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On November 7, 2025, Judge John G. Koeltl of the United States
District Court for the Southern District of New York denied a
motion for leave to amend a putative securities class action
complaint asserting claims against a software company (the
"Company") and certain of its officers (the
"Individual Defendants") under Sections 10(b) and 20(a)
of the Securities Exchange Act of 1934 (the "Exchange
Act") and Rule 10b-5 promulgated thereunder. In re Adobe
Inc., No. 23-cv-9260 (S.D.N.Y. Nov. 7, 2025). In denying
plaintiffs' motion for leave to amend with prejudice, the Court
held that the proposed second amended complaint ("SAC")
would be futile because plaintiffs failed to cure the defects
identified in the first amended complaint ("FAC"), which,
as we previously covered, the Court dismissed on March 27, 2025.
The Court noted that plaintiffs' proposed SAC largely mirrored
the FAC in which plaintiffs alleged that defendants misrepresented
the threat posed to the Company by a competitor through. three
categories of alleged misstatements: (1) downplaying competition
from the competitor; (2) concerning the viability of the
Company's own products; and (3) regarding plans to merge with
the competitor. The SAC included an additional category of alleged
misstatements regarding (4) the total addressable market
("TAM"), reflecting the total potential revenue that the
Company could generate for its product in a given year if it were
able to capture 100% of the market.
The Court held that plaintiffs failed to plead materiality as to
any of the alleged misstatements. First, with respect to alleged
statements downplaying competition from the competitor, the Court
reaffirmed that plaintiffs alleged, at most, a potential
competitive threat rather than concrete, realized harm to the
Company's business. The Court emphasized that the Company
openly identified its competitor in its public filings,
undercutting any theory that the Company framed the competitive
risk as merely hypothetical. The Court also held that plaintiffs
failed to plead any revenue loss to the Company's flagship
products. In support of their allegations, plaintiffs cited a
survey from the UK Competition and Markets Authority purporting to
show that customers believed the competitor's product was an
alternative to the Company's. However, the Court held that the
same source generally characterized the competitor's ability to
compete with the Company's flagship products as "very
limited," even long after the class period.
Second, the Court held that alleged statements about the viability
of the Company's own product were accurate when made. To the
extent they expressed judgments or optimism—such as that the
product "keeps getting better and better" or that it
appeared among "flagship" applications—the Court
held they were inactionable opinions or corporate puffery. The
Court further held that plaintiffs' reliance on the
Company's later regulatory submissions describing the product
as a failed attempt did not establish that the contemporaneous
opinion statements were disbelieved when made.
Third, as to alleged statements regarding the Company's merger
strategy, the Court again rejected plaintiffs' contention that
the Company misled investors by emphasizing organic growth while
negotiating a large acquisition. The Court emphasized that the
Company never disclaimed an acquisition, expressly stating it would
remain "on the lookout" and "burn calories to
acquire" valuable assets.
Fourth, the Court held plaintiffs did not plausibly allege falsity
as to the new TAM theory, reasoning that plaintiffs'
argument—that the Company overstated TAM because it
purportedly included market segments that the Company could not
reasonably capture given competition—was inconsistent with
plaintiffs' own definition of TAM as the total potential
revenue if a company captured 100% of a market. The Court held that
no reasonable investor would understand TAM to predict the market
share the Company would actually achieve, and plaintiffs did not
identify any representation that the Company would, in fact,
capture the entire market.
With respect to scienter, the Court rejected the proposed amendment
for the same reasons as it did when granting the prior motion to
dismiss. Specifically, in holding that plaintiffs failed to
adequately plead motive and opportunity, the Court emphasized that
the Individual Defendants generally increased their holdings during
the putative class period, and the few stock sales that occurred
were executed under Rule 10b5-1 plans or to cover taxes. Addressing
plaintiffs' recklessness theory, the Court again held that
plaintiffs did not plead an "extreme departure from the
standards of ordinary care," noting that plaintiffs identified
no internal documents, confidential witnesses, or contemporaneous
facts showing defendants knew their statements were false or
misleading when made. Furthermore, the Court found that the
regulatory materials plaintiffs cited were either consistent with
the Company's public statements or spoke to potential future
competition rather than realized harm.
Having found that the proposed SAC failed to sufficiently plead any
actionable claim, the Court denied plaintiffs' motion for leave
to further amend.
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