Appeal from the United States District Court for the Northern District of California. D.C. No. CV-90-02453-SBA. Saundra B. Armstrong, District Judge, Presiding
Before: Kozinski, Thompson, and T.g. Nelson, Circuit Judges.
Richard Cloutier, class representative for purchasers of Adobe Systems, Inc. ("Adobe") stock between March 6 and May 24, 1990, appeals the district court's grant of summary judgment in favor of Adobe and various officers of the company. The plaintiff alleges the defendants artificially inflated the price of Adobe stock by issuing false or misleading public statements regarding Adobe's prospects and future earnings, in violation of sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (15 U.S.C. §§ 78j(b) and 78t(a) (1988)) and the Securities and Exchange Commission's Rule 10b-5 promulgated thereunder (17 C.F.R. § 240.10b-5 (1993)). We have jurisdiction under 28 U.S.C. § 1291 and we affirm.
We review de novo a grant of summary judgment, and affirm on any ground supported by the record. In re Apple Computer Sec. Litig., 886 F.2d 1109, 1112 (9th Cir. 1989), cert. denied sub nom. Schneider v. Apple Computer, Inc., 496 U.S. 943, 110 L. Ed. 2d 676, 110 S. Ct. 3229 (1990).
The defendants have the "'initial responsibility of informing the district court of the basis for [their] motion, and identifying those portions' of the record showing the absence of a genuine issue of fact." Id. at 1113 (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986)). The burden then shifts to the plaintiff "to present evidence sufficient to support a verdict in [his] favor on every element of [his] claim for which [he] will carry the burden of proof at trial." Id. (citing Celotex, 477 U.S. at 322-23). Summary judgment may be granted if the plaintiff's evidence is not "'sufficiently probative.'" Id. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986)).
It is a violation of Rule 10b-5 "to 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 the light of the circumstances under which they were made, not misleading." 17 C.F.R. § 240.10b-5. To survive summary judgment, the plaintiff "'must demonstrate that a particular statement, when read in light of all the information then available to the market, or a failure to disclose particular information, conveyed a false or misleading impression.'" Hanon v. Dataproducts Corp., 976 F.2d 497, 501 (9th Cir. 1992) (quoting In re Convergent Technologies Sec. Litig., 948 F.2d 507, 512 (9th Cir. 1991)).
The statements at issue are (1) the consensus $2 per share estimate by Bruce Nakao, Adobe's chief financial officer, on March 6, 1990; (2) the growth statement by John Warnock, Adobe's CEO, on March 6, 1990; (3) the Nakao $2.10 per share earnings estimate on March 20, 1990; and (4) Warnock's statement of optimism on May 1, 1990.
The plaintiff contends that these statements are false and misleading projections or false statements of belief. "In this circuit, a projection or statement of belief may be actionable to the extent that one of three implied factual assertions is inaccurate: '(1) that the statement is genuinely believed, (2) that there is a reasonable basis for that belief, and (3) that the speaker is not aware of any undisclosed facts tending to seriously undermine the accuracy of the statement.'" Id. (quoting Apple Computer, 886 F.2d at 1113.); see also Marx v. Computer Sciences Corp., 507 F.2d 485, 489-90 (9th Cir. 1974). The fact that the prediction proves to be wrong in hindsight does not make the statement false or misleading when made. Marx, 507 F.2d at 489-90.
The plaintiff apparently concedes that all four statements were genuinely believed.*fn1 However, he argues that a genuine, material factual dispute exists as to whether there was any reasonable basis in fact for the optimism. He further contends that the defendants failed to disclose facts tending to seriously undermine the projections, namely: (1) the lower earnings estimates in the 1990 Financial Plan, (2) the strained relationship with Apple, (3) the decrease in revenue from IBM and NEC, (4) the delay in projected revenue from Hewlitt-Packard, and (5) the substantial sale of Adobe stock by insiders during the class period.
"'An issuer's public statements cannot be analyzed in complete isolation.'" Id. Although we have not analyzed the four statements here in isolation, we discuss each in turn.
On March 6, 1990, Nakao and Warnock met with securities analysts in New York. Nakao's and Warnock's statements were reported over the Dow Jones wire. Nakao stated that "consensus estimates for fiscal 1990 have been at about $2 a share."
The plaintiff has failed to show that Nakao's March 6th statement was false or misleading. When he stated that "consensus estimates for fiscal 1990 have been at about $2 a share," he was merely reporting the consensus estimates of others without commenting on the accuracy of the estimates. The plaintiff points to no evidence that consensus estimates were not $2 a share.
B. Warnock's Growth Statement
At the March 6th meeting, Warnock stated that "sustaining [$2.15 to $2.20 a share] earnings growth is possible but that Adobe's future growth will be increasingly tied to trends in the industry. We're getting to the size of company that, if the industry slows down, and the PC [personal computer] market slows, then we're going to slow."
Warnock's March 6th statement that "sustaining [$2.15 to $2.20 a share] earnings growth is possible" was not false or misleading. The comment that something is "possible" means only that it may or may not happen (see WEBSTER'S NEW WORLD DICTIONARY 1054 (3d College Ed. 1988)). Moreover, the statement was ...