LAW: CS Disco Derivative Action Investigation – Board Accountability & Governance

CS Disco, Inc. (LAW) Securities Fraud Investigation: What Investors Need to Know

The matters described are allegations, not findings of fact. No court has determined liability.

The law firm Shamis & Gentile P.A. is investigating potential claims against the board of directors of CS Disco, Inc. (LAW) for corporate governance failures.

The matters described are allegations, not findings of fact. No court has determined liability.

About CS Disco

CS Disco, Inc. is a technology company that provides cloud-native and artificial intelligence-powered legal solutions. Its products are reportedly used for electronic discovery, legal document review, and case management by enterprises, law firms, legal services providers, and government agencies.

The company went public on July 21, 2021. It listed on the New York Stock Exchange under the ticker symbol "LAW."

What's Being Investigated

The investigation examines whether directors and officers breached fiduciary duties, which could lead to shareholder derivative litigation. CS Disco allegedly promoted it had strong growth in revenue from customer use of its cloud-based electronic discovery platform. From this, the company strongly held that they knew the needs of their consumer base now and also in the future.

The complaint further alleges that, while the company acknowledged its rapid revenue growth was “usage driven” and could be volatile, it did not disclose to investors that it had any indication of significant headwinds to its growth during the class period. Investors contend that the company’s August 11, 2022, financial results revealed a drastic slowdown in revenue growth and a change in guidance, which contradicted prior statements and led to a sharp decline in share price the following day. The lawsuit argues these alleged omissions and misrepresentations may have violated federal securities laws (see the amended complaint and case status).

Key Timeline

• July 21, 2021 — CS Disco’s initial public offering (IPO) — marks the start of the class period. Investors say this is when alleged misstatements about growth and visibility began (IPO announcement).
• August 11, 2022 — CS Disco releases Q2 2022 financial results and revises guidance, excluding revenues from its largest customers for the year. Investors allege this disclosure contradicted previous statements and revealed previously undisclosed risks.
• August 12, 2022 — CS Disco shares fall 53% on heavy trading volume.

Why Investors May Be Concerned

Investigations into CS Disco suggest the board have made material misstatements or omissions regarding the sustainability and predictability of its revenue growth. The company’s public statements about having “good advance visibility” into customer demand may not have been accurately reflected from their own knowledge.

Theories in the lawsuit include:

• Misleading Statements/Omissions: Plaintiffs argue the company did not disclose known risks to growth, despite acknowledging volatility.
• Potential Oversight Failures: The investigation also explores whether directors and officers may have failed to adequately monitor or disclose mission-critical risks to investors.

Possible Legal Pathways

Multiple legal avenues may be available to investors:

• Securities Class Action: Investors who purchased CS Disco shares during the class period may seek to recover losses through a class action lawsuit alleging violations of federal securities laws.
• Derivative Actions: The investigation also examines whether directors and officers breached fiduciary duties, which could lead to shareholder derivative litigation.
• Regulatory Inquiries: Although not detailed in the current filings, securities fraud investigations sometimes prompt regulatory scrutiny.

What Investors Can Watch Next

Investors may want to monitor:

• Future court filings and rulings in the Western District of Texas, including any updates on class certification or motions.
• Announcements regarding settlement discussions or further amended complaints.
• Company disclosures in SEC filings or press releases regarding the status of the litigation or related governance changes.

FAQ (allegations-only)

Does this article mean CS Disco broke the law?

No. These are allegations only. No court has determined liability.

What is a derivative lawsuit?

A derivative lawsuit is a case brought by shareholders on behalf of a company, typically alleging that directors or officers breached their fiduciary duties.

What types of governance reforms can result from these cases?

Potential outcomes may include changes in board oversight, risk management practices, or disclosure procedures, depending on the resolution.

Your Rights and Next Steps

This is an ongoing investigation into potential securities law violations and possible breaches of fiduciary duty by CS Disco’s directors and officers. If you purchased or held CS Disco shares between July 21, 2021, and August 11, 2022, and suffered a loss, you may have rights as a class member or derivative plaintiff.

• Securities Class Action: You may be able to join the class action to seek compensation for losses if the court certifies a class.
• Derivative Action: If you believe directors or officers failed in their duties to the company, you may have the right to pursue a derivative claim on behalf of CS Disco.

You are not represented by counsel unless you retain your own attorney or the court certifies a class and appoints class counsel. Participation is typically at no upfront cost, and your share of any recovery does not depend on whether you are a lead plaintiff.

You May Be Entitled to Compensation

Securities investigations are time-sensitive. If you purchased or held CS Disco (LAW) shares during the class period and experienced losses, you may be eligible to join the investigation and seek compensation.

To protect your rights and ensure you are included in any potential recovery, complete the form below to join the investigation.

Contact / information request

If you have information relevant to these allegations, you may contact us to share documents or tips.

No promises of recovery are made. This is not a solicitation or guarantee of legal representation.