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vs.

Plaintiff,

RICHARD MEDOFF, Individually and On
Behalf Of All Others Similarly Situated,

x
:
:
:
:
:
:
:
CVS CAREMARK CORPORATION,
:
THOMAS M. RYAN, DAVID RICKARD, and
:
HOWARD McLURE,
:
:
:
x

Defendants.







Case 1:09-cv-00554-S-DLM Document 34 Filed 07/02/10 Page 1 of 57

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE ISLAND








Civil Action No. 1:09-cv-00554-S-DLM



DEFENDANTS’ MOTION TO DISMISS



Defendants CVS Caremark Corporation (“CVS Caremark” or the “Company”),

Thomas M. Ryan, David Rickard, and Howard McLure (collectively the “Individual

Defendants” and, together with CVS Caremark, the “Defendants”) hereby move to

dismiss the Corrected Consolidated Class Action Complaint, filed June 1, 2010 (the

“Complaint”), pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6) and section

78u-4(b) of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”). In

support of this motion, Defendants rely upon and incorporate by reference the

accompanying memorandum of law and the Declaration of Lawrence Portnoy, including

the exhibits attached thereto. For the reasons set forth in the memorandum of law,

Defendants respectfully request that the Court dismiss the Complaint.





Case 1:09-cv-00554-S-DLM Document 34 Filed 07/02/10 Page 2 of 57







/s/ William R. Grimm
William R. Grimm #1938
HINCKLEY, ALLEN & SNYDER LLP
50 Kennedy Plaza, Suite 1500
Providence, Rhode Island 02903
Tel. (401) 274-2000
Fax. (401) 277-9600
[email protected]

DAVIS POLK & WARDWELL LLP
Lawrence Portnoy (pro hac vice)
Edmund Polubinski III (pro hac vice)
Jessica K. Foschi (pro hac vice)
450 Lexington Avenue
New York, New York 10017
Tel. (212) 450-4000
Fax. (212) 701-5800
Email. [email protected]

[email protected]
[email protected]


Attorneys for Defendants

CERTIFICATE OF SERVICE





I hereby certify that on July 2, 2010, a copy of foregoing Motion to Dismiss was filed
electronically and served by mail on anyone unable to accept electronic filing. Notice of
this filing will be sent by e-mail to all parties by operation of the court’s electronic filing
as indicated on the Notice of Electronic Filing. Parties may access this filing through the
court’s CM/ECF System.





/s/ Mitchell R. Edwards
Mitchell R. Edwards #6942
Hinckley, Allen & Snyder LLP
50 Kennedy Plaza, Suite 1500
Providence, RI 02903
401-274-2000
401-277-9600 (fax)
[email protected]





2

Case 1:09-cv-00554-S-DLM Document 34 Filed 07/02/10 Page 3 of 57

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE ISLAND








Civil Action No. 1:09-cv-00554-S-DLM



vs.

Plaintiff,

RICHARD MEDOFF, Individually and On
Behalf Of All Others Similarly Situated,

x
:
:
:
:
:
:
:
CVS CAREMARK CORPORATION,
:
THOMAS M. RYAN, DAVID RICKARD, and
:
HOWARD McLURE,
:
:
:
x



Defendants.

MEMORANDUM OF LAW IN SUPPORT
OF DEFENDANTS’ MOTION TO DISMISS















HINCKLEY, ALLEN & SNYDER LLP
50 Kennedy Plaza, Suite 1500
Providence, Rhode Island 02903
Telephone: (401) 274-2000
Facsimile: (401) 277-9600

DAVIS POLK & WARDWELL LLP
450 Lexington Avenue
New York, New York 10017
Telephone: (212) 450-4000
Facsimile: (212) 701-5800

Attorneys for Defendants

Case 1:09-cv-00554-S-DLM Document 34 Filed 07/02/10 Page 4 of 57



TABLE OF CONTENTS

PAGE

TABLE OF AUTHORITIES ......................................................................................................... iii



PRELIMINARY STATEMENT .....................................................................................................1

FACTUAL BACKGROUND..........................................................................................................5

The Preliminary Earnings Prediction...................................................................................6

The November 5, 2009 Call.................................................................................................7

The Filing of the Original Complaint ..................................................................................9

The Amended Complaint and the Other Alleged Misstatements and Omissions................9

Scienter Allegations...........................................................................................................11

ARGUMENT.................................................................................................................................12

I. PLAINTIFFS FAIL TO STATE A CLAIM AS TO THE PRELIMINARY EARNINGS

PREDICTION .........................................................................................................................13

A. The Preliminary Earnings Prediction Is Entitled to the Protection of the Safe Harbor

Because It Was Accompanied by Meaningful, Narrowly Tailored Cautionary
Statements. .......................................................................................................................15

B. The Preliminary Earnings Prediction Is Entitled to the Protection of the Safe Harbor

Because Plaintiffs Do Not Plead Facts Supporting a Strong Inference That
Defendants Knew That It Was False or Misleading When Made. ..................................19

II. PLAINTIFFS FAIL TO STATE A CLAIM WITH RESPECT TO ALL OF THE

REMAINING PURPORTEDLY ACTIONABLE STATEMENTS ALLEGED IN THE
COMPLAINT ..........................................................................................................................22

A. Plaintiffs’ Remaining Allegations Fail To Allege Loss Causation. .................................22

B. Even If Plaintiffs Had Alleged Loss Causation as to the Remaining Allegations, the
Vast Majority of the Supposedly False or Misleading Statements They Identify Are
Not Actionable. ................................................................................................................27

1. Plaintiffs’ theory that Defendants failed to disclose potential contract losses fails

as a matter of law. .......................................................................................................27



Case 1:09-cv-00554-S-DLM Document 34 Filed 07/02/10 Page 5 of 57

2. Generalized statements regarding the Company’s strategic business model, sales

outlook, and “success” of the merger are inactionable corporate puffery. ................29

III. THE COMPLAINT FAILS TO PLEAD A STRONG INFERENCE OF SCIENTER AS TO

ANY OF PLAINTIFFS’ CLAIMS ..........................................................................................33

A. Plaintiffs Allegations Regarding Insider Stock Sales Fail To Give Rise to a Strong

Inference of Scienter. .......................................................................................................34

