National Elevator Industry Pension Fund v. VeriFone Holdings, Inc., et al, No. 11-15860 (9th Cir. 2012)Annotate this Case
National Elevator, lead plaintiff on behalf of investors who purchased VeriFone stock, appealed the dismissal of its securities fraud class action. National Elevator alleged that VeriFone, the CEO and former Chairman of the Board of Directors, and the company's former CFO and Executive Vice President, violated sections 10(b), 20(a), and 20A of the Securities and Exchange Act of 1934, 15 U.S.C. 78j(b), 78t-1(a), and 78t(a), and Securities and Exchange Commission Rule 10-b, 17 C.F.R. 240.10b-5(b), in connection with a December 2007 restatement of financial results. The court held that National Elevator adequately pleaded violations of section 10B and Rule 10b as to all defendants; its section 20A claim against the individual defendants was sufficiently pled; but the section 20(a) claim was properly dismissed. Accordingly, the court affirmed in part and dismissed in part.
Court Description: Securities Fraud. The panel reversed in part and affirmed in part the dismissal of investors’ securities fraud class action alleging violations of §§ 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10-b in connection with a restatement of financial results of the company in which the investors had purchased stock. The panel held that the third amended complaint adequately pleaded the § 10(b), § 20A and Rule 10-b claims. Considering the allegations of scienter holistically, as the Supreme Court directed in Matrixx Initiatives, Inc. v. Siracusano, 131 S. Ct. 1309, 1324 (2011), the panel concluded that the inference that the defendant company and its chief executive officer and former chief financial officer were deliberately reckless as to the truth of their financial reports and related public statements following a merger was at least as compelling as any opposing inference. The panel held that the district court properly dismissed the § 20(a) “control person” claims.