Halbert v. Credit Suisse AG

• Citation: 402 F.Supp.3d 1288
• Decision Date: 22 August 2019
• Docket Number: Civil Action Number 2:18-cv-00615-AKK
• Parties: Erich HALBERT, et al., Plaintiffs, v. CREDIT SUISSE AG, et al., Defendants.
• Court: United States District Courts. 11th Circuit. United States District Court of Northern District of Alabama

402 F.Supp.3d 1288

Erich HALBERT, et al., Plaintiffs,
v.
CREDIT SUISSE AG, et al., Defendants.

Civil Action Number 2:18-cv-00615-AKK

United States District Court, N.D. Alabama, Southern Division.

Signed August 22, 2019

402 F.Supp.3d 1299

Cason M. Kirby, Stephen D. Wadsworth, Campbell Partners, Birmingham, AL, for Plaintiffs.

David G. Januszewski, Pro Hac Vice, Herbert S. Washer, Pro Hac Vice, Sesi V. Garimella, Pro Hac Vice, Sheila C. Ramesh, Pro Hac Vice, Cahill Gordon & Reindel LLP, Gillian Groarke Burns, Pro Hac Vice, Jared Stanisci, Pro Hac Vice, Jason M. Halper, Pro Hac Vice, Cadwalader, Wickersham & Taft LLP, New York, NY, Richard Jon Davis, Maynard Cooper & Gale, Adam P. Plant, Robert E. Battle, Battle & Winn LLP, Birmingham, AL, for Defendants.

MEMORANDUM OPINION

ABDUL K. KALLON, UNITED STATES DISTRICT JUDGE

Erich, Sherri, and John Halbert bring this action against Credit Suisse, AG and Janus Index & Calculation Services, LLC for alleged violations of federal and state securities laws and common law causes of action stemming from a market-wide volatility spike on February 5, 2018. Doc. 45. The Halberts claim Credit Suisse sold them high-risk securities in the days leading up to this volatility spike, but failed to disclose that the Defendants intended to facilitate the collapse of these securities by hedging against them, and then profit off their collapse by redeeming the securities at a fraction of their earlier value. The Halberts also claim that, during a one-hour period when the value of the securities was rapidly falling, the Defendants disseminated misleadingly high estimates of the securities' value. The Defendants have moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Doc. 52. For the reasons explained below, except for the Alabama Code §§ 8-6-19(a) and (c) claims premised on the alleged misrepresentation of the Intraday Indicative Values and the breach of contract claim against Credit Suisse, and the negligent misrepresentation claim against Janus related to the Intraday Indicative Value, the motion, which is fully briefed and ripe for review, docs. 57, 58, is due to be granted.

I. STANDARD OF REVIEW

A. The Relevant Standards

Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." "[T]he pleading standard Rule 8 announces does not require ‘detailed factual allegations,’ but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). Mere "labels and conclusions" or "a formulaic recitation of the elements of a cause of action" are insufficient. Id. (citations and internal quotation marks omitted). By contrast with Rule 8(a)'s fairly liberal pleading standard, Federal Rule of Civil Procedure 9(b) requires a party to "state with particularity

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the circumstances constituting fraud or mistake." Where a party raises claims of fraud, Rule 9(b)'s standard is satisfied if the pleading sets forth:

(1) precisely what statements or omissions were made in which documents or oral representations; (2) the time and place of each such statement and the person responsible for making (or, in the case of omissions, not making) them; (3) the content of such statements and the manner in which they misled the plaintiff; and (4) what the defendant obtained as a consequence of the fraud.

FindWhat Inv'r Grp. v. FindWhat.com , 658 F.3d 1282, 1296 (11th Cir. 2011) (citations omitted). Additionally, claims of securities fraud must satisfy the requirement of the Private Securities Litigation Reform Act (PSLRA), which requires a complaint alleging "misleading statements and omissions" to

specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed.

