IBEW Local 98 Pension Fund v. Best Buy Co., Inc.

Background

The plaintiffs—IBEW Local 98 Pension Fund, Marion Haynes, and Rene LeBlanc—brought securities-fraud claims against Best Buy Co., Inc., Brian J. Dunn, Jim Muehlbauer, and Mike Vitelli. They alleged that statements in a September 14, 2010 press release and conference call misrepresented Best Buy’s financial performance and earnings expectations. The plaintiffs sought to represent a class of stockholders who claimed to have been injured.

The case returned to the district court after the Eighth Circuit reversed the court’s class-certification order. The Eighth Circuit held that the defendants had rebutted the presumption that investors relied on the alleged misstatements by presenting direct evidence that the statements had no effect on Best Buy’s stock price. The district court then ruled that the plaintiffs would have to prove traditional, direct reliance—meaning they had to show that they heard the September 14 conference call and bought or sold Best Buy stock because of it. The court also denied the plaintiffs’ requests to file a renewed class-certification motion and to amend their complaint.

Claims and Arguments

The plaintiffs asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act. The court identified reliance as an element of the Section 10(b) claim. Although investors may sometimes rely on a rebuttable fraud-on-the-market presumption, the court explained that direct reliance was required here because the Eighth Circuit had found that the defendants rebutted that presumption.

The defendants relied on Marion Haynes’s deposition testimony. Haynes testified that, before purchasing Best Buy stock on November 29 and December 2, 2010, he had not listened to or read the September 14 earnings call and had not read analysts’ reports about the call or press release. The defendants also argued that the record contained no evidence that IBEW Local 98 Pension Fund or Rene LeBlanc relied on the conference call. Haynes acknowledged that he could not prove the required reliance and did not argue that the summary-judgment motion should be denied. The opinion’s footnote states that IBEW Local 98 Pension Fund and Rene LeBlanc did not file oppositions to the motion.

Court’s Analysis

The court concluded that the plaintiffs could not meet their burden of proving reliance. Because there was no genuine dispute of material fact on that required element, the court held that summary judgment was appropriate on the securities-fraud claim. The court also held that the Section 20(a) control-person claim failed because it was derivative of the Section 10(b) claim.

Disposition

Judge Donovan W. Frank granted the defendants’ Motion for Summary Judgment. The order states that the plaintiffs’ claims were dismissed with prejudice and directed that judgment be entered accordingly.