Former ADT CFO Kathryn Mikells Wins Dismissal of Federal Securities Fraud Claims

On June 4, 2015, the U.S. District Court for the Southern District of Florida granted a motion to dismiss federal securities fraud claims against Cravath client Kathryn A. Mikells, former CFO of The ADT Corporation (“ADT”) and current CFO of Xerox Corporation, in a purported class action lawsuit on behalf of purchasers of ADT common stock between November 27, 2012 and January 29, 2014.

The plaintiffs alleged that ADT and certain of its current and former officers and directors issued false and misleading statements regarding ADT’s financial condition and future business prospects in violation of Sections 10(b) and 20(a) of the U.S. Securities Exchange Act of 1934, resulting in a 37% drop in stock price.

The Court’s opinion adopted many of Ms. Mikells’s arguments and dismissed the complaint on two bases: (i) that plaintiffs failed to show that any of defendants’ public statements were materially false or misleading and (ii) that plaintiffs failed to plead facts giving rise to a strong inference of scienter with respect to any defendant. The Court concluded that plaintiffs’ scienter allegations as to Ms. Mikells were “far from ‘cogent’ [and] built upon inconsistencies and illogic.”

The Cravath team included partner J. Wesley Earnhardt, who argued the motion to dismiss, along with associates Daniel A. Richards, Aarti Iyer and Michael D. Schwartz. The case is Henningsen v. The ADT Corporation et al., No. 14‑cv‑80566 (S.D. Fla.).