We secured a total victory for Uniti when the Third Circuit affirmed the dismissal of common law fraud and securities claims

On August 17, 2022, the United States Court of Appeals for the Third Circuit unanimously affirmed the dismissal of securities and common law fraud claims brought by SLF Holdings, LLC against Uniti Group Inc. and several other defendants. The case secures a complete victory in the case for Uniti. 

Uniti is a publicly traded REIT that owns and leases telecommunications networks.  In 2017, SLF acquired shares of Uniti in connection with Uniti’s purchase of Southern Light, LLC.  Several years later, SLF sued, taking issue with Uniti disclosures about potential risks arising from Uniti’s 2015 spinoff from Windstream Holdings, Inc., which later filed for bankruptcy.

SLF originally filed the complaint in federal court in its home state of Alabama, but Davis Polk won a motion to transfer venue to the District Court for the District of Delaware. There, Davis Polk moved to dismiss, and on November 4, 2020, Chief Judge Leonard P. Stark granted defendants’ motion, concluding that SLF had failed to allege claims under either Alabama law or the federal securities law, including because SLF had failed to allege a false or misleading statement, a duty to disclose, scienter, reasonable reliance, or loss causation. SLF appealed to the Third Circuit. 

On August 17, 2022, in a published opinion written by Judge Joseph A. Greenaway, Jr., a unanimous three-judge panel of the Third Circuit affirmed the District Court’s dismissal. The Court concluded that defendants had no duty to disclose any of the allegedly concealed information. Specifically, the Court reasoned that defendants “had no duty to disclose the possibility that Uniti’s status as a REIT and the Master Lease could be threatened by potential legal action, particularly when, at the time they made the alleged representations, they had no indication that any lawsuit was forthcoming.” The Court further found that, even if there were such a duty, the company’s disclosures adequately disclosed the risk. 

The Davis Polk litigation team includes partners Edmund Polubinski III and Brian M. Burnovski and associates Nikolaus Williams and Diane S. Hu. All members of the Davis Polk team are based in the New York office.

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