Dempsey v. Vieau et al

Filing 77

MEMORANDUM OPINION AND ORDER re: 53 MOTION to Dismiss the Amended Complaint, filed by David P. Vieau, Jason M. Forcier, John R. Granara III, David J. Prystash. For the foregoing reasons, the Court grants Defendants' motion to dismiss the Amended Complaint in its entirety. The Clerk of Court is requested to enter judgment in favor of Defendants and to close this case. This Order resolves docket entry no. 53. (Signed by Judge Laura Taylor Swain on 9/8/2015) (spo)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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RICHARD DEMPSEY,
Individually and on Behalf of All Others Similar Situated,
Plaintiffs,
-v-

No. 13-CV-6883-LTS-SN

DAVID P. VIEAU et al.,
Defendants.
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MEMORANDUM OPINION AND ORDER

Lead Plaintiff Hormuz Irani brings this action individually and on behalf of all
purchasers of the securities of A123 Systems, Inc. (“A123”) between February 28, 2011, and
October 16, 2012 (“Plaintiffs”), against David P. Vieau (“Vieau”), David J. Prystash
(“Prystash”), John R. Granara III (“Granara”), and Jason M. Forcier (“Forcier”) (collectively,
“Defendants”) for securities fraud pursuant to Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder. The Court
has jurisdiction of this action pursuant to 28 U.S.C. § 1331.
Before the Court is Defendants’ motion to dismiss the Amended Complaint
(“AC”) pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b) and the Private Securities
Litigation Reform Act, 15 U.S.C. § 78u-4 et seq. (“PSLRA”). The Court has considered
carefully the parties’ briefing, including their supplemental submissions. For the following
reasons, Defendants’ motion is granted.

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BACKGROUND
The parties’ familiarity with the proceedings and submissions to date is assumed.
This section recites only those facts relevant to the adjudication of the instant motion. Facts
alleged in the AC are taken as true for the purposes of this motion practice.
A123 was principally engaged in the manufacturing of advanced rechargeable
lithium-ion batteries and battery systems for electric automobiles. Plaintiffs allege that, during
the Class Period, Fisker Automotive, Inc. (“Fisker”), a manufacturer of electric automobiles, was
attempting to produce a battery-operated car, the Fisker Karma (“Karma”), which would be
outfitted with A123 batteries. (AC ¶ 2). This lawsuit arises from allegations that Defendants
misled investors as to (1) the status of A123’s manufacture, testing, and shipment to Fisker of
batteries that were ultimately determined to be defective (AC ¶ 4); and (2) the financial status of
Fisker, which affected its ability to purchase and pay for A123 batteries (AC ¶ 3).
With respect to the first category of allegations, Plaintiffs allege that A123 had
entered into a contract to produce batteries for Fisker. (AC ¶ 4.) The batteries A123 was
producing were later demonstrated to be defective – “a coolant leak and leaking of electrolyte
fluid” were among their defects. (Id.) Plaintiffs allege that “[t]he underlying cause of the
coolant leak was observed in A123’s prototype laboratory prior to [A123’s] commencement of
battery production for [the Fisker vehicle]” and that, in spite of these observations, Defendants
continued to issue statements to the public that contradicted the facts available to them. (AC
¶ 5.)
Concerning A123’s relationship with Fisker, Plaintiffs allege that, unbeknownst
to investors, by the start of the Class Period, Fisker had serious financial problems, had defaulted
on its obligation to commence production by February 2011, a failure that entitled the federal

