Case 2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page 1 of Page ID #:1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 21 Jennifer Pafiti (SBN 282790) POMERANTZ LLP 468 North Camden Drive Beverly Hills, CA 90210 Telephone: (310) 285-5330 E-mail: jpafiti@pomlaw.com Jeremy A. Lieberman C. Dov Berger POMERANTZ LLP 600 Third Avenue, th Floor New York, New York 10016 Telephone: (212) 661-1100 Facsimile: (212) 661-8665 Email: jalieberman@pomlaw.com fmcconville@pomlaw.com Patrick V. Dahlstrom POMERANTZ LLP 10 South La Salle Street, Suite 3505 Chicago, Illinois 60603 Telephone: (312) 377-1181 Facsimile: (312) 377-1184 Email: pdahlstrom@pomlaw.com Attorneys for Plaintiff SATYABRATA MAHAPATRA, Individually and on Behalf of All Others Similarly Situated, UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA v. Plaintiff, TRUECAR, INC., JEFFREY KATZENBERG, and LEWIS W. COLEMAN Defendants. : : : : : COMPLAINT FOR : VIOLATION OF THE : FEDERAL SECURITIES : LAWS : DEMAND FOR JURY TRIAL : : : No. CLASS ACTION COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS
Case 2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page 2 of Page ID #:2 1 Plaintiff Satyabrata Mahapatra ( Plaintiff ), individually and on behalf of 2 all other persons similarly situated, by his undersigned attorneys, for his complaint 3 against defendants, alleges the following based upon personal knowledge as to 4 himself and his own acts, and information and belief as to all other matters, based 5 upon, inter alia, the investigation conducted by and through his attorneys, which 6 included, among other things, a review of the defendants public documents, 7 conference calls and announcements made by defendants, United States Securities 8 and Exchange Commission ( SEC ) filings, wire and press releases published by 9 and regarding TrueCar, Inc. ( TrueCar or the Company ), analysts reports and 10 advisories about the Company, and information readily obtainable on the Internet. 11 Plaintiff believes that substantial evidentiary support will exist for the allegations 12 set forth herein after a reasonable opportunity for discovery. 13 NATURE OF THE ACTION 14 1. This is a federal securities class action brought on behalf of a class 15 consisting of all persons and entities, other than defendants and their affiliates, 16 who purchased the securities of TrueCar from May 16 14 to May, 15, 17 inclusive (the Class Period ). Plaintiff seeks to pursue remedies against TrueCar 18 and certain of its officers and directors for violations of the federal securities laws 19 under the Securities Exchange Act of 1934 (the Exchange Act ). 2. Defendant TrueCar, Inc. operates as an Internet-based information, 21 technology, and communication services company. The company operates its platform on the TrueCar Website and TrueCar mobile applications. It also customizes and operates its platform for its affinity group marketing partners, COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS -2-
Case 2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page 3 of Page ID #:3 1 including financial institutions, membership-based organizations, and employee 2 buying programs for large enterprises. 3 3. The company s platform enables users to obtain market-based pricing 4 data on new and used cars, and to connect with its network of TrueCar certified 5 dealers. In addition, it provides data and consulting services regarding 6 determination of the residual value of an automobile at future given points in time, 7 which are used to underwrite automotive loans and leases, and by financial 8 institutions to measure exposure and risk across loan, lease, and fleet portfolios. 9 Further, it provides geographically specific and real-time pricing information for 10 consumers and dealers. 11 4. The Company was formerly known as Zag.com Inc. TrueCar, Inc. 12 was founded in 05, is based in Santa Monica, California, and its shares trade on 13 the NASDAQ under the ticker symbol TRUE. 14 5. Throughout the Class Period, defendants made false and/or 15 misleading statements, and failed to disclose material adverse facts about the 16 Company s business, operations, prospects and performance. Specifically, during 17 the Class Period, defendants made false and/or misleading statements and/or 18 failed to disclose that: (i) TrueCar s business practices violated unfair competition 19 and deceptive trade practice laws; (ii) TrueCar acts as a dealer and broker in car sales transactions without proper licensing, in violation of various States laws 21 that govern car sales; and (iii) as a result of the above, the Company s financial statements were materially false and misleading at all relevant times. COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS -3-
