1:24-cv-12996•PS Lit Recovery, LLC v. Pegasystems Inc. et al
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UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
PS LIT RECOVERY , LLC
v .
PEGASYSTEMS IN C .,
ALAN TREFLER,
Plaintiff ,
and KENNET H STILLWELL
Defendants .
YOUNG , D.J.
MEMORANDUM & ORDER
I. INTRODUCTION
Civil Action
No . 24 -1 2996 - WGY
January 8 , 2026
This action was brought by PS Lit Recovery, LLC ("PS Lit")
-- an assignee of claims from Pegasystems Inc . ( " Pega ") common
stock purchasers that were advised by Praesidium Investment
Management Co mp any , LLC, Compl. , ECF No. 1, ~ 33 , on the heels
of the class act i on case City of F ort Lauderdale Police &
Firefighters' Retirement Systems v . Pegasystems Inc., 683 F .
Supp . 3d 1 2 0 ( D. Mass. 2023) ("Fort Lauderdale") . Fort
Lauderdale was decided against the backdrop of the Vi r gin i a
Circ uit Court decision in App i an Corp. v . Pegasystems Inc~,
Civil Action No. 2020 - 07216 (Circuit Court of Fairfax County ,
Virgin i a) (the " Virginia Action "), ordering Pega to pay Appian
Corporation ("Appian") over $2 , 000 , 000 ,00 0 for willfully and
Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 1 of 45maliciously misappropriating Appian ' s trade secrets. That
judgment had since been reversed and remanded by the Virginia
Court of Appeals in Pegasystems Inc . v . Appian Corp ., 904 S . E . 2d
247 , 284 (2024) , appeal granted (Mar . 7 , 2025) (hereinafter
"Virginia Court of Appeals decision")) . The defendants in this
case : Pega , Alan Trefler ("Trefler") , and Kenneth Stillwell
(" Stillwell") (Trefler and Stillwell jointly referred to as " the
Individual Defendants") contend that this development undermines
the conclusions made by this Court in Fort Lauderdale , which led
to the denial of Pega ' s motion to dismiss (except, with respect
to defendant Stillwell , the motion to dismiss was granted
without prejudice) . Fort Lauderdale , 683 F . Supp . 3d at 125 .
This Court has accordingly agreed to look afresh at the
allegations made by PS Lit in this case .
For the reasons stated below , defendants Pega , Trefler and
Stillwell ' s Motion to Di smiss the Complaint ("Defs .' Mot .
Dismiss " ) , ECF No . 26, is hereby DENIED in part and ALLOWED in
part .
II. PROCEDURAL HISTORY
PS Lit filed this lawsuit against Pega , Trefler and
Stillwell on December 4, 2024, following the class settlement
opt - out period in Fort Lauderdale , 683 F. Supp. 3d 120. The
compla i nt here alleges the same two counts as the class action
[ 2]
Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 2 of 45in Fort Lauderdale : violations of Section l0(b) of the Exchange
Act , 15 U. S . C. § 78j (b) and Rule l0b - 5 promulgated thereunder ,
17 C.F.R . § 240.l0b-5 (count I) , and violations of Section 20(a)
of the Exchange Act , 15 U. S . C. § 78t(a) (count III) . In
addition , PS Lit alleges scheme liability under Rule l0b - 5 (a)
and (c) (count II) , common law fraud (count IV) , and common law
negligent misrepresentation (count V) . See Compl .
On March 13 , 2025 , the Defendants filed a motion to dismiss
all five counts of the complaint. Defs.' Mot . Dismiss , ECF No.
26. The parties have fully briefed the issues . Defs .' Mem .
Supp. Mot . Dismiss ("Defs .' Mem ." ) , ECF No. 27 ; PS Lit
Recovery ' s Opp ' n Defs .' Mot . Dismiss (" Pl .' s Opp ' n " ) , ECF No .
31 ; Defs .' Reply Br. Supp. Mot. Dismiss Compl. (" Defs .' Reply") ,
ECF No. 37 .
This Court held a hearing on the Defendants ' motion to
dismiss on July 22 , 2025. Elec . Clerk ' s Notes , ECF No. 40.
After hearing arguments of counsel , the Court DENIED the motion
as to improper assignment and ALLOWED the motion as to count II
(Rule 10b - 5(a) and (c) scheme). The Court also ruled the
allegations with respect to Stillwell are still insufficient ,
but are adequate as to count III (Section 20(a)) . The Court
took the remainder under advisement . See id .
[ 3]
Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 3 of 45III. Facts Alleged
The allegations bro u ght here by PS Lit mirror, but also
expand on , the same set of operative facts as in Fort
Lauderdale, 683 F. Supp. 3d at 126-128.
Pega, founded in 1983, offers a "low code " software
app li cat i o n development p l atform that al l ows customers to build
and tailor applications as per their specific business needs .
Com pl. ~~ 4 3 -44. The defendant Tr efler i s , and h as been, Pega's
CEO and Ch ai rman of the Board of Directors s in ce the company ' s
founding. Id. ~ 40. The defendant Stil lwell joined Pega in
July 20 16 as Senior Vice President, Chie f Fin ancia l Officer
("CFO"), and Chief Administrative Officer ("CAO") and was
promoted to Chief Operating Off i cer ("COO") in April 2021 . Id .
~ 4 1. One of Pega's main competitors o n the business process
management ("BPM") market is Appian. Id. ~ 45.
Beginning 2012 , Pega engaged in a ser i es of corporate
int e lligen ce activities, al l egedly with intent to mi sappropriate
Appian's trade secrets. Id. ~ 6. Th ese activities can be
broken down int o two dist in ct phases: 1) " Project Crush " (2012 -
2014) , and 2) "T eardown " (2019-2022). Id . ~~ 6 , 8 , 11, 53 , 63 .
A. "Project Crush"
Early in 2012, Pega hired Youyo n g Zou (" Zou " ) to conduct a
ser i es o f actions, code n a med "Pr oject Crush ", perta inin g to
Appian software, which alleged l y included "(i) creat[ing] videos
[ 4 l
Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 4 of 45of himself accessing Appian ' s platform ; (ii) covertly
download [ing] ... Appian's software documentation for Pega;
(iii) showcas[ing] for Pega the functionality of Appian ' s
platform ; (iv) suppl[ying] Pega with confidential information
regarding the strengths and limitations of Appian's software ;
(v) demonstrat[ing] to Pega how to use and navigate Appian ' s
platform; and (vi) answer[ing] Pega's detailed technical
questions about Appian ' s platform." Id. i 53 .
Based on the allegations , Pega was aware of the illicit
nature of these activit i es and attempted to conceal them : Zou
was hired through a third party - KForce - that also paid Zou,
id. ii 6 -7, 51-52 , 251 ; and he was internally referred to as
"M att " to hide his identity. Id . i 64 .
Personnel involved in "Pr oject Crush " included CEO Alan
Trefler; Pega's Chief Product Officer ("CPO") Kerim Akgonul
("Akgonul"); Chief Technology Officer ("CTO") Don Schuerman
(" Schuerman "); Chief of C li ents and Markets ("CMM " ) Leon Trefler
(defendant Trefler's brother) ; Director of Product Marketing
John Petronio ("Petronio"); Director of the Office of the CTO
Ben Baril ("Baril"); Head of Product Marketing Douglas Kim
(" Kim" ) ; and Vice President of Product Management Steve Bixby
(" Bixby " ) . Id. ii 10, 49 , 65 , 71 , 76 .
