Gloster v. Standard Lithium Ltd.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

------------------------------------x

CURTIS ARATA,1 individually and on

behalf of all others similarly

situated, MEMORANDUM & ORDER

22-CV-507(EK)(VMS)

Plaintiff,

-against-

STANDARD LITHIUM LTD., ROBERT

MINTAK, KARA NORMAN, and

ANDREW ROBINSON,

Defendants.

------------------------------------x

ERIC KOMITEE, United States District Judge:

Standard Lithium is a Canadian company whose shares

trade on the TSX Venture Exchange in Canada and the NYSE

American Exchange. The company has attempted to commercialize a

process for extracting lithium from salt water and refining it

into lithium carbonate, for use in various products such as

lithium-ion batteries.

In 2019, Standard Lithium built a pilot lithium

extraction plant in Arkansas. The plant began operations in May

2020. Throughout 2020 and 2021, the company described, in press

1 Curtis Arata has replaced James Gloster as the named plaintiff in this

action. Compare Am. Compl. ¶ 19, ECF No. 27 (Arata as named plaintiff), with

Compl. 1, ECF No. 1 (Gloster as named plaintiff). The Clerk of Court is

respectfully directed to amend the caption of this case to reflect the new

named plaintiff.

releases and financial statements, the successful operations of

the plant and the novel nature of the lithium-extracting

technology implemented there.

According to plaintiff Curtis Arata, however, two

research firms would later put the lie to these statements. In

November 2021, a short seller called Blue Orca Capital published

a report asserting that Standard Lithium had overstated the

progress of operations at the Arkansas plant and the viability

of its technology. Standard Lithium’s shares fell by nearly

nineteen percent after publication. A few months later, another

short seller — provocatively named Hindenburg Research —

published another report disputing the novelty of Standard

Lithium’s technology. Standard Lithium’s shares then fell

nearly twenty-seven percent.

Plaintiff Arata, who first purchased Standard

Lithium’s common shares in October 2021, brought this

securities-fraud action on behalf of himself and a putative

class of similarly situated shareholders who purchased Standard

Lithium shares on the NYSE American or an over-the-counter

marketplace called OTCQX. He alleges that Standard Lithium

overstated its production capabilities, misrepresented its

progress toward achieving “proof of concept” for its brine

extraction process, and wrongly described its technology as

novel and proprietary. In addition to Standard Lithium, Arata

sues Robert Mintak, Standard Lithium’s CEO during the relevant

period; Kara Norman, its CFO during the relevant period; and

Andrew Robinson, its COO.

The complaint asserts two causes of action under the

Securities Exchange Act of 1934 (the “Exchange Act”): first, a

violation of Section 10(b) and Rule 10b-5 against all

defendants, and second, a violation of Section 20(a) — which

establishes controlling-person liability — against Mintak,

Norman, and Robinson. The defendants now move to dismiss the

complaint in its entirety, contending (among other things) that

it does not adequately allege the falsity of the asserted

misrepresentations and omissions, the scienter of the individual

defendants, or loss causation.

For the reasons set forth below, the motion is

granted, and the amended complaint is dismissed.

Background

The facts described herein are taken from the amended

complaint, as well as “statements or documents incorporated into

the complaint by reference” and “legally required public

disclosure documents filed with the SEC,” which are properly

considered at the motion to dismiss stage. See ATSI Commc’ns,

Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007).2 They

2 Unless otherwise noted, when quoting judicial decisions this order

accepts all alterations and omits all citations, footnotes, and internal

quotation marks.

are assumed to be true for purposes of the defendants’ motions

to dismiss.

The complaint relies extensively on statements from

the two short-seller reports. A court may consider allegations

based on short-seller reports at the motion-to-dismiss stage.

Sask. Healthcare Emp.’s Pension Plan v. KE Holdings Inc., 718 F.

Supp. 3d 344, 382 (S.D.N.Y. 2024). Like any other allegation,

however, an allegation transplanted from a short-seller report

must be supported by sufficient factual content to state a

plausible claim. Sask. Healthcare, 718 F. Supp. 3d at 382; see

also In re Hebron Tech. Co. Sec. Litig., No. 20-CV-4420, 2021 WL

4341500, at *13 (S.D.N.Y. Sept. 22, 2021) (“The issue in each

case is whether the allegations in the complaint, taken as a

whole, state a claim.”). Of course, a publishing short seller

will have an “obvious motive to exaggerate the infirmities of

the securities” at issue, given its financial interest in the

security’s price declining. In re EHang Holdings Ltd. Sec.

Litig., 646 F. Supp. 3d 443, 459 (S.D.N.Y. 2022). Thus, courts

will “critically analyze” a short-seller report’s allegations to

determine if they are “reliable as opposed to fabricated based

on self-interest.” Id.

