Pirnik v. Fiat Chrysler Automobiles N.V. et al
Filing
50
OPINION AND ORDER re: 42 MOTION to Dismiss Second Amended Complaint. filed by Richard K. Palmer, Scott Kunselman, Fiat Chrysler Automobiles N.V., Sergio Marchionne. For the reasons stated above, Defendants motion to dismiss is G RANTED in part and DENIED in part. Specifically, Plaintiffs' claims based on Defendants' statements regarding FCA's substantial compliance with applicable regulations survive, but their claims based on Defendants' reserve estim ates and related statements are dismissed. It follows that the claims against Palmer, which concern only the latter, must also be and are dismissed. The Court concludes that Plaintiffs should not be granted leave to file what would amount to their fourth complaint. First, in light of Fait and the legal standards discussed above, any amendment would likely be futile. Second, in granting leave to file the operative complaint, the Court expressly warned Plaintiffs that they would not be given another opportunity to address the problems alleged in Defendants' motion to dismiss (see Docket No. 34), and they give no indication that they possess facts that could cure those problems. See, e.g., Clark v. Kitt, No. 12-CV-8061 (CS), 2014 WL 4054284, at *15 (S.D.N.Y. Aug. 15, 2014) (holding that the plaintiff's failure to remedy the complaint's deficiencies identified by an earlier motion to dismiss "is alone sufficient grounds to deny leave to amend"); see als o, e.g., Ruotolo v. City of N.Y., 514 F.3d 184, 191 (2d Cir. 2008) (affirming the district court's denial of leave to amend in part because of the previous opportunities that the plaintiff had received to amend the complaint). The Clerk of Court is directed to terminate Docket No. 42 and to terminate Defendant Richard Palmer as a party. (Signed by Judge Jesse M. Furman on 10/5/2016) (kgo)
Case 1:15-cv-07199-JMF Document 50 Filed 10/05/16 Page 1 of 26
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------------------------------------------- X
:
VICTOR PIRNIK,
:
:
Plaintiff,
:
:
-v:
:
FIAT CHRYSLER AUTOMOBILES, N.V., et al.,
:
:
Defendants.
:
:
---------------------------------------------------------------------- X
10/05/2016
15-CV-7199 (JMF)
OPINION AND ORDER
JESSE M. FURMAN, United States District Judge:
Plaintiffs in this putative securities fraud class action are investors in Defendant Fiat
Chrysler Automobiles, N.V. (“FCA”), a global car company. In brief, Plaintiffs bring claims
under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15
U.S.C. §§ 78(b), 78(t)(a), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240, alleging that
FCA — acting in part through Defendant Sergio Marchionne, the Chief Executive Officer of
FCA’s largest subsidiary, FCA U.S.; Defendant Richard Palmer, the Chief Financial Officer of
FCA U.S.; and Defendant Scott Kunselman, the former head of Vehicle Safety and Regulatory
Compliance for FCA U.S. — made false and misleading statements regarding its compliance
with vehicle safety laws and improperly accounted for vehicle recall costs. Defendants now
move, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss the operative
complaint. (Docket No. 42). For the reasons that follow, Defendants’ motion to dismiss is
GRANTED in part and DENIED in part.
Case 1:15-cv-07199-JMF Document 50 Filed 10/05/16 Page 2 of 26
BACKGROUND
The following facts — which are taken from the Second Amended Complaint, documents
it incorporates, and matters of which the Court may take judicial notice (including disclosure
documents that FCA was required by law to file) — are construed in the light most favorable to
Plaintiffs. See, e.g., Kleinman v. Elan Corp., 706 F.3d 145, 152 (2d Cir. 2013); see also, e.g.,
Silsby v. Icahn, 17 F. Supp. 3d 348, 354 (S.D.N.Y. 2014).
FCA is a holding company that arose from the 2014 merger of Fiat Group Automobiles
(“Fiat Group”) and Chrysler Group LLC. (Docket No. 38 (“SAC”) ¶ 31). FCA’s subsidiary in
the United States, now known as FCA U.S., is effectively a continuation of Chrysler, the wellknown American car company that manufactures motor vehicles under various brand names,
including Chrysler, Dodge, Fiat, Jeep, and Ram. (Id. ¶¶ 2, 37).1 At all times relevant to this
case, Defendant Marchionne was the CEO of FCA U.S. (and before it, Chrysler); Defendant
Palmer was the CFO; and Defendant Kunselman was the head of Vehicle Safety and Regulatory
Compliance. (Id. ¶¶ 32-34). (For clarity, and because the distinction between Chrysler and FCA
U.S. is immaterial here, the Court will refer to FCA U.S. and Chrysler as simply “Chrysler.”)
As a manufacturer of motor vehicles in the United States, Chrysler must comply with the
National Traffic and Motor Vehicle Safety Act of 1996 (the “Safety Act”), 49 U.S.C. § 30101 et
seq., and its implementing regulations, which are enforced by the National Highway Traffic
Safety Administration (“NHTSA”). (SAC ¶ 4). In the period leading up to the creation of FCA,
The company known as Chrysler was founded in 1925, but “changed its name over the
years from DaimlerChrysler AG (1997-2007), Chrysler LLC (2007-2009), Chrysler Group LLC
(2009-2014) and FCA US (2014-present).” (SAC ¶ 37). These name changes (and related
corporate transformations) are not relevant for purposes of this motion and may not be relevant
to the case writ large. Indeed, although the Second Amended Complaint discloses the various
corporate forms that preceded FCA U.S., it generally discusses the conduct of “Chrysler”
throughout, without ever defining which entity, precisely, is being referenced.
1
2
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NHTSA conspicuously increased its enforcement of the Safety Act. (Id. ¶ 8-9). In 2010, for
example, NHTSA twice levied on Toyota the maximum fine available for Safety act violations in
connection with a high-profile defect involving unintended acceleration. (Id. ¶ 8). In June 2013,
despite initial public resistance by Marchionne, Chrysler itself agreed to recall certain Jeep
vehicles equipped with defective fuel tanks that could ignite in low-impact collisions. (Id. ¶¶ 7374). The U.S. Secretary of Transportation Ray LaHood recounted in an interview thereafter that
Marchionne had agreed to the recall after a meeting with LaHood and NHTSA Administrator
David Strickland. Secretary LaHood stated that, as a result of that meeting and other
discussions, Marchionne “knew” that NHTSA was “a no-nonsense organization”; “[t]he thing
that really set us on a course where people understood that,” he continued, “was the Toyota
(sudden-acceleration recalls) — the fact that we fined them the maximum fines twice.” (Id.
