Henningsen v. ADT Corp. (161 F. Supp. 3d 1161, 2015)

United States District Court for the Southern District of Florida 2015-06-04

Citations

Full opinion text

ORDER GRANTING DEFENDANTS’ MOTIONS TO DISMISS

WILLIAM P. DIMITROULEAS, United States District Judge

THIS CAUSE is before the Court upon the Defendants The ADT Corporation (“ADT” or the “Company”) and Naren Gursahaney’s Motion to Dismiss the Consolidated Complaint, (DE 66); Defendant Kathryn Mikells’ Motion to Dismiss the Consolidated Complaint (DE 68); and Defendants Keith Meister and Corvex Management LP’s (collectively the “Corvex Defendants”) Motion to Dismiss the Consolidated Complaint (DE 67), all filed on September 25, 2014. The Court has considered the Motions, Lead Plaintiffs’ Responses (DE 78, 79, & 80), and Defendants’ Replies (DE 86, 87 & 88), as well as the parties’ oral arguments, which were heard by the Court at hearings held on February 27, 2015, March 20, 2015, and April 10, 2015 (DE 101, 105 & 108), and is otherwise fully advised in the premises.

I. BACKGROUND

A. Overview

This is a federal securities action against Defendants ADT, Gursahaney, Mikells, Corvex and Meister, for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”). Plaintiffs allege that during the Class Period Defendants engaged in a fraudulent scheme to artificially inflate ADT’s stock price by falsely (i) misrepresenting and failing to disclose the effect of competition on customer attrition, customer additions, and costs, (ii) misrepresenting and failing to disclose the impact of customer service problems, unscrupulous sales practices, and increased customer screening, (iii) misrepresenting and failing to disclose ADT’s alleged plans to increase targeted leverage ratio, and (iv) failing to disclose, and engaging in a capital restructuring plan with, an entrenchment motive. (DE 60, Am. Compl. (hereinafter the “Complaint”).)

B. The Parties

Plaintiffs were appointed to serve as Lead Plaintiffs in this action by Order of this Court dated July 14, 2014. (DE 51.) Plaintiffs purchased or otherwise acquired ADT common stock during the Class Period. (DE 60, Am. Compl. ¶ 13.)

Defendant ADT is a leading provider of electronic security and related monitoring services to homes and businesses in the United States and Canada. (Id. ¶ 14.)

Defendant Gursahaney has been Chief Executive Officer (“CEO”), President, and a Director of ADT since the Company was spun-off from Tyco on September 28, 2012. (Id. ¶ 15.)

Defendant Mikells served as ADT’s CFO from May 2012 to May 2, 2013. (Id. ¶ 16.) She voluntarily resigned on May 2, 2013. (Id. ¶ 76.)

Defendant Corvex is an investment firm that between October 2012 and November 2013 owned approximately 5% of ADT’s outstanding common stock. (Id. ¶ 19.) Defendant Meister is the founder, managing director, and principal partner of Cor-vex. (Id. ¶ 20.) On December 17, 2012, Meister was appointed to ADT’s Board of Directors. (Id. ¶ 90.) Meister also served as a member of ADT’s Audit Committee. (Id. ¶ 20.) On November 24, 2013, pursuant to an agreement that was publicly disclosed, ADT repurchased the shares of Corvex at the most recent closing price of ADT shares as of the end of the prior trading day and Meister resigned from the Board. (Id. ¶ 225.)

C. The Class Period

The Class Period begins on November 27, 2012 and ends January 19, 2012.

D. The Stock Repurchase Plan

1. Corvex Publicly Criticizes ADT’s Capital Structure and Becomes a Shareholder. ADT Institutes a Capital Repurchase Plan.

' On October 24, 2012, Defendant Meister, speaking on behalf of Corvex, made a 50-slide presentation to investors, arguing that ADT was undervalued and should use increased leverage to repurchase 30% of ADT’s shares. (/¿¶83.) In the presentation, Defendant Meister publicly criticized ADT’s conservative approach to debt and referred to ADT’s capital structure as “indefensible.” (Id.) On October 25, 2012, the next day, Defendant Corvex filed a Schedule 13D, announcing it had purchased over 5% of ADT’s common stock, and attached to the Schedule 13D the presentation it had given the previous day. (Id.) On the same day, ADT issued a press release, filed with the SEC on Form 8-K, acknowledging Corvex’s Schedule 13D filing. (Id. ¶ 84.) In the press release, ADT acknowledged that it has had “constructive discussions with Defendant Corvex and others to understand their views. ADT is committed to delivering long-term value to all its shareholders.” (Id.) On November 26, 2012, Defendant Meister met with certain members of ADT’s Board and management and stated that he was interested in joining the ADT Board and conveyed Defendant Corvex’s view that “ADT could enhance shareholder value through the incurrence of incremental leverage.” (Id. ¶ 85.)

In ADT’s November 27, 2012 Press Release, ADT announced that the Board had approved a share repurchase program, authorizing ADT to purchase $2 billion of its common stock through November 27, 2015. (Id. ¶¶ 86,114.)

2. The ADT Board Considers Third-Party Presentations that Speculate on the Corvex Defendants’ Likely Future Action. Meister Joins the ADT Board.

On December 13, 2012, the ADT Board discussed the “pros and cons of Keith Meister’s request to join the ADT Board of Directors” and noted that “if Mr. Meister is not asked to join the Board then Corvex Management will likely make a shareholder proposal to elect Mr. Meister and possibly others as directors of ADT at ADT’s 2013 annual meeting of stockholders.” (Id. ¶ 88.) On December 14, 2012, the ADT Board discussed that “Mr. Gordon request that Mr. Bleisch attempt to negotiate mutually satisfactory standstill and confidentiality agreements with Mr. Meister, Corvex Management and the other Corvex-related parties.” (Id.)

During the December 13 and 14, 2012 Board meetings, Credit Suisse made a presentation to the ADT Board speculating that if ADT did not agree to Meister’s capital structure changes and offer him a Board seat, Corvex would “likely” seek to “[a]dd new outside directors or replace existing directors” and make an “attack on CEO or [demand] other changes in management.” (Id. ¶ 89.) Board materials recommended the benefits of negotiating with Defendant Corvex to ensure that all current directors stay on Board. (Id.) Further, a Lazard presentation dated December 3, 2012 speculated that the Board would need to “fully or partially implement Corvex’s capital structure and capital allocation proposals by increasing leverage to 3x” and that “[a]t least some additional capitulation [might] be required to substantiate a Corvex claim of ‘victory’ and encourage exit.” (Id.)

