HOWARD v. ARCONIC INC

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF PENNSYLVANIA

MARTIN HOWARD, )

)

Plaintiff, ) 2:17-cv-1057

)

v. )

)

ARCONIC INC., ET AL., )

)

Defendants. )

)

OPINION

Mark R. Hornak, Chief United States District Judge

This Court previously granted Defendants’ motion to dismiss Plaintiffs’ First Amended

Complaint and dismissed the First Amended Complaint in its entirety and without prejudice with

leave to amend. (ECF Nos. 106, 107.) Plaintiffs seized the opportunity to amend and filed a Second

Amended Complaint, which Defendants have again moved to dismiss in its entirety.

Because the Court concludes that the Second Amended Complaint cures some, but not all,

of the “three related and fundamental flaws” that were fatal to the First Amended Complaint (see

ECF No. 106, at 10), the Court will deny in part, and grant in part, Defendants’ pending Motion to

Dismiss at ECF No. 111. In sum, the claims against Mr. Kleinfeld at Counts III and IV and the

claims against the Individual Defendants and Arconic at Count II will be dismissed with prejudice.

The claims against Arconic at Count III and against all Defendants at Count I survive Defendants’

motion to dismiss, but only to the extent described below.

I. BACKGROUND

The Court previously discussed the events prompting the filing of this lawsuit, as alleged

in the First Amended Complaint (“FAC”) at ECF No. 61. (See ECF No. 106, at 2–8.) The Court

need not repeat this factual history, most of which is re-pleaded in the Second Amended Complaint

(“SAC”) at ECF No. 108, and which is, at this point, familiar to all parties and to the Court.1

But here is a brief recap: Arconic, Inc. is a global company engaged in “the engineering

and manufacturing of aluminum and other lightweight metals.” (SAC ¶ 18.) Arconic manufactured

and sold an aluminum composite product called Reynobond PE, which is applied as an exterior

wall cladding. (Id. ¶ 2.) In 2017, a fire broke out at the Grenfell Tower in London, England, leading

to the death of 71 people and injuries to more than 70 others. (Id. ¶ 5.) The Grenfell Tower’s

exterior cladding system included Reynobond PE, and it was reported that the Reynobond PE

contributed to the fire’s rapid spread. (Id. ¶¶ 5–8.) Plaintiffs filed a federal securities class action

against Defendants, alleging claims under the Securities Exchange Act of 1934 and the Securities

Act of 1933. (Id. ¶¶ 3–4.) Besides Arconic, Defendants include Klaus Kleinfeld, the Company’s

former Chief Executive Officer and Chairman of its Board of Directors; current and former officers

and directors of Arconic who signed the Registration for the Preferred Offering (those individuals,

together with Kleinfeld, the “Individual Defendants”); and investment banking firms that acted as

underwriters for the Preferred Offering (together, the “Underwriter Defendants”). (Id. ¶¶ 19–25.)

In April 2018, Plaintiffs filed the FAC. (ECF No. 61.) Defendants moved to dismiss the

FAC. (ECF No. 71.) After full briefing and oral argument, this Court issued an 82-page Opinion,

dismissing the FAC without prejudice and giving Plaintiffs the chance to file another amended

Complaint to the extent that doing so would not be futile. (ECF Nos. 106, 107.) Plaintiffs filed the

SAC, and Defendants again moved to dismiss. (ECF Nos. 108, 111.) The matter is now fully

briefed, including supplemental briefing on relevant legal developments in the Third Circuit. (ECF

Nos. 112, 115, 118, 126, 128, 129.)

1 Likewise, throughout this Opinion, the Court refrains from explaining the SAC’s allegations if they also appeared

in the FAC.

This Court dismissed Plaintiffs’ FAC centrally based on “three related and fundamental

flaws”: (1) that Plaintiffs did not “adequately and plausibly allege[] that Reynobond PE was being

or had been sold for inappropriate end uses other than on the Grenfell Tower”; (2) that Plaintiffs

failed to “adequately and plausibly allege that Kleinfeld or any other Arconic executive knew that

Reynobond PE was allegedly being sold for improper end uses”; and (3) that “as pleaded, the [FAC

did] not plausibly show that a failure to inform investors of this single sale to an end user who

wound up using the product unsafely provides a basis for a securities law claim.” (ECF No. 106,

at 8–11.) These factual gaps caused the Court to conclude that the FAC did not sufficiently allege

the requisite levels of materiality and scienter sufficient to support the securities law claims that

Plaintiffs sought to advance.

In the SAC, Plaintiffs put forth new allegations that cure some but not all of these flaws.

The new allegations fall into two main categories: (1) Plaintiffs allege that Arconic regularly sold

Reynobond PE for use on high-rise buildings around the world and tracked the specifications for

each construction project to which it supplied Reynobond PE panels; and (2) Plaintiffs allege with

more specificity that Arconic managers tasked with certifying Reynobond products knew and

concealed the fact that Reynobond PE failed to meet safety standards necessary for the cladding

to meet government guidelines.

A. The Alleged Regular Practice of Selling Reynobond PE for Use in High-Rise Buildings

Plaintiffs allege that, on top of the sale of Reynobond PE for use in the Grenfell Tower,

Arconic sold Reynobond PE for use in many other high-rise buildings, including: multiple high-

rise student housing buildings in Newcastle and Nottingham, England; a high-rise student resident

hall in Edinburgh, Scotland; multiple high-rise housing buildings in Camden, England; 14 high-

rise blocks around the United Kingdom; Clements Court tower in London, England; Castlemain

Tower in London, England; Horatia House in Portsmouth, England; the 32-story Marriott

Waterfront Hotel in Baltimore, Maryland; a 24-meter building that houses the office of the

Chancellor of the California State University System in Long Beach, California; a 26-meter

terminal at the Dallas/Fort Worth International Airport; a 20-meter clinic of the University of

Texas Southwestern Medical Center; the 52-meter Cleveland Browns stadium; River East Center’s

hotel and condominium building; and the Gordon B. Isnor Manor in Halifax, Canada. (Id. ¶¶ 49,

51–57, 60, 63, 69, 73–78.) Plaintiffs allege that approximately 230 high-rises in the U.K. are clad

with Reynobond PE. (Id. ¶ 170.) Plaintiffs also allege that these sales were occurring as early as

2006. (Id. ¶ 56.)

According to a confidential witness, certain members of Arconic’s management knew that

Arconic had a practice of systematically selling Reynobond PE for use in high-rise buildings. (Id.

¶ 158.) Plaintiffs also allege that Mr. Claude Schmidt, the general manager of the French facility

where the Reynobond PE products were manufactured for use in the U.K. and parts of Europe,

knew from sales and production reports and an internal tracking database that the Reynobond PE

panels were regularly being sold for use in high-rise projects. (Id. ¶¶ 160–65.)

B. Alleged Concealment of a Failure to Meet Safety Standards

The SAC also pleads in more detail facts that Plaintiffs say show that Arconic concealed

downgraded safety reports about the Reynobond PE product. Here is what the SAC alleges in those

regards.

Plaintiffs cite an expert report prepared in connection with the Grenfell Tower investigation

in the U.K. that revealed Reynobond PE received downgraded safety ratings. (Id. ¶ 120.) The

expert report allegedly shows that Arconic hid the downgraded ratings from the contractor and

architects of the Grenfell Tower refurbishment, and from the British Board of Agrément (“BBA”),

the entity that certifies buildings under the U.K. building regulations. (Id. ¶¶ 120–31.) In 2008,

Reynobond PE had been certified as Class 0 under the U.K. building regulations, which meant that

the product had the highest rating for preventing the spread of flames and heat. (Id. ¶¶ 116–18,

120–21.) But, from October 2011 through 2015, the Scientific and Technical Centre for Building

(“CSTB”), which uses the Euroclass standard to classify building products based on their level of

combustibility and their fire resistances, had rated Reynobond PE as Euroclass E on its scale of

A1 to F, with A1 being the highest fire rating and F being the lowest. (Id. ¶¶ 111, 120.) The

Euroclass E ratings made the Reynobond PE product ineligible for a Class 0 rating, yet Plaintiffs

say that Arconic knowingly continued to claim that Reynobond PE had a Class 0 rating and

continued to rely on a factually incorrect safety certification. (Id. ¶¶ 115–16, 118–21, 131.)

According to a confidential witness, two members of what Plaintiffs contend were among

Arconic’s top management knew about these Reynobond PE fire test results. (Id. ¶ 154.) Mr.

Claude Wehrle, Arconic’s Technical Manager at the French facility, was responsible for the

certification of Arconic’s Reynobond PE products. (Id. ¶ 133.) Plaintiffs allege that although Mr.

Wehrle’s direct employer was an Arconic subsidiary, he nonetheless was the designated Arconic

representative involved in corresponding with the CSTB and was also responsible for

communicating with the BBA about the certification of Arconic’s Reynobond PE products. (Id. ¶¶

133–34.) Under his direction, the Technology Department of the French facility submitted and

received results of the fire tests and coordinated the submission of Reynobond PE panels for

testing. (Id. ¶¶ 154–55.) In addition, when a Reynobond PE panel received poor test results, the

Department reported the results to Mr. Schmidt. (Id. ¶ 154.)

Plaintiffs allege that Arconic concealed from the BBA the test results performed by the

CSTB. (Id. ¶ 134.) Despite Arconic’s contractual obligation to inform BBA that it had received a

Euroclass E rating, the BBA never received that information. (Id. ¶¶ 117–18, 127.) The BBA

continued to maintain its 2008 rating certification of Reynobond PE, which showed that the PE

products were rated Class 0 and Euroclass B. (Id. ¶ 134.) Arconic also allegedly misrepresented

on its website that Reynobond PE had a Class 0 rating. (Id. ¶ 135.) According to the SAC, the

Arconic website stated the following:

• “Reynobond . . . composite and aluminum sheet panels are certified in more than 15

countries by certifying bodies such as BBA, CSTB or ISO.”

• “Fire certificates for Reynobond Architecture: Great Britain BS476 part 6 & 7: Reynobond

PE & FR: Class 0; Great Britain BBA Agreement BBA08/4510, classifying the PE panels

as Class 0.”

• “Behaviour in relation to fire: when tested for reaction to fire, [product] achieved a

classification of B-s2 . . . As a consequence . . . the product[s] may be regarded as having

a Class 0 surface.” (See, e.g., id.)

II. STANDARD OF REVIEW

In considering a motion to dismiss pursuant to Rule 12(b)(6), the Court is to “accept all

factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and

determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to

relief.” Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (citation omitted).

Ordinarily, to survive a motion to dismiss, a complaint must plead “enough facts to state a claim

to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (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.” Ashcroft v. Iqbal,

556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). And as noted below, provisions of

applicable federal securities statutes set the more particularized substantive context in which some

of these assessments are required to be made.

III. DISCUSSION

In the SAC, as in the FAC, Plaintiffs allege that Arconic and Mr. Kleinfeld violated § 10(b)

of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder

(Count III), that all Defendants violated § 11 of the Securities Act of 1933 and the rules and

regulations promulgated thereunder (Count I), that Mr. Kleinfeld violated § 20(a) of the Exchange

Act (Count IV), and that Arconic and the Individual Defendants violated § 15 of the Securities Act

(Count II).

A. Count III: Section 10(b) of the Exchange Act

Section 10(b) of the Exchange Act makes it unlawful for any person “[t]o use or employ,

in connection with the purchase or sale of any security . . . any manipulative or deceptive device

or contrivance in contravention of such rules and regulations” prescribed by the SEC. 15 U.S.C. §

78j(b). To implement § 10(b), the SEC promulgated Rule 10b-5, which makes it unlawful “[t]o

make any untrue statement of a material fact or to omit to state a material fact necessary in order

to make the statements made, in the light of the circumstances under which they were made, not

misleading . . . in connection with the purchase or sale of any security.” 17 C.F.R. § 240.10b-5(b).

The Supreme Court has implied a private cause of action from the text and purpose of §

10(b) available to investors who have been injured by its violation. See Tellabs, Inc. v. Makor

Issues & Rights, Ltd., 551 U.S. 308, 318 (2007). To state a securities fraud claim under § 10(b), a

plaintiff must allege the following elements: (1) a material misrepresentation or omission; (2)

scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a

security; (4) reliance on the misrepresentation or omission; (5) economic loss; and (6) loss

causation. Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 341–42 (2005); City of Edinburgh Council

v. Pfizer, Inc., 754 F.3d 159, 167 (3d Cir. 2014).

In addition to pleading the foregoing elements, the Private Securities Litigation Reform

Act (“PSLRA”) imposes two distinct, heightened pleading requirements that must be satisfied for

a complaint alleging § 10(b) claims to survive a motion to dismiss. See Inst’l Inv’rs Group v.

Avaya, Inc., 564 F.3d 242, 252–53 (3d Cir. 2009). First, the PSLRA requires that “the complaint

shall 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(b)(1). Second, the complaint must, “with respect to each act or

omission alleged to violate this chapter, state with particularity facts giving rise to a strong

inference that the defendant acted with the required state of mind.” 15 U.S.C. § 78u–4(b)(2)(A).

That state of mind is “scienter,” which is defined as a “mental state embracing intent to deceive,

manipulate, or defraud” and it requires knowledge or recklessness. Avaya, 564 F.3d at 252

(quoting Ernst & Ernst v. Hochfelder, 425 U.S. 185, 194 n.12 (1976)). Both provisions require

that facts be pleaded with particularity. This standard “requires plaintiffs to plead the who, what,

when, where and how: the first paragraph of any newspaper story.” Id. at 253 (quoting In re

Advanta Corp. Sec. Litig., 180 F.3d 525, 534 (3d Cir. 1999)).

The Supreme Court has prescribed a three-step process for considering a motion to dismiss

in a § 10(b) case. See Tellabs, 551 U.S. at 322–23. First, as with any motion to dismiss, the court

must “accept all factual allegations in the complaint as true.” Id. at 322. Second, the court must

“consider the complaint in its entirety, as well as other sources courts ordinarily examine when

ruling on Rule 12(b)(6) motions to dismiss, in particular, documents incorporated into the

complaint by reference, and matters of which a court may take judicial notice.” Id. On this point,

the inquiry is “whether all of the facts alleged, taken collectively, give rise to a strong inference of

scienter, not whether any individual allegation, scrutinized in isolation, meets that standard.” Id. at

323. Third, “in determining whether the pleaded facts give rise to a ‘strong’ inference of scienter,

the court must take into account plausible opposing inferences.” Id.

Plaintiffs assert in Count III of the SAC that Arconic and Mr. Kleinfeld violated § 10(b) of

the Exchange Act and Rule 10b-5 by making false statements of material fact and/or by failing to

state, and thereby omitting, material facts, which deceived the investing public, artificially inflated

Arconic’s securities’ prices, and caused Plaintiffs and members of the Class to purchase Arconic’s

securities at artificially inflated prices. In the SAC, Plaintiffs essentially recycle some of the §

10(b) claims that they alleged in the FAC: (1) statements in risk disclosures; (2) statements about

Arconic’s values, commitment to safety, and the safety of Arconic products; and (3) statements

about Reynobond PE in product brochures posted on Arconic’s website.2 The SAC also alleges

that three newly alleged statements that appeared on Arconic’s website are actionable under §

10(b).

