Waterford Township Police & Fire Retirement System v. Ply Gem Holdings, Inc. et al

Filing 66

OPINION AND ORDER re: 55 MOTION to Dismiss the Consolidated Second Amended Complaint. filed by Goldman, Sachs & Co., Robert A. Ferris, Shawn K. Poe, Gary E. Robinette, Michael P. Haley, Ply Gem Holdings, Inc., Jeffrey T. Barber, J ohn D. Roach, Stephens Inc., Credit Suisse Securities (USA) LLC, BB&T Capital Markets, Zelman Partners LLC, Deutsche Bank Securties Inc., Timothy T. Hall, J.P. Morgan Securities LLC, Frederick J. Iseman, UBS Securities LLC, Steven M. Le fkowitz, 65 LETTER MOTION for Oral Argument addressed to Judge J. Paul Oetken from Samuel H. Rudman dated March 25, 2016. filed by Strathclyde Pension Fund. For the foregoing reasons, Defendants' motion is GRANTED IN PART and DE NIED IN PART. Defendants shall file their answer to the surviving claims by October 13, 2016. The Clerk of Court is directed to close the motions at Docket Numbers 55 and 65. (As further set forth in this Order), BB&T Capital Markets answer due 10/ 13/2016; Jeffrey T. Barber answer due 10/13/2016; Credit Suisse Securities (USA) LLC answer due 10/13/2016; Deutsche Bank Securties Inc. answer due 10/13/2016; Robert A. Ferris answer due 10/13/2016; Goldman, Sachs & Co. answer due 10/13/2016; Michae l P. Haley answer due 10/13/2016; Timothy T. Hall answer due 10/13/2016; Frederick J. Iseman answer due 10/13/2016; J.P. Morgan Securities LLC answer due 10/13/2016; Steven M. Lefkowitz answer due 10/13/2016; Ply Gem Holdings, Inc. answer due 10/13/2 016; Shawn K. Poe answer due 10/13/2016; John D. Roach answer due 10/13/2016; Gary E. Robinette answer due 10/13/2016; Stephens Inc. answer due 10/13/2016; UBS Securities LLC answer due 10/13/2016; Zelman Partners LLC answer due 10/13/2016. (Signed by Judge J. Paul Oetken on 9/23/2016) (lmb)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
IN RE PLY GEM HOLDINGS, INC.
:
:
SECURITIES LITIGATION
:
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14-CV-3577 (JPO)
OPINION AND ORDER

J. PAUL OETKEN, District Judge:
On September 29, 2015, this Court granted Defendants’ motion to dismiss Plaintiff’s first
Amended Complaint (“FAC”). In re Ply Gem Holdings, Inc. Securities Litig., 135 F. Supp. 3d
145 (S.D.N.Y. 2015). In its Opinion and Order, the Court granted Plaintiff leave to amend. Id.
at 155. Plaintiff filed its Second Amended Complaint (“SAC”) on November 6, 2015. (Dkt. No.
51.) Defendants moved to dismiss the SAC on January 13, 2016. (Dkt. No. 55.) For the
following reasons, Defendants’ motion to dismiss is granted in part and denied in part. 1
I.

Background
Familiarity with the underlying facts and procedural history, as described in the Court’s

prior opinion, is presumed.
The claims raised in the SAC are substantially similar to those raised in the FAC. In the
SAC, Plaintiff again alleges that Defendants violated Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933 (“Securities Act”) in connection with Ply Gem’s May 23, 2013, initial
public offering of common stock (the “IPO”). (SAC ¶ 1.) As before, Plaintiff alleges that
material information was omitted from, or misstated in, Ply Gem’s Form S-1 registration
statement and prospectus. (Id. ¶ 3.) Plaintiff again points to four main deficiencies in
Defendants’ public disclosures. Three of these omissions relate to Ply Gem’s Windows and

1

Plaintiff also filed a letter motion for oral argument. (Dkt. No. 65.) In light of the
Court’s opinion, the motion for oral argument is denied as moot.