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Department of Energy (“DOE”) to suspend funding under a loan that was essential to Fisker’s
ability to do business, and “was effectively insolvent.” (AC ¶¶ 3, 104-105.) Plaintiffs allege that
Defendants had access to non-public information concerning the problems that Fisker was
experiencing because A123’s Vice President and executive officer, Defendant Forcier, served on
Fisker’s Board of Directors during the Class Period. (See, e.g., AC ¶ 87.) Plaintiffs allege that
Forcier was a member of Fisker’s board from January 2010 to May 2011. (AC ¶ 20.) In
addition, Forcier and Defendant Vieau attended “a Fisker Board meeting at which Fisker’s loan
agreement with the DOE was the principal topic of discussion.” (AC ¶ 88.) That meeting, at
which the board approved the DOE loan agreement, took place in March 2010. (AC ¶ 88.)
Plaintiffs allege that Defendants’ unique customer relationship with Fisker and its knowledge of
the details of the loan agreement with the DOE meant that Defendants knew that Fisker had
defaulted on its loan agreement with the DOE (AC ¶ 105, 142-43), even though Plaintiffs
acknowledge that Fisker “hid the Karma’s true production status from the DOE, . . . falsely
claim[ing] that the Company had met the production milestone for the Karma” during a nonpublic March 2011 meeting with the DOE (AC ¶ 106), and that Fisker only admitted in a nonpublic meeting with the DOE held in June 2011, “that commercial production of the Karma had
not commenced” (AC ¶ 107). Plaintiffs allege that “Defendants . . . continu[ed] to represent to
A123’s investors that the Company expected significant revenues from Fisker battery sales, even
as Defendants began informing A123 employees of an ‘unexpected’ slowdown in orders from
Fisker.” (AC ¶ 110.) Plaintiffs allege that an engineer of A123 was told at an “all hands”
meeting by Defendant Forcier that “Fisker was going to ‘throttle back significantly’ in receiving
A123’s batteries” and that this meeting took place in late August 2011 or in September 2011.
(AC ¶ 110.)

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By November 4, 2011, Defendants acknowledged that Fisker could not purchase
enough batteries for A123 to meet its 2011 revenue forecast. (AC ¶ 116.) However, Defendants
characterized Fisker’s order reduction as “unexpected” and “temporary,” and described A123’s
relationship with Fisker as remaining “strong.” (AC ¶ 117.)
Battery sales to Fisker in 2012 did not materialize. (AC ¶ 130.) A123 was not
able to deliver safe, workable batteries to Fisker. (AC ¶¶161-64.) A123 subsequently filed for
bankruptcy. (AC ¶ 254.) Fisker’s failure to meet the February 2011 milestone and the DOE’s
subsequent withdrawal of its funding were publicly disclosed for the first time on April 17, 2013.
(AC ¶ 131.)
DISCUSSION
Res Judicata
Defendants first contend that Plaintiffs’ claims in this action are barred by res
judicata because a securities class action was filed in federal court in Massachusetts by the
shareholders of A123 securities in Massachusetts against A123 and its executives in 2012 and
that case was dismissed in 2013 for inadequate pleading. See In re A123 System, Inc. Sec.
Litig., 930 F. Supp. 2d 278 (D. Mass. 2013). Although a court typically only reviews the
complaint and does not consider affirmative defenses in making the Rule 12(b)(6) determination,
“when all relevant facts are shown by the court's own records, of which the court takes notice,
the defense [of res judicata] may be upheld on a 12(b)(6) motion.” Day v. Moscow, 955 F.2d
807, 811 (2d Cir.1992). In order for res judicata to apply, (1) the previous action must have
involved an adjudication on the merits; (2) the previous action must have involved the parties or
those in privity with them; and (3) the claims asserted in the subsequent action were, or could

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have been, raised in the prior action. See TechnoMarine SA v. Giftports, Inc ., 758 F.3d 493,
499 (2d Cir. 2014).
Plaintiffs and Defendants dispute whether the parties in the Massachusetts
litigation are identical to the parties in this case for res judicata purposes. Plaintiffs argue that,
because there is a different lead plaintiff in this case, and the putative class had not yet been
certified when the earlier case was dismissed, the parties are not identical for res judicata
purposes. Additionally, Defendant Forcier, who is a party to the present litigation, was not a
defendant in the Massachusetts litigation. Defendants nonetheless argue, without citing any
specific authority, that the appointment of a lead plaintiff under the PSLRA renders the lead
plaintiff representative of all purchasers of A123, and that the parties are therefore identical for
the purposes of the res judicata analysis. The Court is not persuaded by Defendants’ argument.
The Court finds nothing in the plain language of the Private Securities Litigation Reform Act
(“PSLRA”) that would preclude later litigation by an absent class member of a previously
dismissed putative class action prior to certification, so long as the statute of limitations has not
run. Lead plaintiff designation does not abnegate the necessity of class certification, and it is
well settled that “[n]either a proposed class action nor a rejected class action may bind
nonparties.” Smith v. Bayer Corp., 131 S. Ct. 2368, 2380 (2011); see also Kalnit v. Eichler, 264
F.3d 131, 135 n.1 (2d Cir. 2001 (affirming pre-certification dismissal of section 10(b) action,
stating: “The district court did not certify the class under Fed. R. Civ. P. 23. Therefore, this
opinion pertains only to [the named plaintiff] for res judicata purposes.”). Accordingly,
Defendants’ motion, to the extent it is premised on res judicata grounds, is denied.

