928 F. Supp. 2d 705
S.D.N.Y.2013Background
- Central States alleges a securities class action on behalf of purchasers of MetLife common stock from February 2, 2010 to October 6, 2011, linked to MetLife's August 3, 2010 and March 4, 2011 offerings.
- Plaintiff asserts violations of Section 10(b) and Rule 10b-5, Section 20(a), and Sections 11, 12(a)(2), and 15 of the Securities Act against MetLife, its officers/directors, and underwriters.
- The SSA Death Master File (SSA-DMF) is described as a relied-upon source; MetLife allegedly failed to use it to identify deceased insureds for IBNR reserves, especially for group life policies.
- MetLife allegedly discovered $80 million in unpaid benefits related to individual life policies only in 2007 after SSA-DMF cross-checks, while continuing to report inaccurate IBNR reserves.
- In 2010 MetLife issued stock to fund AIG’s acquisition of ALI; a lock-up agreement with AIG limited disposition of MetLife shares for a time.
- In 2011 state investigations into unclaimed property and related disclosures led to investor concern and a subsequent stock price drop; MetLife announced a substantial after-tax reserve increase in October 2011 and disclosed ongoing investigations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Loss causation for 10b claims | Plaintiff alleges the August 5 and October 6 disclosures revealed hidden risks, causing stock declines tied to misstatements. | Defendants contend market-wide factors (credit downgrade, sector declines) caused the drops, not the misstatements. | Loss causation not established for 10b claims; market factors likely caused the declines. |
| Section 11 and 12(a)(2) misstatements | Alleges false or misleading statements in Forms 10-K/10-Q and registration statements regarding IBNR and mortality ratios. | Statements were opinions or omissions lacked duty to disclose; no actionable misstatements. | Sections 11 and 12(a)(2) not dismissed across the board; specific claims may proceed where pleaded adequately. |
| Duty to use SSA-DMF and disclosure | MetLife knew SSA-DMF could reveal shortfalls in reserves and should have used it and disclosed state investigations. | No statutory duty to search SSA-DMF; state investigations not pending litigation under Item 103/S-K; disclosure duties contested. | Duty to disclose state investigations and SSA-DMF use found adequately pleaded under Item 303 as to disclosure obligations. |
| Section 12(a)(2) solicitation by directors | Director/signers of registration statements allegedly engaged in soliciting purchasers. | Signing a registration statement is not per se solicitation; directors’ role insufficient to plead solicitation. | Claims against Individual and Director Defendants under Section 12(a)(2) dismissed. |
| Control person liability | Individuals and directors allegedly controlled MetLife’s statements and filings. | Control requires showing actual control and primary violation; some defendants lacked grounds to allege control. | Control claims evaluated; some defendants found to have actual control, others not; certain claims dismissed as to Castro-Wright. |
Key Cases Cited
- Fait v. Regions Fin. Corp., 655 F.3d 105 (2d Cir.2011) (knowing or baseless opinions may be actionable; framework for statements of opinion)
- Citiline Holdings, Inc. v. iStar Fin. Inc., 701 F. Supp. 2d 506 (S.D.N.Y.2010) (signing a registration statement not sufficient for Section 12(a)(2) solicitation)
- In re Lehman Bros. Sec. & Erisa Litig., 650 F.3d 167 (2d Cir.2011) (loss causation and market effects considerations in complex securities cases)
- In re Morgan Stanley Info. Fund Sec. Litig., 592 F.3d 347 (2d Cir.2010) (basis for scienter and misstatement standards in investment fund context)
- Stoneridge Invest. Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148 (U.S. Supreme Court 2008) (control and secondary liability concepts in securities actions)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading standard for plausibility)