Case 1:18-cv-12330-ADB Document 84 Filed 03/18/21 Page 1 of 21
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`UNITED STATES DISTRICT COURT
`DISTRICT OF MASSACHUSETTS
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`BENJAMIN WASSON, individually and on
`behalf of all others similarly situated,
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`Plaintiff,
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`v.
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`LOGMEIN, INC., WILLIAM R. WAGNER,
`and ROBERT BRADLEY,
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`Defendants.
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`Civil Action No. 18-cv-12330-ADB
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`MEMORANDUM AND ORDER ON MOTION TO DISMISS
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`BURROUGHS, D.J.
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`Lead Plaintiffs Larry Pollock1 and Robert Daub and named Plaintiff Benjamin Wasson
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`(together with Pollock and Daub, “Plaintiffs”) bring this putative shareholder class action against
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`Defendant LogMeIn, Inc. (“LogMeIn” or the “Company”), Defendant William R. Wagner, and
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`Defendant Robert Bradley (with Wagner, the “Individual Defendants,” and with LogMeIn and
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`Wagner, “Defendants”), alleging that Defendants violated federal securities laws in connection
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`with LogMeIn’s acquisition of GetGo, Inc. (“GetGo”) and the transition of former GetGo
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`customers from monthly to annual billing plans.2 See [ECF No. 75 (“SAC”)]. Currently before
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`the Court is Defendants’ motion to dismiss the Second Amended Complaint (“SAC”). [ECF No.
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`1 Mr. Pollock passed away on January 31, 2019. [ECF No. 53].
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`2 Although Edward K. Herdiech was previously a defendant, he is not named in the operative
`complaint. Compare [ECF No. 54 (naming Herdiech as defendant)], with [ECF No. 75 (not
`naming Herdiech as defendant)].
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`Case 1:18-cv-12330-ADB Document 84 Filed 03/18/21 Page 2 of 21
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`76]. For the reasons set forth below, the motion is GRANTED, and no further amendments will
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`be permitted.
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`I.
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`BACKGROUND
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`A.
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`Factual Background
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`For purposes of this motion to dismiss, the Court, as it must, “accept[s] as true all
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`well-pleaded facts alleged in the [SAC] and draw[s] all reasonable inferences therefrom in the
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`[Plaintiffs’] favor.” A.G. ex rel. Maddox v. Elsevier, Inc., 732 F.3d 77, 80 (1st Cir. 2013)
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`(quoting Santiago v. P.R., 655 F.3d 61, 72 (1st Cir. 2011)); see InterGen N.V. v. Grina, 344 F.3d
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`134, 145 (1st Cir. 2003) (noting that an amended complaint “supersedes the original
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`complaint”).3
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`LogMeIn offers free and fee-based subscription software services to mobile professionals
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`and IT service providers. [SAC ¶ 31]. It derives revenue principally from subscription fees from
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`customers, including individual consumers, small and medium businesses, and enterprises (i.e.,
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`larger companies). [Id.]. During the class period, Wagner was LogMeIn’s President and Chief
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`Executive Officer, and Bradley was its Vice President of Investor Relations. [Id. ¶¶ 21–22].
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`In July 2016, LogMeIn announced plans to enter a merger agreement with GetGo, a
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`subsidiary of one of LogMeIn’s competitors. [SAC ¶ 33]. LogMeIn expected the post-merger
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`company to generate revenue exceeding $1 billion and stated that the strategic purposes for the
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`merger were to double the Company’s revenue within three or four years, to cross-sell products
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`3 Plaintiffs base the allegations in the SAC on LogMeIn’s public filings and statements, analyst
`reports concerning the Company, and interviews with former employees. [SAC ¶ 1]. With
`respect to former employees, the SAC includes allegations concerning the observations and
`statements of six confidential witnesses. [Id. ¶¶ 25–30].
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`2
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`Case 1:18-cv-12330-ADB Document 84 Filed 03/18/21 Page 3 of 21
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`across both companies’ customer bases, and to fill in one another’s product-line gaps. [Id.]. The
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`merger closed in late January 2017. [Id. ¶ 34].
