Breece v. Under Armour, Inc.

Filing 173

MEMORANDUM OPINION. Signed by Judge Richard D. Bennett on 5/18/2021. (krs, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
In re UNDER ARMOUR
SECURITIES LITIGATION
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Civil Action No. RDB-17-388

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MEMORANDUM OPINION
As this Court noted in its Memorandum Opinion of January 22, 2020 (ECF No. 139),
the basic allegation in this punitive class action is that the Defendants Under Armour, Inc.
(“Under Armour”) and its former Chief Executive Officer Kevin Plank (“Plank”) (collectively
“Defendants”) misrepresented the level of demand for Under Armour products. Previously,
this Court has dismissed Plaintiffs’ claims under Sections 10(b), 20(a), and 20A of the
Securities Exchange Act of 1934 (“Exchange Act”), as well as Sections 11 and 15 of the
Securities Act of 1933 (“Securities Act”). Nevertheless, during the pendency of an appeal to
the United States Court of Appeals for the Fourth Circuit (ECF No. 102), the Wall Street
Journal published two articles reporting that Under Armour was the subject of investigations
by the Securities and Exchange Commission (“SEC”). Based on this new evidence, this Court
conducted a hearing and ultimately granted a Motion for Relief from its earlier rulings upon a
remand from the United States Court of Appeals for the Fourth Circuit. (ECF No. 140.) The
Fourth Circuit accordingly remanded this case. (ECF No. 145.) After having reviewed the
submissions of the parties and heard argument of counsel during a telephonic hearing on
September 14, 2020, this Court granted motions for consolidation and allowed the filing of a
Third Amended Complaint. (ECF No. 150.)

