forescout that the plaintiffs did not establish falsity as to any of the statements, and found that the allegations from the fifteen confidential witnesses were vague and unreliable. Judge Illston also held that the plaintiffs failed to plead the requisite strong inference of scienter. 

After granting defendants’ motions to dismiss the plaintiffs’ amended complaint in March, the court granted defendants’ motions to dismiss the second amended complaint with prejudice in October. 

The Ropes & Gray team included litigation & enforcement partners C. Thomas Brown (who argued the motion to dismiss), Anne Johnson Palmer, and Peter Welsh.