Ruling on Motion to Dismiss WWE Shareholder Lawsuit

8/18/2019 Ruling on Motion to Dismiss WWE Shareholder Lawsuit

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UNITED STATES DISTRICT COURT

DISTRICT OF CONNECTICUT

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I N RE WORLD WRESTLI NG

ENTERTAI NMENT, I NC. SECURI TI ESLI TI GATI ON

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Ci vi l No. 3: 14- cv- 1070( AWT)

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RULING ON MOTION TO DISMISS

The l ead pl ai nt i f f , Mohsi n Ansar i , and an addi t i onal

pl ai nt i f f , Adnan Shaf eeq, br i ng a f eder al secur i t i es cl ass

act i on pur suant t o Fed. R. Ci v. P. Rul es 23( a) and ( b) ( 3) on

behal f of t hemsel ves and ot hers who pur chased Wor l d Wr est l i ng

Ent er t ai nment , I nc. secur i t i es bet ween Oct ober 31, 2013 and May

16, 2014.

The pl ai nt i f f s al l ege vi ol at i ons of t he Secur i t i es and

Exchange Act of 1934 ( t he “Exchange Act ”) by Wor l d Wr est l i ng

Ent ert ai nment , I nc. ( “WWE”) ; Vi ncent K. McMahon ( “McMahon”) ;

Geor ge A. Bar r i os ( “Bar r i os”) ; Mi chel l e D. Wi l son ( “Wi l son”) ;

and St ephani e McMahon Levesque ( “Levesque”) . Speci f i cal l y, t hey

al l ege vi ol at i on of § 10( b) of t he Exchange Act and Rul e 10b- 5

promul gat ed t her eunder by def endant s WWE, McMahon, Bar r i os, and

Wi l son; vi ol at i on of § 20( a) of t he Exchange Act by def endant s

McMahon, Bar r i os, and Wi l son; vi ol at i on of § 20( b) of t he

Exchange Act by def endants McMahon, Bar r i os, and Wi l son; and

vi ol at i on of § 20( A) of t he Exchange Act by Levesque.



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The def endant s move t o di smi ss t he pl ai nt i f f s’ amended

compl ai nt , pur suant t o Fed. R. Ci v. P. Rul e 9( b) , Fed. R. Ci v.

P. Rul e 12( b) ( 6) , and t he Pr i vat e Secur i t i es Li t i gat i on Ref or m

Act ( PSLRA) . The mot i on t o di smi ss i s bei ng gr ant ed.

I. FACTUAL BACKGROUND

“The compl ai nt , whi ch [ t he cour t ] must accept as t r ue f or

pur poses of t est i ng i t s suf f i ci ency, al l eges t he f ol l owi ng

ci r cumst ances. ” Monsky v. Mor aghan, 127 F. 3d 243, 244 ( 2d

Ci r . 1997) .

WWE i s an i nt egr at ed medi a and ent er t ai nment company that

i s i ncor por at ed i n Del awar e and i s headquar t er ed i n St amf or d,

Connect i cut . Def endant McMahon has been Chai r man of t he Board of

Di r ect or s si nce 1980 and Chi ef Execut i ve Of f i cer si nce Sept ember

2009. Def endant Barr i os has been Chi ef St r ategy and Fi nanci al

Of f i cer si nce November 2013 and Chi ef Fi nanci al Of f i cer si nce

March 2008. Def endant Wi l son i s Chi ef Revenue and Market i ng

Of f i cer . Def endant Levesque has been Chi ef Br and Of f i cer si nce

December 2013 and i s a member of t he Board of Di r ect or s. The

t i me per i od over whi ch t he al l eged Exchange Act vi ol at i ons t ook

pl ace r uns f r om Oct ober 31, 2013 t o May 16, 2014 ( t he “Cl ass

Per i od”) . Lead Pl ai nt i f f Ansar i pur chased WWE common st ock

dur i ng t he Cl ass Per i od and addi t i onal pl ai nt i f f Shaf eeq



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pur chased WWE secur i t i es dur i ng t he Cl ass Per i od. The gr avamen

of t he pl ai nt i f f s ’ cl ai ms i s :

Def endant s engaged i n a scheme to decei ve t he mar ket , and[ i n] a cour se of conduct t hat ar t i f i ci al l y i nf l at ed WWE’ sst ock pr i ce and oper at ed as a f r aud or decei t on Cl assPer i od pur chaser s of WWE’ s st ock by mi sr epr esent i ng t hest at us of WWE’ s i nt er nal cont r ol s and di scl osur es.Ul t i mat el y, however , when Def endant s’ pr i ormi sr epr esent at i ons and f r audul ent conduct came t o ber eveal ed t o i nvest or s, shar es of WWE decl i ned pr eci pi t ousl y– evi dence t hat t he pr i or i nf l at i on i n t he pr i ce of WWE’ sshar es was er adi cat ed. As a resul t of t hei r pur chases ofWWE st ock dur i ng t he Cl ass Per i od at ar t i f i ci al l y i nf l at edpr i ces, Pl ai nt i f f s and ot her member s of t he Cl ass suf f er edeconomi c l osses when t he Company’ s t r ue condi t i on . . . was

f i nal l y and f ul l y r eveal ed and t he ar t i f i ci al i nf l at i on wasr emoved f r om pr i ce of t he Company’ s st ock[ . ]

( Amended Compl ai nt f or Vi ol at i on of t he Feder al Secur i t i es Laws

( Doc. No. 71) ( “Amended Compl ai nt ”) ¶ 78. )

The pl ai nt i f f s al l ege t hat t he def endant s made “mat er i al l y

f al se and mi sl eadi ng st atement s and omi ssi ons dur i ng t he Cl ass

Per i od r egar di ng WWE’ s abi l i t y t o mul t i pl y and t r ansf or m t he

Company’ s ear ni ngs pr of i l e. ” ( I d. ¶ 5. ) The pl ai nt i f f s al l ege

t hat t he def endant s made f al se and mi sl eadi ng st at ement s

r egar di ng t el evi si on cont r act negot i at i ons, suggest i ng t hat WWE

coul d command a cont r act comparabl e t o t hat between NASCAR, NBC

and FOX. The pl ai nt i f f s f ur t her al l ege t hat t he def endant s

“gr ossl y i nf l at ed t he si ze of WWE’ s f an base i n an ef f or t t o

convey a l arger market val ue f or t he Company. ” ( I d. ¶ 6. )

Addi t i onal l y, t he pl ai nt i f f s al l ege t hat t he def endant s “f ai l ed

t o i nf or m i nvest or s of t he det r i ment al i mpact t hat t he Company’ s



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l aunch of i t s WWE Net work, a 24/ 7 subscr i pt i on- based st r eami ng

net wor k . . . had on t he t el evi si on l i cense negot i at i ons wi t h

NBC. ” ( I d. ¶ 7. )

Based on i nf or mat i on f r om a conf i dent i al wi t ness ( “CW1”) ,

who was t he Vi ce Pr esi dent of WWE’ s gl obal di gi t al adver t i si ng

sal es t eam f r om December 2010 t o J anuar y 2014, t he pl ai nt i f f s

al l ege t hat t he def endant s knew t hat t hei r r evenue f or ecast s

wer e i nf l at ed, t hat t hei r f anbase was smal l er t han t hey

r epr esent ed, and t hat t hey over st at ed t he st r engt h of t hei r

negot i at i on posi t i on i n t hei r negot i at i ons wi t h NBC.

On May 15, 2014, WWE announced that i t had r eached a mul t i -

year cont r act wi t h NBCU. 1 On t he same day, af t er t he market

cl osed, WWE i ssued a pr ess r el ease out l i ni ng t he det ai l s of t he

deal and r eveal i ng t hat i nst ead of i ncreasi ng i t s oper at i ng

i ncome by 200 t o 300%, t he cont r act onl y i ncr eased operat i ng

i ncome by 40%. The f ol l owi ng day, WWE st ock dr opped 43%, f r om

$19. 93 at cl ose on May 15, 2014 t o $11. 27 on May 16, 2014.

Wi t h r espect t o def endant Levesque, t he pl ai nt i f f s al l ege

t hat , once i t became cl ear t o “WWE i nsi ders” t hat t he NBC

cont r act woul d not be as prof i t abl e as t he def endant s had

r epr esent ed, def endant Levesque began sel l i ng her shar es of WWE

st ock. I n 16 t r ansact i ons f r om Oct ober 3, 2013 t o J anuar y 7,

1 The pl ai nt i f f s r ef er t o NBCU as “NBC. ”



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2014, Levesque sol d 441, 671 shar es f or a t otal of $6, 174, 551. 02.

( I d. ¶ 23. )

Materially False and/or Misleading Statements or Omissions

The pl ai nt i f f s speci f i cal l y al l ege t hat t he def endant s made

t he f ol l owi ng mat er i al l y f al se and/ or mi sl eadi ng st at ement s

dur i ng t he Cl ass Per i od. 2

On Oct ober 31, 2013, t he def endant s i ssued a pr ess r el ease

announci ng WWE’ s f i nanci al r esul t s. The pr ess r el ease quot ed

def endant McMahon as sayi ng:

These accompl i shments r ef l ect t he st r engt h of our brands,i ncl udi ng a nat i onal t el evi si on audi ence t hat exceeds t heannual r each of most ot her spor t s and ent er t ai nmentpr ogr ams. Thi s st r engt h pr ovi des a sol i d f oundat i on f or t her enegot i at i on of our TV cont r act s and t he pot ent i al l aunchof a WWE net wor k.

( I d. ¶ 37. ) The pr ess r el ease al so quot ed def endant Bar r i os as

stat i ng:

Gi ven t he r i si ng val ue of l i ve cont ent t hat has a br oad,l oyal f ol l owi ng, we ar e conf i dent t hat we wi l l be abl e t onegot i at e our key domest i c agr eement s by t he end of Apr i lnext year and t hat our ef f or t s, i ncl udi ng t he pot ent i all aunch of a WWE network, wi l l keep us on t r ack to doubl e ort r i pl e our OI BDA r esul t s of $63 mi l l i on by 2015[ . ]

( I d. ) The pl ai nt i f f s ar gue t hat t hese st at ement s wer e mat er i al l y

f al se and/ or mi sl eadi ng because t he def endant s knew or

2 I n t he Amended Compl ai nt , t he pl ai nt i f f s al so i dent i f y

al l egedl y f al se and/ or mi sl eadi ng st atement s made i n a Febr uary28, 2014 pr ess r el ease. However , as poi nt ed out by t hedef endant s and conceded by t he pl ai nt i f f s, t he r ef er enced pr essr el ease was i ssued on Febr uary 28, 2013, bef or e t he Cl assPer i od. Ther ef or e, t he cour t does not consi der i t .



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r eckl essl y di sr egarded 1) t hat “WWE had al r eady begun

negot i at i ng wi t h NBC f or a new t el evi si on cont act , and t hose

negot i at i ons had al r eady f ai l ed t o achi eve a doubl i ng or

t r i pl i ng of 2012 OI BDA r esul t s”; 2) t hat “WWE’ s t el evi si on

audi ence was younger , l ess educat ed, and had a l ower aver age

i ncome t han the audi ence f or l i ve spor t s, whi ch caused WWE to

gener at e much l ess adver t i si ng r evenue than l i ve spor t s”; and 3)

t hat “net wor ks vi ewed WWE as cat egor i cal l y di f f er ent f r om and

l ess val uabl e t han t he ‘ l i ve cont ent ’ t hat had gar ner ed

i ncreasi ngl y l ar ge t el evi si on l i censi ng deal s. ” ( I d. ¶ 38. )

Thi s press r el ease al so cont ai ned a di scl ai mer st at i ng:

For war d- Looki ng St at ement s: Thi s press r el ease cont ai nsf or war d- l ooki ng st at ement s pur suant t o the saf e har borpr ovi si ons of t he Secur i t i es Li t i gat i on Ref or m Act of 1995,whi ch ar e subj ect t o var i ous r i sks and uncer t ai nt i es. Theser i sks and uncer t ai nt i es i ncl ude, wi t hout l i mi t at i on, r i sksr el at i ng t o mai nt ai ni ng and r enewi ng key agr eement s,

i ncl udi ng t el evi si on and pay- per - vi ew pr ogr ammi ngdi st r i but i on agr eement s. . . .

( Memorandum of Law i n Suppor t of t he Mot i on of Wor l d Wr est l i ng

Ent er t ai nment , I nc. , Vi ncent K. McMahon, Geor ge A. Bar r i os,

Mi chel l e D. Wi l son, and Stephani e McMahon Levesque t o Di smi ss

t he Consol i dat ed Amended Compl ai nt ( Doc. No. 77- 1) ( “Def endant s’

Memorandum) at 18) ( quot i ng Ex. 4, at 10)3

.

Al so on Oct ober 31, 2013, t he def endant s hel d an ear ni ngs

conf er ence cal l f or t he Thi r d Quar t er . The pl ai nt i f f s al l ege

3 The page number s f or t he Def endants’ Memorandum and Exhi bi t scor r espond t o t he ECF page number f ound at t he t op of t he page.



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t hat t he f ol l owi ng st at ement f r om def endant McMahon was

mi sl eadi ng: “So we pr et t y much t hi nk t hat al l of t hese

i ni t i at i ves ar e, i f al l t he st ar s l i ne up and we bel i eve t hat

t hey wi l l , and we are worki ng hard t o make sur e t hat happens,

t hen our busi ness i s goi ng t o be t r ansf ormed as we know i t . ”

( Amended Compl ai nt ¶ 39. ) As al l eged by t he pl ai nt i f f s,

def endant McMahon knew or r eckl essl y di sr egarded t hat t he st ars

wer e not “l i ni ng up” and t hat “no net work, i ncl udi ng NBC, was

goi ng t o ever pay WWE an amount doubl e or t r i pl e t he val ue of

i t s t hen- cur r ent deal . Wi t hout t he l ever age of i nt er est f r om

ot her sui t or s, Def endant s coul d not negot i at e a cont r act t hat

woul d ‘ t r ansf or m[ ] ’ WWE. ” ( I d. ¶ 40) ( al t er at i ons i n or i gi nal ) .

The pl ai nt i f f s al so al l ege t hat f ol l owi ng st at ements by

def endant Barr i os dur i ng t he Oct ober 31, 2013 conf er ence cal l

wer e mi sl eadi ng:

We ar e conf i dent t hat t he r i si ng val ue of cont ent i n t hemarket pl ace, and the pot ent i al l aunch of a WWE net work wi l lkeep us on t r ack t o doubl e or t r i pl e our 2012 OI BDA r esul t sby 2015. . . .

Recent deal s such as NASCAR wi t h NBC Spor t s r ei nf orce ourvi ew t hat t he pr ol i f er at i on of di st r i but i on al t er nat i ves i sdr i vi ng up t he val ue of cont ent , especi al l y compel l i ngcontent wi t h broad appeal . WWE shares t he key det ermi nants

of val ue t hat ar e at t r i but ed t o l i ve spor t s . . . whi chmakes WWE cont ent l i ke spor t s DVR- proof .

The pot ent i al l aunch of a WWE networ k i s anot her maj orsour ce of f ut ur e earni ngs gr owt h. Our market r esear ch andanal ysi s i ndi cat e t hat pot ent i al f or a meani ngf ulsubscr i ber base and a si gni f i cant economi c oppor t uni t y.



