In re Thornburg Mortg.Inc. Sec. Litig.

• Decision Date: 02 June 2011
• Docket Number: No. CIV 07–0815 JB/WDS.,CIV 07–0815 JB/WDS.
• Citation: 824 F.Supp.2d 1214
• Parties: In re THORNBURG MORTGAGE, INC. SECURITIES LITIGATION.
• Court: U.S. District Court — District of New Mexico

824 F.Supp.2d 1214

In re THORNBURG MORTGAGE, INC. SECURITIES LITIGATION.

No. CIV 07–0815 JB/WDS.

United States District Court, D. New Mexico.

June 2, 2011.

Frederick S. Fox, Aviah Cohen Pierson, Kaplan Fox & Kilsheimer, LLP, Nancy Kaboolian, Abbey Spanier Rodd Abrams & Paradis, LLP, Curtis V. Trinko, Law Offices of Curtis V. Trinko, LLP, Fred T. Isquith, Gregory Nespole, Rachel S. Poplock, Martin E. Restituyo, Wolf Haldenstein Adler Freeman & Herz, LLP, New York, NY, Richard A. Lockridge, Karen H. Riebel, Nathan D. Prosser, Lockridge Gindal Nauen, PLLP, Minneapolis, MN, Evan J. Smith, Brodsky & Smith, L.L.C., Mineola, NY, David R. Scott, Scott & Scott, LLC, Colchester, CT, Arthur Shingler, III, Scott & Scott, LLP, Betsy C. Manifold, Francis M. Gregorek, Rachele R. Rickert, Patrick Moran Wolf Haldenstein Adler Freeman & Herz, LLP, San Diego, CA, Cody Kelley, Charlotte Itoh, Kelley Law Offices, Shane C. Youtz, Youtz & Valdez, P.C., Turner W. Branch, Branch Law Firm, Albuquerque, NM, Andrew Zivitz, Benjamin Sweet, Michelle Newcomer, Richard Russo, Jr., Sean M. Handler, Stewart L. Berman, D. Seamus Kaskela, Barroway Topaz Kessler Meltzer & Check, LLP, Radnor, PA, for the Plaintiffs.

Amy L. Neuhardt, Boies, Schiller & Flexner, LLP, Washington, D.C. Donald L. Flexner, Philip C. Korologos, Boies, Schiller & Flexner, LLP, New York, NY, for Defendants Garrett Thornburg, Anne–Drue M. Anderson, David A. Ater, Joseph H. Badal, Eliot R. Cutler, Ike Kalangis, Francis I. Mullin, III, Stuart C. Sherman, and Paul G. Decoff.William H. Forman, Overland, Borenstein, Scheper & Kim, LLP, Los Angeles, CA, David F. Cunningham, Thompson, Hickey, Cunningham, Clow, April & Dolan, P.A., Santa Fe, NM, for Defendants Thornburg Mortgage, Inc., Garrett Thornburg, Larry A. Goldstone, Clarence G. Simmons, Anne–Drue M. Anderson, David A. Ater, Joseph H. Badal, Eliot R. Cutler, Michael B. Jeffers, Ike Kalangis, Owen M. Lopez, Francis I. Mullin, III, and Stuart C. Sherman.Clinton W. Marrs, Tax, Estate & Business Law, N.A., LLC, Albuquerque, NM, Elizabeth H. Skey, Jonathan A. Shapiro, Wilmer Cutler Pickering Hale and Dorr, LLP, Palo Alto, CA, for Defendants Larry A. Goldstone and Clarence G. Simmons.Robert Badal, P. Patty Li, Wilmer Cutler Pickering Hale and Dorr, LLP, Los Angeles, CA, for Defendants Thornburg Mortgage, Inc., Larry A. Goldstone, Clarence G. Simmons, Michael B. Jeffers, and Owen M. Lopez.Joel Sher, Shapiro Sher Guinot & Sandler, Baltimore, MD, Mary R. Jenke, Walsh Anderson Brown Gallegos & Green, P.C., Albuquerque, NM, for Thornburg Mortgage, Inc.Clifford K. Atkinson, John Thal, Atkinson, Thal & Baker, P.C., Albuquerque, NM, for Defendants AG Edwards & Sons, Inc., BB & T Capital Markets, UBS Securities, Citigroup Global Markets Inc., Friedman, Billings, Ramsey & Co., Oppenheimer & Company, Inc., RBC Dain Rauscher Corp., Stifel, Nicolaus & Company, Inc., and Bear Sterns & Co.Jonathan C. Dickey Gibson, Dunn & Crutcher, LLP, New York, NY, Dean J. Kitchens, Lindsay R. Pennington, Gibson, Dunn & Crutcher, LLP, Los Angeles, CA, for Defendants AG Edwards & Sons, Inc., BB & T Capital Markets, Citigroup Global Markets Inc., Oppenheimer & Company, Inc., RBC Dain Rauscher Corp., and Stifel, Nicolaus & Company, Inc.David Bohan, David Stagman, Katten Muchin Rosenman, LLP, Chicago, IL, for Defendants UBS Securities and Bear Sterns & Co.William Pittard, Steven M. Farina, Williams & Connolly, LLP, Washington, D.C., for Defendant Friedman, Billings, Ramsey & Co.

MEMORANDUM OPINION ¹

JAMES O. BROWNING, District Judge.