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`One of the Company’s top priorities after the merger was transitioning existing GetGo
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`customers to the Company’s preferred billing model. [SAC ¶ 36]. Prior to the merger, nearly all
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`of LogMeIn’s customers had annual contracts and most paid upfront for the entire year with a
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`credit card. [Id. ¶ 43]. Additionally, its customers’ annual subscriptions would automatically
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`renew unless specifically terminated by a customer, and LogMeIn typically did not permit its
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`customers to cancel or terminate early. [Id.]. GetGo, on the other hand, took a more flexible
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`approach. See [id. ¶ 44]. Seventy percent of its customers were invoiced monthly, and its
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`customers were generally permitted to end their contracts early. [Id.].
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`LogMeIn began transitioning GetGo’s former customers to the LogMeIn billing model in
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`Q2 2017, and it did not go well. [SAC ¶¶ 7, 46, 48]. Customers complained, on social media
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`and to the Company, about how the Company handled the transition. [Id. ¶¶ 65–91]. Customers
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`were dissatisfied, among other reasons, because (1) they did not receive adequate notice of the
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`transition, [id. ¶ 65]; (2) notices that were sent led them to believe that they were being forced to
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`transition to annual billing, [id. ¶¶ 69–77]; (3) notices were silent about the elimination of
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`termination for convenience clauses, [id. ¶¶ 78–82]; and (4) the Company’s customer service
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`representatives were unhelpful, difficult to contact, and slow to act, [id. ¶¶ 85–90]. Some
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`customers, unhappy with the new regime, canceled their subscriptions. [Id. ¶¶ 10, 46]. For
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`customers with annual subscriptions, cancelation meant that the subscription would end at the
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`conclusion of the annual period (i.e., not be renewed). [Id. ¶ 10].
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`Before and during the class period, LogMeIn tracked its renewal rates, both for specific
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`products and across all product lines, but publicly reported only its gross renewal rate across all
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`3
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`Case 1:18-cv-12330-ADB Document 84 Filed 03/18/21 Page 4 of 21
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`products. [SAC ¶ 45]. In late July 2018, the Company reported its Q2 2018 financial results,
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`noting that customer churn (i.e., existing customers leaving the Company) had increased, and
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`acknowledging that customers had not responded well to the Company’s transition efforts. [Id.
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`¶ 12]. LogMeIn downwardly adjusted its revenue projections, and its share price decreased
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`significantly. [Id. ¶ 13].
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`B.
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`Procedural Background
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`Plaintiffs filed their first amended complaint (“FAC”) on March 1, 2019. [ECF No. 54
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`(“FAC”)]. On October 7, 2020, the Court granted Defendants’ motion to dismiss but gave
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`Plaintiffs leave to amend with respect to two of the forty-five allegedly fraudulent statements
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`contained in the FAC (the “Conversion Policy Statements”). [ECF No. 72 at 35]. In its Order
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`granting the motion (the “MTD Order”), the Court found that Plaintiffs’ allegations regarding
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`those two statements, which both concerned the transitioning of customers to annual payment
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`plans, presented “close call[s],” but ultimately concluded that Plaintiffs’ factual allegations, with
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`respect to both falsity and scienter, were insufficient to withstand Defendants’ motion. [Id. at
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`28–34].
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`On November 11, 2020, Plaintiffs filed the SAC, which brings a claim against
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`Defendants for violations of § 10(b) of the Securities and Exchange Act of 1934 (the “Exchange
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`Act”) and a claim against the Individual Defendants for a violation of § 20(a) of the Exchange
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`Act. [SAC ¶¶ 2, 148, 163–80]. Plaintiffs’ core assertion is that the Company used overly
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`aggressive methods to transition customers to an annual subscription plan, quickly realized that
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`customers were dissatisfied with that approach and, as a result, were canceling their
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`subscriptions, but nonetheless publicly reported that the transition was going well until finally
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`coming clean in July 2018. See [id. ¶¶ 4–14]. Defendants moved to dismiss on December 16,
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`4
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`2020, [ECF No. 76], Plaintiffs opposed on January 20, 2021, [ECF No. 80], and Defendants
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`replied on February 9, 2021, [ECF No. 83].
