Laborers' Local #231 Pension Fund v. Cowan et al
Filing
42
MEMORANDUM. Signed by Judge Mark A. Kearney on 7/2/2018. (nmg)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
LABORERS' LOCAL #231 PENSION
FUND
CIVIL ACTION
v.
NO. 17-478
RORY J. COWAN, et al
MEMORANDUM
July 2, 2018
KEARNEY,J.
Partially changing its theories of liability after we dismissed its first amended complaint,
a shareholder now challenging disclosures in a proxy statement must plead specific facts giving
rise to liability under the securities laws. As we opined in dismissing the shareholder's first
attempt, claims based on projections with cautionary warnings or innuendo do not proceed into
discovery for securities claims.
While partially repeating these same allegations based on
projections, the shareholder's second amended complaint now includes one allegation of a
misleading statement in a January 2017 proxy statement which should proceed into discovery: a
representation the corporation's board placed confidence in a financial advisor's analysis and
opinion when the shareholder alleges the board's represented confidence conflicts with
undisclosed facts held by the board concerning the accuracy or potential flaws in the financial
advisor's analysis. The board's opinion describing the advisor's allegedly incomplete analysis as
a "positive reason" for the proposed transaction is allegedly false because the board knew it
provided faulty incomplete data to the advisor.
This one claim may proceed but the
shareholder's remaining claims do not meet the pleading requirements under the securities law.
I.
Facts alleged in the second amended complaint.
Delaware corporation Lionbridge Technologies, Inc. provides translation, localization,
digital marketing, global content management, and application testing services to companies
around the world. 1 Since 2012, Lionbridge exparided through ari acquisition based growth
strategy. 2
Lionbridge highlighted its acquisition growth strategy in its annual reports to
shareholders arid told its shareholders it will continue making acquisitions as part of its long-term
business strategy. 3 For example, in 2015, Lionbridge acquired two companies which Lionbridge
publicly touted as significantly expariding its capabilities arid accelerating its growth. 4 The same
year, Lionbridge repurchased $50 million of its shares. 5 Rory J. Cowari, Lionbridge's chairmari
of the board, chief executive officer, arid president, explained to shareholders the stock
repurchase "underscor[ed] our ongoing confidence in the long-term finaricial success of
Lionbridge" arid Lionbridge would "continue to use [its] capital to fund growth both orgariically
arid by acquisitions." 6 Lionbridge senior vice president of finarice arid chief financial officer
Marc Litz told shareholders Lionbridge had "ample flexibility to fund additional tuck-in
acquisitions as appropriate." 7 Mr. Cowari told shareholders Lionbridge would grow through
acquisitions beyond the technology sector in hopes to diversify Lionbridge' s offerings. 8
In 2016, Lionbridge continued assuring shareholders it would continue to grow through
acquisitions. 9 The same year, Lionbridge completed a major reorgariization to facilitate its
acquisition growth strategy. 10
Before the reorgariization, Lionbridge structured itself
"functionally" into global sales, global operations, arid global technology orgariizations. 11 Mr.
Cowari explained to shareholders Lionbridge's earlier functional orgariization structure did not
allow it to scale. 12 Lionbridge reorganized into nine "strategic business units." 13 Each business
unit would be run by a general mariager. 14 Mr. Cowari explained the strategic business unit
structure best served "for ari effective, targeted acquisition strategy. " 15 He further explained
Lionbridge strategic business units would be better tailored to "plug in" smaller acquisitions thari
its former functional orgariization structure. 16 Mr. Cowan believed having general mariagers for
2
each strategic business unit would allow new acquisitions to more quickly integrate into
Lionbridge. 17 Mr. Cowan told shareholders Lionbridge underwent its reorganization so it could
"get to the $1 billion ... level over the coming years." 18
In early 2016, while implementing its acquisition growth strategy, Lionbridge began
fielding inquiries from private equity firms to purchase Lionbridge. 19 Lionbridge's board of
•
directors met to discuss the offers and Lionbridge's long-term prospects.
20
Mr. Cowan provided
the board with projections of Lionbridge's revenues. 21 The board created a special committee of
three independent directors to consider the sale of Lionbridge, to assess alternatives to selling
Lionbridge, to negotiate terms of a potential sale, and to make recommendations to the board. 22
In mid-2016, HIG Capital, LLC expressed interest in acquiring Lionbridge. 23
As a
private equity firm, HIG explained it valued skilled and experienced management teams and
would retain Lionbridge's current management team, if it purchased Lionbridge. 24
Other
interested potential acquirers expressed they would retain Lionbridge's management team, as
well. 25
Lionbridge signed an exclusivity agreement with HIG to negotiate only with HIG
through mid-December 2016. 26
In mid-December 2016, Lionbridge and HIG finalized an agreement for HIG to purchase
Lionbridge's shares at $5.75 per share. 27 Lionbridge's board, absent Mr. Cowan who abstained,
approved the merger agreement with HIG. 28 The board and special committee cited "the ability
to access capital to fund acquisitions" as a motivation to engage in preliminary discussions with
potential acquirers and to ultimately merge with HIG. 29 Lionbridge announced the merger to its
shareholders the next day. 30
Lionbridge hired financial advisor Union Square Advisors LLC to assess the fairness of
HIG's and other potential acquirers' offers. 31
3
Lionbridge gave Union Square financial
projections prepared by Lionbridge, and actual results to the extent available, for fiscal years
2016 and 2017. 32
Based on Lionbridge's projections and other information, Union Square
prepared extrapolated financial projections for the years 2018 through 2020. 33
Lionbridge
approved Union Square's use of the financial projections to assess the fairness of HI G's offer. 34
Union Square found HI G's offer of $5.75 to be fair consideration for a Lionbridge share.
In January 2017, Lionbridge filed a definitive proxy statement with the Securities and
Exchange Commission. 35
In the proxy statement, Lionbridge's board unanimously
recommended shareholders vote in favor of the proposed merger with HIG. 36 The proxy also
included Lionbridge's and Union Square's financial projections from 2016 through 2020. 37 The
proxy statement included a chart summarizing the projections.