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Accordingly, on October 14, 2020, Lead Plaintiff Aberdeen City Council as
Administrating Authority for the North East Scotland Pension Fund (“Aberdeen” or “Lead
Plaintiff”) and Plaintiffs Monroe County Employees’ Retirement System and KBC Asset
Management (collectively, “Plaintiffs”) filed the Consolidated Third Amended Complaint for
violations of the federal securities laws (“TAC”) against Defendants Under Armour and Plank.
(ECF No. 153.) On December 4, 2020, the Defendants filed a Motion to Dismiss (ECF No.
159), to which the Plaintiffs filed a response in opposition (ECF No. 160). On May 3, 2021,
while that motion remained pending, the SEC entered an Order instituting cease-and-desist
proceedings against Under Armour for violations of various federal securities laws and
ordering Under Armour to pay a $9,000,000 civil penalty. (See ECF Nos. 171, 172.) The
Plaintiffs have aptly noted authority of this Court to take judicial notice of the SEC Order in
its consideration of the pending Motion to Dismiss (ECF No. 159). (See ECF No. 172.)
The parties’ submissions have been reviewed and no hearing is necessary. See Local
Rule 105.6 (D. Md. 2018). For the reasons that follow, this Court is satisfied that taking judicial
notice of the SEC’s Order in this case is appropriate. The Plaintiffs’ allegations in the TAC,
read in light of and in combination with the allegations set forth in the SEC’s Order, adequately
allege violations of federal securities laws. Accordingly, the Defendants’ Motion to Dismiss
(ECF No. 159) is DENIED.
BACKGROUND
In ruling on a motion to dismiss, this Court “accept[s] as true all well-pleaded facts in
a complaint and construe[s] them in the light most favorable to the plaintiff.” Wikimedia Found.
v. Nat’l Sec. Agency, 857 F.3d 193, 208 (4th Cir. 2017) (citing SD3, LLC v. Black & Decker (U.S.)
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Inc., 801 F.3d 412, 422 (4th Cir. 2015)). Plaintiff Brian Breece filed a class action Complaint
against Under Armour, Plank, and another executive of the company, Lawrence Molloy on
February 10, 2017. (ECF No. 1.) After consolidation with other suits filed against Under
Armour, Plank, and numerous other defendants, this Court dismissed the Plaintiffs’
Consolidated Amended Complaint. (ECF No. 75.) On November 16, 2018 the Lead Plaintiff
filed a Consolidated Second Amended Complaint for violations of the federal securities laws
(ECF No. 78), naming only Under Armour and Plank as Defendants. That Second Amended
Complaint alleged that between September 16, 2015 and January 30, 2017, the Defendants
issued a series of false and misleading statements about demand for Under Armour products
and the company’s financial condition. (ECF No. 78 ¶¶ 2, 14.)
On August 19, 2019, this Court dismissed the Second Amended Complaint with
prejudice. (ECF No. 98 at 26.) Judgment was entered on September 9, 2019 (ECF No. 101),
and on September 17, 2019, the Plaintiffs filed a notice of appeal to the United States Court
of Appeals for the Fourth Circuit (ECF No. 102). Based on the reports of the Wall Street
Journal that Under Armour was the subject of SEC investigations, Lead Plaintiff moved on
November 18, 2019 for an indicative ruling (ECF No. 105), requesting that this Court grant
the Plaintiffs’ Motion for Relief from the Court’s September 9, 2019 Judgment pursuant to
Federal Rule of Civil Procedure 60(b), if the Fourth Circuit remanded for that purpose. (ECF
No. 106.) On January 22, 2020, this Court granted such request. (ECF No. 139.) Accordingly,
this Court held that it would permit Lead Plaintiff to file a third amended complaint bringing
claims against the Defendants for violations of the Securities Exchange Act of 1934 (the
“Exchange Act”). (Id.)
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On October 14, 2020, the Lead Plaintiff filed the Plaintiffs’ Consolidated Third
Amended Complaint for violations of the federal securities laws (“TAC”) (ECF No. 153)
alleging that Defendants Under Armour and Plank misled investors during the Class Period
by falsely claiming that consumer demand for the company’s products was strong between the
third quarter of 2015 and the fourth quarter of 2016. Plaintiffs allege that the Defendants led
investors to believe that Under Armour’s 26-consecutive quarter 20% year-over-year revenue
growth streak was “safely intact,” when in reality demand for the company’s products was in
decline. (ECF No. 153 ¶¶ 148-168.) They claim that Defendants manipulated the company’s
financial results by pulling sales forward from future quarters and engaged in other allegedly
suspect sales practices. (Id.) The Plaintiffs assert violations of Section 10(b) of the Securities
Exchange Act of 1934 (the “Exchange Act”) and Rule 10b–5 promulgated thereunder against
Defendants Under Armour and Plank (Count I); violations of Section 20(a) of the Exchange
Act, again against both Under Armour and Plank (Count II); and violation of Section 20A of
the Exchange Act against solely Defendant Plank (Count III). (Id. ¶¶ 412-436.)
On December 4, 2020, the Defendants filed a Motion to Dismiss (ECF No. 159) in
which they seek the dismissal of the TAC in its entirety. Their Motion asserts that the TAC
generally fails to plead adequate factual details to support the Plaintiffs’ claims. (Id.) On May
3, 2021, the SEC entered an Order Instituting Cease-and-Desist Proceedings Pursuant to
Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of
1934, Making Findings, and Imposing a Cease-and-Desist Order (“SEC Order”). (See Exh. A,
