We secured a dismissal for the clients

Davis Polk represented the underwriters in connection with California state and federal court securities litigation relating to the 2018 initial public offering of Arlo Technologies, a maker of security cameras and other smart home devices. Plaintiffs alleged that Arlo, certain of its officers and directors, Netgear and the IPO underwriters made misleading statements and omissions in the Registration Statement and Prospectus. The underwriters included Merrill Lynch, Pierce, Fenner & Smith Incorporated, Deutsche Bank Securities Inc., Guggenheim Securities LLC, Raymond James & Associates, Inc., Cowen Inc and Imperial Capital, LLC.

In 2019, we succeeded in convincing the Santa Clara County Superior Court to stay the consolidated litigation pending before it, over the objections of the plaintiffs, in deference to parallel federal court proceedings. We then prevailed on a motion to dismiss the federal action in its entirety. Thereafter, the federal court action was settled for nuisance value, with no monetary payment by the underwriters. Three Arlo stockholders opted out of the federal settlement and attempted to resume litigation in the Santa Clara County Superior Court. The defendants filed motions to dismiss the state complaint based on a federal forum provision (“FFP”) in Arlo’s charter. Davis Polk filed a separate motion to dismiss on behalf of the underwriters arguing that, in light of the FFP’s broad language, the forum selection clause protected not only Arlo but also the underwriters.

On September 9, 2021, in a lengthy opinion, Santa Clara Superior Court Judge Patricia M. Lucas granted in full the FFP motions. Judge Lucas held that the FFP was valid not only as a matter of Delaware law, but also California law. Judge Lucas determined that the FFP was enforceable against the plaintiffs and that it was not “substantively unconscionable.” She found that the defendants had legitimate business reasons for invoking the FFP to avoid the unnecessary costs and burden of defending multiple cases simultaneously in both state and federal courts and the possibility of inconsistent rulings. Judge Lucas applied the FFP even though the passage of time means that the plaintiffs’ claims are time-barred: i.e., they can no longer assert their claims in federal court. Judge Lucas—relying on California case law cited in the underwriters’ motion to dismiss—also specifically agreed that the FFP could be enforced by the underwriters.

The Davis Polk litigation team included partners Neal A. Potischman and Dana M. Seshens, counsel Craig J. Bergman and associate Esther C. Townes. Members of the Davis Polk team are based in the New York and Northern California offices.

Cooley LLP represented Arlo and its officers and directors, and Wilson Sonsini Goodrich & Rosati represented Netgear.

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