COMPLAINT 

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BERNSTEIN LITOWITZ BERGER 

 & GROSSMANN LLP 

BLAIR A. NICHOLAS (Bar No. 178428) 

(blairn@blbglaw.com) 

12481 High Bluff Drive, Suite 300 

San Diego, CA 92130 

Tel: (858) 793-0070 

Fax: (858) 793-0323 

 

Attorneys for Plaintiff City of Miami 

General Employees’ & Sanitation 

Employees’ Retirement Trust 

[Additional counsel appear on signature page] 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION 

CITY OF MIAMI GENERAL 

EMPLOYEES’ & SANITATION 

EMPLOYEES’ RETIREMENT TRUST, on 

behalf of itself and all others similarly 

situated, 

 Plaintiff 

v. 

RH, INC., GARY FRIEDMAN, KAREN 

BOONE 

 Defendants. 

Case No. 

ECF CASE 

COMPLAINT 

CLASS ACTION 

DEMAND FOR JURY TRIAL 

Case 4:17-cv-00554-YGR Document 1 Filed 02/02/17 Page 1 of 17
COMPLAINT 1 

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Plaintiff City of Miami General Employees’ & Sanitation Employees’ Retirement Trust 

(“Plaintiff”) by and through its counsel, alleges the following upon information and belief, except 

as to those allegations concerning Plaintiff, which are alleged upon personal knowledge. 

Plaintiff’s information and belief is based upon, among other things, counsel’s investigation, which 

includes review and analysis of, (a) regulatory filings made by RH, Inc. (“RH” or the “Company”) 

with the United States Securities and Exchange Commission (“SEC”); (b) press releases and media 

reports issued by and disseminated by the Company; (c) analyst reports concerning RH; (d) a 

proprietary investigation by Plaintiff’s counsel and (e) other public information regarding the 

Company. 

I. INTRODUCTION 

1. This securities fraud class action is brought on behalf of all persons and other 

entities that purchased or otherwise acquired RH common stock from March 26, 2015 to June 8, 

2016, inclusive (the “Class Period”). The claims asserted herein are alleged against RH and certain 

of the Company’s current and former senior executives (collectively, “Defendants”), and arise 

under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and 

Rule 10b-5 promulgated thereunder. 

2. RH, headquartered in Corte Madera, California, is a leading luxury retailer in the 

home furnishings marketplace. The Company operates an integrated business with multiple 

channels of distribution including over 70 retail stores in the United States, source book magazines 

and websites. 

3. This case arises from misstatements the Company made regarding its new product 

line, RH Modern. Specifically, the Company and its executives publicly touted RH Modern as its 

“finest work ever,” a “game-changer” that was poised to double the Company’s revenue, and “the 

most important and significant new home furnishings business to be launched in the last 15 or 20 

years.” Bolstering these statements, the Company repeatedly issued revenue guidance that led 

investors to expect substantial increases in revenue due in significant part to the supposed new 

revenue to be generated by RH Modern. 

4. In early 2015, the Company’s core product line was facing headwinds as same store 

Case 4:17-cv-00554-YGR Document 1 Filed 02/02/17 Page 2 of 17
COMPLAINT 2 

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sales were decreasing. Specifically, in the RH’s earnings report for the first quarter of 2015, the 

Company announced its comparable store sales were down 9% from the previous quarter. To 

reinvigorate RH’s earnings, the Company began implementing its critical new product line, RH 

Modern. On June 11, 2015, the Company officially announced it would be releasing RH Modern 

later that fall. From the start of the Class Period, the Company touted its preparedness for the 

launch of RH Modern and increased its fiscal 2015 revenue guidance to $2.146 billion to $2.176 

billion, representing growth in the range of 15% to 17% from the prior year. After raising its 

earnings-per-share (“EPS”) guidance to $2.95 to $3.10 for fiscal 2015 the previous quarter, the 

Company again raised its earnings guidance to a range of $3.02 to $3.15, representing growth in 

the range of 28% to 33% year-over-year. RH attributed the growth in revenue and earnings, in 

large part, to the release of RH Modern. In the months leading up to the release of RH Modern, 

the Company continued to tout the new product line, including the Company’s ability to have the 

new RH Modern products in-stock so that customers would receive furniture they ordered in a 

timely manner. In truth, the Company was woefully unprepared to launch RH Modern and to 

capitalize on the new product line. In December 2015, when RH Modern inventory problems 

began to emerge, the Company repeatedly downplayed the significance of the problems related to 

RH Modern, preventing investors from learning the full truth. As a result of these 

misrepresentations, RH stock traded at artificially inflated prices during the Class Period. 

