Fresno Cnty. Employees' Ret. Ass'n v. comScore, Inc.

• Decision Date: 28 July 2017
• Docket Number: 16–cv–01820 (JGK)
• Citation: 268 F.Supp.3d 526
• Parties: FRESNO COUNTY EMPLOYEES' RETIREMENT ASSOCIATION et al., individually and on behalf of all others similarly situated, Plaintiffs, v. COMSCORE, INC. et al., Defendants.
• Court: U.S. District Court — Southern District of New York

268 F.Supp.3d 526

FRESNO COUNTY EMPLOYEES' RETIREMENT ASSOCIATION et al., individually and on behalf of all others similarly situated, Plaintiffs,

v.COMSCORE, INC. et al., Defendants.

16–cv–01820 (JGK)

United States District Court, S.D. New York.

Signed July 28, 2017

Lesley Frank Portnoy, Glancy Prongay & Murray LLP, John Christopher Browne, Bernstein Litowitz Berger & Grossmann LLP, New York, NY, Geoffrey Coyle Jarvis, Margaret E. Onasch, Naumon A. Amjed, Sharan Nirmul, Kessler Topaz Meltzer & Check, LLP, Radnor, PA, for Plaintiffs.

Stephen Andrew Swedlow, Michelle Schmit, Quinn Emanuel Urquhart & Sullivan, LLP, Chicago, IL, Nidhi Yadava, Robert C. Micheletto, Jones Day, Joanna C. Hendon, Jonathan Charles Fayer, Spears & Imes LLP, Keith William Miller, Jalina Joy Hudson, Perkins Coie LLP, New York, NY, Jennifer Quinn-Barabanov, Steptoe & Johnson LLP, Michael Paul Kelly, Hogan & Hartson LLP, Sarah C. Wang, Douglas B. Paul, Hogan Lovells US LLP, John Sievert Williams, Williams & Connolly LLP, Washington, DC, Ronald Berenstain, Sean C. Knowles, Perkins Coie LLP, Seattle, WA, for Defendants.

OPINION AND ORDER

JOHN G. KOELTL, District Judge:

This is a consolidated securities fraud action. The defendants are (1) comScore, Inc. ("comScore") and several of its current and former officers and directors, specifically, Kenneth J. Tarpey, Melvin Wesley III, Serge Matta, Magid M. Abraham, William J. Henderson, Russell Fradin, Gian Fulgoni, William Katz, Ronald J. Korn, and Joan Lewis (collectively, the "comScore defendants"); and (2) the Rentrak Corporation, a subsidiary of comScore ("Rentrak"), and several of its former directors, specifically, David Boylan, David I. Chemerow, William Engel, Patricia Gottesman, William Livek, Anne MacDonald, Martin O'Connor, Brent Rosenthal, and Ralph Shaw (collectively, the "Rentrak defendants") (together with the comScore defendants, the "defendants").

The Second Consolidated Amended Class Action Complaint (the "SAC") is divided into two parts and asserts two theories of liability. First, the Lead Plaintiffs—the Fresno County Employees' Retirement Association, and the Employees' Retirement System of the City of Baton Rouge and Parish of East Baton Rouge—and individual plaintiff William Huff ("Huff") (collectively, the "plaintiffs") assert claims on behalf of a proposed class of investors in comScore who purchased securities of comScore from February 11, 2014 through November 23, 2016 (the "Class Period"). SAC ¶ 662. In Count I, the plaintiffs allege that comScore, Matta, Wesley, Abraham, and Tarpey (collectively, the "10(b) defendants") made material misstatements in connection with comScore's recognition of revenue for nonmonetary barter transactions. The plaintiffs claim that the 10(b) defendants violated Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. § 78j(b), and Rule 10b–5, promulgated thereunder, 17 C.F.R. § 240.10b–5 (the "Section 10(b) claims" or "10(b) claims"). In Count II, the plaintiffs allege control person liability against Matta, Wesley, Abraham, and Tarpey (collectively, the "individual 10(b) defendants") under Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a).

Second, the plaintiffs allege that the disclosures and solicitations relevant to the January 29, 2016 merger (the "Merger") between comScore and Rentrak contained material misstatements and omissions also in connection with comScore's recognition of revenue for nonmonetary barter transactions. In Count III, plaintiff Huff asserts on behalf of a proposed class of investors who held the common stock of Rentrak as of December 10, 2015, and were entitled to vote on the Merger, see SAC ¶ 662, claims pursuant to Section 14(a) of the Exchange Act, 15 U.S.C. § 79n(a), and Rule 14a–9, promulgated thereunder, 17 C.F.R. § 240.14a–9, against comScore, Matta, Wesley, Abraham, Fulgoni, Fradin, Henderson, Katz, Korn, and Lewis (the "comScore Merger defendants"). In Count IV, plaintiff Huff asserts a similar claim solely against the Rentrak defendants. The comScore Merger defendants sued in Count III and the Rentrak defendants sued in Count IV are referred to collectively as the "Merger defendants." In Count V, plaintiff Huff, on behalf of a proposed class of investors who acquired comScore's common stock pursuant to a registration statement filed with the United States Securities and Exchange Commission (the "SEC") on October 30, 2015, and subsequently amended, asserts a claim pursuant to Section 11 of the Securities Act of 1933 (the "Securities Act"), 15 U.S.C. § 77k, against the comScore Merger defendants.

