Citations
- 300 F. Supp. 3d 551
Full opinion text
PAUL A. ENGELMAYER, District Judge:
The lead plaintiff in this putative class action claims that Xerox Corporation ("Xerox") violated federal securities laws by dissembling about the challenges it faced as it struggled to make profitable a new business venture. Xerox had purchased Affiliated Computer Services, Inc. ("ACS") in 2010, and then sought to develop ACS's Medicaid Management Information System, known as Health Enterprise, into a platform Xerox could profitably market to state governments. The putative plaintiff class consists of purchasers of Xerox's common stock between April 23, 2012 through October 27, 2015 (the "Class Period"). Lead plaintiff the Arkansas Public Employees Retirement System ("APERS") alleges that Xerox falsely claimed that it had a replicable, "plug-and-play" "platform" that could be readily reused by Xerox's state clients; that implementation of the Health Enterprise system was "going well"; and that implementation of Health Enterprise was profitable. APERS alleges that Xerox's share price was artificially inflated for more than three-and-a-half years by these alleged falsehoods and that, when Xerox eventually revealed, over several disclosures, that implementation of Health Enterprise was going badly, Xerox's share price dropped from a high of $14.32 to $9.29 on the last day of the Class Period. APERS sues Xerox as well as corporate officers Ursula M. Burns, Luca Maestri, Kathryn A. Mikells, Lynn R. Blodgett, Robert Zapfel, David H. Bywater, and Mary Scanlon (the "individual defendants," and, with Xerox, the "defendants").
Xerox and all individual defendants except Zapfel have filed a joint motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). Zapfel has separately moved to dismiss under Rule 12(b)(6).
For the reasons that follow, the Court grants both motions to dismiss.
I. Background
A. The Parties
1. The Lead Plaintiff
APERS is a public pension fund providing retirement benefits for certain public employees of the state of Arkansas. Am. Compl. ¶ 32. As of June 2016, APERS managed assets exceeding $7.3 billion on behalf of approximately 93,000 members. Id. APERS purchased Xerox common stock during the Class Period. Id.
2. The Defendants
Xerox is a New York corporation with its principal place of business in Norwalk, Connecticut. Its common stock is listed on the NYSE. Id. ¶ 33. Xerox provides document management solutions-including its eponymous copying machines-as well as business process outsourcing services. Id.
Ursula M. Burns became Xerox's Chairman of the Board and CEO on July 1, 2009, and remained CEO throughout the Class Period. Id. ¶ 34.
Luca Maestri was Xerox's Chief Financial Officer between February 16, 2011 and February 28, 2013. Id. ¶ 35. Maestri was succeeded by Kathryn A. Mikkels, who served as CFO and Executive Vice President between May 2, 2013 and the end of the Class Period. Id. ¶ 36.
Lynn R. Blodgett was ACS's President and CEO until Xerox acquired ACS in 2010. Id. ¶ 37. He then served as President of Xerox's Business Services division between February 2010 and April 1, 2014. Id.
Robert Zapfel succeeded Blodgett as President of Business Services on April 1, 2014, and served in that role through the end of the Class Period. Id. ¶ 38.
David H. By water was Xerox's Chief Operating Officer of State Government between February 2010 and July 2013 and Corporate Vice President between February 2012 and July 2013. Id. ¶ 39.
Mary Scanlon served as Xerox's Senior Vice President of National Sales and Business Development for Government Health Care Solutions between August 2009 and October 2014. Id. ¶ 40.
B. Xerox Buys ACS
In February 2010, Xerox acquired ACS for $6.4 billion. Id. ¶¶ 3, 59. ACS specialized in business-process outsourcing. This entailed providing for clients various back-office services, including call centers, claims processing, and information technology. Id. ¶ 4.
Chief among ACS's customers were government clients, from which ACS generated approximately 40 percent of its revenue. Id. ¶¶ 4, 6, 62. ACS provided a range of services to such clients, including-relevant here-developing, designing, and implementing Medicaid Management Information Systems ("MMIS"). Id. ¶ 6. As described by APERS, an MMIS is a computer system that manages the processing of payments to healthcare providers, the storing of beneficiary information, and all other aspects of a state's Medicaid program. Id. ¶ 7. States are required by law to have such a system, id. ¶ 62; these allow states to process payments to healthcare providers participating in the state Medicaid program, id. ¶ 67. The federal government provides 90 percent of the financing for the design and development of a state's MMIS and 75 percent of the financing for its operation. Id.
ACS offered to state governments a proprietary software product-known as Health Enterprise-that served as a replacement for states' existing MMISs. Id. ¶¶ 8, 69. Health Enterprise was intended to perform four key functions for state governments: (1) benefit plan administration, (2) financial management, (3) information storage and retrieval, and (4) reporting. Id. ¶ 9.
The acquisition of ACS helped transform Xerox-historically a manufacturer and distributor of photocopiers and other hardware-into a service business. Id. ¶ 53. Of Xerox's two primary business segments-Document Technology, home to the company's hardware business, and Services-the service segment became, after the acquisition of ACS, the largest segment in the company, accounting for between 52 and 56 percent of total revenue per year during the Class Period. Id. Within the Services segment, Xerox offered three distinct services (1) business process outsourcing, (2) information technology outsourcing, and (3) document outsourcing. Id. ¶ 54. Business process outsourcing-which represented a significant majority of the total Services revenue-included Xerox's "Government Healthcare Solutions" offering. Id. ¶ 56.
C. Implementation Issues in Six States
At the time of Xerox's acquisition of ACS, ACS had contracted to provide its Health Enterprise software to New Hampshire, North Dakota, and Alaska. Id. ¶¶ 9, 70. Pursuant to its acquisition of ACS, Xerox took control of these contracts. Id. ¶ 65. Plaintiffs allege that ACS, and from 2012 forward Xerox, experienced delays and cost overruns as they performed these contracts.
In late 2005, ACS contracted with New Hampshire to provide the state a new MMIS system. Id. ¶ 73. ACS initially projected that the MMIS would be implemented by 2008; the system was completed (after Xerox had acquired ACS) in April 2013. Id. ¶ 75. ACS had proposed that implementation of the New Hampshire MMIS would cost $60 million; the actual cost exceeded $117 million. Id. ¶ 76.
Also in late 2005, ACS contracted with North Dakota to implement the state's MMIS. Id. ¶ 77. The North Dakota MMIS was scheduled to be completed by July 2009. Id. ¶ 78. ACS-and later Xerox-missed that deadline, see id. ¶¶ 79-83; Xerox instead completed the North Dakota MMIS in October 2015, id. ¶ 87. This six-year delay was attributable to Xerox's efforts to conform the computer code from the New Hampshire MMIS for use in North Dakota. Id. ¶ 89. The cost of implementing the North Dakota MMIS increased from $37 million, as projected in June 2006, to $65 million as of its 2015 completion. Id. ¶ 91.
