RIO DE JANEIRO, July 30 (Reuters) - A U.S. judge earlier this month kept alive a lawsuit against Brazil’s Petrobras in part because he doubted the state-led oil company’s contention that some assurances it made about ethics and governance amounted to “mere puffery.”
District Judge Jed Rakoff, of Manhattan federal court, described puffery as a sort of harmless corporate bragging. To be defined as puffery, such statements, he wrote, would have to be “too general to cause a reasonable investor to rely upon them.”
If that is the case, they are “inactionable,” or not grounds for a lawsuit, he said, adding that a trial would determine where and if Petrobras’ puffery defense is valid.
Rakoff on July 10 declined to dismiss a class action accusing the company of misleading investors for years about a giant price-fixing, bribery and political kickback scandal. The court disclosed on Thursday the reasoning behind that decision.
The investors are seeking undetermined damages from Petroleo Brasileiro SA, as Petrobras is formally known, and from some its former senior executives, for tens of billions of dollars in share losses that they say happened as a result of the scandal.
Rakoff said Petrobras argued that the following alleged statements are “mere puffery”:
* That Petrobras established a commission “aimed at assuring the highest ethical standards.”
* That Petrobras “adopts the best corporate-governance practices.”
* That Petrobras undertook to “conduct its business with transparency and integrity” and to “refuse any corrupt and bribery practices, keeping formal procedures for control and consequences of any transgressions.”
* That it was “fully committed to implementing a fair and transparent operation.”
* That it “will invest all our resources with efficiency and discipline.”
Petrobras officials were not immediately available for comment.
“While some of the alleged statements, viewed in isolation may be mere puffery, nonetheless, when (as here alleged), the statements were made repeatedly in an effort to reassure the investing public about the company’s integrity, a reasonable investor could rely on them as reflective of the true state of affairs at the company,” Rakoff wrote. (Editing by Steve Orlofsky)