Minneapolis Firefighters' Relief Ass'n v. Memc Electronic Materials, Inc.
2011 U.S. App. LEXIS 12238
| 8th Cir. | 2011Background
- Patel leads an uncertified class action alleging §10(b) and §20(a) claims against MEMC and Gareeb.
- MEMC's Pasadena and Merano plants produce polysilicon; Pasadena is a major production site.
- On Feb 29, 2008 MEMC filed a 10-K warning that production disruptions could harm results.
- Pre-class disclosures (8-Ks in 2007-2008) reported plant incidents and their financial impact; MEMC warned of risks.
- During the class period (June–July 2008), Pasadena fire and Merano failure occurred; MEMC did not immediately disclose them.
- July 2008 disclosures attributed the misses to the incidents; stock traded down; Patel suffered losses.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to disclose July 2008 incidents | Patel argues pattern of disclosures created a duty to disclose promptly. | Gareeb: no general duty to disclose all material information; pattern effect not established. | No duty; pattern theory not supported by law or facts. |
| Actionable omission under §10(b)/Rule 10b-5 | Omissions of known material risks were misleading given pre/post disclosures. | Silence only misleading if a duty to disclose exists; no such duty shown here. | No actionable omission pleaded. |
| Scienter under PSLRA | Patel alleged production problems were material and Gareeb knew or acted with motive. | Inferences of non-culpable explanations and no confidential-source corroboration negate scienter. | No strong inference of scienter; dismissal affirmed. |
| Section 20(a) claim | Control-person liability follows from §10(b) allegations. | Derivation bars if §10(b) claim fails. | Affirmed dismissal of §20(a). |
| Motion to amend | Leave to amend should be freely granted if deficiencies exist. | Amendment futile; no new allegations identified; procedural defects persist. | District court did not abuse discretion denying amendment. |
Key Cases Cited
- Gallagher v. Abbott Labs., 269 F.3d 806 (7th Cir.2001) (no automatic duty to disclose all material information)
- In re K-tel Int'l, Inc. Sec. Litig., 300 F.3d 881 (8th Cir.2002) (no new cause of action based on partial disclosures without extraordinary circumstances)
- Acito v. IMCERA Grp., Inc., 47 F.3d 47 (2d Cir.1995) (pattern of omissions evaluated against other factors)
- Higginbotham v. Baxter Int'l, Inc., 495 F.3d 753 (7th Cir.2007) (cautionary statements undermine inference of scienter)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (U.S. Supreme Court, 2007) (strong inference of scienter must be cogent and at least as compelling as opposing inferences)
- Matrixx Initiatives, Inc. v. Siracusano, 131 S. Ct. 1309 (U.S. Supreme Court, 2011) (silence is not misleading absent duty to disclose; materiality alone does not create duty)
- Geffon v. Micrion Corp., 249 F.3d 29 (1st Cir.2001) (repeatedly warning investors undermines inference of scienter)