On March 20, 2025, Judge Gordon P. Gallagher of the United States District Court for the District of Colorado granted a motion to dismiss a proposed securities class action asserting claims against a satellite technology company (the “Company”) and certain of its executives (together, “defendants”) under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5. Lingam, et al. v. Dish Network Corp., et al., No. 23-cv-00734-GPG-KAS (D. Colo. Mar. 20, 2025). The Company argued that plaintiffs’ allegations were not actionable because they were optimistic, forward-looking statements, and because there was no evidence that defendants acted with the requisite intent. The Court agreed, dismissing the action with prejudice.
Plaintiffs alleged that the Company attempted to create a 5G wireless network “based on brand new and unproven technologies” through acquiring and integrating other wireless networks. In late 2020, the Company “was able to send a text message on a small network to validate that it could perform that function,” but, as of the first quarter of 2021, the Company allegedly was experiencing “significant integration issues.” Throughout this time, the Company allegedly made 19 statements variously misrepresenting (1) the Company’s network integration and launch, and (2) its construction of network infrastructure for enterprise customers. Rather than address each statement individually, the Court “focus[ed]” on the two statements in each category most likely to “meet[] the required standards.”
For the first category, the Court considered the Company’s statement that the Company had “completed a successful field validation, utilizing our fully-virtualized standalone 5G core network.” Plaintiffs argued that this statement was false because the validation involved sending a single text message and thus did not meet industry standards for validating an entire network. The Court disagreed, reasoning that the statement did not suggest that the field validation met industry standards. And ultimately, even though the Company later faced alleged integration and construction issues, the Court found that “[p]laintiffs present[ed] nothing showing that defendants knew” at the time of the alleged misstatements that the integration and launch “would turn out badly” even if defendants allegedly knew about the limited nature of the field validation. Relying on confidential witnesses, plaintiffs also argued the statement was false because the integration issues ultimately delayed a successful launch of the network. The Court held that this claim was impermissibly based on hindsight and that the complaint’s allegations, including those based on confidential witness statements, did not establish that defendants had pushed back any timelines at the time the alleged misstatements were made.
For the second category, the Court considered a statement by one of the Company’s officers that the Company’s 5G network offering was “scaling” and “picking up momentum” to service enterprise customers going into 2024 and beyond. Plaintiffs argued that this statement was misleading because the Company was focused on “developing the bare infrastructure to meet the FCC requirements at the expense of the other elements that were necessary to make the network functional.” But the Court held that plaintiffs failed to allege that the Company “was not planning to be able to [service enterprise customers] in the referenced years even though it was incapable of doing so” when the statement was made, or that the officer knew of or was reckless about the statement’s falsity.
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