Bratusov v. ComScore, Inc.
1:19-cv-03210
S.D.N.Y.Jun 24, 2020Background
- Comscore, an audience-measurement and analytics company, was led during the Class Period by CEO Bryan Wiener and CFO Gregory Fink; lead plaintiff bought securities March 26, 2019 and sues on behalf of purchasers from Feb 28–Aug 7, 2019.
- Plaintiff alleges Defendants falsely promoted a revenue-growth strategy to establish a cross-platform measurement currency while the Board favored cost-cutting measures that, plaintiff says, undermined that strategy.
- Relevant public statements: Feb. 28, 2019 Q4/2018 results and guidance (optimism about growth and “on the right track” language, mid-single-digit 2019 revenue guidance); later Q1 and Q2 disclosures showed revenue declines and cost cuts.
- In late March/early April 2019 CEO Wiener and President Hofstetter resigned citing strategy disagreements with the Board; April 1 guidance disappointed analysts and Comscore stock dropped sharply; subsequent May 8 disclosure announced a strategic review and ~10% workforce reduction.
- Plaintiff brought §10(b)/Rule 10b-5 and §20(a) claims; the Court dismissed the complaint for failure to plead actionable misstatements/omissions and scienter, but granted leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the challenged statements were false or misleading | Non-disclosure of a material board-management disagreement rendered optimistic statements about growth and strategy misleading | Statements were truthful, largely historical or puffery, and not rendered false by internal disagreement | Dismissed — plaintiff failed to plead falsity or that statements were misleading |
| Whether Comscore had a duty to disclose internal strategy disagreements | Time Warner-style rule requires disclosure when a company hypes a single plan and secretly considers alternatives | No duty to disclose internal deliberations absent a commitment to an exclusive plan or other special circumstance | Dismissed — no allegation that Comscore promised exclusivity or abandoned its stated goal; no duty to disclose the disagreement |
| Whether plaintiff pleaded scienter (intent/recklessness) | Core-operations inference, confidential witness statements, and executive/board departures support a strong inference of scienter | Allegations are conclusory; no motive, no facts showing access to contrary information, and departures are not indicia of fraud | Dismissed — scienter not plausibly pleaded; inference of mismanagement more compelling than fraud |
| Whether §20(a) control-person liability applies | Individual defendants controlled Comscore and are culpable participants | §20(a) liability depends on a primary securities-law violation | Dismissed — no primary violation pleaded, so §20(a) claim fails |
Key Cases Cited
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) (tests whether pleaded facts give rise to a "strong inference" of scienter)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard under Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (complaints must plead more than threadbare legal conclusions)
- In re Time Warner Inc. Sec. Litig., 9 F.3d 259 (2d Cir. 1993) (narrow duty to disclose alternative plans where issuer touted a single approach)
- Stratte-McClure v. Morgan Stanley, 776 F.3d 94 (2d Cir. 2015) (limitations on affirmative disclosure duties)
- ECA, Local 134 IBEW Joint Pension Tr. v. JPMorgan Chase Co., 553 F.3d 187 (2d Cir. 2009) (materiality standard — "total mix")
- Kalnit v. Eichler, 264 F.3d 131 (2d Cir. 2001) (scienter and conscious recklessness pleading standards)
- Novak v. Kasaks, 216 F.3d 300 (2d Cir. 2000) (motive-and-opportunity and requirements for confidential source allegations)
- ATSI Communications, Inc. v. Shaar Fund, Ltd., 493 F.3d 87 (2d Cir. 2007) (securities fraud pleading requires Rule 9(b) and PSLRA compliance)