A. Standard Lithium’s Extraction Process and Arkansas

Demonstration Plant Project

Standard Lithium Ltd. — hereinafter Standard Lithium

or the “Company” — is in the business of extracting lithium from

brine (that is, salt water). Am. Compl. ¶¶ 2, 29. Industry

participants call this direct lithium extraction (“DLE”). Id.

¶ 2. During the class period, Standard Lithium used a

“proprietary” DLE process called “LiSTR” to extract lithium from

brine, which it then converted into lithium carbonate using

another technology called “SiFT.” Id. ¶¶ 2, 28, 38.

In May 2018, Standard Lithium commissioned a lithium

extraction demonstration plant (the “Demonstration Plant,” or

“Plant”) in Southern Arkansas, in a region called the Smackover

Formation. Id. ¶¶ 35-36. The Company commissioned the

Demonstration Plant pursuant to a memorandum of understanding

with LANXESS, a German chemical company. Id.; see also 2021

Annual Information Form 8, ECF No. 33-4. The Plant was one of

the first steps in a “phased process towards developing

commercial opportunities relating to the production, marketing

and sale of battery grade lithium products” from brine in the

Smackover Formation. 2021 Annual Information Form 8.

Several months later, in November 2018, Standard

Lithium and LANXESS signed a term sheet for “a contemplated

joint venture.” Am. Compl. ¶ 36. As part of the JV (the

“LANXESS Project”), LANXESS would contribute “lithium extraction

rights” it owned in the Smackover Formation, along with “access

to its existing infrastructure” and brine. Id. ¶¶ 35-36.

Standard Lithium would, in turn, contribute the Demonstration

Plant, its own “existing rights and leases in the Smackover

Formation” and its LiSTR extraction process. Id. ¶ 36. If

Standard Lithium successfully demonstrated “proof of concept” (a

term that, as far as the complaint tells us, Standard Lithium’s

disclosures do not define), LANXESS would fund commercial

development of the LiSTR project.3 Id. ¶ 37; 2020 Annual

Information Form 10, ECF No. 33-6.

The complaint’s description of what happened next is

jargon heavy. In early 2019, Standard Lithium conducted

“minipilot scale process work . . . to provide data for the

design of the full-scale Demonstration Plant.” Id. ¶ 38. The

complaint does not explain what the phrase “minipilot scale

process work” means. By mid-October 2019, the Company had

completed the “initial installation” of the Demonstration Plant,

though the complaint largely leaves that term, too, unexplained.

Id. In any event, in August of that year, Standard Lithium

announced that Worley (an engineering firm) had awarded the

LANXESS Project a “favorable” preliminary economic assessment

3 This funding would be subject to certain additional conditions,

including due diligence and studies as to the project’s economic viability.

Am. Compl. ¶ 37.

(“PEA”). Id. ¶ 39. This assessment was predicated, in part, on

the “assumption” that Standard Lithium would achieve a recovery

rate of “about 90%.” Id. ¶ 38. The PEA concluded that the

Project would have a net present value of just under $1 billion,

assuming certain conditions (including the assumed recovery

rate) were satisfied. Id. ¶¶ 39-40.

B. Standard Lithium’s Claimed Progress and Fundraising

On May 19, 2020, Standard Lithium announced in a press

release “that it had successfully commenced operations at the

Demonstration Plant” during the first part of that year. Id.

¶ 41. That press release touted the “successful start-up” of

the Demonstration Plant, hailing it as a “significant milestone

towards achieving proof of concept” of the Company’s

“proprietary” LiSTR technology. Id. ¶¶ 41-42.

Two additional statements in the May press release

figure prominently in the instant dispute. The release claimed

that the LiSTR process “[v]astly increases recovery efficiencies

to as much as >90%.” Id. ¶ 80. (There is some tension, of

course, inherent in placing the “greater than” symbol

immediately after the phrase “as much as.”) The press release

also stated that, because the Demonstration Plant was “designed

to continuously process an input tail brine flow of 50 gallons

per minute,” the Plant could produce “between 100-150 [tons]” of

lithium carbonate per year. Id.

In the months following the May release, Standard

Lithium documented the Demonstration Plant’s progress toward

establishing proof of concept. As noted above, this was an

important milestone because it could help unlock funding for the

LANXESS Project. In a September press release, Robinson said

the Company had been “successfully operating our first-of-its-

kind industrial scale DLE plant,” and had been “continuously

making lithium chloride product for months.” Id. ¶ 96.

Then, on December 3, 2020, Standard Lithium claimed

the Demonstration Plant had achieved “start-to-finish proof of

concept of its modern lithium processing technology.” Id.

¶¶ 48–49; see also December Press Release, ECF No. 33-5. The

release defined this achievement as containing three elements.

The Demonstration Plant had (1) “directly extracted lithium from

brine in Arkansas,” and (2) “produced a purified, concentrated

intermediate product,” which was then (3) “converted to better

than battery quality lithium carbonate” at a separate SiFT plant

in Canada. December Press Release 1. “This proof of concept,”

the release quoted Robinson as saying, “validate[d] [the

Company’s] approach.” Id. at 4.