1. Messrs. Rickard and McLure traded pursuant to 10b5-1 plans, which negate the

inference of scienter. ...................................................................................................34

2. Mr. Ryan’s single stock sale was not suspicious. ......................................................37

B. The Complaint’s Remaining Allegations Fail to Allege That Defendants Acted with a

High Degree of Recklessness. ..........................................................................................38

1. The statements in the Complaint attributed to confidential witnesses do not create

a strong inference of scienter. .....................................................................................38

2. Plaintiffs fail to identify any specific contract-related information that would have

put Defendants on notice that their statements were false or misleading. .................40

3. Plaintiffs fail to plead facts supporting their assertion that Defendants knew that

customer service problems were causing contract losses. .........................................42

4. Plaintiffs’ allegations regarding the CMS Spread Regulation fail to plead a strong

inference of scienter. ...................................................................................................43

5. Plaintiffs’ allegations regarding Maintenance Choice fail to plead a strong

inference of scienter. ...................................................................................................44

IV. PLAINTIFFS DO NOT STATE A CLAIM FOR CONTROL PERSON

LIABILITY..............................................................................................................................44

CONCLUSION..............................................................................................................................46

ii

Case 1:09-cv-00554-S-DLM Document 34 Filed 07/02/10 Page 6 of 57

TABLE OF AUTHORITIES

CASES





PAGE

aff’d, 597 F.3d 330 (5th Cir. 2010)..........................................................................................25


ACA Fin. Guar. Corp. v. Advest, Inc., 512 F.3d 46 (1st Cir. 2008)..................................13, 33, 38

Acito v. Imcera Group, Inc., 47 F.3d 47 (2d Cir. 1995) ................................................................37

Albert Fadem Trust v. Citigroup, Inc., 165 F. App’x 928, 2006 WL 276611 (2d Cir. 2006) .......28

In re Allaire Corp. Secs. Litig., 224 F. Supp. 2d 319 (D. Mass. 2002) .........................................33

Archdiocese of Milwaukee Supporting Fund, Inc. v. Halliburton Co.,
Civ. A. No. 3:02-CV-1152-M, 2008 WL 4791492 (N.D. Tex. Nov. 4, 2008),


Atl. Gypsum Co. v. Lloyds Int’l Corp., 753 F. Supp. 505 (S.D.N.Y. 1990) .................................42

In re Avon Prods., Inc. Sec. Litig.,
No. 05 Civ. 6803(LAK)(MHD), 2009 WL 848017 (S.D.N.Y. Feb. 23, 2009) .......................21

Baron v. Smith, 380 F.3d 49 (1st Cir. 2004) .................................................................................13

In re Biogen IDEC, Inc. Sec. Litig.,
Civ. A. No. 05-10400-WGY, 2008 WL 4810045 (D. Mass. Oct. 25, 2009)...........................33

In re Boston Scientific Corp. Sec. Litig.,
Civ. A. No. 05-11934-DPW, 2010 WL 1704043 (D. Mass. Apr. 27, 2010)...........................28

In re Cabletron Sys., Inc., 311 F.3d 11 (1st Cir. 2002)................................................33, 36, 38, 42

Cal. Pub. Employees’ Ret. Sys. v. Chubb Corp., 394 F.3d 126 (3d Cir. 2004).......................39, 40

Catogas v. Cyberonics, Inc.,


Chien v. Skystar Bio Pharm. Co., 566 F. Supp. 2d 108 (D. Conn. 2008) .....................................28

In re Citigroup, Inc. Sec. Litig., 330 F. Supp. 2d 367 (S.D.N.Y. 2004),

(2d Cir. 2006).................................................................................................................................28

City of Dearborn Heights Act 345 Police & Fire Ret. Sys. v. Waters Corp.,
CA No. 1:08-11889-JTL, 2010 WL 1221402 (D. Mass. Mar. 25, 2010)................................36

292 F. App’x 311, No. 07-20787, 2008 WL 4158923 (5th Cir. 2008)..............................24, 25

aff’d sub nom. Albert Fadem Trust v. Citigroup, Inc., 165 F. App’x 928, 2006 WL 276611

iii

Case 1:09-cv-00554-S-DLM Document 34 Filed 07/02/10 Page 7 of 57

(D. Del. 2009) .........................................................................................................................34

553 F.3d 187 (2d Cir. 2009).....................................................................................................41

(E.D. Pa. Nov. 1, 2006)......................................................................................................25, 26


City of Roseville Employees’ Ret. Sys. v. Horizon Lines, Inc., 686 F. Supp. 2d 404


In re Cytyc Corp. Sec. Litig.,
No. Civ. A. 02-12399-NMG, 2005 WL 3801468 (D. Mass. Mar. 2, 2005) ......................14, 17

In re Dell Inc., Sec. Litig., 591 F. Supp. 2d 877 (W.D. Tex. 2008)...............................................23

In re Discovery Labs. Sec. Litig., No. 06-1820, 2006 WL 3227767


In re Donald Trump Casino Sec. Litig., 7 F.3d 357 (3d Cir. 1993)...............................................16

Dura Pharms., Inc. v. Broudo, 544 U.S. 336 (2005)......................................................3, 12, 22, 23

ECA, Local 134 IBEW Joint Pension Trust of Chicago v. JP Morgan Chase Co.,


In re Elan Corp. Sec. Litig., 543 F. Supp. 2d 187 (S.D.N.Y. 2008) ........................................40, 41

In re First Marblehead Corp. Sec. Litig., 639 F. Supp. 2d 145 (D. Mass. 2009)...........................43

In re Focus Enhancements, Inc. Sec. Litig., 309 F. Supp. 2d 134 (D. Mass. 2001) ......................14

In re Ford Motor Co. Sec. Litig.,


In re Gildan Activewear, Inc. Sec. Litig., 636 F. Supp. 2d 261 (S.D.N.Y. 2009) .........................37

Glazer v. Formica Corp., 964 F.2d 149 (2d Cir. 1992)..................................................................28

In re Glenayre Techs. Inc. Sec. Litig.,
No. 96 CIV. 8252(HB), 1998 WL 915907 (S.D.N.Y. Dec. 30, 1998) ....................................37

Greebel v. FTP Software, Inc., 194 F.3d 185 (1st Cir. 1999)................................................ passim

