Opinion ID: 2982900
Heading Depth: 2
Heading Rank: 1

Heading: January 24 Press Release

Text: On January 24, 2012, Tempur-Pedic issued a press release announcing the company’s 2011 financial results and issuing financial guidance for the upcoming year. The pension funds argue that the company’s financial guidance and a statement about “competitiveness” were materially false or misleading. Both arguments fail. The financial guidance falls within the -6- Case No. 14-5696 Pension Fund Grp. et al. v. Tempur-Pedic Int’l, Inc. et al. PSLRA safe harbor, and Sarvary’s vague mention of “competitiveness” was immaterial corporate puffery that no reasonable investor would find important.
For the upcoming year, Tempur-Pedic projected between $1.60 and $1.65 billion in net sales and between $3.80 and $3.95 in earnings-per-diluted-share. Such guidance falls squarely within the PSLRA’s definition of forward-looking statements. See 15 U.S.C. § 78u-5(i)(1). The pension funds nevertheless argue that Tempur-Pedic’s 2012 financial guidance was not, in fact, forward looking because it omitted how Serta had already affected the company’s sales growth. But they find no support in our precedent for characterizing financial projections as representations of historical or current fact. Under the PSLRA, we ask if a statement meets the statutory definition of forward looking; if it does, we look to whether the defendant meaningfully alerted investors to the risks that might prevent it from reaching its financial targets. See Miller, 346 F.3d at 672, 678. In other words, we ask if Tempur-Pedic “convey[ed] substantive information about factors that realistically could cause results to differ materially from those projected in the forward-looking statements.” Helwig, 251 F.3d at 558–59. Here, the January 24 press release warned about competitive risks and incorporated warnings in other SEC filings by reference. The press release identified numerous “risks and uncertainties that could cause actual results to differ materially” from projected results, including “industry competition.” (R. 91-14, Jan. 24. 2012 Form 8-K.) The warning referred readers to the company’s SEC filings, particularly the “Risk Factors” section of the company’s most recent Form 10-K annual report. That report, released in January 2011, disclosed: “The mattress and pillow industries are highly competitive. Participants in the mattress and pillow industries have -7- Case No. 14-5696 Pension Fund Grp. et al. v. Tempur-Pedic Int’l, Inc. et al. traditionally competed based primarily on price.” (R. 91-4, FY 2010 Form 10-K at 4.) It mentioned Serta specifically: The standard mattress market in the U.S. is dominated by manufacturers of innerspring mattresses, with three nationally recognized brand names: Sealy, Serta and Simmons. These three competitors also offer premium innerspring mattresses and collectively have a significant share of the premium mattress market in the U.S. . . . [Many of our] competitors and, in particular, the three largest brands of innerspring mattresses named above, have significant financial, marketing and manufacturing resources, strong brand name recognition, and sell their products through broader and more established distribution channels. During the past several years, a number of our competitors, including Sealy, Serta and Simmons, have offered viscoelastic mattress and pillow products. (Id. at 5 (emphasis added).) The “Risk Factor” section further explained: “[A] number of our significant competitors offer non-innerspring mattress and viscoelastic pillow products. Any such competition by established manufacturers or new entrants into the market could have a material adverse effect on our business, financial condition and operating results by causing our products to lose market share.” (Id. at 8.) The press release’s warning about industry competition—which incorporates by reference the Form 10-K’s more thorough risk disclosures, see Miller, 346 F.3d at 677–78— adequately disclosed the risk that Tempur-Pedic would fail to sustain its current rate of growth due to increased competition from Serta for share of the memory-foam market. We found similar disclosures meaningful in Miller v. Champion Enterprises, Inc., rejecting the argument that a model-home company should have disclosed its loan to a struggling retailer whose default might leave it saddled with excess inventory: The July 8 letter cited Champion’s risk disclosures in its 1998 Form 10-K, which included a risk related to inventory levels of manufactured housing retailers. Additionally, the letter itself contained warnings that “housing stocks in general have underperformed the markets in 1999,” and that “in certain regions we see too many retail locations, suggesting an over supply of retail inventory of homes in that region.” Plaintiff argues that Champion should also have disclosed the nature of their loans to Parker Homes. This goes too far. Champion disclosed the exact -8- Case No. 14-5696 Pension Fund Grp. et al. v. Tempur-Pedic Int’l, Inc. et al. risk that occurred in this situation: excess retailer inventory that could lead to negative economic effects on Champion. Champion is not required to detail every facet or extent of that risk to have adequately disclosed the nature of the risk. 346 F.3d at 677–78. Similarly, having disclosed the risks posed by competition, Tempur-Pedic was not required to disclose its internal analyses of how a specific competitor affected sales to claim safe-harbor protection. The pension funds’ argument to the contrary finds no support in Helwig v. Vencor, Inc., which denied safe-harbor protection to a healthcare provider’s “cursory and abstract” statements disclaiming any knowledge of how a pending federal law might affect its business. 251 F.3d at 558–59. Helwig stands for the proposition that a defendant fails to provide meaningful cautionary language when it refuses to identify or address imminent risks; it does not address the level of specificity required once a defendant discloses such risks. Id. at 559. Miller, not Helwig, controls our consideration of Tempur-Pedic’s cautionary language. Further, Tempur-Pedic’s warning remained meaningful even if sales at certain retailers grew at a slower rate in the months leading up to the January 24 press release. Although several district courts have denied safe-harbor protection when defendants’ risk disclosures treat currently existing conditions as mere possibilities, they have done so only where the warnings clearly misrepresented facts. See, e.g., In re Compuware Sec. Litig., 301 F. Supp. 2d 672, 685 (E.D. Mich. 2004) (“Defendants’ statement that ‘there can be no assurance that IBM will not choose to offer significant competing products in the future,’ implied that IBM’s development of competing software was a possibility as opposed to an actuality, and therefore, this statement does not qualify as meaningful cautionary language.”). We decline to find Tempur-Pedic’s risk disclosures inadequate merely because the company’s growth appeared to slow—but not reverse—due to competition in 2011. Holding otherwise would deny safe-harbor protection any -9- Case No. 14-5696 Pension Fund Grp. et al. v. Tempur-Pedic Int’l, Inc. et al. time a plaintiff could show that a defendant perceived a general negative trend, even if the trend had not yet affected its bottom line. Such a rule would undermine the PSLRA’s pro-disclosure objective. See Helwig, 251 F.3d at 559.
The January 24 press release also attributed the following comment to Sarvary: “In 2011, we delivered strong financial performance, strengthened our competitiveness and implemented a range of strategic growth initiatives.” (R. 91-14, Jan. 24, 2012 Form 8-K.) The pension funds contend that Sarvary’s statement was false or misleading because he knew that Tempur-Pedic’s growth slowed at retailers carrying the iComfort. But Sarvary’s unspecific reference to the company’s “competitiveness” is immaterial as a matter of law: the term is “too squishy, too untethered to anything measurable, to communicate anything that a reasonable person would deem important to a securities investment decision.” City of Monroe, 399 F.3d at 671. The pension funds fail to identify a “standard against which a reasonable investor could expect [Sarvary’s reference to competitiveness] to be pegged.” Id.