OPINION
Presently before the Court is a motion to dismiss the Consolidated Amended Class Action Complaint, which alleges violations of (i) Section 14(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. § 78n(a), and Rule 14a-9(a) promulgated thereunder, 17 C.F.R. § 240.14a-9(a); (ii) Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and *410 Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5; and (iii) Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a). The motion to dismiss was filed by Exxon Mobil Corporation (“Exxon Mobil”) and Lee R. Raymond 1 (“Raymond,” together with Exxon Mobil, “Defendants”). The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1331 and 1337. For the reasons set forth below, Defendants’ motion to dismiss is granted.
I. BACKGROUND
A. Procedural history
The initial complaint in this action was filed in this Court on February 17, 2004, under the caption Binz v. Exxon-Mobil Corp. and Lee R. Raymond, Civil Action No. 04-1257(FLW). By Order of this Court on June 18, 2004, this case was consolidated with Estate of Hyman J. Rock v. Exxon-Mobil Corp. and Lee Raymond, Civil Action No. 04-1921(FLW) under the caption In re Exxon Mobil Corp. Securities Litigation, Civil Action No. 04-1257(FLW). Subsequently, an Order dated October 26, 2004 consolidated The Ohio Public Employees Retirement System, et al. v. Exxon-Mobil Corp. et al, Civil Action No. 04-2484(FLW) and Ticktin v. Exxon-Mobil Corp. et al, Civil Action No. 04-3629(FLW) with Exxon Mobil Corp. Sec. Litig., Civil Action No. 04-1257(FLW). Ohio Public Employees Retirement System and State Teachers Retirement System of Ohio were appointed Lead Plaintiffs, by an Order dated July 20, 2004. Plaintiffs’ Consolidated Amended Class Action Complaint (the “Complaint”) was filed on October 4, 2004. Presently before the Court is Defendants’ motion to dismiss the Complaint, pursuant to Fed.R.Civ.P. 12(b)(6) and 9(b). For the reasons stated below, the Court grants Defendants’ motion to dismiss Plaintiffs’ securities fraud claims for being untimely, and while not necessary based upon the Court’s ruling that the claims are time-barrеd, the Court also grants Defendants’ motion to dismiss the Plaintiffs’ claims for failure to plead with particularity as required by Fed.R.Civ.P. 9(b) and the Private Securities Litigation Reform Act (the “PSLRA”).
B. The Exxon-Mobil merger
This is a class action brought under the federal securities laws on behalf of all persons and entities who were either holders of Mobil Corp. (“Mobil”) common stock on May 27, 1999, when Exxon and Mobil shareholders voted to approve a proposed merger between the two companies, or who acquired Exxon stock on or about November 30, 1999, through a stoek-for-stock exchange in connection with the merger.
Exxon Mobil is an integrated oil and gas company that engages in the exploration for, and production of, crude oil and gas, the manufacture of petroleum products, and the transportation and sale of crude oil, natural gas and petroleum products. Compl. ¶ 24. On December 1,1998, Exxon and Mobil publicly announced a planned merger, subject to shareholder approval. Id. ¶ 91. Pursuant to the merger, each share of Mobil stock would be exchanged for 1.32015 shares of Exxon stock (the “Exchange Ratio”). Id. ¶2. On April 5, 1999, the two companies issued a joint proxy statement (the “Proxy Statement”) seeking shareholder approval of the proposed merger at Exxon’s and Mobil’s re *411 spective shareholder meetings to be held on May 27, 1999. See Paul F. Carvelli, Esq. (“Carvelli”) Decl. Ex. D. This Proxy Statement incorporated by reference Exxon’s Annual Report on Form 10-K (“10-K”), filed on March 26, 1999 with the Seсurities and Exchange Commission (the “SEC”), which contained Exxon’s 1998 year-end financial statements. Compl. ¶ 92. Exxon also filed three quarterly reports on Form 10-Q (“10-Q”) with the SEC, on May 15, 1999, August 13, 1999, and November 12, 1999, respectively, that incorporated statements regarding the proposed merger that were made in the Proxy Statement. 2 Id. ¶¶ 185, 187, 189; Pis. Opp. at 4.
To be entitled to vote on the proposed merger, a Mobil shareholder had to own Mobil stock at the close of business on March 29, 1999. See Carvelli Decl. Ex. D. at II — 2. On May 27,1999, Mobil and Exxon shareholders approved the merger, and, after receiving regulatory approvals, the merger closed on November 30, 1999. 3 Compl. ¶¶ 3-4. Pursuant to the merger, all Mobil shares were exchanged for Exxon shares in accordance with the Exchange Ratio, and Exxon subsequently changed its corporate name to Exxon Mobil Corp. Id. ¶ 4.
