City of Miami Fire Fighters' and Police Officers' Retirement Trust v. Quality Systems, Inc., No. 15-55173 (9th Cir. 2017)
Annotate this CasePlaintiffs filed this would-be class action on behalf of all persons or entities who purchased or otherwise acquired the common stock of QSI, alleging that during the Class Period, QSI and its officers made false or misleading statements about the current and past state of QSI's sales "pipeline," and used those statements to support public guidance to investors about QSI's projected growth and revenue. The Ninth Circuit reversed the district court's dismissal of the complaint and remanded for further proceedings. The panel held that some of defendants' statements were mixed statements, containing non-forward-looking statements as well as forward-looking statements of projected revenue and earnings; a defendant may not transform non-forward-looking statements into forward-looking statements that are protected by the safe harbor provisions of the Private Securities Litigation Reform Act (PSLRA), 15 U.S.C. 78u-5, by combining non-forward-looking statements about past or current facts with forward-looking statements about projected revenues and earnings; many of defendants' non-forward-looking statements were materially false or misleading; and some of defendants' forward-looking statements were materially false or misleading, were not accompanied by appropriate cautionary statements, and were made with actual knowledge of their false or misleading nature.
Court Description: Securities Fraud. The panel reversed the district court’s dismissal of an action under § 10(b) of the Securities Exchange Act of 1934. The district court found that some of the defendants’ allegedly false or misleading statements were not forward- looking, but found these statements to be “non-actionable puffery.” The district court found that the remainder of the defendants’ allegedly false or misleading statements were forward-looking, were accompanied by appropriate cautionary language, and were made without actual knowledge of their falsity, and therefore were protected by the safe harbor provision of the Private Securities Litigation Reform Act. Disagreeing with the district court, the panel concluded that some of the defendants’ statements were “mixed statements,” containing non-forward-looking statements as well as forward-looking statements of projected revenue and earnings. The panel held that a defendant may not transform non-forward-looking statements into forward-looking IN RE QUALITY SYSTEMS, INC. SECURITIES LITIG. 3 statements that are protected by the safe harbor provision of the PSLRA by combining non-forward-looking statements about past or current facts with forward-looking statements about projected revenues and earnings. The panel held that many of the defendants’ non-forward-looking statements were materially false or misleading. The panel also held that some of the defendants’ forward-looking statements were materially false or misleading, were not accompanied by appropriate cautionary statements, and were made with actual knowledge of their false or misleading nature. The panel remanded the case for further proceedings.
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