In October 2007, ACS contracted with Alaska to replace the state's MMIS. Id. ¶ 93. Implementation of that MMIS, too, suffered from delays and cost overruns. Implementation was scheduled to conclude on June 1, 2010. Id. But the MMIS first went "Live" on October 1, 2013. Id. ¶ 97. Through 2014, Xerox continued to address ongoing defects in the MMIS. Id. ¶¶ 97-100. The cost of implementation grew from an original estimate of $32 million to a final cost of approximately $146 million. Id. ¶ 102.
In March 2010-shortly after acquiring ACS in February 2010-Xerox was awarded a $1.7 billion contract to implement a MMIS for California. Id. ¶ 119. The California MMIS Independent Project Oversight Consultant (IPOC)-a third-party observer-issued several reports detailing Xerox's progress on the project. See id. ¶ 121-31. These described a series of delays . See id. As a result, as of May 2015, California had not paid Xerox for its work on the project. Id. ¶ 131. In April 2016, California terminated its contract with Xerox. Id. ¶ 134. Xerox and California reached a settlement of their claims against each other, under which Xerox was required to pay the state $123 million. Id. ¶ 135.
In April 2012, Xerox was awarded a contract to implement a MMIS for Montana. Id. ¶ 105. That process, too, was marked by delays. The MMIS was originally scheduled to be implemented by February 2015. Id. But throughout 2013 and 2014, Xerox missed milestones and Montana refused to make interim milestone payments. Id. ¶¶ 106-112. On July 18, 2014, Xerox and Montana renegotiated their contract and set a May 2017 completion deadline. Id. ¶ 113. Through 2015, Xerox continued to miss interim milestone deadlines. Id. ¶¶ 114-15. Xerox did not complete implementation of the Montana MMIS. Id. ¶ 116.
Finally, in April 2015, Xerox was awarded a $564 million contract to implement a MMIS for New York. Id. ¶ 138. Xerox never completed the New York MMIS project. Id. ¶ 140.
D. Xerox Spins Off Business Process Outsourcing
On October 26, 2015, at the conclusion of the Class Period, Xerox announced that it would review its portfolio of businesses. Id. ¶ 286. Following that review, on January 29, 2016, Xerox announced that it would separate the company into two separate businesses: a business-process outsourcing company and another company focused on document technology and document outsourcing. Id. On November 8, 2016, Xerox announced that it would effect this reorganization by spinning off its business-process outsourcing services into a new company to be called Conduent Incorporated. Id. ¶ 287. On January 3, 2017, Xerox announced that it had completed that spin-off. Id. ¶ 288.
E. Alleged Misstatements
While Xerox was struggling to implement Health Enterprise in the six states in which it had been awarded MMIS contracts, APERS alleges, Xerox officers made materially false or misleading statements about the company's progress. APERS groups these statements into three categories: (1) that Xerox had a platform that was transferrable, reusable, replicable, and scalable, and possessed plug-and-play characteristics (the "Platform Statements"); (2) that implementation of Health Enterprise was successful and/or going well (the "Success Statements"); and (3) that implementation of Health Enterprise had or would become profitable, and that profitability would be achieved because of the low-cost nature of the Health Enterprise platform (the "Profitability Statements").See id. ¶ 141. The Court summarizes these statements below.
1. Platform Statements
First, APERS alleges that Xerox officers made a series of statements during the Class Period that falsely or misleadingly described Health Enterprise as a "platform."
Beginning at the start of the Class Period, Xerox officers described the MMIS application as a "platform" and extolled the benefits the company expected to enjoy from that platform. See, e.g., Am. Compl. ¶ 172, Appendix Nos. 3, 4; Am. Compl. ¶ 143. In particular, Xerox officers predicted that the company would be able to "reuse" the MMIS platform, lowering Xerox's costs on future contracts. See Am. Compl. ¶¶ 145, 175; Appendix No. 7; see also, e.g., Am. Compl. ¶¶ 146, 184 (alteration omitted); Appendix Nos. 13, 14 ("Platforms across the board help us to have repeatable solutions."). Company officers continued to describe Health Enterprise as a platform and to attribute Xerox's competitive advantage to that platform throughout 2013 and into 2014. See, e.g., Am. Compl. ¶¶ 190, 191, 194; Appendix Nos. 23, 24, 25, 27. Xerox officers also explained to investors and analysts that, as Xerox implemented Health Enterprise on future contracts, the company would be able to "modify for every engagement a little bit of the system but not as big a modification as before," resulting in efficiencies. Am. Compl. ¶ 206; see Appendix Nos. 40, 41, 42; see also, e.g. , Am. Compl. ¶ 203; Appendix Nos. 35, 36; Am. Compl. ¶ 212; Appendix No. 44.
2. Success Statements
Second, APERS alleges that, during the Class Period, Xerox officers made several false or misleading statements about the company's success in implementing Health Enterprise.
Throughout the Class Period, Xerox officers discussed the progress the company was making in implementing Health Enterprise for its several state clients. At times, Xerox officers spoke generally about the company's success. For example, in describing Xerox's fourth quarter 2013 results, Burns said that the company was "making progress" on "government healthcare" and was "stabilizing more and more." Am. Compl. ¶ 213; Appendix Nos. 45, 46; see also, e.g. , Am. Compl. ¶ 233; Appendix No. 56 ("Within government healthcare, we're making good progress, but expense levels are still high as we continue to invest to improve the performance of the first platform implementation of our new Medicaid platform.").
Xerox officers also provided updates on the implementation of Health Enterprise in particular states. Beginning in May 2012, Xerox officers described the implementation of Health Enterprise in California as going "well," see, e.g., Am. Compl. ¶ 181; Appendix No. 10 ("We're happy the State of California implementation has gone very well."), and continued to do so through 2013 and 2014, see, e.g., Am. Compl. ¶ 199; Appendix No. 31 ("And as California is maturing, thank God, and is doing fairly well I'm not going to say very well because very well always jinxes me."); Am. Compl. ¶ 219; Appendix No. 50 ("California is going fairly well, and MMIS is actually going pretty well and we're now at the point where we're starting to lean out our implementation on California and drive it to increased profitability."). Xerox officers made similar statements about Alaska, Am. Compl. ¶ 202; Appendix No. 32, and New Hampshire, see Am. Compl. ¶¶ 238-39; Appendix No. 60, 61.
3. Profitability Statements
Third and finally, APERS alleges, Xerox officers made several false or misleading statements about the present-day profitability of Health Enterprise and the company's expectations for its future profitability.
During the Class Period, Xerox officers made a series of statements predicting that the company's margins on implementation of Health Enterprise would improve over time, leading to increased profitability for the company as a whole. See, e.g ., Am.
