Judge Refuses to Buy Best Buy’s Motion to Dismiss
In an investor lawsuit entitled IBEW Local 98 Pension Fund v. Best Buy Co., Inc., et al., counsel from Robbins Geller have overcome seriatim motions by defendants to defeat the action, which has now proceeded to discovery. The lawsuit was filed on February 18, 2011, on behalf of shareholders against Best Buy and its now-former senior executives, including Chief Executive Officer Brian Dunn, Chief Financial Officer Jim Muehlbauer and Executive Vice President Michael Vitelli.
The complaint alleges that starting September 14, 2010, defendants issued materially false and misleading statements concerning Best Buy’s ability to reverse negative sales trends in key product categories, including HDTVs and laptop computers, and falsely assured investors that the company was “on track” and “in line” to achieve its new increased earnings guidance. These false statements and others made during Black Friday and the Thanksgiving holiday in 2010 caused Best Buy’s stock to trade at artificially inflated prices as high as $43 per share. The truth was revealed on December 14, 2010, when defendants announced quarterly sales results well below those previously forecast and sharply reduced their annual earnings forecast. The company also admitted that earlier forecasts had been too aggressive. Analysts that had previously cheered the company’s positive outlook viewed management’s credibility as damaged. The stock price fell from $41 to $35, causing hundreds of millions of dollars in damage to duped investors.
On March 20, 2012, the court dismissed the consolidated complaint with prejudice, finding that plaintiffs had failed to allege that defendants’ statements were knowingly false, and that certain of the statements were forward looking and therefore protected by the Private Securities Litigation Reform Act safe harbor. Undeterred, counsel at Robbins Geller sought to reopen the case by filing a motion to alter the judgment pursuant to Federal Rule of Civil Procedure 59(e), forcefully setting forth the reasons the court’s March 20, 2012 order should be altered. On October 22, 2012, United States District Judge Donovan W. Frank agreed with plaintiffs and took the extraordinary step of vacating his prior order and allowing plaintiffs to file an amended complaint.
Plaintiffs filed a first amended complaint on October 29, 2012, which clarified key allegations for the court and added new events that had transpired, including the resignation of top management at Best Buy. Defendants again moved to dismiss the case. In an August 5, 2013 order that the court acknowledged was a “departure from the Court’s earlier ruling,” Judge Frank held that the first amended complaint sufficiently alleged that defendants had made false and misleading statements: “Plaintiffs’ allegations that Defendants made the ‘on track’ and ‘in line’ statements despite known negative trends are sufficient to satisfy the pleading requirements of the [Private Securities Litigation Reform Act of 1995].”
Defendants again moved to defeat the action, this time seeking reconsideration or, in the alternative, certification of the action for review by the Eighth Circuit Court of Appeals. Defendants asserted that the court’s August 5, 2013 order was in error. However, on December 19, 2013, after further opposition from plaintiffs’ counsel, the court denied defendants’ motion.
On October 28, 2013, defendants moved for judgment on the pleadings with respect to defendant Vitelli, arguing that he had not made any of the statements found to be false in the court’s August 5, 2013 ruling. Plaintiffs countered again, demonstrating that Vitelli remained potentially liable for the alleged fraud because he possessed the power to control the company’s false and misleading statements. On April 30, 2014, the court once again agreed with plaintiffs and denied defendants’ motion.
On January 31, 2014, plaintiffs filed a motion requesting that the court certify the action as a class action on behalf of all purchasers of Best Buy stock between September 14, 2010 and December 13, 2010. That motion is currently under submission.
IBEW Local 98 Pension Fund v. Best Buy Co., Inc., et al., No. 0:11-cv-00429-DWF-FLN (D. Minn.).