The projections showed
Lionbridge anticipated its revenues to grow from $550 million in 2016 to $641 million in 2020. 38
The projections provided for a compound annual growth rate of 3.9%. 39 From 2011 through
2015, Lionbridge experienced compound annual growth of around 7%. 40
The projections
estimated 2017 revenues at $572 million. In 2017, Lionbridge actually earned just under $600
million. 41
Lionbridge included a summary of assumptions the projections are based on, including:
the projections "were developed under the assumption of continued standalone operation as a
publicly-traded company and did not give effect to any changes or expenses as a result of the
merger or any effects of the merger"; "assumptions that necessarily involve judgments with
respect to, among other things, future economic, competitive, and regulatory conditions";
"assumptions as to certain business decisions that are subject to change"; and a warning "the
forecasts may be affected by our ability to achieve strategic goals." 42 Lionbridge also warned
shareholders the forecasts "reflect assumptions that are subject to change ... based on actual
4
results, revised prospects for our business, changes in general business or economic conditions,
or any other transaction or event that has occurred or that may occur and that was not anticipated
when the forecasts were prepared. " 43
In a disclaimer accompanying the projections and assumptions, Lionbridge explained the
projections are "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." 44
Lionbridge's disclaimer further provides, "The inclusion of the selected elements of the forecasts
in the table and accompanying narrative above should not be regarded as an indication that
Lionbridge and/or any of our affiliates, officers, directors, advisors or other representatives
consider the forecasts to be predictive of actual future events, and this information should not be
relied upon as such." 45 The disclaimer also warns shareholders Lionbridge and its advisors
"undertake no obligation to update or otherwise revise or reconcile the forecasts to reflect the
circumstances existing after the dates on which the forecasts were prepared or to reflect the
occurrence of future events, even in the event that any or all of the assumptions and estimates
underlying the forecasts are shown to be in error."46 The disclaimer ends with a final instruction,
"In light of the foregoing factors and the uncertainties inherent in the forecasts, Lionbridge
stockholders are cautioned not to place undue, if any, reliance on the forecasts." 47
Lionbridge cited the information it relied upon during its deliberations to merge with
HIG. 48
Lionbridge reviewed its "business and financial prospects" if it remained "an
independent, publicly-traded company ... including forecasts of future financial performance set
forth [in the disclosed projections]."49 Lionbridge listed positive reasons to support the merger,
5
including its belief $5.75 per share price "provides greater certainty of value and less risk to such
stockholders relative to the potential trading price of the shares over the long-term after
accounting for the risks to our business resulting from operational execution risk and evolving
industry dynamics, including out ability to grow organically and through business development
opportunities ... "so Lionbridge also described Union Square's fairness opinion as a "positive
reason" supporting its decision to approve the merger. 51
The proxy statement included a summary of Union Square's fairness opinion.
Lionbridge explained Union Square assumed and relied upon the accuracy of information
provided to it and relied upon assurances of Lionbridge management ''they were not aware of
any facts that would make such information inaccurate of misleading. ,,sz Union Square assumed
the financial projections prepared by Lionbridge "were reasonably prepared on a basis reflecting
the best currently available estimates and good faith judgments of management as to the future
competitive, operating, and regulatory environments and related financial performance of
[Lionbridge]. ,,sJ
Following at least two shareholder suits challenging HIG's proposed acquisition,
Lionbridge shareholders approved the merger in February 2017 and the merger closed the same
day.s4
Under the merger agreement, HIG created two affiliate entities, LBT Acquisition, Inc.
and LBT Merger Sub, Inc. 5s LBT Acquisition is an affiliate company controlled by HIG. 56 LBT
Merger Sub is a wholly owned subsidiary of LBT Acquisition. 57 Lionbridge merged into LBT
Merger, Sub, Inc. ss
Lionbridge survived the merger with LBT Merger Sub. s9 Lionbridge
shareholders received $5.75 per share.
6
After closing, Mr. Cowan told a media outlet Lionbridge would "absolutely" participate
actively in mergers and acquisitions. 60
Three days after the merger closed, Lionbridge
announced its acquisition of Exequo, an audio production, translation, and localization company
which operated studios in five countries. 61
A Lionbridge executive stated the acquisition
underscored HIG's support of Lionbridge's acquisition growth strategy. 62
II.
Analysis
In its first amended complaint, Laborers' Local #231 Pension Fund alleged the
projections and assumptions underlying projections in the January 2017 definitive proxy
statement were false and misleading because the projections did not account for Lionbridge's
potential growth through acquisitions. Pension Fund alleged the proxy did not disclose the
projections did not account for acquisition growth.
In our March 13, 2018 Order and
Memorandum, we dismissed Pension Fund's first amended complaint for failing to allege a false
or misleading statement in the proxy statement. Applying our court of appeals teachings in OF!
Asset Mgmt. v. Cooper Tire & Rubber, 63 we found Pension Fund failed to allege the projections
and assumptions were false or misleading because Lionbridge included the projections only to
provide shareholders with the same projections it provided to its board, special committee, and
Union Square in assessing the fairness of the merger. We found the only statement made by
Lionbridge in incorporating the projections in the proxy statement is the same projections were
provided to the other relevant parties. Pension Fund did not allege Lionbridge provided different
projections to its board, special committee, or Union Square.
Upon leave, Pension Fund files a second amended complaint suing HIG, LBT
Acquisition, LBT Merger, Lionbridge, and Lionbridge's board of directors and officers alleging
the January definitive proxy statement violated the Securities and Exchange Act of 1934 and its
implementing regulations. Pension Fund alleges Lionbridge omitted from the proxy statement
7
the material fact the financial projections did not incorporate Lionbridge's potential growth
through its acquisition growth strategy and rendered six statements in the proxy materially false
or misleading under Section 14(a) of the '34 Act. 64 Pension Fund claims HIG, its affiliates, and
Lionbridge's board and officers are "controlling persons" under Section 20(a) of the '34 Act65
and are liable for the false and misleading statements. In our March 13 Memorandum, we found
three of the six statements not false or misleading under the '34 Act.
HIG, its affiliates, Lionbridge, and Lionbridge's board and officers move to dismiss
arguing Pension Fund does not allege a false or misleading statement in the proxy. They argue
the proxy explicitly stated the projections did not include future transactions, including
acquisitions. They argue the disclaimer accompanying the projections explain the projections
are not predictive of future events and are included only to provide the same information
provided to other interested parties in assessing the merger. They argue the statements at issue
are forward looking statements subject to the safe-harbor provision under the Private Securities
Litigation Reform Act. 66 They argue the statements at issue are accompanied by cautionary
language and therefore are not actionable under the "bespeaks caution" doctrine. Finally, they
argue Pension Fund failed to state a claim against Mr. Litz and HIG and its affiliates because
they did not prepare the proxy, did not solicit the shareholders' vote, and are not controlling
persons under Section 20(a).
A. Pension Fund pleads one limited Section 14(a) claim against Lionbridge and
its board and officers.
Pension Fund limits its claim to specific disclosures in the proxy statement which
allegedly violate federal securities law. Pension Fund does not allege breach of fiduciary duty
under Delaware Law.