Case 2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page 4 of Page ID #:4 1 6. On March 9, 15, a complaint was filed in Federal Court against 2 TrueCar claiming that car dealers have been injured by the Company s business 3 practices which violated unfair competition and deceptive trade practice laws. 4 7. On the news, shares of TrueCar fell $0.47, or over 2.7%, to close at 5 $16.50 on May 10, 15. 6 8. On May, 15, a lawsuit was filed against TrueCar in Los 7 Angeles County Superior Court, claiming that TrueCar violates various laws that 8 govern car sales in the state including allegations that TrueCar acts as a dealer and 9 broker in car sales transactions without proper licensing. 10 9. On the news, shares of TrueCar fell $1.04, or over 6.9%, to close at 11 $13.99 on May, 15. 12 10. As a result of defendants wrongful acts and omissions, and the 13 precipitous decline in the market value of the Company s securities, Plaintiff and 14 other Class members have suffered significant losses and damages. 15 JURISDICTION AND VENUE 16 11. The claims asserted herein arise under and pursuant to 10(b) and 17 (a) of the Exchange Act (15 U.S.C. 78j(b) and 78t(a)) and Rule 10b-5 18 promulgated thereunder by the SEC (17 C.F.R. 240.10b-5). 19 12. This Court has jurisdiction over the subject matter of this action under 28 U.S.C. 1331 and 27 of the Exchange Act. 21 13. Venue is proper in this District pursuant to 27 of the Exchange Act (15 U.S.C. 78aa) and 28 U.S.C. 1391(b) as a significant portion of the defendants actions, and the subsequent damages, took place within this District. COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS -4-
Case 2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page 5 of Page ID #:5 1 14. In connection with the acts, conduct and other wrongs alleged in this 2 Complaint, defendants, directly or indirectly, used the means and instrumentalities 3 of interstate commerce, including but not limited to, the United States mail, 4 interstate telephone communications and the facilities of the national securities 5 exchange. 6 PARTIES 7 15. Plaintiff, as set forth in the accompanying Certification, which is 8 incorporated by reference herein, purchased the securities of TrueCar at 9 artificially inflated prices during the Class Period and was damaged upon the 10 revelation of the alleged corrective disclosures. 11 16. Defendant TrueCar is a Delaware company headquartered and 12 operating at 1 Broadway, Suite 0, Santa Monica, CA 90401. At all relevant 13 times herein, shares of TrueCar were listed on the NASDAQ. 14 17. Defendant Scott Painter, ( Painter ) was at all relevant times, the 15 Company s Chairman and Chief Executive Officer ( CEO ). 16 18. Defendant Michael Guthrie ( Guthrie ) was at all relevant times, the 17 Company s Chief Financial Officer ( CFO ). 18 19. Defendants referenced above in 17 and 18 are sometimes referred 19 to herein, collectively, as the Individual Defendants. 21 COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS -5-
Case 2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page 6 of Page ID #:6 1 SUBSTANTIVE ALLEGATIONS 2 Background 3. Defendant TrueCar, Inc. operates as an Internet-based information, 4 technology, and communication services company. The company operates its 5 platform on the TrueCar Website and TrueCar mobile applications. It also 6 customizes and operates its platform for its affinity group marketing partners, 7 including financial institutions, membership-based organizations, and employee 8 buying programs for large enterprises. 9 21. The company ' s platform enables users to obtain market-based pricing 10 data on new and used cars, and to connect with its network of TrueCar certified 11 dealers. In addition, it provides data and consulting services regarding 12 determination of the residual value of an automobile at future given points in time, 13 which are used to underwrite automotive loans and leases, and by financial 14 institutions to measure exposure and risk across loan, lease, and fleet portfolios. 15 Further, it provides geographically specific and real-time pricing information for 16 consumers and dealers. 17. The Company was formerly known as Zag.com Inc. TrueCar, Inc. 18 was founded in 05, is based in Santa Monica, California, and its shares trade on 19 the NASDAQ under the ticker symbol "TRUE." 21 COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS -6-
Case 2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page 7 of Page ID #:7 1 Materially False and Misleading Statements Issued During the Period 2. The Class Period begins on May 16, 14, when TrueCar filed a final 3 prospectus (the "Prospectus") on Form 424B4 with the SEC announcing its IPO. 4 The Prospectus was part of a registration statement, filed on Form S-1 with the 5 SEC, and declared effective by the SEC on May 15, 14 (the "Registration 6 Statement"). The Registration Statement was signed by defendants Painter and 7 Guthrie. In the Prospectus, the Company reported its financial and operating 8 results for the full year ended December 31, 13 and first quarter ended March 9 31, 14. For the year 13, the Company reported a net loss of $25.06 million or 10 $0.29 per diluted share, on revenue of $133.96 million, compared to a net loss of 11 $74.5 million or $0.89 per diluted share, on revenue of $79.89 million for 12. 12 For the first quarter 14, the Company reported a net loss of $9.9 million or 13 $0.17 per diluted share, on revenue of $43.9 million, compared to a net loss of 14 $9.0 million or $0.16 per diluted share, on revenue of $25.04 million for the same 15 period in the prior year. 16 24. On August 7, 14, the Company issued a press release and filed a 17 Form 8-K, announcing its financial and operating results for the second quarter 18 ended June 30, 14. Net loss was $15.0 million, or $0. per diluted share, on 19 revenue of $50.5 million, compared to a net loss of $3.8 million, or $0.07 per diluted share, on revenue of $31.2 million for the same period in the prior year. 21 COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS -7-