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Failure to Plead Securities Fraud Claims with Particularity Under 9(b) and the PSLRA
To state a claim for securities fraud pursuant to Section 10(b) and Rule 10b-5, a
plaintiff must allege (1) a material misrepresentation or omission; (2) scienter, i.e., an intent to
deceive or defraud; (3) in connection with the purchase or sale of a security; (4) reliance; (5)
economic loss; and (6) loss causation. Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 341-42
(2005).
To survive a motion to dismiss, a complaint must plead “enough facts to state a
claim to relief that is plausible on its face,” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570
(2007), and “allow[ ] the court to draw the reasonable inference that the defendant is liable for
the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The Court should
“constru[e] the complaint liberally, accepting all factual allegations in the complaint as true, and
drawing all reasonable inferences in the plaintiff’s favor.” Watson v. Qiu, 553 F. App’x 96, 97
(2d Cir. 2014) (citing Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002)).
A complaint alleging securities fraud is subject to two heightened pleading
standards. First, the complaint must satisfy Federal Rule of Civil Procedure 9(b), which requires
that it “state with particularity the circumstances constituting fraud.” Fed. R. Civ. P. 9(b); see
also ATSI Commc’ns., Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 99 (2d Cir. 2007). A securities
fraud complaint based on misstatements “must (1) specify the statements that the plaintiff
contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were
made, and (4) explain why the statements were fraudulent.” Hall v. Children's Place Retail
Stores, Inc., 580 F. Supp. 2d 212, 224 (S.D.N.Y. 2008). The PSLRA further requires that, in a
securities fraud case alleging a material misrepresentation or omission, “the complaint shall
specify each statement alleged to have been misleading, the reason or reasons why the statement

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is misleading, and, if an allegation regarding the statement or omission is made on information
and belief, the complaint shall state with particularity all facts on which that belief is formed.” 15
U.S.C.S. § 78u–4(b)(1) (LexisNexis 2008). The PSLRA also requires that, in cases where a
particular state of mind on the part of the defendant is an element of the cause of action, the
plaintiff must “state with particularity facts giving rise to a strong inference that the defendant
acted with the required state of mind” with respect to each act or omission. 15 U.S.C. § 78u–
4(b)(2); see also Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 313 (2007). In an
action brought pursuant to Section 10(b) and 10b-5, the requisite state of mind is scienter, that is,
“an intent to deceive, manipulate, or defraud.” ECA, Local 134 IBEW Joint Pension Trust of
Chicago v. JP Morgan Chase Co., 553 F.3d 187, 198 (2d Cir. 2009) (internal citations and
quotation marks omitted).
“To determine whether the plaintiff has alleged facts that give rise to the requisite
‘strong inference’ of scienter, a court must consider plausible, nonculpable explanations for the
defendant’s conduct, as well as inferences favoring the plaintiff . . . . A complaint will survive
only if a reasonable person would deem the inference of scienter cogent and at least as
compelling as any opposing inference one could draw from the facts alleged.” Tellabs, 551 U.S.
at 322-24. A complaint may establish a strong inference of scienter in a Section 10(b) or Rule
10b-5 action by “alleging facts (1) showing that the defendants had both motive and opportunity
to commit the fraud or (2) constituting strong circumstantial evidence of conscious misbehavior
or recklessness.” ATSI Commc’ns., 493 F.3d at 99. “Where motive is not apparent, it is still
possible to plead scienter by identifying circumstances indicating conscious behavior by the
defendant, though the strength of the circumstantial allegations must be correspondingly
greater.” Kalnit, 264 F.3d at 142. In order to provide strong circumstantial evidence of