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`II.
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`LEGAL STANDARD
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`Section 10(b) of the Securities Exchange Act of 1934 forbids the “use or employ,
`in connection with the purchase or sale of any security . . . , [of] any manipulative
`or deceptive device or contrivance in contravention of such rules and regulations as
`the [SEC] may prescribe as necessary or appropriate in the public interest or for the
`protection of investors.”
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`Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308, 318 (2007) (alterations in original)
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`(quoting 15 U.S.C. § 78j(b)). In turn, SEC Rule 10b-5 implements § 10(b) by declaring it
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`unlawful, “in connection with the purchase or sale of any security,”
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`(a) To employ any device, scheme, or artifice to defraud,
`(b) To make any untrue statement of a material fact or to omit to state a material
`fact necessary in order to make the statements made, in the light of the
`circumstances under which they were made, not misleading, or
`(c) To engage in any act, practice, or course of business which operates or would
`operate as a fraud or deceit upon any person.
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`17 C.F.R. § 240.10b-5. Therefore,
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`a complaint alleging securities fraud under section 10(b) of the Exchange Act and
`Securities and Exchange Commission Rule 10b-5 must plead six elements: “(1) a
`material misrepresentation or omission; (2) scienter, or a wrongful state of mind;
`(3) a connection with the purchase or sale of a security; (4) reliance; (5) economic
`loss; and (6) loss causation.”
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`Kader v. Sarepta Therapeutics, Inc., 887 F.3d 48, 56 (1st Cir. 2018) (quoting ACA Fin. Guar.
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`Corp. v. Advest, Inc., 512 F.3d 46, 58 (1st Cir. 2008)).4
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`4 “Claims brought under section 20(a) of the [Securities Exchange] Act, 15 U.S.C. § 78t(a), are
`derivative of 10b-5 claims.” Hill v. Gozani, 638 F.3d 40, 53 (1st Cir. 2011). Section 20(a)
`provides that once a company has been found to have violated the Exchange Act’s substantive
`provisions, “[e]very person who, directly or indirectly, controls” the company “shall also be
`liable jointly and severally with and to the same extent as [the company] . . . unless the
`controlling person acted in good faith and did not directly or indirectly induce the act or acts
`constituting the violation or cause of action.” 15 U.S.C. § 78t(a). Accordingly, to plead a viable
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`5
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`To survive a motion to dismiss, the complaint must contain “enough facts to state a claim
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`to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
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`Further, Plaintiffs must satisfy the Federal Rule of Civil Procedure 9(b) standard for alleging
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`fraud with particularity and comply with the heightened pleading requirements imposed by the
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`Private Securities Litigation Reform Act (the “PSLRA”). Advest, Inc., 512 F.3d at 58. “The
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`PSLRA requires plaintiffs’ complaint to ‘specify each statement alleged to have been misleading
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`[and] the reason or reasons why the statement is misleading.’” Id. (alteration in original)
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`(quoting 15 U.S.C. § 78u-4(b)(1)).
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`Scienter is a mental state embracing intent to deceive, manipulate, or defraud. The
`scienter element may be satisfied by showing that the defendant engaged in
`intentional or willful conduct designed to deceive or defraud investors by
`controlling or artificially affecting the price of securities. A plaintiff can also
`demonstrate scienter by showing that defendants acted with a high degree of
`recklessness. Under the recklessness standard, a defendant can be held liable for a
`highly unreasonable omission, involving not merely simple, or even inexcusable,
`negligence, but an extreme departure from the standards of ordinary care, and
`which presents a danger of misleading buyers or sellers that is either known to the
`defendant or is so obvious the actor must have been aware of it.
