The U.S. Court of Appeals for the Sixth Circuit has affirmed the dismissal of a class action securities lawsuit against Alliance Data Systems Corporation, now known as Bread Financial Holdings, Inc., and several of its former executives. The decision, filed Jan. 21, represents a victory for the defendants in a case that alleged securities law violations.
Newtyn Partners, LP and Newtyn TE Partners, LP brought the lawsuit on behalf of themselves and other similarly situated shareholders against Alliance Data Systems Corporation and three of its executives: Charles L. Horn, John J. Chesnut, and Ralph J. Andretta. The plaintiffs had appealed from a dismissal order issued by the U.S. District Court for the Southern District of Ohio at Columbus, where Judge Edmund A. Sargus Jr. presided over the original case.
The case, numbered 25-3313 in the Sixth Circuit, was argued before a three-judge panel consisting of Circuit Judges Amul Thapar, Chad Readler, and Jane Hermandorfer on Oct. 23, 2025. The court's decision was recommended for publication, indicating the ruling may establish precedent for similar cases within the Sixth Circuit's jurisdiction.
Alliance Data Systems Corporation, which has since been renamed Bread Financial Holdings, Inc., is a data-driven marketing and loyalty analytics company that provides customer loyalty programs, credit services, and marketing solutions. The company has undergone significant corporate restructuring in recent years, including the name change that reflects its evolution in the financial services sector.
The plaintiffs were represented by attorneys from Saxena White P.A., including Jonathan D. Lamet, who argued the case before the appellate panel. Lester R. Hooker, Dianne M. Pitre, and Steven B. Singer also appeared on the brief for the appellants. The firm, known for its securities litigation practice, frequently represents investors in class action lawsuits against publicly traded companies.
Defense counsel included multiple law firms representing different defendants. Charles S. Duggan and Matthew Drocton from Davis Polk & Wardwell LLP represented Alliance Data Systems Corporation and Ralph J. Andretta. Peter A. Stokes from Norton Rose Fulbright US LLP represented Charles L. Horn and John J. Chesnut, indicating that the individual executives retained separate counsel for the litigation.
The underlying district court case was filed in 2023, as indicated by the docket number 2:23-cv-01451. While the specific allegations in the complaint are not detailed in the available court documents, the case follows the typical pattern of securities class action litigation, where shareholders allege that company executives made material misstatements or omissions that artificially inflated the stock price before subsequent revelations caused the share value to decline.
Securities class action lawsuits typically arise under federal securities laws, particularly Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. These cases require plaintiffs to demonstrate that defendants made material misstatements or omissions with scienter, meaning they acted with intent to deceive or with severe recklessness. Plaintiffs must also show that they relied on the alleged misstatements and suffered damages as a result.
The Sixth Circuit's affirmance of the dismissal suggests that the district court found the plaintiffs failed to adequately plead one or more essential elements of their securities fraud claims. Common grounds for dismissal in securities cases include failure to adequately plead scienter, failure to identify specific false or misleading statements, or failure to establish a strong inference that defendants acted with fraudulent intent.
For the defendants, the appellate victory represents the conclusion of what was likely a costly and time-consuming legal battle. Securities class action litigation can result in substantial settlements even when defendants believe the claims lack merit, making successful dismissals particularly valuable for corporate defendants.
The decision also affects other potential shareholders who might have been part of the proposed class. Class action lawsuits allow individual investors with relatively small claims to pool their resources and pursue litigation that would be economically unfeasible on an individual basis. The dismissal means these potential class members will not recover damages through this particular litigation.
Alliance Data Systems' transformation into Bread Financial Holdings reflects broader changes in the financial technology and customer loyalty sectors. The company has focused on becoming a leader in digital payment solutions and loyalty programs, serving major retail partners across various industries.
For securities litigation practitioners, the published decision will provide guidance on how courts in the Sixth Circuit approach similar cases. Published appellate decisions carry precedential weight and can influence how district courts within the circuit handle motions to dismiss in comparable securities class actions.
The case demonstrates the challenges facing plaintiffs in securities litigation, where federal courts apply rigorous pleading standards designed to screen out weak claims while allowing meritorious cases to proceed. The Private Securities Litigation Reform Act of 1995 established heightened pleading requirements specifically intended to reduce frivolous securities lawsuits while preserving legitimate claims.
Neither the plaintiffs nor defendants have indicated whether they plan to seek further appellate review, such as a petition for rehearing or a petition for writ of certiorari to the Supreme Court.