Ross v. Lloyds Banking Group, PLC
546 F. App'x 5
2d Cir.2013Background
- Plaintiff Albert A. Ross purchased Lloyds Banking Group ADRs before Lloyds’ acquisition of HBOS and sued for securities fraud under § 10(b)/Rule 10b-5 and control-person liability under § 20(a).
- Ross alleged defendants (Lloyds, Chairman Victor Blank, CEO Eric Daniels) made three misleading statements and omitted HBOS’s use of Bank of England Emergency Liquidity Assistance (ELA) to conceal HBOS’s poor financial condition.
- Key contested statements: Sept. 18, 2008 statement that HBOS had £60 billion in "highly liquid near cash"; Sept. 18 remark that HBOS had assets eligible for the Special Liquidity Scheme (SLS); Nov. 3, 2008 statement that Lloyds would acquire ~£30 billion net assets for ~£14 billion.
- Ross relied on later disclosures (ELA use, 2011/2012 reports and officials’ statements) to challenge truthfulness and to infer defendants’ scienter (intent to deceive).
- District court dismissed Ross’s amended complaint for failure to plead falsity and scienter with the particularity required by Rule 9(b) and the PSLRA; it also denied leave to amend again. The Second Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether alleged misstatements/omission were false or misleading and pleaded with particularity | Ross: September 18 and November 3 statements and omission of ELA use were false/misleading and hid HBOS’s dire condition | Lloyds: statements were truthful or publicly qualified; omission was encompassed by broader disclosures; allegations are speculative or conclusory | Court: Dismissed — plaintiff failed to plead falsity with particularity and relied on speculative inferences rather than concrete contradictory facts |
| Whether allegations support a strong inference of scienter under the PSLRA/Tellabs | Ross: timing of disclosures and later revelations (ELA, FSA reports, officials’ statements) show intent to deceive | Lloyds: alternative nonculpable explanations (economic logic, public disclosures, plausible accounting adjustments) are more compelling | Court: Dismissed — no strong, cogent inference of fraudulent intent; plaintiff’s inferences are not as compelling as innocent explanations |
| Whether § 20(a) control-person claims against Blank and Daniels survive absent a primary violation | Ross: Blank and Daniels controlled Lloyds and were culpable participants | Lloyds: No primary violation pleaded, so control-person claims fail | Court: Dismissed — control claims require a primary violation, which was not adequately pleaded |
| Whether district court abused discretion by denying further leave to amend | Ross: Given additional time he could cure defects | Lloyds: Ross already amended once and offered no new facts to cure deficiencies | Court: Affirmed denial of further leave — amendment would be futile; no new facts proffered |
Key Cases Cited
- ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87 (2d Cir.) (pleading standards and documents properly considered on a Rule 12(b)(6) securities-fraud dismissal)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) (PSLRA scienter standard: strong inference must be cogent and at least as compelling as opposing inferences)
- Kalnit v. Eichler, 264 F.3d 131 (2d Cir.) (economic irrationality undermines inference of fraudulent intent)
- ECA, Local 134 IBEW Joint Pension Trust v. JP Morgan Chase Co., 553 F.3d 187 (2d Cir.) (generalized motives insufficient to plead scienter)
- Novak v. Kasaks, 216 F.3d 300 (2d Cir.) (recklessness standard; material statements consistent with available data are not actionable)
- Teamsters Local 445 Freight Div. Pension Fund v. Dynex Capital Inc., 531 F.3d 190 (2d Cir.) (plaintiff must identify specific reports showing defendants had access to contrary facts)
- Acito v. IMCERA Grp., Inc., 47 F.3d 47 (2d Cir.) (denial of leave to amend appropriate where amendment would be futile)