The U.S. Court of Appeals for the Fifth Circuit is reviewing the dismissal of a securities fraud class action lawsuit against Lumen Technologies, Inc., formerly known as CenturyLink, and several of its executives, according to court documents filed Jan. 30.
The case, *McLemore v. Lumen Technologies*, involves allegations brought by shareholders John McLemore and Christine Glauber, who filed suit on behalf of a proposed class of similarly situated investors. The plaintiffs sued Lumen Technologies and individual executives including Kate Johnson, Chris Stansbury, Jeffrey K. Storey, and Indraneel Dev for securities fraud.
According to the Fifth Circuit opinion authored by Circuit Judge Jerry E. Smith, the class action plaintiffs filed their lawsuit "in the wake of adverse news coverage, disclosures by corporate executives, and a tumble in stock price." The document indicates the securities fraud claims emerged following negative developments that affected the company's market performance.
The case originated in the U.S. District Court for the Western District of Louisiana under case number 3:23-CV-1290, indicating the lawsuit was filed in 2023. The district court ultimately adopted a magistrate judge's recommendation in full, granting the defendants' Federal Rule of Civil Procedure 12(b)(6) motion to dismiss all claims with prejudice.
A Rule 12(b)(6) motion to dismiss challenges the legal sufficiency of the complaint, arguing that even if all allegations are true, they fail to state a claim upon which relief can be granted. When courts grant such motions "with prejudice," it means the plaintiffs cannot refile their lawsuit.
The Fifth Circuit's review focuses on the district court's decision to dismiss the case with prejudice rather than without prejudice. According to the appellate opinion, "The district court provided no analysis supporting dismissal with prejudice, contrary to the standard practice of dismissing without prejudice or liberally allowing amendments unless pleadings" are fundamentally flawed.
This procedural issue represents a significant concern for the appellate court. Federal courts typically dismiss securities fraud cases without prejudice when plaintiffs fail to meet pleading requirements, allowing them an opportunity to amend their complaint and cure deficiencies. Dismissal with prejudice is generally reserved for cases where amendment would be futile or where plaintiffs have repeatedly failed to state valid claims.
Lumen Technologies, headquartered in Monroe, Louisiana, is a major telecommunications company that provides internet, phone, and television services to residential and business customers across the United States. The company was formerly known as CenturyLink before rebranding to Lumen Technologies in 2020 as part of a strategic shift to focus on enterprise services and fiber networks.
Securities fraud class actions typically arise when companies allegedly make material misstatements or omissions that artificially inflate stock prices, causing investor losses when the truth is revealed. Plaintiffs must demonstrate that defendants made false statements with intent to defraud or with severe recklessness regarding their truth.
The named individual defendants hold or held executive positions at Lumen Technologies. These cases often target corporate officers and directors under theories that they are responsible for company disclosures and have duties to shareholders.
The Fifth Circuit panel reviewing the case consists of Chief Judge Leslie Southwick Elrod and Circuit Judges Jerry E. Smith and Don R. Wilson. Judge Smith authored the opinion, which is designated as unpublished, meaning it will not serve as binding precedent for future cases.
The timing of the case reflects broader challenges facing the telecommunications industry in recent years. Many traditional telecom companies have struggled with declining revenues from legacy services while investing heavily in fiber networks and 5G infrastructure to compete with cable and wireless providers.
For investors, the case highlights the ongoing risks associated with securities litigation in volatile market conditions. When companies face adverse news or disappointing financial results, shareholder lawsuits often follow, particularly if investors believe management failed to adequately disclose risks or made misleading statements.
The procedural nature of the Fifth Circuit's review suggests the appellate court is primarily concerned with whether the district court followed proper procedures in dismissing the case with prejudice. If the Fifth Circuit finds the dismissal was improper, it could remand the case to the district court for further proceedings, potentially allowing the plaintiffs to amend their complaint.
The outcome of this appeal could have implications for how district courts handle motions to dismiss in securities fraud cases, particularly regarding the standard for when dismissal with prejudice is appropriate versus allowing plaintiffs additional opportunities to cure pleading deficiencies.
The case demonstrates the complex procedural requirements in federal securities litigation and the importance of following established practices when dismissing investor claims. The Fifth Circuit's review will determine whether Lumen Technologies and its executives will face continued litigation or whether the case will be permanently dismissed.