Company background

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Litigation background

• Central Laborers Pension Fund v. Integrated Electrical Services Inc
• USDC SD Texas (Houston) 4:04-cv-03342
• Judge Keith P Ellison
• Filed 8.20.04

Lead plaintiffs

• Central Laborers' Pension Fund

Complaint

• Amended consolidated complaint  6.06.05

reported results relating to certain large and complex
projects at one of its subsidiaries

• Press release  8.13.04
• EDGAR filings

Filings

• Motion to dismiss  8.05.05

• Motion
• Brief:  Part 1   Part 2

• Plaintiff's opposition  9.28.05

• Brief

• Reply  11.14.05

• Brief

• Supplemental briefs  1.05.06

• Defendant
• Plaintiff

Central Laborers Pension Fund v.
Integrated Electrical Services Inc  1.10.06

• Grants defendant's motion to dismiss
• Opinion PDF 
• Notice of appeal  2.02.06

Outline of Opinion

• I.  Introduction
• II.  Factual background
• III.  Plaintiff's allegations
• III.A. Sales of stock during the class period

• In this circuit, the law is clear that "[o]nly insider trading in suspicious amounts or at suspicious times is probative of scienter."
  Abrams v. Baker Hughes
  292 F.3d 424, 435 (5th Cir. 2002)
• There is a considerable question, however, as to the relevance of sales by those who did not themselves make statements alleged to be deceptive.
  In re Ciena Corp. Secs. Litig
  99 F.Supp. 2d 650, 663 n.11 (D. Md. 2000)

• III.B.  Restatement over a thirty-month period

• Nonetheless, the law is clear that a restatement of financial data, by itself, does not create a strong inference of scienter.
  Barrie v. Intervoice-Brite, Inc
  397 F. 3d 249, 264 (5th Cir. 2005)
• Indeed, complaints have been dismissed where
  "[p]laintiffs point to no specific internal or external report available at the time of the alleged misstatements that would contradict them."
  Abrams v. Baker Hughes
  292 F.3d 424, 433 (5th Cir. 2002)
• Moreover, all but one of the accounting issues that led to the restatement occurred among IESs subsidiaries. In such a circumstance, the Fifth Circuit requires particularized allegations that create a strong inference that officers of the parent were aware of the issues among the subsidiaries when erroneous statements were issued.
  Sushany v. Allwaste, Inc
  992 F. 2d 517, 523 (5th Cir. 1993)
• For example, the Amended Complaint refers to violations of "the principle that the financial information should be complete and of the principle of fair presentation." This highly generalized form of pleading is insufficient.
  Southland Securities v. Inspire Ins. Solutions,
  365 F. 3d 353, 362 (5th Cir. 2004)

• III.C.  Unlawful "stock touting"

• Because the pleadings do not provide an inference of scienter as to misstatements allegedly contained in the ["Company and Investment Profile"], the CIP is not a separate basis for liability.

• III.D.  Confidential sources

• Plaintiffs Amended Complaint includes many statements, attributed to confidential sources, to the effect that critical problems at IES were well known and consistently ignored. ... Well-established precedents make clear, however, that pleadings are insufficient if they allege only that "defendants must have been aware of the misstatement based on their positions within the company."
  Abrams v. Baker Hughes,
  292 F.3d 424, 432 (5th Cir. 2002)

• III.E.  Obtain a credit facility / Improve market position

• ("A generalized motive that could be imputed to any publicly-owned, for-profit endeavor, is not sufficiently concrete for purposes of inferring scienter.")
  Citing Coates v. Heartland Wireless Comms., Inc
  100 F.Supp. 2d 417, 431 (N.D. Tex. 2000)

• IV.  Control person liability

• Because Plaintiff has failed to allege an underlying violation of the securities laws, the control person claim must also fail.
  ABC Arbritrage v. Tchuruk
  291 F. 3d 336, 362 n.123 (5th Cir. 2002)

• V.  Conclusion

• Plaintiff's claims dismissed with prejudice
• The Court reaches this conclusion with some reluctance. In a case such as this one, a plaintiff faces a formidably daunting task in meeting the requirements of the PSLRA without having had the benefit of discovery. Nonetheless, the law is clear, and it is beyond this Courts authority to attenuate it.