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`The PSLRA mandates a special standard for measuring whether allegations of
`scienter survive a motion to dismiss. A complaint alleging securities fraud must,
`with respect to each alleged act or omission, state with particularity facts giving
`rise to a strong inference that the defendant acted with the required state of mind.
`A plaintiff must allege facts that make an inference of scienter more than merely
`plausible or reasonable—it must be cogent and at least as compelling as any
`opposing inference of nonfraudulent intent. When there are equally strong
`inferences for and against scienter, the draw is awarded to the plaintiff.
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`City of Dearborn Heights Act 345 Police & Fire Ret. Sys. v. Waters Corp., 632 F.3d 751, 757
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`(1st Cir. 2011) (citations and internal quotation marks omitted). The First Circuit has
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`Section 20(a) claim against the Individual Defendants, Plaintiffs must first plead an actionable
`claim under Section 10(b) of the Exchange Act and Rule 10b-5. See Winters v. Stemberg, 529
`F. Supp. 2d 237, 247 (D. Mass. 2008) (quoting In re Focus Enhancements, Inc. Sec. Litig., 309
`F. Supp. 2d 134, 157 (D. Mass. 2001)).
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`6
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`found this demanding [scienter] standard met where a complaint “contains clear
`allegations of admissions, internal records or witnessed discussions suggesting that
`at the time they made the statements claimed to be misleading, the defendant[s]
`were aware that they were withholding vital information or at least were warned by
`others that this was so.”
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`Mehta v. Ocular Therapeutix, Inc., 955 F.3d 194, 206–07 (1st Cir. 2020) (alteration in original)
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`(quoting Brennan v. Zafgen, Inc., 853 F.3d 606, 614 (1st Cir. 2017)).
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`III.
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`DISCUSSION
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`A. Motion for Reconsideration
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`In their opposition to Defendants’ motion to dismiss, Plaintiffs ask the Court to
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`reconsider its prior ruling that the Conversion Policy Statements were not actionable, claiming
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`that the statements are, in fact, actionable “based on the Court’s own analysis of the FAC’s
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`allegations and the applicable First Circuit standards for pleading falsity.” [ECF No. 80 at 12].
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`Defendants respond that Plaintiffs’ request is both procedurally deficient and substantively
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`unwarranted. [ECF No. 83 at 6–8].
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`Although Plaintiffs do not identify the precise basis for their request, and the Federal
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`Rules of Civil Procedure do not specifically provide for the filing of motions for reconsideration,
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`such motions are typically evaluated pursuant to either Federal Rule of Civil Procedure 59(e) or
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`Federal Rule of Civil Procedure 60(b). Lyons v. Fed. Nat’l Mortg. Ass’n, No. 18-cv-10365,
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`2019 WL 1961072, at *2 (D. Mass. May 1, 2019). Regardless of which rule Plaintiffs rely on,
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`the Court has substantial discretion to grant or deny their request, Ruiz Rivera v. Pfizer Pharms.,
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`LLC, 521 F.3d 76, 81 (1st Cir. 2008), and “[t]he granting of a motion for reconsideration is ‘an
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`extraordinary remedy which should be used sparingly,’” Palmer v. Champion Mortg., 465 F.3d
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`24, 30 (1st Cir. 2006) (quoting 11 Charles Alan Wright et al., Federal Practice and Procedure
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`§ 2810.1 (2d ed.1995)). Courts “appropriately may grant a motion for reconsideration ‘where
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`the movant shows a manifest error of law or newly discovered evidence.’ Likewise, a motion for
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`7
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`reconsideration should be granted if the court ‘has patently misunderstood a party . . . or has
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`made an error not of reasoning but apprehension.’” Id. at 81–82 (first quoting Kansky v.
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`Coca-Cola Bottling Co. of New Eng., 492 F.3d 54, 60 (1st Cir. 2007); then quoting Sandoval
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`Diaz v. Sandoval Orozco, No. 01-cv-01022, 2005 WL 1501672, at *2 (D.P.R. June 24, 2005)).