[ 5 l
Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 5 of 45B. "Teardown" In 20 1 9 , Pega initiated an operation "'similar' to ' Project Crush ,' but ' broader [in] scope '". Id. 1 77 (inte rn al citation omitted) . Unable to find a su it able contractor , Pega decided to act on i ts own by accessing the App i an software t hr ough free trial li censes and record reference materials. Id. 11 80 - 83 . Th ese li censes were obtained through, among other things, using fake names, front a n d fake compan i es , id . 11 91 - 109 , or businesses o f Pega employees ' s ignifi cant others , id. 1 84 . Pega's senior executives a nd officers were aware of these act i ons , id. 1 79 ; facts a ll eged by PS Lit further in dicate awareness of the illicit character of this operat i on , id. 11 83 - 85 , 89. C. The Virginia Action On May 29 , 2020 , App i an fil ed a lawsuit aga in st Pega, alleging Pega's engagemen t in "unl awful schemes . [t h at] i nvo lved stealing Appian ' s trade secrets and conf id ential i nformation and then using them to damage Appian ' s business and reputation, and to stea l Appian's customers and potential c ust omers" which "[ i]nvo l v [ed] personnel at Pegasystems up to and including Pegasystems ' CEO and Founder , Al an Tr efler , and ot h er high-ranking Pegasyste ms executives ." Id. 11 13-14 (e mph asis om i tted) . Appian ini tial l y cla im ed it " suffered and will suffer substantial monetary damages in an amount t h at will [ 6] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 6 of 45
exceed $90 million", id. 1 192 (emphasis omitted) ; it eventually
amended its complaint o n February 11 , 2022 , seeking
approximately $3 billion . Id . 11 162, 197.
In response to that development , Pega -- in its Report on
Form 10 - K filed on February 16, 2022 -- for the first time made
a n exp ress and detailed me nti on of the Virgini a Action. 1 Id . 11
20 , 263 . In the same report , Pega stated that: Appian's clai ms ,
"ar e without merit," Pega h as " strong defenses to these c l aims ,"
and "any alleged damages claimed by Appian are not supported by
the necessary legal standard." Id . 1 125 (emphasis omitted) .
On May 9 , 2022 , the jury return ed a un a nimou s verdict in favor
of Appian, finding that Pega willfully and maliciously
misappropriated Appian 's trade secrets in violation of the
Virginia Uniform Trade Secrets Act ("VUTSA") and a violation of
Virginia Computer Crimes Act ("VCCA") provisions, and awarded
Appian $2 , 036,860,045 in damages (before int erest and attorney ' s
fees). Id. 11 127-28 .
Pega appealed and t h e Virginia Court of Appeals held that,
while Pega was not entit l ed to judgement as matter of law , the
trial court " committed a series of errors " that warranted a
10-Q and 10 - K forms filed by Pega between May 29 , 2020 ,
and February 16, 2022 , contained a statement that "[ Pega] ha[s]
rece i ved , and may in the future receive, notices that claim
[Pega] ha[s] misappropriated , misused , or infringed other
parties ' intellectual property rights. " Compl ., 1 153.
[ 7]
Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 7 of 45reversal of the judgement as to the VUTSA claims and a remand for a new trial . Pegasystems Inc. , 90 4 S . E.2d at 284 ; Co mpl., 11 132-134. The Virginia Supreme Court has since agreed to hear the petition seeking to reinstate the verdict. Pl .' s Opp ' n , ECF No . 31 , at 7; Appian Corp . v . Pegasystems , Inc., No. 240736 , 2025 Va . LEXIS 12 , at *1 (Mar . 7 , 2025) . In response to Pega ' s February 16, 2022 disclosure of the Virginia Action , Pega 's stock price dropped approximately 15.62 % on February 17 , 2022 . Pega ' s stock price gradually diminished in value between the commencement of the Virginia Action trial (March 21 , 2022) and again the day before the verdict was announced (May 9 , 2022) from $79 . 57 to $65.93. It dropped by approxi mat ely 20 % on the day the verdict was announced (May 10, 2022) , and another 8 % the day after . Compl ., 11 263 - 2 66 . IV. ANALYSIS A. Pleading Standard To withstand a motion to dismiss, PS Lit ' s complaint must "state a claim upon which relief can be granted .... ", Fed . R. Civ. P. 12 (b) (6), meaning , it must include sufficient factual allegations that , accepted as true , "state a claim to relief that is plausible on its face ." Bell Atlantic Corp . v . Twombly , 550 U. S . 544 , 570 (2007) . The Court must " accept well-pleaded factual allegations in [P S Lit ' s Compl.] as true and view all reasonable inferences in [its] favor. " Premca Extra Income Fund [ 8] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 8 of 45
LP v. iRobot Corp. , 763 F. Supp . 3d 1 2 1 , 146 (D . Mass . 2025) (quoting Zhou v . Desktop Metal , Inc. , 120 F. 4th 278 , 287 (1st Cir . Oct . 28, 2024)). Thus, under this standard, the Court " draw[s] every reasonable inference" in favor of the plaintiff , Berezin v . Regency Sav . Bank, 234 F.3d 68, 70 (1st Cir. 2000) , but disregards statements that " merely offer legal conclusions couched as fact or threadbare recitals of the elements of a cause of action ," Ocasio - Hernandez v . Fortuno-Burset , 640 F.3d 1 , 12 (1st Cir . 2011) (brackets , ellipsis , and quotations omitted) . "To state a claim under section l0(b) , a complaint must allege: ' ( 1) a material misrepresentation or omission ; (2) scienter ; (3) a connection with the purchase or sale of a security ; (4) reliance ; (5) economic loss ; and (6) loss causation .'" Quinones v . Frequency Therapeutics , Inc. , 106 F . 4th 17 7, 182 (1st Cir . 2024) (quoting In re Biogen Inc. Sec . Litig ., 857 F . 3d 34 , 41 (1st Cir . 2017)) . Finally , because PS Lit brought securities as well as state fraud claims , the allegations in the complaint must meet the standard under Federal Rule of Civil Procedure 9(b) and the "heightened pleading requirements " imposed on private securities litigation. Mississippi Pub. Employees ' Ret . Sys . v. Boston Scientific Corp ., 523 F . 3d 75 , 85 (1st Cir. 2008) . Under Rule 9(b) , PS Lit [ 9 l Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 9 of 45
is requ i red to plead with particularity the circumstances [ co n stituting] fraud. Zhou , 120 F . 4th at 287 . Th e sufficiency of pleadings under Section l0(b) and Rule 10b - 5(b) claims , mirroring the ones brought here by PS Lit , have already been the subject of an analysis by this Court in F ort Lauderdale. Now , Pega challenges the conclusions made in Fort Lauderdale -- which there led to a denia l of a motion to dismiss -- arguing that it was decided " on the heels" of a Virgin ia state court ' s decision in Appian , which was since reversed and remanded for a new trial by the Virginia Court of Appeals decision. See Defs .' Mem . at 1. As this Court remarked during the motion hearing , it does not g i ve any weight to the legal determinations made by the Virg ini a courts ; the Virginia Court of Appeals decision , however, by reversing and remanding the trial court ' s dec i sion that stood whil e this Court was deciding Fort Laud erdale , calls for a renewed analysis of the sufficiency of the allegat ions against the backdrop o f the law is it now stands. Hr'g, ECF No. 41 at 10, 1 7. B. False and Misleading Statements See Tr. Mot . To survive a motion to dismiss , a securities comp laint must show that "d efendants made a materially fals e or misleading statement or omitted to state a materia l fact necessary to make a statement not misleading ." Ganem v . InVivo Therapeutics [10] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 10 of 45
Holdings Corp. , 845 F . 3d 447 , 454 (1st Cir . 2017) (quoting
Geffon v. Micrion Corp. , 249 F . 3d 29, 34 (1st Cir . 2001)). The
Private Securities Litigation Reform Act ("PSLRA") "mandates
that the complaint must 'specify each statement alleged to have
been misleading, [and] the reason or reasons why the statement
is misleading.'" State Tchrs. Ret. Sys. of Ohio v . Charles
River Lab'ys Int 'l, Inc., 152 F.4th 1 , 9 (1st Cir . 2025)
(quoting 15 U.S.C . § 78u-4 (b) (1)).
Under Rule 10b - 5(b), it is unlawful to "make any untrue
statement of a material fact or to omit to state a material fact
necessary in order to make the statements made, in the light of
the circumstances under which they were made, not misleading",
in connection with the purchase or sale of a security. Zhou,
120 F.4th at 292 (quoting 17 C . F . R. § 240.10b-5(b)). "A fact or
omission is material if ' a reasonable investor would have viewed
it as having significantly altered the total mix of information
made available .'" Id. (quoting Ponsa-Rabell v . Santander Sec.