On December 17, 2012, ADT announced that Meister had been appointed to ADT’s Board. (Id. ¶ 90.) At its January 10, 2013 board meeting, the ADT Board adopted the recommendation of its committee to keep Meister on the Board and appoint him a member of the Audit Committee. (Id. ¶ 92.) In the January 28, 2013 Proxy Statement, ADT asked shareholders to vote on Defendant Meister’s election as a Director. (Id. ¶ 138.)

3. ADT Increases its Leverage Ratio to Three Times Debt.

During the July 18 and 19, 2013 Board meetings, ADT board members discussed ADT’s capital structure and the share repurchase plan. (Id. ¶ 97.) At the meeting, ADT considered a Goldman Sachs presentation that observed the importance of outwardly maintaining confidence in ADT’s ability to support increased leverage. (Id.) The materials referred to the importance of maintaining the appearance of a strong business model, cash flow and liquidity in order to “execute Meister’s demands.” (Id. (restating a conclusory allegation from the derivative complaint in Case No. 14-80570-WPD).) Further, it is alleged that the Individual Defendants were made aware that the increase in leverage would result in the likely loss of management, credibility in the eyes of rating agencies and debt holders. (Id. ¶ 97.)

In the July 31, 2013 Conference Call, Defendant Gursahaney revealed, for the first time, that ADT was increasing its target leverage ratio to 3 times debt to EBITDA to fund ADT’s capital allocation restructuring including share repurchases. (Id. ¶ 185.) Defendant Gursahaney stated that “[w]e expect to use proceeds from incremental leverage to pursue a flexible, balanced capital allocation plan on an ongoing basis, including investing in organic growth, completing acquisitions, and returning capital to shareholders in the form of dividends and share buybacks.” (Id.)

4. Corvex Requests Accelerated Timeframe.

In September 2013, the Individual Defendants received from Goldman Sachs and Centerview Partners a “Situation Update” concerning Corvex. According to the update, in late August, Corvex proposed an accelerated timeframe for increasing net leverage to 3.0x by the end of FY2014 and using the majority of debt proceeds to repurchase shares, instead of management’s July plans to increase leverage to 3.0x by Q12015 and to allocate capital more heavily to mergers and acquisitions. (Id. ¶ 101.) The materials indicated that adoption of the Corvex capital allocation timetable was a condition to Meister’s exit from the board, that Cor-vex’s participation in a large share repurchase would be dependent on price, and that if the leverage timeframe was not adopted, Corvex would present a Public LBO and run a competing slate of directors. (Id. ¶ 102.)

In the September 24, 2013 Press Release, ADT announced the pricing of $1 billion in debt securities that would raise capital to pay down debt associated with prior and new share repurchases. (Id. ¶ 198.) In November 20, 2013 Press Release, Defendants provided an update on its share repurchase plan, announcing that,' since its inception,' ADT has repurchased 35.5 million shares for $1.6 billion, that an additional $400 million worth of shares would be repurchased from JPMorgan Chase on an accelerated basis, and that the Board had authorized another $1.0 billion in share repurchases. (Id. ¶ 204.)

5. Corvex Sells Stock and Meister Resigns.

In the November 25, 2013 Press Release, ADT announced its agreement with Corvex to repurchase the vast majority of Corvex’s ADT common stock at the current market price ($44.01 per share), and that Defendant Meister had resigned from the Board. (Id. ¶ 225.)

E. Operational Challenges

1. Confidential Witness Accounts

a.CW1

CWl was the Director of Product Management in ADT’s headquarters from December 2005 to April 2014. (Id. at 15 n.5.) He reported to the Vice President of Product Solutions, who in turn reported to the Chief Innovation Officer. (Id.) He primarily worked on Pulse and was the team leader for all of the various teams that were involved with developing Pulse. (Id.) He stated that Comcast and AT & T were formidable competitors because they had significant resources and a growing concern of ADT, particularly in 2013. (Id. ¶ 41.) He commented that attrition was one of the biggest issues emphasized by ADT’s executive leadership and was discussed during the period from April 2013 to April 2014. (Id. ¶ 67.) He said that reducing the attrition rate was one of the key considerations when considering new projects. (Id.) He.recalled that attrition and competition were topics discussed at the Company’s town hall meetings, which Defendant Gursahaney attended. (Id.)

b. CW2

CW2 was a Senior Financial Analyst at ADT in an unspecified location from October 2012 until Spring 2014. (Id. at 15 n.6.) He was responsible for sales reporting to determine the commissions to be paid to sales personnel, and sales-related expense reporting. (Id.) He stated that in mid-2013, competition was having a real impact on ADT, and that in any market where it had competition ADT was “doing horrible.” (Id. ¶ 42.) He said that in mid-2013 Defendant Gursahaney was obsessed with competition, but there is no indication in the Complaint as to the basis for this conclusion about Defendant Gursahaney. (Id.)

c. CW3

CW3 was a Residential Sales Representative at ADT in West Palm Beach, Florida from 2008 to February 2014. (Id. at 16 n.7.) During his last year, the employee was cross-trained to work in a new department focused on promoting existing clients to ADT Pulse. (Id.) He stated that competition was a “rising concern” at ADT during 2013; ADT went into a “state of panic” in early 2013; and ADT started to hold special meetings, led by a District Sales Manager, to discuss with sales representatives a game plan to deal with competition. (Id. ¶ 44.) It is unclear whether these special meetings were a company-wide initiative.

CW3 stated that the sales team was concerned with Comcast and AT & T because their price points were lower than those of ADT, and it was becoming' increasingly challenging to convince customers to buy ADT’s services rather than a competitor’s. {Id.) He stated that ADT increasingly lost more customers to competitors, but did not quantify the number of lost customers. {Id. ¶ 43.)

CW3 stated that there were “significant problems” with ADT’s authorized dealers but failed to allege the temporal or geographical scope of the problems. {Id. ¶ 54.) He said that the work of an unspecified number of dealers was “often shoddy,” which resulted in a loss of “many customers,” and they often sold to customers outdated or unauthorized equipment, which had to be replaced by service technicians. {Id. ¶ 55.) He said that an unspecified number of customers called with complaints about dealers on a “regular basis.” {Id. ¶ 56.) He stated that sales representative would raise problems about the dealers at sales meetings, which were attended by a District Sales Manager and sometimes the Vice President of Sales for Florida, but were told the dealers were not going away. {Id.) He reported that, according to a Company newsletter, in mid-2013 Defendant Gursahaney took the top authorized dealer representatives on a vacation and said they were the backbone of ADT. {Id.)