Case 2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page 8 of Page ID #:8 1 25. 2 3 4 5 6 7 8 9 10 11 12 13 14 15 26. In the press release, the Company stated, in part: TrueCar delivered a record second quarter, highlighting the growing power, reach and scale of our core business, said Scott Painter, Chief Executive Officer of TrueCar. For the first time, we exceeded $50 million of quarterly revenue, delivering growth of 62% year-over-year. The primary driver of revenue growth was a 55% year-over-year increase in total units as TrueCar users purchased nearly 150,000 cars from TrueCar Certified Dealers during the second quarter, an all-time high. Mr. Painter continued, We also continued to expand our dealer network, adding over 1,000 dealers in the first half of 14, and growing our dealer count to nearly 7,700 franchise dealers, or one out of every four dealers in the United States. While we have grown our network both in terms of reach and geographic coverage, we have also increased our relevance to our dealers. Average transaction revenue per franchise dealer grew for the sixth consecutive quarter to $6,195. Our exceptional growth highlights the enhanced relevance of our platform as dealers and consumers alike benefit from TrueCar s mission to bring transparency to the car buying process. As we continue to deliver unique value to our dealer partners and the car buying public, we have a lot of growth in front of us, concluded Mr. Painter. On August 14, 14, the Company filed a quarterly report on Form 16 10-Q with the SEC which was signed by defendants Painter and Guthrie, and 17 reiterated the Company s previously announced quarterly and year-end financial 18 results and financial position. In addition, the Form 10-Q contained signed 19 certifications pursuant to the Sarbanes-Oxley Act of 02 ( SOX ) by defendants Painter and Guthrie, stating that the financial information contained in the Form 21 10-Q was accurate and disclosed any material changes to the Company s internal control over financial reporting. COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS -8-
Case 2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page 9 of Page ID #:9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 21 27. On November 5, 14, the Company issued a press release and filed a Form 8-K, announcing its financial and operating results for the third quarter ended September 30, 14. Net loss was $13.6 million or $0.18 per diluted share, on revenue of $56.8 million, compared to a net loss of $4.6 million or $0.08 per diluted share, on revenue of $37.5 million for the same period in the prior year. 28. In the press release, the Company stated, in part: The third quarter marked another quarter of financial and operational excellence, with TrueCar delivering record results across every metric, said Scott Painter, Founder and Chief Executive Officer of TrueCar. Revenue of $56.8 million hit yet another all-time high and we delivered record positive adjusted EBITDA of $3.9 million. We also delivered non- GAAP net income of $0.3 million. Mr. Painter continued, With one out of every four dealers in the U.S. on our network, over 4.6 million unique visitors engaging with TrueCar monthly, and our market share of all new car sales in the U.S. on the rise, TrueCar is transforming into one of the most recognizable and relevant brands in automotive. That said, we are still in the early stages of building our platform to deliver the ideal new car buying experience for consumers, dealers and manufacturers. Mobile platform development, OEM incentive spending efficacy and solving more of the problem, including TrueTrade, will be of core focus in 15 and beyond. 29. On November 12, 14, TrueCar filed a final prospectus (the Prospectus ) on Form 424B4 with the SEC announcing its public offering of 1,000,000 shares. The Prospectus was part of a registration statement, filed on Form S-1 with the SEC, and declared effective by the SEC on November 10, 14 (the Registration Statement ). The Registration Statement was signed by defendants Painter and Guthrie. In the Prospectus, the Company reiterated the COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS -9-