Compl. ¶ 162; Appendix No. 1; Am. Compl. ¶ 171; Appendix No. 2 ("[W]e're shifting a lot of our work to platforms, our new MMIS platform that was a significant investment is the kind of thing that will help drive higher margins."). The company also represented that implementation of Health Enterprise would entail high up-front costs, followed by a period of lower costs and increased profitability. See, e.g., Am. Compl. ¶ 174; Appendix No. 5 ("[A] lot of the start-up cost, the ramp being of-the investment in platforms that we made on some of the services business have already taken place and now we're getting to a much more normalized level of margins on a lot of these new contracts."); see also, e.g., Am. Compl. ¶ 181; Appendix Nos. 10-11; Am. Compl. ¶ 205; Appendix No. 39.
During the Class Period, Xerox officers also represented that the profitability of the company's Health Enterprise contracts was currently improving. For example, on an April 23, 2013, conference call with analysts and investors to discuss the company's financial results from the first quarter of 2013, Burns said:
State government we are seeing some good news particularly in healthcare. We have a strong position as you know in MMIS around the United States, and California is our big contract; New Hampshire just went live. We're doing well there .... So healthcare is a big segment for us. We do well there. And our profitability is improving in that segment actually very, very well. So I'm bullish about healthcare[,] government healthcare services.
Am. Compl. ¶ 198; Appendix Nos. 28, 29. Later, in 2014, Burns added that Xerox had achieved "flat profitability" on its California contract and expected, going forward, "growing profitability in a very predictable kind of a standard way." Am. Compl. ¶ 227; Appendix Nos. 52, 53.
F. Disclosures
APERS alleges that the series of statements summarized above caused the common stock of Xerox to be artificially inflated during the Class Period. Id. ¶ 255. And when Xerox made public disclosures of new information about Health Enterprise on October 22, 2014, April 24, 2015, October 26, 2015, and October 27, 2015-disclosures APERS describes as each partially correcting the company's earlier misstatements-Xerox's stock price dropped. Id. ¶ 256.
On October 22, 2014, Xerox filed a Form 8-K, reporting the company's results for the third quarter of 2014. Id. ¶ 257. In the 8-K, and in the ensuing conference call with investors, Xerox and Burns told the market that the company's services business-including Health Enterprise-had been less successful than expected. Id. ¶¶ 257-59.
On April 24, 2015, Xerox filed another Form 8-K, reporting financial results for the first quarter of 2015. Id. ¶ 262. Xerox again reported that its services business had performed worse than expected. Id. In a conference call that same day, Mikells explained that "the driver of the Services margin miss was lower revenue and more costs than anticipated with our Health Enterprise platform implementation. California had the largest impact on our results in the quarter." Id. ¶ 263. On that conference call, Mikells and Zapfel made further statements which, APERS alleges, revealed that Xerox's Health Enterprise system had never been a "platform" at all. See id. ¶¶ 265-70. As a result of these disclosures, APERS claims, Xerox's share price dropped from $13.14 on April 23, 2015, to $11.62 on April 27, 2015. Id. ¶ 273.
On October 26, 2015, Xerox filed another Form 8-K. Id. ¶ 275. In a conference call that day, Mikells told analysts and investors that Xerox's Health Enterprise contracts in Montana and California were operating at a loss. Id. ¶ 276. Those disclosures, APERS alleges, led Xerox's stock price to drop from $10.34 on October 23, 2015 to $9.29 on October 27, 2015. Id. ¶ 281.
G. Procedural History
On October 21, 2016, the Oklahoma Firefighters Pension and Retirement System filed the original complaint in this case. Dkt. 1. On December 23, 2016, several plaintiffs, including APERS, moved to be appointed lead plaintiff. See Dkts. 20-31. On December 28, 2016, the Court entered a stipulation extending the deadline to respond to the complaint until after a lead plaintiff had been appointed and a schedule had been set for the filing of an amended complaint and a motion to dismiss. Dkt. 32. On February 28, 2017, the Court appointed APERS as lead plaintiff, its counsel, Kessler Topaz Meltzer & Check LLP as lead counsel, and Labaton Sucharow LLP as liaison counsel. Dkt. 38.
On May 1, 2017, APERS filed an amended complaint, the currently operative complaint. Dkt. 48. On June 30, 2017, Zapfel filed his motion to dismiss, Dkt. 59, a memorandum of law, Dkt. 60 ("Zapfel Br."), and a supporting declaration, Dkt. 61. That same day, Xerox and the other individual defendants filed their motion to dismiss, Dkt. 65, a memorandum of law, Dkt. 66 ("Def. Br."), and supporting declaration, Dkt. 67.
On August 29, 2017, APERS filed its briefs in opposition. Dkts. 68 ("Pl. Br."); 69 ("Pl. Op. to Zapfel"). On October 13, 2017, defendants filed their replies. Dkts. 70 ("Zapfel Reply Br."); 71 ("Def. Reply Br.").
II. Applicable Legal Standards
A. Standards for Resolving a Motion to Dismiss
To survive a motion to dismiss under Rule 12(b)(6), a complaint must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim will only have "facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). A complaint is properly dismissed where, as a matter of law, "the allegations in a complaint, however true, could not raise a claim of entitlement to relief." Twombly , 550 U.S. at 558, 127 S.Ct. 1955. Although the court must accept as true all well-pled factual allegations in the complaint and draw all reasonable inferences in the plaintiff's favor, Steginsky v. Xcelera Inc ., 741 F.3d 365, 368 (2d Cir. 2014), that tenet "is inapplicable to legal conclusions," Iqbal , 556 U.S. at 678, 129 S.Ct. 1937.
"Securities fraud claims are subject to heightened pleading requirements that the plaintiff must meet to survive a motion to dismiss." ATSI Commc'ns, Inc. v. Shaar Fund, Ltd. , 493 F.3d 87, 99 (2d Cir. 2007) ; see also Tellabs, Inc. v. Makor Issues & Rights, Ltd ., 551 U.S. 308, 321-23, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007).
First, a complaint alleging securities fraud must meet the requirements of Federal Rule of Civil Procedure 9(b). See ECA & Local 134 IBEW Joint Pension Trust of Chi. v. JP Morgan Chase Co ., 553 F.3d 187, 196 (2d Cir. 2009). Rule 9(b) states that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). "Allegations that are conclusory or unsupported by factual assertions are insufficient." ATSI , 493 F.3d at 99.
Second, such a complaint must comply with the pleading requirements of the Private Securities Litigation Reform Act ("PSLRA"), 15 U.S.C. § 78u-4(b). See ECA , 553 F.3d at 196. In particular, where a plaintiff's claims depend upon allegations that the defendant has made an untrue statement of material fact or that the defendant omitted a material fact necessary to make a statement not misleading, the plaintiff "shall specify each statement alleged to have been misleading [and] the reason or reasons why the statement is misleading." 15 U.S.C. § 78u-4(b)(1). Thus, in order to plead a claim of securities fraud, plaintiffs "must do more than say that the statements ... were false and misleading; they must demonstrate with specificity why and how that is so." Rombach v. Chang , 355 F.3d 164, 174 (2d Cir. 2004). In addition, the plaintiff "shall, with respect to each act or omission ... state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind." 15 U.S.C. § 78u-4(b)(2).