15 U.S.C. § 78u-4.

Federal Rule of Civil Procedure 12(b)(6) permits dismissal when a complaint fails to state a claim upon which relief can be granted. "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Id. (citations and internal quotation marks omitted). A complaint states a facially plausible claim for relief "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citation omitted). Ultimately, this inquiry is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679, 129 S.Ct. 1937.

B. What the Court Considers

Generally, a district court "must convert a motion to dismiss into a motion for summary judgment if it considers materials outside the complaint." Day v. Taylor , 400 F.3d 1272, 1275-76 (11th Cir. 2005) (citation omitted); see Fed. R. Civ. P. 12(d). However, "the court may consider a document attached to a motion to dismiss without converting the motion into one for summary judgment if the attached document is ... central to the plaintiff's claim and ... undisputed," meaning "the authenticity of the document is not challenged." Day , 400 F.3d at 1276 (citation omitted). Similarly, if a "document's contents are alleged in a complaint," and the document is "central to the plaintiff's claim" and undisputed, the court may consider it. Id. In determining whether a document is central to the plaintiff's claims, courts consider whether the plaintiff "would have to offer the document to prove his case." See Lockwood v. Beasley , 211 F. App'x 873, 877 (11th Cir. 2006). Furthermore, the court may take judicial notice of an adjudicative fact "not subject to reasonable dispute" because it is either "generally known within the trial court's territorial jurisdiction" or "can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201.

The Defendants have attached seven documents to their motion: (1) a sworn affidavit by defense counsel attesting to the authenticity of the other six documents; (2) the January 29, 2018 VelocityShares Pricing Supplement to the Prospectus Supplement dated June 30, 2017 and Prospectus dated June 30, 2017; (3) Credit Suisse's press release dated February

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6, 2018; (4) a news article from Reuters published on April 30, 2018; (5) Credit Suisse's press release dated February 14, 2018; (6) data tables purportedly displaying the Intraday Indicative Value for the VelocityShares Daily Inverse VIX Short Term exchange traded notes on February 5, 2018 from 3:30:02 PM to 5:10:00 PM ET; and (7) data tables purportedly displaying the levels of the S&P 500 VIX Short-Term Futures Index ("VIX Futures Index") on February 5, 2018 from 3:30:02 PM to 5:10:04 PM. See docs. 52-1, 52-2, 52-3, 52-4, 52-5, 52-6, 52-7. The authenticity of all the documents is undisputed. See doc. 57.

The court finds that the January 29, 2018 Pricing Supplement is "central" to the Halberts' claims because their claims are based on purported misrepresentations and omissions made in this document. Moreover, the court takes judicial notice of the Pricing Supplement because "a court, when considering a motion to dismiss in a securities fraud case, may take judicial notice ... of relevant public documents required to be filed with the SEC, and actually filed." Bryant v. Avado Brands, Inc. , 187 F.3d 1271, 1278 (11th Cir. 1999).

However, the remaining documents are neither "central" to the Halberts' claims nor properly subject to judicial notice. Although the February 6, 2018 press release, in which Credit Suisse announced the acceleration event and end of trading for the XIV ETNs, is referenced in the Amended Complaint, see doc. 45 ¶ 33, this document is not "central" because the Halberts would not have to "offer the document to prove [their] case" given there were no alleged misrepresentations in the press release. See Lockwood v. Beasley , 211 F. App'x 873, 877 (11th Cir. 2006). Similarly, the February 14, 2018 press release and the Reuters article are not "central" to the Halberts' claims as they are not referenced anywhere in the Amended Complaint. Furthermore, with respect to the attached data tables, docs. 52-6, 52-7, the Defendants contend that the court can consider "the entirety of this data" and cite to cases in which courts have taken judicial notice of stock prices. See doc. 52 at 25 n.12; see La Grasta v. First Union Sec., Inc. , 358 F.3d 840, 842 (11th Cir. 2004), abrogated on other grounds by Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (judicially noticing stock price on the "other days" during the relevant period where the complaint only listed stock price on certain days); see In re ING Groep, N.V. ERISA Litig. , 749 F. Supp. 2d 1338, 1344 (N.D. Ga. 2010) (noting that "general economic conditions, stock prices, and market...