ECF No. 171.) The SEC Order states that it determined that instituting cease-and-desist
proceedings in this matter was appropriate and that in anticipation of those proceedings,
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Under Armour submitted an Offer of Settlement, which the SEC accepted. (Id. at I, II.)
Under Armour therefore consented to entry of the Order, but did so without admitting or
denying the findings of the SEC. (Id. at II.) The cease-and-desist order was imposed for
violation of Sections 17(a)(2) and (3) of the Securities Act of 1933 (the “Securities Act”) and
Section 13(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rules 13a-1,
13a-11, 13a-13, 12b-20 thereunder, including failing to comply with Item 303(a)(3)(ii) of
Regulation S-K. (Id. at III ¶¶ 5, 45-48.) The SEC Order also included a civil penalty of
$9,000,000 subject to Exchange Act Section 21F(g)(3). (Id. at IV ¶ B.)
The SEC Order is based upon the consent of the Defendants without the admission
or denial of any findings. Furthermore, the Order is not dipositive of the issues in this case.
Nevertheless, the practice of accelerating sales information is central to the allegations in these
consolidated cases. Accordingly, this “pull forward” practice and its effect on revenue
estimates will await further discovery in this case.
STANDARD OF REVIEW
Under Rule 8(a)(2) of the Federal Rules of Civil Procedure, a complaint must contain a
“short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R.
Civ. P 8(a)(2). The purpose of Rule 12(b)(6) is “to test the sufficiency of a complaint and not
to resolve contests surrounding the facts, the merits of a claim, or the applicability of
defenses.” Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006). To survive a motion
under Rule 12(b)(6), a complaint must contain facts sufficient to “state a claim to relief that is
plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 684 (2009) (quoting Bell Atl., Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). Under the plausibility standard, a complaint must contain
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“more than labels and conclusions” or a “formulaic recitation of the elements of a cause of
action.” Twombly, 550 U.S. at 555; see Painter’s Mill Grille, LLC v. Brown, 716 F.3d 342, 350 (4th
Cir. 2013). A complaint need not include “detailed factual allegations.” Iqbal, 556 U.S. at 678
(quoting Twombly, 550 U.S. at 555). A complaint must, however, set forth “enough factual
matter (taken as true) to suggest” a cognizable cause of action, “even if . . . [the] actual proof
of those facts is improbable and . . . recovery is very remote and unlikely.” Twombly, 550 U.S.
at 556 (internal quotations omitted). “Threadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice” to plead a claim. Iqbal, 556 U.S. at
678; see A Soc’y Without a Name v. Virginia, 655 F.3d 342, 346 (4th. Cir. 2011).
This Court has noted that a claim for securities fraud must meet the heightened
pleading requirements of Federal Rule of Civil Procedure 9(b) and the Private Securities
Litigation Reform Act (“PSLRA”), 15 U.S.C. § 78u–4(b). In re Constellation Energy Grp., Inc. Sec.
Litig., 738 F. Supp. 2d 614, 634 (D. Md. 2010). Rule 9(b) of the Federal Rules of Civil
Procedure requires that “the circumstances constituting fraud be stated with particularity.”
Fed. R. Civ. P. 9(b). The rule “does not require the elucidation of every detail of the alleged
fraud, but does require more than a bare assertion that such a cause of action exists.” Mylan
Labs., Inc. v. Akzo, N.V., 770 F. Supp. 1053, 1074 (D. Md. 1991). To satisfy the rule, a plaintiff
must “identify with some precision the date, place and time of active misrepresentations or
the circumstances of active concealments.” Johnson v. Wheeler, 492 F. Supp. 2d 492, 509 (D.
Md. 2007). The PSLRA further requires a securities fraud claim to (1) “specify each statement
alleged to have been misleading [and] the reason or reasons why the statement is misleading,”
and (2) “state with particularity facts giving rise to a strong inference that the defendant acted
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with the required state of mind.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 321
(2007) (quoting 15 U.S.C. § 78u-4(b)(1), (b)(2)).
While ruling on a motion to dismiss, a court’s evaluation is generally limited to
allegations contained in the complaint. Goines v. Calley Cmty. Servs. Bd., 822 F.3d 159, 166-67
(4th Cir. 2016). However, courts may also consider documents explicitly incorporated into
the complaint by reference. Id. at 166 (citing Tellabs, 551 U.S. at 322). In addition, a court may
also “take judicial notice of ‘matters of public record’ and other information that, under
[Federal Rule of Evidence] 201, constitute ‘adjudicative facts.’” Goldfarb v. Mayor & City Council
of Baltimore., 791 F.3d 500, 508 (4th Cir. 2015) (citing Philips v. Pitt Cty. Mem’l Hosp., 572 F.3d
176, 180 (4th Cir. 2009); see Fed. R. Evid. 201(b) (stating, in relevant part, that a “court may
judicially notice a fact that is not subject to reasonable dispute because it . . . can be accurately
and readily determined from sources whose accuracy cannot reasonably be questioned.”).
“[C]ourts are permitted to consider facts and documents subject to judicial notice without
converting the motion to dismiss into one for summary judgment.” Zak v. Chelsea Therapeutics
Int'l, Ltd., 780 F.3d 597, 607 (4th Cir. 2015). If a court considers such facts at the motion to
dismiss stage, the facts must be construed “in the light most favorable to the plaintiffs.” Zak,
780 F.3d at 607 (citation omitted).
ANALYSIS
I.

