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Case 3:13-cv-01684-N Document 1 Filed 05/02/13 Page 1 of 21 PagelD 1
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
Individually and on Behalf of All Others Similarly Situated,
Plaintiff,
V.
No. 3:13-cv-1684
CLASS ACTION
COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS
DIGITAL GENERATION, INC., NEIL : DEMAND FOR JURY TRIAL
NGUYEN, CRAIG HOLMES, SCOTT K. GINSBURG, and OMAR CHOUCAIR
Defendants.
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Plaintiff ("Plaintiff'), individually and on behalf of all other persons
similarly situated, by her undersigned attorneys, for her complaint against defendants, alleges
the following based upon personal knowledge as to herself and her own acts, and information
and belief as to all other matters, based upon, inter al/a, the investigation conducted by and
through her attorneys, which included, among other things, a review of the defendants' public
documents, conference calls and announcements made by defendants, United States Securities
and Exchange Commission ("SEC") filings, wire and press releases published by and regarding
Digital Generation, Inc. ("Digital Generation" or the "Company"), analysts' reports and
advisories about the Company, and information readily obtainable in the public record. Plaintiff
believes that substantial evidentiary support will exist for the allegations set forth herein after a
reasonable opportunity for discovery.
NATURE OF THE ACTION
1. This is a federal securities class action on behalf of a class consisting of all
persons other than defendants who purchased or otherwise acquired Digital Generation
securities between June 20, 2011 and February 19, 2013, both dates inclusive (the "Class
Period"), seeking to recover damages caused by defendants' violations of the federal securities
laws and to pursue remedies under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934
(the "Exchange Act") and Rule lOb-5 promulgated thereunder against the Company and certain
of its top officials.
2. Digital Generation purports to be the "world's leading ad management and
distribution platform." The Company connects over 12,000 global advertisers and 5,000
agencies with their targeted audiences through an expansive network of over 40,000 media
destinations across broadcast and digital in 75 countries, managing approximately ten percent
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of the world's media assets.
3. Throughout the Class Period, Defendants made materially false and misleading
statements regarding the Company's business, financial performance, and prospects.
4. During the Class Period, Digital Generation touted itself as a Company
achieving steady and consistent growth, and poised for a strategic buyout on the basis of the
Company's strong performance and diversification. In order to cultivate this image, Defendants
made a series of false and/or misleading statements regarding its growth and value of its
acquisitions, failing to disclose that: (i) the Company's online segment was grossly
underperforming, and well below the value reported to investors; (ii) past acquisitions had
masked the Company's declining revenue base; (iii) the Company had vastly overpaid for its
acquisition of Media Mind, Inc. ("Media Mind") and other online segments in order to appear
to be an attractive acquisition target; (iv) the Company was not sufficiently poised for a
strategic partnership or buyout; and (v) as a result of the above, the Company's financial
statements were materially false and misleading at all relevant times.
5. In order to attract attention as a potential acquisition target, the Company went
on a shopping spree with borrowed money, buying up five other media companies, and nearly
quadrupling the size of Digital Generation's online segment, while burdening the Company's
balance sheet with over $400 million in debt. Notably, the Company reported to investors that
the total value of the assets acquired from these five transactions was $623.5 million.
6. Defendants' largest acquisition, completed on July 25, 2011, was a tender offer
for the shares of Media Mind, Inc. (Media Mind). At the time of the acquisition, Defendants
stated that the total transaction value of the Media Mind acquisition was $517 million in equity
value. The Company informed investors that the value of Media Mind assets acquired was
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$499.3 million, including $220,866,000 in goodwill.
7. After concluding its shopping spree and touting to investors the synergies and
benefits of a combined TV and online business model, rumors began to spread, shortly after
announcement of Digital Generation's first quarter 2012 results, that the Company was poised
for a strategic buyout.
8. In reaction to this news, the Company's share price jumped $2.54 per share to
$12.13, an increase of roughly 26% on June 6, 2012, after a report was published regarding a
potential sale of the Company.
9. On July 16, 2012 the Company issued a press release confirming that, "its Board
of Directors is undergoing a strategic review of the feasibility and relative merits of various
financial strategies for the company, which may include partnerships, strategic business model
alternatives, a sale or other transaction." The Company had retained Goldman Sachs & Co. to
act as its strategic advisor.
10. On this news, the Company's shares jumped $2.19 per share to close at $11.80
on July 17, 2012, an increase of approximately 23%.