Doors segment, 2 namely: (1) failure to disclose the cost of the Buy-Back Program in the Home
Depot supply agreement; (2) failure to disclose that the agreement required Ply Gem to sell a
large volume of lower-margin windows; and (3) failure to disclose operational inefficiencies and
ramp-up costs with a new window-manufacturing facility. (Id. ¶¶ 9-11.) The fourth alleged
omission relates to Ply Gem’s Siding segment: failure to disclose declining sales of vinyl siding
products. (Id. ¶ 12.)
Where the SAC differs from the FAC, however, is in the amount of factual detail it
marshals in support of its allegations. In particular, the SAC includes an entirely new section
titled “The Omitted Facts Were Material,” which includes much new information, both
quantitative and qualitative, about the magnitude of the alleged omissions. (Id. ¶¶ 70-86.) In
this section, Plaintiff compares the value of the alleged omissions to a variety of Ply Gem
financial metrics, provides detail about the segment-level impact of the alleged omissions, and
excerpts analyst reports describing the import of the alleged omissions. (Id.)
Much of Defendants’ current motion to dismiss is similar to their prior motion to dismiss.
The motion argues that the SAC should be dismissed because: (1) Plaintiff failed to add
sufficient facts to establish that the alleged omissions were material, and (2) Defendants
adequately disclosed the alleged omissions to Ply Gem’s investors. (Dkt. No. 56 at 2-3.)
Defendants also argue that Plaintiff’s Section 12(a)(2) claim fails due to the failure to plead that
Defendants are liable as “statutory seller[s]” under that section of the statute. (Id. at 21.)
II.

Discussion
“To survive a motion to dismiss, a complaint must plead enough facts to state a claim to

relief that is plausible on its face.” Ply Gem, 135 F. Supp. 3d at 149 (quoting Litwin v.
2

Ply Gem has two business segments: (1) Siding, Fencing and Stone; and (2) Windows
and Doors. (SAC ¶ 38.)
2

Blackstone Group, L.P., 634 F.3d 706, 715 (2d Cir. 2011) (citation omitted)). As before, no
heightened pleading standard applies and “this is an ordinary notice pleading case, subject only
to the ‘short and plain statement’ requirements of Federal Rule of Civil Procedure 8(a).” Id.
(quoting Litwin, 634 F.3d at 715).
Sections 11, 12(a)(2), and 15 of the Securities Act impose liability on a seller of
securities, and those who control such sellers, where a registration statement or prospectus
“contain[s] an untrue statement of a material fact or omit[s] to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.” 15 U.S.C. § 77k(a);
see also id. §§ 77l(a)(2), 77o.
In making its claims, Plaintiff again relies on Item 303 of SEC Regulation S-K as the
basis for Defendants’ disclosure obligation. Item 303 requires a registrant to describe “any
unusual or infrequent events or transactions of any significant economic changes that materially
affected the amount of reported income from continuing operations” and “any known trends or
uncertainties that have had or that the registrant reasonably expects will have a material or
unfavorable impact on net sales or revenues or income from continuing operations.” 17 C.F.R.
§ 229.303(a)(3)(i)-(ii). “The SEC’s interpretive release regarding Item 303 further explains that
a ‘disclosure duty exists where a trend, demand, commitment, event or uncertainty is both [1]
presently known to management and [2] reasonably likely to have material effects on the
registrant’s financial condition or results of operation.’” Ply Gem, 135 F. Supp. 3d at 149-50
(citing Litwin, 634 F.3d at 716).

3

A.

