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US Appeals Court Sends BlackBerry Lawsuit Back to Lower Court

US Appeals Court Sends BlackBerry Lawsuit Back to Lower Court

By Reuters | Updated: 25 August 2016 10:05 IST

Highlights

Lawsuit failed to state a plausible claim
BlackBerry launched its Z10 phone in January 2013
Low sales of the Z10 led to a projected $930 million writedown

A US appeals court on Wednesday upheld the dismissal of a lawsuit accusing BlackBerry of fraudulently inflating its stock price by painting an upbeat picture of the prospects for its BlackBerry Z10 smartphone line that was misleading.

While the 2nd US Circuit Court of Appeals in New York said the lawsuit failed to state a plausible claim, it ordered a lower-court judge to reconsider whether to let the plaintiffs amend their complaint in light of what they said was new evidence.

Neither BlackBerry nor a lawyer for lead plaintiffs Todd Cox and Mary Dinzik responded immediately to requests for comment.

BlackBerry launched its Z10 phone in January 2013 in a bid to recoup market share lost to Apple's iPhone, and Samsung devices powered by Google's Android.

The BlackBerry Z10 won positive reviews, but low sales led to a projected $930 million (roughly Rs. 6,240 crores) writedown for unsold inventory on September 20, 2013. BlackBerry shares lost about one-sixth of their value that day.

The Waterloo, Ontario-based company ousted its chief executive officer, Thorsten Heins, less than two months later. The lawsuit alleged that BlackBerry attempted to conceal the poor performance of the Z10 in order to artificially inflate its stock price.

In Wednesday's decision, the 2nd Circuit upheld US District Judge Thomas Griesa's March 2015 dismissal of the lawsuit for the failure to allege that BlackBerry and its executives knowingly misled investors.

The three-judge appeals panel said the plaintiffs' claims amounted to "fraud by hindsight" by saying that the defendants must have known the device would be unsuccessful.

The court nonetheless said the plaintiffs could try to persuade Griesa to let them amend their complaint in light of new legal developments and evidence that the plaintiffs said would support their claims.

The appeals court said if Griesa refuses to let the plaintiffs amend their complaint, he should explain his reasons, which he had not done before.

The case is Cox v. BlackBerry Limited, 2nd US Circuit Court of Appeals, No. 15-3991.

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