Greenberg v. Crossroads Sys., 364 F.3d 657 (5th Cir. 2004)........................................................23

Haft v. Eastland Fin. Corp., 755 F. Supp. 1123 (D.R.I. 1991) ......................................................32

In re Ibis Tech. Sec. Litig., 422 F. Supp. 2d 294 (D. Mass. 2006) ....................................17, 18, 19

In re Initial Pub. Offering Sec. Litig., 399 F. Supp. 2d 261 (S.D.N.Y. 2005).........................15, 23


184 F. Supp. 2d 626 (E.D. Mich. 2001), aff’d, 381 F.3d 563 (6th Cir. 2004).........................28

iv

Case 1:09-cv-00554-S-DLM Document 34 Filed 07/02/10 Page 8 of 57

499 F. Supp. 2d 117 (D. Conn. 2007), aff’d, 312 F. App’x 400, 2009 WL 481897
(2d Cir. 2009)...........................................................................................................................39

In re Int’l Rectifier Corp. Sec. Litig.,
No. CV 07-02544-JFW (VBKx), 2008 WL 4555794 (C.D. Cal. May 23, 2008) ...................35

Isham v. Perini Corp., 665 F. Supp. 2d 28 (D. Mass. 2009)....................................................14, 40

Kafenbaum v. GTECH Holdings Corp., 217 F. Supp. 2d 238 (D.R.I. 2002)................................32

Kalnit v. Eichler, 264 F.3d 131 (2d Cir. 2001)..............................................................................42

Kenney v. State St. Corp.,
Civ. A. No. 09-CV-10750-PBS, 2010 WL 938333 (D. Mass. Mar. 15, 2010) .......................32

Lasker v. New York State Elec. & Gas Corp., 85 F.3d 55 (2d Cir. 1996) ....................................31

Lentell v. Merrill Lynch & Co., 396 F.3d 161 (2d Cir. 2005).................................................22, 23

Magruder v. Halliburton Co.,
Civ. A. No. 3:05-CV-1156-M, 2009 WL 854656 (N.D. Tex. Mar. 31, 2009) ........................23

Malin v. XL Capital Ltd.,



In re Medimmune, Inc., Sec. Litig., 873 F. Supp. 953 (D. Md. 1995) ..........................................28

Miss. Pub. Employees Ret. Sys. v. Boston Sci. Corp., 523 F.3d 75 (1st Cir. 2008) .....................34

N.J. Carpenters Pension & Annuity Funds v. Biogen IDEC Inc.,


NPS, LLC v. Ambac Assurance Corp.,
Civ. A. No. 08-11281-DPW, 2010 WL 723786 (D. Mass. Feb. 25, 2010) .......................32, 33

In re Newell Rubbermaid Sec. Litig.,
No. 99 C 6853, 2000 WL 1705279 (N.D. Ill. Nov. 14, 2000).................................................31

In re Number Nine Visual Tech. Corp. Sec. Litig., 51 F. Supp. 2d 1 (D. Mass. 1999)...........30, 31

In re Parametric Tech. Corp. Sec. Litig., 300 F. Supp. 2d 206 (D. Mass. 2001).....................18, 21

In re Peritus Software Services, Inc. Sec. Litig., 52 F. Supp. 2d 211 (D. Mass. 1999)...........31, 32

Polin v. Conductron Corp., 552 F.2d 797 (8th Cir.) ......................................................................16

In re Rackable Sys., Inc. Sec. Litig.,
No. C 09-0222 CW, 2010 WL 199703 (N.D. Cal. Jan. 13, 2010)...........................................39

537 F.3d 35 (1st Cir. 2008)..........................................................................................36, 37, 40

v

Case 1:09-cv-00554-S-DLM Document 34 Filed 07/02/10 Page 9 of 57

604 F. Supp. 2d 332 (D. Mass. 2009) ..........................................................................14, 15, 16

superseded on other grounds by statute, 15 U.S.C. § 78u-4(b)(1)-(2)............................. passim


Rombach v. Chang, 355 F.3d 164 (2d Cir. 2004)..........................................................................30

Rosen v. Textron, Inc., 321 F. Supp. 2d 308 (D.R.I. 2004)................................................... passim

Santa Fe Indus. Inc. v. Green, 430 U.S. 462 (1977) ......................................................................32

Scritchfield v. Paolo, 274 F. Supp. 2d 163 (D.R.I. 2003)...................................................... passim

Sekuk Global Enters. v. KVH Indus.,
No. Civ. A. 04-306ML, 2005 WL 1924202 (D.R.I. Aug. 11, 2005).......................................14

Shaw v. Digital Equip. Corp., 82 F.3d 1194 (1st Cir. 1996),


Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124 (2d Cir. 1994) ...................................................42

Simon v. Am. Power Conversion Corp., 945 F. Supp. 416 (D.R.I. 1996) ....................................31

Slayton v. Am. Express Co., 604 F.3d 758 (2d Cir. 2010)............................................................19

In re Smith & Wesson Holding Corp. Sec. Litig.,


Spiegel v. Tenfold Corp., 192 F. Supp. 2d 1261 (D. Utah 2002) ..................................................25

Stiegele ex. rel. Viisage Tech. v. Bailey,
No. 05-10677-MLW, 2007 WL 4197496 (D. Mass. Aug. 23, 2007) ......................................35

In re Stone & Webster, Inc. Sec. Litig., 253 F. Supp. 2d 102 (D. Mass. 2003) ............................42

In re Stone & Webster, Inc. Sec. Litig., 414 F.3d 187 (1st Cir. 2005) ..........................................14

In re Sun Healthcare Group, Inc. Sec. Litig., 181 F. Supp. 2d 1283 (D.N.M. 2002) ..............19, 20

Suna v. Bailey Corp., 107 F.3d 64 (1st Cir. 1997) ........................................................................45

Teamsters Local 445 Freight Div. Pension Fund v. Dynex Capital, Inc.,


Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) ..........................................4, 33

Watterson v. Page, 987 F.2d 1 (1st Cir. 1993).................................................................................5

Wietschner v. Monterey Pasta Co., 294 F. Supp. 2d 1102 (N.D. Cal. 2003) ................................35