"[T]he fundamental purpose of the Securities Exchange Act is to
implement 'a philosophy of full disclosure;' once full and fair disclosure has occurred, the
8
fairness of the terms of the transaction is beyond the scope of the Act. " 67 A breach of fiduciary
duty unaccompanied by misrepresentation, nondisclosure, or deception, does not violate the '34
Act. 68 We cannot allow counsel's "artful legal draftsmanship" to backdoor claims "essentially
grounded on corporate mismanagement" under federal securities law. 69
Section 14(a) of the '34 Act prohibits any person "in contravention of such rules and
regulations as the [Securities and Exchange Commission] may prescribe ... to solicit or to
permit the use of his name to solicit any proxy or consent or authorization in respect of any
security ... registered pursuant to section 12."70 "Section 14(a) seeks to prevent management or
others from obtaining authorization for corporate actions by means of deceptive or inadequate
disclosures in proxy solicitations." 71 Securities and Exchange Commission Rule 14a-9 provides
"[n]o solicitation subject to this regulation shall be made by means of any proxy statement ...
containing any statement which, at the time and in light of the circumstances under which it is
made, is false or misleading with respect to any material fact, or which omits to state any
material fact necessary in order to make the statements therein not false or misleading ... "72
"To be actionable under Rule 14a-9, 'a statement or omission must have been misleading at the
time it was made; liability cannot be imposed on the basis of subsequent events. "' 73 The filer of
a proxy statement is not obligated to predict the future, unless the filer has reason to believe a
future event will occur. 74
To plead a Section 14(a) violation, Pension Fund must allege "(1) a proxy statement
contained a material misrepresentation or omission which (2) caused the plaintiff injury and (3)
that the proxy solicitation itself, rather than the particular defect in the solicitation materials, was
an essential link in the accomplishment of the transaction." 75 An omission is material if "there is
a substantial likelihood that a reasonable shareholder would consider it important in deciding
9
how to vote ... Put another way, there must be a substantial likelihood that the disclosure of the
omitted fact would have been viewed by the reasonable investor as having significantly altered
the 'total mix' of information made available." 76
Scienter is not an element of a Section 14(a)
claim. 77
Our court of appeals instructs us claims sounding in fraud brought under Section 14(a)
are subject to the heightened pleading standards found in the Private Securities Litigation
Reform Act. 78
Under the heightened standard, "the complaint shall specify each statement
alleged to have been misleading, the reason or reasons why the statement is misleading, and, if
an allegation regarding the statement or omission is made on information and belief, the
complaint shall state with particularity all facts on which that belief is formed." 79 The Reform
Act is designed to restrict abuses of class action securities litigation. 80 The Reform Act mandates
we dismiss a complaint failing to meet the heightened pleading requirements. 81
Under the '34 Act and Reform Act, we limit our review to the statements alleged to be
false or misleading in Pension Fund's second amended complaint. We express no opinion on
any other statement in Lionbridge's January 31 proxy statement. Limiting our analysis to the
Pension Fund's challenge, Pension Fund alleges one specific statement is materially false or
misleading under Section 14.
1. Pension Fund again fails to allege a false or misleading statement
based on the projection numbers and assumptions.
Pension Fund claims the projections found in the proxy and the assumptions underlying
the projections are false and misleading because the projections did not account for Lionbridge's
potential growth through acquisitions. In its first amended complaint, Pension Fund claimed the
same projections and assumptions to be false and misleading. We dismissed Pension Fund's
10
claim based on the projection numbers and assumptions after applying our court of appeals
decision in OF! Asset Mgmt.
In OF! Asset Mgmt., our court of appeals affirmed the dismissal of a complaint based on
alleged misleading financial projections included in a proxy statement. The plaintiff in OF!
Asset alleged the proxy statement contained materially false and misleading financial projections
because the projections did not provide accurate estimates of the defendant's future revenue and
operating profits. 82
The shareholder alleged the management team created updated financial
projections before filing the proxy statement but only included the older projections. 83 The court
found the financial projections did not stand alone as a statement of affirmative fact, rather the
defendant accompanied the projections with "a lengthy and specific disclaimer." 84
The disclaimer stated, "[The] financial projections set forth below are included in this
proxy statement only because this information was provided to the [potential acquirer] . . . in
connection with a potential transaction involving [the defendant] ... You should not regard the
inclusion of these projections in this proxy statement as an indication that [the defendant], [the
potential acquirer], [or other relevant parties] considered or consider the projections to be
necessarily predictive of actual future events, and you should not rely on the projections as
such. " 85
The disclaimer listed the defendant's financial advisor as having received the
projections during the negotiation process, as well. 86 The financial advisor used the projections
to form a fairness opinion regarding the potential merger. 87 The proxy statement also labelled
the projections as "outdated" and explained the defendant did not intend to update the
projections. 88
The court concluded, "[t]he projections are plainly not included as statements of fact.
Instead, the only relevant statement of fact is that the projections were, in fact, the projections
11
that [the defendant] provided to [the potential acquirer] and the financing bank during the
negotiation of the deal." 89 Because the plaintiff did not allege the projections included in the
proxy statement were different from what the defendant provided to the potential acquirer and its
financial advisor, the plaintiff did not plead an actionable false or misleading statement under the
'34 Act. 90
In its Second Amended Complaint, Pension Fund again claims the projections and
assumptions underlying the projections are false and misleading because the projections did not
include Lionbridge's potential growth through acquisitions. Pension Fund does not allege new
facts or raise new legal arguments relating to the projections and assumptions.
As in OF! Asset Mgmt., Lionbridge accompanied its financial projections with "a lengthy
and specific disclaimer." The disclaimer included in the proxy closely resembles the disclaimer
analyzed in OF! Asset Mgmt.
The disclaimer highlighted the fact Lionbridge included the
projections cited by Pension Fund in the proxy statement for the purpose of providing the voting
shareholders with information Lionbridge's board, special committee, and financial advisor used
to assess the potential merger. Based on the disclaimer accompanying the projections, the only
relevant statement of fact a shareholder may draw from the inclusion of the projections is
Lionbridge provided the same projections to its special committee of independent directors and
to Union Square in assessing the proposed merger with LBT Merger Sub.
Pension Fund cites the fact the estimated growth rate of 3.9% differed from Lionbridge's
experienced growth rate of 7% from 2011 through 2015 as evidence the projections did not
include acquisition based growth.
Even assuming Pension Fund alleged sufficient facts to
attribute the reduction in Lionbridge' s growth estimates to its failure to include estimated growth
12
through its acquisition strategy, Pension Fund does not allege a false or misleading statement
based on the projections.