¶ 75). Finally, in May 2014, NHTSA fined General Motors (“GM”) $35 million, the maximum
permitted, for its failure to timely report a defect in the ignition switches of various vehicles. (Id.
¶ 9). In its Consent Order with GM, NHTSA expressly noted that, in the prior five years, it had
fined six different vehicle manufacturers a combined total of $124.5 million. (Id.).
On August 12, 2014, Chrysler announced the establishment of a new office of Vehicle
Safety and Regulatory Compliance that would “help intensify the Company’s continuing
commitment to vehicle safety and regulatory compliance.” (Id. ¶ 184). Defendant Kunselman
was assigned to head the office and report directly to Marchionne, “ensuring a high level of
information flow and accountability.” (Id. ¶¶ 11, 184, 263). At the time, Chrysler was in the
midst of the recall with respect to Jeep fuel tanks. (See id. ¶¶ 72-88). In addition, Chrysler was
one of ten vehicle manufacturers undertaking recalls of vehicles with Takata airbags, which
could explode upon deployment, propelling metal fragments and debris into the passenger
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compartment. (See id. ¶¶ 89-108). In combination, that recall “constituted the largest and most
complex safety recall in U.S. history with more than 28 million [airbag] inflators under recall in
the United States.” (Id. ¶ 90).
In October 2014, Chrysler and Fiat Group merged to create FCA, and FCA began trading
on the New York Stock Exchange. (Id. ¶ 36). On November 12, 2014, FCA filed disclosure
forms with the Securities and Exchange Commission (“SEC”) that contained the following
representation (a representation that would be repeated in disclosures through June 2015):
Our vehicles and the engines that power them must also comply with extensive
regional, national and local laws and regulations and industry self-regulations
(including those that regulate vehicle safety, end-of-life vehicles, emissions and
noise). We are substantially in compliance with the relevant global regulatory
requirements affecting our facilities and products. We constantly monitor such
requirements and adjust our operations to remain in compliance.
(Id. ¶¶ 198, 203, 222, 234, 236 (emphasis added)). Shortly thereafter, at a United States Senate
hearing prompted by the Takata airbag recall, Kunselman stated that Chrysler had “the highest
recall completion rate of all major U.S.-market auto makers,” that “NHTSA regards [Chrysler’s]
customer-notification protocols as ‘industry-best,’” and that Chrysler’s “average per-campaign
vehicle volume is among the lowest in the industry — well below the industry average,” which
was a “testament to [Chrysler’s] transparency and demonstrates clearly the robustness of
[Chrysler’s] fleet-monitoring and [Chrysler’s] rapid response when issues arise.” (Id. ¶ 200).
Naturally, FCA soon faced questions about the costs of the recalls. For example, in a
January 28, 2015 earnings call, an analyst asked Defendant Palmer if Chrysler had “reflect[ed]
the cost of the Takata airbag recall at year end or is this coming in 2015” and to “give . . . some
sense of this industrial cost going into 2015, are there likely to be less of a headwind versus
2014”? (Id. ¶ 210). Palmer answered: “Yes. We have booked the Takata item in [the fourth
quarter of 2014]. In 2015 . . . we expect the industrial cost headwind to be significantly less than
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it was in 2014 because of the fact that all these launches with extra content have had a 12-month
cycle now. So, year-over-year, they’re in the numbers.” (Id.). On the same call, Marchionne
said that the prior year’s recalls reflected “a changing paradigm for the auto sector” and that
Chrysler was “adjusting [its] internal structures to deal with this new state of affairs.” (Id.
¶ 212). “It is my expectation,” he continued, “that this cost will come down as we progress
through reconstitution of the management process of what’s going on here.” (Id.).
Notably, around the time that FCA first filed its regulatory compliance statement with the
SEC and Kunselman testified before the Senate, NHTSA Administrator David Friedman sent
letters to Chrysler alleging shortcomings with respect to the two high-profile recalls. (Id. ¶¶ 1415). On October 29, 2014, for example, Administrator Friedman sent what appears to have been
a form letter to Steve Williams, Head of Vehicle Safety Compliance and Product Analysis at
Chrysler, emphasizing the “critical imperative” of “aggressive and proactive action” to remedy
the “defective Takata air bags.” (Id. ¶ 272; Docket No. 43 (“Monahan Decl.”), Ex. 6). On
November 25, 2014, Friedman sent directly to Marchionne a follow-up letter specific to
Chrysler. “Chrysler,” Friedman wrote, “has consistently maintained its position at the rear of the
pack,” and its “delay in notifying consumers and taking other actions necessary to address the
safety defect identified is unacceptable and exacerbates the risk to motorists’ safety.” (SAC
¶ 15; Monahan Decl., Ex. 7). A letter from Administrator Friedman to Marchionne, dated
November 19, 2014, sounded similar notes with respect to the Jeep fuel tank recall. Specifically,
Friedman expressed concern “about the results of Chrysler’s October 2014 recall update reports
showing a woeful three percent repair rate out of more than 1.5 million affected vehicles,” and
asserted that Chrysler’s actions were “unacceptable.” (SAC ¶ 14). On November 21, 2014,
Marchionne and Kunselman each sent a letter in response; Kunselman’s letter acknowledged that
5
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Chrysler’s actions were “not satisfactory.” (Id. ¶¶ 87-88). On February 26, 2015, NHTSA sent a
letter to Chrysler regarding a recall with a decidedly lower profile (a transmission issue in a
certain model year car); it too highlighted Chrysler’s delays in executing the recall and suggested
that those delays were at odds with Chrysler’s Safety Act duties. (Monahan Decl., Ex. 8).
Prompted by Chrysler’s apparent shortcomings, on May 18, 2015, NHTSA announced
that it would hold a public hearing on July 2, 2015, to determine whether Chrysler had complied
with its Safety Act duties in connection with twenty prior recall campaigns, including the three
discussed in the letters. (Monahan Decl., Ex. 9). (NHTSA subsequently expanded its inquiry to
include three additional Chrysler recalls, for a total of twenty-three. (See SAC ¶ 241).) The
following day, Chrysler issued a press release titled “NHTSA Recall Scrutiny” indicating that it
would respond to, and cooperate with, the regulator. (Monahan Decl., Ex. 10). At the July 2,
2015 hearing, NHTSA “found [Chrysler] frequently delayed responding to safety problems,
contrary to federal law. And even when it did order a recall, the feds questioned why repair rates
often were so low and slow.” (SAC ¶ 245; see also id. ¶¶ 70, 148, 276).
