California Buyer’s “I Have A Plan” Statement Found To Be Immaterial Puffery
Tuesday, November 25, 2014

A recent California Court of Appeal decision is a helpful reminder that buyers can also be targets of securities fraud suits.  In Goldsholle v. Brisco, 2014 Cal. App. Unpub. LEXIS 7997 (Cal. App. 2d Dist. Nov. 6, 2014), the seller of a company claimed that the buyer’s assurances that it had a plan to increase website traffic were actionable under Section 25401 of the California Corporations Code.  The Court of Appeal, however, in an opinion authored by Justice Brian M. Hoffstadt held:

California securities law looks to its federal counterpart, (Viterbi v. Wasserman (2011) 191 Cal.App.4th 927, 937), and federal law provides that “‘[v]ague, generalized, and unspecific assertions’ of corporate optimism or statements of ‘mere puffing’ cannot state actionable material misstatements of fact under federal securities laws. [Citations.]” (In re Cornerstone Propane Partners, L.P. (2005) 355 F.Supp.2d 1069, 1087.)  Such “forward-looking or generalized statements . . . are ‘not capable of objective verification’ and ‘lack[] a standard against which a reasonable [seller or purchaser] could expect them to be pegged. [Citations.]” (Ibid.)  As a result, such statements are immaterial because no “reasonable [seller or purchaser] would consider [them] important in reaching an investment decision.” (Insurance Underwriters Clearing House, Inc. v. Natomas Co. (1986) 184 Cal.App.3d 1520, 1526.)

Despite affirming the trial court’s grant of summary judgment for the defendants, the defense bar will be unhappy with the Court’s opinion in one respect.  It was not certified for publication. Rule 8.115(a) of the California Rules of Court prohibits courts and parties, with certain exceptions, from citing or relying on opinions that have not been certified for publication.

 

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