Quinn Emanuel recently obtained a dismissal, with prejudice, of a securities class action complaint against our client, Pitney Bowes Inc. Plaintiff was represented by Robbins Geller, one of the largest plaintiffs’ securities class action firms. The firm took over the litigation from prior counsel shortly before plaintiff filed its second amended complaint.
In October 2007, Pitney Bowes announced that it had missed its earnings and revenue predictions for the third quarter of 2007, causing its stock price to fall 15% in a single day. The share price has never fully recovered. Plaintiffs seized on these events, alleging not only that Pitney Bowes knew its projections were unattainable due to undisclosed adverse business conditions, but that these conditions—including the decline in regular mail—were causing a fundamental and lasting change in the client’s business. In other words, plaintiff alleged that Pitney Bowes painted an overly rosy picture of its prospects by touting its successes and omitting to disclose the “thorns.” Plaintiff bolstered its allegations by relying on 14 former employees who held various positions throughout the Company as confidential witnesses. According to the complaint, these confidential witnesses attested to adverse conditions at the Company, including the failure to meet internal sales targets, lower-than-anticipated revenues from the change to digital postal meters, and rampant customer departures.
By carefully parsing the allegations, Quinn Emanuel was able to explain to the Court that the Company’s public statements were predominantly forward-looking statements that are protected by the securities laws, and that plaintiff’s allegations about the Company amounted to only scattered anecdotes by mid-level managers that were insufficient to allege with specificity any impact on the projections of a company with $6 billion in annual revenue.
The 77-page decision adopted nearly all of Quinn Emanuel’s arguments. The Court concluded that the Company’s public statements were protected by the PSLRA Safe Harbor because the client’s extensive cautionary language warned investors not only about important risk factors, but about the very factors that plaintiff alleged caused its loss; that plaintiff failed to allege scienter with any kind of particularity as the confidential witnesses were several levels removed from the individual defendants, and general allegations that financial information “rolled up through finance” were insufficient; and that claiming business segments were declining without alleging how much, or when the decline began or took place, was insufficient to show that any statements were actually false. The Court noted that the Company made yet additional arguments that defeated plaintiff’s claim, but the Court had no need to address them.