2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page 10 of Page ID #:10 1 Company s previously announced quarterly and year-end financial results and 2 financial position. 3 30. On November 14, 14, the Company filed a quarterly report on 4 Form 10-Q with the SEC which was signed by defendants Painter and Guthrie, 5 and reiterated the Company s previously announced quarterly and year-end 6 financial results and financial position. In addition, the Form 10-Q contained 7 signed certifications pursuant to the Sarbanes-Oxley Act of 02 ( SOX ) by 8 defendants Painter and Guthrie, stating that the financial information contained in 9 the Form 10-Q was accurate and disclosed any material changes to the Company s 10 internal control over financial reporting. 11 31. On February 19, 15, the Company issued a press release and filed a 12 Form 8-K with the SEC, announcing its financial and operating results for the 13 fourth quarter and year ended December 31, 14. For the fourth quarter, net loss 14 was $9.8 million or $0.13 per diluted share, on revenue of $55.5 million, 15 compared to a net loss of $13.6 million, or $0.18 per diluted share, on revenue of 16 $40.1 million for the same period in the prior year. For the year, net loss was 17 $48.4 million or $0.68 per diluted share, on revenue of $6.6 million, compared 18 to a net loss of $25.1 million, or $0.43 per diluted share for 13. 19 32. In the press release, the Company stated, in part: TRUECar had an amazing 14, delivering record growth across all of our key performance indicators, said Scott 21 Painter, Founder and Chief Executive Officer of TrueCar. Total revenue growth of 54% came in well ahead of our expectations at the time of our IPO and we delivered strong improvements across all of our profitability metrics. We also achieved a major milestone for the Company, in achieving cash COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS -10-
2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page 11 of Page ID #:11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 21 flow positive operating results for both the fourth quarter and full year. Mr. Painter continued, TrueCar continues to attract both consumers and dealers in record numbers, driving strong network effects and significant operating leverage. Users on our platform accounted for 611,000 units across the TrueCar Certified Dealer network in 14. The real story, however, is the growth in our branded TRUECar channel where units grew by 125% in 14 to 5,000 cars and now accounts for approximately 40% of total unit sales. We ended 14 with 8,501 new car franchise dealers, which is more than 1 out of every 4 dealers in the country and represents growth of nearly 30% over last year. Nevertheless, we remain a nascent national brand at the upslope of consumer adoption with currently just under 4% share of the total new car market in the U.S. Mr. Painter concluded, Looking ahead to 15, we re expecting another year of very strong revenue growth. Leverage in the business will continue to expand, and we ll continue to prioritize reinvestments focused on scaling TrueCar for the long-term. Brand awareness, mobile applications and the OEM channel will continue to be the focus of our investments. 33. The statements referenced in 32 above were materially false and misleading because Defendants made false and/or misleading statements, and failed to disclose material adverse facts about the Company s business, operations, prospects and performance. Specifically, during the Class Period, Defendants made false and/or misleading statements and/or failed to disclose that: (i) TrueCar s business practices violated unfair competition and deceptive trade practice laws; (ii) TrueCar acts as a dealer and broker in car sales transactions without proper licensing, in violation of the laws of a number of States; and (iii) as a result of the above, the Company and misleading at all relevant times. s financial statements were materially false COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS -11-
2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page 12 of Page ID #: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 21 The Truth Emerges 34. On March 9, 15, a complaint was filed against TrueCar in the United States District Court for the Southern District of New York, claiming that car dealers have been injured by the Company s business practices which violated unfair competition and deceptive trade practice laws (the SDNY Complaint ). The SDNY Complaint seeks injunctive relief in addition to over $250 million in damages as a result of the alleged diversion of customers from the plaintiffs dealerships to TrueCar Certified Dealers. Specifically, the SDNY Complaint alleges, in part, that: TrueCar s advertisements falsely claim that consumers using its services can purchase an automobile with no haggling and no negotiation, and that TrueCar benefits consumers by removing surprises at the dealership. However, TrueCar merely acts as a referral service that provides TrueCar-affiliated automobile dealerships with customer leads and contact information. Contrary to TrueCar s advertising claims, the consumer must negotiate, or haggle, with TrueCar s affiliated dealers to complete the