5. Contrary to Defendants’ representations that the Company was prepared for the 

launch of RH Modern, in reality, the launch of RH Modern was an abject catastrophe. The 

Company knew that it was not prepared to introduce RH Modern on a timetable and at the quality 

level that its clients expected, but Defendants nonetheless assured investors of near-term profits to 

be driven by the new product line. As Defendants knew during the Class Period, the introduction 

of RH Modern was beset with a host of problems, including a near-complete lack of inventory, 

countless shipping delays, customer cancelations and returned products. 

6. The truth began to be revealed on December 10, 2015, when the Company 

announced that it had missed its earnings projections due, in part, to the fact that RH Modern 

furniture was not fully in-stock. As a result of these disclosures, shares of RH declined by 

Case 4:17-cv-00554-YGR Document 1 Filed 02/02/17 Page 3 of 17
COMPLAINT 3 

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approximately $9 per share, closing at $78.65 per share on December 14. To stem the decline, the 

Company made a number of reassuring statements, including touting the launch of RH Modern as 

“phenomenal” and falsely attributing the low inventory of RH Modern products to a purported 

strategy of conservatively managing purchases for the new product line. 

7. Then, on February 9, 2016, the Company announced the surprise resignation of its 

Chief Operating Officer (“COO”), Kenneth Dunaj (“Dunaj”), who just one year prior had been put 

in charge of inventory management. 

8. On February 24, 2016, the Company announced disappointing earnings for the 

fourth quarter of 2015 due to shipping delays of the RH Modern furniture. This disclosure caused 

RH stock to decline by $13.43 per share. In an effort to mitigate the market reaction, the Company 

continued to tout RH Modern as a success and assured investors that the RH Modern inventory 

problems were behind them. 

9. Then on June 8, 2016, the Company significantly reduced its earnings guidance for 

fiscal 2016, which the Company attributed to “accommodations largely due to RH Modern 

production delays.” These disclosures caused RH stock to decline by $7.66 per share. 

10. As a result of Defendants’ wrongful acts and omissions, and the precipitous decline 

in the market value of the Company’s common stock, Plaintiff and other Class members have 

suffered significant damages. 

II. JURISDICTION AND VENUE 

11. The claims asserted herein arise under Sections 10(b) and 20(a) of the Exchange 

Act, 15 U.S.C. §§ 78j(b) and 78t(a), and Rule 10b-5 promulgated thereunder by the SEC, 17 C.F.R. 

§ 240.10b-5. This Court has jurisdiction over the subject matter of this action pursuant to 28 

U.S.C. §§ 1331 and 1337, and Section 27 of the Exchange Act, 15 U.S.C. § 78aa. 

12. Venue is proper in this District pursuant to Section 27 of the Exchange Act and 28 

U.S.C. § 1391(b). RH is headquartered in California and conducts business in this District, and 

many of the acts and conduct that constitute the violations of law complained of herein, including 

the materially false and misleading statements of fact, occurred in and/or were issued from this 

District. In connection with the acts alleged in this Complaint, Defendants, directly or indirectly, 

Case 4:17-cv-00554-YGR Document 1 Filed 02/02/17 Page 4 of 17
COMPLAINT 4 

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used the means and instrumentalities of interstate commerce, including, but not limited to, the 

mails, interstate telephone communications, and the facilities of the national securities markets. 

III. PARTIES 

13. Plaintiff purchased shares of RH stock on the New York Stock Exchange during the 

Class Period and suffered damages as a result of the violations of the federal securities laws alleged 

herein. 

14. Defendant RH is incorporated in Delaware and maintains its headquarters in Corte 

Madera, California. RH is one of the leading luxury retailers in home furnishings in the United 

States. The Company’s stock trades on the New York Stock Exchange, which is an efficient 

market, under ticker symbol “RH.” As of October 31, 2016, there were approximately 41 million 

shares of RH stock outstanding. 

