In re Molycorp. Inc. Securities Litigation
Filing
70
OPINION & ORDER re: 55 MOTION for Reconsideration of the March 12, 2015 Opinion & Order. filed by Allen Trempe, Paul Saldana, Macie J. Jurkowski, Brett Huber, Gary Armstrong, Gail Fialkov, Ronald Simmers. The Court DENIES Plaintiffs' motion. The Clerk is directed to terminate the motion at Docket 55. (As further set forth in this Order) (Signed by Judge Paul A. Crotty on 5/23/2016) (lmb)
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13 Civ. 5697 (PAC)
IN RE MOL YCORP, INC.
SECURITIES LITIGATION
OPINION & ORDER
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HONORABLE PAUL A. CROTTY, United States District Judge:
Plaintiffs move for reconsideration of the Court's March 12, 2015 Opinion & Order
dismissing their Consolidated Amended Complaint ("CAC"), which alleges Defendants made
material misstatements and omissions in public filings, in violation of Exchange Act §§ 1O(b)
and 20(a), and Rule 10b-5. 1 2015 WL 1097355. Plaintiffs argue that the Court erred in (i)
failing to consider as a discrete material misrepresentation Defendants' alleged failure to disclose
contractual breaches by a Molycorp contractor; and (ii) denying the motion with prejudice and
without leave to amend. Neither argument has merit; the motion is DENIED.
BACKGROUND
Between February 2012 and October 2013, Plaintiffs allegedly purchased stock in
Molycorp, a Delaware corporation that sells rare earth and metal products. CAC, Dkt. 28 ,-r,-r 1,
18, 39-40. Plaintiffs allege that during that time period "Defendants materially misrepresented
three primary facets of Molycorp's operations, and thereby fraudulently and artificially inflated
1 Plaintiffs moved for reconsideration on April 1, 2015. Dkt. 55. On June 25, 2015, Defendant Molycorp filed for
bankruptcy, and the Court terminated the reconsideration motion pending resolution of the bankruptcy proceedings.
Dkt. 61, 64. On April 8, 2016, the Bankruptcy Court confirmed Molycorp's Chapter 11 reorganization plan, which
discharges Plaintiffs' claims against Molycorp. In re Molycorp, Inc., No. 15-11357 (CSS) (Bankr. D. Del.). As
such, the Court reinstates the motion only as to Plaintiffs' claims against Individual Defendants Constantine
Karayannopoulos, Mark Smith, Michael Doolan, John Burba, and John Ashburn, Jr. Dkt. 69.
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the price of its securities." !d.
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2 (emphasis added). "First, after nearly two years building
investors' excitement for a modernization ofMolycorp's rare earths mine in Mountain Pass,
California, to expand its production capacity to rival industry titans in China, Defendants
[allegedly] misled investors by repeatedly representing that the first phase of the project was
progressing on schedule and would be completed in late 2012." !d. "Second," Defendants
allegedly materially misstated "the amount of inventory carried on its balance sheet and its cost
of sales." !d.
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3. "Lastly," Defendants allegedly touted Molycorp's progress in developing a
cerium-based filtration product called SorbX while knowing that Molycorp "was not making
meaningful progress in building commercial potential for SorbX, nor was SorbX expected to
meaningfully stimulate demand for cerium before or during 2014." !d.
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4. In partial support of
the first claim (misrepresenting that Phase 1 was progressing on schedule), Plaintiffs allege that
contractor M&K Chemical Engineering Consultants ("M&K") performed deficient work,
causing Molycorp to incur damages, terminate M&K, and initiate litigation. !d.
~~
2, 67-70.
On August 13, 2014, Defendants moved to dismiss. They argued (among other things)
that the CAC does not adequately plead Defendants' scienter as to any of the "three sets of
alleged misstatements." Dkt. 41 at 8, 15-25. In their opposition brief, Plaintiffs agreed that the
CAC alleges misstatements "concerning three aspects ofMolycorp's business." Dkt. 48 at 1.