Defendants contend that Plaintiffs’ § 10(b) claims must be dismissed because: (1) the Court

already concluded that most statements in the SAC are not actionable and none of the new

allegations affect these rulings; (2) Plaintiffs fail to adequately allege that the new statements in

the SAC: (i) were materially misleading, (ii) were made “in connection with” the purchase or sale

of securities, or (iii) were the proximate cause of the decline in the security’s value (in other words,

2 Plaintiffs are no longer pursuing their § 10(b) claims with respect to Defendants’ representations in financial

disclosures. (ECF No. 115, at 13 n.4.)

a failure to adequately plead loss causation); and (3) Plaintiffs again fail to raise a strong inference

of scienter as to Arconic or Mr. Kleinfeld.

The Court must essentially decide whether the SAC’s new allegations affect the Court’s

prior § 10(b) rulings, and whether the newly alleged misleading statements are actionable. The

Court will first address Defendants’ arguments about each group of alleged misleading

statements.3 The Court will then turn to the issue of scienter, which pertains to all § 10(b) claims.

1. Risk Disclosures

The Court previously concluded that the identified risk disclosures were not actionable

because they were not materially false or misleading, and they were protected by the PSLRA safe

harbor and the common-law bespeaks caution doctrine. (ECF No. 106, at 39–48.) Now the Court

concludes that the amplified allegations of the SAC transform the context in which these

statements were made. In light of the new context, Plaintiffs plausibly allege that the statements

were materially false or misleading. However, all but one statement within the risk disclosures

remain protected by the PSLRA safe harbor or “bespeaks caution” doctrine and are therefore not

actionable here.

i. Material misrepresentation or omission

The first element of a § 10(b) securities fraud claim is a material misrepresentation or

omission. Under the PSLRA’s heightened pleading standard, a plaintiff first must specify each

allegedly misleading statement, why the statement was misleading, and, if an allegation is made

on information and belief, all facts supporting that belief with particularity. 15 U.S.C. § 78u–

4(b)(1). To prevail on a § 10(b) claim, a plaintiff must show that the defendant made a misleading

statement or omission as to a material fact. Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 38

3 The challenged statements that survive the motion to dismiss in whole or in part are reproduced in Appendix A to

this Opinion.

(2011) (citing Basic Inc. v. Levinson, 485 U.S. 224, 238 (1988)). A misrepresentation or omission

“is material if there is a substantial likelihood that a reasonable shareholder would consider it

important in deciding how to [act].” TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976).

The Supreme Court has held that to satisfy the materiality requirement “there must be a substantial

likelihood that the disclosure of the omitted fact would have been viewed by the reasonable

investor as having significantly altered the ‘total mix’ of information made available.” Basic Inc.,

485 U.S. at 231–32 (quoting TSC Indus., 426 U.S. at 449).

The Third Circuit has held that the question of materiality “typically presents a mixed

question of law and fact,” which has traditionally been viewed as appropriate for the trier of fact.

Semerenko v. Cendant Corp., 223 F.3d 165, 178 (3d Cir. 2000). But “complaints alleging securities

fraud often contain claims of omissions or misstatements that are obviously so unimportant that

courts can rule them immaterial as a matter of law at the pleading stage.” In re Burlington Coat

Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997). The Court determines materiality as of

the date of the alleged misstatement or omission, not with the benefit of hindsight. See In re NAHC,

Inc. Sec. Litig., 306 F.3d 1314, 1330 (3d Cir. 2002).

Plaintiffs argue that the risk disclosures were materially false or misleading in light of the

allegations of the SAC. The risk disclosures made representations about Arconic’s exposure to

legal proceedings and investigations; Arconic’s compliance with health and safety legislation and

regulations; and the impact of unexpected events on Arconic’s cost of doing business. (See, e.g.,

SAC ¶¶ 240–42.) Plaintiffs contend that these statements were materially false or misleading

because Arconic failed to disclose what Plaintiffs contend was Arconic’s regular practice of selling

Reynobond PE in a manner that was unsafe, was not legally compliant, and presented a fire hazard.

(ECF No. 115, at 22; see, e.g., SAC ¶ 270.) Defendants contend that none of the new allegations

have any impact on the Court’s earlier rulings on risk disclosures. (ECF No. 118, at 8.)

Despite Defendants’ assertions otherwise, the new allegations throughout the SAC have a

“plausible impact” on the Court’s prior reasoning. (See ECF No. 112, at 13.) In its prior Opinion,

the Court emphasized Plaintiffs’ failure to adequately allege that Reynobond PE had been sold for

inappropriate end uses other than on the Grenfell Tower. Indeed, the Court expressly viewed the

risk disclosures in the context of the one sale of Reynobond PE to the Grenfell Tower, concluding

that the single sale was “too far removed from Arconic’s company-wide risk disclosure to be

actionable.” (ECF No. 106, at 41 (“It would appear that these disclosures were designed to deal

with just such a situation as a sale of a product that no longer complied with local regulations.”).)

And when discussing the alleged falsity of the risk disclosures, the Court repeatedly referred to “a

sale” of Reynobond PE for “an inappropriate use.” (See, e.g., id. at 42 (emphasis added).) The

Court stated that such a sale, “without more,” could not render insufficient Arconic’s risk

management and compliance programs. (See id. at 41.)

The new allegations in the SAC sufficiently offer “more.” The new allegations plausibly

allege not just a single sale of Reynobond PE that resulted in an inappropriate use by one end user,

but instead assert a regular and systematic practice of such sales, leading to many dozens of sales

over multiple years. The SAC now alleges with specificity that Arconic regularly sold Reynobond

PE for use in high-rise buildings, approximating that 230 high-rise buildings in the U.K. are clad

with Reynobond PE and also identifying its use in specific high-rises around the world. (See, e.g.,

¶¶ 49, 51, 54, 73, 170.)

In light of the new allegations, the Court concludes that Plaintiffs adequately plead that the

risk disclosures were materially false or misleading. In Meyer v. Jinkosolar Holdings Company,

the Second Circuit concluded that statements warning about potential environmental risks were

misleading because they failed to disclose violations of environmental regulations that had already

occurred and were ongoing. 761 F.3d 245, 251–52 (2d Cir. 2014) (“A generic warning of a risk

will not suffice when undisclosed facts on the ground would substantially affect a reasonable

investor’s calculations of probability.” (citing Rombach v. Chang, 355 F.3d 164, 173 (2d Cir.

2004))). Similarly, here, statements warning about potential compliance issues and safety risks

could plausibly be found to have been misleading because they failed to disclose an allegedly

ongoing and systematic sales practice of a sufficient magnitude that increased the likelihood of

that risk materializing in a serious way. For example, Arconic was allegedly already selling the

Reynobond PE product for non-compliant use, and doing so on a regular basis, when Arconic

issued statements about its regulatory compliance.

Defendants’ arguments do not persuade the Court otherwise. For example, Defendants

emphasize that the risk disclosures in this case are more generic than the actionable statements in

Meyer. (See ECF No. 118, at 8 n.3.) This is true and something the Court noted in its earlier

Opinion. The Court then explained that, unlike the detailed disclosures in Meyer, “the broad

disclosures here could not mislead investors into thinking that Arconic would never face any

product-safety risks or that it had completely eliminated such risks.” (ECF No. 106, at 43.) But the

Court conducted its prior analysis of the disclosure statements given the allegations set forth in the

FAC. In the context of the SAC, the disclosure statements could plausibly be found to be

insufficient when considering Plaintiffs’ plausible allegations that Arconic failed to disclose the

allegedly extensive ongoing Company sales practice of Reynobond PE for use in high-rise

buildings. Likewise, Defendants cite the Court’s previous observation that Plaintiffs’ “theory

would impose securities liability any time a company spoke on its compliance programs and then

had any sort of compliance gap or issue.” (See id. at 42.) But Defendants again ignore the crux of

the SAC’s new allegations. Unlike the FAC, the SAC does not allege a “compliance gap.” Instead,

the SAC alleges a concerted sales effort that allegedly did not align in a significant and material

way with Arconic’s representations in the risk disclosures. The alleged omissions are no longer

too attenuated from the risk disclosures.

Defendants also advance an argument about the § 11 claims that is applicable to the § 10(b)

claims and thus worth discussing here. They say that the statement that Arconic “believes it has

adopted appropriate risk management and compliance programs to address and reduce” certain

risks is a non-actionable opinion. (ECF No. 112, at 36.) Most courts recognize that analyses of

opinion statements are similar under both § 11 and § 10(b). See, e.g., Hall v. Johnson & Johnson,

No. 18-1833, 2019 WL 7207491, at *12 (D.N.J. Dec. 27, 2019).

To adequately allege that an opinion statement is false or misleading, a plaintiff must plead

facts that, if true, would be sufficient to show that the opinion statement “constitutes a

factual misstatement” or is rendered misleading by the omission of material facts about the

“inquiry into or knowledge concerning” the statement, if those facts “conflict with what a

reasonable investor would take from the statement itself.” Omnicare, Inc. v. Laborers Dist.

Council Const. Indus. Pension Fund, 575 U.S. 175, 182, 189 (2015) (discussing opinion statements

in the context of § 11 claims).4 “[A] reasonable investor may, depending on the circumstances,

understand an opinion statement to convey facts about how the speaker has formed the opinion—

or, otherwise put, about the speaker’s basis for holding that view. And if the real facts are

4 Although Omnicare examined claims under Section 11, the Supreme Court clarified that these principles are “not

unique to § 11.” Omnicare, 575 U.S. at 191. The Third Circuit has not considered whether Omnicare applies to claims

brought under the Exchange Act. See Jaroslawicz v. M&T Bank Corp., 962 F.3d 701, 717 n.16 (3d Cir. 2020), cert.

denied, 141 S. Ct. 1284 (2021). But, as referenced above, most courts have applied Omnicare’s analysis of opinion

statements to alleged misleading opinions under § 10(b). See, e.g., Hall, 2019 WL 7207491, at *12; In re Lehman

Bros. Sec. & Erisa Litig., 131 F. Supp. 3d 241, 251 (S.D.N.Y. 2015).

otherwise, but not provided, the opinion statement will mislead its audience.” Id. at 188. As such,

an investor “cannot state a claim by alleging only that an opinion was wrong; the complaint must

as well call into question the issuer’s basis for offering the opinion.” Id. at 194.

Here, Plaintiffs “identify particular (and material) facts” whose omission plausibly makes

the opinion statement at issue misleading to a reasonable investor “reading the statement fairly and

in context.” See id. The Court previously concluded that this specific statement was a non-

actionable opinion statement in part because “one sale” of Reynobond PE resulting in

inappropriate use did not contradict Arconic’s basis for a general opinion about its global risk

management programs. (See ECF No. 106, at 44.) But the Court recognized that “such a belief

does not provide a company carte blanche” to assert any opinion. (See id.) Under the

circumstances alleged in the SAC, a reasonable investor could plausibly understand the statement

to convey misleading facts about how Arconic formed its belief that it had adopted appropriate

risk management and compliance programs. A reasonable investor could plausibly take from this

risk disclosure statement that Arconic had a reasonable basis for its belief that it had implemented

appropriate risk management and compliance programs, an understanding that conflicts with

Arconic’s alleged sales practice of actively and broadly placing into the marketplace a flammable

product for improper use in situations where the risk of any loss being catastrophic was significant,

were a loss to occur. In other words, in making the statement, Defendants conveyed to investors

that there was a reasonable basis for their belief about the adequacy of the compliance/risk

management programs. But the substantial number of sales now pled in the SAC could plausibly

call into question the reasonableness of that belief. The SAC’s allegations now render this

particular statement materially misleading even if it were classified as being an “opinion.”

ii. PSLRA safe harbor and the “bespeaks caution” doctrine

In its prior Opinion, the Court further concluded that the risk disclosures fell within the

PSLRA safe harbor and were protected by the “bespeaks caution” doctrine because they were

plainly forward-looking and were accompanied by sufficient cautionary language. (ECF No. 106,

at 44–48.) The PSLRA safe harbor “immunizes from liability any forward-looking statement,

provided that: the statement is identified as such and accompanied by meaningful cautionary

language; or is immaterial; or the plaintiff fails to show the statement was made with actual

knowledge of its falsehood.” Avaya, 564 F.3d at 254 (citing 15 U.S.C. § 78u–5(c)). The cautionary

language must be “‘extensive yet specific’ to prevent a reasonable investor from relying on specific

projections.” Semerenko, 223 F.3d at 182 (quoting In re Trump Casino Sec. Litig., 7 F.3d 357, 369

(3d Cir. 1993)).

The judicially adopted bespeaks caution doctrine, which overlaps with, but is not

supplanted by, the PSLRA safe harbor, provides that when:

[F]orecasts, opinions or projections are accompanied by meaningful cautionary

statements, the forward-looking statements will not form the basis for a securities

fraud claim if those statements did not affect the ‘total mix’ of information . . .

provided investors. In other words, cautionary language, if sufficient, renders the

alleged omissions or misrepresentations immaterial as a matter of law.

In re Trump, 7 F.3d at 371. The doctrine is a “shorthand for the well-established principle that a

statement or omission must be considered in context, so that accompanying statements may render

it immaterial as a matter of law.” Id. at 363. Yet the doctrine does not automatically render all

disclaimers not actionable. A “vague or blanket (boilerplate) disclaimer which merely warns the

reader that the investment has risks will ordinarily be inadequate to prevent misinformation.” Id.

at 371. To be protected under the doctrine, “the cautionary statements must be substantive and

tailored to the specific future projections, estimates or opinions in the prospectus which the

plaintiffs challenge.” Id. at 371–72.

To determine whether the safe harbor applies, the Court first must decide if the challenged

statements meet the definition of “forward-looking,” as the provision only applies to forward-

looking statements. The Court previously concluded that the risk disclosure statements were

“plainly forward-looking.” (ECF No. 106, at 45.)

In the § 10(b) section of their response brief, Plaintiffs only appear to argue that the

cautionary language was insufficient, not that the statements were not forward-looking. (ECF No.

115, at 22–23.) But in discussing the alleged § 11 violation, Plaintiffs do argue that the risk

disclosure statements are not entitled to the PLSRA safe harbor because the risks about which

Arconic was allegedly cautioning investors were not simply ones that could possibly transpire, but

instead were ones that had already existed and had transpired for years. (Id. at 32.)5 After all, the

SAC alleges that Arconic sold Reynobond PE for use in high-rises before the Preferred IPO, even

as early as 2006. (See, e.g., SAC ¶ 56.) As such, and because a “mixed present/future statement is

not entitled to the safe harbor with respect to the part of the statement that refers to the present,”

Plaintiffs contend that the safe harbor provision does not apply. (ECF No. 115, at 22–23 (quoting

Avaya, 564 F.3d at 255).)

But what really matters is the language of the statements and the context in which they

arise. See Avaya, 564 F.3d at 255–56. The risk disclosures at issue here appeared in the “Risk

Factors” section of Arconic’s 10-K reports. Courts have often found that risk disclosures of this

kind are forward-looking or are otherwise not actionable by themselves. See, e.g., Indiana Pub.

5 The safe harbor that applies to statements covered by the Securities Act and the safe harbor that applies to statements

covered by the Exchange Act are “identical in all significant respects.” See W. Palm Beach Firefighters’ Pension Fund

v. Conagra Brands, Inc., 495 F. Supp. 3d 622, 654 (N.D. Ill. 2020) (citing Asher v. Baxter Int’l Inc., 377 F.3d 727,

729 (7th Cir. 2004), as amended (Sept. 3, 2004)).

Retirement System, et. al. v. Pluralsight, Inc., No. 19-128, 2021 WL 1222290, at *13–14 (D. Utah

Mar. 31, 2021) (collecting cases); In re FBR Inc. Sec. Litig., 544 F. Supp. 2d 346, 360 (S.D.N.Y.