CW3 also stated that an unspecified number of customers complained that their homes were not being monitored because of faulty equipment. (Id. ¶ 60.) He explained that near of the end of 2013, ADT created a Customer Loyalty Desk, which was dedicated to resolving customer complaints, although he thought the department was “a joke.” (Id. ¶ 62.) He observed that the level of customer care consistently decreased year after year, and customer service became worse after ADT and Tyco separated. (Id. ¶ 63.) The time period between the end of 2012 and when he left in early 2014 was the apex of the worst problems at ADT, he alleged. (Id.)

d. CW4

CW4 was a Credit Balance Analyst at ADT in an unspecified location from December 2010 to August 2013. (Id. at 16 n.8.) He worked in the Shared Account Services Department and reviewed credits on customer accounts and determined whether to refund or retain the balance. (Id.) He said that new competition was definitely a concern at ADT, especially Comcast’s new system that was similar to ADT Pulse but less expensive. (Id. ¶ 45.) During the last year of his employment, i.e. August 2012 to 2013, it was “especially common” that an unspecified number of customers canceled their accounts to move to a competitor. (Id.) He said it was also “common” that an unspecified number of customers canceled because they found out that their residence was not actually being monitored due to ADT mistakes. (Id. ¶ 60) CW4 complained that ADT spent money on retention credits as an enticement to keep customers who called to cancel their accounts, but the credits rarely resulted in customers staying. (Id. ¶ 70.)

e. CW5

CW5 was a Cash Application Specialist in ADT’s Billing Department located in Aurora Colorado from 2009 to March 2014. (Id. at 17 n.9.) He worked on 80-150 accounts per day and determined whether to retain or refund funds to the customer. (Id.) In 2013, “many customers” were switching over to competitors, causing a “bump” in the number of deactivated accounts. (Id. ¶ 45.)

More generally, CW5 stated that ADT was “constantly” receiving requests from customers to cancel and saw deactivated accounts “all the time” from March 2013 to March 2014. (Id. ¶ 64.) ADT was losing customers “like crazy” in 2013. (Id.) He said that in 2013, many Field Support Center employees were sent home early or laid off because of the lack of new accounts. (Id.)

f.CW6

CW6 was a Customer Service Representative with ADT for a little over one year, from July 2012 to November 2013, at a call center in Irving, Texas. (Id. at 17 n.10.) He worked in the Customer Service Department, which employed 300-400 people. (Id.) He handled 65-70 calls per day from residential and small business customers, among other duties. (Id.) He said that he “regularly” received deactivation requests because competitors were offering a lower price. (Id. ¶ 45.)

CW6 said that customers “often” complained about sales people, saying they gave the customer unfulfilled promises of lower costs or free equipment. (Id. ¶ 57.) When CW6 or his colleagues tried to reach the sales people, the sales people rarely returned their calls. (Id.) He also said that customers complained because they were charged twice. (Id. ¶ 59.) CW6 also stated that salespeople did not generally tell customers that a permit was needed, which became an issue when the alarm was set off and the police refused to come. (Id. ¶ 61.)

g. CW7

CW7 was a Senior Analyst for Internal Controls and Compliance, who worked for Tyco and then later ADT at headquarters from October 2012 until April 2014. (Id. at 21 n.17.) He said that ADT partnered with dealers that did not require a background check or permitted a lower credit score if the dealer had a large enough customer base. (Id. ¶ 53.)

h. CW8

CW8 was a Customer Service Unit Manager employed with ADT from March 2010 to January 2014. (Id. at 21 n.18.) He oversaw the entire operations of a call center in Irving, Texas, comprised of about 400 agents who monitored the alarm systems. (Id.) He said that ADT’s dealers were a “constant” issue because, they would make false promises and then evade customer calls. (Id. ¶ 54.)

2. Internal Documents

a. March 13 and 14, 2013 Board Meetings

At its meetings on “March 13 and 14, 2013,” “[t]he Board ... evaluated ADT’s competitive environment, noting that ‘[consumers increasingly have more options — not only from competitors that are positioning themselves directly against ADT, but also from new formidable entrants launching in the space.’ ” (Id. ¶ 47.) Moreover, “ADT was also facing competitive pressures that inhibited dealer marketing and prospecting efficiency.” (Id.) The Board, which included Defendants Gursahaney and Meister, “discussed ‘changes in the market environment, including ... increased competitor.advertising that [was] reducing ADT’s share of voice in overall marketing by electronic security companies.’ ” (Id.)

In addition, the Board received a second quarter 2013 “Business Update,” which also revealed: “(1) an increase in attrition, with Q2’13 T12M at 13.9%, 20 bps higher than plan [sic], driven by relocations and nonpayment; (2) Pulse take rates and competitive environment driving subscriber acquisition costs up; (3) continued pressure on lead generation (Direct) and Dealer softness impacting gross adds and recurring revenue; and (4) recurring revenue shortfall putting pressure on margin rates.” (Id. ¶74 (emphasis in original).)

The “March 13, 2013 Board meeting minutes” revealed that there was an “increase in [subscriber acquisition costs]” due to the Company’s Pulse “take rates,” “promotions and discounting” and noted that “ ‘pressure on the recurring revenue margin is the biggest issue for the quarter ... [and] the Company continues to see overall pressure on attrition.’ ” (Id. ¶ 75.)

b.May 9, 2013 Board Meeting

At the Board meeting on May 9, 2013, which was attended by all directors, including Defendant Gursahaney, “[t]he ‘competitive market and attrition continued to be a focus of the Board’s discussions.’ ” (Id. ¶ 77.)

c.June 15, 2013 E-mail

On June 15, 2013, “Defendant Gursahaney sent an email to certain of [ADT’s officers and directors].... In the email he noted that the Company had closed the books on May, but ‘thought it might be useful to provide [] a quarter to date update on [ADT’s] financial performance.’ Defendant Gursahaney stated that ‘[t]hrough two months, we are slightly ($1M) behind our revenue forecast as unit production is below forecast and attrition is continuing to run high.... As we look to the rest of the quarter and year, we are anticipating continued pressure on gross adds and attrition.’ ” (Id. ¶ 78) (emphasis in original.)

d.July 12, 2013 E-mail

On July 12, 2013, in advance of the release of the Company’s third quarter 2013 results, Defendant Gursahaney sent an email to certain of ADT’s officers and directors. (Id. ¶ 79.) This email “warn[ed] that there were ‘three primary gaps’ in ADT’s financials, of which he wanted to ‘make you aware of in advance of your review of the materials.’ ” (Id.) The “gaps” included the following:

In FY14, we will be implementing an enhanced customer credit screening process to help reduce non-pay disconnects. Based on our pilots, we expect this to impact our gross adds in our direct sales channel by 8%. Needless to say, we understand we need to offset more of this than is currently reflected in the model and are working to do so. We also need to make sure our attrition rate reflects the benefit of this screening, however much of the benefit will be realized after FY14. We are confident this is the right thing for the business to do and we understand we need to find offsets to the gross adds shortfall this creates,

Also in FY14, our SSFCF [steady-state free cash flow] is about $20M below where I believe we should be, even after considering our increase in interest payments ....