11. On August 9, 2012, the Company announced disappointing earnings from
continuing operations of $0.5 million, or $0.02 per diluted share. Despite these lackluster
results, Defendants attempted to assuage investors regarding the Company's prospects, issuing
a press release which reiterated, "[a]s announced on July 16, 2012 [the Company's] Board of
Directors has hired Goldman, Sachs & Co. to advise and assist the Board in its strategic review
of the feasibility and relative merits of various financial strategies for the company. .
12. On that same day the Company filed its quarterly report for the period ending
June 30, 2012. Amongst other disclosures, the Company reported that the value of its goodwill
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was $583,695,000, $349 million of which was attributable to its online segment.
13. The wholly unrealistic valuations placed by the Company on its online segment
acquisitions could not be sustained indefinitely. On November 8, 2012, the Company reported
that for the quarter ending September 30, 2012, an impairment charge of over $208 million was
taken against the online media assets it had just recently acquired: Media Mind, Inc., Eye
Wonder and Peer 39. This impairment represented a staggering 33% write-down of the initial
purchase price of these assets. The Company also reported that its television unit took an
impairment charge of over $131 million.
14. Given the significant impairment taken to these key assets of the Company,
potential strategic buyers were simply unwilling to purchase Digital Generation at any
substantial premium to its current share price. As a result of this lack of interest, on February
19, 2013, the Company issued a press release announcing that a Special Committee of the
Company's Board of Directors had failed to approve any transaction or strategic alternative. In
addition, the Company recorded an additional $11.4 million write-down of its recently acquired
online segments.
15. On this news, the Company's shares dropped $2.53 per share to close on
February 19, 2013 at $6.45 per share, a decline of roughly 28%.
16. As a result of defendants' wrongful acts and omissions, and the precipitous
decline in the market value of the Company's securities, Plaintiff and other Class members
have suffered significant losses and damages.
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JURISDICTION AND VENUE
17. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a)
of the Exchange Act (15 U.S.C. § 78j(b) and 78t(a)) and Rule lob-S promulgated thereunder
(17 C.F.R. § 240.lOb-5).
18. This Court has jurisdiction over the subject matter of this action pursuant to § 27
of the Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331.
19. 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 Digital Generation's principal place of business is located
within this District.
20. In connection with the acts, conduct and other wrongs alleged in this Complaint,
defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,
including but not limited to, the United States mail, interstate telephone communications and
the facilities of the national securities exchange.
PARTIES
21. Plaintiff as set forth in the attached Certification, acquired Digital Generation
securities at artificially inflated prices during the Class Period and has been damaged thereby.
22. Defendant Digital Generation is a Delaware corporation with its principal
executive offices located at 750 West John Carpenter Freeway, Suite 700, Irving Texas.
Digital Generation's common stock trades on the NASDAQ under the ticker symbol "DGIT."
23. Defendant Neil Nguyen ("Nguyen") is currently the Company's President and
Chief Executive Officer.
24. Defendant Scott Ginsburg ("Ginsburg") is the Company's Chairman and also
served as the Company's Chief Executive Officer from 2003 through January 2012.
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25. Defendant Craig Holmes ("Holmes") has been the Company's Chief Financial
Officer ("CFO") since November 8, 2012.
26. Defendant Omar Choucair ("Choucair") served as the Company's CFO and
Executive Vice President from July 1999 until his resignation in June 2012. During this period
he also served on the Company's Board of Directors.
27. The defendants referenced above in ¶J 23 - 26 are sometimes referred to herein
as the "Individual Defendants."
SUBSTANTIVE ALLEGATIONS Background
28. Digital Generation purports to be the "world's leading ad management and
distribution platform." The Company connects over 12,000 global advertisers and 5,000
agencies with their targeted audiences through an expansive network of over 40,000 media
destinations across broadcast and digital in 75 countries, managing approximately ten percent
of the world's media assets. Digital Generation helps advertisers engage with consumers across
television and online media while delivering timely and impactful ad campaigns.
29. The Company traditionally had focused its business model on TV advertising,
but after a series of acquisitions attempted to shift towards a more balanced combination of
online and TV advertising revenue.
Materially False and Misleading Statements Issued Duriiw the Class Period
30. On June 16, 2011 the Company announced, through a press release and SEC
filing, a tender offer for all the assets of Media Mind. And, later that day held a conference call
to discuss the proposed acquisition of Media Mind, and the benefits to Digital Generation
shareholders, calling the proposed transaction a "game-changing combination," and predicting
a large growth rate to Media Mind's core business after the transaction.