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( I d. ¶ 41. ) The pl ai nt i f f s al l ege t hat , accor di ng t o CW1, t he

def endant s “knew or r eckl essl y di sr egarded t hat WWE does not

‘ shar e[ ] t he key det er mi nant s of val ue t hat ar e at t r i but ed t o

l i ve spor t s’ because WWE coul d not generat e t he t ype of

adver t i si ng r evenue t hat l i ve spor t s gener at ed. ” ( I d. ¶ 42. ) The

pl ai nt i f f s al l ege t hat , “[ a] ccor di ng t o CW1, i n or der f or a

network t o ent er i nt o a $400 mi l l i on annual deal wi t h WWE, t hey

woul d need t o gener ate f our t i mes more per adver t i si ng spot ,

whi ch per CW1, both Def endant s and net works, speci f i cal l y NBC,

knew was i mpossi bl e. ” ( I d. ) CW1 f ur t her al l eges t hat i nt er nal

document s i ndi cat ed t hat WWE recogni zed t hat i t was “not t he

PGA, NFL, or MLB[ , ] ” but r ather a company i n i t s ear l y gr owt h

st ages. ( I d. ) The pl ai nt i f f s al so al l ege t hat WWE i s not l i ke

l i ve spor t s because i t i s not “DVR- pr oof . ” ( I d. ¶ 43. )

Fur t her mor e, t he pl ai nt i f f s al l ege t hat t he “Def endant s

knew or r eckl essl y di sr egarded t hat t he WWE net wor k woul d not be

‘ anot her maj or sour ce of f ut ur e ear ni ngs gr owt h’ ” because

i nt er nal r esear ch i ndi cated t hat WWE di d not have a l arge enough

f an base. ( I d. ¶ 44. ) The pl ai nt i f f s al l ege t hat “CW1 st at ed

t hat Bar r i os ‘ absol ut el y’ knew t hese r eal f i gur es, because i t

was a r egul ar t opi c of di scussi on” bet ween def endant s Bar r i os

and McMahon and because bot h of t hem had access t o t he r epor t s.

( I d. )



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On t he same Oct ober 31, 2013 conf erence cal l , def endant

Bar r i os al so st at ed:

Over t he past 12 mont hs, our progr ammi ng surpassed t hecumul at i ve audi ence del i ver y of most spor t s andent er t ai nment pr ogr ams, i ncl udi ng t he nat i onal br oadcast ofMaj or League Basebal l , NASCAR, t he NHL and even The Wal ki ngDead, and our t ot al soci al medi a pl at f or m now r eachesnear l y 219 mi l l i on f ol l ower s, i ncl udi ng mor e than 140mi l l i on l i kes and 70 mi l l i on Twi t t er f ol l ower s . . .

( I d. ¶ 45. ) The pl ai nt i f f s al l ege t hat t hese number s wer e

dr ast i cal l y i nf l at ed, as one f an who was “f ol l owi ng” a dozen

di f f er ent wr est l er s woul d be count ed t wel ve t i mes. The

pl ai nt i f f s al so al l ege t hat def endant Wi l son asked CW1 t o

mi sr epr esent vi ewer shi p dat a to adver t i ser s.

The def endant s poi nt out t hat t he cal l st ar t ed wi t h t he

st at ement : “I n t oday’ s di scussi on, we’ l l be maki ng sever al

f orward- l ooki ng st atement s. These st atement s are based on

management est i mat es. Act ual r esul t s may di f f er due t o numerous

f act or s as descr i bed i n our pr esent at i on and i n our f i l i ngs wi t h

t he SEC. ” ( See Def endant s’ Memorandum at 18; Ex. 5, at 2)

On December 10, 2013 def endant Bar r i os par t i ci pat ed i n t he

UBS Gl obal Medi a and Communi cat i ons Conf erence. At t he

conf erence he compar ed a r ecent NASCAR deal wi t h NBC t o t he deal

t hat WWE was negot i at i ng wi t h NBCU. He not ed that whereas NASCAR

di d 330 hour s of pr ogr ammi ng i n the pr evi ous year wi t h an

aver age of 3 mi l l i on vi ewers, WWE di d 314 hours of progr ammi ng



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wi t h an average of 3. 7 mi l l i on vi ewers. He then comment ed t hat

because t he NASCAR cont r act was $820 mi l l i on and WWE was

cur r ent l y at about $100 mi l l i on, t he new cont r act negot i at i ons

were a “massi ve oppor t uni t y” f or WWE. ( Amended Compl ai nt ¶ 47. )

He st at ed:

And we bel i eve, wi t h some success acr oss [ t he f our r enewalnegot i at i ons] , we doubl e or t r i pl e our 2012 OI BDA and gett o $120 mi l l i on t o $190 mi l l i on. I nt er nal l y, t hat ’ s whatwe’ r e shoot i ng f or . A homer un i n ei t her of t he f i r st t woget s you t her e al one. Thr ee or f our mi l l i on subs on anet work get s you t her e al one. Get hal f way bet ween wher e weare and wher e NASCAR [ i t ] get s you t her e al one. Some

success on bot h wi l l l ook and f eel pr et t y good.

( I d. ) Dur i ng t he conf er ence, def endant Bar r i os al so stat ed t hat

WWE had 220 mi l l i on soci al medi a f ol l owers ar ound t he wor l d.

The pl ai nt i f f s al l ege t hat def endant Bar r i os “mi sl ed

i nvest ors t o bel i eve t hat NASCAR and WWE’ s pur por t edl y si mi l ar

vi ewer shi p hour s woul d r esul t i n WWE achi evi ng a si mi l ar

t el evi si on l i censi ng cont r act as t he $820 mi l l i on annual deal

NBC and FOX made wi t h NASCAR. ” ( I d. ¶ 48. ) The pl ai nt i f f s al l ege

t hat WWE woul d not be abl e to negot i at e such a l arge cont r act

because WWE brought i n f ar l ess adver t i si ng r evenue t han NASCAR,

i n par t because i t s audi ence had l ess spendi ng power t han l i ve

spor t s audi ences. Accor di ngl y, t he pl ai nt i f f s al l ege t hat t he

def endant s knew t hat i t woul d be “i mpossi bl e” t o “get hal f way

bet ween wher e we ar e t oday and wher e NASCAR i s. ” ( I d. ) The

pl ai nt i f f s al so al l ege t hat def endant Bar r i os mi sr epr esent ed t he



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si ze of WWE’ s f an base; he st at ed t hat WWE had 220 mi l l i on

soci al medi a f ol l ower s around t he wor l d, but i n r eal i t y WWE onl y

had 4 t o 6 mi l l i on f ans. Accor di ngl y, t he def endant s knew or

r eckl essl y di sr egar ded t hat i t woul d be i mpossi bl e t o get “t hr ee

or f our mi l l i on subs on a net wor k. ” The pl ai nt i f f s al l ege t he

def endant s knew t he act ual si ze of t he f an base “because CW1

speci f i cal l y r ef used t o pr esent t hese i nf l at ed number s when

asked by Def endant Wi l son on t he basi s t hat t hey wer e f al se. ”

( I d. ¶ 50. )

The def endant s al so not e t hat dur i ng t he quest i on and

answer per i od at t he conf er ence, def endant Barr i os was asked

about hi s compar i son of NASCAR and WWE and whet her adver t i ser s

f ound NASCAR t o be more at t r act i ve. Def endant Bar r i os st ated

t hat he t hought di st r i but i on agr eement s, r at her t han adver t i si ng

r evenue, woul d dr i ve t he cont r act s. He f ur t her st at ed, “t he

adver t i si ng shoul d be pr et t y cl ose but I don’ t have t he har d

data t o support t hat . ” ( Def endant s’ Memorandum, Ex. 6 at 9. )

The def endant s al so not e t hat :

I n di scussi ng t he negot i at i on of t he t el evi si on cont r act s,Bar r i os st ated t hat t he NHL, NASCAR, maj or l eague basebal l ,and t he NBA wer e “get t i ng anywhere bet ween 50 cent s and $1

per vi ewer hour whi l e WWE was get t i ng around 10 cent s perhour . ( Ex. 6 [ at 7] ) . He sai d, “[ Y]ou can make your own j udgment about oppor t uni t y t here. ” ( Ex. 6 [ at 7] ) .

( Def endant s’ Memorandum at 19- 20. )



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On December 17, 2013, Var i ety magazi ne publ i shed an ar t i cl e

ent i t l ed, “WWE Ai ms t o Pi n Down Ri ch New TV Ri ght s Deal s

( EXCLUSI VE) . ” The ar t i cl e was based on i nt er vi ews wi t h

def endant s McMahon, Bar r i os, and Wi l son. The pl ai nt i f f s al l ege

t hat t he f ol l owi ng st at ement was mat er i al l y f al se and/ or

mi sl eadi ng:

“We’ ve had t o evol ve our t hi nki ng, ” [ Mi chel l e] Wi l son says,“We ar e cl ear l y ent er t ai nment - based, but i f you t hi nk aboutt he char acter i st i cs of our br and, i t ’ s l i ve acti on, andt hat ’ s sport s. We want t o be compensat ed f or a l i veaudi ence si nce l i ve cont ent i s get t i ng a ver y si gni f i cant

pr emi um i n t he market pl ace. ” The company ci t es Nascar ’ si mpressi ve deal maki ng t hi s summer as an exampl e. The raci ngl eague secured a new 10- year deal wi t h NBC and Fox wor t h$820 mi l l i on a year . And that i ncr ease came i n the f ace ofdecl i ni ng r at es f or many of i t s r aces. WWE ar gues t hat“Raw” and “SmackDown” al one are j ust as at t r act i ve, wi t h ar abi d f anbase t hat ’ s hel ped bui l d net wor ks, and i t s ser i esar e di ver se i n et hni ci t y and age.

( Amended Compl ai nt ¶ 51. ) The pl ai nt i f f s argue t hat t hese

st atement s wer e mater i al l y f al se and/ or mi sl eadi ng because they

“knew or r eckl essl y di sr egar ded t hat t he ‘ char act er i st i cs of

[ t he WWE] br and’ wer e not si mi l ar t o l i ve spor t s” as evi denced

by t he f act t hat i t s i nt er nal document s “di scuss t he Company’ s

r ecogni t i on t hat WWE i s ‘ not t he PGA, NFL, or MLB . . . ’ and

t hat WWE i s ‘ st i l l ear l y i n gr owt h st ages. ’ ”( I d. ¶ 52. ) The

pl ai nt i f f s al so al l ege t hat t hese i nt er nal document s bel i ed

def endant Wi l son’ s r epr esent at i on t hat WWE want ed t o “be

compensat ed f or a l i ve audi ence. ” Addi t i onal l y, t he pl ai nt i f f s

agai n chal l enge the appr opr i at eness of t he compar i son t o NASCAR



- 13-

because t he def endant s knew or r eckl essl y di sr egarded t hat WWE

coul d not gener at e the same l evel of adver t i si ng revenue.

On J anuary 14, 2014, t he def endant s had a conf er ence cal l

t o di scuss t he l aunch of a WWE Net work. Dur i ng t he cal l , an

anal yst asked about t he possi bl e canni bal i st i c i mpact t hat

l aunchi ng t he WWE Net work coul d have on i t s audi ence base f or

t he NBCU and Syf y progr ams. Def endant McMahon repr esent ed that

t he networ k and t he NBCU programmi ng wer e di st i nct because NBCU

woul d be ai r i ng t he l i ve pr ogr ami ng. He f ur t her r epr esent ed t hat

i t was bot h WWE’ s vi ew and USA’ s vi ew t hat t he net work was goi ng

t o i ncrease t el evi si on r at i ngs and over al l i nt er est i n and

awareness of WWE. The pl ai nt i f f s al l ege t hat def endant McMahon’ s

st at ement s wer e mat er i al l y f al se and/ or mi sl eadi ng because ( a)

he l ater admi t t ed t hat “t he WWE net work ‘ def i ni t el y had a

negat i ve i mpact ’ on negot i at i ons wi t h NBC” and ( b) he al so

al l egedl y admi t t ed t hat whet her t he WWE net work was goi ng t o

i ncrease tel evi si on r at i ngs was a “poi nt of cont ent i on dur i ng

t he negot i at i on pr ocess. ” ( I d. ¶ 54. )

The def endant s not e t hat t he f ol l owi ng st at ement was made

at t he begi nni ng of t he cal l :

Today’ s di scussi on wi l l i ncl ude f or war d- l ooki ng st at ements. These f or war d- l ooki ng st at ements r ef l ect our cur r ent vi ews,are based on var i ous assumpt i ons and are subj ect t o r i sksand uncer t ai nt i es di scl osed f r om t i me t o t i me i n our SECf i l i ngs. Act ual r esul t s may di f f er mat er i al l y and unduer el i ance shoul d not be pl aced on t hem.



- 14-

( Def endant s’ Memorandum, Ex. 25 at 1. ) Fur t hermore, dur i ng t he

cal l , def endant Bar r i os st at ed:

Al t hough t hese i ni t i at i ves hol d si gni f i cant pot ent i al , ourf i nanci al per f or mance f or 2014 coul d f al l wi t hi n a wi der ange of out comes dependi ng on t he r at e of Net worksubscri ber acqui si t i on, t he l evel of pot ent i al pay- per - vi ewcanni bal i zat i on and t he out come of our cont entnegot i at i ons. Thi s wi de range of out comes i n 2014 i ncl udespot ent i al l y l ower earni ngs i n 2013. . . . Management maychange i t s expect at i on t hat t he pl anned Net wor k wi l lcont r i but e t o pot ent i al l y doubl i ng or t r i pl i ng t hecompany’ s 2012 OI BDA r esul t s of $63 mi l l i on by 2015.

( I d. at 5. )

On J anuar y 16, 2014, WWE had a conf erence cal l wi t h

anal yst s. Dur i ng t hi s cal l , def endant Barr i os agai n compared WWE

wi t h NASCAR and l i ve spor t s, st at i ng:

The second maj or t r ansf or mabl e oppor t uni t y f or us i s t her enewal of our f our l argest TV agr eement s, t wo i n t he USwi t h NBCU. . . . Up t op you have t he l i ve gr oss r at i ngpoi nt s del i ver ed by t he maj or l i ve – del i ver er s of l i f e of[ l i ve] cont ent whi ch i s spor t s – NBA 514; Maj or League

Basebal l 295; NASCAR 212. WWE del i ver ed 344 l i ve gr ossr at i ng poi nt s over t he l ast 12 mont hs. The payment f ort hose gr oss r at i ng poi nt s s i t [ s] somewher e bet ween $2mi l l i on and $5 mi l l i on cur r ent l y i n t he mar ket pl ace. So t heway t hat mat h wor ks, i f you ar e NASCAR, you have 212 grossr at i ng poi nt s, you ar e aver agi ng about $4 mi l l i on per ,NASCAR on aver age i s $800 mi l l i on of domest i c r i ght s f ees ayear . As I ment i oned bef or e, WWE’ s f our l ar gest deal s ar eat $100 mi l l i on gl obal l y. So t he domest i c get s obvi ousl yl ess t han t hat . So t he r ange of oppor t uni t y si t s f r omsomewher e wher e are t oday t o t hose number s. We’ ve sai d wi t h

some l evel of success especi al l y across t he net work and t her i ght s r enewal t hat we t hi nk we can doubl e or t r i pl e 2012OI BDA by 2015.

( Amended Compl ai nt ¶ 55. ) The pl ai nt i f f s cont end that “Def endant

Bar r i os mi sl ed i nvest or s t o bel i eve t hat WWE’ s t el evi si on



- 15-

l i cense negot i at i ons woul d l ead t o a cont r act aki n t o NASCAR’ s

$800 mi l l i on annual l i censi ng deal because WWE’ s ‘ l i ve gr oss

r at i ng poi nt s’ wer e above bot h Maj or League Basebal l and

NASCAR. ” ( I d. ¶ 56. ) They al l ege t hat def endant Bar r i os omi t t ed

t he cruci al f act t hat i n or der t o secur e a cont r act even hal f of

t hat si ze, WWE woul d have t o garner f our t i mes mor e per

adver t i si ng spot t han i t was cur r ent l y get t i ng. The pl ai nt i f f s

al l ege t hat “CW1 st at ed t hat t hi s was i mpossi bl e and t her ef or e

NBC woul d never pay t hat much. Thus, i t was al so mat er i al l y

f al se and mi sl eadi ng t o st at e t hat ‘ we thi nk we can doubl e or

t r i pl e 2012 OI BDA by 2015’ wi t h t he r i ght s r enewal . ” ( I d. )

The pl ai nt i f f s al l ege t hat dur i ng t hi s cal l , def endant

Bar r i os agai n mi sr epr esent ed the si ze of WWE’ s f an base, st at i ng

t hat WWE had “13 mi l l i on t o 14 mi l l i on uni ques t o our websi t e,

250 mi l l i on soci al medi a f ol l ower s. That i s mor e t han t he NBA

and al l of i t s t eams combi ned. That ’ s more t han t he NFL and al l

of i t s t eams combi ned. ” ( I d. ¶ 57. ) The pl ai nt i f f s al l ege t hat

t hi s st at ement i s mat er i al l y f al se and/ or mi sl eadi ng because

“[ a] ccor di ng t o CW1, management woul d recount t he same f ol l owers

may t i mes over i n an ef f or t t o i nf l at e t he number of WWE

f ans . . . [ and] because Def endant s knew or r eckl essl y

di sr egarded t hat WWE’ s f an base was not near l y t he si ze of other

l i ve spor t s . ” ( I d. ¶ 58. )



- 16-

On Februar y 20, 2014, WWE i ssued a pr ess r el ease announci ng

i t s 2013 Four t h Quar t er and f ul l year f i nanci al r esul t s. The

r el ease quot ed def endant Bar r i os as st at i ng:

Regardi ng our domest i c TV l i censi ng agr eement s, we ar e nowengaged wi t h pot ent i al par t ner s af t er exi t i ng our excl usi venegot i at i ons per i od wi t h NBCU. Based on our anal ysi s of t heval ue of comparabl e pr ogr ams and our ext ensi ve r esearchr egardi ng consumer i nterest i n WWE Net work, we cont i nue t obel i eve t hat we can doubl e or t r i pl e our 2012 OI BDA r esul t sof $63 mi l l i on by 2015.

