389 F. Supp. 3d 221
S.D. Ill.2019Background
- Plaintiff (Public Employees' Retirement System of Mississippi) alleges Signet and certain executives made materially false statements about the company’s culture, claiming a pervasive culture of sexual harassment contrary to Signet’s public Code of Conduct and SEC disclosures.
- The Jock litigation—an arbitration and related EEOC action—generated nearly 250 employee declarations alleging widespread sexual harassment, retaliation, and promotion conditioned on sexual favors, including allegations against senior executives.
- Signet repeatedly disclosed and described the Jock litigation in SEC filings and publicly asserted its Codes and ethics policies (adopted annually and incorporated into SEC filings) that touted merit-based decisions, discipline for misconduct, anonymous reporting, and executive adherence to ethical standards.
- After unredacted (but partially redacted) declarations and media coverage in Feb 2017, Signet’s stock price dropped and Signet issued a statement calling reports "distorted and inaccurate."
- Plaintiff filed the Fifth Amended Complaint alleging Section 10(b)/Rule 10b-5 and Section 20(a) claims based in part on the purported falsity of Signet’s Code-based statements.
- The court previously denied Defendants’ motion to dismiss, holding some Code statements could be actionable where they are directly contradicted by alleged conduct; Defendants moved for judgment on the pleadings following Singh v. Cigna Corp.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Signet’s Code statements are immaterial puffery as a matter of law | Code statements were specific assurances (merit-based promotions, discipline for misconduct, anonymous reporting, executive compliance) and, given Jock declarations, are directly contradicted and thus materially false | Singh v. Cigna requires treating code statements as generic puffery; court should ignore context and dismiss Code-based allegations | Denied: Cigna did not create a per se rule; context matters and Code statements can be actionable when contradicted by alleged facts; reasonable investor could find these statements material |
| Whether Cigna changed Second Circuit materiality law to categorically bar Code-of-Conduct claims | N/A | Cigna purportedly holds code statements are textbook puffery and immaterial | Rejected: Court reads Cigna as reaffirming puffery doctrine but not abolishing contextual analysis; it does not foreclose claims based on Codes when specific conduct contradicts them |
| Whether the FAC plausibly alleges a material misrepresentation under Rule 12(c) | FAC pleads specific factual allegations (employee declarations, alleged retaliation, executive misconduct) that render Code statements misleading | Statements are generalized aspirational language and therefore non-actionable | Denied: Allegations plausibly show statements were more than aspirational and were relied upon by investors given the Jock disclosures and company reassurances |
| Whether statements may be dismissed as so obviously unimportant that reasonable minds could not differ | N/A | Code statements are too vague for any investor reliance | Denied: Materiality is context-specific; factual allegations could lead reasonable investors to consider such statements important |
Key Cases Cited
- Singh v. Cigna Corp., 918 F.3d 57 (2d Cir. 2019) (holds general code statements about integrity can be puffery but reaffirms context matters for materiality)
- ECA, Local 134 IBEW Joint Pension Tr. v. J.P. Morgan Chase Co., 553 F.3d 187 (2d Cir. 2009) (defines corporate puffery and limits on materiality)
- Indiana Pub. Ret. Sys. v. SAIC, Inc., 818 F.3d 85 (2d Cir. 2016) (explains when reputation/integrity statements may be more than puffery depending on context)
- City of Pontiac Policemen’s & Firemen’s Ret. Sys. v. UBS AG, 752 F.3d 173 (2d Cir. 2014) (general statements about reputation and integrity are inactionable puffery)
- In re Moody’s Corp. Sec. Litig., 599 F. Supp. 2d 493 (S.D.N.Y.) (codes can be actionable where contradicted by corporate conduct)
- TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438 (U.S. 1976) (materiality standard: "substantial likelihood" that a reasonable investor would consider statement important)
- Basic Inc. v. Levinson, 485 U.S. 224 (U.S. 1988) (materiality assessed by whether statement significantly altered the total mix of information)