Opinion  8.21.07

• Affirms grant of defendant's motion to dismiss
• Opinion PDF  Click to print PDF

In order first cited in opinion

• Nathenson v. Zonagen Inc
  267 F.3d 400 (5th Cir. 2001)
• Plotkin v. IP Axess Inc
  407 F.3d 690 (5th Cir. 2005)
• Fin. Acquisition Partners LP v. Blackwell
  440 F.3d 278, 286 (5th Cir. 2006)
• ABC Arbitrage Plaintiffs Group v. Tchuruk
  291 F.3d 336, 350 (5th Cir. 2002)
• Goldstein v. MCI WorldCom
  340 F.3d 238, 245 (5th Cir. 2003)
• Barrie v. Intervoice-Brite, Inc
  397 F.3d 249, 258 (5th Cir. 2005)
• Rosenzweig v. Azurix Corp
  332 F.3d 854, 867 (5th Cir. 2003)
• Tellabs, Inc. v. Makor Issues & Rights, Ltd
  127 S. Ct. 2499, 2510 (2007)
  Tellabs v Makor Issues
• Rubinstein v. Collins
  20 F.3d 160, 169 (5th Cir. 1994)
• Abrams v. Baker Hughes Inc
  292 F.3d 424, 435 (5th Cir. 2002)
• Southland Sec. Corp. v. INSpire Ins. Solutions, Inc
  365 F.3d 353, 368 (5th Cir. 2004)
• Ronconi v. Larkin
  253 F.3d 423, 43537 (9th Cir. 2001)
• In re: Suprema Specialties, Inc. Sec. Litig
  438 F.3d 256, 277 (3d Cir. 2006)
  Suprema Specialties
• Wietschner v. Monterey Pasta Co
  294 F.Supp. 2d 1102, 1117 (N.D. Cal. 2003)
• In re: Lattice Semiconductor Corp. Sec. Litig
  No. CV 04-1255-AA, 2006 WL 538756, at *18
  (D. Or. 1.03.06)
  Lattice Semiconductor
• In re: Michaels Stores, Inc. Sec. Litig
  No. 3:03-CV-0246, 2004 WL 2851782, at *12 & n.11
  (N.D. Tex. 12.10.04)
• Garfield v. NDC Health Corp
  466 F.3d 1255, 1266 (11th Cir. 2006)
• Foman v. Davis
  371 U.S. 178, 182 (1962)
• Mayeaux v. La. Health Serv. and Indem. Co
  376 F.3d 420, 426 (5th Cir. 2004)
• United States v. Humana Health Plan of Tex. Inc
  336 F.3d 375, 387 (5th Cir. 2003)

