IN RE LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES LITIGATION
Nos. 10-0712-cv, 10-0898-cv, 10-1288-cv
United States Court of Appeals for the Second Circuit
May 11, 2011
August Term, 2010 (Argued: January 11, 2011)
In re Lehman Bros. Mortg.-Backed Sec. Litig, et. al.,
Wyo. State Treasurer v. Moody‘s Investors Serv., Inc.
Vaszurele Ltd. v. Moody‘s Investors Serv., Inc.
IN RE LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES LITIGATION
WYOMING STATE TREASURER, WYOMING RETIREMENT SYSTEM,
Plaintiffs-Appellants,
POLICE AND FIRE RETIREMENT SYSTEM OF THE CITY OF DETROIT, INDIVIDUALLY, POLICE AND FIRE RETIREMENT SYSTEM OF THE CITY OF DETROIT, ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,
Plaintiffs,
v.
MOODY‘S INVESTORS SERVICE, INC., THE MCGRAW-HILL COMPANIES, INC., FITCH INC.,
Defendants-Appellees,
INDYMAC MBS, INCORPORATED, RESIDENTIAL ASSET SECURITIZATION TRUST 2006-A5CB, INDYMAC INDX MORTGAGE LOAN TRUST 2006-AR9, INDYMAC INDX MORTGAGE LOAN TRUST 2006-AR11, INDYMAC INDX MORTGAGE LOAN TRUST 2006-AR6, RESIDENTIAL ASSET SECURITIZATION TRUST 2006-A6, RESIDENTIAL ASSET SECURITIZATION TRUST 2006-A7CB, INDYMAC INDX MORTGAGE LOAN TRUST 2006-AR13, INDYMAC INDX MORTGAGE LOAN TRUST 2006-1, INDYMAC HOME EQUITY MORTGAGE LOAN ASSET-BACKED TRUST, SERIES 2006-H2, INDYMAC INDX MORTGAGE LOAN TRUST 2006-AR21, RESIDENTIAL ASSET SECURITIZATION TRUST 2006-A8, INDYMAC INDX MORTGAGE LOAN TRUST 2006-AR19, INDYMAC INDZ MORTGAGE
Defendants,
LYNETTE ANTOSH, INDYMAC INDX MORTGAGE LOAN TRUST SERIES 2006-AR14, INDYMAC INDX MORTGAGE LOAN TRUST SERIES 2006-AR2, INDYMAC INDX MORTGAGE LOAN TRUST SERIES 2006-AR15, INDYMAC INDX MORTGAGE LOAN TRUST SERIES 2006-AR4, INDYMAC INDX MORTGAGE LOAN TRUST SERIES 2006-AR7, INDYMAC RESIDENTIAL MORTGAGE BACKED TRUST SERIES 2006-L2, INDYMAC RESIDENTIAL ASSET BACKED TRUST SERIES 2006-D, BANK OF AMERICA CORPORATION, SUCCESSOR-IN-INTEREST TO COUNTRYWIDE SECURITIES CORPORATION, FITCH RATING LIMITED,
Consolidated-Defendants.
VASZURELE LIMITED,
Lead Plaintiff-Appellant,
VASILI TSERETELI, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,
Plaintiff,
v.
MOODY‘S INVESTORS SERVICE, INC., THE MCGRAW HILL COMPANIES, INC.,
Defendants-Appellees,
Residential Asset Securitization Trust 2006-A8, Credit Suisse Securities (USA) LLC,
Defendants.*
* The Clerk of the Court is directed to amend the captions to read as shown above.
Appeals from three judgments of the United States District Court for the Southern District of New York (Lewis A. Kaplan, Judge) dismissing plaintiffs’ complaints seeking to hold the rating agency defendants liable as underwriters or control persons for misstatements or omissions in securities offering documents in violation of §§ 11 and 15 of the Securities Act of 1933. See
AFFIRMED.