Pension Fund does not allege how the om1ss10n of potential growth through an
acquisition strategy is materially misleading or false based on the information reported to Union
Square. Pension Fund does not allege Lionbridge's board did not provide the projections to its
special committee, or financial advisor. Whether the projection incorporated the acquisition
strategy does not negate Lionbridge's representation it provided the same projection to others
involved in assessing the merger. The representation in the proxy statement is true. Pension
Fund's claim the Defendants should have told Union Square more information may have been or
could have been part of the pre-merger Chancery Court litigations, but this "should have
disclosed" is not part of the plead Section 14 claim here.
Pension Fund's claim based on the projection assumptions fails for the same reasons.
Pension Fund does not identify how the assumptions render the statement of fact the same
projections were provided to Lionbridge's board and Union Square is materially false or
misleading. Even assuming it is true the assumptions do not reflect Lionbridge's acquisition
strategy, it would not negate the representation by Lionbridge it provided the same projections
based on the same purported assumptions to its board, special committee and financial advisor.
Allowing Pension Fund to backdoor a claim based on the projections by alleging false and
misleading assumptions would allow Pension Fund to wholly bypass our court of appeals'
decision in OF! Asset Mgmt. Based on our liberal reading of Pension Fund's second amended
complaint, Lionbridge provided the same allegedly flawed projections to its board, special
committee, and financial advisors as it did to its shareholders. 91
13
Pension Fund now seeks to hold Lionbridge's board and others liable for failing to
provide accurate projections. This theory is not viable under our court of appeals' guidance in
OF! Asset Mgmt. If it did, we would be recognizing a claim challenging the board's adherence
to the fiduciary duties of loyalty, candor and care in the context of a 14(a) claim. We decline to
transform Section 14(a) focusing on disclosure into a second shot at a fiduciary duty claim for
failing to disclose information to the financial advisor. This may be a claim in Chancery Court
but we do not see a viable claim plead today under Section 14(a) after OF! Asset Mgmt. Pension
Fund fails to allege a false or misleading statement under Section 14(a).
2. Pension Fund fails to sufficiently allege the board's consideration of
Lionbridge's business and financial prospects if it remained an
"independent, publicly traded company" is false or misleading.
Pension Fund claims the following statement in the proxy is materially false or
misleading because the proxy statement did not disclose the projections did not include potential
growth through an acquisition strategy:
"During the course of its deliberations, the Special
Committee held numerous meetings and consulted with our senior management, Union Square
and Goodwin Proctor, and reviewed, evaluated and considered numerous factors and a
significant amount of information and data, together with our full Board of Directors, including .
. . our business and financial prospects if we were to remain an independent, publicly-traded
company and the growth and scale required to effectively compete in the localization and
interpretation industries, including forecasts of future financial performance set forth in the
[disclosed projections]. " 92
Pension Fund argues this statement makes two representations.
First, Lionbridge
directors considered the projections in their decision to approve the merger.
Second,
Lionbridge's board believed the projections represented Lionbridge's actual "business and
financial prospects if [it] were to remain an independent, publicly-traded company." Pension
14
Fund argues the second representation is misleading because the disclosed projections did not
actually represent Lionbridge's "business and financial prospects" as an "independent, publiclytraded company" because they did not incorporate acquisition based growth.
Pension Fund relies on the Supreme Court's holding in Omnicare, Inc. v. Laborers Dist.
Council Constr. Indus. Pension Fund. 93 In Omnicare, the Court assessed when an opinion may
be false or misleading under Section 11 of the Securities Act of 193 3. The Court explained the
inclusion of an opinion in a registration statement affirms one fact: the speaker actually holds the
stated belief. 94 If the speaker does not in fact hold the stated belief, the opinion is false and
misleading, assuming this fact is material. 95 The Court also found a sincere statement of opinion
may give rise to liability if the registration statement "omits material facts about the issuer's
inquiry into or knowledge concerning a statement of opinion, and if those facts conflict with
what a reasonable investor would take from the statement itself. " 96
In Omnicare, the Supreme Court interpreted and applied the '33 Act.
Our court of
appeals acknowledges the Court's holding applies to Section 11 of the '33 Act, but has not held
whether Omnicare applies to claims arising under the '34 Act. 97 HIG, its affiliates, Lionbridge,
and Lionbridge's board and officers do not argue Omnicare cannot be applied here.
HIG, its affiliates, Lionbridge, and Lionbridge's board and officers argue the challenged
statement does not include a representation the projections are a reliable prediction of the future.
They argue it simply states Lionbridge's board and special committee considered the projections
in their analysis of the merger.
Pension Fund's claim directly contradicts the "lengthy and specific disclaimer" attached
to the projections in the proxy statement. The disclaimer stated Lionbridge did not consider the
projections to be predictive of Lionbridge's actual business prospects.
15
Specifically, the
disclaimer stated, "The inclusion of the selected elements of the forecasts in the table and
accompanying narrative above should not be regarded as an indication that Lionbridge and/or
any of our affiliates, officers, directors, advisors or other representatives consider the forecasts to
be predictive of actual future events, and this information should not be relied upon as such."
Pension Fund attempts to backdoor a claim based on the projection numbers and bypass OF!
Asset Mgmt.
Lionbridge included the projections to provide its shareholders the same
projections the board, special committee, and Union Square used in assessing the merger.
Pension Fund fails to allege this challenged statement is false or misleading under Section 14.
3. Pension Fund alleges Lionbridge's expressed belief Union Square's
fairness opinion is a "positive reason" supporting its decision to
approve the merger is materially false or misleading.
Pension Fund claims Union Square's fairness opinion and Lionbridge's board's reliance
on the fairness opinion is materially false and misleading because the proxy omitted the fact the
projections did not incorporate acquisition based growth. Specifically, Pension Fund challenges
the statement Lionbridge's board considered Union Square's fairness opinion to be a "positive
reason" to support the merger agreement. Pension Fund also challenges statements found in the
summary of Union Square's fairness opinion.
Specifically, Pension Fund challenges the
statements Union Square "used and relied" upon the projections Lionbridge's management
provided in rendering its fairness opinion; Union Square "assumed and relied upon" the accuracy
of information provided to it; Union Square assumed the financial forecasts "were reasonably
prepared on a basis reflecting the best currently available estimates and good faith judgments of
management"; and Union Square "relied on assurances of [Lionbridge's] management that they
were not aware of any facts that would make such information inaccurate or misleading" in
rendering its fairness opinion.
16
With respect to the statements summarizing Union Square's assumptions, Pension Fund
does not allege the statements are false or misleading. The assumptions are not opinions and
Omnicare does not apply.
Pension Fund does not allege Union Square did not make these
assumptions and did not rely on the financial projections provided to it in making its fairness
opinion.
