778 F. Supp. 2d 858
N.D. Ill.2011Background
- Pension fund sues Allscripts-Misys for alleged §10(b) and §20(a) securities violations for stock purchases during May 8, 2007–February 13, 2008.
- Plaintiff alleges Defendants Davis (CFO) and Tullman (CEO/Chair) issued misleading statements about Version 11 and implementation timelines.
- Allegations contend Defendants knew of Version 11 defects and implementation delays, causing artificial inflation of stock price.
- Complaint asserts omissions/false statements related to May 2007, August 2007, November 2007, and February 2008 disclosures, and seeks relief on a market-fraud theory.
- Defendants moved to dismiss under Rule 12(b)(6); court granted in part and denied in part, allowing claims based on two May 8, 2007 statements to proceed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Materiality of optimistic statements | Pension Fund argues rosy statements were material given positive factual context | Defendants contend these are non-actionable puffery | Immatterial; dismissed for optimistic statements |
| PSLRA safe harbor applicability | Plaintiff contends safe harbor does not shield all forward-looking statements | Cautionary language was meaningful and applies to safe harbor | Safe harbor applies to forward-looking statements; those claims dismissed |
| Falsity/present or past-tense statements | Alleges specific misstatements/omissions at time of statements | Some statements not false or misleading when made; others inadequately pleaded | Two May 8, 2007 statements adequately pleaded; others dismissed |
| Scienter sufficiency | Allege deliberate recklessness based on CWs and internal systems | Allegations insufficient to show strong inference of scienter for all statements | Strong inference of scienter found for May 8, 2007 statements; other statements fail |
| Section 20(a) viability | If primary §10(b) violation exists, §20(a) liable | Section 20(a) relies on primary violation; dismissed if no §10(b) claim | Survives to the extent based on the two viable May 8, 2007 statements |
Key Cases Cited
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (U.S. 2007) (PSLRA heightened pleading standard; holistic scienter inquiry)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (U.S. 2007) (Tellabs II; require strong inference of scienter)
- Basic Inc. v. Levinson, 485 U.S. 224 (U.S. 1988) (Fraud on the market theory; materiality and reliance framework)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 437 F.3d 588 (7th Cir. 2006) (Tellabs I; materiality and puffery guidance)
- In re Cutera Sec. Litig., 610 F.3d 1103 (9th Cir. 2010) (Meaningful cautionary language; safe harbor applicability)