409 F. App'x 412
2d Cir.2011Background
- Amorosa purchased AOL stock before the AOL-Time Warner merger and later filed suit after alleged accounting fraud came to light.
- Amorosa asserted §11 of the Securities Act, and §§14(a) and 10(b) of the Exchange Act, plus state-law claims for aiding and abetting fiduciary duties and fraud.
- The district court granted EY’s dismissal motions, dismissing §14(a) and §10(b) for lack of loss causation, and dismissing §11 as time-barred or lacking loss causation; held no federal holder claim and SLUSA precluded state claims; sanctions against Gray were imposed.
- Amorosa argues loss causation can be shown by market reactions to disclosures; EY argues the complaint fails to allege a causal link between misstatements and losses.
- The panel reviews the district court’s rulings de novo on the federal claims and for abuse of discretion on sanctions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Loss causation for §14(a) and §10(b)? | Amorosa—loss causation shown by market response to disclosures. | EY—no specific corrective disclosure tied to the misstatements; no proximate cause. | Loss causation not established for either claim. |
| §11 claim timeliness and loss causation? | Amorosa—timeliness should be measured differently; loss causation supports claims. | Claim time-barred or lacks loss causation; corrective-disclosure date forecloses recovery. | §11 claim time-barred and/or lacks loss causation; dismissal affirmed. |
| Whether there is a federal “holder” claim under Rule 10b-5? | Amorosa—holder status allows federal deception claim. | Dabit forecloses holder standing. | No holder claim under federal securities law. |
| SLUSA preemption of state-law claims? | Amorosa—state claims survive federalization. | SLUSA precludes covered class-action-style claims. | SLUSA preempts state-law claims. |
| Sanctions under Rule 11/PSLRA? | Gray—sanctions improper or excessive. | Court properly imposed sanctions for Rule 11/PSLRA violations. | No abuse of discretion; sanctions affirmed. |
Key Cases Cited
- Lentell v. Merrill Lynch & Co., 396 F.3d 161 (2d Cir. 2005) (loss causation and the pleading standard in this context)
- Grace v. Rosenstock, 228 F.3d 40 (2d Cir. 2000) (loss causation requirement in §10(b)/Rule 10b-5 claims)
- Suez Equity Investors, L.P. v. Toronto-Dominion Bank, 250 F.3d 87 (2d Cir. 2001) (proximity and causation in loss causation analysis)
- Dura Pharmaceuticals v. Broudo, 544 U.S. 336 (Sup. Ct. 2005) (requirement of proof of loss causation in misstatement claims)
- Pani v. Empire Blue Cross Blue Shield, 152 F.3d 67 (2d Cir. 1998) (affirmative defense can be raised on a Rule 12(b)(6) motion for loss causation)
- Dabit, Merr il l Lynch & Co. v. Deloitte, 547 U.S. 71 (Sup. Ct. 2006) (holding no holder standing expanded under Rule 10b-5 (Blue Chip Stamps precedent))