(Credit: Sean Doherty)
BlackBerry Ltd. shareholders enjoyed some rare good tidings on Thursday, when the company posted a surprise profit after previous quarters of punishing losses. But the news wasn’t so good for investors-turned-plaintiffs suing BlackBerry in a proposed securities class action that met its demise the same day.
The U.S. Court of Appeals for the Second Circuit tossed the case in a brief order, affirming a district court’s ruling that the plaintiffs failed to establish that BlackBerry or its executives made material misstatements or intended to deceive investors. The ruling is a win for Scott Musoff and Jay Kasner of Skadden, Arps, Slate Meagher & Flom, who have defended BlackBerry since the case was first filed in 2011.
Several plaintiffs firms filed securities fraud claims against BlackBerry (then Research in Motion) three years ago, accusing the company and its top execs of defrauding investors who bought RIM stock between December 2010 and June 2011. Among other things, they claimed RIM cofounder Jim Balsillie and others knowingly misled shareholders by stating that the company was “growing fast” and that its newly launched Playbook tablet would be a “winner.”
RIM instead suffered badly in 2011. The Playbook never gained traction amid defects and shipping delays, and the company failed to regain lost footing in the smartphone market as Apple, Samsung and other competitors surged ahead. RIM’s share price plummeted from a high of nearly $70 in February 2010 to just over $27 in June 2011.
As we reported, Musoff and Kasner persuaded Manhattan U.S. District Judge Richard Sullivan to dismiss the case with prejudice in March 2013. RIM’s financial spiral, the judge wrote, suggested “corporate mismanagement, not misfeasance.” The Second Circuit affirmed on Thursday, following oral arguments that pitted Skadden’s Musoff against David Brower of Brower Piven.
“In light of the company’s alleged history of delays, bugs and setbacks, the defendants’ projections may have been unduly optimistic and even negligent,” the Second Circuit panel wrote. “But negligence alone is insufficient to demonstrate the extreme departure from standards of ordinary care necessary to show recklessness.”