Market participants reacted favorably to the

December 3 announcement. On December 7, H.C. Wainwright gave

Standard Lithium a “buy” rating, noting the “unquestionable

success of [its] proof of concept.” Id. ¶ 50. Cannacord

Genuity initiated coverage of Standard Lithium on January 11,

2021, and projected that the LANXESS Project was “imminent.”

Id. ¶ 51. And in a report dated January 18, Roth Capital

Partners predicted an “official signing” of the LANXESS Project

agreement. Id. ¶ 53. Between December 2 and January 19, the

Company’s share price rose seventy percent from $1.93 to $3.29.4

Around the same time, Standard Lithium announced and

conducted a public offering of common shares on the TSX Venture

Exchange in Canada. Id. ¶¶ 54-55. The Company indicated its

intent to use the offering proceeds to fund efforts at the

LANXESS Project. Id. The Company’s shares began trading on the

NYSE American exchange more than six months later, on July 13,

2021. Id. ¶¶ 8, 56-58. Before that date, the Company’s share

had traded on a U.S.-based over-the-counter marketplace called

OTCQX. Id. ¶ 8.

C. “Corrective Disclosures” and Stock-Price Declines

Blue Orca published its report on November 18, 2021.

Plaintiffs’ complaint quotes this report extensively, for

approximately three full pages. Id. ¶ 60. Blue Orca claimed

that data Standard Lithium had filed with an Arkansas regulatory

body — specifically, the Arkansas Oil and Gas Commission, or

4 See Standard Lithium Ltd. (SLI), Yahoo Finance,

https://finance.yahoo.com/quote/SLI/history (last visited September 3, 2025).

The Court “may take judicial notice of well-publicized stock prices,” even if

such prices were not mentioned in (or appended to) the complaint. See Ganino

v. Citizens Utils. Co., 228 F.3d 154, 166 n.8 (2d Cir. 2000).

“AOGC” — undermined Standard Lithium’s recovery-rate and proof-

of-concept claims. Id. ¶ 60.

Blue Orca asserted, based on its review of the AOGC-

filed data, that the Demonstration Plant had recovery rates

“significantly lower” than the ninety-percent rate Standard

Lithium had touted in its May 2020 press release. Id. The

short seller added that the Company’s recovery rate was trending

in the wrong direction, actually declining over time. Id. By

Blue Orca’s arithmetic, Standard Lithium had “achieved an

average lithium recovery rate of just 13%” over the preceding

twelve months. Id.

Blue Orca also cited AOGC data in support of its

assertion that the Demonstration Plant had produced “just 66

pounds of lithium carbonate” after eighteen months of

operations. Id. ¶ 66-67; Blue Orca Report 1, ECF No. 33-1. The

report concluded that Standard Lithium’s technology was “neither

economically viable nor scalable.” Blue Orca Report 1.

Standard Lithium’s stock price fell almost nineteen percent on

the day of the report’s publication, closing at $8.01 (in U.S.

dollars). Am. Compl. ¶ 62.

In response, Standard Lithium issued a press release

that same day. Id. ¶ 63. It asserted that Blue Orca’s

calculation of lithium recovery rates was incorrect because it

was based on incomplete information. Per the Company, the AOGC

data reflected only a portion of lithium chloride solution that

it had recovered — the portion it had “temporarily stored on

. . . site.” November Press Release 5, ECF No. 33-3. As a

result, the AOGC reports did not include the “much large[r]

volume” of lithium chloride solution that the Demonstration

Plant processed but then reinjected back into the brine

formation. Id.

On February 3, 2022, Hindenburg published its report.

Hindenburg, too, disparaged Standard Lithium’s technology,

claiming that it was based on three patent applications

purchased from a “one-man engineering shop,” two of which had

been deemed unpatentable by the U.S. Patent and Trademark

Office. Am. Compl. ¶¶ 75–76. The report went on to challenge

Standard Lithium’s claim that “proof of concept” had been

achieved. In fact, Hindenburg wrote, LANXESS had “admit[ted]

that Standard’s extraction technology has still not demonstrated

proof of concept.” Id. ¶ 77. Following publication of the

Hindenburg report, the company’s share price fell twenty-seven

percent, closing at $5.29 per share. Id. ¶ 79.

D. This Putative Class Action

Another named plaintiff, James Gloster, filed this

putative class action in January 2022. ECF No. 1. In June

2022, an amended complaint replaced Gloster as the named

plaintiff with Arata. Am. Compl. 1. The amended complaint

defines the putative class to include “all persons and entities

that purchased or otherwise acquired Standard Lithium common

stock on the OTCQX between May 19, 2020 and July 12, 2021, and

between July 13, 2021 and February 3, 2022, on the NYSE,

inclusive, and who were damaged thereby.” Id. ¶ 201.

