Ninth Circuit Holds That Incomplete Disclosures About Sales Force Performance Are Not Material Omissions

by charlesjung

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In In re Cutera Securities Litigation, 610 F.3d 1103 (9th Cir. 2010), a fraud-on-the-market class action suit, plaintiff investors appealed the dismissal of their securities fraud class action against Cutera, Inc., its chief executive officer, Kevin Connors, and its chief financial officer, Robert J. Santilli, under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934.  The investors alleged that Cutera provided false and misleading revenue projections and failed to disclose material information about the shortcomings of Cutera’s sales staff.

Chief Judge Vaughn R. Walker of the Northern District of California dismissed without prejudice for failure to state claim. Investors appealed.

The Ninth Circuit affirmed, concluding that Cutera’s alleged incomplete disclosures about its sales force are not material omissions made in violation of the securities laws, and that Cutera’s earnings projections fall within the statutory safe harbor for forward-looking projections under the Private Securities Litigation Reform Act of 1995 (“PSLRA“), 15 U.S.C. § 78u-5.

Judges and Attorneys

Circuit Judge M. Margaret McKeown wrote the opinion for the panel.  Circuit Judge David R. Thompson and Senior District Judge Thomas S. Zilly concurred.

Chief Judge Vaughn R. Walker of the Northern District of California was the trial judge.

Paul D. Clement and Zachary D. Tripp of King & Spalding LLP represented the appellee.

By CHARLES H. JUNG

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