On Sunday, July 26, 2015, Chrysler entered into a Consent Order with NHTSA (the
“First Consent Order”), admitting that it had violated the Safety Act and agreeing to pay a record
$105 million fine. (Id. ¶ 19). Specifically, Chrysler admitted it had failed to timely notify
NHTSA and vehicle owners in connection with twenty-three recalls affecting more than eleven
million vehicles and that it had failed to adequately remedy defects in connection with three of
those twenty-three recalls. (Id.; see Monahan Decl., Ex. 11 at 4-5). FCA’s stock price then fell
$0.74, or roughly 4.9%, to close at $14.41 on July 27, 2015 — a fall that resulted in over a $950
million decline in the company’s market capitalization. (SAC ¶¶ 20, 244). On a July 30, 2015
earnings call, Marchionne acknowledged that FCA had “not always been perfect in complying
6
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with [recall] requirements” and that, over the prior “year and a half, NHTSA ha[d] begun to take
a harder look at these technical compliance issues, and frankly we [had] started to do the same
thing about the same time.” (SAC ¶ 270; Monahan Decl., Ex. 23, at 2).
On October 27, 2015, Chrysler announced Kunselman’s resignation. (SAC ¶ 250). The
next day, FCA announced its results for the third quarter — i.e., the quarter in which NHTSA
and Chrysler entered into the First Consent Order. (Id. ¶ 251). FCA disclosed that it recorded “a
€761 million pre-tax charge for estimated future recall campaign costs for vehicles sold in prior
periods in [the North American Free Trade Agreement zone]” (which includes the United
States). (Id.; Monahan Decl., Ex. 12, at 16). Prior to this announcement, FCA had disclosed that
its “estimated future costs of [service and recall] actions are primarily based on historical claims
experience for the Group’s vehicles” and that its “process . . . relies upon long-term historical
averages until actual data is available.” (See, e.g., Monahan Decl., Ex. 4, at F29). In announcing
the €761 million increase in its reserves, FCA stated that in light of the “recent increases in both
the cost and frequency of recall campaigns and increased regulatory activity across the industry
in the U.S. and Canada, an additional actuarial analysis that gives greater weight to the more
recent calendar year trends in recall campaign experience has been added to the adequacy
assessment to estimate future recall costs.” (Monahan Decl., Ex. 12, at 16). Following the
announcement, FCA shares fell $0.69, or 4.7%, to close at $14.72. (SAC ¶ 252).
On December 8, 2015, NHTSA and Chrysler entered into an amendment to the First
Consent Order (the “Second Consent Order”). In it, Chrysler admitted that it had not submitted
certain early warning information to NHTSA “due to coding problems in its [early warning]
system that failed to recognize when reportable information was received or updated,” and
because Chrysler “did not update its system to reflect new FCA brands.” (Monahan Decl., Ex.
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13, at 2). Chrysler agreed to pay an additional fine of $70 million. (Id. at 3). Later the same
day, an article titled “One Reason Fiat Chrysler (FCAU) Stock Closed Down Today” explained:
“Fiat Chrysler Automobiles (FCAU) stock closed lower by 0.07% to $13.80 on Thursday, after
the National Highway Traffic Safety Administration (NHTSA) fined the automaker $70 million
for failing to report safety data, including reports of death and injuries, consumer complaints,
warranty claims, and other data.” (SAC ¶ 256).
In 2015, Plaintiff Victor Pirnik filed this lawsuit against FCA, Marchionne, Kunselman,
and Palmer. On December 9, 2015, the Court appointed Gary Koopman and Timothy Kidd as
Lead Plaintiffs. (Docket No. 24). Thereafter, they filed the operative Second Amended
Complaint, which alleges that Defendants violated Section 10(b) and Rule 10b-5 by making false
and misleading statements and omissions concerning FCA’s compliance with regulations and by
estimating falsely the quarterly provisions for FCA’s warranty and recall reserves. (See SAC
¶¶ 297-307). Plaintiffs also seek to hold Marchionne, Kunselman, and Palmer liable as “control
persons” under Section 20(a) of the Exchange Act. (See id. ¶¶ 308-313).
LEGAL STANDARDS
“In reviewing a motion to dismiss pursuant to Rule 12(b)(6), the Court must accept the
factual allegations set forth in the complaint as true and draw all reasonable inferences in favor
of the plaintiff.” Cohen v. Avanade, Inc., 874 F. Supp. 2d 315, 319-20 (S.D.N.Y. 2012) (citing
Holmes v. Grubman, 568 F.3d 329, 335 (2d Cir. 2009)). The Court will not dismiss any claims
pursuant to Rule 12(b)(6) unless the plaintiff has failed to plead sufficient facts to state a claim to
relief that is facially plausible, see Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007), that is,
one that contains “factual content that allows 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).
8
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More specifically, a plaintiff must allege facts showing “more than a sheer possibility that a
defendant has acted unlawfully.” Id. A complaint that offers only “labels and conclusions” or “a
formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555.
Further, if a plaintiff has not “nudged [its] claims across the line from conceivable to plausible,
[those claims] must be dismissed.” Id. at 570.
Because they allege securities fraud, Plaintiffs must also satisfy the heightened pleading
requirements of both Rule 9(b), which requires that the circumstances constituting fraud be
“state[d] with particularity,” Fed. R. Civ. P. 9(b), and the Private Securities Litigation Reform
Act (“PSLRA”), 15 U.S.C. § 78u-4(b), which requires that scienter — that is, a defendant’s
“intention to deceive, manipulate, or defraud” — also be pleaded with particularity, Tellabs, Inc.
v. Makor Issues & Rights, Ltd., 551 U.S. 308, 313 (2007) (internal quotation marks omitted). To
satisfy Rule 9(b), a plaintiff “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.’” Anschutz Corp. v. Merrill Lynch & Co., 690 F.3d
98, 108 (2d Cir. 2012) (quoting Rombach v. Chang, 355 F.3d 164, 170 (2d Cir. 2004)). To
satisfy the PSLRA, a complaint must, “‘with respect to each act or omission alleged to
[constitute securities fraud], state with particularity facts giving rise to a strong inference that the
defendant acted with the required state of mind.’” ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493
F.3d 87, 99 (2d Cir. 2007) (quoting 15 U.S.C. § 78u-4(b)(2)(A)).
