Mogensen v. Body Cent. Corp.
| Decision Date | 19 March 2014 |
| Docket Number | Case No. 3:12–cv–954–J–20JRK. |
| Citation | 15 F.Supp.3d 1191 |
| Parties | Nick MOGENSEN, individually and on behalf of all others similarly situated, Plaintiff, v. BODY CENTRAL CORPORATION, B. Allen Weinstein, Thomas Stoltz, and Beth R. Angelo, Defendants. |
| Court | U.S. District Court — Middle District of Florida |
David J. George, Holly Kimmel, Kathleen B. Douglas, Paul J. Geller, Robert Jeffrey Robbins, Robbins Geller Rudman & Dowd, LLP, Boca Raton, FL, Francis A. Bottini, Jr., Bottini & Bottini, Inc., La Jolla, CA, for Plaintiff.
Brian Danitz, Jerome F. Birn, Jr., Kelley M. Kinney, Steven M. Schatz, Wilson, Sonsini, Goodrich & Rosati, PC, Palo Alto, CA, Charles B. Lembcke, Law Office of Charles B. Lembcke, PA, Jacksonville, FL, for Defendants.
Defendants having notified this Court that they do not wish to convert their motion to dismiss into a motion for summary judgment, (Dkt. 47, filed September 24, 2013), this cause is before this Court on the following filings:
This Court has considered these filings, determined that this matter does not require oral argument, and now issues this Order.
Nick Mogensen, lead Plaintiff, initiated this putative class action suit on August 27, 2012, and filed an Amended Complaint on February 26, 2013. (Dkts. 1, 25). Plaintiff alleges that, between November 10, 2011 and June 18, 2012 (the “class period”), Defendants lied to investors about Body Central's expected growth and sales to artificially inflate its stock prices. Plaintiff further alleges that Defendants Angelo and Weinstein, along with an executive who is not named as a defendant (Angelo's father, Jerrold Rosenbaum), reaped the benefits of this inflation by engaging in insider trading during the class period before Body Central's stock prices plummeted in early May of 2012. On behalf of himself and all others who purchased Body Central common stock during the class period, Plaintiff brought suit under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b) and 78t(a), and Rule 10b–5 promulgated thereunder, 17 C.F.R. § 240.10b–5.
Plaintiff Nick Mogensen purchased Body Central common stock during the class period and suffered an economic loss when the market price of his stock declined. Compl. at ¶¶ 16, 123–35. This Court, in a prior Order, appointed Mr. Mogensen to serve as Lead Plaintiff in this putative class action suit. (Dkt. 17).
Defendant Body Central is a Delaware corporation with its headquarters in Jacksonville, Florida. Body Central retails trendy apparel and accessories for females in their late teens and early twenties who seek a flattering fit at bargain prices. Compl. at ¶¶ 17, 28, 29. To remain profitable, the company needs to anticipate and react quickly to changes in fashion trends and consumer demand. Until the class period, Body Central appears to have done this fairly well. Starting from a single store in Jacksonville in 1972, the company went public in October 2010, and by 2012, the company had expanded to 276 stores across 24 states. Compl. at ¶¶ 2, 28; (Dkt. 36 at p. 4). Body Central stock hit its all-time high on April 27, 2012, but on May 4, 2012, its market price plummeted by approximately 48.55% in the wake of a press release that revealed the company's declining financial performance. Compl. at ¶¶ 5, 7. When Body Central lowered its sales and earnings forecasts a second time on June 18, 2012, the market price of the company's common stock again lost almost half of its value, falling approximately 48%. As of the date of the Amended Complaint, the price of Body Central stock had not recovered. Compl. at ¶¶ 9, 10.
During the class period, Defendant B. Allen Weinstein was President, Chief Executive Officer (“CEO”), and a director of Body Central. On August 16, 2012, Weinstein resigned from his CEO and director positions. Compl. at ¶ 18. During the class period, Defendant Thomas Stoltz was Chief Financial Officer (“CFO”), Executive Vice President, and Treasurer of Body Central. On August 17, 2012, the company announced that Stoltz would become Body Central's Chief Operating Officer (“COO”) and interim CEO to replace Weinstein. Compl. at ¶ 19. During the class period, Defendant Beth Angelo was Chief Merchandising Officer (“CMO”) of the company. Compl. at ¶ 20.