1. Impairment of Exxon’s oil and gas assets
The gravamen of Plaintiffs’ action alleges that Defendants, by failing to recognize in Exxon’s 1998 year-end financial statements certain impairments to the long-term carrying value of Exxon’s oil and gas assets, inflated Exxon’s assets and earnings and thereby artificially inflated the value of Exxon stock to Mobil shareholders before the merger. Compl. ¶ 96. According to Plaintiffs, the steep drop in oil prices in 1998, see id. ¶¶ 88-89, required Exxon to report the impairment of its oil and gas fields pursuant to the Statement of Financial Accounting Standards No. 121 (“SFAS 121”) 4 under the Generally Accepted Accounting Principles (“GAAP”). Id. ¶¶ 97-99. According tо the Complaint, a confidential witness, identified in the Complaint as an individual who held various financial analysis positions within Exxon USA from 1995 to 1998, and an oil and gas accounting expert will be able to confirm that Exxon had impaired properties in 1998. 5 See Compl. ¶¶ 127-137, 167-175. Plaintiffs allege that Exxon, by not reporting the SFAS 121 impairments, maintained its stock value at artificially high levels and thus avoided paying more shares of its stock to Mobil shareholders in the merger. Id. ¶ 250(a). According to Plaintiffs, Exxon should have recognized an impairment of approximately $3.7 billion. Id. ¶ 250(a)(i). Given the stock allocation to Exxon and Mobil shareholders resulting from the merger, 6 Plaintiffs allege that Exxon “shortchang[ed] Mobil sharehold *412 ers” by as much as $18 billion. Pis. Opp. at 24. Alternatively, Plaintiffs claim that if Exxon had taken the impairments and reduced its 1995-1998 net earnings by $3.7 billion, Mobil shareholders would have received an extra 2.3% of the outstanding stock of the combined company. 7 Compl. ¶ 250(a)(iv).
Defendants, on the other hand, assert that Exxon did not have to recognize any impairment of its oil and gas assets because its “disciplined investment and asset management program” regularly reviewed properties and also monitored underper-forming assets that the company ultimately “improved to acceptable levels or divested.” Defs. Mot. Summ. J. at 10, 30. In its 1998 Annual Report on Form 10-K, Exxon claimed that its asset management program created a “very efficient capital base,” which thereby eliminatеd the need to impair certain of its oil and gas assets in 1998. See Pis. Opp. at 10.
2. Plaintiffs’ securities fraud claims
Count I of the Complaint asserts a violation of Section 14(a) of the Exchange Act and Rule 14a-9(a) promulgated thereunder. In pertinent part, Section 14(a) states that
[i]t shall be unlawful for any person ... in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors, to solicit ... any proxy or consent or authorization in respect of any security (other than an exempted security) registered pursuant to Section 781 of the Act.
15 U.S.C. § 78n(a). Rule 14a-9 provides, in relevant part, that
[n]o solicitation ... shall be made by means of any proxy statement ... containing any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading. ...
17 C.F.R. § 240.14a-9(a). Plaintiffs allege that the Proxy Statement filed in connection with the merger, which contained Exxon’s 1998 year-end financial statements, was false and misleading because it “(i) failed to record any SFAS 121 impairment for oil and gas properties ... (ii) failed to disclose any internal accounting policy that could have explained its failure to report an impairment, as GAAP and SEC Regulations required; and (in) resultеd in a material overstatement of Exxon’s net income.” Compl. ¶ 235. Because of these omissions and inaccurate financial statements, Plaintiffs claim that Mobil shareholders “did not receive the consideration for their Mobil stock that [D]efen-dants told them they would get.” Id. ¶ 238; see also id. ¶¶ 229-240.
Count II of the Complaint alleges violations of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. Section 10(b) makes it unlawful for any person to “use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [SEC] may prescribe as necessary or appropriate in the public interest or for the protection of investors.” 15 U.S.C. § 78j(b). Rule 10b-5 renders it illegal to “make any untrue
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statement of a material fact or to omit to state a material fact necessary in order to make the statements made in the light of the circumstances under which they were made, not misleading ... in connection with the purchase or sale of any security.” 17 C.F.R. § 240.10b-5(b). Section 10(b) and Rule 10b-5 reach “beyond statements and omissions made in a registration statement or prospectus in connection with an initial distribution of securities and create liability for ‘false or misleading statements or omissions of material fact that affect trading on the secondary market.’ ”
In re Biurlington Coat Factory Sec. Litig.,
Count III of the Complaint alleges a violation of Section 20(a) of the Exchange Act by Raymond, Exxon’s most senior corporate officer at the time of the merger. Section 20(a) imposes joint and several liability on any person who “controls a person liable under any provision of the [Exchange Act].”
Shapiro v. UJB Financial Corp.,
C. Statute of limitations
Defendants have moved to dismiss Plaintiffs’ securities fraud claims on the ground that they are barred by the statute of limitations. Specifically, Defendants contend that the limitations period governing the Section 14(a) and Section 10(b) claims is one year after the discovery of the alleged wrongdoing or three years from the occurrence of the alleged wrongdoing, whichever period is shorter. See Defs. Mot. Summ. J. at 12. Defendants further assert that Plaintiffs were on inquiry notice of the alleged misstatements when the Proxy Statement was disseminated in April 1999. See id. at 18. Finally, Defendants claim that Plaintiffs have failed to adequately plead scienter. Plaintiffs respond that the appropriate limitations period for their claims is to be found in Section 804 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), and regardless, they were not on inquiry notice of their claims before March 2004. See Pis. Opp. at 7. Furthermore, Plaintiffs assert that their securities fraud claims actually arose on November 30, 1999, when the merger was consummated. Plaintiffs thus contend that their claims were not time-barred prior to Sarbanes-Oxley becoming effective on July 30, 2002.