Legal Standard

To overcome a Rule 12(b)(6) motion, a plaintiff must

plead factual allegations sufficient “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 is plausible “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). The Court must accept all factual allegations in the

complaint as true and draw all reasonable inferences in the

plaintiff’s favor. See Lundy v. Catholic Health Sys. of Long

Island Inc., 711 F.3d 106, 113 (2d Cir. 2013).

Securities fraud cases are also subject to the

“heightened pleading requirements” of both Federal Rule of Civil

Procedure 9(b) and the Private Securities Litigation Reform Act

(“PSLRA”). In re Synchrony Fin. Sec. Litig., 988 F.3d 157, 166

(2d Cir. 2021). Rule 9(b) requires a party to “state with

particularity the circumstances constituting fraud.” Fed. R.

Civ. P. 9(b). “Allegations that are conclusory or unsupported

by factual assertions are insufficient.” ATSI Commc’ns, 493

F.3d at 99. The PSLRA further requires a plaintiff to “specify

each statement alleged to have been misleading, the reason or

reasons why the statement is misleading, and, if an allegation

regarding the statement or omission is made on information and

belief, . . . state with particularity all facts on which that

belief is formed.” 15 U.S.C. § 78u-4(b)(1)(B).

Thus, plaintiffs “must do more than say that the

statements were false and misleading; they must demonstrate with

specificity why and how that is so.” Carpenters Pension Tr.

Fund of St. Louis v. Barclays PLC, 750 F.3d 227, 236 (2d Cir.

2014).

Discussion

Under Section 10(b) of the Exchange Act (as

implemented by Rule 10b-5), it is 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 light of the

circumstances under which they were made, not

misleading.” 17 C.F.R. § 240.10b–5. Section 10(b) and Rule

10b-5 only apply to “transactions in securities listed on

domestic exchanges[] and domestic transactions in other

securities.” Morrison v. Nat’l Austl. Bank Ltd., 561 U.S. 247,

267 (2010).

To state a Rule 10b-5 claim, a plaintiff must

demonstrate: “(1)a material misrepresentation or omission by the

defendant; (2) scienter; (3) a connection between the

misrepresentation or omission and the purchase or sale of a

security; (4) reliance upon the misrepresentation or omission;

(5) economic loss; and (6) loss causation.” Stoneridge Inv.

Partners, LLC v. Sci.–Atlanta, 552 U.S. 148, 157 (2008).

A. Domesticity Under Morrison

Standard Lithium first asserts that any claims arising

from the period prior to its NYSE American listing — i.e., from

May 19, 2020, to July 12, 2021, see Am. Compl. ¶ 1 — must be

dismissed because the plaintiff has not adequately alleged that

Standard Lithium trades on OTCQX were “domestic” transactions.

A transaction is domestic if (1) it involves

“securities listed on domestic exchanges,” or (2) “domestic

transactions in other securities.” Morrison, 561 U.S. at 267.

Plaintiff argues that he adequately pleaded both options, though

(a) he makes this argument half-heartedly and without much in

the way of citation to the complaint itself, and (b) he

purchased shares only on the NYSE American exchange. See Arata

Purchase Cert., ECF No. 15-2.

1. “Domestic Exchange”

The complaint does not allege that OTCQX is an

exchange — only that it is a marketplace “for over-the-counter

trading of stocks in the United States.” Am. Compl. ¶ 21. In

opposing dismissal, however, Arata writes that OTCQX is “an

over-the-counter exchange based in the U.S.” Pl.’s Opp’n Br. 10

n.8, ECF No. 34 (emphasis added). The italicized language is an

oxymoron of sorts: “over-the-counter transactions are, by

definition, those that do not occur on an exchange.” In re

Petrobras Sec. Litig., 150 F. Supp. 3d 337, 340 (S.D.N.Y. 2015).

Plaintiff does not meaningfully contest the exchange /

over-the-counter dichotomy, or its application to OTCQX.

Instead, he argues that the defendants’ domesticity argument

should be tabled until the class-certification stage. At the

pleading stage, he contends, there “is no question” that the

sole named plaintiff — Arata, who bought shares on NYSE American

— “purchased in a domestic transaction under Morrison.” Pl.’s

Opp’n Br. 11. On this view, the defendants’ arguments about

OTCQX go to Arata’s adequacy and typicality as a class

representative under Federal Rule of Civil Procedure 23(a), not

to whether he has stated a claim under Rule 12(b)(6). The

defendants reply that Morrison’s requirement of a purchase or

sale of securities in the United States is a pleading

requirement, and that the OTCQX portion of the complaint alleges

“claims that fall outside the reach of U.S. securities laws.”

Defs.’ Reply Br. 1 & n.2, ECF No. 35.

Morrison’s domesticity requirement is indeed a

pleading requirement. 561 U.S. at 267 (it is “only transactions

in securities listed on domestic exchanges, and domestic

transactions in other securities, to which § 10(b) applies”).

And the defendants are correct on the merits: OTCQX is not a

domestic “exchange.” Petrobras, 150 F. Supp. 3d at 340. Arata

brought claims on behalf of two sets of purchasers who bought in

two different venues over two different periods. Am. Compl.

