By Dean Seal

Law360 (May 29, 2020, 9:22 PM EDT ) At least 50 federal securities cases with references to COVID-19 have been filed in the past three months, including merger challenges, regulatory enforcement actions and sprawling investor suits, according to a Law360 review of filings. As the pandemic pushes into the summer, Law360 is taking a look at eight major investor actions, in the order they were filed, that were brought in connection with the novel coronavirus since it captured the public consciousness in March.

Norwegian Cruise Line

What appears to be the first federal securities suit directly connected to the pandemic is also the first of three filed against Norwegian Cruise Line, which was accused in a pair of news articles March 11 and 12 of having senior sales managers give sales agents scripted responses for concerned customers that downplayed the seriousness of the virus.

Investor Eric Douglass launched an opening salvo against Norwegian on March 12 with a proposed class action alleging the cruise line's sales staff were urged to lie to prospective customers about the impact of the coronavirus outbreak. Norwegian's stock fell more than 50% in two days when the practice was revealed in the news reports.

The allegations against the cruise line were noted by Florida Attorney General Ashley Moody, who said March 23 that her office had launched an investigation into reports that Norwegian fed sales staff "inaccurate one-liners" to allay customer fears about COVID-19.

Norwegian, which is among cruise lines under strict no-sail orders from the Centers for Disease Control and Prevention, has not publicly responded to the investor suit or two substantially similar actions filed March 31 and April 22 in Florida federal court, where three sets of law firms are duking it out in a race to lead the consolidated action.

The case is Douglas et al. v. Norwegian Cruise Lines et al., case number 1:20-cv-21107, in the U.S. District Court for the Southern District of Florida.

Inovio Pharmaceuticals

On the same day the Norwegian action was launched, an investor opened a case in Pennsylvania federal court against Inovio Pharmaceuticals Inc., which saw its stock value rise 10% after its CEO said on Fox Business News on Feb. 14 that Inovio had developed a COVID-19 vaccine "in a matter of about three hours once we had the DNA sequence from the virus" and aimed to "start phase one human testing in the U.S. early this summer."

After a well-publicized meeting with President Donald Trump on March 2, CEO J. Joseph Kim repeated his claim about a vaccine and said Inovio could begin testing in early April, and Inovio's stock price quadrupled. But on March 9, the day Inovio had planned to offer $50 million of its common stock for sale, a short-seller report called the company's vaccine claims "ludicrous and dangerous," and its share price dropped from $18.72 to $9.83 by the end of the day and then to $5.70 by the end of the next.

Inovio shareholder Patrick McDermid is aiming to hold the company and Kim liable for the 71% stock decline, alleging that Inovio has not actually developed a vaccine as Kim had claimed and instead capitalized on its hype to artificially inflate Inovio's share price.

The company has not formally responded to the allegations in court, but the closely watched case has seen nine bids for appointment as lead plaintiff and counsel. On April 20, another investor opened derivative litigation against Inovio's board over the company's vaccine claims.

The cases are McDermid v. Inovio Pharmaceuticals et al., case number 2:20-cv-01402, and Beheshti v. Kim et al., case number 2:20-cv-01962, in the U.S. District Court for the Eastern District of Pennsylvania.

Zoom

Zoom Video Communications Inc. has been hit with multiple lawsuits since the pandemic drove workers, students and families to the company's video conferencing service this year, with scrutiny focusing on its data privacy and security measures.

On April 7, shareholder Michael Drieu decided to mold that scrutiny into a proposed securities class action in California federal court, in which he claims Zoom "significantly overstated the degree to which its video communication software was encrypted," as revealed by news reports and company admissions days before the suit was filed.

Another investor brought similar claims the following day and further alleged that Zoom's executives had engaged in insider trading before stock drops, which allegedly track with revelations that the company's ability to protect confidential information could be compromised and that the New York City Department of Education would no longer be using Zoom for remote learning.

Both suits were combined in mid-May and, if the Norwegian and Inovio cases are any indication, will likely draw a host of lead plaintiff applications when the deadline to apply closes June 8. Zoom has not yet responded to the allegations in court.

The case is In re: Zoom Securities Litigation, case number 5:20-cv-02353, in the U.S. District Court for the Northern District of California.

IAnthus Capital

On April 15, investor William Riback filed a proposed class action accusing the Canada-based publicly traded cannabis company iAnthus Capital Holdings Inc. of trying to use the coronavirus pandemic to explain away a missed $4.4 million interest payment.

The suit in New York federal court claimed iAnthus' stock dropped 62% after the company announced it would not be able to make the interest payment to a private equity firm that specializes in cannabis and cannabis-related enterprises. But while iAnthus blamed its nonpayment in part on extraordinary market conditions created by COVID-19, it failed to explain why $5.7 million held in escrow for the financing agreement at issue was not used to pay the tab, Riback alleged.

