In re: Barclays Bank PLC Security
734 F.3d 132
2d Cir.2013Background
- Between Apr 2006 and Apr 2008 Barclays completed four offerings of callable preference ADSs (Series 2, 3, 4, 5) that raised ~$5.45 billion; plaintiffs bought shares in all four series.
- Plaintiffs sued under Sections 11, 12(a)(2), and 15 of the Securities Act alleging material misstatements and omissions about Barclays’s exposure to mortgage/credit markets and failure to timely/adequately write down impaired assets.
- District court dismissed the consolidated complaint with prejudice, ruling claims tied to Series 2–4 were time‑barred, the pleadings were inadequate as to all offerings, plaintiffs lacked §12(a)(2) standing, and the Series 5 lead plaintiff was inadequate.
- Plaintiffs moved for reconsideration and proposed an amended complaint adding allegations that defendants disbelieved their own asset valuations (esp. for Series 5) and replacing the Series 5 lead plaintiff. The district court denied leave to amend as futile.
- On appeal the Second Circuit affirmed the dismissal of Series 2–4 as time‑barred but held the district court erred in denying leave to amend as to Series 5 in light of later Second Circuit precedent permitting claims that defendants disbelieved their own subjective opinions under §§11 and 12(a)(2).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness of claims for Series 2–4 (§§11, 12) | Barclays’ later disclosures were incomplete; plaintiffs lacked notice until later | November 2007 and Feb 2008 disclosures provided constructive notice, so claims untimely | Series 2–4 claims time‑barred; dismissal affirmed |
| Actionability of subjective valuations (Series 5) | Plaintiffs alleged defendants disbelieved their own valuations and failed timely/adequately to write down assets | Valuation/writedown decisions are subjective and not actionable absent fraud; amendment would be futile | Amendment permitting disbelief‑of‑opinion allegations is permissible under §§11/12; denial of leave to amend as to Series 5 was error |
| §12(a)(2) standing | Plaintiffs purchased in the public offerings (alleged in proposed amended complaint) | Original complaint pleadings only alleged securities were "traceable"; thus no direct purchaser standing | Proposed amendment cured standing defects for Series 5; standing issue remediable on remand |
| Denial of leave to amend (futility) | Proposed facts plausibly alleged disbelief of opinions and remedied lead‑plaintiff and standing issues | District court: disbelief allegations equate to fraud claims and so cannot be pleaded under §§11/12 | District court erred; leave to amend should have been allowed for Series 5 (remand to permit amended complaint and new lead plaintiff) |
Key Cases Cited
- Fait v. Regions Fin. Corp., 655 F.3d 105 (2d Cir. 2011) (opinions/beliefs actionable under §§11/12 if objectively false and disbelieved by speaker)
- Va. Bankshares v. Sandberg, 501 U.S. 1083 (1991) (distinction between statements of belief and fraud/liability principles)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading must contain sufficient factual matter to state a plausible claim)
- Gustafson v. Alloyd Co., 513 U.S. 561 (1995) (§12(a)(2) limited to initial public offerings/prospectus sales)