Regarding the statement Union Square relied on assurances from Lionbridge's
management they did not know any facts making the information Union Square relied on
misleading, Pension Fund does not allege Union Square did not rely on an assurance. Pension
Fund argues the assurance rendered the financial projections in the proxy materially false and
misleading because the projections did not incorporate acquisition based growth. But Pension
Fund seeks to impose liability based on an alleged misrepresentation Lionbridge made to Union
Square months before issuing the proxy statement. Claims of management lying to its financial
advisor by making false assurances to induce the advisor to render a favorable fairness opinion
may sound in breach of fiduciary duty, but they do not form the basis of a Section 14 claim. The
proxy statement explained Union Square relied on Lionbridge's assurance in rendering its
fairness opinion.
Pension Fund does not allege Union Square did not actually rely on the
assurance or Lionbridge did not make the assurance. The statement in the proxy is not false or
misleading.
Lionbridge's statement identifying Union Square's fairness opinion as a "positive reason"
supporting its completed decision to approve the merger presents a closer issue. The statement at
issue is a statement of opinion and not a projection of future performance. 98
Citing Omnicare, Pension Fund argues the board's belief Union Square's fairness opinion
is a positive reason supporting its decision to approve the merger is materially misleading
because the board knew the fairness opinion relied in-part on projections the board provided
17
Union Square which did not account for acquisition based growth and the board did not disclose
this fact.
While a close call, at this preliminary stage we find Lionbridge's belief Union Square's
fairness opinion is a positive reason supporting its decision to approve the merger may be an
actionable statement under Section 14. Reading Lionbridge's opinion, a reasonable investor
could take from the statement Lionbridge placed confidence in Union Square's analysis and
opm10n.
A reasonable investor could take Lionbridge believed Union Square accurately
analyzed Lionbridge's potential financial growth and concluded $5.75 to be fair consideration
for a Lionbridge share. These facts a reasonable investor could have taken from the statement of
opinion conflict with undisclosed facts or knowledge held by the board concerning the accuracy
or potential flaws in Union Square's analysis. 99
Lionbridge argues the proxy statement disclosed the projections did not incorporate
potential growth through acquisitions. Lionbridge cites language in the proxy statement: "the
forecasts do not take into account any circumstances, transactions, or events occurring after the
dates on which the forecasts were prepared." But the proxy also states, "The forecasts reflect
assumptions that are subject to change and are susceptible to multiple interpretations and
periodic revisions based on actual results, revised prospects for our business, changes in general
business or economic conditions, or any other transaction or event that has occurred or that may
occur and that was not anticipated when the forecasts were prepared." Based on the latter
representation, Lionbridge incorporated "anticipated" transactions into the forecasts which an
investor may read to mean Lionbridge incorporated into the forecasts acquisitions it anticipated
making at the time it created the forecasts.
18
Defendants also argue this claim is barred by the "bespeaks caution" doctrine as it is an
opinion presented among a variety of cautionary warnings. Defendants argue the Reform Act's
safe harbor for forward-looking statements and the bespeaks caution doctrine immunize them
from potential liability under the '34 Act. The Reform Act's safe harbor provision applies to
forward-looking statements. 15 U.S.C. § 78u-5(c)(l). A forward looking statement includes (1)
a statement containing a projection of revenues, income, earnings per share, capital expenditures,
dividends, capital structure, or other financial items; (2) a statement of the plans and objectives
of management for future operations; (3) a statement of future economic performance; (4) any
statement of the assumptions underlying or relating to any statement previously listed; (5) any
report issued by an outside reviewer retained by an issuer regarding a forward-looking statement
made by the issuer; (6) a statement containing a projection or estimate on other topics specified
by rule or regulation by the Securities and Exchange Commission. Id. § 78u-5(i)(l)(A)-(F).
This opinion is not a forward-looking statement under the Reform Act and is not subject
to the safe harbor provision. Under the bespeaks caution doctrine, "when an offering document's
forecasts, opinions, or projections are accompanied by meaningful cautionary statements, the
forward-looking statements will not form the basis of a securities fraud claim if those statements
did not affect the 'total mix' of information the documented provided to investors. In other
words, cautionary language, if sufficient, renders the alleged omissions or misrepresentations
immaterial as a matter of law."
100
"Cautionary language must be extensive, specific, and
directly related to the alleged misrepresentation." 101
The bespeaks caution doctrine may apply to statements of opinion, but Defendants do not
identify meaningful, extensive, and specific cautionary statements in the proxy directly related to
the alleged misrepresentation. Defendants cite to the disclaimer accompanying the financial
19
projections explaining the forecasts do not take into account "circumstances, transactions or
events occurring after the dates on which the forecasts were prepared"; warning actual results
will differ and may differ materially from the forecasts; explaining the forecasts should not be
regarded as an indication Lionbridge, the board, and officers "consider the forecasts to be
predictive of actual future events" and shareholders should not rely on the forecasts as such; and
concluding "Lionbridge stockholders are cautioned not to place undue, if any, reliance on the
forecasts."
These cited disclaimers directly relate to the board's belief Union Square's fairness
opinion is a "positive reason" supporting its decision to approve the merger.
Disclaimers
cautioning shareholders the projections numbers may differ materially from actual results and
should not be relied upon as being predictive of actual results are not equivalent to cautioning
shareholders of the board's expressed reliance on Union Square's fairness opinion.
The
disclaimers do not caution shareholders to the board's confidence in Union Square's fairness
opinion and do not provide reasons why shareholders should not place undue value in the
statement Union Square's fairness opinion is a "positive reason" supporting the board's decision
to approve the merger.
Based on a liberal reading of Pension Fund's second amended complaint, Lionbridge did
not incorporate acquisition based growth into its projections it provided to Union Square.
Lionbridge also did not disclose to its shareholders it omitted acquisition based growth in its
financial projections. This omission conflicts with the information a reasonable investor could
have taken from the representation in the proxy. 102 The board allegedly knew its projections and
Union Square's fairness opinion did not account for acquisition based growth but simultaneously
expressed confidence in the same opinion to its shareholders. Pension Fund states a claim under
20
Section 14 based on the board's expressed belief Union Square's fairness opinion is a positive
reason supporting its decision to approve the merger.
4. Pension Fund fails to allege the board's belief $5.75 provided
shareholders with greater certainty of value over their share's
potential trade price is materially false or misleading.
Pension fund claims the board's belief $5.75 "provides greater certainty of value and less
risk to [] stockholders relative to the potential trading price of the shares over the long-term after
accounting for the risks to our business resulting from operational execution risk and evolving
industry dynamics, including our ability to grow organically and through business development
opportunities" as a "positive reason" supporting the merger is materially false and misleading.
Pension Fund claims the statement implies the projections and Union Square's fairness opinion
reflected Lionbridge's ability to grow "through business development opportunities."