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`The Court declines to reconsider its prior ruling. The Court does not believe that there
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`has been a manifest error of law, Plaintiffs have pointed to no newly discovered evidence, and
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`the Court is confident that it understood Plaintiffs’ position when it decided Defendants’ initial
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`motion to dismiss.
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`B. Motion to Dismiss
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`In the MTD Order, the Court permitted Plaintiffs to amend their complaint as it related to
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`the Conversion Policy Statements. Bradley made the first allegedly fraudulent statement at the
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`September 13, 2017 Deutsche Bank Technology Conference, in response to a question regarding
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`whether the transition of GoTo customers could be a source of churn5:
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`It would be, but right now because there – you have 12 opportunities to collect from
`these people, you ask the first time. If they get pushed back, you come back to
`them again. So we’re just taking the willing conversions right now and down the
`road there’s an opportunity and try to – you increase the monthly price if you don’t
`go annual. That’s an opportunity that we haven’t implemented, but certainly, I
`know companies that we buy subscription software from have utilized techniques
`like that in the past. And these are – because it’s small-medium business, these
`aren’t enormous size deals, with the exception of the customer engagement, they
`aren’t seven-figure deals. They’re often four- and five-figure deals.
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`And so it’s not necessarily that much of a burden for the end-user and in some cases,
`it’s helpful for them as well. Instead of them chasing, 12 invoices a year, it’s one.
`And so we’ve already – in the low-end it’s much – it’s – in some cases not even a
`conversation, people say okay. And we’ve got that expertise from doing it for 10
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`5 The Court notes that while Plaintiffs maintain that the question was about whether the
`transition was “a potential source of churn,” [ECF No. 80 at 10], the transcription of the
`conference that Plaintiffs have annexed to their SAC does not clearly state what the question
`leading to Bradley’s answer was, see [ECF No. 81-1 at 10 (“Is that a potential source of [ph]
`churned up [indiscernible] ?”)].
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`8
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`years at LogMeIn. So we have confidence that we can do it across a much bigger
`base.
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`[SAC ¶ 54; ECF No. 81-1 at 10]. Wagner made the second at the JPMorgan Global Tech
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`Conference on May 15, 2018:
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`One of the things that we believe – and in SaaS – SaaS is a subscription that people
`should pay for the subscription upfront. That was LogMeIn’s policy. The GoTo
`policy was monthly subscription – or annual subscriptions, but monthly pay. And
`customers can still do that, but we’ve incented the sales force to migrate those
`customers to annual pay. That’s obviously driven significant increase in cash flow,
`but we haven’t really insisted that people do that.
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`So we’re also being, I think, taking our time to do it. We don’t need to. We’re
`expanding cash flow and margins as we go nicely. There’s still a lot of runway
`there, but we’re not telling people when they renew, okay, you have to move to an
`annual subscription. I mean, we’re giving that option, giving incentive. But if
`people push back and don’t want to do it, then that will be okay, at least in the short
`term.
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`[SAC ¶ 56; ECF No. 81-2 at 10]. Plaintiffs claim that each statement was materially false and/or
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`misleading because
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`it failed to disclose, among others: (i) that LMI was forcing former GoTo customers
`to transition to annual billing against their will; (ii) that LMI was forcing customers
`to switch to annual commitments/terms; (iii) that many [small-medium business]
`customers were transitioned without receiving notice; (iv) that, for those customers
`that did receive advanced notice, these customers were led to believe that they were
`being forced to convert to annual billing without a choice and the notice did not
`clearly indicate that they were being converted to annual commitments/terms; (v)
`that LMI removed the termination for convenience clause, thereby masking that a
`significant portion of customers would not renew their contracts; (vi) that LMI had
`also admittedly forced larger customers to sign new purchase orders rather than
`auto-renewing or when adding seats/licenses; (vii) that forcing customers to convert
`to annual billing and commitments/terms against their will was causing increased
`customer friction and churn; and (viii) that there was a substantial number of
`customers who, after being forced to convert to annual contracts, immediately
`notified LMI of their intent to cancel their contracts, which would begin churning
`off in Q2’18 when the first wave of converted customers reached a full year after
`being converted to annual contracts.