LLC , 35 F.4th 26 , 33 (1st Cir. 2022)) . "[W]hether a statement
is ' misleading ' depends on the perspective of a reasonable
investor." Omnicare , Inc. v . Laborers Dist. Council Constr.
Indus . Pension Fund , 575 U.S. 175, 186 (2015).
Rule 10b-5(b) does not , however , cover pure omissions
only "half-truths." Macquarie Infrastructure Corp . v. Moab
Partners , L. P ., 144 S . Ct . 885 , 891 , (2024). The same , applies
[11]
Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 11 of 45to Sect i on l0(b) . See Zhou , 120 F.4th at 292 . Thus , it "bears emph asis that§ l0(b) and Ru l e 10b-5(b) do not create an affirmative duty to disclose any and a l l material information . Disclosure is required under these provisions only when necessary ' to make . . statements made , in the light of the c i rcumstances u nder which they were made , not misleading. ' " Macquar i e , 1 44 S . Ct . 885 , 891 (2024) (q u oting Matrixx I n itiat i ves , Inc . v . Siracusano , 563 U.S . 27 , 44 (2011)) . 1. Materially Misleading Disclosures--Reassurances PS L it points to Pega ' s statements in i t s Report on Form 10-K for fiscal year 2021 (fi l ed on February 16 , 2022 , and signed by Trefler and Stillwell) . In this 2021 report , Pega stated "[ it] believe[s ]" that the claims asserted in the Virgin i a Action were 'wi thout merit ,' Pega had ' strong defenses ' t o t h e claims , and that the appropriate causation standard did not support Appian ' s damages claim as false and/or misleading , especially in light of " their years-long scheme to misappropriate Appian ' s trade secrets ." Compl . !! 21 , 125 , 163 - 64 . Pega argues to the con t rary that t h ese statements " were neither objectively nor s u bjectively false ." Defs .' Mem . at 8 . T his Court previous l y ruled these statements to be actionable as they " did not ' fairly align ' with [Trefler ' s] awareness of , involve ment in , and direction of Pega ' s espionage [12] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 12 of 45
campaign against Appian ." Fort Lauderdale , 683 F . Supp . 3d at 135 (quoting Omnicare , 575 U. S . at 189) . This Court further pointed out that "[g]iven the way that statement was couched and the identity of the speaker , a reasonable investor could justifiably have understood Trefler ' s message that Appian ' s claims were ' without merit ' as a denial of the facts underlying Appian ' s claims -- as opposed to a mere statement that Pega had legal defenses against those claims ." Id . Now , Pega contends that the Virginia Court of Appeals decision " undermines any assertion that Defendants ' opinions were objectively false " and " validates Defendants ' subjective belief that Appian ' s claims were ' without merit ', . . . that Pega had ' strong defenses' ", and that "the appropriate causation standard did not support Appian ' s damages claim. " Defs .' Mem . at 9- 10 . The Court rejects this argument. In general , securities law assumes an ex ante perspective of the statements made : "just as a statement true when made does not become fraudulent because things unexpectedly go wrong, so a statement materially false when made does not become acceptable because it happens to come true . " Pommer v . Medtest Corp. , 961 F . 2d 620 , 623 (7th Cir . 1992) . Such an approach is appropriate when dealing with statements of fact; less so when it involves to the "proper interpretation of data " where the analysis shifts towards the question whether such interpretation was rational or [13] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 13 of 45
reasonable . In Re Philip Morris Int ' l Inc . Sec . Litig ., 89 F . 4th 408 , 422 (2d Cir . 2023) (quoting Tongue v . Sanofi , 816 F.3d 199 , 214 (2d Cir . 2016)) When it comes to opinions , "an investor cannot state a claim by alleging only that an opinion was wrong ; the complaint must as well call into question the issuer ' s basis for offering the opinion." Omnicare , 575 U.S . at 194 . Id. To be specific : The investor must identify particular (and material) facts going to the basis for the issuer ' s opinion -- facts about the inquiry the issuer did or did not conduct or the knowledge it did or did not have -- whose omission makes the opinion statement at issue mi sleading to a reasonable person reading the statement fairly and in context . . That is no small task for an investor. As this Court emphasized in Fort Lauderdale, "[a]n issuer may legitimately oppose a claim against it, even when it possesses subjective knowledge that the facts underlying the claims against it are true[ , ]" but "it must do so with exceptional care , so as not to mislead investors . " Fort Lauderdale , 683 F. Supp. 3d at 135 . What it entails is that "[a]n issuer may not . ' ma [ke] [(misleading)] substantive declarations regarding its beliefs about the merits of the . litigation .'" Id . at 136 (quoting Rosenbaum Cap. LLC v. Boston Commc ' ns Grp ., Inc . , 445 F . Supp . 2d 170, 175 (D. Mass. 2006)) (alteration in original) . Thus , an issuer need be careful when [ 14] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 14 of 45
formulating such statements as "[a] reasonable investor ' expects not just that the issuer believes the op i nion (however irrationally) , but that it fairly aligns with the information in the issuer ' s possession at the time .'" Id . (quoting Omnicare , 575 U. S . at 189). Pega , in its statements in the 2021 10 - K expressed , in strong words , its " belie[£] " as to the lack of merit of Appian ' s claim in the Virginia Action , Pega ' s " strong defenses ," and that " any a l leged damages claimed by Appian are not supported by necessary legal standard of proximate cause . " Compl. 1 162. By doing so , as this Court concluded in Fort Lauderdale , and what still holds true here , "Trefler and Pega categorically denied that Appian ' s claims had any merit -- despite possessing substantial information about the viability of those claims . " 683 F . Supp. 3d at 136 . While the reversal and remand of the Virginia Action verdict shifts the validity of the misappropriation claims alleged by Appian back to the realm of uncertainty , i t does not d i spel PS Lit ' s allegations as to Pega ' s extensive knowledge of the underlying facts and conduct - - hiring a "spy ," accessing Appian ' s platform under " fake names ," etc. Compl . 1 164 . PS Lit points both to the opinions i t believes were misleading or false , as well as the "particular (and material) facts go i ng to the basis for the issuer ' s opinion ," Omnicare , 575 U. S . at 1 94 , whi l e emphasizing a [15) Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 15 of 45
resounding dissonance between them. Pega does create a competing inference by undermining the relati ve and inherently subjective nature of "belief . " Defs. ' Mem. at 8 -10. Pega does so, however, in light of the Virginia Court of Appeals decision which , of course , was also unavailab l e at the time Pega made the disputed statements . In any case , such competing inferences should be resolved , as appropriate at this stage, for the non - movant. 2 PS Lit ' s allegations that Trefler and Pega ' s opinion statements as to the Appian ' s c l aims were misleading are , therefore , adequately pled . Fort Lauderdale , 683 F. Supp . 3d at 136 . Even if, however , this Court were to consider the conclusions made by the Virginia Court of Appeals , l ittle changes. A comparison invoked by Pega to the contrary the FDA ' s eventua l approval being a significant factor in about defeating the plaintiffs theory that defendants "knew, by the first day of the Cl ass Period, of the serious adverse side effects observed ," Kovtun v . VIVUS , Inc., No . 10-4957, 2012 WL 4477647 , at *10 (N . D. Cal. Sept. 27, 2012) , aff ' d sub nom., Ingram v. VIVUS, Inc. , 591 F. App ' x 592 (9th Cir. 2015) -- is 2 The Court must "take as true all well-pleaded facts in the plaintiffs ' complaint[ ] . and draw all reasonable inferences therefrom in [ their ] favor ." Fothergill v . United States, 566 F . 3d 248 , 251 (1st Cir. 2009) (citing Muniz-Ri vera v. United States, 326 F.3d 8 , 11 (1st Cir . 2003)) . [ 16] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 16 of 45
