High Income Securities Fund v. Cedar Realty Trust, Inc.

EASTERN DISTRICT OF NEW YORK 10:01 am, Se p 25, 2023

----------------------------------------------------------------------X U.S. DISTRICT COURT

HIGH INCOME SECURITIES FUND, EASTERN DISTRICT OF NEW YORK

LONG ISLAND OFFICE

Plaintiff, MEMORANDUM & ORDER

22-CV-04031 (JMA) (JMW)

-against-

CEDAR REALTY TRUST, INC., CEDAR REALTY

TRUST PARTNERSHIP, L.P., BRUCE J. SCHANZER,

GREGG A. GONSALVES, ABRAHAM EISENSTAT,

STEVEN G. ROGERS, SABRINA KANNER,

DARCY D. MORRIS, RICHARD H. ROSS,

and SHARON STERN,

Defendants.

----------------------------------------------------------------------X

AZRACK, United States District Judge:

Plaintiff High Income Securities Fund claims that Defendants Cedar Realty Trust, Inc.

(“Cedar” or the “Company”), Cedar Realty Partnership, L.P. (“Cedar LP”), and eight individual

Cedar officers (the “Individual Defendants”) made materially false or misleading statements or

omissions in violation of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange

Act”), 15 U.S.C. § 78j(b), as well as SEC Rule 10b-5, 17 C.F.R. § 240.10b-5. Plaintiff also brings

derivative claims against the Individual Defendants for control person liability under Section 20(a)

of the Exchange Act, 15 U.S.C. § 78t(a). Finally, Plaintiff asserts negligent misrepresentation

claims against all Defendants based on the same facts.

Currently before the Court is Defendants’ motion to dismiss the complaint pursuant to

Federal Rules of Civil Procedure 12(b)(6) and 9(b), as well as 15 U.S.C. § 78u-4(b)(3)(A). (ECF

No. 21.) For the following reasons, Defendants’ motion is granted, and the complaint is dismissed.

I. BACKGROUND

A. Facts

1. The Parties

Cedar is a real estate investment trust, or “REIT,” that “provide[s] a managed real estate

Boston.” (Compl. ¶ 15, ECF No. 1.) Cedar owns a 99.4% interest in and is the sole general partner

of Cedar LP, through which it conducts substantially all its business. (Id. ¶ 16.) The Individual

Defendants are all members of Cedar’s board of directors (the “Board”), with Gonsalves serving

as Chairman. (Id. ¶¶ 17–24.) In addition to his role as a director, Schanzer is Cedar’s President

and CEO. (Id. ¶ 17.)

Plaintiff is a registered closed-end investment company that “invests in a range of

securities, including publicly issued preferred stock.” (Id. ¶ 13.)

2. Cedar’s Underperformance and Shareholders’ Response (2018 – 2021)

In or around 2018, Cedar’s common stock price began to trade at a significant discount

relative to its net asset value (“NAV”) per share, as well as to its peers. (Compl. ¶ 32.) For

example, in 2018, the shopping center public REIT sector traded at a 12% discount to NAV on

average; Cedar’s common stock traded as low as a 55% discount to NAV. (Id. ¶ 33.) Recognizing

Cedar’s underperformance, in July 2019 the Board formed a special committee with the remit “to

consider strategies to maximize stockholder value, including maintaining the Company’s current

strategy, selling non-core assets, pursuing larger asset sales in portfolio or Company-level

transactions, or implementing a phased liquidation of the Company.” (Id. ¶ 34.) The special

committee “was authorized to consider and evaluate any proposals that might be received by the

Company regarding a potential sale transaction, in whole or in part, and to participate in and direct

the negotiation of the material terms and conditions of any such transaction.” (Id. ¶ 35.) Although

the special committee’s process was interrupted by the Covid-19 pandemic, it restarted in earnest

in early 2021. (Id. ¶ 36.)

At the same time, Cedar faced mounting pressure from its shareholders to address its

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Companies Equity Partners, L.P. (“Barington”), Ewing Morris & Co. Investment Partners Ltd.

(“Ewing”), and Camac Partners, LLC (“Camac”)—piled further pressure on Cedar’s Board by

announcing that they each planned to nominate their own directors for election to the Board. (Id.

¶ 37.) Ewing nominated Defendant Darcy Morris, and Camac nominated Defendants Richard

Ross and Sharon Stern. (Id.)

3. Cedar’s Public Statements (March – August 2021)

Following the shareholders’ announcement, on March 2, 2021, Cedar issued a press release

titled “Cedar Realty Trust Comments On Recent Public Announcements” (the “March Press

Release”). (Compl. ¶ 40.) The March Press Release stated in relevant part as follows:

Cedar Realty Trust’s Board of Directors and management team are committed to

acting in the best interests of shareholders as we work to deliver best-in-class

performance for our investors and other stakeholders. . . . We remain committed to

corporate governance best practices and intend to further strengthen our Board with

the near-term addition of one or more highly qualified candidates. . . . [O]ur Board

and management team are focused on navigating through this pandemic period and

maximizing value for our shareholders. We are always open to constructive input

and assess all good ideas to create value for shareholders as the market and the

Company’s share price continue to recover from this unprecedented time.