¶ 1. One set (the OTCQX set) has not stated a claim.5

2. “Domestic Transactions” Off-Exchange

The complaint also falls short of alleging a domestic

transaction that occurred off exchange. An off-exchange

transaction is “domestic” when “irrevocable liability is

incurred or title passes within the United States.” Absolute

Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60, 67 (2d

Cir. 2012). The complaint alleges that OTCQX “is the top tier

of the three marketplaces for the over-the-counter trading of

5 Rule 12(b)(6) motions are generally directed at “a single count or

claim for relief,” if not a complaint in its entirety, rather than just a

”part of a claim.” See 5B Charles Wright & Arthur Miller, Federal Practice

and Procedure § 1358 (4th ed.). Still, district courts in this circuit have

frequently “granted motions to dismiss with respect to some” allegations in

securities fraud complaints, even without dismissing an entire claim. In re

ITT Educ. Servs., Inc. Sec. Litig., 34 F. Supp. 3d 298, 301 & n.1 (S.D.N.Y.

2014) (dismissing “with respect to some allegedly misleading statements while

allowing claims as to other statements to proceed”); In re Vale S.A. Sec.

Litig., No. 19-CV-526, 2020 WL 2610979, at *19 (E.D.N.Y. May 20, 2020)

(setting out, in an appendix, lists of “actionable” and “inactionable”

statements).

stocks in the United States,” and that companies listed on it

are “subject to SEC regulation.” Am. Compl. ¶ 21. In his

brief, Arata cites the OTCQX website for the unremarkable

proposition that the platform “provides a market for foreign

listed companies to access U.S. investors.” Pl.’s Opp. Br. 10

n.9. None of this comes close to satisfying Morrison or

Absolute Activist.

This pleading shortfall is somewhat surprising. Had

plaintiff asserted his claims on behalf of U.S. purchasers,

rather than all “persons and entities that purchased or

acquired” Standard Lithium stock during the specified periods,

the outcome might be different on this issue. For such U.S.

purchasers, it is likely that both sides of the “irrevocable

liability” that Absolute Activist requires would be in the

United States. When a purchaser buys stock on OTCQX, his or her

counterparty is not the ultimate seller of the shares in

question, but rather a U.S.-based clearinghouse.6 The complaint

6 The over-the-counter trading of equities is different from other

securities in this regard, in a manner that may have important implications

for Morrison’s domesticity analysis. Morrison’s dichotomy between on- and

off-exchange trading is presumably relevant to the location of the purchase

and sale because, with a centralized exchange, irrevocable liability always

passes at the exchange itself. In contrast, in classic over-the-counter

trading, there is no central hub; instead, market participants trade directly

with one another, and at least one of the parties may be located abroad. See

Petrobras, 150 F. Supp. 3d at 340. In equities trading, however, a

purchaser’s liability does not run to the seller, but rather to a central

clearinghouse like NSCC — even in over-the-counter trading through a platform

like OTCQX. See generally Paolo Saguato, The Ownership of Clearinghouses:

When "Skin in the Game" Is Not Enough, The Remutualization of Clearinghouses,

34 Yale J. on Regul. 601, 608-13 (2017) (providing an overview of the role of

clearinghouses in securities trading).

is not restricted to U.S. purchasers, however, and the plaintiff

has not argued that the OTCQX purchases at issue were domestic

transactions. The claims based on OTCQX purchases thus cannot

survive (though the Court nevertheless addresses them in its

falsity analysis below).

B. Materially False and Misleading Misrepresentations or

Omissions

The complaint alleges that dozens of Standard

Lithium’s statements and omissions were false or misleading.

Am. Compl. ¶¶ 80-178. The alleged misrepresentations fall into

four main categories: (1) statements about the recovery rates

and production capabilities of Standard Lithium’s technology,

(2) statements about the Demonstration Plant’s achievement of

“proof of concept” for lithium extraction, (3) statements about

the scalability and commercial viability of the LiSTR process,

and (4) statements describing LiSTR as “novel,” “proprietary,”

and “protected by a series of patent applications.” See, e.g.,

id. ¶¶ 80, 164. The Court addresses each category of statements

in turn.

1. Statements About Recovery Rates and Production

Capabilities

Arata first alleges that Standard Lithium’s statements

about the performance of the Demonstration Plant were false or

misleading. Relying on the Blue Orca Report, he challenges

Standard Lithium’s ostensible claims that (1) the Demonstration

Plant’s lithium recovery rate was around ninety percent, and (2)

the Plant was producing lithium carbonate at a rate of 100-150

tons per year.7 See id. ¶¶ 60, 81. Arata contrasts these claims

with Blue Orca’s assertion (based on AOGC data) that the

Demonstration Plant’s average recovery rate was closer to

thirteen percent, and that it had only produced sixty-six pounds

of lithium carbonate in the preceding eighteen months. Blue

Orca Report 1.