Materiality

Plaintiff’s claims under Section 11, 12(a)(2), and 15 all rise or fall on the issue of
materiality. 3 In its prior opinion, the Court dismissed the FAC for failure to “plead facts
sufficient to permit the conclusion that the alleged omissions were ‘reasonably likely to be
material’ at the time of the IPO.” Id. (quoting Litwin, 634 F.3d at 716).
Materiality is satisfied where a plaintiff alleges “a statement or omission that a reasonable
investor would have considered significant in making investment decisions.” Ganino v. Citizens
Utils. Co., 228 F.3d 154, 161 (2d Cir. 2000); see also Basic v. Levinson, 485 U.S. 224, 231-32
(1988). “At this stage, a ‘complaint may not properly be dismissed . . . on the ground that the
alleged misstatements or omissions are not material unless they are so obviously unimportant to
a reasonable investor that reasonable minds could not differ on the question of their
importance.’” Ply Gem, 135 F. Supp. 3d at 150 (quoting Ganino, 338 F.3d at 162).
In its prior opinion, the Court emphasized that the materiality inquiry is “inherently factspecific,” id. (citing Basic, 485 U.S. at 236), with both “quantitative and qualitative” aspects, id.
(citing Litwin, 634 F.3d at 717). The Court also noted that the Second Circuit has endorsed the
use of SEC Staff Accounting Bulletin No. 99, 64 Fed. Reg. 45150 (1999) (“SAB No. 99”), which
provides that “[t]he use of a percentage as a numerical threshold, such as 5%, may provide the
basis for a preliminary assumption” that a deviation less than that threshold is likely to be
immaterial, but that smaller deviations may be material where other overriding factors are

3

Section 11 applies to registration statements; Section 12(a)(2) applies to prospectuses.
See Hutchison v. Deutsche Bank Sec. Inc., 647 F.3d 479, 484 (2d Cir. 2011). Here, the
prospectus was incorporated into Ply Gem’s registration statement. (SAC ¶ 3.) Section 15
additionally requires a plaintiff to allege that a defendant was in control of the Securities Act
violation, Hutchinson, 647 F.3d at 490, which Defendants do not dispute (Dkt. No. 56 at 23).
4

present. Ply Gem, 135 F. Supp. 3d at 150 (quoting SAB No. 99 at *45151-52) (citing Ganino,
228 F.3d at 151).
In finding that the FAC failed to plead materiality, the Court generously provided
Plaintiff with a roadmap to remedying that failure, pointing out at every turn additional facts that
would have better supported Plaintiff’s claims. In the SAC, Plaintiff has followed that roadmap,
albeit with one major detour.
1.

Windows and Doors Omissions

Plaintiff supplements its quantitative allegations of materiality for the alleged Windows
and Doors omissions by adding discrete numerical comparators that helpfully contextualize the
value of the omissions within Ply Gem’s finances.
First, Plaintiff alleges that Defendants should have disclosed to Ply Gem’s investors the
buyback provision in the agreement between Ply Gem and Home Depot, which required Ply
Gem to incur a substantial loss on inventory it was required to buy from Home Depot. (SAC
¶¶ 61-64, 76-77.) In the SAC, Plaintiff alleges that the buyback resulted in a $2.2 million decline
in gross profit in the second quarter of 2013 and contextualizes that loss as a percentage of Ply
Gem’s overall gross profit (2.88%), operating earnings (76.87%), loss before income taxes
(4.45%), net loss (4.52%), and comprehensive loss (4.32%). (Id. ¶ 77.) Within the Windows
and Doors segment, this loss allegedly reduced gross profit by 10.44% and increased operating
loss by 56.05%. (Id. ¶ 80.) Plaintiff also claims that the total cost of this loss in the first three
quarters of 2013 was $4.5 million. (Id. ¶ 101.) As compared to the allegations in the FAC, the

