Opinion ID: 787524
Heading Depth: 3
Heading Rank: 2

Heading: Actionable Misrepresentation or Omission

Text: 12 The PSLRA mandates that, where plaintiffs allege that the defendant made an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements made, in light of the circumstances in which they were made, not misleading, plaintiffs must specify each statement alleged to have been 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 the belief is formed. 15 U.S.C. § 78u-4(b)(1). Silence, absent a duty to disclose, is not misleading under Rule 10b-5. Basic, Inc. v. Levinson, 485 U.S. 224, 239 n. 17, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988). Yet, even absent a duty to speak, a party who discloses material facts in connection with securities transactions `assume[s] a duty to speak fully and truthfully on those subjects.' Helwig, 251 F.3d at 561 (quoting Rubin v. Schottenstein, 143 F.3d 263, 268 (6th Cir.1998)). There is no general or independent duty to disclose soft information, information that is uncertain and not objectively verifiable such as predictions, matters of opinion, and asset appraisals. Helwig, 251 F.3d at 559. However, even with soft information, a defendant may choose silence or speech based on the then-known factual basis, but it cannot choose half-truths. Helwig, 251 F.3d at 561, 564 (holding that a company may remain silent regarding soft information until the fullness of time and additional detail permit confident disclosure, but it may not volunteer material, soft information despite its uncertainty and then escape liability for that information's misleading or false nature). 13 Plaintiffs allege, not that Ford had an independent duty to disclose the dangerousness of ATX equipped Explorers or the possible loss contingency regarding it, but that Ford made misrepresentations or statements that are misleading absent the disclosure of such material information. In their complaint, plaintiffs allege that Ford made many statements about Ford having experienced earnings improvement and the Explorer having set various sales records that were misleading because Ford knew that such profits and sales were due to its sale of a defective product and that the eventual public revelation of the defect would affect adversely Ford's financial status. However, we have held that [t]he disclosure of accurate historical data does not become misleading even if... [the company might predict] less favorable results ... in the future. In re Sofamor Danek Group, 123 F.3d 394, 401 n. 3 (6th Cir.1997). Because plaintiffs have not alleged the historical inaccuracy of Ford's financial and earnings' statements, such statements are not misrepresentations. 14 A misrepresentation or an omission is material only if there is a substantial likelihood that a reasonable investor would have viewed the misrepresentation or omission as `having significantly altered the total mix of information made available.' In re Sofamor, 123 F.3d at 400 (quoting Basic, Inc., 485 U.S. at 232, 108 S.Ct. 978). We may properly dismiss a complaint on the ground that the alleged misrepresentations or omissions are immaterial only if they are so obviously unimportant to a reasonable investor that reasonable minds could not differ on the question of their unimportance. Helwig, 251 F.3d at 563 (internal quotation marks, citation and emphasis omitted). Immaterial statements include vague, soft, puffing statements or obvious hyperbole upon which a reasonable investor would not rely. In re K-tel Int'l, Inc. Sec. Litig., 300 F.3d 881, 897 (8th Cir.2002). Statements that are mere puffing or corporate optimism may be forward-looking or generalized statements of optimism that are not capable of objective verification. Grossman v. Novell, Inc. 120 F.3d 1112, 1119 (10th Cir.1997). In their complaint, plaintiffs allege that Ford made many misleading statements regarding its commitment to quality, safety, and corporate citizenship, such as: 1) [A]t Ford quality comes first.; 2) We aim to be the quality leader; 3) Ford has its best quality ever; 4) Ford is taking across-the-board actions to improve ... [its] quality.; 5) Ford has made quality a top priority; 6) Ford is a worldwide leader in automotive safety; 7) Ford has made quality a top priority; 8) Ford is designing safety into... [its] cars and trucks because it wants its customers to feel safe and secure in their vehicles at all times; 9) Ford want[s] to make customers' lives ... safer; 10) Ford has dedicated ... [itself] to finding even better ways of delivering ... safer vehicles to [the] consumer; 11) Ford want[s] to be clear leaders in corporate citizenship; 12) Ford's greatest asset is