b'Because the Time Warner acquisition contemplatedClaims as well as violations of Sections 10(b) and 20(a), offering Time Warner shareholders AT&T stock, inof the 1934 Act and Rule 10b-5 promulgated thereunder. November 2016 AT&T filed a draft Registration Statement,Plaintiffs alleged that defendants knew but failed to which was subsequently amended and became effectivedisclose that there was a significant risk of technical on January 6, 2017. The Registration Statement andproblems with DTVN, likely unprofitability, promotion-January 9, 2017 Prospectus (Offering Documents)related churn, and overly aggressive sales tactics which described the DTVN business as strong notingthey failed to disclose while trumpeting successes of and growth by approximately 1.5 million subscribers, andgrowth of subscribers to DVTN. incorporated by reference various of the companys priorDefendants moved to dismiss the state court action and and subsequent SEC filings containing information aboutthe New York State Supreme Court granted the motion in DTVN, including a January 20, 2017 announcement thatfull, holding that plaintiff failed to plead that any statement DTVN added 200,000 net paid subscribers in the fourthin the Registration Statement was false or misleading as quarter of 2016. On February 13, 2017, Time Warnersof the effective date. As a preliminary matter, the court shareholders voted to approve the merger, but the closingagreed with defendants that the effective date of the was delayed until June 14, 2018 by the U.S. DepartmentRegistration Statement was the applicable date to assess of Justices unsuccessful effort to enjoin the merger onSection 11 liability, rejecting plaintiffs argument that antitrust grounds.defendants had a duty to file a post-effective amendment From DTVNs inception, AT&T announced net additions ofto the Registration Statement regarding alleged changes paid subscribers every quarter through the third quarterin subscriber trends between its effective date and the of 2018, made various positive statements about DVTN,transaction close date which would change the relevant and repeatedly stated that growth in DTVN subscribersperiod for Section 11 liability. The court reasoned that there largely offset the loss of satellite customers. Throughoutwere no specific representations in the Registration this period, AT&T also ran several promotions to attractStatement about the viability or success of [the sector] DTVN subscribers. On October 24, 2018, the companyof AT&Ts business that included DTVN and there can announced that in 3Q 2018 it had 49,000 net additionalbe no duty to update information that was not contained subscribersan 85% decrease from the 342,000 netin the Registration Statement in the first place. It further additional subscribers reported by the company for thereasoned that declining DTVN subscription rates did prior quarter. The company explained that in 3Q 2018 itnot represent a fundamental change to trigger a duty scaled back promotions and special offers to optimizeto issue a post-effective amendment because DTVN profitability because it discovered a group of low-value,represented less than 1% of AT&Ts video-subscriber high churn customers, and it expected this to lead to abusiness, which itself was only a small part of AT&Ts decline in net additions but that the 3Q 2018 figure wasoverall business. more positive than expected. That day, AT&Ts stockNext, the state court held that the Registration Statement price decreased 8%. Then, on January 9, 2019, AT&Tdid not contain an untrue statement of a material fact or further disclosed that, in 2018, about one third of itsomit to state a material fact required to be stated therein or DTVN subscribers (approximately 500,000 customers)necessary to make the statements therein not misleading, were on three-month promotions and that the companyas of the effective date. Specifically, it held that defendants stopped doing one such promotion in 3Q 2018. That day,had no obligation to disclose [AT&Ts] various promotions AT&Ts stock price fell 3.77%. On January 30, 2019, thefor increasing DTVN subscriptions, even if they were AT&Ts stock price dropped an additional 4.3% when itflawed as plaintiff alleges, that defendants description announced that it had lost 267,000 DTVN subscribers inof its DTVN launch and subscriber growth as strong the 4Q 2018.was inactionable corporate puffery, and the remaining Former Time Warner shareholders (converted to AT&Tallegations were improper fraud-by-hindsight. Likewise, shareholders) filed a putative class action againstthe court concluded that statements by AT&T directors AT&T, its officers and directors in New York state courtpost-close suggesting they knew about the risks of their alleging violations of Sections 11, 12(a), and 15 of thepromotional practices related to DTVN and thought they 1933 Act through purported misleading statementsmight ultimately cause a drop in subscriptions does not in the Registration Statement regarding the strongrender anything in the Offering Documents misleading launch of DTVN with impressive subscriber growthas of the effective date. The court also dismissed the without disclosing that those subscriptions resultedSection 12 and 15 claims given its finding that the Offering from unsustainable promotional and sales practicesDocuments did not contain any material misstatements that defendants cracked down on leading up to theor omissions. Plaintiff appealed the state court dismissal, acquisition, which caused subscription rates to fall.which they voluntarily dismissed on March 24, 2021. Subsequently, investors filed a similar putative securitiesOn November 18, 2019, defendants moved to dismiss the class action in federal court against AT&T and several offederal action on the grounds that plaintiffs failed to plead its executives and directors alleging the same 1933 Acta material misrepresentation or scienter for the 1934 Act 72'