2008). The Sixth Circuit explained that “[r]isk disclosures like the ones accompanying 10–Qs and

other SEC filings are inherently prospective in nature” because they “warn an investor of what

harms may come to their investment” and “are not meant to educate investors on what harms are

currently affecting the company.” Bondali v. YumA Brands, Inc., 620 F. App’x 483, 491 (6th Cir.

2015). “[A] reasonable investor would be unlikely to infer anything regarding the current state of

a corporation’s compliance, safety, or other operations from a statement intended to educate the

investor on future harms.” Id. The court recognized, however, that “there may be circumstances

under which a risk disclosure might support Section 10(b) liability.” Id.

For the reasons outlined in the Court’s prior Opinion, most of the identified risk disclosure

statements warn investors about future harms. The Court stated that the risk disclosures “project

possible consequences should a risk related to safety, product liability, unexpected events, or other

contingencies materialize.” (ECF No. 106, at 45.) The Court also highlighted that the 2013 10-K

explicitly defined “Forward-Looking Statements” as including all expectations and assumptions

other than statements of historical fact. (See 2013 10-K, at 4.) These observations generally remain

true under the SAC, and as a result, most of the risk disclosures are forward-looking. For example,

the risk disclosure statements that refer to unexpected events that “may increase” Arconic’s cost

of doing business warn investors about possible changes that may occur in the future. (See SAC

¶¶ 242, 280, 321, 361); see also 15 U.S.C. § 78u–5(i)(1)(B) (defining forward-looking statement

in part as a statement about future operations). Similarly, the following statements are forward-

looking: statements that Arconic “may be exposed” to legal proceedings and “could be subject to”

fines and penalties; statements that compliance with legislation and regulatory requirements “may

prove to be” more costly; statements that operations results “could be affected” by other matters;

and statements that evolving regulatory standards “can result in increased litigation.” (See parts of

SAC ¶¶ 240, 241, 278, 279, 319, 320, 359, 360.)

That leaves only three challenged risk disclosure statements for further consideration:

(1) The “Company is . . . subject to a variety of legal compliance risks. These risks

include, among other things, potential claims relating to product liability, health

and safety . . . and compliance with U.S. and foreign export laws . . . and sales and

trading practices.”;

(2) “[Arconic] is subject to a broad range of health, safety and environmental laws and

regulations in the jurisdiction in which it operates and may be exposed to substantial

costs and liabilities associated with such laws and regulations.”; and

(3) “[Arconic] believes it has adopted appropriate risk management and compliance

programs to address and reduce these risks.”

The first two statements include present-tense language about the legal risks facing

Arconic (e.g., “is subject to . . .”). As Plaintiffs note, the safe harbor provision does not apply to a

“‘mixed present/future statement . . . with respect to the part of the statement that refers to the

present.’” Avaya, 564 F.3d at 255. However, parts of a forward-looking statement can only be

actionable when they include “discernable references to the present” that can “meaningfully be

distinguished from the future projection of which they are a part.” In re Aetna, Inc. Sec. Litig., 617

F.3d 272, 280 (3d Cir. 2010) (quoting Avaya, 564 F.3d at 255). Here, the first two statements refer

to future risk (“risks [of] potential claims” and “may be exposed”), and the present-tense aspect of

the statement (“[Arconic] is subject to . . .”) cannot be separated from these forward-looking

warnings. These two statements are therefore considered to be forward-looking.

The third statement, however, presents a different story. The statement identified in the

SAC is not forward-looking, nor is it even expressly in the present tense. But the Court recognizes

that it “must examine allegedly misleading statements in context.” In re Amarin Corp. PLC Sec.

Litig., No. 13-6663, 2016 WL 1644623, at *8 (D.N.J. Apr. 26, 2016), aff’d, 689 F. App’x 124 (3d

Cir. 2017). The full statement in the 10-K is: “While [Arconic] believes it has adopted appropriate

risk management and compliance programs to address and reduce these risks, the global and

diverse nature of its operations means that these risks will continue to exist, and additional legal

proceedings and contingencies may arise from time to time.” The first part of the statement refers

to Arconic’s belief at the time it was issued, and the core of that statement discusses Arconic’s

past adoption of risk management and compliance programs, albeit ones that arguably would have

also existed at the time the statement was being made. But if such a statement were considered

forward-looking, companies would be free to turn statements of historical fact into forward-

looking statements merely by reframing the statement solely as one expressing a current belief. To

the extent the rest of the statement references the future, the initial assertion that the Company

believes it adopted risk management and compliance programs is meaningfully distinguishable

from that future aspect. As a result, the third statement identified above is not forward looking.

(See SAC ¶¶ 240, 278, 319, 359.) This means that it is not protected by the PSLRA safe harbor or

the bespeaks caution doctrine, which only apply to forward-looking statements.

But, as discussed, the rest of the statements in the risk disclosures are forward-looking.

And under the PSLRA safe harbor, Defendants will not be liable for such forward-looking

statements if they were accompanied by meaningful cautionary language or if Plaintiffs failed to

show they were made with actual knowledge of falsity.

As for the adequacy of the accompanying cautionary language, the Court’s prior conclusion

no longer holds up as previously stated and must now be viewed in the context of the SAC’s

allegations. Integral to the Court’s prior conclusion on this issue was that the FAC did not plausibly

allege “with requisite specificity that any sales occurred other than the Grenfell Tower sale” or

that “Arconic was selling Reynobond PE for high-rise uses ‘for years.’” (See id. at 46.) This

mattered to the Court because “no amount of general cautionary language can protect a company

from failure to disclose . . . a risk that has already occurred.” (See id. (citing Lin v. Interactive

Brokers Grp., Inc., 574 F. Supp. 2d 408, 417 (S.D.N.Y. 2008).) Because the SAC now plausibly

alleges that Arconic had a years-long practice of selling Reynobond PE for use in high-rise

buildings contrary to its approved and tested uses, Plaintiffs plausibly allege that the cautionary

language is no longer sufficient to warrant protection under the safe-harbor provision or the

bespeaks caution doctrine. The risk-related statements as pleaded in the SAC did not “sufficiently

address[] the actual hazards Arconic faced.” (See ECF No. 106, at 47.) The SAC thus plausibly

alleges that the statements lacked meaningful cautionary language.

Even still, the safe harbor will still apply to the forward-looking statements if Plaintiffs

failed to adequately allege that the statements were made with actual knowledge of their falsehood.

See Avaya, 564 F.3d at 259 (“Since this provision specifies an ‘actual knowledge’ standard, the

scienter requirement for forward-looking statements is stricter than that for statements of current

fact. Whereas liability for the latter requires a showing of either knowing falsity or recklessness,

liability for the former attaches only upon proof of knowing falsity.”) As described in Section

III.B.2, infra, the Court concludes that Plaintiffs have not sufficiently pled a strong inference that

Defendants acted with actual knowledge of the falsity of those statements. This pleading failure is

dispositive on the question of whether the safe harbor applies to the forward-looking statements

within the risk disclosures. See id. The Court must therefore dismiss Plaintiffs’ § 10(b) claims

relating to the forward-looking risk disclosures.6

In sum, the SAC transforms Plaintiffs’ allegations about the risk disclosure statements—

but not enough for the claims based on all risk disclosure statements to survive. The SAC

adequately alleges the material misrepresentation element of the § 10(b) claim, but the PSLRA

safe harbor protects the forward-looking risk disclosure statements. However, the Court concludes

that one plausibly materially misleading risk disclosure statement is not forward looking, and so

the PSLRA safe harbor and bespeaks caution doctrine do not apply to that statement. That

statement is as follows: “[Arconic] believes it has adopted appropriate risk management and

compliance programs to address and reduce these risks.” (See SAC ¶¶ 240, 278, 319, 359.)

2. Values-Based and Safety Statements

Plaintiffs also allege that Arconic made materially misleading statements about the safety

of its products, its commitment to safety and development of safety procedures, its values and

ethics, and its compliance programs. The Court previously concluded that such statements were

not false or misleading, and that some statements were non-actionable puffery. (ECF No. 106, at

30–37, 48–51.) Plaintiffs argue that in light of the SAC’s new allegations that Arconic regularly

supplied Reynobond PE for use in high-rises, statements concerning safety and compliance with

laws and regulations are now actionable. (ECF No. 115, at 23.) Defendants again contend that the

SAC should not change the Court’s prior decision. (ECF No. 112, at 11–13.) The Court now

concludes that Plaintiffs plausibly allege that certain values-based/safety statements were

materially false or misleading.

6 To be clear, the actual knowledge requirement only comes into play when considering the PSLRA safe harbor or

bespeaks caution doctrine which only apply to forward-looking statements. Thus, the actual knowledge standard is

not required for non-forward-looking statements, such as the one identified above.

Like with the risk disclosure statements, the Court’s prior Opinion about the values-based

and safety statements focused on the single sale of Reynobond PE for use in the Grenfell Tower

and the alleged unsafe use by one end user. The Court distinguished the allegations about safety

practices here from the allegations in Shapiro v. UJB Fin. Corp., 964 F.2d 272 (3d Cir. 1992),

“where incompetent management practices were plainly at odds with statements touting

management’s prowess.” (ECF No. 106, at 32.) In Shapiro, the Third Circuit explained that if a

defendant characterizes a practice as “‘adequate’ or ‘solid’ even though it knows [it is] inadequate

or unstable, it exposes itself to possible liability for securities fraud. By addressing the quality of

a particular management practice, a defendant declares the subject of its representation to be

material to the reasonable shareholder” and must speak truthfully. 964 F.2d at 282. In assessing

the FAC, the Court determined that, unlike in Shapiro, there was “no nexus between Arconic’s

averred commitment to safety and ethics and alleged unsafe end use of one of its products.” (ECF

No. 106, at 32.) The Court stated that it was “not reasonable to interpret Arconic’s general values

statements as a covenant that each of its products would be safe in any use made by an end user.”

(Id. at 33.)

The SAC’s allegations impact the Court’s analysis. As explained above, the SAC now

plausibly pleads far more than “one sale” of Reynobond PE for an improper use. The SAC’s

allegations are more like those outlined in Shapiro, because Plaintiffs now allege that Arconic’s

representations contradicted its own sales practices, as opposed to one isolated improper use by an

end user. The SAC also alleges that Arconic concealed Reynobond PE’s downgraded certifications

from the Grenfell Tower contractors, the BBA, and the public. (See, e.g., SAC ¶¶ 129–34.) The

SAC adequately pleads that, by making affirmative representations about product safety and fire

safety certifications, Arconic exposed itself to potential liability on the matter. It would be

reasonable for an investor to interpret Arconic’s statements as representing that Arconic sought to

comply with—rather than ignore or mislead—regulatory bodies, and to employ sales practices for

its products that were attentive to relevant safety standards—rather than being dismissive of them.

As a result, Plaintiffs plausibly allege that some of the alleged statements in the SAC about

Arconic’s product safety and safety policies are materially false or misleading.7

However, some of the problems that plagued the FAC still remain in the SAC with respect

to certain types of these statements. First, some of the alleged statements “relate to [Arconic’s]

own workplace safety, not product safety.” (ECF No. 106, at 34.) The new allegations in the SAC

do not render Arconic’s statements about its own workplace safety false or misleading. The same

is true for statements about contractor safety. As one example of a workplace safety statement,

Arconic allegedly stated, “By reinforcing that nothing is more valuable than human life, [Arconic]

has progressively improved its safety performance over the years.” (SAC ¶ 261.) Read in context,

this statement refers to the safety of Arconic’s employees. For this reason, the alleged

misrepresentations about workplace safety within SAC ¶¶ 232, 243, 247, 260, 261, 283, 288, 295,

313, 331, 338, and 364 are not actionable and claims based on them will be dismissed.8

7 The Court notes that the SAC abandons some of the alleged false or misleading values/safety statements that were

pleaded in the FAC.

8 Likewise, other statements placed at issue here are not plausibly false or misleading. For example, SAC ¶ 334 is not

actionable because it is about the writing of Arconic’s sustainability report and is not false or misleading. Likewise,

SAC ¶ 284 is not false or misleading either. And part of SAC ¶ 333 is not actionable because it is about advanced

thermal technologies and is not contradicted by any of the SAC’s allegations. (“We create thermally efficient

architectural aluminum systems that help improve building energy-efficiency by up to 50%.”) The Court notes that

this statement is different from the statement in ¶ 336, which also refers to thermal technologies. The statement in ¶

336 is: “Architectural aluminum systems that use advanced thermal technologies can provide superior thermal

performance without compromising on structural performance” (emphasis added). Because the latter half of the

sentence refers to the structural performance of Arconic’s aluminum systems, an issue that Plaintiffs plausibly plead

that Defendants put “in play,” the statement in ¶ 336 is actionable, but the thermal-technology statement in ¶ 333 is

not. Finally, in addition to referring to workplace safety, SAC ¶ 338 mentions a certification that “assesses a product’s

safety to humans.” But the SAC’s allegations do not render such statement materially misleading.

Second, some of the allegations about values and safety statements are not actionable

because they are immaterial puffery. “It is well-established that general statements about

reputation, integrity, and compliance with ethical norms are inactionable ‘puffery,’ meaning that

they are ‘too general to cause a reasonable investor to rely upon them.’” City of Pontiac

Policemen’s & Firemen’s Ret. Sys. v. UBS AG, 752 F.3d 173, 183 (2d Cir. 2014) (citation omitted).

The distinguishing feature of puffery is its use of broad generalities, not simply its use of

talismanic aspirational language. Schiro v. Cemex, S.A.B. de C.V., 396 F. Supp. 3d 283, 298 n.5

(S.D.N.Y. 2019). Puffery statements do not violate the securities laws because they lack an

underlying factual basis and fail to meet Rule 10b–5’s materiality requirement. In re Newell

Brands, Inc. Sec. Litig., 837 F. App’x 869, 874 (3d Cir. 2020) (citing EP Medsystems, Inc. v.

EchoCath, Inc., 235 F.3d 865, 872 (3d Cir. 2000)).

Despite the new allegations in the SAC, certain allegedly misleading statements remain

non-actionable puffery. The statements that refer to Arconic’s Environmental, Health, and Safety

Policy and Principles are puffery because they are generalized and are “plainly aspirational goals.”

(See ECF No. 106, at 36); see also Singh v. Cigna Corp., 918 F.3d 57, 63 (2d Cir. 2019) (describing

statements in a Code of Ethics and Principles of Conduct as a “textbook example” of puffery); cf.

Allegheny Cty. Employees’ Ret. Sys. v. Energy Transfer LP, No. 20-200, 2021 WL 1264027, at

*16 (E.D. Pa. Apr. 6, 2021) (discussing corporate codes of conducts and explaining that statements

that address “concrete steps” a company is taking have been found actionable). The same goes for

statements in Arconic’s annual reports generally touting the Company’s values and the existence

of an ethics and compliance program. A reasonable investor would not rely on such generalized

statements of optimism.9 As a result, the claims based on the alleged misrepresentations at SAC

¶¶ 244, 249, 250, 255, 281, 283, 299, 300, 323, 324, 337, and 365 will be dismissed.

