Charter Township of Clinton Police and Fire Retirement System v. LPL Financial Holdings Inc.
3:16-cv-00685
S.D. Cal.Aug 18, 2017Background
- Prior to the $250M share repurchase, LPL’s December 8, 2015 Goldman Sachs conference featured statements by Casady, Audette, and LPL’s management misrepresenting or omitting issues about earnings, assets, and debt flexibility.
- LPL disclosed an accelerated buyback on December 10, 2015, benefiting TPG with a large share liquidation.
- February 11-12, 2016 results showed weaker 4Q15 performance; stock fell dramatically on February 12, 2016, undermining prior optimistic statements.
- Plaintiff alleges the statements at the December 8 conference were false or misleading and tied to the buyback timing and LPL’s financial state.
- Court considers Rule 10b-5 and PSLRA pleading standards, grants RJN for documents incorporated by reference, and discusses core operations theory and scienter.
- Court ultimately dismisses the Section 10(b)/Rule 10b-5 claims for lack of strong scienter inference, but allows amendment on certain other statements and reserves leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the complaint pleads strong inference of scienter | Plaintiff asserts defendants knew of weak Q4 2015 results. | Defendants contend allegations are insufficient to show knowledge or recklessness. | Dismissed for lack of a strong scienter inference. |
| Whether some statements are actionable puffery or forward-looking | Audette/Casady statements about recovery and growth were factual misrepresentations. | Those statements are puffery or forward-looking with safe harbor protections. | Puffery statements dismissed; forward-looking claims barred with leave to amend in part. |
| Whether the core-operations theory can support scienter | Core metrics alleged as critical; defendants knew concealed problems. | Lack of particularity and corroborating detail undermines core-operations inference. | Core-operations theory rejected as insufficient on its own; scienter not proven. |
| Whether claims regarding Audette’s 2015 G&A guidance on track are actionable | Dismissed with prejudice or with leave to amend as to related statements. |
Key Cases Cited
- Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27 (2011) (requires holistic pleading; strong inference must be cogent and at least as compelling as opposing inference)
- Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981 (9th Cir. 2009) (pleading falsity and scienter with particularity)
- In re Oracle Corp. Sec. Litig., 627 F.3d 376 (9th Cir. 2010) (recklessness standard for scienter; core-operations critique)
- Lipton v. Pathogenesis Corp., 284 F.3d 1027 (9th Cir. 2002) (need for particularity in alleging knowledge of negative reports)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) (strong inference standard; holistic review of allegations)
- In re Vantive Corp. Sec. Litig., 283 F.3d 1079 (9th Cir. 2002) (core-operations and pleading standards context)
- In re Verifone Holdings, Inc. Sec. Litig., 704 F.3d 694 (9th Cir. 2012) (holistic analysis of facts for scienter)