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U.S. Appeals Court Rules BlackBerry Lawsuit Was Rightfully Dismissed

Inside The BlackBerry Annual Shareholder Meeting While Phone Fades As Third Contender With Apple-GoogleInside The BlackBerry Annual Shareholder Meeting While Phone Fades As Third Contender With Apple-Google
A pair of BlackBerry Z10 smartphones.Photograph by Pawel Dwulit—Bloomberg via Getty Images

A U.S. appeals court on Wednesday upheld the dismissal of a lawsuit accusing BlackBerry (BBRY) of fraudulently inflating its stock price by painting an upbeat picture of the prospects for its BlackBerry Z10 smartphone line that was misleading.

While the 2nd U.S. Circuit Court of Appeals in New York said the lawsuit failed to state a plausible claim, it ordered a lower-court judge to reconsider whether to let the plaintiffs amend their complaint in light of what they said was new evidence.

Neither BlackBerry nor a lawyer for lead plaintiffs Todd Cox and Mary Dinzik responded immediately to requests for comment.

BlackBerry launched its Z10 phone in January 2013 in a bid to recoup market share lost to Apple iPhone (AAPL), and Samsung devices powered by Google Android (GOOG).

The BlackBerry Z10 won positive reviews, but low sales led to a projected $930 million writedown for unsold inventory on Sept. 20, 2013. BlackBerry shares lost about one-sixth of their value that day.

The Waterloo, Ontario-based company ousted its chief executive officer, Thorsten Heins, less than two months later.

The lawsuit alleged that BlackBerry attempted to conceal the poor performance of the Z10 in order to artificially inflate its stock price.


In Wednesday’s decision, the 2nd Circuit upheld U.S. District Judge Thomas Griesa’s March 2015 dismissal of the lawsuit for the failure to allege that BlackBerry and its executives knowingly misled investors.

The three-judge appeals panel said the plaintiffs’ claims amounted to “fraud by hindsight” by saying that the defendants must have known the device would be unsuccessful.

The court nonetheless said the plaintiffs could try to persuade Griesa to let them amend their complaint in light of new legal developments and evidence that the plaintiffs said would support their claims.

The appeals court said if Griesa refuses to let the plaintiffs amend their complaint, he should explain his reasons, which he had not done before.

The case is Cox v. BlackBerry Limited, 2nd U.S. Circuit Court of Appeals, No. 15-3991.