Tuesday, July 18, 2006

The Cold Light of Hindsight

Plaintiffs must be wondering what hit them the Metris action, having received a summary judgment blow to the head from Judge James M. Rosenbaum (D. Minn.) (Reagan Class of ‘85) (the picture to the left was taken immediately after the ruling was issued), who said that “in the cold light of hindsight, defendants' projections were overly optimistic, but economic prognostication, though faulty, does not, without more, amount to fraud.”

That’s not so bad you say. Oh no, I’m just gettin’ warmed up. How about “these plain vanilla statements are simply too vague to support a securities fraud action; the test is whether a reasonable investor would have considered such statements significant at the time. And a reasonable investor would not. There is nothing concrete or substantial in these statements upon which a reasonable investor would base an investment decision.”

But "where the case unravels,” is on scienter, as, well, “Plaintiffs have failed to produce evidence" of it. "Instead, their case teeters on repeated, but unsupported, theories of motive and opportunity, mixed with a mere suggestion of recklessness. While scienter is generally a question of fact for the jury, neither plaintiffs' motive and opportunity theory, nor their soupcon of recklessness, is sufficient to withstand summary judgment.”

Yes, I was kidding about when the picture was taken, but maybe, just maybe....

You can read In re Metris, issued April 21, 2006, at 428 F. Supp. 2d 1004.

Nugget: “The fact that a company may have hit a rocky patch does not mean it has no positive prospects. The Court finds these allegations too general to pose a triable issue of fact.”

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