( I d. ¶ 59. ) The pl ai nt i f f s al l ege t hat t hi s st at ement was

mat er i al l y f al se and/ or mi sl eadi ng because, accor di ng t o CW1,

“f r om t he onset ot her net wor ks had expr essed no i nt er est i n

worki ng wi t h WWE” and, t hus, t hey were not engaged wi t h ot her

pot ent i al par t ner s at t he t i me def endant Bar r i os made t he

stat ement . ( I d. ¶ 60. ) I n l i ght of t hat f act , t he pl ai nt i f f s

al so al l ege t hat :

Wi t hout t he i nt er est f r om ot her net wor ks, Def endant s knewor r eckl essl y di sr egarded t hat WWE coul d not negot i ate acont r act t hat woul d ‘ doubl e or t r i pl e’ t he oper at i ng i ncomeof WWE based on a new t el evi si on cont r act , because t heCompany was onl y negot i at i ng i t s cont r act wi t h NBC wi t houtany bar gai ni ng power .

( I d. )

The def endant s not e t hat t he press r el ease cont ai ned t he

f ol l owi ng di scl osur e:

For war d Looki ng St at ement : Thi s pr ess r el ease cont ai nsf or war d- l ooki ng st at ement s pur suant t o the saf e har borpr ovi si ons of t he Secur i t i es Li t i gat i on Ref or m Act of 1995,i ncl udi ng, wi t hout l i mi t at i ons, f or war d- l ooki ng stat ement sr egardi ng t he Company’ s growt h pl ans. Al l of t hose f orward-l ooki ng st at ement s are subj ect t o var i ous r i sks and



- 17-

uncer t ai nt i es. These r i sks and uncer t ai nt i es i ncl ude,wi t hout l i mi t at i on, r i sks rel at i ng t o ent er i ng i nt o,mai nt ai ni ng and r enewi ng key agr eement s, i ncl udi ngt el evi si on and pay- per - vi ew pr ogr ammi ng and our networkdi st r i but i on agr eement s. . . . Actual r esul t s coul d di f f ermat er i al l y f r om t hose cur r ent l y expect ed or ant i ci pat ed.

( Def endant s’ Memorandum, Ex. 11 at 10. )

8. On Febr uar y 20, 2014, WWE al so had an earni ngs

conf er ence cal l f or i t s 2013 Four t h Quar t er f i nanci al r esul t s.

Def endant Bar r i os st at ed:

[ W] e cont i nue t o bel i eve t hat we can doubl e or t r i pl e our2012 OI BDA r esul t s by 2015. Our progr ams share t he same key

det er mi nant s of val ue t hat ar e at t r i but ed t o l i ve spor t s,si gni f i cant f i r st r un hour s, and t he associ at ed gr ossr at i ng poi nt s, a passi onat e and l oyal f an base and 90% l i vepl us same day vi ewershi p, whi ch makes WWE cont ent l i kesport s DVR- pr oof . Benchmar ki ng our r i ght s f ees t o the f eespai d f or spor t s pr ogr ammi ng and ot her or i gi nal scr i pt edser i es i ndi cat es t hat our l i cense agr eement s coul d havemeani ngf ul upsi de pot ent i al .

( Amended Compl ai nt ¶ 61. ) The pl ai nt i f f s al l ege t hat t hi s

st at ement was “mat er i al l y f al se and/ or mi sl eadi ng when made

because, among ot her t hi ngs, Def endant Bar r i os knew or

r eckl essl y di sr egarded t hat WWE does not ‘ shar e[ ] t he key

det er mi nant s of val ue t hat ar e at t r i but ed t o l i ve spor t s’

because WWE coul d not gener at e t he t ype of adver t i si ng r evenue

t hat l i ve spor t s gener at e. ” ( I d. ¶ 62. ) The pl ai nt i f f s al l ege

t hat t he def endant s al so knew t hat t hei r f an base di d not have

si gni f i cant spendi ng power , whi ch al so had a negat i ve i mpact on

t hei r negot i at i ons. Addi t i onal l y, t he pl ai nt i f f s al l ege t hat WWE

i s not DVR- pr oof .



- 18-

Dur i ng t he cal l , def endant Bar r i os al so addr essed a

quest i on as t o whet her or not t he f act t hat t he medi a pai d a

l ower CPM ( “cost per t housand”) f or WWE’ s cont ent was a f actor

cont r i but i ng t o why WWE had not yet r eached a deal wi t h NBCU.

Def endant Barr i os r esponded,

I don’ t want t o char act er i ze any of t he di scussi ons we’ vehad i ncl udi ng wi t h NBCU. As I have sai d bef or e r i ght behi ndt he NFL and t he NBA comes WWE i n t erms of gener at i ng l i vegr oss r at i ng poi nt s i n t he U. S. So t hat ’ s ahead of NASCAR,ahead of NHL, i t i s ahead of Maj or League Basebal l , and al lt hei r nat i onal deal s. So we f eel good about t he val ue t hatwe br i ng t o a par t ner bot h i n adver t i si ng, bei ng abl e t o

dr i ve t hei r CPM as wel l as and mor e i mpor t ant l y i n t heval ue t o t hei r af f i l i at e r evenue st r eams.


“mat er i al l y f al se and/ or mi sl eadi ng when made because Def endant s

knew or r eckl essl y di sr egarded t hat pur port edl y comparabl e

‘ gr oss r at i ng poi nt s’ f or WWE t o the NFL, MLB, NBA, NHL and

NASCAR wer e i n no way commensur at e wi t h how NBC val ued WWE’ s

t el evi si on l i cense. ” ( I d. ¶ 65. ) Accor di ngl y, t he pl ai nt i f f s

al l ege t hat t her e was no r eason t hat t he def endant s shoul d “f eel

good” about WWE’ s abi l i t y to add val ue t o an adver t i si ng

par t ner shi p or t o af f i l i at e r evenue st r eams. The pl ai nt i f f s al so

al l ege that “ot her net wor ks had al r eady decl i ned to wor k wi t h

WWE, so t he Company was onl y r enegot i at i ng i t s cont r act wi t h

NBC, who woul d not come cl ose t o t he $400 mi l l i on ( of t he total

$800 mi l l i on) t hat NASCAR r ecei ved i n i t s l i cense deal . ” ( I d. )



- 19-

The def endant s not e t hat t hi s conf er ence cal l began wi t h

anot her f or war d- l ooki ng st at ement s di scl ai mer , whi ch was si mi l ar

t o t hose on pr i or occasi ons. They al so not e t hat def endant

McMahon “st at ed t hat t he r equi r ement t hat WWE negot i at e

excl usi vel y wi t h NBC had expi r ed and ‘ we’ r e out i n t he

mar ket pl ace [ f or ] t he f i r st t i me i n a l ong, l ong t i me. ’ ”

( Def endant s’ Memorandum at 25- 26) ( quot i ng Ex. 12 at 5) .

Def endant Bar r i os al so not ed t hat WWE had r enewed agr eement s i n

t he UK and Thai l and and was al so i n di scussi ons i n I ndi a.

On May 1, 2014, t he def endant s had anot her ear ni ngs cal l

wi t h anal yst s, and def endant Bar r i os made the f ol l owi ng

st atement :

Regar di ng our t el evi si on l i censi ng agr eement s, we ar econt i nui ng t o negot i at e wi t h pot ent i al di st r i but i onpar t ner s i n t he U. S. and I ndi a. . . . we cont i nue t obel i eve t hat t he successf ul execut i on of key i ni t i at i ves

coul d pot ent i al l y r esul t i n doubl i ng or t r i pl i ng our 2012OI BDA r esul t s t o a r ange of $125 mi l l i on t o $190 mi l l i on by2015.

( Amended Compl ai nt ¶ 69. ) The pl ai nt i f f s al l ege t hat t hi s

st at ement was mat er i al l y f al se and/ or mi sl eadi ng because,

accor di ng t o CW1, at t he t i me t hese st at ement s wer e made, WWE

was onl y negot i at i ng wi t h NBC, not wi t h any ot her “pot ent i al

di st r i but i on par t ner s. ” Fur t her mor e, t he pl ai nt i f f s al l ege t hat

t he st atement s wer e mater i al l y f al se and/ or mi sl eadi ng because

“accor di ng t o CW1, NBC was not wi l l i ng t o pay an amount of money



- 20-

f or t he cont r act t hat woul d come anywher e cl ose t o doubl i ng or

t r i pl i ng 2012 OI BDA r esul t s. ” ( I d. ¶ 70. )

Dur i ng t he same cal l , def endant Bar r i os al so st at ed,

Our comprehensi ve consumer r esear ch demonst r at es t hat mor et han 50% of TV homes acr oss WWE’ s t op gl obal mar ket s wereabout 120 mi l l i on homes, r epor t some l evel of af f i ni t y f orWWE cont ent . And among t hese WWE homes, mor e t han 80mi l l i on ar e cl assi f i ed as act i ve, r epr esent i ng mor e t han170 mi l l i on passi onat e and casual f ans.


mater i al l y f al se or mi sl eadi ng when made because, accor di ng t o

CW1, t he def endant s knew t hat t hei r f an base was 4- 6 mi l l i on

f ans, not mor e t han 80 mi l l i on.

The def endant s not e t hat t hi s earni ngs cal l st ar t ed wi t h a

f or war d- l ooki ng st at ement s di scl ai mer .

II. LEGAL STANDARD

When deci di ng a mot i on t o di smi ss under Fed. R. Ci v. P.

Rul e 12( b) ( 6) , t he cour t must accept as t r ue al l f act ual

al l egat i ons i n t he compl ai nt and must dr aw i nf er ences i n a l i ght

most f avor abl e t o t he pl ai nt i f f . Scheuer v. Rhodes, 416 U. S.

232, 236 ( 1974) . Al t hough a compl ai nt “does not need detai l ed

f act ual al l egat i ons, a pl ai nt i f f ’ s obl i gat i on t o pr ovi de t he

‘ gr ounds’ of hi s ‘ ent i t l e[ ment ] t o r el i ef ’ r equi r es mor e t han

l abel s and concl usi ons, and a f or mul ai c r eci t at i on of t he

el ement s of a cause of act i on wi l l not do. ” Bel l At l ant i c Cor p.

v. Twombl y, 550 U. S. 550, 555 ( 2007) ( ci t i ng Papasan v. Al l ai n,



- 21-

478 U. S. 265, 286 ( 1986) ( on a mot i on t o di smi ss, cour t s “ar e not

bound t o accept as t r ue a l egal concl usi on couched as a f act ual

al l egat i on”) ) . “Nor does a compl ai nt suf f i ce i f i t t ender s

naked asser t i ons devoi d of f ur t her f act ual enhancement .

Ashcrof t v. I qbal , 556 U. S. 662, 678 ( 2009) ( quot i ng Twombl y, 550

U. S. at 557) . “Fact ual al l egat i ons must be enough t o r ai se a

r i ght t o rel i ef above t he specul at i ve l evel , on t he assumpt i on

t hat al l al l egat i ons i n t he compl ai nt ar e t r ue ( even i f doubt f ul

i n f act ) . ” I d. ( ci t at i ons omi t t ed) . However , t he pl ai nt i f f

must pl ead “onl y enough f act s t o st at e a cl ai m t o r el i ef t hat i s

pl ausi bl e on i t s f ace. ” I d. at 1974. “The f unct i on of a mot i on

t o di smi ss i s ‘ mer el y t o assess t he l egal f easi bi l i t y of t he

compl ai nt , not t o assay t he wei ght of t he evi dence whi ch mi ght

be of f er ed i n suppor t t her eof . ’ ” Myt ych v. May Dept . St or e Co. ,

34 F. Supp. 2d 130, 131 ( D. Conn. 1999) ( quot i ng Ryder Energy

Di st r i but i on v. Mer r i l l Lynch Commodi t i es, I nc. , 748 F. 2d 774,

779 ( 2d Ci r . 1984) ) . “The i ssue on a mot i on t o di smi ss i s not

whet her t he pl ai nt i f f wi l l pr evai l , but whet her t he pl ai nt i f f i s

ent i t l ed t o of f er evi dence t o suppor t hi s cl ai ms. ” Uni t ed

St at es v. Yal e New Haven Hosp. , 727 F. Supp. 784, 786 (D. Conn.

1990) ( ci t i ng Scheuer , 416 U. S. at 232) .

I n i t s r evi ew of a mot i on t o di smi ss f or f ai l ur e t o st at e a

cl ai m, t he cour t may consi der “onl y t he f act s al l eged i n t he

pl eadi ngs, document s at t ached as exhi bi t s or i ncor por at ed by



- 22-

r ef er ence i n t he pl eadi ngs and mat t er s of whi ch j udi ci al not i ce

may be t aken. ” Samuel s v. Ai r Transpor t Local 504, 992 F. 2d 12,

15 ( 2d Ci r . 1993) .

Feder al Rul e of Ci vi l Pr ocedur e 8( a) r equi r es t hat a

pl eadi ng cont ai n “a shor t and pl ai n st at ement of t he cl ai m

showi ng t hat t he pl eader i s ent i t l ed t o r el i ef . ” Fed. R. Ci v. P.

8( a) ( 2) . However , al l egat i ons of secur i t i es f r aud pl ed under

§ 10( b) of t he Exchange Act and Rul e 10b–5 are subj ect t o the

pl eadi ng r equi r ement s of Feder al Rul e of Ci vi l Pr ocedur e Rul e

9( b) . Shi el ds v. Ci t yt r ust Bancor p, I nc. , 25 F. 3d 1124, 1127 ( 2d

Ci r . 1994) . Rul e 9( b) pr ovi des: “I n al l egi ng f r aud or mi st ake, a

par t y must st at e wi t h par t i cul ar i t y t he ci r cumst ances

const i t ut i ng f r aud or mi st ake. Mal i ce, i nt ent , knowl edge, and

ot her condi t i ons of a per son' s mi nd may be al l eged gener al l y. ”

Fed. R. Ci v. P. 9( b) . “[ A] compl ai nt maki ng such al l egat i ons

must ‘ ( 1) speci f y t he st at ement s t hat t he pl ai nt i f f cont ends

wer e f r audul ent , ( 2) i dent i f y the speaker , ( 3) st at e wher e and

when t he st at ement s were made, and ( 4) expl ai n why t he

st at ement s wer e f r audul ent . ’ ” Shi el ds, 25 F. 3d at 1127–28

( quot i ng Mi l l s v. Pol ar Mol ecul ar Cor p. , 12 F. 3d 1170, 1175 ( 2d

Ci r . 1993) ) .

Si mi l ar l y, t he Pr i vat e Secur i t i es Li t i gat i on Ref or m Act of

1995 ( “PSLRA”) r equi r es t hat when a pl ai nt i f f cl ai ms t hat t he

def endant has made an unt r ue st at ement of a mat er i al f act or



- 23-

omi t t ed a mat er i al f act necessary t o make a st at ement not

mi sl eadi ng, t he pl ai nt i f f must “speci f y each st at ement al l eged

t o have been mi sl eadi ng [ and] t he reason or r easons why t he

st at ement i s mi sl eadi ng . . . ” 15 U. S. C. § 78u–4( b) ( 1) ( 2010) .

