Broker-Dealer Litigation - Greenberg Traurig LLP

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In re St. Jude Med., Inc. Sec. Litig., 2011 WL 6755008 (D. Minn. Dec. 23, 2011).
In a putative securities fraud class action, the district court denied defendants’ motion to
dismiss claims predicated on alleged misrepresentations in press releases and quarterly
statements pertaining to the defendants’ alleged practice of artificially inflating revenues through
“channel stuffing.” Specifically, plaintiffs alleged that defendants intentionally sold large
quantities of heavily discounted products at quarter end to customers which artificially inflated
inventories in order to create the false appearance that the company was meeting previous
financial guidance. Defendants argued that allegedly false and misleading financial projections
were forward-looking statements shielded from liability by the Private Securities Litigation
Reform Act of 1995’s safe harbor provisions. The court found that cautionary language
accompanying defendants’ projections was insufficient to warrant safe harbor protection because
it was boilerplate, related solely to external macroeconomic variables, and did not address
defendants’ alleged practice of “channel stuffing” or other related accounting misconduct. The
court further found that plaintiffs had adequately alleged scienter and that, if plaintiffs’
allegations regarding channel stuffing were true, defendants knew the financial projections at
issue were false when they were made. Accordingly, the court found that the safe harbor did not
apply and denied defendants’ motion to dismiss.
In re Stec Inc. Sec. Litig., 2011 WL 2669217 (C.D. Cal. Jun. 17, 2011).
In a putative securities fraud class action, the district court denied defendants’ motion to
dismiss claims related to an alleged scheme to artificially inflate the defendant company’s stock
prior to a secondary public offering. Plaintiffs alleged, among other things, that defendants
misled investors about the nature of an agreement with one of its largest customers in order to
create the impression that revenue generated from the agreement would be recurring.
Defendants argued that statements regarding the agreement were forward-looking and shielded
from liability by the Private Securities Litigation Reform Act of 1995’s safe harbor. The court
found that cautionary language cited by defendants was generic and simply warned of the
inability to forecast customer demand, whereas plaintiffs alleged that defendants knew that the
agreement was a one-off deal and that the customer would not continue purchasing at the same
volume. Accordingly, the court declined to find that the safe harbor shielded the statements at
issue from liability and denied defendants’ motion to dismiss with respect to these forwardlooking
statements.
MannKind Sec. Actions, 2011 WL 6327089 (C.D. Cal. Dec. 16, 2011).
In a putative securities fraud class action, the district court denied defendants’ motion to
dismiss claims premised on allegedly false and misleading statements regarding FDA approval
of the defendant pharmaceutical company’s flagship product. Plaintiffs alleged that defendants
continued to make overly optimistic statements regarding anticipated FDA approval despite
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