But
Pension Fund claims the projections did not account for acquisition based growth.
The statement is limited to Lionbridge's board's subjective belief $5.75 provides
shareholders greater certainty in value versus the shares' long-term potential sale price. Pension
Fund does not allege the board did not actually hold this belief. Lionbridge's board knew about
its acquisition growth strategy and Pension Fund does not allege the board failed to consider its
acquisition strategy in making its valuation analysis. In expressing its opinion, the board does
not cite to or rely upon Union Square, its fairness opinion, or the allegedly flawed projection
numbers. When the statement is read in context with the remaining bulleted points in the section
listing "positive reasons" the board believed supported its approval of the merger, it becomes
apparent this challenged statement relates only to the board's subjective belief. The board listed
Union Square's fairness opinion finding $5.75 per share to be fair consideration and Union
Square's financial analyses presented to the board separately to be a positive reason to support its
decision to approve the merger.
21
The board, with knowledge of Lionbridge's acquisition growth strategy, expressed its
subjective belief $5.75 provided shareholders greater certainty and Pension Fund does not allege
the board did not hold this belief or the board did not account for Lionbridge's acquisition
strategy when making its own valuation analysis.
Pension Fund fails to allege a false or
misleading statement under Section 14 based on the board's subjective belief $5.75 provides its
shareholders greater certainty in value.
5. Pension Fund fails to plead a Section 14(a) claim against HIG, LBT
Acquisition, and LBT Merger Sub but pleads a claim against Mr.
Litz.
Section 14(a) applies to any person who solicits or permits the use of his name to solicit a
proxy in violation of securities regulations. 103 Mr. Litz, HIG, LBT Acquisition, and LBT Merger
Sub argue they did not solicit and did not permit Lionbridge to use their names to solicit the
shareholders' votes. Pension Fund does not respond as to whether HIG, LBT Acquisition, and
LBT Merger Sub are liable under Section 14(a).
As to Mr. Litz, Pension Fund alleges he, as Lionbridge's Senior VP and CFO, provided
material information included in the proxy, worked with Mr. Cowan to prepare the financial
projections disclosed in the proxy, and made public statements before issuing the proxy
confirming Lionbridge's acquisition strategy.
The proxy statement explains the "proxy
solicitation is being made and paid for by Lionbridge on behalf of our Board of Directors." 104
The proxy card attached to the proxy statement also states, "The undersigned hereby
acknowledges receipt of the Notice of the Special Meeting of Stockholders and Proxy Statement,
and hereby revokes all prior proxies and appoints Rory J. Cowan, Marc E. Litz and Margaret A.
Shukur as proxies, and each or any of them as Proxy Holders with full power of substitution and
power to act alone, to vote all shares of Common Stock which the undersigned would be entitled
to vote at the Special Meeting of Stockholders ... " 105
22
Pension Fund sufficiently alleges Mr.
Litz as an executive of Lionbridge and as a proxy holder solicited the proxy. Mr. Litz may be
held liable under Section 14(a).
Pension Fund does not allege HIG, LBT Acquisition, and LBT Merger Sub solicited or
permitted Lionbridge to use their name to solicit Lionbridge shareholders' proxy. Pension Fund
fails to allege a Section 14(a) claim against HIG, LBT Acquisition, and LBT Merger Sub.
B. Pension Fund pleads a Section 20(a) claim against Mr. Litz, HIG, LBT
Acquisition, and LBT Merger Sub.
Pension Fund claims Lionbridge's board members and officers, HIG, LBT Acquisition,
and LBT Merger Sub are liable for the alleged false and misleading statements and omissions as
"controlling persons" under Section 20(a) of the '34 Act. Mr. Litz, HIG, LBT Acquisition, and
LBT Merger Sub argue Pension Fund failed to allege sufficient facts they are controlling persons
under Section 20(a).
Section 20(a) of the '34 Act imposes liability on every person who controls any person
liable under any provision of the '34 Act. 106 To plead control person liability, Pension Fund
must allege "(1) a primary violation of federal securities law by a controlled person; [and] (2)
control of the primary violator by the defendant." 107
Allegations supporting a reasonable
inference HIG, LBT Acquisition, LBT Merger Sub, and Mr. Litz had the potential to influence
and direct the activities of Lionbridge and its board and officers are sufficient to allege control. 108
There is disagreement among district courts in our Circuit whether Pension Fund must also
allege HIG, LBT Acquisition, LBT Merger Sub, and Mr. Litz were in some meaningful sense
culpable participants in the Section 14(a) violation. 109 In Dutton v. Harris Stratex Networks, the
Honorable Joseph J. Farnan, Jr. found the general trend in our Circuit to be a plaintiff did not
have to plead culpable participation because "the facts relevant to culpable participation are
usually within the control of the defendant, and thus, discovery is warranted on the issue." 110
23
Lionbridge pleads one Section 14(a) claim, a primary violation, against Lionbridge and
its board and officers. Lionbridge sufficiently alleges control of Lionbridge and its board and
officers by Mr. Litz. Mr. Litz provided material information to Lionbridge's board and officers
included in the proxy statement, including the financial projections in the proxy. 111 The board
relied on this information to approve the merger and to recommend the merger to Lionbridge
shareholders. Pension Fund alleged sufficient facts to support an inference Mr. Litz had the
potential to influence the board's decision to approve and recommend the merger to its
shareholders.
Lionbridge sufficiently alleges control of Lionbridge and its board and directors by HIG
and its affiliate companies. Under the merger agreement, LBT Acquisition and LBT Merger
Sub, entities created by HIG, were obligated to cooperate in preparing and filing the proxy
statement and to provide Lionbridge certain information.1! 2 LBT Acquisition also had the
opportunity to review and comment on the proxy statement before Lionbridge issued it to its
shareholders. 113
Pleading opportunities to provide information, to review the proxy, and to
comment on the substance of the proxy, Pension Fund alleges sufficient facts to support the
inference HIG, LBT Acquisition, and LBT Merger Sub at least had the potential to influence
Lionbridge's board in approving and recommending the merger to its shareholders.
III.
Conclusion
In the accompanying Order, we grant in part and deny in part the Defendants' motion to
dismiss. Pension Fund pleads a Section 14(a) claim against Lionbridge and its board and officers
based on the statement the board viewed Union Square's fairness opinion as a "positive reason"
supporting its decision to approve the proposed merger. We dismiss Pension Fund's Section
14(a) claim based on all other alleged false or misleading statements or omissions. Pension Fund
24
pleads a Section 20(a) claim against Lionbridge's board and officers, HIG, LBT Acquisition, and
LBT Merger Sub.
1
ECF Doc. No. 34 at~ 14.
