Schiro v. Cemex, S.A.B. de C.V. et ay, 438 F.Supp.3d 194

Background

Plaintiffs (lead investors) sued Cemex, two Cemex officers, and Cemex Latam Holdings (CLH) alleging securities fraud under §10(b), §20(a)/(b), and Rule 10b-5 based on nondisclosure of an alleged bribery scheme tied to Cemex Colombia’s acquisition of the Maceo plant.
Plaintiffs relied on company disclosures (Sept. 2016 press release, Dec. 2016/Apr. 2017 filings) that revealed approximately $20M in “irregular” payments to a CI Calizas representative but did not expressly admit bribery.
Plaintiffs’ earlier FAC was dismissed with leave to amend; the SAC added CLH and removed prior confidential-witness allegations that had been found vague.
The Cemex Defendants moved to dismiss for failure to state a claim; CLH also moved to dismiss for lack of personal jurisdiction and that the §20(b) claim was time-barred.
The Court held plaintiffs failed to plead the underlying bribery with the who/what/when/where/how required by Rule 9(b)/PSLRA, so no actionable omission under Rule 10b-5 was pleaded.
The §20(b) claim against CLH was dismissed as time-barred because plaintiffs had inquiry notice by at least April 28, 2017; the SAC (filed Aug. 1, 2019) did not relate back to the original complaint. The case was dismissed with prejudice.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether defendants made a material misrepresentation/omission by not disclosing bribery (Rule 10b-5)	Plaintiffs: Cemex’s disclosures and statements amounted to admissions of bribery; omission was actionable	Cemex: disclosures only reported irregular payments and internal-control weaknesses, not admissions of bribery	Held: No actionable omission—plaintiffs did not plausibly allege bribery so no material omission was pleaded
Whether plaintiffs pled underlying bribery with the particularity required by Rule 9(b) and the PSLRA	Plaintiffs: company “admissions” made confidential-witness detail unnecessary	Cemex: SAC lacks who/what/when/where/how; prior CW allegations were removed and were inadequate	Held: Insufficient; conclusory allegations and removed CW allegations fail PSLRA/Rule 9(b) particularity
Whether CLH’s §20(b) claim is timely or relates back to earlier complaints	Plaintiffs: limitations did not run until March 14, 2018 (DOJ subpoena disclosure) or claim relates back	CLH: inquiry notice arose from Sept. 2016–Apr. 2017 disclosures; claim filed Aug. 2019 is time-barred; relation-back doesn’t apply	Held: Time-barred. Inquiry notice by Apr. 28, 2017; relation-back denied because omission of CLH was deliberate, not a mistake
Remedy: whether leave to amend should be granted again	Plaintiffs: sought to proceed on SAC	Defendants: dismissal appropriate; prior leave given and Court warned further amendment would require specifics	Held: Dismissal with prejudice because plaintiffs failed to propose detailed, nonfutile amendments as previously required

Key Cases Cited

Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)
Ashcroft v. Iqbal, 556 U.S. 662 (2009) (court need not accept legal conclusions as true)
ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87 (2d Cir. 2007) (PSLRA/Rule 9(b) pleading requirements for securities fraud)
Novak v. Kasaks, 216 F.3d 300 (2d Cir. 2000) (particularity for fraud allegations in securities cases)
Pacific Inv. Mgmt. Co. v. Mayer Brown LLP, 603 F.3d 144 (2d Cir. 2010) (elements required to plead a §10(b)/Rule 10b-5 claim)
Gamm v. Sanderson Farms Inc., 944 F.3d 455 (2d Cir. 2019) (when nondisclosure is premised on illegal activity, underlying facts must be pleaded with particularity)
Merck & Co. v. Reynolds, 559 U.S. 633 (2010) (statute of limitations for securities claims begins upon discovery/inquiry notice)
Dodds v. Cigna Sec., Inc., 12 F.3d 346 (2d Cir. 1993) (inquiry notice and "storm warnings" trigger duty to investigate)
City of Pontiac Gen. Emps.’ Ret. Sys. v. MBIA, Inc., 637 F.3d 169 (2d Cir. 2011) (earlier disclosures can provide sufficient information to trigger the statute of limitations)
Krupski v. Costa Crociere S.p.A., 560 U.S. 538 (2010) (relation-back requires a mistake about the proper party’s identity, not a deliberate omission)
Schiro v. Cemex, S.A.B. de C.V. (Cemex I), 396 F. Supp. 3d 283 (S.D.N.Y. 2019) (prior dismissal of FAC and guidance on deficient CW allegations)