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3rd Circ. Won't Revive Suit Over $360M Lionbridge Deal

The Third Circuit has refused to revive a proposed securities class action over private equity firm HIG Capital's roughly $360 million acquisition of Lionbridge Technologies Inc., rejecting claims that the globalization specialist issued a misleading proxy statement in seeking shareholder approval of the deal.

In a nonprecedential opinion, a circuit panel on Wednesday upheld a Delaware federal court's March summary judgment ruling for the companies and related defendants with respect to a Lionbridge board statement in the proxy that it viewed a fairness opinion from the company's financial adviser as a "positive reason" to approve the transaction.

Lead plaintiff and former Lionbridge shareholder Laborers' Local #231 Pension Fund has claimed the statement is misleading since it didn't disclose that the financial projections used by the adviser did not include the impact of the company's future acquisitions. Lionbridge ultimately merged into an HGI subsidiary.

But the panel reasoned that the second sentence in a passage in the January 2017 proxy undercuts the pension fund's argument.

The first sentence of the passage states, "'The forecasts ... reflect assumptions that are subject to change and are susceptible to multiple interpretations and periodic revisions based on actual results, revised prospects for our business, changes in general business or economic conditions, or any other transaction or event that has occurred or that may occur and that was not anticipated when the forecasts were prepared,'" according to the panel opinion.

The second sentence states, "'In addition, the forecasts do not take into account any circumstances, transactions or events occurring after the dates on which the forecasts were prepared,'" the opinion said.

"Even if the first sentence creates any ambiguity as to whether future acquisitions were considered, the second sentence clarifies that the forecasts do not account for those future acquisitions," the panel said in the opinion, authored by U.S. Circuit Judge Morton I. Greenberg.

In addition to U.S. District Judge Colm F. Connolly's March order, the panel affirmed the judge's February order denying the pension fund's bid to revise its second amended complaint to add allegations related to the financial projections for Lionbridge in the proxy. The pension fund has claimed the statements in question misled shareholders into supporting the deal.

The panel concluded that "the projections at issue were included in the proxy not as an estimate of Lionbridge's future performance, but rather solely to provide shareholders with the same information that had been provided" to a special committee of Lionbridge board members, the board and the financial adviser.

"Our ruling does not eliminate a plaintiff's ability to bring a securities claim by alleging that certain projections themselves are false and misleading when those projections are included as an estimate of the company's future performance," the panel said. "But such a circumstance is distinct from the situation in this matter in which the projections were expressly disclaimed as being disclosed solely for the reason that they were made available to individuals and entities other than the shareholders."

Counsel for the parties did not immediately respond to requests for comment Thursday.

U.S. Circuit Judges Thomas M. Hardiman, Morton I. Greenberg and Anthony J. Scirica sat on the panel for the Third Circuit.

Laborers' Local #231 Pension Fund is represented by Randall Baron, Joseph D. Daley, David T. Wissbroecker and Christopher H. Lyons of Robbins Geller Rudman & Dowd LLP, and Peter B. Andrews, David M. Sborz and Craig J. Springer of Andrews & Springer LLC.

The defendants are represented by Deborah S. Birnbach and Jennifer B. Luz of Goodwin Procter LLP, David John Teklits of Morris Nichols Arsht & Tunnell LLP, Anne S. Gaza, Elena C. Norman and Robert M. Vrana of Young Conaway Stargatt & Taylor LLP, and Joshua Z. Rabinovitz, Adam T. Humann and Kevin R. Powell II of Kirkland & Ellis LLP.

The case is Laborers' Local 231 Pension Fund v. Rory J. Cowan et al., case number 20-1844, in the U.S. Court of Appeals for the Third Circuit.