The United States District Court for the District of Nevada has denied a motion for summary judgment by defendants, thereby permitting a securities fraud class action to proceed. Plaintiffs, who had purchased stock in a company that was erecting a casino in Las Vegas, alleged that defendants had misrepresented the casino's expected construction costs. Although the challenged statement describing construction expenses as "funded" was couched in the past tense, the Court held that it constituted a "forward-looking" statement under the Private Securities Litigation Reform Act ("PSLRA") because the prospectus emphasized the ongoing nature of the construction. The Court concluded, however, that defendants could not take advantage of the PSLRA's safe harbor for predictive statements, in light of evidence indicating defendants' "actual knowledge" that their statement was misleading, such as a memorandum containing cost figures some $10 million higher than those contained in the prospectus. (In the matter of Stratosphere Corp. Secur. Litig., CV-S-96-708, 1999 WL 804023, D. Nev., 10/4/99)
District Court Rejects Reliance On PSLRA "Safe Harbor" Provision
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