531 F.3d 190 (2d Cir. 2008).....................................................................................................42

vi

Case 1:09-cv-00554-S-DLM Document 34 Filed 07/02/10 Page 10 of 57



STATUTES & RULES


15 U.S.C. § 77z-2(c)(1)(A)(i) ........................................................................................................13

15 U.S.C. § 78j(b)......................................................................................................................9, 44

15 U.S.C. § 78t...........................................................................................................................9, 44

15 U.S.C. § 78u-4(b) ............................................................................................................. passim

15 U.S.C. § 78u-4(b)(1) .................................................................................................16, 2, 13, 32

15 U.S.C. § 78u-4(b)(2) .................................................................................................6, 12, 13, 32

15 U.S.C. § 78u-4(b)(3)(A)............................................................................................................13

15 U.S.C. § 78u-5(c)(1)(A)(i)........................................................................................................13

15 U.S.C. § 78u-5(d)......................................................................................................................15

15 U.S.C. § 78u-5(i)(1)..................................................................................................................14

17 C.F.R. § 240.10b5.................................................................................................................9, 44

17 C.F.R. § 240.10b5-1(c)(1)(i)(A) .........................................................................................11, 34

Fed. R. Civ. P. 9(b) ........................................................................................................................12


vii

Case 1:09-cv-00554-S-DLM Document 34 Filed 07/02/10 Page 11 of 57



Defendants CVS Caremark Corporation (“CVS Caremark” or the “Company”), Thomas

M. Ryan, David Rickard, and Howard McLure (collectively the “Individual Defendants” and,

together with CVS Caremark, the “Defendants”) respectfully submit this memorandum of law in

support of their motion to dismiss the Corrected Consolidated Class Action Complaint, filed June

1, 2010 (the “Complaint”),1 pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6) and

section 78u-4(b) of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”).

PRELIMINARY STATEMENT

As this Court has noted, Congress enacted the PSLRA in 1995 to put an end to the

abusive practice of filing securities fraud claims against public companies whenever their stock

prices decline. Rosen v. Textron, Inc., 321 F. Supp. 2d 308, 316-17 (D.R.I. 2004) (Smith, J.).

One of the chief abuses that Congress sought to stop was suits claiming fraud whenever a

company lowers its financial forecasts. To achieve this aim, Congress enacted a heightened

pleading standard for all securities fraud claims and, in particular, a safe harbor at the pleading

stage for forward-looking statements like earnings projections.

This action is precisely the sort of case at which the PSLRA is aimed. Plaintiffs seek to

recover for the alleged loss in value of CVS Caremark stock following the Company’s

November 5, 2009 third-quarter earnings call (the “November Call”). Three months earlier, on

the Company’s August 4, 2009 second-quarter earnings call, the Company’s Chief Executive

Officer, Thomas M. Ryan, had expressed his preliminary view on the Company’s earnings

outlook for 2010 (the “Preliminary Earnings Prediction”). On the November Call, Mr. Ryan



1 Plaintiff Medoff filed an initial complaint on November 17, 2009. Nearly six months later, on May 3,
2010, plaintiffs filed a consolidated amended class action complaint. The Complaint is a corrected version of the
May 3, 2010 complaint.



Case 1:09-cv-00554-S-DLM Document 34 Filed 07/02/10 Page 12 of 57

provided more formal guidance, lowering the expectation for 2010 earnings expressed in his

Preliminary Earnings Prediction. The reason for the adjustment in expectations, Mr. Ryan

explained, was substantial and unexpected losses since August 2009 in the Company’s pharmacy

benefit management (“PBM”) business.

Plaintiffs do not allege that any of CVS Caremark’s actual financial results were

misstated. Nor do plaintiffs dispute that the PBM business losses described in the November

Call do, in fact, explain the difference between the Preliminary Earnings Prediction and the

earnings guidance provided by Mr. Ryan on the November Call. Instead, they now claim, with

the benefit of hindsight, that the Preliminary Earnings Prediction must have been fraudulent

because the Company should have foreseen those business losses and therefore knew that the

Preliminary Earnings Prediction was false at the time it was given. The lengthy Complaint also

includes a profusion of other generalized allegations of misstatements or omissions about CVS

Caremark’s PBM business and about other specific contract losses that were publicly known

well before the November Call. Each of plaintiffs’ allegations fails to meet the heightened

pleading burdens under the PSLRA.

First, Mr. Ryan’s Preliminary Earnings Prediction of the Company’s future economic

performance is protected by the PSLRA’s statutory safe harbor for forward-looking statements

for two independent reasons. The Preliminary Earnings Prediction was accompanied by

meaningful cautionary language and, under the PSLRA and well-established First Circuit law, is

protected for that reason alone. Greebel v. FTP Software, Inc., 194 F.3d 185, 201 (1st Cir. 1999);

Scritchfield v. Paolo, 274 F. Supp. 2d 163, 177 (D.R.I. 2003) (Smith, J.). In addition, plaintiffs

do not plead facts sufficient to allege that Mr. Ryan had actual knowledge that the Preliminary

Earnings Prediction was false or misleading when made, as they must under the PSLRA’s safe

2

Case 1:09-cv-00554-S-DLM Document 34 Filed 07/02/10 Page 13 of 57

harbor. In Scritchfield, this Court applied the PSLRA’s safe harbor to dismiss claims based on

several forward-looking statements, including a similar earnings prediction. 274 F. Supp. 2d at

187. As this Court explained: “That [the Company] ultimately may have been unable to realize

its dreams cannot transmogrify hopeful predictions into fraudulent dictions. ” Id. at 181.

Second, plaintiffs have not pled loss causation—a causal link between the alleged

misstatement and plaintiffs’ alleged losses—for the remainder of the alleged misstatements and

omissions in the Complaint. Plaintiffs do not and cannot contend that any of these statements

was addressed, much less “corrected,” on the November Call; as a result, the stock price drop

following the November Call cannot—as a matter of law—have been caused by any of these

alleged misstatements or omissions. For example, each and every one of the other alleged PBM

contract losses that are collectively the focus of dozens of paragraphs in the Complaint was

publicly known before the call, in fact often months before. Because the market was fully aware

of these losses before November 5, none of these alleged misstatements or omissions could

therefore have caused the loss in stock price value on that day for which the Complaint now

seeks to recover. Under a straightforward application of the United States Supreme Court’s

holding in Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005), the Court must reject as

irrelevant and inactionable the vast majority of the allegations in the Complaint.

