Judge Trims Claims in EA Battlefield 4 Class Action Lawsuit

The claims in class action lawsuit against Electronic Arts inc. (EA) alleging that the video game company, including specified officers and directors of the company, violated the Securities Exchange Act by making false and misleading statements during the launch of the game were trimmed by a California federal judge.

Last December, investors in EA filed the Battlefield 4 class action lawsuit in federal court. The investors alleged that EA botched the launch of Battlefield 4 and also made “materially false and misleading statements” to highlight the claimed strength of the company’s release of Battlefield 4.

The plaintiffs allege EA issued a “strong fiscal 2014 financial guidance for the company and actually increased that guidance on Oct. 29, 2013” and that these statements artificially raised EA’s the stock price to a high of $28.13 per share by August 2013. However, EA’s share price fell after it was revealed that the company had halted development of the popular video game in order to focus on fixing bugs of the game and had no plans for a relaunch. The investors argued in their initial filing that EA company officials knew or intentionally disregarded material adverse facts and failed to disclose those fact to investors in violation of the Securities Exchange Act.

Last week, the California federal judge assigned to the class action lawsuit trimmed the investor’s claims. U.S. District Court Judge Susan Illston found that that at least some of the allegedly fraudulent statements were nothing more than “corporate confidence.” She pointed out that while those statements may have been misplaced, they cannot establish enough evidence to support the claims in the class action lawsuit. Judge Illston ruled that the alleged “false and misleading statements” about the game were not actually fraudulent, but were instead normal vague and optimistic statements that the upper management of a major game publisher is expected to make.

“[CFO Blake] Jorgensen’s Oct. 29, 2013 statement comparing ‘BF4’ to a World Series ace pitcher is puffery,” said the judge in her order issed last week. “Defendant [CEO Andrew] Wilson’s Oct. 29, 2013 statement explaining that EA ‘worked more closely with Microsoft and Sony throughout the entire process’ resulting in a ‘launch slate of games that are the best transition games that I’ve ever seen come out of this company’ is an inactionable opinion,” continued the judge, “as well as a vague statement of corporate optimism.”

The ruling represents a major victory for EA, but Judge Illston retained some of the investors’ claims and will allow them to amend their complaint. In its motion to dismiss, EA pointed out that five of the eight statements cited by the investors named as plaintiffs in the Battlefield 4 class action lawsuit were made after they had purchased stock in EA, so the investors could not have relied on them in deciding to invest in EA.

Judge Illston concurred with EA that claims based on those statements should be removed unless the named investors find and substitute other investors who did purchase stock in reliance on those alleged “misstatements” made between October 29 and December 3 in their class action lawsuit. The named investors were given until November 3 to make the substitution.

The EA Battlefield 4 Securities Class Action Lawsuit is Ryan Kelly v. Electronic Arts Inc., et al., in the U.S. District Court for the Northern District of California.