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Laborers' Local #231 Pension Fund v. Cowan

United States District Court, D. Delaware

July 18, 2018

LABORERS' LOCAL #231 PENSION FUND
v.
RORY J. COWAN, et al

          ORDER-MEMORANDUM

          KEARNEY, J.

         AND NOW, this 18th day of July 2018, upon considering Defendants' Motion for reargument (ECF Doc. No. 49) of our July 2, 2018 Order (ECF Doc. No. 43) and finding most of the present arguments are duplicative from briefing on the motion to dismiss and Defendants otherwise do not show an intervening change in law, new evidence, or the need to correct a clear error of law or fact to prevent a manifest injustice, it is ORDERED Defendants' Motion for reargument (ECF Doc. No. 49) is DENIED.

         Analysis

         Lionbridge Technologies, Inc.'s board issued a definitive proxy statement to its shareholders unanimously recommending they approve a going-private merger with HIG Capital, LLC. The merger agreement provided shareholders $5.75 in consideration for each of Lionbridge share. In anticipation of issuing the proxy statement, Lionbridge's management team prepared financial projections for the next two years. The management team, including Chairman, CEO, and President Rory J. Cowan and CFO Marc Litz, provided these projections to financial advisor Union Square Advisors LLC. Union Square relied on, among other things, these financial projections to prepare extrapolated financial projections and to render the opinion $5.75 to be fair consideration for a Lionbridge share. In the years leading up to Lionbridge's merger with HIG, Lionbridge publicly pursued an acquisition growth strategy. Despite publicly pursuing an acquisition growth strategy, Lionbridge did not incorporate its potential growth through acquisitions in the financial projections provided to Union Square.

         The proxy statement included management's two year projections, Union Square's extrapolated projections, and Union Square's fairness opinion. Lionbridge's board included a series of disclaimers in the proxy statement. Lionbridge's board disclaimed (1) the projections are not predictive of Lionbridge's actual future performance; (2) "The forecasts reflect assumptions that are subject to change and are susceptible to multiple interpretations and periodic revisions based on .. . any other transaction or event that has occurred or that may occur and that was not anticipated when the forecasts were prepared."; and (3) "In addition, the forecasts do not take into account any circumstances, transactions or events occurring after the dates on which the forecasts were prepared." Lionbridge's board failed to disclaim the projections did not incorporate acquisition based growth.

         Three days after closing the merger, Lionbridge announced its acquisition of the studio Exequo.[1] Lionbridge did not mention Exequo or the potential acquisition of Exequo in the proxy statement.[2] Pension Fund identified a smaller studio than Exequo had a market capitalization of $400 million on the London Stock Exchange.[3] Lionbridge also alleged the acquisition of a company the size of Exequo takes several months and as a result, Lionbridge's board knew of the planned acquisition before issuing the definitive proxy statement but failed to disclose it in the proxy statement.[4]

         After two shareholder challenges to the merger and disclosures in the proxy statement and after the shareholders approved the merger, shareholder Laborers' Local #231 Pension Fund sued Lionbridge, its board, HIG Capital, and HIG's affiliate companies created to complete the merger under Section 14 and Section 20 of the Securities and Exchange Act of 1934. Pension Fund challenged six representations in the proxy statement. Pension Fund alleged the six representations are false or misleading because the board failed to disclose in the proxy statement the projections did not account for acquisition based growth. We found one of the six representations to be actionable under Section 14.

         The representation surviving dismissal explained at the time Lionbridge's board approved the merger with HIG, the board believed Union Square's fairness opinion to be a "positive reason" supporting its decision to approve the merger. We found Pension Fund plead a Section 14 claim because it alleged Lionbridge's board knew the fact the projections did not account for acquisition based growth, but based on the "positive reason" statement, a shareholder could conclude Lionbridge placed confidence in Union Square' fairness opinion and Lionbridge believed Union Square accurately analyzed its potential for future growth.[5]

         Defendants raise four grounds for reconsideration. A motion for reconsideration may only be granted where the moving party shows: "(1) an intervening change in the controlling law; (2) the availability of new evidence that was not available when the court [ruled]; or (3) the need to correct a clear error of law or fact or to prevent manifest injustice."[6] "Because federal courts have a strong interest in the finality of judgments, motions for reconsideration should be granted sparingly."[7]

         A.

         Lionbridge, its board, HIG, and HIG's affiliates disagree with our factual findings and argue the proxy statement disclosed the projections excluded future transactions. They raised the same argument in their motion to dismiss. They acknowledge the disclaimer accompanying the projections explains the forecasts reflect assumptions subject to change and susceptible to multiple interpretations based on, among other things, transactions or events not anticipated when the forecasts were prepared. Based on this statement, we found a reasonable shareholder could conclude the projections included future transactions, including acquisitions, Lionbridge anticipated at the time its management created the projections. Defendants again cite to the immediately following sentence explaining the forecasts do not take into account any circumstances, transactions or events occurring after the date Lionbridge prepared the projections. Defendants argues the first sentence read in context with the second only allows for the interpretation the projections excluded all future transactions, even if anticipated at the time management created the projections.

         The second statement does not change the first statement. The first statement explains the projections reflect assumptions which may be subject to change based on, among other things, transactions or events not anticipated at the time Lionbridge created the projections. The second statement warns shareholders the projections do not account for events taking place after Lionbridge created the projections. Meaning the projections are only as current as the date Lionbridge created them. The statements are not inconsistent. Disclaiming the projections do not take into account future transactions which actually occur is not the same as disclaiming the projections do not incorporate anticipated transactions. Lionbridge could not include actual future transactions at the time it created the projections because Lionbridge cannot predict the future. Lionbridge could only account for anticipated transactions and told shareholders it did so. The proxy statement did not disclose the projections excluded anticipated transactions.

         B.

         Lionbridge, its board, HIG, and HIG's affiliates argue Pension Fund failed to allege they excluded material anticipated acquisitions from the projections. They argue Pension Fund therefore did not allege the omission of acquisition based growth from the ...


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