These claims fail for two reasons, as set out in

greater detail below. First, Standard Lithium never said the

Demonstration Plant was achieving a ninety-percent recovery rate

or producing 100-150 tons of lithium carbonate per year.

Second, even if Standard Lithium had made those claims, Blue

Orca’s calculations would not necessarily have falsified them.

Before we reach the question of falsity, however, we pause to

address the defendants’ claim that the AOGC data cannot support

a claim of falsity because that information was in the public

domain.

7 In addition to the May 19 press release, Am. Compl. ¶ 80, these

statements appeared in several subsequent releases and SEC filings. For

instance, a September 2020 press release also stated that the LiSTR process

offered “90% recovery” rather than the “40-60%” offered by “conventional

methods.” Id. ¶ 98. Meanwhile, another September 2020 press release

repeated the annualized “100-150 tons” statement. Id. ¶ 94. So did a June

2021 Form 40-F filing. Id. ¶ 128.

a. Defendants’ argument that the information was

in the public domain fails at this stage.

As a preliminary matter, the defendants argue that the

AOGC data on which Blue Orca based its calculations was already

public, such that the Company’s failure to disclose that data

cannot have rendered its statements false or misleading. Defs.’

Br. 15-16, ECF No. 32; see also Am. Compl. ¶ 60 (describing AOGC

data as publicly available). That argument is easily dispensed

with here.

In a private civil action under Section 10(b), we

consider the issue of public availability under the rubric of

the “truth on the market” doctrine. E.g., SEC v. Honig, No. 18-

CV-8175, 2020 WL 906383, at *6 (S.D.N.Y. Feb. 25, 2020). That

doctrine — a corollary to the familiar “fraud on the market”

theory — holds that an alleged “misrepresentation is immaterial”

when the truth of the matter in question “is already known to

the market.” Ganino v. Citizens Utils. Co., 228 F.3d 154, 167

(2d Cir. 2000).

The truth-on-the-market defense, however, is

“intensely fact-specific” and will “rarely” be an appropriate

basis on which to dismiss a Section 10(b) claim at the pleading

stage. Id. Moreover, it is not enough for a defendant to argue

that it had no duty to disclose a piece of information, simply

because that information was drifting somewhere in the vast

universe of publicly available information. E.g., Litwin v.

Blackstone Grp., L.P., 634 F.3d 706, 718 (2d Cir. 2011)

(rejecting the “sweeping proposition that an issuer of

securities is never required to disclose publicly available

information”). Instead, a defendant must demonstrate that a

piece of information was “conveyed to the public with a degree

of intensity and credibility sufficient to counter-balance

effectively any misleading information created by the alleged

misstatements.” Ganino, 228 F.3d at 167; cf. In re Keyspan

Corp. Sec. Litig., 383 F. Supp. 2d 358, 377-78 (E.D.N.Y. 2003)

(information must be “readily accessible in the public

domain”(emphasis added)).8

The AOGC data does not, at this stage, come close to

meeting that standard. The complaint contains no allegations

concerning the visibility of the AOGC website to the investing

8 Courts applying the truth-on the-market doctrine have held that it

applies only to “affirmative misstatements” rather than omissions. See In re

Bank of Am. AIG Disclosure Sec. Litig., 980 F. Supp. 2d 564, 577 (S.D.N.Y.

2013). But the distinction between the two categories is often fuzzy: a

misleading statement is definitionally one that “omits the truth.” In re

Smith Barney Transfer Agent Litig., 290 F.R.D. 42, 47 (S.D.N.Y. 2013). Thus,

“in most securities fraud cases, an affirmative misstatement can be cast as

an omission and vice versa.” Id.; accord Wilson v. Comtech Telecomms. Corp.,

648 F.2d 88, 93 (2d Cir. 1981) (“The labels by themselves, therefore, are of

little help.”). Here, it is not entirely clear whether the plaintiff

challenges Standard Lithium’s purported statement that the Demonstration

Plant was achieving a ninety-percent recovery rate as (1) affirmatively

false, or (2) misleading in light of the omission to disclose at some later

point that the rate was not being realized. Because the first option is a

plausible one, the Court declines to delve into the “futile logomachical

exercise” of distinguishing affirmative misstatement from omission at this

stage. Smith Barney, 290 F.R.D. at 47.

public.9 See Honig, 2020 WL 906383, at *7 (Wikipedia page could

not satisfy truth-on-the-market doctrine without “any evidence

of promotion” of the page in question). And, importantly, the

defendants do not claim that the ostensible thirteen-percent

recovery rate was itself available on the AOGC website.

Instead, they assert only that an investor could extrapolate

that rate from public data. Put differently, the underlying

“truth of the matter,” Ganino, 228 F.3d at 167, was at most a

derivative of information ostensibly available to the public —

and a complex one to calculate, at that.