Nonetheless, the new context provided by the SAC gives vitality to claims based on some

of the other safety statements, plausibly removing them from the puffery realm. Beyond the

generalized principles and values statements, Plaintiffs also allege that Arconic made

misrepresentations about specific aspects of its safety policies. For example, Arconic allegedly

stated that it was developing “procedures to cover . . . external activities, including product safety”;

that its products enabled buildings that are safe; and that its wall systems increased occupant safety

and were designed to provide increased security to protect occupants against damage and

devastation. (See, e.g., SAC ¶¶ 231, 245, 333, 336; see also id. ¶¶ 339, 340, 362.)10 Arconic also

allegedly represented that a “main activit[y] undertaken in support of [its] safety system” was

“[i]dentifying hazards and assessing the risks associated with [its] products.” (See SAC ¶¶ 232,

247, 288, 313.) These statements are far more specific, and it would be plausibly reasonable for

an investor to rely on them. See Martin v. GNC Holdings, Inc., No. 15-01522, 2017 WL 3974002,

at *10 & n.14 (W.D. Pa. Sept. 8, 2017), aff’d, 757 F. App’x 151 (3d Cir. 2018); In re BHP Billiton

Ltd. Sec. Litig., 276 F. Supp. 3d 65, 79 & n.4 (S.D.N.Y. 2017). The SAC renders such statements

plausibly misleading because by placing the Company’s product safety “in play,” Defendants were

also required to disclose certain facts contradicting those representations, such as its alleged

regular practice of selling the PE product for unsafe use. See Shapiro, 964 F.2d at 282.

9 Some alleged misrepresentations that appear in Arconic’s “Environment, Health, and Safety” Policy and Principles

emphasize Arconic’s commitment to supplying safe products, valuing human life above all else, and not

compromising on safety values. (See, e.g., SAC ¶¶ 249, 250.) Though the Court concludes that there is no basis for a

claim as to these statements, the Court notes that it does not resolve here whether they may or may not be otherwise

admissible at a trial for an otherwise relevant purpose.

10 Only parts of the identified statements are plausibly materially misleading; Appendix A to this Opinion sets forth

the specific aspects of the challenged statements that survive the motion to dismiss the § 10(b) claims.

The Court concludes that at least parts of the following values/safety statements could be

plausibly found to be materially false or misleading: SAC ¶¶ 231, 232, 245, 246, 247, 287, 288,

312, 313, 333, 336, 339, 340, and 362. Appendix A to this Opinion sets out the specific

values/safety statements that the Court concludes are plausibly materially misleading (and

ultimately plausibly actionable).

3. Brochure and Online Statements

Finally, Plaintiffs allege that Defendants misrepresented Arconic’s products in statements

in brochures on Arconic’s website (“brochure statements”) and in other statements also posted on

Arconic’s website (“online statements”). The brochure statements were pleaded in the FAC, but

the online statements are new to the SAC. The online statements are as follows:

(1) “Reynobond . . . composite and aluminum sheet panels are certified in more than 15

countries by certifying bodies such as BBA, CSTB or ISO.”

(2) “Fire certificates for Reynobond Architecture: Great Britain BS476 part 6 & 7:

Reynobond PE & FR: Class 0; Great Britain BBA Agreement BBA08/4510, classifying

the PE panels as Class 0.”

(3) “Behaviour in relation to fire: when tested for reaction to fire, [product] achieved a

classification of B-s2 . . . As a consequence . . . the product[s] may be regarded as

having a Class 0 surface.” (SAC ¶¶ 253, 290, 326, 366.)

Defendants argue that: (1) that neither the brochure statements nor the online statements

were made “in connection with” the sale of securities; (2) that neither the brochure statements nor

the online statements were materially false or misleading; and (3) that Plaintiffs failed to allege

loss causation with respect to the online statements.11

11 Defendants did not raise a loss causation argument in their motion to dismiss the FAC. (ECF No. 106, at 14 n.2.)

For the following reasons, the Court concludes that parts of the online statements and

brochure statements are plausibly actionable.

i. “In connection with” element

Rule 10b-5’s “in connection with” requirement is satisfied if a statement “is material to a

decision by one or more individuals . . . to buy or sell” a security. Chadbourne & Parke LLP v.

Troice, 571 U.S. 377, 387 (2014) (interpreting the identical language of the Securities Litigation

Uniform Standards Act of 1998). More specifically, it is met “where material misrepresentations

are ‘disseminated to the public in a medium upon which a reasonable investor would rely.’”

Rowinski v. Salomon Smith Barney Inc., 398 F.3d 294, 301 (quoting Semerenko, 223 F.3d at 176).

The Supreme Court has outlined some broad parameters for evaluating the “in connection

with” requirement. First, Rule 10b-5 must be “flexibly” construed to “effectuate its remedial

purposes.” SEC v. Zandford, 535 U.S. 813, 819 (2002). Second, although Rule 10b-5 protects the

integrity of the securities markets, its remedial purposes are not limited to that goal. Id. at 821–22.

The “in connection with” requirement can therefore be met even if a “transaction is not conducted

through a securities exchange or an organized over-the-counter market.” Superintendent of Ins. of

State of N.Y. v. Bankers Life & Cas. Co., 404 U.S. 6, 10 (1971). Third, the fraud can be “in

connection with” the purchase or sale of securities even if an identifiable purchaser or seller is not

the individual who is deceived. United States v. O’Hagan, 521 U.S. 642, 658 (1997).

In its assessment of the FAC, the Court concluded that the brochure statements did not

appear in a medium upon which a reasonable investor would rely. Plaintiffs now offer what is

essentially a piggybacking theory: they argue that the online statements meet the “in connection”

element, and so too do the brochure statements (as they also appeared on the Company’s website).

At its core, Plaintiffs’ argument echoes their original one, that statements on Defendants’ website

were part of the “total mix” of information relied upon by investors, under a fraud-on-the-market

theory. They argue that “[i]nvestors rely on statements made on websites and brochures as market

information, particularly as it relates to compliance and legal issues that have the potential to

significantly increase a company’s risk of liability.” (ECF No. 115, at 18.)

Defendants counter that the online statements and the brochure statements were not made

“in connection with” the purchase or sale of securities because they were not directed at investors

and the online statements were too technical for a reasonable investor to rely upon. In addition,

because the third online statement was limited in scope and referred only to “one minor product of

a foreign subsidiary in a foreign market,” Defendants say that no reasonable investor would have

looked to it. (See ECF No. 118, at 11.)

Though the Court considers this a particularly close question, the Court concludes that the

SAC drives a plausible inference that the online statements and brochure statements were alleged

misrepresentations upon which reasonable investors would rely. Thus, Plaintiffs have adequately

shown that the online statements and brochure statements were made “in connection with” the

purchase or sale of a security. The Court will first discuss the online statements and then turn to

the brochure statements.

The Court first notes that Plaintiffs need not allege that Defendants were directing the

online statements specifically to investors in particular. Even if the alleged misrepresentations

were not “made for the purpose or the object of influencing the investment decisions of market

participants,” they still meet the “in connection with” requirement so long as they were shared

with the public in a medium upon which a reasonable investor would rely and were material when

disseminated. See Semerenko, 223 F.3d at 176–77 (explaining that plaintiffs are “not required to

establish that the defendants actually envisioned that members of the Class would rely upon the

alleged misrepresentations when making their investment decisions”). Moreover, as Plaintiffs

note, “Defendants’ statements that the website was not designed to communicate with investors

ignores the everyday practice of all research, which begins with checking a company’s website.”

(ECF No. 115, at 17 n.7 (highlighting that a company search on Bloomberg directs visitors to that

company’s website).) And it is certainly plausible that any rational seller of securities would

operate on the belief that investors would visit the Company’s website. In fact, an Arconic annual

report directed shareholders to its website—not just to access SEC filings and quarterly earnings

reports, but also to view “other Company news.” (See, e.g., ECF No. 72-13, at 6.) Likewise,

shareholders were referred to the Company website in shareholder/analyst calls.12 (See ECF No.

72-11, at 7; ECF No. 72-14, at 7.)

Statements on websites can be made “in connection with” the sale or purchase of securities.

See S.E.C. v. StratoComm Corp., 2 F. Supp. 3d 240, 258 (N.D.N.Y. 2014) (explaining that

materially false or misleading “website representations” satisfy the “in connection with”

requirement), aff’d sub nom. Sec. & Exch. Comm’n v. StratoComm Corp., 652 F. App’x 35 (2d

Cir. 2016); SEC v. Stinson, No. 10-3130, 2011 WL 2462038, at *5 (E.D. Pa. June 20, 2011)

(concluding that the “in connection element” was satisfied because the defendants communicated

material misstatements in direct email solicitations, a webinar, and various websites); Last Atlantis

Cap. LLC v. AGS Specialist Partners, 749 F. Supp. 2d 828, 834 (N.D. Ill. 2010) (explaining that

it is “reasonable for companies maintaining websites to anticipate that current or potential investors

might read and rely on website statements” and noting that other “courts have analyzed companies’

statements on public websites as potentially fraudulent”), order clarified sub nom. Last Atlantis v.

12 The annual reports and shareholder calls were incorporated by reference in the SAC, so the Court may therefore

consider them. See Winer Fam. Tr. v. Queen, 503 F.3d 319, 327 (3d Cir. 2007); In re Burlington Coat Factory Sec.

Litig., 114 F.3d 1410, 1426 (3d Cir. 1997).

AGS Specialist Partners, No. 04-397, 2011 WL 223798 (N.D. Ill. Jan. 21, 2011). Accepting

Plaintiffs’ allegations as true and viewing them in the light most favorable to Plaintiffs, the Court

cannot say that a reasonable investor would not plausibly rely on the statements posted on

Arconic’s official website, or more precisely that here, such would be excluded from consideration

as a definitional matter.

And in the Court’s view, the online statements are not too technical to satisfy the “in

connection with” element. Indeed, “the market can absorb technical . . . information.” See In re

Carter-Wallace, Inc. Sec. Litig., 150 F.3d 153, 156 (2d Cir. 1998). The second and third online

statements promote Reynobond products as having a Class 0 certification. Such technical

information about Arconic’s safety certifications may be of “enormous importance” to reasonable

investors. See id. Arconic is a global provider of aluminum and lightweight metals for various

markets including building and construction. (See SAC ¶¶ 2, 18.) Information about the safety,

including the fire safety, of such products would seem to plainly bear on the financial prospects of

the Company.

As for the brochure statements, the Court concludes, for similar reasons, that they too now

meet the “in connection with” element. The Court previously determined that the customer-facing

nature of the brochure statements, in the context of the FAC, precluded Rule 10b-5 liability. But

now, with the SAC’s new allegations about the online statements, Plaintiffs plead a greater overall

online presence regarding Arconic’s alleged misrepresentation of Reynobond PE products. The

SAC thus changes the full picture of the brochure statements. Arconic allegedly emphasized in

SEC filings that the Company delivered its products “at a quality . . . that ensure[d] customer

success and shareholder value.” (SAC ¶ 255.) While such statement is not actionable standing

alone, it is plausible that a shareholder would visit Arconic’s official website to learn more about

the “quality” of Arconic’s consumer products that Arconic itself promoted as being important to

shareholder value. Moreover, as discussed below, some of the brochure statements could now be

plausibly found to be material and of importance to the investing public, given the extensive

allegations about the magnitude of the overall Reynobond PE sales practice. The broader sales

scheme alleged in the SAC puts the public dissemination of the information in the brochure

statements into a new light. On the facts alleged in the SAC, the Court cannot say as a matter of

law that a reasonable investor would not rely upon the brochure statements when making

investment decisions.

ii. Material omission or representation

The parties next debate whether the SAC plausibly alleges that the online statements and

the brochure statements are materially misleading. The Court finds most of Defendants’ arguments

unpersuasive at this stage of litigation and concludes that parts of the online statements and

brochure statements are plausibly pled as being materially misleading. The Court will again begin

with an analysis of the online statements.

According to the allegations in the SAC, the online statements touted inaccurate safety

classifications of Reynobond PE products. In context, the second and third online statements

promoted a BBA certification claiming that Reynobond PE was classified as Class 0, the highest

possible fire safety rating under the U.K. building regulations. (See SAC ¶¶ 116, 120–21.) But the

SAC alleges that, contrary to Arconic’s representations, Reynobond PE did not meet the Class 0

classification when the online statements were made on the Arconic official website between 2014

and 2017. Because the Reynobond PE product had allegedly been downgraded from Euroclass B

to Euroclass C and E, the product could no longer meet the Class 0 certification. In objecting to

the falsity of these statements, Defendants inappropriately introduce (mostly through footnotes) a

debate about the technical standards of safety testing.13 (See ECF No. 112, at 14–17 nn.6–7; ECF

No. 118, at 10 nn.8–9.) But the Court need not wade through and evaluate the nuances of such

technical arguments at this stage. The Court treats as it must the allegations in the SAC as true and

views those allegations in the light most favorable to Plaintiffs. The SAC sufficiently alleges that

the second and third online statements were false or misleading. And viewed in the context of the

SAC’s allegations that Arconic was regularly selling Reynobond PE for unsafe use, these

statements could also be found to be material to investors. That Arconic was showcasing allegedly

false safety certifications and concealing Reynobond PE’s downgraded test results plausibly could

be viewed as important to a reasonable shareholder.

That leaves the first online statement, which Plaintiffs concede they added “simply for

context.” (ECF No. 115, at 15.) The first online statement is as follows: “Reynobond . . . composite

and aluminum sheet panels are certified in more than 15 countries by certifying bodies such as

BBA, CSTB or ISO.” The SAC does not render this statement false or misleading. Unlike the

second and third statements, it does not refer to Reynobond PE, either specifically (second

statement) or when considered in context (third statement). The SAC does not allege that Arconic

concealed downgraded certifications for all Reynobond panels. Nor are there allegations in the

SAC that would make the rest of the statement false or misleading. The first online statement is

therefore not actionable.

Plaintiffs also plausibly plead that the brochure statements about Reynobond products are

materially misleading. The Court previously held otherwise, but the SAC again changes the game.

13 Defendants also argue that the end of the second statement as alleged in the SAC — “classifying the PE panels as

Class 0” — does not appear in the document that Defendants identified as containing the second statement. (See ECF

No. 112, at 15 n.7 (citing ECF No. 112-8).) But notwithstanding that assertion by Defendants, the document that

Defendants cite shows the PE product classified as Class 0. Defendants argue that Plaintiffs’ allegation collapses

because this Class 0 rating refers to British Standard 476, and not the BBA. (See id.; ECF No. 118, at 10.) But as

explained above, such a technical argument is inappropriate for resolution here and now. The SAC’s allegations, as a

whole, render the second statement plausibly capable of being materially false or misleading.

The brochure statements claimed that the Reynobond products were “fully tested,” “[s]afe and

[c]ompliant,” and “designed and tested to meet safety . . . building codes around the world.” (SAC

¶¶ 229, 251, 285, 310.) The Court’s previous conclusion that these statements were not materially

false or misleading rested primarily on the Court’s conclusion that Reynobond PE’s use in the

Grenfell Tower’s cladding did not contradict the brochure statements. (ECF No. 106, at 26.) But

Plaintiffs now plausibly allege that Arconic was regularly supplying Reynobond PE for unsafe use

in high-rise buildings at the time the brochure statements were made. More than that, the SAC

alleges that the Reynobond PE product had received downgraded fire safety ratings that were also

concealed by managers at the French facility. Viewed together, it is plausible that the brochure

statements about Reynobond products could have given the false or misleading impression that

Arconic was selling Reynobond PE only for safe uses.

The brochure statement about general fire safety, however, is not materially misleading.

