Oklahoma Firefighters Pension & Retirement System v. Smith & Wesson Holding Corp.
2012 U.S. App. LEXIS 3259
| 1st Cir. | 2012Background
- Class of Smith & Wesson security purchasers sues for misrepresentation under §10(b)/Rule 10b-5; district court granted Smith & Wesson summary judgment; plaintiffs appealed.
- Statements June 14, 2007 and September 2007 contained strong sales data and forward-looking guidance with safe harbor warnings.
- Promotional tactics and pull-forward discounts alleged to inflate current quarter revenue and shift revenues to prior quarter.
- Internal inventories and demand indicators (Orderometer, Call Reports, backlog) suggested weakening demand before September statements.
- August 2007 emails and notes indicated concerns about quarter performance and market conditions.
- Court reviews whether the statements were actionable and whether plaintiffs showed scienter; affirming summary judgment for defendants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether June/Sept statements were actionable under 10b-5. | Smith & Wesson implied strong demand. | Statements were accurate and forward-looking with safe harbor. | No liability; insufficient evidence of misrepresentation/omission with scienter. |
| Whether plaintiffs proved scienter. | Defendants knew demand was weakening. | No proof of conscious intent or extreme recklessness. | Lack of scienter; summary judgment affirmed. |
| Whether July discounts and August deficits establish fraud through channel stuffing. | Promotions pulled forward revenue to Q1 2008. | Discounting may be normal; evidence insufficient of abnormal manipulation. | Promotions not shown to be abnormal enough to prove scienter. |
Key Cases Cited
- Mississippi Pub. Emps.' Ret. Sys. v. Boston Scientific Corp., 649 F.3d 5 (1st Cir. 2011) (requires scienter; materiality and recklessness standards)
- City of Dearborn Heights Act 345 Police & Fire Ret. Sys. v. Waters Corp., 632 F.3d 751 (1st Cir. 2011) (materiality and forward-looking statements; omission theory)
- Lucia v. Prospect St. High Income Portfolio, Inc., 36 F.3d 170 (1st Cir. 1994) (literal accuracy does not bar liability for omissions)
- Makor Issues & Rights, Ltd. v. Tellabs Inc., 513 F.3d 702 (7th Cir. 2008) (channel stuffing; context-dependent assessment of manipulation)