On May 1, 2017, Judge Jon Tigar of the United States District Court for the Northern District of California dismissed a putative securities fraud class action against GoPro, Inc. (“GoPro” or the “Company”) and certain executives, in which plaintiffs alleged that defendants made material misrepresentations about the strength of GoPro’s camera sales. Bodri v. GoPro, Inc., No. 16-cv-00232-JST (N.D. Cal. May 1, 2017). The Court dismissed the claims, stating that plaintiffs had taken defendants’ statements out of context and failed to point to any facts that made the statements false, and that certain of the statements were non-actionable “corporate puffery.” This decision adds to the body of cases that caution against taking statements out of context and serves as a reminder that conclusory allegations of falsity without supporting facts will not survive dismissal.
GoPro is a consumer electronics company that develops mountable and wearable cameras and related accessories for consumers to capture footage while engaged in activities. In July 2015, GoPro introduced the Hero4 Session camera (“Session”). According to plaintiffs, defendants allegedly made several false statements regarding Session, including the “momentum” of its launch, its sales trajectory, and its pricing stability that were not consistent with GoPro’s internal projections.
The Court rejected each of the claims. First, the Court found that references to “terrific momentum” related to more products than just Session and, in any event, that the specific reference to Session’s “momentum” was non-actionable corporate puffery. The Court also held that statements that Session’s sales were “going really well” and “improving” were not misleading because they were tempered by cautionary statements, including the statement that “it’s a little hard for little old Session here, because it’s competing against the top two selling cameras in the world” and statements that certain positive sales information was based on a “small data set.” The Court also rejected allegations that positive statements about sales were inconsistent with internal sales forecasts because the complaint did not include sufficient detail regarding the internal sales reports, such as who prepared the reports or how specifically the sales deviated from the reports. The Court also held that statements relating to GoPro’s pricing stability were not false or misleading because (i) GoPro was open about its pricing challenges with Session; (ii) the specific, allegedly misleading statements regarding pricing stability referred to the entire line of products and not just to Session; and (iii) statements about past and present average selling price could not be interpreted to be an “objective assurance of future [pricing] stability.” Lastly, with respect to allegations that defendants issued false revenue guidance without a reasonable basis and without meaningful cautionary language, the Court found that (i) plaintiffs failed to allege facts that showed that defendants had knowledge of the falsity of the guidance, and (ii) the projections fell within the safe harbor for forward-looking statements under the PSLRA because they were accompanied by sufficient cautionary language.
The Court also concluded that plaintiffs failed to plead scienter sufficiently because, when viewed holistically, the allegations in the complaint did not overcome competing inferences that the Company had simply miscalculated the demand for its new product. In particular, the Court noted that GoPro had completed share buybacks during the Class Period, which negated any inference of intent. The Court granted GoPro’s motion to dismiss without prejudice, granting plaintiff leave to file an amended complaint within 21 days.
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