5

SAC allegations provide quantitative detail that “meaningfully situate[s]” the cost of the buyback
“in the context of the Company’s finances.” 4 Ply Gem, 135 F. Supp. 3d at 151.
Plaintiff also alleges that Defendants should have disclosed that the agreement with
Home Depot required Ply Gem to sell a large volume of lower-margin windows and that Ply
Gem was experiencing operational inefficiencies and ramp-up costs with a new manufacturing
facility. (SAC ¶ 9-10.) Plaintiff alleges that the cost of the sale of low-margin windows and the
ramp-up costs together totaled $8 million. 5 (Id. ¶ 75.) Plaintiff again contextualizes that loss as
a percentage of Ply Gem’s overall gross profit (9.73%), operating earnings (92.36%), loss before
income taxes (18.35%), net loss (18.66%), and comprehensive loss (17.74%). (Id.) Plaintiff also
claims that these costs together accounted for a 29.77% impact on gross profit in the Windows
and Doors segment, and also would have turned an operating profit in that segment into a loss.
(Id. ¶ 83.)
Many of Plaintiff’s newly offered comparisons satisfy SAB No. 99’s 5% rule of thumb.
See Ply Gem, 135 F. Supp. 3d at 150. Some do not. In response to the Court’s prior refusal to
“adopt operating earnings as the pertinent guidepost,” id. at 154, Plaintiff now offers a
smorgasbord of options, comparing the omissions to multiple income-statement metrics in the
hopes of providing an acceptable like-for-like comparison, see Ganino, 228 F.3d at 165. At this

4

Defendants also contend that Plaintiff fails to plead that the buyback was an “unusual or
infrequent” transaction, as required under Item 303. (Dkt. No. 56 at 10.) See 17 C.F.R.
§ 229.303(a)(3)(i). However, Plaintiff’s description of the buyback shows that it was not a usual
and frequent feature of Ply Gem’s business (SAC ¶¶ 61-63; Dkt. No. 63 at 20), and the Court is
not persuaded to the contrary by Defendants’ reference to the disclosure of an unrelated
inventory buyback in Ply Gem’s 2012 10-K (Dkt. No. 56 at 10).
5

Defendants dispute the accuracy of relying on this $8 million figure, arguing that the
alleged misstatements account for only a small portion of the total. (Dkt. No. 56 at 12-13.)
However, at this stage, the Court is obliged to draw all reasonable inferences in Plaintiff’s favor.
See Litwin, 634 F.3d at 715.
6

stage, the Court cannot decide which particular financial metric offers the best like-to-like
comparison, as this implicates questions of fact about the nature of the omissions themselves and
about Ply Gem’s cost structure and accounting practices. See Ganino, 228 F.3d at 165
(“Whether the plaintiffs will be able to prove that the [misstated revenue] had no offsetting
expenses—and therefore can be properly recorded as income—is an issue of fact that cannot be
decided at this stage of the litigation.”). But the Court does find that Plaintiff’s bolstered
quantitative allegations help support its claim that the omissions were material.
What Plaintiff does not do, and likely cannot do, is plead that the value of the alleged
omissions amounts to more than five percent of Ply Gem’s net sales. Defendants repeatedly take
Plaintiff to task for this failure, and suggest that it alone should justify dismissal. (Dkt. No. 56 at
2, 8, 13.) But while the Court’s prior opinion suggested that such an allegation might be
sufficient to show materiality, it nowhere held that it is necessary. See Ply Gem, 135 F. Supp. 3d
at 152. Setting up a per se numerical bar to materiality—whether five percent of sales or
otherwise—runs counter to the guidance of the Supreme Court and the Second Circuit, which
have described materiality as an “inherently fact-specific finding,” Basic, 485 U.S. at 236,
defying “formulaic” assessment, Ganino, 228 F.3d at 162. Cf. SAB No. 99, at *45151
(“[Q]uantifying, in percentage terms, the magnitude of a misstatement is only the beginning of
an analysis of materiality; it cannot appropriately be used as a substitute for a full analysis of all
relevant considerations.”). This Court again declines to draw a rigid line separating material
from immaterial; rather, it need only consider Plaintiff’s revised allegations, both quantitative
and qualitative, and determine which side of that line they are on.
In addition to supplementing its quantitative case for the materiality of the Windows &
Doors omissions, Plaintiff also significantly strengthens its qualitative case. First, Plaintiff does

