Xerox Wins Dismissal of Securities Fraud Class Action over Medicaid Software

On March 20, 2018, Judge Paul A. Engelmayer of the U.S. District Court for the Southern District of New York dismissed a putative securities fraud class action brought on behalf of certain purchasers of Xerox stock against Cravath clients Xerox Corporation and certain current and former Xerox directors and officers.

The complaint alleged that defendants made numerous misstatements in connection with Xerox’s implementation of its Health Enterprise software platform as a Medicaid administration tool for six state governments, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b‑5. Specifically, the complaint alleged that the defendants had misrepresented (i) the reusability of the Health Enterprise platform from state to state, (ii) the success of the respective implementations, and (iii) the profitability of the Health Enterprise business segment.

In granting Xerox’s motion to dismiss, Judge Engelmayer found that the vast majority of the challenged statements were inactionable because they were “classic puffery,” statements of opinion and/or forward‑looking statements accompanied by meaningful cautionary language. Of the remaining statements, Judge Engelmayer found that they were either literally true, or that the plaintiff had failed to plead with particularity why the statements were false or misleading.

The Cravath team included partner Wes Earnhardt and associates Nick Friedman, John I. Karin, Winnifred A. Lewis, and Alma M. Mozetic. The case is Oklahoma Firefighters Pension and Retirement System v. Xerox Corporation, et al., No. 16-cv-08260 (S.D.N.Y.).