b'customer bases supported the companys optimisticCostanzo v. DXC Technology Company, statement, as well as the inclusion of sufficient riskCase No. 19-cv-05794-BLF, 2020 WL factors to curb those statements. Similarly, the court4284838 (N.D. Cal. July 27, 2020) held that statements classifying Pivotals products andWorkforce Optimization Effect On business as uniquely position[ed], strong across sectors, best-in-class, and industry-leading wereCustomer Satisfactioninactionable puffery. Moreover, the court deemedDXC Technology Company (DXC) is a Fortune 500 many statements to be inactionable forward-lookingcompany that provides end-to-end IT services to its statements, including statements regarding Pivotalsclients. DXC was formed on April 1, 2017, the result of future economic performance, or assumptionsthe combination of two large IT service businesses, underlying its future economic performance. ForComputer Sciences Corporation (CSC) and the example, such statements as [W]ere expecting [ourEnterprise Services division of Hewlett Packard net expansion rate] to come down and we expect ourEnterprise Company (HPES). In May 2016, CSC existing customers to continue to expand their footprintand Hewlett Packard Enterprise Company (HPE) with PKS were deemed sufficiently forward looking toannounced the mergerstructured as a Reverse escape liability under Section 10(b). And the court heldMorris Trust wherein HPES was spun off into the new that [t]he cautions Pivotal provided addressed the verycompany, DXC, which then purchased CSC and CSC subjects Plaintiffs challenge. shareholders stock was converted on a one-to-one Finally, the court held that plaintiffs failed to adequatelybasis. After filing several amendments, on February allege scienter. The court held that plaintiffs failed24, 2017, DXC filed with the SEC a final amendment to to establish reliability of their confidential witnessesthe Registration Statement. The Registration Statement because all of them were at least two reporting levelsstated that DXC expected the merger would produce removed from the defendants and [g]eneral allegationsfirst-year synergies of approximately $1 billion post-of [defendants] interaction with other officers andclose and $1.5 billion run rate at the end of year one, employees, their attendance at meetings, and theircalculated by estimating the expected value of receipt of weekly or monthly reports are insufficientharmonizing policies and benefits between the two to create an inference of scienter more cogent orcompanies, supply chain and procurement benefits compelling than an alternative innocent inference.from expected economies of scale such as volume And, none of the confidential witness statements relieddiscounts as well as cost synergies expected from upon by plaintiffs were indicative of scienter, explainingworkforce optimization[.] The Registration Statement that confidential witness claims of [a]n unsuccessfulnoted a turnaround plan to align [DXCs] costs with sales strategy and disagreement within the companyits revenue trajectory. It also included cautionary over its approach to selling PKS does not supportlanguage indicating that the amount of [cost-cutting] an allegation that Pivotal was deliberately reckless.synergies actually realizedcould differ from the Second, the court rejected plaintiffs contention thatexpected synergies and referenced loss of personnel the proximity of Pivotals March earnings statements toas workforce optimization such as elimination of its later revised going-forward guidance indicates thatduplicative roles and warned of the risk of failing to those statements were false when made; rather, theattract and retain qualified personnel. court noted that it is well-settled in the Ninth Circuit thatOn April 3, 2017, DXC common stock began publicly honest optimism followed by disappointment is nottrading on the NYSE. Following the merger, CSCs the same as lying or misleading[.] The court rejectedexecutive vice president became DXCs executive plaintiffs attempt to rely on the core operationsvice president and head of global delivery, but was doctrine on the ground that it would not be absurdterminated on July 20, 2018, purportedly following to suggest that management was without knowledgedisagreements with the DXC chairwoman, president, of core facts relevant to plaintiffs claims despiteand CEO. On February 6, 2019, he sued DXC in New allegations that defendants had generalized accessYork federal court challenging his termination, and to sales reports and occasionally sat in on regularalleging, among other things, that the company had meetings. Finally, the court held that, taking all of thean internal target to cut $2.7 billion to the Global complaints allegations into consideration, together theyDelivery divisions annual expenses primarily by do not give right to a strong inference of scienter. workforce reduction, to which he allegedly expressed As to plaintiffs Section 20(a) claim, the court held thatreservations concerning the pace of the cuts to the because their predicate Section 10(b) claim failed, sodetriment of customer satisfaction, and that he reduced too must their Section 20(a) claim.Global Deliverys workforce by 20% over the next Plaintiffs opted against amending the complaint andtwelve months at the direction of DXCs CEO.sought dismissal, with prejudice, agreeing not to appeal the dismissal order. 32'