Third, even if the Complaint could adequately allege loss causation for the alleged

misstatements or omissions other than the Preliminary Earnings Prediction, the vast majority

should be rejected because they are inactionable. Because it is well settled that a company need

not disclose an outcome that is merely likely, as opposed to substantially certain, plaintiffs

cannot recover based on allegations that the Company did not disclose contracts that it was

allegedly “likely” to lose. And statements like “our model is working,” “we are seeing new

3

Case 1:09-cv-00554-S-DLM Document 34 Filed 07/02/10 Page 14 of 57

business opportunities in 2010,” and “our sales team is very optimistic about the opportunities

that lie ahead” are classic examples of the sort of allegations that this and other Courts routinely

and properly reject as inactionable puffery. See, e.g., Scritchfield, 274 F. Supp. 2d at 174.

Finally, plaintiffs’ Complaint must be dismissed in its entirety for the separate and

independent reason that plaintiffs have failed to meet their heightened burden under the PSLRA

of pleading a strong inference of scienter—i.e., pleading that defendants engaged in conscious

wrongdoing or acted with a high degree of recklessness—with respect to any of the alleged

misstatements or omissions. The Supreme Court has instructed that, for plaintiffs to meet this

burden at the pleading stage, the inference of scienter must be “cogent and at least as compelling

as any opposing inferences one could draw.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551

U.S. 308, 324 (2007). Plaintiffs seek to meet this burden by reference to stock trades by Messrs.

Ryan, Rickard, and McLure and supposed statements by confidential witnesses. Defendants’

overall pattern of trading—including their use of “10b5-1 plans,” pursuant to which their stock

was sold automatically during certain trading windows—does not, however, support any

inference of scienter. Nor do the allegations attributed to the confidential witnesses. This is not

surprising given that more than half of these witnesses had concededly left CVS Caremark prior

to the alleged class period (and well before the Preliminary Earnings Prediction); most are not

alleged to have met, let alone worked with, any of the Individual Defendants; and none is alleged

to have any knowledge whatsoever of the forecasting process.

Plaintiffs have had six-and-a-half months since the filing of their initial complaint to meet

their steep pleading burden. During that time, they purportedly interviewed scores of witnesses

and generated a lengthy complaint. But that length is largely a result of their inclusion of

irrelevant facts, inactionable purported misstatements, and unsupported assertions of scienter. At

4

Case 1:09-cv-00554-S-DLM Document 34 Filed 07/02/10 Page 15 of 57

its core, this remains a typical fraud-by-hindsight claim in which plaintiffs seek to recover

because the Company was unsuccessful in perfectly predicting its future earnings. This is

precisely the type of claim that Congress intended to eliminate with the PSLRA, and the Court

here should dismiss it with prejudice.

FACTUAL BACKGROUND2

CVS Caremark is an integrated provider of prescriptions and related health services

headquartered in Woonsocket, Rhode Island. (Compl. ¶ 15, 34.) The Individual Defendants

were executives of CVS Caremark during the relevant time. Mr. Ryan was the Company’s

Executive Chairman, President, and Chief Executive Officer (“CEO”) (Compl. ¶ 28); Mr.

Rickard was its Chief Financial Officer (“CFO”) and Executive Vice President (Compl. ¶ 29);

and Mr. McLure was the President of Caremark Pharmacy Services, the PBM division of CVS

Caremark (Compl. ¶ 30).

CVS Corp. merged with Caremark Rx Inc. in 2007 to form the combined Company.

(Compl ¶ 1.) Broadly speaking, CVS Caremark operates two business divisions: its retail

pharmacy business and its PBM business. (Compl. ¶ 35.) The retail pharmacy business operates

retail drugstores which sell prescription drugs and other general merchandise. (Compl. ¶ 35.)

The PBM business administers drug benefit programs on behalf of employers, government

agencies, health maintenance organizations, and other entities that provide prescription drug

insurance to their members. (Compl. ¶ 38.) The PBM business does so by entering into

contracts with these entities to provide PBM services to them. (Compl. ¶ 38.) This business is

highly competitive, and the revenue stream of the PBM division and, correspondingly, of the


2 For purposes of this motion to dismiss only, the non-conclusory factual allegations in the Complaint are

taken as true. The facts described herein are taken from the Complaint, as well as from publicly available
documents and other sources central to plaintiffs’ claim or sufficiently referred to in the Complaint. See Watterson
v. Page, 987 F.2d 1, 4 (1st Cir. 1993).

5

Case 1:09-cv-00554-S-DLM Document 34 Filed 07/02/10 Page 16 of 57

Company as a whole can be impacted in substantial ways by wins or losses of large PBM

contracts. (Compl. ¶ 34.)

The Preliminary Earnings Prediction

On August 4, 2009, the Company announced its earnings for the second quarter of 2009.

On a conference call that day to discuss those earnings (the “August Call”), Mr. Ryan provided

preliminary views of the Company’s earnings expectations for 2010—the Preliminary Earnings

Prediction. After explaining that he was “not giving guidance for 2010,” Mr. Ryan said:

I would be very disappointed if we didn’t have an EPS growth of at least 13 to
15% next year. As I said, we haven’t completed our plan for 2010, and it is too
early to give specific guidance, but I did want to give you some visibility on the
Med D impact.



(Compl. ¶ 160; Ex. 3, transcript of the CVS Caremark second-quarter 2009 earnings conference

call (the “Aug. 4 Tr.”) at 2.)3 In addition to Mr. Ryan’s own cautionary statements about the

earliness and imprecision of the Preliminary Earnings Prediction, the Company also identified it

as a forward-looking statement at the time it was made. At the outset of the August Call, Nancy

R. Christal, CVS Caremark’s Senior Vice President of Investor Relations, announced that the

presentation would include “certain forward-looking statements” and that the Company claimed

“the protection of the Safe Harbor for forward-looking statements contained in the Private

Securities Litigation Reform Act of 1995.” (Ex. 6, Aug. 4 Tr. at 2.)