Finally, in the out years (FY17 & FY18) the investments required to support the growth programs are yet to be defined in enough detail to provide meaningful estimates at the project level. For our modeling purposes, we have assumed a level of capax that is consistent with this year.

(Id.)

e.July 18 and 19, 2013 Board Meeting On July 18 and 19, 2013, the Board held meetings [attended by Defendants Gursahaney and Meister, among others], during which it discussed ADT’s capital structure, strategic plan, share repurchase plan, and business risks facing the Company, including increased competition in the marketplace, and an “attrition trend [that] continues to grow,” offsetting benefits from planned initiatives. (Id. ¶ 80 (emphasis in original).)

f. October 20, 2013 E-mail

Thereafter, “[o]n October 20, 2013, Defendant Gursahaney sent an email to certain [officers and directors] regarding the preliminary [fourth quarter 2013 and fiscal year 2013] results, noting that ADT had come in about $15 million below its FCF [free cash flow] forecast and about $25 million below its SSFCF [steady-state free cash flow] estimate.” (Id. ¶ 81.) “The primary drivers of the shortfall were attrition, higher Pulse take rates and Pulse upgrades that increased subscriber acquisition costs and higher capital expenses as the Company accelerated some IT spending associated with its new Pulse product platform.” (Id.)

F. The Alleged Misstatements and Omissions

1. First Fiscal Quarter 2013

a. Repurchase Plan

In ADT’s November 27, 2012 Press Release, ADT disclosed that the Board had approved a share repurchase program, authorizing ADT to purchase $2 billion of its common stock through November 27, 2015. (Id. ¶ 114.) The Form 10-K announced that its “board of directors approved $2 billion of share repurchases over the next three years.” (Id. ¶ 122.) In the November 27, 2012 Conference Call, Defendant Gursahaney further commented that the share repurchase program was “a thoughtful capital policy that is based on our overall business strategy and the opportunities and risks we see for our business.” (Id. ¶ 126.) Defendant Gursahaney commented on ADT’s “commitment to maintain an investment grade rating” and targeted leverage ratio of “about 2 times.” (Id.) Defendant Gursahaney stated that he did not see a major departure from what was contemplated prior to the spin-off. (Id.) Defendant Mikells further stated that “in looking at our leverage target, we are certainly confident that is going to enable us to maintain investment and investment grade rating. And ultimately that something were [sic] going to continue to manage to.” (Id. ¶ 127.)

b. Operations

In the November 27, 2012 Press Release, ADT announced its fourth quarter and total fiscal year 2012 financial results. Defendant Gursahaney boasted of solid recurring revenue growth and the Company’s strong competitive position. (Id. ¶ 113.)

In the 2012 Form 10-K, ADT highlighted its “proven track record of successfully balancing” its key business drivers and discussed its customer service, commenting on its ability to use its recurring revenue “to more effectively deliver exceptional service to our customers.” (Id. ¶ 115.) The Form 10-K stated that ADT’s emphasis “on customer value drives customer satisfaction and tenure, decreasing customer attrition and improving [its] profitability.” (Id. ¶ 116.) The Form 10-K also stated that ADT “maintain[s] a service culture aimed at ‘Creating Customers for Life.’ ” (Id. ¶ 117.) ADT stated that it “maintainfs] consistently high levels of customer satisfaction.” (Id. ¶ 121.)

Regarding ADT’s customer selection process, the Form 10-K stated that ADT has “[a] structured customer acquisition process that is designed to produce customers with attractive characteristics, including strong credit scores ..., which we believe results in long average customer tenure.” (Id. ¶ 117-18.)

Regarding ADT’s competition, the Form 10-K commented as follows:

Competition is oftén based primarily on price in relation to value of the solutions and service. Rather than compete purely on price, we emphasize the quality of our electronic security and home/business automation services, the reputation of our industry leading brands and our knowledge of customer needs, which together allow us to deliver an outstanding customer experience. In addition, we are increasingly offering added features and functionality, such as those in our ADT Pulse interactive services offering, which provide new services and capabilities that serve to further differentiate our offering and support a pricing premium.

As we move into the interactive services and home automation space, we face new competition from competitors such as cable and telecommunications companies. However, we believe our robust field sales force,- including our nationwide team of in-home sales consultants, our solid reputation for and expertise in providing reliable security and monitoring services through our in-house network of fully redundant monitoring centers, our reliable product solutions and our highly skilled installation and service organization position us well to compete with these new competitors.

(Id. ¶ 119.)

Likewise, in the November 27, 2012 Conference Call, Defendant Gursahaney observed that there were some new competitors in addition to ADT’s traditional competitors with strong capabilities and considerable scale and capitalization but stated that “we feel very good about our positioning capabilities compares to these new competitors.” (Id. ¶ 125.) Defendant Gursahaney stated that he “d[id]n’t see a significant difference in our performance in those markets versus other markets.” (Id. ¶ 129.)

Regarding ADT’s sales force, the Form 10-K commented as follows:

We train and monitor each dealer to help ensure the dealer’s financial stability, use of sound and ethical business practices and delivery of reliable and consistent high-quality sales and installation methods. Authorized dealers are required to adhere to the same high quality standards for sales and installation as company-owned field offices.

(Id. ¶ 120.)

Regarding growth in subscriber acquisition costs, Defendant Gursahaney stated at the Conference Call that growth was “heavily” and “primarily” driven by Pulse. (Id. ¶ 130.)

Regarding attrition, the Form 10-k announced increased attrition, attributing it to price escalations without further explanation. (Id. ¶ 123.) On the November 27, 2012 Conference Call, Defendant Mikells stated that ADT’s implementation of programs to help customer retention would “help to mitigate otherwise pressure against attrition.” (Id. ¶ 128.) Likewise, Defendant Gursahaney stated:

[W]e have got a very robust set of programs that we’re implementing and continuing to drive to try and mitigate that [attrition] across all areas.... As part of our leadership meeting a couple weeks ago, we really focused 80% of our leadership meeting on how we become a more customer obsessed organization and some investments that we think we can make there. So, again, I think there are some natural headwinds but we’re working hard to make sure we minimize that and get to the extent possible, try and offset it.

(Id. ¶ 128.)

2. Second Fiscal Quarter 2013

a. Repurchase Plan

In the January 14, 2013 Press Release, ADT announced that it had priced a private offering of 4.125% Senior Notes due 2023 worth $700 million. (Id. ¶ 137.) In the January 30, 2013 Press Release, ADT provided an update on its stock repurchase plan, stating that ADT had repurchased over 2 million shares for a total of $100 million, and had entered into an accelerated share repurchase agreement with Credit Suisse International, under which it would repurchase approximately $600 million of its common stock using the funds from its recently concluded debt offering. (Id. ¶ 141.) The Form 10-Q for the first quarter of 2013 provided information regarding certain of the shares repurchased and debt issued in connection with the $2 billion repurchase plan. (Id. ¶ 143.)