15. Defendant Gary Friedman (“Friedman”) is, and was at all relevant times, RH’s 

Chief Executive Officer (“CEO”) and Chairman. 

16. Defendant Karen Boone (“Boone”) is, and was at all relevant times, RH’s CoPresident and Chief Financial and Administrative Officer. 

17. Defendants Friedman and Boone are collectively referred to hereinafter as the 

“Individual Defendants.” The Individual Defendants, because of their positions with RH, 

possessed the power and authority to control the contents of RH’s reports to the SEC, press 

releases, and presentations to securities analysts, money and portfolio managers, and institutional 

investors. Each of the Individual Defendants was provided with copies of the Company’s reports 

and press releases alleged herein to be misleading prior to, or shortly after, their issuance and had 

the ability and opportunity to prevent their issuance or cause them to be corrected. Because of 

their positions and access to material non-public information available to them, each of the 

Individual Defendants knew that the adverse facts and omissions specified herein had not been 

disclosed to, and were being concealed from, the public, and that the positive representations and 

omissions which were being made were then materially false and/or misleading. 

IV. BACKGROUND 

18. RH is a leading luxury retailer in the home furnishings marketplace that operates 

Case 4:17-cv-00554-YGR Document 1 Filed 02/02/17 Page 5 of 17
COMPLAINT 5 

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an integrated business with multiple channels of distribution, including over 70 retail stores in the 

United States, source book magazines and websites. In early 2015, the Company’s core product 

line was facing headwinds as same store sales were decreasing. Specifically, in RH’s earnings 

report for the first quarter of 2015, the Company announced its comparable store sales were down 

9% from the previous quarter. To reinvigorate RH’s earnings, the Company began implementing 

its critical new product line, RH Modern. The Company’s CEO, Friedman, touted RH Modern as 

“the most innovative and new concept in the world of home design” and claimed it “represents our 

finest work to date.” He went on to describe RH Modern as “the most important and significant 

new home furnishings business to be launched in the last 15 or 20 years.” 

19. Prior to the release of RH Modern, Defendants repeatedly assured investors that the 

Company was prepared for the launch of the product and would have the appropriate amount of 

inventory in stock so that customers would not experience delays in receiving RH Modern products 

they ordered. For example, Friedman stated “[o]n the Modern side, and the lead times, the wait 

times are a real disadvantage for the people in the marketplace today. We are going to compete on 

speed just like we would our current business.” He continued, “it's going to be a huge competitive 

advantage versus how the marketplace exists and operates today.” 

20. In truth, the Company was woefully unprepared for the RH Modern launch as it 

knowingly gave vendors unrealistic timelines to manufacture products. This led to the Company 

having a near-total lack of inventory when the product line was launched leading to severe shipping 

delays and customer cancelations. Further, many customers who did receive RH Modern products 

ended up returning the products because they were defective due to the fact that vendors had to 

rush to create the product. 

21. In addition, after the release of RH Modern, Defendants repeatedly downplayed 

issues surrounding RH Modern, including low inventory levels, shipping delays, and customer 

cancelations, thus preventing investors from realizing the true nature and impact of the problems. 

V. DEFENDANTS’ FALSE AND MISLEADING STATEMENTS AND OMISSIONS 

22. The Class Period starts on March 26, 2015, the day the Company reported its results 

for the fourth quarter and fiscal year 2014, and announced the release of RH Modern later in the 

Case 4:17-cv-00554-YGR Document 1 Filed 02/02/17 Page 6 of 17
COMPLAINT 6 

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year. On that day, the Company touted RH Modern as its “finest work ever” and a “game-changer” 

for the Company. Based on this, the Company raised its 2015 EPS guidance to $2.95 to $3.10, 

representing growth in the range of 25% to 31% from fiscal 2014. The Company emphasized to 

investors that it would have no trouble meeting the inventory needs that the new RH Modern 

product line would require. Boone stressed that the Company would “continue to make inventory 

investments to make sure that [the Company] improve[s] our in-stocks and make sure we're not 

having high back orders.” Friedman further emphasized the Company’s strong inventory 

management stating, “Ken Dunaj, our Chief Operating Officer, has recently taken over inventory 

management. He has a new leader in that area of the business. I think we have more intelligence, 

more energy and passion behind inventory management than ever in the history of our Company 

right now.” 

