IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

LAZAR MACOVSKI, individually and on )

behalf of all others similarly situated, )

)

Plaintiff, )

)

vs. ) Case No. 20 C 2581

)

GROUPON, INC., RICH WILLIAMS, and )

MELISSA THOMAS, )

)

Defendants. )

MEMORANDUM OPINION AND ORDER

MATTHEW F. KENNELLY, District Judge:

On April 28, 2021, the Court dismissed the plaintiffs' amended complaint for 

failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). See Macovski v. 

Groupon, Inc., No. 20 C 2581, 2021 WL 1676275, at *1 (N.D. Ill. Apr. 28, 2021). The 

plaintiffs now seek leave to file a second amended complaint. The defendants assert 

that the proposed second amendment complaint also fails to state a claim, and they 

urge the Court to deny leave to amend. For the reasons discussed below, the Court 

grants the plaintiffs' motion.

Background

On behalf of himself and others, Lazar Macovski brought this securities fraud 

case after shares he purchased in Groupon, Inc. lost significant value. Under the 

Private Securities Litigation Reform Act, Fadi E. Rahal was appointed to serve as Lead 

Plaintiff. See 15 U.S.C. § 78u-4(a)(3)(B)(i). The Court will refer to the plaintiff as 

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"Rahal" even though he was not the party who initially filed the complaint.

At the heart of this suit are two alleged omissions of material adverse

information: (1) the performance of Groupon's Select program; and (2) the company's 

performance in a subcategory of its sales called "Goods." Rahal blames his shares'

loss in value on the alleged omissions. He accuses Groupon, its former chief executive 

officer, Richard Williams, and its then interim chief financial officer, Melissa Thomas, of 

misleading investors by knowingly omitting the adverse information. Rahal brings two 

claims, both under the Securities Exchange Act: fraud under section 10(b) and 

vicarious liability for fraud under section 20(a). 

The defendants argue that the Court should deny leave to amend because the 

proposed amendment would not survive a motion to dismiss and is therefore futile. 

Thus, in considering the plaintiffs' motion, the Court must accept as true the wellpleaded factual allegations in Rahal's proposed second amended complaint and must 

view those allegations in the light most favorable to Rahal. See Runnion ex rel. v. Girl 

Scouts of Greater Chicago & Nw. Indiana, 786 F.3d 510, 524 (7th Cir. 2015) ("But when 

the basis for denial is futility, we apply the legal sufficiency standard of Rule 12(b)(6) to 

determine whether the proposed amended complaint fails to state a claim."); Appert v. 

Morgan Stanley Dean Witter, Inc., 673 F.3d 609, 622 (7th Cir. 2012) (recounting the 

standards for considering dismissals under Rule 12(b)(6)). 

The following facts are drawn from Rahal's proposed second amended 

complaint. 

A. Groupon's business model and recent "headwinds"

Groupon is an e-commerce marketplace that connects consumers to merchants. 

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At the time the relevant events occurred, Groupon competed in three markets: (1) 

"Local" (e.g., local services, events, and activities sold by Groupon but provided by a 

third-party merchant); (2) "Goods" (i.e., merchandise sold directly to customers); and (3) 

"Travel" (i.e., hotels, airfare, and package travel deals). Of the three, Local deals were 

the company's primary profit driver. Though Local only made up 40 percent of 

Groupon's consolidated revenues, it generated 73 percent of the company's 

consolidated gross profits. Conversely, though Goods sales made up 55 percent of 

Groupon's total revenue, it represented only 20 percent of gross profits. 

Despite its low margins, Goods had value beyond its profits because it drew 

customers to other parts of Groupon's platform where they could view and purchase the 

company's higher-margin offerings, especially Local deals. In other words, even though 

Local was Groupon's main profit driver and that market was the one with the greatest 

opportunity for growth, the company believed Goods—even with its smaller profit 

margins—was necessary as an "engagement driver" for its other products. See 2d 

Amd. Compl. ¶ 30 (internal quotation marks omitted). 

These customer cross-shopping opportunities were especially important for 

Groupon, as the company was—and had for years been—"experiencing severe 'traffic 

headwinds,'" i.e., decreases in "its principal marketing channels (email and search 

engine marketing)." Id. ¶¶ 3-4; see also id. ¶¶ 26-27. Also distressing was the fact that 

the company had for years been facing a stubborn decline in its active customer count. 

B. Groupon's focus on increasing customers' purchase frequency

In response to these "headwinds," Groupon settled on a strategy of increasing 

existing customers' purchase frequency. Id. ¶ 31. As Williams explained in a letter to 

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shareholders in 2019, at that point, "increasing purchase frequency and total unit 

volume [were] more important . . . than . . . customer counts," because increased 

purchase frequency and total unit volume would "unlock the leverage in [Groupon's] 

model and an ability to profitably invest in growth." Id. ¶ 31. 

One way Groupon tried to increase purchase frequency was through Groupon 

Select, a paid membership program. The way the Select program worked was that, in 

exchange for a monthly membership fee, Groupon customers who joined the program

received discounts on products in addition to other benefits. Groupon hoped that 

Select, along with other "product enhancements" and "initiatives," would be "important 

drivers for increasing customer purchase frequency and growing . . . business over 

time." Id. ¶ 72 (emphasis omitted). The company cautioned, however, that "gross profit 

and operating income may be adversely impacted in the near term" as a result of its 

focus on "driving" these strategic initiatives. Id.

Throughout the class period, the defendants shared positive reports about 

Select's rollout and performance. In a July 30, 2019 letter to shareholders, Williams 

said that Select's early "indicators [were] very positive with significantly improved 

purchase frequency, higher average order value and increased customer propensity to 

search for things to eat, see, do and buy." Id. ¶¶ 35, 70 (emphasis omitted). In the 

subsequent Q2 2019 conference call with analysts and investors, Groupon asserted 

that Select was profitable and that it would "almost double the average gross profit per 

customer" that Groupon generated at that point. Id. ¶ 37 (internal quotation marks 

omitted). 

In a November 4, 2019 letter to shareholders, Williams indicated that Groupon 

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was "pleased" with Select's "results to date," noting that the program had attracted more 

than 260,000 members. Id. ¶¶ 40, 78. Williams said that he and others were 

encouraged by how Select's members behaved, and he told shareholders that the 

company's metrics showed a "60 percent increase in purchase frequency and a 20 

percent jump in average order value" among the program's members. Id. ¶¶ 40, 78

(emphasis omitted). Still, Williams observed that these results were "early" and that the 

company was "still analyzing" them, as the first Select members had only barely 

completed their first year in the program. Id. ¶ 40. He further noted that Groupon had 

"work to do to fully build out the infrastructure necessary for Select to run at scale." Id.

In the subsequent Q3 2019 conference call with analysts and investors, 

Groupon's executives repeated many of the positive points about Select and reasserted 

its profitability. For example, Thomas described being "really excited" by the 

"encouraging results" that Select had produced to date. Id. ¶ 41. During the same call, 

Williams indicated that Groupon's strategy around Select was starting "to play its way 

through the local customer" and pointed to a 60 percent increase in purchase frequency 

as evidence of this fact. Id. ¶ 81 (emphasis omitted). Moreover, Williams, in a 

December 11, 2019 Barclays conference presentation, shared that Select's margins 

were "such that [Groupon made money] on the units . . . [and] on the membership fees 

as well. So, the total economics of the program are really compelling." Id. ¶ 98

(emphasis omitted); see also id. ¶ 43. 

C. Groupon's financial guidance for 2019

Before and throughout the class period, Groupon's financial outlook was 

principally expressed through a figure known as its adjusted projected EBITDA—

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earnings before interest, taxes, depreciation, and amortization. In 2019, Groupon's 

adjusted projected EBITDA—first provided in February of that year—was $270 million. 

The 270-million-dollar figure was reiterated and reaffirmed when the company

announced its first, second, and third quarter results for 2019. 

D. Groupon shutters Select and exits the Goods marketplace

In February 2020, Groupon announced two decisions. The first was that the 

company would exit the Goods category and instead focus on Local experiences. The 

company explained in its Q4 2019 letter to shareholders that "[m]idway through the 

fourth quarter it became abundantly clear" that Groupon was not able to compete 

"effectively in Goods." Id. ¶¶ 60,105. Data showed "far fewer customers engag[ing] 

with Goods in the fourth quarter than . . . anticipated, which impacted overall traffic to 

[the] site." Id. Lower traffic to the site caused lower performance in all of Groupon's 

categories. 

Goods had been a troubled area for some time ("for four quarters"). See id ¶¶ 

65, 105, 122. As indicated earlier, the company justified its continued competition in the 

market because Goods had been an engagement driver for other categories, primarily 

Local. By this time, however, Groupon had "seen engagement with . . . Goods 

inventory shift meaningfully lower, driven in large part by [the company's] inability to 

compete in [this] fiercely competitive . . . retail landscape." Id. ¶¶ 65; 105. In short, 

because Goods was "no longer generating the cross-shopping behavior or customer 

activation activity" to justify further investment, Groupon's executives determined that 

"Goods ha[d] outlived its role as a business driver" and instead had "become a 

significant drag." Id. ¶¶ 65, 105. Williams gave similar explanations for the decision 

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during the Q4 2019 conference call with analysts and investors. 