During the January 30, 2013 Conference Call, Defendant Gursahaney stated that the repurchase was a “very effective way of using our additional leverage to enhance shareholder returns.” (Id. ¶ 141.) Defendant Mikells stated, in response to a question about the reason ADT was not buying back more shares, “we are executing exactly what we intended and said we were going to execute and I think we are fairly far along in the program for the year and that is very consistent with the overall capital structure and capital allocation that we talked about at the end of November.” (Id. ¶ 150.)

In the March 21, 2013 Amendment No. 1 to Form S-4, ADT disclosed an exchange offer of up to $2.5 billion principal of its outstanding unregistered debt securities for new registered debt securities. (Id. ¶ 153.)

b. Operations

In the January 30, 2013 Press Release, ADT announced its first quarter results and reaffirmed its guidance for fiscal 2013, originally announced in November 2012.

In the 2013 Form 10-Q First Quarter, ADT stated that it focuses on “Creating Customers for Life by maintaining consistently high levels of customer satisfaction, which increases customer tenure and improves profitability.” (Id. ¶ 142.) ADT stated that it focuses on “high quality service and our disciplined customer selection process in order to limit customer attrition.” (Id.)

Regarding attrition, in the Form 10-Q, the Company announced flat attrition and lower additions, blaming it on Hurricane Sandy and lower deal channel production. (Id. ¶ 144.) In the January 30, 2013 Conference Call, Defendant Gursahaney stated that ADT saw some stabilization in attrition and that loss to competition accounts for 10% of disconnects. (Id. ¶¶ 146 — 47.) In addition, Defendant Gursahaney observed negative trends in gross customer additions, lead generation, and subscriber acquisition costs, but failed to address the impact of competition on the trends. (Id. ¶ 148.)

Regarding competition, Defendant Gursahaney stated that ADT was “not seeing any significant change, but clearly it is a dynamic environment. We have got new competition coming in and we are going to continue to monitor it very closely.” (Id. ¶ 150.) When an analyst mentioned that previously ADT has cited competition as the reason for not buying back more shares and asked what they were seeing as far as competition, Defendant Mikells stated as follows:

So from my perspective, we are executing exactly what we intended and said we were going to execute and I think we are fairly far along in the program for the year and that is very consistent with the overall capital structure and capital allocation that we talked about at the end of November.... [T]he competitive environment really hasn’t changed quarter-to-quarter. We are seeing the same level of overall competition.... [T]he metrics are holding up very well.

(Id. ¶ 150.)

3. Third Fiscal Quarter 2013

a. Repurchase Plan

In the April 1, 2013 Form 424B3 prospectus supplement, ADT disclosed an exchange offer of up to $2.5 billion principal of its outstanding unregistered debt securities for new registered debt securities. (Id. ¶ 156.) In the April 12, 2013 Press Release, ADT announced that it had completed its accelerated stock repurchase program resulting in the repurchase of 12.6 million shares at a cost of $600 million. (Id. ¶ 157.) In the April 12, 2013 Form S-4 and the April 18, 2013 Form 424B3 prospectus supplement, ADT issued statements regarding an exchange offer of $700 million worth of unregistered 4.125% Senior Notes due 2023 for new registered notes. (¶¶ 158-59.) The May 1, 2013 Press Release provided an update on the purchases under the stock repurchase plan and stated “[e]apital management continues to be a major focus for us.” (¶¶ 95, 163.) In the Form 10-Q, ADT provided information regarding certain of the shares repurchased and debt issued in connection with the $2 billion share repurchase plan announced in November 2012. (Id. ¶ 165.) In the May 1, 2013 Conference Call, regarding the funding of the share repurchases, Defendant Gursahaney stated the Company has a “resilient business model, which enables us to invest in growth and consistently return significant capital to shareholders” and further commented “I think we have liquidity at this point and we are at our target leverage. So again I think we are sticking to what we laid out back in November.” (Id. ¶ 173.)

b. Operations

In the May 1, 2013 Press Release, ADT announced its financial results for the second quarter of fiscal year 2013. In the May 1, 2013 Form 10-Q Second Quarter, ADT reported “consistently high levels of customer satisfaction, which increases customer tenure and improves profitability.” (Id. ¶ 164.) The Company’s Business Overview stated that it focused on “grow[ing] [its] account base in a cost effective manner.” (Id.) ADT added that it focuses on delivering “high quality services” and its “disciplined customer selection process” in order- to limit customer attrition.” (Id. ¶ 166.)

During the May 1, 2013 Conference Call, Defendants stated “attrition has stabilized over the last two quarters and was essentially flat at 13.9% versus last quarter.” (Id. ¶ 168.) Defendants predicted that ADT would “come in at the high end of our full-year EBITDA margin guidance.” (Id. ¶ 169.)

Regarding costs, Defendant Gursahaney stated that “[w]ith our needed customer service investments in place, we will be focused on cost control-” (Id. ¶ 170.)

Regarding competition and further discussing attrition, Defendant Gursahaney stated “[n]ew entry competitors continue to have little impact on attrition and in fact, we think the level of concern that has been expressed by some over the past few weeks is overblown.... [W]e attribute less than 10% of our total customer disconnects to lost competition”.... We continue to closely monitor the impact ..., but to date nothing has really changed.” (Id. ¶ 171.)

4. Fourth Fiscal Quarter 2013

a. Repurchase Plan

In the July 31, 2013 Conference Call, Defendant Gursahaney revealed, for the first time, that ADT was increasing its target leverage ratio to 3 times debt to EBITDA to fund ADT’s capital allocation restructuring including share repurchases. (Id- ¶ 185.) Defendant Gursahaney stated that “[w]e expect to use proceeds from incremental leverage to pursue a flexible, balanced capital allocation plan on an ongoing basis, including investing in organic growth, completing acquisitions, and returning capital to shareholders in the form of dividends and share buybacks.” (Id.) When asked for the reason for the increase, Defendant Gursahaney stated that the extra debt would be “optimal” for the ADT’s growth and acquisition strategy, and deferred any other discussion until the Company’s Investor Day, scheduled in the fall of 2013. (Id. ¶ 186.)

In the July 31, 2013 Press Release, ADT provided an update on its share repurchases program, announcing the buyback of a total of 9.3 million shares in the prior quarter, and stating, that since inception, ADT had repurchased 25.3 million shares for $1.15 billion.

b. Operations

In the July 31, 2013 Press Release, ADT announced financial results for the third quarter. Defendant Gursahaney reported “solid execution on our growth and cost control initiatives.” (Id. ¶ 178.) In the July 31, 2013 Form 10-Q Third Quarter, ADT reaffirmed its “Business Overview,” including its focus on creating “Customers for Life.” (Id. ¶ 181.)

