In re Molycorp, Inc. Securities Litigation
157 F. Supp. 3d 987
D. Colo.2016Background
- Plaintiffs allege violations of Sections 10(b) and 20(a) of the 1934 Act and Sections 11, 12(a), and 15 of the 1933 Act arising from Molycorp’s Mountain Pass REE disclosures during Feb–Nov 2011.
- Class period runs from February 7, 2011 through November 10, 2011, with alleged misrepresentations about dysprosium and terbium (HREEs) and Mountain Pass ore composition.
- Plaintiffs claim that the ore contained no HREEs and that executives had access to LIMS data reflecting this; they rely on confidential witnesses CW1 (chemist) and CW2 (operator) to support these allegations.
- Alleged misstatements occurred in the February 2011 S-1/A, S-1MEF, and prospectus, the March 9, 2011 conference call, and the June 2011 Registration Statement/Prospectus, as well as 1Q11 and 2Q11 forms.
- The court granted Investor Defendants’ motion to dismiss and granted in part and denied in part Defendants’ motion to dismiss, with certain 10(b) and 20(a) claims and related 1933 Act claims surviving as to various defendants.
- Plaintiffs also allege insider trading by Investor Defendants and seek relief under Section 11, Section 12(a)(2), and Section 15 of the 1933 Act.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 10(b)/Rule 10b-5 claims are adequately pled | Plaintiffs contend misrepresentations re HREEs and principal products were material and non-puffery. | Defendants argue some statements are non-actionable puffery or forward-looking and that PSLRA pleading requirements are not met. | Partially upheld: some 10(b)/Rule 10b-5 claims survive against specific Defendants; others are dismissed. |
| Whether the scienter requirement is sufficiently pleaded | Plaintiffs rely on CWs, stock sales, and core-operations theory to show intentional/misleading conduct. | Defendants contend scienter is not adequately pled for many defendants and CWs lack reliable bases. | Sufficient scienter pled for certain non-investor Defendants based on CWs and insider trading context; investor-defendant insider trading claims rejected. |
| Whether loss causation is adequately pled | Plaintiffs assert that November 8–10, 2011 disclosures caused price declines tied to the fraud. | Defendants argue causation is not sufficiently linked to specific misstatements. | Adequate loss causation pled for the 10(b) misrepresentations related to HREEs and Mountain Pass. |
| Whether the 1933 Act claims (Sections 11, 12(a)(2), 15) are viable | Plaintiffs rely on the same alleged misrepresentations as in the 1934 Act to support negligent/fraud-based 1933 Act claims. | Defendants argue lack of Rule 9(b) pleading or insufficient nexus for certain defendants and offerings. | Section 11 and Section 12(a)(2) claims deemed adequately pled; Section 15 claims alleged against several defendants; some defendants omitted from Section 15. |
Key Cases Cited
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (U.S. 2007) (requires a holistic, total-pleadings approach to infer scienter)
- Twombly v. Bell Atlantic Corp., 550 U.S. 544 (U.S. 2007) (plausibility pleading standard)
- Adams v. Kinder-Morgan, Inc., 340 F.3d 1083 (10th Cir. 2003) (to plead control and scienter via Adams factors)
- In re Crocs, Inc. Sec. Litig., 774 F.Supp.2d 1122 (D. Colo. 2011) (PSLRA particularity and evaluation of Adams factors)
- Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (U.S. 2005) (loss causation requires a causal connection to the misrepresentation)
- In re Williams Sec. Litig.-WCG Subclass, 558 F.3d 1130 (10th Cir. 2009) (loss causation and corrective disclosures framework)