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`[SAC ¶¶ 55, 57].
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`In granting Defendants’ motion to dismiss the FAC, the Court made observations
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`intended to guide Plaintiffs’ efforts to amend. First, that Plaintiffs’ allegations, “taken together,
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`indicate[d] that the Company was employing aggressive techniques to transition customers but
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`d[id] not indicate that the Company was unilaterally transitioning customers from monthly to
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`annual payment plans against their will or without other options.” [ECF No. 72 at 30]. Second,
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`that “[m]aking it challenging for customers or otherwise aggravating them is not the same as
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`transitioning unwilling customers.” [Id.]. Third, the fact “[t]hat the choice was made difficult by
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`the Company’s abrasive techniques does not mean that it was not a choice.” [Id. at 31]. Fourth,
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`“[t]aking all the factual allegations as true, Plaintiffs make out a convincing story of corporate
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`mismanagement and poor customer service but fall short of making out a claim for securities
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`fraud.” [Id. at 34]. The SAC does not cure these deficiencies and although Plaintiffs’ new
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`allegations paint a more detailed picture of potential corporate mismanagement and poor
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`customer service, they still do not make out a claim for securities fraud. See City of Dearborn
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`Heights, 632 F.3d at 760 (“Allegations of corporate mismanagement are not actionable under
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`Rule 10b-5.”). Accordingly, for the reasons detailed below, Defendants’ motion to dismiss is
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`GRANTED.
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`1.
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`Plaintiffs Have Failed to Adequately Allege that the Statements Were
`Materially False or Misleading
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`On September 13, 2017, Bradley announced that LogMeIn was in the process of
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`transitioning GetGo’s former customers and that, at that time, only willing customers were being
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`transitioned, [SAC ¶ 54], and on May 15, 2018, Wagner stated that the Company was still not
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`requiring its customers to switch payment plans although it was incentivizing them to do so, [id.
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`¶ 56]. The allegations in the SAC do not suggest that these statements were false or misleading.
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`10
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`First, the allegations in the SAC, and documents referenced therein, demonstrate that
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`customers did, in fact, have a choice as to how they would be billed. See, e.g., [SAC ¶ 68 (email
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`inviting customers to contact Company with questions about annual billing cycle); id. ¶ 91
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`(customer indicating that monthly pricing existed on website and customer service representative
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`acknowledging that customer could pay monthly); ECF No. 75-1 at 6 (Company representative
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`noting that transition was underway “in phases”); ECF No. 75-2 at 3 (noting that monthly plans
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`were “more expensive because of the shorter commitment period”); id. at 4 (noting that
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`month-to-month subscribers could continue to pay month to month)].
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`Second, the fact that the notices sent to customers outlining the transition were “written
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`in a manner to lead customers to believe that they were being forced to transition to annual
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`billing,” [SAC ¶ 69], does not mean that customers were, in fact, being forced to transition.
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`Plaintiffs’ allegations suggest only that the Company used an opt-out model instead of an opt-in
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`model for the switch to annual billing, see [ECF No. 80 at 16 (describing LogMeIn’s approach as
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`“opt in”)], not that the Company mandated that its customers make the switch. Nor is there any
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`allegation that customers who chose to opt out (i.e., pushed back against the Company) were
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`actually prevented from doing so.
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`Third, because the Conversion Policy Statements do not reference termination for
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`convenience or prorated refunds for early cancellation, Plaintiffs’ allegations regarding the
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`Company’s decision to eliminate the termination for convenience clauses and its refund policy,
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`[SAC ¶¶ 78–84], are not relevant. Although the SAC is replete with allegations suggesting that
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`the Company bungled the transition which caused customers to be disgruntled and angry, those
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`facts do not suggest that the Conversion Policy Statements were false or misleading.
