Jacksonville Pension Fund v. CVB, No. 13-56838 (9th Cir. 2016)
Annotate this CaseJacksonville filed a putative class action against CVB alleging violations of Section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. 240.10b-5. The district court granted CVB's motion to dismiss. The court concluded that vague optimistic statements by CVB officials are not actionable and the district court correctly dismissed the claims based on these boasts, characterizing them as puffery. Further, CVB's statements describing the Southern California real estate market and Generally Accepted Accounting Principles (GAAP) violations were not misleading. The court concluded, however, that the second amended complaint (SAC) sufficiently alleges falsity and scienter as to the “no serious doubts” statements in the 10-K on March 4, 2010, and the 10-Q on May 10, 2010. The court also concluded that the SAC adequately plead loss causation. The court held that the announcement of an investigation can “form the basis for a viable loss causation theory” if the complaint also alleges a subsequent corrective disclosure by the defendant. Therefore, the court dismissed the second amended complaint with respect to the "no serious doubts" representations made in the 10-K and the 10-Q and remanded for further proceedings. The court otherwise affirmed the judgment.
Court Description: Securities Fraud The panel affirmed in part and reversed in part the district court’s dismissal of a putative class action under Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5, alleging misrepresentations in defendant’s filings with the Securities and Exchange Commission. The panel held that the announcement of an SEC investigation related to an alleged misrepresentation, coupled with a subsequent revelation of the inaccuracy of that misrepresentation, can serve as a corrective disclosure for the purpose of loss causation. Accordingly, the second amended complaint stated a claim as to two alleged misrepresentations. Affirming as to other alleged misrepresentations, the panel held that vague, optimistic statements were correctly characterized as puffery and were not actionable. In context, there was nothing misleading about statements regarding the Southern California real estate market. In addition, the
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