Paycom Software Inc

From time to time, we are involved in various disputes, claims, suits, investigations and legal proceedings arising in the ordinary course of business, including commercial, intellectual property and employment-related matters, as well as stockholder derivative actions, class action lawsuits and other matters. The litigation matters described below involve issues or claims that may be of particular interest to our stockholders, regardless of whether any of these matters are material to our business or financial condition based upon the standard set forth in the SEC’s rules. We believe we have substantial defenses in each matter and we intend to vigorously defend against the claims brought by plaintiffs in these lawsuits.

On August 22, 2023, an individual on behalf of herself and her two minor children filed a class action lawsuit against our wholly owned subsidiary, Paycom Payroll, LLC, in the District Court of Oklahoma County. See Carmen Johnson et al. v. Paycom, No. CJ-2023-4763. The complaint relates to the previously disclosed cybersecurity incident involving a third-party vendor, MOVEit, and alleges claims and damages resulting from that matter, including claims for negligence, breach of implied contract, invasion of privacy, unjust enrichment and a request for declaratory and injunctive relief.

On November 10, 2023, a stockholder filed a securities class action lawsuit against the Company, Chad Richison (in his capacity as Chief Executive Officer) and Craig Boelte (in his capacity as Chief Financial Officer), in the U.S. District Court, Western District of Oklahoma, on behalf of a class of acquirers of Company securities between May 3, 2023 and November 1, 2023. See Angelo Ventrillo Jr. v. Paycom Software, Inc., et al., Case Number CIV-23-1019-F. Similar securities class action lawsuits, involving substantially similar allegations, have also been filed. See Minarik v. Paycom Software, Inc., et al., Case Number 5:24-CV-00014-J in the United States District Court for the Western District of Oklahoma; Schoenrock v. Paycom Software, Inc., et al., Case Number 5:24-CV-00012-F in the United States District Court for the Western District of Oklahoma; and Caloto v. Paycom Software, Inc., et al., Case Number 5:24-cv-00019-R in the United States District Court for the Southern District of New York (transferred to the Western District of Oklahoma on January 9, 2024). The plaintiffs are currently seeking consolidation, designation as lead plaintiff and certification as class representative under Rule 23 of the Federal Rules of Civil Procedure. The plaintiffs have brought multiple claims, including for violations of the federal securities laws under the Exchange Act, on behalf of persons or entities who purchased or otherwise acquired publicly traded Paycom securities during a disputed class period. Plaintiffs claim they incurred losses based on materially false and misleading statements made by the defendants during the class period, which led plaintiffs to invest in Paycom securities. The plaintiffs are seeking remedies including, but not limited to, compensatory damages, reimbursement of out-of-pocket costs, and injunctive relief.

On January 12, 2024, a stockholder filed a stockholder derivative complaint in the U.S. District Court, District of Delaware, against the Company and the members of the Board of Directors, invoking the allegations set forth in the Ventrillo, Caloto, Schoenrock and Minarik lawsuits described above. The complaint alleges breaches of fiduciary duties and violations of federal law. The plaintiffs seek to recover unspecified monetary damages on behalf of the Company. See Chelsey Moon, Derivatively on Behalf of Nominal Defendant Paycom Software, Inc., v. Chad Richison, et al., Case No. 1:24-cv-00046-UNA.

We believe that the resolution of current pending legal matters will not have a material adverse effect on our business, financial condition, results of operations or cash flows. Nonetheless, we cannot predict the outcome of these proceedings, as legal matters are subject to inherent uncertainties, and there exists the possibility that the ultimate resolution of these matters could have a material adverse effect on our business, financial condition, results of operations or cash flows.