B. Elements of Plaintiffs Claims
APERS asserts claims under §§ 10(b) and 20(a) of the Exchange Act, and Rule 10b-5. Am. Compl. ¶¶ 315-25; id. ¶¶ 326-31.
Section 10(b) of the Exchange Act makes it unlawful to "use or employ, in connection with the purchase or sale of any security ... any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe." 15 U.S.C. § 78j(b). The SEC's implementing rule, Rule 10b-5, provides that it is unlawful "[t]o make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading." 17 C.F.R, § 240.10b-5.
To state a claim under § 10(b) of the Exchange Act, a plaintiff must adequately plead "(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation." Matrixx Initiatives, Inc. v. Siracusano , 563 U.S. 27, 37-38, 131 S.Ct. 1309, 179 L.Ed.2d 398 (2011) (internal quotation marks and citation omitted).
To state a claim under § 20(a) of the Exchange Act, "a plaintiff must show (1) a primary violation by the controlled person, (2) control of the primary violator by the defendant, and (3) that the defendant was, in some meaningful sense, a culpable participant in the controlled person's fraud." Carpenters Pension Trust Fund of St. Louis v. Barclays PLC , 750 F.3d 227, 236 (2d Cir. 2014) (quoting ATSI , 493 F.3d at 108 ) (internal quotation marks omitted). If a plaintiff has not adequately alleged a primary violation, i.e. , a viable claim under another provision of the Exchange Act, then the § 20(a) claims must be dismissed. See id.
C. Scienter
As noted, Rule 9(b) and the PSLRA require plaintiffs to "state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind." 15 U.S.C. § 78u-4(b)(2). "For an inference of scienter to be strong, 'a reasonable person [must] deem [it] cogent and at least as compelling as any opposing inference one could draw from the facts alleged.' " ATSI , 493 F.3d at 99 (quoting Tellabs , 551 U.S. at 324, 127 S.Ct. 2499 ) (alteration and emphasis in original).
The requisite mental state is one "embracing intent to deceive, manipulate, or defraud." Tellabs , 551 U.S. at 319, 127 S.Ct. 2499 (internal quotation marks and citation omitted). Plaintiffs "may satisfy this requirement by alleging facts (1) showing that the defendants had both motive and opportunity to commit the fraud or (2) constituting strong circumstantial evidence of conscious misbehavior or recklessness." ATSI , 493 F.3d at 99. However, where plaintiffs do not sufficiently allege-or decline to allege at all-that defendants had a motive to defraud the public, they "must produce a stronger inference of recklessness." Kalnit v. Eichler , 264 F.3d 131, 143 (2d Cir. 2001).
Recklessness is "a state of mind approximating actual intent, and not merely a heightened form of negligence." S. Cherry St., LLC v. Hennessee Grp. LLC , 573 F.3d 98, 109 (2d Cir. 2009) (citation and emphasis omitted). To qualify as reckless, defendants' conduct must have been "highly unreasonable" and "an extreme departure from the standards of ordinary care." Novak v. Kasaks , 216 F.3d 300, 308 (2d Cir. 2000) (quoting Rolf v. Blyth, Eastman Dillon & Co ., 570 F.2d 38, 47 (2d Cir. 1978) ) (internal quotation marks omitted). An alleged "refusal to see the obvious, or to investigate the doubtful," must be "egregious" to be actionable. Chill v. Gen. Elec. Co ., 101 F.3d 263, 269 (2d Cir. 1996) (citation omitted).
Plaintiffs can establish recklessness by adequately alleging that "defendants knew facts or had access to non-public information contradicting their public statements" and therefore "knew or should have known they were misrepresenting material facts." In re Scholastic Corp. Sec. Litig ., 252 F.3d 63, 76 (2d Cir. 2001) (citing Novak , 216 F.3d at 308 ). However, an inference of scienter does not follow from the mere fact of non-disclosure of relevant information. In re Sanofi Sec. Litig. ("Sanofi I") , 87 F.Supp.3d 510, 534 (S.D.N.Y. 2015), aff'd sub nom. Tongue v. Sanofi ("Sanofi II") , 816 F.3d 199 (2d Cir. 2016). "Instead, to adequately plead scienter, plaintiffs must also provide sufficient factual allegations to indicate that defendants understood that their public statements were inaccurate, or were 'highly unreasonable' in failing to appreciate that possibility." Id. (quoting Novak , 216 F.3d at 308 ). "The key, of course, is the honest belief of the management in the truth of information issued to the public." In re AstraZeneca Sec. Litig. , 559 F.Supp.2d 453, 470 (S.D.N.Y. 2008), aff'd sub nom. State Univ. Ret. Sys. of Ill. v. Astrazeneca PLC , 334 Fed.Appx. 404 (2d Cir. 2009) (summary order).
D. Material Misrepresentation
To survive a motion to dismiss, a complaint must adequately plead "that the defendant made a statement that was 'misleading as to a material fact.' " Matrixx Initiatives, 563 U.S. at 38, 131 S.Ct. 1309 (quoting Basic Inc. v. Levinson, 485 U.S. 224, 238, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988) ) (emphasis omitted). Significantly, § 10(b) and Rule 10b-5 "do not create an affirmative duty to disclose any and all material information." Id. at 44, 131 S.Ct. 1309 ; see also Basic , 485 U.S. at 239 n.17, 108 S.Ct. 978. "Disclosure of... information is not required ... simply because it may be relevant or of interest to a reasonable investor." Resnik v. Swartz , 303 F.3d 147, 154 (2d Cir. 2002). An omission of information not affirmatively required to be disclosed is, instead, actionable only when disclosure of such information is "necessary 'to make ... statements made, in the light of the circumstances under which they were made, not misleading.' " Matrixx Initiatives , 563 U.S. at 44, 131 S.Ct. 1309 (quoting 17 C.F.R. § 240.10b-5(b) ) (ellipses in original); see also In re Vivendi, S.A. Sec. Litig ., 838 F.3d 223, 239-40 (2d Cir. 2016) (" 'Pure omissions' " of information, absent a duty to disclose, are not actionable, but " '[h]alf-truths-statements that are misleading ... by virtue of what they omit to disclose," are).
