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Denial That Company For Sale Not An Actionable Misstatement

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The United States Court of Appeals for the Fourth Circuit has affirmed the dismissal of a securities fraud class action by selling shareholders, holding that a statement that "[w]e're not a company that's for sale," made by its CEO shortly before the company announced that it had reached a merger agreement, was not actionable. The Court held that, viewed in the context in which it was made, the statement was not materially misleading. Among other things, the CEO's remarks were made while he was commenting on a favorable earnings report issued by the company. In addition, articles reporting his remarks noted that the field in which the company did business was rapidly consolidating. Independently, the Court concluded that the complaint failed adequately to allege that the CEO had acted willfully or recklessly in making the statement at issue. (Phillips v. LCI International, Inc., Fed. Sec. L. Rep. 90,645 (CCH) 4 th Cir., 9/15/99)

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