United States District Court, D. Minnesota
In re TARGET CORPORATION SECURITIES LITIGATION THIS RELATES TO All Actions
N. ERICKSEN UNITED STATES DISTRICT JUDGE
like Carpenters' Pension Fund of Illinois sued Target
Corporation and its former officers (collectively,
“Target”) over Target's public Statements.
E.g., Proposed Am. Compl. 2d (simply,
“Compl.”) ¶¶ 141, 224 (accusing May 30,
2013 Statement), Dkt. No. 105-1. In making those Statements,
Target allegedly defrauded the securities markets. Compl.
¶¶ 294-296. Considering the proposed allegations,
the Court denies reconsideration of this lawsuit's
dismissal. See Mot., Dkt. No. 105. Carpenters'
Pension has not plausibly pled that the accused Statements
meet the materiality standard for securities fraud.
Court summarizes this lawsuit's context. There are nearly
1, 800 Target stores in the United States. Between March and
December 2013, Target opened over a hundred more, this time
throughout Canada's ten provinces. For those Canadian
stores, which were incorporated under Target's Canadian
business, Target's inventory-management technology
allegedly caused overbuys and shortages in on-sale consumer
goods. In January 2015, Target's Canadian business filed
for bankruptcy. Along the way, Target allegedly defrauded the
securities markets by making public Statements that omitted
facts about its inventory-management technology.
securities fraud, a material statement involves “a
substantial likelihood that the disclosure of the omitted
fact would have been viewed by the reasonable investor as
having significantly altered the ‘total mix' of
information made available.” Detroit Gen. Ret. Sys.
v. Medtronic, Inc., 621 F.3d 800, 805-07 (8th Cir. 2010)
(affirming dismissal of securities-fraud lawsuit). To decide
plausible materiality, a court “may consider . . .
materials embraced by the pleadings and . . . the public
record.” Id. at 805.
begin with, the accused Statements cannot be material to the
alleged securities fraud. Soft language couches the
Statements. See Id. at 806 (dismissing
securities-fraud lawsuit when accused statement
“couches the information . . . as preliminary, and . .
. ‘suggests.' . . .”). Even if Target
misleadingly omitted the technological root of its Canadian
business's problems, those problems were disclosed
(figure, below). “It is difficult to see how . . .
disclosing a possible problem . . . [is] materially
misleading.” Id. Target disclosed its Canadian
business's inventory, brand and financial problems. The
media confirmed those problems and, within months, disclosed
their technological root. Earlier disclosure of that
technological root could not have been viewed by the
reasonable investor as having significantly altered the total
mix of available information. The Court analyzes the accused
Statements in detail below.
• Manual ordering
• Empty shelves
• Brand decay
• Data glitches
• Staggered opening
• Quarterly losses
20, 2013 Statements
Annual Report for fiscal year 2012 could not have been
material to the alleged securities fraud. See Compl.
¶ 196. No stores had opened in Canada during that year.
See Compl. ¶ 110. And Target disclosed its
problems. It disclosed that, for that year, its Canadian
business lost $315 million. Target Corp., 2012 Annual Rpt. 22
(Form 10-K) (March 20, 2013), Dkt. No. 72-2. Target's
Canadian loss was about 10% of its U.S. net earnings. See
Id. Target further warned that “Our 2013 entry
into the Canadian retail market is our first retail store
expansion outside of the United States.” Id.
at 9. Even if incipient technological issues caused Target to
stagger its Canadian stores' openings, Compl. ¶ 196,
that staggering publically manifested. See Mark
Wiltamuth, et al., Target Corp.: Canada on Track; Mgmt
Presentation on Rollout and Store Visit Notes, Morgan
Stanley Res. N. Am. 3 (March 27, 2013) (“Concern over
system startup issues (either technology, . . . inventory)
drove the staggered opening. . . .”), Dkt. No. 73 (Ex.
6). Target disclosed its then-incipient Canadian problems.
28, 2013 Statements
after Target's 2012 loss and other Canadian problems came
out, one of Target's then-officers described his optimism
about the Canadian business. Compl. ¶ 200
(“We're right where we want to be right now. . . .
expect[ing] . . . next year to be profitable for the full
year.”). He tempered, “for Canada, . . . . we
certainly have our hands full right now.” Interview by
Perry Caicco with John Mulligan, CFO, Target Corp, in
Toronto, Ont. 11 (March 28, 2013), Dkt. No. 73 (Ex. 3). And
he confirmed that Target lost “hundreds of millions of
dollars of capital” to “depreciation” in
distribution infrastructure. Id. at 3.
analysts tempered their optimism, too. Mark Wiltamuth, et al.
3 (noting “uncertainty for Target shareholders”
and that “[that officer] gave scant details over sales
performance”), Dkt. No. 73 (Ex. 6); Jason DeRise &
Mark Carden, Target Corp.: All eyes on Canada, UBS
Investment Res. (Apr. 15, 2013) (“We think the
expansion is risky as [Target] has little time to test its
Canadian format.”), Dkt. No. 73 (Ex. 7). They described
the Canadian stores as “sparse with inventory.”
David Strasser, et al., Seeing TGT Canada Stores First
Hand, Janney Capital Markets 2 (March 27, 2013), Dkt.
No. 73 (Ex. 4); see Christopher Horvers, et al.,
Hardlines Retail: Target, J.P. Morgan: N. Am. Equity
Res. fig.2, 5 (Apr. 15, 2013), Dkt. No. 73 (Ex. 5). The
securities markets had likewise “double penalized
[Target] for its Canada startup” by discounting
Target's stock price. See Wiltamuth, et al. 2.
begin with, the March 28, 2013 Statements cannot be material
to the alleged securities fraud. The Statements contradict
Target's allegedly misleading optimism. Target noted that
it had its hands full. It mentioned the Canadian
business's prospective risk, quarterly loss and
distribution problems. Third-party analysts echoed the
Canadian business's risk and viewed Target's optimism
as content-free-as did the securities markets. Those analysts
even disclosed that, inside the Canadian stores, customers
saw empty shelves. Target's Canadian problems were thus
22, 2013 Statements
disclosed a quarterly loss of $205 million on its Canadian
stores. Target Corp., Quarterly Rpt. 19 (Form 10-Q) (May 22,
2013), Dkt. No. 73 (Ex. 9). Responding to this loss, a
then-officer praised Target's technology for
“accommodat[ing] the increasing volume of
traffic.” Compl. ¶ 205. He “fe[lt] very
confident” that the Canadian business had put supply
chains “in place” and was “refining”
them. Compl. ¶ 207. Another then-officer predicted that
“by the fourth quarter we expect our Canadian
operations will be slightly accretive.” Compl. ¶
209. But a day earlier, a survey published that, in Canada,
Target's brand had decayed. Faye Landes & Tal Lev,