On March 20, 2025, Judge Gordon P. Gallagher of the United
States District Court for the District of Colorado granted a motion
to dismiss a proposed securities class action asserting claims
against a satellite technology company (the "Company")
and certain of its executives (together, "defendants")
under Sections 10(b) and 20(a) of the Securities Exchange Act of
1934 (the "Exchange Act") and Rule 10b-5. Lingam, et
al. v. Dish Network Corp., et al., No. 23-cv-00734-GPG-KAS (D.
Colo. Mar. 20, 2025). The Company argued that plaintiffs'
allegations were not actionable because they were optimistic,
forward-looking statements, and because there was no evidence that
defendants acted with the requisite intent. The Court agreed,
dismissing the action with prejudice.
Plaintiffs alleged that the Company attempted to create a 5G
wireless network "based on brand new and unproven
technologies" through acquiring and integrating other wireless
networks. In late 2020, the Company "was able to send a text
message on a small network to validate that it could perform that
function," but, as of the first quarter of 2021, the Company
allegedly was experiencing "significant integration
issues." Throughout this time, the Company allegedly made 19
statements variously misrepresenting (1) the Company's network
integration and launch, and (2) its construction of network
infrastructure for enterprise customers. Rather than address each
statement individually, the Court "focus[ed]" on the two
statements in each category most likely to "meet[] the
required standards."
For the first category, the Court considered the Company's
statement that the Company had "completed a successful field
validation, utilizing our fully-virtualized standalone 5G core
network." Plaintiffs argued that this statement was false
because the validation involved sending a single text message and
thus did not meet industry standards for validating an entire
network. The Court disagreed, reasoning that the statement did not
suggest that the field validation met industry standards. And
ultimately, even though the Company later faced alleged integration
and construction issues, the Court found that "[p]laintiffs
present[ed] nothing showing that defendants knew" at the time
of the alleged misstatements that the integration and launch
"would turn out badly" even if defendants allegedly knew
about the limited nature of the field validation. Relying on
confidential witnesses, plaintiffs also argued the statement was
false because the integration issues ultimately delayed a
successful launch of the network. The Court held that this claim
was impermissibly based on hindsight and that the complaint's
allegations, including those based on confidential witness
statements, did not establish that defendants had pushed back any
timelines at the time the alleged misstatements were made.
For the second category, the Court considered a statement by one of
the Company's officers that the Company's 5G network
offering was "scaling" and "picking up
momentum" to service enterprise customers going into 2024 and
beyond. Plaintiffs argued that this statement was misleading
because the Company was focused on "developing the bare
infrastructure to meet the FCC requirements at the expense of the
other elements that were necessary to make the network
functional." But the Court held that plaintiffs failed to
allege that the Company "was not planning to be able to
[service enterprise customers] in the referenced years even though
it was incapable of doing so" when the statement was made, or
that the officer knew of or was reckless about the statement's
falsity.
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