Briefs

• Plaintiff  9.05.06
• Defendant  10.12.06
• Reply  11.03.06

D= Defendant     P= Plaintiff

• ABC Arbitrage Plaintiffs Group v. Tchuruk  D  P
  291 F.3d 336 (5th Cir. 2002)
• Abrams v. Baker Hughes, Inc  D  P
  292 F.3d 424 (5th Cir. 2002)
• Adams v. Kinder-Morgan, Inc  D
  340 F.3d 1083 (10th Cir. 2003)
• Alaska Elec. Pension Fund v. Adecco S.A.  D
  371 F.Supp. 2d 1203 (S.D. Cal. 2005)
• Alcina v. pcOrder.com  D
  230 F.Supp. 2d 732 (W.D. Tex. 2002)
• Barrie v. Intervoice-Brite, Inc.  D  P
  397 F.3d 249 (5th Cir. 2005)
• Bond Opportunity Fund v. Unilab Corp  D 
  2003 WL 21058251 (S.D.N.Y. 5.09.03)
• Cal. Pub. Emp. Ret. Sys. v. Chubb Corp  D
  394 F.3d 126 (3d Cir. 2004)
• Chan v. Orthologic Corp  D 
  1998 WL 1018624 (D. Ariz. 2.05.98)
• Chase v. Czajka  D  
  2005 WL 1123397 (S.D.N.Y. 5.12.05)
• Chill v. General Elec  D
  101 F.3d 263 (2d Cir. 1996)
• City of Philadelphia v. Fleming Cos  D
  264 F.3d 1245 (10th Cir. 2001)
• Coates v. Heartland Wireless Commcns., Inc  D
  100 F.Supp. 2d 417 (N.D. Tex. 2000)
• Coates v. Heartland Wireless Commcns., Inc  D
  55 F.Supp. 2d 628 (N.D. Tex. 1999)
• Collmer v. U.S. Liquids, Inc D 
  268 F.Supp. 2d 718 (S.D. Tex. 2003)
• Confederate Meml Assn., Inc. v. Hines  D
  995 F.2d 295 (D.C. Cir. 1993)
• Contra In re Vertex Pharm. Inc. Sec. Litig  P
  357 F.Supp. 2d 343 (D. Mass. 2005)
• Crowley v. McKinney  D
  400 F.3d 965 (7th Cir. 2005)
• D.E. & J. Ltd. PShip v. Conaway  D
  284 F.Supp. 2d 719 (E.D. Mich. 2003)
• Dietrich v. Bauer  D
  76 F.Supp. 2d 312 (S.D.N.Y.1999)
• Doe v. Dow Chem. Corp  D
  343 F.3d 325 (5th Cir. 2003)
• Ellison v. American Image Motor Co  D
  36 F.Supp. 2d 628 (S.D.N.Y. 1999)
• Financial Acquisition Partners, L.P. v. Blackwell  P
  440 F.3d 278 (5th Cir. 2006)
• Garfield v. NDC Health Corp  P
  No. 05-14765, 2006 WL 2883238 (11th Cir. 10.12.06)
• Goldstein v. MCI Worldcom  D  P
  340 F.3d 238 (5th Cir. 2003)
• Greenbelt v. FTP Software, Inc  D  P
  194 F.3d 185 (1st Cir. 1999)

• Halbert v. City of Sherman  P
  33 F.3d 526 (5th Cir. 1994)

• Head v. NetManage, Inc  D 
  1998 WL 917794 (N.D. Cal. 12.30.98)
• Helwig v. Vencor  D
  251 F.3d 540 (6th Cir. 2001)
• In re Advanta Corp. Sec. Litig  D 
  180 F.3d 525 (3d Cir. 1999) 
• In re AFC Enter., Inc. Sec. Litig  D
  348 F.Supp. 2d 1363 (N.D. Ga. 2004)
• In re Alpharma Inc. Sec. Litig  D
  372 F.3d 137 (3d Cir. 2004)

• In re Apple Computer Sec. Litig  P
  886 F.2d 1109 (9th Cir. 1989)

• In re Apple Computer, Inc. Sec. Litig  D
  243 F.Supp. 2d 1012 (N.D. Cal. 2002)
• In re Apple Computer, Inc  D 
  127 Fed. Appx. 296 (9th Cir. 4.04.05)
• In re Baker Hughes Sec. Litig  D
  136 F.Supp. 2d 630 (S.D. Tex. 2001)
• In re Boeing Sec. Litig  D
  40 F.Supp. 2d 1160 (W.D. Wash. 1998)
• In re Bristol-Myers Squibb Sec. Litig  D
  312 F.Supp. 2d 549 (S.D.N.Y. 2004)
• In re Cabletron Sys., Inc  D  P
  311 F.3d 11 (1st Cir. 2002)
• In re Capstead Mortgage Sec. Litig  D  P
  258 F.Supp. 2d 533 (N.D. Tex. 2003)

• In re Cardinal Health Inc. Sec. Litig  P
  426 F.Supp. 2d 688 (S.D. Ohio 2006)

