Laborers' Local #231 Pension Fund v. Cowan et al

Filing 234

MEMORANDUM ORDER denying 163 MOTION to Amend/Correct 34 Amended Complaint, filed by Laborers' Local #231 Pension Fund. Signed by Judge Colm F. Connolly on 2/7/2020. (nmf)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
LABORERS' LOCAL #231
PENSION FUND, Individually and
on Behalf of All Others Similarly
Situated,

Plaintiff,
V.

Civil Action No. 17-478-CFC
RORY J. COWAN, EDWARD A.
BLECHSCIDv1IDT, WCHAEL G.
DALLAS, GUY L. de CHAZAL,
SUSAN JANE KANTOR, PAUL A.
KAVANAUGH, JACK NOONAN,
JAMES A. QUELLA, CLAUDE P.
SHEER, MARC LITZ, H.I.G.
CAPITAL LLC, LBT
ACQUISITION, INC.
and LIONBRIDGE
TECHNOLOGIES,
INC.,
Defendant.

MEMORANDUM ORDER
Lead Plaintiff Laborers' Local #231 Pension Fund (Plaintiff), pursuant to
Rule 15 of the Federal Rules of Civil Procedure and the Court's Second Amended
Scheduling Order (D.1. 143), filed a Motion for Leave to Amend the Complaint

(D.1. 163) on May 14, 2019-the final day amendments were permitted under the
then-operative scheduling order.
In Plaintiffs words, it sought to amend the Second Amended Complaint in
order to add allegations that ( 1) "the Proxy made materially misleading statements
about how Defendants altered the projections that Union Square relied on[;]" (2)
the Proxy falsely stated that "each set of projections was not materially different
from the December projections except that the December projections were updated
to provide for the 2017 fiscal year forecast based on the updated 2016 fiscal year
forecasts[;]"(3) the Proxy's statements that "the disclosed projections included
forecasts by management for the full fiscal years 2016 and 2017, and extrapolated
projections for calendar year~ 2018 through 2020 prepared by Union Square" and
that "management previously prepared a set of financial projections which
included full year forecasted results for 2016 and 2017" while literally true were
misleading because the Proxy omitted "that those projections also included full
year forecasted results for 2018 through 2020 prepared by management, rather than
Union Square, and that reflected markedly different growth rates[;]" and (4) the
Proxy "misleadingly states that the July projections were not materially different
from the December Projections summarized above except that these projections
were based on preliminary results through June 30, 2016 and expectations for the
remainder of2016 resulting in 2016 Adjusted EBITDA figures approximately 12%

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higher than the December Projections summarized above." Reply in Support of
Plaintiffs' Motion for Leave to Amend Its Complaint, D.I. 174 at 3-4 (quotation
marks and citations omitted) (emphasis added). In short, Plaintiffs proposed
amendments all pertain to the financial projections for Lionbridge that were
included in the proxy statement. See D.I. 164-1 ,I137 ("The misleading statements
and omissions regarding the pessimistic projections, in tum, caused shareholders to
believe that the Merger was more attractive ...").
These projections were the principal subject of the Court's July 2, 2018
Memorandum in which the Court explained why it was granting in part and
denying in part Defendants' motion to dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(6). See D.I. 42. The Court explained then that the correct way to
evaluate these projections and the disclaimer that accompanied them was under

OF/ Asset Management v. Cooper Tire & Rubber, 834 F.3d 481 (3d Cir. 2016).
OF/ concerned a merger between Apollo Tyres Ltd. and Cooper Tire &
Rubber Company. OFI, 834 F.3d at 486. As part of the merger process, Cooper
Tire issued a proxy statement, which included the following disclaimer:
[The] financial projections set forth below are included in
this proxy statement only because this information was
provided to the Apollo Parties . . . in connection with a
potential transaction involving Cooper Tire ... You should
not regard the inclusion of these projections in this proxy
statement as an indication that Cooper Tire, the Apollo
Parties, [or other relevant parties] considered or consider

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the projections to be necessarily predictive ofactual future
events, and you should not rely on the projections as such.
Id. at 501 (alteration and emphasis in original). The disclaimer also made it clear

~at the projections were "outdated" and it explicitly stated that the party that
prepared the proxy statement '"d[id] not intend to update' them." Id. (alteration in
the original) (citation omitted).
Although the OFI Plaintiffs alleged that the financial projections included in
the proxy statement were false and misleading, the Third Circuit concluded that the
projections accused of being false and misleading were "plainly not included as
statements of fact." See id at 500-01. According to the Court, "the only relevant
statement of fact is that the projections were, in fact, the projections that Cooper
provided to Apollo and the financing bank during the negotiation of the deal." Id.
at 501. Because the Plaintiff had not alleged that Cooper had provided Apollo or
the financing bank with a different set of projections during negotiations, Plaintiff
had not identified a false or misleading statement. Id.
As in OFI, the Proxy Statement in this case included a disclaimer that,
among other things, stated the projections were "included solely to give the
Lionbridge stockholders access to certain financial projections that were made
available to the Special Committee, our Board of Directors and Union Square, and
is not included in this proxy statement to influence a Lionbridge stockholder's
decision whether to vote for the merger agreement or for any other purpose." D .I.
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17-1 at 53. Accordingly, the Court found in its July 2, 2018 Memorandum that
"the only relevant statement of fact a shareholder may draw from the inclusion of
the projections [in the Proxy Statement] is [that] Lionbridge provided the same
projections to its special committee of independent directors and to Union Square
in assessing the proposed merger[.]" D.I. 42 at 12. Because Plaintiffs Second
Amended Complaint alleged that "Lionbridge provided the same allegedly flawed
projections to its board, special committee, and financial advisors as it did its
shareholders[]" the only relevant statement of fact regarding the projections was
alleged to be true and therefore Plaintiff "fail[ed] to allege a false or misleading
statement under Section 14(a)." D.I. 42 at 13-14.
Nothing has changed since the Court issued its July 2, 2018 Memorandum.
Plaintiffs new allegations pertain to the projections. Under OF/, the only relevant
statement of fact about the projections is that the projections were made available
to the special committee, Lionbridge' s board of directors, and Union Square.
Plaintiffs proposed amendments do not allege that the projections were not
provided to the special committee, Lionbridge' s board of directors, and to Union
Square. Therefore, under OF/ Plaintiffs proposed amendments fail to allege a
false or misleading statement under Section 14(a).
Futility is a proper ground to deny a motion for leave to amend. See In re
Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1435 (3d Cir. 1997). The

V

Court finds that under OFI the proposed amended complaint would fail to state a
claim upon which relief could be granted and therefore amendment is futile. See

id. at 1434.
NOW THEREFORE, at Wilmington this Seventh day of February in 2020,
IT IS HEREBY ORDERED that Plaintiff's Motion for Leave to Amend the
Complaint (D.I. 163) is DENIED.

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