DISCUSSION
As noted, Plaintiffs seek to hold FCA, Marchionne, Kunselman, and Palmer liable for
securities fraud under Section 10(b) and Rule 10b-5 and to hold Marchionne, Kunselman, and
Palmer liable as “control persons” under Section 20(a). Broadly speaking, Plaintiffs’ claims
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relate to two categories of statements. The first category includes statements concerning FCA’s
compliance with applicable regulations — most notably, FCA’s representations of substantial
regulatory compliance in its SEC filings, but also oral statements made by Marchionne and
Kunselman relating to Chrysler’s fulfillment of its safety and recall duties. The second category
includes statements concerning the amount of funds FCA reserved to address its warranty and
recall costs, including oral statements by Palmer.
To state a claim for relief under Section 10(b) and Rule 10b-5 (and, by extension, a claim
under Section 20(a)), a plaintiff must plausibly allege “(1) a material misrepresentation or
omission by the defendant; (2) scienter; (3) a connection between the misrepresentation or
omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or
omission; (5) economic loss; and (6) loss causation.” Matrixx Initiatives, Inc. v. Siracusano, 563
U.S. 27, 37-38 (2011) (internal quotation marks omitted); see also, e.g., SEC v. First Jersey Sec.,
Inc., 101 F.3d 1450, 1472 (2d Cir. 1996) (noting that a plaintiff must plead a plausible primary
violation of Section 10(b) to state a claim for control person liability under Section 20(a)). Here,
three elements are in dispute: whether Plaintiffs adequately plead a material misrepresentation or
omission, scienter, and loss causation. The Court will begin by addressing whether Plaintiffs
adequately plead a material misrepresentation or omission and scienter, first in connection with
Defendants’ statements and omissions regarding its regulatory compliance and then in
connection with Defendants’ statements about FCA’s warranty and recall reserves. Lastly, the
Court will address Defendants’ arguments regarding loss causation.
A. Defendants’ Statements Regarding Regulatory Compliance
Defendants move to dismiss Plaintiffs’ claims relating to FCA’s compliance with
applicable regulations on two grounds: first, that the statements were not false or constitute
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inactionable puffery and, second, that Plaintiffs fail to adequately allege scienter. The Court will
address each argument in turn.
1. Falsity
To start, Defendants argue that FCA’s statements about regulatory compliance in the
company’s SEC filings (and the oral statements made by Marchionne and Kunselman to similar
effect) were neither false nor misleading. (Docket No. 44 (“Defs.’ Mem.”) 24-25). “[W]hether a
statement is misleading depends on the perspective of a reasonable investor: The inquiry . . . is
objective.” Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund, 135 S. Ct.
1318, 1327 (2015) (internal quotation marks omitted). Courts “consider whether the disclosures
and representations, taken together and in context, would . . . misle[a]d a reasonable investor
about the nature of the securities.” In re ProShares Trust Sec. Litig., 728 F.3d 96, 103 (2d Cir.
2013) (internal quotation marks omitted). “Even a statement which is literally true, if susceptible
to quite another interpretation by the reasonable investor, may properly be considered a material
misrepresentation.” Kleinman, 706 F.3d at 153. Finally, to the extent relevant here, “[a]
statement or omission is material if there is a substantial likelihood that a reasonable shareholder
would consider in important in deciding how to act.” IBEW Local Union No. 58 Pension Trust
Fund & Annuity Fund v. Royal Bank of Scotland Grp., PLC, 783 F. 3d 383, 389 (2d Cir. 2015)
(internal quotation marks omitted).
Applying those standards here, the Court easily concludes that Plaintiffs plausibly allege
actionable and material misrepresentations. In the sentence primarily at issue, FCA represented
from November 2014 through June 2015 that it was “substantially in compliance with the
relevant global regulatory requirements affecting [the company’s] facilities and products.” (SAC
¶¶ 198, 203, 222, 234, 236). At the time of those statements, however, FCA was allegedly not
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“substantially in compliance” with the “regulatory requirements” of the Safety Act; after all, only
months later, FCA admitted to widespread noncompliance with those requirements. Cf., e.g.,
Iowa Pub. Emps.’ Ret. Sys. v. MF Global, Ltd., 620 F.3d 137, 143, n.13 (2d Cir. 2010)
(“Depending on the problem, its existence in February 2008 may support an inference that it was
present six months earlier. This is sufficient to raise [the plaintiffs’] right to relief above the
speculative level.” (internal quotation marks omitted)). Defendants do not (and, at this stage of
the litigation, could not) argue otherwise. Instead, emphasizing the vastness of FCA’s “global
regulatory requirements,” Defendants contend that “isolated disputes concerning a handful of
regulations with one U.S. regulator do[] not remotely suggest that FCA was not at any time in
substantial compliance with the myriad global regulations to which it was subject.” (Defs.’
Mem. 24-25). That argument might have legs if the sentence at issue read that FCA was
“substantially in compliance with” substantially all of “the relevant global regulatory
requirements.” But that is not what it said, nor how it would be interpreted by a reasonable
investor, let alone the only interpretation to which the sentence is “susceptible.” Kleinman, 706
F.3d at 154. Instead, a reasonable investor could, and likely would, read FCA’s statement to
mean that the company was substantially in compliance with all applicable regulations, including
the Safety Act and vehicle safety regulations in the United States. See, e.g., Fed. Hous. Fin.
Agency Nomura Holding Am., Inc., 104 F. Supp. 3d 441, 563 (S.D.N.Y. 2015) (finding, after a
bench trial, that defendants’ representations of “general compliance” were misleading because
they “indicated that certain immaterial exceptions might exist,” not that significant violations
existed (internal quotation marks omitted)); In re Bear Stearns Cos. Inc. Sec., Derivative, and
ERISA Litig., 763 F. Supp. 2d 423, 459 (S.D.N.Y. 2011) (finding defendant’s statement that it
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was “in compliance with [the SEC’s Consolidated Supervised Entity] regulatory capital
requirements” to be materially false).
The statement’s text and context support that conclusion. First, the only word qualifying
“global regulatory requirements” is “relevant,” and the Safety Act is plainly relevant (that is,
applicable, to FCA). Indeed, in the preceding sentence, FCA noted it “must . . . comply with
extensive regional, national and local laws and regulations and industry self-regulations
(including those that regulate vehicle safety . . .).” (SAC ¶ 198 (emphasis added)).2 See
Omnicare, 135 S. Ct. at 1332 (noting that the reasonable investor interprets a statement “fairly
and in context”). Second, a reasonable investor could certainly conclude that the word
“substantially” modifies only the words “in compliance.” That is so not only because of
grammar and syntax — i.e., the words are next to one another, see id. at 1328 (observing that
“the reasonable investor expects” an SEC filing to “ha[ve] been carefully wordsmithed”) — but
also because the law “does not concern itself with trifles” and “substantial” compliance is usually
good enough, Amalgamated Serv. & Allied Indus. Joint Bd., Amalgamated Clothing & Textile
Workers Union, AFL-CIO, CLC v. N.L.R.B., 815 F.2d 225, 228 (2d Cir. 1987). In fact, the next
sentence equates “substantially in compliance” and “in compliance” — stating “[w]e constantly
monitor such requirements and adjust our operations to remain in compliance” — dropping any
qualifying language to the pledged degree of compliance. Thus, a reasonable investor could
have understood FCA to be representing that it was “substantially in compliance,” not with most
requirements in most areas, but with all “such requirements,” including with vehicle safety
2
In light of that language, the fact that the statement appeared under the heading
“Environmental and Other Regulatory Matters” (see Defs.’ Mem. 25) is of no great significance.