JOEL P. LAITMAN, Cohen Milstein Sellers & Toll PLLC, New York, New York (Michael B. Eisenkraft, Daniel B. Rehns, Kenneth M. Rehns, Cohen Milstein Sellers & Toll PLLC, New York, New York; Steven J. Toll, Joshua S. Devore, Matthew B. Kaplan, S. Douglas Bunch, Cohen Milstein Sellers & Toll PLLC, Washington, D.C., on the brief), for Lead Plaintiff-Appellant Locals 302 & 612 of the International Union of Operating Engineers – Employers Construction Industry Retirement Trust and Plaintiffs-Appellants New Jersey Carpenters Health Fund and Boilermakers-Blacksmith National Pension Trust.
JOSEPH J. TABACCO, JR., Berman DeValerio, San Francisco, California (Patrick T. Egan, Berman DeValerio, Boston, Massachusetts, on the brief), for Plaintiffs-Appellants Wyoming State Treasurer and Wyoming Retirement System.
LESTER L. LEVY, Wolf Popper LLP, New York, New York, for Lead Plaintiff-Appellant Vaszurele Limited.
FLOYD ABRAMS (S. Penny Windle (admission pending), Adam Zurofsky, Tammy L. Roy, on the brief), Cahill Gordon & Reindel LLP, New York, New York, for Defendant-Appellee The McGraw Hill Companies, Inc.
ANDREW J. EHRLICH (Martin Flumenbaum, on the brief), Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York, New York, for Defendant-Appellee Fitch, Inc.
REENA RAGGI, Circuit Judge:
Because these three appeals raise common questions of law, we dispose of them in a single opinion. Plaintiffs, Locals 302 & 612 of the International Union of Operating Engineers – Employers Construction Industry Retirement Trust (“Operating Engineers“), New Jersey Carpenters Health Fund, and Boilermakers-Blacksmith National Pension Trust (collectively, “Union Plaintiffs“); Wyoming State Treasurer and Wyoming Retirement System (collectively, “Wyoming“); and Vaszurele Limited (“Vaszurele“), appeal from judgments of the United States District Court for the Southern District of New York (Lewis A. Kaplan, Judge) entered on February 5, 2010, and February 17, 2010, dismissing their class-action complaints seeking to hold defendants, The McGraw Hill Companies, Inc. (“McGraw Hill“), through its subsidiary Standard & Poor‘s (“S&P“), Moody‘s Investors Service, Inc. (“Moody‘s“), and/or Fitch, Inc. (“Fitch“) (collectively, “Rating Agencies“), liable as underwriters or control persons for misstatements or omissions in securities offering documents in violation of §§ 11 and 15 of the Securities Act of 1933 (“1933 Act“). See
We reject these arguments as without merit.
I. Background
On appeal, we assume the truth of the facts alleged in plaintiffs’ complaints. See, e.g., In re NYSE Specialists Sec. Litig., 503 F.3d 89, 91 (2d Cir. 2007).
A. The Securities Offerings
1. Mortgage Pass-Through Certificates
In the period from 2005 to 2007, plaintiffs and similarly situated persons purchased approximately $155 billion worth of mortgage pass-through certificates registered with the Securities and Exchange Commission (“SEC“) entitling them to distributions from underlying pools of mortgages. To create such certificates, a “sponsor” originates or acquires mortgages. Next, the loans are sold to a “depositor” that securitizes the loans — meaning, in effect, that the depositor secures the rights to cash flows from the loans so that those rights can be sold to investors. The loans are then placed in issuing trusts, which collect the principal and interest payments made by the individual mortgage borrowers and, in turn, pay out distributions to the purchasers of the mortgage pass-through certificates. Finally,
Many of the certificates here at issue received AAA ratings, the “safest” tranche supposedly least likely to default. Investment-grade ratings were crucial to the certificates’ sale because many institutional investors must purchase investment-grade securities. Moreover, some senior certificates’ sales were conditioned on the receipt of AAA ratings.
