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IN RE GLENAYRE TECHS.

November 4, 1997

IN RE GLENAYRE TECHNOLOGIES, INC. SECURITIES LITIGATION.


The opinion of the court was delivered by: BAER

 HAROLD BAER, JR., District Judge:

 Defendants move to dismiss these consolidated class action securities cases. Defendants also move to transfer venue to the Western District of North Carolina. For the reasons discussed below, the motions to dismiss are GRANTED, with leave to replead. The motion to transfer is DENIED.

 BACKGROUND

 Plaintiffs allege that defendants violated the securities laws by (1) misrepresenting the "firmness" of the company's backlog and (2) failing to disclose the adverse implications of an FCC freeze on licenses for new paging channels. As a result, plaintiffs allege a fraud on the market, which harmed persons who purchased Glenayre stock from February 6, 1996 through September 13, 1996.

 Specifically, plaintiffs allege that on February 6-7, 1996 the Company, which among other products is a leading manufacturer of paging technology, announced record results for the prior year and quarter and that various analysts reported the Company's announcement, including the Company's $ 102 million "firm" backlog. On February 8, the FCC issued a Notice of Proposed Rulemaking that froze new paging license applications (the "Freeze"). Plaintiffs allege that those in the industry, such as Glenayre, were aware of this Freeze before the February 8 FCC announcement and had a duty to disclose its imminence and potential impact. On March 1, 1996 Glenayre filed Comments with the FCC that stated that the Freeze "imposes significant harm on the paging industry" and estimating that Glenayre would lose $ 10-$ 12 million in revenue and $ 2.9-$ 5.7 million in profit as a result of the Freeze. On March 5, 1996 the company issued a press release describing the potential impact of the FCC Freeze. Its stock price fell 20%.

 On March 28, 1996, the company issued its 1995 10-K, touting its year-end "firm" backlog of $ 102 million. It also noted FCC's actions and indicated that the Freeze "may" adversely affect sales. The company continued to issue optimistic statements and very positive results throughout the year. On September 13, 1996 the Company issued a statement saying third quarter income would be 40-45% below the same quarter in the prior year. The next trading day, is stock price dropped from $ 33 to $ 20 on heavy trading.

 During the class period, the individual defendants sold significant amounts of Glenayre stock. Seven of the eleven individual defendants sold $ 36 million worth of stock during the month of February 1996--between the time the FCC announced the Freeze and the time Glenayre informed the public of the Freeze's impact. Furthermore, eight of the individual defendants also sold additional stock during the year, primarily in May 1996.

 DISCUSSION

 I. Motions to Dismiss

 A. Fraud

 Defendants first allege that plaintiffs have failed to plead facts establishing fraud, as required by Rule 9(b) and the Private Securities Litigation Reform Act ("PSLRA") of 1995, Pub. L. No. 104-67, 109 Stat. 737. Though plaintiffs identify numerous documents and press releases issued by Glenayre, their only allegations regarding falsity or misrepresentation relate to the company's backlog and the FCC Freeze. With respect tot he backlog, there are no allegations that the numbers provided by defendants were inaccurate. Rather, plaintiffs contend solely that defendants represented that the backlog orders were "firm" without identifying the possible contingencies that could lead to fewer order. In fact, plaintiffs allege, the backlog orders could be cancelled by customers with no penalty. Defendants respond by arguing convincingly that (i) the backlog figures were accurate; (ii) the 10-K indicated that backlog orders "generally" are shipped within six months and there are no allegations in the Complaint that this statement was false when made or ultimately proved to be false; and (iii) there are no allegations that the losses suffered by Glenayre had anything to do with the "infirmity" of the backlog.

 Once the FCC made its announcement on February 8, Glenayre filed its comments on March 1 and went public with the substance of those comments on March 5. Plaintiffs fail to allege any facts to support their conclusory allegations that the defendants knew the impact of the Freeze prior to their announcement. "Mere allegations that statements in one report should have been made in earlier reports do not make out a claim of securities fraud." Acito v. IMCERA Group, 47 F.3d 47, 53 (2d Cir. 1995). Furthermore, defendants had a right a ensure that any announcement regarding the possible impact of the Freeze be accurate and the timing of such an announcement is a matter business judgment. Financial Indus. Fund., Inc. v. McDonnell Douglas Corp., 474 F.2d 514, 518-19 (10th Cir. 1973). The Second Circuit has held ...


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