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31. On July 25, 2011, the Company filed a Form SC TO-T/A announcing that the
proposed tender offer had been consummated.
32. On August 9, 2011, the company filed with the SEC its quarterly report for the
period ending June 30, 2011, and reported total revenues and income for the quarter of $67.8
million and 10.2 million respectively. The Company also reported a goodwill asset value of
over $243 million.
33. On November 10, 2011, the Company filed with the SEC its quarterly report for
the period ending September 30, 2011, and reported total revenues for the quarter of $84.6
million. The Company also reported a loss of $4.1 million, and a goodwill asset value of over
$494 million. The rise in the Company's goodwill value was attributed to three recent
acquisitions by the Company, namely the Media Mind acquisition, which the Company
reported brought over a $220.9 million goodwill value to Digital Generation's balance sheet.
34. On February 29, 2012, the Company filed with the SEC its annual report for the
period ending December 31, 2011, and reported annual revenues of $324.3 million including,
$77.5 million contributed from the Company's online segment. The Company also reported net
income of $24.5 million, and a goodwill asset value of $576.4 million. The increase to goodwill
value resulted namely after an increase of over $68 million to the goodwill value assigned to
the Media Mind acquisition.
35. On May 9, 2012 the Company issued a press release announcing its first quarter
2012 results. In that press release the Company announced that consolidated revenue for the
three months ended March 31, 2012 increased 46% to $92.8 million, compared to $63.5 million
in the same period of 2011. Digital Generation's first quarter income from continuing
operations was $1.3 million, or $0.05 per diluted share, compared to $12.9 million, or $0.46 per
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diluted share, in the year earlier period.
36. On May 11, 2012, the Company filed with the SEC its quarterly report for the
period ending March 31, 2012, and amongst various disclosures stated that Company's
goodwill asset value was approximately $576.9 million, with the Company's online segment
accounting for over $342 million of its goodwill value.
37. Following the announcement of its first quarter 2012 results, and after its
acquisition spree, rumors began to spread that the Company was poised for a strategic buyout,
and the Company's stock prices jumped $2.54 per share to $12.13 per share a rise of roughly
26% on June 6, 2012, after a report was published regarding a potential sale of the Company.
38. On June 6, 2012, the Company announced Defendant Choucair's resignation
from the Company.
39. On July 16, 2012 the Company issued a press release confirming that, "its Board
of Directors is undergoing a strategic review of the feasibility and relative merits of various
financial strategies for the company, which may include partnerships, strategic business model
alternatives, a sale or other transaction."
40. On news of the potential sale, the Company's shares jumped $2.19 per share to
close at $11.80 on July 17, 2012, arise of roughly 23%.
41. On August 9, 2012 the Company issued a press release announcing its financial
results for the second quarter 2012. The Company stated that consolidated revenue for the three
months ended June 30, 2012 increased 42% to $96.3 million, compared to $67.9 million in the
same period of 2011. The Company's second quarter income from continuing operations was
$0.5 million, or $0.02 per diluted share, compared to $10.5 million, or $0.38 per diluted share,
in the year earlier.
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42. The Company filed with the SEC its quarterly report for the period ending June
30, 2012, and amongst various disclosures stated that Company's goodwill asset value was
approximately $583.7 million, with the Company's online segment accounting for over $349
million of this goodwill value.
43. In response to these lackluster results the Company's shares dropped $1.88 per
share to close at $9.32 on August 10, 2012, a decline of roughly 17%.
44. In an attempt to prop up the Company's stock despite its poor financial
performance, Defendants issued a press release reminding investors that, "[a]s announced on
July 16, 2012 [the Company's] Board of Directors has hired Goldman, Sachs & Co. to advise
and assist the Board in its strategic review of the feasibility and relative merits of various
financial strategies for the company. .
45. On November 8, 2012 the Company issued a press release announcing its
financial results for the third quarter 2012. The Company reported consolidated revenue for the
three months ended September 30, 2012 increased 11% to 93.8 million, compared to $84.6
million in the same period of 2011. The Company also reported that its third quarter loss from
continuing operations, which included a goodwill impairment charge related to the online
segment of $208.2 million, was $219.7 million, or $7.96 per diluted share, compared to a loss
of $2.7 million, or $0.10 per diluted share, in the year earlier period.
