Parot v. Clarivate Plc, 1:22-cv-00394

Plaintiffs filed a class-action securities complaint against Clarivate plc, several Clarivate officers, Citigroup (underwriter), PricewaterhouseCoopers LLP (auditor), and certain investment funds, asserting violations of the Securities Exchange Act, Rule 10b-5, and the Securities Act of 1933.
Defendants moved to dismiss; at oral argument the court criticized the complaint for lacking particularity about which statements were false and why.
The court invited post-argument briefing on whether dismissal, if warranted, should be with or without leave to amend; plaintiffs asked for leave only if claims were dismissed.
The court considered Rule 15 and Foman factors: there had been no prior amendments, discovery had not started, and no undue delay or bad faith was shown, weighing in favor of permitting amendment.
The court held some defendant defenses (e.g., auditor categorical immunity; fund defendants not being statutory sellers/underwriters) raise legal sufficiency issues that could be dispositive, but found arguments that confidential witnesses are too low-level to plead falsity/scienter do not make amendment necessarily futile.
The court granted limited sua sponte leave to amend (by July 7, 2023), requiring plaintiffs to make claims plausible under Twombly but not to change their legal theories; plaintiffs were also directed to streamline the complaint consistent with Rule 8.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether leave to amend should be granted after motions to dismiss	Plaintiffs sought leave to amend if claims were dismissed	Defendants argued dismissal should be with prejudice or that amendment would be futile	Court granted limited leave to amend sua sponte, noting Rule 15 favors amendment absent futility or prejudice
Futility based on auditors' categorical exemption from liability	Plaintiffs proceed against PwC under existing theories	PwC contends auditors are categorically exempt from liability for certain statements as a matter of law	Court treated this as a legal-sufficiency defense that could be dispositive, so not a reason to deny leave as futile at this stage
Futility based on fund defendants not being underwriters/statutory sellers	Plaintiffs allege funds acted as underwriters or sellers	Fund defendants say they are not underwriters or statutory sellers as a matter of law	Court viewed this as a legal question that could defeat claims if proven, so not a bar to granting leave to amend
Sufficiency of confidential witnesses to plead falsity and scienter	Plaintiffs relied on lower-level confidential witnesses to plead falsity/scienter	Defendants argued those CWs know too little to establish falsity or scienter, making claims deficient	Court held such deficiencies might be curable on repleading and do not render amendment futile; repleading permitted to attempt to cure pleading defects

Foman v. Davis, 371 U.S. 178 (1962) (factors guiding leave-to-amend analysis)
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for complaints)
Panther Partners Inc. v. Ikanos Commc’ns, Inc., 681 F.3d 114 (2d Cir. 2012) (futility is a legal determination under Rule 12(b)(6))
Khodeir v. Sayyed, 323 F.R.D. 193 (S.D.N.Y. 2017) (court may grant leave to amend sua sponte)
In re Take-Two Interactive Sec. Litig., 551 F. Supp. 2d 247 (E.D.N.Y. 2008) (repleading may cure scienter pleading defects)
Francisco v. Abengoa, S.A., 559 F. Supp. 3d 286 (S.D.N.Y. 2021) (no undue prejudice to defendants where discovery has not begun)
Logan v. Matveevskii, 57 F. Supp. 3d 234 (S.D.N.Y. 2014) (district court may dismiss without leave where successive pleadings remain prolix and unintelligible)
Salahuddin v. Cuomo, 861 F.2d 40 (2d Cir. 1988) (district courts have discretion in granting leave to amend)