The second decision announced in February 2020 was that Groupon would

"discontinue new enrollments" in the Select program. Id. ¶¶ 53, 111. As with the Goods 

decision, the company explained the move to shutter Select in its Q4 2019 letter to 

shareholders and on the Q4 2019 conference call with analysts and investors. The Q4 

2019 letter stated that Select "added to [the company's] challenges in [Q4 2019]" 

because Select's benefits began "appealing disproportionately to customers purchasing 

goods" rather than those "transacting on [the company's] local platform." Id. ¶ 110. As 

a result, Select "pressured margins and drove higher than anticipated customer 

acquisition costs." Id. After it became aware of these facts, Groupon determined that 

Select could not provide the return on investment "needed for it to be a key priority", as 

the program did not "address the core of [Groupon's] product or business model, nor 

[did it] overcome the limitations in the legacy Groupon business." See id..

On the Q4 2019 conference call, Thomas added that Select "was expected to be 

net neutral to gross profit in the fourth quarter," but the program underperformed 

because—in addition to the problems discussed in the letter to shareholders—there was

"a lower than expected number of enrollees converting to paid members." Id. ¶ 111. 

E. Groupon's shares decline

Following the disclosure of these decisions, Groupon's shares—which had 

closed on February 18, 2020 at $3.05 per share—fell $1.35 (nearly 44 percent) and 

closed the next day at $1.70 per share. Id. ¶ 113. On February 19, over 155 million 

Groupon shares changed hands, more than 25 times Groupon's average daily trading 

volume during the Class Period. Id.

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Discussion

In his proposed second amended complaint, Rahal asserts that the defendants 

violated the Exchange Act when they made materially misleading statements about 

Select and Goods. Specifically, Rahal alleges that though the defendants knew that 

Select was "over-indexing" to Goods and knew that Groupon could no longer effectively 

compete in Goods, they failed to disclose this information to investors. The defendants 

urge the Court to deny leave to amend because they believe that proposed second 

amendment complaint—like the since dismissed amended complaint—fails to state a 

claim. 

"Although Federal Rule of Civil Procedure 15(a)(2) directs courts to freely give 

leave to amend when justice so requires, courts may deny a proposed amended 

pleading if the amendment would be futile." Always Towing & Recovery, Inc. v. City of 

Milwaukee, 2 F.4th 695, 707 (7th Cir. 2021) (alterations accepted) (internal quotation 

marks omitted). An amendment is futile "only if it appears to a certainty that [the] 

plaintiff cannot state a claim." Barry Aviation Inc. v. Land O'Lakes Mun. Airport 

Comm'n, 377 F.3d 682, 687 (7th Cir. 2004); see also Garcia v. City of Chicago, 24 F.3d 

966, 970 (7th Cir. 1994) ("[F]utile repleadings include restating the same facts using 

different language, reasserting claims previously determined, failing to state a valid 

theory of liability, and the inability to survive a motion to dismiss." (citations omitted)).

To survive a motion to dismiss for failure to state a claim, a complaint "must (1) 

describe the claim in sufficient detail to give the defendant fair notice of the claim and 

[the] grounds on which it rests and (2) contain sufficient factual matter, accepted as 

true, to state a claim to relief that is plausible on its face." Cornielsen v. Infinium Cap. 

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Mgmt., LLC, 916 F.3d 589, 598 (7th Cir. 2019) (citation omitted) (internal quotation 

marks omitted). A claim is plausible on its face "when the plaintiff pleads factual content 

that allows the court to draw the reasonable inference that the defendant is liable for the 

misconduct alleged." Bissessur v. Indiana Univ. Bd. of Trustees, 581 F.3d 599, 602 (7th 

Cir. 2009) (internal quotation marks omitted). 

A complaint's factual allegations "must be enough to raise a right to relief above 

the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). 

"Threadbare recitals of the elements of a cause of action, supported by mere conclusory 

statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

In addition to the standard under Rule 12(b)(6), the Court must also consider the 

heightened pleading requirements imposed by Federal Rule of Civil Procedure 9(b). 

See Cornielsen, 916 F.3d at 598 ("Heightened pleading requirements apply to 

complaints alleging fraud."). Under Rule 9(b), a party alleging fraud or mistake "must 

state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 

9. The Seventh Circuit has said that Rule 9(b) requires a plaintiff to provide "precision 

and some measure of substantiation to each fraud allegation." Menzies v. Seyfarth 

Shaw LLP, 943 F.3d 328, 338 (7th Cir. 2019) (internal quotation marks omitted). The 

court has also said that a plaintiff satisfies Rule 9(b) when he pleads "the who, what, 

when, where, and how of the alleged fraud." Id. (internal quotation marks omitted).

There is one further standard to consider. In securities fraud cases like this one, 

the Private Securities Litigation Reform Act (PSLRA) imposes further pleading 

requirements. See Cornielsen, 916 F.3d at 599. Specifically, claims under the 

Securities Exchange Act must "specify each statement alleged to have been 

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misleading, the reason or reasons why the statement is misleading, and, if an allegation 

regarding the statement or omission is made on information and belief, the complaint 

shall state with particularity all facts on which that belief is formed." 15 U.S.C. § 78u–

4(b)(1)(B). Additionally, the complaint must "state with particularity facts giving rise to a 

strong inference that the defendant acted with the required state of mind." 15 U.S.C. § 

78u–4(b)(2)(A).

A. Section 10(b) claim

Section 10(b) of the Securities Exchange Act prohibits the unlawful "use or 

employ[ment], in connection with the purchase or sale of any security . . . any 

manipulative or deceptive device or contrivance in contravention of such rules and 

regulations as the Commission may prescribe." 15 U.S.C. § 78j(b). SEC Rule 10b–5

"implements" Section 10(b) of the Exchange Act. See W. Palm Beach Firefighters'

Pension Fund v. Conagra Brands, Inc., No. 19 C 1323, 2020 WL 6118605, at *4 (N.D. 

Ill. Oct. 15, 2020). Rule 10b–5 prohibits any "untrue statement of a material fact or . . .

omit[ting] to state a material fact necessary in order to make the statements made, in 

the light of the circumstances under which they were made, not misleading." 17 C.F.R. 

§ 240.10b–5(b).

To state a claim under section 10(b) and Rule 10b–5, the plaintiff must allege "(1) 

a material misrepresentation or omission by the defendant; (2) scienter; (3) a 

connection between the misrepresentation or omission and the purchase or sale of a 

security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) 

loss causation." See Halliburton Co. v. Erica P. John Fund, Inc., 573 U.S. 258, 267

(2014) (internal quotation marks omitted).

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1. Material misrepresentations or omissions

To determine whether a statement was misleading, a court must "consider the 

context in which the statement was made" and "determine whether the facts alleged are 

sufficient to support a reasonable belief as to the misleading nature of the statement or 

omission." Constr. Workers Pension Fund-Lake Cty. & Vicinity v. Navistar Int'l Corp., 

114 F. Supp. 3d 633, 651 (N.D. Ill. 2015) (internal quotation marks omitted). "Even 

statements that are literally true can still be actionable under § 10(b) as misleading if 

they are susceptible to another interpretation by a reasonable investor." Id.

Rahal argues that the defendants made various material misstatements and 

omissions during the class period. The allegedly misleading statements were shared in 

Groupon's Q2 2019 and Q3 2019 earnings announcements and at a conference held in 

December 2019.1 For each statement he has proffered, Rahal asserts it was materially 

misleading because the defendants were "in possession of, but concealed and failed to 

disclose, material adverse information." Id. ¶¶ 71, 79, 82, 84; see also id. ¶¶ 73, 85, 87, 

91, 93, 97, 99. Specifically, Rahal alleges that when the statements were 

communicated, the defendants were already aware that "Select was over-indexing to 

Goods . . . and therefore that Select was failing to meaningfully boost purchase 

1 The defendants contend that because Thomas was not interim CFO at the time of 

Groupon's Q2 2019 earnings announcement and did not participate in the Barclay's 

conference, Rahal cannot "allege any securities fraud claims against her based on 

statements" made at those times. See Def.'s Resp. Br. at 2 n.1, 9 n.2. But there are 

only two claims in this case—a single claim of fraud under section 10(b) and a single 

claim of vicarious liability for fraud under section 20(a)—not a series of parsed claims 

premised on individual statements. In short, the proposition that Thomas did not make 

misleading statements during Q2 2019 or at the Barclay's conference does not affect 

the outcome. If, as Rahal alleges, Thomas made materially misleading statements 

during the Q3 2019 earnings announcement, and the other requirements for liability are 

met, she can be held liable. 

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frequency in the important Local category." Id. ¶¶ 71, 73, 79, 82, 84; see also id. ¶¶ 85, 

87, 93, 97, 99. Rahal also argues that the defendants knew that Goods had long been 

underperforming. See id. ¶¶ 71, 73, 79, 82, 84, 85, 87, 91, 93, 97, 99. At bottom, Rahal 

contends that by "omitting that Select was over-indexing to an admittedly 

underachieving business segment" the defendants "misled investors to believe that 

Select was more successful that it in fact was." Id. ¶¶ 71; see also id. ¶¶ 73, 79, 82, 84, 

85, 87, 93, 97, 99.

The defendants assert that the proposed second amended complaint does not 

include any actionable false or misleading statements regarding either Goods or Select. 

First, the defendants argue that Rahal has failed to plead any facts showing that Select 

members were purchasing more Goods offerings than Local products throughout the 

Class Period or that the defendants knew this when Rahal alleges they did. The 

defendants then argue that Rahal's allegations fault them for failing to disclose

information that did not even exist at the time the allegedly misleading statements were 

made. Third, even if the defendants omitted information, they argue that the omissions

do not make any of the identified statements misleading, especially when read in 

context. Finally, the defendants assert that several of the statements proffered are 

affirmative statements that are either factually correct according to the proposed 

amended complaint, too vague to be considered material, or "forward-looking 

statements accompanied by meaningful cautionary language" that Rahal "does not 

allege lacked a reasonable basis." Def.'s Resp. Br. at 3. 

