Nikolov v. Livent Corp.

• Decision Date: 02 July 2020
• Docket Number: Civil Action No. 19-2218
• Citation: 470 F.Supp.3d 461
• Parties: Bisser NIKOLOV, Individually and on Behalf of All Others Similarly Situated, Plaintiff, v. LIVENT CORPORATION, et al., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

470 F.Supp.3d 461

Bisser NIKOLOV, Individually and on Behalf of All Others Similarly Situated, Plaintiff,

v.LIVENT CORPORATION, et al., Defendants.

Civil Action No. 19-2218

United States District Court, E.D. Pennsylvania.

Signed July 2, 2020

Laurie L. Largent, Robbins Geller Rudman & Dowd, San Diego, CA, Lee Albert, Glancy Prongay & Murray LLP, New York, NY, Jacob A. Goldberg, The Rosen Law Firm, Jenkintown, PA, Timothy N. Mathews, Chimicles Schwartz Kriner & Donaldson-Smith LLP, Haverford, PA, for Plaintiff Bisser Nikolov.

Keith Lorenze, The Rosen Law Firm PA, Jenkintown, PA, Timothy N. Mathews, Chimicles Schwartz Kriner & Donaldson-Smith LLP, Haverford, PA, for Plaintiff Larry Roe.

Dana M. Seshens, Brian M. Burnovski, James P. Rouhandeh, Davis Polk & Wardwell LLP, New York, NY, Jay A. Dubow, Brian H. Callaway, Troutman Pepper Hamilton Sanders LLP, Philadelphia, PA, for Defendants Livent Corporation, Paul W. Graves, Gilberto Antoniazzi, Nicholas L. Pfeiffer, Pierre R. Brondeau, Andrea E. Utecht.

Charlene S. Shimada, Morgan Lewis Bockius, San Francisco, CA, Laura H. McNally, Marc J. Sonnenfeld, Morgan Lewis & Bockius LLP, Philadelphia, PA, for Defendants Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs & Co. LLC, Credit Suisse Securities (USA) LLC, Citigroup Global Markets Inc., Loop Capital Markets LLC, Nomura Securities International, Inc.

Jay A. Dubow, Troutman Pepper Hamilton Sanders LLP, Philadelphia, PA, for Defendant FMC Corporation.

MEMORANDUM

CHAD F. KENNEY, JUDGE

Lead Plaintiffs, Central Laborers’ Pension Fund and New York Hotel Trades Council & Hotel Association of New York City, Inc. Pension Fund, on behalf of themselves and all others similarly situated (collectively "Plaintiffs") filed this securities class action suit against Livent Corporation ("Livent"), its officers and directors (the "Individual Defendants"), the underwriters of Livent's Initial Public Offering (the "Underwriter Defendants"), and Livent's controlling shareholder, FMC Corporation ("FMC") (collectively "Defendants"), alleging violations of §§ 11, 12, and 15 of the Securities Act of 1933.¹ Plaintiffs allege in the Corrected Consolidated Amended Complaint (the "Complaint") that Defendants made false and misleading statements and omissions in the registration statement and prospectus filed with the Securities and Exchange Commission ("SEC") in connection with Livent's October 2018 initial public offering ("IPO"). See generally ECF No. 44. Defendants filed a joint motion to dismiss this action pursuant to Fed. R. Civ. P. 12(b)(6).² ECF No. 50. Plaintiffs filed a response in opposition to Defendants’ Motion to Dismiss. ECF No. 51. Defendants then filed a reply in support of their Motion to Dismiss. ECF No. 52. On May 5, 2020, the Court held oral argument on the Motion to Dismiss via video conference, in which both Plaintiffs and Defendants participated. ECF Nos. 56, 57.

I. STANDARD OF REVIEW

When reviewing a motion to dismiss, the Court "accept[s] as true all allegations in plaintiff's complaint as well as all reasonable inferences that can be drawn from them, and [the court] construes them in a light most favorable to the non-movant." Tatis v. Allied Interstate, LLC , 882 F.3d 422, 426 (3d Cir. 2018) (quoting Sheridan v. NGK Metals Corp. , 609 F.3d 239, 262 n.27 (3d Cir. 2010) ). "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.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic 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 pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (quoting Twombly , 550 U.S. at 557, 127 S.Ct. 1955 ). "The plausibility determination is ‘a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.’ " Connelly v. Lane Const. Corp. , 809 F.3d 780, 786-87 (3d Cir. 2016) (quoting Iqbal , 556 U.S. at 679, 129 S.Ct. 1937 ).

Finally, courts reviewing the sufficiency of a complaint must engage in a three-step process. First, the court "must ‘take note of the elements [the] plaintiff must plead to state a claim.’ " Id. at 787 (quoting Iqbal , 556 U.S. at 675, 129 S.Ct. 1937 ) (alterations in original). "Second, [the court] should identify allegations that, ‘because they are no more than conclusions, are not entitled to the assumption of truth.’ " Id. (quoting Iqbal , 556 U.S. at 679, 129 S.Ct. 1937 ). Third, "[w]hen there are well-pleaded factual allegations, [the] court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id. (quoting Iqbal , 556 U.S. at 679, 129 S.Ct. 1937 ) (alterations in original).

