10 December 2017

US Corporate Law News: Ninth Circuit announces bright line rule on mixed forward-looking statements and non-forward-looking statements for safe harbor purposes

Gregory Pun
Associate | US

The Ninth Circuit Court of Appeals recently issued a decision relating to safe harbor protections for forward-looking statements under the U.S. Private Securities Litigation Reform Act (the PSLRA). The lower court had held that the defendants' forward-looking statements were protected under the safe harbor, which precludes civil liability based on false or misleading forward-looking statements that are so identified as forward-looking and accompanied by meaningful cautionary statements identifying important risk factors that could affect future performance (or in the absence of such cautionary statements, if the speaker lacks actual knowledge that the statement was false or misleading). The appeals court reversed the lower court decision, stating that where a statement contains a mix of both forward-looking statements and non-forward-looking statements, the false and/or misleading non-forward-looking statements are ineligible for the safe harbor provision. The appeals court held that the mere fact that a statement contains a reference to a projection of future events does not sensibly bring the statement within the safe harbor if the allegation of falsehood relates to non-forward-looking aspects of the statement. Thus, entities seeking safe harbor protection would do better to segregate their forward-looking statements from non-forward-looking (historical) statements. For more information on In re Quality Systems, Inc. Securities Litigation, see http://caselaw.findlaw.com/us-9th-circuit/1869216.html.

Gregory Pun Associate | Greenwich