46. In connection with the Company's impairment charge, the Company stated:
During the third quarter, the Company conducted a goodwill impairment test of our online reporting unit. We estimated the fair value of the online reporting unit using a weighting of fair values derived from an income approach and market approach. Upon estimating the fair value of the online unit's goodwill, we determined it was less than its carrying value. As a result, DO's third quarter operating results include a $208.2 million non-cash charge before income taxes related to the write-down of our online reporting unit's goodwill.
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47. On November 9, 2012, the Company filed with the SEC its quarterly report for
the period ending September 30, 2012, and amongst various disclosures stated that Company's
goodwill asset value had shrunk to approximately $380 million, with the Company's online
segment now accounting for only $145.5 million of Digital Generation's goodwill value. This
decline represented a nearly 60% decline in the goodwill value recorded for these assets a mere
five months before. The Company also disclosed that it took an impairment charge of over
$131 million to its television segment.
48. As a result of defendants' wrongful acts and omissions, and the precipitous
decline in the market value of the Company's securities, Plaintiff and other Class members
have suffered significant losses and damages.
49. The statements referenced in ¶J 30- 46 were materially false and misleading
because: (i) the Company's online segment was not as valuable as the Company had disclosed to
investors; (ii) past acquisitions had masked the Company's declining revenue base; (iii) the
Company had vastly overpaid for its acquisition of Media Mind, Inc. ("Media Mind") and other
online segments in order to appear to be an attractive acquisition target; (iv) the Company was
not sufficiently poised for a strategic partnership or buyout; and (v) as a result of the above, the
Company's financial statements were materially false and misleading at all relevant times.
THE TRUTH EMERGES
50. On February 19, 2013, the Company issued a press release announcing its fourth
quarter and full year 2012 results. The Company stated that consolidated revenue for the three
months ended December 31, 2012 decreased 4% to 103.6 million, compared to $108.3 million in
the same period of 2011. The Company reported that its annual loss was over $239 million and
its fourth quarter loss from continuing operations was $20.8 million, or $0.75 per diluted share,
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compared to income from continuing operations of $5.8 million, or $0.21 per diluted share, in
the year earlier period. The Company also announced that it had taken an additional $11.4
million write-down to its online segment's goodwill value, bringing the annual impairment to
goodwill to approximately $220 million, a staggering 63% of the value it had touted to investors
a mere five months before.
51. Also, on February 19, 2013, the Company announced that its efforts to find a
buyer or strategic partner failed, stating:
Since August 2012, the Special Committee has explored numerous strategic alternatives available to the Company, including a sale of all or parts of the business, a spin-off and split-off of parts of the business, capital structure alternatives, and potential merger combinations. As part of its active review, the Special Committee and its financial advisor, Goldman Sachs, engaged with over 45 potential financial and strategic partners (including competitors of the Company) to determine their levels of interest in a strategic transaction involving the Company. None of the parties contacted by the Special Committee presented a definitive transaction for final approval by the Special Committee. The Special Committee is not recommending any transaction or other strategic alternative to the Board. Accordingly, the Special Committee has advised the Board that its review of strategic alternatives has concluded.
52. On this news, Digital Generation's shares declined $8.98 to $6.45 per share or
nearly 28%, on unusually high trading volume of 4.6 million shares.
PLAINTIFF'S CLASS ACTION ALLEGATIONS
53. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil
Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased or
otherwise acquired Digital Generation securities during the Class Period (the "Class"); and
were damaged thereby. Excluded from the Class are defendants herein, the officers and
directors of the Company, at all relevant times, members of their immediate families and their
legal representatives, heirs, successors or assigns and any entity in which defendants have or
had a controlling interest.
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54. The members of the Class are so numerous that joinder of all members is
impracticable. Throughout the Class Period, Digital Generation securities were actively traded
on the NASDAQ. While the exact number of Class members is unknown to Plaintiff at this
time and can be ascertained only through appropriate discovery, Plaintiff believes 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 Digital Generation or its transfer
agent and may be notified of the pendency of this action by mail, using the form of notice
similar to that customarily used in securities class actions.
55. Plaintiff's claims are typical of the claims of the members of the Class as all
members of the Class are similarly affected by defendants' wrongful conduct in violation of
federal law that is complained of herein.
56. Plaintiff will fairly and adequately protect the interests of the members of the
Class and has retained counsel competent and experienced in class and securities litigation.
Plaintiff has no interests antagonistic to or in conflict with those of the Class.