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recklessness, the complaint must allege “conduct which is highly unreasonable and which
represents an extreme departure from the standards of ordinary care to the extent that the danger
was either known to the defendant or so obvious that the defendant must have been aware of it.”
Id. at 142.
Plaintiffs’ Section 10(b) and Rule 10b-5 claims against Defendants are premised
on allegedly false statements regarding the quality of A123’s production of batteries and
statements regarding its business prospects insofar as those prospects were intertwined with
Fisker’s prospects. Plaintiffs further allege that Defendants’ financial disclosures did not comply
with Generally Accepted Accounting Principles (“GAAP”). Defendants argue that the Amended
Complaint should be dismissed because Plaintiffs fail to meet the pleading requirements with
respect to three of the elements of a securities fraud claim—(1) a material misrepresentation or
omission; (2) scienter; and (3) loss causation.
Fraud Claims Relating to Battery Defects
Plaintiffs allege that “A123’s batteries were produced defectively utilizing a
flawed manufacturing process and pursuant to an inadequate [validation] plan” (AC ¶ 146), and
that certain statements made during the Class Period with respect to batteries that were later
found defective due to coolant and electrolyte leaks were therefore fraudulent. In support of
their assertion, Plaintiffs disparage the development, sufficiency, and funding of A123’s
validation plan (AC ¶ 4, 141-44) without specifying what a proper validation plan would have
entailed or how a different validation plan would have prevented the battery defects that were
later discovered. Plaintiffs also proffer that the “[t]he underlying cause” of one of the batteries’
defects was “observed in A123’s prototype laboratory prior to [A123’s] commencement of
battery production for the Karma” and that “upper management,” including “Dave Vieau,” knew

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of some of the potential problems related to the batteries and retaliated against employees who
informed their superiors that the batteries would not work. (AC ¶ 150.)
The Complaint fails, however, to identify any allegedly false statements
concerning the validation program or the functioning of the batteries. The statements that are
identified in the Complaint concern the features and intended functions of the batteries (e..g., AC
¶ 145). The Complaint contains no factual allegations demonstrating the falsity of the
statements, and thus is insufficient to meet the stringent pleading requirements of Rule 9(b) and
the PSLRA. Plaintiffs’ securities fraud claims with regard to the battery defects are therefore
dismissed to the extent they relate to statements regarding A123’s production of batteries.
Fraud Claims Relating to Business with Fisker
The thrust of Plaintiffs’ claims regarding A123's business with Fisker is that A123
made positive statements regarding its prospects for increasing and/or doing substantial business
with Fisker, which was its largest customer, when A123 knew that Fisker faced “effective
insolvency” stemming from its failure to meet a production milestone on which DOE loan
funding was conditioned, and from Fisker’s lack of other funding sources. Defendants’
knowledge of Fisker’s financial woes and production shortfalls was allegedly derived entirely
from Defendant Forcier’s membership on Fisker’s board, including his participation in the board
meeting at which the terms of the DOE loan agreement were approved. Plaintiffs cite
congressional testimony by Fisker’s former Chief Operating Officer that Fisker’s board members
“were informed regarding the financial condition of Fisker” (AC ¶ 317), and Delaware law
provisions under which directors are entitled to access to a company’s books, records and
management information (id.), as the basis for their allegations that all of the Defendants were
aware of details of Fisker’s business affairs, ranging from the reasons for and details of certain

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venture capital funding received beginning in 2009, to alleged non-public “questionable”
representations to the DOE prior to the issuance of the loan, to the specifics of the missed
milestone, to the alleged maintenance of three sets of projections - internal, for investors, and for
regulators, to the proposition that “absent the DOE Loan, Fisker was effectively insolvent,
threatening its ability to pay A123 for the batteries and/or fulfill the Supply Agreement.” (Id.)
There are no specific allegations that Forcier or any of the other Defendants was given any of
this information at any time, or that any of them received it in any other capacity. Plaintiffs
nonetheless assert that Defendants knew or should have known that Fisker would eventually
become “effectively insolvent,” and that, therefore, statements made during the Class Period in
which Defendants expressed an expectation that Fisker would purchase A123 batteries and
contribute to A123’s earnings were fraudulent.
As explained above, in order to determine whether a plaintiff has alleged facts
giving rise to the requisite “strong inference” of scienter, “a court must consider plausible,
nonculpable explanations for the defendant’s conduct, as well as inferences favoring the
plaintiff,” and the pleadings are sufficient to survive a motion to dismiss only if the inferences
favoring the plaintiff are “as compelling as any opposing inference one could draw from the facts
alleged.” Tellabs, 551 U.S. at 322-24.
Plaintiffs argue that Defendants had motive to commit fraud because Defendants
wanted to artificially inflate the value of their A123 stock. (AC ¶¶ 322-33.) However, Plaintiffs’
theory is supported neither by the law nor the facts. Defendants Prystash and Granara sold no
A123 shares during the class period, undermining Plaintiffs’ theory that all defendants
participated in a scheme to defraud investors. See In re Glenayre Techs. Sec. Litig., 98 Civ.
8252 (HB), 1998 WL 915907, at * 4 (S.D.N.Y. Dec. 30, 1998) (inference of scienter fatally