(Id.)

On April 28, 2021, Cedar announced that it had agreed to appoint Morris, Ross, and Stern

to the Board. (Id. ¶ 41.) Cedar issued a press release titled “Cedar Realty Trust Announces

Appointment of Three New Independent Directors” (the “April Press Release”), which stated in

relevant part as follows:

Cedar’s Board of Directors is committed to adhering to the highest standards of

corporate governance and acting in our shareholders’ best interests. To that end,

after thoughtful deliberation, and in consultation with our shareholders, we are

pleased to welcome Darcy [Morris], Richard [Ross], and Sharon [Stern] to our

Board and look forward to working collaboratively with them to reach our goal of

delivering superior shareholder value in the years ahead. Our new directors bring

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and further enhance our Board’s alignment with shareholders.

(Id.)

Finally, on September 9, 2021, Cedar issued another press release, titled “Cedar Realty

Trust Announces Dual-Track Review Of Strategic Alternatives To Maximize Shareholder Value”

(the “September Press Release”), disclosing that the Board had “initiated a dual-track process” to

carry out the strategic review previously delegated to the special committee. (Id. ¶ 42.) The

September Press Release stated in relevant part as follows:

[The] Board of Directors has initiated a dual-track process to review the Company’s

strategic alternatives in order to maximize shareholder value. As part of this

process, Cedar is exploring, among other alternatives, a potential sale or merger

involving the entire Company, and alternatively the potential sale of its core

grocery-anchored shopping center portfolio and its mixed-use redevelopment

projects.

(Id.) The September Press Release also included the following statement attributed to Schanzer:

“We believe there is a profound disconnect between Cedar’s share price and the

underlying value of our real estate, as evidenced by recent transaction activity both

within our portfolio and in our markets,” stated Bruce Schanzer, President and

CEO. “The Board is committed to maximizing value for all our shareholders and,

accordingly, we believe that this dual-track strategic review process will enable us

to achieve that.”

(Id.; O’Brien Decl. Ex. 10 at 7, ECF No. 23-10.)1 Cedar also noted that “[n]o assurances can be

given regarding the outcome or timing of the strategic review process,” and that it “does not

presently intend to make any further public comment regarding the process until it has been

completed.” (O’Brien Decl. Ex. 10 at 7.)

1 In addition to the allegations in the complaint, courts may consider “written instruments attached

[to the complaint], statements incorporated by reference [in the complaint], and public disclosure

documents filed with the SEC.” Gamm v. Sanderson Farms, Inc., 944 F.3d 455, 462 (2d Cir. 2019) (citation

omitted). The full text of the September Press Release was included as an exhibit to Cedar’s Form 8-K

filed with the SEC on September 9, 2021, and attached as an exhibit to the Declaration of Sean R. O’Brien,

ECF No. 23.

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Plaintiff alleges that notwithstanding Defendants’ statements in the March, April, and

September Press Releases, which suggested that Cedar “was working to maximize value for all

stockholders,” (Compl. ¶ 39), Defendants “knew by at least August 2021 that any deal was likely

to result in benefits only for common stockholders, who would exit at a premium, while preferred

stockholders would not receive deal consideration and would be relegated to a small and less

secure version of the Company surviving the transaction.” (Id. ¶ 44.) According to Plaintiff, on

August 3, 2021, Cedar’s Board “was actively negotiating the sale of a significant portion of

Cedar’s assets to multiple counterparties” and “instructed management to ‘make outreach to

potential counterparties’ for the Company’s remaining assets with the expectation that the deal(s)

for the Company’s primary assets would be successful.” (Id. ¶ 45.)

Although the Board received “multiple offers” for Cedar “as a whole,” it instead pursued

a series of transactions that “would chop up the Company’s properties, allow common

stockholders to exit at a premium, and leave preferred stockholders behind as stockholders of

Remainco,” an entity that would be comprised of Cedar’s remaining assets. (Id. ¶¶ 46–47.)

On January 19, 2022, Cedar opened negotiations with Wheeler Real Estate Investment

Trust, Inc. (“Wheeler”) regarding a transaction involving Remainco. (Id. ¶ 47.) Wheeler is a “tiny

firm with historically inferior performance” and has “a history of abusing its preferred

stockholders[.]” (Id. ¶ 62.) The Board received a non-binding term sheet from Wheeler on January

27, 2022, which contemplated Wheeler’s acquisition of Remainco in an all-cash transaction

payable to Cedar’s common shareholders. (Id. ¶ 49.) Under the terms of the proposed transaction,

Cedar’s preferred shares would remain outstanding and, as a result, its preferred shareholders

would receive no consideration in connection with the Remainco acquisition. (Id. ¶ 50.)

