A Texas federal judge has dismissed a securities class action lawsuit filed against AT&T and several of its executives, ruling that the plaintiffs failed to meet the heightened pleading requirements for securities fraud related to allegations of misleading investors about lead-covered copper cables in the company’s network.
The lawsuit, part of a broader multidistrict litigation, accused AT&T of failing to disclose the presence of lead in obsolete telephone cables and claimed executives knowingly concealed the risks. However, on Monday, U.S. District Judge David C. Godbey issued an opinion stating the complaint did not adequately allege knowledge of wrongdoing (scienter) by the defendants. The judge criticized the plaintiffs for relying on generalized group allegations and unsigned “issue briefs” that could not be attributed to any specific individual.
Judge Godbey granted the plaintiffs 30 days to amend their complaint but highlighted that the motives presented—cost reduction and incentive compensation—were insufficient to establish fraud. “The desire to reduce costs is a motivation held by all businesses and is so generic as to not be actionable,” the opinion reads. Additionally, incentive compensation “can hardly be the basis on which an allegation of fraud is predicated,” the judge emphasized.
While the overall complaint was dismissed, the court found certain statements by AT&T about cost savings from copper cable reclamation and environmental stewardship to be potentially actionable. Specifically, claims regarding removal and disposal of regulated materials and hazardous waste were challenged as possibly false, based on allegations that lead-lined cables were left in place, potentially causing environmental contamination.
The investors originally filed the suit in 2023, following investigative reporting on health impacts to telecom workers from lead-covered cables. The reporting coincided with a nearly 7% drop in AT&T’s stock on heavy trading volume. The case has since attracted similar suits consolidated in Texas federal court.
Representatives for the parties have not yet commented on the ruling.