II. DISCUSSION
Federal Rule of Civil Procedure 12(b)(6) provides that a court may dismiss a complaint “for failure to state a claim upon which relief can be granted.” A claim should be dismissed only if “it appears beyond doubt that the plaintiff can prove
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no set of facts in supрort of his claim which would entitle him to relief.”
In re Rockefeller Ctr. Props., Inc. Sec. Litig.,
As a general matter, courts ruling on a motion to dismiss may not consider matters extraneous to the complaint.
Burlington Coat,
A. Applicability of Rule 9(b)
Independent of the standard applicable to Rule 12(b)(6) motions,
Fed.R.Civ.P.
9(b) (“Rule 9(b)”) requires that “[i]n all aver-ments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.”
Fed. R.Civ.P.
9(b). This particularity requirement has been rigorously applied in securities fraud cases.
See Burlington Coat,
B. Private Securities Litigation Reform Act
In addition to Rule 9(b), plaintiffs alleging securities fraud pursuant to the Exchange Act must also comply with the
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heightened pleading requirements of the PSLRA. 15 U.S.C. §§ 78u-4(b)(1), (b)(2). The PSLRA “imposes another layer of factual particularity to allegations of securities fraud.”
Rockefeller,
C. Statute of limitations for securities fraud claims
Prior to the enactment of Sarbanes-Oxley, the statute of limitations for Exchange Act claims was the earlier of one-year after discovery of the alleged wrongdoing or three years from the occurrence of the alleged violation.
See Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson,
On July 30, 2002, Congress enacted the Sarbanes-Oxley Act. Section 804 of Sar-banes-Oxley (“Section 804”) lengthened the statute of limitations for certain private causes of action to two years after the discovery of the wrongdoing or five years from the alleged violation, whichever was earlier. See 28 U.S.C. § 1658(b). Section 804, entitled “Statute of Limitations for Securities Fraud,” provides in pertinent part that:
a private right of action that involves a claim of fraud, deceit, manipulation or contrivance in contravention of a regulatory requirement concerning the securities laws, as defined in section 3(a)(47) of the Securities Ex *416 change Act of 1934 (15 U.S.C. § 78c(a)(47)), 8 may be brought not later than the earlier of—(1) 2 years after the discovery of the facts constituting the violation; or (2) 5 years after such violation. 28 U.S.C. § 1658.
Congress directed that the new, longer limitations period “shall apply to all proceedings addressed by this section that commenced on or аfter the date of enactment [July 30, 2002] of this Act.” Sar-banes-Oxley Act § 804(b). Congress further provided that “[njothing in this section shall create a new, private right of action.”
Id.
§ 804(c). In addition, the Second, Seventh and Eighth Circuits, as well as several district courts within the Third Circuit, have held that Sar-banes-Oxley cannot be applied retroactively and does not revive claims that were time-barred prior to its enactment.
See In re Interpool, Inc. Sec. Litig.,
No. 04-321,
1. Inquiry notice
Courts within this Circuit have uniformly adopted the “inquiry notice” standard to determine when a plaintiff should have discovered the existence of a cause of action under the federal securities laws.
See Del Sontro v. Cendant Corp.,
Whether the plaintiffs, in the exercise of reasonable diligence, should have known of the basis for their claims depends on whether they had “sufficient information of possible wrongdoing to place them on ‘inquiry notice’ or to excite ‘storm warnings’ of culpable activity.”
NAHC,
Here, Defendants argue that Plaintiffs were on inquiry notice of their Exchange Act claims by April 1999, when the Proxy Statement was disseminated to Plaintiffs in connection with the merger, and that these claims are thus time-barred. On the other hand, Plaintiffs contend that they could not have known about Defendants’ fraudulent statements until the initial complaint in the matter was filed in March 2004 10 because “there was no conflicting information that could have possibly put a reasonable Mobil investor on notice that (i) Exxon’s statements that it had no impaired oil and gas assets to report under SFAS 121 and (ii) Exxon’s explanation thereof, were false.” Pis. Opp. at 6. The Court finds Plaintiffs’ arguments without merit and finds that their Sections 14(a) and 10(b) claims are time-barred under the one year discovery statute of limitations and that the lengthened limitations period under Section 804 does not apply to Plaintiffs’ case.
The Court finds unreasonable Plaintiffs’ claim that they were unaware of the alleged fraud because there was “no mix of information to create storm warnings” and
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“the only information available to [Plaintiffs was Exxon’s own false statements.” Pis. Opp. at 7. Plaintiffs unequivocally allege in their Complaint that 1998 “experi-enc[ed] the sharpest annual collapse in oil prices since 1990,” Compl. ¶ 89, and that it was this “steep oil price decline that triggered the obligation under SFAS 121 to ... report impairments of oil and gas fields.” Comp. ¶ 101. Plaintiffs even point to various forecasts of the collapse in oil prices made by the U.S. Department of Energy and other prominent businessmen in the oil industry as early as 1998.