(See, e.g., SAC ¶ 346.) That statement explains that fire is a “key issue when it comes to buildings,”

further elaborating that building heights help define which building materials are safer to use. (See

id.) The SAC avers that this statement is materially false or misleading because, at the time the

statement was made, Defendants “failed to disclose that Arconic was selling Reynobond PE for

use in construction projects, where the product was to be used in a manner that the Company knew

was unsafe and presented a fire hazard, directly contradicting the Company’s representations.”

(SAC ¶ 352.) But any alleged omissions about Arconic’s sales practices do not render such a

general and truthful statement about fire safety misleading. Nothing in the SAC indicates that this

statement is false or misleading.

In sum, Plaintiffs adequately allege that the second and third online statements and the

brochure statements about Reynobond products are materially false or misleading. (See SAC ¶¶

229, 251, 253, 285, 290, 310, 326, 366.) Appendix A to this Opinion sets out the specific online

and brochure statements that the Court concludes are materially misleading (and ultimately

plausibly actionable).

iii. Loss causation

To prevail on a § 10(b) claim, the plaintiff must also prove “loss causation.” Erica P. John

Fund, Inc. v. Halliburton Co., 563 U.S. 804, 807 (2011). Loss causation is defined as “a causal

connection between the material misrepresentation and the loss.” See Dura Pharms., Inc., v.

Broudo, 544 U.S. 336, 342 (2005). The plaintiff must plead that “the defendant’s

misrepresentation (or other fraudulent conduct) proximately caused the plaintiff’s economic

loss.” Id. at 346. “[T]he plaintiff must show that the revelation of that misrepresentation or

omission was a substantial factor in causing a decline in the security’s price, thus creating an actual

economic loss for the plaintiff.” McCabe v. Ernst & Young, LLP, 494 F.3d 418, 425–26 (3d Cir.

2007). The Third Circuit takes a “practical approach [to loss causation], in effect applying general

causation principles.” Id. at 426 (citing EP MedSystems, Inc. v. EchoCath, Inc., 235 F.3d 865, 884

(3d Cir. 2000)). “[L]oss causation is a fact intensive inquiry which is best resolved by the trier of

fact.” In re Wilmington Tr. Sec. Litig., 29 F. Supp. 3d 432, 450 (D. Del. 2014) (citing EP

Medsystems, 235 F.3d at 884).

In accordance with these standards, Plaintiffs have adequately alleged loss causation as to

the online statements under a “materialization of a concealed risk” theory. Plaintiffs seek to plead

loss causation by alleging that a corrective disclosure of a previously undisclosed truth and that a

materialization of a concealed risk caused the decline in the stock price. (See ECF No. 115, at 21;

see In re Wilmington Tr. Sec. Litig., 29 F. Supp. 3d at 450.) Defendants first argue that because

the 2017 corrective disclosures did not correct statements about the false or misleading nature of

the safety ratings, it cannot be said that disclosure of such facts caused any losses. (ECF No. 112,

at 19.) On this much, the Court agrees. The online statements are allegedly misleading because

they allegedly concealed from the market the downgraded Euroclass certifications and were

allegedly false as to the BBA Class 0 rating. But the corrective disclosures did not reveal the falsity

or misleading nature of these misrepresentations, nor suggest that the published safety

certifications were inaccurate or outdated. True, “there is no requirement that the disclosure mirror

the earlier misrepresentation.” In re Urb. Outfitters, Inc. Sec. Litig., 103 F. Supp. 3d 635, 655 (E.D.

Pa. 2015). But the disclosure must still “reveal at least part of the falsity of the alleged

misrepresentation.” In re DVI, Inc. Sec. Litig., No. 03-05336, 2010 WL 3522090, at *6 (E.D. Pa.

Sept. 3, 2010). The SAC does not allege as much. The disclosures had nothing to do with the safety

certifications of Reynobond PE. The corrective disclosures thus did not reveal information about

the allegedly misleading online statements that could have caused the loss of which Plaintiffs

complain.

But Plaintiffs’ other loss causation theory fares better. Under the materialization of the risk

theory, Plaintiffs can prove loss causation by showing an event that reveals that an earlier statement

was false, or in other words, by showing the materialization of a risk that was misrepresented by

the Company.14 Under this theory, “where some or all of the risk is concealed by the defendant’s

misrepresentation or omission, courts have found loss causation sufficiently pled.” In re Am. Int’l

Grp., Inc. 2008 Sec. Litig., 741 F. Supp. 2d 511, 534 (S.D.N.Y. 2010) (citation omitted). The SAC

14 Defendants note that the Third Circuit has not adopted the materialization of the risk theory. (ECF No. 118, at 13.)

But district courts in this Circuit have applied it. See, e.g., In re Urb. Outfitters, Inc. Sec. Litig., 103 F. Supp. 3d 635,

656–57 (E.D. Pa. 2015). And the Third Circuit has discussed the theory without rejecting it. See McCabe v. Ernst &

Young, LLP., 494 F.3d 418, 428–29 (3d Cir. 2007); see also In re DVI, Inc. Sec. Litig., No. 03-05336, 2010 WL

3522090, at *7 & n.12 (E.D. Pa. Sept. 3, 2010) (“Although the Third Circuit has not adopted the . . . materialization

of the risk approach, it has in dicta discussed this standard and has not rejected it.” (citing cases)). Other circuits have

adopted or recognized the theory too. See, e.g., In re Vivendi Universal, S.A., Sec. Litig., 838 F.3d 223, 260–61 (2d

Cir. 2016); Ohio Pub. Emps. Ret. Sys. v. Fed. Home Loan Mortg. Corp., 830 F.3d 376, 385 (6th Cir. 2016) (noting

“the clear weight of persuasive authority” that supported application of the materialization of the risk theory).

alleges that the downgraded certifications were hidden from investors, the public, a regulatory

body, and the parties involved in the Grenfell Tower refurbishment. The hazardous nature of using

Reynobond PE in high-rise buildings was likewise allegedly concealed. The SAC adequately

pleads that the risks concealed by the misleading fire safety ratings—such as a devastating fire

accelerated by Reynobond PE, and Arconic’s accompanying civil and criminal liability—

subsequently materialized and did so to Plaintiffs’ detriment. (See, e.g., SAC ¶¶ 386, 388.)

Because Plaintiffs have adequately alleged facts that would trigger the materialization of risk

theory, the Court concludes that the SAC sufficiently pleads the loss causation element.

4. Scienter

Plaintiffs’ last hurdle to advancing the otherwise actionable parts of their Exchange Act

claims is “scienter.” Scienter is a “mental state embracing intent to deceive, manipulate, or

defraud” and “requires a knowing or reckless state of mind.” Avaya, 564 F.3d at 252 (quoting

Ernst & Ernst v. Hochfelder, 425 U.S. 185, 194 n.12 (1976)). Recklessness involves “not merely

simple, or even inexcusable negligence, but an extreme departure from the standards of ordinary

care, and which presents a danger of misleading buyers or sellers that is either known to the

defendant or is so obvious that the actor must have been aware of it.” Id. at 267 n.42 (quoting

Advanta, 180 F.3d at 535 (internal quotation marks omitted)). The PSLRA requires that a plaintiff

plead scienter with particularity. In re Suprema Specialties, Inc. Sec. Litig., 438 F.3d 256, 276 (3d

Cir. 2006). The particularity requirement is satisfied by a complaint that pleads “facts giving rise

to a strong inference that the defendant acted with the required state of mind.” 15 U.S.C. § 78u–

4(b)(2)(A).

As the Supreme Court explained in Tellabs, “[t]he inference that the defendant acted with

scienter need not be irrefutable . . . or even ‘the most plausible of competing inferences,’” but a

complaint adequately pleads a strong inference of scienter “only if a reasonable person would

deem the inference of scienter cogent and at least as compelling as any opposing inference one

could draw from the facts alleged.” 551 U.S. at 324 (quoting Fidel v. Farley, 392 F.3d 220, 227

(6th Cir. 2004)). A plaintiff need not come forward with “smoking-gun” evidence to plead scienter.

Id. Rather, the Court “analyze[s] the complaint holistically to determine whether its allegations,

‘taken collectively, give rise to a strong inference of scienter, not whether any individual

allegation, scrutinized in isolation, meets that standard.’” In re Hertz Global Holdings Inc., 905

F.3d 106, 114 (3d Cir. 2018) (quoting Tellabs, 551 U.S. at 323).

The FAC failed to adequately plead the scienter of Mr. Kleinfeld or Arconic. The SAC

attempts to cure this deficiency, at least with respect to Arconic, through new allegations that

managers in the facility where Reynobond PE products were manufactured knew about the

downgraded safety certifications and Arconic’s alleged regular sales practice of selling Reynobond

PE for use in high-rises. The SAC is silent as to new scienter allegations regarding Mr. Kleinfeld.

For the reasons below, the Court concludes that the SAC fails to adequately plead the

scienter of Mr. Kleinfeld, but now adequately pleads the scienter of Arconic through a theory of

corporate scienter.

i. Scienter of Mr. Kleinfeld

The SAC’s allegations about Mr. Kleinfeld’s scienter mirror those presented in the FAC.

Plaintiffs admit as much by not responding to Defendants’ arguments on this issue. Instead,

Plaintiffs merely state in a footnote that “Plaintiffs submit that the scienter allegations with respect

to Defendant Kleinfeld raised in the FAC and Plaintiffs’ opposition to the prior motion to dismiss

were sufficient and are hereby incorporated by reference.” (ECF No. 115, at 29 n.14.)

The Court’s prior Opinion explained in detail why the FAC failed to adequately plead Mr.

Kleinfeld’s scienter. (ECF No. 106, at 52–60.) Plaintiffs do not advance any argument about

scienter relative to Mr. Kleinfeld based on the new allegations in the SAC. In the Court’s view,

the SAC adds nothing to change the Court’s conclusion or reasoning on this question. Thus, for

the same reasons the Court previously outlined, the Court concludes that Plaintiffs have failed to

plead facts in the SAC which, viewed together, would support a strong inference that Mr. Kleinfeld

acted with scienter. The failure to plead the scienter of Mr. Kleinfeld is fatal to the Exchange Act

claims against him and those claims will be dismissed.

ii. Scienter of Arconic

As for Arconic, Plaintiffs allege a “corporate scienter” theory. A corporate scienter theory

permits a plaintiff “to plead an inference of scienter against a corporate defendant without raising

the same inferences required to attribute scienter to an individual defendant.” Rahman v. Kid

Brands, Inc., 736 F.3d 237, 246 (3d Cir. 2013). Under this theory, where a defendant is a

corporation, a plaintiff must plead facts that give rise to “a strong inference that someone whose

intent could be imputed to the corporation acted with the requisite scienter.” Teamsters Loc. 445

Freight Div. Pension Fund v. Dynex Cap. Inc., 531 F.3d 190, 195 (2d Cir. 2008). “Ascribing a

state of mind to a corporate entity is a difficult and sometimes confusing task.” Jackson v.

Abernathy, 960 F.3d 94, 98 (2d Cir. 2020).

Plaintiffs argue that the SAC pleads specific scienter on the part of Claude Wehrle, the

Technical Manager of the French facility, and Claude Schmidt, the General Manager of the French

facility. Plaintiffs also argue that the scienter of Mr. Wehrle and Mr. Schmidt is properly imputed

to Arconic. Defendants respond that the Third Circuit has not yet adopted the corporate scienter

approach; that the SAC does not adequately plead the specific scienter of Mr. Wehrle and Mr.

Schmidt; and that regardless, knowledge of foreign subsidiary employees cannot be imputed to

Arconic’s senior management.

There remains a circuit split about the corporate scienter doctrine. Compare Teamsters,

531 F.3d at 195–97 (adopting a corporate scienter approach in which the scienter of a corporate

defendant may be established through a strong inference that someone whose intent could be

imputed to the corporation acted with the requisite scienter), Makor Issues & Rights, Ltd. v. Tellabs

Inc., 513 F.3d 702, 710 (7th Cir. 2008) (same), and City of Monroe Emps. Ret. Sys. v. Bridgestone

Corp., 399 F.3d 651, 668 (6th Cir. 2005) (same),15 with Southland Sec. Corp. v. INSpire Ins. Sols.

Inc., 365 F.3d 353, 365 (5th Cir. 2004) (concluding that scienter may be imputed to a corporation

only by looking at “the state of mind of the individual corporate official or officials who make or

issue the statement . . . rather than generally to the collective knowledge of all the corporation’s

officers and employees acquired in the course of their employment”) and Phillips v. Sci.-Atlanta,

Inc., 374 F.3d 1015, 1018 (11th Cir. 2004) (noting in dictum that “the most plausible reading” of

the PSLRA is that a plaintiff “must allege facts sufficiently demonstrating each defendant’s state

of mind regarding his or her alleged violations”).16

The Third Circuit has not definitively weighed in on this question, stating that it “neither

ha[s] accepted nor rejected the doctrine of corporate scienter in securities fraud actions.” Rahman,

736 F.3d at 246. Yet it has suggested that it may be possible to plead scienter against a corporate

defendant without pleading scienter against an individual defendant. See id.; In re Hertz Global

15 See also In re NVIDIA Corp. Sec. Litig., 768 F.3d 1046, 1063 (9th Cir. 2014) (observing that the corporate scienter

theory might be appropriate in some cases); Glazer Cap. Mgmt., LP v. Magistri, 549 F.3d 736, 743–44 (9th Cir. 2008)

(same).

16 For a more in-depth discussion about the circuit split and the nuances of the various corporate scienter approaches,

see In re Cognizant Tech. Sols. Corp. Sec. Litig., No. 16-6509, 2020 WL 3026564, at *24–32 (D.N.J. June 5,

2020), motion to certify appeal denied, No. 16-6509, 2021 WL 1016111 (D.N.J. Mar. 17, 2021); see also In re

Omnicare, Inc. Sec. Litig., 769 F.3d 455, 474–77 (6th Cir. 2014) (discussing the merits of the different corporate

scienter approaches and adopting a “middle ground” approach).

Holdings Inc., 905 F.3d 106, 121 n.6 (3d Cir. 2018); City of Roseville Employees’ Ret. Sys. v.

Horizon Lines, Inc., 442 F. App’x 672, 676 (3d Cir. 2011). In addition, district courts in this Circuit

have applied the corporate scienter principle. See In re Cognizant Tech. Sols. Corp. Sec. Litig., No.

16-6509, 2020 WL 3026564, at *29 (D.N.J. June 5, 2020), motion to certify appeal denied, No.

16-6509, 2021 WL 1016111 (D.N.J. Mar. 17, 2021) (analyzing corporate defendant’s scienter

under various corporate scienter approaches); Sun v. Han, No. 15-703, 2015 WL 9304542, at *12

(D.N.J. Dec. 21, 2015); see also In re Merck & Co., Sec. Derivative & “ERISA” Litig., Nos. 05-

1151, 05-2367, 2013 WL 396117, at *15 (D.N.J. Jan. 30, 2013) (recognizing that the Third Circuit

has not definitively embraced or rejected the theory of corporate scienter). The Court will proceed

by analyzing the SAC to determine whether this is an appropriate case in which to apply this

analytical approach if it were available.

a. Scienter of Mr. Wehrle and Mr. Schmidt

To begin, the Court finds that the SAC adequately pleads scienter on the part of Mr. Wehrle

and Mr. Schmidt. The SAC alleges that Mr. Wehrle acted with scienter because he, as the person

responsible for the certification of Arconic’s Reynobond PE products, knew that Reynobond PE

failed to meet fire safety standards and failed to disclose this information to the BBA. (SAC ¶¶

133, 134, 139.) The SAC alleges that Mr. Schmidt acted with scienter because he knew that the

Reynobond PE product failed safety tests and that it was regularly and arguably extensively being

sold for use on high-rises. (Id. ¶¶ 154, 161, 162, 165.)

