341 F. Supp. 3d 358
S.D. Ill.2018Background
- Securities class action against Barrick Gold Corp. and four executives alleging violations of Section 10(b) and Rule 10b-5 based on statements about remedial works and 2017 production guidance for the Veladero mine during Feb 16–Apr 24, 2017.
- Veladero experienced prior cyanide spills in 2015 and 2016; Barrick implemented remedial measures and resumed operations after regulatory review.
- Feb 16, 2017: Barrick GM Jorge Palmes said Veladero had "completed a series of remedial works to prevent such an incident." Plaintiffs claim this was false.
- Mar 28, 2017: a pipe rupture at Veladero (leak contained on site). Mar 30 and Apr 6 press releases reaffirmed production guidance and stated no anticipated material impact to 2017 production.
- Apr 24, 2017: Barrick updated guidance, reducing Veladero’s full-year production expectations; stock price declined. Plaintiffs allege prior statements were false/misleading and caused losses.
- Defendants moved to dismiss under Rules 12(b)(6) and 9(b)/PSLRA; court considered falsity, scienter, PSLRA safe harbor, and loss causation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Feb 16 statement that remedial works were "completed" was false | Palmes' statement was false because March 2017 leak occurred and some work orders remained uncompleted | The statement described completed remedial measures; occurrence of later leak is hindsight and does not render the earlier statement false | Court: Not false or misleading as pleaded; plaintiffs allege at most hindsight critique |
| Whether defendants acted with scienter as to Feb 16 statement | Defendants had access to operational/accounting data and knowledge of problems; core-operations inference | No specific facts showing motive, access to contrary reports, or conscious recklessness; allegations are generalized | Court: Plaintiffs failed to plead a cogent, compelling inference of scienter |
| Whether Mar 30 and Apr 6 production statements are actionable | Statements misrepresented that restrictions wouldn't materially affect 2017 production | Statements are forward-looking and accompanied by meaningful, company-specific cautionary language; alternatively, plaintiffs can't show actual knowledge of falsity | Court: Statements are protected by PSLRA safe harbor; also plaintiffs failed to plead actual knowledge |
| Whether plaintiffs pleaded loss causation and Section 20(a) control-person liability | Stock drops following disclosures were corrective and caused losses; executives controlled Barrick | Price movements do not reliably show corrective disclosure; primary violation not plausibly alleged, so control claims fail | Court: Loss causation arguments weak; Section 20(a) fails because no primary violation alleged |
Key Cases Cited
- Glob. Network Commc'ns, Inc. v. City of New York, 458 F.3d 150 (2d Cir. 2006) (standards for considering facts on Rule 12(b)(6) motion)
- ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87 (2d Cir. 2007) (documents incorporated by reference and SEC filings on a motion to dismiss)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (standard that allegations must raise right to relief above speculative level)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (scienter pleading evaluated holistically; "cogent and compelling" standard)
- Halliburton Co. v. Erica P. John Fund, Inc., 573 U.S. 258 (elements of a Rule 10b-5 claim)
- Slayton v. Am. Express Co., 604 F.3d 758 (2d Cir. 2010) (PSLRA safe-harbor and meaningful cautionary language analysis)
- Novak v. Kasaks, 216 F.3d 300 (2d Cir. 2000) (rejecting "fraud by hindsight")
- ECA, Local 134 IBEW Joint Pension Tr. of Chi. v. JPMorgan Chase Co., 553 F.3d 187 (2d Cir. 2009) (motive/opportunity and circumstantial scienter framework)