Claims under Section 10(b) and Rule 10b–5
Section 10(b) of the Exchange Act prohibits the use of “any manipulative or deceptive

device or contrivance” in connection with the sale of a security in violation of SEC rules. 15
U.S.C. § 78j(b). “Rule 10b–5 encompasses only conduct already prohibited by § 10(b).”
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Stoneridge Inv. Partners, LLC v. Sci.-Atlanta, 552 U.S. 148, 157 (2008). A typical § 10(b) action
requires a plaintiff to prove six elements: “(1) a material misrepresentation or omission by the
defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the
purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5)
economic loss; and (6) loss causation.” Yates v. Mun. Mortg. & Equity, LLC, 744 F.3d 874, 884
(4th Cir. 2014 (quoting Stoneridge, 552 U.S. at 157).
In their Motion to Dismiss, Defendants Plank and Under Armour assert that the
Plaintiffs have simply failed to state a claim for relief under Section 10(b) and Rule 10b–5.
(ECF No. 159-1.) First, the Defendants assert that the Plaintiffs’ core allegations that the
Defendants engaged in improper “channel stuffing” are insufficient. (Id. at 8.) “Channel
stuffing” is another term used to describe the practice of pulling forward sales from a future
quarter, and is defined by the United States Court of Appeals for the First Circuit as “inducing
purchasers to increase substantially their purchases before they would, in the normal course,
otherwise purchase products from the company” with the “result of shifting earnings into
earlier quarters, quite likely to the detriment of earnings in later quarters.” Greebel v. FTP
Software, Inc., 194 F.3d 185, 202 (1st Cir. 1999). The Defendants note that “[a]llegations of
channel stuffing are, standing alone, insufficient to sustain the state of mind requirement in a
securities fraud claim because ‘there may be a number of legitimate reasons for attempting to
achieve sales earlier’ than in the normal course.” In re Trex Co., Inc. Sec. Litig., 212 F. Supp. 2d
596, 608 (W.D. Va. 2002) (quoting Greebel, 194 F.3d at 185 (concluding that channel stuffing
allegations “[do] not support a strong inference of scienter”)). The Defendants assert that the
Plaintiffs have failed to provide adequate details regarding Under Armour’s pull forward
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practice, specifically “dollar amounts or percentages of overall sales,” in order to suggest that
the Defendants knew or should have known that demand was declining. (ECF No. 159-1 at
2.) The Defendants argue that the Plaintiffs have simply failed to offer any “corroborating
details” to support their claims. (Id.)
Second, the Defendants assert that the Plaintiffs have failed to plead facts to suggest
that the Defendants acted with the requisite scienter, engaging in intentional misconduct or
severe recklessness. (ECF No. 159-1 at 26.) To prevail on a securities fraud action, the
Plaintiffs must, at a minimum, show “‘an act so highly unreasonable and such an extreme
departure from the standard of ordinary care as to present a danger of misleading the plaintiff
to the extent that the danger was either known to the defendant or so obvious that the
defendant must have been aware of it.’” Ottmann v. Hanger Orthopedic Grp., Inc., 353 F.3d 338,
343 (4th Cir. 2003) (quoting Phillips v. LCI Int’l, Inc., 190 F.3d 609, 620 (4th Cir. 1999)). To
prevail on a claim against a corporation specifically, the Plaintiffs must allege facts “giving rise
to a strong inference that at least one corporate agent acted with the required state of mind.”
Matrix Cap. Mgmt. Fund, LP v. BearingPoint, Inc., 576 F.3d 172, 189 (4th Cir. 2009).
With respect to the claims against Defendant Plank, the Defendants assert that the
TAC repleads many of the same factual allegations provided in the Second Amended
Complaint, which this Court found were insufficient to state a claim for relief. (ECF No. 1591 at 27); see also Under Armour Sec. Litig., 409 F. Supp. 3d 446, 462 (D. Md. 2019). The only
new pieces of “evidence” provided are emails which allegedly show Defendant Plank was
aware of the pull forward sales and accounting practices. (ECF No. 159-1 at 28.) Defendants
assert that such new evidence is insufficient, as the Plaintiffs have not adequately alleged that
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such sales and accounting practices were actually improper. (Id.) With respect to the claims
against Under Armour, the Defendants assert that the Plaintiffs have failed to plead scienter
as to Plank or any of the other corporate agents included in the TAC. (Id. at 37.)
Third, the Defendants also contend that the Plaintiffs have failed to adequately plead
falsity as required by the Private Securities Litigation Reform Act (“PSLRA”). (Id. at 40.)
Section 78u–4(b)(1) provides that a plaintiff must allege that the defendant “made an untrue