2
Id.~ 56.
3
Id.~ 56.
4
Id.~ 57.
5
Id.~ 57.
6
Id.~ 58.
7
Id.~ 58.
8
Id.~ 58.
9
Id.~ 59.
IO
Id.~ 60.
11
Id.~60.
12
Id.~ 60.
13
Id.~ 60.
14
Id.~ 60.
15
Id.~ 60.
16
Id.~ 60.
17
Id.~ 60.
18
Id.~ 60.
19
Id.~ 40.
20
Id.~ 41.
21
Id.~ 41.
25
22
Id.~ 42.
23
Id.~ 44.
24
Id.~ 44.
25
Id.~ 44.
26
Id.~ 46.
27
Id.~ 46.
28
Id.~ 46.
29
Id.~~ 61-62.
30
Id.~ 46.
31
Id.~ 54.
32
Id.~ 70.
33
Id.~ 70.
34
Id.~ 70.
35
Id.~ 69.
36
Id.~ 69.
37
Id.~ 70.
38
Id.~ 71.
39
Id.~ 72.
40
Id.~ 72.
41
Id.~72.
42
Id.~ 83.
43
Id.~ 84.
26
44
Lionbridge Techs., Inc., Proxy Statement (Schedule 14A) at 53 (Jan. 31, 2017) (ECF Doc. No.
Pension Fund did not attach the proxy statement at issue to its second amended
17-1 ).
complaint. But we may take judicial notice of the January 31, 2017 proxy statement filed
publicly with the Securities and Exchange Commission. In re NAHC, Inc. Sec. Litig., 306 F.3d
1314, 1331 (3d Cir. 2002).
45
Lionbridge Techs., Inc., Proxy Statement (Schedule 14A) at 54 (Jan. 31, 2017). (ECF Doc. No.
17-1).
46
Id.
47
Id. The proxy statement also included a section titled "Special Note Regarding ForwardLooking Statements." Id. at iii. The special note listed potential factors which may influence
Lionbridge's future financial results. Id. The note stated, "You should not rely on forwardlooking statements because they involve known or unknown risks, uncertainties, and other facts,
some of which are beyond our control. These risks, uncertainties, and other factors may cause
our actual results, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by the forward
looking statements .... These forward-looking statements speak only as of the date on which the
statements were made and are not guarantees of future results, levels of activity, performance or
achievements. Except as may be required by applicable law, we do not intend to update and
assume no obligation to update any forward-looking statements. All forward looking statements
in this document and in documents incorporated by reference herein are qualified by this
cautionary statement." Id.
48
Id.~ 77.
49
Id.~ 77.
50
Id.~ 81.
51
Id.~ 79.
52
Id.~ 79.
53
Id.~ 79.
54
In evaluating a motion to dismiss, we may consider matters of public record. Buck v. Hampton
Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir. 2006).
The public record confirms we are reviewing the third Lionbridge shareholder challenge to the
HIG merger. Lionbridge shareholders, including Pension Fund, sued to enjoin or alter this
merger in the Chancery Court challenging the directors' disclosures made in the proxy statement
twice before the merger. On January 13, 2017, a Lionbridge shareholder filed a class action
hoping to enjoin the HIG merger claiming a preliminary January 5, 2017 proxy statement
27
omitted material information including regarding "Lionbridge's financial projections and the
analyses performed by Lionbridge's financial advisor. .. Union Square in support of its so-called
fairness opinion." Verified Class Action Compl., ~ 52, Paul Parshall v. Lionbridge Techs., Inc.,
et al., No. 2017-0022 (Jan. 13, 2017).
On February 28, 2017, Pension Fund sued Lionbridge in the Court of Chancery. Verified
Compl. to Compel Books and Records under 8 Del. C. § 220, Laborers' Local #231 Pension
Fundv. Lionbridge Techs., Inc., No. 2017-151(Feb.28, 2017). Pension Fund sought books and
records alleging HIG's offer of $5.75 per share described in the proxy statement undervalued
Lionbridge and "the opportunity to participate in Lionbridge's expected long-term growth will be
taken away from them and handed to HIG for what is clearly an unfair price." Id. ~ 28.
55
ECF Doc. No. 34 at~ 27-28.
56
Id.~ 27.
57
Id.~ 28.
58
Id.~ 28.
59
Id.~ 28.
60
Id.~ 64.
61
Id.~66.
62
Id.~ 66.
63
834 F.3d 481 (3d Cir. 2016).
64
15 U.S.C. § 78n(a).
65
15 U.S.C. § 78t(a).
66
15 U.S.C. § 78u-4(b)(l).
67
Craftmatic Sec. Litig. v. Kraftsow, 890 F.2d 628, 638 (3d Cir. 1989) (citing Santa Fe Indus.,
Inc. v. Green, 430 U.S. 462, 477-78 (1977)).
68
Id.
69
Id.
70
15 U.S.C. § 78n(a)(l).
28
71
Seinfeld v. Becherer, 461 F.3d 365, 369 (3d Cir. 2006) (citing Shaev v. Saper, 320 F.3d 373,
379 (3d Cir. 2003)).
72
17 C.F.R. § 240.14a-9.
73
Tracinda Corp. v. Daimler Chrysler AG, 502 F.3d 212, 228 (3d Cir. 2007) (quoting Jn re
NAHC, Inc. Sec. Litig., 306 F.3d 1314, 1330 (3d Cir.2002)).
74
Jn re NAHC, Inc. Sec. Litig., 306 F.3d at 1330 (citation omitted).
75
Cal. Pub. Emps. Ret. Sys. v. Chubb Corp., 394 F.3d 126, 144 (3d Cir. 2004) (citing Gen. Elec.
Co. v. Cathcart, 980 F.2d 927, 932 (3d Cir. 1992)).
76
TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976) (footnote omitted); Shaev v.
Saper, 420 F.3d 373, 379 (3d Cir. 2003).
77
Cal. Pub. Emps. Ret. Sys., 394 F.3d at 143.
78
Id. at 144; 15 U.S.C. § 78u-4(b)(l). Although Section 14(a) claims only require a showing of
negligence, Pension Fund's second amended complaint sounds in fraud. Pension Fund alleges
HIG, its affiliates, and Lionbridge's board and executives knowingly provided false and
misleading statements to its shareholders. ECF Doc. No. 34 at iii! 67, 80, 95. Pension Fund
alleges Lionbridge offered these false statements to allow its financial advisor to approve HIG's
offered per share purchase price and in an effort to induce shareholders to vote in favor of the
merger. Id. iii! 88, 95. Pension Fund alleges Lionbridge's management team induced its
shareholders' favorable vote because HIG offered the management team continued employment
and allowed Mr. Cowan to rollover a portion of his Lionbridge stock into the surviving
company's stock. Id. iii! 48, 53.