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regulations in the United States — particularly when considered in conjunction with
Marchionne’s and Kunselman’s statements on that topic.
FCA’s argument that its misrepresentations were merely inactionable puffery fares no
better. That argument has no merit with respect to FCA’s specific representation discussed
above. See, e.g., In re BioScrip, Inc. Sec. Litig., 95 F. Supp. 3d 711, 721–22 (S.D.N.Y. 2015)
(holding that the statement that “the Company believes it is in substantial compliance with all
laws, rules and regulations that affects its business and operations,” even though an opinion, was
actionable (emphasis added)). And with respect to Marchionne and Kunselman, Defendants do
not argue for dismissal on the ground that, under Janus Capital Grp., Inc. v. First Derivative
Traders, 564 U.S. 135, 142 (2011), the individual defendants did not “make” that statement.
Compare In re UBS AG Sec. Litig., No. 07-CV-11225 (RJS), 2012 WL 4471265, at *10
(S.D.N.Y. Sept. 28, 2012) (“Although Janus might not necessarily imply that there can be only
one ‘maker’ of a statement in the case of express or implicit attribution, the individual defendants
still must have actually ‘made’ the statements under the new Janus standard to be held liable
under Section 10(b).” (internal quotation marks and citations omitted)), aff’d sub nom. City of
Pontiac Policemen’s & Firemen’s Ret. Sys. v. UBS AG, 752 F.3d 173 (2d Cir. 2014), with, City
of Pontiac Gen. Emps. Ret. Sys. v. Lockheed Martin Corp., No. 11-CV-5026 (JSR), 2012 WL
2866425, at *13-14 (S.D.N.Y. July 13, 2012) (holding that the group pleading doctrine survives
Janus). In any event, Marchionne’s and Kunselman’s “comforting [oral] statements . . . about
compliance measures” — viewed in combination with FCA’s representation in its SEC
disclosures of substantial compliance and the reality of its noncompliance — “could be found by
a trier of fact to be . . . misleading.” Meyer v. JinkoSolar Holdings Co., Ltd, 761 F.3d 245, 251
(2d Cir. 2014); see also, e.g., In re Vivendi Universal, S.A. Sec. Litig., 765 F. Supp. 2d 512, 573
14
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(S.D.N.Y. 2011) (finding statements concerning the company’s “sound financial footing” were
not puffery because they were “supported by specific statements of fact regarding Vivendi’s
resources and financial condition” such as “zero net debt” and “free cash flow”), aff’d, — F.3d
—, 2016 WL 5389288 (2d Cir. Sept. 27, 2016). Accordingly, with respect to Defendants’
statements concerning FCA’s regulatory compliance, Plaintiffs plausibly allege actionable
misrepresentations.
2. Scienter
The Court thus turns to the question of scienter. In this Circuit, a plaintiff may satisfy the
scienter pleading requirement in either of two ways: “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. In their opposition to Defendants’ motion, Plaintiffs rely solely on the latter, so they must
allege either actual intent or “conscious recklessness — i.e., a state of mind approximating actual
intent, and not merely a heightened form of negligence.” Stratte-McClure v. Morgan Stanley,
776 F.3d 94, 106 (2d Cir. 2015).3 More specifically, Plaintiffs must allege conduct by
3
There are allegations in the Second Amended Complaint that could be read to suggest
reliance on a motive-and-opportunity theory. (See Defs.’ Mem. 12 (citing SAC ¶¶ 279-85, 302)).
To the extent that Plaintiffs ever relied on that theory, however, they have abandoned the theory
by not responding to Defendants’ arguments on the issue. (See id.; Defs.’ Reply 3). That is just
as well. Plaintiffs do not allege that any of the Defendants sold shares of FCA stock during the
Class Period. See, e.g., Rombach v. Chang, 355 F.3d 164, 177 (2d Cir. 2004) (finding “no
personal interest sufficient to establish motive” where “[p]laintiffs [did] not allege that
defendants sold stock or profited in any way during the relevant period”). And while they do
allege that Defendants had an interest in keeping FAC’s stock price high and an opportunity to
commit fraud by virtue of their positions, those sorts of generic allegations are insufficient to
satisfy the scienter requirement. See, e.g., South Cherry Street, LLC v. Hennessee Grp. LLC, 573
F.3d 98, 108–09 (2d Cir. 2009) (“[I]n attempting to show that a defendant had fraudulent intent,
it is not sufficient to allege goals that are possessed by virtually all corporate insiders, such as the
desire to maintain a high credit rating for the corporation or otherwise sustain the appearance of
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Defendants, “which is ‘at the least, 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.’” Kalnit v.
Eichler, 264 F.3d 131, 142 (2d Cir. 2001) (quoting In Re Carter-Wallace, Inc. Sec. Litig., 220
F.3d 36, 39 (2d Cir. 2000)). The inquiry is “highly fact-based.” Id. As a general matter,
however, courts have approved of claims when plaintiffs “have specifically alleged defendants’
knowledge of facts or access to information contradicting their public statements. Under such
circumstances, defendants knew or, more importantly, should have known that they were
misrepresenting material facts related to the corporation.” Novak v. Kasaks, 216 F.3d 300, 308
(2d Cir. 2000) (noting as well that “[a]n egregious refusal to see the obvious, or to investigate the
doubtful, may in some cases give rise to an inference of . . . recklessness” (alterations in
original)).
Significantly, in arguing against an inference of scienter, FCA does not really dispute that
the Second Amended Complaint alleges that Marchionne and Kunselman had knowledge of the
company’s noncompliance with respect to at least some recalls. (Defs.’ Mem. 17-18). Instead,
echoing their arguments with respect to falsity, Defendants merely seek to downplay how
“substantial” the known noncompliance was. Thus, for example, FCA emphasizes that
NHTSA’s letters to Marchionne and Kunselman concerned “just three U.S. recall campaigns.”
