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In a recent decision in In re Lottery.com Securities Litigation, (SDNY 2/24), a federal judge held that corporate statements concerning preliminary results for a completed quarter constituted “forward looking statements” protected under the “bespeaks caution” doctrine.  The case arose out of a series of allegedly false and misleading statements by the target of a de-SPAC transaction made before and after completion of the merger.

One of the challenged statements was an October 21, 2021 press release announcing the company’s results for its third fiscal quarter, which ended on September 30, 2021. The plaintiffs alleged that since the results disclosed were for a completed quarter, they should not be regarded as forward looking statements.  The Court disagreed:

The 10/21/21 Press Release’s statements regarding Lottery’s preliminary revenue results are nonactionable under the bespeaks-caution doctrine because they, too, are “statements whose truth [could not] be ascertained until some time after the time they [we]re made.” In re Philip Morris, 89 F.4th at 428 (citation omitted). Plaintiffs contend that these statements were “simply not forward-looking” because they “concern[ed] revenue results for Q3 2021, a quarter that had already closed when the statement was made.” Lottery Class Opp. at 13.

Although this line of reasoning has some intuitive appeal, the Court disagrees. When applying the bespeaks-caution doctrine, courts in the Second Circuit generally treat “corporate statements of projections as to corporate earnings” as forward-looking statements, “without regard to whether the last day of the covered earnings period had passed.” Lopez v. Ctpartners Exec. Search Inc., 173 F. Supp. 3d 12, 39 (S.D.N.Y. 2016).

Citing the Lopez case, the Court went on to say that just because a quarter has been completed, that doesn’t mean its results have been finalized, and that insofar as a press release offers a “preliminary” calculation of those results “based on currently available financial and operating information and management’s preliminary analysis of the unaudited financial results for the quarter,” it involves forward-looking statements.

– John Jenkins