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began to purchase shares of Cedar’s 6.50% Series C Cumulative Redeemable Preferred Stock

(“Preferred Stock”). Between January 7, 2022 and February 28, 2022, Plaintiff purchased 85,770

shares. (Id. ¶¶ 54–55.)

5. Announcement of the Transactions (March 2022)

On March 2, 2022, Cedar announced a series of all-cash transactions through which it

planned to sell itself and all its assets. (Compl. ¶ 57–58.) The transactions included three asset

sales to third parties and, as relevant here, an agreement with Wheeler pursuant to which Cedar (as

Remainco) would merge with WHLR Merger Sub Inc., a subsidiary of Wheeler, with Cedar as the

surviving entity controlled by Wheeler. (Id. ¶ 58.) In a press release announcing the transactions,

Cedar stated: “We believe this combination of transactions represents the best possible outcome

for our common shareholders and we are very pleased with the progress thus far of our dual-track

review of strategic alternatives.” (Id. ¶ 59.)

After the transactions were announced, the price of Cedar’s Preferred Stock plummeted

from $22.85 per share on March 2 to $9.85 per share at the close of trading on March 3, on nearly

250 times the previous day’s trading volume. (Id. ¶ 68.) As a result, Plaintiff alleges that it

incurred unrealized losses of approximately $1.5 million. (Id. ¶ 69.)

B. Procedural History

Plaintiff commenced this action on July 11, 2022. Defendants then filed a pre-motion

conference letter regarding their anticipated motion to dismiss, (ECF No. 11), to which Plaintiff

responded, (ECF No. 15.) The Court subsequently waived the pre-motion conference and so-

ordered the parties’ proposed briefing schedule. (Electronic Order dated Oct. 25, 2022.)

Defendants filed the instant motion on February 17, 2023. (ECF No. 21.)

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A. Motion to Dismiss Under Rule 12(b)(6)

To survive a motion to dismiss brought under Rule 12(b)(6), “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 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,

570 (2007)). In general, a court must “‘accept[] as true all factual claims in the complaint and

draw[] all reasonable inferences in the plaintiff’s favor.’” Altimeo Asset Mgmt. v. Qihoo 360

Tech. Co., 19 F.4th 145, 147 (2d Cir. 2021) (quoting Henry v. Cty. of Nassau, 6 F.4th 324, 328

(2d Cir. 2021)). However, a court is “not bound to accept as true a legal conclusion couched as a

factual allegation.” Twombly, 550 U.S. at 555.

B. Pleading Standards Applicable to Securities Fraud Claims

“Securities fraud claims are subject to heightened pleading requirements that the plaintiff

must meet to survive a motion to dismiss.” ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d

87, 99 (2d Cir. 2007); see also In re Synchrony Fin. Sec. Litig., 988 F.3d 157, 166 (2d Cir. 2021).

First, a complaint alleging securities fraud must satisfy Rule 9(b)’s requirement that

“circumstances constituting fraud” be “state[d] with particularity[.]” Under Rule 9(b), a plaintiff

alleging fraud must: “‘(1) specify the statements that the plaintiff contends were fraudulent, (2)

identify the speaker, (3) state where and when the statements were made, and (4) explain why the

statements were fraudulent.’” In re Synchrony, 988 F.3d at 167 (quoting Anschutz Corp. v. Merrill

Lynch & Co., Inc., 690 F.3d 98, 108 (2d Cir. 2012)). “Allegations that are conclusory or

unsupported by factual assertions are insufficient.” ATSI, 493 F.3d at 99.2

2 Like its securities fraud claims, Plaintiff’s negligent misrepresentation claims “must be pled with

particularity under Rule 9(b)” because “they are based on the same set of facts as the fraud claims.” Trahan

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expands on Rule 9(b). The PSLRA requires securities fraud complaints to “‘specify each

misleading statement; . . . set forth the facts on which a belief that a statement is misleading was

formed; and . . . state with particularity facts giving rise to a strong inference that the defendant

acted with the required state of mind.” In re Synchrony, 988 F.3d at 167 (quoting Anschutz, 690

F.3d at 108).

III. DISCUSSION

Defendants argue that Plaintiff has failed to plausibly allege a claim for securities fraud

under Section 10(b) and Rule 10b-5, and that without such a claim, Plaintiff’s claims under Section

20(a) and for negligent misrepresentation should be dismissed as well. (Defs.’ Mem. at 2–3, ECF

No. 22.) Plaintiff opposes Defendants’ motion on all fronts. (Pl.’s Opp’n, ECF No. 24.)

