Sullivan & Cromwell Wins Dismissal of Securities Litigation Against Sweden’s Evolution AB

Evolution AB (publ) obtained the dismissal with prejudice of a securities fraud class action by investors in unsponsored American Depository Receipts (ADRs) referencing the company's Swedish-listed shares. The company, headquartered and incorporated in Sweden, develops and produces gaming software, as well as live casino games, which it sells to online gaming companies. The decision, which dismisses the action for lack of personal jurisdiction, establishes an important precedent that non-U.S. companies should not be liable for claims based on unsponsored ADRs, even if they have wholly owned U.S. subsidiaries, where they follow appropriate principles of corporate governance.

The plaintiffs, who acquired ADRs issued by financial institutions in the United States without Evolution AB's involvement, alleged that Evolution made misleading statements about the growth of Evolution's business and the compliance of Evolution's customers with gaming laws. They claimed personal jurisdiction over Evolution AB by asserting that its subsidiaries operating in the U.S. allegedly acted as its alter egos.

In her September 5 ruling, which followed jurisdictional discovery, Judge Mia Roberts Perez of the U.S. District Court for the Eastern District of Pennsylvania held that Evolution AB had demonstrated that Evolution AB and its U.S. subsidiaries have a "normal parent-subsidiary relationship" with "clear corporate separation" and that "Evolution AB does not exercise the type of day-to-day control necessary" to allege jurisdiction. Judge Perez had previously dismissed with prejudice claims against the company's CEO and former CFO.

The S&C team that represented Evolution AB and its senior executives included Robert Giuffra Jr., David Rein, Julia Malkina, Gulliver Brady, Cooper D'Agostino, Jason Winston and Marina Berardino.