And Plaintiffs repeated the three categories of alleged misstatements:
First, Defendants repeatedly misrepresented that "Phase 1" ofMolycorp's
modernization of a major mining project ... was "on track" for completion by the
end of2012 ... . Second, Molycorp repeatedly touted its successes in marketing
and gaining market penetration for SorbX ... Yet, at the time, Molycorp was
experiencing significant SorbX quality problems as quantities of unsold SorbX
stockpiled .... Third, in August 2013, Molycorp admitted that certain of its
previously-issued financial statements were materially inaccurate, among other
reasons, for failing to properly account for Molycorp's inventory issues, and
therefore had to be restated.
!d. at 1-2. On March 12, 2015, the Court granted the motion to dismiss. 2015 WL
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1097355. The Court followed the three-category structure, holding (i) as to the Phase 1
allegations (which include M&K's alleged contractual breaches), the CAC does not adequately
plead Defendants' scienter; (ii) as to the SorbX allegations, the CAC does not adequately allege
that "these forward-looking statements were made with actual knowledge that the statement was
false or misleading when made"; and (iii) as to the financial restatements, the CAC does not
adequately plead Defendants' scienter. !d. at *9, 13, 14.
In seeking reconsideration, Plaintiffs argue that the Court should have considered a
fourth, and until now unknown, category. They claim the Court erred in failing to consider the
"separate actionability" of Defendants' alleged failure to disclose M&K's contractual breaches
and the resulting damages and litigation, which Defendants allegedly had an independent duty to
disclose pursuant to Item 303 of Regulation S-K.2 Dkt. 56 at 1, 6. Additionally, Plaintiffs assert
that the Court improperly denied them an opportunity to amend the CAC after dismissal and
entry of judgment so that they can "recraft their pleading so as to address the Court's concerns"
and include "additional information ... [uncovered] during their still-ongoing investigation." !d.
at2-3.
DISCUSSION
I.
Applicable Law
"Motions for reconsideration are governed by Local Rule 6.3 and are committed to the
sound discretion ofthe district court." In re Optimal US. Litig., 813 F. Supp. 2d 383, 387
(S.D.N.Y. 2011). "The purpose of Local Rule 6.3 is to ensure the finality of decisions and to
Item 303, as interpreted by the Second Circuit, can give rise to Section lO(b) liability based on failure to disclose
"known trends or uncertainties . . . that the registrant reasonably expects will have a material .. . unfavorable impact
on .. . revenues or income." 17 C.F.R. 229.303(a)(3)(ii); Stratte-McClure v. Morgan Stanley, 776 F.3d 94, 100 (2d
Cir. 2015).
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prevent the practice of a losing party examining a decision and then plugging the gaps of a lost
motion with additional matters." Id. (internal quotation marks omitted). As such, "[a] motion
for reconsideration is not an opportunity for making new arguments that could have been
previously advanced," id., and "[i]t is not enough ... that [the losing party] could now make a
more persuasive argument." In re Goldman Sachs Group, Inc. Sec. Litig., 10 cv 3461 (PAC),
2014 WL 2815571, at *4 (S.D.N.Y. June 23, 2014). "[D]ecisions should not usually be changed
unless there is an intervening change of controlling law, the availability of new evidence, or the
need to correct a clear error or prevent a manifest injustice." Id. (internal quotation marks
omitted). 3
A plaintiff may amend the complaint as a matter of course within 21 days after service of
the complaint or a motion to dismiss. Fed. R. Civ. P. 15(a). In all other cases, plaintiff can
amend only with the opposing party's consent or the court's leave. Id. As a general matter, the
court should freely give leave to amend, denying it only in cases of "undue delay, bad faith or
dilatory motive . . . , repeated failure to cure deficiencies by amendments previously allowed,
undue prejudice to the opposing party ... , [or] futility." Williams v. Citigroup, Inc., 659 F.3d
208,213-14 (2d Cir. 2011). But the inquiry shifts when plaintiff moves to amend post-judgment.