Thus, the Court will not endorse, at this stage,

Standard Lithium’s argument that the AOGC data was readily

accessible to the public or necessarily impounded into the

stock’s price. Alpha Cap. Anstalt v. New Generation Biofuels,

Inc., No. 13-CV-5586, 2014 WL 6466994, at *9 (S.D.N.Y. Nov. 18,

2014) (taking similar approach); but see Rice v. Intercept

Pharms., Inc., No. 21-CV-0036, 2022 WL 837114, at *10 (S.D.N.Y.

9 Standard Lithium notes that it told investors about AOGC in its public

disclosures. Defs.’ Br. 9 & n.6. This is true enough. The PEA noted that

Standard Lithium had to produce data to AOGC for purposes of determining a

royalty rate to landowners. See Preliminary Econ. Assessment 42-43, ECF No.

33-7. And a quarterly disclosure document from November 2019 stated, when

summarizing the information in a LANXESS report on the Smackover Formation,

that AOGC data was “on-line and easily searchable.” Management’s Discussion

& Analysis for Period Ending September 2019, at 12, ECF No. 33-9. But that

is insufficient, at this stage, both for the reasons set out above and also,

importantly, because the accuracy of Blue Orca’s calculations from the AOGC

data remains disputed. In the end, Standard Lithium cannot have it both ways

— arguing on the one hand that everyone should have been able to do what Blue

Orca did to identify the alleged overstatement in recovery rates, and on the

other hand that Blue Orca’s work makes no sense.

Mar. 21, 2022) (adverse reaction information in FDA database was

sufficiently available to the public, even though the database

contained only “raw data” files that could not be searched

without “familiar[ity] with [the] creation of relational

databases”).

b. Standard Lithium never said it was achieving a

certain recovery rate or production quota.

Arata has not adequately alleged the falsity of

Standard Lithium’s statements about the Demonstration Plant’s

performance. Here, Arata’s allegations proceed from a flawed

premise: Standard Lithium never said the Plant had achieved a

ninety-percent recovery rate, or that it was producing 100-150

tons of lithium carbonate per year.

Recovery Rates. Beginning with the recovery rate,

Standard Lithium said the Demonstration Plant was using LiSTR

technology, and that a “key feature” of the technology was that

it ”[v]astly increase[d] recovery efficiencies to as much as

>90%.” Am. Compl. ¶ 80 (excerpting May press release). But

read in context, this was a statement about the potential

capabilities of the Plant’s technology, not a statement about

the Plant’s actual performance. Indeed, the Company never

represented that the ninety-percent figure was derived from the

Demonstration Plant’s operations. Rather, as at least one of

its annual reports made clear, the ninety-percent figure stemmed

from “bench scale” testing and had “not yet been commercially

proven.” See 2020 Annual Information Form 18-19. In other

words, Standard Lithium disclosed to investors that the ninety-

percent figure was based on laboratory-scale testing, and never

said this figure had been achieved at the Plant.

At bottom, then, the statements in the complaint

reveal only that Standard Lithium told investors that the

Demonstration Plant was using LiSTR (which Arata does not

dispute), Am. Compl. ¶ 80, and that LiSTR had demonstrated a

ninety-percent recovery rate under non-commercial laboratory

conditions (also not disputed). Id. Because Arata does not

contest the veracity of those claims, he cannot allege that

these statements about the Demonstration Plant’s ongoing

operations were false or misleading.

Production Capabilities. Arata also mischaracterizes

what Standard Lithium said about the production capabilities of

the Demonstration Plant. Contrary to the complaint’s

implication, Standard Lithium did not say that the Demonstration

Plant was producing (or would produce) 100-150 tons of lithium

carbonate per year. Contra id. ¶ 95. Rather, it said the

Demonstration Plant was “designed” to process brine at a certain

per-minute rate, and that this was “equivalent to an annual

production of between 100-150 [tons]” of lithium carbonate.

E.g., id. ¶ 94 (emphasis added). This is not the same as saying

the Plant had reached, or would reach, that production target.

See, e.g., Hawes v. Argo Blockchain plc, No. 23-CV-7305, 2024 WL

4451967, at *7 (S.D.N.Y. Oct. 9, 2024) (“[S]aying that something

is ‘designed’ to achieve certain goals does not either expressly

or impliedly guarantee that those goals will be achieved.”).

Arata does not dispute that the Demonstration Plant

was “designed” to process any certain amount of brine per

minute. He simply complains that the Demonstration Plant was

not, in fact, achieving an outcome within its design parameters.

Id. ¶ 95. Because Standard Lithium never said the Plant was

doing so, Arata has not plausibly alleged that statements about

the Demonstration Plant’s annualized production were false or

misleading. See Hawes, 2024 WL 4451967, at *7.

Arata contests other stray comments in Standard

Lithium’s public statements about the performance of the

Demonstration Plant, but those are non-actionable puffery. A

“subjective statement[] that cannot be proven true or false”

cannot form the basis of a fraud action. MacNaughton v. Young

Living Essential Oils, LC, 67 F.4th 89, 96 (2d Cir. 2023).

