In an opinion issued yesterday, Judge Sweet dismissed all claims brought by a putative class of shareholders against magicJack, a low-cost provider of internet phone service, and certain of its executives. The complaint identified a raft of alleged misrepresentations and omissions:
[B]etween the period of February 28, 2012 through January 8, 2013, the Company made a series of “false and/or misleading statements and/or failed to disclose material facts … for the purpose of keeping the Company’s stock price inflated.” [Specifically,] that the Company failed to (1) disclose a lawsuit; (2) record an inventory write-down; (3) disclose the significance of revenue recorded from puts; and (4) disclose that [former CEO] Borislow had pledged his stock. In addition, the Complaint maintains that throughout the Class Period, magicJack was engaged in a buyback program to repurchase $100 billion of its stock.
Judge Sweet disagreed. The allegedly hidden lawsuit was publicly filed in open court; certain claims were based on a research report by Copperfield Research, which itself was based only on publicly available information; and the accounting claims were “mere speculation.” Judge Sweet found that the plaintiffs had failed to plead a material misrepresentation, scienter or loss causation for any of their claims.