Part of the SAC’s scienter allegations stem from statements from confidential witnesses.

“[W]here plaintiffs rely on confidential personal sources but also on other facts, they need not

name their sources as long as the latter facts provide an adequate basis for believing that the

defendants’ statements were false. Moreover, even if personal sources must be identified, there is

no requirement that they be named, provided they are described in the complaint with sufficient

particularity to support the probability that a person in the position occupied by the source would

possess the information alleged.” Rahman, 736 F.3d at 244 (quoting Cal. Pub. Emps.’ Ret. Sys. v.

Chubb Corp., 394 F.3d 126, 146 (3d Cir. 2004)). In Avaya, the Third Circuit explained that when

dealing with confidential witnesses, courts should assess the “detail provided by the confidential

sources, the sources’ basis of knowledge, the reliability of the sources, the corroborative nature of

other facts alleged, including from other sources, the coherence and plausibility of the allegations,

and similar indicia.” Avaya, 564 F.3d at 261 (quoting Chubb, 394 F.3d at 147).

The statements of the confidential witnesses are pleaded with sufficient particularity here.

Plaintiffs’ scienter allegations are supported in particular by statements from two confidential

witnesses (“CW1” and “CW4”). According to CW1, a Marketing Manager and Director between

2000 and 2011, Mr. Wehrle’s Technology Department coordinated the submission of Reynobond

PE panels to the CSTB for testing and also received the CSTB reports of the results. (SAC ¶¶ 141,

155.) Additionally, CW1 stated that poor fire safety results of Reynobond PE were reported to Mr.

Schmidt as the General Manager of the facility. (Id. ¶ 154.) And according to CW4, a sales

manager in the French facility, Mr. Schmidt knew that Reynobond PE panels were regularly being

sold for use in high-rises based on information Mr. Schmidt learned from sales and production

reports. (Id. ¶¶ 159–61.) CW4 allegedly knew this because they attended meetings with Mr.

Schmidt during which Mr. Schmidt discussed these sales reports. (Id. ¶ 159.) CW4 also reported,

based on personal knowledge and use of the system, that Arconic kept an internal database called

the Customer Relations Management (“CRM”) software system that tracked what panels were sold

to what type of buildings. (Id. ¶ 162.) CW4 said that Mr. Schmidt and other employees knew about

Arconic’s sales of Reynobond PE for use in high-rises based on CRM reports. (Id. ¶¶ 164–65.)

Defendants do not ask the Court to discount the statements of the confidential witnesses,

and the Court finds no reason to do so for these purposes, particularly given other corroborating

allegations in the SAC about the non-compliance with fire safety standards and the sale of

Reynobond PE for use in many high-rises beyond the Grenfell Tower.

The allegations in the SAC, including the statements from CW1 and CW4, support a

plausible inference that Mr. Schmidt and Mr. Wehrle knew, and failed to disclose to customers or

the public, that Reynobond PE’s safety certifications had been downgraded, and that Mr. Schmidt

knew that the downgraded Reynobond PE panels were regularly being sold for use in high-rises.

Defendants essentially acknowledge this, and instead argue that the SAC does not adequately

allege that the managers knew such use was inappropriate because compliance with building

regulations depended on the overall cladding system, not the individual components. (ECF No.

112, at 26.) This argument fails at this stage of the proceedings. According to the SAC, Mr.

Schmidt knew about the common sales practice and the concealed downgraded fire safety ratings.

Mr. Wehrle allegedly concealed from the BBA the downgraded test results performed by the

CSTB, while at the same time Arconic continued to use an outdated BBA certification heralding

a then-false Class 0 safety rating. Viewed collectively, the SAC supports a strong inference that

Mr. Schmidt not only knew that Arconic was regularly selling Reynobond PE for use in high-rises,

but also that he knew, or at least recklessly disregarded, that this “common practice” was improper.

In evaluating the allegations collectively, the Court concludes that Plaintiffs sufficiently

plead scienter of Mr. Wehrle and Mr. Schmidt. See Avaya, 564 F.3d at 273 (“[I]nference is not

arithmetic. The inferential significance of any single allegation can be determined only by

reference to all other allegations.”).

b. Imputing scienter to Arconic

The Court also concludes that the scienter of Mr. Wehrle and Mr. Schmidt can plausibly

be properly imputed to Arconic. “In determining whether to impute an employee’s scienter to

the corporation, courts have considered the employee’s role and rank within the company, as well

as the employee’s relationship to those who ultimately proffered the materially false information

that defrauded investors.” Thomas v. Shiloh Indus., Inc., No. 15-7449, 2017 WL 2937620, at *3

(S.D.N.Y. July 7, 2017). Defendants make much of the fact that Mr. Wehrle and Mr. Schmidt work

for a foreign subsidiary of Arconic. To be sure, the “mere existence of a parent-subsidiary or

affiliate relationship is not on its own sufficient to impute the scienter of the subsidiary to the

parent or affiliate.” Schiro v. Cemex, S.A.B. de C.V., 396 F. Supp. 3d 283, 301–02 (S.D.N.Y. 2019)

(citing Valentini v. Citigroup, Inc., 837 F. Supp. 2d 304, 317 (S.D.N.Y. 2011)). That employees at

a subsidiary “were allegedly knowledgeable about the fraud does not mean that the parent

company’s executives . . . were aware.” Christian v. BT Grp. PLC, No. 17-497, 2018 WL 3647213,

at *8 (D.N.J. Aug. 1, 2018).

But the scienter of an officer of a subsidiary may be imputed to the subsidiary’s parent

corporation if the plaintiff adequately alleges that the parent company “possessed some degree of

control over, or awareness about, the fraud.” Valentini, 837 F. Supp. 2d at 317; see also Makor

Issues & Rts., Ltd. v. Tellabs Inc., 513 F.3d 702, 708 (7th Cir. 2008) (“the doctrines of respondeat

superior and apparent authority remain applicable to suits for securities fraud” (citing Am. Tel. &

Tel. Co. v. Winback & Conserve Program, Inc., 42 F.3d 1421, 1429–33 (3d Cir. 1994))). Plaintiffs

have now done just that at the pleading stage. The SAC alleges that Arconic maintained a level of

control over the alleged fraud by essentially appointing Mr. Wehrle and Mr. Schmidt to manage

the safety certifications and sales of Reynobond PE. According to Plaintiffs, Mr. Wehrle, as

manager of the Technology Department, was designated as the person responsible for the

certification of Reynobond PE products and was designated as the Arconic representative involved

in corresponding with the CSTB and the BBA. (SAC ¶¶ 133–34, 155.) And Mr. Schmidt, as

General Manager of the facility, was tapped with tracking the sales reports of Reynobond PE for

Arconic. (Id. ¶¶ 159–63.)

The SAC alleges that Mr. Wehrle and Mr. Schmidt knew about the downgraded safety tests

and that they supplied that information to Arconic and recklessly disregarded or tolerated

Arconic’s false representations about its products. (Id. ¶¶ 139, 167.) Despite Defendants’

assertions otherwise, Plaintiffs’ allegations on these points are not too conclusory because the SAC

as a whole pleads with particularity the designated roles and responsibilities of Mr. Wehrle and

Mr. Schmidt with regards to the safety and sales of the Reynobond PE product. This case appears

different than cases cited by Defendants, where nothing seems to have suggested that the parent

company had control over subsidiary managers in the manner that occurred here, and where the

subsidiary managers had no connection to the asserted conduct beyond their status as managers

within the subsidiary. See Christian v. BT Grp. PLC, No. 17-497, 2018 WL 3647213, at *1–4, 8

(D.N.J. Aug. 1, 2018); Pathfinder Mgmt., Inc. v. Mayne Pharma, Inc., No. 06-2204, 2009 WL

4250061, at *9 (D.N.J. Nov. 25, 2009).

Defendants are nonetheless adamant that Mr. Wehrle and Mr. Schmidt are insufficiently

senior for their scienter to be imputed to Arconic. Defendants rely in particular on Thomas v. Shiloh

Industries, Inc., 2018 WL 4500867 (S.D.N.Y. Sept. 19, 2018). In that case, the court determined

that a “low- to mid-level manager responsible for just a slice of the Company’s accounting” was

not sufficiently senior to impute his scienter to the corporation, even when the individual had

allegedly furnished false information to corporate officials. 2018 WL 4500867, at *5. The court

noted that “the fact that an employee is not part of senior management weighs strongly against

imputation,” but such is not always determinative. Id. at *4. The court proceeded to reject an

agency theory of liability that would attribute scienter to the corporation based on any low-level

employee’s intentional misbehavior. Id. at *4–5.

Though Thomas is instructive, it does not compel the conclusion Defendants seek. The

SAC does not endeavor to attribute scienter to the corporation based on the misbehavior of “any

low-level employee.” Such a characterization better describes the allegations in the FAC, which

focused on the knowledge of Deborah French, a U.K. sales manager. The SAC now focuses on the

knowledge of managers of the French facility where Reynobond PE products were manufactured

for use in the U.K. and parts of Europe. See Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec.,

LLC, 797 F.3d 160, 177–78 (2d Cir. 2015) (imputing the scienter of a managing director). And the

allegations pertain not just to any managers, but rather the very ones assigned with managing the

safety certifications and sales of the Reynobond PE product.

The Court must also consider the allegations about Mr. Wehrle and Mr. Schmidt’s

knowledge and responsibilities given the new allegations about the allegedly voluminous sales of

Reynobond PE. This is no longer a case alleging that “one employee of an Arconic subsidiary

made one sale of Reynobond PE for use on one high-rise building.” (See ECF No. 106, at 62.) The

SAC moves far beyond that. Besides allegations about dozens of such sales, the SAC alleges that

subsidiary managers were essentially deputized by Arconic to be in charge of the Reynobond PE

product. Taken collectively, Mr. Wehrle and Mr. Schmidt are plausibly alleged to have acted as

managerial agents of Arconic with respect to this product. Ultimately, the SAC does enough at this

stage of litigation to permit the particular scienter of Mr. Wehrle and Mr. Schmidt to be imputed

to Arconic. An inference of corporate scienter here is “cogent and at least as compelling as” an

opposing inference that could be drawn from the facts alleged. Tellabs, 551 U.S. at 324.

On these alleged facts and given the magnitude of alleged Reynobond PE sales for use in

high rises, the Court finds it appropriate to apply the “corporate scienter” doctrine here. The Court

concludes that the SAC supports a strong inference of scienter as it relates to Mr. Wehrle and Mr.

Schmidt, so this is not a case dealing with unknown individuals who may have possessed

scienter.17 And as Plaintiffs note in their briefing, they plead not just that Mr. Wehrle and Mr.

Schmidt had the requisite scienter, but also that those individuals were ones who knowingly

supplied or furnished misinformation to Arconic. (ECF No. 115, at 26–27 & n.10 (citing the

narrower Fifth Circuit corporate scienter approach).)

***

In sum, the Court will dismiss the § 10(b) claims against Mr. Kleinfeld because Plaintiffs

failed to allege his requisite scienter to survive a motion to dismiss. As for the § 10(b) claims

against Arconic, Plaintiffs plausibly plead facts to support their claims based on the following

statements only: parts of SAC ¶¶ 240, 278, 319, and 359 (risk disclosure statements); parts of SAC

¶¶ 231, 232, 245, 246, 247, 287, 288, 312, 313, 333, 336, 339, 340, and 362 (values/safety

statements); and SAC ¶¶ 229, 251, 285, and 310 (brochure statements) and parts of SAC ¶¶ 253,

290, 326, and 366 (online statements).18 To the extent that Plaintiffs’ § 10(b) claims rest on other

statements alleged in the SAC, they are dismissed with prejudice.

17 Plaintiffs do not appear to proceed on a theory that the facts alleged in the SAC are so “extraordinary” so as to

establish a strong inference of corporate scienter, like the alleged wrongdoing in Bridgestone, 399 F.3d 651, or the

hypothetical set forth in Makor, 513 F.3d 702. See Roseville, 442 F. App’x at 676.

18 The specific challenged statements under § 10(b) that survive the motion to dismiss are reproduced in Appendix A

to this Opinion.

B. Count I: Section 11 of the Securities Act

Section 11 of the Securities Act imposes civil liability on preparers and signers of

materially misleading registration statements. 15 U.S.C. § 77k(a). A § 11 claim may be brought

against the issuer of securities, its directors or partners, underwriters, and accountants who

prepared or signed the registration statement. Id. It is limited to registered public offerings and

provides for broader liability than the Exchange Act because a plaintiff need only show that she

bought the security and then that the registration statement contained a material misrepresentation.

Reliance is generally not required. In re Constar Int’l Inc. Sec. Litig., 585 F.3d 774, 783 (3d Cir.

2009). Nor does § 11 require scienter. In re Adams Golf, Inc. Sec. Litig., 381 F.3d 267, 273 nn.5,

7 (3d Cir. 2004). The issuer will be strictly liable once the plaintiff proves that she bought the

security and there was a material misstatement in the registration statement. Section 11 thus acts

as a “virtually absolute liability provision,” even for innocent statements. Id. at 274 n.7.

Materially identical safe harbor provisions, however, appear in both the Exchange Act and

the Securities Act. See 15 U.S.C. §§ 77z-2(c), 78u-5(c). Consequently, for § 11 claims, a safe

harbor provision limits liability for forward-looking statements if the statements were

accompanied by meaningful cautionary statements or if the plaintiff fails to show the statements

were made with actual knowledge of their falsity.

Plaintiffs allege that Arconic’s 2013 10-K, incorporated by reference into its Registration

Statement for the Preferred Offering, omitted information necessary to make the statements in the

10-K not misleading and omitted information required to be disclosed by SEC rules (Items 303

and 503). For the reasons that follow, the Court agrees that the § 11 claims can proceed to the next

litigation steps, but only based on the one non-forward-looking statement that is not protected by

the PSLRA safe harbor.19 Because the Court concludes that Plaintiffs failed to sufficiently plead

the requisite actual knowledge, the forward-looking statements are protected by the PSLRA safe

harbor and thus cannot proceed. Likewise, the § 11 claims based on Item 303 and 503 cannot

proceed because, as discussed below, both SEC rules also require some requisite level of actual

knowledge that Plaintiffs fail to plead. Thus, the only § 11 claim that will proceed to the next steps

is the one based on the following non-forward-looking statement: “[Arconic] believes it has

adopted appropriate risk management and compliance programs to address and reduce these risks.”

1. False or Misleading

Under § 11, a plaintiff must allege that a registration statement “(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

Suprema Specialties, Inc. Sec. Litig., 438 F.3d 256, 269 (3d Cir. 2006) (quoting 15 U.S.C. § 77k(a))

(internal quotation marks omitted). Because Plaintiffs’ § 11 claims do not sound in fraud, they are

only subject to Federal Rule of Civil Procedure 8’s more relaxed pleading requirements, and not

the PSLRA’s heightened standard. See id. at 269.