23. On June 11, 2015, during RH’s 2015 first quarter earnings call, the Company 

announced that RH Modern would officially be released in the fall and increased its revenue 

guidance to $2.146 billion to $2.176 billion, representing growth in the range of 15% to 17%, and 

raised its EPS guidance to a range of $3.02 to $3.15, representing growth in the range of 28% to 

33% from fiscal 2014 based largely on the RH Modern release. Friedman continued to tout RH 

Modern, calling it the “most innovative and new concept in the world of home design” and 

claiming it could double the Company’s revenue saying, “could RH Modern, in and of itself, take 

$4 billion to $5 billion up? Yes, it could.” Friedman assured investors that the RH Modern 

inventory would be in-stock stating, “[i]nventory at the end of the first quarter was up 24%, and 

we expect to end the year with inventory growth that is higher than our sales growth given the 

inventory investments in RH Modern.” Further, Boone stated, “[w]e are adding 1.5 million square 

foot DC [in] northern California in the coming months, actually it's opening this summer. That 

was planned partially for Modern, both to keep up with the growth we have in the core business 

but also knowing that Modern was coming. So, we should be very good on supply chain capacity 

for a while.” The Company also emphasized that not only would its delivery window be 

comparable with what the Company has done in the past, but would also be an advantage for the 

Company. Friedman stated “[o]n the Modern side, and the lead times, the wait times are a real 

Case 4:17-cv-00554-YGR Document 1 Filed 02/02/17 Page 7 of 17
COMPLAINT 7 

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disadvantage for the people in the marketplace today. We are going to compete on speed just like 

we would our current business.” He continued, “it’s going to be a huge competitive advantage 

versus how the marketplace exists and operates today.” 

24. On September 10, 2015, approximately a month before RH Modern’s official 

release, Friedman continued to tout RH Modern, stating that the new product line “can be as big 

as RH is today or bigger than we are today. There is no reason to believe that RH Modern can’t 

be a multi-billion dollar business in the US.” He further stated that RH Modern “is the most 

important and significant new home furnishings business to be launched in the last 15 or 20 years.” 

The Company again raised revenue guidance to $2.158 billion to $2.178 billion, representing 

growth in the range of 16% to 17% from fiscal 2014. The Company also increased its EPS 

guidance to a range of $3.06 to $3.16, representing growth in the range of 30% to 34%, based on 

the RH Modern launch. Friedman also reassured investors that bringing the critical new product 

line to market would not be a problem for the Company stating, “[s]o the great thing about this 

and why we can go so fast is we know this business. This is a parallel business with a different 

aesthetic that can be presented in a compelling way that I think is going to completely open up the 

aperture and the acceptance of the RH brand.” Further, Boone reported that inventory was up 29%, 

stating that inventory growth “is higher than our sales growth given the inventory investments 

necessary for the launches of RH Modern and RH Teen.” 

25. The statements set forth in ¶22-24 were materially false and misleading. Contrary 

to Defendants’ representations that the Company was prepared for the launch of RH Modern, that 

inventory was adequate, and that customers would not face shipping delays, in reality, the 

Company had severely inadequate inventory and was woefully unprepared to launch RH Modern. 

Indeed, the Company knowingly placed orders over vendors’ capacity, and gave vendors 

unrealistic deadlines, leading to the Company having grossly inadequate RH Modern inventory instock at the time of the launch. Even when vendors were able to manufacture RH Modern 

furniture, it was often damaged or unfinished as vendors had to rush to meet unrealistic deadlines, 

which led to numerous customers canceling their orders or returning defective RH Modern 

furniture. 

