WOOD, Chief Judge, and ROVNER and HAMILTON, Circuit Judges

Listen to this article

7^th Circuit Court of Appeals

Case Name: Pension Trust Fund for Operating Engineers, et al. v. Kohl’s Corporation, et al.

Case No.: 17-2697

Officials: WOOD, Chief Judge, and ROVNER and HAMILTON, Circuit Judges

In September 2011, Kohl’s Corporation announced that it was correcting several years of its financial filings because of multiple lease accounting errors. Hard on the heels of that announcement came a putative class action complaint. The plaintiffs, led by the Pension Trust Fund for Operating Engineers, allege that Kohl’s and two of its executives defrauded investors by publishing false and misleading information in the lead-up to the corrections. (For ease of exposition, we refer to the putative class as the Pension Fund.) The Pension Fund took the position that one can infer that the defendants knew that these statements were false or recklessly disregarded that possibility at the time they were made, because Kohl’s recently had made similar lease accounting errors. Despite those earlier errors, it was pursuing aggressive investments in its leased properties, and at the same time, company insiders sold considerable amounts of stock.

The district court dismissed the complaint for failure to meet the enhanced pleading requirements for scienter imposed by the Private Securities Litigation Reform Act (PSLRA). The court entered that dismissal with prejudice, declining to give the Pension Fund even one opportunity to amend to cure the defects. The Pension Fund now appeals both the dismissal of the complaint and the district court’s decision to enter it with prejudice. Because the first complaint fell short and the Pension Fund has not been able to suggest how an amendment might help, we affirm.

Affirmed

Full Text

Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.