2. Union Plaintiffs’ Purchase of Certificates
The Union Plaintiffs and other similarly situated persons bought certificates in ninety-four offerings between September 29, 2005, and July 28, 2007, that were sponsored by Lehman Brothers Holdings, Inc. (“LBHI“) and underwritten by Lehman Brothers, Inc., with Structured Asset Securities Corporation (“SASCo“), a wholly-owned LBHI entity, acting as depositor (collectively, “Lehman“). The certificates were issued pursuant to one of two
3. Wyoming‘s Purchase of Certificates
Wyoming and similarly situated persons purchased certificates sponsored by IndyMac Bank, with IndyMac MBS, Inc. acting as depositor. Many large investment banks underwrote the offerings, which were issued pursuant to three registration statements first filed on August 15, 2005, February 24, 2006, and February 14, 2007, respectively. S&P, Moody‘s, and Fitch rated Wyoming‘s certificates.
4. Vaszurele‘s Purchase of Certificates
Vaszurele and similarly situated plaintiffs acquired senior mortgage pass-through certificates, issued on June 28, 2006, by the Residential Asset Securitization Trust 2006-A8 (“RAST“). IndyMac Bank sponsored Vaszurele‘s certificates, with IndyMac MBS, Inc. acting as depositor and Credit Suisse Securities (USA) Inc. as lead underwriter. S&P and Moody‘s rated the certificates acquired by Vaszurele, which are traceable to a registration statement initially filed on February 24, 2006.
B. Rating Agencies’ Alleged Role in the Offerings
In the transactions described above, plaintiffs allege that the Rating Agencies, which ordinarily serve as passive evaluators of credit risk, exceeded their traditional roles by actively aiding in the structuring and securitization process. Specifically, plaintiffs allege that issuing banks engaged particular Rating Agencies through a “ratings shopping” process,
During and after this negotiation, the Rating Agencies engaged in an “iterative process” with the banks, providing “feedback” on which combinations of loans and credit enhancements would generate particular ratings. Id. ¶ 177 (internal quotation marks and emphasis omitted); Wyoming Compl. ¶ 91 (internal quotation marks and emphasis omitted); Vaszurele Compl. ¶ 38 (internal quotation marks and emphasis omitted). In the course of this dialogue, issuers adjusted the certificates’ structures until they achieved desired ratings. As one Moody‘s officer described the process: “You start with a rating and build a deal around a rating.” Union Compl. ¶ 176 (internal quotation marks and emphasis omitted); Wyoming Compl. ¶ 90 (internal quotation marks omitted); Vaszurele Compl. ¶ 38 (internal quotation marks and emphasis omitted). Plaintiffs submit that the Rating Agencies thus helped determine the composition of loan pools, the certificates’ structures, and the amount and kinds of credit enhancement for particular tranches.
C. District Court Proceedings
During the 2008 mortgage crisis, the Rating Agencies downgraded plaintiffs’ AAA or investment-grade certificates, causing their values to decline. Plaintiffs proceeded to sue various entities involved in their offerings.
The Union Plaintiffs’ suit originated as two complaints filed in the Supreme Court of New York against various Lehman entities, the issuing trusts, and individual Lehman executives. Neither complaint named the Rating Agencies as defendants. After the cases were removed to the Southern and Eastern Districts of New York, respectively, the Lehman entities filed for bankruptcy. The Southern District court consolidated the cases and appointed the Operating Engineers as lead plaintiff. The Union Plaintiffs then filed the Consolidated Securities Class Action Complaint at issue here, naming, for the first time, McGraw Hill and Moody‘s as defendants.
Wyoming‘s suit similarly began as two complaints filed in the Southern District of New York. In a July 29, 2009 order, the district court consolidated the cases and named Wyoming lead plaintiff. Wyoming then filed the Consolidated Class Action Complaint at issue on appeal against, inter alia, IndyMac MBS, individual defendants, several underwriter entities, and all three Rating Agencies.
