On July 25, 2003, the U.S. District Court for the District of Rhode Island denied the motion to dismiss filed by officers of the now-bankrupt "Log On America" (LOA), an Internet access provider. A copy of the opinion is available here. The motion having been denied, SLW's Settlement Watch is now officially on.

The Court denied the motion for several reasons, certain of which may be unsettling to defense counsel. First, the Court found that LOA's descriptions of itself as the "premier provider of high- speed DSL services in the Northeast corridor," "one of New England's leading providers of bundled communications services," "in a dominant position in the market for integrated data and voice services," and "a dominant super regional communications player" were, themselves, actionable. The Court found that such statements were material and not mere puffery.

Also of note--because defendants raised the puffery defense with respect to these alleged misstatements, the Court stated that "interposing the puffery defense is tantamount to conceding that the offending statements were technically inaccurate" and the Court therefore deemed the substance of these statements to be untrue for purpose of the motion to dismiss. A question for securities litigation counsel: Is it proper for a Court to conclude that defendants concede that statements are untrue where defendants assert the puffery defense?

Further, the Court found that a statement repeated at the bottom of numerous 1999 LOA press releases describing LOA's business was itself actionable. The statement was that "[LOA] is a ... 'CLEC' and ... 'IISP' providing local dial-tone, instate toll, long distance, high-speed Internet access and cable programming solutions...." The Court found that this was an actionable misstatement because, in fact, LOA was never able to offer cable programming at any time in the class period.

Memo to Issuers: Check your press release footers!