The Court first examines Plaintiff’s claims under Section 10(b) and Rule 10b-5, and,

finding that Plaintiff has failed to state a claim for securities fraud under those provisions, briefly

addresses Plaintiff’s remaining claims.

A. Section 10(b) and Rule 10b-5 Claims

Section 10(b) of the Exchange Act provides that it is unlawful “[t]o use or employ, in

connection with the purchase or sale of any security registered on a national securities exchange

or any security not so registered, . . . any manipulative or deceptive device.” 15 U.S.C. § 78j(b).

Rule 10b-5 implements Section 10(b) by prohibiting, “in connection with the purchase or sale of

any security,” (a) “employ[ing] any device, scheme, or artifice to defraud,” (b) “mak[ing] any

untrue statement of a material fact or . . . omit[ting] to state a material fact necessary in order to

v. Lazar, 457 F. Supp. 3d 323, 354 n.11 (S.D.N.Y. 2020) (citation omitted); see also DoubleLine Cap. LP v.

Odebrecht Fin., Ltd., 323 F. Supp. 3d 393, 463 (S.D.N.Y. 2018) (dismissing negligent misrepresentation

claim based on failure to satisfy Rule 9(b)’s pleading requirements).

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misleading,” and (c) “engag[ing] in any act, practice, or course of business which operates or

would operate as a fraud or deceit upon any person.” 17 C.F.R. § 240.10b-5. Thus, “[t]o state a

claim for relief under § 10(b) and Rule 10b-5, ‘a plaintiff must allege that the defendant (1) made

misstatements or omissions of material fact, (2) with scienter, (3) in connection with the purchase

or sale of securities, (4) upon which the plaintiff relied, and (5) that the plaintiff’s reliance was the

proximate cause of its injury.’” Altimeo, 19 F.4th at 149–50 (quoting Setzer v. Omega Healthcare

Invs., Inc., 968 F.3d 204, 212 (2d Cir. 2020)).

Plaintiff’s central allegation is that “[d]espite repeatedly representing to the investing

public that the Company was seeking a value-maximizing transaction for all stockholders,” in the

March, April, and September Press Releases, “Defendants knew by at least August 2021 that any

deal was likely to result in benefits only for common stockholders, who would exit at a premium,

while preferred stockholders would not receive deal consideration and would be relegated to a

smaller and less secure version of the Company surviving the transaction.” (Compl. ¶ 44.) In

other words, Defendants “led the market to believe that the Board was pursuing one type of

transaction,” which would benefit both common and preferred shareholders, “when it was, in fact,

actively negotiating something very different,” namely, a transaction that would benefit only

common shareholders. (Pl.’s Opp’n at 8.) And as a result, Plaintiff argues, when Cedar announced

the Wheeler transaction in March 2022, Cedar’s Preferred Stock dropped, damaging persons who

had bought Preferred Stock in reliance on Cedar’s previous statements.

Defendants contend that Plaintiff’s claims under Section 10(b) and Rule 10b-5 should be

dismissed because (i) Cedar’s statements in the March Press Release, April Press Release, and

September Press Release are forward-looking and thus fall within the PSLRA’s safe harbor; (ii)

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to allege facts demonstrating that the alleged misstatements and omissions were false or

misleading; (iv) Plaintiff fails to adequately plead scienter; (v) Plaintiff could not have reasonably

relied on the alleged misstatements and omissions because the terms governing its Preferred Stock

make clear that its rights are contractual; and (vi) Plaintiff fails to allege that a majority of

Defendants made any misstatement or omission such that they may be subjected to liability.

(Defs.’ Mem. at 2–3.)

1. The March and April Press Releases

The Court begins its analysis with the March and April Press Releases. As discussed

above, Plaintiff claims that the March and April Press Releases, together with the September Press

Release, led the market to believe that Cedar was pursuing a transaction that would “benefit both

common and preferred shareholders,” when instead, it was negotiating “something very

different[.]” (Pl.’s Opp’n at 8.) Plaintiff appears to challenge the following specific portions of

the March and April Press Releases:

• “[The] Board . . . and management team are committed to acting in the best interests of

shareholders as we work to deliver best-in-class performance for our investors and

other stakeholders.” (Compl. ¶ 40.)

• “[The] Board and management team are focused on navigating through this pandemic

period and maximizing value for our shareholders.” (Id.)

• “[The Board] [is] always open to constructive input and assess all good ideas to create

value for shareholders[.]” (Id.)

• “[The] Board . . . is committed to adhering to the highest standards of corporate

governance and acting in our shareholders’ best interests.” (Id. ¶ 41.)

• “[The Board] look[s] forward to working collaboratively with [Defendants Morris,

Ross, and Stern] to reach our goal of delivering superior shareholder value in the years

ahead.” (Id.)