Fur t her mor e, t o st at e a cl ai m f or secur i t i es f r aud, t he

pl ai nt i f f must “wi t h r espect t o each act or omi ssi on . . . st at e

wi t h par t i cul ar i t y f acts gi vi ng r i se t o a st r ong i nf er ence t hat

t he def endant act ed wi t h t he requi r ed st at e of mi nd. ” 15 U. S. C.

§ 78u–4(b) ( 2) ( 2010) . “The r equi si t e st at e of mi nd i n a Rul e 10b-

5 act i on i s ‘ an i nt ent t o decei ve, mani pul at e or def r aud. ’ ”

Gani no v. Ci t i zens Ut i l s. Co. , 228 F. 3d 154, 168 ( 2d Ci r . 2000)

( quot i ng Er nst & Er nst v. Hochf el der , 425 U. S. 185, 193 n. 12

( 1976) ) .

III. DISCUSSION

The def endant s move t o di smi ss t he pl ai nt i f f ’ s consol i dat ed

amended compl ai nt , pur suant t o Rul es 9( b) and 12( b) ( 6) of t he

Feder al Rul es of Ci vi l Procedur e and t he PSLRA. They ar gue t hat

t he Amended Compl ai nt shoul d be di smi ssed because

1. i t f ai l s t o pl ead non- concl usor y f act s showi ng a

mat er i al f al se st at ement or omi ssi on, as opposed t ogenui nel y bel i eved opt i mi sm about t he Company’ s f ut ur epr ospect s; 2. i t f ai l s t o pl ead non- concl usor y f act screat i ng t he r equi si t e st r ong i nf er ence of sci ent er ; 3.i t f ai l s t o pl ead non- concl usor y f act s showi ng l osscausat i on; and 4. i t i s bar r ed by t he saf e har bor i n t hePSLRA f or f orward- l ooki ng st atement s made wi t hout actualknowl edge of t hei r f al si t y.



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( Def endant s’ Memorandum at 9. )

They f ur t her asser t t hat “t he cl ai ms agai nst Wi l son and

Levesque shoul d be di smi ssed because Pl ai nt i f f s have not al l eged

any el ement s of a vi ol at i on agai nst t hem and have i gnor ed t hat

Leveque’ s shar es wer e sol d pur suant t o a Rul e 10b5- 1 pl an t hat

was execut ed and publ i cl y di scl osed seven mont hs bef ore t he

begi nni ng of t he cl ass per i od. ” ( I d. at 9. )

A. Count I: Violation of Section 10(b) of the Exchange

Act and Rule 10b-5 by defendants WWE, McMahon, Barrios, and

Wilson

Sect i on 10( b) of t he Exchange Act makes i t unl awf ul t o “use

or empl oy, i n connect i on wi t h t he pur chase or sal e of any

secur i t y . . . any mani pul at i ve or decept i ve devi ce or

cont r i vance i n cont r avent i on of such r ul es and r egul at i ons as

t he Commi ssi on may pr escr i be as necessar y or appr opr i at e i n t he

publ i c i nt er est or f or t he pr ot ect i on of i nvest or s. ” 15 U. S. C. §

78j ( b) .

To st at e a cl ai m f or vi ol at i on of Sect i on 10( b) and Rul e

10b- 54, t he pl ai nt i f f must al l ege “( 1) a mat er i al

mi sr epr esent at i on or omi ssi on by t he def endant ; ( 2) sci ent er ;

4 Rul e 10b- 5, pr omul gat ed by t he SEC t o i mpl ement Sect i on 10( b) ,

makes i t unl awf ul f or any per sons, di r ect l y or i ndi r ect l y, “[ t ] omake any unt r ue st atement of a mater i al f act or t o omi t t o st atea mat er i al f act necessary i n order t o make t he st at ement s made,i n l i ght of t he ci r cumst ances under whi ch they were made, notmi sl eadi ng. ” 17 C. F. R. § 240. 10b- 5( b) .



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( 3) a connect i on bet ween the mi sr epr esent at i on or omi ssi on and

t he pur chase or sal e of a secur i t y; ( 4) r el i ance upon t he

mi sr epr esent at i on or omi ssi on; ( 5) economi c l oss; and ( 6) l oss

causat i on. ” Amgen I nc. v. Conn. Ret . Pl an and Trust Funds, 133

S. Ct . 1184, 1192 ( 2013) ( quot i ng Mat r i xx I ni t i at i ves, I nc. v.

Si r acusano, 563 U. S. 27, 37- 38 ( 2011) ) . 5

1. Material Misrepresentation or Omission

To st at e a cl ai m, t he pl ai nt i f f s must al l ege “t hat t he

def endant [ s] made a st at ement t hat was ‘ mi sl eadi ng as t o a

mat er i al f act . ’ ” Mat r i xx I ni t i at i ves, 563 U. S. at 38 ( quot i ng

Basi c I nc. v. Levi nson, 485 U. S. 224, 238 ( 1988) ) . The

“mat er i al i t y r equi r ement i s sat i sf i ed when t her e i s ‘ a

subst ant i al l i kel i hood t hat t he di scl osur e of t he omi t t ed f act

woul d have been vi ewed by t he r easonabl e i nvest or as havi ng

si gni f i cant l y al t er ed t he “t ot al mi x” of i nf or mat i on made

avai l abl e. ’ ” I d. , 563 U. S. at 38 ( quot i ng Basi c, 485 at 231- 32

5 The t hi r d and f i f t h el ements do not appear t o be cont est ed i n

t hi s case. The pl ai nt i f f s ar gue t hat r el i ance i s est abl i shed vi at he f r aud- on- t hemar ket doct r i ne. “The f r aud- on- t hemar ketpr emi se i s t hat t he pr i ce of a secur i t y tr aded i n an ef f i ci entmar ket wi l l r ef l ect al l publ i cl y avai l abl e i nf or mat i on about a

company; accor di ngl y, a buyer of t he secur i t y may be pr esumed t ohave r el i ed on t hat i nf or mat i on i n pur chasi ng t he secur i t y. ”Amgen I nc. , 133 S. Ct . at 1190. “[ I ] f a mar ket i s shown t o beef f i ci ent , cour t s may pr esume t hat i nvest or s who t r adedsecur i t i es i n t hat mar ket r el i ed on publ i c, mat er i almi sr epr esent at i ons r egar di ng t hose secur i t i es. ” I d. at 1192. Thedef endant s do not cont est t he appl i cabi l i t y of t he f r aud- on- t hemar ket doct r i ne.



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( 2010) ) . “[ W] hen pr esent ed wi t h a Rul e 12( b) ( 6) mot i on, ‘ a

compl ai nt may not pr oper l y be di smi ssed . . . on t he gr ound

t hat t he al l eged mi sst at ement s or omi ssi ons are not mat er i al

unl ess t hey are so obvi ousl y uni mport ant t o a r easonabl e

i nvest or t hat r easonabl e mi nds coul d not di f f er on t he quest i on

of t hei r i mport ance. ’ ” Gani no, 228 F. 3d at 162 ( quot i ng Gol dman

v. Bel den, 754 F. 2d 1059, 1067 ( 2d Ci r . 1985) ) . “Whi l e each

al l egat i on of f r aud must be suf f i ci ent l y par t i cul ar i zed,

al l egat i ons of mat er i al i t y shoul d not be consi der ed i n

i sol at i on. ” Manavazi an v. At ec Gr p. , I nc. , 160 F. Supp. 2d 468,

478 ( E. D. N. Y. 2001) .

“[ Sect i on] 10( b) and Rul e 10b- 5( b) do not cr eat e an

af f i r mat i ve dut y t o di scl ose any and al l mat er i al i nf or mat i on.

Di scl osur e i s r equi r ed under t hese pr ovi si ons onl y when

necessar y ‘ t o make . . . st at ement s made, i n t he l i ght of t he

ci r cumst ances under whi ch t hey were made, not mi sl eadi ng. ’ ”

Mat r i xx I ni t i at i ves, 563 U. S. at 44 ( quot i ng 17 CFR § 240. 10b-

5( b) ) .

Cour t s di st i ngui sh bet ween f al se or mi sl eadi ng st at ement s

of f act and f al se or mi sl eadi ng st at ement s of opi ni on.

St at ement s of opi ni on ar e consi der ed f al se or mi sl eadi ng i f at

t he t i me a st at ement was made, “t he speaker di d not hol d t he

bel i ef she pr of essed” or “t he suppor t i ng f act [ s] she suppl i ed

were unt r ue. ” Tongue v. Sanof i , No. 15- 588- CV, 2016 WL 851797,



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at *7 ( 2d Ci r . Mar . 4, 2016) ( quot i ng Omni car e, I nc. v. Labor er s

Di st . Counci l Const r . I ndus. Pensi on Fund,

135 S. Ct . 1318, 1327

( 2015) ) . The pl ai nt i f f

must i dent i f y par t i cul ar ( and mat er i al ) f act s goi ng t o t hebasi s f or t he i ssuer ' s opi ni on- - f act s about t he i nqui r y t hei ssuer di d or di d not conduct or t he knowl edge i t di d ordi d not have- - whose omi ss i on makes t he opi ni on st at ement ati ssue mi sl eadi ng t o a reasonabl e per son r eadi ng t hest at ement f ai r l y and i n cont ext .

I d. ( quot i ng Omni car e, 135 S. Ct . at 1332) . “[ O] pi ni ons, t hough

si ncer el y hel d and ot her wi se t r ue as a mat t er of f act , may

nonet hel ess be act i onabl e i f t he speaker omi t s i nf or mat i on whose

omi ss i on makes t he st at ement mi sl eadi ng to a r easonabl e

i nvest or . ” I d. ( quot i ng Omni car e, 135 S. Ct . at 1332) . “[ A]

r easonabl e i nvest or , upon hear i ng a st at ement of opi ni on f r om an

i ssuer , ‘ expect s not j ust t hat t he i ssuer bel i eves t he opi ni on

( however i r r at i onal l y) , but t hat i t f ai r l y al i gns wi t h t he

i nf or mat i on i n t he i ssuer ' s possessi on at [ t he] t i me. ’ ” I d.

( quot i ng Omni care, 131 S. Ct . at 1329) . At t he same t i me,

“[ r ] easonabl e i nvest or s under st and t hat opi ni ons somet i mes r est

on a wei ghi ng of compet i ng f act s, ” and, t her ef or e, “a st at ement

of opi ni on ‘ i s not necessari l y mi sl eadi ng when an i ssuer knows,

but f ai l s t o di scl ose, some f act cut t i ng t he ot her way. ’ ” I d. at

*8 ( quot i ng Omni car e, 135 S. Ct . at 1329) .

The Amended Compl ai nt i dent i f i es many st at ements t hat t he

pl ai nt i f f s al l ege ar e f al se or mi sl eadi ng. Those st at ement s f al l



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i nt o f our gener al cat egor i es: 1) t he si ze of WWE’ s f an base, 2)

t he pot ent i al l y canni bal i st i c ef f ect of l aunchi ng the WWE

net work, 3) compar i son bet ween WWE and l i ve spor t s, 4) t he

st at us of negot i at i ons wi t h NBCU, and 5) st at ement s r egar di ng

t he potent i al t o doubl e or t r i pl e 2012 OI BDA by 2015. The

pl ai nt i f f ’ s cent r al gr i evance - - t he f act t hat WWE knew t hat t he

NBCU cont r act was not goi ng t o doubl e or t r i pl e OI BDA - - i s

germane t o most of t hese cat egor i es.

The cour t concl udes t hat t he pl ai nt i f f s have f ai l ed t o

al l ege f act s suf f i ci ent t o suggest t hat t he def endant s’

st at ement s about t he si ze of WWE’ s f an base, st at ement s about

t he canni bal i st i c ef f ect of l aunchi ng t he WWE net wor k,

st atement s about t he st atus of negot i at i ons wi t h NBCU, and

st at ement s r egar di ng t he pot ent i al t o doubl e or t r i pl e OI BDA

wer e mat er i al l y f al se or mi sl eadi ng. However , t he cour t

concl udes t hat t he pl ai nt i f f s have al l eged f act s suf f i ci ent t o

suggest t hat t he def endant s’ r epeated compar i son bet ween WWE and

l i ve spor t s, wi t hout r ef er enci ng t he di screpancy i n adver t i si ng

r evenue bet ween WWE and t hose spor t s, was mat er i al l y mi sl eadi ng.

a. Statements about the size of WWE’s fan base

The pl ai nt i f f s i dent i f y si x st at ements i n whi ch t hey al l ege

t he def endant s mi sr epr esent ed t he si ze of WWE’ s f an base.

I n t hr ee i nst ances, t he pl ai nt i f f s al l ege t hat t he

def endant s mi sr epr esent ed t he si ze of WWE’ s soci al medi a



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f ol l owi ng. ( See Amended Compl ai nt ¶¶ 45, 50, 57. ) Fi r st , dur i ng

t he Oct ober 31, 2013 cal l , def endant Bar r i os st at ed:

[ O] ur t ot al soci al medi a pl at f or m now r eaches near l y 219mi l l i on f ol l ower s, mor e t han 140 mi l l i on Facebook l i kes and70 mi l l i on Twi t t er f ol l ower s, r epr esent i ng a 28% i ncreasef r om t he end of t he pr ecedi ng quar t er and a 92% i ncr easef r om t he end of t he t hi r d quar t er l ast year . Bui l di ng t hest r engt h of our br and i s evi denced i n t hese met r i cs, andt aki ng advant age of t hat st r engt h i s a cr i t i cal componentof our l ong- t er m st r at egy.

( I d. ¶ 45. ) Second, at t he December 10, 2103 conf er ence,

def endant Bar r i os st at ed:

The t hesi s i s we have 220 mi l l i on soci al medi a f ol l ower saround t he wor l d. I ment i oned J ohn Cena i s t he number 3at hl et e behi nd Kobe and LeBr on i n t he ent i r e wor l d, i nt er ms of f ol l ower s. Ther e ar e peopl e monet i zi ng t hataudi ence today. We are not doi ng as good a j ob i n t hatf ront .

( I d. ¶ 50) ; ( Def endant s’ Memorandum, Ex. 6 at 7. )

Thi r d, dur i ng t he J anuar y 16, 2014 conf er ence cal l ,

def endant Bar r i os st at ed,

The t hi r d i t em I t al ked about i s our soci al medi a anddi gi t al audi ence, 13 mi l l i on t o 14 mi l l i on uni ques t o ourwebsi t e, 250 mi l l i on soci al medi a f ol l ower s. That i s mor et han t he NBA and al l of i t s t eams combi ned. That ' smore t han t he NFL and al l of i t s t eams combi ned. I t i s anamazi ng tool f or us t o r each and engage our audi ence. Thesoci al medi a chat t er on t he Network has been t hr ough t her oof f or us gl obal l y.

( Amended Compl ai nt ¶ 57. )

The pl ai nt i f f s al l ege t hat t hese numbers ar e i nf l at ed

because management mani pul at ed the number of t hei r f ans on

soci al medi a by count i ng t he same f an mul t i pl e t i mes. For



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exampl e, i f one f an was “f ol l owi ng” 12 wr est l er s on soci al

medi a, management counted t hi s one f an as 12 f ans. Though t hi s

may be t r ue, gi ven t he cont ext i n whi ch t hese repr esent at i ons

wer e made, t he pl ai nt i f f s have f ai l ed t o al l ege t hat t her e i s a

subst ant i al l i kel i hood t hat a r easonabl e i nvest or woul d f i nd

t hat t he “cor r ect ” number of soci al medi a f ol l owers woul d have

“si gni f i cant l y al t er ed t he ‘ t ot al mi x’ of i nf or mat i on made

avai l abl e. ” Mat r i xx I ni t i at i ves, I nc. , 563 U. S. at 38 ( quot i ng

Basi c, 485 U. S. at 231- 232) ( emphasi s added) .

When consi der i ng the mi sl eadi ng natur e of a st atement , t he

key quest i on t he cour t must ask i s “whet her def endant s'

r epr esent at i ons, t aken t oget her and i n cont ext , woul d have

mi sl ead a reasonabl e i nvest or [ . ] ” McMahan & Co. v. Wherehouse

Ent m' t , I nc. , 900 F. 2d 576, 579 ( 2d Ci r . 1990) . These st at ement s

wer e made i n the cont ext of support i ng ot her st at ement s t hat t he

pl ai nt i f f s have not al l eged ar e mat er i al l y f al se or mi sl eadi ng.

