IN RE NIELSEN HOLDINGS PLC SECURITIES LITIGATION

Background

The plaintiffs brought a proposed securities-fraud class action under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5. They alleged that Nielsen Holdings plc and officers Dwight Mitchell Barns, Jamere Jackson, and Kelly Abcarian made false or misleading statements about Nielsen’s Buy and Watch business segments during a class period from February 11, 2016, through July 25, 2018.

The Buy Segment measured consumer purchasing and analytics. The plaintiffs challenged statements about: (1) projected growth and the stability of the Buy Developed Market business; (2) the strength of the Buy Emerging Market business; and (3) the value of Buy Segment goodwill, an intangible asset reflecting future economic benefits from an acquisition. They also challenged statements about the effect of the European Union’s General Data Protection Regulation, or GDPR, on Nielsen’s Watch Marketing Effectiveness business.

Legal Standard

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. Because the case involved alleged securities fraud, the plaintiffs also had to plead the circumstances of the alleged fraud with particularity and provide particular facts supporting a strong inference that the defendants acted with intent to deceive, manipulate, defraud, or with recklessness.

Rulings on the Buy Segment Claims

The court granted the motion as to claims that Nielsen failed to disclose the downward trend in discretionary spending in its 2016 annual report and April 2016 quarterly report. The court found that the complaint did not adequately allege that Barns and Jackson knew about the trend in 2015 or the first quarter of 2016. The court denied the motion as to claims that Nielsen failed to disclose the trend in its July 2016 quarterly report and later Securities and Exchange Commission filings, concluding that Nielsen’s own statements plausibly showed management knew about the trend by that time.

The court allowed claims based on statements in July 2016 about the strength and stability of the Buy Developed Market business to proceed. It dismissed claims based on earlier statements because the complaint did not plausibly allege that the downward trend had taken root, that the defendants omitted facts making their opinions misleading, or that the defendants did not believe their optimistic statements. The court also dismissed claims based on Buy Developed Market revenue forecasts for 2016 and 2017. Those forecasts were forward-looking statements, and the complaint did not identify specific contemporaneous information showing that the defendants did not believe the forecasts when made.

The court dismissed the Buy Emerging Market claims. It found that the confidential-witness allegations and later disappointing financial results did not adequately establish that the defendants acted with conscious recklessness rather than negligence. The court therefore rejected the plaintiffs’ theory that later negative results, by themselves, showed earlier securities fraud.

The court denied the motion as to claims concerning the value of Buy Segment goodwill in Nielsen’s 2016 and 2017 annual reports. The plaintiffs alleged that the reported valuations relied on baseless cash-flow growth rates, failed to disclose relevant accounting information, and did not account for a sustained decrease in Nielsen’s stock price. The court concluded that these allegations, considered together with Nielsen’s later $1.4 billion impairment charge reducing Buy Segment goodwill by 54%, provided sufficiently strong circumstantial evidence of recklessness to allow the claims to proceed.

Rulings on the GDPR Claims

The court granted the motion as to claims based on statements made before GDPR took effect. The complaint did not adequately allege that the defendants knew before May 25, 2018, that data providers would cut off Nielsen’s access to data or that the defendants’ projections about GDPR were misleading when made. The court also found that Nielsen’s earlier risk disclosures adequately warned that data-protection laws, including GDPR, could limit data access or affect Nielsen’s services. The court likewise dismissed the related claims that Nielsen failed to disclose GDPR-related uncertainties.

The court denied the motion as to claims based on statements made after GDPR took effect. It concluded that Barns’s statement six days after the effective date that GDPR was a “non-event” and that Nielsen had access to all needed data, along with Abcarian’s similar June 14, 2018 statement, was plausibly misleading in light of the allegation that 120 campaigns had been shut off on May 25. The court also concluded that the repeated assurances and the magnitude of the alleged data-access problem supported an inference of scienter, meaning the required state of mind for securities fraud.

Disposition

The court granted the motion to dismiss in part and denied it in part. The claims that survived concerned the alleged failure to disclose declining discretionary spending in July 2016 and later filings, misleading July 2016 statements about the Buy Developed Market business, misleading statements about Buy Segment goodwill, and misleading statements about GDPR’s effect on the Watch Segment after GDPR took effect. The court dismissed the Section 20(a) claims tied to the dismissed Section 10(b) claims.

The court granted the plaintiffs leave to amend the dismissed claims one more time. It directed the parties to confer and submit a proposed schedule for any amended complaint and related responses by January 19, 2021. The clerk was directed to terminate the defendants’ motion to dismiss.