The shortcomings of Plaintiff’s theory are immediately apparent: none of the alleged

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misstatement or omission must be material. And as the Second Circuit has explained, “[t]o be

material, ‘a statement must, in the view of a reasonable investor, have ‘significantly altered the

total mix of information made available.’” Plumber & Steamfitters Loc. 773 Pension Fund v.

Danske Bank A/S, 11 F.4th 90, 100–01 (2d Cir. 2021) (quoting Singh v. Cigna Corp., 918 F.3d

57, 63 (2d Cir. 2019)). Here, however, the challenged statements are simply platitudes regarding

the Board’s commitment to acting in shareholders’ interests—an obligation shared by the board of

any public company. They bear no relation to any future transaction, let alone the series of

transactions about which Plaintiff complains. Rather, they are precisely the type of generalized,

corporate “buzzwords” that are “too general to induce reliance” by a reasonable investor. Id. at

104 (citing ECA, Loc. 134 IBEW Joint Pension Tr. of Chicago v. JP Morgan Chase Co., 553 F.3d

187, 205–06 (2d Cir. 2009)).

Indeed, other courts within this Circuit have concluded that similar “[b]road statements

about value creation and seizing opportunities are the type of corporate-speak that ‘offer only

generally optimistic opinions’ and are non-actionable as puffery.” City of Sterling Heights Police

& Fire Ret. Sys. v. Reckitt Benckiser Grp. PLC, 587 F. Supp. 3d 56, 92 (S.D.N.Y. 2022) (quoting

In re Synchrony, 988 F.3d at 170); see also id. (explaining that company’s statement that

transaction had “the potential to deliver significant long-term value to Shareholders” was non-

actionable puffery); In re Synergy Pharms., Inc. Sec. Litig., No. 18-CV-873, 2021 WL 4480625,

at *11 (E.D.N.Y. Sept. 30, 2021) (concluding that company’s statement that loan would

“ultimately maximize long-term shareholder value” was “too vague to be actionable”), aff’d in

part, vacated in part on other grounds, remanded, No. 21-2724-CV, 2023 WL 5526675 (2d Cir.

Aug. 28, 2023); In re Vale S.A. Sec. Litig., No. 15-CV-9539, 2017 WL 1102666, at *21 (S.D.N.Y.

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health, safety, and the environment” were “aspirational generalizations” and therefore inactionable

puffery); Hutchinson v. Perez, No. 12-CV-1073, 2012 WL 5451258, at *8 (S.D.N.Y. Nov. 8, 2012)

(holding that defendants’ statement that company would “continue to . . . create significant value

of [sic] our shareholders” was inactionable puffery).

The Court’s conclusion finds further support in the context in which the challenged

statements appear. See In re Synchrony, 988 F.3d at 171 (“The literal truth of an isolated statement

is insufficient; the proper inquiry requires an examination of defendants’ representations, taken

together and in context.” (citation and internal quotation marks omitted)). The challenged

statements in the March and April Press Releases are surrounded by general declarations of what

the Board is “committed” to doing, what it is “focused on” and “work[ing] to deliver,” and how it

is “working collaboratively . . . to reach [its] goal[s][.]” (Compl. ¶¶ 40–41.) These are exactly

“the types of qualifiers which render the [challenged] statements even more in the nature of

puffery[.]” In re Vale, 2017 WL 1102666, at *22 (citing company’s statements regarding “what

[it] is ‘seeking’ to do, what it is ‘committed’ to doing, what it is ‘focused on,’ what it is ‘aiming’

to do, and what its ‘priorities’ are”); see also Plumber & Steamfitters Loc. 773, 11 F.4th at 103

(explaining that “[g]eneral declarations” of a company’s goals are “inactionable puffery, especially

when expressed in aspirational terms” (citation omitted)). Read in context, they are clearly “too

general to induce reliance” by a reasonable investor. Id. at 104 (citation omitted). Accordingly,

the challenged statements in the March and April Press Releases are not actionable.

2. The September Press Release

Because Cedar’s statements in the March and April Press Releases are not actionable,

Plaintiff’s claims under Section 10(b) and Rule 10b-5 depend on its allegations regarding the

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Plaintiff zeroes in on Schanzer’s statement in the September Press Release that “[t]he

Board is committed to maximizing value for all our shareholders and, accordingly, we believe that

this dual-track strategic review process will enable us to achieve that.” (Compl. ¶ 42; see also Pl.’s

Opp’n at 8.) Plaintiff alleges that this statement was materially misleading because despite Cedar’s

stated “commit[ment] to maximizing value for all [its] shareholders,” Defendants “knew by at least

August 2021 that any deal was likely to result in benefits only for common stockholders, who

would exit at a premium, while preferred stockholders would not receive deal consideration and

would be relegated to a smaller and less secure version of the Company surviving the transaction.”

