Alleged violations of the Securities Acts of 1933 (the 1933 Act) & 1934 (the 1934 Act); Whether plaintiffs stated a claim for false & misleading statements or omissions about defendant’s “customer-acquisition cost” (CAC) & warnings in its Registration Statement; 15 USC §§ 11, 12(a)(2), & 15; §§ 10(b) & 10b-5; Whether plaintiff’s claims under §§ 11 & 12(a)(2) were subject to FedRCivP 9(b)’s heightened pleading requirements; Whether the contested statements were actionable or were protected as “historical statements of past performance”; The “Bespeaks Caution” doctrine; The Private Securities Litigation Reform Act (PSLRA); Control-person liability

The court held for the first time that the Bespeaks Caution doctrine survived the codification of the PSLRA, and concluded it will shield companies from liability when “forward-looking statements are accompanied by meaningfully cautionary language so that a reasonable investor would understand the statements.” Plaintiff-Plumbers Local 290 Pension Trust Fund invested in defendant-Root, Inc., attracted by its supposedly low CAC. When the stock was purchased, it sold for $27 per share. But the stock price decreased when Root’s CAC increased, ending its competitive advantage. It claimed this was caused by its nationwide expansion. Plumbers Local and other investors sued under the 1933 and 1934 Securities Acts. The district court dismissed the complaint for failure to state a claim. On appeal, the court agreed with the district court that the Rule 9(b) pleading standard applied where “plaintiffs presented a 1934 Act Section 10(b) fraud claim and a 10b-5 fraud claim along with 1933 Act Sections 11 and 12(a)(2) claims that were all grounded in one fraudulent course of conduct relying on one set of facts, alleging that Root made materially false and misleading statements and omissions.” The court further held that two of the statements at issue involved “protected statements of past or historical performance,” and that Root “had no duty to update [them] even if less favorable results might have been predictable.” The court also joined other circuits in holding that the Bespeaks Caution doctrine survived the PSLRA’s codification and that “when companies such as Root make forward-looking statements contained in a registration statement or in connection with an initial public offering, the Bespeaks Caution doctrine” shields them from liability when those “statements are accompanied by meaningfully cautionary language so that a reasonable investor would understand the statements.” It found that the third statement at issue was “a cautionary statement, is labeled a risk factor, and is forward-looking. It falls squarely within the Bespeaks Caution doctrine’s protection.” The court also noted that since there was no primary violation of either §§ 11 or 12(a)(2), there was “no control-person liability” here. Affirmed.