distinguishable. The Virginia Court of Appeal's decision, unlike the FDA approval of a drug, is distinguishable. While some Virginia trial courts' errors warranted the reversal of the verdict and a remand, the Court of Appeals also rejected Pega's argument "that Appian failed to establish misappropriation of any trade secret as a matter of law." The Virginia Court of Appeals also stopped short of ruling the trial court was in error in refusing to strike the verdict, emphasizing that "Appian provided considerable evidence that it took careful steps to safeguard its secrets and that the information was neither 'generally known' nor readily ascertainable." See Pegasystems, 904 S.E.2d at 284, 265. Thus, the reversal of the Virginia Action verdict has no bearing on the truth or falsity of Pega's statements which gave rise to the PS Lit claims at this stage of the proceedings. The same analysis applies to Pega's statements that the appropriate causation standard did not support Appian's claim-- the Defendants misconstrue the Virginia Court of Appeals decision as reinforcing the correctness of this statement by saying that the damages award "had 'no correlation to proximate cause.'" Defs.' Mem. at 10. The statement in full (from the Quarterly Report on Form 10-Q for the first quarter of 2022), however, voiced Pega's belief "that any alleged damages claimed by Appian are not supported by the necessary legal standard of [17] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 17 of 45
proximate cause ." Compl . t 162 (emphas i s added) . The Virginia Court of Appeals merely h eld that the erroneous exclusion of certain evidence in conjunction with a jury instruction ' s emphas i s on Pega ' s tota l sales "exponentially increased the likelihood of a runaway damages verdict that had no correlation to proximate ca u se ." Pegasystems, 904 S . E . 2d at 276 . For these reasons, Pega ' s arguments as to the Virg inia Co urt of Appeals dec i s i on ' s impact in this case fail . 2. Code of Conduct Next , Pega arg u es that Pega ' s Code of Conduct statement expressing its commitment "[n] ever [ to ] use ill egal or questionable means to acq ui re a competitor ' s trade secrets or other confidential information" is neither misleading nor material . Comp l. t 16 . P ega further conte n ds that the Virgini a Co u rt of Appeals ' decision is " fatal " to PS Lit ' s attempt to show ob j ective and sub je ctive falsity . Defs.' Mem . at 10 . This Co urt will proceed with the renewed ana l ysis for the same reason stated above. While other co u rts ha ve recognized codes of conduct as "inh erent l y aspirationa l" and " express [in g] opinions as to what act i ons are preferable , as opposed to implying that all staff , d i rectors , and officers always adhere to its aspirations ," this [ 18] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 18 of 45
view generally applies to objective l y un verifiable statements . Retail Wholesale & Dep ' t Store Onion Loe. 338 Ret . Fund v. Hewlett -P ackard Co ., 845 F.3d 1268, 1276-77 (9th Cir. 2017) (quoting Andropo li s v . Red Robin Gourmet Burgers , Inc., 505 F . Supp . 2d 662 , 685-86 (D. Colo . 2007)) ; see also Sing h v . Cigna Corp. , 918 F.3d 57, 6 1, 63 (2d Cir. 2019) (holding that code of ethics statements regarding "a responsibility to act with integrity in all we do, including any and all dealings with government officials" were a "textbook example of 'puffer y '" ) . As this Court has al r eady ruled, however, Pega's Code of Conduct statements that "d escribe[ ] with specificity a course of conduct " that the defendant "promised to abjure" are not asp irati onal and thus may be deemed act i onable . Fort Lauderdale, 683 F. Supp. 3d at 134; see , e.g ., Constr. Laborers Pension Tr. v. CBS Corp. , 433 F. Supp . 3d 515, 532 (S .D.N. Y. 2020) (listing among potentially actionable statements , " stateme nts that were so anathema to the alleged internal wrongdoing that, even if general or aspirationa l, they were materially false."); In re Tenari s S . A. Sec . Litig., 493 F. Supp. 3d 143, 159 (E.D.N.Y. 2020) (finding actionable the code of conduct statement that "[the company] will not condone , under any circumstances , the offering or receiving of bribes or any other form of improper payments"). [19) Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 19 of 45
Here , Pega argues that due to the Virginia Court of Appeals ' decision to vacate the lower state court ' s verdict , this Court ' s ruling as to the actionability of one of the Pega ' s Code of Conduct statements is no longer valid . again , rejects this argument . The Court , Pega ' s Code of Conduct stated "that Pega would ' [n]ever use illega l or questionable means to acquire a competitor ' s trade secrets or other confidential information , such as . .. seeking confidential information from a new employee who recently worked for a competitor , or misrepresenting your identity in hopes of obtaining confidential information .' " Compl . ~ 171 (emphasis omitted) . As this Court observed in Fort Lauderdale, Pega ' s Code of Conduct was an assurance "specifically directed to investors." 683 F . Supp . 3d at 1 33 n.6. Contrary to what Pega asserts in its motion to dismiss , the assurance implicated not only trade secrets , but also "other confidential information." This assurance explicitly proscribed Pega from " us[ing] illegal or questionable means to acquire " and "misrepresenting your identity in hopes of obtaining " such information. Meanwhile , PS Lit al l eged that several Pega employees and officers were either actively participating or at least familiar with the ongoing operation , and that some Pega officers had doubts regarding the legality of these practices. Compl . ~ 175 . Furthermore , as PS Lit highlights in its opposition , Pega did not appeal the [20] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 20 of 45
Virginia verdict as to the VCCA violations by Pega which, while only resulting in nominal damages , could still be considered bearing on to the falsity of the Code of Conduct assurances . Pl .' s Opp ' n at 12 n.9. These allegations , seen in a light most receptive to the non-movant , are enough to survive a motion to dismiss. 3. Litigation Risk Disclosures PS Lit further alleges that Pega "misl eading l y failed to disclose the Virginia Action, which commenced in May 2020 , or Pega ' s egregious misappropriation of Appian ' s confidentia l information" in its SEC Reports on Form 10-Q, filed in the second and third quarter of 2020 , throughout 2021 , as well as Form 10-K filed in 202 1. Compl . ii 153-60. These forms incorporated by reference the Form 10-K for fiscal year 2019 filed by Pega in February 2020 - three months before Appian filed their Virginia lawsuit. Id. i 154. PS Lit ' s claim is that the representations mad e in these forms repeatedly informed investors about a potential risk for litigation, but , misleadingly, never actually disclosed that Pega "had already engaged in a scheme to misappropriate Appian ' s intellectual property , had already been caught in the act by Appian, was already mired in lit igat i on over its scheme , and already faced enormous financial and reputational risk as a result." Id. i [ 21] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 21 of 45
153 (emphasis in original) . PS Lit argues that Pega ' s failure to disclose the Virginia Action and potential loss expos ure constituted a vio lation of SEC (Item 103) and GAAP (ASC 450) regulations . Compl . ~~ 160(d), 17 9- 213. Forms 10-Q were signed by Stillwell; Forms 10-K--by both Stillwell and Trefler . 151 , 1 55 , and 157. Pega argues that such explicit disclosure was not required under It em 103 as material pending litigation , nor as a loss cont in gency under GAAP principles (ASC 450) , and it was "necessarily included " by the passage , incorporated by reference in the SEC filings before Feb . 16, 2022 , that Pega "h a [ s ] received , and may in the future receive , n otices that claim we have misappropriated, misused, or infringed other parties ' intellectual property rights , and to the extent we gain greater market visibility , we face a high er risk of being the subject of inte lle ctual property infringement claims ." Defs .' Mem . at 11- 15 ; Compl . ~ 153 . a. S.E.C. Regulation S-K, Item 103 As to Item 103 , the regulati on requires disclosure of "any material pending legal proceedings , other than ordinary routine litigation in cidental to the business , to which the registrant or any of its subsidiar i es is a party or of which any of their property is the subject ." 17 C . F.R . § 229 . 103(a) . An exception is prov i ded for proceedings "[ t] hat involve primarily a c l aim [ 22 ] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 22 of 45