7

so by providing new detail about the importance of the Windows and Doors segment to Ply
Gem’s business. In its prior opinion, the Court noted that “SAB No. 99 contains an illustrative
list of circumstances which could ‘render material a quantitatively small’ omission,” finding that
“Plaintiff has not cited any qualitative factors that it believes support a finding of materiality.”
Ply Gem, 135 F. Supp. 3d at 152 (quoting SAB No. 99, at *45152). SAB No. 99 includes on that
list “[w]hether the misstatement concerns a segment or other portion of the registrant’s business
that has been identified as playing a significant role in the registrant’s operations or profitability”
and “[w]hether the misstatement changes a loss into income or vice versa.” SAB No. 99, at
*45152. The SAC has remedied this defect in the FAC by providing detail about the growth and
profitability of the Windows and Doors segment relative to Ply Gem’s other segment (SAC ¶ 8182), and by alleging that the value of the omissions transformed a profit into a loss in that
segment (id. ¶ 83-84). (See also Dkt. No. 63 at 14-15.) In further distinction from the FAC,
Plaintiff now signposts its pleading with express reference to the requirements of SAB No. 99,
making clear how its supplemented allegations satisfy that Bulletin and this Court’s standard for
materiality. (Id. ¶ 79, 84.)
The SAC further strengthens the qualitative case for materiality by providing context
around Ply Gem’s stock-price decline after the disclosure of the alleged omissions as part of Ply
Gem’s second quarter 2013 earnings. See SAB No. 99, at *45152 (“[V]olatility of the price of a
registrant’s securities in response to certain types of disclosures may provide guidance as to
whether investors regard quantitatively small misstatements as material.”). Though market
reaction alone is “too blunt an instrument to be depended on” to determine whether a single
omission is material, id., especially “where a disclosure contains many revelations,” In re New
Oriental Educ. & Tech. Grp. Sec. Litig., 988 F. Supp. 2d 406, 424 (S.D.N.Y. 2013), Plaintiff

8

excerpts two analyst reports that point directly to the alleged omissions as justification for
reduced stock-price expectations. (SAC ¶ 86 (noting “reduction in gross margin percentage” due
to “labor inefficiency and ramp-up costs” and “Home Depot . . . roll[ing] out low margin product
introductions”).) The SAC’s description of analyst disappointment resulting directly from the
alleged omissions supports an inference that the adverse market reaction was predictable, and
thus that the omissions were qualitatively material. Cf. ECA, Local 134 IBEW Joint Pension
Trust of Chicago v. JP Morgan Chase Co., 553 F.3d 187, 205 (2d Cir. 2009) (“Plaintiffs have
not alleged facts that would permit the inference that [management] expected that the alleged
misclassification of the loans might result in a significant market reaction. For this reason, the
market reaction . . . does not point towards qualitative materiality under SAB No. 99.”).
These qualitative factors and quantitative factors together make clear that the SAC
adequately alleges materiality regarding the three Windows and Doors omissions. The Court
cannot conclude that the Windows and Doors omissions described in the SAC are “so obviously
unimportant to a reasonable investor that reasonable minds could not differ on the question of
their importance.” Ply Gem, 135 F. Supp. 3d at 150 (quoting Ganino, 338 F.3d at 162).
2.

Siding Omission

As regards the Siding-related omission, however, Plaintiff has again failed to carry its
burden of alleging materiality. Plaintiff claims that Defendants failed to disclose declining sales
of vinyl siding products at the time of the IPO. (SAC ¶ 12, 65.) The Court previously faulted
the FAC for “fail[ing] to situate the alleged omission . . . within the context of Ply Gem’s
finances so that a reasonable mind could conclude it was likely to be material at the time of the
IPO.” Ply Gem, 135 F. Supp. 3d at 154.

