Singh v. Cigna Corp et al

Filing 77

ORDER granting in part and denying in part #74 Motion for Reconsideration pursuant to the attached ruling and order. Lead Plaintiff shall file a Third Amended Complaint on or before 09/16/2017. Signed by Judge Vanessa L. Bryant on 09/01/2017. (Lee, E.)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT

MINOHOR SINGH,
Individually and On Behalf of All Others
Similarly Situated,
Plaintiff,

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v.
CIGNA CORP., ET AL.,
Defendants.

CIVIL ACTION NO.
3:16-cv-00182 (VLB)
September 1, 2017

RULING AND ORDER ON MOTION FOR RECONSIDERATION [DKT. 74]
Before the Court is Lead Plaintiff’s Motion for Reconsideration of the Court’s
Order directing Lead Plaintiff to file a proposed amended complaint in
contemplation of his request for leave to amend should the Court grant
Defendants’ Motion to Dismiss. [Dkt. 74]. This motion is opposed by Defendants.
See [Dkt. 76 (Opp’n on Mot. Reconsideration)]. For the foregoing reasons, the
Court GRANTS in part and DENIES in part Lead Plaintiff’s Motion for
Reconsideration.
The Court will briefly review the procedural posture of this case. Jyotindra
Patel filed the initial complaint in this lawsuit on February 4, 2016. [Dkt. 1 (Compl.)].
The Complaint raised allegations of violations of sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 (the “Exchange Act” or “Act”), codified under 15
U.S.C. §§ 78j(b) and 78t(a) respectively, and Rule 10b-5 promulgated by the
Securities Exchange Commission (“SEC”) under 17 C.F.R. § 240.10b-5, that
occurred during the Class Period. In April 2016, Plaintiff moved to appoint Minohor
Singh as Lead Plaintiff, which the Court granted. [Dkt. 28 (Mot. Appoint Counsel);
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Dkt. 34 (Order]. Singh thereafter amended the complaint, raising substantially
more factual allegations. See [Dkt. 40 (Am. Compl.)]. In September 2016, Singh
filed a Motion to Modify Pretrial Deadlines indicating intentions for requesting leave
to amend due to “key developments” since the previous filing. [Dkt. 50 at 3].
Defendants opposed this objection and argued that Singh had six months from the
filing of the original complaint and two months from his appointment as Lead
Plaintiff to amend the complaint. [Dkt. 51 (Opp’n Mot. Modify) at 2].
The Court held a telephonic conference on October 7, 2016, and granted
Lead Plaintiff a modification of the scheduling order as well as leave to amend. See
[Dkt. 54 (Tr. Tel. Conf.) at 19-21]. During the hearing, signaling the insufficiency of
the Complaint, the Court specifically asked Lead Plaintiff’s counsel, “[D]o you
expect that if you were to amend you would be able to state with more particularity
the basis of your claims?” Id. at 15:9-14. Counsel responded in the affirmative.
See id. 15:15-18. Defense counsel posited that discovery had been ongoing for
several months and that they “were prepared and have worked hard under [the
Court’s] order to prepare a motion to dismiss that [they] were prepared to file in 10
days. . . .” Id. at 17:24-18:3. Upon considering the arguments the Court determined
Lead Plaintiff should have “a reasonable opportunity to complete discovery to the
point where they are able to file an amended complaint that fairly reflects all of the
information that they can reasonably acquire in conducting thorough due diligence
of their allegations.” Id. at 18:8-16. The Court reasoned, “[W]e want this matter to
be resolved one way or the other on the merits with full consideration of all of the
relevant facts, and if that takes an additional couple of months to do I think it’s time
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well spent for everyone involved, including Defendants.” Id. at 19:14-20. Lead
Plaintiff thereafter filed the 87-page Second Amended Complaint, which is
operative today.
Defendants filed the Motion to Dismiss on February 13, 2017, and the motion
is now fully briefed. Lead Plaintiff requests that should the Court grant Defendants’
Motion to Dismiss it should allow Lead Plaintiff to replead the Second Amended
Complaint. The Court reviewed the Second Amended Complaint in the context of
the Motion to Dismiss and on August 28, 2017, it ordered Lead Plaintiff to file a
proposed Third Amended Complaint.

[Dkt. 72].