The materiality requirement "is satisfied when there is 'a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the total mix of information made available.' " Matrixx Initiatives, 563 U.S. at 38, 131 S.Ct. 1309 (quoting Basic , 485 U.S. at 231-32, 108 S.Ct. 978 ). As the Supreme Court has explained, a lower standard-such as defining a "material fact" as any "fact which a reasonable shareholder might consider important"-would lead corporations to "bury the shareholders in an avalanche of trivial information[,] a result that is hardly conducive to informed decisionmaking." TSC Indus., Inc. v. Northway, Inc ., 426 U.S. 438, 448-49, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976). The "materiality hurdle" is, therefore, "a meaningful pleading obstacle." In re ProShares Trust Sec. Litig ., 728 F.3d 96, 102 (2d Cir. 2013). However, because of the fact-intensive nature of the materiality inquiry, the Court may not dismiss a complaint "on the ground that the alleged misstatements or omissions are not material unless they are so obviously unimportant to a reasonable investor that reasonable minds could not differ on the question of their importance." ECA , 553 F.3d at 197 (internal quotation marks and citation omitted).
E. Statements of Opinion
Not only objective statements of material fact, but also subjective statements of opinion can be actionable as fraud. As the Supreme Court has recently clarified, such statements of opinion can give rise to liability in two distinct ways. First, "liability for making a false statement of opinion may lie if either 'the speaker did not hold the belief she professed' or 'the supporting fact she supplied were untrue.' " See Sanofi II , 816 F.3d at 210 (quoting Omnicare, Inc. v. Laborers Dist. Council Const. Indus. Pension Fund , --- U.S. ----, 135 S.Ct. 1318, 1327, 191 L.Ed.2d 253 (2015) ). "It is not sufficient for these purposes to allege that an opinion was unreasonable, irrational, excessively optimistic, [or] not borne out by subsequent events." In re Salomon Analyst Level 3 Litig ., 350 F.Supp.2d 477, 489 (S.D.N.Y. 2004). "The Second Circuit has firmly rejected this 'fraud by hindsight' approach." Podany v. Robertson Stephens, Inc. , 318 F.Supp.2d 146, 156 (S.D.N.Y. 2004) (citing Stevelman v. Alias Research, Inc ., 174 F.3d 79, 85 (2d Cir. 1999) ).
Second, "opinions, though sincerely held and otherwise true as a matter of fact, may nonetheless be actionable if the speaker omits information whose omission makes the statement misleading to a reasonable investor." Sanofi II , 816 F.3d at 210 (citing Omnicare , 135 S.Ct. at 1332 ). To adequately allege that a statement of opinion was misleading through the omission of material information, "[t]he investor must identify particular (and material) facts going to the basis for the issuer's opinion-facts about the inquiry the issuer did or did not conduct or the knowledge it did or did not have-whose omission makes the opinion statement at issue misleading to a reasonable person reading the statement fairly and in context." Id. at 209 (quoting Omnicare , 135 S.Ct. at 1332 ). As the Second Circuit has explained, "a reasonable investor, upon hearing a statement of opinion from an issuer, 'expects not just that the issuer believes the opinion (however irrationally), but that it fairly aligns with the information in the issuer's possession at a time.' " Id. at 210 (quoting Omnicare , 135 S.Ct. at 1329 ). "The core inquiry," then, "is whether the omitted facts would 'conflict with what a reasonable investor would take from the statement itself.' " Id. (quoting Omnicare , 135 S.Ct. at 1329 ).
As the Supreme Court has emphasized, however, the doctrine under which material omissions of facts may render a statement of opinion actionable should not be given "an overly expansive reading," and establishing liability on such a theory "is no small task for an investor" to meet. Id. (quoting Omnicare , 135 S.Ct. at 1332 ) (internal quotation marks omitted). "Reasonable investors understand that opinions sometimes rest on a weighing of competing facts,...[and do] not expect that every fact known to an issuer supports its opinion statement." Id. (quoting Omnicare , 135 S.Ct. at 1329 ) (alterations and internal quotation marks omitted). "[A] statement of opinion 'is not necessarily misleading when an issuer knows, but fails to disclose, some fact cutting the other way.' " Id. (quoting Omnicare , 135 S.Ct. at 1329 ). Further, statements of opinion must be considered in the context in which they arise. " '[T]he investor takes into account the customs and practices of the relevant industry,' and ... 'an omission that renders misleading a statement of opinion when viewed in a vacuum may not do so once that statement is considered, as is appropriate, in a broader frame.' " Id. (quoting Omnicare , 135 S.Ct. at 1330 ).
F. The PSLRA Safe Harbor
The PSLRA amended the Exchange Act to provide a safe harbor for forward-looking statements. See 15 U.S.C. § 78u-5(c). Forward-looking statements are defined as those that contain, among other things, "a projection of revenues, income, [or] earnings," "plans and objectives of management for future operations," or "a statement of future economic performance." Id. § 78u-5(i)(1). A forward-looking statement is not actionable if it "is identified and accompanied by meaningful cautionary language or is immaterial or the plaintiff fails to prove that it was made with actual knowledge that it was false or misleading." Slayton v. Am. Exp. Co ., 604 F.3d 758, 766 (2d Cir. 2010). Because the statute is written in the disjunctive, statements are protected by the safe harbor if they satisfy any one of these three categories. Id. Materiality is defined above; the other two categories are defined as follows:
Meaningful cautionary language: To qualify as "meaningful," cautionary language "must convey substantive information about factors that realistically could cause results to differ materially from those projected in the forward-looking statements." Id. at 771 (quoting H.R. Conf. Rep. 104-369, at 43 (1995) ). Language that is "vague" or "mere boilerplate" does not suffice. Id. at 772. "To determine whether cautionary language is meaningful, courts must first 'identify the allegedly undisclosed risk' and then 'read the allegedly fraudulent materials-including the cautionary language-to determine if a reasonable investor could have been misled into thinking that the risk that materialized and resulted in his loss did not actually exist.' " In re Delcath Sys., Inc. Sec. Litig ., 36 F.Supp.3d 320, 333 (S.D.N.Y. 2014) (quoting Halperin v. eBanker USA.com, Inc ., 295 F.3d 352, 359 (2d Cir. 2002) ). Plaintiffs may establish that cautionary language is not meaningful "by showing, for example, that the cautionary language did not expressly warn of or did not directly relate to the risk that brought about plaintiffs' loss." Halperin , 295 F.3d at 359.
Actual knowledge : The scienter requirement for forward-looking statements-actual knowledge-is "stricter than for statements of current fact. Whereas liability for the latter requires a showing of either knowing falsity or recklessness, liability for the former attaches only upon proof of knowing falsity." Slayton , 604 F.3d at 773 (quoting Inst. Invs. Grp. v. Avaya, Inc., 564 F.3d 242, 274 (3d Cir. 2009) ). Under the heightened pleading standards that apply to both scienter requirements, plaintiffs must "state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind." 15 U.S.C. § 78u-4(b)(2).
III. Analysis
The Court begins with Xerox's motion to dismiss. Xerox argues that, for two reasons, APERS' Amended Complaint fails to state a Section 10(b) claim: First, it fails to allege any actionable misstatements because none of the statements at issue was false or misleading; and second, it fails to plead loss causation. And, because the Amended Complaint fails to state a 10(b) claim, Xerox argues, APERS' derivative Section 20(a) claim must also be dismissed.