actual purchase. TrueCar s false advertising unlawfully diverts consumers away from Plaintiffs automobile dealerships, which results in lost sales and harm to Plaintiffs goodwill. TrueCar s literally false or misleading advertisements deceive consumers into believing that they can purchase an automobile without price negotiations at a guaranteed low price by simply logging onto TrueCar s website and printing or downloading a price certificate. In reality, consumers using TrueCar s services must negotiate with the TrueCar-affiliated dealers over price, features, and financing, just as they would need to do with any other non-affiliated dealer. Despite its advertising claims to the contrary, TrueCar does not remove surprises at the dealership. Instead, TrueCar s customers will be surprised to learn that, among other discrepancies, the promised vehicle may not be in stock, and may not be available at the advertised price or financing terms. TrueCar s false or misleading advertising includes: (a) false no-haggle claims; (b) bait-and-switch advertising; (c) false factory invoice claims; COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS -12-
2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page 13 of Page ID #: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 21 (d) false financing claims; (e) false transparency claims; and (f) false rebate claims. TrueCar s advertising is causing serious and irreparable harm to Plaintiffs. It constitutes false advertising in violation of Section 43(a)(1)(B) of the Lanham Act (15 U.S.C. 1125(a)(1)(B)); unfair competition in violation of New York common law; and violation of the New York Deceptive Acts and Practices Act (N.Y. Gen. Bus. Law 349-350) and violation of the comparable unfair competition and deceptive acts and practices laws of the other states in which the advertising is disseminated. If TrueCar s advertising is not immediately enjoined, Plaintiffs will continue to suffer irreparable harm in the marketplace. Plaintiffs have lost sales and have suffered injury to their goodwill and business reputation as a result of TrueCar s false advertising claims. 35. On the news, shares of TrueCar fell $0.47, or over 2.7%, to close at $16.50 on May 10, 15. 36. On May, 15, a lawsuit was filed against TrueCar in Los Angeles County Superior Court, claiming that TrueCar violates various laws that govern car sales in that State including allegations that TrueCar acts as a dealer and broker in car sales transactions but doesn t have proper licensure to act in that capacity (the LA Complaint ). Specifically, the LA Complaint alleges, in part, that: This action arises from TrueCar, Inc.'s noncompliance with various sections of the California Vehicle Code ("CVC") pertaining to dealer licensing, brokering, advertising, and disclosure.through its failure to obtain the necessary dealer s license and autobroker s endorsement, which are required in light of the manner in which TrueCar, Inc. ( TrueCar ) conducts business, TrueCar avoids compliance with a host of CVC sections regulating licensed dealers and autobrokers. Accordingly, TrueCar s methods of doing business: (a) undermine the purpose of the CVC, to wit, consumer protection; (b) effectively allow TrueCar to function as a dealer and autobroker without complying with CVC regulations pertaining to dealers and autobrokers; and (c) place CNCDA COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS -13-
2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page 14 of Page ID #: 1 members who are licensed dealers doing business or attempting to do business in a situation of potentially unwittingly not 2 complying with the law. 3 37. On the news, shares of TrueCar fell $1.04, or over 6.9%, to close at 4 $13.99 on May, 15. 5 38. As a result of defendants ' wrongful acts and omissions, and the 6 precipitous decline in the market value of the Company ' s securities, Plaintiff and 7 other Class members have suffered significant losses and damages. 8 PLAINTIFF 'CLASS ACTION ALLEGATIONS 9 39. Plaintiffs bring this action as a class action pursuant to Federal Rule 10 of Civil Procedure (a) and (b)(3) on behalf of a Class, consisting of all those 11 who purchased or otherwise acquired TrueCar securities during the Class Period 12 (the "Class"); and were damaged upon the revelation of the alleged corrective 13 disclosures. Excluded from the Class are Defendants herein, the officers and 14 directors of the Company, at all relevant times, members of their immediate 15 families and their legal representatives, heirs, successors or assigns and any entity 16 in which Defendants have or had a controlling interest. 17 40. The members of the Class are so numerous that joinder of all 18 members is impracticable. Throughout the TrueCar Class Period, securities of 19 TrueCar were actively traded on the NASDAQ Global Select Market. While the exact number of Class members is unknown to Plaintiffs at this time and can only 21 be ascertained through appropriate discovery, Plaintiffs believe that there are hundreds or thousands of members in the proposed Class. Record owners and other members of the Class may be identified from records maintained by TrueCar COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS -14-