(Compl. ¶ 44.) However, for several reasons, these allegations—whether viewed as “alleging a

material omission, a misleading statement, or half-truth,” In re DraftKings Inc. Sec. Litig., No. 21-

CV-5739, 2023 WL 145591, at *32 (S.D.N.Y. Jan. 10, 2023)—fail to state a claim under Section

10(b) and Rule 10b-5.

a. Materiality

As an initial matter, the precise statement on which Plaintiff relies—that “[t]he Board is

committed to maximizing value for all our shareholders”—is, for the same reasons as the March

and April Press Releases, “too general to induce reliance” by a reasonable investor. Plumber &

Steamfitters Loc. 773, 11 F.4th at 104 (citation omitted). Even if it represents a “statement[] about

a specific state of affairs,” as Plaintiff argues, (Pl.’s Opp’n at 12), it still must be read in context.

See In re Synchrony, 988 F.3d at 171. The September Press Release focuses on what Cedar intends

to “explor[e]” through its strategic review, and how it “believe[s]” that this review will enable the

Company to “achieve” its goals. Additionally, the September Press Release cautions investors

that “[n]o assurances can be given regarding the outcome or timing of the strategic review

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“aspirational terms” and disclaimers, the challenged statement is no more than a “general

declaration” of Cedar’s goals. See Plumber & Steamfitters Loc. 773, 11 F.4th at 103; see also In

re Vale, 2017 WL 1102666, at *22. Therefore, it is not actionable.

b. Falsity

In any event, the complaint does not adequately allege that the challenged statement in the

September Press Release was false or misleading—or that subsequent events rendered it false or

misleading, such that Cedar assumed a duty to disclose or update.

First, Plaintiff has not plausibly alleged that the challenged statement was false or

misleading at the time it was made. See In re Lululemon Sec. Litig., 14 F. Supp. 3d 553, 571

(S.D.N.Y. 2014) (“A violation of Section 10(b) and Rule 10b-5 premised on misstatements cannot

occur unless an alleged material misstatement was false at the time it was made.” (emphasis in

original)), aff’d, 604 F. App’x 62 (2d Cir. 2015). According to the complaint, by August 2021,

Defendants “knew . . . that any deal was likely to result in benefits only for common

stockholders[.]” (Compl. ¶ 44.) Specifically, “[o]n August 3, 2021, the Board was actively

negotiating the sale of a significant portion of Cedar’s assets to multiple counterparties and

instructed management to ‘make outreach to potential counterparties’ for the Company’s

remaining assets with the expectation that the deal(s) for the Company’s primary assets would be

successful.” (Id. ¶ 45.) Plaintiff contends that by this time, “[t]he die was cast, and the Company’s

assets inevitably would be stripped for the benefit of common shareholders,” (Pl.’s Opp’n at 11),

and therefore, Schanzer’s later statement in September 2021 that the Board remained “committed

to maximizing value for all [Cedar’s] shareholders” was false or misleading.

However, Plaintiff has not alleged any facts demonstrating that Schanzer’s statement was

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alleged that “Defendants had settled upon a particular form of transaction either as of August 2021

. . . , or as of the date of the September 2021 press release announcing the ‘dual-track’ process to

review strategic alternatives.” (Defs.’ Reply at 5, ECF No. 25.) Indeed, on closer scrutiny,

Plaintiff’s assertions that by September 2021, “the die was cast” and Defendants were “seeking

only to achieve” a positive outcome for common shareholders, (Pl.’s Opp’n at 11, 12), are

unsupported by any well-pleaded factual allegations.3

Plaintiff insists that the structure of Cedar’s transaction with Wheeler, which was not even

contemplated until January 2022, (Compl. ¶¶ 48–49), somehow renders Schanzer’s statement in

September 2021 false or misleading. (Pl.’s Opp’n at 2.) But even if the Wheeler transaction

ultimately did not treat all shareholders alike, that subsequent fact does not show that Schanzer’s

statement—that Cedar would seek to “maximiz[e] value for all our shareholders”—was false or

misleading when it was made. At bottom, Plaintiff’s allegations amount to nothing more than

“fraud by hindsight.” Novak v. Kasaks, 216 F.3d 300, 309 (2d Cir. 2000); see also San Leandro

Emergency Med. Grp. Profit Sharing Plan v. Philip Morris Cos., Inc., 75 F.3d 801, 812 (2d Cir.

