Broker-Dealer Litigation - Greenberg Traurig LLP

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In re Coinstar Sec. Litig., 2011 WL 4712206 (W.D. Wash. Oct. 6, 2011).
In a putative securities fraud class action, the district court granted in part and denied in
part defendants’ motion to dismiss claims related to allegedly false and misleading revenue
projections for the video-rental company Redbox. Specifically, plaintiffs alleged that
defendants’ revenue projections did not account for several known negative developments and
facts, including that: (a) movie producers were delaying delivery of DVDs to Redbox;
(b) Redbox’s new blu-ray business was not performing well; (c) defendants’ internal financial
projections reflected deteriorating sales; (d) upcoming releases were unlikely to generate
significant revenue; and (e) Redbox was incurring costs associated with migrating DVDs
between locations. Defendants argued that the various statements at issue were forward-looking
statements shielded from liability by the Private Securities Litigation Reform Act of 1995’s safe
harbor and that plaintiffs had failed to establish that the statements were false. With respect to
allegedly false projections contained in a press release, the court found that the release warned
investors that results might differ and specifically listed several risks that might affect actual
performance, including the risks plaintiffs alleged defendants failed to disclose to the public.
With regard to allegedly false oral statements made during an analyst conference call, the court
found that defendants’ reference to cautionary language in the defendant company’s regulatory
filings was adequate to warrant safe harbor protection. The court distinguished cases holding
that mere reference to warnings elsewhere was insufficient for written communications and
noted that oral forward-looking statements are protected as long as investors are orally referred
to warnings in a readily available written document. Given the adequate cautionary language
accompanying the allegedly false projections, the court found that defendants’ state of mind was
irrelevant and the forward-looking statements at issue were shielded from liability by the safe
harbor. On the other hand, the court found that certain reiterations of the company’s earnings
projections were not protected by the safe harbor because there was an unresolved issue of fact
regarding whether these reiterations were accompanied by cautionary language. Moreover, the
court found that plaintiffs had adequately pleaded that defendants knew the reiterated guidance
was false and misleading and, thus, the safe harbor did not apply. Accordingly, the court granted
in part and denied in part defendants’ motion to dismiss.
Mishkin v. Zynex Inc., 2011 WL 1158715 (D. Colo. Mar. 30, 2011).
In a securities fraud class action against a supplier of medical devices, the district court
denied defendants’ motion to dismiss claims related to an alleged scheme to inflate reported
revenue. Specifically, plaintiffs alleged that defendants knowingly overbilled insurance
companies and reported revenue based upon the inflated billing rather than revenue it expected to
collect. Defendants argued that certain alleged misstatements made by its CEO in a press release
were forward-looking statements shielded from liability by the Private Securities Litigation
Reform Act of 1995’s safe harbor provisions. The court found that some parts of the press
release discussed present and historical facts, such as “sales and rentals… continue at a strong
pace,” which were not forward-looking and, thus, did not qualify for protection under the safe
harbor. To the extent the press release contained forward-looking statements, the court found
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