The Court's analysis begins-and ends-with Xerox's first argument. Xerox argues that the statements in each of the three categories at issue (Platform Statements, Success Statements, and Profitability Statements) are not actionably false or misleading, both because the Amended Complaint does not plead falsity with the required particularity, and because the statements are non-actionable puffery. For the reasons that follow, the Court agrees the challenged statements are not actionable. This holding obviates the need to address Xerox's alternative argument based on the pleadings as to loss causation, and Zapfel's arguments particular to himself.
The Court begins by eliminating certain statements whose theory of falsity the Amended Complaint does not explain or which qualify as puffery. The Court then analyzes, category by category, the remaining statements at issue.
A. Statements Lacking Particularized Allegations of Falsity
As to certain statements, APERS alleges only conclusorily, and with far from the required particularity, how the given statement was false or misleading.
For example, APERS faults Blodgett's statement at the Barclays Capital Global Technology, Media, and Telecommunications Conference on May 23, 2012, that "the sole driver of margin decline had to do with the significant set up in bookings and in growth rates" and that this growth rate "was driven almost exclusively by the State of California and by a couple of other major contracts." See Am. Compl. ¶ 180; Appendix No. 9. But the Amended Complaint does not explain why this statement was, ostensibly, misleading. It states only that this statement (and several others)
was "materially false or misleading because Defendants failed to disclose material information, when made." Am. Compl. ¶ 183. Such an allegation does not state a claim under Section 10(b). To plead falsity, a complaint must instead "specify ... the reason or reasons why the statement is misleading." 15 U.S.C. § 78u-4(b)(1)(B) ; see Rombach , 355 F.3d at 174 (plaintiff "must demonstrate with specificity why and how" a statement was false or misleading).
The same deficiency-conclusory pleading-affects other statements which plaintiffs term false or misleading. The Court puts these statements aside as a basis for liability.
B. Statements Consisting of Mere Puffery
Many statements APERS faults-across all three categories-are puffery. Statements are mere puffery, and non-actionable, when they are "too general to cause a reasonable investor to rely upon them." ECA , 553 F.3d at 206 ; accord Boca Raton Firefighters & Police Pension Fund v. Bahash , 506 Fed.Appx. 32, 37 (2d Cir. 2012) ; Kleinman v. Elan Corp., plc , 706 F.3d 145, 153 (2d Cir. 2013).
One set of the statements at issue that were too general to cause a reasonable investor to rely upon them include those broadly reciting "[Xerox's] belief in its 'competitive advantage.' " Steinberg v. PRT Grp., Inc ., 88 F.Supp.2d 294, 305 (S.D.N.Y. 2000). Such statements "cannot reasonably be found to be misleading." Id. Burns's general statement at the November 13, 2012 Investor Conference is a good example. There, Burns stated: "This idea of platform is something that we spend a lot of time talking about that it's important that you understand that helps us differentiate ourselves from our competitors around the world." Am. Compl. ¶ 184; Appendix No. 13. This statement suggested nothing more than Xerox's confidence in its competitiveness. Accord, e.g., Norfolk Cnty. Ret. Sys. v. Tempur-Pedic Int'l, Inc ., 22 F.Supp.3d 669, 684 (E.D. Ky. 2014) (claim of "strengthened competitiveness" held puffery), aff'd sub nom. Pension Fund Grp. v. Tempur-Pedic Int'l, Inc ., 614 Fed.Appx. 237 (6th Cir. 2015) ; In re Cable & Wireless, PLC Sec. Litig. , 321 F.Supp.2d 749, 768 (E.D. Va. 2004) (claim of competitive advantage held puffery). This and similar statements, see, e.g., Appendix No. 25 ("I think we win [contracts] because we have great technology"), are not actionable.
Another set of similarly ineligible statements are those that vaguely and enthusiastically described Xerox's performance, expectations of business success, or the fact of its business focus on Health Enterprise. Statements of this nature do not give a reasonable investor meaningful information on which to rely. See, e.g., Boca Raton Firefighters , 506 Fed.Appx. at 37 (holding puffery claim that company was able to "compete successfully in an increasingly global and complex market, and that is true today and we are confident it will be so in the future"); SE Pennsylvania Transp. Auth. v. Orrstown Fin. Servs., Inc ., No. 1:12-CV-00993, 2015 WL 3833849, at *30 (M.D. Pa. June 22, 2015) (claim of experience held puffery);
Johnson v. Sequans Commc'ns , 2013 WL 214297, at *14 (S.D.N.Y. Jan. 17, 2013) (statement that company was "early leader" held puffery); Gammel v. Hewlett-Packard Co. , 905 F.Supp.2d 1052, 1071 (C.D. Cal. 2012) (claim of a deep executive bench held puffery); In re Xinhua Fin. Media, Ltd. Sec. Litig. , No. 07 CIV. 3994 LTS/AJP, 2009 WL 464934, at *8 (S.D.N.Y. Feb. 25, 2009) (claim that management team was "strong," "experienced," and "capable" held puffery).
Here, for example, Xerox noted its "successful implementation" of Health Enterprise or stated that it had "launched successfully" a state MMIS contract. See, e.g., Am. Compl. ¶ 202; Appendix No. 32. This and similar statements conveyed "no meaningful, objective data that an investor would rely upon," Billhofer v. Flamel Techs., S.A. , No. 07 CIV. 9920, 2012 WL 3079186, at *9 (S.D.N.Y. July 30, 2012), except to the extent that they truthfully represented that Xerox had commenced its MMIS contracts.
The key distinction between these and potentially actionable statements is that these statements were non-verifiable. See Novak , 216 F.3d at 315. To describe the initial launch of a Health Enterprise implementation in a given state as a "success" does not give an investor an assessment that can be measured or verified. For this reason, corporate statements that a company is "moving forward well," Billhofer , 2012 WL 3079186, at *9, that "things are going well," In re Nevsun Res. Ltd ., No. 12 CIV. 1845 PGG, 2013 WL 6017402, at *9 (S.D.N.Y. Sept. 27, 2013), that the company is "well positioned," id. , or that its operations are "successful," id. , are classically non-actionable unless "the statements addressed concrete and measurable areas of the defendant company's performance," id. Xerox's optimistic musings about the early success of its implementations of Health Enterprise were not of such a concrete nature.
Plaintiffs, finally, note that investment analysts at times repeated Xerox's puffery. Pl. Br. at 18-19; see Am. Compl. ¶¶ 194, 196. But the fact of recapitulation by analysts did not make these statements actionable. See Rombach , 355 F.3d at 175. To be sure, a corporate officer may be liable for "intentionally foster[ing] a mistaken belief concerning a material fact" where this statement was then incorporated in and disseminated via analyst reports. Novak , 216 F.3d at 314. But the analyst report must incorporate material facts. A report that merely recaps corporate puffery does not convert that puffery into a material misstatement. See Rombach , 355 F.3d at 176 (statements of "puffery or misguided optimism" repeated in analyst reports not actionable).
