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A group of shareholders have filed what appears to be the first lawsuit against CrowdStrike after an update in the cybersecurity company’s software crashed computers globally earlier this month, reports our colleague Jonathan Stempel.
CrowdStrike’s faulty update to its security software caused major outages to computers powered by Microsoft’s Windows operating system, disrupting internet services across the globe and affecting a broad swathe of industries including airlines, banking and healthcare. Now, shareholders represented by Labaton Keller Sucharow say the cybersecurity company defrauded them by concealing how its inadequate software testing could cause the July 19 outage affecting more than 8 million computers around the world.
In a proposed class action filed in the Austin, Texas federal court, shareholders said they learned that CrowdStrike’s assurances about its technology were materially false and misleading after the computing crash. They said CrowdStrike’s share price fell 32% over the next 11 days, wiping out $25 billion of market value. In a statement, CrowdStrike said it believes the case lacks merit.
The fallout from the crash is ongoing. U.S. Fortune 500 companies, excluding Microsoft, will face $5.4 billion in financial losses from the recent CrowdStrike outage, insurer Parametrix has said. Delta Airlines, which was particularly hard hit after the tech disaster led to more than 2,200 flight cancellations, reportedly hired prominent lawyer David Boies to seek damages.
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- North Carolina solicitor general Ryan Park faced Republican criticism at his confirmation hearing for a 4th Circuit vacancy, and one member of the Senate Judiciary Committee warned that he had lined up support to block his nomination from advancing. Park, denying that he was an “activist” lawyer, defended his work for North Carolina Democratic Attorney General Josh Stein.
- The Republican National Committee lost its bid to revive its lawsuit accusing Alphabet’s Google of intentionally misdirecting the political party’s email messages to users’ spam folders. U.S. District Judge Daniel Calabretta in Sacramento dismissed the RNC’s lawsuit for a second time, and said the organization would not be allowed to refile it. While expressing some sympathy for the RNC’s allegations, he said it had not made an adequate case that Google violated California’s unfair competition law.
- A state judge in San Francisco dismissed a lawsuit brought by students and alumni of California’s Golden Gate University School of Law seeking to stop its impending closure and denied their request for an injunction that would keep the school open for the fall semester. But Judge Richard Ulmer will allow the plaintiffs to file an amended complaint.
- The Biden administration nominated Lisa Re to serve as inspector general to the Commerce Department, and picked Kristi Zuleika Lane Scott to be the NSA’s inspector general. Re is currently at HHS as an assistant inspector general for legal affairs, and Scott is an assistant general counsel at the CIA. Both nominations need Senate approval.
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“We found the Department’s efforts at times to be chaotic and disorganized.“
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—A DOJ report that evaluated the role former U.S. Attorney General William Barr played in responding to protests in Washington following the police killing in Minneapolis of George Floyd in 2020. The report found Barr, who did not agree to be interviewed as part of the investigation, created security risks when he deployed unprepared federal law enforcement officers to respond. Officers used tear gas and rubber bullets to clear racial justice protesters near the White House, before then-President Donald Trump emerged and walked to a nearby church where he posed for a photograph holding a Bible.
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- Ismael “El Mayo” Zambada, the alleged co-founder of the Sinaloa cartel, is expected to appear in a U.S. court in Texas after pleading not guilty last week to drug trafficking charges following his dramatic arrest, Jack Queen and Luc Cohen report. Zambada is due to appear for a status conference before U.S. District Judge Kathleen Cardone in El Paso. Zambada was taken into U.S. custody on July 25 alongside 38-year-old Joaquin Guzman Lopez, a son of the legendary imprisoned drug trafficker and Zambada’s fellow Sinaloa cartel co-founder Joaquin “El Chapo” Guzman.
- The FTC at an open meeting will hear testimony about pharmacy benefit managers and their industry role, as the agency looks at what it calls the outsized influence these companies have on drug prices. The agency has said the biggest PBMs — managing 79% of U.S. prescription drug claims — have enriched themselves at the expense of smaller pharmacies and consumers, according to an interim staff report. Pharmacy benefit managers UnitedHealth, CVS and Express Scripts, the country’s three largest PBMs, denounced the FTC’s findings.
- In Connecticut federal court, U.S. District Judge Michael Shea will hold a status conference in the antitrust price-fixing lawsuit that Connecticut and other states filed against many generic pharmaceutical companies. The litigation has returned to Shea’s court from Philadelphia, where a sprawling multidistrict proceeding had been underway for years. Drugmakers opposed allowing Connecticut to leave the MDL, saying it would cause “chaos.”
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Court calendars are subject to last-minute docket changes.
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- U.S. District Judge Richard Boulware in Nevada rejected a $335 million accord in a pair of related class actions accusing Ultimate Fighting Championship of artificially suppressing wages of martial arts fighters. Boulware set one of the cases for a trial in October, where damages could exceed $1 billion. The plaintiffs said they are open to continued settlement talks.
- UBS sued Bank of America for $200 million, saying the second-largest U.S. bank refused to cover its legal costs related to risky mortgages issued before the 2008 global financial crisis. UBS bundled mortgages from Countrywide Financial, which Bank of America bought in 2008, into securities, and said in the lawsuit Countrywide agreed to indemnify it against claims that the mortgages were underwritten poorly or fraudulently.
- Massachusetts could face a “public health crisis” if bankrupt Steward Health Care cannot quickly complete a sale of six hospitals, an attorney for the state said at a U.S. bankruptcy court hearing in Houston. Steward has binding purchase agreements in place for all six properties, but the sale has been delayed by a dispute between Steward and its landlords.
- CarShield in Missouri federal court agreed to a $10 million settlement to resolve charges of deceptive advertising of its vehicle service contracts, and has been barred from allowing misrepresentations by celebrity endorsers such as Ice-T. The payout will be made by CarShield and American Auto Shield, the FTC said. Morgan Lewis represented CarShield.
- A U.S. military veteran was charged with violating U.S. arms export control laws by conspiring to ship weapons to Colombia for a failed May 2020 armed incursion aimed at ousting socialist Venezuelan President Nicolas Maduro. Jordan Goudreau was indicted in federal court in Tampa on charges of sending AR-type firearms, night vision devices, laser sights and other equipment to Colombia without the required U.S. export licenses, according to court records.
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- Paul Hastings hired Arnold & Porter Kaye Scholer’s Brian Israel, who will co-lead Paul Hastings’ environmental litigation practice and will work out of the firm’s Los Angeles and D.C. offices. (Reuters)
- Locke Lord added partners J.P. Hong and James Shreve in Chicago. Hong, who will join the firm’s regulatory and transactional insurance group, was previously at Sidley, while Shreve, who will join the privacy and cybersecurity practice group, was at Thompson Coburn. (Locke Lord)
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