X hits on this document





27 / 47

As the Whitney Defendants point out, the Company’s reported increase in its

chargeback processing reserves prior to the Purported Class Period is neither relevant,

nor indicative of any “sham.” Rather, it is not unexpected for any company that accepts

payment by credit card to have a credit card processing company agree to hold a

certain percentage in reserve to cover chargebacks. Allegations of “ordinary conduct”

do not support an inference that defendants acted with fraudulent intent under Tellabs.

Plaintiff has not alleged with any specificity what the chargeback percentage should

have been, or why such an increase in reserves was abnormal. The increase in

chargebacks does not give rise to an inference of scienter.

Likewise, the allegation that Whitney’s zero-refund policy establishes scienter

fails. While plaintiff paints a sinister picture of this policy, the CAC does not explain how

the zero refund policy translates into securities fraud. Absent a connection, the fact that

Whitney had a zero refund policy does not establish an inference of scienter.

Plaintiff also relies on statements made during an internal Company telephone

conference regarding the increase in chargebacks during which the Company explored

options to decrease the number. Again, the fact Whitney was experiencing

chargebacks does not show securities fraud, much less establish scienter.

Moreover, plaintiff’s reliance on the Paisola Email is insufficient. The email does

not show what accounts were in “crisis mode,” or what the crisis was. It does say say

which divisions were “out of control.” It does not explain what information Paisola had

access to or the basis upon which he made derogatory statements against Whitney.

In addition to the Paisola E-Mail, plaintiff alleges scienter is established because

Paisola was fired shortly after submitting the memo and filed a complaint with OSHA


Document info
Document views197
Page views197
Page last viewedTue Jan 24 16:13:22 UTC 2017