statement of a material fact” or “omitted to state a material fact necessary in order to make
the statements made, in the light of the circumstances in which they were made, not
misleading.” 15 U.S.C. § 78u–4(b)(1). The section continues, stating that “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.” Id. Again, the Defendants assert that the TAC merely realleges the Second
Amended Complaint, and that the new allegations included in the TAC fail to cure the
deficiencies previously noted by this Court. (ECF No. 159-1 at 40-50.) The Defendants also
assert that certain forward-looking statements are protected by the PSLRA “safe harbor,”
which provides that “projections of future performance not worded as guarantees are generally
not actionable under federal securities laws.” (Id. at 44 (citing Raab v. Gen. Physics Corp., 4 F.3d
286, 290 (4th Cir. 1993)).)
On January 29, 2021, the Plaintiffs filed a Response in Opposition to the Defendants’
Motion to Dismiss, asserting that the TAC and the evidence incorporated into the TAC
adequately allege a plausible claim for relief. (ECF No. 162.) On May 7, 2021, the Plaintiffs
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filed correspondence with this Court supplementing their Opposition in light of the SEC
Order issued on May 3, 2021. (ECF No. 172.) The Plaintiffs now ask this Court to take
judicial notice of the SEC Order. (Id.) As noted above, this court may, consistent with Rule
201 of the Federal Rules of Evidence, take judicial notice of relevant facts that are “not subject
to reasonable dispute” when such facts “can be accurately and readily determined from sources
whose accuracy cannot reasonably be questioned.” See Fed. R. Evid. 201(b). There is no
dispute with respect to the accuracy of the SEC Order. The Plaintiffs also provide numerous
examples of cases in which courts have taken judicial notice of similar SEC cease-and-desist
orders. (See ECF No. 172 (citing In re Deutsche Bank Aktiengesellschaft Sec. Litig., No. 16 Civ.
3495 (AT) (BCM), 2017 WL 4049253, at *4 (S.D.N.Y. June 28, 2017); In re UBS Auction Rate
Sec. Litig., No. 08 Civ. 2967(LMM), 2010 WL 2541166, at *13-14 (S.D.N.Y. June 10, 2010); Se.
Pa. Transp. Auth. v. Orrstown Fin. Servs., Inc., No. 12-cv-00993, 2016 WL 7117455, at *6 (M.D.
Pa. Dec. 7, 2016)).) Taking judicial notice of the SEC Order is permissible and appropriate in
this case.
Taking into consideration the facts alleged in the SEC Order, this Court is satisfied that
the Plaintiffs’ allegations survive the Defendants’ Motion to Dismiss. To be clear, the SEC
Order does not supply dispositive evidence in this case—as the Order clearly states, the SEC’s
findings “are not binding on any other person or entity in this or any other proceeding.” (Exh.
A at n.1, ECF No. 171.) Nevertheless, the SEC Order lends support to the allegations of the
Plaintiffs in this case. With respect to the Plaintiffs’ allegations regarding the pull forward
sales practices, or “channel stuffing,” the SEC Order provides specific factual allegations
regarding the amount of the products pulled forward and concludes that because of the
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undisclosed pull forward tactics used, investors “were left with a misleading impression of
how Under Armour was meeting or beating analysts’ revenue estimates.” (Id. at III. ¶¶ 3, 1338, 42-43.) The SEC found that “Under Armour’s reported financial results . . . did not reflect
its natural revenue and revenue growth, and were not indicative of its future financial results.”
(Id. at III ¶ 41.) Such allegations undermine the Defendants’ first argument for dismissal.
The Defendants have aptly noted that unlike under Section 10(b), a finding of liability
under Sections 17(a)(2) and (3) does not require scienter and may rest on a finding of
negligence. (Exh. A at III ¶ 46, ECF No. 171 (citing Aaron v. SEC, 446 U.S. 680, 685, 701-02
(1980)).) Nevertheless, the SEC’s decision not to plead scienter does not impede the Plaintiffs’
ability to plead a strong inference of scienter in this case. See In re VeriFone Holdings, Inc. Sec.
Litig., 704 F.3d 694, 707 n.5 (9th Cir. 2012) (“We draw no inference from the SEC’s decision
not to plead scienter or charge defendants with fraud. The district court erred in concluding
that ‘the SEC’s decision not to plead scienter hurts plaintiffs’ ability to plead a strong inference
of scienter.’”). Despite containing no finding on the issue of scienter, the SEC’s Order
includes specific allegations that the company and its top officials, including then-CEO
Defendant Plank, were aware of the potential misleading nature of the undisclosed pull
forward sales practices.
Again, this Court notes that the SEC Order does not provide dispositive evidence in
this case. Nevertheless, the SEC’s findings allege factual details which may support the
Plaintiffs’ allegations in the TAC with respect to scienter.