2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page 15 of Page ID #: 1 or their transfer agents and may be notified of the pendency of this action by mail, 2 using the form of notice similar to that customarily used in securities class actions. 3 41. Plaintiff ' s claims are typical of the claims of the members of the 4 Class as all members of the Class are similarly affected by defendants ' 5 conduct in violation of federal law complained of herein. wrongful 6 42. Plaintiff will fairly and adequately protect the interests of the 7 members of the Class and have retained counsel competent and experienced in 8 class action and securities litigation. 9 43. Common questions of law and fact exist as to all members of the 10 Class and predominate over any questions solely affecting individual members of 11 the Class. Among the questions of law and fact common to the Class are: 12 whether the federal securities laws were violated by Defendants ' acts as alleged herein; 13 whether statements made by Defendants to the investing public 14 during the Class Period misrepresented material facts about the business, operations and management of TrueCar; 15 whether the Individual Defendants caused TrueCar to issue false 16 and misleading financial statements during the Class Period; 17 whether Defendants acted knowingly or recklessly in issuing false and misleading financial statements; 18 whether the prices of TrueCar securities during the Class Period 19 were artificially inflated because of the Defendants ' conduct complained of herein; and, whether the members of the Class have sustained damages and, if 21 so, what is the proper measure of damages. 44. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy since joinder of all members is COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS -15-
2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page 16 of Page ID #:16 1 impracticable. Furthermore, as the damages suffered by individual Class 2 members may be relatively small, the expense and burden of individual litigation 3 make it impossible for members of the Class to individually redress the wrongs 4 done to them. There will be no difficulty in the management of this action as a 5 class action. 6 45. Plaintiff will rely, in part, upon the presumption of reliance 7 established by the fraud-on-the-market doctrine in that: 8 Defendants made public misrepresentations or failed to disclose material facts during the Class Period; 9 the omissions and misrepresentations were material; 10 TrueCar securities are traded in efficient markets; 11 the Company ' s shares were liquid and traded with moderate to 12 heavy volume during the Class Period; 13 the Company traded on the NASDAQ, and was covered by multiple analysts; 14 the misrepresentations and omissions alleged would tend to 15 induce a reasonable investor to misjudge the value of the Company ' s securities; and 16 Plaintiff and members of the Class purchased and/or sold 17 TrueCar securities between the time the Defendants failed to disclose or misrepresented material facts and the time the true 18 facts were disclosed, without knowledge of the omitted or misrepresented facts. 19 46. Based upon the foregoing, Plaintiff and the members of the Class are entitled to a presumption of reliance upon the integrity of the market. 21 47. Alternatively, Plaintiffs and the members of the Class are entitled to the presumption of reliance established by the Supreme Court in Affiliated Ute COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS -16-
2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page 17 of Page ID #:17 1 Citizens of the State of Utah v. United States, 406 U.S. 128, 92 S. Ct. 2430 (1972), 2 I as Defendants omitted material information in their Class Period statements in I 3 violation of a duty to disclose such information, as detailed above. 4 COUNT I 5 (Against All Defendants For Violations of Section 10(b) And Rule 10b-5 Promulgated Thereunder) 6 48. Plaintiff repeats and realleges each and every allegation contained 7 above as if fully set forth herein. 8 49. This Count is asserted against defendants and is based upon Section 9 10(b) of the Exchange Act, 15 U.S.C. 78j(b), and Rule 10b-5 promulgated 10 thereunder by the SEC. 11 50. During the Class Period, defendants engaged in a plan, scheme, 12 conspiracy and course of conduct, pursuant to which they knowingly or recklessly 13 engaged in acts, transactions, practices and courses of business which operated as 14 a fraud and deceit upon Plaintiff and the other members of the Class; made 15 various untrue statements of material facts and omitted to state material facts 16 necessary in order to make the statements made, in light of the circumstances 17 under which they were made, not misleading; and employed devices, schemes and 18 artifices to defraud in connection with the purchase and sale of securities. Such 19 scheme was intended to, and, throughout the Class Period, did: (i) deceive the investing public, including Plaintiff and other Class members, as alleged herein; 21 (ii) artificially inflate and maintain the market price of TrueCar securities; and (iii) cause Plaintiff and other members of the Class to purchase or otherwise acquire COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS -17-
