A&O Shearman

Securities Litigation

Northern District Of California Dismisses Putative Class Action Against Materials Science Company

On July 7, 2026, Judge Maxine M. Chesney of the United States District Court for the Northern District of California dismissed with leave to amend a putative class action against a materials science company (the “Company”) and its CEO and CFOs (“Individual Defendants” and, together, “Defendants”) asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5. Nowakowski v. AXT Inc., No. 24-cv-02778-MMC (N.D. Cal. July 7, 2026). Plaintiffs alleged that Defendants concealed risks to the planned IPO of the Company’s Chinese subsidiary on China’s Science and Technology Innovation Board (the “STAR Market”) of the Shanghai Stock Exchange. The Court dismissed the claims for failure to plead scienter and loss causation and did not address materiality and falsity arguments raised by Defendants.
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Second Circuit Holds That “Blockers” In Derivatives Contracts Shield Liability For Short-Swing Profits Under Section 16(b)

On July 7, 2026, the United States Court of Appeals for the Second Circuit affirmed the dismissal of an action asserting claims under Section 16(b) of the Securities Exchange Act of 1934 seeking disgorgement of short-swing profits from an investment manager and its client fund. 20230930-DK-Butterfly-1, Inc. v. HBC Invs. LLC, --F.4th--, 2026 WL 1954771 (2d Cir. 2026). Plaintiff alleged that defendants were required to disgorge short-swing profits under Section 16(b) because they beneficially owned 10% or more of a company’s common stock or had the ability to acquire 10% or more pursuant to derivatives contracts, notwithstanding certain “blocker” provisions in the contracts that required defendants to stay below 10% ownership. The Second Circuit affirmed the district court’s dismissal, and, in an issue of first impression in the Second Circuit, held that the “blockers” protected defendants from Section 16(b) liability.
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Government/Regulatory Enforcement

DOJ And Agricultural Company Enter $10 Million Deferred Prosecution Agreement For One Count Of Conspiracy To Violate Foreign Corrupt Practices Act

On July 17, 2026, the Department of Justice (“DOJ”) entered into a three-year deferred prosecution agreement (the “DPA”) with a United States-based agricultural supply chain company (the “Company”) for alleged violations of the Foreign Corrupt Practices Act (“FCPA”). The allegations related to a multi-year scheme in which the Company directed third-party customs brokers to bribe Mexican officials to bypass border inspections. Under the DPA, the Company will pay a $9,769,521 criminal penalty and forfeiture of $414,351.
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DOJ Declines To Prosecute Optometry Company Under New Corporate Enforcement Policy After Self-Disclosure

On July 29, 2026, the National Fraud Enforcement Division of the Department of Justice (“DOJ”) declined to prosecute a management services organization and its holding company (collectively, “Optometry Company”) that provided billing and other administrative services to an optometry practice and an affiliated ambulatory surgery center (collectively, “Practice”) for health care fraud, illegal kickbacks and bribes, and conspiracy, pursuant to Part I of the DOJ’s Corporate Enforcement and Voluntary Self-Disclosure Policy (“CEP”). The Practice was founded and controlled by an individual (“Founder”) who later formed Optometry Company with outside investors. Acting Attorney General Blanche announced the new CEP on March 10, 2026. The decision resolves a criminal health care fraud investigation and requires Optometry Company to pay $1 million in disgorgement to victims. The DOJ separately announced a seven-count indictment against the Founder for allegedly orchestrating diagnostic testing and kickback schemes.
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M&A and Corporate Governance

Delaware Court Of Chancery Dismisses Stockholder Derivative Suit, Rejecting “Eleventh Hour” Section 220 Demand Tolling Theory

On July 9, 2026, Vice Chancellor Lori W. Will of the Delaware Court of Chancery dismissed a stockholder derivative action against a biopharmaceutical company (the “Company”), as the nominal defendant, and several of its current and former officers and directors. In re Axsome Therapeutics, Inc. S’holder Deriv. Litig., Consol. C.A. No. 2025-1076-LWW (Del. Ch. July 9, 2026). The Court rejected plaintiffs’ argument that a Section 220 demand necessarily tolls the statute of limitations and held that plaintiffs’ breach of fiduciary duty, unjust enrichment, and waste claims were barred by laches because they were filed after the three-year limitations period expired. The Court explained: “A diligently pursued books and records suit may, in appropriate circumstances, justify equitable tolling. But an eleventh-hour, out-of-court demand pursued with little zeal does not.”
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Delaware Court Of Chancery Applies Section 144 Heightened Independence Presumption To Demand Futility