3 Citations to “Ex. __” refer to exhibits to the Declaration of Lawrence Portnoy, dated July 2, 2010.

The Court may consider the entirety of documents cited and quoted in plaintiffs’ Complaint on a motion to

dismiss: “This prevents a party from ‘excising an isolated statement from a document and importing it into the
complaint, even though the surrounding context imparts a plainly non-fraudulent meaning to the allegedly wrongful
statement.’” Rosen v. Textron, Inc., 321 F. Supp. 2d 308, 312 (D.R.I. 2004) (Smith, J.) (quoting Shaw v. Digital
Equip. Corp., 82 F.3d 1194, 1220 (1st Cir. 1996), superseded on other grounds by statute, 15 U.S.C. § 78u-4(b)(1)-
(2)).

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Ms. Christal also warned investors that forward-looking statements made on the call “are

subject to risks and uncertainties that could cause actual results to differ materially” and directed

investors to the Cautionary Statement Concerning Forward-Looking Statements of the

Company’s most recently filed Form 10-Q and the Risk Factors section of the Company’s most

recently filed Annual Report on Form 10-K. (Id. at 2.) The 10-Q for the fiscal second quarter of

2009 (the “Second-Quarter 2009 10-Q”) included cautionary statements warning investors that

“all forward-looking statements involve risks and uncertainties” and emphasizing that “[a]ctual

results may differ materially from those contemplated by the forward-looking statements for a

number of reasons.”4 (Ex. 3, Second-Quarter 2009 10-Q at 32.) The 10-K for the period ended

December 31, 2008 (the “2008 10-K”) warned investors of specific risks associated with the

Company’s business, including its PBM business. (Ex. 1, 2008 10-K at 12, 20.)

The November 5, 2009 Call

On November 5, 2009, CVS Caremark reported results for its fiscal third quarter ending

September 30, 2009 and held a conference call to discuss those results. On that call, Mr. Ryan

provided guidance on the Company’s 2010 earnings outlook,5 which fell short of the Preliminary

Earnings Prediction. Mr. Ryan explained that “operating profit in the PBM will decline in 2010,

perhaps as much as 10 to 12%” and he further explained that, as a result, he no longer expected

that the Company would achieve the 13 to 15% growth rate in 2010 he had preliminarily


4 In particular, the 10-Q contained warnings of specific risk factors that could lead to differences between

results predicted in Mr. Ryan’s statement and actual results, including: “[o]ur ability to realize fully the incremental
revenues and other benefits from the Caremark merger”; “[t]he possibility of client loss and/or the failure to win
new client business”; “[t]he effect on our Pharmacy Services business of a declining margin environment
attributable to increased competition in the pharmacy benefit management industry and increased client demands for
lower prices, enhanced service offerings and/or higher service levels”; “[r]isks regarding the impact of the Medicare
prescription drug benefit on our business”; and “[l]itigation, legislative and regulatory risks associated with our
business or the . . . pharmacy benefit management industry generally.” (Ex. 3, Second Quarter 2009 10-Q at 32-33.)

5 The Company customarily first provides formal guidance on the earnings outlook for a prospective year

no earlier than the third-quarter earnings call of the prior year.

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predicted in August. (Compl. ¶ 182.) Mr. Ryan also announced that Mr. McLure “will be

retiring effective November 27.” (Ex. 7, transcript of the CVS Caremark third-quarter 2009

earnings conference call (the “Nov. 5 Tr.”) at 5.) CVS Caremark shares declined following the

November Call. (Compl. ¶ 212.)

On the November Call, Mr. Ryan explained the unforeseen developments in the PBM

business that had made the Preliminary Earnings Prediction unattainable: namely, the loss of a

contract with the State of New Jersey, the loss of Medicare low-income subsidy (“LIS”) business

in 15 regions (accounting for the overwhelming majority of the 10-12% loss he projected for the

PBM business), the loss of the managed Medicare business for the State of Ohio, the early

renegotiation—at the request of the client—of a contract with the Blue Cross Blue Shield Federal

Employees Plan (“FEP”), and $600 million in other, smaller contract losses:

We had $1.4 billion in wins in 2010. Approximately, 600 million of those gross
wins came since the last quarterly call. We had 4.5 billion in losses and
approximately two plus billion of those came from the last call—since the last call,
and those would be Horizon, I think you know about obviously the State of New
Jersey. This was a bid that the state wanted on a stand-alone basis, so it was a
kind of price and carve-out issue. We lost the State of Ohio and the managed
Medicare business. It was carved in, which is about 500 plus million. And then
we had another 600 million miscellaneous. These were basically smaller clients
around RxAmerica or PharmaCare that just really wanted essentially smaller
PBMs. So in total, that was about $2 plus billion since the last call.

And then, lastly, we had $1.7 billion that we lost in Med-D business. This was
the 500,000 lives that we lost in the duals, and once again, this was since the last
call. So net-net, it’s about $4.8 billion in loss—in net loss for 2010 and
approximately almost 3.7 billion since the last call.

. . .

To get to that 13 to 15% growth rate, I expected strong double-digit growth in our
retail business, which I still do, and I expected low-to-mid single digit in our PBM
business, which is not going to happen. What’s changed? Well, as I just said, we
lost more PBM business than we expected since the call, $2 billion in contracts.
We lost the Med-D duals in 15 regions, which was 1.7 billion, which I just
referred to. And we extended the $4 billion FEP contract through 2011 at the



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Case 1:09-cv-00554-S-DLM Document 34 Filed 07/02/10 Page 19 of 57

client’s request. This was an early renegotiation, not at our request, but at the
client’s request. So we're going to have obviously some margin implications in
2010.


(See Ex. 7, Nov. 5 Tr. at 4-5.) Plaintiffs do not and cannot deny that these contract losses would

account for the difference between the Preliminary Earnings Prediction and the 2010 earnings

guidance provided by Mr. Ryan on the November Call; nor can they contend that any of these

contract losses occurred prior to the Preliminary Earnings Prediction. Instead, they contend that

the Company somehow knew that these losses were going to occur before they did. (Compl.

¶¶ 85, 110.)

The Filing of the Original Complaint

Seeking to recover based on the decline in CVS Caremark’s stock price, plaintiffs filed a

complaint on November 17, 2009, alleging that the Company and the Individual Defendants

violated section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and

Securities and Exchange Commission (“SEC”) Rule 10b-5 and that the Individual Defendants

are liable as controlling persons under section 20(a) of the Exchange Act. The original

complaint alleged only that the Preliminary Earnings Prediction was somehow fraudulent; it did

not identify any other alleged misstatements or omissions that were purportedly revealed either

in the November Call or at any other prior point in time.

