Staying On Track

Under the PSLRA’s safe harbor for forward-looking statements, such statements cannot form the basis for securities fraud liability unless (a) the statements were not accompanied by “meaningful cautionary statements” and (b) the defendants had “actual knowledge” of their falsity. A company’s forward-looking statements, however, often contain some reference to present facts. Does that make these statements ineligible for the safe harbor?

In IBEW Local 98 Pension Fund v. Best Buy Co., Inc., 2013 WL 3982629 (D. Minn. Aug. 5, 2013), the court considered this question in evaluating whether the company’s statements that it was “on track to deliver and exceed our annual EPS guidance” and that its earnings were “essentially in line” with expectations were forward-looking. Although the defendants argued that these statements were simply affirmations of the projected guidance, and therefore forward-looking, the court concluded that they really were statements of present condition. Accordingly, the statements were not subject to the safe harbor.

Holding: Motion to dismiss granted in part and denied in part.

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