On June 15, 2026, Vice Chancellor Lori W. Will of the Delaware Court of Chancery granted in part and denied in part a motion to dismiss claims of breach of fiduciary duty and unjust enrichment in a stockholder derivative action challenging two board compensation decisions by a financial institution (the “Company”): a one-time $50 million equity grant to its founder and non-executive chairman, and the directors’ self-awarded compensation. Ayers v. Foley, No. 2025-0650-LWW, 2026 WL 1723538 (Del. Ch. June 15, 2026). Applying the recently amended 8 Del. C. § 144(d)(2), the Court dismissed the claims tied to the equity grant but sustained the claims arising out of director compensation.
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Antitrust Litigation

Federal Judge Rules On Summary Judgment And Sends Turkey Price-Fixing Claims To Trial

On July 7, 2026, Judge Sunil R. Harjani of the United States District Court for the Northern District of Illinois issued a Memorandum Opinion and Order resolving five summary judgment motions in the consolidated turkey price-fixing litigation. In re Turkey Antitrust Litigation, No. 19 C8318 (N.D. Ill. July 7, 2026). The ruling granted defendants’ motion for summary judgement on plaintiffs’ rule of reason claims, but set the stage for two upcoming jury trials on the per se Sherman Act claims: the first from direct purchaser plaintiffs against defendants Butterball LLC, Jennie-O Turkey Store, Inc., and Prestage Farms of South Carolina and the second trial against the same defendants from indirect purchasers and direct action plaintiffs.
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DOJ And FTC Extract Record $12 Million In Civil Penalties For Failing To Submit An HSR Filing

On July 13, 2026, the U.S. Department of Justice Antitrust Division and the Federal Trade Commission (the “Agencies”) filed a complaint and lodged a proposed final judgment in the U.S. District Court for the District of Columbia, looking to resolve allegations that a global medical-device manufacturer (“Buyer”) and a Singapore-based medtech group (“Seller”) (collectively “Defendants”) deliberately structured a $115 million acquisition to evade the notification and waiting-period requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”). The complaint sought penalties for failure to file, and the proposed consent decree, which remains subject to court approval, imposes a combined $12 million penalty, the largest ever for failing to make an HSR filing. United States v. Edwards Lifesciences Corp. & Genesis MedTech Group Ltd., No. 1:26-cv-02450 (D.D.C. July 13, 2026).
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Intellectual Property Litigation

Federal Circuit Affirms JMOL Overturning $107.5 Million Jury Award: Patents Do Not Enable Unit Dosages For Treatment Of A Patient

In Wyeth LLC v. AstraZeneca Pharmaceuticals LP, No. 2024-2325 (Fed. Cir. July 9, 2026), the Federal Circuit affirmed the District of Delaware’s grant of judgment as a matter of law that asserted patent claims directed to methods of treating gefitinib- or erlotinib-resistant non-small cell lung cancer (NSCLC) were invalid for lack of enablement under 35 U.S.C. § 112(a). The Court affirmed the district court’s determination on JMOL that the patent specifications did not enable a person of ordinary skill in the art to determine, without undue experimentation, therapeutically effective daily dosages across the full scope of the claims. At trial, a jury had found the asserted claims of the patents not invalid and infringed, and awarded $107.5 million in damages. However, enablement is a question of law based on underlying facts, and is therefore amenable to resolution on JMOL.
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The Patent Eligibility Restoration Act: Where Things Stand After the Senate Judiciary Committee’s First Full-Committee Hearing

This note provides an update on Section 101 patent-eligibility legislation pending in Congress. On July 14, 2026, the Senate Judiciary Committee held its first full-committee hearing on S. 1546, the Patent Eligibility Restoration Act of 2025 (“PERA”). Co-Sponsored by Senators Thom Tillis (R-NC) and Chris Coons (D-DE), PERA would eliminate all judicially created exceptions to patent eligibility under 35 U.S.C. § 101 and replace them with defined statutory exclusions, leaving Sections 102, 103, and 112 (novelty, nonobviousness, and disclosure) unchanged. The bill addresses only the threshold eligibility question.
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