Harris v. Ivax Corp

Brief Fact Summary. Ivax Corp. (Defendant) issued multiple press releases including forward-looking statements.

Synopsis of Rule of Law. When the elements underlying a prediction or economic estimate include both suppositions and declarations of known fact, the complete list is regarded as a forward-looking statement.

Facts. In early August, Ivax Corp. issued a press release that mirrored optimism about the future while also recognizing business problems. On September 30, the final day of the quarter, in a press release Ivax broadcast that it anticipated a $43 billion loss. This press release included a list of elements that related to Ivax business affecting third quarter outcomes. The statement included forward looking statements and also factual ones. In early Novemeber, Ivax broadcast a multi-million dollar loss in the third quarter, over one hundred million of which was a decrease in the carrying value of the goodwill attributed to specific Ivax businesses. Neither of the previous press releases cited the probability of a goodwill meltdown. The price of Ivax stock plunged. Investors (Plaintiff) brought suit claiming Ivax press releases included deceitful statements. Investors representative of a class of recent buyers of Ivax stock sued for fraud and negligent misrepresentation. The district court dismissed the complaint.

Issue. Are mixed statements protected under the safe harbor provision for forward-looking statements?

Held. (Cox, J.) Yes. Forward-looking statements are usually comprised of historical observation and assumptions regarding the future. Therefore, treating the mixed statement in the September 30 press release as a forward-statement is consistent with congressional objective to relax the “muzzling effect†of possible liability for forward-looking statements. This objective is at the core of the safe harbor stipulation. Affirmed.

Discussion. The Private Securities Litigation Reform Act of 1995(PSLRA) attached the safe harbor stipulation for forward-looking statements to the Securities Exchange Act of 1934. The year after the PSLRA’s creation, there was a noticeable upsurge in the quantity of firms proffering financial predictions, with the largest increase among the chancier firms.