the trust and confidence ... [it] has earned from ... [its] customers; 13) Ford is going to lead in corporate social responsibility. Such statements are either mere corporate puffery or hyperbole that a reasonable investor would not view as significantly changing the general gist of available information, and thus, are not material, even if they were misleading. All public companies praise their products and their objectives. Courts everywhere have demonstrated a willingness to find immaterial as a matter of law a certain kind of rosy affirmation commonly heard from corporate managers and numbingly familiar to the marketplace—loosely optimistic statements that are so vague, so lacking in specificity, or so clearly constituting the opinions of the speaker, that no reasonable investor could find them important to the total mix of information available. Shaw v. Digital Equip. Corp., 82 F.3d 1194, 1217 (1st Cir.1996); see also Nathenson v. Zonagen, Inc. 267 F.3d 400, 404, 419 (5th Cir.2001) (broad, general statements about positive and statistically significant test results of a new drug were puffery); Lasker v. N.Y. State Elec. & Gas Corp., 85 F.3d 55, 58 (2d Cir.1996) (corporation's self-praise about its business strategy is not considered seriously by the marketplace and investors in assessing a potential investment). 15 The same is true with respect to statements such as (1) We want to ensure that all our vehicles have world-class quality[,]... developing cars and trucks that are defect-free  and (2) We're also insisting our suppliers maintain Ford's stringent quality standards. What Ford wants or is insisting its suppliers do would not be interpreted by an investor as a representation that its products achieve that objective or its suppliers maintain the quality standards it asks. Yet, plaintiffs maintain that this statement was false because Ford permitted Bridgestone, its largest tire supplier for the Explorer, Ford's most important product, to supply defectively designed and/or improperly manufactured ATX tires ... [that] utilized bad, out-of-specification or inappropriate raw materials, and had only a `C' heat/temperature rating. 16 Plaintiffs allege only three affirmative statements relating specifically to the safety of Ford Explorers with ATX tires. The first two are related. In February 2000, in response to an inquiry from a Houston, Texas television station regarding three specific rollover accidents involving Explorers with ATX tires, a Ford public affairs manager is alleged to have said that the [F]ord Explorer is an extremely safe and thoroughly engineered vehicle that, as substantiated by NHTSA data, performs as well as or better than peer vehicles in its class.... Ford is very, very proud of the Explorer and strongly believes that the vehicle is extremely safe when operated properly. 17 In response to either the same or another inquiry regarding Texas accidents, a public affairs manager stated these accidents clearly resulted from driver error and had nothing to do with the design of the vehicle. 18 Ford asserts as to these allegations, first, that they are statements of opinion, that plaintiffs offer no basis to believe Ford was not proud or otherwise did not believe the opinions expressed, and that there is, therefore, no basis to conclude that Ford knew they were false or made recklessly. Further, with respect to the first statement, it was a comment on the vehicle itself since that is what is measured by NHTSA. In the instance of the second statement plaintiffs have failed to allege with particularity that the Ford spokesman or Ford knew that the statements were false or made with the recklessness required under the PLRA. There are no allegations with respect to the actual cause of the accidents referred to or further identifying the accidents referred to. 19 The third statement was made on August 1, 2000, after NHTSA had opened an investigation into the safety of Bridgestone tires. In response to two safety groups urging Ford to recall Ford Explorers equipped with ATX tires, Ford responded in a written statement that it was extremely satisfied with the safety record of their vehicles. Since the recall of tires was legally the responsibility of Bridgestone under 49 U.S.C. § 30120(b), the statement, as fairly read, is the expression of Ford's opinion as to the safety record of the vehicle itself. As statements of the speakers' opinions, these statements are actionable only if the speaker does not believe the opinion and the opinion is not factually well grounded. Helwig, 251 F.3d at 562. Plaintiffs did not allege facts that demonstrate the speaker did not believe the statements they made. 5