• In re Cerner Corp. Sec. Litig  D
  425 F.3d 1079 (8th Cir. 2005)
• In re Ciena Corp. Sec. Litig  D
  99 F.Supp. 2d 650 (D. Md. 2000)
• In re Comshare, Inc. Sec. Litig  D
  183 F.3d 542 (6th Cir. 1999)
• In re Credit Suisse  D
  431 F.3d 44 (1st Cir. 2005)
• In re Cree, Inc. Secs. Litig  D
  333 F.Supp. 2d 461 (M.D.N.C. 2004)
• In re Enron Corp. Sec., Derivative & ERISA Litig  P
  258 F.Supp. 2d 576 (S.D. Tex. 2003)
• In re Fleming Cos. Inc., Secs. & Derivative Litig  P
  No. 5-03-MD-1530 (TJW), 2004 U.S. Dist. LEXIS 26488 (E.D. Tex. 6.10.04)
• In re FVC.Com Sec. Litig  D
  136 F.Supp. 2d 1031 (N.D. Cal. 2000)
• In re HI/FN, Inc. Sec. Litig  P
  No. C 99-4531 SI, 2000 U.S. Dist. LEXIS 11631
  (N.D. Cal. 8.09.00)
• In re Keithley Instruments, Inc. Sec. Litig  D
  268 F.Supp. 2d 887 (N.D. Ohio 2002)
• In re Lattice Semiconductor Corp. Secs. Litig  D  P
  2006 WL 538756 (D. Or. 1.03.06)
  Lattice Semiconductor
• In re Livent, Inc. Sec. Litig  D
  78 F.Supp. 2d 194 (S.D.N.Y. 1999)
• In re McKesson HBOC, Inc. Sec. Litig  P
  126 F.Supp. 2d 1248 (N.D. Cal. 2000)
• In re Metawave Commcns. Corp. Sec. Litig  D
  298 F.Supp. 2d 1056 (W.D. Wash. 2003)
• In re Michaels Stores, Inc. Sec. Litig  P
  No. 3:03CV 0246, 2004 WL 2851782
  (N.D. Tex. Dec. 10, 2004)
• In re Microstrategy, Inc. Sec. Litig  D  P
  115 F.Supp. 2d 620 (E.D. Va. 2000)
• In re Nash Finch Co. Sec. Litig  D
  323 F.Supp. 2d 956 (D. Minn. 2004)
  Nash Finch
• In re Orbital Sciences Corp. Sec. Litig  P
  58 F.Supp. 2d 682 (E.D. Va. 1999)
• In re Party City Sec. Litig  D
  147 F.Supp. 2d 282 (D.N.J. 2001)
• In re Peerless Sys., Corp. Sec. Litig  P
  182 F.Supp. 2d 982 (S.D.Cal. 2002)
• In re Peritus Software Servs., Inc. Sec. Litig  D
  52 F.Supp. 2d 211 (D. Mass. 1999)
• In re PETsMART, Inc. Sec. Litig  D
  61 F.Supp. 2d 982 (D. Ariz. 1999)
• In re Sec. Litig. BMC Software, Inc  D  P
  183 F.Supp. 2d 860 (S.D. Tex. 2001)
• In re Segue Software, Inc. Sec. Litig  D
  106 F.Supp. 2d 161 (D. Mass. 2000)
• In re Silicon Graphics, Inc. Sec. Litig  D
  183 F.3d 970 (9th Cir. 1999)
• In re SmarTalk Teleservices, Inc. Sec. Litig  P
  124 F.Supp. 2d 527 (S.D. Ohio 2000)
• In re Suprema Specialties, Inc. Sec. Litig  D  P
  438 F.3d 256 (3d Cir. 2006)
  Suprema Specialties
• In re Telxon Corp. Sec. Litig  D
  133 F.Supp. 2d 1010 (N.D. Ohio 2000)
  Telxon
• In re Vantive Corp. Sec. Litig  D
  283 F.3d 1079 (9th Cir. 2002)
• In re Vertex Pharm. Inc. Sec. Litig  D 
  357 F.Supp. 2d 343 (D. Mass. 2005)
• Kaltman v. Key Energy Servs., Inc  P
  447 F.Supp. 2d 648 (W.D. Tex. 8.11.06)
