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In order to obtain the protections of the PSLRA’s safe harbor, a forward-looking statement must be “accompanied by” meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the forward-looking statements.  Over on The Business Law Prof Blog, Prof. Ann Lipton recently flagged the SDNY’s decision in Construction Industry Laborers Pension Fund v. Fortrea Holdings Inc., (S.D.N.Y.; 9/26), in which the Court concluded that certain statements made by management at an industry conference weren’t protected by the safe harbor because they weren’t “accompanied by” meaningful cautionary statements.

This excerpt from the Court’s decision addresses the issue:

At that conference, Mr. Pike prefaced his remarks with the following fifteen-word warning, and nothing else: “Forward looking statements. We may make some forward-looking statements, you have all the usual stuff here.” Mr. Pike made the third statement at the Barclays Global Healthcare Conference on March 12, 2024: “Now turning to Fortrea, of course, there [ ] may be forward looking statements here.”

Mr. Pike’s cursory warnings were insufficiently “meaningful” to qualify the statements for the safe harbor….

To be sure, executives of publicly traded companies are not required to incant a precise prophylactic warning to warrant protection under the safe harbor. But all that was required was for Mr. Pike or one of his employees to orally identify the “document, or portion thereof, that contains the additional [cautionary] information” — in other words, to direct his audience to the cautionary statements made in some prior disclosure.

Ann noted that, in the end, things worked out for the company because the case was dismissed on other grounds. However, she says the Court’s approach to the “accompanied by” requirement came as a bit of a surprise, because for as long as she can remember, courts have been “handwaving the PSLRA’s formal requirement of accompaniment.”

– John Jenkins