C. Platform Statements
The Court next considers the Platform Statements. During the Class Period, Xerox and its officers made a series of statements about its Health Enterprise system, including statements that simply described the software as a "platform" and statements that supplied detail about the features or capabilities of the platform (some consisting of puffery, some not). Neither set of Platform Statement, however, is an actionable violation of Section 10(b).
1. Statements Representing That Xerox Had a Platform
Statements that merely asserted, without more, that Xerox had a platform were not misleading for a simple reason: Health Enterprise was a "platform." For example, at Xerox's November 13, 2012 annual investor conference, Burns stated, "We have [a] platform we call Enterprise. Enterprise is the newest Medicaid platform." Am. Compl. ¶ 185; Appendix No. 15. Similarly, at the December 3, 2013 Credit Suisse Technology Conference, Mikells told analysts and investors that Xerox had "other platforms in the health care space, specifically, our new Medicaid Management Information platform that we're deploying in certain states." Am. Compl. ¶ 212; Appendix. No. 44.
Statements of this kind were not misleading because Health Enterprise was justifiably termed a "platform." As Xerox notes, a "platform" is simply computer architecture upon which other applications may run. See Def. Br. at 11 (citing, inter alia, American Heritage Dictionary (2017) ). APERS notes criticisms of Health Enterprise levied by some of Xerox's customers, and on this basis argues that Health Enterprise never was a "platform." See Pl. Br. at 10-11. But those criticisms went to the quality of Xerox's platform, not to its existence. Relevant too, Xerox's own descriptions of its product, reviewed in the next section, did not ever define "platform" in such a way as to exclude Health Enterprise from that definition. Contra S.E.C. v. Enterprises Sols., Inc. , 142 F.Supp.2d 561, 576-77 (S.D.N.Y. 2001).
For this reason, statements that extolled the benefits of Xerox's Health Enterprise platform in vague and enthusiastic terms-which the Court earlier held inactionable as puffery, see Section III.A, supra ; Steinberg , 88 F.Supp.2d at 305 -are not are made actionable simply because they embedded a description of Health Enterprise as a platform. Xerox, again, did have a platform. Plaintiffs, for example, fault Blodgett's February 12, 2013, address to the Goldman Sachs Technology & Internet Conference. There, he stated:
I think we win [contracts] because we have great technology. People look at our platforms and they realize that this stuff's pretty complicated. Our Medicaid platform has 6 million lines of code in it, and, there hasn't been a new Medicaid system that's been developed for a long time, in over a decade. And so now, as we demonstrate that to people, they can-they're experts. They look at it and [ ] say, 'Wow, it has functionality and features that are unique.'
Am. Compl. ¶ 191; Appendix No. 25. Similarly, plaintiffs fault Scanlon's statement, at Xerox's March 7, 2013 Healthcare Services Analyst Day, that Xerox "had a big presence in a large number of states" which the Health Enterprise "platform gives us an opportunity to expand." Am. Compl. ¶ 193; Appendix No. 26. But those statements, to the extent they described Health Enterprises as a platform, were not misstatements, and to the extent they expressed enthusiasm for that platform, were non-actionable puffery. Such statements were not false or misleading.
2. Statements Describing the Platform
During the Class Period, Xerox officers also made statements describing the Health Enterprise platform's features or functionality. In assessing these statements, the Court focuses on the statements themselves, not plaintiff's recasting of them. See In re Centerline Holding Co. Sec. Litig. , 380 Fed.Appx. 91, 94 (2d Cir. 2010). The Court, therefore, considers the statements as made, not APERS's repeated claim in its brief that Xerox falsely held out Health Enterprise as a "platform that was transferrable, reusable, replicable, and scalable, and possessed plug-and-play characteristics." Although Xerox officers represented Health Enterprise using some of those terms, APERS does not point to any statement in which they used that phrase in its entirety (or anything like it). Instead, at various points, Xerox officers either described features of Health Enterprise or identified ways in which Xerox expected Health Enterprise to benefit Xerox in the future.
APERS's central argument is that Xerox's Platform Statements are actionable because they "create[d] a false impression that [the] company [had] a developed, tested and presently available product." Pl. Br. at 9 (quoting SEC v StratoComm Corp ., 2 F.Supp.3d 240, 253 (N.D.N.Y. 2014), aff'd 652 Fed.Appx. 35 (2d Cir. 2016) ). APERS focuses on certain claims by Xerox officers about Health Enterprise's capabilities. In particular, APERS notes Maestri's claim at the 2012 J.P. Morgan Conference that Xerox could "reuse that platform as we acquire new contracts," Am. Compl. ¶¶ 145, 175; Appendix No. 7, Mikell's claim on the October 24, 2013 conference call that implementing Health Enterprise was a "pretty replicable process for us," Am. Compl. ¶ 203; Appendix No. 36, Scanlon's representation, at Xerox's 2013 Healthcare Services Analyst Day, that Health Enterprise allowed Xerox to provide states with "a plug-and-play with different capabilities that they have," Am. Compl. ¶ 194; Appendix No. 27, and Burns's claim, on the October 24, 2013 call, that, as a result of Health Enterprise's replicability, "the bulk of the investment won't have to change," Am. Compl. ¶ 206, Appendix No. 41. Drawing on these statements, APERS charges that Xerox falsely claimed to have a product "that was transferrable, reusable, replicable, and scalable, and possessed plug-and-play characteristics." E.g., Am. Compl. ¶ 141.
But these statements do not give rise to Section 10(b) liability, a point, in fact, well underscored by comparison with two of the cases on which APERS relies: SEC v. e-Smart Techs., Inc. , 85 F.Supp.3d 300 (D.D.C. 2015) ; and StratoComm , 2 F.Supp.3d 240. In e-Smart , the company had falsely represented specific, concrete features of its technology-it falsely stated that the "smart cards" at issue had a particular fingerprint sensor that could recognize fingerprints at particular rates of accuracy, and that the cards could receive an electrical charge wirelessly, for example. See id. at 315, 317-18. These claims, the district court held, were "at the heart of e-Smart's representations" about its smart-card technology. Id. at 318. Accordingly, the court held, e-Smart had claimed to have a product it did not have, and these statements therefore could rise to Section 10(b) liability. In StratoComm , the company had represented that it was selling its "Transitional Telecommunications System" product to clients around the world when, in fact, it had no such product at all and had entered into no such sales contracts. 2 F.Supp.3d at 254-57.