9

But Plaintiff does little to remedy the Court’s earlier concern. It does not—unlike its
treatment of the Windows and Doors omissions—quantify the magnitude of the sales decline or
situate the value of the omission against Ply Gem’s financial metrics. The SAC’s added section,
“The Omitted Facts Were Material,” hardly discusses the siding omission at all. (SAC ¶¶ 7086.) While it does offer a comment from an analyst that “sluggish demand . . . for siding” was in
part responsible for diminished stock-price expectations, this qualitative remark lacks sufficient
context to adequately allege materiality. (Id. ¶ 86.) And Plaintiff’s off-handed comment in its
brief suggesting that disclosure of the drop in siding demand would have changed a loss into
income is similarly unsupported. (Dkt. No. 63 at 24.) Given Plaintiff’s failure to bolster its
allegations regarding the Siding omission, the Court again concludes that Plaintiff has failed to
allege materiality as to this claim. See Ply Gem, 135 F. Supp. 3d at 154.
B.

Adequate Disclosure

Defendants argue that even if the omissions are found to be material, Plaintiff’s claim
should be dismissed “because Plaintiff does not, and cannot, allege that Defendants failed to
satisfy their duty to make adequate disclosures to Ply Gem’s investors.” (Dkt. No. 56 at 3.)
Specifically, Defendants contend that Defendants lacked sufficient knowledge of the buyback
omission, as required under Item 303, and that Defendants adequately disclosed the omissions
relating to the sale of low-margin windows and the ramp-up costs. 6
First, Defendants contend that Plaintiff fails to plead that Defendants had actual
knowledge of the existence of the Windows and Doors omissions’ impact at the time of the
omissions, as required under Item 303. (Dkt. No. 56 at 10-12, 15, 18-19.) See 17 C.F.R.

6

Because it deems the pleading’s Siding-related claim inadequate on the ground of
materiality, the Court does not address Defendants’ remaining Siding arguments. (Dkt. No. 56 at
19-21.)
10

§ 229.303(a)(3)(ii). “A cognizable claim under Section 11 or 12 of the 1933 Act requires
plaintiffs to, ‘at a minimum, plead facts to demonstrate that allegedly omitted facts both existed,
and were known or knowable, at the time of the offering.’” Lin v. Interactive Brokers Grp., Inc.,
574 F. Supp. 2d 408, 421 (S.D.N.Y. 2008) (quoting Castlerock Mgmt. Ltd. v. Ultralife Batteries,
Inc., 114 F. Supp. 2d 316, 323 (D.N.J. 2000)). Plaintiff alleges that Defendants were aware of
the buyback and that buyback-related losses had already been incurred prior to the IPO. (SAC
¶¶ 61, 63, 64.) Similarly, Plaintiff alleges that Defendants were aware of the impact resulting
from the sale of low-margin windows (id. ¶¶ 44, 69), and from the ramp-up costs at the Dallas
plant (id. ¶¶ 47-50). Unlike in Blackmoss—the case upon which Defendants primarily rely—in
which a company was found to lack knowledge of a nascent, exogenous trend in the mortgagebacked securities market, here the nature and impact of the buyback were well within
Defendants’ knowledge. (Dkt. No. 45 at 11.) See Blackmoss Investments Inc. v. ACA Capital
Holdings, Inc., No. 07 CIV. 10528, 2010 WL 148617, at *10 (S.D.N.Y. Jan. 14, 2010).
Defendants also contend that Ply Gem adequately disclosed the alleged omissions
involving the sale of low-margin windows and the ramp-up costs. 7 (Dkt. No. 56 at 14-15, 1718.) Regarding the low-margin windows, Defendants point to several sources, including the
Registration Statement, which reported that Ply Gem’s sales increase was “focused on [its] lower
margin products,” which resulted in “gross profit decrease,” and that the “sales mix of . . . value
priced window products that generally carry lower gross profit margins” increased. (Id. at 14-15
(citations omitted).) Regarding the ramp-up costs, Defendants note that the Registration
Statement included discussion of “labor inefficiencies and other ramp up costs,” with “labor