• Kurtzman v. Compaq Computer Corp  D
  2000 WL 34292632 (S.D. Tex. 12.12.00)
• Kushner v. Beverly Enters  D
  317 F.3d 820 (8th Cir. 2003)
• Lipton v. Pathogenesis Corp  D
  284 F.3d 1027 (9th Cir. 2002)
• Lovelace v. Software Spectrum Inc  D  P
  78 F.3d 1015 (5th Cir. 1996)
• Marksman Partners, L.P. v. Chantal Pharm. Corp  P
  927 F.Supp. 1297 (C.D. Cal. 1996)
• Mayeaux v. La. Health Serv. & Indem. Co  D  P
  376 F.3d 420 (5th Cir. 2004)
• Melder v. Morris  D  P
  27 F.3d 1097 (5th Cir. 1994)
• Morgan v. Prudential Group, Inc D
  81 F.R.D. 418 (S.D.N.Y. 1978)
• Nathenson v. Zonagen, Inc  D  P
  267 F.3d 400 (5th Cir. 2001)
• Nolte v. Capital One Fin. Corp  D
  390 F.3d. 311 (4th Cir. 2004)
• Novak v. Kasaks  D
  216 F.3d 300 (2d Cir. 2000)
• Potter v. Bexar County Hosp. District  P
  No. 04-51320, slip op. 2006 WL 2252742
  (5th Cir. 8.07.06)
• PR Diamonds, Inc. v. Chandler  D
  364 F.3d 671 (6th Cir. 2004)
• Presidio Enter. v. Warner Bros. Distrib. Corp  D
  784 F.2d 674 (5th Cir. 1986)
• Provenz v. Miller  D  P
  102 F.3d 1478 (9th Cir. 2001)
• R2 Invs. LDC v. Phillips  P
  401 F.3d 638 (5th Cir. 2005)
• Ronconi v. Larkin  D
  253 F.3d 423 (9th Cir. 2001)
• Rosenzweig v. Azurix Corp  D  P
  332 F.3d 854 (5th Cir. 2003)
• Rubinstein v. Collins  P
  20 F.3d 160 (5th Cir. 1994)
• S.E.C. v. Healthsouth Corp  D
  261 F.Supp. 2d 1298 (N.D. Ala. 2003)
• Sec. Indus. Assn v. Bd. of Governors  P
  468 U.S. 137 (1984)
• Shields v. Citytrust Bancorp, Inc  D
  25 F.3d 1124 (2d Cir. 1994)
• Southland Sec. Corp. v. Inspire Solutions  D  P
  365 F.3d 353 (5th Cir. 2004)
• Svezzese v. Duratek  D
  2002 WL 1012967 (D. Md. 4.30.02)
• Tuchman v. DSC Communications  P
  14 F.3d 1061 (5th Cir. 1994)
• United States v. Regents of the Univ. of Cal  P
  363 F.3d 398 (5th Cir. 2004)
• U.S. v. Willard  D
  336 F.3d 375 (5th Cir. 2003)
• Virginia Bankshares, Inc. v. Sandberg  D
  501 U.S. 1083 (1991)
• W.R. Carney v. Cambridge Tech. Partners, Inc  D
  135 F.Supp. 2d 235 (D. Mass. 2001)
• Warden v. Barnett  D 
  2001 WL 422590 (5th Cir. 2001)
• Wenger v. Lumisys  D
  2 F.Supp. 2d 1231 (N.D. Cal. 1998)
• Wietschner v. Monterey Pasta Co  D  P
  294 F.Supp. 2d 1102 (N.D. Cal. 2003)
• Zishka v. Am. Pad & Paper Co P
  No. 3:98-CV-0660-M, 2000 U.S. Dist. LEXIS 13300
  (N.D. Tex. 9.13.00)
• Zucco Partners, LLC v. Digimarc Corp  D
  445 F.Supp. 2d 1201 (D. Or. 2006)

Lead plaintiff

• Cohen Milstein

Company defense

• Vinson & Elkins

Law firm alerts

• Vinson & Elkins  8.30.07

• Haynes Boone  9.10.07

Tellabs v Makor Issues

Scienter: Post-Tellabs