Riback voluntarily dropped his suit April 20, but another with identical claims took its place the same day. A third suit came in the same court May 5 and a fourth, which accused iAnthus of taking a sweetheart deal from the private equity firm, May 19. The cannabis company has yet to respond to the allegations in court.

The cases are Finch v. iAnthus Capital Holdings Inc. et al., case number 1:20-cv-03044, Cedeno v. iAnthus Capital Holdings Inc. et al., case number 1:20-cv-03513, and Hi-Med LLC v. iAnthus Capital Holdings Inc. et al., case number 1:20-cv-03898, in the U.S. District Court for the Southern District of New York.

Phoenix Tree

IAnthus isn't the only foreign company facing securities claims in U.S. courts over the COVID-19 crisis. On April 24, Chinese co-living company Phoenix Tree Holdings Ltd. was hit with a proposed class action in New York federal court for allegedly misleading investors about risks posed to its business by the novel coronavirus.

Phoenix Tree owns a Beijing-based online co-living platform that links property owners with mostly young renters willing to share living space to save money.

Investor Katherine Wandel claims the company, which operates under the Danke and Dream Apartment brands, pushed an initial public offering earlier this year without fully disclosing those pandemic-related risks or mentioning disputes from tenants who accuse the company of enrolling them in loans without their knowledge.

Phoenix Tree will not have to answer the complaint until a lead plaintiff has been selected; the deadline to apply ends June 26.

The case is Wandel v. Gao et al., case number 1:20-cv-03259, in the U.S. District Court for the Southern District of New York.

SCWorx

On April 29, about a week after the U.S. Securities and Exchange Commission halted trading for SCWorx Corp., investor Daniel Yannes filed a proposed class action in New York federal court accusing the health care supplier of falsely claiming it was poised to sell millions of COVID-19 rapid testing kits in a deal that appeared to be backed by fraudsters and convicted felons.

While the SEC had cited "questions and concerns" over the "adequacy and accuracy of publicly available information" regarding SCWorx's stock, Yannes more directly alleged the company and its CEO had committed fraud by announcing weeks earlier that SCWorx had a committed purchase order for 2 million COVID-19 rapid testing kits "with provision for additional weekly orders of 2 million units for 23 weeks, valued at $35 [million] per week."

Yannes leans heavily on the words of investment research firm Hindenburg Research, which released a report April 17 calling the deal "completely bogus" and casting doubt on whether the supposed buyer in the deal could actually deliver on its promise. The complaint also takes aim at SCWorx's CEO for having a "checkered past" and says the kit supplier's CEO is a convicted rapist.

The company has not responded to the suit or a similar complaint filed in New York federal court May 27.

The cases are Yannes v. SCWorx Corp. et al., case number 1:20-cv-03349, and Leeburn v. SCWorx Corp. et al, case number 1:20-cv-04072, in the U.S. District Court for the Southern District of New York.

Sorrento Therapeutics

Sorrento Therapeutics Inc. has found itself in a similar boat as Inovio after being sued in California federal court May 26 over comments its CEO made to Fox News.

An investor in the biopharmaceutical company claims its stock price was artificially inflated after Sorrento announced May 15 that it had discovered an antibody that "demonstrated 100% inhibition of SARS-CoV-2 virus infection." That same day, Fox News quoted CEO Henry Ji as saying, "We want to emphasize there is a cure. There is a solution that works 100 percent. ... If we have the neutralizing antibody in your body, you don't need the social distancing. You can open up a society without fear."

That statement, along with another one from a company vice president, falsely characterized the company's purported research breakthrough as a "cure" to COVID-19, the suit alleges, and when Hindenburg Research poked holes in the claims May 20, Sorrento's shares dropped 43% from highs reached after the antibody discovery announcement.

The case is Wasa Medical Holdings v. Sorrento Therapeutics Inc. et al., case number 3:20-cv-00966, in the U.S. District Court for the Southern District of California.

Carnival Corp.

The most recent major pandemic-linked securities case filed in the past three months came against Carnival Corp. in Florida federal court May 27, where a shareholder blasted the world's largest cruise line for its handling of the COVID-19 crisis.

While Carnival is facing similar accusations in proposed class actions from passengers, the securities suit seeks to hold Carnival and its top executives liable for stock drops allegedly tied to revelations that Carnival continued to operate after learning COVID-19 had proliferated on its ships.

According to the complaint, Carnival's stock has repeatedly slipped after news articles accused the company of failing to adequately protect customers and facilitating the spread of the virus despite early warning signs available to Carnival.

Like all the companies on this list, Carnival has yet to respond.

The case is Service Lamp Corp. Profit Sharing Plan v. Carnival Corp. et al., case number 1:20-cv-22202, in the U.S. District Court for the Southern District of Florida.

--Additional reporting by Rachel O'Brien, McCord Pagan, Frank G. Runyeon, Emilie Ruscoe and Reenat Sinay. Editing by Kelly Duncan and Brian Baresch.

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