Opinion ID: 783853
Heading Depth: 4
Heading Rank: 2

Heading: The July 21, 1999, Press Release

Text: 46 The July 21, 1999, press release was not a forward-looking statement and was therefore not protected under the safe harbor provisions of the PSLRA. We nevertheless hold that the plaintiff failed to state a claim regarding the July 21, 1999, press release. The press release in question announced that Champion's second quarter earnings per share [] grew 13 percent to $0.59 from $0.52 last year. In the CAC, plaintiff quoted nearly all of the July 21 press release, much of which consists of statements that would qualify as forward-looking under the PSLRA. The district court, applying a test found in Ivax for mixed statements of present fact and future prediction, found the whole press release to be forward-looking. It also found that the July 21 press release was accompanied by meaningful cautionary language, and therefore concluded that the statements fit into the statutory safe harbor of the PSLRA and were not actionable. 47 Plaintiff contends that he took issue solely with the earnings figure included in the July 21 press release, and therefore argues that this is not a forward-looking statement protected by the PSLRA's safe harbor provision. Specifically, he argues that the district court misapplied Ivax in concluding that the entire press release should be treated as a forward-looking statement. Plaintiff avers that the earnings figure given in the July 21 press release (and repeated in the August 9, 1999, Form 10-Q filed with the SEC) was recklessly misstated, because, under generally accepted accounting principles (GAAP), Champion was required to accrue a loss of approximately $18 million 12 in the second quarter of 1999 due to the probability of Parker Homes's bankruptcy, about which the defendants knew or should have known. 48 We agree with the plaintiff that the earnings figure statement in the July 21 press release is a statement of present or historical fact, and therefore not subject to the safe harbor provision of the PSLRA. We also agree with the plaintiff that the mixed scenario described in Ivax does not apply to this situation, and therefore that the district court erred in so holding. The mixed statement discussed in Ivax was a list of factors that would influence Ivax's third quarter results. The court there held that: 49 The mixed nature of this statement raises the question whether the safe harbor benefits the entire statement or only parts of it. Of course, if any of the individual sentences describing known facts (such as the customer's bankruptcy) were allegedly false, we could easily conclude that that smaller, non-forward-looking statement falls outside the safe harbor. But the allegation here is that the list as a whole misleads anyone reading it for an explanation of Ivax's projections, because the list omits the expectation of a goodwill writedown. If the allegation is that the whole list is misleading, then it makes no sense to slice the list into separate sentences. Rather, the list becomes a statement in the statutory sense, and a basis of liability, as a unit. It must therefore be either forward-looking or not forward-looking in its entirety. 50 182 F.3d at 806. The court in Ivax concluded that a list must be treated as a whole when the allegation was that the list itself misled investors by omitting certain relevant factors. The statement at issue here is not a list, nor is the argument that the earnings figure is misleading based on an omission from a list. The earnings figure is easily separable from the forward-looking statements contained in the press release, and is not given merely as an assumption underlying future projections. It therefore is not protected under the safe harbor provisions of the PSLRA, and the district court erred in so holding. 51 The question still remains whether the earnings figure was fraudulently misstated, which is dependent on whether the defendants recklessly failed to accrue an $18 million loss because of the possibility of Parker Homes's bankruptcy. For the reasons given below in discussing Champion's identical earning figure given in the August 9, 1999, Form 10-Q, there was no such reckless failure, and the plaintiff therefore failed to state a claim regarding the July 21, 1999, press release.