Petzschke v. Century Aluminum Co.
729 F.3d 1104
| 9th Cir. | 2013Background
- Section 11 of the Securities Act allows suits by purchasers of securities issued under a false or misleading registration statement.
- Plaintiffs purchased Century Aluminum shares in January 2009, after a secondary offering; over 49 million shares were already in the market.
- The January 28, 2009 prospectus supplement for the secondary offering was part of the registration statement for §11 purposes.
- Plaintiffs must prove their shares are traceable to the secondary offering rather than to the pool of previously issued shares when multiple registration statements exist.
- The district court treated the motion as a jurisdictional Rule 12(b)(1) issue and considered extrinsic evidence; the court should have treated it as a 12(b)(6) pleading issue.
- The panel ultimately affirmed dismissal under Rule 12(b)(6) based on pleading deficiencies, and clarified that plaintiffs lack of traceability defeats §11 standing, though subject-matter jurisdiction was not the proper vehicle for that inquiry.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Traceability of shares to the secondary offering | Plaintiffs allege direct traceability to the secondary offering. | Defendants contend plaintiffs’ allegations are insufficient to show tracing; evidence could show shares came from the pre-existing pool. | Traceability pleading insufficient; inadequate to plausibly allege traceability. |
| Pleading standard post-Twombly/Iqbal for traceability | Allegations of dates, prices, and trading volume should support plausibility. | Allegations are too incidental; they do not exclude alternative explanations. | Pleading not plausible under Iqbal/Twombly; requires more specific facts. |
| Judicial reliance on extrinsic evidence at dismissal | District court erred in excluding extrinsic evidence from consideration for standing. | Extrinsic facts could resolve tracing issue. | Court erred in treating matter as 12(b)(1); still affirmed on 12(b)(6) grounds without extrinsic evidence. |
Key Cases Cited
- Starr v. Baca, 652 F.3d 1202 (9th Cir.2011) (two plausible explanations; need allegations that exclude alternative explanations to survive)
- Twombly, 550 U.S. 544 (Supreme Court 2007) (pleading must contain plausible claims, not just possible ones)
- Iqbal, 556 U.S. 662 (Supreme Court 2009) (pleadings must have factual content showing plausibility)
- Joseph v. Wiles, 223 F.3d 1155 (10th Cir.2000) (traceability considerations in aftermarket purchases)
- Abbey v. Computer Memories, Inc., 634 F.Supp. 875 (N.D. Cal.1986) (traceability concept in §11 standing)
- Krim v. pcOrder.com, Inc., 402 F.3d 489 (5th Cir.2005) (traceability and pleading standards for §11)
- Barnes v. Osofsky, 373 F.2d 269 (2d Cir.1967) (tracing shares in securities cases; practical hurdles)
- Tellabs, Inc. v. Makar Issues & Rights, Ltd., 551 U.S. 308 (Supreme Court 2007) (context-specific analysis for plausibility)
- Barms, 373 F.2d 271 (2d Cir.1967) (illustrative tracing/standing discussion)