296 F. Supp. 3d 670
D. Del.2017Background
- Hudson City shareholders sued after Hudson City merged into M&T; plaintiffs allege the proxy for the merger omitted and misstated material facts in violation of Section 14(a).
- Merger agreement executed Aug. 27, 2012; Proxy became effective Feb. 22, 2013; regulatory approval expected Q2 2013 but was delayed after April 2013 disclosures about Federal Reserve concerns with M&T's BSA/AML controls.
- April 12, 2013 press release and April 15, 2013 earnings call disclosed that the Federal Reserve had raised concerns about M&T’s Bank Secrecy Act and anti–money‑laundering program and that closing would be delayed.
- CFPB enforcement action against M&T was announced Oct. 9, 2014; Federal Reserve approved the merger on Sept. 30, 2015; the merger closed Nov. 1, 2015.
- Plaintiffs allege three Section 14(a) theories: failure to disclose mandatory Item 503 risk factors, misleading opinion statements (Omnicare theory), and that April disclosures were untimely/insufficient; defendants moved to dismiss the second amended complaint.
- District court granted dismissal without prejudice, finding plaintiffs failed to plead actionable omissions or facts required by Omnicare and that reliance on hindsight and improper new theories in briefing doomed the claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Proxy omitted required Item 503 risk factors about BSA/AML and CFPB risks | Proxy failed to disclose that M&T's regulatory noncompliance could delay/deny the merger or lead to sanctions | Proxy already disclosed regulatory‑approval timing and operational/compliance risks; no specific CFPB risk was known in Feb. 2013 | Dismissed — no omission where Proxy already disclosed the relevant risks; CFPB action later cannot supply state‑of‑mind at filing |
| Whether opinion statements (compliance and timing) were misleading under Omnicare omission theory | Opinions omitted material facts about the basis/process of the opinions (e.g., lack of adequate due diligence) making them misleading | Opinions were hedged and contextualized; plaintiffs fail to plead particular facts about what inquiry was or was not performed | Dismissed — plaintiffs did not plead particular, material facts about the issuer’s basis or process as required by Omnicare |
| Whether April 2013 disclosures were untimely or insufficient to cure Proxy defects | April disclosures were made too close to the shareholder vote and did not cure prior omissions | April disclosures were not the basis of any count in the complaint; plaintiffs cannot amend by briefing and offered no post‑closing remedy authority | Dismissed as pleaded — court declined to entertain new theory raised in briefing and noted absence of a pleaded claim or established post‑closing remedy |
| Procedural defenses (motion timeliness, law of the case, Rule 12(g)(2)) | Defendants’ motion is improper/reargument or barred as successive motion | Defendants’ motion addressed new allegations in amended complaint and repeated earlier defenses; not procedurally barred | Denied — court found the motion procedurally proper and not barred by law‑of‑the‑case or Rule 12(g)(2) |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard for plausible claims)
- Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, 575 U.S. 175 (2015) (standards for when opinion statements are actionable under securities laws)
- Mayer v. Belichick, 605 F.3d 223 (3d Cir. 2010) (scope of materials reviewable on a motion to dismiss)
- In re NAHC, Inc. Sec. Litig., 306 F.3d 1314 (3d Cir. 2002) (misleading statement must be misleading when made; cannot rely on hindsight)
- Williams v. Globus Med., Inc., 869 F.3d 235 (3d Cir. 2017) (limitations on using after‑the‑fact events to show prior statements were misleading)
- Christianson v. Colt Indus. Operating Corp., 486 U.S. 800 (1988) (law‑of‑the‑case doctrine principles)
- United States ex rel. Petratos v. Genentech Inc., 855 F.3d 481 (3d Cir. 2017) (interlocutory orders and reconsideration)
- Tongue v. Sanofi, 816 F.3d 199 (2d Cir. 2016) (interim regulator concerns do not necessarily conflict with optimistic statements absent concrete contrary information)
- In re Westinghouse Sec. Litig., 90 F.3d 696 (3d Cir. 1996) (internal recommendations for improvement do not alone show misrepresentation of internal controls)