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undermined by fact that high-ranking corporate officers sold no shares during class period).
Additionally, Defendant Vieau and Forcier’s stock sales were made pursuant to a Rule 10b5-1
plan, and the mere fact that stock shares were traded pursuant to a Rule 10b5-1 trading “do[es]
not give rise to a strong inference of scienter.” In re Lululemon Sec. Litig., 14 F. Supp. 3d 553,
585 (S.D.N.Y. 2014). In order to establish scienter based on stock sales, plaintiffs must plead
facts establishing that the sales were unusual or suspicious in amount or timing. See, e.g., Glaser
v. The9, Ltd., 772 F. Supp. 2d 573, 587 (S.D.N.Y. 2011). Plaintiffs have pleaded none, and the
Court, accordingly, finds Plaintiffs’ allegations insufficient to establish motive.
Plaintiffs’ assertion that Defendant’s statements evidence conscious misbehavior
or recklessness rests on the same factual foundation as their allegations of falsity, and depends on
the following chain of inferences: (1) Defendants knew or should have known the details of
Fisker’s loan arrangement with the DOE; (2) Defendants knew or should have known that Fisker
depended heavily on the DOE loan; (3) Defendants knew or should have known that Fisker
failed to commence production of the Karma in February 2011, and thus failed to meet a
milestone established in the DOE’s loan arrangement with Fisker; (4) Defendants knew or
should have known that failure to meet the February 2011 milestone would lead to the DOE’s
suspension of the loan; and (5) Defendants knew or should have known that Fisker would be
unable to secure other sources of funding in order to produce the Karma vehicle.
The strength of Plaintiffs’ inference of scienter is limited by several factors. The
bedrock foundation of Plaintiffs’ thesis – that Defendants must have known that Fisker was in
mortal peril when it missed the February 2011 production milestone – rests on the unsupported
assumptions that the particular production milestone was featured so prominently in the review
of the agreement’s provisions at the March 2010 board meeting that Forcier and Vieau would

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have recognized the failure contemporaneously and that Forcier, by reason of his board
membership, understood that Fisker had no other viable sources of revenue. Only under such
circumstances would Defendants’ late February 2011 positive comments to the press and
analysts about Fisker’s sales prospects and A123's statements in is March 2011 Form 10-K
report about its long-term revenue expectations from the Fisker supply contract (see AC ¶¶ 165168) be indicative of conscious misbehavior or recklessness. Forcier’s May 2011 departure from
Fisker’s board undermines any inference that Defendants had specific information regarding the
terms, likely length or impact of the DOE’s June 2011 loan payment suspension, and so
statements in the summer of 2011 regarding A123's battery production value are no more
indicative of conscious misbehavior or recklessness than they are of expectations that Fisker
would produce cars incorporating A123's batteries. Similarly, statements characterizing Fisker’s
later delivery cutbacks as temporary or surprising are more consistent with lack of insight into
Fisker’s financial affairs than with conscious misbehavior or recklessness.
The final two inferences in Plaintiffs’ chain of logic would have been entirely
speculative during the Class Period. Fisker had, in the past, received financing from a venture
capital firm at a time when its prospects may have looked grim to an outside observer, and a
partner of the venture capital firm chaired Fisker’s board until early 2012. (AC ¶ 76.) Nothing
in the Complaint demonstrates that Fisker’s business was so plainly unsalvageable that
Defendants should have known that A123 would never be able to make, or collect on, deliveries
to Fisker. Rather, the nonculpable inference that Defendants believed that Fisker would
eventually recover and contribute to A123’s revenue is more compelling than the alternative
version asserted by Plaintiffs. See Tellabs, 551 U.S. at 322-24.