According to the Amended Complaint, throughout the class period, Weinstein, Stoltz, and Angelo were responsible for ensuring the accuracy of Body Central's public filings and statements, and they personally attested to—and certified the accuracy of—those filings and statements. In short, they controlled the contents of the company's SEC filings and other public statements. By virtue of their positions, they were privy to confidential company information and had access to nonpublic information concerning the company's business, finances, merchandise, markets, and present and future business prospects. Compl. at ¶¶ 21–25.
By the start of the class period, Body Central had announced plans to expand its business by at least 15% annually through the opening of new stores. Compl. at ¶ 30. During the class period, however, Body Central experienced declining sales performance. According to the Amended Complaint, two factors accounted for this decline: (1) at least since first-quarter 2011 and throughout most of the class period, the company's “lazy buyers” lagged far behind the latest fashions and instead repeatedly reordered the same items for extended periods of time, even reordering merchandise that had previously sold on clearance due to low demand; and (2) during the class period, Weinstein and another executive instituted changes in company policy that resulted in extensive turnover of key employees and short-staffing at the district management level. Compl. at ¶¶ 31–54.
To support these contentions, the Amended Complaint relies on information given by five anonymous confidential witnesses who worked at the company during the class period: (1) a former regional vice president who oversaw nearly 100 stores across different regions of the country and reported directly to Weinstein; (2) a former senior district manager who oversaw 12 Florida stores and reported to a regional vice president; (3) a former senior district manager who oversaw an unspecified number of stores in three states; (4) a former district manager who supervised 10 Florida and Georgia stores and reported to a regional manager; and (5) a former store manager who oversaw a store in Jacksonville, Florida and reported to a district manager. Compl. at ¶ ¶ 32 n. 1, 35 n. 2, 36 n. 3, 37 n. 4, 38 n. 5 These confidential witnesses generally described the company's repeated failure to order new, trendy merchandise and excessive inventory mark-downs in their stores. Compl. at ¶¶ 32–42. The second former senior district manager asserted that Body Central failed to meet internal sales goals in the fourth quarter of 2011. Compl. at ¶ ¶ 37. The witnesses also described Body Central's failure to cure the problem in the first quarter of 2012, when repetitive and “unexciting” products continued to appear on their shelves, and the “horrible” January and February that ensued. Furthermore, according to the confidential witnesses, their stores continued to offer stale merchandise when the company rolled out its inventory for spring 2012, and this negatively impacted their sales in 2012. Compl. at ¶ ¶ 33, 34, 37–39.
According to the Amended Complaint, the former regional vice president contends that the lack of new, updated merchandise was a primary concern for low-and mid-level management, and the concern was “definitely discussed” with corporate executives—including Weinstein—during Monday morning conference calls with regional vice presidents, corporate executives, and Body Central's buyers. Compl. at ¶ 40. The former regional vice president, first former senior district manager, and former store manager all contend that Weinstein participated in these calls. Compl. at ¶¶ 40–42. Additionally, the former regional vice president asserts that Weinstein was unreceptive to the concerns voiced by lower management during these calls. Compl. at ¶ 40. The Amended Complaint further alleges that Weinstein always participated in conference calls with regional managers and Body Central buyers after a “bad” week of sales. Compl. at ¶ 42.
According to the Amended Complaint, the confidential witnesses also contend that Weinstein changed the pay structure for employees to prevent them from receiving bonuses by setting unrealistic internal sales goals (which were higher than those announced to investors), and this led to a mass exodus of many key district managers, along with a regional director. Compl. at ¶¶ 43–54. According to the former regional vice president, not all of these vacant positions were filled, and new employees with little ability and experience came to occupy the positions that were filled. Other district managers began to leave, and several regions did not have enough district managers to cover their stores. Compl. at ¶¶ 44, 45. With lower management spread too thin, Body Central began to...
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Mogensen v. Body Cent. Corp.
...15 F.Supp.3d 1191Nick MOGENSEN, individually and on behalf of all others similarly situated, Plaintiff,v.BODY CENTRAL CORPORATION, B. Allen Weinstein, Thomas Stoltz, and Beth R. Angelo, Defendants.Case No. 3:12–cv–954–J–20JRK.United States District Court, M.D. Florida, Jacksonville Division......
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Barham v. Royal Caribbean Cruises Ltd.
...such language is considered mere puffery and cannot, therefore, support a claim for misrepresentation. See Mogensen v. Body Cent. Corp. , 15 F. Supp. 3d 1191, 1211 (M.D. Fla. 2014) (describing puffery as "generalized, non-verifiable, vaguely optimistic statements" that "are immaterial as a ......