See id.
¶¶ 204-214. Thus, the industry conditions that allegedly mandated companies like Exxon to report such impairments existed a year prior to any statements made by Defendants in the 1999 Proxy Statement. Plaintiffs also describe in great detail how, as a result of historically low oil prices, Exxon’s competitors reported SFAS 121 impairments of their oil and gas assets in 1998 — again, a year before the merger transaction occurred.
See
Compl. ¶¶ 104-111. Plaintiffs do not dispute the fact that the reporting of such impairments by these companies was public information.
11
The actions of Exxon’s competitors, combined with Defendants’ explicit admission that the company did not recognize impairments of its oil and gas assets in its 1998 Annual Report, which was filed with the SEC in March 1999 and was incorporated by reference in the Proxy Statement, provided the “red flags” that should have alerted Plaintiffs to the possibility that Defendants made misleading statements or significant omissions regarding the true nature of Exxon’s financial condition. Plaintiffs nonetheless contend that they “were entitled to rely,” Pis. Opp. at 7, on Exxon’s explanation of why the company did not record certain impairments. However, while investors may not be considered to have been placed on inquiry notice where “ ‘warning signs are accompanied by
reliable
words of comfort from management’ ” such that “ ‘an investor of ordinary intelligence would reasonably rely on them to allay the investor’s concerns,’ ”
Daimlerchrysler AG Sec. Litig.,
Here, the public information regarding the impairments taken by other oil and gas companies directly contradicted Exxon’s actions of not reporting the SFAS 121 impairments. Given this discrepancy and the collapse of oil prices which occurred a year before the merger, it was not reasonable, beyond when thе Proxy Statement was disseminated on April 1999, for Plaintiffs to defer to Defendants’ statements regarding Exxon’s decision not to record certain impairments and its representations of Exxon’s assets and earnings. Plaintiffs did not need to “know all of the details or ‘narrow aspects’ of the alleged fraud to trigger the limitations period.”
NAHC,
The Court finds incongruous Plaintiffs’ argument that the reporting of impair *419 ments by Exxon’s competitors, at most, raised “vague suspicions” of fraud insufficient for inquiry notice, in the face of Plaintiffs’ allegations that “the actions of Exxon’s peers provide circumstantial evidence of [unrecognized] impairments.” Compl. ¶ 100. These allegations constitute the core of Plaintiffs’ securities fraud claims against Defendants. In addition, Defendants’ unequivocal explanation of why Exxon did not recognize impairments of its oil and gas assets expressed far more than a mere inconsistency about Exxon’s financial condition: it strikes at the heart of Plaintiffs’ allegations that Exxon’s 1998 year-end financial statements, incorporated in the Proxy Statement, were false and misleading. Thus, assuming the allegations in the Complaint are true, Plaintiffs had more than sufficient reason to believe that Defendants’ statements in the Proxy Statement contained misstatements regarding Exxon’s financial status, and thus were on inquiry notice аs of April 1999.
Moreover, Plaintiffs have failed to provide the date for when they had inquiry notice of the alleged fraud. Plaintiffs’ statement that the inquiry notice trigger date was March 2004 strains credulity. Plaintiffs claim that they “did not learn of their claims until after the ... complaint [in Binz v. Exxon-Mobil Corp. and Lee R. Raymond, Civil Action No. 04-1257(FLW)] was filed in March 2004.” Pls. Opp. at 7. However, the Binz complaint alleges the same fraudulent conduct as the Complaint in this matter, and adds no allegations or facts other than what were already known, or should have been known, when the Proxy Statement was issued on April 9, 1999. For instance, the Binz complaint alleges that the 1999 Proxy Statement contained financial misstatements that originally appeared in Exxon’s 10-K for the year ending 1998. See Binz Compl. ¶ 11. The Binz plaintiff also claims that the Proxy Statement was false and misleading because Exxon did not properly record the SFAS 121 impairments for its oil and gas assets. See id. ¶ 29. Therefore, not only is it logical that the Binz plaintiff was aware of the information upon which to base the securities fraud allegations prior to March 2004, but the Binz complaint could not have provided Plaintiffs in this matter with any additional information that they could have used in forming their claims against Defendants. It is irrelevant, for inquiry notice purposes, whether Plaintiffs in particular did not know about the existence of certain facts suggesting wrongdoing. The standard for inquiry notice is whether a reasonable investor should have discovered the probability that he or she had been defrauded. Because the Binz plaintiff must have known about the еxistence of certain facts suggesting fraudulent conduct on part of Defendants prior to the filing of the complaint in March 2004, the same information was available to Plaintiffs in this matter. Thus, the Court finds that an investor of ordinary intelligence, in the exercise of reasonable diligence, would have discovered the basis of the claims asserted in this case prior to March 2004.
