Asher v. Baxter International Incorporated

377 F.3d 727 (7th Cir. 2004)

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Nature of the Case

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Facts

D is a manufacturer of medical products. It released its second-quarter financial results for 2002 on July 18 of that year. Sales and profits did not match analysts' expectations. Shares swiftly fell from $43 to $32. Ps sued D and contend that the $43 price was the result of materially misleading projections on November 5, 2001, projections that D reiterated until the bad news came out on July 18, 2002. Ps are investors who purchased during that time either in the open market or by exchanging their shares of Fusion Medical Technologies. D acquired Fusion in a stock-for-stock transaction. Ps alleged that D juiced up the market price so that it could secure Fusion in exchange for fewer of its own shares. Ps claim that D's November 5 projections were materially false because: (1) its Renal Division had not met its internal budgets in years; (2) economic instability in Latin America adversely affected D's sales in that part of the world; (3) D closed plants in Ronneby, Sweden, and Miami Lakes, Florida, that had been its principal source of low-cost dialysis products; (4) the market for albumin (blood-plasma) products was 'over-saturated,' resulting in lower prices and revenue for the BioSciences Division; (5) sales of that division's IGIV immunoglobin products had fallen short of internal predictions; and (6) in March 2002 the BioScience Division had experienced a sterility failure in the manufacture of a major product, resulting in the destruction of multiple lots and a loss exceeding $10 million. D's projection, repeated many times was that during 2002 the business would yield revenue growth in the 'low teens' compared with the prior year, earnings-per-share growth in the 'mid-teens,' and 'operational cash flow of at least $500 million.' D often referred to these forecasts as 'our 2002 full-year commitments.' D provided a number of cautionary statements throughout the class period. The district court concluded that these are 'meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement.' Ps contend these projections were materially false Ps contend that the cautionary statements did not cover any of the six matters that (in Ps' view) D had withheld. Ps also contend that the cautionary statement did not follow the firm's fortunes: plants closed but the cautionary statement remained the same; sterilization failures occurred but the cautionary statement remained the same, and bad news that D well knew in November 2001 did not cast even a shadow in the cautionary statement. The district court dismissed holding that D's forecasts come within the safe harbor created by the PSLRA.