District Court Holds Video Game Company’s Optimistic Statements Are Not Actionable

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The US District Court for the Northern District of California recently dismissed a securities fraud class action against Electronic Arts, Inc. (EA) and named officers and directors, holding that optimistic statements about EA’s ability to transition to next-generation gaming consoles were mere puffery. 

In early 2013, EA began development on a sequel to one of its most profitable titles, Battlefield 4, and announced that the new game would be playable on next-generation gaming consoles, Sony PlayStation 4 and Microsoft Xbox One. During the development and release period—between May 2013 and December 2013—EA representatives made positive statements about Battlefield 4, emphasizing EA’s ability to transition with the next-generation consoles, contrary to what plaintiffs describe as EA’s prior history of disastrous game-launch and console-transition failures. After an October 29 launch, the company received complaints from customers and negative reviews from critics regarding the game’s playability. EA’s stock price dropped from a high of $27.99 to $21.01 on December 5, 2013. In late 2013 and early 2014, plaintiffs brought separate actions alleging securities fraud, which were consolidated in February 2014.  

The court examined eight statements identified by plaintiffs as materially false or misleading and held that the statements emphasizing that EA was prepared to make the console transition, or that EA had “de-risked” the process, were corporate opinion or mere puffery. Thus, the court granted EA’s motion to dismiss because all of the alleged misstatements were inactionable opinion. 

Kelly v. Electronic Arts, Inc., No. 13-05837 SI (N.D. Ca. Oct. 20, 2014).

 

 

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