In a detailed 74-page opinion yesterday, Judge Failla dismissed a securities fraud complaint against Chipotle arising from its alleged failure to properly disclose to investors various matters relating to the food-borne illness outbreaks that caused its stock to drop.  She had dismissed an earlier version of the complaint last year, as we covered here.

Judge Failla ruled (among other things) that generalized statements in Chipotle’s filings about its commitment to food safety could not be the basis for fraud:
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This week, Judge Failla dismissed a putative class action stemming from the 2015 food-borne illness outbreak among Chipotle customers.  According to the complaint, at least seven E. coli outbreaks at Chipotle restaurants in 2015 were caused by Chipotle’s switch from processing produce at a central facility to processing produce in each of its 1,900 restaurants.  The complaint alleged that Chipotle and its executives failed to disclose the change in produce processing and the resulting increase in the risk of food-borne illness outbreaks.

Judge Failla found that these statements were not actionable:


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In a brief order today, Judge Scheindlin denied a request by French conglomerate Vivendi to file, in light of the Supreme Court’s recent decision in the Halliburton II case, a new Rule 50(b) motion three years after its initial post-trial motion was denied. As Judge Scheindlin explained:

In the Supreme Court’s own words, it granted certiorari in Halliburton II to address two issues: (1) “to resolve a conflict among the Circuits over whether securities fraud defendants may attempt to rebut the Basic [Inc. v. Levinson] presumption at the class certification stage with evidence of a lack of price impact”; and (2) “to reconsider the presumption of reliance for securities fraud claims that [the Supreme Court] adopted in Basic. The Court said yes to the first question and no to the second.

Vivendi had argued that Halliburton II created new law under Rule 10b-5, requiring a plaintiff to prove that a misleading statement had an impact on the price of a security. But, Judge Scheindlin ruled, that has always been the rule, and was the rule when Vivendi’s prior Rule 50(b) motion had been denied. Halliburton II merely requires that “[d]efendants must be afforded an opportunity before class certification to defeat the [Basic]presumption through evidence that an alleged misrepresentation did no actually affect the market price of the stock.”
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In an opinion today, Judge Marrero denied SAC Capital’s motion to dismiss a class action brought by investors in Wyeth and Elan stock who traded contemporaneously with trades that SAC allegedly made based on inside information. SAC argued (among other things) that it already disgorged to the SEC an amount larger than the amount sought in the complaint for some of the claims, but Judge Marrero found that the precise amount of any offset would have to be determined in discovery:
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In an opinion dated Friday, Judge Cote granted partial summary judgment to the FHFA (the conservator for the two Government-Sponsored Enterprises, or “GSEs,” Fannie Mae and Freddie Mac), dismissing various banks’ affirmative defense that the GSEs had knowledge that the mortgage securities at issue were defective. The essence of her ruling was that, while the GSEs may have had generalized knowledge of problems with mortgage origination, there was no evidence that they had specific knowledge that the representations at issue were false:
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In an opinion issued today, Judge Ramos dismissed securities fraud and related claims brought against Deloitte & Touche for its part in allegedly fraudulent financial statements and other SEC filings by ChinaCast Education, a Chinese company that traded on the NASDAQ from 2006 to 2012.  Deloitte was ChinaCast’s auditor, and the plaintiffs were investors in the company, including current management, who claimed to have uncovered misdeeds by ChinaCast’s prior management. Judge Ramos described the plaintiffs’ claims:

At bottom, Plaintiffs contend that, had the Deloitte Defendants performed any audit at all, they would have discovered the rampant fraud at ChinaCast much earlier. The FAC describes a number of failures to comply with PCAOB and GAAP standards, as well as “red flags” that should have placed the Deloitte Defendants on notice of the fraud. Consequently, Plaintiffs assert that DTTC’s statements for the years 2007 through 2010, that it conducted its audits in accordance with PCAOB standards and that ChinaCast’s audited financial statements were GAAP compliant, and for the years 2008 and 2009, that the Company’s internal controls over financial reporting were effective, were materially false.


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In an opinion yesterday, Judge Forrest denied a motion to dismiss by the investment bank Macquarie, which argued (see here and here) that, based on Janus Capital Group, Inc. v. First Derivative Traders, 131 S. Ct. 2296 (June 13, 2011), the allegedly false prospectus at issue was “made” by the issuer (a company called Puda Coal), not the underwriter (Macquarie).  There a few lower court decisions on this issue, but Judge Forrest found that Janus did not bar the plaintiffs’ claims here:
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As we reported in May, Judge Swain precluded the trial testimony of the plaintiffs’ loss causation and damages expert in a shareholder class action accusing Pfizer of concealing the cardiovascular risks of two drugs, Celebrex and Bextra.  At the time we wrote:  “Without a damages expert, it is unclear how the plaintiffs can prove their case at trial, which is currently scheduled for September.” The answer, based on an Order yesterday, is that the plaintiffs will not be able to prove their case.  Judge Swain dismissed the case altogether, writing:  “To prevail on a securities fraud claim under Section 10(b) of the Securities Exchange Act of 1934, Plaintiffs must prove loss causation and damages. See, e.g., Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 157 (2007); 15 U.S.C. § 78u-4(b)(4). Without a loss causation expert, Plaintiffs cannot prove either.” She rejected the plaintiffs’ attempt to update the expert’s report to fix the issued she identified earlier:
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In an opinion issued yesterday, Judge Crotty denied Goldman Sachs’ motion for reconsideration of his refusal to dismiss securities fraud claims that Goldman argued were inactionable “puffery.”  See our post on that decision here. Goldman had pointed to three subsequent Second Circuit opinions — in City of  Pontiac Policemen’s & Firemen’s Ret. Sys. v. UBS AG, Carpenters Pension Trust Fund of St. Louis v. Barclays PLC, and Boca Raton Firefighters & Police Pension Fund v. Bahash — that it argued had changed or clarified controlling law on puffery.  Judge Crotty disagreed:
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