The Amended Complaint and the Other Alleged Misstatements and Omissions

The Consolidated Class Action Complaint was filed almost six months later—on May 3,

2010—followed by the Corrected Consolidated Class Action Complaint on June 1, 2010. The

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Complaint includes an array of other allegations of alleged misstatements and omissions,6 none

of which is alleged to have been disclosed for the first time or corrected on the November Call.

Most of these alleged misstatements are inactionable corporate puffery regarding the

Company’s business prospects or the success of the 2007 merger. (See, e.g., Compl. ¶ 113 (“I

would say our model is working”); Compl. ¶ 135 (“[a]s we head into the 2010 selling season, our

sales team is very optimistic about the opportunities that lie ahead”); Compl. ¶ 150 (“this model

really is going to make a difference going forward”).) And the Complaint does not allege that

any of these statements was disclosed on the November Call—the only alleged “corrective

disclosure” date in the Complaint. (Compl. ¶ 179.)

In fact, plaintiffs concede that the vast majority of the alleged misstatements and

omissions described in the Complaint had been disclosed weeks or even months earlier.

Although the Complaint alleges that the November Call somehow revealed “the magnitude of

the lost business, including the loss of the New Jersey account, and the true impact on the

Company’s earnings” (Compl. ¶ 183), each of the major PBM contract losses and events that

plaintiffs describe in the Complaint had previously been disclosed:

• The Company confirmed the loss of the Coventry Health Care commercial business

(“Coventry”) on May 5, 2009. (Compl. ¶ 141.)

• The Company confirmed the loss of the Chrysler unionized retirees business

(“Chrysler”) on the August Call. (Compl. ¶ 163.)

• On the August Call, the Company also disclosed the impact on revenues of a Centers
for Medicare & Medicaid Services (“CMS”) regulatory amendment requiring PBMs to
report as an administrative cost the difference, or spread, between the price a PBM
pays for a drug and the amount it is reimbursed for purchasing that drug (the “CMS
Spread Regulation”). (Compl. ¶ 152.)



6 The Complaint attributes these statements to Mr. Ryan or Mr. Rickard. The Complaint does not allege

that Mr. McLure made any false or misleading statements.

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• The Company’s loss of the State of New Jersey (“New Jersey”)7 business was known

to the market as early as August 11, 2009. (See Ex. 12, August 11, 2009
NorthJersey.com article.)

• The Company announced, in a mid-quarter press release on October 2, 2009, the loss

of LIS members enrolled in its SilverScript and Accendo Medicare Part D plans as
well as the earnings per share impact of that loss. (Compl. ¶ 174.)

Scienter Allegations

In support of their claim that Defendants acted with the requisite scienter, plaintiffs rely

primarily on allegations of insider trading on behalf of the Individual Defendants. (Compl.

¶ 204.) But plaintiffs acknowledge that Messrs. Rickard and McLure traded pursuant to “pre

arranged 10b-5 trading plans.”8 (Compl. ¶ 205.) Plaintiffs also concede that Mr. Ryan made

only one trade during the alleged class period, which amounted to only a small percentage of his

total holdings of stock. (Compl. ¶ 109.)

The Complaint’s remaining scienter allegations, purportedly based on information from

confidential witnesses, include a variety of conflicting, irrelevant, and conclusory allegations

about the Defendants’ purported knowledge of contract losses, customer service and integration

issues, regulatory changes, and the success of the Company’s Maintenance Choice program.

(See, e.g., Compl. ¶¶ 65, 68, 69, 98, 110, 111.) None of these, however, is a particularized

allegation concerning any Defendant’s state of mind. None describes a single conversation or

meeting with any of the Individual Defendants; none describes how the specific contract losses

and other issues that the Individual Defendants purportedly knew about affected the Company’s



Cross Blue Shield of New Jersey. (Compl. ¶ 84.)

7 CVS Caremark provided PBM benefits to the State of New Jersey through a contract with Horizon Blue

8 A 10b5-1 trading plan is a contract between a company executive and a broker that contains detailed

instructions to sell specified amounts of securities on particular dates or at specified prices. See 17 C.F.R.
§ 240.10b5-1(c)(1)(i)(A).

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forecasts; and, in any event, none describes in any way the process the Company used to reach

its Preliminary Earnings Prediction.

In fact, most of the confidential witnesses included in the Complaint did not work at the

Company during the alleged class period; the remainder only worked at the Company for small

portions of the alleged class period; only one confidential witness was employed by the

Company in August of 2009 when Mr. Ryan made his 2010 Earnings Projection. (See Compl.

¶ 33.) And most of the confidential witnesses are not alleged to have ever even met any of the

Individual Defendants, much less have particularized evidence of what those Individual

Defendants were thinking.

ARGUMENT

The elements of a securities fraud claim are (1) a material misrepresentation or omission,

(2) scienter, (3) a connection with the purchase or sale of a security, (4) reliance, (5) economic

loss, and (6) loss causation. See Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 341-42 (2005);

Rosen v. Textron, Inc., 321 F. Supp. 2d 308, 316 (D.R.I. 2004) (Smith, J.).

To survive a motion to dismiss a securities fraud suit, plaintiffs must satisfy the

heightened pleading standards of both Federal Rule of Civil Procedure 9(b) and the PSLRA. See

Rosen, 321 F. Supp. 2d at 316; Scritchfield v. Paolo, 274 F. Supp. 2d 163, 170 (D.R.I. 2003)

(Smith, J.). Rule 9(b) requires 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). The PSLRA

“augments Rule 9(b)’s particularity requirement.” Rosen, 321 F. Supp. 2d at 317. It further

requires that a complaint alleging a Rule 10b-5 violation shall (i) “specify each statement alleged

to have been misleading [and] the reason or reasons why the statement is misleading” and (ii)

“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)(1), (2).