For exampl e, t he f i r st st atement was made i n t he cont ext of t he

def endant s i dent i f yi ng t hat WWE had exper i enced “a 28% i ncr ease

f r om t he end of t he pr ecedi ng quar t er and a 92% i ncr ease f r om

t he end of t he t hi r d quar t er l ast year ” i n i t s soci al medi a

pl at f or m. The pl ai nt i f f s have not al l eged t hat t hi s f act i s

f al se or mi sl eadi ng. The second st at ement was made i n the

cont ext of st at i ng t hat J ohn Cena was ver y popul ar and t hat WWE

needed t o do a bet t er j ob of mobi l i zi ng i t s soci al medi a f an



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base. I n t hat cont ext , even i f t he number s are mi sst at ed, t he

pl ai nt i f f s have f ai l ed t o al l ege t hat t he def endant s’

r epr esent at i ons are mat er i al l y mi sl eadi ng.

As t o t he t hi r d st at ement , t he pl ai nt i f f s al l eged wi t h

r espect t o t he compar i son t o t he NBA and t he NFL, t hat “an

i nt er nal company pr esent at i on” st ated t hat “WWE i s ‘ not t he PGA,

NFL, or MLB . . . ’ and t hat WWE i s ‘ st i l l i n ear l y gr owt h st ages

and need[ s] t o manage [ i t s] busi ness accor di ngl y. ’ ” ( Amended

Compl ai nt ¶ 58) . However , t he pl ai nt i f f s pr ovi de no cont ext f or

t he st at ement i n t he i nt er nal pr esent at i on and whet her t hi s

st at ement r el at es at al l t o t he si ze of t he soci al medi a

f ol l owi ng f or t hose spor t s as compared t o WWE. Thus, t he cour t

cannot concl ude t hat t he pl ai nt i f f s have al l eged f act s

suf f i ci ent t o cause t hi s st at ement t o be mi sl eadi ng.

The pl ai nt i f f s al so i dent i f y t hree i nst ances i n whi ch t hey

al l ege t he def endant s made f al se or mi sl eadi ng st atement s about

WWE’ s t el evi si on audi ence. Fi r st , t hey poi nt t o t he Oct ober 31,

2013 pr ess r el ease t hat quot ed def endant McMahon as st at i ng,

These accompl i shments r ef l ect t he st r engt h of our brands,i ncl udi ng a nat i onal t el evi si on audi ence t hat exceeds t heannual r each of most ot her spor t s and ent er t ai nment

pr ogr ams. Thi s st r engt h pr ovi des a sol i d f oundat i on f or t her enegot i at i on of our TV cont r act s and t he pot ent i al l aunchof a WWE net work. Based on our abi l i t y t o create power f ul ,ent er t ai ni ng cont ent and t o expand di st r i but i on, west r ongl y bel i eve t hat we ar e poi sed t o t r ansf or m ourbusi ness.



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( I d. ¶ 37. ) The pl ai nt i f f s al l ege t hat t hi s stat ement i s f al se

or mi sl eadi ng because t he “Def endant s knew or r eckl essl y

di sr egar ded t hat WWE’ s f an base was smal l er t han l i ve spor t s . .

. whi ch mi sl ead i nvest or s t o bel i eve that WWE’ s t el evi si on

l i censi ng was as val uabl e as or mor e val uabl e t han l i ve spor t s. ”

( I d. ¶ 38. ) However , t he pl ai nt i f f s do not al l ege f act s t hat

coul d cause def endant McMahon’ s st at ement t hat WWE had a

“nat i onal t el evi si on audi ence t hat exceeds t he annual r each of

most ot her spor t s and ent ert ai nment pr ogr ams” t o be mi sl eadi ng.

Fur t her more, def endant McMahon’ s st atement i s not abl y gener al .

He st ates t hat t he st r engt h of t he WWE br and “provi des a sol i d

f oundat i on” f or WWE’ s negot i at i ons and notes WWE’ s “abi l i t y” t o

expand di st r i but i on. Gi ven t he cont ext i n whi ch t hi s st at ement

was made, t he pl ai nt i f f s have f ai l ed t o al l ege f act s suf f i ci ent

t o suggest t hat def endant McMahon’ s st at ement was mi sl eadi ng,

l et al one t hat i t was mat er i al l y mi sl eadi ng.

Second, t he pl ai nt i f f s ci t e def endant Bar r i os’ s Oct ober

31, 2013 st at ement i n whi ch he st at ed, “Our market r esearch and

anal ysi s i ndi cat e t he pot ent i al f or a meani ngf ul subscr i ber base

and a si gni f i cant economi c oppor t uni t y. ” ( I d. ¶ 41. ) The

pl ai nt i f f s al l ege t hat t hi s st at ement i s mat er i al l y mi sl eadi ng

because WWE’ s i nt ernal r esear ch showed t hat WWE had “at most ,

about 1. 3 mi l l i on vi ewer s per mont h, and about 4 t o 6 mi l l i on

f ans t ot al - - 2. 5 mi l l i on of whi ch wer e under t he age of 18- - i n



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t he Uni t ed St at es. ” ( I d. ¶ 44. ) Because WWE woul d need about 1

mi l l i on subscr i bers t o br eak even, WWE woul d need about 75% of

i t s t otal f an base t o si gn up f or t he net work whi ch CW1

r epr esent ed was “compl et el y unr eal i st i c. ” ( I d. )

“[ W] her e pl ai nt i f f s cont end def endant s had access t o

cont r ar y f act s, t hey must speci f i cal l y i dent i f y t he r epor t s or

st at ement s cont ai ni ng t hi s i nf or mat i on. ” Teamst er s Local 445

Frei ght Di v. Pensi on Fund v. Dynex Capi t al I nc. , 531 F. 3d 190,

196 ( 2d Ci r . 2008) ( quot i ng Novak v. Kasaks, 216 F. 3d 300, 309

( 2d Ci r . 2000) ) ; see al so San Leandr o Emer gency Med. Gr p. Prof i t

Shar i ng Pl an v. Phi l i p Mor r i s Compani es, I nc. , 75 F. 3d 801, 812

( 2d Ci r . 1996) ( “Pl ai nt i f f s' unsuppor t ed gener al cl ai m of t he

exi st ence of conf i dent i al company sal es r epor t s t hat r eveal ed

t he l ar ger decl i ne i n sal es i s i nsuf f i ci ent t o sur vi ve a mot i on

t o di smi ss. ”) . CW1 does not speci f i cal l y i dent i f y t he r epor t or

st atement t hat cont ai ned or r ef l ect ed t he data t hat WWE had “at

most , about 1. 3 mi l l i on vi ewers per mont h, and about 4 t o 6

mi l l i on f ans t ot al - - 2. 5 mi l l i on of whi ch wer e under t he age of

18- - i n t he Uni t ed St ates. ” ( Amended Compl ai nt ¶ 44. )

Moreover , even i f CW1’ s al l egat i ons are t r ue, t hey do not

cause def endant Barr i os’ s st at ement t o be mi sl eadi ng because

havi ng 4 t o 6 mi l l i on f ans coul d const i t ut e a “meani ngf ul

subscr i ber base. ” CW1 mi ght have di sagr eed, but hi s di sagr eement



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does not cause def endant Bar r i os’ s s t at ement t o be mat er i al l y

f al se or mi sl eadi ng.

Thi r d, on May 1, 2014 def endant Bar r i os st at ed:

Our comprehensi ve consumer r esear ch demonst r at es t hat mor et han 50% of TV homes acr oss WWE’ s t op gl obal market s orabout 120 mi l l i on homes r epor t some l evel of af f i ni t y f orWWE cont ent . And among t hese WWE homes, mor e t han 80mi l l i on ar e cl assi f i ed as act i ve, r epr esent i ng mor e t han170 mi l l i on passi onate and casual f ans. Moreover , webel i eve t hat we have t he potent i al t o reengage some port i onof t he 40 mi l l i on homes wi t h l apsed f ans i n t hese mar ket s.I n our vi ew, t aki ng advant age of WWE’ s t r emendous brandst r engt h t o expand t he net wor k gl obal l y wi l l pr ovi de apl at f or m f or dr i vi ng l ong- t er m gr owt h over t he next sever al

year s.

( Def endant s’ Memorandum, Ex. 15 at 6) ; ( Amended Compl ai nt ¶ 71. )

Agai n, t he cour t consi der s t he cont ext i n whi ch t he st at ement

was made. See McMahan, 900 F. 2d at 579. Thi s st at ement was made

i n the cont ext of a di scussi on about expandi ng the WWE Network.

Dur i ng t hese same remarks, def endant Barr i os st at ed t hat “t he

net wor k [ was] on t r ack t o achi eve 1 mi l l i on subscr i ber s by year

end and 2 mi l l i on t o 3 mi l l i on subscr i ber s at st eady- st at e. ”

( Def endant s’ Memor andum, Ex. 15 at 6. ) He was t hen asked a

f ol l ow- up quest i on as t o why, i f WWE had a “mar ket si ze . . . of

about 140 mi l l i on, pl us about 40 mi l l i on l apsed[ , ] ” t he est i mat e

wasn’ t mor e l i ke 6 mi l l i on subscri ber s. ( I d. , Ex. 15 at 12. )

Def endant Bar r i os t hen expl ai ned t hat compar i ng t he number s was

a bi t l i ke compar i ng “appl es and oranges” and t hat t he 2 t o 3

mi l l i on was what t hey hoped f or domest i cal l y and t hat t he other



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numbers measur ed WWE f ans i nt ernat i onal l y. ( I d. ) Def endant

McMahon added t hat he t hought t he 2 t o 3 mi l l i on was a

conser vat i ve est i mat e.

The pl ai nt i f f s al l ege t hat def endant Bar r i os’ s st at ement

was f al se and mi sl eadi ng because, accor di ng t o CW1, def endant

Barr i os “had access t o pay- per - vi ew number s and i nt er nal and

ext ernal r esearch r epor t s whi ch i ndi cat ed t hat at most WWE had

4- 6 mi l l i on act i ve f ans, not ‘ mor e t han 80 mi l l i on. ’ ” ( Amended

Compl ai nt ¶ 72. ) Agai n, t he pl ai nt i f f s do not “speci f i cal l y

i dent i f y t he r epor t s or st at ement s cont ai ni ng t hi s i nf or mat i on. ”

Teamst er s Local 445, 531 F. 3d at 196. Mor eover , even i f dat a

known t o CW1 di r ect l y cont r adi ct ed t he number s pr esent ed by

def endant Bar r i os, t he pl ai nt i f f s have f ai l ed t o al l ege f act s

t hat make such a mi sr epr esent at i on mater i al . The def endant s

consi st ent l y updat ed anal yst s on the number of subscr i bers WWE

had, t hei r goal t o r each 1 mi l l i on subscr i ber s by year - end, and

t hei r goal t o hi t 2- 3 mi l l i on at “st eady- st at e. ” They al so

expl ai ned t hat compar i ng t hese goal s t o the numbers r epr esent ed

was l i ke compar i ng “appl es t o oranges. ” Gi ven t he cont ext i n

whi ch t he def endant s made these remar ks about t he si ze of WWE’ s

f an base and t he t ot al mi x of i nf or mat i on avai l abl e t o



- 36-

i nvest or s, t he cour t does not concl ude t hat t hei r

r epr esent at i ons wer e mat er i al l y mi sl eadi ng. 6

b. Statements regarding the potentially

cannibalistic effect of launching the WWE network

The pl ai nt i f f s al l ege t hat t he def endant s knew or

r eckl essl y di sr egar ded t he pot ent i al l y canni bal i st i c i mpact of

l aunchi ng t he WWE net work. On J anuar y 14, 2014, def endant

McMahon r esponded t o a quest i on about t he pot ent i al

canni bal i st i c ef f ect of l aunchi ng t he net wor k. He was asked,

“Gi ven t he f act t hat you wi l l be rebr oadcast i ng some of t hose

progr ams, j ust maybe el aborat e on why t he l aunch of t he Net work

woul dn’ t be somewhat canni bal i st i c t o your - - pot ent i al l y

canni bal i st i c t o your cur r ent audi ence base f or t hose key

pr opert i es?” ( Amended Compl ai nt ¶ 53. ) He responded t hat he di d

not bel i eve i t woul d be because t he ot her shows wer e l i ve and

t hat was par t of t hei r appeal ; si nce the WWE network woul d not

be l i ve, he di d not t hi nk the net wor k woul d canni bal i ze t he

audi ence base f or WWE’ s ot her programmi ng. Def endant McMahon

added: “And by t he way, t hi s i s not somethi ng t hat i s j ust a WWE

poi nt of vi ew. Thi s i s al so a USA poi nt of vi ew. Havi ng

di scussi ons, obvi ousl y, wi t h management t her e, t hey t oo - - t he

6 Addi t i onal l y, t he pl ai nt i f f s do not al l ege any connect i on

bet ween t hi s al l eged mi sr epr esent at i on and t he negot i at i on oft he NBCU cont r act . I n t hei r di scussi on of t he NBCU cont r actannouncement on May 15, 2014, t he pl ai nt i f f s do not ment i onanyt hi ng about t he WWE net work and i t s success or f ai l ur e.



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net wor k, USA, t hey t oo bel i eve t hi s i s goi ng t o i ncr ease

t el evi si on r at i ngs. ” ( I d. ) Dur i ng t he May 19, 2014 conf er ence

cal l , def endant McMahon made, what t he pl ai nt i f f s char act er i ze

t o be, a “st unni ng Company admi ssi on” ( i d. ¶ 77) t hat he

bel i eved t hat t he t i mi ng of t he WWE Net work l aunch “def i ni t el y

had a negat i ve i mpact ” on t he st r engt h of t hei r negot i at i ng

posi t i on wi t h NBCU. ( I d. ¶ 76. )

However , def endant McMahon’ s candor on May 19t h does not

show t hat he di d not bel i eve at t he t i me hi s pr evi ousl y

expressed opi ni on t hat l aunchi ng t he WWE Net work woul d not have

a canni bal i zi ng ef f ect , and t he pl ai nt i f f s have of f er ed no

f act ual al l egat i ons t hat suggest t hat he di d not honest l y hol d

hi s bel i ef when he answered t he quest i on. Hi s opi ni on may have

t ur ned out t o be wr ong, but t hat does not mean t hat he di d not

act ual l y bel i eve hi s st at ement when he made i t . Accor di ngl y,

under Sanof i and Omni car e, he cannot be hel d l i abl e f or t hi s

st at ement . See Omni car e 131 S. Ct . 1326.

The pl ai nt i f f s al so al l ege t hat t he st at ement t hat USA al so

bel i eved t hat t he l aunch of t he WWE Net work woul d i ncrease

r at i ngs was mi sl eadi ng “because McMahon admi t t ed t hat i t was a

poi nt of cont ent i on dur i ng t he negot i at i on pr ocess. ” ( Amended

Compl ai nt ¶ 54. ) However , t he pl ai nt i f f s do not i dent i f y wher e,

when, or how def endant McMahon “admi t t ed” t hi s. Theref ore, t he

pl ai nt i f f s have not al l eged f acts suf f i ci ent t o suggest t hat



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def endant McMahon’ s st atement s about t he potent i al canni bal i zi ng

ef f ect of t he Net wor k l aunch was mat er i al l y mi sl eadi ng.

c. Statements comparing WWE and live sports

The pl ai nt i f f s al l ege t hat i t was mi sl eadi ng f or t he

def endant s t o repr esent WWE as havi ng t he “key det ermi nants of

val ue t hat ar e at t r i but abl e t o l i ve spor t s” ( Amended Compl ai nt

¶¶ 41- 42) and t o benchmark WWE’ s t el evi si on cont r act s agai nst

cont r act s obt ai ned by l i ve spor t s because t he def endant s knew or

r eckl essl y di sr egar ded t he f act t hat WWE br ought i n a f r act i on

of t he adver t i si ng r evenue t hat l i ve spor t s di d. The pl ai nt i f f s

al l ege t hat f ai l ur e t o di scl ose t hi s f act was a mat er i al

omi ssi on.

The pl ai nt i f f s i dent i f y seven i nst ances i n whi ch t he

def endant s compare WWE t o l i ve spor t s, i ncl udi ng NASCAR.

