Texas Securities Fraud Lawsuit Against MetroPCS Communications is Dismissed

A district court judge has dismissed the Texas securities fraud case against MetroPCS Communications Inc. (PCS). The telecom services provider is accused of putting out false or misleading statements about its 2009 earnings guidance, which was issued in November 2008 and reaffirmed for the duration of the class period.

The plaintiff also claimed that MetroPCS or its executives made misleading and false statements about the strength of the companies business model, the effect of competition on the cell phone provider, and the relationship between churn, which is the percentage of subscribers that stop using the company’s services during a given time frame, and subscriber growth, such as how the $49 handset promotion was likely to (and did) increase churn when it brought in customers who were likely to leave MetroPCS when the promotional period was over. When MetroPCS eventually lowered its guidance, its stock price dropped to $6.01/share, which was a lot lower than its $18.85 class period high.

In his ruling, Judge A. Joe Fish said that the lead plaintiff did not sufficiently allege scienter and the lawsuit did not plead fraud with the requisite specificity in regards to certain claims. He also said that certain challenged statements were either immaterial puffery or forward-looking statements protected under the Private Securities Litigation Reform Act’s safe harbor.

In dismissing the case, the court said while the plaintiffs emphasized three allegations that allegedly support a solid inference of scienter, which their 1934 Securities Exchange Act claims require, these alone were not enough support. That said, the court noted that even if the allegations of scienter did suffice, it would have still dismissed the Texas securities fraud lawsuit. The court also noted that allegations regarding churn-related misrepresentations weren’t specific enough.

Related Web Resources:
Telecom Services Provider Wins Dismissal of Investor Securities Suit, BNA Daily Securities, March 31, 2011
Hopson v. MetroPCS Communications Inc.

More Blog Posts:
Texas Securities Fraud: SEC Charges Talk Radio “MoneyMan” Over Promissory Note Offerings, Stockbroker Fraud Blog, April 4, 2011
Motion to Dismiss SEC Lawsuit Accusing Dallas Billionaire Brothers of $500,000 Securities Fraud Denied, Stockbroker Fraud Blog, April 1, 2011
FBI Arrests Texas Leader of Pump-and-Dump Scheme, Stockbroker Fraud Blog, March 23, 2011
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