Boston Retirement System v. Uber Technologies, Inc.

Background

Boston Retirement System (BRS), the lead plaintiff in a proposed class action, sued Uber Technologies, several current and former executives, and the underwriters of Uber’s initial public offering. BRS bought Uber stock in the May 2019 offering. The complaint asserts claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, alleging that Uber’s registration statement contained false or misleading statements and omitted material information.

BRS alleged that the registration statement misleadingly portrayed Uber as having moved beyond earlier problems. The alleged omissions concerned the legality of Uber’s business model, passenger safety, and Uber’s financial condition. The defendants jointly moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint adequately states a legally sufficient claim.

Materials Considered by the Court

The court allowed incorporation by reference of Uber’s amended registration statement and its first- and second-quarter 2019 financial-results press releases because the complaint extensively relied on them. The court also took judicial notice of 26 news articles, but only to show that information was available to the market—not to establish the truth of every factual assertion in those articles.

Pleading Standards

The court applied Rule 8’s plausibility requirement and the heightened pleading rules applicable to securities claims. It held that Rule 9(b), which requires fraud-based allegations to identify the specific circumstances of the alleged misconduct, did not generally apply because BRS expressly disclaimed a fraud theory and pleaded the claims against Uber under strict liability and against the other defendants under negligence theories. The court held that challenged statements of opinion still had to be pleaded with particularity.

Puzzle Pleading

The defendants argued that the complaint used impermissible “puzzle pleading”—a format that makes defendants and the court match allegedly misleading statements with generalized reasons they were misleading. Although the court described the complaint as long, confusing, and repetitive, it found that BRS identified the statements it challenged and explained why it believed each was false or misleading. The court therefore rejected this argument.

Alleged Omissions

The court held that BRS plausibly alleged actionable omissions. Although the registration statement disclosed legal uncertainty, reports of sexual assault and other safety incidents, and expected near-term losses, the court concluded that those disclosures did not necessarily correct the more optimistic impression created by the document as a whole.

In particular, the court found plausible BRS’s allegations that Uber continued using a strategy of entering markets in ways it allegedly knew were illegal, treated fines or bribes as a cost of doing business, and delayed layoffs and restructuring despite knowing they were necessary. The court also held that BRS plausibly alleged disclosure duties under Securities and Exchange Commission Regulation S-K Items 105 and 303, which concern significant investment risks and known trends or uncertainties affecting financial performance.

The defendants relied on a “truth-on-the-market” defense, meaning that the alleged information was already publicly available and therefore did not mislead investors. The court found that defense generally less applicable to registration statements for initial public offerings, where the offering price is set before public trading. It also held that the defense was not suitable for resolution at the motion-to-dismiss stage and that, in any event, the defendants had not met the required burden on the facts alleged.

Other Challenges to the Statements

The court rejected the argument that the challenged statements were non-actionable corporate “puffery,” or vague optimism that reasonable investors would not rely on. In context, statements such as “it’s a new day at Uber” could imply that significant past problems had been corrected, while BRS plausibly alleged that some of those problems continued.

The court also rejected arguments based on hindsight pleading, the bespeaks-caution doctrine, and opinions. It concluded that BRS relied on information allegedly known at the time of the initial public offering rather than later events to show that the statements were misleading when made. The cautionary language in the registration statement did not conclusively eliminate the possibility that the statements were misleading. Finally, BRS plausibly alleged particular facts undermining the basis for Uber’s statements about legal compliance, passenger safety, and financial performance.

Disposition

The court denied the defendants’ motion to dismiss. The defendants were ordered to respond to the complaint within 21 days of the order. This order addressed whether BRS had adequately pleaded its claims; it did not enter a final judgment on liability.

Classification Note

This is classified as a procedural order because the court ruled on a Rule 12(b)(6) motion to dismiss, even though it concluded that the allegations were plausible and discussed the underlying Securities Act theories.