Fi r st , t he Oct ober 31, 2013 pr ess r el ease quot ed def endant

Bar r i os as st at i ng:

Gi ven t he r i si ng val ue of l i ve cont ent t hat has a br oad,l oyal f ol l owi ng, we ar e conf i dent t hat we wi l l be abl e t onegot i at e our key domest i c agr eement s by t he end of Apr i lnext year and t hat our ef f or t s, i ncl udi ng t he pot ent i all aunch of a WWE network, wi l l keep us on t r ack to doubl e ort r i pl e our 2012 OI BDA r esul t s of $63 mi l l i on by 2015[ . ]

( I d. ¶ 37. ) The pl ai nt i f f s al l ege t hat i t was mi sl eadi ng t o

char act er i ze t he WWE as “l i ve cont ent ” because t he “Def endant s

knew or r eckl essl y di sr egarded t hat net works vi ewed WWE as

cat egor i cal l y di f f er ent and l ess val uabl e t han t he ‘ l i ve



- 39-

cont ent ’ t hat had gar ner ed i ncreasi ngl y l ar ge t el evi si on

l i censi ng deal s. ” ( I d. ¶ 38. ) Second, dur i ng t he conf er ence cal l

on Oct ober 31, 2013, def endant Barr i os st ated:

Recent deal s such as NASCAR wi t h NBC Spor t s r ei nf orce ourvi ew t hat t he pr ol i f er at i on of di st r i but i on al t er nat i ves i sdr i vi ng up t he val ue of cont ent , especi al l y compel l i ngcontent wi t h broad appeal . WWE shares t he key det ermi nantsof val ue t hat ar e at t r i but ed t o l i ve spor t s. Si gni f i cantf i r st r un hour s and associ at ed gr oss r at i ng poi nt s, apassi onate and l oyal f an base, and 90% l i ve pl us same dayvi ewershi p whi ch makes WWE cont ent l i ke spor t s DVR- pr oof .

( I d. ¶ 41. )

Thi r d, t he pl ai nt i f f s poi nt t o def endant Bar r i os’ s comments

dur i ng t he December 10, 2013 UBS conf erence dur i ng whi ch he

st at ed:

Let ' s t ake NASCAR, i t ' s one of my f avor i t es. NASCAR di dabout 330 hours of progr ammi ng l ast year . They aver agedabout 3 mi l l i on vi ewer s acr oss t hose 300 hour s, so do t hatmul t i pl i cat i on, i t ' s about 940 mi l l i on vi ewer hour s, t het ot al [ i n pr esci ent ] . Thei r cont r act s, t hei r aver age annual

val ue of t hei r deal s are about $820 mi l l i on. So I ment i onedour s ar e l ess t han $100 mi l l i on f or t hose f our deal s. Sot hey' r e at $820 mi l l i on. So l et ' s t ake t hat and compar e i tt o t he WWE. NASCAR di d 334 hours, WWE di d 314. NASCARaveraged about 3 mi l l i on, WWE averaged about 3. 7 mi l l i on –so 20% more vi ewers t han NASCAR di d. They' r e at 800, we' r eat some number around 100. That ' s why we thi nk t hi s i s amassi ve oppor t uni t y f or us. Does t hat al l get made up i none renewal cycl e? Don' t know. What I do know i s l i vecont ent t oday i s i ncredi bl y val uabl e. Al l t hese pr oper t i esare si gned up f or t he l ong t erm ot her t han t he NBA and WWE,

whi ch ar e the ones comi ng up - - r eal oppor t uni t y.

( I d. ¶ 47. ) Four t h, t he December 17, 2013 Var i et y ar t i cl e, based

on i nt er vi ews wi t h def endant s McMahon, Barr i os, and Wi l son,

st at ed:



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“We’ ve had t o evol ve our t hi nki ng, ” [ Mi chel l e] Wi l son says.“We ar e cl ear l y ent er t ai nment - based, but i f you t hi nk aboutt he char acter i st i cs of our br and, i t ’ s l i ve acti on, andt hat ’ s sport s. We want t o be compensat ed f or a l i veaudi ence, si nce l i ve cont ent i s get t i ng a ver y si gni f i cantpr emi um i n t he market pl ace. ” The company ci t es Nascar ’ si mpressi ve deal maki ng t hi s summer as an exampl e. Ther aci ng l eague secured a new 10- year deal wi t h NBC and Foxwor t h $820 mi l l i on a year . And t hat i ncr ease came i n t hef ace of decl i ni ng r at i ngs f or many of i t s r aces. WWE ar guest hat “Raw” and “SmackDown” al one ar e j ust as at t r act i ve,wi t h a r abi d f anbase t hat ’ s hel ped bui l d net wor ks, and i t sser i es ar e di ver se i n et hni ci t y and age.

( I d. ¶ 51. )

Fi f t h, on t he J anuar y 16, 2014 conf er ence cal l wi t h

anal yst s, def endant Bar r i os st at ed:

Up t op you have t he l i ve gr oss r at i ng poi nt s del i ver ed byt he maj or l i ve - - del i ver er s of l i f e cont ent whi ch i sspor t s - - NBA 514; Maj or League Basebal l 295; NASCAR 212.WWE del i ver ed 344 l i ve gr oss r at i ng poi nt s over t he l ast 12mont hs. The payment f or t hose gr oss r at i ng poi nt s si t [ s]somewher e bet ween $2 mi l l i on and $5 mi l l i on cur r ent l y i nt he market pl ace. So the way t hat mat h works, i f you areNASCAR, you have 212 gr oss r at i ng poi nt s, you ar e aver agi ng

about $4 mi l l i on per , NASCAR on aver age i s $800 mi l l i on ofdomest i c r i ght s f ees a year . As I ment i oned bef ore, WWE' sf our l ar gest deal s ar e at $100 mi l l i on gl obal l y. So t hedomest i c get s obvi ousl y l ess t han t hat . So t he r ange ofoppor t uni t y si t s f r om somewhere where we are t oday t o t hosenumber s.

( I d. ¶ 55. )

Si xt h, dur i ng t he 2013 Four t h Quar t er f i nanci al r esul t s

conf er ence cal l on Febr uar y 20, 2014, def endant Bar r i os st at ed:

[ W] e cont i nue t o bel i eve t hat we can doubl e or t r i pl e our2012 OI BDA r esul t s by 2015. Our progr ams share the keydet er mi nant s of val ue t hat ar e at t r i but ed t o l i ve spor t s,si gni f i cant f i r st r un hour s, and t he associ at ed gr ossr at i ng poi nt s, a passi onat e and l oyal f an base and 90% l i vepl us same day vi ewershi p, whi ch makes WWE cont ent l i ke



- 41-

sport s DVR- pr oof . Benchmar ki ng our r i ght s f ees t o the f eespai d f or spor t s pr ogr ammi ng and ot her or i gi nal scr i pt edser i es i ndi cat es t hat our l i cense agr eement s coul d havemeani ngf ul upsi de pot ent i al .

( I d. ¶ 61. )

Sevent h, he al so st at ed dur i ng t hat conf er ence cal l :

As I have sai d bef ore, r i ght behi nd t he NFL and NBA comesWWE i n t er ms of gener at i ng l i ve gr oss r at i ng poi nt s i n t heUS. So t hat ' s ahead of NASCAR, ahead of NHL, i t i s ahead ofMaj or League Basebal l , and al l t hei r nat i onal deal s. So wef eel good about t he val ue t hat we br i ng t o a part ner bothi n adver t i si ng, bei ng abl e t o dr i ve t hei r CPM as wel l asand mor e i mpor t ant l y i n t he val ue t o t hei r af f i l i at er evenue st r eams.

( I d. ¶ 64. )

The st at ements above compare WWE t o l i ve spor t s based on

t he met r i cs of gr oss r at i ng poi nt s, same day vi ewer shi p, f i r st

r un hour s, and i t s passi onat e and l oyal f an base. The def endant s

make no compar i sons of adver t i si ng r evenue. Ther ef ore, t he cour t

consi der s whet her omi ssi on of t he al l eged di scr epancy bet ween

WWE’ s adver t i si ng r evenue and t hat of l i ve spor t s r ender ed t hese

compar i sons mi sl eadi ng. “[ Sect i on] 10( b) and Rul e 10b–5( b) do

not cr eat e an af f i r mat i ve dut y t o di scl ose any and al l mat er i al

i nf or mat i on. Di scl osur e i s r equi r ed under t hese pr ovi si ons onl y

when necessary ‘ t o make . . . st atement s made, i n t he l i ght of

t he ci r cumst ances under whi ch they were made, not mi sl eadi ng. ’ ”

Mat r i xx I ni t i at i ves, 563 U. S. at 44 ( quot i ng 17 C. F. R. §

240. 10b- 5( b) ) . “Even wi t h r espect t o i nf or mat i on t hat a

r easonabl e i nvest or mi ght consi der mater i al , compani es can



- 42-

cont r ol what t hey have t o di scl ose under t hese pr ovi si ons by

cont r ol l i ng what t hey say t o t he mar ket . ” I d. at 45; see al so I n

r e Ti me War ner I nc. Sec. Li t i g. , 9 F. 3d 259, 267 ( 2d Ci r . 1993)

( “a cor por at i on i s not r equi r ed t o di scl ose a f act mer el y

because a reasonabl e i nvest or woul d ver y much l i ke to know t hat

f act . Rat her , an omi ssi on i s act i onabl e under t he secur i t i es

l aws onl y when t he cor por at i on i s subj ect t o a dut y t o di scl ose

t he omi t t ed f act s. As Ti me Warner poi nt edl y remi nds us, we have

not onl y emphasi zed t he i mpor t ance of ascer t ai ni ng a dut y t o

di scl ose when omi ssi ons ar e at i ssue but have al so dr awn a

di st i nct i on bet ween t he concept s of a dut y t o di scl ose and

mat er i al i t y. ” (c i t at i ons omi t t ed) ) .

The def endant s poi nt out t hat def endant Bar r i os di d, i n

f act , di scl ose t he di screpancy i n adver t i si ng r evenue t o

i nvest ors dur i ng t he December 10, 2013 conf erence. Def endant

Bar r i os s t at ed t hat t he NHL, NASCAR, MLB, and t he NBA were

“get t i ng anywhere bet ween $50 and $1 per hour” and WWE was

get t i ng $0. 10. 7 ( Def endant s’ Memorandum, Ex. 6, at 7. ) He st at ed,

“[ Y] ou can make your own j udgment cal l about our oppor t uni t y

her e. ” ( I d. ) He was al so asked about t he anal ogy bet ween WWE and

7 I n t hei r mot i on t o di smi ss, t he def endant s quot e t hi s st at ementas “[ ] get t i ng anywher e bet ween 50 cent s and $1 per vi ewer hourwhi l e WWE was get t i ng around 10 cent s per vi ewer hour . ”( Memor andum at 12. ) I t appear s t hat t he conf er ence t r anscr i pthas a t ypo; wher e t he t r anscr i pt r eads $50, i t shoul d r ead$0. 50.



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NASCAR and t he gap bet ween t hem. An anal yst asked, “[ H] ow do you

make t hat gap up, i s i t r eal l y the adver t i ser s, Pepsi , Coke

sayi ng hey, t he demogr aphi cs of NASCAR are more at t r act i ve than

t he demogr aphi cs of WWE?” ( I d. at 11. ) Def endant Barr i os

r esponded:

[ I ] f you l ooked at al l t hose deal s and l ooked at how muchi s gener at ed i n adver t i si ng dol l ar s by the net wor ks so i fyou say wel l NASCAR i s gener at i ng $820 mi l l i on i n l i censef ees f r om i t s par t ner how much adver t i si ng ar e t he net wor ksgener at i ng. Ver y l i t t l e rel at i vel y speaki ng 200 maybe 300,so t he quest i on why are net works payi ng money they are notgoi ng to l ose money i f t hey onl y maki ng that on t he

adver t i si ng. The r eason t hey pay t he money i s because oft he di str i but i on f ees. . . . So i t ’ s not j ust about t headver t i si ng, i t ’ s about bot h [ t he adver t i si ng anddi st r i but i on f ees] , t he quest i on speci f i cal l y on t headver t i si ng we don’ t have di r ect dat a on what ever ybody[ ’ s]CPMs ar e. We thi nk i f you l ook at t he under l yi ng demo t heyl ook pr et t y cl ose so my guess i s t he monet i zat i on, t headver t i si ng r evenue shoul d be pr et t y cl ose but I don’ t havet he hard data t o suppor t t hat . But . . . networks make 70%of t hei r money on aver age f r om di st r i but i on . . . and i t ’ sget t i ng more, t hat per cent age i s skewi ng mor e and more

everyday and on t hat f r ont we compar e t o everybody.

( I d. ) Addi t i onal l y, when Bar r i os was asked t o expl ai n t he

“di spar i t y” bet ween NASCAR and WWE, he r esponded:

Ei t her t her e i s some f undament al di f f er ence i n t he del i ver yt hat we are not seei ng and we’ ve l ooked at everyt hi ngi ncl udi ng demogr aphi cs and i f anythi ng I ’ d ar gue ourdemogr aphi cs l ook a bi t bet t er because i t ’ s younger andmor e di ver se. Househol d i ncome i s a l i t t l e bi t l ower but

not mat er i al l y so. So t here may be somethi ng t hat we ar emi ss i ng on t hat end or we j ust haven’ t done as good a j obas we shoul d have hi st or i cal l y i n negot i at i ng t heseagr eement s. But i f you bel i eve . . . t her e i s val ue i n l i veeyebal l and i f you bel i eve t her e i s val ue i n zer odevel opment r i sk i n del i ver i ng t hose eyebal l s, so we’ r e nott al ki ng about a ser i es t hat maybe i t does wel l , maybe i tdoesn’ t and t he hi t r at e’ s about one i n t en. So i f you



- 44-

bel i eve t hat t her e’ s val ue i n l i ve, bui l t i n f an base andDVR pr oof t her e’ s val ue i n our cont ent . And I t hi nk i f your ead t he t r ades you know t hat ’ s t he onl y thi ng peopl e areval ui ng now, l i ve and bui l t i n whi ch i s why spor t s [ ar e]wher e t hey ar e at . So i t ’ s a gr eat quest i on about hel p[ i ng]us t hi nk t hr ough t hat . We can’ t f i nd dat a t o expl ai n t hegap.

( I d. at 9. )

As not ed, when consi der i ng t he mi sl eadi ng natur e of a

st atement , t he cour t must ask “whet her def endant s'

r epr esent at i ons, t aken t oget her and i n cont ext , woul d have

mi sl ead a reasonabl e i nvest or . ” McMahan, 900 F. 2d at 579.

Def endant Bar r i os’ s di scl osur e at t he UBS conf er ence pr ovi des

t he cont ext f or ot her st at ement s made at t hat conf erence and

t hat cont ext i ncl udes t he st at i st i cs about adver t i si ng r evenue.

For t hi s r eason, t he cour t does not consi der hi s st at ement s at

t he UBS conf erence t o be mi sl eadi ng.

However , t he cont ext of t he ot her r epr esent at i ons di d not

i ncl ude t hese stat i st i cs about adver t i si ng r evenue. The

pl ai nt i f f s al l ege t hat , based on st at ement s f r om CW1, omi ssi on

of t hi s i nf or mat i on was mat er i al l y mi sl eadi ng. CW1 st at es t hat

i n or der f or WWE t o secur e a cont r act even hal f t he si ze of

NASCAR’ s, i t woul d have had t o get pai d f our t i mes more per

adver t i si ng spot , and CW1 st at ed t hat t hi s was not possi bl e.