The Court addresses each of the defendants' arguments against the proffered 

statements below.

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a. So-called "temporal flaws"

The defendants argue that there is a "temporal flaw" in some of Rahal's 

allegations. See Def.'s Resp. Br. at 5. According to the defendants, Williams's Q2 2019 

statements regarding Select's performance were not misleading because the 

information that led Groupon to end the Select program did not exist until the fourth 

quarter. See id. Additionally, the defendants assert that the decision to exit the Goods 

market was based on fourth quarter performance and thus any duty to disclose the 

decision to exit the Goods market could not have arisen before the Q4 2019 earnings 

announcement. See id. at 3.

The defendants misunderstand Rahal's allegations. In the proposed second 

amended complaint, Rahal alleges the defendants "knew that Select was over-indexing

to Goods" by the time of the July 30, 2019 letter, i.e. long before the fourth quarter and 

the decision to shutter Select. 2d Amd. Compl. ¶ 71. To support this allegation, Rahal 

notes that defendants admitted that Select's over-indexing trend became apparent in 

the "second half of 2019." Id. ¶ 111. Thus it is plausible that, as Rahal alleges, the 

defendants knew of the Select's troubles in July 2019 when the Q2 earnings statements 

were made. See id. ¶¶ 68–72. 

Regarding Goods, Rahal does not allege that the defendants' statements were 

misleading because they failed to disclose that Groupon decided to exit Goods. 

Instead, the proposed complaint repeatedly alleges that the defendants knew Select 

was over-indexing to Goods—an already underachieving business segment—instead of 

Local, and failed to disclose this fact. See id. ¶¶ 71, 73, 75, 79, 82, 84–85, 87–89, 91, 

93, 97, 99. Rahal asserts that by omitting this information, the defendants misled 

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investors about Select's performance and its relationship to Goods. See id. ¶¶ 71, 73, 

75, 79, 82, 84–85, 87–89, 91, 93, 97, 99.

To the extent the defendants argue that it is unreasonable to infer that they knew 

of Select's troubling trend only one month into the second half of 2019, that argument 

lacks merit. Depending on the problem alleged, its existence at a later date "may 

support an inference that it was present . . . months earlier." Iowa Pub. Employees' Ret. 

Sys. v. MF Glob., Ltd., 620 F.3d 137, 143 n.13 (2d Cir. 2010); see also In re Apple Inc. 

Sec. Litig., No. 19-CV-02033-YGR, 2020 WL 6482014, at *9 (N.D. Cal. Nov. 4, 2020)

(holding defendant's statement that "he saw signs that were 'particularly bad'" in 

November 2019, yielded the inference that troubling signs existed in preceding months). 

Moreover, making such an inference is "sufficient to raise the plaintiffs' right to relief 

above the speculative level." Iowa Pub. Employees' Ret. Sys., 620 F.3d at 143 n.13 

(alterations accepted) (internal quotation marks omitted). Defendants' contention on 

this point is unavailing.

b. Materiality

The defendants argue that many of the proffered statements are not actionable 

because they are not material. Determining the materiality of a statement is a factintensive process. Shah v. Zimmer Biomet Holdings, Inc., 348 F. Supp. 3d 821, 840 

(N.D. Ind. 2018). Materiality is judged by determining "the significance the reasonable 

investor would place on the withheld or misrepresented information." W. Palm Beach 

Firefighters' Pension Fund, 495 F. Supp. 3d at 650 (internal quotation marks omitted). 

"The crux of materiality is whether, in context, an investor would reasonably rely on the 

defendant's statement as one reflecting a consequential fact about the company." Id. at 

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651 (internal quotation marks omitted). 

Because determination of the materiality of a statement is fact intensive, 

materiality determinations are "rarely appropriate at the summary judgment stage, let 

alone on a motion to dismiss." Shah, 348 F. Supp. 3d at 840 (internal quotation marks 

omitted); see also Marks v. CDW Computer Centers, Inc., 122 F.3d 363, 370

(alterations accepted) (internal quotation marks omitted) (7th Cir. 1997) (“[T]he 

determination of materiality requires delicate assessments of the inferences a

reasonable shareholder would draw from a given set of facts and the significance of 

those inferences to him, and these assessments are peculiarly ones for the trier of 

fact."); In re Akorn, Inc. Sec. Litig., 240 F. Supp. 3d 802, 815 (N.D. Ill. 2017) (explaining 

that at the motion to dismiss stage, materiality arguments are not appropriate unless the 

allegedly misleading statements are "so obviously unimportant to a reasonable investor 

that reasonable minds could not differ on the question of their importance").

The defendants do not argue outright that the allegedly misleading statements 

are so obviously unimportant that reasonable minds could not question their materiality. 

See In re Akorn, Inc. Sec. Litig., 240 F. Supp. 3d at 815. Instead, they argue that many 

of the statements were too vague to be material. That argument may turn out to have 

merit once the evidence is presented, but at this point in the proceedings, the Court 

cannot appropriately conclude, on the face of the complaint, that any of the statements

challenged by the defendants would have been obviously unimportant to a reasonable 

investor such that reasonable minds could not disagree. See id. Each of the 

challenged statements supports Rahal's theory that the defendants communicated a 

narrative of improvement rather than disclosing the adverse trends affecting Select and 

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Goods. See 2d Amd. Compl. ¶¶ 70, 71, 78–79, 81–84, 86–87, 98–99. Without more, it 

is not obvious that a reasonable investor would not view these statements as important, 

especially when considering the importance of Goods to Groupon's overall business, 

see 2d Amd. Compl. ¶¶ 3, 4, 65, and that Select was implemented to increase 

"customer purchase frequency" and Groupon's "business over time," see id. ¶ 72. 

Further, whether these particular statements are too vague to be material seems exactly 

the kind of inquiry that would lead reasonable minds to different conclusions. 

For these reasons, the Court concludes that the defendants' materiality 

arguments are inappropriate at this stage of the proceedings.

c. Truth

Related to their materiality argument, the defendants assert that many of the 

challenged statements were true when made. But, as noted earlier, truthful statements 

are still actionable under section 10(b) if they are misleading. Constr. Workers Pension 

Fund, 114 F. Supp. 3d at 651; Plumbers & Pipefitters Loc. Union No. 630 PensionAnnuity Tr. Fund v. Allscripts-Misys Healthcare Sols., Inc., 778 F. Supp. 2d 858, 878 

(N.D. Ill. 2011). 

To allege that a statement was misleading, a plaintiff must identify "a specific 

statement that is made misleading by an omission, and offer specific, contradictory 

information known to Defendants sufficient to establish that Defendants made any 

misleading statements.” Constr. Workers Pension Fund, 114 F. Supp. 3d at 651 

(alterations accepted) (internal quotation marks omitted); see also Plumbers & 

Pipefitters Loc. Union No. 630, 778 F. Supp. 2d at 878 ("In determining whether a 

statement is false or misleading, the relevant question a court must answer is 'whether 

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the facts alleged are sufficient to support a reasonable belief as to the misleading nature 

of the statement or omission.'"). 

Rahal has met this burden for each of the statements the defendants argue were 

not misleading. First up, Williams's Q2 2019 statements. Rahal asserts that Williams' 

Q2 2019 statements that Groupon was "making progress on initiatives" it believed 

would "lay the foundation for long-term, profitable growth," and the statement that Select 

was driving "significantly improved customer purchase frequency" and "higher average 

order value," communicated a "narrative of improvement" despite having material 

adverse information indicating otherwise. See 2d Amd. Compl. ¶¶ 69-71. Rahal alleges 

that the statements were misleading because Williams, at the time the statements were 

made, must have been aware "that Select was over-indexing to Goods" instead of Local 

and was therefore aware that "Select was failing to meaningfully boost purchase 

frequency in the important Local category." Id. ¶ 71. At this stage, Rahal's allegations 

regarding the Q2 2019 statements are sufficient. He has identified the allegedly 

misleading statements and explained what contrary information he believes Williams 

knew at the time he made the statements. See Constr. Workers Pension Fund, 114 F. 

Supp. 3d at 651. If Williams knew of this adverse trend, his statements, even if true, 

would be misleading. Id.

Second to consider are a series of statements made within Groupon's Q3 

earnings announcements. 2nd Amd. Compl. ¶¶ 76–93. The defendants argue that the 

allegations in the proposed second amended complaint do not establish that Select was 

"failing to meaningfully boost purchase frequency" and do not refute that Select's 

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"performance and prospects" were as positive as portrayed.2 Def.'s Resp. Br. at 7. 

Again, Rahal does not and does not need to allege that the defendants' statements 

were false. Instead, he alleges that the statements were misleading because the 

defendants were in possession of material adverse information—that Select was overindexing to Goods—and failed to disclose that information. Rahal concludes that the 

defendants' failure to disclose "that Select was over-indexing to a foundering business 

line that Groupon was on the verge of exiting . . . [misled] investors by portraying 

Select's performance and prospects as more positive than they in fact were." See id. ¶¶

79, 82; see also id. ¶¶ 84, 85, 87, 93, 97, 99. Thus, here too, the Court concludes that 

Rahal alleged facts sufficient to support a reasonable belief that the proffered 

statements were misleading. He has identified allegedly misleading statements, 

explained what information he believes the defendants knew at the time the statements 

were made, and provided a basis for his belief. See Constr. Workers Pension Fund, 

114 F. Supp. 3d at 651.

In sum, Rahal has adequately and properly pled that the defendants' various 

statements were misleading when made. 

d. PSLRA safe harbor provision

The defendants argue that many of their statements are not actionable because 

they are forward-looking statements accompanied by meaningful cautionary language. 