In sum, Plaintiffs’ allegations regarding the SFAS 121 impairments relate to conduct that occurred prior to November 30, 1999, and specifically, were known, or should have been known, by April 9, 1999. Although some courts have found that it is inappropriate to dismiss a claim as time— barred because an analysis of inquiry notice is so fact-intensive,
12
in this matter, it is readily apparent from the face of the Complaint that Plaintiffs were on inquiry notice of the alleged fraud no later than April 9, 1999.
See NAHC,
306 F.3d at
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1326-27 (finding securities fraud claim time-barred
on
motion to dismiss because plaintiffs had notice of defendant’s overstatement of value of its business, through various SEC filings and general condition of defendant’s kind of business in financial markets, approximately three months pri- or to date plaintiffs alleged they were placed on notice of alleged fraud);
see also In re Dreyfus Aggressive Growth Mut. Fund Litig.,
2. Sarbanes-Oxley does not revive time-barred claims
Although Section 804 of Sarbanes-Oxley extended the limitations period to two years from discovery of the alleged wrongdoing, district courts within the Third Circuit as well as the Second, Seventh and Eighth Circuit courts have held that Sarbanes-Oxley cannot be applied retroactively to revive claims that were time-barred prior to the statute’s enactment. See supra at 416. Sarbanes-Oxley became effective on July 30, 2002 and since Plaintiffs were on inquiry notice of Defendants’ alleged fraud as of April 9, 1999, their Exchange Act claims were time-barred as of April 9, 2000 — one year after Defendants’ alleged misrepresentations in the Proxy Statement and more than two years before the enactment of the statute. Thus, the extended statute of limitations under Sarbanes-Oxley does not revive Plaintiffs’ time-barred claims.
In support of their retroactivity argument, Plaintiffs cite to an SEC amicus brief, filed in connection with a non-prece-dential case,
AIG Asian Infrastructure v. Chase Manhattan,
3. The three-year statute of limitations period
Even if Plaintiffs did not have inquiry notice of Defendants’ alleged fraud, their Exchange Act claims are still time-barred under the three-year limitations period which runs from the time of the wrongdoing. In support of their argument that their securities fraud claims arose on November 30, 1999 (аnd thus were not time-barred when Sarbanes-Oxley became effective on July 30, 2002), Plaintiffs rely primarily on
Baron v. Allied Artists Pictures Corp.,
Furthеrmore, in light of the Third Circuit’s decision to apply the limitations period for actions brought under Section 10(b) (pursuant to which plaintiffs must bring securities claims actions within one year of the time they discover the alleged fraud, and no later than three years of the securities law violation itself) to actions brought under Section 14(a),
see Westinghouse Elec. Corp.,
Plaintiffs also contend that their Section 10(b) claim accrued on November 30, 1999 because that is when Plaintiffs exchanged their Mobil shares for Exxon shares in connection with the merger and hence participated in the “purchase or sale” of securities.
See
Pls. Opp. at 11-12. In support of this argument, Plaintiffs cite to
Hill v. Equitable Trust Co.,
Moreover, the Complaint itself contradicts Plaintiffs’ contention that their Section 10(b) claim arose on the “purchase or sale” date of November 30, 1999. The Complaint alleges that the Lead Plaintiffs, Ohio Public Employees Retirement System and State Teachers Retirement System of Ohio, purchased Exxon shares during the six-month period prior to the closing of the merger on November 30, 1999. See Compl. ¶¶ 22-23. Therefore, the alleged misrepresentations about Exxon’s financial status must have occurred prior to that date in order for Plaintiffs to claim that the accuracy of Exxon’s financial statements was “material in that there [was] a substantial likelihood that a reasonable shareholder would have con *423 sidered them important in choosing to exchange their Mobil Shares on or about November 30, 1999,” Id. ¶ 248, and in “deciding how to vote on the proposed acquisition .... ” Id. ¶ 237.
4. Effect of Sarbanes-Oxiey on limitations period for Section 14(a) claims
Aside from the fact that Plaintiffs’ Exchange Act claims were time-barred prior to the enactment of Sarbanes-Oxiey and therefore not entitled to the lengthened limitations period afforded by the statute, Plaintiffs’ Section 14(a) claim also cannot benefit from the extended limitations period because Section 804 of Sar-banes-Oxiey applies only to claims of fraud.
The statute of limitations set forth in Sarbanes-Oxiey extended the limitations period for claims brought pursuant to Section 10(b) and Rule 10b-5, lengthening the period set forth in 15 U.S.C. §§ 78i(e) and interpreted by the Supreme Court in
Lampf. See, e.g., Friedman v. Rayovac,
Here, Plaintiffs assert Section 14(a) liability against Defendants and allege that they made false and misleading statements in the 1999 Proxy Statement. In contrast to Section 10(b) and Rule 10(b)(5), scienter is not a necessary element in alleging a Section 14(a) claim.
