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"Bespeaks Caution" Doctrine Inappropriate for Historical Facts

The 9th U.S. Circuit Court of Appeals held that the extension of the "bespeaks caution" doctrine to statements of historical fact was inappropriate. In a case involving an alleged misstatement on the successful completion of a private equity offering, company directors attached a notice to an offering memorandum that stated that the memorandum had not been updated to reflect that the $25 million private equity fund raising had been completed. At the time, only $2 million had yet been raised. Characterizing the statement as a historical fact, the court reversed a district court's dismissal, stating that the lower court had erred in finding the statement immaterial due to sufficient cautionary language in the memorandum.

The court also reversed the lower court's finding that the required mental state for scienter had not adequately been plead. It found that the defendants did not contest that they were aware that the stock sale had not been completed, and yet authored an attached notice to the memorandum stating that it had been completed. Dismissal of the suit's state law claims were also reversed.

‚ Livid Holdings Ltd. v. Salomon Smith Barney, Inc. (9thCir) is reported at ¶93,235 .