The PSLRA's safe harbor provision protects forward-looking statements. A statement is 

forward-looking if it "discuss[es] 'the plans and objectives of management for future 

2 For the reasons already discussed, the Court is not persuaded by the defendants' 

arguments regarding the immateriality of these statements or any purported temporal 

flaw.

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operations, including plans and objectives relating to the products or services of the 

issuer' and 'the assumptions underlying or relating' to those statements." Constr. 

Workers Pension Fund, 114 F. Supp. 3d at 646 (quoting 15 U.S.C. §§ 78u–5(i)(1)(B), 

(D)). To be eligible for safe harbor protection, the statement must be "identified as 

forward-looking and accompanied by meaningful cautionary language identifying factors 

that could cause actual results to materially differ from those in the forward–looking 

statement.” Constr. Workers Pension Fund, 114 F. Supp. 3d at 646. (internal quotation 

marks omitted). A statement may also be eligible for safe harbor protection "if the 

plaintiff fails to demonstrate that the statement was made with actual knowledge that it 

was false or misleading." Id.

The Court addresses each of the challenged statements individually. 

i. Q2 2019 letter to shareholders

In Groupon's Q2 2019 letter, Williams wrote: 

In the second quarter, Groupon continued our relentless focus on becoming 

the daily habit in local commerce. We are transforming our brand, product 

and business, and we are making progress on the initiatives that we 

believe lay the foundation for long-term, profitable growth and a new 

Groupon for consumers, merchants and stockholders alike.

* * *

Select is simply the best way to experience Groupon today, leveraging all 

of the work we’re putting into voucherless while accelerating the savings for 

which we’re best known. And it’s only getting better . . . .

More than 150,000 members have joined the program so far, and it is 

scaling quickly with both new and existing customers. Initial

indicators are very positive with significantly improved purchase 

frequency, higher average order value and increased customer 

propensity to search for things to eat, see, do and buy. It’s still early 

days, but given its promise and pace, we expect to invest more aggressively 

in Select over the coming quarters.

2d Amd. Compl. ¶ 70.

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Williams's statements were forward-looking (e.g., "we are making progress on 

the initiatives that we believe lay the foundation for long-term, profitable growth" and 

"we expect to invest more aggressively in Select over the coming quarters.").3 See 2d 

Amd. Compl. ¶ 70 (emphasis from original omitted) (emphasis added). But even if the 

first element of the test is satisfied, the second element is not because the statements 

were not accompanied by meaningful cautionary language sufficient to trigger safe 

harbor protection. See Constr. Workers Pension Fund, 114 F. Supp. 3d at 646. 

"Cautionary language is meaningful if it puts an investor on notice of the danger of the 

investment to make an intelligent decision about it according to her own preferences for 

risk and reward." Desai v. Gen. Growth Properties, Inc., 654 F. Supp. 2d 836, 844 

(N.D. Ill. 2009) (internal quotation marks omitted). Boilerplate warnings will not do; 

instead, cautionary language must be "substantive and tailored to the specific 

predictions made in the allegedly misleading statement." Id. at 845 (internal quotation 

marks omitted). To say that the cautionary language must be substantive and tailored 

to the specific predictions made does not mean that the language must "expressly refer 

to the risk that ultimately caused the projection to differ from the results" or that 

companies are expected to provide the "most helpful caution." See id. at 845. It is 

enough that the company identify that "the principal contingencies," related to the 

particular projections, "that could cause actual results to differ." Id.

There are no tailored cautions in Williams's statements, and no such cautions 

were incorporated by reference. See id. at 844. ("[C]ourts consider cautionary 

3 In its Q2 2019 10–Q, Groupon notes that the words like "may," "will," "should," 

"could," "expect," "anticipate," "believe," "estimate," "intend," "continue" are intended 

to identify forward-looking statements. Dkt. no. 49-3 at ECF p. 3 of 10.

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statements that either accompanied the forward-looking statement or were incorporated 

by reference."). It is true that Williams was clear that he was only communicating "initial 

indicators" in the program's "early days", see 2d Amd. Compl. ¶ 70 (emphasis omitted), 

but those obvious facts do not amount to substantive and tailored language meant to 

put an investor on notice of the danger in investing. See Desai, 654 F. Supp. 2d at 845. 

In fact, read in context, these statements give no reason to conclude that Williams even 

intended to mention any principal or important risks for investing. See Asher v. Baxter 

Int'l Inc., 377 F.3d 727, 734 (7th Cir. 2004), as amended (Sept. 3, 2004) (concluding 

that there was no reason on the record to conclude that the defendant mentioned the 

allegedly cautionary statements to share principal or important risks for investing).

Additionally, the defendants suggest that language from Groupon's Q2 2019 

Form 10–Q was meant to temper Williams's statements in the letter. Ordinarily, courts 

are only permitted to "consider cautionary statements that either accompanied the 

forward-looking statement or were incorporated by reference." Desai, 654 F. Supp. 2d

at 844. However, the defendants assert that the plaintiffs have invoked the fraud-on 

the-market theory, that is, they allege that third parties (e.g., professional traders, 

mutual fund managers, securities analysts) analyzed the allegedly false or misleading 

statements and "made trades or recommendations that influenced the price." See 

Asher, 377 F.3d at 731.

4 Rahal does not contest this characterization of his suit.

Plaintiffs who invoke a fraud-on-the-market theory "must acknowledge that all 

public information is reflected in the price." Id. Thus, in fraud-on-the-market cases, 

4 In a traditional securities suit, the suit is brought by an investor who claims "to have 

read or heard the statement and, not having access to the truth, relied to his detriment 

on the falsehood." Asher, 377 F.3d at 731.

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courts may consider "cautionary statements contained in SEC filings, so long as they 

were available when the purportedly misleading statements cited by Plaintiffs were 

made [and] were absorbed into the market." Desai, 654 F. Supp. 2d at 844; see also 

Asher, 377 F.3d at 732 ("[I]f the truth or the nature of a business risk is widely known, 

an incorrect statement can have no deleterious effect, and if a cautionary statement has 

been widely disseminated, that news too affects the price just as if that statement had 

been handed to each investor.").

In its Q2 2019 10–Q filing, Groupon noted that it was "currently developing and 

testing a number of product enhancements" including Select, which it described as one 

of the "important drivers for increasing customer purchase frequency and growing . . .

business over time." 2d Amd. Compl. ¶ 72 (emphasis omitted). The company advised, 

however, that given its current focus on efforts to grow customer awareness of the new 

product enhancements and "scaling the related merchant base," its "gross profit and

operating income [could] be adversely impacted in the near term as [it focused] more on 

driving [these] strategic initiatives." Id.

The above statement from Groupon's 10–Q is not cautionary language that 

would temper Williams's Q2 2019 statements. Again, cautionary language must be 

"substantive and tailored to the specific predictions made in the allegedly misleading 

statement." Desai, 654 F. Supp. 2d at 845 (emphasis added). The warnings in 

Groupon's Q2 2019 10–Q do not even address the predictions made in Williams's 

statements. Rahal asserts that Williams's misleading statements from Q2 2019 were 

that Groupon was "making progress on initiatives," believed the initiatives (including 

Select) would "lay the foundation for long-term, profitable growth," and that Select was 

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driving "significantly improved customer purchase frequency" and "higher average order 

value." 2d Amd. Compl. ¶ 71. Rather than identifying the principal or important 

variances from the projections Williams made regarding Select, the statement from the

Q2 2019 10–Q merely explains that Groupon's decision to invest in its growth might 

adversely and temporarily impact the corporate bottom line. That is not enough. Cf. 

Asher, 377 F.3d at 734; Pub. Employees' Ret. Sys. of Mississippi v. TreeHouse Foods, 

Inc., No. 16 C 10632, 2018 WL 844420, at *3 (N.D. Ill. Feb. 12, 2018) ("A company 

providing projections cannot simply include a generic list of factors that might affect 

future performance, but instead, must list the principal or important sources of variances 

from projections."). Moreover Groupon's disclaimer does not address Select's 

performance or its role in Groupon's long term, profitable growth.

Because the identified cautionary statements are not meaningful, Williams's Q2 

2019 statements are not—at this point—within the protection provided by the PSLRA's 

safe harbor. This is not to say that Groupon cannot avail itself of the PSLRA's safe 

harbor provision in this case. Today, the Court has concluded only that the safe harbor 

provision is not a basis for insulating this statement on a motion to dismiss for failure to 

state a claim. See Shah, 348 F. Supp. 3d at 842 (holding that a defendant could not, "at 

the motion to dismiss stage, avail itself of the safe harbor provision"). The Court does 

not "exclude the possibility that if after discovery [the defendants] establish[ ] that the 

cautions did reveal what were, ex ante, the major risks, the safe harbor may yet carry 

the day." See Asher, 377 F.3d at 734; see also Shah, 348 F. Supp. 3d at 842 (citing 

Asher and reaching the same conclusion).

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ii. Q2 2019 Form 10–Q

Second, as mentioned above, the company indicated in a section titled 

"Management's Discussion and Analysis of Financial Condition and Results of 

Operations" that it was:

. . . currently developing and testing a number of product enhancements

intended to make our offerings easier to use for both customers and 

merchants and to improve purchase frequency, including cash back offers 

linked to customer credit cards, booking capabilities and a paid membership 

program in North America, Groupon Select, which offers greater discounts 

on our offerings and other benefits. We believe that those initiatives may 

be important drivers for increasing customer purchase frequency and 

growing our business over time. We are currently focusing our efforts on 

growing customer awareness of those products and scaling the related 

merchant base. As such, our gross profit and operating income may be 

adversely impacted in the near term as we focus more on driving our 

strategic initiatives.

