## Facts

- Wynn Resorts Limited operated resort casinos; Stephen A. Wynn served as founder and, during much of the relevant period, CEO and Chairman.
- Investors brought a putative class action for purchasers of Wynn Resorts securities during February 28, 2014 to February 12, 2018.
- Plaintiffs alleged defendants concealed longstanding allegations of sexual harassment and assault by Stephen Wynn against employees and used company resources to facilitate concealment.
- Plaintiffs challenged public statements praising corporate culture and treatment of women, referencing a Code of Conduct applicable to all employees, and asserting belief in legal/regulatory compliance while warning of conditional regulatory risks if key personnel were deemed unsuitable.
- In January 2018, a news article publicly described allegations against Stephen Wynn; Wynn Resorts’ stock price declined, and plaintiffs alleged investor losses from prior inflation.
- Defendants moved to dismiss under Rule 12(b)(6) and the PSLRA’s heightened pleading standards.

## Issues

1. Whether the complaint pled actionable material misstatements or omissions under Exchange Act § 10(b) and Rule 10b-5 with PSLRA particularity.
2. Whether the complaint pled a strong inference of scienter as to each defendant.
3. Whether the complaint adequately pled loss causation linking a corrective disclosure to a prior actionable misrepresentation or omission.
4. Whether § 20(a) control-person liability could stand absent a adequately pled primary § 10(b) violation.

## Decision

- The court granted the motions to dismiss the amended complaint.
- The court held plaintiffs did not plead actionable false or misleading statements or omissions with PSLRA particularity.
- The court held scienter was not pled with the required strong inference.
- The court held loss causation was not adequately pled because plaintiffs did not identify an actionable misstatement or omission that the later disclosure corrected.
- The court dismissed the § 20(a) control-person claim as derivative of the failed § 10(b) claim.

## Legal Principles

- General, aspirational statements about corporate culture, values, and workplace environment are commonly inactionable puffery when too vague or subjective to be objectively verified or material.
- References to a corporate code of conduct are not actionable absent particularized allegations that the statements were false when made; alleged non-enforcement of internal policies does not, by itself, plead securities fraud.
- Statements framed as opinions or beliefs (e.g., “we believe” we comply with laws) require allegations that the speaker did not genuinely hold the stated belief at the time.
- Conditional or forward-looking risk disclosures (e.g., key personnel “could” be deemed unsuitable) do not necessarily imply the absence of existing issues and are not automatically misleading.
- Exchange Act § 10(b) does not impose a freestanding duty to disclose alleged internal misconduct unless omission of that information makes a specific statement misleading.
- Loss causation requires that a later disclosure reveal the truth about, and thereby correct, a prior actionable misrepresentation or omission.

## Conclusion

The court dismissed the securities-fraud and control-person claims because plaintiffs did not identify actionable misstatements or a duty-triggering omission, and therefore could not meet the PSLRA’s heightened requirements for scienter and loss causation.


Ferris v. Wynn Resorts Ltd., 462 F. Supp. 3d 1101 (D. Nev. 2020)