See Cal-PERS,
On its face, then, the language of Sar-banes-Oxley clearly applies to “claims” of fraud. It does not specifically apply to claims, like those under Section 14(a), for which fraud is not an element or requisite. Plaintiffs’ Section 14(a) claims, although predicated on fraud, are not fraud claims. Plaintiffs even allege in their Complaint that “Defendants should have known that Exxon was required to report impaired assets under SFAS 121Compl. ¶ 236 (emphasis added), thereby connoting negligence on the part of Defendants. Furthermore, Plaintiffs do not incorporate any scienter allegations into their Section 14(a) claim in the Complaint, although such allegations appear in their Section 10(b) claim. See Compl. ¶¶ 229-40.
The fact that Plaintiffs are required to plead their Section 14(a) claim against Defendants with particularity pursuant to the PSLRA does not entitle Plaintiffs to the lengthened statute of limitations. Although Plaintiffs acknowledge that Section 14(a) claims “can be treated as seeurities-fraud claims for pleading-standard purposes,” Pis. Opp. at 18 (emphasis added); they have failed to cite to any case law that treats Section 14(a) actions as fraud claims for statute of limitations purposes. Furthermore, this Court finds no basis for finding so here. Thus, the one/three year scheme, not Section 804, applies to Plaintiffs’ Section 14(a) claim.
5. Plaintiffs’ Section 10(b) claim based on Exxon’s 10-Qs are time-barred
In an effort to salvage part of their Section 10(b) claim as timely, Plaintiffs also allege that Defendants are liable for misrepresentations made in the company’s quarterly reports on Form 10-Q, filed on August 13, 1999 and November 12, 1999. Plaintiffs contend that since each of these 10-Qs contains independent, actionable misstatements, their Section 10(b) claims are timely because they had not lapsed under the three-year repose period when Sarbanes-Oxley extended the limitations period in July 2002. The Court finds this argument without merit. Most importantly, Plaintiffs have not alleged that they relied on Exxon’s representations in these quarterly reports when they exchanged their shares in connection with the merger on November 30, 1999, despite claiming that “[t]he accuracy of Exxon’s financial statements was a critical factor in the Mobil Board of Directors’ recommendation to move forward with the merger ...,” Compl. ¶ 5, and that thus Plaintiffs reasonably relied on such statements. Therefore, Plaintiffs have failed to plead an essential element in a Section 10(b) claim.
14
*425
See Semerenko,
6. Plaintiffs’ Section 10(b) “relation-back” argument
In another effort to save their Section 10(b) claim, Plaintiffs contend that such claim is timely under Sarbanes-Oxley’s extended five-year limitations period because it relates back to a Section 14(e) tender offer claim made under the Exchange Act and plead in a complaint filed on March 17, 2004. The Court agrees with Plaintiffs’ argument that Defendants were on notice from the initial complaint that the gravamen of Plaintiffs’ case was Defendants’ failure to recognize impairments of its oil and gas assets in 1998, which resulted in fraudulent statements regarding Exxon’s financial condition. Thus, Plaintiffs’ Section 10(b) claim ■ arose out of the same conduct or transaction set forth in Plaintiffs’ initial complaint and thus relates back for purposes of Fed.R.Civ.P. 15(c). 16 However, since the extended five-year limitations period under Sarbanes-Oxley is inapplicable to Plaintiffs’ claims in this case, Plaintiffs’ “relation-back” argument does not save their claims.
D. PSLRA and Rule 9(b) pleading requirements
The Third Circuit has stated that unless plaintiffs in a securities fraud action “allege facts supporting their contentions of fraud with the requisite particularity mandated by Rule 9(b) and the [PSLRA], they may not benefit from inferences flowing from vague or unspecific allegations .... ”
Rockefeller,
Furthermore, “allegations of GAAP violations or accounting irregularities, standing alone, are insufficient to state a securities fraud claim ... only where such allegations are coupled .with evidence of corresponding fraudulent intent, might they suffice.”
Nappier,
The Third Circuit has held that courts should be “sensitive” to situations in which “sophisticated defrauders” may “successfully conceal the details of their fraud.”
Rockefeller,
Here, the information allegedly requiring Defendants to record impairments of Exxon’s oil and gas assets in 1998 was not exclusively in the control of Defendants. Plaintiffs go to great lengths in their Complaint to explain the state of oil prices in 1998 and the fact that most of Exxon’s competitors recorded SFAS 121 impairments during that year. Thus, Plaintiffs essentially claim that the taking of these impairments by such companies was common knowledge and practice. Indeed, such information was disclosed in public documents filed with the SEC. In addition, Plaintiffs have made no attempt to describe any efforts to obtain any information that they were not able to discover and add as allegations in their Complaint. With respect to the confidential witness, Plaintiffs merely claim that the witness cannot specify the names of any specific impaired oil fields because of “the passage of time and his/her present lack of access to the relevant databases.” Compl. ¶ 139. Because Plaintiffs have not adequаtely alleged that the information that they need lies exclusively in the control of Defendants, and since they have made no attempt to obtain such information, Plaintiffs are not entitled to a relaxed application of Rule 9(b).
E. Scienter
1. Exxon
In a Section 10(b) claim, a plaintiff must show that each defendant acted with scienter — the requisite state of mind to commit fraud.
See Advanta,
Under the motive and opportunity test, Plaintiffs must allege facts showing that each defendant had the motive to commit fraud and a “clear opportunity” to do so.