2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page 18 of Page ID #: 1 TrueCar securities and options at artificially inflated prices. In furtherance of this 2 unlawful scheme, plan and course of conduct, defendants, and each of them, took 3 I the actions set forth herein. 4 51. Pursuant to the above plan, scheme, conspiracy and course of 5 conduct, each of the defendants participated directly or indirectly in the 6 preparation and/or issuance of the quarterly and annual reports, SEC filings, press 7 releases and other statements and documents described above, including 8 statements made to securities analysts and the media that were designed to 9 influence the market for TrueCar securities. Such reports, filings, releases and 10 statements were materially false and misleading in that they failed to disclose 11 material adverse information and misrepresented the truth about TrueCar s 12 finances and business prospects. 13 52. By virtue of their positions at TrueCar, defendants had actual 14 knowledge of the materially false and misleading statements and material 15 omissions alleged herein and intended thereby to deceive Plaintiff and the other 16 members of the Class, or, in the alternative, defendants acted with reckless 17 disregard for the truth in that they failed or refused to ascertain and disclose such 18 facts as would reveal the materially false and misleading nature of the statements 19 made, although such facts were readily available to defendants. Said acts and omissions of defendants were committed willfully or with reckless disregard for 21 the truth. In addition, each defendant knew or recklessly disregarded that material facts were being misrepresented or omitted as described above. COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS -18-
2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page 19 of Page ID #:19 1 53. Defendants were personally motivated to make false statements and 2 omit material information necessary to make the statements not misleading in 3 order to personally benefit from the sale of TrueCar securities from their personal 4 portfolios. 5 54. Information showing that defendants acted knowingly or with 6 reckless disregard for the truth is peculiarly within defendants ' knowledge and 7 control. As the senior managers and/or directors of TrueCar, the Individual 8 Defendants had knowledge of the details of TrueCar 's internal affairs. 9 55. The Individual Defendants are liable both directly and indirectly for 10 the wrongs complained of herein. Because of their positions of control and 11 authority, the Individual Defendants were able to and did, directly or indirectly, 12 control the content of the statements of TrueCar. As officers and/or directors of a 13 publicly-held company, the Individual Defendants had a duty to disseminate 14 timely, accurate, and truthful information with respect to TrueCar ' s businesses, 15 operations, future financial condition and future prospects. As a result of the 16 dissemination of the aforementioned false and misleading reports, releases and 17 public statements, the market price of TrueCar securities was artificially inflated 18 throughout the Class Period. In ignorance of the adverse facts concerning 19 TrueCar ' s business and financial condition which were concealed by defendants, Plaintiff and the other members of the Class purchased or otherwise acquired 21 TrueCar securities at artificially inflated prices and relied upon the price of the securities, the integrity of the market for the securities and/or upon statements disseminated by defendants, and were damaged thereby. COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS -19-
2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page of Page ID # 1 56. During the Class Period, TrueCar securities were traded on an active 2 and efficient market. Plaintiff and the other members of the Class, relying on the 3 materially false and misleading statements described herein, which the defendants 4 made, issued or caused to be disseminated, or relying upon the integrity of the 5 market, purchased or otherwise acquired shares of TrueCar securities at prices 6 artificially inflated by defendants ' wrongful conduct. Had Plaintiff and the other 7 members of the Class known the truth, they would not have purchased or 8 otherwise acquired said securities, or would not have purchased or otherwise 9 acquired them at the inflated prices that were paid. At the time of the purchases 10 and/or acquisitions by Plaintiff and the Class, the true value of TrueCar securities 11 was substantially lower than the prices paid by Plaintiff and the other members of 12 the Class. The market price of TrueCar securities declined sharply upon public 13 disclosure of the facts alleged herein to the injury of Plaintiff and Class members. 