Vasili Tsereteli, the sole shareholder of Vaszurele, initially filed a complaint in the Supreme Court of New York, which was removed to the Southern District of New York. The district court substituted Vaszurele as lead plaintiff because Tsereteli did not himself
All plaintiffs allege that the Rating Agencies that rated their certificates are “underwriters” as defined in
The Rating Agencies moved to dismiss all claims against them, which motions the district court granted. In an opinion filed in the Union Plaintiffs’ case, the district court ruled that the Rating Agencies could not be liable under § 11 because they did not fall within the statutory definition of “underwriter” when they participated in creating the securities but not
These timely appeals followed.
II. Discussion
A. Standard of Review
We review de novo the district court‘s dismissal of plaintiffs’ complaints pursuant to
B. Section 11(a)(5) Underwriter Claims
Section 11 provides the purchasers of registered securities with strict liability protection for material misstatements or omissions in registration statements filed with the SEC. The imposition of strict liability is limited, however, to statutorily enumerated parties: (1) signatories of the registration statement; (2) directors or partners of the issuer at the time of filing; (3) persons consenting to be named as about to become a director or partner; (4) accountants or other experts consenting to be named as preparing or certifying part of the registration statement; and (5) underwriters of the security at issue. See
The term “underwriter” is defined in the 1933 Act as:
any person who has purchased from an issuer with a view to, or offers or sells for an issuer in connection with, the distribution of any security, or participates or has a direct or indirect participation in any such undertaking, or participates or has a participation in the direct or indirect underwriting of any such undertaking.
1. Underwriter Liability Requires Participation in Activities Involving the Distribution of Securities to the Public
a. The Statute‘s Plain Language
To interpret the statutory definition of “underwriter,” we begin, as we must, with the statute‘s text, considering the ordinary meaning of Congress‘s chosen language as informed by its punctuation. See BedRoc Ltd., LLC v. United States, 541 U.S. 176, 183 (2004); Dobrova v. Holder, 607 F.3d 297, 301 (2d Cir. 2010) (“Statutory analysis necessarily begins with the plain meaning of a law‘s text and, absent ambiguity, will generally end there.” (internal quotation marks and brackets omitted)); see also United States Nat‘l Bank of Or.
Applying these principles here, we conclude that common to all categories of persons identified as “underwriters” by the plain language of
Thus, to qualify as an underwriter under the participation prongs of the statutory definition, a person must participate, directly or indirectly, in purchasing securities from an issuer with a view to distribution, in offering or selling securities for an issuer in connection with a distribution, or in the underwriting of such an offering. See generally Alameda Cnty. Emps.’ Ret. Ass‘n v. Ebbers (In re WorldCom Sec. Litig.), 308 F. Supp. 2d 338, 344 (S.D.N.Y. 2004) (Cote, J.) (“According to the statutory definition of an underwriter . . .
b. Relevant Precedent
Plaintiffs acknowledge that
In urging otherwise, plaintiffs also rely on Harden v. Raffensperger, Hughes & Co., 65 F.3d 1392 (7th Cir. 1995), wherein the Seventh Circuit held a qualified independent underwriter (“QIU“) subject to
Nor are we persuaded that Pinter v. Dahl, 486 U.S. 622 (1988), requires a different result. There, the Supreme Court declined to extend
Unlike plaintiffs, we do not interpret this discussion as supporting imposition of
Even if we were to identify ambiguity in the text or in our prior case law, which we do not, an examination of
A House Report explains that “underwriter” was “defined broadly enough to include not only the ordinary underwriter, who for a commission promises to see that an issue is disposed of at a certain price, but also . . . the person who purchases an issue outright with the idea of then selling that issue to the public.” H.R. Rep. No. 73-85, at 13 (1933). Additionally, the definition encompassed “two other groups of persons who perform functions, similar in character, in the distribution:” (1) underwriters of the underwriter, and (2) “participants in the underwriting or outright purchase . . . who are given a certain share or interest.” Id. A later House Report states that changes were made to exclude from the
By focusing on persons playing roles similar to those disposing of or reselling securities, or those participating in such actions, these reports indicate that “congressional intent was to include as underwriters all persons who might operate as conduits for securities being placed into the hands of the investing public.” 2 Thomas Lee Hazen, Law of Securities Regulation § 4.27[1] (6th ed. 2011) (emphasis added); see Ackerberg v. Johnson, 892 F.2d 1328, 1335-36 (8th Cir. 1989) (same); see also New Jersey Carpenters Vacation Fund v. Royal Bank of Scot. Grp., PLC, 720 F. Supp. 2d at 262-63 & n.7 (concluding that
“Indeed, the strict liability nature of the statutory cause of action suggests the opposite.” Pinter v. Dahl, 486 U.S. at 652. As we have previously noted,
In sum, we conclude that the text, case law, legislative history, and purpose of the statute demonstrate that Congress intended the participation clause of the underwriter definition to reach those who participate in purchasing securities with a view towards distribution, or in offering or selling securities for an issuer in connection with a distribution, but not further.
