SAN FRANCISCO - The First District Court of Appeal has affirmed a demurrer without leave to amend on behalf of Twitter over a complaint posed on the social icon by Pope Trading.
Pope Trading argued Twitter was accountable for a sustainable financial loss over an 2015 tweet the trading company alleged “negligent misrepresentation” since steps should have been taken to prevent a premature financial data.
Twitter tweeted regardless.
Trusting Twitter, Pope Trading acquired Twitter stock April 28, 2015 to turn around and sell at the stock by close of the trading day. But Twitter’s reliance on Shareholder.com, Inc. thwarted the plan when the public relations firm prematurely released the financial results during regular stock market trading hours at 3:07 p.m.
Not only did Shareholder.com upload Twitter’s figures into an investor portal, which was accessed by real-time corporate intelligence firm Selerity, allegedly shared the informatization with Wall Street investors before the infamous tweet was sent into Twittersphere.
This was not the first time financial figures were released early, according to Pope Trading. Due to prior premature releases, Twitter was “on notice of the potential for early release of its financial report for the first quarter of 2015, but Twitter failed to take appropriate actions to safeguard against such an eventuality,” according to the appeals court decision.
When the Twitter stock dropped due to leaked information, Pope Trading was unable to turnaround the trade for profit and the lack of planned trades cost them more than $1.74 million in less than an hour. Twitter’s “negligent misrepresentation” ultimately preventing “Pope Trading from executing its plan to sell Twitter stock before its value was affected by the release of Q1 2015 financial results,” according to the appeals court decision.
However, Twitter demurred on the grounds that “”negligent misrepresentation cannot be based on a statement about a future action,” and “Twitter did not owe Pope Trading a legal duty of care,” according to the appeals court decision.
Twitter’s demurer to leave without amend was sustained by the trial court since the “the gravamen of the complaint is that Twitter’s promise about when its Q1 2015 financial results would be released was a false statement because Twitter lacked the internal controls to prevent an early release,” according to the appeals court decision. “Negligent misrepresentation and intentional fraud are both forms of deceit, with similar but not identical elements.”
Citing Tarmann v State Farm Mutual Auto. Ins. Co. (1992), the appeals court said in its decision “California law does not recognize a cause of action for a negligent false promise…Rather, a statement about what a speaker intends to do in the future can form the basis of a fraud claim only when the statement is intentionally false.”
“Thus, Pope Trading failed to state facts constituting a cause of action for negligent misrepresentation.” .