See Burlington Coat,
Here, Plaintiffs’ “motive” theory contains precisely the type of allegations that have been routinely rejected as insufficient to demonstrate a strong inference of scien-ter. “In every corporate transaction, the corporation and its officers have a desire to complete the transaction, and officers will usually reap financial benefits from a successful transaction.”
GSC Partners,
Scienter cannot be established by merely alleging that Defendants inflated Exxon’s earnings in connection with the acquisition of Mobil by a stock-for-stock transaction.
See
Pls. Opp. at 25. Plaintiffs’ reliance on
In re NUI Sec. Litig.,
Plaintiffs’ reliance on
In re ATI Technologies, Inc. Sec. Litig.,
Plaintiffs also rely heavily on
In re Ravisent Technologies, Inc. Sec. Litig.,
2. Raymond
Plaintiffs claim that they have sufficiently plead scienter on the part of Raymond because (1) his post-merger compensation of approximately $43.6 mil *430 lion demonstrates “a concrete benefit from the fraud ...” Pis. Opp. at 30, (2) his position at Exxon meant he “must have known or recklessly disregarded,” Compl. ¶ 250(d), the alleged improper failure to record the SFAS 121 impairments, (3) his statements before Congress in 1999 concerning oil prices, and (4) Exxon’s corporate history is evidence of Raymond’s “leadership of fraud or deliberate misconduct.” Compl. ¶ 250(h). 19 The Court finds all of these arguments without merit.
The Third Circuit has unequivocally stated that a showing that an officer reaped financial benefits from a successful transaction, standing alone, cannot give rise to a strong inference of fraudulent intent.
See GSC Partners,
The Court also finds unavailing Plaintiffs’ contention that Raymond’s statements to Congress regarding low oil prices and Exxon’s corporate history sufficiently establish scienter on the part of Raymond. The Court is at a loss to understand how Raymond’s statements that he could not forecast future oil prices demonstrate his intent to misstate Exxon’s earnings by not recording the SFAS 121 impairments. Similarly, Plaintiffs’ characterization of Exxon as a company with a history of misdeeds is wholly irrelevant in the determination of Raymond’s scienter. For the foregoing reasons, this Court finds that Plaintiffs have failed to sufficiently plead scienter on the part of Raymond.
F. Recklessness
Because Plaintiffs cannot sufficiently demonstrate scienter through motive and opportunity, they must demonstrate scienter through allegations of specific facts that constitute “strong circumstantial evidence of conscious misbehavior or recklessness.”
Advanta,
It is not enough for Plaintiffs to allege that Defendants knew or should have known about the alleged fraud.
See GSC Partners,
For the reasons stated above, the Court finds that the Complaint fails to satisfy the PSLRA’s strict requirement to specify with precision the reasons why the statements in Exxon’s SEC filings were misleading. It also fails to state with particularity allegations specific to Defendants that would give rise to a strong inference of scienter. Because of Plaintiffs’ failure to comply with the PSLRA, Defendants’ motion to dismiss the claims under Section 10(b) and Rule 10b-5 will be granted.
G. Section 20(a) of the Exchange Act
Plaintiffs also claim that Defendant Raymond is liable for a violation of Section 20(a) of the Exchange Act. Because, however, a Section 20(a) claim does not create a separate cause of action, but rather depends on the viability of Section 10(b) claims, and the Court is dismissing the claims under Section 10(b) and Rule 10(b)— 5, and Plaintiffs’ Complaint fails to adequately plead an actionable predicate violation of Section 10(b) or Rule 10b-5, Plaintiffs’ claim for “control person” liability under Section 20(a) must be dismissed.
See Shapiro,
H. Amendment of Plaintiffs’ Complaint
Plaintiffs assert that they should be given leave to amend their Complaint because they “have filed only
one
amend[ed] complaint.” Pls. Opp. at 31.
Fed.R.Civ.P.
15(a) provides that leave to amend “shall be freely given” by the court “when justice so requires.”
Fed.R.Civ.P.
15(a). Generally, leave to amend is granted when a complaint is dismissed for failure to plead with particularity under Rule 9(b).
See Burlington Coat,
III. CONCLUSION
The Court grants Defendants’ motion to dismiss Plaintiffs’ Sections 10(b), 14(a), 20(a), Rule 10b-5 and Rule 14a-9(a) claims, with prejudice, for being untimely. While not necessary based upon the Court’s finding that these claims are time-barred, the Court also grants Defendants’ motion to dismiss these claims based on the finding that Plaintiffs have failed to plead their claims with particularity pursuant to Fed.R.Civ.P. 9(b) and the PSLRA. The Court will issue an appropriate Order reflecting the rulings made herewith.
Notes
. Raymond is the current Chairman of the Board and Chief Executive Officer of Exxon Mobil and, prior to 2004, was also the President of Exxon Mobil. Raymond has recently announced that he will retire from his positions at Exxon Mobil at the end of the year. See Jad Mouawad, Lee Raymond, Exxon Mobil's Chief Since 1999 Merger, to Step Down at Year's End, N.Y. Times, August 5, 2005, at Cl.
