In re CENTERLINE HOLDING COMPANY SECURITIES LITIGATION.
No. 09-3744-cv.
United States Court of Appeals, Second Circuit.
June 9, 2010.
380 Fed. Appx. 91
J. Michael Fried, Joseph A. Braddock, Norman Millman and Edward Friedlander, as Trustee for the Ed Friedlander Trust, individually and on behalf of all others similarly situated (collectively known as the “Centerline Investor Group“), Plaintiffs-Appellants, Mark K. Goldstein, Deborah Dechter, Peter Frank, Thomas Lyons, and Lori Weinrib, Consolidated Plаintiffs, v. Centerline Holding Company, Marc D. Schnitzer, Robert L. Levy, Jeff T. Blau, and Stephen M. Ross, Defendants-Appellees.
Even if the district court could have considered rehabilitation evidence in deciding whether to resentence defendant, we would identify no abuse of discretion in its conclusion that Nunez-Gonzalez‘s post-sentence activities including learning to read, speak, and write English; obtaining his GED; working as a Spanish instructor; participating in Toastmasters; and completing an angеr management course-did not warrant a reduced sentence. See, e.g., United States v. Cavera, 550 F.3d at 189 (“[W]e will not substitute our own judgment for the district court‘s on the question of what is sufficient to meet the
We have considered Nunez-Gonzalez‘s other arguments on appeal and conclude that they are without merit. Accordingly, we AFFIRM the January 27, 2009 order of the district court.
Edward Labaton (Lawrence A. Sucharow and Joseph Sternberg, on the brief), Labaton Sucharow LLP, New York, NY, (Sherrie R. Savett, Barbara A. Podell, and Eric Lechtzin, Berger & Montague, P.C., Philadelphia, PA, on the brief), for Plaintiffs-Appellants.
Richard A. Rosen (Daniel J. Leffell, on thе brief), Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York, NY, (Peter L. Simmons, Fried, Frank, Harris, Shriver & Jacobson LLP, New York, NY, and Jennifer F. Beltrami, Cozen O‘Connor, New York, NY, on the brief), for Defendants-Appellees.
PRESENT: WALKER, CHESTER J. STRAUB, and DEBRA ANN LIVINGSTON, Circuit Judges.
Plaintiffs-Appellants, both individually and on behalf of a group of similarly situated investors, appeal from the January 12, 613 F.Supp.2d 394 (2009), and August 4, 2009, 678 F.Supp.2d 150, ordеrs of the United States District Court for the Southern District of New York (Scheindlin, J.), dismissing their securities fraud claims brought under Section 10(b) of the Securities Exchange Act for failing adequately to plead scienter, and consequently dismissing their control person liability claims under Section 20(a) of the Act. We assume the parties’ familiarity with the underlying facts, procedural history, and specification of the issues on appeal.
This Court reviews a district court‘s dismissal of a сomplaint pursuant to
A Section 10(b) claim requires a plaintiff to “establish that ‘the defendant, in connection with the purchase or sale of securities, made a materially false statement or omitted a material fact, with scienter, and that the plaintiff‘s reliance on the defendаnt‘s action caused injury to the plaintiff.‘” Lawrence v. Cohn, 325 F.3d 141, 147 (2d Cir.2003) (quoting Ganino v. Citizens Utils. Co., 228 F.3d 154, 161 (2d Cir. 2000)). For an omission to be considered actionable under Section 10(b) and the SEC‘s implementing regulation, the defеndant must be subject to an underlying duty to disclose. See Basic Inc. v. Levinson, 485 U.S. 224, 239 n. 17, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988) (“To be actionable, . . . a statement must also be misleading. Silence, absent a duty to disclose, is not misleading under Rule 10b-5.“); Vacold LLC v. Cerami, 545 F.3d 114, 121 (2d Cir.2008). Such a duty can arise from the need to make prior statements not misleading.
The Private Securities Litigation Reform Act (“PSLRA“) imposes аdditional requirements on a securities fraud plaintiff:
Any complaint alleging securities fraud must satisfy the heightened pleading requirements of the PSLRA and
Fed. R.Civ.P. 9(b) by stating with particularity the circumstances constituting fraud. Under the PSLRA, the complaint must specify each statement alleged to have been misleading, and the reason or reasons why the statement is misleading, and state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind. Therefore, while we normally draw reasonable inferences in the non-movant‘s favor on a motion to dismiss, the PSLRA establishes a more stringent rule for inferences involving scienter because the PSLRA requires particular allegations giving rise to a strong inference of scienter.
ECA, 553 F.3d at 196 (internal quоtation marks, citations, and brackets omitted). Scienter can be established in the context of a Section 10(b) claim “by alleging facts to show eithеr (1) that defendants had the motive and opportunity to commit fraud, or (2) strong circumstantial evidence of conscious misbehavior or recklessnеss.” Id. at 198 (citing Ganino, 228 F.3d at 168-69). “Conscious misbehavior or recklessness,” in turn, can be established by showing, inter alia, that defendants “knew facts or had access to information suggesting that their public statements were not accurate.” Id. at 199 (quoting Novak v. Kasaks, 216 F.3d 300, 311 (2d Cir.2000)) (internal quotation marks omitted). But conversely, where liability is premised upon alleged material omissions, if the complaint “does not present facts indicating a clear duty to disclose“-such as that arising from the need to correct or update рrior statements-“plaintiff‘s scienter allegations do not provide strong evidence of conscious misbehavior or recklessness.” Kalnit v. Eichler, 264 F.3d 131, 144 (2d Cir.2001) (emphasis omitted).
On appеal, Plaintiffs focus upon Defendants’ alleged material omissions, arguing that the Defendants had a duty to disclose their plans to transform Centerline‘s business mоdel from one focused on the generation of distributable tax-exempt income to that of an asset manager focused on growth. Plaintiffs arguе that Defendants’ duty to disclose arose primarily from the
After a careful review of the class period statements identified by Plaintiffs, we affirm the dismissal of Plaintiffs’ claims for substantially the reasons identified in the district court‘s January 12 and August 4, 2009 orders. We note particularly that the effort in Plaintiffs’ amended complaint to characterize many of Defendants’ class period statements as speaking to the company‘s future plans-and thus as misleading in light of Defendants’ undisclosed plans for Centerline-fails when the statements are reviewed in their entirety and in the context of the questions from analysts to which they were responsive. See Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47 (2d Cir.1991) (noting well-established rule thаt a “complaint is deemed to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by referеnce“). These statements were not rendered misleading by the Defendants’ omissions. Because Defendants therefore had no clear duty to disclоse their plans, and for the other reasons identified by the district court, Plaintiffs’ amended complaint did not adequately allege “conscious misbehаvior or recklessness,” and otherwise failed sufficiently to allege fraudulent scienter.
We have considered the Plaintiffs’ remaining arguments and find them to bе without merit. For the foregoing reasons, the district court‘s judgment is AFFIRMED.
The Clerk of the Court is directed to amend the official caption to reflect the listing of the parties as indicated above.