79
15 U.S.C. § 78u-4(b)(l).
80
OF! Asset Mgmt. v. Cooper Tire & Rubber, 834 F.3d 481, 490 (3d Cir. 2016) (citation
omitted).
81
15 U.S.C. § 78u-4(b)(3)(A).
82
Id. at 500.
83
Id. at 500-01.
84
Id. at 501.
85
Id.
29
86
Id. at 488; OF! Risk Arbitrages v. Cooper Tire & Rubber Co., No. 14-68, 2015 WL 4036179,
at *6 (D. Del. Jul. 1, 2015).
87
OF! Asset Mgmt., 834 F.3d at 488.
88
Id. at 501.
89
Id.
90
Id. Although the court conducted its analysis under Section lO(b) of the '34 Act, the court also
found the plaintiff failed to allege a material misrepresentation under Section 14(a) for the same
reasons articulated in its Section 10 analysis. Id. at 505.
91
Allegations of directors and executives providing false information to its financial advisors to
receive a favorable fairness opinion to in tum induce its shareholders' favorable vote may sound
in breach of fiduciary duty. Pension Fund does not plead a breach of fiduciary duty claim here.
We express no opinion on the merits or possibility of a fiduciary duty claim.
92
Lionbridge Techs., Inc., Proxy Statement (Schedule 14A) at 39-40 (Jan. 31, 2017). (ECF Doc.
No. 17-1).
93
135 S. Ct. 1318, _U.S._ (2015).
94
Id. at 1326.
95
Id. at 1327.
96
Id. at 1329.
97
OF! Asset Mgmt., 834 F.3d at 493 n. 11; In re Amarin Corp. PLC Sec. Litig., 689 F. App'x
124, 132 n. 12 (3d Cir. May 23, 2017).
98
Defendants argue the Reform Act's safe harbor for forward-looking statements and the
bespeaks caution doctrine immunize them from potential liability under the '34 Act.
The Reform Act's safe harbor provision applies to forward-looking statements. 15 U.S.C. § 78u5(c)(l). A forward looking statement includes (1) a statement containing a projection of
revenues, income, earnings per share, capital expenditures, dividends, capital structure, or other
financial items; (2) a statement of the plans and objectives of management for future operations;
(3) a statement of future economic performance; (4) any statement of the assumptions underlying
or relating to any statement previously listed; (5) any report issued by an outside reviewer
retained by an issuer regarding a forward-looking statement made by the issuer; (6) a statement
containing a projection or estimate on other topics specified by rule or regulation by the
Securities and Exchange Commission. Id. § 78u-5(i)(l)(A)-(F).
30
The statement at issue is not a forward-looking statement under the Reform Act and is not
subject to the safe harbor provision.
Under the bespeaks caution doctrine, "when an offering document's forecasts, opm10ns, or
projections are accompanied by meaningful cautionary statements, the forward-looking
statements will not form the basis of a securities fraud claim if those statements did not affect the
'total mix' of information the documented provided to investors. In other words, cautionary
language, if sufficient, renders the alleged omissions or misrepresentations immaterial as a
matter of law." In re Donald Trump Casino Sec. Litig., 7 F.3d 357, 371 (3d Cir. 1993); see also
EP Medsystems, Inc. v. Echocath, 235 F.3d 865, 874 (3d Cir. 2000) (explaining bespeaks caution
doctrine only applies to forward-looking statements). "Cautionary language must be extensive,
specific, and directly related to the alleged misrepresentation." In re Aetna Sec. Litig., 617 F.3d
272, 282 (3d Cir. 2010) (citation omitted).
The bespeaks caution doctrine may apply to statements of opinion, but Defendants do not
identify meaningful, extensive, and specific cautionary statements in the proxy directly related to
the alleged misrepresentation. Defendants cite to the disclaimer accompanying the financial
projections explaining the forecasts do not take into account "circumstances, transactions or
events occurring after the dates on which the forecasts were prepared"; warning actual results
will differ and may differ materially from the forecasts; explaining the forecasts should not be
regarded as an indication Lionbridge, the board, and officers "consider the forecasts to be
predictive of actual future events" and shareholders should not rely on the forecasts as such; and
concluding "Lionbridge stockholders are cautioned not to place undue, if any, reliance on the
forecasts."
None of the cited disclaimers directly relate to the board's belief Union Square's fairness opinion
is a "positive reason" supporting its decision to approve the merger. Disclaimers cautioning
shareholders the projections numbers may differ materially from actual results and should not be
relied upon as being predictive of actual results are not equivalent to cautioning shareholders of
the board's expressed reliance on Union Square's fairness opinion. The disclaimers do not
caution shareholders to the board's confidence in Union Square's fairness opinion and do not
provide reasons why shareholders should not place undue value in the statement Union Square's
fairness opinion is a "positive reason" supporting the board's decision to approve the merger.
99
See Omnicare, 135 S. Ct. at 1329.
100
In re Donald Trump Casino Sec. Litig., 7 F.3d 357, 371 (3d Cir. 1993); see also EP
Medsystems, Inc. v. Echocath, 235 F.3d 865, 874 (3d Cir. 2000) (explaining bespeaks caution
doctrine only applies to forward-looking statements).
101
In re Aetna Sec. Litig., 617 F.3d 272, 282 (3d Cir. 2010) (citation omitted).
102
Id.
103
15 U.S.C. § 78n(a)(l).
31
104
Lionbridge Techs., Inc., Proxy Statement (Schedule 14A) at 21 (Jan. 31, 2017). (ECF Doc.
No. 17-1).
ios Id. (ECF Doc. No. 17-1 at p. 187-88).
106
15 U.S.C. § 78t(a).
107
Tracinda Corp. v. DiamlerChrysler AG, 197 F. Supp. 2d 42, 55 (D. Del. Mar. 22, 2002)
(citation omitted).
108
Id. (citation omitted).
109
Belmont v. MB Inv. Partners, Inc., 708 F.3d 470, 485 n.20 (3d Cir. 2013) (identifying district
court disagreement but not resolving disagreement); Dutton v. Harris Stratex Networks, 270
F.R.D. 171, 181 (D. Del. Jul. 22, 2010) (identifying disagreement and concluding general trend
is plaintiff does not have to plead culpable participation).
110
Dutton, 270 F.R.D. at 181-82 (citation omitted).
111
ECF Doc. No. 34 at~ 24.
112
Lionbridge Techs., Inc., Proxy Statement (Schedule 14A) at A-43 (Jan. 31, 2017). (ECF Doc.
No. 17-1).
113
Id.
32
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