14 57. By reason of the conduct alleged herein, defendants knowingly or 15 recklessly, directly or indirectly, have violated Section 10(b) of the Exchange Act 16 and Rule 10b-5 promulgated thereunder. 17 58. As a direct and proximate result of defendants ' wrongful conduct, 18 Plaintiff and the other members of the Class suffered damages in connection with 19 their respective purchases, acquisitions and sales of the Company ' s securities during the Class Period, upon the disclosure that the Company had been 21 disseminating misrepresented financial statements to the investing public. COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS --
2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page 21 of Page ID #:21 1 COUNT II 2 (Violations of Section (a) of the 3 Exchange Act Against The Individual Defendants) 4 59. Plaintiff repeats and realleges each and every allegation contained in 5 the foregoing paragraphs as if fully set forth herein. 6 60. During the Class Period, the Individual Defendants participated in the 7 operation and management of TrueCar, and conducted and participated, directly 8 and indirectly, in the conduct of TrueCar s business affairs. Because of their 9 senior positions, they knew the adverse non-public information about TrueCar s 10 misstatement of income and expenses and false financial statements. 11 61. As officers and/or directors of a publicly owned company, the 12 Individual Defendants had a duty to disseminate accurate and truthful information 13 with respect to TrueCar s financial condition and results of operations, and to 14 correct promptly any public statements issued by TrueCar which had become 15 materially false or misleading. 16 62. Because of their positions of control and authority as senior officers, 17 the Individual Defendants were able to, and did, control the contents of the 18 various reports, press releases and public filings which TrueCar disseminated in 19 the marketplace during the Class Period concerning TrueCar s results of operations. Throughout the Class Period, the Individual Defendants exercised 21 their power and authority to cause TrueCar to engage in the wrongful acts complained of herein. The Individual Defendants therefore, were controlling persons of TrueCar within the meaning of Section (a) of the Exchange Act. In COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS -21-
2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page of Page ID # 1 this capacity, they participated in the unlawful conduct alleged which artificially 2 inflated the market price of TrueCar securities. 3 63. Each of the Individual Defendants, therefore, acted as a controlling 4 person of TrueCar. By reason of their senior management positions and/or being 5 directors of TrueCar, each of the Individual Defendants had the power to direct 6 the actions of, and exercised the same to cause, TrueCar to engage in the unlawful 7 acts and conduct complained of herein. Each of the Individual Defendants 8 exercised control over the general operations of TrueCar and possessed the power 9 to control the specific activities which comprise the primary violations about 10 which Plaintiff and the other members of the Class complain. 11 64. By reason of the above conduct, the Individual Defendants are liable 12 pursuant to Section (a) of the Exchange Act for the violations committed by 13 TrueCar. 14 PRAYER FOR RELIEF 15 WHEREFORE, Plaintiff demands judgment against Defendants as 16 I follows: 17 A. Determining that the instant action may be maintained as a class 18 action under Rule of the Federal Rules of Civil Procedure, and certifying 19 Plaintiff as the Class representative; B. Requiring Defendants to pay damages sustained by Plaintiff and the 21 Class by reason of the acts and transactions alleged herein; COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS --
2:15-cv-03979-R-PJW Document 1 Filed 05/27/15 Page of Page ID # 1 C. Awarding Plaintiff and the other members of the Class prejudgment 2 and post-judgment interest, as well as their reasonable attorneys ' fees, expert fees 3 and other costs; and 4 5 6 7 D. Awarding such other and further relief as this Court may deem just and proper. DEMAND FOR TRIAL BY JURY Plaintiff hereby demands a trial by jury. 8 9 10 11 12 13 14 15 16 17 18 19 21 Dated: May 27, 15 Respectfully submitted, POMERANTZ LLP By: s/ Jennifer Pafiti Jennifer Pafiti (SBN 282790) 468 North Camden Drive Beverly Hills, CA 90210 Telephone: (310) 285-5330 E-mail: jpafiti@pomlaw.com POMERANTZ, LLP Jeremy A. Lieberman C. Dov Berger 600 Third Avenue, th Floor New York, New York 10016 Telephone: (212) 661-1100 Facsimile: (212) 661-8665 POMERANTZ LLP Patrick V. Dahlstrom Ten South La Salle Street, Suite 3505 Chicago, Illinois 60603 Telephone: (312) 377-1181 Facsimile: (312) 377-1184 E-mail: pdahlstrom@pomlaw.com Attorneys for Plaintiff COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS --