Opinion ID: 6929117
Heading Depth: 2
Heading Rank: 2

Heading: Morgan Stanley and Dean Witter Analysts’ Projections

Text: Three analysts’ reports issued by Morgan Stanley and Dean Witter contain earnings estimates and other predictions which shareholders allege lacked a “reasonable basis.” 7 Liability for the Underwriters’ forecasts attaches under Rule 10b-5 only if at the time of publication “one of three implied factual assertions is inaccurate: ‘(1) that the statement is genuinely believed, (2) that there is a reasonable basis for that belief, and (3) that the speaker is not aware of any undisclosed facts tending to seriously undermine the accuracy of the statement.’ ” Hanon v. Dataproducts Corp., 976 F.2d 497, 501 (9th Cir.1992) (quoting In re Apple Computer Sec. Litig., 886 F.2d 1109, 1113 (9th Cir.1989), cert. denied, 496 U.S. 943, 110 S.Ct. 3229, 110 L.Ed.2d 676 (1990)). The fact that the prediction proves to be wrong in hindsight does not render the statement untrue when made. Marx v. Computer Sciences Corp., 507 F.2d 485, 489-90 (9th Cir.1974). The “facts” upon which shareholders proceed are the same as those that VeriFone and the Underwriters allegedly failed to disclose, that is, forward-looking information which projected a future for VeriFone less promising than that conveyed by estimates in the analysts’ reports. From this, shareholders infer that VeriFone and the Underwriters must have known that inconsistent predictions displayed in the published reports lacked a reasonable basis. It follows from Lyondell, however, which held that failure to disclose existing internal projections that had been shown to the company’s lender and were less favorable than the prospectus was not an omission of a material fact, that the failure to disclose non-existing internal forecasts is not a material factual omission that renders forward-looking statements misleading. 984 F.2d at 1052-53; accord Convergent Technologies, 948 F.2d at 516. 8