MetroPCS Escapes Securities Class Action

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Shareholders of MetroPCS Communications, Inc., the nation's fifth-largest wireless communications provider, filed a federal securities class action against the company and certain of its officers, alleging that defendants made materially false or misleading statements or omissions regarding the company's future prospects that artificially inflated the value of MetroPCS common stock in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The U.S. District Court for the Northern District of Texas held that plaintiffs failed to adequately plead fraud and granted the defendants' motion to dismiss.

The objectionable statements related to: (1) the accuracy of the 2009 earnings guidance issued at the end of 2008; (2) the strength of MetroPCS's business model in a recessionary economy; (3) the impact of increased competition on the wireless communications business; and (4) the relationship between subscriber growth and attrition, particularly in light of a cell phone promotion that may have attracted disloyal customers who were inclined to leave after the promotion ended. Plaintiffs alleged that certain officers sold their shares prior to announcing adjusted corporate financials for 2009, causing the stock price to fall from $18.85 to $6.01 per share.

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Published In: Business Organization Updates, Business Torts Updates, Civil Procedure Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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