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Because Plaintiffs have not pleaded facts supporting a “strong inference” of
conscious misbehavior or recklessness, their securities fraud claim with respect to statements
regarding A123’s business with Fisker is dismissed.
Claims Regarding Accounting Noncompliance
Plaintiffs additionally assert a securities fraud claim based on A123’s alleged
failure to report an “other than temporary impairment” (“OTTI”) of its Fisker investment (AC
298-299) and A123’s alleged failure to disclose an impairment in the value of the battery
inventory as of the end of 2011 (AC ¶ 307ff), in violation of GAAP.
According to Plaintiffs, Fisker’s failure to launch commercial production of the
Karma in February 2011, followed by the DOE’s suspension of its loan disbursements to Fisker
in June 2011, signified an OTTI of A123’s investment in Fisker that necessitated disclosure.
(AC 298.) “[A]llegations of GAAP violations or accounting irregularities, standing alone, are
insufficient to state a securities fraud claim.” Novak v. Kasaks, 216 F.3d 300, 309 (2d Cir.
2000). However, such allegations “coupled with evidence of ‘corresponding fraudulent intent”
may be sufficient to state a securities law violation. Id. (internal citation omitted).
Like the other allegations the Court has reviewed and deemed insufficient, the
facts alleged in connection with the supposed GAAP violation fail to provide a sufficient basis
for the requisite inference of fraudulent intent. Because Fisker had continued to draw funds on
the DOE loan arrangements in the months prior to the suspension of the DOE loan in June 2011
and Fisker had been able to secure loans from a venture capital firm in 2009, it is more likely that
Defendants believed that Fisker would be able to secure the necessary funds to continue
production of the Karma and uphold its contract with A123 and that, therefore, there was no

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OTTI to report. Consequently, Plaintiffs have failed to allege facts supporting a strong inference
of scienter with respect to the alleged accounting violations. See Tellabs, 551 U.S. at 322-24.
With regard to the allegation that Defendants failed to disclose an OTTI in the
value of the battery inventory, Plaintiffs have not pleaded sufficient facts to demonstrate the
falsity of Defendants’ statement. A statement regarding OTTI is an opinion, not a matter of
objective fact. MHC Mut. Conversion DFund, L.P. v. United W. Bankcorp. Inc., 913 F Supp. 2d
1026, 1035 (D. Colo. 2012); accord Fait v. Regions Fin. Corp., 655 F.3d 105, 110 (2d Cir. 2011)
(accounting judgments that “depend on management’s determination of the ‘fair value’ of the
assets’” are matters of opinion). To state a claim based on an allegedly false opinions, plaintiffs
must plead both their objective falsity and their subjective falsity. See Fait, 655 F.3d at 112; see
also Omnicare, Inc. v. Laborers Dist. Council Const. Industry Pension Fund, 135 S. Ct. 1318
(2015) (an opinion may give rise to Section 11 liability when the defendant (1) does not
genuinely believe the opinion; or (2) omits a material fact regarding the basis for defendant’s
opinion that renders it misleading). In order to allege subjective falsity, plaintiffs must allege
that the speaker did not truly believe the opinion given. Id. at 113. Because Plaintiffs have
failed to allege that Defendants did not honestly believe the opinion given, they have failed to
demonstrate falsity of the opinion. The claim, insofar as it is based on Defendants’ failure to
disclose an OTTI in the value of the battery inventory, is therefore dismissed.
Section 20(a) Claim
Section 20(a) of the Securities Exchange Act creates a cause of action against
“control persons” of those engaged in the primary securities fraud. Because Plaintiffs have failed
to adequately plead a predicate Exchange Act violation under Section 10(b) and Rule 10b-5, the
Court dismisses Plaintiffs’ Section 20(a) claim.

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CONCLUSION
For the foregoing reasons, the Court grants Defendants’ motion to dismiss the
Amended Complaint in its entirety. The Clerk of Court is requested to enter judgment in favor
of Defendants and to close this case.
This Order resolves docket entry no. 53.

SO ORDERED.
Dated: New York, New York
September 8, 2015
/s/ Laura Taylor Swain
LAURA TAYLOR SWAIN
United States District Judge

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