(Defs.’ Mem. 17 (emphasis in original)). And they note that the November 25, 2015 NHTSA
letter “referred only to the single Takata airbag recall” (Defs.’ Mem. 18 (emphasis in original))
— as if the largest automotive recall in history had involved only one solitary airbag (rather than
corporate profitability or the success of an investment, or the desire to maintain a high stock
price in order to increase executive compensation.” (internal quotation marks omitted)).
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millions of airbags). To the extent Defendants are rearguing falsity under the guise of scienter,
their argument is without merit for the reasons discussed above; and to the extent they are
presenting a materiality argument in disguise, the argument is without merit because materiality
“is generally not an appropriate basis on which to dismiss a complaint.” In re Vivendi Universal,
S.A. Sec. Litig., 381 F. Supp. 2d 158, 182 (S.D.N.Y. 2003).
Along the same lines, although it may be true that “Plaintiffs do not allege facts showing
that any of the Individual Defendants — the most senior executives at FCA and/or FCA US —
participated in the preparation of [FCA’s safety reports to NHTSA] or knew that they were
submitted late” (Defs.’ Mem. 19), Plaintiffs do not need to show that the individual Defendants
were personally involved with each Safety Act violation or even aware of any particular
violation. Instead, it is enough at this stage for Plaintiffs to allege that Defendants were aware of
nonpublic facts contradicting their public representations of substantial legal compliance.
Plaintiffs do so, given the three deficient recalls about which Defendants appear to concede
Kunselman and Marhcionne were aware. In addition, several other considerations raise a strong
inference of knowledge. For instance, in its announcement that Kunselman, “a very, very
senior” individual, would head the new office devoted to vehicle safety and regulatory
compliance and report directly to the CEO himself, FCA assured its regulators and (more
importantly for present purposes) its investors that, when it comes to ensuring safety, the buck
would stop at the C Suite. (See SAC ¶¶ 184, 200, 212, 263). Additionally, Plaintiffs allege that
Defendants “frequent[ly]” discussed “regulatory compliance in press releases, earnings calls and
SEC filings” (SAC ¶ 257) and that Marchionne himself stated, in July 2015, that “over the last
year and a half, NHTSA has begun to take a harder look at these technical compliance issues,
and frankly we started to do the same thing about the same time.” (SAC ¶ 270 (emphases
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added)). In short, in light of the Court’s analysis regarding falsity, NHTSA’s direct
correspondence to FCA’s top executives, and FCA’s self-acclaimed installation of a direct chain
of safety-related information and accountability to those same top executives, Plaintiffs’
allegations raise an inference of scienter as to those individuals that is “cogent and at least as
compelling as any opposing inference of nonfraudulent intent.” Tellabs, Inc. v. Makor Issues &
Rights, Ltd., 551 U.S. 308, 314 (2007). Accordingly, Plaintiffs adequately allege scienter with
respect to the statements concerning legal compliance.4
B. Defendants’ Statements Regarding Recall and Warranty Provisions
The same cannot be said of Plaintiff’s allegations regarding Defendants’ statements
relating to FCA’s recall reserves. The Second Circuit has held that “determining the adequacy of
loan loss reserves is not a matter of objective fact” but a matter of opinion. Fait v. Regions Fin.
Corp., 655 F.3d 105, 113 (2d Cir. 2011) (emphasis added). As a result, such reserve estimates
are actionable only if they are “both false and not honestly believed when they were made.” Id.;
see also City of Omaha v. CBS Corp., 679 F.3d 64, 67–68 (2d Cir. 2012) (applying the reasoning
of Fait, which affirmed dismissal of section 11 and 12(a) claims, to section 10(b) and 20(a)
claims). Fait involved loan loss reserves, but its logic applies equally here — to reserves for
product warranties and recalls — unless Plaintiffs can point to “an objective standard for setting
[warranty] reserves.” 655 F.3d at 113. Like the plaintiffs in Fait, however, Plaintiffs fail to do
4
Defendants also cite, in a single sentence and a footnote (Defs. Mem. 19-20 & n.14), two
cases rejecting securities fraud claims based on alleged omissions concerning government
investigations. See In re Lions Gate Entm’t Corp. Sec. Litig., No. 14-CV-5197 (JGK), 2016 WL
297722, at *6-7 (S.D.N.Y. 2016); In re UBS AG Sec. Litig., No. 07-CV-11225 (RJS), 2012 WL
4471265, at *31 (S.D.N.Y. Sept. 28, 2012), aff’d sub nom. City of Pontiac Policemen’s &
Firemen’s Ret. Sys. v. UBS AG, 752 F.3d 173 (2d Cir. 2014). Those cases are inapposite here as
Plaintiffs allege securities fraud based on affirmative misrepresentations of compliance, not
based on the failure to disclose ongoing government investigations.
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so. Although they cite the International Financial Reporting Standards, those standards required
only that FCA’s reserve provision be assessed quarterly and adjusted “to reflect the current best
estimate.” (Pls.’ Opp’n 25). That is not an “objective standard” in any meaningful sense of the
word “objective.” See, e.g., In re NovaGold Res. Inc., 629 F. Supp. 2d 272, 294 (S.D.N.Y. 2009)
(“[T]he word ‘estimate’ connotes uncertainty.”). Plaintiffs also state, in a footnote and without
explanation, that FCA’s own reports to NHTSA supply an objective standard. (Pls.’ Opp’n 27
n.5). Although those reports do contain information about the numbers and types of recalls FCA
was undertaking — just as the bank in Fiat presumably had information on the numbers and
types of the loans it was issuing — that raw data is not itself a formula for estimating adequate
recall reserves. Accordingly, Fait’s standards apply here, and Plaintiffs must show that FCA’s
“opinions” — i.e., its determinations of its reserve provisions — were not only “false” (i.e.,
inaccurate) but also “not honestly believed when they were made.” 655 F.3d at 113; see also
Omnicare, 135 S. Ct. at 1326-27 (noting that a “statement of opinion does not constitute an
‘untrue statement of . . . fact’ simply because the stated opinion ultimately proves incorrect.”);
see also In re Sanofi Sec. Litig., 87 F. Supp. 3d 510, 534 (S.D.N.Y. 2015) (“[W]here plaintiffs
allege a false statement of opinion, the falsity and scienter requirements are essentially identical
. . . .” (internal quotation marks omitted)), aff’d sub nom. Tongue v. Sanofi, 816 F.3d 199 (2d Cir.
2016).