2d Amd. Compl. ¶ 72.

Rahal argues that Groupon's statement that Select could be an important driver 

to "increasing customer purchase frequency and growing business over time" was 

misleading because the defendants knew that Select was over-indexing to Goods 

instead of Local and was therefore failing to meaningfully boost purchase frequency in 

Local. Id. ¶ 73 (emphasis omitted).

The statement from the 2019 10–Q was forward looking (e.g., "we believe that 

those initiatives may be important drivers. . . over time."). See 2d Amd. Compl. ¶ 72

(emphasis from original omitted) (emphasis added). The problem, again, is that the 

statement was not accompanied by meaningful cautionary language sufficient to trigger 

safe harbor protection. See Constr. Workers Pension Fund, 114 F. Supp. 3d at 646. 

The allegedly misleading projection was the role Select would play in increasing 

customer purchase frequency and business over time. See 2d Amd. Compl. 72. The 

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warnings here do not touch on that particular projection. Instead, the statement from 

the Q2 2019 10–Q merely explains that Groupon's decision to invest in Select and other 

initiatives might adversely and temporarily impact the corporate bottom line. That is not 

enough to confer safe harbor protection at this point. See Shah, 348 F. Supp. 3d at 

842.

iii. November 4-5, 2019 statements

Last, the defendants claim the PSLRA's safe harbor protects a statement 

Thomas made in November 2019. During a conference call announcing Q3 results, 

Thomas said the following about Select:

[THOMAS]: And then on the Select side there, just to give you a little bit of

color on why essentially Select is – we expect it to be net neutral in the 

fourth quarter. There is [sic] a few elements I laid out in my prepared 

remarks that you need to take into consideration when we think about 

Select. So, we are making investments in Select and those do show up in 

terms of [gross profit], whether it be opportunity, costs, et cetera. However, 

those are offset by subscription fees that we are collecting. And then the 

important part to remember is that we are also earning incremental 

[gross profit] on the transactions and we’re seeing a purchase 

frequency lift at 60% higher in that 180-day post-enrollment in the 

program.

2d Amd. Compl. ¶ 83.

In part, Rahal asserts that Thomas's statement that Select would have a "net 

neutral" impact in the fourth quarter was misleading because Thomas knew Select was 

not operating profitably, it was over-indexing to Goods, and the company's 15 percent 

discount for Select members' purchases "cannibalized any profit margins." Id. ¶ 85. 

Thomas's statement is forward looking ("we expect"), but the statement did not include 

meaningful cautionary language that was "substantive and tailored to the specific 

predictions made in the allegedly misleading statement." See Desai, 654 F. Supp. 2d at 

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845 (emphasis added); 2d Amd. Compl. ¶ 83 (emphasis omitted). Rather, the 

remainder of Thomas's statement only provides support for her forward-looking 

statement. Without more, her statement is not insulated by the PSLRA's safe harbor. 

See Shah, 348 F. Supp. 3d at 842.

e. Forward-looking statements and reasonableness 

In addition to arguing that some of their statements are eligible for protection 

under the PSLRA, the defendants argue that those same statements are not actionable 

because Rahal has not pleaded sufficient facts to call into question the statements' 

reasonableness. See In re HealthCare Compare Corp. Sec. Litig., 75 F.3d 276, 282 

(7th Cir. 1996). In other words, the defendants argue that unless Rahal can 

demonstrate that the defendant's forward-looking statements were not reasonable at the 

time they were made, the statements must be protected.

This argument is unpersuasive, for two reasons. First, it is true that the Seventh 

Circuit has held that forward-looking statements were not actionable unless plaintiffs

allege "specific facts which illustrate that the company's predictions lacked a reasonable 

basis." Id. (alterations accepted) (internal quotation marks omitted). But one of the 

Seventh Circuit cases enunciating this requirement came before the PSLRA's 

enactment in 1995, see Arazie v. Mullane, 2 F.3d 1456, 1466 (7th Cir. 1993), and the 

other came shortly after the PSLRA's enactment, see In re Healthcare Compare Corp., 

75 F.3d at 282. Thus, it is not clear what viability this requirement has after the 

PSRLA's alteration of the pleading standards applicable in federal securities fraud 

litigation. See City of Livonia Employees' Ret. Sys. & Loc. 295/Loc. 851 v. Boeing Co., 

711 F.3d 754, 756–57 (7th Cir. 2013) (recognizing that the PSLRA "altered the 

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landscape of federal securities fraud litigation" and identifying four of the ways it did so).

Second, even assuming that a plaintiff is still required to allege specific facts 

illustrating that the forward-looking statements lacked a reasonable basis, Rahal has 

cleared that bar. Rahal's theory of this case is that the defendants knew and failed to 

disclose that Select was over-indexing to Goods and that Select was not meaningfully 

boosting purchases in Local. See 2d Amd. Compl. ¶¶ 71, 73, 75, 79, 82, 84–85, 87–89, 

91, 93, 97, 99. And he contends that the defendants' statements misled investors about 

Select's performance. See id. ¶¶ 71, 73, 75, 79, 82, 84–85, 87–89, 91, 93, 97, 99. If

both assertions are true, there can be no question that the defendants would not have 

had a reasonable basis for sharing an incomplete (or even contrary) narrative. 

In short, even assuming that a plaintiff must proffer specific facts illustrating why 

predictions lacked a reasonable basis, Rahal has met that standard, and the 

defendants' statements are actionable. 

2. Guidance reaffirmation

Rahal alleges in his proposed second amended complaint that the defendants' 

reaffirmation of Groupon's adjusted EBITDA was materially misleading. During the Q3 

2019 conference call, Thomas told listeners:

[THOMAS]: As we move into the fourth quarter, a very important time for 

us, we expect positive contribution from our conversion initiatives, which 

include our recent guest checkout and universal cart product launches. In 

addition, we expect marketing leverage to increase modestly from what we 

delivered in Q3. These factors, along with a continued momentum in North 

America Local including improved performance in units, give us confidence 

that we can drive sequential improvement in year-over-year gross 

profit trends and deliver approximately $270 million in adjusted 

EBITDA for full-year 2019.

Id. ¶ 90. Moreover, in the company's Q3 2019 press release, Groupon declared that it 

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continued to "expect Adjusted EBITDA of approximately $270 million." Id. (emphasis 

omitted). And in its Q3 2019 presentation, the company repeatedly affirmed its 

confidence that it would meet its expected adjusted EBITDA. Id.

The defendants argue that their guidance reaffirmation is not actionable, but the 

Court is not persuaded. First, as discussed earlier, Rahal has plausibly alleged that the 

defendants knew of the material adverse trends at the heart of this case as early as the 

end of July 2019. There is no "temporal flaw." See supra at 13–14. 

Second, the defendants contend that in the Q3 earnings call—as in other earning 

calls—they disclosed the challenges Groupon faced in the Goods category. But that 

contention ignores the heart of Rahal's allegation here. He asserts that the guidance 

reaffirmation was misleading because the defendants' "knew, but concealed and failed 

to disclose, that: (i) by November 2019 it became 'abundantly clear' that Groupon was 

not competing effectively in Goods, (ii) by November 2019 Goods has become a less 

meaningful driver of engagement with Groupon’s more profitable Local segment, and 

(iii) as a result of the foregoing, the Guidance was not achievable." 2d Amd. Compl. ¶ 

91 (internal quotation marks omitted). 

So even if it is true that the defendants were open about Groupon's troubles in 

Goods, Rahal's allegation is that the defendants did not disclose the severity of Goods' 

troubles and did not adjust their forecast even though they had knowledge that seriously 

undermined the accuracy of that guidance. See Selbst v. McDonald's Corp., No. 04 C 

2422, 2005 WL 2319936, at *9 (N.D. Ill. Sept. 21, 2005) ("A defendant thus may be 

liable for issuing a future projection of earnings if the defendant 'ignored facts seriously 

undermining the accuracy of the forecast.'"). If, as Rahal alleges, Groupon failed to 

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"speak the whole truth" and omitted a known fact that would make the guidance 

misleading, the defendants are liable. See id.

The defendants' third argument is that Rahal's allegation that the guidance 

affirmation was not achievable is speculative. The defendants assert that Rahal has not 

explained, with particularity, the factual basis for his allegation. Yet, as previously 

noted, Rahal has explained the basis for his allegation. He claims that the defendants 

knew that Groupon could not effectively compete in Goods and knew that Goods was a 

less potent tool for driving customers to Local, the more profitable category of 

Groupon's sales. See 2d Amd. Compl. ¶ 91. Considering those two facts, Rahal 

concludes that the 2019 guidance could not have been achievable, and defendants' 

reaffirmation of the guidance was therefore misleading. Id. As alleged, Rahal has 

provided sufficient detail to support a reasonable belief the guidance reaffirmation was 

misleading. See Constr. Workers Pension Fund, 114 F. Supp. 3d at 651; Plumbers & 

Pipefitters Loc. Union No. 630, 778 F. Supp. 2d at 878.

Finally, the defendants argue that the guidance reaffirmation was protected by 

the PSLRA's safe harbor provision. To support their argument, they point to statements 

made in their Q3 2019 10–Q. In that document, Groupon explains that among the 

"risks" and "uncertainties" that could affect forward-looking statements are the 

"execution of [its] business and marketing strategies," its ability to "retain[ ] existing 

customers and add[ ] new customers," and its ability to "compet[e] successfully in [its] 

industry." Dkt. no. 49–4 at ECF p. 3 of 3.

Groupon's guidance was inherently forward looking, as it was a communication 

of the company's projected earnings. Nevertheless, at this stage, the PSLRA's safe 

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harbor cannot insulate the guidance from liability. The disclosures of risks and 

uncertainties in Groupon's Q3 2019 10–Q were boilerplate, not substantive cautionary 

language tailored to the specific predictions made. See Desai, 654 F. Supp. 2d at 844. 

The warnings from the Q3 2019 10–Q do not address the company's adjusted EBITDA; 

instead they address generally "any statements regarding [its] future results of 

operations and financial position, business strategy and plans and [its] objectives for 

future operations." Dkt. no. 49–4 at ECF p. 3 of 3. In addition to the risks mentioned 

above, the Q3 2019 10–Q lists more than a dozen other "risk" and "uncertainties" each 

with general bearing on the companies' earnings. Of course, the success of any firm 

doing business in a competitive market will depend on the execution of its business, its 

ability to sell goods or services, and its ability to compete. The PSLRA requires more. 

See Pub. Employees' Ret. Sys., 2018 WL 844420, at *3 ("A company providing 

projections cannot simply include a generic list of factors that might affect future 

performance, but instead, must list the principal or important sources of variances from 

projections."). Because the defendants did not identify risks, uncertainties, or "principal 

contingencies" related to the particular projections "that could cause actual results to 

differ," the guidance is not eligible for safe harbor protection. See Desai, 654 F. Supp. 

2d at 844. However, it is worth repeating that the Court does not exclude the possibility 

that post discovery "the safe harbor may yet carry the day." See Asher, 377 F.3d at 

734.

In sum, the defendant's guidance reaffirmation is actionable under section 10(b).

3. Item 303

In addition to the investor communications discussed above, Rahal claims that 

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Groupon should have disclosed in certain SEC filings Select's trend of over-indexing to

Goods and the trend of Goods' declining ability to drive meaningful business to 

Groupon's Local offerings. 2d Amd. Compl. ¶¶ 75, 88, 89. He alleges that these trends 

were "reasonably likely to have a material unfavorable impact on net sales or income 

from continuing operations or cause a material change in the relationship between costs 

and revenues." See 2d Amd. Compl. ¶ 88; see also ¶¶ 74, 75, 89. In Rahal's view, the 

failure to disclose these adverse trends were violations of Item 303 of SEC Regulation 

S-K, "which provides that registration statements and annual 10–K reports must reveal

any known trends or uncertainties that have had or that the registrant reasonably 

expects will have a material favorable or unfavorable impact on net sales or revenues or 

income from continuing operations." See Gallagher v. Abbott Labs., 269 F.3d 806, 810 

(7th Cir. 2001).

The Seventh Circuit has not decided whether Item 303 imposes a duty to 

disclose that, when violated, can give rise to fraud under the Exchange Act and other 

circuits are divided on the issue. Twin Master Fund, Ltd. v. Akorn, Inc., No. 19 C 3648, 

2020 WL 564222, at *7 (N.D. Ill. Feb. 5, 2020) (Kennelly, J.); compare Stratte-McClure 

v. Morgan Stanley, 776 F.3d 94, 101 (2nd Cir. 2015) ("Item 303's affirmative duty to 

disclose in Form 10–Qs can serve as the basis for a securities fraud claim under 

Section 10(b)."), with Carvelli v. Ocwen Fin. Corp., 934 F.3d 1307, 1331 (11th Cir. 2019)

("Item 303 imposes a more sweeping disclosure obligation than Rule 10b-5, such that a 

violation of the former does not ipso facto indicate a violation of the latter."), In re 

NVIDIA Corp. Sec. Litig., 768 F.3d 1046, 1056 (9th Cir. 2014) ("Item 303 does not 

create a duty to disclose for purposes of Section 10(b) and Rule 10b–5."), and Oran v. 

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Stafford, 226 F.3d 275 (3rd Cir. 2000) (Alito, J.) (concluding that a violation of Item 303

"does not automatically give rise to a material omission under Rule 10b–5.").

Regardless, the Court will assume for purposes of this motion that there’s a duty

to disclose under Item 303 and that it can give rise to a claim under the Exchange Act. 

When using Item 303 to state a claim for securities fraud under Section 10(b), "a plaintiff 

must first allege that the defendant failed to comply with Item 303 in a 10–Q or other 

filing." Stratte-McClure, 776 at 103. Second, he must allege "that the omitted 

information was material under Basic's probability/magnitude test, because 10b–5 only 

makes unlawful an omission of material information that is necessary to make

statements made . . . not misleading." Id. (alterations accepted) (internal quotation 

marks omitted). 5 Lastly, the plaintiff must plead scienter, reliance, and loss causation, 

as with any Section 10(b) claim. Id.

Groupon claims that Rahal has failed to sufficiently plead a violation of Item 303

for two reasons. First, Groupon contends it adequately disclosed the challenges it 

faced in Goods in its Q2 2019 and Q3 2019 10–Q filings. Second, Groupon argues that 

Rahal has not drawn "a connection between Select’s performance and Groupon’s

financial conditions as a whole, as is required to trigger a disclosure duty under Item 

5 Under Basic Inc. v. Levinson, 485 U.S. 224 (1988), the materiality requirement is 

satisfied when a plaintiff alleges that there is a "substantial likelihood that the disclosure 

of the omitted fact would have been viewed by the reasonable investor as having 

significantly altered the ‘total mix’ of information made available." Id. at 232. "[I]t is not 

necessary to assert that the investor would have acted differently if an accurate 

disclosure was made." Litwin v. Blackstone Grp., L.P., 634 F.3d 706, 717 (2d Cir. 

2011). Moreover, as with a Rule 10b–5 claim, a district court may not dismiss a 

complaint premised on Item 303 "on the ground that the alleged misstatements or 

omissions are not material unless they are so obviously unimportant to a reasonable 

investor that reasonable minds could not differ on the question of their importance." Id.

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303." Def.'s Resp. Br. at 12. Groupon notes that Rahal does not allege that Select had 

an adverse effect on Groupon’s bottom line but instead only that the program did not do 

well relative to its own costs and revenues.

Regarding the adverse trend related to Goods, Rahal has stated a claim for an 

Item 303 violation. He asserts that Groupon's revenues "suffered material declines" due 

to Goods' inability to compete in the competitive market and that Local revenues also 

suffered because Goods could no longer meaningfully drive customers to Local. 2d 

Amd. Compl. ¶ 89. Groupon says it disclosed this information in its Q2 and Q3 10–Qs 

for 2019 and therefore met its burden under Item 303. That's not entirely true. Groupon 

disclosed its historical financial metrics for each individual business segment, including 

Goods. Groupon also reported that financial metrics declined due to "fewer customers, 

"lower customer traffic," see dkt. no. 49–3 at ECF p. 4 of 10, and "intense competition in 

[ ]Goods," Amd. Compl. ¶ 89. But Rahal contends that Item 303 required Groupon to

also disclose that Goods "had largely ceased providing added value for Groupon" 

because it was no longer "driving meaningful business to Local" and explain how that 

trend was likely to have a materially unfavorable impact on Groupon's future revenues. 

2d Amd. Compl. ¶ 85; see also Litwin, 634 F.3d at 718–19 ("In this case, the key 

information that plaintiffs assert should have been disclosed is whether, and to what 

extent, the particular known trend, event, or uncertainty might have been reasonably 

expected to materially affect" the plaintiff's investments."). The historical information on 

the 10–Qs provides an answer to the wrong question. Accepting Rahal's well-pleaded 

allegations as true, the Court concludes that he has sufficiently alleged an Item 303 

violation regarding Goods.

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Regarding the adverse trend related to Select, Groupon argues that Select was 

not material to Groupon's financial condition as a whole. Def.'s Resp. Br. at 12 

("Plaintiff does not, and cannot, draw a connection between Select’s performance and 

Groupon’s financial condition as a whole, as is required to trigger a disclosure duty 

under Item 303."). But Groupon overlooks that Item 303 also says that if a "registrant" 

like Groupon "knows of events that are reasonably likely to cause a material change in 

the relationship between costs and revenues (such as known or reasonably likely future 

increases in costs of labor or materials or price increases or inventory adjustments), the 

change in the relationship must be disclosed." 17 C.F.R. § 229.303(b)(2)(ii).

In his proposed second amended complaint, Rahal alleges that Select's overindexing to Goods was "reasonably likely to cause a material change in the relationship 

between costs and revenues" because the defendants "had repeatedly represented

Select [w]as profitable on a per-unit basis: i.e., that even after factoring in the discounts 

and other costs associated with Select, transactions were still generating incremental 

profits." 2d Amd. Compl. ¶ 75; see also id. ¶ 88. Put another way, Rahal asserts that 

because Select over-indexed to Goods rather than Local, it must also be true that 

Select's costs "rose higher than revenues, rather than remaining lower." Id. ¶¶ 75, 88. 

That is enough to give rise to a viable Item 303 claim regarding Select.

3. Scienter

"The PSLRA requires plaintiffs to state with particularity both the facts 

constituting the alleged violation, and the facts evidencing scienter, i.e., the defendant's 

intention 'to deceive, manipulate, or defraud.'" Tellabs, Inc. v. Makor Issues & Rts., Ltd., 

551 U.S. 308, 313 (2007). A complaint fails to satisfy the PSLRA's particularity 

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requirements when it includes only "conclusory allegations of scienter derived from a 

defendant's mere access to information." Cornielsen, 916 F.3d at 602; see also Pugh v. 

Trib. Co., 521 F.3d 686, 694 (7th Cir. 2008) ("[T]here is a big difference between 

knowing about the reports from [a subsidiary] and knowing that the reports are false."). 