2. Application of Underwriter Definition to Defendants’ Alleged Conduct
With this understanding of the scope of
The complaints contain extensive descriptions of the Rating Agencies’ activities in structuring the certificate transactions, dictating the kinds and quantity of loans or credit enhancements needed for desired ratings, and providing modeling tools to traders to pre-structure loan pools. Plaintiffs submit that these allegations demonstrate that the Rating Agencies played a necessary role in the securities’ distribution because (1) their ratings translated opaque financial products into understandable risk levels, (2) institutional investors were required to buy investment-grade securities, and (3) offerings were conditioned on senior tranches receiving AAA ratings. We disagree. Like all of the district courts to have considered similar claims, we conclude that structuring or creating securities does not constitute the requisite participation in underwriting. See, e.g., New Jersey Carpenters Health Fund v. NovaStar Mortg., Inc., No. 08 Civ. 5310, 2011 WL 1338195, at *7-9 (S.D.N.Y. Mar. 31, 2011); Public Emps.’ Ret. Sys. of Miss. v. Goldman Sachs Grp., Inc., No. 09 CV 1110, 2011 WL 135821, at *5 (S.D.N.Y. Jan. 12, 2011);
As the district court in this case explained, even assuming, as we must, that the Rating Agencies “had a good deal to do with the composition and characteristics of the pools of mortgage loans and the credit enhancements of the [c]ertificates that ultimately were sold,” plaintiffs failed to allege that defendants “participated in the relevant” undertaking: that of purchasing securities from the issuer with a view towards distribution, or selling or offering securities for the issuer in connection with a distribution. In re Lehman Bros. Sec. & ERISA Litig., 681 F. Supp. 2d at 499; see also In re Wells Fargo Mortg.-Backed Certificates Litig., 712 F. Supp. 2d at 968-69 (dismissing
The fact that the market needed ratings to understand structured financial products or that particular ratings were essential to the certificates’ eventual sale does not change the analysis. While it is certainly true that some investors will refrain from buying securities that do not bear a AAA rating, and that some banks will decline to assume the risk of pursuing a public offering unless a security receives a high credit rating, plaintiffs, once again, fail to demonstrate that the Rating Agencies were involved in a statutorily listed distributional activity.
The rating issued by a Rating Agency speaks merely to the Agency‘s opinion of the creditworthiness of a particular security. In other words, it is the sort of expert opinion classically evaluated under the “expert” provision of
Furthermore, expanding
Because plaintiffs’ theory would render these narrowly drawn categories meaningless and contradict well-settled canons of statutory construction, see, e.g., Corley v. United States, 129 S. Ct. 1558, 1566 (2009) (noting that “statute should be construed so that effect is given to all its provisions, so that no part will be inoperative or superfluous, void or insignificant” (internal quotation marks omitted)); Weinstein v. Islamic Republic of Iran, 609 F.3d 43, 49 (2d Cir. 2010), we decline to adopt it. Rather, we conclude that the mere structuring or creation of securities does not constitute participation in statutory underwriting.