Plaintiffs fail to make that showing. The only facts Plaintiffs rely on are that (1) the
number of FCA vehicles recalled in the United States increased significantly from 2010 to 2015
and (2) that, while FCA did increase its reserve estimates during that period (see Defs.’ Reply
10), those increases were insufficient, as evidenced by the €761 million adjustment. (Pls.’ Opp’n
26). Those facts — even when combined with Palmer’s statement about the adequacy of
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reserves (which Plaintiffs do not even mention in arguing against dismissal (see SAC ¶ 210; Pls.’
Opp’n 25-29)) or FCA’s statement, in July 2015, that it “does not expect that the net cost of
providing these additional alternatives will be material to its financial position, liquidity or
results of operations” (SAC ¶ 246; see Pls.’ Opp’n 28) — do not allege securities fraud.5 See,
e.g., Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1129 (2d Cir. 1994) (“Shields claims that
Citytrust filed a document in August 1989 stating that it believed its loan loss reserve was
adequate. Yet the following October it turned out that the reserve was inadequate and that
Citytrust would make a significant addition to it. This technique is sufficient to allege that the
defendants were wrong; but misguided optimism is not a cause of action, and does not support an
inference of fraud. We have rejected the legitimacy of alleging fraud by hindsight.” (internal
quotation marks omitted)); NECA-IBEW Pension Trust Fund v. Bank of Am. Corp., No. 10-CV440 (LAK) (HBP), 2012 WL 3191860, at *10 (S.D.N.Y. Feb. 9, 2012) (“Even had [the
defendant] stated that it believed its loss reserves were adequate, ‘[t]hat defendants later decided
to revise the amount of loan loss reserves that it deemed adequate provides absolutely no
reasonable basis for concluding that defendants did not think [the] reserves were adequate at the
time the registration statement and prospectus became effective.’” (quoting In re CIT Grp. Inc.
Sec. Litig., 349 F. Supp. 2d 685, 690–91 (S.D.N.Y. 2004))); In re Wachovia Equity Sec. Litig.,
753 F. Supp. 2d 326, 362 (S.D.N.Y. 2011) (“In the absence of particularized allegations that
Wachovia was experiencing or internally predicting losses exceeding their set reserves, the
subsequent disclosures provide no basis to conclude that Defendants recklessly misstated
previous reserve levels.”); In re Fannie Mae 2008 Sec. Litig., 742 F. Supp. 2d 382, 412
Moreover, as Defendants note without rebuttal (Defs.’ Mem. 17 n.10; Defs.’ Reply 10
n.8), the July 2015 statement refers only to a specific portion of the costs stemming from the
First Consent Order (relating to potentially repurchasing certain vehicles), not to total costs.
5
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(S.D.N.Y.2010) (finding no actionable misstatement of loss reserves where the defendant “did
increase its provisions . . . throughout the Class Period” and noting that “a massive increase to
. . . combined loss reserves . . . is not, in itself, an indicator that the previous reserve levels were
inadequate”). Moreover, given that FCA’s publicly disclosed methodology for estimating recall
costs was based on “long-term historical averages” (see, e.g., Monahan Decl., Ex. 4, at F29), one
would expect FCA’s estimates to be too low if costs drastically increased over a relatively short
time frame. And as Plaintiffs themselves appear to emphasize, recall enforcement and
corresponding costs underwent just such a drastic increase in the relevant time period. (See, e.g.,
SAC ¶ 244 (quoting an analyst who described NHTSA’s fine of Chrysler as a “record fine” and
the vehicle buyback requirement as “unprecedented”)).
In arguing against dismissal, Plaintiffs principally point, again, to the reports that FCA
filed with NHTSA. (Pls.’ Opp’n 26-27 & n.15). But those reports did not directly “contradict”
FCA’s estimates; they were not “internal analyses” of what FCA’s estimates should really have
been. In re Converium Holding AG Sec. Litig., No. 04-CV-7897 (DLC), 2006 WL 3804619, at
*13 (S.D.N.Y. Dec. 28, 2006), reconsideration granted in part on other grounds, 2007 WL
1041480 (S.D.N.Y. Apr. 9, 2007). In light of FCA’s uncontested methodology for estimating
reserve provisions, Plaintiffs fail to explain how the reports “demonstrat[e] the inaccuracy of
[FCA’s] public statements,” Teamsters Local 445 Freight Div. Pension Fund v. Dynex Capital
Inc., 531 F.3d 190, 196 (2d Cir. 2008) — let alone how they demonstrate that FCA’s estimates
were not reasonably believed when made, see Fait, 655 F.3d at 113. Plaintiffs also cite a few
cases, but the contrast between the facts of those cases and the allegations here simply
underscores the inadequacies of Plaintiffs’ claim. See In re Converium, 2006 WL 3804619, at
*13 (scienter adequately pleaded where plaintiffs “allege[d] in sufficient detail . . . that the
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publicly reported numbers were at odds with Converium’s internal analyses” and that the
“defendants believed that the internal analyses more accurately reflected the actual financial
condition of the company”); In re Veeco Instruments, Inc. Sec. Litig., 235 F.R.D. 220, 231
(S.D.N.Y. 2006) (scienter adequately pleaded where plaintiffs alleged, among other things, “that
defendants had knowledge of or recklessly ignored a series of accounting improprieties, each of
which violated [Generally Accepted Accounting Principles] and Veeco’s own internal policies,”
including allegations from confidential witnesses about specific internal incidents where
defendants “refused to permit” the updating of financial statements); see also, e.g., In re Loral
Space & Commc’ns Ltd., No. 01-CV-4388 (JGK), 2004 WL 376442, at *10-11 (S.D.N.Y. Feb.
27, 2004) (no scienter where allegations regarding reports that purportedly “directly contradicted
the defendants’ projections” were not pleaded “with sufficient particularity”). Lacking internal
analyses, confidential witnesses, or other particularized allegations, Plaintiffs fail to adequately
allege scienter with respect to Defendants’ reserve estimates and related statements. See, e.g., In
re Turquoise Hill Res. Ltd. Sec. Litig., No. 13-CV-8846 (LGS), 2014 WL 7176187, at *7
(S.D.N.Y. Dec. 16, 2014) (“The fact of an error, even a large error, does not suggest knowledge
or intent to misstate when the financial results were originally published, particularly when the
error was a matter of judgment . . . .”). Accordingly, Defendants’ motion must be and is granted
with respect to claims based on those estimates and related statements.