"When the moving party has had an opportunity to assert the amendment earlier, but has waited
until after judgment before requesting leave, a court may exercise its discretion [to grant leave to
amend] more exactingly." Id. at 213 . " [T]o hold otherwise would enable the liberal amendment
The standards governing a motion to alter or amend a judgment under Fed. R. Civ. P. 59(e) are identical to those
under Local Rule 6.3. Henderson v. Metro. Bank & Trust Co., 502 F. Supp. 2d 372, 375 (S.D.N.Y. 2007). The
standards governing a motion for relief from a final judgment under Fed. R. Civ. P. 60(b) are similarly exacting, as
such relief "is an extraordinary remedy that works against the interest of finality and should be applied only in
exceptional circumstances." In re Optionable Sec. Litig., No. 07 cv 3753 (PAC), 2009 WL 1653552, at *2
(S.D.N.Y. June 15, 2009).
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policy of Rule 15(a) to be employed in a way that is contrary to the philosophy favoring finality
of judgments and the expeditious termination oflitigation." Nat'! Petrochem. Co. of/ran v. MIT
Stolt Sheaf, 930 F.2d 240,245 (2d Cir. 1991). Denial of leave to amend is further warranted
where "plaintiffs' submissions do not include a new pleading but only sketches of some of the
types of allegations that such a pleading might contain." In re Refco Capital Markets, Ltd.
Brokerage Customer Sec. Litig., No. 06 cv 643 (GEL), 2008 WL 4962985, at *3 (S.D.N.Y. Nov.
20, 2008).
II.
Analysis
Plaintiffs do not articulate a valid ground for reconsideration. The Court did not overlook
allegations that Defendants' failure to disclose M&K contractual breaches constitute discrete,
actionable misrepresentations; Plaintiffs never made those allegations. The CAC articulates
three categories of alleged misrepresentations, and includes the M&K breaches within the first
category. CAC
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2. The motion to dismiss correctly interpreted the CAC that way, and
Plaintiffs maintained that categorization in their opposition brief. Plaintiffs' failure to clearly
articulate what they now claim is a fourth theory of liability is not just a matter of clumsy
organization or imprecise argumentation. The Private Securities Litigation Reform Act of 1995
requires that a complaint alleging material misstatements in public filings "specify each
statement alleged to have been misleading." 15 U.S.C. § 78u-4(b)(l)(B) (emphasis added).
Plaintiffs' failure to clearly specify the fourth theory renders the complaint deficient as to that
claim. Furthermore, neither the CAC nor Plaintiffs' opposition brief mentions Item 303, a key
component of the newly formulated claim. Plaintiffs' motion is an improper attempt to make a
new argument that could have been previously advanced or to plug the gaps in a deficient
pleading; reconsideration is denied. Optimal, 813 F. Supp. 2d at 387.
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The Court also declines to exercise its discretion to grant leave to amend. Plaintiffs were
on notice from at least August 13, 2014 that Defendants sought dismissal on grounds that the
CAC failed to adequately plead scienter. Rather than seeking leave amend anytime in the
subsequent seven months, Plaintiffs sought leave only after the entry of judgment and without
attaching a proposed amended complaint. The Court will not permit such dilatory tactics.
Williams, 659 F.3d at 213-14. Nor will the Court upset the judgment to permit Plaintiffs to plug
in newly discovered evidence. Amendment is not a "do-over when more facts emerge."
Optionable, 2009 WL 1653552, at *4.
CONCLUSION
The Court DENIES Plaintiffs' motion. The Clerk is directed to terminate the motion at
Docket 55.
SO ORDERED
Dated: New York, New York
May 23, 2016
PAUL A. CROTTY
United States District Judge
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