The statements by Xerox about its platform that APERS challenges were far less specific than the factual claims at issue in e-Smart . In those statements, Xerox claimed that Health Enterprise could be "reused," that implementing Health Enterprise was a "pretty replicable process" in which "the bulk of the investment [wouldn't] have to change" and that Health Enterprise would give state clients "a plug-and-play with different capabilities." And to the extent that these statements are susceptible to verification or refutation, they are not concretely pled to have been untrue (let alone untrue when made). Quite the contrary: Plaintiffs do not dispute that Health Enterprise existed and that it was intended to be used for the purpose Xerox described. Nor do plaintiffs anywhere contend that Xerox's Health Enterprise was incapable of being "reused." On the facts pled, Health Enterprise clearly was capable of being reused, albeit (as Xerox did not hide) with modifications customized for the needs to the particular state. Plaintiffs also do not dispute the accuracy of Xerox's statements to the effect that the platform gave states the opportunity to build their own features onto the base architecture.
Nor did Xerox's statements represent that the company had a product that it in fact lacked. To be sure, the process of implementation and state-specific integration of Health Enterprise, as pled and as Xerox's statements over time revealed, proved more difficult and costly than Xerox had forecast. But those later adverse developments did not make untrue-and certainly not at the time made-Xerox's broad descriptions of Health Enterprise as a platform it could "reuse ... as we acquire new contracts," as involving a "pretty replicable" implementation process, or as enabling Xerox to provide states "a plug and play with different capabilities than they have." Xerox's claims are thus a far cry from those held actionable in StratoComm , whose product "did not even exist." 2 F.Supp.3d at 255. Unlike the plaintiffs in e-Smart and Stratocomm , APERS fails to identify any concrete statement that materially misrepresented facts about the corporate defendant's product.
3. Forward-Looking Statements
Finally, during the Class Period, Xerox officers described ways in which Health Enterprise was anticipated to benefit the company in the future. APERS, noting that the Health Enterprise venture ultimately failed, bases its Section 10(b) claims, in part, upon these statements. Xerox counters that these forward-looking Platform Statements are not actionable, given the ample cautionary language accompanying them, including with regard to the need for Xerox to customize Health Enterprise to the circumstances presented by specific states. APERS counters that the PSLRA's safe harbor does not apply because Xerox's statements were not forward-looking but instead contained representations about the current state of Health Enterprise, and because, to the extent Xerox's statements were forward-looking, they were unaccompanied by meaningful disclosures. Pl. Br. at 17-18.
As to the first objection, the PSLRA safe harbor provision applies to all forward-looking statements where they were accompanied by meaningful cautionary language, were not material, or were made without actual knowledge that they were false or misleading. Slayton , 604 F.3d at 766. On the Court's review, Xerox's forward-looking statements at issue satisfied those requirements.
Illustrative is the October 24, 2013 conference call, on which APERS focuses. There, Mikells stated that "the really nice thing about platforms" was that-while "standing [them] up" involves some "pain"-future implementation "becomes a pretty replicable process" that leads to "scale and experience gains in that area." Am. Compl. ¶ 203; Appendix No. 36. Mikells added that she anticipated that the investments associated with implementing Health Enterprise contracts (like other factors bearing on Xerox's profits) would be "transitionary and temporary factors" in "2014 and beyond." Am. Compl. ¶ 204; Appendix No. 38. Those statements were forward-looking-they described Xerox's expectations as to how implementation of Health Enterprise would benefit the company in the future-and were accompanied by meaningful cautionary language. On the same call, Mikells cautioned that "standing up these systems is not particularly easy." Atkinson Decl., Ex. 27 at 8; see also id. at 12. Indeed, Burns noted, doing so had "cost a little bit more than we thought." Id. at 14. But, Mikells predicted that, implementing "new platforms" would "become for us repeatable processes." See Am. Compl. ¶ 205; Appendix No. 39. APERS faults that statement as misleading. But in making this predictive, forward-looking statement, Mikells noted the challenges presented by "standing these things up," including cost challenges, and disclosed that Xerox expected to have "year-over-year margin decline " in its Services business. Atkinson Decl., Ex. 27 at 16 (emphasis added).
APERS separately faults a statement by Burns on that same October 24, 2013 calk There, Burns elaborated on her expectations for the future implementation of Health Enterprise. She predicted that "the bulk of the investment won't have to change." Am. Compl. ¶ 206; Appendix No. 41. Like Mikells' statements, however, Burns's prediction was accompanied by sufficiently meaningful cautionary language to bring it within the PSLRA safe harbor. Burns stated: "We have to modify for every engagement a little bit of the system but not as big a modification as before and that's one of the things that we are learning." Id. APERS disputes Burns's cautionary admonition because she described the part of the system that would require modification as "little." See Pl. Br. at 12 & n.10. But "Section 10-b is not concerned with such subtle disagreements over adjectives and semantics." City of Austin Police Ret. Sys. v. Kinross Gold Corp ., 957 F.Supp.2d 277, 298 (S.D.N.Y. 2013) ; see also id. (distinction between "relatively hard" and "very hard" ore not meaningful); In re Merrill Lynch Auction Rate Sec. Litig. , 704 F.Supp.2d 378, 392 (S.D.N.Y. 2010), aff'd sub nom. Wilson v. Merrill Lynch & Co. , 671 F.3d 120 (2d Cir. 2011) ("semantic distinction [between "routinely" and "systematically"] is not persuasive"); In re Xinhua Fin. Media, Ltd. Sec. Litig ., 2009 WL 464934, at *8 ("[S]oft adjectives are nothing more than puffery."). Burns's cautionary language was sufficient, as a matter of law, to warn investors of the risk that, as Xerox implemented its Health Enterprise platform in other states, it would be required, each time, to modify it.
D. Success Statements
Throughout the Class Period, Xerox officers made numerous statements describing the company's success in implementing Health Enterprise pursuant to its six state contracts. Of the Success Statements that are not non-actionable puffery, see Section III.B, supra , the remainder are non-actionable opinion statements or statements of fact that were not false or misleading.
1. Statements of Opinion
Xerox executives, while often using qualifying language, repeatedly opined-for example, on the January 24, 2014 and October 22, 2014 conference calls with analysts and investors-that the implementation of Health Enterprise was going well. See, e.g., Am. Compl. ¶ 213; Appendix Nos. 45, 46; Am. Compl. ¶ 233; Appendix No. 56 ("Within government healthcare, we're making good progress, but expense levels are still high as we continue to invest to improve the performance of the first platform implementation of our new Medicaid platform."). Xerox officials also touted-at, for example, the December 7, 2012 BMO Capital Markets IT Services Day or the September 2, 2014 Citi Global Technology Conference-the implementation of Health Enterprise in specific states as reasonably successful. See, e.g., Am. Compl. ¶ 187; Appendix No. 16 ("I think [California's] operating well."); Am. Compl. ¶ 199; Appendix Nos. 30, 31 ("And as California is maturing, thank God, and is doing fairly well I'm not going to say very well because very well always jinxes me .