Pending before the Court are four motions pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss the SAC for failure to state a claim on behalf of (1) all of the comScore defendants collectively; (2) Wesley individually; (3) Tarpey individually; and (4) the Rentrak defendants. This Court has subject matter jurisdiction pursuant to 15 U.S.C. §§ 77v and 78aa, and 28 U.S.C. § 1331.

For the following reasons, the motions are denied .

I.

In deciding a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, the allegations in the complaint are accepted as true, and all reasonable inferences must be drawn in the plaintiffs' favor. McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 2007). The Court's function on a motion to dismiss is "not to weigh the evidence that might be presented at a trial but merely to determine whether the complaint itself is legally sufficient." Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985). A complaint should not be dismissed if the plaintiffs have stated "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff[s] plead[ ] factual content that allows the court to draw the reasonable inference that the defendant[s] [are] liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). While factual allegations should be construed in the light most favorable to the plaintiffs, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Id.

A claim under Section 10(b) of the Exchange Act sounds in fraud and must meet the pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure and of the Private Securities Litigation Reform Act ("PSLRA"), 15 U.S.C. § 78u–4(b). Rule 9(b) requires that the complaint "(1) specify the statements that the plaintiff[s] contend[ ] were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent." ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 99 (2d Cir. 2007). The PSLRA similarly requires that the complaint "specify each statement alleged to have been misleading [and] the reason or reasons why the statement is misleading," and it adds the requirement that "if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed." 15 U.S.C. § 78u–4(b)(1) ; ATSI, 493 F.3d at 99.

When presented with a motion to dismiss pursuant to Rule 12(b)(6), the Court may consider documents that are referenced in the complaint, documents that the plaintiffs relied on in bringing suit and that are either in the plaintiffs' possession or that the plaintiffs knew of when bringing suit, or matters of which judicial notice may be taken. See Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002). The Court can take judicial notice of public disclosure documents that must be filed with the SEC and documents that both "bear on the adequacy" of SEC disclosures and are "public disclosure documents required by law." Kramer v. Time Warner, Inc., 937 F.2d 767, 773–74 (2d Cir. 1991) ; see also In re Eletrobras Sec. Litig., No. 15-CV-5754 (JGK), 245 F.Supp.3d 450, 456–58, 2017 WL 1157138, at *1–2 (S.D.N.Y. Mar. 27, 2017).

II.

The following facts are undisputed or accepted as true for purposes of the defendants' motions to dismiss. The SAC is divided into two parts. The first part relates to Counts I and II, and the second part to Counts III, IV, and V. The facts relevant to one set of Counts will not be repeated except as necessary.

A.

The following facts are primarily relevant to Counts I and II.

comScore is a media measurement and digital analytics company that analyzes audience and consumer behavior, including by assessing Internet traffic and usage. SAC ¶ 40. comScore provides its data analysis services to its customers—such as marketers and advertisers—regarding the size and demographics of audiences and consumers. SAC ¶ 40.

The individual 10(b) defendants were each high-ranking officers and directors of comScore.

Abraham is the co-founder of comScore and served as the company's CEO from its founding in 1999 until March 1, 2014. SAC ¶ 37. From March 1, 2014 until July 21, 2016, Abraham served as the Executive Chairman of the Board of Directors. SAC ¶ 37.

Matta began working for comScore in 2000, and served as the company's President from June 2013 until August 5, 2016. SAC ¶ 35. Matta replaced Abraham as comScore's CEO, a position he held from March 1, 2014 until August 5, 2016. SAC ¶ 35. Matta became a director in April 2014. See comScore Amended Form 10–K dated Apr. 24, 2015 at 1.

Tarpey was comScore's CFO from April 20, 2009 until August 5, 2014. SAC ¶ 38. Wesley replaced Tarpey as comScore's CFO, a position he held from August 29, 2014 until August 5, 2016. SAC ¶ 36.

During the Class Period, comScore entered into a series of data sharing agreements with other companies. Pursuant to these agreements, substantially no money changed hands; instead, comScore and its counterparties swapped data-for-data, making the data swaps nonmonetary "bar...