In re Gold Resource Corp. Securities Litigation
957 F. Supp. 2d 1284
D. Colo.2013Background
- Lead Plaintiff Banker represents similarly situated purchasers of GRC stock in a consolidated securities class action against Gold Resource Corporation (GRC) and four officers/directors.
- Class Period spans Jan 30, 2012 to Nov 8, 2012; alleges violations of §10(b) and Rule 10b-5 and control-person liability §20(a).
- GRC’s El Aguila mining project in Mexico involves open-pit/underground mining with stoping and long-hole stoping; production targets and dividends were part of the business plan.
- Plaintiff alleges 2012 production problems and an overbilling scheme—restatement of revenues related to provisional vs final assay results.
- Provisional invoices and final sample pricing created inflated revenue; November 2012 restatement disclosed material weaknesses in internal controls; CEO/SOX certifications are involved.
- Court granted dismissal of all claims with prejudice; struck down §20(a) claim due to lack of a primary violation; plaintiff’s motion to strike/reject reply denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether mining-projection statements fall under PSLRA safe harbor | Plaintiff argues some statements are misstatements of historical fact not protected | GRC claims statements are forward-looking and protected if accompanied by cautionary language | Forward-looking parts protected; misstatements not pleaded with strong scienter |
| Whether non-forward-looking misstatements show scienter | Plaintiff asserts restatement and overbilling show knowing falsity | Plaintiff lacks particularized facts of actual knowledge; statements were optimistic | No strong inference of scienter; insufficient facts show actual knowledge |
| Whether GAAP violations alone establish scienter | GAAP violations strengthen scienter | GAAP alone insufficient without other particularized facts | GAAP violations insufficient alone; no strong scienter established |
| Whether §20(a) control-person claim survives | Control-liability relies on primary violation | No primary violation shown; control liability fails | Dismissed as to §20(a) |
Key Cases Cited
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (U.S. 2007) (set heightened pleading standard for scienter under PSLRA)
- Adams v. Kinder-Morgan, Inc., 340 F.3d 1083 (10th Cir. 2003) (requires particularized facts showing scienter)
- In re Level 3 Communications, Inc. Securities Litigation, 667 F.3d 1331 (10th Cir. 2012) (examines pleading standards under PSLRA)
- Institutional Investors Group v. Avaya, Inc., 564 F.3d 242 (3d Cir. 2009) (distinguishes current facts vs projections in safe harbor context)
- Hams v. Ivax Corp., 182 F.3d 799 (11th Cir. 1999) (explains cautionary language suffices for forward-looking statements)
- Grossman v. Novell, Inc., 120 F.3d 1112 (10th Cir. 1997) (puffery/forward-looking statements not actionable without falsity proof)