3. The July 22, 1992 Statement
The July 22, 1992 press release announced record revenues in the first half of the year, but stated the company's "concerns" that there could be "slower than expected growth in the second half of 1992." Plaintiffs argue that the second part of the statement misled the market because Symbol expected a decline (i.e., not just slower growth) in earnings per share.
The defendants respond by arguing that the statement relates only to revenues, not earnings. I agree; the statement does not refer to second-half earnings; it refers only to revenue growth. Plaintiffs' alternative claim -- that the statement is misleading even if limited to second half revenues -- also fails. In June 1992, Symbol was forecasting growth in revenues for the second half of the year. Although plaintiffs contend that certain internal documents reflect a projected decline in revenue for the third quarter of 1992, the allegedly actionable statement refers to the second half as a whole, as to which the company was indisputably forecasting a growth in revenues over second-half 1991. Defendants have shown that even though internal documents forecast a possible negative "growth" in the third quarter of 1992, these same documents predicted that fourth quarter earnings would rebound and that aggregate growth for the second half of the year would therefore be positive, although less than in the first half. Plaintiffs have not shown any evidence that casts doubt on defendants' claim that these were the projections available to and relied upon by the officers of Symbol as of July 22, 1992. Therefore, according to internal projections, the July 22, 1992 press release was not false when it was made. For these reasons, the third statement, like the first and second, is not actionable, and defendants' claims of securities fraud cannot stand.
Defendants' motion for summary judgment could be granted upon this finding alone. However, I also find that defendants' motion must be granted on the alternate ground that plaintiffs have failed adequately to support their allegations of scienter.
To prevail on a securities fraud claim, plaintiffs must prove that each defendant had a mental state embracing an intent to deceive, manipulate and defraud. Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n.12, 47 L. Ed. 2d 668, 96 S. Ct. 1375 (1976). Plaintiffs can show scienter by establishing a motive for committing fraud and a clear opportunity for doing so or by pointing to facts that give rise "to a strong inference of fraudulent intent." Acito, 47 F.3d at 52. Mere negligence is insufficient to support a § 10(b) claim, Ernst & Ernst, 425 U.S. at 198-99; conscious mischaracterization of facts or reckless disregard of facts must be shown. Time Warner, 9 F.3d at 268-69; San Leandro, 75 F.3d at 813. Plaintiffs have the "burden of pleading circumstances that provide at least a minimal factual basis for their conclusory allegations of scienter." Chill v. General Electric Corp., 101 F.3d 263, 267 (2d Cir. 1996). The failure to come forward with evidence from which a reasonable factfinder could find that defendants had the requisite scienter is an appropriate basis for granting summary judgment. Mayer v. Oil Field Systems Corp., 803 F.2d 749, 756 (2d Cir. 1986) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986)).
Plaintiffs do not allege a motive to commit fraud. This is not surprising, since the company and defendant Amato, as well as two high-ranking financial officers, purchased shares of Symbol stock during the class period. Plaintiffs attempt to establish scienter by resort to circumstantial evidence. They contend that any time there is an inconsistency between a company's public statement and information in its internal documents, then a jury may properly find scienter. (Transcript of Oral Argument dated April 19, 1996, at 62.) This is simply wrong, and ignores the Second Circuit standard described above.
Plaintiffs have not set forth any evidence of scienter with respect to the June 8, June 26 and July 22, 1992 statements. Even if those statements were actionable, a jury would have nothing upon which it could base a finding that defendants had the requisite intent. Mere generalized allegations that defendants knew at the time of the statements that the predictions of continued growth were false are insufficient to defeat this motion. As discussed above, all of the internal documents support the assessments and projections in the three statements at issue. Plaintiffs have not pointed to any evidence, let alone "strong evidence," that defendants had or relied on information to the contrary. In light of the absence of evidence suggesting that defendants knew (or were reckless in not knowing) that the statements were false, there can be no finding defendants committed a fraud on the market. See In re Caere Corp. Sec. Litig., 837 F. Supp. 1054, 1061 (N.D. Cal. 1991); Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir. 1994).
Plaintiffs fail to recognize that they must demonstrate a genuine issue of material fact as to whether there was fraud. The evidence shows, at most, that Symbol's senior management relied on internal forecasts that turned out, in hindsight, to be inaccurate. This is not fraud. Acito, 47 F.3d at 53.
C. The § 20 Allegations
Plaintiffs' allegations of § 20(a), or "controlling person," liability are predicated on a valid underlying § 10(b) claim. 15 U.S.C. § 78t; In re Verifone Sec. Litig., 11 F.3d 865, 872 (9th Cir. 1993). If there is no § 10(b) securities fraud claim, there can be no related claim under § 20. Bosio v. Norbay Sec., Inc., 599 F. Supp. 1563, 1568 (E.D.N.Y. 1985). As discussed above, plaintiffs' § 10(b) claim fails as a matter of law. Therefore, plaintiffs' § 20(a) claim must be dismissed as well.
For the foregoing reasons, the defendants' motion for summary judgment is granted.
United States District Judge
Dated: January 13, 1997
Brooklyn, New York