THIS MATTER comes before the Court on the Plaintiff's Omnibus Motion of (i) Leave to Amend the Consolidated Class Action Complaint and (ii) For Reconsideration of the Court's January 27, 2010 Memorandum Opinion and Orders Granting in Part and Denying in Part Defendant's Motions to Dismiss the Consolidated Amended Complaint, filed July 9, 2010 (Doc. 309)(“Motion”). The Court held a hearing on November 3, 2010. The primary issues are: (i) whether the Court should reconsider the Defendants' disclosure obligations under the abstain-or-disclose doctrine and Item 303 of Regulation S–K, 17 C.F.R. § 229.303; (ii) whether the Court should reconsider its decision that Defendant Thornburg Mortgage, Inc.'s (“TMI's”) 2007 Form 10–K Report was not actionable; (iii) whether the Court should reconsider its decision that certain of the Defendants' statement were inactionable puffery; (iv) whether the Court should reconsider dismissing the Plaintiffs' claims under Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), against Defendants Garrett Thornburg and Joseph H. Badal; (v) whether the Court should reconsider reserving ruling on the dismissal of the Plaintiffs' claims under Sections 20(a) of the Exchange Act, 15 U.S.C. § 78t(a), against Defendants Larry A. Goldstone, Clarence D. Simmons, and Paul G. Decoff; and (vi) whether the Court should give the Plaintiffs leave to file their Second Amended Complaint (“SAC”), which is attached to their Motion. See Doc. 309–1. After carefully considering the parties' arguments, the Court concludes that: (i) it will reconsider the Defendants' disclosure obligations under the abstain-or-disclose doctrine and Item 303, but that the Defendants' disclosure duties thereunder do not alter that Court's holdings; (ii) the Court will not change its decision that TMI's 2007 Form 10–K was not actionable, because the Plaintiffs present no new law or facts to support their request for a different decision on this matter; (iii) the Court will not alter its decision that certain of the Defendants' statements were inactionable puffery, because the Plaintiffs again present no new law or facts to support their request for a different decision on this matter; (iv) the Court will not change its decision dismissing the Plaintiffs' Section 10(b) claims against Thornburg and Badal, because the disclosure duties under the abstain-or-disclose rule and Item 303 do not alter the Court's analysis; (v) the Court will reconsider reserving ruling on the dismissal of the Plaintiffs' Section 20(a) claims against Goldstone, Simmons, and Decoff, dismissing the Plaintiffs' claims against Decoff, but not dismissing the Plaintiffs' claims against Goldstone and Simmons; and (vi) the Court grants the Plaintiffs' leave to file their SAC, because the SAC cures deficiencies in the Plaintiffs' allegations establishing Section 20(a) liability against Thornburg.

FACTUAL BACKGROUND ²

The Plaintiffs' Consolidated Class Action Complaint, filed May 27, 2008 (Doc. 68) (“CCAC”) and SAC, describe a series of public statements and filings dating back to early 2006 that the Plaintiffs assert contain fraudulent material misrepresentations. The Plaintiffs also contend that the Defendants' public statements and filings contain material omissions. The Court draws the following statement of facts from the well-pleaded, non-conclusory allegations of the CCAC, as the Court must when deciding or reconsidering a motion to dismiss filed under rule 12(b)(6) of the Federal Rules of Civil Procedure. Where relevant, the Court includes information from TMI's Securities and Exchange Commission (“SEC”) filings to which Plaintiffs refer in their CCAC. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007) (“[C]ourts must consider the complaint in its entirety, as well as other sources ..., in particular, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice.”); Litwin v. Blackstone Group, L.P., 634 F.3d 706, 708 (2d Cir.2011) (“[W]e include information from [SEC] filings by the Blackstone Group, L.P. ... to which plaintiffs refer in their complaint, particularly the Form S–1 Registration Statement ... and Prospectus filed by Blackstone in connection with its June 21, 2007 initial public offering....”); ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir.2007) (“[W]e may consider ... legally required public disclosure documents filed with the SEC, and documents possessed by or known to the plaintiff and upon which it relied in bringing the suit.”).

1. The Parties.

This consolidated action is brought by Lead Plaintiffs (i) W. Allen Gage, individually and on behalf of J. David Wrather; (ii) Harry Rhodes; (iii) FFF Investments, LLC; (iv) Robert Ippolito, individually and as Trustee for the Family Limited Partnership Trust; (v) Nicholas F. Aldrich, Sr., individually and on behalf of the Aldrich Family; (vi) Betty L. Manning; (vii) John Learch; and (viii) Boilermakers Lodge 154 Retirement Plan (“Boilermakers Lodge”) (collectively “the Plaintiffs”). The Plaintiffs all purchased shares of TMI stock during the Class Period ³ at prices that they allege were artificially inflated. They assert that they were damaged as a result of these inflated-price purchases. See CCAC ¶ 53, at 15–16. Manning acquired 550 shares of TMI common stock during the May 2007 Offering. See CCAC ¶ 54, at 16. She bought them on May 4, 2007 and paid $27.05 per share. See CCAC ¶ 54, at 16. Learch, as trustee for the Learch trust, acquired 400 shares of 7.5% Series E Cumulative Convertible Redeemable Preferred Stock in the June 2007 Offering. See CCAC ¶ 55, at 16. He bought his shares on June 19, 2007 and paid $25.00 per share. See CCAC ¶ 55, at 16. Boilermakers Lodge purchased TMI stock during the September 2007 Offering. See Plaintiffs' Opposed Motion for Leave to Amend Consolidated Class Action Complaint to Add Additional Representative Plaintiff ¶ 5, at 4, filed January 27, 2009 (Doc. 160). No particular Plaintiff alleges to have purchased any TMI stock in the January 2008 offerings.

TMI, a Defendant whose securities are at the heart of this action, is a publicly traded residential-mortgage lender that represents that it focuses primarily on the “jumbo” and “super-jumbo” segment, i.e., loans totaling over $417,000.00, of the adjustable-rate mortgage (“ARM”) market.⁴ CCAC ¶...