On May 31, 2024, Judge Julie S. Sneed of the United States District Court for the Middle District of Florida granted a motion to dismiss a putative securities class action against an autonomous vehicle technology company (the "Company"), certain of its officers, and an officer of one of the Company's subsidiaries. Alms v. Luminar Technologies, Inc., et al, No. 6:23-cv-982-JSS-LHP (M.D. Fla. May 31, 2024). Plaintiff alleged that defendants violated Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by allegedly making false statements in an investor presentation regarding plans to economize its newly developed technology. The Court dismissed plaintiff's amended complaint, holding that plaintiff failed to adequately plead a false statement of a material fact and scienter.
According to the amended complaint, on February 28, 2023, the Company presented to investors about its plans to scale its newly developed autonomous vehicle technology. One of the slides in the investor presentation allegedly included a picture of a competitor's microchip. Two weeks after the presentation, a news article was published accusing the Company of using the competitor's image. Following this revelation, the Company allegedly removed the image from the investor materials online, replaced the picture with one of its own microchips, and published a letter to shareholders on its website addressing the competitor's complaint and threat of legal action. In particular, the Company claimed that the picture was merely intended to serve as a generic illustration in one slide out of a 165-page presentation, and not an attempt to pass off the competitor's technology as its own. Upon issuing the statement, the Company's stock price fell. Plaintiff—on behalf of a putative class of purchasers of the Company's stock between February 28, 2023 and March 17, 2023—filed a complaint against the Company alleging that it made a misstatement of a material fact in its investor materials by including the competitor's "much more sophisticated looking" microchip, which ultimately caused the shareholders losses.
The Court dismissed the claim, holding first that plaintiff failed to adequately plead materiality. The Court initially determined that a reasonable investor would not expect pictures of products on a slide presenting a company's plans for manufacture of those precise products to contain a picture of a competitor's product as a general example. In finding that the investor slide was misleading, the Court noted that "[t]o place a picture of a competitor's product next to pictures of the company's own products on an investor presentation slide, displayed during a discussion of the company's specific manufacturing capabilities and plans, marked as the company's copyright, would lead a reasonable investor to infer the company owns the pictured product." Nonetheless, the Court held that the misleading graphic was immaterial in this instance because it did "not convey anything about the capabilities" of the Company's overall product, and therefore could not be considered significant to a trading decision of a reasonable investor. The Court noted that plaintiff "leaves unexplained how the small, professional-looking graphic on a single slide communicated to investors any impression regarding the quality, capabilities, or 'sophisticat[ion]' of" the competitor's microchip that plaintiff claimed the Company allegedly tried to pass off as its own. Accordingly, the Court concluded that plaintiff provided no basis to believe a reasonable investor's trading decision would have been affected if the Company had placed the photograph of its own chip on the presentation slide initially.
The Court then turned to the issue of scienter, holding that plaintiff failed to adequately plead scienter. The Court found that the complaint lacked any allegations to establish that the Company and its executives had a fraudulent motive to include the picture in the presentation. Specifically, the Court held that plaintiff "never identifie[d] who prepared the slide, [and] simply claiming the named executives must have known and signed off on it by nature of their positions within the [C]ompany . . . typically is insufficient to establish scienter." The Court further held that it is "more likely" that the Company inadvertently used the picture rather than intentionally using it to artificially inflate the stock price by conveying superior capabilities, as evidenced by the fact that none of the analyst reports or news articles following the revelation highlighted the microchip.
Having found that plaintiff did not adequately plead a misstatement of a material fact or scienter, the Court dismissed the amended complaint without prejudice.
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