Case 4:17-cv-00554-YGR Document 1 Filed 02/02/17 Page 8 of 17
COMPLAINT 8 

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VI. IN RESPONSE TO BELATED DISCLOSURE OF RH 

MODERN PROBLEMS, THE COMPANY MAKES FALSE 

EXCUSES AS INVESTORS SUFFER SIGNIFICANT LOSSES 

26. On December 10, 2015, just two months after the official launch of RH Modern, 

the Company disclosed that it had missed its earnings projection due to “deceleration from the 

second quarter based on a shift in the timing of our new product introductions.” Specifically, the 

Company announced that the RH Modern source book magazine had been issued a month later 

than expected and thus sales for RH Modern were also delayed. The Company further disclosed 

that while its inventory was up 25% year-over-year, RH Modern furniture was not fully in-stock 

stating, “[w]e expect RH Modern volumes to build as in-stocks improve.” These disclosures 

caused RH stock to decline by $3.78 per share, wiping out over $153 million in market value on 

December 11, 2015. The market continued to react to the news on December 14, 2015, causing 

RH stock to decline $5.16 per share, wiping out an additional $210 million in market value. 

27. To stem this decline, Defendants made false statements to reassure investors about 

the RH Modern launch, stating “[t]he early data would tell us that [RH Modern is] opening up an 

entirely new market, it’s bringing in new customers, and it’s accretive to our current core 

customers . . . . we’re seeing hits on multiple levels, and that’s why we’re seeing the early response 

that we’re seeing today.” Further, while the Company disclosed that RH Modern was not fully instock, it continued to assure investors the Company’s industry position was strong, stating that 

inventory was up 25% year-over-year and that the Company expected “to end the year with 

inventory growth higher than our sales growth given the inventory investments in RH Modern and 

RH Teen . . . . The investments we have made in our supply chain and systems infrastructure will 

enable us to continue to improve our customer experience and support our long term growth.” 

Boone continued that, despite her previous assurances that the Company would be prepared for 

the release of RH Modern, the reason the Company was low on RH Modern inventory was because 

it wanted to be conservative initially in purchasing inventory, stating, “[l]et me just clarify, it's not 

that we were in and then we were out, it's really just a build of getting some of those most initial 

products. Its every week we get more of the initial runs of things, and a certain -- we certainly 

Case 4:17-cv-00554-YGR Document 1 Filed 02/02/17 Page 9 of 17
COMPLAINT 9 

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want to be conservative with how we buy the inventory.” Friedman further reassured investors 

that the RH Modern launch had been successful and that the lack of inventory was because demand 

for the product was so high stating, “the best sellers in a new business are always going to sell out, 

and you're going to always have to respond and catch up with those.” Based on these statements, 

the Company further raised its revenue guidance to a range of $2.17 to $2.18 billion, representing 

growth in the range of 16% to 17% and also raised its EPS guidance to a range of $3.11 to $3.16 

or 32% to 34% increase from fiscal 2014. 

28. On February 9, 2016, the Company announced that its COO, Dunaj, would be 

resigning from the Company just one year after he was put in charge of inventory management. 

Analysts noted that the reasons behind Dunaj’s resignation seemed strange. For example, analysts 

from Buckingham Research stated “[w]hile we were not given any indication as to the nature of 

Ken Dunaj’s resignation other than for personal reasons, we note that the company did not have a 

good explanation as to the timing of Mr. Dunaj’s resignation.” 

29. On February 24, 2016, the Company released its 2015 fourth quarter earnings 

results one month early and announced disappointing earnings. The Company further disclosed 

that it would be investing $8-$10 million in customer accommodations during the first quarter due 

to “higher cancellation rates, shipping delays, and our overall initiative to elevate the customer 

experience . . . . We anticipate that these investments will moderate by the end of the second quarter 

as we reach optimal in-stock levels for RH Modern and improve our execution.” These disclosures 

caused RH stock to decline by $13.43 per share, wiping out over $546 million in market value. 

