Opinion ID: 691552
Heading Depth: 4
Heading Rank: 3

Heading: The $2 million statement

Text: 37 In response to a question from an analyst near the end of the April 23rd conference call about deals that had closed in Europe during April, Burton incorrectly responded that Legent had closed three deals worth a total of $2 million in the United Kingdom. Appellants contend that Burton's misrepresentation was materially false and misleading and, therefore, fraudulent. They maintained during oral argument that this statement was material because it impressed upon analysts that Legent was closing big deals, when in fact the value of the three deals closed in the United Kingdom was only $193,000 and represented a portion of an undisclosed number of deals in Europe worth a total of $2 million. Burton admitted at trial that, in response to a question at the end of the April 23rd conference call, he mistakenly attributed the $2 million worth of sales that had closed in all of Europe to three sales in the United Kingdom. Burton further testified that he was unaware he had made this misstatement until this litigation began. 38 We reject Appellants' argument that the $2 million statement was fraudulent, because we find no evidence of scienter, the second essential element for a private cause of action for damages under Sec. 10(b) and Rule 10b-5. Malone, 26 F.3d at 476. 39 In a Rule 10b-5 action, issues of intent typically go to the jury and defendants are not entitled to judgment as a matter of law on the ground of lack of scienter unless the plaintiff has failed to present facts that can support an inference of bad faith or an inference that defendants acted with an intent to deceive, manipulate, or defraud. 40 Id. at 479 (quoting Wechsler v. Steinberg, 733 F.2d 1054, 1058-59 (2d Cir.1984)). 41 Appellants presented no evidence from which a jury could infer that Burton spoke in bad faith or intended the $2 million dollar statement to deceive the market. Thus, even assuming the statement concerned a material fact on which the analysts relied, there is no evidence of scienter. Without evidence supporting an inference that Burton knowingly spoke in bad faith or with the intention to deceive, manipulate, or defraud the market, the misstatement cannot satisfy the elements of securities fraud. Malone, 26 F.3d at 479.