For the same reason, we reject Wyoming‘s claim that the Rating Agencies’ alleged review of and comments on draft prospectus supplements incorporated into the registration statements stated a
Contrary to plaintiffs’ assertion, this conclusion will not absolve rating agencies of all liability for their roles in fraudulent securities offerings. As plaintiffs acknowledged at oral argument, they may bring securities fraud claims against the Rating Agencies pursuant to
In sum, because plaintiffs failed to plead facts sufficient to bring the Rating Agencies within the statutory definition of underwriter, their
The Union Plaintiffs and Wyoming also appeal the district court‘s dismissal of their
Although our Court has not yet discussed “control” for
The parties dispute whether we should further adopt the requirement that
Plaintiffs contend that the district court erroneously applied a heightened pleading standard by requiring their complaints to support an inference “that the decision making power lay entirely with the Rating Agencies.” In re Lehman Bros. Sec. & ERISA Litig., 681 F. Supp. 2d at 501 (emphasis added). Unlike plaintiffs, we do not understand the district court‘s passing reference to “entire” control to require a pleading that defendants controlled the primary violators to the exclusion of all others. The district court correctly observed that
Wyoming alleges that defendants “actively collaborated” with the depositors in creating the transactions by providing “direct input,” “advisory opinions,” and “guidance” on which loans or structures would achieve desired ratings. Wyoming Compl. ¶¶ 47-49, 64,
At most, these allegations suggest that the Rating Agencies provided advice and “strategic direction,” Wyoming Br. at 32, on how to structure transactions to achieve particular ratings. Such purported involvement in transaction-level decisions falls far short of showing a power to direct the primary violators’ “management and policies.” SEC v. First Jersey Sec., Inc., 101 F.3d at 1472-73 (emphasis added); see Boilermakers Nat‘l Annuity Trust Fund v. WaMu Mortg. Pass Through Certificates, Series AR1, 748 F. Supp. 2d 1246, 1260 (W.D. Wash. 2010) (dismissing control person claims because allegations that rating agencies “determined the structure and credit support” of transactions “simply d[id] not implicate [violator‘s] management or policies” (internal quotation marks omitted)); In re Wells Fargo Mortg.-Backed Certificates Litig., 712 F. Supp. 2d at 970 (dismissing control
Moreover, allegations of advice, feedback, and guidance fail to raise a reasonable inference that the Rating Agencies had the power to direct, rather than merely inform, the banks’ ultimate structuring decisions. Put another way, providing advice that the banks chose to follow does not suggest control. See Harrison v. Dean Witter Reynolds, Inc., 974 F.2d 873, 877 (7th Cir. 1992) (“[T]he ability to persuade and give counsel is not the same thing as ‘control’ . . . .” (internal quotation marks omitted)); New Jersey Carpenters Health Fund v. Residential Capital, LLC, No. 08 CV 8781, 2010 WL 1257528, at *7 (S.D.N.Y. Mar. 31, 2010) (dismissing control person claim against underwriters because ability to persuade issuers insufficient).15
Indeed, plaintiffs’ “ratings shopping” allegations undermine their control theory. Specifically, plaintiffs allege that the banks wielded “incredible leverage over,” Wyoming Compl. ¶ 195, and “pressured” the Rating Agencies, Union Compl. ¶ 168, by awarding business to the agency providing the highest percentage of AAA ratings with the lowest levels of credit enhancement. Such allegations might suggest that the primary violators had
Nor are we persuaded by the Union Plaintiffs’ argument that they adequately alleged control by stating that SASCo was a “dummy corporation” with the sole purpose of securitizing transactions. The complaint does not, in fact, allege that SASCo was a “dummy corporation,” see Manning v. Utils. Mut. Ins. Co., 254 F.3d 387, 401 (2d Cir. 2001) (noting that allegations must be contained in complaint to defeat motion to dismiss), nor does it plead facts suggesting that SASCo was a shell company created to avoid liability for securities law violations, cf. In re Refco, Inc. Sec. Litig., 503 F. Supp. 2d at 661 (concluding defendants could be liable when they allegedly controlled entities exercising power over shell entities). In any event, the complaint alleges that Lehman wholly owned SASCo and “controlled every aspect of the securitization,” without alleging that the Rating Agencies created SASCo or directed its management or policies. Union Compl. ¶ 6. Such allegations do not raise a reasonable inference that the Rating Agencies controlled SASCo.
