June 23, 2015

Ruling bolsters investor protections under the Private Securities Litigation Reform Act

(WASHINGTON D.C.) The U.S. Court of Appeals for the District of Columbia Circuit has reversed the dismissal of a securities fraud class action against Harman International Industries, Inc., and remanded it to the U.S. District Court for further proceedings. The Lead Plaintiff in the case is Arkansas Public Employees Retirement System (APERS), which is represented by Lead Counsel Cohen Milstein Sellers & Toll PLLC.

The ruling issued today is significant in that it determines the scope of protection afforded by the so-called “safe-harbor” for forward-looking statements in the Private Securities Litigation Reform Act (PSLRA) of 1995.  Generally, forward-looking statements are insulated from liability when they are accompanied by “meaningful” cautionary statements. The D.C. Circuit held that cautionary statements are not “meaningful,” however, when, as in the case of certain of Harman’s cautionary statements, they warn against risks that have already transpired or are misleading in light of historical facts. This holding is a significant win for investors, since it means that defendants cannot invoke the protection of the PSLRA’s safe harbor when, despite boilerplate cautionary language, their statements nonetheless mislead investors.

The D.C. Circuit also held that contrary to defendants’ arguments, their use of the words “very strong” to describe sales at Harman were plausibly understood by investors to be important and to describe a “historical fact rather than unbridled corporate optimism, i.e., immaterial puffery,” and thus was actionable.

“We are pleased that the D.C. Circuit Court reversed the dismissal of this case and believe that it is the result Congress intended in enacting the Private Securities Litigation Reform Act,” said Cohen Milstein Managing Partner Steven J. Toll, who argued the appeal. “Companies should not be allowed to use the PSLRA’s safe harbor to misrepresent facts with impunity, and the Circuit’s opinion today recognizes that.”

Gail Stone, Executive Director of the Arkansas Public Employees Retirement System, added, "Protecting APERS’ financial assets is a key priority and we are pleased that D.C. Circuit’s ruling will allow us to continue to pursue these fraud claims on behalf of our beneficiaries and all the investors in the class. We also commend Cohen Milstein attorneys on their effective advocacy and perseverance on behalf of Harman investors."

The case now returns to U.S. District Court for the District of Columbia. For more information about In re: Harman Industries International, Inc., Securities Litigation, visit /practice-area/securities-litigation-investor-protection.

Opinion - June 23, 2105