On March 25, 2020, the Honorable Dustin B. Pead, Magistrate Judge for the U.S. District Court for District of Utah, entered an order appointing the Indiana Public Retirement System and the Public School Teachers’ Pension and Retirement Fund of Chicago as Lead Plaintiffs and Cohen Milstein as Lead Counsel in this securities fraud class action against Pluralsight, Inc., a provider of cloud-based and video training courses for software developers, IT administrators, and other creative professionals, and its Chief Executive Officer (“CEO”) and Chairman, Aaron Skonnard, and Chief Financial Officer (“CFO”), James Budge, as well as Pluralsight’s Directors and co-lead underwriters, Morgan Stanley & Co LLC and J.P. Morgan Securities LLC.

On June 9, 2020, Cohen Milstein filed Lead Plaintiffs’ amended complaint, which asserted claims against the Defendants under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 and/or Sections 11, 12(2) and 15(a) of the Securities Act of 1933. The District of Utah dismissed this amended complaint on August 2, 2021, and Lead Plaintiffs appealed this decision to the United States Court of Appeals for the Tenth Circuit.

On August 23, 2022, the Tenth Circuit issued a significant opinion on scienter for shareholders, reversing the district court’s decision and remanding the case for further proceedings. The Tenth Circuit held:

  • Lead Plaintiffs adequately alleged that Pluralsight’s CFO James Budge falsely or misleadingly stated in January 2019 that “today we have about 250” quota-bearing sales representatives, even though Pluralsight in fact only had “about 200” such representatives at that time, as Budge later admitted.
  • Lead Plaintiffs’ allegations supported a strong inference of scienter. The Tenth Circuit found that there were multiple allegations sufficient to adequately allege scienter, including, among others:
  • Allegations that Budge knew his January 2019 statement was false or misleading when made because Budge monitored and reported on the number of sales representatives, which was an objectively verifiable data point. In addition, the statement presented an obvious risk of misleading buyers or sellers, and Budge had a financial motive for making the misleading representation.
  • Importantly, the Tenth Circuit held the existence of a 10b5-1 trading plan does “not per se rebut an inference of scienter where, as here, a defendant was allegedly motivated to misrepresent or withhold material information to affect a stock price.” The Court agreed that the “text and history of Rule 10b5-1 shows that such plans can be manipulated easily for personal financial gain and thus cannot rebut the inference that personal financial gain was a motive for Defendants’ material misrepresentations.”
  • Further, the Tenth Circuit also held that Lead Plaintiffs’ allegations raised a strong inference of scienter because the CEO and CFO allegedly profited from their stock sales, sold a significant portion of their holdings, and the volumes of sales were higher than outside the class period.

The Tenth Circuit also revived Plaintiffs’ claims under Section 20A of the Exchange Act, which provides a private right of action to contemporaneous purchasers against corporate insiders who purchase or sell a security while in possession of material inside information. Finally, the Tenth Circuit also ruled that the district court relied on erroneous reasoning in dismissing Plaintiffs’ claims based on the alleged violation of Item 303 in Regulation S-K, and remanded to the district court for it to consider in the first instance “whether two months of being behind an internal sales ramp capacity plan constitutes a ‘trend’ within the meaning of Item 303.”

Case Background

Originally filed in the U.S. District Court for the Southern District of New York, and later transferred to the U.S. District Court for the District of Utah, this securities fraud class action is brought on behalf of investors who purchased or otherwise acquired Pluralsight common stock from January 16, 2019 through July 31, 2019 (the “Class Period”), and on behalf of purchasers of stock pursuant or traceable to a secondary offering during the Class Period. 

As alleged in the amended complaint, shortly before the start of the Class Period, Pluralsight completed its initial public offering (“IPO”), raising $331.2 million in net proceeds. Less than a year later, on March 7, 2019, Pluralsight completed a secondary public offering (“SPO”), whereby certain of its executive officers, Board members and company insiders sold 15.6 million shares at a price of $29.25 per share, for gross proceeds of approximately $456 million. According to the amended complaint, the SPO served as a massive cash-out, as all the proceeds went to Company insiders and related parties, and none of the money went to fund corporate developments or initiatives.

The amended complaint alleged that throughout the Class Period, Pluralsight misrepresented the size of the Company’s salesforce and its ability to generate strong growth in billings. Specifically, the Company failed to disclose that Pluralsight was experiencing substantial delays in hiring and properly training the salesforce necessary to fuel its sustained growth. In addition, the Defendants knew at the time of the March 2019 SPO that Pluralsight was behind schedule onboarding new sales representatives, which was hurting the Company’s sales execution abilities and preventing Pluralsight from continuing to grow billings at its historical rate. Instead of disclosing such facts at the time of the SPO, and to cash out at inflated prices, Defendants intentionally withheld this pertinent information from investors.

On July 31, 2019, after the close of the markets, Pluralsight announced dismal financial results for the second quarter ended June 30, 2019: specifically, that its billings growth rate had sharply deteriorated from over 40% to just 23% in the same quarter year-over-year. The Company blamed its declining growth in billings on sales execution challenges and other issues with its salesforce. Pluralsight also disclosed that its Chief Revenue Officer was resigning. In response to these disclosures, Pluralsight’s share price plummeted. The stock price fell $12.13 per share in a single day – a nearly 40% drop – to close at $18.56 per share on August 1, 2019, causing significant financial damages to the proposed class members.

After the District of Utah dismissed the amended complaint on August 2, 2021, Lead Plaintiffs appealed to the Tenth Circuit, which on August 23, 2022 reversed the district court’s decision and remanded for further proceedings.


Originally named, City of Birmingham Firemen’s and Policemen’s Supplemental Pension System, et al. v. Pluralsight, Inc., et al., the case is now captioned: Indiana Public Retirement System and Public School Teachers’ Pension and Retirement Fund of Chicago, et al. v. Pluralsight, Inc., et al., Case No. 1:19-cv-000128-JNP-DBP (D. Utah).