Plaintiffs allege that the Registration Statement misleadingly failed to disclose that, at the

time of the Preferred IPO, Arconic regularly sold and was selling and/or negotiating to sell

Reynobond PE for unauthorized and unsafe use on high-rise towers. (ECF No. 115, at 30 (citing

SAC ¶ 182); see also SAC ¶ 181.) The test for materiality under § 11 and § 10(b) is the same. In

re Constar Int’l, 585 F.3d at 783; In re Merck & Co., Inc. Sec. Litig., 432 F.3d 261, 273–74 (3d

Cir. 2005); Rombach v. Chang, 355 F.3d 164, 172 n.7 (2d Cir. 2004). Given that mirror image

19 The Court’s specific conclusions as to the actionable status of the § 11 claims are set forth in Appendix B to this

Opinion.

analysis, for the same reasons discussed in the Court’s analysis in Section III.A.1.i, supra, the risk

disclosures have been sufficiently alleged to be materially false or misleading for § 11 purposes.

However, as discussed in Section III.A.1.ii, most of the risk disclosures fall within the

protection of the PSLRA safe harbor. With the exception of one statement, the risk disclosures are

forward-looking. And because, as described below, the SAC does not raise a strong inference of

Arconic’s actual knowledge that the statements were false or misleading, they are protected by the

PSLRA safe harbor. Notwithstanding that, the one non-forward-looking statement within SAC ¶

182 is actionable under § 11. That sole statement is: “[Arconic] believes it has adopted appropriate

risk management and compliance programs to address and reduce these risks.”

2. Item 303

As stated, Section 11 liability attaches if a registration statement “contained an untrue

statement of a material fact or omitted to state a material fact required to be stated therein or

necessary to make the statements therein not misleading.” 15 U.S.C. § 77k(a). Because registration

statements must comply with Regulation S-K, Item 303 information is “required to be stated

therein” and therefore must be disclosed. Item 303 requires a public company to affirmatively

disclose trends or uncertainties that are: (1) presently known to management, and (2) reasonably

likely to have material effects on the registrant’s financial condition or results of operation. 17

C.F.R. § 229.303.

The SAC alleges that at the time of the Preferred Offering, there was an undisclosed trend

of knowing and unapproved sales of Reynobond PE for use on high-rise buildings in a manner that

Arconic knew was unsafe and which conflicted with safety and risk management safeguards. (SAC

¶¶ 187–88.) Plaintiffs contend that these sales needed to be disclosed in the Registration Statement

because they were reasonably likely to have a material impact on Arconic’s profitability under

Item 303. (SAC ¶¶ 189.) Defendants argue that the sale of Reynobond PE for allegedly unsafe use

does not constitute a “‘trend or uncertainty’ that could have materially affected Arconic’s revenues

or income,” and even if it did, it was not known to management at the time of the Preferred

Opening.

By pleading that Arconic was persistently churning out Reynobond PE sales for unsafe use

in high-rises, Plaintiffs sufficiently plead a “trend” reasonably likely to have material effects on

the registrant’s financial condition. Even though Reynobond PE makes up a fraction of Arconic’s

overall sales, the considerable extent of the alleged improper sales of Reynobond PE could

plausibly be found to drive uncertainties and create substantial risk to Arconic. After all, each sale

allegedly increased the likelihood that an impending disaster would come to pass, and that if any

such risk converted to reality, the loss resulting would be catastrophic, even if the events were of

a limited frequency.

Thus, the alleged undisclosed trend would trigger Item 303’s disclosure requirements, so

long as it was “known to management.” Plaintiffs’ argument on this point is based on new

allegations about the knowledge of employees at the French facility, broad and general allegations

about Arconic’s knowledge, and an allegation previously pled in the FAC about a statement in a

news article.

These allegations are insufficient. Plaintiffs have failed to raise a plausible inference of the

requisite knowledge by Arconic’s management. First, the allegations about the French managers

do not establish liability under Item 303, which requires a showing that “management” had the

requisite actual knowledge of the alleged undisclosed trend when the Registration Statement was

issued.20 See Indiana Pub. Ret. Sys. v. SAIC, Inc., 818 F.3d 85, 95 (2d Cir. 2016); In re Hertz

Global Holdings, Inc. Sec. Litig., No. 13-7050, 2017 WL 1536223, at *19 n.7 (D.N.J. Apr. 17,

2017).

Second, without citing any specific allegation, Plaintiffs declare that the SAC “alleges that

Arconic’s management was aware of these sales practices.” (ECF No. 115, at 35.) Surely, the SAC

alleges that Arconic methodically tracked the specifications for each construction project to which

it was supplying PE panels. (SAC ¶ 48.) But it would be too big a leap for the Court to, as Plaintiffs

suggest, infer from this that Arconic’s management had the requisite actual knowledge of the

alleged sales practice. (Id.) The SAC cites a 2007 article that reported Arconic implemented an

upgraded global database system that allowed “[Arconic’s] executives . . . to access, manage, and

integrate global data.” (Id. ¶ 140.) The SAC does not allege that this system is the same as the

CRM software system described by CW4 nor does it allege that Arconic’s executives actually

accessed or managed the data relevant here. (See id. ¶ 162.) This allegation thus does not raise the

plausible inference that management had the required actual knowledge. To adequately plead an

Item 303 violation, it is not enough to allege that Arconic’s management could have known, or

even should have known, about the existing trend, event, or uncertainty. See Indiana Pub. Ret.

Sys., 818 F.3d at 95. Hypothetical knowledge does not cut it, even in the third iteration of the

Complaint and at the pleading stage. See Blackmoss Invs. Inc. v. ACA Cap. Holdings, Inc., No. 07-

10528, 2010 WL 148617, at *9 (S.D.N.Y. Jan. 14, 2010) (“While it is true that Section 11 claims

generally do not require pleading scienter, Item 303’s requirement of knowledge requires that a

20 The scienter standard is distinguishable from the required mental state for Item 303, which requires management’s

actual knowledge. Scienter, on the other hand, “is a mental state embracing intent to deceive, manipulate, or defraud,

and requires a knowing or reckless state of mind.” Avaya, 564 F.3d at 252 (citations and quotations omitted).

plaintiff plead, with some specificity, facts establishing that the defendant had actual knowledge

of the purported trend.”); id. (citing cases).

Next, the SAC further pleads that “Arconic’s top management” knew about the fire test

results of Reynobond PE (see, e.g., SAC ¶ 154) and that “Arconic’s management” knew that

Arconic had a practice of systematically selling Reynobond PE for application on high-rises (see,

e.g., id. ¶ 158). But such bare, conclusory allegations with a generic reference to “management”

are not enough. “Item 303 simply requires more to demonstrate a plausible inference of knowledge

by management.” In re Coty Inc. Sec. Litig., No. 14-919, 2016 WL 1271065, at *7 (S.D.N.Y. Mar.

29, 2016) (rejecting vague allegations about actions by “management”).

Finally, Plaintiffs’ last attempt to establish management’s actual knowledge lies with a

news article that the Court already rejected as not meeting the mark. Like the FAC, the SAC cites

a Reuters article that reported that “Arconic said in a statement [to Reuters] that it had known the

panels would be used at the Grenfell Tower but that it was not its role to decide what was or was

not compliant with local building regulations.” (SAC ¶ 105.) Plaintiffs ask the Court again to put

weight on this statement, which Plaintiffs submit is sufficient on its own to establish that

management knew of the sales. (ECF No. 115, at 35 n.25 (“[E]ven if the employee who gave the

statement did not have the authority to make it, it would have been approved by someone who had

the authority, i.e., it was not a rogue, low-level employee making unauthorized statements on

behalf of Arconic.”).) The Court’s prior conclusion on this point still holds up: “Arconic’s after-

the-fact statement to a news outlet, seeking to emphasize that it did not know that the Grenfell

Tower use of Reynobond PE was non-compliant with local regulations . . . [does] not suffice to

allege that management knew of any sales for improper uses.” (See ECF No. 106, at 71.) Plaintiffs

do not point to any other allegations in the SAC that could raise a plausible inference that

management knew of the undisclosed trend. Nor do they cite any cases to support their argument

that what is alleged is enough.

Though the SAC now sufficiently alleges an undisclosed trend or uncertainty that could

require disclosure under Item 303, there are insufficient alleged facts in the SAC to support an

inference that Arconic’s management had actual knowledge of the alleged trend or certainty. As a

result, the SAC does not plausibly allege a violation of Item 303.

3. Item 503(c) (now Item 105)21

Item 503 of Regulation S-K addresses risk factors associated with the issuer’s business or

the securities being distributed. Item 503 requires issuers to disclose the most significant factors

that make an investment speculative or risky. “[T]hose factors should be (a) concise and organized;

(b) specific, not generic; and (c) include an explanation connecting the risks to the offer.”

Jaroslawicz v. M&T Bank Corp., 962 F.3d 701, 711 (3d Cir. 2020) (citing 17 C.F.R. § 229.105).

In other words, while “Item [503] seeks a ‘concise’ discussion, free of generic and generally

applicable risks, it requires more than a short and cursory overview and instead asks for a full

discussion of the relevant factors.” Id. at 712.

Plaintiffs argue that Defendants violated their affirmative disclosure duties under Item 503

by failing to disclose that Arconic was selling its product for unauthorized use and that the danger

created by these sales practices could expose Arconic to significant criminal and/or civil liabilities,

thereby making an investment in Arconic risky or speculative. (ECF No. 115, at 33 (citing SAC ¶

192).) Defendants contend that the SAC fails to plead an actionable omission under Item 503

because the risk of sales related to Reynobond PE could not have been one of Arconic’s “most

21 On April 2, 2019, the SEC relocated Item 503(c) to Item 105 of Regulation S-K to streamline disclosure

requirements. See FAST Act Modernization and Simplification of Regulation S-K, 84 Fed Reg. 12674, 12688-89

(Apr. 2, 2019); 17 C.F.R. § 229.105. For ease of reference, and because all briefing in this case refers to these

requirements as Item 503(c), the Court will also continue to refer to these requirements as Item 503(c).

significant” factors, and, in any event, Arconic appropriately disclosed the risks that materialized.

(ECF No. 112, at 30–36.) Defendants further assert that the Item 503 claim must be dismissed

because Plaintiffs fail to adequately allege that anyone responsible for the issuance of the

Registration Statement knew of the alleged risk to investors.

Relevant to this issue is Jaroslawicz v. M&T Bank Corporation, which the Third Circuit

decided after the SAC was filed and about which the parties filed supplemental briefing. See 962

F.3d 701. In Jaroslawicz, the Third Circuit explained the basic “parameters” of Item 503(c): first,

“a cause of action for failing to disclose a material risk naturally requires an allegation that a known

risk factor existed at the time of the offering,” and second, “registrants need not list speculative

facts or unproven allegations, even if they fit within one of the identified factors.” Id. at 713.

Applying these parameters to the facts of the case before it, the Third Circuit held that the plaintiffs

plausibly alleged that the defendants’ disclosures did not meet the requirements of Item 503. The

risk disclosures had identified that a merger “hinged on obtaining regulatory approval,” but failed

to discuss how “treacherous” jumping through the regulatory hoops would be. Id. at 714–15. Even

though the defendants allegedly knew that failure to obtain regulatory approval would be

“significant” and “possibly fatal” to the merger, the defendants offered “little more than generic

statements about the process of regulatory review.” Id. at 716. Such disclosures were deficient and

did not meet the Item 503(c) bar.

Here, Arconic generally disclosed that it “may be exposed to significant legal proceedings

[and] investigations,” and that it was “subject to a variety of legal compliance risks,” including

“potential claims relating to product liability, health and safety.” (SAC ¶ 182.) It disclosed that its

“results of operations or liquidity . . . could be affected by certain health, safety or environmental

matters.” (Id.) Finally, it also disclosed that “unexpected events, including fires or explosions . . .

may impact [Arconic’s] financial performance.” (Id. ¶ 195.)

Disclosure of these general risks—were more specific risk factors known, as discussed

below—would be plausibly insufficient. The disclosures identified risks facing Arconic but failed

to discuss how Arconic’s own sales practices amplified those risks. Defendants submit that

Jaroslawicz “underscores how significant a risk factor must be in order to warrant disclosure under

Item 503(c).” (See ECF No. 126, at 2.) That may be so, but the SAC still meets that mark. Plaintiffs’

theory is that it was very dangerous to use Reynobond PE on high-rises, but Arconic was

nonetheless selling that exact product for that exact dangerous use—not once, not twice, but

allegedly more than 200 times throughout the U.K. (SAC ¶ 170), plus other sales worldwide. Such

a sales practice could plausibly expose Arconic to substantial civil and criminal liabilities. As with

the Item 303 “trend” analysis, given the pled magnitude of these allegedly dangerous sales, it

would not be dispositive that Defendants’ profitability did not “entirely depend[] on [the]

commercial success” of Reynobond PE. See Silverstrand Invs. v. Amag Pharm., Inc., 707 F.3d 95,

103–04 (1st Cir. 2013).

Jaroslawicz is instructive. The defendants in Jaroslawicz knew that failure to obtain

regulatory approval would harm the company, and they warned investors as much. Defendants

here knew that they could face legal compliance issues and health and safety risks, including those

stemming from unexpected fires, and they warned investors as much. But, contrary to Item 503’s

directive that “specificity is key,” defendants in both cases allegedly failed to detail the level of

risk that existed. See Jaroslawicz, 962 F.3d at 706. Plaintiffs here have therefore pleaded enough

to show that there is a substantial likelihood that a reasonable shareholder would have considered

the sales practice important.22

The sufficiency of Plaintiffs’ Item 503 claim therefore turns on whether such a claim

requires knowledge of the significant risk factor. The parties here debate what Jaroslawicz says

about a knowledge requirement under Item 503. On the one hand, Plaintiffs argue that the Third

Circuit clarified that “actual knowledge of the alleged wrongdoing ‘is of no moment,’” because,

in Jaroslawicz, it was the “‘risk to the merger posed by the regulatory inspection itself’ that

triggered the duty to disclose.” (ECF No. 128, at 2 (quoting Jaroslawicz, 962 F.3d at 716).) On the

other hand, Defendants contend that Jaroslawicz “unequivocally” held that Item 503 requires

knowledge of the alleged risk factor for liability to attach. (ECF No. 126, at 2.)

In Jaroslawicz, the Third Circuit plainly imposes some level of knowledge requirement,

stating that a “known risk factor” must have existed at the time of the offering. See 962 F.3d at

713 (citing Silverstrand, 707 F.3d at 103). The court further explained that, like the defendants in

Silverstrand, the defendants in Jaroslawicz were plausibly alleged to have known that regulators

would be looking into its compliance program and that failure to obtain approval would be

significant to the merger. Id. at 716. The Court of Appeals appears to have perhaps muddied the

waters a bit, however, in also noting that the defendants’ actual knowledge of compliance

shortcomings was not relevant.23 Id. But the court did not waver in its holding that given the

22 And the stakes here went beyond the impact of a potential corporate restructuring. The core of Plaintiffs’ case

appears to be that Arconic was globally selling a considerable volume of Reynobond PE for uses that were contrary

to its approved uses, and that the risk of any loss being catastrophic was both real and high. Given that, the degree of

specificity becomes even more acute, in that it is more than plausible that any loss would by definition be a big one,

and, in terms of actual financial liability, would generate a risk of major harm to the reputation of the product and then

to Arconic as a seller of the product. Even if the likelihood of a specific risk being converted to an actual loss on any

one day at any one building may not be huge, the likelihood that any loss, were it to occur, would be huge is plausibly

quite real and quite significant.

23 The Court also notes there remains some differences among other courts about what satisfies this knowledge

requirement. Compare Rubinstein v. Credit Suisse Grp. AG, 457 F. Supp. 3d 289, 300 (S.D.N.Y. 2020) (“Plaintiffs

must demonstrate actual knowledge of an existing trend, event, or risk to allege violations of Section 303 and [503].”)

defendants’ alleged knowledge of the significance of the merger, the defendants were still required

to make more than generic statements about the process of regulatory review.