The cour t concl udes t hat t he pl ai nt i f f s have al l eged f act s

suf f i ci ent t o suggest t hat t her e i s a subst ant i al l i kel i hood

t hat t he di scl osur e of t he di scr epancy i n adver t i si ng r evenue



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“woul d have been vi ewed by t he r easonabl e i nvest or as havi ng

si gni f i cant l y al t er ed t he ‘ t ot al mi x’ of i nf or mat i on made

avai l abl e. ” Mat r i xx I ni t i at i ves, 563 U. S. at 38 ( quot i ng Basi c,

485 at 231- 32) . I n addi t i on, t he cour t concl udes t hat t he

pl ai nt i f f s have al l eged f act s suf f i ci ent t o suggest t hat WWE had

a dut y t o di scl ose t he di scr epancy i n adver t i si ng revenue. Gi ven

t he cont ext i n whi ch the st at ement s wer e made - - di scussi ons

about t he def endant s’ cont r act negot i at i ons wi t h NBCU - - t he

pl ai nt i f f s have al l eged f acts suf f i ci ent t o suggest t hat i t was

mi sl eadi ng t o benchmark WWE agai nst spor t s l i ke NASCAR and t hat

i n order t o render such a compar i son not mi sl eadi ng, and t he

di scr epancy i n adver t i si ng r evenue needed t o be di scl osed.

d. Statements about the status of negotiations with

NBCU

The pl ai nt i f f s al l ege t hat t he def endant s made several

f al se or mi sl eadi ng st at ement s r egar di ng t hei r negot i at i ons wi t h

NBCU. Fi r st , t he Febr uar y 20, 2014 pr ess r el ease st at es:

“Regardi ng our domest i c TV l i censi ng agr eement s, we are now

engaged wi t h pot ent i al par t ner s af t er exi t i ng our excl usi ve

negot i at i ng per i od wi t h NBCU. ” ( Amended Compl ai nt ¶ 59. ) The

pl ai nt i f f s al l ege t hat “[ a] ccor di ng t o CW1, f r om t he onset ot her

net works had expr essed no i nt er est i n worki ng wi t h WWE. ” ( I d. ¶

60. ) However , CW1 was not an empl oyee of WWE i n February 2014,

and t he pl ai nt i f f s have not of f er ed any ot her f act s t o suppor t



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t hei r al l egat i on t hat t he st at ement i n t he pr ess r el ease was not

t r ue at t he t i me i t was made. Li kewi se, t he pl ai nt i f f s poi nt t o

a si mi l ar st atement , made by def endant Barr i os dur i ng t he

ear ni ngs cal l on May 1, 2014, as mi sl eadi ng. Bar r i os st at ed:

“[ w] e ar e cont i nui ng t o negot i at e wi t h pot ent i al di st r i but i on

par t ner s i n t he U. S. and I ndi a. ” ( I d. ¶ 69. ) The pl ai nt i f f s

al l ege t hat “Def endant Bar r i os’ s s t at ement s r egar di ng the st at us

of t he U. S. t el evi si on deal negot i at i ons wer e mat er i al l y f al se

and mi sl eadi ng because at t he t i me t hese st at ement s were made,

WWE was no l onger negot i at i ng wi t h mul t i pl e ‘ pot ent i al

di st r i but i on par t ner s. ’ ” ( I d. ¶ 70. ) Agai n t he pl ai nt i f f s base

t hi s al l egat i on on t he r epr esent at i on of CW1 t hat “ot her

networks had al r eady expr essed no i nt erest i n worki ng wi t h WWE,

so t he Company was onl y renegot i at i ng i t s cont r act wi t h NBC. ”

( I d. ) CW1 was not empl oyed by WWE i n May 2014, and t he

pl ai nt i f f s have not of f er ed any ot her f act s t o suppor t t hei r

al l egat i on t hat t hi s st atement was unt r ue when i t was made.

Accor di ngl y, t he cour t concl udes t hat t he pl ai nt i f f s have

f ai l ed t o al l ege f acts suf f i ci ent t o suggest t hat t he

def endant s’ st at ement s r egar di ng t he st at us of t hei r

negot i at i ons wi t h NBCU wer e mat er i al l y f al se and/ or mi sl eadi ng

when made.



- 47-

e. Statements regarding doubling or tripling 2012

OIBDA

The pl ai nt i f f s al l ege t hat i t was mat er i al l y f al se and/ or

mi sl eadi ng t o r epr esent t hat t he NBCU deal woul d doubl e or

t r i pl e 2012 OI BDA because when t he def endant s made t hese

r epr esent at i ons, t hey knew or r eckl essl y di sr egar ded t he f act

t he NBCU deal was not goi ng t o doubl e or t r i pl e 2012 OI BDA.

The def endant s ar gue t hat t hei r r epresent at i ons wer e mer el y

opt i mi st i c opi ni ons. I n suppor t of t hi s cont ent i on, t hey poi nt

t o t he def endant s’ use of condi t i onal and aspi r at i onal l anguage.

For exampl e, i n di scussi ng t he cont r act negot i at i ons, t he

def endant s use l anguage l i ke “i f successf ul , ” “i f al l t he st ar s

l i ne up, and we bel i eve t hat t hey wi l l , ” and “we f eel good about

t he val ue t hat we br i ng t o a par t ner . ” ( Def endant s’ Memorandum

at 42) ( emphasi s i n or i gi nal ) . The def endant s al so not e t he use

of wor ds l i ke “conf i dent , ” “bel i eve, ” and “pot ent i al l y” when

di scussi ng t he pl an t o doubl e or t r i pl e OI BDA. ( I d. )

I n or der t o al l ege a mi sl eadi ng opi ni on, t he pl ai nt i f f s

“must i dent i f y par t i cul ar ( and mat er i al ) f act s goi ng t o t he

basi s f or t he i ssuer ' s opi ni on - - f act s about t he i nqui r y t he

i ssuer di d or di d not conduct or t he knowl edge i t di d or di d not

have - - whose omi ss i on makes t he opi ni on st at ement at i ssue

mi sl eadi ng t o a r easonabl e per son r eadi ng t he st atement f ai r l y

and i n cont ext . ” Sanof i , 2016 WL 851797, at *7 ( quot i ng



- 48-

Omni car e, 135 S. Ct . at 1332) . “[ A] r easonabl e i nvest or , upon

hear i ng a stat ement of opi ni on f r om an i ssuer , ‘ expect s not j ust

t hat t he i ssuer bel i eves t he opi ni on ( however i r r at i onal l y) , but

t hat i t f ai r l y al i gns wi t h t he i nf or mat i on i n t he i ssuer ' s

possessi on at [ t he] t i me. ’ ” I d. ( quot i ng Omni car e, 131 S. Ct . at

1329) .

The pl ai nt i f f s al l ege t hat t he i nf or mat i on t hat t he

def endant s had at t he t i me i ndi cat ed t hat t he NBCU deal woul d

not doubl e or t r i pl e OI BDA. However , t he pl ai nt i f f s

mi schar act er i ze t he def endant s’ r epr esent at i on of t hei r goal s.

The def endant s r epresent t hat t hey wer e opt i mi st i c t hat t hey

woul d be abl e to doubl e or t r i pl e OI BDA by 2015 t hr ough

negot i at i on of domest i c and i nt er nat i onal agr eement s, as wel l as

t he l aunch of t he WWE net wor k. Even i n t he May 15, 2014

announcement of t he new NBCU deal , WWE st at ed, “Gi ven the

ant i ci pat ed i ncrease i n t el evi si on r i ght s, and wi t h successf ul

WWE Net wor k subscr i ber gr owt h, WWE management cont i nues t o

bel i eve t hat t he Company can achi eve si gni f i cant ear ni ngs

gr owt h, pot ent i al l y doubl i ng or t r i pl i ng 2012 OI BDA r esul t s t o a

r ange of $125 mi l l i on t o $190 mi l l i on by 2015. ” ( Def endant s’

Memor andum, Ex. 16 at 2. )

The pl ai nt i f f s r epeat edl y al l ege t hat because t he

negot i at i on of t he NBCU deal woul d not r eal i st i cal l y doubl e or

t r i pl e OI BDA, t he def endant s’ st at ement s wer e mat er i al l y f al se



- 49-

and/ or mi sl eadi ng. Yet , t he pl ai nt i f f s have not al l eged t hat t he

def endant s ever st ated t hat t hey bel i eved t hat t he NBCU deal

al one woul d doubl e or t r i pl e 2012 OI BDA by 2015. Rather , i n the

st at ement s ci t ed by t he pl ai nt i f f s, t he def endant s r epr esent ed

t hat t hey wer e conf i dent or hopef ul t hat t hei r deal s

col l ect i vel y woul d doubl e or t r i pl e 2012 OI BDA by 2015.

Accor di ngl y, t he pl ai nt i f f s do not al l ege f acts suf f i ci ent t o

suggest t hat t he def endant s’ opi ni ons t hat t hese deal s

col l ect i vel y mi ght r esul t i n doubl i ng or t r i pl i ng 2012 OI BDA by

2015 di d not f ai r l y al i gn wi t h i nf or mat i on i n WWE’ s possessi on

at t he t i me. Ther ef or e, t he pl ai nt i f f s have f ai l ed t o al l ege

f act s suf f i ci ent t o suggest t hat t he def endant s made mat er i al

mi sr epr esent at i ons wi t h r espect t o t hei r goal s f or OI BDA.

2. Scienter

“To meet t he sci ent er r equi r ement i n a 10b- 5 act i on under

t he PSLRA, a pl ai nt i f f must ‘ st at e wi t h par t i cul ar i t y f acts

gi vi ng r i se t o a st r ong i nf er ence t hat t he def endant act ed wi t h

t he r equi r ed st at e of mi nd. ’ ” Empl oyees' Ret . Sys. of Gov' t of

t he Vi r gi n I sl ands v. Bl anf or d, 794 F. 3d 297, 305 ( 2d Ci r . 2015)

( quot i ng 15 U. S. C. § 78u- 4( b) ( 2) ( A) ) . “Al t hough specul at i on and

concl usor y al l egat i ons wi l l not suf f i ce, nei t her [ does t he

Second Ci r cui t ] r equi r e ‘ gr eat speci f i ci t y’ pr ovi ded t he

pl ai nt i f f al l eges enough f act s t o suppor t ‘ a st r ong i nf er ence of

f r audul ent i nt ent . ’ ” Gani no, 228 F. 3d at 169 ( quot i ng St evel man



- 50-

v. Al i as Resear ch I nc. , 174 F. 3d 79, 84 ( 2d Ci r . 1999) ) . “[ A]

compl ai nt wi l l sur vi ve [ a mot i on t o di smi ss] . . . onl y i f a

r easonabl e per son woul d deem t he i nf er ence of sci ent er cogent

and at l east as compel l i ng as any opposi ng i nf er ence one coul d

dr aw f r om t he f act s al l eged. ” Sl ayt on v. Amer i can Exp. Co. , 604

F. 3d 758, 766 ( 2d Ci r . 2010) ( quot i ng Tel l abs, I nc. v. Makor

I ssues & Ri ght s, Lt d. , 551 U. S. 308, 324 ( 2007) ) .

“The r equi si t e st at e of mi nd i n a Rul e 10b- 5 act i on i s ‘ an

i nt ent t o decei ve, mani pul at e or def r aud. ’ ” Gani no, 228 F. 3d at

168 ( quot i ng Er nst & Er nst , 425 U. S. 193 n. 12) . “The r equi si t e

sci ent er can be est abl i shed by al l egi ng f act s t o show ei t her ( 1)

t hat t he def endant s had t he mot i ve and oppor t uni t y t o commi t

f r aud, or ( 2) st r ong ci r cumst ant i al evi dence of consci ous

mi sbehavi or or r eckl essness. ” ECA, Local 134 I BEW J oi nt Pensi on

Tr ust of Chi cago v. J P Mor gan Chase Co. , 553 F. 3d 187, 198 ( 2d

Ci r . 2009) ( ci t i ng Gani no, 228 F. 3d at 168- 69) . I n or der t o

pl ead “consci ous r eckl essness, ” t he pl ai nt i f f s must al l ege “a

st at e of mi nd appr oxi mat i ng act ual i nt ent , and not mer el y a

hei ght ened f or m of negl i gence. ” Sout h Cher r y St . , LLC v.

Hennessee Gr p. , Lt d. , 573 F. 3d 98, 109 ( 2d Ci r . 2009) ( emphasi s

i n or i gi nal ) ( quot i ng Novak, 216 F. 3d at 312) . “Wher e t he

compl ai nt al l eges t hat def endant s knew f act s or had access t o

nonpubl i c i nf or mat i on cont r adi ct i ng t hei r publ i c st at ement s,

r eckl essness i s adequatel y pl ed f or def endant s who knew or



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shoul d have known t hey wer e mi sr epr esent i ng mater i al f act s wi t h

r espect t o the cor por at e busi ness. ” I n r e Schol ast i c Cor p. Sec.

Li t i g. , 252 F. 3d 63, 76 ( 2d Ci r . 2001) .

The al l egat i ons i n t he compl ai nt “ar e not t o be r evi ewed

i ndependent l y or i n i sol at i on, but t he f act s al l eged must be

‘ t aken col l ect i vel y. ’ ” Sl ayt on, 604 F. 3d at 766 ( quot i ng

Tel l abs, 551 U. S. at 323) . I f t he cour t deci des t hat t he

pl ai nt i f f has successf ul l y pl ed ei t her t he consci ous or r eckl ess

mi sbehavi or pr ong or t he mot i ve and oppor t uni t y pr ong of

sci ent er , i t need not al so consi der t he ot her pr ong. See Gani no,

228 F. 3d at 170 ( “Of cour se, i f t he cour t deci des on r emand t hat

t he Compl ai nt successf ul l y pl eaded the def endant s engaged i n

consci ous or r eckl ess mi sbehavi or , i t need not al so consi der t he

mot i ve and oppor t uni t y pr ong of sci ent er . ”) .

The cour t has concl uded t hat t he pl ai nt i f f s adequat el y pl ed

mat er i al mi sr epr esent at i ons or omi ssi ons wi t h respect t o

st at ement s t hat compar ed WWE t o NASCAR and other l i ve spor t s

wi t hout di scl osi ng t he di scr epancy i n adver t i si ng r evenue, but

not wi t h r espect t o ot her cat egor i es of mi sr epr esent at i ons or

omi ssi ons asser t ed. Ther ef or e, t he cour t onl y consi der s whet her

t he pl ai nt i f f s have adequat el y pl ed sci ent er wi t h r espect t o the

st at ement s t hat compar ed WWE t o NASCAR and other l i ve spor t s

wi t hout di scl osi ng adver t i si ng r evenue. The cour t concl udes t hat

t he pl ai nt i f f s have f ai l ed t o do so.



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a. Motive and Opportunity

The pl ai nt i f f s have f ai l ed t o adequat el y pl ead sci enter on

t he basi s of mot i ve and oppor t uni t y. “I n or der t o r ai se a st r ong

i nf er ence of sci ent er t hr ough ‘ mot i ve and oppor t uni t y’ t o

def r aud, Pl ai nt i f f s must al l ege t hat [ t he cor por at e def endant or

i t s of f i cer s] ‘ benef i t t ed i n some concr et e and per sonal way f r om

t he pur port ed f r aud. ’ ” ECA, Local 134, 553 F. 3d at 198 ( quot i ng

Novak, 216 F. 3d at 307- 08) . The pl ai nt i f f s have not al l eged t hat

any of t he def endant s named i n Count I benef i t ed i n any concr ete

and per sonal way f r om t he al l eged f r aud. For exampl e, t hey have

not al l eged that any of t he def endant s named i n Count I sol d any

of t hei r st ock dur i ng t he Cl ass Per i od. “The absence of st ock

sal es by i nsi der s, or any ot her evi dence of pecuni ar y gai n by

company i nsi der s at shar ehol der s' expense, i s i nconsi st ent wi t h

an i nt ent t o def r aud shar ehol der s. ” I n r e N. Tel ecom Lt d. Sec.

Li t i g. , 116 F. Supp. 2d 446, 462 ( S. D. N. Y. 2000) . The pl ai nt i f f s

have al l eged t hat def endant Levesque sol d st ock dur i ng t he Cl ass

Per i od, however , “t he sal e of st ock by one company execut i ve

does not gi ve r i se t o a st r ong i nf er ence of t he company' s

f r audul ent i nt ent ; t he f act t hat ot her def endant s di d not sel l

t hei r shar es dur i ng t he r el evant cl ass per i od suf f i ci ent l y

under mi nes pl ai nt i f f s' cl ai m r egar di ng mot i ve. ” San Leandr o, 75

F. 3d at 814; see al so Schol ast i c, 252 F. 3d at 75 ( “We f ound i n

[ San Leandr o and Aci t o] t hat t he f ai l ur e of ot her def endant s t o



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sel l t hei r st ock under mi ned t he pl ai nt i f f s' t heor i es t hat

negat i ve i nf or mat i on was wi t hhel d t o obt ai n a hi gher sel l

pr i ce. ” ( ci t i ng San Leandr o, 75 F. 3d at 814; Aci t o v. I MCERA

Gr p. , I nc. , 47 F. 3d 47, 54 ( 2d Ci r . 1995) ) . Al so, t he

“pl ai nt i f f s have al l eged no f act s suggest i ng t hat [ Levesque]

act i ng al one had t he opport uni t y t o mani pul ate [ WWE’ s st ock] f or

[ her] own advant age. ” San Leandr o, 75 F. 3d 814 n. 14.