30. However, in an effort to stop this decline, the Company downplayed its poor 

quarterly performance, and falsely reassured investors that the problems related to RH Modern 

were over. Specifically, in the Company’s earnings call for the fiscal fourth quarter ended 

December 31, 2015, Friedman stated, “we’re on the backside of the mountain, if you will. So I 

think we are on the backside of this now. I think we're past the peak. The in stocks in Modern are 

going up.” Friedman assured investors that 70% of RH Modern products were in-stock stating, 

“[w]e're currently in the 70% range as far as our in stocks today, and we expect that to build to the 

mid-80%s by the end of the quarter which is more at a normalized level.” Defendants also offered 

Case 4:17-cv-00554-YGR Document 1 Filed 02/02/17 Page 10 of 17
COMPLAINT 10 

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two reasons for its poor performance that shifted blame away from the Company itself. First, 

Friedman stated, “we are experiencing shipping delays as certain vendors are struggling to ramp 

up production of this new product line.” Second, the Company blamed the underperformance on 

“markets affected by energy, oil, or currency fluctuations.” 

31. While these statements mollified the market, analysts continued to raise questions 

about the Company’s inventory levels related to RH Modern. For example, on May 9, 2016, 

analysts from BB&T Capital Markets surveyed 50 RH Modern products in order to determine how 

many were currently in-stock. The analysts found that only 40% of RH Modern products were instock and that the survey results “run counter to management’s late March commentary [that] 70% 

of RH Modern inventory was currently in stock.” The analysts noted that the “survey results 

indicate RH has made scant progress in ‘catching up’ with RH Modern backorders.” 

32. The statements set forth in ¶26-31 were materially false and misleading. Contrary 

to Defendants’ representations that the RH Modern launch was a remarkable success, in reality, 

the launch of RH Modern was plagued by a severe lack of inventory leading to numerous shipping 

delays, and customers canceling orders and returning defective RH Modern furniture. Further, 

Defendants’ representations that the problems surrounding RH Modern were in the past, and were 

the result of factors external to the Company, were materially false and misleading. In truth, RH 

Modern inventory was grossly inadequate throughout the Class Period. 

33. Then, on June 8, 2016, just two months after Defendants had assured investors that 

the worst problems related to RH Modern were over, the Company announced that it was 

dramatically lowering its earnings guidance for fiscal 2016 “largely due to RH Modern production 

delays during the first half.” On the same day, the Company held a conference call with analysts 

and investors to discuss the Company’s earnings and operations for the first quarter of 2016. 

During that call, Boone disclosed the Company had “invested approximately $18 million during 

the first quarter in customer accommodations and related expenses, largely as a result of RH 

Modern production delays,” nearly twice as much as the Company stated it would spend to 

accommodate customers just months earlier. 

34. Analysts noted their shock and disappointment in the true state of RH’s operations. 

Case 4:17-cv-00554-YGR Document 1 Filed 02/02/17 Page 11 of 17
COMPLAINT 11 

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For example, analysts from BB&T Capital Markets stated they were “flabbergasted by how 

quickly the wheels appear to be falling off of RH, and think the last two quarters’ debacles cast 

significant doubt on management’s credibility and ability to achieve its long-term financial 

targets.” 

35. As a result of these disclosures, RH stock declined by $7.66 per share, wiping out 

over $311 million in market value on that day alone. 

VII. LOSS CAUSATION 

36. During the Class Period, as detailed herein, Defendants made materially false and 

misleading statements and omissions, and engaged in a scheme to deceive the market. This 

artificially inflated the price of RH common stock and operated as a fraud or deceit on the Class 

(as defined below). When Defendants’ prior misrepresentations and fraudulent conduct began to 

be revealed on December 10, 2015 and February 24, 2016, Defendants made falsely reassuring 

statements to prevent the stock from declining further. Then, when Defendants’ prior 

misrepresentations and fraudulent conduct were fully revealed on June 8, 2016, the price of RH 

common stock fell precipitously again, as the prior artificial inflation came out of the stock price. 

As a result of their purchases of RH common stock during the Class Period, Plaintiff and other 

members of the Class suffered economic loss, i.e., damages, under the federal securities laws. 

VIII. CLASS ACTION ALLEGATIONS 

37. Plaintiff brings this action as a class action pursuant to Rule 23 of the Federal Rules 

of Civil Procedure on behalf of all persons who purchased the common stock of RH during the 

Class Period (the “Class”). Excluded from the Class are Defendants and their families, directors, 

and officers of RH and their families and affiliates. 

