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Matter of Liberty Tax Inc. Securities Litigation

Securities Fraud Suit Dismissed; Statements 'Puffery', Loss Causation Not Pleaded

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MEMORANDUM & ORDER lead Plaintiff IBEW Local 98 Pension Fund (“IBEW”) brings this action against Liberty Tax, Inc. (“Liberty”); Liberty’s former chief executive officer, John Hewitt; and Liberty’s former chief financial officer, Kathleen Donovan. Plaintiffs allege that Liberty and its officers violated federal securities law by making a series of false and misleading statements and by omitting material facts pertaining to the company’s internal controls, compliance efforts, and compensation paid to Hewitt. (Am. Compl. (Dkt. 38) 1.) The cruces of Plaintiffs’ allegations are that Liberty, Hewitt, and Donovan fraudulently covered up Hewitt’s wide-ranging misconduct as CEO and that this misconduct eventually caused Liberty’s stock price to plummet. (Id.

1-16.) Defendants now move to dismiss Plaintiffs’ Consolidated Amended Class Action Complaint (“Complaint”) for failure to state a claim. For the reasons that follow, Defendants’ motion to dismiss is GRANTED. I. BACKGROUND A. Factual Allegations For the purposes of considering Defendants’ motion to dismiss, the court accepts as true all factual allegations in the Complaint. See N.Y. Pet Welfare Ass’n v. City of New York, 850 F.3d 79, 86 (2d Cir. 2017), cert, denied sub nom., 138 S. Ct. 131 (2017). The court will supplement these allegations by taking judicial notice of Liberty’s stock price when relevant. See Acticon AG v. China N. E. Petroleum Holdings Ltd., 692 F.3d 34, 37 n.1 (2d Cir. 2012). IBEW represents a putative class of investors who purchased Liberty Tax securities from October 2013 through February 2018 (the “Class Period”). (Am. Compl.

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