BG Litig. Recovery I, LLC v. Barrick Gold Corp.
| Citation | 180 F.Supp.3d 316 |
| Decision Date | 18 April 2016 |
| Docket Number | 15 Civ. 8457 (SAS), 15 Civ. 8465 (SAS) |
| Parties | BG Litigation Recovery I, LLC, Plaintiff, v. Barrick Gold Corporation, Aaron Regent, Jamie Sokalsky, Peter Kinver, Igor Gonzales, George Potter, and Sybil Veenman, Defendants. Highfields Capital I LP, Highfields Capital II LP, and Highfields Capital III LP, Plaintiffs, v. Barrick Gold Corporation, Aaron Regent, Jamie Sokalsky, Ammar Al-Joundi, Peter Kinver, Igor Gonzales, George Potter, and Sybil Veenman, Defendants. |
| Court | U.S. District Court — Southern District of New York |
For Highfields and BG Plaintiffs: Lawrence M. Rolnick, Esq., Marc B. Kramer, Esq., Michael J. Hampson, Esq., Lowenstein Sandler LLP, 1251 Avenue of the Americas, New York, NY 10020, (973) 422-6764.
For Defendants: Jonathan R. Tuttle, Esq., Ada Fernandez Johnson, Esq., Bruce E. Yannett, Esq., Elliott Greenfield, Esq., Debevoise and Plimpton LLP, 919 Third Avenue, 31st Floor, New York, NY 10022, (212) 909-6000.
These suits—respectively brought in October 2015 by Highfields Capital I LP, Highfields Capital II LP, and Highfields Capital III LP (collectively, “Highfields”) and BG Litigation Recovery I, LLC (“BG”) (together, with Highfields, “plaintiffs”) against Barrick Gold Corporation (“Barrick”), Aaron Regent, Jamie Sokalsky, Ammar Al-Joundi, Peter Kinver, Igor Gonzales, George Potter, and Sybil Veenman (the “Individual Defendants”) (with Barrick, “defendants”)1 —were initiated by plaintiffs who opted out of a class action already pending before this Court.2
The plaintiffs in these suits are either purchasers, or assignees of purchasers, of Barrick common stock. The Highfields plaintiffs purchased Barrick common stock on various dates between April 11, 2013 and September 20, 2013.3 Each of BG's members was a purchaser of Barrick common stock who, pursuant to BG's Operating Agreement, assigned their claims against defendants to BG prior to the initiation of BG's suit.4 The BG assignors had all liquidated their positions in BG common stock by June 4, 2013.5
Like the class action plaintiffs, Highfields' and BG's claims are based on alleged misstatements relating to Barrick's now-halted development of Pascua-Lama, a large gold mine spanning the border between Chile and Argentina (the “Project”). Also like the class, Highfields and BG assert securities fraud claims against certain defendants pursuant to Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, and control person claims against certain defendants pursuant to Section 20(a) of the Exchange Act.
In the class action, in April 2015, the Court granted in part and denied in part defendants' motion to dismiss (the “April 2015 Class Action Opinion”).6 In doing so, the Court dismissed one category of defendants' alleged misstatements (cost and scheduling estimates), but allowed litigation to proceed with respect to the following three categories of allegations: (1) statements regarding compliance with environmental regulations; (2) statements regarding internal controls and accounting for capital costs; and (3) statements concerning accounting for the Project.7 In March 2016, the Court granted plaintiffs' motion for class certification.8
Defendants now move to dismiss the Highfields and BG Complaints pursuant to Rules 9(b)
, 12(b)(1), and 12(b)(6) of the Federal Rules of Civil Procedure, as well as Section 78u–4 of Title 15 of the United States Code.9 For the following reasons, defendants' motion is GRANTED in part and DENIED in part.
In deciding a motion to dismiss pursuant to Rule 12(b)(6)
, the court must “accept[ ] all factual allegations in the complaint as true and draw[ ] all reasonable inferences in the plaintiff's favor.”10 The court evaluates the sufficiency of the complaint under the “two-pronged approach” set forth by the Supreme Court in Ashcroft v. Iqbal.11 Under the first prong, a court may “begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth.”12 For example, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”13 Under the second prong of Iqbal, “[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief.”14 A claim is plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”15 Plausibility requires “more than a sheer possibility that a defendant has acted unlawfully.”16
Further, [t]he court may consider “the complaint, ... any documents attached thereto or incorporated by reference and documents upon which the complaint relies heavily,”17 as well as “legally required public disclosure documents filed with the SEC[ ] ....”18
and the Private Securities Litigation Reform Act (“PSLRA”)
Private securities fraud claims are subject to a heightened pleading standard. First , Rule 9(b)
requires plaintiffs to allege the circumstances constituting fraud with particularity. However, “[m]alice, intent, knowledge, and other conditions of a person's mind may be alleged generally.”19
Second , the PSLRA provides that, in actions alleging securities fraud, “the complaint shall, with respect to each act or omission alleged to violate this chapter, state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.”20
Rule 15(a)(2) provides that, other than amendments as a matter of course, “a party may amend [its pleading] only by leave of court or by written consent of the adverse party.”21 Although “[t]he Court should freely give leave when justice so requires,”22 it is “within the sound discretion of the district court to grant or deny leave to amend.”23 When a motion to dismiss is granted, “'[i]t is the usual practice ... to allow leave to replead.' ”24 Where a plaintiff inadequately pleads a claim and cannot offer additional substantive information to cure the deficient pleading, granting leave to amend is futile and should be denied.25
Section 10(b) of the Exchange Act prohibits using or employing, “in connection with the purchase or sale of any security ... any manipulative or deceptive device or contrivance....”26 Rule 10b-5, promulgated thereunder, makes it illegal to “make any untrue statement of a material fact or to omit to state a material fact ... in connection with the purchase or sale of any security.”27 To sustain a claim for securities fraud under Section 10(b), “a plaintiff must prove (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.”28
In order to satisfactorily allege misstatements or omissions of material fact, a complaint must “state with particularity the specific facts in support of [plaintiffs'] belief that [defendants'] statements were false when made.”29 “[A] fact is to be considered material if there is a substantial likelihood that a reasonable person would consider it important in deciding whether to buy or sell [securities] ....”30 Mere “allegations that defendants should have anticipated future events and made certain disclosures earlier than they actually did do not suffice to make out a claim of securities fraud.”31
The required level of scienter under Section 10(b) is either “intent to deceive, manipulate, or defraud”32 or “reckless disregard for the truth.”33 Plaintiffs may meet this standard 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.”34 Under the latter theory, plaintiffs must allege that the defendants have engaged in “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.”35 36 An inference of scienter “must be more than merely plausible or reasonable—it must be cogent and at least as compelling as any opposing inference of nonfraudulent intent.”37
A securities fraud plaintiff is required to “prove both transaction causation (also known as reliance) and loss causation.”38 Loss causation is “the proximate causal link between the alleged misconduct and the plaintiff's economic harm.”39 “A misrepresentation 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 ....' ”40 Therefore, “to plead loss causation, the complaint[ ] must allege facts that support an inference that [defendant's] misstatements and omissions concealed the circumstances that bear upon the loss suffered such that plaintiffs would have been spared all or an ascertainable portion of that loss absent the fraud.”41
Section 20(a) of the Exchange Act (“Section 20(a)”) creates a cause of action against “control persons” of the...
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