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The First Circuit has explained that these pleading requirements are “notably strict and

rigorous.” ACA Fin. Guar. Corp. v. Advest, Inc., 512 F.3d 46, 58 n.7 (1st Cir. 2008) (quoting

Greebel v. FTP Software Inc., 194 F.3d 185, 193 (1st Cir. 1999)). Because plaintiffs fail to meet

them, the Complaint must be dismissed. See 15 U.S.C. § 78u-4(b)(3)(A) (where pleading

requirements are not met, “the court shall . . . dismiss the complaint”).

I.

PLAINTIFFS FAIL TO STATE A CLAIM AS TO THE PRELIMINARY
EARNINGS PREDICTION

In their nearly one hundred-page Complaint, plaintiffs point to only a single alleged

misstatement that was actually addressed for the first time on the November Call: Mr. Ryan’s

Preliminary Earnings Prediction, made on the August Call, that he “would be very disappointed

if [CVS] didn’t have an EPS growth of at least 13 to 15% next year.”9 (Compl. ¶ 160.) But

plaintiffs cannot state a claim with respect to Mr. Ryan’s Preliminary Earnings Prediction

because, as a quintessentially forward-looking statement, it falls squarely within the safe harbor

of the PSLRA.

The PSLRA exempts forward-looking statements from securities fraud causes of action if

“the forward-looking statement is identified as a forward-looking statement, and is accompanied

by meaningful cautionary statements identifying important factors that could cause actual results

to differ materially from those in the forward-looking statement . . . .” 15 U.S.C. §§ 77z-

2(c)(1)(A)(i),78u-5(c)(1)(A)(i); accord Baron v. Smith, 380 F.3d 49, 54 (1st Cir. 2004); Rosen v.

Textron, 321 F. Supp. 2d 308, 321 (D.R.I. 2004) (Smith, J.); Scritchfield v. Paolo, 274 F. Supp.

2d 163, 177 (D.R.I. 2003) (Smith, J.). The PSLRA codified the bespeaks caution doctrine. See,

e.g., Shaw v. Digital Equip. Corp., 82 F.3d 1194, 1213 n.23 (1st Cir. 1996), superseded on other


9 The Preliminary Earnings Prediction represented Ryan’s preliminary estimate, in August 2009, of the
Company’s earnings “next year” (i.e., in the fiscal year beginning January 1, 2010). It reflects not only the PBM
business, but all other business segments of the Company.

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grounds by statute, 15 U.S.C. § 78u-4(b)(1)-(2). “Under this doctrine, [a] forward looking

statement is not materially misleading if ‘accompanied by adequate cautionary disclosures.”’ In

re Cytyc Corp. Sec. Litig., No. Civ. A. 02-12399-NMG, 2005 WL 3801468, at *21 (D. Mass

Mar. 2, 2005) (quoting In re Focus Enhancements, Inc. Sec. Litig., 309 F. Supp. 2d 134, 162 (D.

Mass. 2001)). As the First Circuit has recognized, “when statements of ‘soft’ information such

as forecasts, estimates, opinions or projections are accompanied by cautionary disclosures that

adequately warn of the possibility that actual results or events may turn out differently, the ‘soft’

statements may not be materially misleading.” Shaw, 82 F.3d at 1213.

The Preliminary Earnings Prediction is, self-evidently, a textbook example of a forward-

looking statement. “Forward-looking statements are, generally speaking, statements that speak

predictively of the future.” In re Stone & Webster, Inc. Sec. Litig., 414 F.3d 187, 195 (1st Cir.

2005) (citing 15 U.S.C. § 78u-5(i)(1)) (internal quotation marks omitted); see also 15 U.S.C.

§ 78u-5(i)(1) (defining “forward-looking statement” to include predictive statements of “future

economic performance,” including projections of revenues, income, and earnings per share).

Courts have consistently invoked this straightforward, commonsense definition when assessing

motions to dismiss securities fraud claims. See, e.g., Isham v. Perini Corp., 665 F. Supp. 2d 28,

39-40 (D. Mass. 2009) (deeming “statements about anticipated revenue and earnings per share”

protected by PSLRA safe harbor); In re Smith & Wesson Holding Corp. Sec. Litig., 604 F. Supp.

2d 332, 341 (D. Mass. 2009) (deeming statement regarding projected “income per share”

protected by PSLRA safe harbor); Sekuk Global Enters. v. KVH Indus., No. Civ.A. 04-306ML,

2005 WL 1924202, at *11 (D.R.I. Aug. 11, 2005) (deeming statement predicting “revenue

growth in the range of 30-50%” protected by PSLRA safe harbor); Scritchfield, 274 F. Supp. 2d

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at 187 (holding that CEO’s prediction of “$15 million in revenues by the end of 2000” is a non-

actionable forward-looking statement).

Interpreting the PSLRA, the First Circuit has held that the safe harbor for forward-

looking statements like the Preliminary Earnings Prediction has “two alternative inlets”:

[T]he first shelters forward-looking statements that are accompanied by
meaningful cautionary statements. See 15 U.S.C. § 78u-5(c)(1)(A)(i). The
second inlet focuses on the state of mind of the defendant and precludes liability
for a forward-looking statement unless the maker of the statement had actual
knowledge it was false or misleading.

Greebel v. FTP Software, Inc., 194 F.3d 185, 201 (1st Cir. 1999); see also Smith & Wesson, 604

F. Supp. 2d at 340 (“A forward-looking statement is protected if it . . . includes a disclaimer

regarding risks and the possibility that results will differ from projections . . . or . . . the

executives of the company had no actual knowledge the statement was false or misleading.”).10

Thus the Preliminary Earnings Prediction is inactionable if either of these “two alternative

inlets” applies. As explained below, both do.

A.

The Preliminary Earnings Prediction Is Entitled to the Protection of the Safe
Harbor Because It Was Accompanied by Meaningful, Narrowly Tailored
Cautionary Statements.

The PSLRA’s safe harbor applies because the Preliminary Earnings Prediction was

accompanied by cautionary language that was “substantive and tailored to the specific future

projections, estimates or opinions . . . which the plaintiffs challenge.” Smith & Wesson, 604 F.



10 In addition, because the Preliminary Earnings Prediction is forward-looking, the PSLRA provides that

Defendants had no duty to update or correct it. See 15 U.S.C. § 78u-5(d). The Complaint therefore alleges no more
than “the unfortunate but commonplace event of a publicly traded company failing to meet its revenue forecast,
coupled with a concomitant and predictable drop in share prices.&rdquo