In re General Electric Co. Securities Litigation, 856 F. Supp. 2d 645

Background

Defendants seek partial reconsideration of the January Opinion and judgment on the pleadings on Securities Act and Exchange Act claims.
The Securities Act Motion concerns statements about GE Capital’s ability to issue commercial paper, GAAP asset reclassifications, and balance sheet asset quality.
The Exchange Act Motion concerns Sherin’s statements about GE Capital’s loan portfolio quality.
The challenged topics include: post-crisis funding via CPFF/TLGP, asset reclassifications from available-for-sale to held-to-maturity, and publicly made statements by Immelt and Sherin.
The court’s analysis follows Fait v. Regions and addresses materiality, opinion versus fact, and pleading standards for Sections 11/12(a)(2) and Section 10(b) claims.
The ruling grants the Securities Act reconsideration and denies the Exchange Act reconsideration on the remaining claims.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Securities Act: material misstatements in the Offering Documents	Lead argues misstatements/omissions in the Offering Documents about commercial paper and asset valuation.	GE/Sherin contend statements are either non-actionable opinions or immaterial.	Securities Act claims survive for some issues; materiality and opinions are addressed in detail.
Materiality and 'bespeaks caution' in proposals	Misstatements about liquidity and asset values are material.	Cautionary language and later superseding statements negate materiality.	Materiality analyzed; some statements deemed immaterial or superseded; others require further scrutiny.
Unincorporated and superseded statements regarding commercial paper	Alleged statements incorporated by reference support liability.	Certain statements were not incorporated or were superseded by later prospectus.	Unincorporated/superseded statements barred; remaining statements not materially misleading.
Sherin: Exchange Act scienter and statements about loan quality	Sherin's statements were knowing or reckless falsehoods.	Statements were opinions; SAC lacks subjective falsity or proper pleading of scienter.	Sufficiency of scienter adequately pleaded; claims against Sherin survive.
GAAP reclassification of assets and materiality	GAAP violations inflated asset values in Offering Documents.	Reclassifications, though problematic, lack demonstrable material impact.	Reclassification claim survives pleading as misstatement of asset values; materiality not established.

Key Cases Cited

Fait v. Regions Financial Corp., 655 F.3d 105 (2d Cir. 2011) (subjective falsity required for opinions; forward-looking guidance may not be actionable absent falsity)
Rombach v. Chang, 355 F.3d 164 (2d Cir. 2004) (pleading materiality and scienter rules; opinions and omissions)
Basic Inc. v. Levinson, 485 U.S. 224 (1988) (materiality; total mix of information standard)
Olkey v. Hyperion 1999 Term Trust, Inc., 98 F.3d 2 (2d Cir. 1996) (materiality and 'reasonable investor' standard)
ECA, Local 134 IBEW Joint Pension Trust of Chi. v. JP Morgan Chase Co., 553 F.3d 187 (2d Cir. 2009) (five-factor materiality and strong-inference of scienter)
TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438 (1986) (materiality and inference standards)
Daum v. Psz. Stolz Family P’ship L.P., 355 F.3d 92 (2d Cir. 2004) (bespeaks caution doctrine; limits for forward-looking statements)
Iowa Pub. Emps’. Ret. Sys. v. MF Global, Ltd., 620 F.3d 137 (2d Cir. 2010) (bespeaks caution and materiality in context)
Ganino v. Citizens Utils. Co., 228 F.3d 154 (2d Cir. 2000) (integrated assessment of materiality; context matters)
Litwin v. Blackstone Grp., L.P., 634 F.3d 706 (2d Cir. 2011) (integrative materiality analysis)
Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) (strong inference standard for scienter under PSLRA)
Teamsters Local 445 Freight Div. Pension Fund v. Dynex Capital Inc., 531 F.3d 190 (2d Cir. 2008) (need to specify reports contradicting statements in access-to-information theory)