In considering allegations regarding scienter, courts must determine "whether all 

of the facts alleged, taken collectively, give rise to a strong inference of scienter, not 

whether any individual allegation, scrutinized in isolation, meets that standard." Tellabs, 

551 U.S. at 323. A strong inference of scienter is one that is “cogent and at least as 

compelling as any opposing inference of nonfraudulent intent.” Id. at 314. To 

determine whether allegations give rise to a strong inference of scienter, courts must 

"take into account plausible opposing inferences because the strength of an inference 

cannot be decided in a vacuum, and the inquiry is inherently comparative." Pierrelouis 

v. Gogo, Inc., No. 18 C 4473, 2021 WL 1608342, at *5 (N.D. Ill. Apr. 26, 2021)

(alterations accepted) (internal quotation marks omitted).

The defendants first argue that Rahal does not plead a strong inference of 

scienter. The Court disagrees and concludes Rahal has met his burden. As Rahal 

notes in his reply brief, the proposed second amended complaint improves upon the 

prior complaint by including individualized allegations against each defendant and 

describing what information each defendant is alleged to have known when their 

respective statement was communicated. See 2d Amd. Compl. ¶¶ 71, 79, 82, 83, 84, 

97, 99 (regarding Williams); ¶¶ 83, 84, 85, 91, 93 (regarding Thomas); ¶¶ 73, 75, 87, 

88, 89, 91 (regarding Groupon). These allegations, along with the additional scienter

allegations, see id. ¶¶ 114–129, and the allegations regarding corporate scienter, see 

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id. ¶¶ 130–31, go beyond merely alleging that Groupon owed investors a running 

commentary on its ups and down, see Def.'s Resp. Br. at 12, and provide a strong 

inference of scienter.6

Next, the defendants contend that there is another inference more plausible than 

an inference they had the requisite scienter: that they "preferred not to disclose 'halfformed stories'" before their earning calls.7 See id. (quoting Higginbotham v. Baxter 

Int'l, Inc., 495 F.3d 753, 761 (7th Cir. 2007)). The Court is not convinced. Rahal's 

allegations regarding scienter are "cogent and at least as compelling as any opposing 

inference of nonfraudulent intent." See Tellabs, 551 U.S. at 323. It bears repeating

once more that Rahal alleges that, at the time their statements were made, the 

defendants knew and failed to disclose the various adverse trends regarding Select and 

Goods. He further asserts that rather than disclosing the information they had, the 

defendants affirmatively misled investors. If Rahal's allegations are true, there can be 

6 In drive-by fashion, the defendants assert that because Rahal has not provided any 

confidential witnesses after having the opportunity to investigate, his case for scienter is 

undermined. Def.'s Resp. Br. at 13 (citing In re Guidant Corp. Sec. Litig., 536 F. Supp. 

2d 913, 931 (S.D. Ind. 2008). But the court in In re Guidant Corp. did not hold that 

confidential witnesses were required in considering scienter. See id. Instead, it simply 

noted what evidence the plaintiffs had not provided to support their allegations that the 

defendants had deliberately concealed adverse information. Id. Thus, Court is not 

persuaded by this argument.

7 It is not clear, but to the extent the defendants are arguing that the Court should rule in 

their favor because Rahal has not alleged precisely when they knew the adverse 

information, that argument is not appropriate at this stage. "[T]he fact that it is not 

certain precisely when the information available to defendants became bad enough to 

render [the defendants'] statements knowingly or recklessly false does not defeat 

plaintiff's claim because the Court need not identify the precise moment at which the 

culpable inference overtook the innocent one at this early stage." Pierrelouis, 2021 WL 

1608342, at *9 (alterations accepted) (internal quotation marks omitted).

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no question that the defendants had the required state of mind to commit securities 

fraud. Based on the allegations discussed above, this story is at least as plausible as 

the story proffered by the defendants.

Finally, the defendants assert that Rahal has not meet his burden here because 

he has not identified a motive to commit fraud. Though a "motive can be a relevant 

consideration . . . the absence of a motive allegation is not fatal." Id. at 325. 

"[A]llegations must be considered collectively; the significance that can be ascribed to 

an allegation of motive, or lack thereof, depends on the entirety of the complaint." Id. 

Though motive allegations "might meaningfully enhance the strength of the inference of 

scienter, a strong inference of scienter does not necessarily depend on such an 

enhancement." Shah, 348 F. Supp. 3d at 846 (internal quotation marks omitted). 

Considering the allegations in their totality, Rahal has proffered a cogent and compelling 

inference that the defendants elected not to disclose adverse events. Because the 

absence of an allegation of motive is not dispositive, the Court concludes that the lack 

of such an allegation does not meaningfully undermine Rahal's contentions regarding 

scienter.

In sum, Rahal's inference of fraudulent intent is cogent and as compelling as the 

contrary inference offered by the defendants. Rahal has met the PSLRA's standard for 

pleading scienter.

4. Loss Causation

"Loss causation is a fact-based inquiry that need not be proven until later stages 

of litigation." In re Akorn, Inc. Sec. Litig., 240 F. Supp. 3d at 821 (internal quotation 

marks omitted). "Because pleading loss causation is 'not meant to impose a great 

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burden upon a plaintiff,' loss causation allegations need only 'provide a defendant with 

some indication of the loss and the causal connection that the plaintiff has in mind.'" Id.

(quoting Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 347 (2005)); Washtenaw Cty. 

Employees' Ret. Sys. v. Walgreen Co., No. 15-CV-3187, 2019 WL 4597518, at *7 (N.D. 

Ill. Sept. 23, 2019) ("As the Seventh Circuit instructs, the requirement of loss causation 

'ought not place unrealistic burdens on the plaintiff at the initial pleading stage.'"). 

Therefore, in pleading loss causation, "the complaint need only allege facts that support 

an inference that the Defendants' misstatements and omissions concealed the 

circumstances that bear upon the loss suffered such that Plaintiffs would have been 

spared all or an ascertainable portion of that loss absent the fraud." Pub. Emps. Ret. 

Sys. of Mississippi, Puerto Rico Tchrs. Ret. Sys. v. Amedisys, Inc., 769 F.3d 313, 325 

(5th Cir. 2014); Ray v. Citigroup Glob. Markets, Inc., 482 F.3d 991, 995 (7th Cir. 2007)

(explaining that one way that plaintiffs may show loss causation is to establish "that the 

defendants' alleged misrepresentations artificially inflated the price of the stock and that 

the value of the stock declined once the market learned of the deception.").

The defendants argue the proposed amended complaint fails to allege loss 

causation because it does not support an inference that: (1) Groupon's stock price was 

artificially inflated at the beginning of the class period; (2) Groupon corrected any 

misleading statements; or (3) that Groupon's price fell by 44 percent as a result of any 

corrected statements. Def.'s. Resp. Br. at 13.

The defendants' first argument regarding loss causation is unpersuasive. They

argue that the July 30, 2019 letter did not mention Goods at all or only mentioned Select 

along with other initiatives. But as discussed throughout this opinion, the central 

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allegations in Rahal's complaint are, among other things, that the defendants that knew 

Select was over-indexing to Goods—an already underachieving business segment—

instead of Local, and failed to disclose this fact. See 2d Amd. Compl. ¶¶ 71, 73, 75, 79, 

82, 84–85, 87–89, 91, 93, 97, 99. The omissions of these facts are what Rahal alleges 

mislead investors about Select's performance and its relationship to Goods. See id. ¶¶ 

71, 73, 75, 79, 82, 84–85, 87–89, 91, 93, 97, 99. So it is not fatal to Rahal's loss 

causation allegations that the earliest of the allegedly misleading statements do not 

place a particular emphasis on either Goods or are not solely focused on Select. 

That said, it is worth noting that both of the July 30, 2019 statements address 

Select and its performance. See id. ¶¶ 70 (describing Select as the "best way to 

experience Groupon" and providing metrics for the program's performance); 71 (noting 

among the initiatives being developed and tested are the "paid membership program in 

North America, Groupon Select, which offers greater discounts on our offerings and

other benefits" and explaining that Select and other "initiatives may be important drivers 

for increasing customer purchase frequency and growing our business over time"). 

Though the defendants argue that "[a]ny allegedly omitted information about Select 

members’ product choices (Goods, Local, or Travel) as of July 30, 2019, could not 

possibly have artificially inflated Groupon’s stock," that cursory argument, though boldly 

proclaimed, is only plausibly maintained. See Defs.' Resp. Br. at 14. 

Maybe the connection between these allegedly misleading statements and the 

decline in the price of Groupon's stock will turn out to be too attenuated. If so, that 

conclusion is appropriate "at a later stage in litigation" and after "a highly fact intensive 

inquiry that need not be reached at this point." See Amedisys, Inc., 769 F.3d at 325. At 

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this stage of the proceedings, it is enough that the plaintiff has alleged facts that support 

an inference that the allegedly misleading statements inflated the price of Groupon's 

stock. See Ray, 482 F.3d at 995.

Next, the defendants argue that corrective disclosures identified in the proposed 

second amended complaint, are anything but corrective disclosures because they did 

not correct or reveal as deceptive any earlier information. See Def.'s Resp. Br. at 14–

15; see also 2d Amd. Compl. ¶¶ 103–12. With regard to Select, the defendants 

essentially argue that their statements during the class period were forthright and that 

their later statements, rather than correcting earlier ones, disclosed new information. 

See Def.'s Resp. Br. at 14. But, as discussed earlier, truthful statements are still 

actionable under section 10(b) if they are misleading, which is exactly what Rahal 

alleges here. See Constr. Workers Pension Fund, 114 F. Supp. 3d at 651. It may be 

that the defendants' class period statements were not false in and of themselves. But 

that is not the point. If the statements were misleading because they omitted portions of 

already known material facts, any later disclosure that revealed the whole truth to 

investors is manifestly a corrective one.