for damages if the a mo unt involved, exc lu sive of interes t and costs , does not exceed 10 percent of the current assets of the r egist rant and its s ub sidiaries on a consolidated basis ," in which case "n o information need be given ." 17 C.F . R. § 229 .10 3 (b) (2). Her e , Pega a rgu es th at : 1) App i an 's $90 ,000,0 00 damages c l ai m " a mounted to just 5 % o f Pega's current assets in every quarter before February 2022 except for [ ... ] 3Q 2021 " thus f al ling within th e It e m's 10 3 ' s exception , 2) the Virgi ni a Act i on "was exact ly th e type o f cla im to which [it] [w as ] ' o rd inarily ' subject ," and 3) that PS Lit "h a[s] not adequately a ll eged th at [P ega ] did n o t act u ally believe" that the Virg inia Action was immat eria l. De f s ' Mem. at 14-1 5 (quoting Sa lim v . Mobile Telesystems PJSC, No. 1 9- 1 589 , 2021 WL 796088 , at *9 (E.D.N.Y. Mar. 1, 2021), af f'd, No. 21 - 839-CV , 2022 WL 966903 (2d Cir . Mar. 3 1, 2022)) . This Cou rt is not persuaded by Pega's arguments. As h e ld by the Supre me Court in Omni care , "[t]he investor must ident if y particular (and materia l) facts going to the basis for the issuer's opinio n -facts abo ut the inquiry the i ss ue r did or did not conduct or t h e knowledge it did or did not have-w h ose o mi ssion makes the opin i on statement at issue misleading to a reasonable person reading the statement fairly and in context ." 575 U.S. at 194. [ 23 ] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 23 of 45
PS Lit makes extensive allegations as to why the Virginia Action fell outside classification as an "ordinary routine litigation incidental to [Pega ' s] business." Compl. 11 184-204 . PS Lit points out that Pega itself , in its 20 2 1 10 - K form filed on February 16 , 2022 , indicated several million dollars in legal fees and related expenses that arose "from proceedings that originated outside of the ordinary course of business ", id. 11 186 - 88 , and that the damages sought in Virginia Action by Appian surpassed the quantitative threshold of 10 % required by Item 103 . 3 I d . 190-93 . Importantly , PS Lit makes these allegations in the broader context , arg ui ng that the Virginia Action cannot be considered ordinary or routine and should have been disclosed no later than in Pega's 2Q20 10 - Q filing. Id . 1 189 . This is especially relevant considering the " extraordinary allegations" of conducting " a nearly decade-long scheme to misappropriate a primary competitor ' s information " as to the publicly traded company , its CEO , and senior management . Id. Pega ' s argument that the disclosure mandated by Item 103 is "necessarily included " in the passage that " Pega "ha[s] received , and may in t h e future receive , notices that c l aim we 3 PS Lit states that "Pega ' s reported then - current assets during Relevant Period ranged from approximately $804 million to $977 million , " while Appian sought damages " in an amount that will exceed $90 million ." Compl . 11 191 - 92 (emphasis in original) (internal citat i on omitted). [24] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 24 of 45
have misappropriated, misused, or infringed other parties' intellectual property rights ... " is also unavailing. Defs.' Mem. at 11; Compl. ~ 153. The situation here is clearly distinguishable from In re SeaChange Int'l, Inc., No. 02-12116- DPW, 2004 WL 240317, at *10 (D. Mass. Feb. 6, 2004) (Woodlock, J.), where "[the] disclosure was certainly enough to alert investors of the [pending] litigation and to prompt them to make further inquiry directly about the litigation should they choose to do so." Here, Pega did not give the investors enough information to conduct their inquiry. While "[t]he disclosure required by Item 103 is meant to put potential investors on notice of pending litigation, not to force companies to predict a particular outcome in the litigation," id. (citing Wielgos v. Commonwealth Edison Co., 892 F.2d 509, 517-18 (7th Cir. 1989) ), a disclosure of unspecified "notices of claim" cannot be treated as alerting the investing public in the same manner as outright naming of a pending litigation. To the contrary, considering the Section lO(b) and Rule 10-5 requirements, such partial information could arguably be seen as a "half-truth" -- the type of omission these rules aim to prohibit. 4 See Zhou, 120 F.4th at 4 For this reason, Pega raised the argument that it "could not have known the trial judge would misapply Virginia law in a manner 'exponentially increas[ing] the likelihood of a runaway damages verdict.' Defs.' Mem. at 15 (quoting Pegasystems, 904 S.E.2d 247 at 276). This argument does not persuade the Court, as the issue here does not turn on whether Pega was or was not [25] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 25 of 45
292 (quoting Macquarie Infrastructure Corp . v. Moab Partners , L .
f..:_ , 144 S. Ct. 885 , 891 (2024)). For these reasons, PS Lit has
adequately pled its allegations as to the Item 103 disclosures
being misleading.
b. GAAP Rule ASC 450
With respect to the arguments as to whether Pega violated
GAAP Rule ASC 450 , Compl. ~~ 205 - 213 ; Defs .' Mem . at 13-14 , this
Court confirms its ruling expressed in Fort Lauderdale that
having found Pega and Trefler ' s statements false and/or
misleading , and " given th e fact - intensive nature of that
question , this Court prefers not to express a definitive view on
the issue at this stage ." 683 F. Supp . 3d at 136 n.10; see
also , e . g ., In re Ambac Fin . Grp ., Inc . Sec . Litig. , 693 F.
Supp . 2d 241 , 273 (S . D. N. Y. 2010) ("The parties ' disagreements
over GAAP compliance also raise issues of fact that cannot be
resolved on a motion to dismiss.")
4. BPM Industry, Pega's Marketing Efforts, and
"Competitiveness" Statements
PS Lit makes allegations with respect to several statements
made by Pega and the Individual Defendants in a variety of
a~le accurately to predict the outcome of the Virginia Action
per se .
[ 2 6]
Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 26 of 45different circumstances which were related to sales , competitive efforts , and market pos i tioning of Pega . 5 Compl. 11 139-49. PS Lit claims these statements were materially false and misleading when made , as they failed to disclose that the positive outcomes were owed to espionage on competition to gain access to its competitors ' confidential information and trade secrets . 6 Id . 1 150 . Additionally , PS Lit makes several a ll egations as to Sti ll well , Compl . 11 214-17 , that this Court has ruled insufficient . See Elec . Clerk ' s Notes , EC F No. 40 . Pega challenges these allegations , stating that PS Lit " has not plausibly alleged t h at those statements were objectively false , or that Pega did not believe that it was competitively d i fferentiated or that i ts commercial success was attributable to client relationships and industry experience. " Defs. ' Mem. at 12 . As to any statements attributed to Stillwell , Compl . 11 139 - 40 , 142 - 43 , 145 , 149 , Pega invokes the Fort Lauderdale decision where these statements were ruled not actionable as 5 NASDAQ 42nd London Investor Conference , 40th Annual Canaccord Genuity Growth Conference , Barclays Global Technology , Media and Te l ecommunications Conference , conference call with investors and analysts as part of the Jeffries Software Conference , Pegasystems ' second quarter of 2020 earnings call , Form 10 - K for fiscal year 2020. 6 These comments concerned Pega ' s "credib[ility] " with customers in public sector , Compl . 1 142 - 43 , its ability to " differentiat[e ]" and " show very well competitive l y ", i d . 11 1 39 , 1 41 , 144 , 147 , its solution being "best-in-class ", id . 1 140 , and its marketing and sales efforts , id . 11 148-49 . [27] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 27 of 45
they wer e made without scienter. Defs .' Mem . at 11 - 12 (citing Fort L auderdale , 683 F. Supp . 3d at 132) Moreover, as to Sti llwell's statements with Presidium on March 11 , 2020 , May 5 , 2020 , and June 4, 2020 , Pega challenges the al l egat i ons contending the se statements were puffery . n . 21. Defs .' Mem . at 12 Thi s Court rules that the argument over these allegations i s fact -int ensive , making resolution at this stage inappropri ate . Thus , this Court adopts the same approach as it did with respect to GAA P Rule ASC 450 violations . See supra at 26 . C. Scienter A statement , even i f found false or misleading , must have been made with t h e requisite scienter to be actionab l e under PSLRA. See ACA Fin. Guar . Corp . v . Advest , Inc ., 512 F . 3d 46 , 58 (1st C ir. 2008) . Importantly , in a private enfo r ce ment action " the PSLRA also separately imposes a rigorous pleading standard on allegations of sc i enter ." Id . Specifically , the pleaded facts must give rise to a " strong inference" of scienter . T ellabs , Inc. v . Makor I ssues & Rights , Ltd., 551 U. S . 308 , 322 (2007) . To support a finding of scienter under the PSLRA , a co mpl aint must " state with particularity facts giving rise to a strong inference th at the defendant ... either [28] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 28 of 45