In Southeastern Pennsylvania

Transportation Authority, the district court described the scienter standard a plaintiff must meet
to survive a motion to dismiss, stating that a plaintiff must allege “specific facts demonstrating
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how the Exchange Act Defendants knew—or were at least reckless as to their knowledge—
that the relevant [statements or omission] were false at the time they were made.” 2016 WL
7117455, at *21 (citing In re Radian Sec. Litig., 612 F. Supp. 2d 594, 620 (E.D. Pa. 2009)). The
court found that although the scienter allegations of the operative complaint “largely
mirror[ed]” those contained in a previously dismissed complaint, a “recently-issued SEC
Order, of which the Court [had] taken judicial notice, provide[d] additional factual information
as to how certain of the Exchange Act Defendants knew—or were at least reckless as to their
knowledge—that the relevant representations as to financial reporting were false and/or
misleading at the time they were made.” Id. Upon review of the TAC, the briefs and
correspondence filed by the parties, the SEC Order, and “assessing all of [the Plaintiffs’]
allegations ‘holistically,’ as the Court is required to do when assessing scienter,” id. at *22 (citing
Tellabs, 557 U.S. at 326), this Court is satisfied that the Plaintiffs have alleged facts supporting
a strong inference of scienter in order to state a plausible claim for relief under the Exchange
Act against both Defendants. 1
Finally, the SEC Order provides support for the Plaintiffs’ allegations with respect to
falsity. The SEC Order specifically alleges that:
As a result of Under Armour’s failure to disclose the impact of its pull forward
practice on revenue growth, Under Armour’s public statements were materially
misleading. In particular, throughout the Relevant Period, Under Armour made
positive statements regarding its revenue growth rate and the factors
contributing to the revenue growth rate without disclosing the significant
impact on revenue from its use of pull forwards. Under Armour also failed to

