Electric Last Mile Solutions Board Wins Dismissal of Federal Securities Action in Delaware

Paul, Weiss achieved a significant victory when a federal district judge in Delaware adopted a magistrate judge’s recommendation that securities claims against all defendant board members and the former chairman of electric vehicle company Electric Last Mile Solutions (ELMS) be dismissed, ending an investor lawsuit stemming from the company’s public disclosures.

ELMS was formed through the merger of Electric Last Mile (ELM) and the Forum Merger III Corporation (FIII), a special purpose acquisition company. The plaintiff—an investor in FIII’s private investment in public equity offering ahead of its acquisition of ELM—alleged in a lawsuit filed in 2023 in Delaware federal district court that, prior to the merger, FIII made materially false and misleading disclosures about certain equity transactions by and between ELMS directors and officers, as well as about ELM’s audited financial statements.

In his memorandum opinion overruling the investor’s objections and accepting U.S. Magistrate Judge Laura Hatcher’s recommendation that all claims against the defendant directors under Section 10(b) of the Securities Exchange Act of 1934 be dismissed, U.S. District Judge Gregory Williams reasoned that the plaintiff failed to adequately allege that the chairman, Jason Luo, was the “maker” of any false statements or that he had ultimate authority over any such statements. Specifically, Judge Williams explained that the plaintiff’s presumption that corporate insiders as a group are the “makers” of a statement because the statement is deemed attributed to those insiders is legally insufficient. Judge Williams also accepted the recommendation that the plaintiff’s Rule 10b-5 scheme liability claim and Section 20(a) control person liability claim be dismissed.

The Paul, Weiss team includes litigation partners Andrew Ehrlich, Roberto Finzi, Gregory Laufer and Matthew Stachel.