57. Common questions of law and fact exist as to all members of the Class and
predominate over any questions solely affecting individual members of the Class. Among the
questions of law and fact common to the Class are:
• whether the federal securities laws were violated by defendants' acts as alleged herein;
• whether statements made by defendants to the investing public during the Class Period misrepresented material facts about the business, operations and management of Digital Generation;
• whether the Individual Defendants caused Digital Generation to issue false and misleading financial statements during the Class Period;
• whether defendants acted knowingly or recklessly in issuing false and misleading financial statements;
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• whether the prices of Digital Generation securities during the Class Period were artificially inflated because of the defendants' conduct complained of herein; and
• whether the members of the Class have sustained damages and, if so, what is the proper measure of damages.
58. 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 impracticable. Furthermore, as
the damages suffered by individual Class members may be relatively small, the expense and
burden of individual litigation make it impossible for members of the Class to individually
redress the wrongs done to them. There will be no difficulty in the management of this action
as a class action.
59. Plaintiff will rely, in part, upon the presumption of reliance established by the
fraud-on-the-market doctrine in that:
• defendants made public misrepresentations or failed to disclose material facts during the Class Period;
• the omissions and misrepresentations were material;
• Digital Generation securities are traded in an efficient market;
• the Company's shares were liquid and traded with moderate to heavy volume during the Class Period;
• the Company traded on the NASDAQ and was covered by multiple analysts;
• the misrepresentations and omissions alleged would tend to induce a reasonable investor to misjudge the value of the Company's securities; and
• Plaintiff and members of the Class purchased, acquired and/or sold Digital Generation securities between the time the defendants failed to disclose or misrepresented material facts and the time the true facts were disclosed, without knowledge of the omitted or misrepresented facts.
60. Based upon the foregoing, Plaintiff and the members of the Class are entitled to
a presumption of reliance upon the integrity of the market.
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COUNT I
(Against All Defendants For Violations of Section 10(k) and Rule lOb-S Promulgated Thereunder)
61. Plaintiff repeats and realleges each and every allegation contained above as if
fully set forth herein.
62. This Count is asserted against defendants and is based upon Section 10(b) of the
Exchange Act, 15 U.S.C. § 78j(b), and Rule lob-S promulgated thereunder by the SEC.
63. During the Class Period, defendants engaged in a plan, scheme, conspiracy and
course of conduct, pursuant to which they knowingly or recklessly engaged in acts,
transactions, practices and courses of business which operated as a fraud and deceit upon
Plaintiff and the other members of the Class; made various untrue statements of material facts
and omitted to state material facts necessary in order to make the statements made, in light of
the circumstances under which they were made, not misleading; and employed devices,
schemes and artifices to defraud in connection with the purchase and sale of securities. Such
scheme was intended to, and, throughout the Class Period, did: (i) deceive the investing public,
including Plaintiff and other Class members, as alleged herein; (ii) artificially inflate and
maintain the market price of Digital Generation securities; and (iii) cause Plaintiff and other
members of the Class to purchase or otherwise acquire Digital Generation securities and
options at artificially inflated prices. In furtherance of this unlawful scheme, plan and course of
conduct, defendants, and each of them, took the actions set forth herein.
64. Pursuant to the above plan, scheme, conspiracy and course of conduct, each of
the defendants participated directly or indirectly in the preparation and/or issuance of the
quarterly and annual reports, SEC filings, press releases and other statements and documents
described above, including statements made to securities analysts and the media that were
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designed to influence the market for Digital Generation securities. Such reports, filings,
releases and statements were materially false and misleading in that they failed to disclose
material adverse information and misrepresented the truth about Digital Generation's finances
and business prospects.
65. By virtue of their positions at Digital Generation, defendants had actual
knowledge of the materially false and misleading statements and material omissions alleged
herein and intended thereby to deceive Plaintiff and the other members of the Class, or, in the
alternative, defendants acted with reckless disregard for the truth in that they failed or refused
to ascertain and disclose such facts as would reveal the materially false and misleading nature
of the statements made, although such facts were readily available to defendants. Said acts and
omissions of defendants were committed willfully or with reckless disregard for the truth. In
addition, each defendant knew or recklessly disregarded that material facts were being
misrepresented or omitted as described above.
66. Information showing that defendants acted knowingly or with reckless disregard
for the truth is peculiarly within defendants' knowledge and control. As the senior managers
and/or directors of Digital Generation, the Individual Defendants had knowledge of the details
of Digital Generation's internal affairs.