1 This Court’s holding on scienter with respect to Defendant Plank may be supported not only by allegations regarding
senior management and executives included in the SEC Order, but also specific allegations in the TAC considered in light
of the Order, including Plank’s statements acknowledging his access to company data and forecasts (ECF No. 153 ¶¶ 106111), his alleged attendance and participation in company meetings (id. ¶¶ 120-23), and his entry into a Rule 10b5-1 trading
plan in November 2016 and April 2016 through which he sold $138.2 million in Under Armour stock (id. ¶¶ 124-35).

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disclose that the sales that had been pulled forward were no longer available in
the future quarter.
(Exh. A. at III ¶ 4, ECF No. 171.) The Order specifically notes that by the third quarter of
2015, Under Armour was aware that its full-year internal projections for revenue were much
lower than the late-2014 forecast had predicted. (Id. at III ¶ 13.) The company saw a $120
million decline in sales projections for its largest market category, North American wholesale
apparel. (Id. at III ¶ 13.) Yet, Under Amour continued to report its financial results without
disclosing its use of pull forward sales and their effect on future revenue and growth. (Id. at
III ¶ 42.) The SEC did not suggest that any of the company’s statements were protected by
the PSLRA safe harbor. It focused on Under Armour’s omission of information regarding
the pull forward sales practices potentially hindering an investor’s ability “to evaluate Under
Armour’s future revenue and ability to meet future guidance and analysts’ revenue
expectations.” (Id. at III ¶ 44.)
These allegations, combined with the allegations included in the TAC, are sufficient to
state a plausible claim that the Defendants “omitted to state a material fact necessary in order
to make the statements made, in the light of the circumstances in which they were made, not
misleading.” 15 U.S.C. § 78u–4(b)(1). The SEC Order and the TAC together “specify each
statement alleged to have been misleading” and “the reason or reasons why the statement is
misleading.” Id.
II.

Claims under Sections 20(a) and 20A
Section 20(a) provides for derivative liability for those who control others found to be

primarily liable under the Exchange Act. 15 U.S.C. § 78t(a). A claim of control person liability
must allege a predicate violation of Section 10(b). In re Mun. Mortg. & Equity, LLC Sec. &
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Derivative Litig., 876 F. Supp. 2d 616, 647 (D. Md. 2012). Section 20A provides for a private
right of action to buyers and sellers of securities who trade “contemporaneously” with an
insider in possession of material nonpublic information. 15 U.S.C. § 78t–1(a). “Like a claim
for control person liability asserted under § 20(a), a § 20A claim must contain a well-pled
predicate violation of the Exchange Act.” In re E. Spire Comms., Inc. Sec. Litig., 127 F. Supp. 2d
734, 750 (D. Md. 2001).
Defendants contend that the Plaintiffs have failed to adequately allege a claim under
Section 10(b) and Rule 10b–5, and therefore, the Sections 20(a) and 20A claims must be
dismissed. (ECF No. 159-1 at 50.) As described above, however, this Court is satisfied that
the Plaintiffs have adequately alleged their claims under Section 10(b) and Rule 10b–5.
Further, the Plaintiffs have alleged that they purchased Under Armour stock during the Class
Period contemporaneously with Plank’s trades when he was allegedly in possession of material,
non-public information concerning Under Armour’s suspect sales and accounting practices,
as required for a Section 20A claim. For these reasons, the Plaintiffs have stated a plausible
claim for relief under Section 20(a) and Section 20A.
CONCLUSION
For the foregoing reasons, the Defendants’ Motion to Dismiss (ECF No. 159) is
DENIED.
A Separate Order follows.

Dated: May 18, 2021
________/s/___________
Richard D. Bennett
United States District Judge
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