U.S. District Court Judge Dismisses Claims Alleging Projections Noted in Merger Proxy and Fairness Opinion Were False or Misleading

On January 25, 2018, in City of Hialeah Employees’ Retirement System v. FEI Co., the U.S. District Court in Oregon dismissed Section 14(a) claims challenging projections in a merger proxy statement, finding them protected by the Private Securities Litigation Reform Act (PSLRA) safe harbor for forward-looking statements. Management had previously prepared high and low sets of projections which were both included in the proxy statement, and directed its financial advisor to base its financial analysis in the fairness opinion on the lower projections, believing those projections were more reflective of the business. The proxy statement explained the preference for the lower projections and cautioned that the projections were not factual and might materially differ from actual results. In addition to finding the statements protected by the PSLRA, the Court found the cautionary language sufficient for the proxy. The Court also dismissed a claim alleging the fairness opinion was false or misleading due to over-discounting the DCF analysis, finding plaintiffs’ allegations of material omissions conclusory due to insufficient allegations that the inputs or assumptions, or the opinion itself, were inaccurate or misleading.