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`Case 1:18-cv-12330-ADB Document 84 Filed 03/18/21 Page 12 of 21
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`Fourth, the customer complaints included in the SAC demonstrate dismal customer
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`service, see, e.g., [SAC ¶ 65(a) (noting failure to provide notice); id. ¶ 65(b) (noting
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`ninety-minute wait to speak with customer service regarding billing transition); id. ¶ 86 (noting
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`that customers were required to call tech support to turn off auto-renew); id. ¶ 88(b) (noting
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`inability to cancel subscription online); id. ¶ 88(c) (same); id. ¶ 88(d) (noting unavailability of
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`salespeople); id. ¶ 88(e) (noting inability to modify subscription online); id. ¶¶ 88(f)–(i) (same);
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`id. ¶¶ 89(a)–(k) (noting long wait times for, and general unresponsiveness of, customer service)],
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`but making it difficult for customers to express their dissatisfaction with the Company’s
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`preference for annual billing and/or maintain their monthly billing plans is not the same as
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`transitioning unwilling customers and none of Plaintiffs’ allegations suggest that unwilling
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`customers were transitioned or that the Company “insist[ed]” on transitioning customers.
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`Finally, LogMeIn forcing certain customers to sign new purchase orders, as opposed to
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`allowing them to auto-renew, see [SAC ¶¶ 93–94], speaks to the manner in which customers
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`could renew, but does not suggest that the Conversion Policy Statements, which do not reference
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`purchase orders or auto-renewal, were false or misleading.
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`In sum, the SAC does not adequately demonstrate that the Conversion Policy Statements
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`were false or misleading because the allegations do not plausibly suggest that the Company was
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`transitioning unwilling customers.
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`As an alternative to their primary argument that the Conversion Policy Statements were
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`literally false, Plaintiffs argue that they were “misleading ‘half-truths’ due to their omission of
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`material information about LogMeIn’s conversion practices.” [ECF No. 80 at 14–15]. Plaintiffs
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`are correct that “the fact that a statement is literally accurate does not preclude liability under
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`Case 1:18-cv-12330-ADB Document 84 Filed 03/18/21 Page 13 of 21
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`federal securities laws.” Lucia v. Prospect Street High Income Portfolio, Inc., 36 F.3d 170, 175
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`(1st Cir. 1994).
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`“Some statements, although literally accurate, can become, through their context
`and manner of presentation, devices which mislead investors. For that reason, the
`disclosure required by the securities laws is measured not by literal truth, but by the
`ability of the material to accurately inform rather than mislead prospective buyers.”
`Under the foregoing standards, “emphasis and gloss can, in the right circumstances,
`create liability.”
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`Id. (first quoting McMahan & Co. v. Wherehouse Ent., Inc., 900 F.2d 576, 579 (2d Cir. 1990);
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`then quoting Isquith ex rel. Isquith v. Middle S. Utils., Inc., 847 F.2d 186, 203 (5th Cir. 1988)).
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`Here, however, Plaintiffs’ factual allegations do not plausibly suggest that the Conversion Policy
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`Statements were misleading based on context. In the Conversion Policy Statements, Bradley and
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`Wagner did not opine on: (1) the manner in which the Company was seeking conversions;
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`(2) how aggressively the Company was seeking conversions; (3) how customers were responding
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`to the Company’s transition-related overtures; or (4) the Company’s customer service policies.
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`Accordingly, Bradley and Wagner were under no duty to disclose the aggressive, abrasive, and
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`aggravating techniques that the Company appears to have been employing or customers’
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`reactions to those techniques. See City of Dearborn Heights, 632 F.3d at 760 (“A company does
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`not commit securities fraud merely by failing to disclose all non-public material information that
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`it knows.”); In re Parametric Tech. Corp. Sec. Litig., 300 F. Supp. 2d 206, 221 (D. Mass. 2001)
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`(“There is no duty to disclose broader information; a company is not called upon to give a
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`general business review whenever it accurately discloses a particular, discrete fact.”). See
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`generally Gross v. Summa Four, Inc., 93 F.3d 987, 992 (1st Cir. 1996) (discussing the limits of
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`the duty to disclose).