1996) (affirming dismissal of securities fraud claims where plaintiffs failed to allege facts

“demonstrating that during the class period [the defendant] was doing anything but pursuing [its

expressed] strategy,” or that defendant “made any statements or predictions foreclosing the

possibility of adopting alternative marketing strategies”); In re Kirkland Lake Gold Ltd. Sec. Litig.,

No. 20-CV-4953, 2021 WL 4482151, at *4–5 (S.D.N.Y. Sept. 30, 2021) (rejecting plaintiff’s

allegations regarding acquisition as “fraud by hindsight” because challenged statements “were not

3 Plaintiff’s additional allegation that Defendants “knew” by August 2021 that “any deal was likely

to result in benefits only for common stockholders,” (Compl. ¶ 44), is entirely conclusory and therefore

fails to satisfy Rule 9(b). See ATSI, 493 F.3d at 99.

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as in San Leandro and Kirkland, Plaintiff does not plausibly allege that the challenged statement

was false or misleading when it was made. Likewise, Defendants made “[n]o assurances . . .

regarding the outcome or timing of the strategic review process,” and the Board expressly noted

that it was considering various “alternatives,” which it disclosed. (O’Brien Decl. Ex. 10 at 7.)

Second, for similar reasons, Plaintiff has not plausibly alleged an actionable omission. It

is well-settled that “‘[s]ilence, absent a duty to disclose, is not misleading under Rule 10b-5.’” In

re Synchrony, 988 F.3d at 167 (quoting Basic Inc. v. Levinson, 485 U.S. 224, 239 n.17 (1988)).

Thus, “an omission is actionable under the securities laws only when the corporation is subject to

a duty to disclose the omitted facts,” such was when “a statement is made that would be inaccurate,

incomplete, or misleading without further context.” Id. (internal quotation marks omitted). At the

same time, “[i]t is equally well established that a company has no such duty to disclose changes to

its business plans—unless the company ‘had “hyped” a specific plan, thereby inducing investors

to believe that alternative plans were excluded.’” Friedman v. Endo Int’l PLC, No. 16-CV-3912,

2018 WL 446189, at *6 (S.D.N.Y. Jan. 16, 2018) (quoting San Leandro, 75 F.3d at 810 (alterations

omitted)).

Plaintiff asserts that Cedar’s “misstatement in September 2021 that the Board was pursuing

a transaction to maximize value for ‘all our shareholders’ was materially misleading in view of the

undisclosed fact that, by at least August 2021, the Board was orchestrating a transaction that would

inequitably transfer much of the Company’s value solely to common stockholders at the expense

of the preferred stockholders.” (Pl.’s Opp’n at 9.) Plaintiff also maintains that by “comment[ing]

on the nature of the transaction the Board was orchestrating,” Defendants assumed a duty to

disclose “that the Board was actually negotiating a transaction that would . . . destroy significant

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proposition, but none supports its claims here.

Plaintiff relies primarily on In re Time Warner Inc. Sec. Litig., 9 F.3d 259 (2d Cir. 1993),

but Time Warner is distinguishable. The plaintiffs in Time Warner claimed that the company’s

“highly publicized campaign to find international ‘strategic partners’ who would infuse billions of

dollars of capital into the company,” was false and misleading because the company failed to

disclose that it was actively and seriously considering an alternative method of raising capital. 9

F.3d at 267–68. The Second Circuit held that the company’s decision to “publicly hype[] strategic

alliances” may have given rise to “a duty to disclose facts that would place the statements

concerning strategic alliances in a materially different light,” i.e., that it was simultaneously

considering strategies that it had implicitly ruled out. Id. at 268. Similarly, the portion of Kirkland

on which Plaintiff relies involved allegations that the company was “actively considering” a

specific acquisition, despite the CEO “explicitly downplay[ing]” the possibility of acquisitions

generally and the suitability of the target company specifically. 2021 WL 4482151, at *3. Because

the CEO “mentioned acquisitions while simultaneously minimizing it as an approach for [the

company] to grow,” the plaintiff’s allegations were sufficient to survive a motion to dismiss. Id.

And in Hi-Crush Partners L.P. Sec. Litig., No. 12-CV-8557, 2013 WL 6233561 (S.D.N.Y. Dec. 2,

2013), the court held that the plaintiff had adequately alleged a duty to disclose where the company

had “publicly hyped the importance of its relationship” with “one of its largest customers,” even

after the customer had repudiated its contracts with the company. Id. at *13–14.

By contrast, the Court agrees with Defendants that the well-pleaded allegations in the

complaint suggest that “nothing material was hidden from investors” in Cedar’s press releases.