Regarding competition, in the July 31, 2013 Conference Call, Defendant Gursahaney stated “I would say loss to competition, there hasn’t been a significant change there,” and he further stated “I think we are able to continue to get prices although we are going to continue to watch that [competition] closely.” (Id. ¶ 187.)

Regarding subscriber acquisition costs in ADT’s direct sales channel, Defendant Gursahaney stated that SAC was up 12.8% on a trailing 12-month basis versus last year “reflecting ongoing success in selling Pulse to new .... customers, as well as costs related to Pulse upgrade for existing customers” and was expected to continue to grow due to Pulse. (Id. ¶ 194; DE 66-1 at 267.) Later, when asked about pressure on subscriber acquisition costs with the emergence of new competitors, Defendant Gursahaney acknowledged that “SAC has gone up” but then stated “most of our SAC increase is the result of the Pulse take rates as well as the Pulse upgrades.” (Id. ¶ 189.)

Regarding attrition, Defendant Gursahaney commented on the “enhanced screening of prospects aimed at reducing non-party attrition. These efforts in addition to ongoing investments in our loyalty desk and the proactive upgrading of customers to Pulse should continue to benefit the controllable elements of attrition.” (Id. ¶ 191.)

5. First Fiscal Quarter 2014

a. Repurchase Plan

On November 20, 2013, ADT issued a press release that provided an update on the repurchase plan. (See ¶ 204.) Defendant Gursahaney stated that he viewed the repurchase of Corvex’s shares as “a good business decision for us being a buyer in the market.” (Id. ¶ 232.) In the November 20, 2013 Form S-3, ADT made statements regarding the registration of certain debt securities, common stock, etc. (Id. ¶ 224.) In the December 2, 2013 Form 8-K, ADT confirmed its repurchase of shares from Corvex. (Id. ¶ 228.)

b. Operations

On November 20, 2013, ADT issued a press release announcing its fourth quarter 2013 financial results and providing guidance for fiscal year 2014. (Id. ¶ 201.) The press release highlighted solid recurring revenue growth and attributed an increase in attrition (13.9% vs. 13.8% the prior quarter) on housing relocations. (Id.)

In the 2013 Form 10-K, ADT discussed its “proven track record of successfully balancing” its key business drivers.” (Id. ¶205.) The Form 10-K also stated that ADT “maintain[s] a service culture aimed at ‘Creating Customers for Life.’ ” (Id. ¶207.) ADT commented on its “disciplined customer selection practices and our delivery of a superior customer experience.” (Id. ¶ 208.) ADT also stated “[w]e believe our ability to retain customers for longer periods of time is driven in part by our disciplined customer selection practices and our delivery of a superior customer experience.” (Id. ¶ 211.)

Regarding competition, like the prior year’s Form 10-K, the Form 10-K for fiscal year 2013 stated that while ADT’s principal competitors were traditional security companies, it believed it was positioned well to compete with new competition from competitors such as cable and telecommunications companies. (Id. ¶209.) During the November 20, 2013 Conference Call, after discussing positive financial results, Defendant Gursahaney stated “[w]e continue to see minimal impact on our business performance, specifically attrition, ARPU, and Pulse take rates, resulting from any new competitors attempting to enter our market.” (Id. .¶ 217.) He attributed the increase in attrition to “relocation disconnects.” (Id. ¶¶ 219, 221.) Defendant Gursahaney stated that ADT’s two-channel (direct and dealer) approach “provides us significant competitive advantage and has allowed us to add more than 1 million new customers each year for the past four years.” (Id. ¶ 219.)

Regarding dealers, like the prior year’s Form 10-K, the Form 10-K for fiscal year 2013 stated that “[ajuthorized dealers are required to adhere to the same high quality standards for sales and installation as company-owned field offices.” ■ (Id. ¶ 210.)

The Form 10-K provided financial results through September 27, 2013, touting positive results for increased recurring revenue, higher average revenue per customer, and increased gross customer additions over the prior fiscal year (aided in part by an acquisition and offsetting lower dealer channel production). (Id. ¶ 213.) ADT announced increased attrition, but attributed it to the housing market and stated it continued to focus on high quality service and a disciplined customer selection process. (Id.)

Finally, according to the Complaint, Defendant Gursahaney stated that per-subscriber acquisition costs in the direct sales channel were up 15.9% versus last year, but blamed it on increased costs in connection with Pulse. (Id. ¶ 220.) Defendant Gursahaney stated that “[ojverall, Pulse accounted for the majority of the increase in direct channel SAC.” (DE 66-1 at 283.)

During the December 6, 2013 Investor Day Conference, Defendant Gursahaney state “[t]he [market] share story hasn’t changed much. Despite some M & A activity and some entrants, ADT is the clear market share leader in this space with six times the scale of our next largest competitor.” (Id. ¶ 229.) Defendant Gursahaney stated “[i]n the aggregate, the cable market&emdash;cable players only have less than 1% of the market today. So it’s not a huge impact on the business, and again ADT has some tremendous advantages.” (Id.) He further stated, “I think as we look forward to 2014, no changes in the marketplace.” (Id.)

II. LEGAL STANDARD

A. Section 10(b) Claim

To state a claim for securities fraud under section 10(b) of the Act and Rule 10b-5, a plaintiff must allege “six elements: (1) a material misrepresentation or omission; (2) made with scienter; (3) a connection with the purchase or sale of a security; (4) reliance on a misstatement or omission; (5) economic loss; and (6) a causal connection between the material misrepresentation or omission and the loss, commonly called ‘loss causation.’ ” Instituto De Prevision Militar v. Merrill Lynch, 546 F.3d 1340, 1352 (11th Cir.2008) (quotation omitted).

To survive a motion to dismiss, a claim brought under section 10(b) of the Act or Rule 10b-5 must satisfy (1) the federal notice pleading requirements; (2) the special fraud pleading requirements found in Fed.R.Civ.P. 9(b), see Ziemba v. Cascade Int’l, Inc., 256 F.3d 1194, 1202 (11th Cir.2001); and (3) the additional pleading requirements imposed by the PSLRA, see Phillips v. Scientific-Atlanta, Inc., 374 F.3d 1015, 1016 (11th Cir.2004).

Under the federal notice pleading standards, a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R.Civ.P. 8(a)(2). Additionally, Rule 9(b) requires that, for complaints alleging fraud or mistake, “a party must state with particularity the circumstances constituting fraud or mistake,” although “[mjalice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Fed.R.Civ.P. 9(b).