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`Case 1:18-cv-12330-ADB Document 84 Filed 03/18/21 Page 14 of 21
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`2.
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`Plaintiffs Have Failed to Adequately Allege Scienter
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`Even if Plaintiffs’ allegations were sufficient with respect to falsity, their claims would
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`still fail. Plaintiffs have a weighty burden with respect to scienter, see supra, Section II, and they
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`have not met it. As an initial matter, Plaintiffs cannot establish scienter because doing so would
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`require them to demonstrate that LogMeIn’s executives intentionally or recklessly misled
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`investors regarding forced conversions notwithstanding the fact that Plaintiffs have failed to
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`plead facts plausibly suggesting that such forced conversions actually occurred. Even assuming
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`there were forced conversions, or that the Conversion Policy Statements were otherwise
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`misleading, Plaintiffs have still failed to adequately plead scienter. Plaintiffs argue that, viewed
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`holistically, their factual allegations are sufficient. [ECF No. 80 at 23–32]. As explained further
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`below, the Court finds Plaintiffs’ argument unpersuasive and concludes that the “opposing
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`inference of nonfraudulent intent” is more compelling. See Tellabs, 551 U.S. at 314.
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`To meet their burden with respect to the Conversion Policy Statements, Plaintiffs must
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`allege facts giving rise to a strong inference that on September 13, 2017 and May 15, 2018,
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`Bradley and Wagner, respectively, either intentionally deceived investors or acted in manner that
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`was “an extreme departure from the standards of ordinary care, and which present[ed] a danger
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`of misleading buyers or sellers that [wa]s either known to [him] or is so obvious [he] must have
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`been aware of it.” City of Dearborn Heights, 632 F.3d at 757. Plaintiffs’ allegations as to both
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`statements fall short.
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`a.
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`Sept. 13, 2017 Statement
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`First, Plaintiffs’ argument that prior to and during the class period, Defendants paid close
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`attention to (1) the risks of customer churn connected to the conversion of GetGo customers to
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`annual payment plans and (2) the conversion tactics being employed to manage those risks, [ECF
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`No. 80 at 23–27], is unavailing. They seem to be arguing that because the transition from
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`Case 1:18-cv-12330-ADB Document 84 Filed 03/18/21 Page 15 of 21
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`monthly to annual payment plans was important to the Company, any statements about the
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`transition were made with the requisite scienter. That argument fails to establish scienter. Cf. In
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`re Wayfair, Inc. Sec. Litig., 471 F. Supp. 3d 332, 345 (D. Mass. 2020) (“Plaintiffs’ argument,
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`essentially, is that because Defendants said that they paid close attention to their financial
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`position and their financial position ended up being different than Defendants said it was,
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`Defendants must have been lying and/or were recklessly indifferent about Wayfair’s financial
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`position. That is akin to saying that any time a company’s financial projection is wrong, the
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`speaker has engaged in securities fraud. But that is not the law.”). Notably, Plaintiffs do not
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`point to any statements from Bradley (or Wagner) describing conversion tactics with any
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`specificity or allege that either participated in any discussions regarding the same.
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`Second, contrary to Plaintiffs’ assertions, [ECF No. 80 at 23–24], Bradley’s other
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`September 13, 2017 statements, [SAC ¶¶ 53, 126], do not give rise to a strong inference of
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`scienter. Bradley’s acknowledgment that the Company had a “deliberate” and “specific” plan
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`regarding the transition, [id. ¶ 53], and general statement concerning conversion tactics,6 [id.
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`6 Additionally, it remains unclear what precisely Bradley meant. According to the transcription
`of the Deutsche Bank conference filed by Plaintiffs, the exchange was as follows:
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`Q. . . . And again, back to the question about the ne