. In the Complaint, Plaintiffs mistakenly refer to the filing date of Exxon's Third Quarterly Report as September 30, 1999, instead of November 12, 1999. See Compl. ¶ 189.
. According to Exxon’s 10-Q filed with the SEC on August 13, 1999, Mobil shareholders overwhelmingly approved the Merger “with 613,913,495 votes for, 10,874,343 against, and 3,387,746 abstentions.” Carvelli Decl. Ex. E at 21.
. See Compl. ¶¶ 67-87 for Plaintiffs’ detailed overview of SFAS 121.
. According to Defendants, Plaintiffs improperly used Exxon Mobil trade secrets and other confidential business information by including information supplied by the confidential witness in the Complaint. See Defs. Reply at 11, n. 8; Ex. D-E.
. The terms of the merger provided that Exxon shareholders would own approximately 70% of the combined company and former Mobil shareholders would own approximately 30 percent. Compl. ¶ 2.
. According to Plaintiffs, an additional 2.3% of the outstanding stock of the combined company represents $4.6 billion in damages to Mobil shareholders. Compl. ¶ 250(a)(iv).
. Section 3(a)(47) provides: "The term 'securities laws’ means the Securities Act of 1933, the Securities Exchange Act of 1934, the Public Utility Holding Company Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940, and the Securities Investor Protection Act of 1970.’’
. See discussion infra at 420 - 421.
. See infra 418-19 for discussion of Plaintiffs’ claim that the inquiry notice trigger date was March 2004.
. In fact, Plaintiffs refer to these companies' 1998 Annual Reports on Form 10-K, which were public documents filed with the SEC, that disclosed the reporting of impairments of certain oil and gas assets. See Compl. ¶¶ 105-106, 110-111.
. See supra at 416 - 417.
. The parties dispute exactly when Plaintiffs first filed their Section 10(b) claim in this matter. According to Defendants, Plaintiffs first asserted their Section 10(b) claim on May 27, 2004. See Defs. Mot. Summ. J. at 16. On the contrary, Plaintiffs contend that their initial complaint was filed on March 17, 2004 because their Seсtion 10(b) claim “relates- *422 back” to the claims asserted in that complaint, which alleged "a nearly identical claim for violation of § 14(e)....” Pis. Opp. at 19. Regardless of whether Plaintiffs' Exchange Act claims were filed in March or May of 2004, the Court finds that Plaintiffs do not have a viable cause of action because their Exchange Act claims were time-barred as of April 2002, which was prior to the enactment of Sarbanes-Oxley and the extended statute of limitations for securities fraud actions.
. In light of Plaintiffs’ failure to provide any dates of securities purchases, the Court finds unpersuasive Plaintiffs' argument that they have viable Section 10(b) claims based on Defendants' statements in the 10-Qs. Indeed, according to Defendants, Lead Plaintiffs likely owned more Exxon stock than Mobil stock prior to the merger. See Defs. Reply at 11, n. 8. Defendants thus contend that Lead Plaintiffs profited, as Exxon shareholders, from the alleged fraud. See id. Defendants refer to Exxon-Mobil stock price and dividend charts in support of this argument, see Carvelli Decl. Ex. B, but it is not entirely clear to the Court that these charts reflect Lead Plaintiffs’ holdings in Exxon stock prior to the merger. However, the annual financial report of the State Teachers Retirement System of Ohio ("STRSO”) for the period ending June 30, 1999, indicates that STRSO held 3,849,767 shares of Exxon common stock as of June 30, 1999. See Carvelli Reply Decl. Ex. B. In addition, the annual financial report of the Ohio Public Employees Retirement System for the year ended December 31, 1998 indicates that this entity held 3,372,500 shares of *425 Exxon stock but only 1,125,600 shares of Mobil stock. See id. Ex. C.
. The Court notes that Plaintiffs do not provide the dates on which they purchased their Mobil shares, stating that such dates are immaterial because their “claims stem solely from the November 1999 Exxon stock transaction. ...” Pls. Opp. at 22, n. 22. However, Plaintiffs cannot assert a claim based on the alleged misrepresentations in the 10-Qs if they did not trade any securities based on such reports.
. Fed.R.Civ.P. 15(c) provides that "[a]n amendment of a pleading relates back to the date of the original pleading when the claim or defense asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading[.]” Fed.R.Civ.P. 15(c).
. According to Defendants, Exxon’s 1998 10-K, which was incorporated into the Proxy Statement, was audited by Pricewaterhouse Coopers LLP, “which rendered an unqualified opinion that the financial statements contained therein presented fairly, in all material respects, the financial position and results of Exxon in conformity with GAAP.” Defs. Mot. Summ. J. at 21-22. Plaintiffs do not dispute the accuracy of this opinion.
. At least one court has found that “a delinquent write-down of the impaired asset[], without anything more, does not state a claim of securities fraud, stating at best a bad business decision.” ICN Pharmaceuticals, 299 F.Supp.2d at 1065.
. The Court notes that Plaintiffs only address Raymond’s compensation package in the scienter argument of their opposition brief.