The defendants advance a version of the same argument with regard to Goods. 

Here, though, the defendants contend that the disclosures could not have corrected any 

of their earlier statements because Rahal has failed to identify any misleading 

statements about Goods from the start of the class period. But the crux of Rahal's 

allegations regarding Goods is that the defendants omitted information regarding 

Goods' overall performance and its performance in relation to Select. The omission of

this information is what Rahal alleges made the defendants statements misleading. So 

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it is not fatal to Rahal's loss causation argument that the earliest of the allegedly 

misleading statements do not affirmatively mention Goods.

There is one additional basis for rejecting the defendants' second loss causation 

argument. As Rahal has noted, an argument that the "news of the truth credibly entered 

the market and dissipated the effects of the misstatement" is an argument for trial. See 

In re Allstate Corp. Sec. Litig., No. 16 C 10510, 2020 WL 7490280, at *7 (N.D. Ill. Dec. 

21, 2020) (alterations accepted); see also Asher, 377 F.3d at 734 (7th Cir. 2004) ("A 

'truth-on-the-market' defense is available in principle . . . but not at the pleading 

stage.'"). Thus, to the extent the defendants' argument is that investors were aware of 

the truth and that therefore their allegedly misleading statements were immaterial, that 

argument is inappropriate at the pleading stage.

There is one final argument to consider on this point. "The loss causation 

element of securities fraud claims requires plaintiffs to tether directly the fraudulent 

conduct to the harm." Twin Master Fund, Ltd., 2020 WL 564222, at *13 (alterations 

accepted) (internal quotation marks omitted). "A plaintiff can make this connection by 

alleging that a defendant's misrepresentations artificially inflated its stock price and that 

once the market learned of the deception, the stock value declined." Id. The 

defendants contend that Rahal's attempt to connect Groupon's stock price decline to 

alleged securities fraud is "illogical," given Select's "small size" and Groupon's 

"repeated warnings" that Select's costs might negatively affect 2019 results. Def.'s 

Resp. Br. at 15. Instead, the defendants posit that the fall in the stock price must have 

been because of its earnings miss. See id.

The Court is not persuaded. Whether plaintiff's theory of loss causation holds 

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water from a factual standpoint involves Select's materiality, and as indicated earlier 

materiality determinations are typically inappropriate on a motion to dismiss unless the 

allegedly misleading statements are "so obviously unimportant to a reasonable investor 

that reasonable minds could not differ on the question of their importance." See In re 

Akorn, Inc. Sec. Litig., 240 F. Supp. 3d at 815. For the same reasons discussed above, 

the Court cannot conclude that is the case regarding the allegedly misleading

statements cited here. See supra at 14–16.

Also inappropriate at this stage of the proceedings is the defendants' assertion 

that Groupon's fall in the stock price must have been because of its earnings miss and 

not any corrective disclosures; that is a more appropriate subject for summary judgment 

or trial. See Holwill v. AbbVie Inc., No. 1:18 C 6790, 2020 WL 5235005, at *6 (N.D. Ill. 

Sept. 1, 2020) ("While Defendants may attempt to prove that AbbVie's stock price 

incorporated the information from information previously available and that the drop in 

AbbVie's stock price was in fact caused by some factor other than the publicity afforded 

to the filing of the California Department of Insurance's publicly available complaint, that 

is a proper subject for discovery and a motion for summary judgment or trial, not a 

motion to dismiss."). What is more, Rahal's allegation that fraud contributed to the fall in 

value of Groupon's stock would not be negated even if there are other contributory 

causes; "it is possible for more than one cause to affect the price of a security and, 

should the case survive to that point, a trier of fact can determine the damages 

attributable to the fraudulent conduct." See Caremark, Inc. v. Coram Healthcare Corp., 

113 F.3d 645, 649 (7th Cir. 1997).

Finally, though defendants do no identify which of Groupon's "warnings" are 

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important for its argument, the Court assumes they are referring to the statements made 

in the company's Q2 2019 10–Q. See 2d Amd. Compl. ¶ 72 (advising that given its 

current focus on efforts to grow customer awareness of the new product enhancements 

and "scaling the related merchant base," Groupon's "gross profit and operating income

[could] be adversely impacted in the near term as [it focused] more on driving [its] 

strategic initiatives."). For reasons already discussed, the Court is not persuaded that 

those warnings amount to cautionary language tailored to the specific predictions made 

in the allegedly misleading statements. See supra at 22–26; Desai, 654 F. Supp. 2d at 

845.

In short, Rahal has alleged that the decline in Groupon's stock price was a result 

of its disclosure of the "collapse of Goods, the unprofitability of Select, and the failure of 

both Goods and Select as drivers for Groupon's core Local business and overall gross 

profits." 2d Amd. Compl. ¶ 134. That is sufficient at this stage; Rahal has provided the 

defendants with an indication of the loss and the causal connection that lies at the heart 

of the alleged loss. See Dura, 544 U.S. at 347; see also Twin Master Fund, Ltd., 2020 

WL 564222, at *13. 

B. Section 20(a) claim

Because Rahal has adequately stated a claim for his section 10(b) claim, he may 

move forward with his section 20(a) claim, as the defendants' argument for dismissal of 

the latter is reliant on the claimed nonviability of former. See Pugh, 521 F.3d at 693 

("Thus, to state a claim under § 20(a), a plaintiff must first adequately plead a primary 

violation of securities laws—here, a violation of § 10(b) and Rule 10b–5.").

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C. Defendants' supplemental authority

The Court grants the defendants' motion for leave to file supplemental authority 

and has reviewed the Seventh Circuit's recent opinion in City of Taylor Police & Fire 

Ret. Sys. v. Zebra Techs. Corp., — F.4th —, 2021 WL 3503430, at *1 (7th Cir. Aug. 10, 

2021). That case is distinguishable from this one. At the outset, the allegations in this 

case are stronger than those in City of Taylor. The complaint of the plaintiff in City of

Taylor was that the defendant corporation was not entirely transparent about the 

unforeseen troubles of a merger. Id. Rahal, by contrast, alleges that the defendants 

made the allegedly misleading statements already knowing the material adverse 

information.

There are other significant differences too. The plaintiff in City of Taylor alleged 

that the defendant's savings estimates were misleading because they were not coupled 

with information about the ongoing costs of integration with another company. Id. 

These were "one-time expenses" that the Seventh Circuit compared to "tangential"

difficulties. Id. The present case involves an allegedly important aspect of Groupon's 

business and a program that was implemented to increase "customer purchase 

frequency" and thought to be the key to increasing Groupon's "business over time." 

See 2d Amd. Compl. ¶¶ 3, 4, 65, 72. 

In addition, the plaintiff in City of Taylor complained that the defendant's profitmargin projection was misleading because the company achieved about one 

percentage point less than its guess—what the Seventh Circuit called "a near miss." 

City of Taylor, 2021 WL 3503430, at *2. Groupon's "miss," by contrast, was materially 

further off. Rather than a $270 million EBITDA, Groupon achieved a $227.2 million 

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EBITDA—almost 16 percent off the promised target. See 2d Amd. Compl. ¶ 102.

Both the Seventh Circuit and the district court concluded that the statements 

proffered by the plaintiff in City of Taylor were not material falsehoods but instead clear 

examples of puffery and devoid of substantial factual information. See City of Taylor,

2021 WL 3503430, at *2; City of Warren Police & Fire Ret. Sys. v. Zebra Techs. Corp., 

No. 19 C 5782, 2020 WL 6118571, at *6 (N.D. Ill. Oct. 16, 2020). By contrast, this Court 

is not able to conclude on the present motion that the matters alleged here are 

immaterial, devoid of significant factual information, or simple puffery. 

Finally, the Seventh Circuit held that the plaintiff in City of Taylor failed to satisfy 

the PSLRA's requirement that plaintiffs state, with particularity, the facts that give rise to 

a strong inference of scienter, because the plaintiffs' inferences from the facts were less

likely than any competing inference. City of Taylor, 2021 WL 3503430, at *2. That 

conclusion make sense in that case, given that executives overseeing an "ongoing 

corporate consolidation . . . possess only limited information about the internal 

operations of other corporations" and learn more only once consolidation is underway. 

Id. at *3. In that situation, it is more plausible to believe that a corporation's earlier 

statements were the result of "limited knowledge and optimism" rather than knowing 

omissions or falsehoods. Id. at *2.

Here, by contrast, Rahal sufficiently and plausibly alleges the defendants knew 

the material adverse information at the time they made the allegedly misleading 

statements. The Court acknowledges the defendants' contention that their statements 

were made during a developing process and are therefore afforded greater allowance 

for imprecision. But this case, as it is alleged in the complaint, is not premised on 

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ongoing developments as in City of Taylor. Rahal's inference from the facts is equally 

plausible as the defendants' contrary inference.

In sum, City of Taylor does not command a different outcome in this case. 

Conclusion

For the reasons stated above, the Court grants the plaintiff's motion for leave to 

amend [docket no. 66]. Plaintiff should now file the second amended complaint as its 

own docket entry. The telephone status hearing set for August 13, 2021 is vacated and 

reset to August 27, 2021 at 9:15 a.m. to set any necessary schedules for further 

proceedings, using call-in number 888-684-8852, access code 746-1053. Counsel 

should wait for the case to be called before announcing themselves. Counsel are 

directed to confer regarding an appropriate discovery and pretrial schedule and are to 

file a joint status report on August 23, 2021 with a joint proposed schedule or separate 

proposals.

________________________________

MATTHEW F. KENNELLY

 United States District Judge

Date: August 11, 2021

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