Accordingly, we affirm the district court‘s dismissal of the control person claims.
D. Leave to Replead
All plaintiffs charge the district court with error in denying leave to amend. We review such a denial only for abuse of discretion, see Chavis v. Chappius, 618 F.3d 162, 167 (2d Cir. 2010); Sims v. Blot (In re Sims), 534 F.3d 117, 132 (2d Cir. 2008) (describing abuse of discretion standard), which we do not identify here.
In their briefs in opposition to the motions to dismiss, plaintiffs requested leave to amend without specifying what additional facts, if any, they might assert in a new pleading. As we have previously ruled, “[i]t is within the [district] court‘s discretion to deny leave to amend implicitly by not addressing” requests for amendment made “informally in a brief filed in opposition to a motion to dismiss.” Joblove v. Barr Labs. Inc. (In re Tamoxifen Citrate Antitrust Litig.), 466 F.3d 187, 220 (2d Cir. 2006); see also Litwin v. Blackstone Grp., L.P., 634 F.3d 706, 723 (2d Cir. 2011). Where, as here, the district court did not specify in its decisions that it dismissed the complaints with prejudice, and plaintiffs thereafter failed to make formal motions to amend or to offer proposed amended complaints, we identify no abuse of discretion in the district court‘s implicit denial of plaintiffs’ cursory requests for leave to amend.
In any event, a denial of leave to amend is not an abuse of discretion if amendment would be futile. See In re Tamoxifen Citrate Antitrust Litig., 466 F.3d at 220. While plaintiffs’ conclusorily assert on appeal that recent government investigations provide new information about the Rating Agencies’ role in the transactions, they fail to identify new facts that might redress the complaints’ noted deficiencies. Accordingly, we reject as without merit plaintiffs’ challenge to the denial of leave to amend.
III. Conclusion
- To qualify as an “underwriter” under
15 U.S.C. § 77b(a)(11) , a person must have participated, directly or indirectly, in the purchase of securities with a view toward distribution, or in the sale or offer of securities in connection with a distribution. Because the Rating Agencies’ alleged structuring or creation of securities was insufficient to demonstrate their involvement in the requisite distributional activities, plaintiffs’§ 11 claims against these defendants were properly dismissed. - Because the Rating Agencies’ provision of advice and guidance regarding transaction structures was insufficient to permit an inference that they had the power to direct the management or policies of alleged primary violators of
§ 11 , plaintiffs’ “control person” claims against these defendants pursuant to15 U.S.C. § 77o(a) were properly dismissed. - The district court did not abuse its discretion in denying implicitly plaintiffs’ cursory requests for leave to amend.
AFFIRMED.
Notes
(a) In case any part of the registration statement, when such part became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring such security (unless it is proved that at the time of such acquisition he knew of such untruth or omission) may, either at law or in equity, in any court of competent jurisdiction, sue--
(1) every person who signed the registration statement;
(2) every person who was a director of (or person performing similar functions) or partner in the issuer at the time of the filing of the part of the registration statement with respect to which his liability is asserted;
(3) every person who, with his consent, is named in the registration statement as being or about to become a director, person performing similar functions, or partner;
(4) every accountant, engineer, or appraiser, or any person whose profession gives authority to a statement made by him, who has with his consent been named as having prepared or certified any part of the registration statement, or as having prepared or certified any report or valuation which is used in connection with the registration statement, with respect to the statement in such registration statement, report, or valuation, which purports to have been prepared or certified by him;
(5) every underwriter with respect to such security.
SEC v. Kern subsequently quoted Chinese Consolidated‘s “steps necessary” language
Every person who, by or through stock ownership, agency, or otherwise, or who, pursuant to or in connection with an agreement or understanding with one or more other persons by or through stock ownership, agency, or otherwise, controls any person liable under sections 77k or 77l of this title, shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable, unless the controlling person had no knowledge of or reasonable ground to believe in the existence of the facts by reason of which the liability of the controlled person is alleged to exist.