York County on Behalf of the County of York Retirement Fund v. HP Inc.

Background

The plaintiff, a former HP shareholder, brought the action on behalf of a purported class. The plaintiff alleged that HP, Dion J. Weisler, Catherine A. Lesjak, Enrique Lores, and Richard Bailey committed securities fraud involving HP’s ink-and-toner supplies business.

The alleged class period ran from November 6, 2015, to June 21, 2016. According to the complaint, the defendants publicly represented that the supplies business was healthy while concealing elevated channel inventory and practices called “gray marketing” and “accelerations” or “pull-ins.” The plaintiff alleged that these practices involved discounted sales, harmed profit margins, increased inventory, and led to later disclosures about reduced supplies revenue and inventory write-downs.

Court’s analysis

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. The court focused on the statute of limitations. Under the rule discussed in the opinion, a securities-fraud claim must be brought within two years after the plaintiff discovered, or reasonably should have discovered, the facts constituting the alleged violation.

The court found that the complaint itself alleged that the relevant misstatements, the individual defendants’ involvement, financial certifications, margin information, inventory reductions, and revenue disclosures were publicly available during 2015 and 2016. The court concluded that a reasonably diligent plaintiff could have discovered the operative facts by the end of the class period or shortly afterward. Because those facts could have been discovered nearly five years before the complaint was filed, the court held that the claims were time-barred.

The court also stated that allegations concerning statements made after the plaintiff sold all of its HP shares were barred because the plaintiff could not show harm from those later statements. The opinion describes this as a lack of standing and a lack of subject-matter jurisdiction over those claims.

Disposition

Judge Jeffrey S. White granted the defendants’ motion to dismiss on statute-of-limitations grounds without leave to amend. The court concluded that it could not conceive of facts that would avoid the limitations bar without directly contradicting the complaint’s earlier allegations. The court ordered a separate judgment and directed the Clerk to close the file.

Classification

This is a procedural order because the court dismissed the claims under a statute-of-limitations bar and did not decide whether the alleged securities fraud occurred.