Schelling v. Microvast Holdings, Inc., 4:23-cv-04565

Background

Securities-fraud class action alleging §10(b)/Rule 10b-5 and §20(a) claims for purchases of Microvast stock between Oct. 19, 2022 and Apr. 1, 2024; motion to dismiss decided on Aug. 22, 2025.
Microvast: Delaware public company headquartered in Texas but with most operations, employees (~95%), and manufacturing in China; major strategic U.S. projects included a separator plant in Kentucky (Hopkinsville) and a 2 GWh Clarksville, TN battery plant (Phase IA ongoing).
DOE $200 million grant: Microvast publicly announced it had been selected for a $200M DOE grant; in fact it had been invited to negotiate (subject to DOE diligence), and DOE later terminated negotiations on May 22, 2023.
Clarksville project: Plaintiffs allege repeated executive statements overstating equipment delivery and construction progress while former employees reported serious delays, unpaid vendors, contractor walk-offs, and an effectively demobilized site by Dec. 2023/Jan. 2024.
Allegedly-actionable statements: 13 statements identified (5 re: DOE grant; 8 re: Clarksville progress) attributed to Microvast and senior officers; plaintiffs rely on confidential former employees and public transcripts; defendants moved to dismiss under Rules 12(b)(6), 9(b), and PSLRA safe-harbor.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Actionability of DOE-grant statements	Microvast falsely told investors it "received/was selected to receive" $200M and concealed material risk that negotiations could fail	Statements were conditional/known publicly (DOE website, 10-Q); many are forward-looking or immaterial	Court: denied dismissal. Statements plausibly misleading/ material; plaintiffs pleaded scienter for multiple officers; safe-harbor not applicable to the asserted present-tense/mixed statements
Actionability of Clarksville progress statements	Executives misrepresented equipment shipment, installation, and that facility was "on track"; FEs corroborate delays, vendor liens, contractors leaving	Statements were general, puffery, or forward-looking; risks were disclosed elsewhere; lack particularity for scienter	Court: denied in part. Many Clarksville statements plausibly false/material and scienter adequately pleaded for officers; but dismissed select forward-looking/puffery portions (see Held details)
Sufficiency of scienter / group pleading	Plaintiffs rely on core-operations theory, former employees, exec visits and weekly vendor calls to show severe recklessness or actual knowledge by Wu, Webster, Kelterbom, Smith	Defendants say plaintiffs failed to plead particularized facts tied to individual officers and improperly rely on group pleading or anonymous sources	Court: found scienter adequately pleaded for named officers (holistic core-operations analysis, FE detail, exec involvement); group-pleading exception applied narrowly where statements were central and obvious
PSLRA safe-harbor (forward-looking statements)	Many allegedly false statements were mixed present/future and thus outside safe harbor	Defendants assert many statements are forward-looking, accompanied by cautionary language or immaterial	Held: Majority were mixed present/future and not protected. However, one press-release forecast (Statement 9) and certain concrete future-timing remarks were treated as forward-looking; Statement 9 (and portions deemed puffery) dismissed under safe-harbor or as nonactionable puffery

Key Cases Cited

Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading "plausibility" standard under Rule 12(b)(6))
Ashcroft v. Iqbal, 556 U.S. 662 (courts disregard legal conclusions in assessing facial plausibility)
Basic Inc. v. Levinson, 485 U.S. 224 (materiality test and "total mix" standard)
Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (standard for evaluating competing inferences on scienter)
Flaherty & Crumrine Preferred Income Fund, Inc. v. TXU Corp., 565 F.3d 200 (Rule 9(b) particularity in securities fraud)
Ind. Elec. Workers' Pension Tr. Fund v. Shaw Grp., Inc., 537 F.3d 527 (PSLRA/ scienter pleading; limits of confidential-witness allegations)
Nathenson v. Zonagen, Inc., 267 F.3d 400 (PSLRA particularity for specifying alleged misstatements)
Okla. Firefighters Pension & Ret. Sys. v. Six Flags Entertainment Corp., 58 F.4th 195 (5th Cir.) (mixed present/future statements and safe-harbor analysis; core-operations context)
In re Venator Materials PLC Sec. Litig., 547 F. Supp. 3d 624 (S.D. Tex.) (application of core-operations theory and mixed-statement analysis)
In re BP p.l.c. Sec. Litig., 843 F. Supp. 2d 712 (S.D. Tex.) (group-pleading limits and pleading scienter under corporate facts)