152 F. Supp. 3d 186
S.D.N.Y.2016Background
- Multiple related individual actions allege Petrobras and related defendants engaged in a multi‑year bribery scheme and made false/misleading statements in violation of the Securities Act, Exchange Act, state law, and Brazilian law. These claims substantially overlap with the consolidated In re Petrobras Securities Litigation class action.
- Defendants moved to dismiss; the court issued a partial grant/partial denial (October 19 Order) and this Memorandum Order explains and refines those rulings.
- Plaintiffs include direct purchasers of Petrobras Notes and purchasers of ADSs; some plaintiffs sue as assignees or on behalf of funds/series that allegedly lack separate legal personality.
- Key pleading disputes: standing (including assignee/third‑party standing), domestic transaction requirements for Exchange Act/Securities Act claims (Morrison/Absolute Activist), §12(a)(2) statutory seller status, reliance and particularity under §18 and common‑law claims, and statutes of repose for various federal and state claims.
- Plaintiffs voluntarily withdrew Brazilian‑law claims; some state claims dismissed as precluded by SLUSA. Court granted leave to amend on several dismissed claims where plaintiffs might plead necessary facts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing of assignee plaintiffs (Aura) | Aura alleged valid written assignments of claims; thus has standing | Assignments lack specificity and formalities | Denied dismissal: assignments facially valid at pleading stage (Sprint governs) |
| Third‑party/prudential standing for fund plaintiffs (NN, Dimensional) | Named plaintiffs act for funds/series that cannot sue; close relationship and barriers exist | Allegations are legal conclusions insufficient at pleading stage | Denied dismissal: factual allegations accepted at pleading stage satisfy Huff factors |
| Exchange Act/Securities Act claims re: Notes — domestic transaction requirement (Morrison/Absolute Activist) | Notes purchased in initial offerings or settled through DTC (NY) — domestic | Must plead irrevocable liability or title transfer in U.S.; DTC settlement insufficient; prospectuses show offshore offerings | Granted dismissal for Notes claims lacking domestic‑transaction facts; leave to amend to plead Absolute Activist facts |
| §12(a)(2) claims and "statutory seller" status of underwriters | Underwriters in firm‑commitment offerings are statutory sellers for plaintiffs | Individual actions must identify specific underwriters who sold/solicited plaintiff's purchase | Dismissed §12(a)(2) vs. underwriters for failure to identify specific sellers; allowed amendment; §12(a)(2) against Petrobras allowed (issuer counts as seller per SEC Rule 159A) |
| §18 Exchange Act claims — reliance under Rule 9(b) | Plaintiffs alleged reliance on specific financial figures in Forms 20‑F | Defendants contend lack of transaction‑specific reliance allegations | Denied dismissal: pleadings sufficiently particular given extended relevant period and numerical misstatements |
| Negligent misrepresentation (Washington State Investment Board) — choice of law and duty | WISB alleges injury in WA; defendants misrepresented under U.S. securities laws, creating special relationship/duty | Defendants urge New York law applies; challenge adequacy/particularity under Rule 9(b) | Denied dismissal: WA law applies; WISB pleaded special relationship, material misrepresentations, and reliance with requisite particularity |
| Control‑person liability (§15) against Theodore Helms | Plaintiffs allege Helms ran U.S. IR and signed registration statement, showing control/culpability | Helms not alleged to be director; cannot have same acts serve as primary §11 and derivative §15 basis | Granted dismissal of §15 claims vs. Helms; leave to amend to plead more on control |
| §10(b) and state common‑law fraud claims — statute of repose | Plaintiffs argue claims based on multi‑year course of conduct | Defendants invoke five‑year repose for §10(b) and corresponding state repose periods | Granted dismissal to extent claims cover purchases earlier than five years before filing dates |
| §11/§12/§15 claims — Securities Act three‑year repose and post‑earnings‑statement §11 reliance | Plaintiffs contend Rule 8 notice pleading suffices for §11 even post‑earnings statement | Statute provides three‑year repose; §11 requires reliance for purchases after certain widely‑available earnings statements | Dismissed Securities Act claims beyond three‑year repose; dismissed §11 claims for purchases after Aug 11, 2014 for failure to plead reliance |
| State law claim in Central States — preclusion by SLUSA | Plaintiffs maintain state common‑law fraud claim | Defendants argue SLUSA preempts covered class actions alleging misrepresentations regarding covered securities | Granted dismissal: claim falls within SLUSA scope |
Key Cases Cited
- Sprint Communications Co. v. APCC Servs., Inc., 554 U.S. 269 (2008) (assignee has standing to pursue assigned claim)
- W.R. Huff Mgmt. Co. v. Deloitte & Touche LLP, 549 F.3d 100 (2d Cir. 2008) (prudential third‑party standing requires close relationship and a barrier to suit)
- Morrison v. Natl. Australia Bank Ltd., 561 U.S. 247 (2010) (Exchange Act extraterritoriality: claims require domestic transaction)
- Absolute Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60 (2d Cir. 2012) (domestic transaction requires irrevocable liability in U.S. or title passage in U.S.; pleading must include transactional facts)
- Pinter v. Dahl, 486 U.S. 622 (1988) (elements to be a "statutory seller" under §12)
- Capri v. Murphy, 856 F.2d 473 (2d Cir. 1988) (successful solicitation must be tied to plaintiff's particular transaction)
- Heit v. Weitzen, 402 F.2d 909 (2d Cir. 1968) (Rule 9(b) applies to §18 claims requiring particularized reliance allegations)
- Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S. 71 (2006) (definition of "covered class actions" under SLUSA)
- Romano v. Kazacos, 609 F.3d 512 (2d Cir. 2010) (SLUSA preclusion analysis)