Ashland, Inc. v. Oppenheimer & Co., Inc.
648 F.3d 461
| 6th Cir. | 2011Background
- Ashland purchased ARS and SLARS through Oppenheimer in 2007–2008 to invest ~$1.3 billion.
- Oppenheimer marketed ARS as liquid, safe investments despite known market fragility; offering materials claimed high liquidity and underwriters would prevent auction failures.
- Market disruptions occurred Feb 2008 as ARS auctions failed and underwriters withdrew bids, leaving Ashland with illiquid holdings and financing costs.
- Ashland alleges Oppenheimer had advance knowledge of the ARS market’s fragility and hidden risks, supported by internal memos, executive sales, and cautionary communications.
- Ashland asserted five claims under federal and Kentucky law: Section 10(b)/Rule 10b-5, Kentucky Blue Sky, common-law fraud, promissory estoppel, and negligent misrepresentation; district court dismissed with prejudice; Ashland appeals.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Ashland stated a cognizable Section 10(b)/Rule 10b-5 claim | Ashland contends Oppenheimer concealed liquidity risk and market collapse. | Oppenheimer argues lack of materiality or duty to disclose, and insufficient scienter under PSLRA. | Affirmed; no strong inference of scienter, considering the holistic pleading and absence of advance knowledge. |
| Whether Ashland stated a Kentucky Blue Sky claim | Argues Section 292.320/480 claims parallel federal Rule 10b-5. | Identical standards to 10b-5; claims fail for lack of sufficient pleading. | Affirmed; analysis mirrors 10b-5 ruling and claims are not viable. |
| Whether Ashland stated a common-law fraud claim | Ashland asserts knowing and deliberate misrepresentations and omissions. | Oppenheimer contends failure to plead intent and material misrepresentation with particularity. | Affirmed; failure to plead knowing deceit or reckless misrepresentation with particularity. |
| Whether Ashland stated a promissory-estoppel claim | Promises of liquidity and non-liquidity risk were binding under Restatement §90. | Promises were vague and contradicted by ARS brochures; not enforceable to avoid injustice. | Affirmed; reliance on vague promises unreasonable given explicit warnings. |
| Whether Ashland stated a negligent-misrepresentation claim | Ashland relied on misrepresentations about ARS liquidity and safety. | Doubts about materiality and reliance given warnings and documents; no false information proven. | Affirmed; failure to show justifiable reliance on actionable misrepresentations. |
Key Cases Cited
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (U.S. 2007) (holistic scienter standard under PSLRA)
- Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. _ (U.S. 2011) (holistic approach to scienter and materiality)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (requirement of plausible pleading beyond mere conclusory statements)
- Twombly v. Bell Atl. Corp., 550 U.S. 544 (U.S. 2007) (plausibility standard for pleading negligence/fraud claims)
- Frank v. Dana Corp., 547 F.3d 564 (6th Cir. 2008) (reaffirmed holistic approach to pleading in securities cases)
- Ley v. Visteon Corp., 543 F.3d 801 (6th Cir. 2008) ( PSLRA scienter standards for pleading)
- In re Sofamor Danek Grp., Inc., 123 F.3d 394 (6th Cir. 1997) (materiality threshold for misrepresentation)
- PR Diamonds, Inc. v. Chandler, 364 F.3d 671 (6th Cir. 2004) (recklessness standard for scienter)