iThe US District Court for the Northern District of California recently dismissed with prejudice a securities fraud class action against Electronic Arts, Inc. (EA) and its officers, holding that the plaintiffs’ amended complaint failed to identify any actionable misstatements by the defendants. The court had dismissed the plaintiffs’ prior complaint in 2014 with leave to amend.
The complaint arises out of the 2013 release of the game “Battlefield 4” (BF4). According to the complaint, EA and its executives made a series of statements suggesting to the market that the company had learned from technical problems associated with prior new game releases, and that Battlefield 4 was less likely to experience a problematic launch. In particular, the plaintiffs challenged statements suggesting that EA had “de-risked” its technology for transitioning to new games and new game systems.
Following the game’s release, however, customers complained that Battlefield 4 suffered from technical defects and crashes. The complaint alleges that EA’s stock price declined due to these customer complaints and certain negative press associated with the release of Battlefield 4.
The court granted EA’s motion to dismiss on the ground that the challenged statements were inactionable “corporate optimism and puffery.” First, the court found that the term “de-risk” was too vague to be actionable and that plaintiffs did not establish that the term had a specialized and concrete meaning in the video game industry. The court also held that the additional statements regarding lessons learned from past launches were non-actionable optimism and puffery. Lastly, the court held that the statements made by EA’s chief executive officer regarding the “unfinished” character of the platform, when taken in context, referred to the new hardware systems on which BF4 was meant to run, and not the platform that EA used to develop the game.
Kelly v. Electronic Arts, Inc., 13-cv-05837-SI (N.D. Cal. April 30, 2015).
Daniel M. Ketani is co-author of this article.