38. The members of the Class are so numerous that joinder of all members is 

impracticable. The disposition of their claims in a class action will provide substantial benefits to 

the parties and the Court. As of December 2, 2016, there were approximately 41 million shares of 

RH stock outstanding. 

39. Questions of law and fact common to the members of the Class which predominate 

over questions which may affect individual Class members include: 

Case 4:17-cv-00554-YGR Document 1 Filed 02/02/17 Page 12 of 17
COMPLAINT 12 

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(a) Whether Defendants violated the Exchange Act; 

(b) Whether Defendants omitted and/or misrepresented material facts; 

(c) Whether Defendants’ statements omitted material facts necessary in order 

to make the statements made, in light of the circumstances under which they were made, not 

misleading; 

(d) Whether Defendants knew or recklessly disregarded that their statements 

and/or omissions were false and misleading; 

(e) Whether the price of RH common stock was artificially inflated; 

(f) Whether Defendants’ conduct caused the members of the Class to sustain 

damages; and 

(g) The extent of damages sustained by Class members and the appropriate 

measure of damages. 

40. Plaintiff’s claims are typical of those of the Class because Plaintiff and the Class 

sustained damages from Defendants’ wrongful conduct. 

41. Plaintiff will adequately protect the interests of the Class and has retained counsel 

experienced in class action securities litigation. Plaintiff has no interests which conflict with those 

of the Class. 

42. A class action is superior to other available methods for the fair and efficient 

adjudication of this controversy. 

IX. INAPPLICABILITY OF STATUTORY SAFE HARBOR 

43. RH’s “Safe Harbor” warnings accompanying its forward-looking statements issued 

during the Class Period were ineffective to shield those statements from liability. 

44. Defendants are also liable for any false or misleading forward-looking statements 

pleaded herein because, at the time each such statement was made, the speaker knew the statement 

was false or misleading and the statement was authorized and/or approved by an executive officer 

of RH who knew that the statement was false. None of the historic or present tense statements 

made by Defendants were assumptions underlying or relating to any plan, projection, or statement 

of future economic performance, as they were not stated to be such assumptions underlying or 

Case 4:17-cv-00554-YGR Document 1 Filed 02/02/17 Page 13 of 17
COMPLAINT 13 

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relating to any projection or statement of future economic performance when made, nor were any 

of the projections or forecasts made by Defendants expressly related to, or stated to be dependent 

on, those historic or present tense statements when made. 

X. PRESUMPTION OF RELIANCE 

45. At all relevant times, the market for RH common stock was an efficient market for 

the following reasons, among others: 

(a) RH stock met the requirements for listing, and was listed and actively traded 

on the New York Stock Exchange, a highly efficient and automated market; 

(b) As a regulated issuer, RH filed periodic public reports with the SEC and the 

New York Stock Exchange; 

(c) RH regularly and publicly communicated with investors via established 

market communication mechanisms, including through regular disseminations of press releases on 

the national circuits of major newswire services and through other wide-ranging public disclosures, 

such as communications with the financial press and other similar reporting services; and 

(d) RH was followed by several securities analysts employed by major 

brokerage firm(s) who wrote reports which were distributed to the sales force and certain 

customers of their respective brokerage firm(s). Each of these reports was publicly available and 

entered the public marketplace. 

46. As a result of the foregoing, the market for RH securities promptly digested current 

information regarding RH from all publicly available sources and reflected such information in the 

price of RH common stock. Under these circumstances, all purchasers of RH common stock 

during the Class Period suffered similar injury through their purchase of RH common stock at 

artificially inflated prices and the presumption of reliance applies. 

COUNT I 

For Violation of Section 10(b) of the Exchange Act and Rule 10b-5 Against All Defendants

47. Plaintiff repeats and realleges each and every allegation contained above as if fully 

set forth herein. 

48. During the Class Period, Defendants carried out a plan, scheme, and course of 

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COMPLAINT 14 

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conduct which was intended to and, throughout the Class Period, did: (i) deceive the investing 

public, including Plaintiff and other Class members, as alleged herein; and (ii) cause Plaintiff and 

other members of the Class to purchase RH common stock at artificially inflated prices. 

