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On May 24, 2021, the District of Oregon entered summary judgment for a defendant manufacturer, its CEO and its CFO in a securities fraud class action alleging that the company’s announced earnings guidance was close to impossible to attain, but that its CEO continued to make materially false and misleading statements that the company was progressing toward its target. Murphy v. Precision Castparts, 2021 WL 2080016 (D. Or. 2021) (Beckerman, J.). The court held, in light of the Ninth Circuit’s recent opinion in Wochos v. Tesla, 985 F.3d 1180 (9th Cir. 2021),[1] that defendants’ “relatively generic” statements “were not sufficiently concrete to qualify as a concrete factual assertion about a specific present or past circumstances, nor specific enough for Plaintiffs to establish falsity.” After the Ninth Circuit issued its opinion in Tesla, defendants moved for reconsideration of the court’s July 3, 2020 opinion denying summary judgment as to certain statements. Based on Tesla, the court reversed its July 3 opinion with respect to the PSLRA’s safe harbor for forward-looking statements and falsity under Section 10(b).

The court stated that it interpreted Tesla—where an electric vehicle manufacturer and certain executives were alleged to have made false and misleading statements about an allegedly unattainable production goal—to mean “that the Safe Harbor protects statements that a company remains ‘on track’ to meet its target.” The court found that the non-actionable statements in Tesla (such as “it’s coming in as expected”; “there are no issues”; and “we are on-track”) were indistinguishable from the statements at issue here (such as “we’re on that slope”; “we’re pretty much on that drum beat”; “we hover around that line”; “the framework . . . is all intact”; “nothing has gone negative”; “we’ve been able to stay on that continuum”; and “there is no change to the . . . framework we laid out”). The court had previously held that the safe harbor did not protect the CEO’s statements because they contained facts about the company’s current circumstances. However, applying Tesla, the court found the CEO’s “relatively generic statements do not include sufficiently ‘concrete descriptions’ of present facts to fall outside the protection of the Safe Harbor.”

The court further determined that the statements in this case about the company’s current circumstances were just as vague as those in Tesla and thus under the Ninth Circuit’s reasoning were not actionable. Specifically, the court stated that “under Tesla’s reasoning, [the CEO’s] statements that ‘the framework is intact’ cannot be false unless there was no longer any part of the framework intact.” As to the statement that the company had achieved incremental benchmarks, the court explained that it read Tesla to “instruct that a company must disclose that it reached a specific benchmark for the statement to be actionable, not that it reached an undisclosed or non-specific benchmark.”