finding no inference of scienter where "several of Plaintiff's allegations involve[d] either vague dates, or dates that occurred after" the allegedly fraudulent statements were madeSummary of this case from Neca-Ibew Health & Welfare Fund v. Pitney Bowes Inc.
December 21, 2009.
Appeal from a March 4, 2009 order of the United States District Court for the Southern District of New York (Richard J. Sullivan, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the judgment of the District Court be AFFIRMED.
Marc I. Gross, Pomerantz, Haudek Grossman Gross LLP, New York, NY, for Plaintiff-Appellant.
Jonathan K. Youngwood, (Bruce D. Angiolillo, Janet A. Gochman, of counsel) Simpson Thacher Bartlett LLP, New York, NY, for defendant-appellee PXRE Group, Ltd.
Jonathan R. Tuttle, Scott N. Auby, David S. Karp, Debevoise Plimpton LLP, Washington, D.C., for defendant-appellee Radke.
Brad S. Karp, Jonathan H. Hurwitz, Joshua D. Anders, New York, NY, for defendant-appellee Hengesbaugh.
M. William Munno, Justin M. Garbaccio, Seward Kissel LLP, New York, NY, for defendant-appellee Modin.
PRESENT: GUIDO CALABRESI, JOSÉ A. CABRANES and B.D. PARKER, Circuit Judges.
Plaintiff-appellant Chad Condra, lead plaintiff in this securities fraud class action, appeals from the District Court's order dismissing the class plaintiffs' complaint, which alleges claims under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated by the Securities and Exchange Commission. This class action arises out of statements made by defendants-appellees PXRE Group Ltd. ("PXRE"), Jeffrey L. Radke, John M. Modin, and Guy Hengesbaugh (together, "defendants"), regarding the losses that PXRE, a reinsurance company, would be exposed to in the wake of Hurricane Katrina as well as the company's procedures for calculating loss. We assume the parties' familiarity with the remaining facts, procedural history, and issues on appeal.
On appeal, plaintiffs argue that the District Court erred in dismissing their complaint on the basis that it fails to raise a strong inference of scienter so as to survive a motion to dismiss. Specifically, plaintiffs assert that the District Court erred by (1) holding that the Chief Actuary's opinion was insufficient to infer scienter, (2) finding that the magnitude of PXRE's understatement of losses, absolutely and relative to its peers, did not support an inference of scienter, and (3) discounting defendants' motive and opportunity in making their alleged misstatements about PXRE's losses. Plaintiffs also argue for the first time on this appeal that the District Court should have imputed to defendants knowledge of "core operations" of the company to support a finding of scienter or, alternatively, that defendants' duty of inquiry supports the inference of scienter.
We review de novo the District Court's decision dismissing a complaint pursuant to Rule 12(b)(6), see Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002). "To survive dismissal, [a] plaintiff must provide the grounds upon which his claim rests through factual allegations sufficient `to raise a right to relief above the speculative level.'" ATSI Commc'ns., Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).
To plead scienter under the Private Securities Litigation Reform Act of 1995, Pub.L. 104-67, 109 Stat. 737 (codified as amended in scattered sections of 15 U.S.C.) sufficiently to survive a motion to dismiss a plaintiff must allege with particularity "facts giving rise to a strong inference that the defendant acted with the required state of mind" — an intent to deceive, manipulate, or defraud. 15 U.S.C. § 78u-4(b)(2). A plaintiff may establish a "strong inference" of scienter by alleging either "(1) that defendants had the motive and opportunity to commit fraud, or (2) strong circumstantial evidence of conscious misbehavior or recklessness." ECA v. JP Morgan Chase Co., 553 F.3d 187, 198 (2d Cir. 2009). In assessing allegations of scienter we must consider " all of the facts alleged, taken collectively," and must also "take into account plausible opposing inferences." Tellabs, Inc. v. Makor Issues Rights, Ltd., 551 U.S. 308, 322-23, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007). The inference of scienter must be "at least as compelling as any opposing inference of nonfraudulent intent." ECA, 553 F.3d at 198 (citation omitted).
In a thorough, well-reasoned opinion, the District Court granted defendants' motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, holding that plaintiffs failed to sufficiently plead scienter under either of the two prongs of the scienter test required by our holding in ECA. After considering plaintiffs' complaint and all of the arguments on appeal, we dismiss plaintiffs' claims substantially for the reasons stated by the District Court's careful order and opinion of March 4, 2009. See In re PXRE Group, Ltd., Sec. Litig., 600 F.Supp.2d 510 (S.D.N.Y. 2009).
Accordingly, we AFFIRM the judgment of the District Court.