Daily Journal Quotes Rex Heinke on 9th Circuit Ruling on Safe Harbor Provisions of Private Securities Litigation Reform Act
Rex Heinke, co-head of the Supreme Court and appellate practice at Akin Gump, has been quoted in the Daily Journal article “9th Circuit revives case alleging Quality Systems misled investors,” pertaining to a shareholder suit alleging that leaders of a major California health care information systems company made false statements to investors about the company’s financial stability in 2011 and 2012.
A proposed class action was first filed in 2013 alleging that the CEO and other executives of Quality Systems Inc. told investors and financial analysts that the company’s sales of its medical office software to health care providers were increasing when they were not. According to the article, the court’s ruling, which said that “mixed” comments including statements about both the company’s current sales and projected sales were not protected, could limit how corporate entities present information about present and future growth.
“In the real world, you often are going to have combined or what the court calls mixed statements. You’re not too often going to have only one or the other,” observed Heinke. He added that corporate growth projections are often based on current rates. Under case law, companies are not able to receive safe harbor protection for mixed statements when the nonforward-looking statements are false, regardless of the presence of cautionary statements for forward-looking projections.