Vivint Solar Secures Second Circuit Victory

On June 21, Skadden secured a significant Second Circuit Court of Appeals victory for clients Vivint Solar, Inc. and the Blackstone Group L.P. arising from Vivint's 2014 IPO. The plaintiff argued that Vivint was required to disclose its third-quarter financial results in its registration statement, which was issued on the last day of the quarter, because the results were allegedly an "extreme departure" from prior results. The plaintiff relied primarily on a First Circuit case for the "extreme departure" standard. The Second Circuit declined to adopt that standard and instead looked at the results holistically to determine whether their omission rendered any statements in the registration statement false and misleading. The Second Circuit stated that the plaintiff focused on changes in two metrics that were "not fair indicators of performance" and concluded that in the context of Vivint's disclosures of its six prior quarters and its unique business, Vivint's third-quarter results were consistent with past performance and "the successful implementation of its business model." The Second Circuit also held that Vivint's risk warnings that regulatory changes in Hawaii posed a threat to future growth adequately served as a defense to the plaintiff's claim under Item 303.