business as the "other segment," since that segment was not the
focus of the Company's public offering.
Ultralife further cautioned that "[t]here can be no assurance
that . . . its efforts to expand it's manufacturing and quality
control activities will be successful or that it will be able to
satisfy commercial scale production requirements on a timely and
cost-effective basis." (Feig Aff't, Ex. A. at 9). Not only does
this cautionary statement negate the precise implied
representation upon which Plaintiffs base their Second Amended
Complaint, but it constitutes an accurate prediction of
precisely the "bumps in the road" that Ultralife experienced
when it attempted to increase its production of 9-volt batteries
to meet heightened demands.
Thus, the exact production problems that form the foundation
of Plaintiffs' Second Amended Complaint were the subject of
explicit cautionary language in the Prospectus. That cautionary
language negated any inference that Defendants' representation
of manufacturing capacity included an implied representation
that such capacity could be reached by a smooth "ramp-up" of
production. In other words, the inference that Plaintiffs seek
to draw from the Company's statement of "capacity" is
unreasonable in light of the Prospectus' express language to the
contrary. Therefore, this Court concludes that Defendants did
not omit to state facts necessary to render the expressed
statement about manufacturing capacity not misleading.
Plaintiffs cannot show that Defendants misrepresented or omitted
to state existing material information which gave rise to a
false or misleading impression.
2. Section 15 of the Securities Act
Section 15 of the Securities Act states, in relevant part,
"Every person who . . . controls any person liable under
sections [11 or 12 of the Securities Act] shall also be liable
jointly and severally with and to the same extent as such
controlled person." 15 U.S.C. § 770.*fn6 Thus, any person who
"controls" another who is liable under Sections 11 or 12 is
jointly and severally liable for the mistakes of the person they
Plaintiffs allege that the Individual Defendants are liable
under Section 15 because they controlled those persons who
allegedly violated Sections 11 and 12(2) of the Securities Act.
However, liability under Section 15 of the Securities Act hinges
on liability under either Section 11 or Section 12. Having
determined that Plaintiffs failed to allege sufficient facts to
support a finding of liability under Sections 11 or 12 of the
Securities Act, Plaintiffs' claim under Section 15 must fail.
C. The "Bespeaks Caution" Doctrine
The "bespeaks caution" doctrine provides an alternative,
independent basis for this Court to dismiss the Second Amended
Complaint as a matter of law.*fn7 The judicially created
"bespeaks caution" doctrine generally provides that "when an
offering document's forecasts, opinions or projections are
accompanied by meaningful
cautionary statements, the forward looking statements will not
form the basis for a securities . . . claim if those statements
did not affect the `total mix' of information the document
provided investors." In re Donald J. Trump Casino Sec. Litig.,
7 F.3d at 371. "In other word, cautionary language, if
sufficient, renders the alleged omissions or misrepresentations
immaterial as a matter of law." Id.
In this case, the statement of manufacturing capacity was a
statement of presently existing fact that Plaintiffs do not
challenge as false. Plaintiffs allege only that such a
statement, without a further caution of potential production
stresses and strains, contained an implied forecast of smooth
production that Plaintiffs contend was negligently misleading.
Plaintiffs' allegation that Defendants impliedly represented a
forecast of a smoothly running production line when the future
"ramp-up" would occur, is akin to a "forward-looking statement."
In this case, the implication of smoothly running production was
negated by "meaningful cautionary statements" about the
difficulties that might well be encountered when the company
increased future production to meet anticipated future demand.
Thus, the "total mix" of information provided to investors was
not materially misleading. See In re Donald J. Trump Casino
Securities Litigation, 7 F.3d at 371.
D. The Reform Act's Safe Harbor
Because this Court has found no negligent misrepresentation or
omission, it is unnecessary to reach the question of whether the
safe harbor provision of the Private Securities Litigation
Reform Act, 15 U.S.C. § 77z-2(c), 78u-4(b)(1), (2) (1995) (the
"PSLRA") provides an alternate basis to dismiss Plaintiffs'
Securities Act Claims. If this Court were to reach the question,
however, it is inclined to agree with Defendants that, under the
facts alleged in this case, the alleged omitted statement is a
representation that Ultralife's production processes might
encounter strains down the road as it proceeds to increase
production of 9-volt batteries to reach capacity levels.
The PSLRA established a safe harbor protection for certain
forward looking statements, which effective insulate Company's
for liability under Section 11 and Section 12 in certain
circumstances. See 15 U.S.C. § 77z-2(c). The PSLRA defines
forward looking as, inter alia,:
(A) a statement containing a projection of
revenues, income (including income loss), earnings
(including earnings loss) per share, capital
expenditures, dividends, capital structure, or
other financial items;
(B) a statement of the plans and objectives of
management for future operations, including plans
or objectives relating to the products or services
of the issuer;
(C) a statement of future economic performance,
including any such statement contained in a
discussion and analysis of financial condition by
the management or in the results of operations
included pursuant to the rules and regulations of
(D) any statement of the assumptions underlying
or relating to any statement described in
subparagraph (A), (B), or (C);. . . .
15 U.S.C. § 77z-2(i)(1).
This Court has already found that: (i) the risks stated in the
Prospectus explicitly cautioned of precisely those problems;
(ii) that the language negated any inference that those problems
would not exist; and (iii) that, therefore, there was no
omission to state material facts necessary to make the
representation with respect to manufacturing capacity not
misleading. However, this Court notes that it would be inclined
to agree with Defendants that prediction about future
manufacturing stresses and strain on equipment that is run
harder or longer or faster to meet anticipated future heightened
demand appears to be a "forward-looking statement" protected by
the safe harbor provision of the
PSLRA. See Harris v. Ivax Corp., 182 F.3d 799, 806 (11th Cir.
1999) ("There is no question under the statute that a material
and misleading omission can fall within the forward-looking safe
For the foregoing reasons, it is on this 28th day of
September, 2000, hereby
ORDERED that the Defendants' Motions to Dismiss be, and are
hereby GRANTED; and it is further
ORDERED that this case is closed.