67. The Individual Defendants are liable both directly and indirectly for the wrongs
complained of herein. Because of their positions of control and authority, the Individual
Defendants were able to and did, directly or indirectly, control the content of the statements of
Digital Generation. As officers and/or directors of a publicly-held company, the Individual
Defendants had a duty to disseminate timely, accurate, and truthful information with respect to
Digital Generation's businesses, operations, future financial condition and future prospects. As
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a result of the dissemination of the aforementioned false and misleading reports, releases and
public statements, the market price of Digital Generation securities was artificially inflated
throughout the Class Period. In ignorance of the adverse facts concerning Digital Generation's
business and financial condition which were concealed by defendants, Plaintiff and the other
members of the Class purchased or otherwise acquired Digital Generation 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.
68. During the Class Period, Digital Generation securities were traded on an active
and efficient market. Plaintiff and the other members of the Class, relying on the materially
false and misleading statements described herein, which the defendants made, issued or caused
to be disseminated, or relying upon the integrity of the market, purchased or otherwise acquired
shares of Digital Generation securities at prices artificially inflated by defendants' wrongful
conduct. Had Plaintiff and the other members of the Class known the truth, they would not
have purchased or otherwise acquired said securities, or would not have purchased or otherwise
acquired them at the inflated prices that were paid. At the time of the purchases and/or
acquisitions by Plaintiff and the Class, the true value of Digital Generation securities was
substantially lower than the prices paid by Plaintiff and the other members of the Class. The
market price of Digital Generation securities declined sharply upon public disclosure of the
facts alleged herein to the injury of Plaintiff and Class members.
69. By reason of the conduct alleged herein, defendants knowingly or recklessly,
directly or indirectly, have violated Section 10(b) of the Exchange Act and Rule lOb-5
promulgated thereunder.
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70. As a direct and proximate result of defendants' wrongful conduct, Plaintiff and
the other members of the Class suffered damages in connection with their respective purchases,
acquisitions and sales of the Company's securities during the Class Period, upon the disclosure
that the Company had been disseminating misrepresented financial statements to the investing
public.
COUNT II
(Violations of Section 20(a) of the Exchange Act Against The Individual Defendants)
71. Plaintiff repeats and realleges each and every allegation contained in the
foregoing paragraphs as if fully set forth herein.
72. During the Class Period, the Individual Defendants participated in the operation
and management of Digital Generation, and conducted and participated, directly and indirectly,
in the conduct of Digital Generation's business affairs. Because of their senior positions, they
knew the adverse non-public information about Digital Generation's misstatement of income
and expenses and false financial statements.
73. As officers and/or directors of a publicly owned company, the Individual
Defendants had a duty to disseminate accurate and truthful information with respect to Digital
Generation's financial condition and results of operations, and to correct promptly any public
statements issued by Digital Generation which had become materially false or misleading.
74. Because of their positions of control and authority as senior officers, the
Individual Defendants were able to, and did, control the contents of the various reports, press
releases and public filings which Digital Generation disseminated in the marketplace during the
Class Period concerning Digital Generation's results of operations. Throughout the Class
Period, the Individual Defendants exercised their power and authority to cause Digital
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Generation to engage in the wrongful acts complained of herein. The Individual Defendants
therefore, were "controlling persons" of Digital Generation within the meaning of Section 20(a)
of the Exchange Act. In this capacity, they participated in the unlawful conduct alleged which
artificially inflated the market price of Digital Generation securities.
75. Each of the Individual Defendants, therefore, acted as a controlling person of
Digital Generation. By reason of their senior management positions and/or being directors of
Digital Generation, each of the Individual Defendants had the power to direct the actions of,
and exercised the same to cause, Digital Generation to engage in the unlawful acts and conduct
complained of herein. Each of the Individual Defendants exercised control over the general
operations of Digital Generation and possessed the power to control the specific activities
which comprise the primary violations about which Plaintiff and the other members of the
Class complain.
76. By reason of the above conduct, the Individual Defendants are liable pursuant to
Section 20(a) of the Exchange Act for the violations committed by Digital Generation.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff demands judgment against defendants as follows:
A. Determining that the instant action may be maintained as a class action under
Rule 23 of the Federal Rules of Civil Procedure, and certifying Plaintiff as the Class
representative;
B. Requiring defendants to pay damages sustained by Plaintiff and the Class by
reason of the acts and transactions alleged herein;
C. Awarding Plaintiff and the other members of the Class prejudgment and post-
judgment interest, as well as their reasonable attorneys' fees, expert fees and other costs; and
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Case 3:13-cv-01684-N Document 1 Filed 05/02/13 Page 20 of 21 PagelD 20
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.
Dates: May 2, 2013
Respectfully submitted,
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