C. Loss Causation
Finally, with respect to the surviving claims concerning Defendants’ statements about
substantial compliance, the Court addresses the argument that Plaintiffs fail to allege loss
causation. (Defs.’ Mem. 29-30; Defs.’ Reply 12). “Loss causation is the causal link between the
alleged misconduct and the economic harm ultimately suffered by the plaintiff.” Lattanzio v.
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Deloitte & Touche LLP, 476 F.3d 147, 157 (2d Cir. 2007); see also Dura Pharm., Inc. v. Broudo,
544 U.S. 336, 342 (2005) (defining loss causation as “a causal connection between the material
misrepresentation and the loss”). The loss causation requirement “exists because private
securities fraud actions are ‘available, not to provide investors with broad insurance against
market losses, but to protect them against those economic losses that misrepresentations actually
cause.’” In re Omnicom Grp., Inc. Sec. Litig., 597 F.3d 501, 510 (2d Cir. 2010) (quoting Dura
Pharm., 544 U.S. at 345). A misstatement or omission “is the proximate cause of an investment
loss if the risk that caused the loss was within the zone of risk concealed by the
misrepresentations [or omissions] alleged by a disappointed investor.” Lattanzio, 476 F.3d at
157 (internal quotation marks and alterations omitted). To plead loss causation, a plaintiff must
allege that the alleged “misstatement or omission concealed something from the market that,
when disclosed, negatively affected the value of the security.” Lentell v. Merrill Lynch & Co.,
396 F.3d 161, 173 (2d Cir. 2005).
Plaintiffs’ allegations satisfy those standards at this stage of the litigation. Indeed, they
plausibly allege at least two “corrective disclosures” that “negatively affected the value of the
security,” Lentell, 396 F.3d at 173: the First Consent Order, in which FCA admitted that it had
violated the Safety Act and agreed to pay a substantial fine (after which the value of FCA’s stock
declined by roughly 4.9% (SAC ¶ 244)); and the Second Consent Order, in which FCA admitted
to additional violations of the Safety Act and paid another substantial fine (after which the value
of FCA’s stock declined by .07% (id. ¶ 256)). Other than rehashing their unpersuasive
arguments concerning falsity (Defs.’ Mem. 29), Defendants’ sole argument on loss causation is
that the Consent Orders were not corrective disclosures because Chrysler had issued a press
release when NHTSA announced the July 2015 public hearing. (Defs.’ Mem. 30). That
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argument is meritless. Chrysler’s four-sentence, boilerplate press release did not come close to
fully revealing the information contained in the Consent Orders. It did not, for example, disclose
the fact that the company had violated the Safety Act in twenty-three recall campaigns, let alone
the ramifications of those violations — for example, that Chrysler would enter into a settlement
with its regulator admitting to widespread violations and agreeing to various costly conditions
including payment of large fines and appointment of an independent monitor. In short, given the
allegations in the Second Amended Complaint, a factfinder could certainly find that the First and
Second Consent Orders were corrective disclosures and not merely “negative characterization[s]
of already-public information,” In re Omnicom, 597 F.3d at 512. Accordingly, Defendants’ loss
causation arguments are unavailing.
CONCLUSION
For the reasons stated above, Defendants’ motion to dismiss is GRANTED in part and
DENIED in part. Specifically, Plaintiffs’ claims based on Defendants’ statements regarding
FCA’s substantial compliance with applicable regulations survive, but their claims based on
Defendants’ reserve estimates and related statements are dismissed. It follows that the claims
against Palmer, which concern only the latter, must also be and are dismissed.
Two issues remain. First, Defendants’ request, in a footnote, that the Court “dismiss all
claims brought on behalf of purchasers of FCA stock on the Milan Stock Exchange.” (Defs.’
Mem. 6 n.2). As Defendants point out, “[t]he Second Circuit has squarely held that the U.S.
securities laws do not apply to claims brought by purchasers of dual-listed stock on non-U.S.
exchanges.” (Id. (citing City of Pontiac Policemen’s & Firemen’s Ret. Sys., 752 F.3d 173 at
181)). Plaintiffs offer no counter-argument in their opposition and have thus abandoned any
such claims. See, e.g., Simon v. City of N.Y., No. 14-CV-8391 (JMF), 2015 WL 4092389, at *2
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(S.D.N.Y. July 6, 2015) (citing cases). In any event, in light of the clear Second Circuit
precedent on the issue, Defendants’ request is granted and any claims in this putative class action
brought on behalf of purchasers of FCA stock on a foreign exchange are dismissed.
Second, in a single boilerplate sentence at the end of their opposition brief, Plaintiffs
request leave to amend in the event that the Court finds that the Second Amended Complaint
falls short in any way. (See Pls.’ Opp’n 31). The Second Circuit has held that a motion under
Rule 15(a) of the Federal Rules of Civil Procedure — which the Court construes Plaintiffs’
request to be — “should be denied only for such reasons as undue delay, bad faith, futility of the
amendment, and perhaps most important, the resulting prejudice to the opposing party.” Aetna
Cas. & Sur. Co. v. Aniero Concrete Co., 404 F.3d 566, 603 (2d Cir. 2005); see also Loreley Fin.
(Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160, 190 (2d Cir. 2015) (“leav[ing]
unaltered” prior case law on denial of leave to amend, including the rule that “leave may be
denied where amendment would be futile”). At the same time, “the grant or denial of an
opportunity to amend is within the discretion of the District Court.” Williams v. Citigroup Inc.,
659 F.3d 208, 214 (2d Cir. 2011). Applying those principles here, the Court concludes that
Plaintiffs should not be granted leave to file what would amount to their fourth complaint. First,
in light of Fait and the legal standards discussed above, any amendment would likely be futile.
Second, in granting leave to file the operative complaint, the Court expressly warned Plaintiffs
that they would not be given another opportunity to address the problems alleged in Defendants’
motion to dismiss (see Docket No. 34), and they give no indication that they possess facts that
could cure those problems. See, e.g., Clark v. Kitt, No. 12-CV-8061 (CS), 2014 WL 4054284, at
*15 (S.D.N.Y. Aug. 15, 2014) (holding that the plaintiff’s failure to remedy the complaint’s
deficiencies identified by an earlier motion to dismiss “is alone sufficient grounds to deny leave
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to amend”); see also, e.g., Ruotolo v. City of N.Y., 514 F.3d 184, 191 (2d Cir. 2008) (affirming
the district court’s denial of leave to amend in part because of the previous opportunities that the
plaintiff had received to amend the complaint).
The Clerk of Court is directed to terminate Docket No. 42 and to terminate Defendant
Richard Palmer as a party.
SO ORDERED.
Date: October 5, 2016
New York, New York
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