II. ELEMENTS PLAINTIFFS MUST PLEAD TO STATE A CLAIM

Plaintiffs allege the registration statement and prospectus Livent filed with the SEC in connection with its October 2018 IPO contained false and misleading statements and omissions, in violation of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933. ECF No. 44. The Securities Act of 1933 (the "Act"), 15 U.S.C. § 77a et seq. , protects investors by requiring that companies issuing securities provide financial and other significant information concerning the securities being offered for public sale. See Omnicare, Inc. v. Laborers Dist. Council Const. Indus. Pension Fund , 575 U.S. 175, 178, 135 S.Ct. 1318, 191 L.Ed.2d 253 (2015). Companies offering securities for sale to the public, with a few exceptions, must file a registration statement and prospectus with the Securities and Exchange Commission with specific information about the company and the securities for sale. See 15 U.S.C. §§ 77aa, 77f, 77j ; see also Omnicare , 575 U.S. at 178, 135 S.Ct. 1318. "Beyond those required disclosures, the issuer may include additional representations of either fact or opinion." Omnicare , 575 U.S. at 178, 135 S.Ct. 1318.

To establish a prima facie³ violation of Section 11 of the Act, plaintiff "need only show a material misstatement or omission" in the issuing company's registration statement. Herman & MacLean v. Huddleston , 459 U.S. 375, 382, 103 S.Ct. 683, 74 L.Ed.2d 548 (1983). Section "11 imposes liability ‘if a registration statement, as of its effective date: (1) contained an untrue statement of material fact; (2) omitted to state a material fact required to be stated therein; or (3) omitted to state a material fact necessary to make the statements therein not misleading.’ " In re Constar Int'l Inc. Sec. Litig. , 585 F.3d 774, 782–83 (3d Cir. 2009) (quoting In re Suprema Specialties, Inc. Sec. Litig. , 438 F.3d 256, 269 (3d Cir. 2006) ). Section 11 "does not require a showing of individualized loss causation, because injury and loss are presumed." In re Constar Int'l , 585 F.3d at 785. Furthermore, "Section 11 imposes near-strict liability for untruths and omissions made in a registration statement." Obasi Inv. LTD v. Tibet Pharm., Inc. , 931 F.3d 179, 182 (3d Cir. 2019).

Similarly, "Section 12(a)(2) provides for civil liability for anyone who offers or sells a security ‘by means of a prospectus or oral communication, which includes an untrue statement of material fact or omits to state a material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading ....’ " In re Suprema Specialties , 438 F.3d at 269 (quoting 15 U.S.C. § 77l(a)(2) ). "To state a claim under Section 12(a)(2), plaintiffs must allege that they purchased securities pursuant to a materially false or misleading ‘prospectus or oral communication.’ " In re Adams Golf Inc. , 381 F.3d 267, 273 (3d Cir.2004). "Like Section 11, Section 12(a)(2) is a ‘virtually absolute’ liability provision that does not require an allegation that defendants possessed scienter." In re Suprema Specialties , 438 F.3d at 269 (quoting In re Adams Golf , 381 F.3d at 274 n.7 ).

In order for an omission to constitute a "violation[ ] of sections 11 and 12(a)(2), plaintiffs must allege that an omitted material fact was required to be included by the securities laws or that its absence rendered statements in the prospectus misleading." In re Adams Golf , 381 F.3d at 277 (citing 15 U.S.C. §§ 77k(a), 77l ). Section 11's omissions clause creates liability for a statement of opinion where "a registration statement omits material facts about the issuer's inquiry into or knowledge concerning a statement of opinion, and ... those facts conflict with what a reasonable investor would take from the statement itself." Omnicare , 575 U.S. at 189, 135 S.Ct. 1318. Furthermore, a "reasonable investor understands a statement of opinion in its full context, and § 11 creates liability only for the omission of material facts that cannot be squared with such a fair reading." Id. at 190-191, 135 S.Ct. 1318.

In addition, "[m]ateriality is ordinarily an issue left to the factfinder and is therefore not typically a matter for Rule 12(b)(6) dismissal." In re Adams , 381 F.3d at 274 (citing Weiner v. Quaker Oats Co. , 129 F.3d 310, 317 (3d Cir. 1997) ). "Only if the alleged misrepresentations or omissions are so obviously unimportant to an investor that reasonable minds cannot differ on the question of materiality is it appropriate for the district court to rule that the allegations are inactionable as a matter of law." Id. (quoting Shapiro v. UJB Fin. Corp., 964 F.2d 272, 286 (3d Cir. 1992) ).

Lastly, "Section 15 of the Securities Act provides for joint and several liability on the part of one who controls a violator of Section 11 or Section 12." In re Suprema Specialties , 438 F.3d at 284 (citing 15 U.S.C. § 77o ). Under Section 15, the "plaintiff must prove that one person controlled another person or entity and that the controlled...