Rather than accepting the

opportunity to replead a second time as offered by the Court, Lead Plaintiff now
seeks reconsideration of the offer to replead.
In the Second Circuit, the standard for granting a motion for reconsideration
“is strict, and reconsideration will generally be denied unless the moving party can
point to controlling decisions or data that the court overlooked—matters, in other
words, that might reasonably be expected to alter the conclusion reached by the
court.” Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995); see D. Conn.
L. R. 7(c) (requiring the movant to file along with the motion for reconsideration “a
memorandum setting forth concisely the controlling decisions or data the movant
believes the Court overlooked”). There are three grounds for granting a motion for
reconsideration: (1) “intervening change of controlling law”; (2) “the availability of
new evidence”; or (3) a “need to correct a clear error or prevent manifest
injustice.” Virgin Atl. Airways Ltd. v. Nat’l Mediation Bd., 956 F.2d 1245, 1255 (2d
Cir. 1992) (quoting 18 C. Wright, A. Miller & E. Cooper, Fed. Practice & Procedure,
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§ 4478 at 790). If the Court “overlooked controlling decisions or factual matters
that were put before it on the underlying motion,” reconsideration is appropriate.
Eisemann v. Greene, 204 F.3d 393, 395 (2d Cir. 2000) (per curium). By like measure,
a motion for reconsideration should be denied when the movant “seeks solely to
relitigate an issue already decided.” Shrader, 70 F.3d at 257; Patterson v. Bannish,
No. 3:10-cv-1481 (AWT), 2011 WL 2518749, at *1 (D. Conn. June 23, 2011) (same).
Lead Plaintiff’s Motion for Reconsideration does not address the standard
set forth above. Given that Lead Plaintiff does not raise any “intervening change
of controlling law” or “the availability of new evidence,” Virgin Atl. Airways, 956
F.2d at 1255, the Court assumes Lead Plaintiff seeks to “correct a clear error or
prevent manifest injustice.”
Lead Plaintiff requests that the Court grant leave to amend should it find the
Second Amended Complaint fails to state a claim upon which relief may be granted.
Leave to amend is to be given freely “when justice so requires,” Fed. R. Civ. P.
15(a), unless the moving party acted with “undue delay, bad faith or dilatory motive
. . . , repeated failure to cure deficiencies by amendments previously allowed,” or
the amendment would create undue prejudice to the opposing party or be futile.
Foman v. Davis, 371 U.S. 178, 182 (1962). “District courts typically grant plaintiffs
at least one opportunity to plead fraud with greater specificity when they dismiss
under Rule 9(b).” ATSI Comms., Inc., 493 F.3d 87, 108 (2d Cir. 2007). However, it
is well within the court’s discretion to grant leave to amend under Fed. R. Civ. P.
15(a) “and a district court may therefore properly deny leave to amend where a
plaintiff has already been given one opportunity to plead fraud with greater
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specificity.” Abuhamdan v. Blyth, Inc., 9 F. Supp. 3d 175, 212 (D. Conn. 2014)
(quoting Endovasc, Ltd. v. J.P. Turner & Co., LLC, 169 F. App’x. 655, 657–58 (2d
Cir.2006)).
Section 78u-4 of the PSLRA contemplates that in general “all discovery and
other proceedings shall be stayed during the pendency of any motion to dismiss. .
. .” 15 U.S.C. § 78u-4(b)(3)(B). When, after conducting the telephonic conference,
the Court granted leave to amend the Amended Complaint and extended the
deadline for the motion to dismiss, there were practical implications enabling Lead
Plaintiff to continue in his pursuit of discovery well past the period typically
allowed. The Court contemplated these implications and determined it fair and
necessary to give the Lead Plaintiff an opportunity to plead with particularity, in
compliance with Rule 9(b), from the outset. As the Court directed, Lead Plaintiff
was granted a modification of the scheduling order and leave to amend with the
understanding that he would exercise his due diligence and replead stating his
claims with particularity, alleging specific facts constituting the elements of the
claims asserted.
The Second Amended Complaint indeed provides more factual allegations
indicating Lead Plaintiff attempted to cure some defects with particularity. For
example, the Second Amended Complaint contains a new section documenting
that Cigna received 75 notifications of non-compliance from CMS, with explicit
references to the content of certain notifications. [Dkt. 57 ¶¶ 115-18]. The Second
Amended Complaint also raises new allegations that Defendant Appel was required
to report to senior management information about Medicare compliance. Id. ¶¶
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159-61. These allegations are clear examples of Lead Plaintiff’s attempt to address
the Rule 9(b) particularity requirements.
However, notwithstanding the Second Amended Complaint is 87 pages, it is
replete with conclusory and irrelevant allegations, and it still falls short on facts
necessary to satisfy the Rule 9(b) pleading standard. Specifically, the Second
Amended Complaint does not identify the types of notifications issued by CMS to
Defendant Cigna; it does not allege the type of compliance letter issued by CMS,
although there are 4 distinct types of letters with varying severities and sanctions.
It does not state whether the deficiencies cited in the compliance letters were
resolved and when. It does not allege when the letters were issued or the factual
content of the compliance letters. The Second Amended Complaint does not
include relevant SEC filings made by Cigna during the relevant period (with a few
exceptions) nor does it include factual allegations about highly relevant time
periods. Furthermore, the Second Amended Complaint does not allege what Cigna
knew at the time it made the alleged material misstatements and/or omissions and
when it came to know it. Essentially, Lead Plaintiff has marginally, if at all, pleaded
that a duty to disclose arose, or at what point and under what circumstances this
duty could have arisen. See Stratte-McClure v. Morgan Stanley, 776 F.3d 94, 101
(2d Cir. 2015) (stating the duty to disclose instead arises where there is “a statute
or regulation requiring disclosure” or a “corporate statement that would otherwise
be inaccurate, incomplete, or misleading”). The allegation that certain compliance
letters were issued in certain months without specifying the nature of the
compliance letter and whether the subject matter of the letter was resolved may be
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insufficient to establish the specificity necessary to adequately plead fraud, given
the progressive compliance regime of the CMS.

