Turner v. MagicJack VocalTec Ltd. et al
Filing
50
OPINION re: 35 MOTION to Dismiss. filed by Daniel Borislow, Peter J. Russo, Andrew Macinnes, Gerald T. Vento, MagicJack VocalTec Ltd. For the reasons set forth above, Defendants' motion to dismiss is granted. IT IS SO ORDERED. (Signed by Judge Robert W. Sweet on 1/29/2014) (ama)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
--x
DOUGLAS TURNER, Individually and on Behalf
Of All Others Similarly Situated,
13 Civ. 0448
Plaintiffs,
OPINION
-against
MAGICJACK VOCALTEC, LTD., ANDREW MACINNES,
DANIEL BORISLOW, GERALD T. VENTO, and PETER
J. RUSSO,
rr _,
Defendants.
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A P PEA RAN C E S:
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Attorne
et al.
for the Defendants MAGICJACK VOCALTEC LTD.
ARNOLD & PORTER, LLP
555 Twelfth Street NW
Washington, DC. 20004
By:
John A. Freedman, Esq.
ARNOLD & PORTER, LLP
399 Park Avenue
New York, NY 10022
By:
Stewart D. Aaron, Esq.
Plaintiffss and the Class
POMERANTZ GROSSMAN HUFFORD DAHLSTROM & GROSS LLP
600 Third Avenue, 20th Fl.
New York, NY 10016
By:
Marc I. Gross, Esq.
Jeremy A. Lieberman, Esq.
Murielle J. Steven Walsh, Esq.
.
~.,-. -~.-~.-.~~'-----~
Star Mish
1 Tyner, Esq.
THE ROSEN LAW FIRM
275 Madison Avenue, 34th Fl.
New York, NY 10016
By:
Laurence M. Rosen, Esq.
Phill
Kim, ESq.
Turner
Attorne
BRONSTEIN GEWIRTZ & GROSSMAN LLP
60 East 42nd Street, S
4600
New York, NY 10165
Peretz Bronstein, Esq.
1
Sweet, D. J.
Defendants magicJack VocalTec Ltd.
"Company"), Andrew Ma
nnes
("magicJack" or
("MacInnes"), Daniel Borislow
("Borislow"), Gerald Vento (Vento") and Peter Russo ("Russo")
(collectively "Defendants") move to dismiss the Second Amended
Complaint ("SAC") of Plaintiffs Douglas Turner, individually and
on behalf of all others similar
situated ("Turner" or
"Plaintiffs") .
For the reasons set forth below, Defendants' motion is
granted.
Procedural History
Plaintiffs
led the
rst Complaint on January 18,
2013, and the First Amended Complaint ("FAC") on March 12, 2013.
On April 26, 2013, pursuant to Section 21 D(a) (3) (B)
of the Exchange Act, 15 U.S.C. §7Su-(a) (3) (B), the magicJack
Investor Group and
s members were appointed as Lead Plaintiffs
for the class because they have the largest financial interest
in
s litigation and otherwise
is
the requirements of
R. Civ. P. 23, and the Rosen Law Firm P.A. and Pomerantz
2
Grossman Hufford Dahlstrom & Gross LLP were appointed Co-Lead
Counsel.
On July 22, 2013,
Amended Complaint ("SAC").
Plaintiffs filed their Second
Defendants filed their motion to
dismiss the SAC on September 13, 2013.
Defendants' motion was heard and marked fully
submitted on November 20, 2013.
Facts
This
purchasers
February
of
28,
is
a
securities
magicJack
2012,
"Class Period").
securities
through
(CompI.
MagicJack
is
class
and
action
during
including
on
the
January
behalf
period
8,
of
from
2013
'j[ 1.)
an
Israeli
company
that
develops
and
sells software and hardware for making telephone calls over the
internet.
(CompI.
'j['j[
2,
15,
21 23.)
between the period of February 28,
Plaintiffs
allege
2012 through January 8,
that
2013,
the Company made a series of "false and/or misleading statements
and/or failed to
the purpose
sclose material facts
of keeping the Company's stock price inflated.
3
II
(CompI.
'j[
3.)
The
Complaint
also
disclose a
lawsuit
write-down
(Compl.
alleges
(Compl.
'j['j[
that
'j['j[
81 100);
the
56-57);
(Compl.
that
his
Borislow had pledged
addition,
the
Complaint
failed
record an
(2)
to
(1)
inventory
disclose the significance of
(3)
revenue recorded from puts
Company
107-115); and (4)
'j['j[
stock
maintains
(Compl.
that
disclose
34-46).
'j['j[
throughout
In
the
Class
Period, magicJack was engaged in a buyback program to repurchase
$100
Ilion of its stock.
(Compl.
'j['j[
104, 106.)
The individual Defendants are of
cers and directors
of magicJack during the Class Period.
Borislow served as magicJack's CEO from the beginning
of
t
Class
Borislow
is
shares
of
(Compl.
'j[
and
Period
through
alleged to
magicJack
34),
strategic
December
have pledged
as
collateral
2012.
(Compl.
"over one million
against
personal
"$3.7
(Compl.
investors,
million
'j['j[
of
16.)
his
debt,"
which he was alleged to have sold to "long term
including
the
Company's
President and three shareholders," at a price whi
a
'j[
scount
from
then-current
mar
Chairman,
represented
prices."
42, 145.)
On May 9, 2012, Thompson Reuters published an article
detailing how the CEO of Green Mountain Cof
4
Roasters had been
ousted atter
had sold pledged shares
to meet margin calls.
The article quoted former SEC chairman Arthur Levitt,
"The
perception
holdinas is so
of
d
management
borrowing
against
I would encourage
.
stating,
their
reholders to push
companies to implement such protections where they don't
(Compl.
41.)
<]I
Nine days later,
8-K filed on May 18,
magicJack
shares
own
st."
Defendants revealed in a form
2012 that Borislow disposed of 1.1 million
for
"liquidity,
that
II
the
ision
had
been
"moved along quicker" by recent news regarding executive margin
accounts,
and that Defendants Vento and MacInnes were among the
group of investors purchasing Bo
prices.
(Compl.
represented
float.
agreed
more
(Id. )
not
disclosure,
to
4,
<]I <]I
than
The
pledge
magicJack
43. )
5
May
slow's shares at
The
percent
18
his
of
shares
(Compl.
<]I
declined
Borislow's
pledges
p
or
though such disclosure was required.
pledged as
Company's
per
sold
outstanding
Borislow had
future.
$1.13
er
share,
this
or
6
to close at $17.74 per share
Defendants
Compla
the
to
of Regulation S-K requires
the
stock
5.)
According
disclose
of
stated that
in
percent over two trading sessions,
on May 18, 2012.
the
8-K also
shares
amount
low market
to
this
announcement,
(Compl.
sclosure of
did
the
<]I
4.)
not
even
Item 403(b)
number of shares
security by named executive officers and directors.
5
See
17 C. F. R.
130
with
the
§
229.403.
SEC,
For persons required to
pledges
of
securities
disclosed within ten days of the pledge,
are
Ie Schedule
required
as well as "material"
sales that result from any margin call or foreclosure.
240.1
2 (a);
(Compl.
to
at
Id.
§
45.)
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