In In re Cutera Securities Litigation, 10 CDOS 8329, the 9th Circuit today joined other federal courts of appeals in interpreting the protections of the Private Securities Litigation Reform Act's "safe harbor" in a disjunctive fashion, which is both consistent with the statutory language and helpful to defendants. The court held that the safe harbor shields forward-looking statements that are (1) identified as such and accompanied by sufficient cautionary language, or (2) immaterial, or (3) if not properly identified, or accompanied by sufficient language, where the plaintiff fails to prove actual knowledge that the statement was false or misleading.

Thus, the court held, if a forward-looking statement is accompanied by meaningful cautionary language, the state of mind of the maker of the statement is irrelevant. In other words, plaintiffs cannot escape dismissal of a case involving such a statement even by suggesting the one or more of the defendants had actual knowledge that the statement was false.

This is consistent with the statutory language, but in an earlier case (America West), the Ninth Circuit had suggested, without deciding, that "a strong inference of actual knowledge" could take a forward-looking statement outside of the safe harbor no matter what cautionary language had been used. The court today rejected that earlier statement as dicta, and in a footnote explicitly stated that today's ruling "should clear up the issue for the handful of district courts that have embraced that passing reference as a holding from this court."

For those interested in the court's specific language, here is the relevant passage:

As written, the statute provides a safe harbor for:

A)(i) identified forward-looking statements with sufficient cautionary language;

A)(ii) immaterial statements; and

B)(i)-(ii) unidentified forward-looking statements or forward-looking statements lacking sufficient cautionary language where the plaintiff fails to prove actual knowledge that the statement was false or misleading.

15 U.S.C. § 78u-5(c)(1). . . .The logical reading of the statute is simply to take it as written — subsections (A) and (B) and their subpoints each offer safe harbors for different categories of forward-looking statements. The defendants' state of mind is not relevant to subsection (A). To read the provisions otherwise would make no sense.

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