In addition, Cigna’s lack of

expertise as alleged in the Second Amended Complaint together with the temporal
proximity of the escalation in the number of compliance letters and the suspension
without further specificity as to the nature and the pendency of the performance
deficiencies and compliance letters, combine to undermine Lead Plaintiff's claims.
Lead Plaintiff has similarly failed to tailor the Second Amended Complaint’s
allegations to support a strong inference of scienter. Tellabs, Inc. v. Makor Issues
& Rights, Ltd., 551 U.S. 308, 322-23 (2007). It is incumbent upon Lead Plaintiff to
provide more specifics than a broad, roughly two-year time period for which certain
Defendants “suspiciously sold stock.” [Dkt. 40 ¶ 180]. Lead Plaintiff must also
plead more than allegations suggesting that the certain Defendants “must have
known their statements to be untrue.” In re BioScrip, Inc. v. Sec. Litig., 95 F. Supp.
3d 711, 738 (S.D.N.Y. 2015).
To the extent Lead Plaintiff believes the Motion to Dismiss does not provide
sufficient notice of the Second Amended Complaint’s insufficiencies, the Court
notes that the Motion to Dismiss aptly identifies the issues. See Endovasc, Ltd. v.
J.P. Turner & Co., LLC, 169 F. App’x 655, 657 (2d Cir. 2006) (observing “the district
court provided [plaintiff] an opportunity to amend its pleadings in light of
defendants’ dismissal papers, thus granting [plaintiff] an ‘opportunity to plead
fraud with greater specificity,’”) (quoting Luce v. Edelstein, 802 F.2d 49, 56 (2d Cir.
1986)); Abuhamdan v. Blyth, Inc., 9 F. Supp. 3d 175, 212 (D. Conn. 2014) (granting
motion to dismiss and denying leave to amend after giving plaintiff the opportunity
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to replead prior to the court’s ruling and upon reviewing the defendants’ motion to
dismiss).
Lead Plaintiff has already been given a chance to replead with greater
specificity, both after the telephonic conference and recently with the Court’s
order. See Abuhamdan, 9 F. Supp. 3d at 212-13. Lead Plaintiff believes he should
be given another opportunity “after hearing the Court’s assessments of the merits
of the Complaints.” [Dkt. 68 at 49]; see also [Dkt. 75 (Mot. Reconsideration) at 2].
To avoid any potential for “manifest injustice,” the Court has now provided notice
to Lead Plaintiff of the Second Amended Complaint’s fundamental deficiencies.
Accordingly, the Court DENIES the relief sought in Lead Plaintiff’s Motion for
Reconsideration to the extent he seeks leave to amend the Second Amended
Complaint after the Court issues its ruling on Defendants’ Motion to Dismiss, [Dkt.
66]. The Court GRANTS Lead Plaintiff’s Motion for Reconsideration to the extent
Lead Plaintiff seeks relief from filing a proposed amended complaint on September
4, 2017, and ORDERS Lead Plaintiff to file a Third Amended Complaint on or before
September 16, 2017.
IT IS SO ORDERED.
________/s/__ ________
Hon. Vanessa L. Bryant
United States District Judge

Dated at Hartford, Connecticut: September 1, 2017

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