... consciously intended to defraud , or that they acted with a high degree of recklessness." Quinones , 106 F . 4th at 182 (citation and internal qu otatio n marks omitted). "It does not suffice that a reasonable factfinder plausibly cou ld infer from the co mplaint's allegations the requisite state of mind ." Tellabs , 551 U. S . at 3 14. Instead , " an inference of scienter must be more than merely plausible or reasonable -- it must be cogent and at least as compelling as any other oppos ing inferen ce of nonfraudulent intent." Id . Recklessness in this context means " a highly unreasonab l e omission , involving not merely simple , or even inexcusable[] negligence, but an extreme departure from the standards of ordi nary care , and which presents a danger of misl ea ding buyers or se ll ers that is either known to the defendant or is so obvious the actor must have been aware of it." In re Biogen Inc. Sec . Litig., 193 F. S upp. 3d 5 , 44 (D. Mass . 2 016) (Saylor, J .) (quoting Mississippi Pub . Emps.' Ret . Sys . v . Boston Sci. Corp . II, 649 F . 3d 5 , 20 (1st Cir . 2011 )) (a l teration in original) , aff ' d , 857 F. 3d 34 (1st C ir. 2017) . As th i s Court pr ev iously wrot e about the applicable PSLRA standard , these "heightened pleading requir e me nts" go beyond the standard provided in Rule 9(b) . Securities & Exch. Comm 'n v . Sharp , 626 F. Supp . 3d 345 , 388 (D . Ma ss . 2022) (quoting Merrill Lynch, Pierce , Fenner & Smith , Inc. v . Dabit , 547 U. S . 71 , 81 (2006)) . Judge Lindsay aptly described the underlying reasoning o f this imp ortan t legislativ e in t ervention : [ 2 9 J Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 29 of 45
In particular, Congress sought to reform private securities litigation to discourage unmeritorious class actions , including actions brought because of a decline in stock prices . The aims of the PSLRA are three-fold : '(1) to encourage the voluntary disclosure of information by corporate issuers ; (2) to empower investors so that they--not their lawyers- - exercise primary control over private securities litigation ; and ( 3) to encourage plaintiffs ' lawyers to pursue valid claims and defendants to fight abusive claims. ' The PSLRA seeks to curtail the filing of abusive lawsuits at the pleading stage of litigation by establishing uniform and stringent pleading requirements . I n re Galileo Corp. S ' holders Litig ., 127 F . Supp. 2d 251 , 260 (D . Mass . 2001) (citations and quotations omitted) . With that in mind , this Court evaluates the scienter allegations made by PS Lit , which were in many instances repackaged and expanded , as compared to the allegations made by the class action plaintiffs in Fort Lauderdale . PS Lit mak es these extensive scienter allegations as to Pega , its officers including the Individual Defendants -- and its employees. In particular , PS Lit highlights how Pega secretly engaged a third party " to identify and recruit ' an Appian Developer ' who was not ' loyal ' to Appian ." Compl . !! 65-76 . PS Lit also highlights Zou ' s work creating various materials based on his access to Appian ' s software was essential for " Project Crush", the concealment of his identity , even in the internal conversations , Zou ' s close work with Pega employees . Compl . !! 65-76 , 219 - 220 . PS Lit further alleges that "various Pega employees used fake names and fake or front companies to conceal evidence of their [30] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 30 of 45
espionage " when accessing Appian ' s platform , e . g ., the free
tr ial of Appian 's software , in full knowledge and approval of
severa l Pega's officers. Id. 11 92 - 109 , 224 . In this context ,
one of the directors -- Ben Baril ("Baril") -- allegedly changed
his depos iti on testimony in the Vir ginia Action , as to the
reason why he has created a fake consult i ng firm with a
fictitious website. Baril changed his reasoning from
"subscrib[ing] to certain journals or things that wanted
personal information that I didn ' t want to share" , to
" obtain [ing] access to a free Appian trial. " Baril also
allegedly changed his awareness of " anyone at
Pegasyste ms ... taking action to get access to the Appian software
platform ," from "I'm not " to "[ y ]e s , I'm aware of someone - of
others taking action to get access to the Appian software
platform." Id. 11 226-230. What can be inferred from these
al l egations is Pega ' s awareness and organized effort : 1) to
obtain information (presumably business confidential , if not
rising to the level of trade secrets) by employing methods that
violate Pega's own Code of Conduct , and 2) to conceal these
dubious corporate intelligence practices from the investing
public. 7
7 Th e complaint alleges , based on depositions and trial
transcripts from the Virginia Action that Pega ' s officers and
emp l oyees had voiced their doubts regarding the legality of
these practices. Compl. 11 238-42.
[31]
Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 31 of 45Standing alone , the abovementioned practices may create at
least an equally strong inference that the purpose of keeping
secrets was to prevent Appian from learning about Pega's
theoretically legal corporate intelligence efforts . " When there
are equally strong inferences for and against scienter ,"
however , "the draw is awarded to the plaintiff." Pizzuto v .
Homology Meds ., Inc ., No . 1 : 23 - CV-10858 - AK , 2024 WL 1436025 , at
*15 (D . Mass . Mar . 31 , 2024) (Kelley , J . ) (quoting City of
Dearborn Heights Act 345 Police & Fire Ret. Sys . v. Waters
Corp ., 632 F . 3d 751 , 757 (1st Cir . 2011)) ; see also Skiadas v .
Acer Therapeutics Inc ., No . 1 : 19 - CV - 6137 - GHW , 2020 WL 3268495 ,
at *10 (S . D.N . Y. June 16 , 2020) (Woods , J.) ("At the motion to
dismiss stage , a tie on scienter goes to the plaintiff " ).
Moreover , what pushes these inferences beyond the required
threshold are the allegations as to Pega ' s senior management .
Most notable is Trefler -- both as an Individual Defendant and a
corporate officer responsible for making the challenged
statements whose scienter is imputed to Pega , see In re Boston
Sci . Corp . Sec . Litig ., No . CV 20 - 12225 - DPW , 2022 WL 17823837 ,
at *2 (D . Mass . Dec. 20 , 2022) (Woodlock , J . ) - - and who is
personally alleged to have instigated and overseen the
fraudu l ent scheme . Compl . 11 66 , 77 . Importantly , the
complaint paints Trefler not only as an overseer , who allegedly
approved hir i ng the inside operative , id . 1 66 , received updates
[32]
Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 32 of 45about the intelligence operations , e . g . , id . 11 10 , 67 , 85 , 86 , 88 , 96 , 252 , but also as an active participant , who himself used a fake alias to access Appian software, id . 1 224 . In its defense , Pega argues that the Virginia Action demonstrates a lack of the required scienter , pointing to "Trefler's belief that Pega ' s competitive intelligence efforts were lawful and that Appian's claims were without merit because Pega had not misappropriated any ' trade secrets. '" Defs. ' Mem . at 16 - 17 . Pega reasons that "even if [the Court] were to accept as true Plaintiffs' unsupported statements that . . . [Trefler] ... must have known both about the [lawsuit] and about the fraudulent business practices forming the basis of [the Virginia Action] , the important issue in this case is not whether Defendants knew the underlying facts , but whether Defendants knew that not disclosing the [lawsuit] posed substantial likelihood of misleading a reasonable investor ." Id . at 17 (quoting City of Philadelphia v. Fleming Cos ., Inc ., 264 F . 3d 1245 , 1264 (10th Cir . 2001)). These arguments are unavailing . First , the PS Lit allegations in this case are supported and substantiated by the extensive evidentiary material of the Virginia Action invoked and cited by PS Lit in its complaint . Even if this Court does not rely on this material , the existence of that evidence serves as a basis for alleging facts here . Second , Trefler personally [33] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 33 of 45
signed and authorized the statements that PS Lit alleges were
false and misleading . Considering Trefler ' s knowledge about
both the underlying facts pertaining to the corporate
intelligence efforts and the effect that relief sought by Appian
may have on Pega ' s financial situation , an outright "denial of
Appian claims ' merit posed an obvious danger to mislead
investors as to the substantial risks Pega was facing in
connection with the Virginia Action." Fort Lauderdale , 683 F .