The PSLRA imposes additional heightened pleading requirements. For section 10(b) and Rule 10b-5 claims predicated on allegedly false or misleading statements or omissions, the PSLRA provides that “the complaint shall specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed.” 15 U.S.C. § 78u-4(b)(1). Specifically, the complaint must “plead with particularity facts giving rise to a strong inference that the defendants either intended to defraud investors or were severely reckless when they made the alleged materially false or incomplete statements.” Mizzaro v. Home Depot, Inc., 544 F.3d 1230, 1238 (11th Cir.2008) (quotation marks omitted).

B. Judicial Notice

“In determining whether to grant a Rule 12(b)(6) motion, the Court primarily considers the allegations in the complaint, although matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint, also may be taken into account.” Watson v. Bally Mfg. Corp., 844 F.Supp. 1533, 1535 n. 1 (S.D.Fla.1993), aff'd, 84 F.3d 438 (11th Cir.1996). When a plaintiff refers to documents in the complaint that are “central to the plaintiffs claims,” the Court “may consider the documents part of the pleadings for purposes of Rule 12(b)(6) dismissal, and the defendant’s attaching such documents to the motion to dismiss will not require the conversion of the motion into a motion for summary judgment.” Brooks v. Blue Cross & Blue Shield of Florida, Inc., 116 F.3d 1364, 1369 (11th Cir.1997). Additionally, the Eleventh Circuit has expressly held that a court may judicially notice relevant documents legally required by, and publicly filed with, the Securities and Exchange Commission (“SEC”). See Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1276-81 (11th Cir.1999). As the Eleventh Circuit stated, the “usual rules for considering 12(b)(6) motions are thus bent to permit consideration of an allegedly fraudulent statement in context.” Harris v. Ivax Corp., 182 F.3d 799, 802 n. 2 (11th Cir.1999); Hubbard v. BankAtlantic Bancorp, Inc., 625 F.Supp.2d 1267, 1279 (S.D.Fla.2008).

Here, Plaintiffs’ Complaint relies on allegedly false statements made in conference calls, press releases, and SEC filings that were legally required and actually filed with the SEC. Because the statements are central to Plaintiffs’ claims, the fact that the filings and transcripts are not attached to the Plaintiffs’ Complaint is not dispositive. Additionally, the. Court notes that Plaintiffs did not object to Defendants’ proffer of these documents as exhibits in support of their Motions to Dismiss, and, therefore, the Court will consider the SEC filings, as well as the transcripts of the conference calls and the press releases, to place the allegedly fraudulent statements in context. See id.

Plaintiffs have objected, however, to Defendants’ reliance on excerpts from the presentations by Lazard (DE 66-1 at 356, 1.e. Exhibit 18) and Credit Suisse (DE 86-2, i.e. Exhibit B), which were filed by Defendants in support of their Motion to Dismiss (DE 66). Unlike the SEC filings, press releases, and earning transcripts in the record, which contain allegedly fraudulent statements and are offered to put those statements in context, the presentations proffered by Plaintiffs do not contain any of the allegedly fraudulent statements. Further, Defendants have only offered short excerpts from lengthy presentations. The Court cannot adequately place the allegedly fraudulent statements in context when Defendants themselves have offered only snippets of the full documents. Accordingly, the Court will not rely on the exhibits containing excerpts from the Lazard and Credit Suisse presentations in considering Defendants’ Motions to Dismiss.

III. DISCUSSION

A. Section 10(b) Claim

1. Material

Misrepresentations/Omissions

“A statement is misleading if ‘in light of the facts existing at the time of the statement a reasonable investor, in the exercise of due care, would have been misled by it.’ ” FindWhat Investor Group, 658 F.3d at 1305 (quoting SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 863 (2d Cir.1968)) (alterations and ellipsis omitted). The “appropriate primary inquiry” is “into the meaning of the statement to the reasonable investor and its relationship to truth.” FindWhat Investor Group v. FindWhat.com, 658 F.3d 1282, 1305 (11th Cir.2011) (quoting Texas Gulf Sulphur Co., 401 F.2d at 862). A statement is misleading only if it “conveyed to the public a false impression.” FindWhat Investor Group, 658 F.3d at 1305 (citation omitted).

Rule 10b-5 prohibits not only literally false statements, but also any omissions of material fact “necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.” 17 C.F.R. § 240.10b-5(b). By voluntarily revealing one fact about its operations, a duty arises for the corporation to disclose such other facts, if any, as are necessary to ensure that what was revealed is not “so incomplete as to mislead.” FindWhat Investor Group, 658 F.3d at 1305 (internal quotation marks omitted).'

However, “[r]equiring that disclosures be ‘complete and accurate’ does not mean that by revealing one fact about a product, one must reveal all others that, too, would be interesting, market-wise.” Id. (citation, alterations, and ellipsis omitted). A corporation has a duty to neutralize only the “natural and normal implication” of its statements. Id.

Under Section 10(b) and Rule lob-5, “a plaintiff must show that the [defendant’s] statements were misleading as to a material fact.” Basic Inc. v. Levinson, 485 U.S. 224, 238, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988) (emphasis omitted). “The test for materiality in the securities fraud context is ‘whether a reasonable man would attach- importance to the fact misrepresented or omitted in determining his course of action.’ ” See SEC v. Merch. Capital, LEG, 483 F.3d 747, 766 (11th Cir.2007); see Next Century Commc’ns Corp. v. Ellis, 318 F.3d 1023, 1027-28 (11th Cir.2003) (holding that the statement, “as our Company’s strong performance continues,” to be non-actionable puffery, which, as a matter of law, would not induce reliance).

a. Repurchase Plan

i. Failure to Disclose Motivation

Plaintiffs argue that ADT’s statements in public filings and press releases during the Class Period and certain statements made by Defendants Mikells and Gursahaney during conference calls regarding ADT’s stock repurchase program were false or misleading. Plaintiffs assert that the statements were false because Defendants failed to disclose the alleged threats made by Defendant Meister on behalf of Corvex that he would oust the Board members from their positions if they did not adopt their stock repurchase plan. Plaintiffs allege that Defendants failed to disclose the “true” motivation of the ADT Board members in proceeding with the stock repurchase plan, which was, allegedly, to remain entrenched in their positions.

Among other statements which Plaintiffs claim are false or misleading, Defendant Gursahaney commented that the share repurchase program was “a thoughtful capital policy that is based on our overall business strategy and the opportunities and risks we see for our business.” (Compl. ¶ 126.) Also, in the January 30, 2013 Conference Call, Defendant Gursahaney stated that the repurchase was a “very effective way of using our additional leverage to enhance shareholder returns.” (Id. ¶ 141.)

Even if it were plausible based upon the allegations of the Complaint that the ADT Board harbored a hidden entrenchment motivation when the Board members adopted and implemented the share repurchase program, the law imposes no duty to disclose that motivation. See Alabama Farm Bureau Mut. Cas. Co. v. Am. Fid. Life Ins. Co., 606 F.2d 602, 610 (5th Cir.1979) (holding that Section 10(b) and Rule 10b-5 does not ordinarily require the disclosure of an individual’s motives or subjective beliefs in entering into a transaction); see also Golub v. PPD Corp., 576 F.2d 759, 765 (8th Cir.1978) (holding plaintiffs’ claim that proxy statement issued by defendants was false because it did not disclose defendants’ “true motivation” in selling the assets of the company was not actionable); Ward v. Succession of Freeman, 854 F.2d 780, 791-92 (5th Cir.1988) (holding that defendants’ failure to disclose an entrenchment motive was not actionable). Section 10(b) and Rule 10b-5 were “designed to impose a duty to disclose and inform rather than to become enmeshed on passing judgments on information elicited.” Golub, 576 F.2d at 764 (citation omitted). The federal purpose is served when the corporation’s public statements fully and fairly set out the relevant facts that a reasonably prudent investor would find material. Id. Stockholders are not entitled to have a disclosure of the “true” motivation behind management’s decision in entering a transaction, because the motivation of management is not a material “fact” subject to disclosure. Id. at 765.

In Alabama Farm, which is binding in this circuit, the plaintiffs brought a derivative action against American Fidelity (“AMFI”) and five of its directors to recover for alleged violations of Rule 10b-5 and other provisions. 606 F.2d at 605-06. The plaintiffs asserted that a stock repurchase program instituted by defendants was a manipulative device carried out to boost artificially the price of the corporation’s stock, which defendants failed to disclose. Id. at 608.

Although the court ultimately found that genuine issues of material fact precluded summary judgment for the defendants, id. at 605-06, the Alabama Farm court first considered whether the mere failure of the individual defendants to disclose to the Board and the shareholders their “real” motive for adopting the repurchase program, which was allegedly to retain their position of control over AMFI, was actionable under Rule 10b-5. Id. at 610. In answering the question in the negative, the court began its analysis with Santa Fe Industries, Inc. v. Green, 430 U.S. 462, 473-74, 97 S.Ct. 1292, 51 L.Ed.2d 480 (1977), stating that a breach of fiduciary duty by corporate officers without any manipulation, deception, misrepresentation or omission does not violate the statute or Rule 10 b-5 but is actionable solely under state law. Id. at 608, 610. Applying Santa Fe, the Alabama Farm court held that the failure of a corporate official to disclose his motives in entering a transaction is not actionable. Id. at 610.

The Alabama Farm court reasoned that Section 10(b) and Rule 10b-5 were “promulgated to prevent fraudulent practices in securities trading and trading on inside information. They were not intended to require, under normal circumstances, the disclosure of an individual’s motives or subjective beliefs, or his deductions reached from publicly available information.” Id. (citation omitted). As long as the “facts” of the transaction — the nature, size, and scope of the stock repurchase plan — are adequately disclosed, the mere nondisclosure of the “motive” for the transaction is not actionable. See id.

The allegations of Alabama Farm, however, presented more than the mere nondisclosure of motive. In that case, the court found that the evidence raised genuine issues of material facts as to whether the repurchase program there, as intended and carried out, was a manipulative device to inflate artificially the market price. Id. at 611-16. The defendants allegedly carried out the repurchase plan to boost the market price because the defendants wanted to discourage others from purchasing shares or attempting to gain control of AMFI. Id. There was evidence of steady buying by AMFI, purchases at inflated prices, deterioration of AMFI’s policyholder surplus, a letter from the Florida Department of Insurance directing AMFI to cease repurchases, a possible impact on AMFI’s ability to write new business, and the suspicious timing of the. repurchase program in conjunction with the incurrence of taxes. Id. at 615-16. Under those circumstances, the court found that the evidence presented genuine issues of material fact as to whether the stock repurchase program was a manipulative device and whether the nondisclosure of defendants’ scheme, including their entrenchment motive, constituted deception within the meaning of Section 10(b) and Rule 10b-5. Id.

Alabama Farm teaches that in the absence of allegations demonstrating that an entrenchment motive is part and parcel of a manipulative device or deceptive scheme, and where the size and scope of a transaction is adequately disclosed, the nondisclosure of motive is not actionable. See also Ward, 854 F.2d at 791-92 (“The plaintiffs cite no cases in which an entrenchment motive alone is held actionable, and thus Charge 17 is clearly improper. Although impure deeds or omissions that enable defendants to implement a plan are said ... to constitute actionable “facts,” no such deeds or omissions are alleged in Charge 5. Standing alone, Charge 5 is also flawed.”); Vaughn v. Teledyne, Inc., 628 F.2d 1214, 1220 (9th Cir.1980) (stating that it is not a violation of any securities law to have a plan to make a stock acquisition to obtain control unless “the plan includes practices that are intended to mislead or to defraud investors”).

In the case at bar, it is undisputed that the size and scope of the repurchase plan were adequately disclosed to the public when it was adopted and throughout its implementation. Moreover, Plaintiffs fail to allege that the stock repurchase plan included fraudulent practices intended to mislead or defraud investors. See infra Section III.A.3. Accordingly, the mere failure of the Individual Defendants to disclose the ADT Board’s alleged motivation in adopting the share repurchase program is not actionable.

Plaintiffs argue that Alabama Farm is distinguishable because in this case Defendants mischaracterized the rationale for the stock repurchase plan. At the July 31, 2003 Conference Call, Defendant Gursahaney announced the debt increase and new target leverage ratio of 3 times debt to EBITDA and stated “[w]e expect to use proceeds from incremental leverage to pursue a flexible, balanced capital allocation plan on an ongoing basis, including investing in organic growth, completing acquisitions, and returning capital to shareholders in the form of dividends and share buybacks.” (Compl. ¶ 85.) When specifically asked for the rationale for the increase, Defendant Gursahaney stated only that the extra debt would be “optimal” for business growth and acquisition strategy. (Id.)

However, Defendants’ alleged mischaracterization of the rationale for the stock repurchase plan is not actionable for the same reason the nondisclosure of motive is not actionable. Although Defendants did not characterize the stock repurchase plan as Plaintiff would have characterized it, Plaintiffs are not complaining about the absence of any facts about the size and scope of the underlying stock repurchase plan. Defendants’ motives and subjective beliefs and deductions from publicly available information are not actionable. See Alabama Farm, 606 F.2d at 610; Golub, 576 F.2d at 759 (finding that defendants’ mischaracterization of the bonus aspect of the sale¡ which allegedly was not compensation for services but a premium for their willingness to make the sale, was not actionable). As stated by the district court in Stedman v. Storer and often repeated:

The unclean heart of a director is not actionable, whether or not it.is “disclosed,” unless the impurities are transl