49. Defendants: (i) employed devices, schemes, and artifices to defraud; (ii) made 

untrue statements of material fact and/or omitted to state material facts necessary to make the 

statements not misleading; and (iii) engaged in acts, practices, and a course of business which 

operated as a fraud and deceit upon the purchasers of the Company’s common stock in an effort 

to maintain artificially high market prices for RH common stock in violation of Section 10(b) of 

the Exchange Act and Rule 10b-5 promulgated thereunder. 

50. Defendants, individually and in concert, directly and indirectly, by the use, means 

or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a 

continuous course of conduct to conceal adverse material information about the Company’s 

financial well-being, operations and prospects. 

51. During the Class Period, Defendants made the false statements specified above, 

which they knew or recklessly disregarded to be false or misleading in that they contained 

misrepresentations and failed to disclose material facts necessary in order to make the statements 

made, in light of the circumstances under which they were made, not misleading. 

52. Defendants had actual knowledge of the misrepresentations and omissions of 

material fact set forth herein, or recklessly disregarded the true facts that were available to them. 

Defendants engaged in this misconduct to conceal RH’s true condition from the investing public 

and to support the artificially inflated prices of the Company’s common stock. 

53. Plaintiff and the Class have suffered damages in that, in reliance on the integrity of 

the market, they paid artificially inflated prices for RH common stock. Plaintiff and the Class 

would not have purchased the Company’s common stock at the prices they paid, or at all, had they 

been aware that the market prices for RH common stock had been artificially inflated by 

Defendants’ fraudulent course of conduct. 

54. As a direct and proximate result of Defendants’ wrongful conduct, Plaintiff and the 

other members of the Class suffered damages in connection with their respective purchases of the 

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Company’s common stock during the Class Period. 

55. By virtue of the foregoing, Defendants violated Section 10(b) of the Exchange Act 

and Rule 10b-5 promulgated thereunder. 

COUNT II 

For Violation of Section 20(a) of the Exchange Act Against the Individual Defendants 

56. Plaintiff repeats, incorporates, and realleges each and every allegation set forth 

above as if fully set forth herein. 

57. The Individual Defendants acted as controlling persons of RH within the meaning 

of Section 20(a) of the Exchange Act. By virtue of their high-level positions, participation in 

and/or awareness of the Company’s operations, direct involvement in the day-to-day operations of 

the Company, and/or intimate knowledge of the Company’s actual performance, and their power 

to control public statements about RH, the Individual Defendants had the power and ability to 

control the actions of RH and its employees. By reason of such conduct, the Individual Defendants 

are liable pursuant to Section 20(a) of the Exchange Act. 

XI. PRAYER FOR RELIEF 

WHEREFORE, Plaintiff prays for judgment as follows: 

A. Determining that this action is a proper class action under Rule 23 of the Federal 

Rules of Civil Procedure; 

B. Awarding compensatory damages in favor of Plaintiff and other Class members 

against all Defendants, jointly and severally, for all damages sustained as a result 

of Defendants’ wrongdoing, in an amount to be proven at trial, including interest 

thereon; 

C. Awarding Plaintiff and the Class their reasonable costs and expenses incurred in 

this action, including attorneys’ fees and expert fees; and 

D. Awarding such equitable/injunctive or other further relief as the Court may deem 

just and proper. 

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COMPLAINT 16 

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XII. JURY DEMAND 

Plaintiff demands a trial by jury. 

Dated: February 2, 2017 Respectfully submitted, 

BERNSTEIN LITOWITZ BERGER 

 & GROSSMANN LLP 

/s/ Blair A. Nicholas 

BLAIR A. NICHOLAS 

BLAIR A. NICHOLAS (Bar No. 178428) 

(blairn@blbglaw.com) 

12481 High Bluff Drive, Suite 300 

San Diego, CA 92130 

Tel: (858) 793-0070 

Fax: (858) 793-0323 

GERALD H. SILK 

(jerry@blbglaw.com) 

AVI JOSEFSON 

(avi@blbglaw.com) 

1251 Avenue of the Americas, 44th Floor 

New York, New York 10020 

Tel: (212) 554-1493 

Fax: (212) 554-1444 

Attorneys for Plaintiff City of Miami 

General Employees’ & Sanitation 

Employees’ Retirement Trust

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