(Defs.’ Reply at 8.) In fact, Plaintiff’s own allegations are entirely consistent with Cedar’s

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2021. Just as Plaintiff alleges that the Board “was actively negotiating the sale of a significant

portion of Cedar’s assets” and “instructed management to ‘make outreach to potential

counterparties’” regarding other asset sales, the September Press Release communicated that the

Board had “initiated a dual-track process to review the Company’s strategic alternatives,” and that

the Company was “exploring, among other alternatives, a potential sale or merger involving the

entire Company, and alternatively the potential sale of [specific assets].” (Compl. ¶ 42.) Unlike

the cases on which Plaintiff relies, Cedar’s Board even disclosed the specific assets under

consideration as part of any potential asset sale, which were ultimately sold to third parties as part

of the Wheeler transaction. (See O’Brien Decl. Ex. 10 at 7 (listing Cedar’s real estate advisors

“with respect to a potential sale of the grocery-anchored shopping center portfolio” and “the

mixed-use redevelopment projects,” respectively).) And the Board expressly disclaimed any

certainty regarding “the outcome or timing of the strategic review process.” (See id.) Therefore,

Plaintiff has not plausibly alleged that Cedar “‘stated its intention to adhere exclusively to’ a

particular strategy and then changed its strategy without informing investors,” such that it had a

duty to disclose. Friedman, 2018 WL 446189, at *6 (quoting Pehlivanian v. China Gerui

Advanced Materials Grp., Ltd., 153 F. Supp. 3d 628, 651 (S.D.N.Y. 2015)).4

4 To the extent Plaintiff argues that subsequent events obligated Defendants to update their statements

in the March, April, and September Press Releases, that argument fails. As discussed above, the challenged

statements in the press releases were not material. Defendants therefore had no duty to update them. See

In re Int’l Bus. Machines Corp. Sec. Litig., 163 F.3d 102, 110 (2d Cir. 1998) (explaining that “there is no

duty to update” if “the original statements are not material” (citations omitted)). At most, Defendants’

statements reflected expressions of optimism regarding the strategic review to be undertaken by the Board.

But, “[a] corporation’s expressions of optimism about negotiations, without definite positive projections,

do not create a duty to disclose all aspects of the negotiation to investors.” In re Synchrony, 988 F.3d at

167; see also id. (“In other words, there is no duty to update vague statements of optimism or expressions

of opinion.” (internal quotation marks omitted)).

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misleading statement or omission of material fact, Plaintiff’s claims under Section 10(b) and Rule

10b-5 must be dismissed.5

B. Section 20(a) Claims

To state a claim for control person liability under Section 20(a) of the Exchange Act, “a

plaintiff is required to establish, among other things, ‘a primary violation’ of the securities laws.”

Steamfitters’ Indus. Pension Fund v. Endo Int’l PLC, 771 F. App’x 494, 498 (2d Cir. 2019) (citing

Carpenters Pension Tr. Fund of St. Louis v. Barclays PLC, 750 F.3d 227, 236 (2d Cir. 2014)).

Because the complaint fails to state a primary violation under Section 10(b) and Rule 10b-5, it

necessarily fails to state a claim under Section 20(a). See Plumber & Steamfitters Loc. 773, 11

F.4th at 98 n.2 (“The failure to sufficiently plead actionable misstatements or omissions is fatal to

the [plaintiffs]’ § 10(b) claim. Because their § 20(a) claim depends on a viable § 10(b) claim, the

§ 20(a) claim fails as well.”). Accordingly, Plaintiff’s Section 20(a) claims are dismissed.

C. Negligent Misrepresentation Claims

To state a claim for negligent misrepresentation under New York law, a plaintiff must

allege that “‘(1) the defendant had a duty, as a result of a special relationship, to give correct

information; (2) the defendant made a false representation that he or she should have known was

incorrect; (3) the information supplied in the representation was known by the defendant to be

desired by the plaintiff for a serious purpose; (4) the plaintiff intended to rely and act upon it; and

(5) the plaintiff reasonably relied on it to his or her detriment.’” Anschutz, 690 F.3d at 114

(quoting Hydro Investors, Inc. v. Trafalgar Power Inc., 227 F.3d 8, 20 (2d Cir. 2000)).

5 As a result, the Court need not reach Defendants’ additional arguments in support of dismissal of

Plaintiff’s claims under Section 10(b) and Rule 10b-5. (See Defs.’ Mem. at 14–15, 18–22.)

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representation of a material fact that they knew or should have known was incorrect, Plaintiff’s

negligent misrepresentation claim must be dismissed. See Walsh v. Rigas, No. 17-CV-4089, 2019

WL 294798, at *13 (S.D.N.Y. Jan. 23, 2019) (explaining that “the identical analysis applies” to

securities fraud and negligent misrepresentation claims and dismissing negligent

misrepresentation claims “for same reasons that plaintiff’s securities claims failed”).

IV. CONCLUSION

For the reasons stated above, Defendants’ motion to dismiss is GRANTED and the

complaint is DISMISSED with prejudice. The Clerk of Court is respectfully directed to enter

judgment accordingly and close the case.

SO ORDERED.

Dated: September 25, 2023

Central Islip, New York

/s/ JMA

JOAN M. AZRACK

UNITED STATES DISTRICT JUDGE

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