7

In its prior opinion, the Court did not have occasion to consider the adequacy of Ply
Gem’s disclosures, given the dismissal of the FAC on the basis of immateriality. Ply Gem, 135
F. Supp. 3d at 150 n.2.
11

ramp-up costs” listed as a potential risk factor that “could result in a decrease in [Ply Gem’s]
short-term earnings,” and mentioned “$0.8 million of expense associated with the consolidation
and start-up of [Ply Gem’s] production facility in Dallas.” (Id. at 17 (citations omitted).)
Plaintiff does not dispute Ply Gem’s disclosure of the existence of these issues. (Dkt. No.
63 at 16-19.) Rather, “the key information that plaintiffs assert should have been disclosed is
whether, and to what extent, the particular known trend, event, or uncertainty might have been
reasonably expected to materially affect” Ply Gem’s business. Litwin, 634 F.3d at 718-19. Here,
Ply Gem’s disclosures fail to provide clarity on the extent of the expected effect of the lowmargin windows and the ramp-up costs—which Plaintiff alleges was a full $8 million. (SAC
¶ 75.) Ply Gem might not have been aware of the precise value of the omissions (Dkt. No. 56 at
18-19), but Plaintiff has adequately alleged that Ply Gem did know that they were “reasonably
likely” to have a material impact (SAC ¶ 69). This “potential future impact was certainly not
public knowledge . . . and thus cannot be considered part of the ‘total mix’ of information
already available to investors.” Litwin, 634 F.3d at 719.
C.

Section 12(a)(2) Claim

Defendants also contend that Plaintiff’s Section 12(a)(2) claim should be dismissed due
to Plaintiff’s failure to allege that Defendants are “statutory seller[s].” (Dkt. No. 56 at 21-22.)
See 15 U.S.C. § 77l.
“An individual is a ‘statutory seller’—and therefore a potential section 12(a)(2)
defendant—if he: (1) ‘passed title, or other interest in the security, to the buyer for value,’ or (2)
‘successfully solicit[ed] the purchase [of a security], motivated at least in part by a desire to
serve his own financial interests or those of the securities[’] owner.’” In re Morgan Stanley Info.

12

Fund Sec. Litig., 592 F.3d 347, 359 (2d Cir. 2010) (quoting Pinter v. Dahl, 486 U.S. 622, 642,
647 (1988)).
Plaintiff has alleged that it purchased Ply Gem shares in the IPO (SAC ¶ 19), that each
individual defendant was an officer or director of Ply Gem at the time of the IPO (id. ¶¶ 21-25),
and that each underwriter defendant acted as an underwriter in connection with the IPO (id.
¶¶ 26-27). At this stage, that is enough. See Briarwood Invs. Inc. v. Care Inv. Trust Inc., No. 07
CIV. 8159, 2009 WL 536517, at *4 (S.D.N.Y. Mar. 4, 2009) (“Numerous courts in this circuit
hold that on a motion to dismiss, officers or directors of the stock issuer who signed its
registration statement are deemed to have solicited the purchase of the offered stock.”); In re MF
Glob. Holdings Ltd. Sec. Litig., 982 F. Supp. 2d 277, 324 (S.D.N.Y. 2013) (“It is enough, at this
stage, for Plaintiffs to allege that they purchased securities ‘in’ or ‘pursuant to’ the relevant
offerings. Should it become apparent after a full factual record is established during discovery
that Plaintiffs cannot prove direct purchases from certain individual underwriters, those
underwriters will have the opportunity to seek judgment as a matter of law in a motion for
summary judgment.” (citation omitted)).

13

III.

Conclusion
For the foregoing reasons, Defendants’ motion is GRANTED IN PART and DENIED IN

PART. Defendants shall file their answer to the surviving claims by October 13, 2016.
The Clerk of Court is directed to close the motions at Docket Numbers 55 and 65.

SO ORDERED.
Dated: September 23, 2016
New York, New York
____________________________________
J. PAUL OETKEN
United States District Judge

14