United States District Court, S.D. New York
OKLAHOMA FIREFIGHTERS PENSION AND RETIREMENT SYSTEM, individually and on behalf of all other similarly situated, Plaintiff,
XEROX CORPORATION, URSULA M. BURNS, LUCA MAESTRI, KATHRYN A. MIKELLS, LYNN R. BLODGETT, and ROBERT K. ZAPFEL, Defendants.
OPINION & ORDER
A. ENGELMAYER, District Judge
Oklahoma Firefighters Pension and Retirement System brings
this putative class action, claiming that defendant Xerox
Corporation ("Xerox") and five of its officers
committed securities fraud by making false and misleading
statements and by failing to disclose material adverse
information about their business and outlook between April
23, 2012 and October 23, 2015 (the "Class Period").
Plaintiff brings claims under Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 (the "Exchange
Act"), 15 U.S.C. §§ 78j(b) and 78(t)(a), along
with Rule 10b-5 promulgated by the Securities and Exchange
Commission ("SEC"), 17 C.F.R. § 240.10b-5.
Plaintiff specifically faults defendants for not disclosing
that projects within Xerox's Health Enterprise business
were experiencing significant delays and cost overruns, and
that Xerox would be unable to offer Health Enterprise
products at sustainable profits. After Xerox eventually made
corrective disclosures, plaintiff alleges, Xerox's stock
price dropped, harming plaintiffs.
the Court are motions from two competing movants, each
seeking appointment as lead plaintiff and appointment of
their respective attorneys as lead counsel. These are (1) the
Arkansas Public Employees Retirement System
(“APERS”), an institutional investor, and (2) IWA
Forest Industry Pension Plan (“IWA Forest”), a
following reasons, the Court appoints APERS as lead
plaintiff, appoints APERS's attorney, Kessler Topaz
Meltzer & Check, LLP, as lead counsel, and Labaton
Sucharow LLP as class liaison counsel.
is a global provider of printing machines and document
processing services. It is listed on the New York Stock
Exchange with the ticker symbol “XRX.” The five
individual defendants were Xerox officers within the class
period. Complaint ¶¶ 18-23. These officers, plaintiffs
allege, had the authority to control the contents of
Xerox's submissions to the SEC, press releases, and
presentations to market participants such as securities
analysts, money portfolio managers, and institutional
investors. Id. ¶ 24.
has two primary business divisions for reporting purposes:
Services, which accounted for about 55 percent of Xerox's
total revenue in 2015; and Document Technology, which
includes the sale and support of printing and copying
machines, and which accounted for about 40 percent of
Xerox's total revenue in 2015. Id. ¶ 2.
Xerox's Services division offers a “Health
Enterprise” service, a software management product
designed to help state agencies administer Medicaid programs
in accordance with federal regulations. Id. ¶
3. Before and during the Class Period, Xerox sold this
product to states. Id.
the Class Period, Xerox promoted its Health Enterprise
business as a valuable growth area, with low costs and high
profit margins. Plaintiff alleges, however, that
defendants' statements about the profitability and growth
potential of the Health Enterprise business were materially
false and misleading. Specifically, plaintiff alleges,
defendants did not disclose that (1) Xerox's
then-existing Health Enterprise projects were experiencing
significant delays and cost overruns; and (2) Xerox would be
unable to deliver Health Enterprise products at sustainable
profits. These omissions made defendants' optimistic
statements about Xerox's Health Services business,
operations, and potential inaccurate and unreasonable.
Id. ¶ 4.
identifies four announcements within the Class Period
revealing problems associated with its Health Enterprise
product that allegedly caused Xerox's stock price to
October 22, 2014, Xerox issued a press release announcing its
third-quarter 2014 results, which revealed disappointing
margins in the Health Services segment. Xerox blamed the low
margins on high costs resulting from the prolonged
implementation of its existing Health Enterprise projects.
Notwithstanding these “mounting costs, ”
plaintiffs allege, “Xerox assured investors that these
costs were ‘more contained in the third quarter'
and [Xerox] was making ‘good progress' within
Health Enterprise.” Id. ¶ 5. That day,
Xerox's common stock fell $0.94 per share, a decrease of
7.5 percent, to close at $11.57 per share on October 22,
2014. Id. ¶ 6.
April 24, 2015, Xerox announced its first quarter 2015
financial results, which again reflected disappointing
margins in the same business, again due to higher costs
associated with the continued implementation of Health
Enterprise projects. Nonetheless, plaintiffs allege,
“defendants continued to assure investors that
[Xerox's] Services business segment was performing
well.” Id. ¶ 7. That day, Xerox's
common stock fell $1.10 per share, a decrease of 8.75
percent, and closed at $11.48. Id. ¶ 8.
October 13, 2015, Xerox issued a press release announcing
that it would be taking a $385 million pre-tax charge with
its third quarter 2015 results. This charge related to assets
and unrecoverable costs part of the implementation of Health
Enterprise projects. Xerox disclosed, too, that it would not
complete its Health Enterprise projects in California and
Montana. Id. ¶ 9. The following day, Xerox
common stock fell by $0.32 per share, a decrease of 3.17
percent, closing at $9.83 per share on October 14, 2015.
Id. ¶ 10.
on October 26, 2015, Xerox released its financial results for
the third quarter of 2015. These results fell short of
analysts' estimates, partly because of revenues lost as a
result of the termination of the projects in California and
Montana. Xerox admitted it would experience lower revenues as
a result of the loss of these contracts. It also announced
that its directors had authorized a strategic review of
Xerox's business portfolio. Id. ¶ 11. That
day, Xerox's common stock fell $0.30 per share, a
decrease of 3 percent, closing at $9.73 per share on October
26, 2015. Id. ¶ 12.
bring two claims. The first, against all defendants, is for a
violation of Section 10(b) of the Exchange Act and Rule
10b-5, based on Xerox's dissemination and/or approval of
false and misleading statements and material omissions
concerning Health Enterprise. Id. ¶¶ 71-
75. The second, against only the individual defendants, is
for a violation of Section 20(a) of the Exchange Act,
claiming that the individual defendants had the power and