Laborers' Local 231 Pension Fund v. Cowan, 1:17-cv-00478

Background

Lionbridge Technologies pursued growth via acquisitions and reorganized in 2016 to facilitate bolt-on deals; management publicly touted a plan to reach $1 billion in revenue.
In late 2016 Lionbridge negotiated a merger with HIG affiliates for $5.75 per share; Lionbridge retained Union Square as its financial advisor and provided Union Square with Lionbridge’s internal financial projections (2018–2020) to evaluate the deal.
The January 31, 2017 definitive proxy included a projections table (2016–2020) and detailed disclaimers stating the projections were those provided to the board, special committee, and Union Square, were not predictive, and would not be updated.
Pension Fund sued under Section 14(a) (and Section 20(a) as a control claim) alleging the proxy’s projections and assumptions were materially false or misleading because they failed to incorporate Lionbridge’s acquisition growth strategy and the near-term Exequo acquisition.
Defendants moved to dismiss, arguing (inter alia) the challenged disclosures were factually true (they were the projections given to the advisor), accompanied by robust forward-looking disclaimers, and that plaintiff failed to plead the specific, actionable misstatements required by the PSLRA.
The court limited review to the statements plaintiff specifically challenged and relied on Third Circuit precedent (notably OFI Asset Mgmt.) holding that inclusion of advisor-used projections with detailed disclaimers does not, by itself, create a Section 14(a) violation.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the proxy’s published projections were materially false/misleading because they omitted acquisition-driven growth	Projections understated growth (≈3.9% CAGR) and failed to reflect Lionbridge’s acquisition strategy and the subsequent Exequo deal	Projections were the same figures provided to the board, special committee, and Union Square; accompanied by specific disclaimers; not presented as predictive facts	Dismissed — projections were not misleading where they matched what was given to the advisor and were disclosed with detailed disclaimers
Whether the proxy’s statements about the assumptions underlying the forecasts were false/misleading	Statements about assumptions were misleading because they did not disclose omission of acquisition assumptions	Assumption statements were descriptive and did not negate the fact that the same projections were provided to the advisor and board	Dismissed — challenging assumptions would improperly relitigate fiduciary-advice content and circumvent OFI Asset Mgmt. precedent
Whether the Reform Act safe-harbor/bespeaks-caution doctrines bar the claims	Plaintiff argued forward-looking protections may not apply (possible going-private transaction exclusion)	Defendants relied on lengthy cautionary language and the forward-looking note to argue non-actionability	Court did not decide on safe-harbor applicability because it found no actionable misstatement under Section 14(a)
Whether a Section 20(a) control-person claim survives absent a Section 14(a) violation	Control liability asserted against directors, executives, and acquirers	Defendants argued Section 20(a) requires an underlying securities-law violation	Dismissed — Section 20(a) claim fails because no underlying Section 14(a) violation was pled

Key Cases Cited

OFI Asset Mgmt. v. Cooper Tire & Rubber, 834 F.3d 481 (3d Cir. 2016) (projections disclosed to advisor with detailed disclaimers are not actionable as material misstatements under securities laws)
TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438 (Sup. Ct. 1976) (standard for materiality in securities disclosures)
In re NAHC, Inc. Sec. Litig., 306 F.3d 1314 (3d Cir. 2002) (court may take judicial notice of public filings when deciding a motion to dismiss)
Cal. Pub. Emps. Ret. Sys. v. Chubb Corp., 394 F.3d 126 (3d Cir. 2004) (discussing limits on Section 14(a) claims and materiality principles)
Tracinda Corp. v. DaimlerChrysler AG, 502 F.3d 212 (3d Cir. 2007) (Section 14(a) aims to prevent deceptive or inadequate proxy disclosures)