In re Petrobras Securities Litigation
169 F. Supp. 3d 547
S.D.N.Y.2016Background
- Multiple individual but related securities suits were filed against Petrobras and related defendants, including auditor PwC, alleging a multi-year bribery/kickback scheme and false/misleading statements violating the Securities Act, Exchange Act, state law, and Brazilian law.
- Plaintiffs pursued claims against PwC under Securities Act § 11, Exchange Act § 10(b) and § 18, various state-law torts (e.g., negligent misrepresentation), and Brazilian law causes of action in separate individual actions tied to the consolidated class action In re Petrobras Securities Litigation.
- PwC moved to dismiss the individual complaints, largely relying on rulings the Court had already made in the related class-action memorandum order and raising SLUSA preemption and pleading-deficiency defenses (scienter, reliance, standing, and foreign-law substantive rules).
- The court applied prior class-action rulings by stipulation for several claims (e.g., § 11 and § 10(b) issues), dismissed many claims against PwC, but preserved all § 11 claims in certain actions.
- Key rulings: dismissal of § 10(b) claims for failure to plead a strong inference of scienter; dismissal of § 18 and negligent misrepresentation claims for failure to plead actual reliance with required particularity; dismissal of Brazilian-law claims where SLUSA did not bar them but Brazilian substantive law did; dismissal of state-law claims by the Board of Regents under SLUSA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of § 11 claims | § 11 claims survive post-Omnicare; class-action decision applies to individual actions | PwC sought dismissal under Omnicare and other grounds | Court denied dismissal of § 11 claims in OPERS and WSIB (class-order applied) |
| Sufficiency of § 10(b) claims (scienter) | Plaintiffs allege scheme and PwC's audit failures imply scienter | PwC: plaintiffs fail to plead strong inference of scienter | Court dismissed § 10(b) claims (applied earlier class-action ruling) |
| § 18 and negligent misrepresentation — reliance | Plaintiffs allege they read and relied on analyst reports and Forms 20-F containing PwC’s workpapers/opinions | PwC: § 18 requires actual reliance; claims lack particularized identification of PwC statements; negligent misrep lacks reliance on PwC | Court dismissed § 18 and negligent-misrep claims for failure to plead actual, particularized reliance |
| Brazilian-law claims' viability | Plaintiffs assert Brazilian law claims for ADR/U.S. purchases | PwC: SLUSA bars such claims or, on merits, Brazilian law applies territorially and requires realized losses | Court: SLUSA's text does not reach foreign law; nonetheless dismissed Brazilian-law claims on merits under Brazilian law (no extraterritorial reach and no realized losses alleged) |
Key Cases Cited
- Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, 135 S. Ct. 1318 (U.S. 2015) (governs § 11 pleading and opinion statements)
- Heit v. Weitzen, 402 F.2d 909 (2d Cir. 1968) (§ 18 requires actual reliance)
- W.R. Huff Asset Mgmt. Co. v. Deloitte & Touche LLP, 549 F.3d 100 (2d Cir. 2008) (standing and prudential exception analysis)
- Lamie v. U.S. Trustee, 540 U.S. 526 (U.S. 2004) (courts must follow plain statutory text)
- Lander v. Hartford Life & Annuity Ins. Co., 251 F.3d 101 (2d Cir. 2001) (SLUSA’s purpose and scope discussed)
- LaSala v. Bordier et Cie, 519 F.3d 121 (3d Cir. 2008) (treatment of foreign-law claims under SLUSA)
- Demings v. Nationwide Life Ins. Co., 593 F.3d 486 (6th Cir. 2010) (definition and analysis of "political subdivision" for immunity/related contexts)