CrowdStrike Wins Legal Battle Against Shareholder Lawsuit Following Major Software Outage

A federal judge has dismissed a lawsuit filed by shareholders of CrowdStrike, a prominent cybersecurity firm. The shareholders accused the company of defrauding them by hiding its inadequate software testing and quality assurance practices prior to a significant outage in July 2024, which affected over 8 million Microsoft Windows-based computers globally.

In a ruling made public on Tuesday, U.S. District Judge Robert Pitman from Austin, Texas, stated that the shareholders did not convincingly demonstrate that numerous statements made by CrowdStrike and its executives—found in regulatory filings, earnings calls, and on the company’s website—were materially false or misleading, nor did they show any intent to defraud.

The lawsuit, led by New York State Comptroller Thomas DiNapoli, claimed that CrowdStrike lacked “test plans and a quality assurance team,” citing testimonies from former employees. The shareholders argued that the executives prioritized “speed over everything else” to maximize profits.

Despite identifying two questionable statements regarding compliance with security requirements set by federal authorities, including the Department of Defense, Judge Pitman concluded that the shareholders “failed to plausibly plead a strong inference of [intent to defraud] for the individual defendants or for CrowdStrike itself.”

DiNapoli oversees the $291.4 billion New York State Common Retirement Fund, one of the largest public pension funds in the U.S. Following the ruling, Pitman indicated that the comptroller could amend his complaint.

A spokesperson for DiNapoli stated on Wednesday that the decision is “under review.” Cathleen Anderson, CrowdStrike’s chief legal officer, expressed appreciation for the court’s careful consideration and the decision to dismiss the case.

Delta, Airline Passengers Also Sued CrowdStrike

The outage on July 19, 2024, which was attributed to a flawed update of CrowdStrike’s Falcon software, caused significant disruptions for airlines, banks, hospitals, and 911 emergency services.

As the ramifications of the outage became apparent, CrowdStrike’s share price plummeted by 32% over the following 11 days, resulting in a loss of $25 billion in market value.

Delta Air Lines was particularly affected, reporting losses of approximately $500 million and the cancellation of over 7,000 flights. The airline has also filed a lawsuit against CrowdStrike, and a Georgia state judge allowed Delta to pursue most of its claims last May.

In a related matter, Judge Pitman dismissed a lawsuit against CrowdStrike from airline passengers last June. This decision is currently under appeal in the federal appeals court in New Orleans.

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Lawsuits

A federal judge has dismissed a lawsuit filed by shareholders of CrowdStrike, a prominent cybersecurity firm. The shareholders accused the company of defrauding them by hiding its inadequate software testing and quality assurance practices prior to a significant outage in July 2024, which affected over 8 million Microsoft Windows-based computers globally.

In a ruling made public on Tuesday, U.S. District Judge Robert Pitman from Austin, Texas, stated that the shareholders did not convincingly demonstrate that numerous statements made by CrowdStrike and its executives—found in regulatory filings, earnings calls, and on the company’s website—were materially false or misleading, nor did they show any intent to defraud.

The lawsuit, led by New York State Comptroller Thomas DiNapoli, claimed that CrowdStrike lacked “test plans and a quality assurance team,” citing testimonies from former employees. The shareholders argued that the executives prioritized “speed over everything else” to maximize profits.

Despite identifying two questionable statements regarding compliance with security requirements set by federal authorities, including the Department of Defense, Judge Pitman concluded that the shareholders “failed to plausibly plead a strong inference of [intent to defraud] for the individual defendants or for CrowdStrike itself.”

DiNapoli oversees the $291.4 billion New York State Common Retirement Fund, one of the largest public pension funds in the U.S. Following the ruling, Pitman indicated that the comptroller could amend his complaint.

A spokesperson for DiNapoli stated on Wednesday that the decision is “under review.” Cathleen Anderson, CrowdStrike’s chief legal officer, expressed appreciation for the court’s careful consideration and the decision to dismiss the case.

Delta, Airline Passengers Also Sued CrowdStrike

The outage on July 19, 2024, which was attributed to a flawed update of CrowdStrike’s Falcon software, caused significant disruptions for airlines, banks, hospitals, and 911 emergency services.

As the ramifications of the outage became apparent, CrowdStrike’s share price plummeted by 32% over the following 11 days, resulting in a loss of $25 billion in market value.

Delta Air Lines was particularly affected, reporting losses of approximately $500 million and the cancellation of over 7,000 flights. The airline has also filed a lawsuit against CrowdStrike, and a Georgia state judge allowed Delta to pursue most of its claims last May.

In a related matter, Judge Pitman dismissed a lawsuit against CrowdStrike from airline passengers last June. This decision is currently under appeal in the federal appeals court in New Orleans.

Topics
Lawsuits