Supp . 3d at 132 ; see also Schlifke v . Seafirst Corp., 866 F.2d
935 , 946 (7th Cir. 1989) ("rather , it is the ' danger of
misleading buyers [that] must be actually known or so obvious
that any reasonable man would be legally bound as knowing' " )
(quoting Sundstrand Corp . v. Sun Chem . Corp ., 553 F . 2d 1033,
1045 (7th Cir. 1977)) .
Taken together , these factors create a cogent and
compelling inference of , if not conscious intention to defraud,
at least a high degree of recklessness. See Quinones , 106 F.4th
at 182 . As this Court previously noted , "[s]cienter is a
holistic concept and 'need not be irrefutable , i . e. , of the
"smoking-gun " genre , or even the "most plausible of competing
inferences."'" Premca Extra Income Fund LP , 763 F. Supp . 3d at
158 (quoting Tellabs, Inc. v. Makor Issues & Rights, Ltd. , 551
U.S . 308 , 323 - 324(2007). Accordingly , this Court rules that PS
[34)
Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 34 of 45Lit has alleged sufficient facts to raise a strong inference of scienter as to Pega and defendant Trefler . Wi th respect to defendant Stillwell , this Court signaled during the motion hearing that the scienter allegations are insufficient. Tr . Mot. Hr ' g at 20 . Admittedly , PS Lit has attempted to bolster its argument by invoking defendant Stil l well ' s statements made after the Virginia Action trial. Compl . 1 129 . PS Lit reasons that "Defendants now concede that the preparers and signers of Pega ' s f i nancial disclosures -- inc l ud i ng Stillwell - ~ determined that the Virginia Action was ' immateria l, ordinary , and routine litigation ' that did not require d i sc l osure" and that "[s]uch a determination requires an actual assessment of the merits ." Pl .' s Opp ' n at 14 . Because of th i s assessment , " it cannot be ' mere speculation ' that Stillwell invest i gated and evaluated the Virginia Action in the course of making determinations of its merit and materiality : that is a conceded fact (or there is at l east a strong inference of that fact based on Defendants ' argument) . " Id . To no avail . PS Lit sti l l relies on the inference that Stillwell must have assessed , invest i gated , and evaluated the merits of the Virginia Action because of his position in Pega -- a repackaged "must have known" claim . Thus , this Court ' s conclusions made in Fort Lauderdale , finding such allegations a "mere speculation " and " a mere extension of the ' scienter by status ' theory , which has [35] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 35 of 45
been uniformly rejected ," retain their validity in this case .
Fort Lauder dale , 683 F. S upp. 3d at 132 (quoting Lirette v .
Shiva Corp ., 27 F . S upp. 2d 268 , 283 (D . Mass . 1998)) .
D. Section 20(a) Against Individual Defendants is
Plausibly Alleged
Sect i on 20(a) provides that once a company has been found
to have violated the Exchange Act's substantive provisions ,
"[ e]very person who , directly or indirectly , controls " the
company " shall also be li able j ointly and several ly with and to
the same extent as [the co mp any ] unless the controlling
p e rs o n acted in good faith and did not directly or indi rectly
induce the act or acts constituting the violation or cause o f
action ." 15 U.S . C. § 78t(a) (emphasis added) . Thu s , "[ a ]
Section 20(a) claim ," 15 U. S . C. § 78t , "is derivative of an
underlying violation of the securities laws ." Fir e & Police
Pension Ass ' n of Colorado v . Abiomed, Inc., 778 F.3d 228 , 246
(1st C ir. 2015) (cit ing ACA Fin . Guar . Corp . v. Advest , Inc. ,
512 F . 3d 46, 67-68 (1st Cir. 2008)) . Accord ingl y , to plead a
viab le Section 20(a) cla im against the Individual Defendants ,
the P laintiffs mu st first plead an actio nable claim under
Sect i o n l0(b) of the Exchange Act and Ru l e l0 b - 5 . See In re
Sto n e & Webster, Inc ., Sec . Litig ., 424 F.3d 24 , 27 (1st Cir .
2005) ("In short , it is an essential element of the§ 20(a)
[ 36]
Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 36 of 45controlling person claims in question that plaintiffs show a
Ru l e l0b-5 violation by the controlled entity . ") ; Winters v .
Sternberg , 529 F . Supp . 2d 237 , 247 (D . Mass . 2008) ("A section
20(a) claim is dependent on establishing an ' independent
violat i on of the securities laws .' ") (quoting In re Focus
Enhancements , Inc . Sec . Litig ., 309 F . Supp . 2d 134 , 157 (D .
Mass . 2001) (Woodlock , J . )) .
Here , PS Lit a l leges Section 20(a) claims against the
Individual Defe n dants as contro ll ing persons within t h e meaning
of Sec t ion 20(a) on the grounds that :
[b ] y v i rtue of their high - level pos i tions , partic i pation
in and awareness of the Company ' s operations , intimate
know l edge of Pega ' s publicly - issued statements , and
facts alleged . the Individual Defendants had the
power to influence and control and did influence and
contro l, directly or indirect l y , the dec i sion - making of
the Company , including the content and dissemination of
t he a l legedly false and misleading statements giving
rise to the securities violations as alleged in [c ] ount
I.
Compl . ~ 316 . As to Trefler , PS Lit points to his position as
the CEO and Chairman of Pega since 1983 , who also owned , in the
re l evant time frame , 49 - 50 % of Pega ' s outstanding common shares ,
and who , allegedly , " exerted a tremendous amount of power over
the Company ." Id. 1 1 31 0- 1 1. Wi th respect to Stillwell , PS Lit
emphasizes his " expansive role at Pega on both the financial and
operat i onal side of the bus in ess " as the Company's COO and CFO .
