Bratusov v. ComScore, Inc.

Background

Sergii Bratusov brought a putative securities class action for himself and other people and entities who purchased or acquired ComScore securities during the alleged class period, February 28, 2019, through August 7, 2019. He sued ComScore, its then-chief executive officer Bryan Wiener, and its chief financial officer Gregory A. Fink.

Bratusov asserted claims under Section 10(b) of the Securities Exchange Act, Securities and Exchange Commission Rule 10b-5, and Section 20(a) of the Exchange Act. He alleged that ComScore and its executives made false or misleading statements about revenue growth and the Company’s strategy to establish a cross-platform measurement currency. According to the complaint, ComScore’s executives and Board disagreed about whether to emphasize growth and product development or cost controls. Wiener and President Sarah Hofstetter later resigned, and ComScore disclosed disappointing financial results, workforce reductions, and a strategic review.

The defendants moved to dismiss under Federal Rules of Civil Procedure 9(b) and 12(b)(6). Rule 12(b)(6) allows dismissal when a complaint does not plausibly state a legal claim. Rule 9(b) requires fraud to be pleaded with particularity.

Court’s analysis

The court held that Bratusov did not adequately plead an actionable misstatement or omission. It found no allegation showing that ComScore’s statements about expanding customer relationships, driving revenue growth, improving its cost structure, investing in product development, or having a strong foundation were false when made.

The court also concluded that much of ComScore’s statement that its strategy was “working” and that it was on the “right track” was non-actionable corporate optimism, or “puffery”—general promotional language that a reasonable investor would not treat as a guarantee of a specific result. Bratusov also failed to show that the company’s revenue-growth statements were false when made.

The court rejected the argument that ComScore had a duty to disclose the internal disagreement between management and the Board. It found that ComScore had not promised to pursue revenue growth to the exclusion of cost control, had not committed to a particular level of spending or resources, and had not abandoned the shared goal of creating a cross-platform measurement currency. The complaint therefore did not show why disclosure of the disagreement was necessary to prevent the challenged statements from misleading a reasonable investor.

The court separately held that the complaint did not plead scienter, meaning the intent to deceive or sufficiently reckless conduct required for securities fraud. The complaint did not allege facts showing that the defendants personally benefited from fraud, knew facts contradicting their statements, engaged in deliberately illegal behavior, or failed to monitor information they had a duty to check. The confidential-witness allegations and employee departures supported, at most, an inference of disagreement over business strategy, not an intent to mislead investors.

Because Bratusov failed to plead a primary securities-law violation, the court also held that he could not state a control-person claim under Section 20(a) against the individual defendants.

Disposition

The court granted the defendants’ motion to dismiss and dismissed the complaint. Judge Katherine Polk Failla granted Bratusov’s request for leave to amend because the court had not previously allowed him to correct the pleading deficiencies and could not conclude that amendment would be futile or unfairly prejudicial. The court instructed him to consider the opinion’s observations and to focus any amended complaint on allegations related to the class period. It ordered him to notify the court by July 24, 2020, whether he would file a second amended complaint.