Mor eover , t o t he ext ent t he pl ai nt i f f s al l ege a gener al

mot i ve t o i ncr ease t he pr of i t s of WWE or of f i cer and di r ect or

compensat i on,

[ m] ot i ves t hat are common t o most corporate of f i cer s, suchas t he desi r e f or t he cor por at i on t o appear pr of i t abl e andt he desi r e t o keep st ock pr i ces hi gh t o i ncr ease of f i cercompensat i on, do not const i t ut e “mot i ve” f or pur poses oft hi s i nqui r y. Rat her , t he “mot i ve” showi ng i s gener al l y metwhen corporate i nsi der s al l egedl y make a mi sr epr esent at i oni n or der t o sel l t hei r own shar es at a pr of i t .

ECA, Local 134, 553 F. 3d at 198.

The cour t concl udes t hat t he pl ai nt i f f s have not adequat el y

pl ed sci ent er on t he basi s of mot i ve and oppor t uni t y.

b. Conscious Recklessness

The pl ai nt i f f s have al so f ai l ed t o adequat el y pl ead

sci ent er on t he basi s of consci ous r eckl essness. I n or der t o

pl ead consci ous r eckl essness, t he pl ai nt i f f s must al l ege “a

st at e of mi nd appr oxi mat i ng act ual i nt ent , and not mer el y a

hei ght ened f or m of negl i gence. ” Sout h Cher r y St . , 573 F. 3d at



- 54-

109 ( emphasi s r emoved) ( quot i ng Novak, 216 F. 3d at 312) . I n

Sout h Cher r y St . , t he cour t st at ed:

I n el abor at i ng as t o what may const i t ut e r eckl essness i nt he cont ext of a pr i vat e secur i t i es f r aud act i on, we haver ef er r ed t o conduct t hat “‘ at t he l east . . . i s hi ghl yunr easonabl e and whi ch repr esent s an ext r eme depar t ur e f r omt he st andar ds of or di nar y car e t o the ext ent t hat t hedanger was ei t her known to t he def endant or so obvi ous t hatt he def endant must have been aware of i t , ’ ” I n r e Cart er –Wal l ace, I nc. Secur i t i es Li t i gat i on, 220 F. 3d 36, 39 ( 2dCi r . 2000) ( quot i ng [ Rol f v. Bl yt h, East man Di l l on & Co. ,I nc. , 570 F. 2d 38, 47 ( 2d Ci r . 1978) ] ( emphasi s our s) ) ; ort o evi dence t hat t he “def endant s f ai l ed t o revi ew or checki nf or mat i on t hat t hey had a dut y to moni t or , or i gnor edobvi ous si gns of f r aud, ” and hence “shoul d have known t hat

t hey wer e mi sr epr esent i ng mater i al f act s, ” Novak, 216 F. 3dat 308 ( emphases added) . “An egr egi ous r ef usal t o see t heobvi ous, or t o i nvest i gat e t he doubt f ul , may i n some casesgi ve r i se t o an i nf er ence of . . . r eckl essness. ” [ Chi l l v.Gener al El ect r i c Co. ,

101 F. 3d 263, 269 ( 2d Ci r . 1996) ]

( i nt er nal quot at i on mar ks omi t t ed) ( emphases added) ; see,e. g. , [ SEC v. McNul t y, 137 F. 3d 732, 741 ( 2d Ci r . ) , cer t .deni ed, 525 U. S. 931 ( 1998) ] ( def endant cor por at e of f i cerwho prepared and pr oceeded t o f i l e document s wi t h t he SECcont ai ni ng st atement s whose ver aci t y he hi msel f hadquest i oned, had had an obvi ous dut y to ver i f y the

suspi ci ous i nf or mat i on) .

I d. ( emphasi s i n or i gi nal ) .

The pl ai nt i f f s have f ai l ed t o al l ege f act s suf f i ci ent t o

suggest t hat t he def endant s’ conduct r epr esent ed an “ext r eme

depar t ur e f r om t he st andar ds of or di nar y car e. ” Thr oughout t he

Amended Compl ai nt , t he pl ai nt i f f s al l ege that t he def endant s had

access t o i nf or mat i on t hat cont r adi ct ed t hei r publ i c st at ement s.

Al t hough “[ p] l ai nt i f f s can est abl i sh consci ous r eckl essness by

adequat el y al l egi ng t hat ‘ def endant s knew f act s or had access t o

nonpubl i c i nf or mat i on cont r adi ct i ng t hei r publ i c st at ement s’



- 55-

and t her ef ore ‘ knew or shoul d have known t hey were

mi srepr esent i ng mat er i al f acts[ , ] ’ ” t he pl ai nt i f f s have f ai l ed

t o do so her e. I n r e Sanof i Sec. Li t i g. , 87 F. Supp. 3d 510,

544- 45 ( S. D. N. Y. 2015) af f ' d sub nom. Tongue v. Sanof i , No. 15-

588- CV, 2016 WL 851797 ( 2d Ci r . Mar . 4, 2016) ( quot i ng

Schol ast i c, 252 F. 3d at 76) . That i s because wi t h r espect t o t he

st at ement s compar i ng WWE t o l i ve spor t s wi t hout not i ng t he

di f f er ence i n adver t i si ng r evenue, t he pl ai nt i f f s have not

al l eged f act s t hat suggest t hat t he i nf or mat i on avai l abl e t o t he

def endant s cont r adi ct ed t he i nf ormat i on t hey conveyed t o t he

publ i c. The pl ai nt i f f s have i dent i f i ed onl y one i nst ance wher e

t he def endant s di scussed adver t i si ng r evenue - - dur i ng def endant

Barr i os’ s comment s at t he UBS conf er ence - - and i n t hi s

i nst ance, def endant Barr i os shar ed the f act t hat WWE earned

si gni f i cant l y l ess per adver t i si ng spot t han l i ve spor t s such as

t he NHL, NASCAR, MLB and t he NBA.

The pl ai nt i f f s’ cont ent i on of consci ous r eckl essness,

t her ef ore, must be pr emi sed on t he f act t hat t he def endant s di d

not di scl ose t hi s i nf or mat i on i n t he cont ext of t hei r ot her

st atement s compar i ng WWE to l i ve spor t s. Mer e non- di scl osur e,

however , does not sat i sf y t he requi r ement s f or sci ent er . See I n

r e Sanof i Sec. Li t i g. , 87 F. Supp. 3d at 534. ( “[ t ] he mer e

al l egat i on t hat def endant s f ai l ed t o di scl ose [ r el evant

i nf or mat i on] does not i n and of i t sel f const i t ut e st r ong



- 56-

evi dence t hat t hey di d so wi t h sci ent er ” ( quot i ng For t Wor t h

Empl oyer s' Ret . Fund v. Bi ovai l Cor p. , 615 F. Supp. 2d 218, 226

( S. D. N. Y. 2009) ) ) .

I n Sanof i , t he def endant s di d not di scl ose t he f act t hat

t he FDA had expr essed reservat i ons about Genzyme’ s si ngl e- bl i nd

dr ug t r i al s. The cour t concl uded t hat Genzyme’ s f ai l ur e t o

di scl ose t he FDA’ s r eser vat i ons di d not suppor t a st r ong

i nf er ence of sci ent er . Rat her , t he cour t concl uded t hat

“[ v] i ewi ng t he ci r cumst ances, as pl ed, i n t ot al i t y, an i nf er ence

of sci ent er i s not pl ausi bl e, and t he i nf er ence t hat def endant s

i nt ended t o mi sl ead i s not ‘ at l east as compel l i ng’ as t he

al t er nat i ve i nf er ence, namel y, ‘ t hat def endant s di d not know,

and had no reason t o know, t hat t he FDA woul d i ni t i al l y’ r ej ect

t he sBLA f or Lemt r ada. ” I n r e Sanof i Sec. Li t i g. , 87 F. Supp. 3d

at 534- 35 ( quot i ng Bi ovai l , 615 F. Supp. 2d at 228) . Her e, one

compet i ng i nf er ence t o be dr awn f r om t he f act s al l eged i n t he

Amended Compl ai nt i s evi denced by def endant Bar r i os’ s

expl anat i on at t he UBS conf erence: t he def endant s knew about t he

di scr epancy i n adver t i si ng r evenue between WWE and l i ve spor t s

but di d not bel i eve t hat i t woul d have a maj or ef f ect on t hei r

cont r act negot i at i ons wi t h NBCU; t hey bel i eved, i nst ead, t hat

di st r i but i on f ees woul d be a dr i vi ng f orce and t hat WWE was

compar abl e to l i ve spor t s al ong t hat met r i c. The i nf er ence

suggest ed by t he pl ai nt i f f s i s t hat t he def endant s knew t hat



- 57-

t hi s di scr epancy woul d pr event WWE f r om secur i ng a l ucr at i ve

cont r act wi t h NBCU and f ai l ed t o di scl ose i t i n or der t o

i ncr ease t he val ue of t he st ock. However , t he pl ai nt i f f s have

f ai l ed t o al l ege f acts suf f i ci ent t o suggest t hat t hi s i nf er ence

i s “at l east as compel l i ng” as the compet i ng i nf er ence.

Accor di ngl y, t he cour t concl udes t hat t he pl ai nt i f f s have

f ai l ed t o adequat el y al l ege sci ent er , and Count I i s bei ng

di smi ssed.

B. Count II: Violation of Section 20(a) of the Exchange

Act by defendants McMahon, Barrios, and Wilson

To st at e a cl ai m under § 20( a) of t he Exchange Act , “a

pl ai nt i f f must show ( 1) a pr i mar y vi ol at i on by t he cont r ol l ed

per son, ( 2) cont r ol of t he pr i mar y vi ol at or by t he def endant ,

and ( 3) t hat t he def endant was, i n some meani ngf ul sense, a

cul pabl e par t i ci pant i n t he cont r ol l ed per son' s f r aud. ”

Car pent er s Pensi on Tr ust Fund of St . Loui s v. Bar cl ays PLC, 750

F. 3d 227, 236 ( 2d Ci r . 2014) ( quot i ng ATSI Commc’ ns, I nc. v.

Shaar Fund, Lt d. , 493 F. 3d 87, 108 ( 2d Ci r . 2007) ) . I f a

pl ai nt i f f has f ai l ed t o al l ege a pr i mar y vi ol at i on, t hen t he §

20( a) cl ai ms must be di smi ssed. See ATSI Commc’ ns, 493 at 108.

Because t he pl ai nt i f f s have not adequat el y pl ed a pr i mar y

vi ol at i on by any of t he def endant s, Count I I i s bei ng di smi ssed.



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C. Count III: Violation of Section 20(b) of the Exchange

Act by defendants McMahon, Barrios, and Wilson

Sect i on 20( b) of t he Exchange Act pr ovi des t hat “[ i ] t shal l

be unl awf ul f or any per son, di r ect l y or i ndi r ect l y, t o do any

act or t hi ng whi ch i t woul d be unl awf ul f or such per son t o do

under t he pr ovi si ons of t hi s chapt er or any rul e or r egul at i on

t hereunder t hr ough or by means of any ot her person. ”

15 U. S. C. § 78t ( b) . The par t i es di sagr ee as t o whet her § 20( b)

cr eat es a pr i vat e r i ght of act i on. However , t he cour t need not

deci de whet her or not t hi s st at ut e creat es a pr i vat e r i ght of

act i on because t he cour t has concl uded t hat t he pl ai nt i f f s have

not adequat el y pl ed vi ol at i on of any of t he “pr ovi si ons of t hi s

chapt er or any r ul e or r egul at i on t her eunder . ” Accor di ngl y,

Count I I I i s bei ng di smi ssed.

D. Count IV: Violation of Section 20(A) of the Exchange

Act by defendant Levesque

Sect i on 20( A) of t he Exchange Act pr ovi des:

Any per son who vi ol at es any pr ovi si on of t hi s chapt er ort he r ul es or r egul at i ons t her eunder by pur chasi ng orsel l i ng a secur i t y whi l e i n possessi on of mat er i al ,nonpubl i c i nf or mat i on shal l be l i abl e i n an act i on i n anycour t of compet ent j ur i sdi ct i on t o any per son who,cont empor aneousl y wi t h the pur chase or sal e of secur i t i est hat i s t he subj ect of such vi ol at i on, has pur chased ( wher e

such vi ol at i on i s based on a sal e of secur i t i es) or sol d( wher e such vi ol at i on i s based on a pur chase of secur i t i es)secur i t i es of t he same cl ass.

15 U. S. C. § 78t - 1( a) . The pl ai nt i f f s al l ege t hat def endant

Levesque was “i n possessi on of mat er i al , nonpubl i c i nf or mat i on”



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about t he r eal i t y of WWE’ s cont r act negot i at i ons and

part i ci pat ed i n “t he scheme t o def r aud i nvest ors. ” ( Amended

Compl ai nt ¶ 113. ) The pl ai nt i f f s al l ege t hat whi l e she was i n

possessi on of t hi s adver se, nonpubl i c i nf or mat i on, she sol d

appr oxi mat el y 441, 671 shar es of WWE st ock f or approxi mat el y

$6, 174, 551. 02. The l ead pl ai nt i f f pur chased WWE secur i t i es

cont empor aneousl y wi t h Levesque’ s sal e of secur i t i es. The

pl ai nt i f f s al l ege t hat t he l ead pl ai nt i f f and ot her member s of

t he put at i ve cl ass who pur chased WWE secur i t i es

cont emporaneousl y wi t h Levesque’ s sal e of st ock suf f er ed

“subst ant i al damages” by payi ng an ar t i f i ci al l y i nf l at ed pr i ce

f or t hei r st ock and woul d not have pur chased the st ock had t hey

known t hat t he def endant s’ st at ement s were f al se. ( Amended

Compl ai nt ¶ 114. )

The def endant s not e t hat def endant Levesque sol d her shares

pur suant t o a 10b5- 1 pl an t hat was ent er ed i nt o and di scl osed i n

an SEC f i l i ng more t han seven mont hs bef ore t he Cl ass Per i od

began. ( Def endant s’ Memor andum at 56- 57, 69. ) Addi t i onal l y, t he

def endant s poi nt out t hat Levesque sol d onl y a f r act i on of her

shar es and t hat she was not a di r ect or of WWE unt i l af t er t he

Cl ass Per i od ended. ( Def endant s’ Memorandum at 69. )

“[ I ] n or der t o st at e a cl ai m under § 20A, [ t he pl ai nt i f f ]

must pl ead as a pr edi cat e an i ndependent vi ol at i on of t he ’ 34

Act. ” J ackson Nat . Li f e I ns. Co. v. Mer r i l l Lynch & Co. , I nc. ,



32 F. 3d 697, 704; see al so I n re LaBr anche Secur i t i es

Li t i gat i on, 405 F. Supp. 2d 333, 364 ( S. D. N. Y. 2005) ( “Si nce a

Sect i on 10( b) cl ai m has not been st at ed agai nst [ t he def endant ] ,

i t f ol l ows t hat a Sect i on 20A cl ai m has not been st at ed. ”) The

pl ai nt i f f s i n t hi s case have not adequat el y pl ed i ndependent

vi ol at i on of t he Exchange Act . Accor di ngl y, Count I V i s bei ng

di smi ssed.

IV. CONCLUSION

For t he reasons set f or t h above, t he Mot i on of Def endant s

Wor l d Wr est l i ng Ent er t ai nment , I nc. , Vi ncent K. McMahon, George

A. Bar r i os, Mi chel l e D. Wi l son, and St ephani e McMahon Levesque

t o Di smi ss t he Consol i dat ed Amended Compl ai nt ( Doc. No. 77) i s

her eby GRANTED.

The Cl er k shal l enter j udgment i n f avor of t he def endant s

and cl ose t hi s case.

I t i s so or der ed.

Si gned t hi s 31st day of Mar ch 2016, at Har t f or d,

Connect i cut .

/ s /Al vi n W. ThompsonUni t ed St at es Di st r i ct J udge

Ruling on Motion to Dismiss WWE Shareholder Lawsuit

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