In this way, Jaroslawicz is different than this case. The SAC does not allege a known risk

like the one present in Jaroslawicz. As discussed above, there is no well-pleaded allegation that

anyone responsible for making the statements in the 10-K, or anyone in Arconic’s management,

was actually aware that Arconic was persistently selling Reynobond PE for allegedly improper

use. Without such allegations, the Item 503 claim is insufficient. In short, like with Item 303, the

SAC’s failure to adequately plead Arconic’s actual knowledge is fatal to this claim.

4. Timing

Finally, Defendants also argue that the § 11 claims must be dismissed in part because the

SAC fails to adequately plead violations after October 2015. “Section 11 plaintiffs generally are

presumed to have relied on allegedly false and misleading statements in offering documents.” In

re IndyMac Mortg.-Backed Sec. Litig., 286 F.R.D. 226, 240 (S.D.N.Y. 2012). Notwithstanding

that general rule, a plaintiff bringing a § 11 claim must prove reliance on a misrepresentation in a

registration statement if the plaintiff “acquired the security after the issuer has made generally

available to its security holders an earning statement covering a period of at least twelve months

beginning after the effective date of the registration statement.” 15 U.S.C. § 77k(a); see also In re

Petrobras Sec., 862 F.3d 250, 259–60 (2d Cir. 2017) (mentioning limitations inherent in Section

11 (citing 15 U.S.C. § 77k(a))).

Defendants argue that the SAC does not allege that any purported class member relied on

the Registration Statement (declared effective on July 30, 2014, see SAC ¶ 178), and so, any claims

with Panther Partners Inc. v. Jianpu Tech. Inc., No. 18-9848, 2020 WL 5757628, at *10 (S.D.N.Y. Sept. 27, 2020)

(“Plaintiff need not allege Defendants’ knowledge in order to plead an Item 503 violation.”).

based on purchases after October 23, 2015, by which date Arconic had issued such earning

statements, must be dismissed. (ECF No. 112, at 36 (citing In re Petrobras Sec. Litig., 150 F. Supp.

3d 337, 344 (S.D.N.Y. 2015).)

An “earning statement” must consist of one, or any combination of, the following corporate

reports: Forms 10-K, 10-Q, 8-K, 20-F, 40-F, 6-K, or in the annual report pursuant to Rule 14a–3

of the Exchange Act. 17 C.F.R. § 230.158(a)(2)(i)-(ii). Here, a combination of 10-K and 10-Q

reports covering a period of at least 12 months beginning after the effective date of the registration

statement were made available to security holders. (See SAC ¶¶ 276, 293, 297, 302.)

Plaintiffs do not respond to Defendants’ argument on this point in their briefing. Nor do

they plead that they relied on the original registration statements for purchases made after the

issuance of the earning statements. Accordingly, Plaintiffs’ § 11 claims based on purchases after

October 23, 2015 must be dismissed.

***

In sum, Count I of the SAC survives Defendants’ motion to dismiss only to the extent that

it is based on the non-forward-looking statement within SAC ¶ 182 and on purchases before

October 23, 2015. The other § 11 claims, including those based on Item 303 and Item 503, are

dismissed with prejudice.

C. Count IV: Section 20(a) of the Exchange Act

Plaintiffs also allege claims pursuant to § 20(a) against Mr. Kleinfeld. In Plaintiffs’ view,

because they have alleged a primary violation under § 10(b), the Court should sustain Plaintiffs’

control-person claims under § 20(a). In addition to arguing that the § 20(a) claim should be

dismissed because the SAC fails to allege a predicate violation of § 10(b), Defendants argue that

Plaintiffs fail to plead Mr. Kleinfeld’s culpable participation in the alleged wrongdoing, and as

such, the § 20(a) claims against him must be dismissed.

Section 20(a) of the Exchange Act imposes joint and several liability on any individual

who exercises control over a “controlled person” who violates §10(b). 15 U.S.C. § 78t(a); In re

Merck & Co., Inc. Sec. Litig., 432 F.3d 261, 275 (3d Cir. 2005). The elements of a § 20(a) claim,

or a “control person” claim, are: (1) the defendant controlled another person or entity; (2) the

controlled person or entity committed a primary violation of the securities laws; and (3) the

defendant was a culpable participant in the fraud. In re Suprema, 438 F.3d at 284 & n.16.

“[P]laintiffs must prove not only that one person controlled another person, but also that the

‘controlled person’ is liable under the [Exchange] Act.” Belmont v. MB Inv. Partners, Inc., 708

F.3d 470, 484 (3d Cir. 2013) (quoting In re Alpharma Inc. Sec. Litig., 372 F.3d 137, 153 (3d Cir.

2004), abrogated on other grounds by Tellabs, 551 U.S. 308). “Culpable participation refers to

either knowing and substantial participation in the wrongdoing or inaction with the intent to further

the fraud or prevent its discovery.” Carmack v. Amaya Inc., 258 F. Supp. 3d 454, 466 (D.N.J.

2017) (citing Rochez Bros., Inc. v. Rhoades, 527 F.2d 880, 890 (3d Cir. 1975)).

District courts in this Circuit are divided on whether Plaintiffs must plead culpable

participation to establish control person liability at the pleading stage. See Belmont, 708 F.3d at

485 n.20 (declining to resolve the “difference of opinion” about the § 20(a) pleading requirements

that has emerged among district courts in the Third Circuit). The Court will follow the lead of the

recent decisions of other courts in this Circuit that require a plaintiff to plead all elements of a §

20(a) claim, including culpable participation. See, e.g., In re Advance Auto Parts, Inc., No. 18-

212, 2020 WL 599543, at *9–10 (D. Del. Feb. 7, 2020); In re Cognizant Tech. Sols. Corp. Sec.

Litig., No. 16-06509, 2018 WL 3772675, at *35 (D.N.J. Aug. 8, 2018); see also In re Suprema,

438 F.3d at 284 n.16 (suggesting that § 20(a) requires culpable participation to be pled).

The Court explained above, in Section III.A.4, supra, that Plaintiffs failed to adequately

plead scienter on behalf of Mr. Kleinfeld. For substantially the same reasons, Plaintiffs have not

alleged that Mr. Kleinfeld was a “culpable participant” in the fraud. See In re Henry Schein, Inc.

Sec. Litig., No. 18-01428, 2019 WL 8638851, at *29 (E.D.N.Y. Sept. 27, 2019) (finding that

because plaintiffs failed to allege scienter of certain defendants under § 10(b), the plaintiffs

necessarily failed to allege that those defendants were culpable participants under § 20(a)); see

also id. (citing cases).

The Court will thus dismiss with prejudice the § 20(a) claims against Mr. Kleinfeld.

D. Count II: Section 15 of the Securities Act

Finally, Defendants move to dismiss the § 15 claims against the Individual Defendants and

Arconic. Plaintiffs argue that the Court should sustain the § 15 claims on the basis that Plaintiffs

have alleged a primary violation under § 11. (ECF No. 115, at 36.) Like with the § 20(a) claims,

in addition to arguing that Plaintiffs fail to plead a predicate violation, Defendants also argue that

Plaintiffs fail to plead the culpable participation of the Individual Defendants, and as such, the §

15 claims must be dismissed. (ECF No. 112, at 36.)

Section 15 of the Securities Act imposes joint and several liability on any person who

controls anyone liable under § 11 of the Securities Act. 15 U.S.C. § 77o(a); In re Suprema, 438

F.3d at 285. “[T]he plaintiff must prove that one person controlled another person or entity and

that the controlled person or entity committed a primary violation of the securities laws.” In re

Suprema, 438 F.3d at 284. The Third Circuit has not clarified whether culpable participation is

also required for a § 15 violation. Some district courts in our Circuit have required culpable

participation as an element of a § 15 claim, and others have not. See SEB Inv. Mgmt. AB v. Endo

Int’l, PLC, 351 F. Supp. 3d 874, 911 n.189 (E.D. Pa. 2018) (noting that it is “not clear whether

culpable participation is . . . required for a § 15 violation” and referencing the split on the matter

among district courts in the Third Circuit). The Court concludes that such a claim requires culpable

participation as an element which needs to be pled and then proven.24 See Carmack v. Amaya Inc.,

258 F. Supp. 3d 454, 466, 469 (D.N.J. 2017); Yang v. Tibet Pharms., Inc., No. 14-3538, 2015 WL

730036, at *5 n.11 (D.N.J. Feb. 20, 2015); In re Ravisent Techs., Inc., No. 00-1014, 2004 WL

1563024, at *15 (E.D. Pa. July 13, 2004); see also In re Weight Watchers Int’l Inc. Sec. Litig., No.

19-2005, 2020 WL 7029134, at *7 (S.D.N.Y. Nov. 30, 2020); In re Marsh & Mclennan

Companies, Inc. Sec. Litig., 501 F. Supp. 2d 452, 493–94 (S.D.N.Y. 2006).

Here, the Court has concluded that Plaintiffs adequately alleged a primary violation of §

11. But the SAC fails to allege facts about the culpable participation of any Individual Defendant

in the alleged wrongdoing. See Carmack, 258 F. Supp. 3d at 469 (finding no particularized

allegations of individual defendants’ alleged control of, or culpable participation in, any of the

alleged false or misleading statements); see also Belmont, 708 F.3d at 485 (describing examples

of culpable participation in the § 20(a) context). The SAC alleges only that the Individual

Defendants signed the Registration Statement (SAC ¶ 24), and then pleads conclusory statements

that the Individual Defendants were control persons of Arconic by virtue of their positions, and

that they were culpable participants based on having signed the Registration Statement and having

24 The Court recognizes that the split among district courts, in this Circuit and in others, about whether a § 15 claim

requires culpable participation is more entrenched than the split about pleading culpable participation for a § 20(a)

claim, as some district courts have held that § 20(a) requires culpable participation while § 15 does not. See, e.g., In

re Refco, Inc. Sec. Litig., 503 F. Supp. 2d 611, 660 & n.43 (S.D.N.Y. 2007); In re Vivendi Universal, S.A., 381 F.

Supp. 2d 158, 187–89 (S.D.N.Y. 2003). The Court notes that the Third Circuit has not spoken on this question, and it

was barely briefed by the parties. In fact, Plaintiffs only contended that culpable participation is not required to plead

a § 15 claim in their response to the motion to dismiss the FAC, not in any of the SAC briefing. (See ECF No. 75, at

51 n.31; ECF No. 115, at 36.)

participated in the process that allowed the Preferred IPO to be completed. (Id. ¶¶ 208–09.) That

is not enough for culpable participation.

But the SAC alleges § 15 claims against Arconic too. The parties did not directly address

these claims in their briefing. The Court bears in mind that the SAC also alleges that Arconic is

the controlled entity under the § 11 claims. “A person cannot be both the controller and the

controlled.” In re Regal Communications Corp. Sec. Litig., No. 94-179, 1996 WL 411654, *4

(E.D. Pa. July 17, 1996); see also Rochez v. Rhoades, 527 F.2d 880, 891 (3d Cir. 1975). The Court

recognizes that alternative theories of liability are permitted at the pleading stage, including with

respect to control-person claims in securities fraud cases such as this one. See Fed. R. Civ. P.

8(d)(2) (stating that a party “may set out” alternative statements of a claim alternatively or

hypothetically, either in a single count or defense or in separate ones); In re Harmonic, Inc., Sec.

Litig., No. 00-2287, 2006 WL 3591148, at *8 (N.D. Cal. Dec. 11, 2006); see also Universal Am.

Corp. v. Partners Healthcare Sols. Holdings, L.P., 176 F. Supp. 3d 387, 398 (D. Del. 2016); In re

Van der Moolen Holding N.V. Sec. Litig., 405 F. Supp. 2d 388, 412–13 (S.D.N.Y. 2005). The

alternative pleading requirement under Rule 8(d)(2) “is generally met through ‘either-or’

propositions’ or ‘if-then’ allegations.’” See Sun Life Assurance Co. of Canada v. Imperial

Premium Fin., LLC, 904 F.3d 1197, 1213 (11th Cir. 2018). In the § 11 section of the SAC,

Plaintiffs here allege that each Defendant “violated and/or controlled a person who violated § 11

of the Securities Act.” (SAC ¶ 202.)

Regardless, to survive a motion to dismiss, Plaintiffs must do more than make a single

conclusory assertion that Arconic was a controlling person liable for § 15 claims; they must support

such claims with requisite factual allegations that would show just that. On this point, Plaintiffs

allege only that Arconic “controlled the Individual Defendants and all of Arconic’s employees.”

(SAC ¶ 208); see Kovach v. Turner Dairy Farms, Inc., 929 F. Supp. 2d 477, 500 (W.D. Pa. 2013)

(“While pleading in the alternative is certainly permitted by the Federal Civil Rules, what is pled

alternatively must still have a plausible basis grounded in fact.”).

The SAC as a whole does not support this alternative theory of liability. Without much

more, such a purely conclusory allegation will not carry the day, and the SAC does not reveal any

intention on the part of Plaintiffs to plead § 15 claims in the alternative. And neither the SAC nor

the briefing submitted by Plaintiffs otherwise explain the facial tension between their allegations

that it was the Individual Defendants who were the “controlling persons” and their modest almost

boilerplate converse conclusion that it was instead Arconic that was the “controlling person.” And

these gaps in explanations come after Plaintiffs have now attempted to plead their claims three

times. As a result, the Court will dismiss with prejudice the § 15 claims against all parties with

prejudice.

IV. CONCLUSION

In sum, the SAC transforms the plausibility of some, but not all, of Plaintiffs’ allegations.

As a result, some, but not all, of Plaintiffs’ claims can proceed to the next stage of litigation. The

actionable statements are reproduced in Appendix A (§ 10(b) claims) and Appendix B (§ 11

claims) to this Opinion.

For the reasons stated, Defendants’ Motion to Dismiss at ECF No. 111 is granted as

follows:

• Count I of the SAC will be dismissed against all Defendants with the exception of the

specific limited claims described below.

• Count III of the SAC will be dismissed against Arconic with the exception of the

specific limited claims described below.

• Count III of the SAC will be dismissed in its entirety against Mr. Kleinfeld.

• Count II of the SAC will be dismissed in its entirety against the Individual Defendants

and Arconic.

• Count IV of the SAC will be dismissed in its entirety against Mr. Kleinfeld.

All dismissals are with prejudice. Plaintiffs have now twice amended their original Complaint and

have had full opportunity to plead whatever could be said in support of their claims. Any further

amendment would thus be futile.

For the reasons stated, Defendants’ Motion to Dismiss at ECF No. 111 is denied in part as

follows:

• Count I of the SAC survives against all Defendants only with regard to claims based

on the sole non-forward-looking statement within SAC ¶ 182 and then only as to claims

based on purchases before October 23, 2015.

• Count III of the SAC survives but only against Arconic, and only with regard to claims

based on the actionable allegations as described in detail above and within SAC ¶¶ 240,

278, 319, and 359 (risk disclosure statements); SAC ¶¶ 231, 232, 245, 246, 247, 287,

288, 312, 313, 333, 336, 339, 340, and 362 (values/safety statements); SAC ¶¶ 229,

251, 285, and 310 (brochure statements), and SAC ¶¶ 253, 290, 326, and 366 (online

statements).

An appropriate Order will issue.

s/ Mark R. Hornak

Mark R. Hornak

Chief United States District Judge

Dated: June 23, 2021