Id . ~ 314. PS L it further alleges that
[ 37]
Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 37 of 45[t] he Individual Defendants signed SEC filings during the Relevant Period , including SOX Certifications in connection with these filings attesting to their accuracy , and thus were responsible for the content and dissemination of these materials , including the false and misleading statements therein. . the Individual Defendants themselves made numerous false and misleading statements during industry or earnings conference calls identified above , and thus had the ability to prevent these statements from being made or cause the statements to be corrected . Id . <JI 315 . Pega makes one argument against control liability - that the claim must fail " because Plaintiff has failed to plead a violat i on of§ l0(b) . " Defs .' Mem . at 20 n . 33. As this Court stated above , however , the l0b - 5 claim is adequately alleged . Since Section 20(a) imposes joint and several l i ability on " every person who , directly or indirectly , controls " the company , therefore , Trefler (as CEO of Pega) and Stillwell (as CFO of Pega) may be jointly and severally liable as control persons of Pega unless they "acted in good faith" and did not directly or indirectly induce the l0b - 5 violation . 15 U. S . C. § 78t(a) . As to both Trefler and Stillwell , control is alleged through their roles as senior executives of Pega , or at least through their signing of the relevant corporate disclosures (10 - K and 10 - Q). Stillwell , as COO and CFO , is implicated in the claim - - even though he may not have personally made the statement which gave rise to the l0b-5 claim . [38] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 38 of 45
Pega , however , does not offer an alternative argument in support of dismissing the section 20(a) claim - - it does not argue that Trefler or Stillwell acted in good faith , and did not directly or indirectly induce the lOb - 5 violation . Thus , PS Lit has adequately pleaded a claim under Section 20(a) as to both Trefler and Stilwell . E. Loss Causation As it did in Fort Lauderdale , this Court sees the loss causation -- i . e. , a " causal connection between the [] material misrepresentations " and the loss as adequately alleged by PS L it . Massachusetts Ret . Sys . v. CVS Caremark Corp ., 716 F . 3d 229 , 237 (1st Cir. 2013). Pega allegedly concealed from the market its corporate espionage against Appian , while falsely reassuring investors that it would never misappropriate trade secrets. Compl . t 154 . After Appian sued and the existence of the Virginia Action was disclosed , Pega continued misleading investors stating that the claims against it were "without merit . " Id . 1 26 3 . As the reality of the Virginia Action trial began " leak[ing] into the marketplace , " Pega ' s stock price started sinking, falling dramatically following the multi - billion - dollar judgment. Id . 1 263 - 66. The allegations go beyond a correlation , and into the causation territory . Contrary to the Pega ' s arguments , Defs . ' [39) Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 39 of 45
Mem . at 18-19 , PS Lit mentions and quotes several analysts commenting on the negative impact that the verdict and the subsequent judgement may have (had) on Pega ' s stock price , tying that drop in stock to the verdict and Pega ' s misappropriation of trade secrets . Compl . 11 267-68 , 271. Moreover , PS Lit alleges that The timing and magnitude of the decline in the price of Pega ' s stock , particularly when compared to the movements of the NASDAQ stock index and the S&P Software Index . . negate any inference that the loss suffered by Plaintiff was caused by changed market conditions , macroeconomic or industry factors , or Company - specific facts unrelated to Defendants ' fraudulent conduct. Id. 1 272. Taken as true , it is thus apparent that Pega's disclosure of the verdict " relate[s] to the same subject matter as the alleged misrepresentation[s] ." Massachusetts Ret . Sys. , 716 F . 3d at 240 . Accordingly , PS Lit has sufficiently alleged l oss causation at this stage . F . Common Law Fraud Claim (Count IV) PS Lit also brings, and Pega challenges , a claim for common law fraud, premised on substantially the same allegations of false or misleading statements and omissions as the federal securities fraud claim. Compl. 11 319-325. ; Pl.'s Opp ' n at 20 . Claims of fraud under Massachusetts law require a showing of essentially the same elements as Rule l0b-5--to recover for [40] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 40 of 45
fraud , a plaintiff must prove8 that the defendant : " ( 1) ' made a false representation of material fact '; ( 2) ' with knowledge of its falsity '; ( 3) ' for the purpose of inducing the plaintiff [ to act on this representation '; ( 4) ' that the plaintiff [ ] reasonably relied on the representation as true '; and (5) ' that [ the pla i ntiff] acted upon it to their damage .'" AcBel Polytech , Inc . v . Fairchild Semiconductor I nt ' l, Inc ., 928 F . 3d 110 , 122 (1st Cir. 2019) (citing Cumis Ins . Soc ' y , Inc . v . BJ ' s Wholesale Club , Inc. , 455 Mass . 458 , 470 (2009)) . "A false representation can occur through omission , or ' the failure to d i sc l ose a material fact .'" Walgreen Co . v . Haseotes , 778 F . Supp . 3d 264 , 285 (D . Mass . 2025) (Guzman , J.) (quoting Van v . Amer i can Ai rlines , Inc. , 370 F . Supp . 3d 218 , 232 (D . Mass . 2019)) . " [T ] o establish a fraud by omission claim , a plaintiff must establish defendants ' ' concealment of material information ' and ' duty requiring disclosure .'" AcBel Polytech , Inc , 928 F . 3d at 122 (quoting Sahin v . Sahin , 435 Mass . 396 , 403 n . 9 (2001)) . PS Lit raises essentially the same allegations as to both the federa l securities fraud and common law fraud claims . Since " [t ] he elements of common law fraud are substantively similar to those of securities fraud under Rule l0b-5 ," In re Lernout & 8 By a preponderance of the evidence . See Compagnie De Reassurance D' Ile De France v . New England Reinsurance Corp ., 57 F . 3d 56 , 72 (1st Cir . 1995) . [ 41 ] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 41 of 45
Hauspie Sec . Litig ., 230 F . Supp . 2d 152 , 176 (D . Mass. 2002) (Saris , J . ) (citations omitted), the forgoing analysis would mirror the discussion above . 9 As this Court rules the PS Lit allegations as to material misrepresentations by Pega and Trefler and strong inference of scienter are adequately pleaded, the same conclusion ought be reached here. Since the PSLRA I pleading standard is met, this relatively less stringent standard is also met. Accordingly , Pega ' s motion to dismiss the common law fraud claim (count IV) is DENIED . G. Negligent Misrepresentation Claim Pega further challenges PS Lit ' s allegations of negligent misrepresentation as to all Defendants . "The standard for a negligent representation claim differs . " from the fraud standard in that it" . does not require an intent to deceive or actual knowledge that a statement is false." AcBel Polytech , Inc., 928 F . 3d at 122 (quoting Cumis Ins . Soc'y , 455 Mass. at 471). "To sustain a claim for negligent misrepresentation under Massachusetts law , " however , "a plaintiff must show that the defendant : (1) in the course of its business , (2) supplied false information for the 9 See also Kennedy v . Josephthal & Co., 635 F . Supp. 399 , 401 (D . Mass . 1985) (Mazzone, J . ) (noting that elements of common law fraud are essentially the same as those of l0b-5 fraud) (citation omitted) . [42] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 42 of 45
guidance of others (3) in their business transacti o ns , (4) causing and resulting in pecuniary loss to those others (5) by their justifiable reliance upon the information , and (6) that it failed to exercise reasonable care or competence in obtaining or communicating the information ." Optim LLC v . Freeman Mfg . LLC, 774 F . Supp . 3d 274 , 288 (D. Mass . 2025) (Guzman, J.) (quoting Cummings v . HPG Int ' l , Inc. , 244 F . 3d 16 , 24 (1st Cir. 2001)) (citations omitted) . " Negligent misrepresentation claims " are also still " subject to Rule 9(b) ' where the core allegations effective l y charge fraud .'" In re LastPass Data Sec . Incident Litig ., 742 F. Supp. 3d 1 09 , 125 (D . Mass. 2024) (Saris , J . ) (quoting North Am . Cath . Educ. Programming Found . , Inc. v. Cardinale , 567 F.3d 8 , 15 (1st Cir . 2009)) . Pega argues this claim fails because the "Plaintiff does not plausibly allege a materially false statement . . or that Defendants did not exercise ' reasonable care or competence in communicating the information ' conveyed. " Defs . ' Mem . at 20 . As this Court has already ruled , however , several Pega and Individual Defendants ' statements are plausibly alleged to have been false at the time they were communicated. Unlike a claim for fraud or a l0b-5 violation, a negligent misrepresentation claim does not require intentional wrongdoing or scienter , which makes defendant Stillwell ' s lack of scienter immaterial . PS Lit [ 4 3 l Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 43 of 45
adequately alleges Pega and the Individual Defendant ' s failure to exercise reasonable care in providing information. Compl. ii 328-32 . PS Lit also makes extensive and adequate allegations as to the reliance on the false information (by Pega ' s SEC filings , impressions of the Defendants ' statements , and reliance on these inputs when creating a valuation model of Pega and purchasing its stock) . Compl . ii 277 - 81. Thus , PS Lit did plausibly allege a materially false statement and that Pega and the Individual Defendants breached their duty _of care in communicating critical information to i nvestors . Therefore , the motion to dismiss the negligent representation claim (count V) is DENIED . V . CONCLUSION For the reasons stated above , Pega's and Individual Defendants ' motion to dismiss this action , ECF No . 26 , is hereby ALLOWED in part and DENIED in part. In sum , the motion is ALLOWED as to count II (10b5(a) and (c) scheme) , and with respect to defendant Stillwell , as to count I (violation of Section lO(b) and Rule lOb-5) and count IV (Common Law Fraud) . The motion is DENIED as to the improper assignment , counts I and IV (with respect to the defendants Pega and Trefler) , count III (the Section 20(a) claim) , and count V [44] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 44 of 45
(negligent misrepresentation as to all Defendants) . SO ORDERED . of the UNITED STATES 1 0 10 This is how my predecessor , Peleg Sprague (D . Mass . 1841- 1865) , would sign official documents . Now that I ' m a Senior District Judge I adopt this format in honor of all the j udicial colleagues , state and federal , with whom I have had the privilege to serve over t he past 47 years . [ 4 5 ] Case 1:24-cv-12996-WGY Document 53 Filed 01/08/26 Page 45 of 45
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