Here, Standard Lithium described the operation of the

Demonstration Plant as a (among other things) a “major advance,”

id. ¶ 82, a “significant stride[],” id. ¶ 92, and a “key project

milestone[].” Id. These are “classic examples of puffery.”

Schaeffer v. Nabriva Therapeutics plc, No. 19-CV-4183, 2020 WL

7701463, at *9 (S.D.N.Y. Apr. 28, 2020) (labeling statement that

company had achieved “another major milestone” as puffery, and

collecting similar cases).

c. Even if Standard Lithium had made the

challenged statements, the Blue Orca Report did

not plausibly falsify them.

Even if we were to construe Standard Lithium’s

statements as claiming a certain recovery rate and production

quota, Arata’s claim would still fail. Arata’s complaint does

not plausibly allege why such statements (if they had been made)

would be false or misleading. This is because his allegations

as to the falsity of these claims are internally inconsistent.

A court “need not accept as true an allegation that is

contradicted by documents on which the complaint relies.” In re

Bristol-Myers Squibb Sec. Litig., 312 F. Supp. 2d 549, 555

(S.D.N.Y. 2004). Here, Arata relies on the Blue Orca Report’s

finding of a thirteen-percent (rather than ninety-percent)

recovery rate. Am. Compl. ¶ 60. The Blue Orca Report’s

recovery-rate calculations also underpin Arata’s challenge the

Company’s ostensible production-quota statement: if Standard

Lithium was not achieving a ninety-percent recovery rate, it

could not possibly hit the 100-150 tons target, because it would

not be extracting enough lithium chloride.

Crucially, however, Arata also relies on the

allegations in the Hindenburg Report, the entirety of which —

all fifty-one pages — the Court may deem incorporated. See id.

¶¶ 76-77 (extensively quoting Hindenburg Report); Trump v.

Vance, 977 F.3d 198, 210 n.8 (2d Cir. 2020) (where complaint

makes “clear, definite, and substantial reference” to a

document, the court may consider the entire document). And

Hindenburg contradicts Blue Orca on this point: it credits

Standard Lithium’s claim that Blue Orca’s calculations are wrong

because they disregard vast quantities of lithium chloride that

the Company had produced and reinjected back into the brine

aquifer. Hindenburg Report 47. So, Arata’s sprawling

allegations — which rely so extensively on the short sellers —

are internally contradictory.

Given this tension, the Court need not (and cannot)

credit Arata’s allegations (derived from Blue Orca) regarding

the falsity of Standard Lithium’s purported statements about the

Demonstration Plant’s operations. See In re Bristol-Myers

Squibb Sec. Litig., 312 F. Supp. 2d at 555 (court need not

accept allegations “contradicted by documents on which the

complaint relies”). The claim therefore fails as to those

statements, even assuming Standard Lithium had made those

statements in the first place.

2. Statements About Proof of Concept

Arata also challenges Standard Lithium’s December 2020

claim that the Demonstration Plant had achieved proof of

concept. In response to the Court’s question at oral argument,

Arata’s counsel stated that this was the most plainly false

statement alleged in the entire complaint. Oral Arg. Tr. 36:4-

11, ECF No. 42. The Court disagrees.

Standard Lithium touted the proof-of-concept

achievement virtually throughout the December press release.

December Press Release 2-3. The release’s long title began:

“Standard Lithium Successfully Completes Proof-of-Concept of

Modern Lithium Extraction and Crystallization . . . .” Id. at

1. Immediately below that, in a section titled “Highlights,”

the second bullet point read: “Successful proof-of-concept of

modern lithium processing technology.” Id. Then, the opening

paragraphs of the release stated that the company had

“successfully completed the start-to-finish proof of concept of

its modern lithium processing technology,” which “culminat[ed]”

in converting lithium chloride into lithium carbonate at the

SiFT plant in Canada. Id.

Arata says the proof-of-concept claim was false,

primarily because:

•

the Company’s efforts at the Demonstration Plant had

“yielded just 44 pounds of lithium carbonate, nowhere

near the 100-150 [tons] per annum repeatedly

represented”;

•

the Company was “achieving far below a 90% lithium

recovery rate,” as shown by the Blue Orca Report, and;

•

the Company “had no reasonable basis to claim that its

LiSTR technology could” achieve the recovery rate or

annual production levels mentioned above.

Am. Compl. ¶ 116. He also points to the Blue Orca Report’s

assertion that proof of concept was “critical” for Standard

Lithium because it would unlock joint-venture funding from

LANXESS. Blue Orca Report 1; see also Am. Compl. ¶ 192.

Arata has not plausibly alleged the falsity of the

proof-of-concept claim, for the straightforward reason that the

Company had not defined “proof of concept” with any precision

before issuing the December release.10 See Kuriakose v. Fed.

Home Loan Mortg. Corp., 897 F. Supp. 2d 168, 183 (S.D.N.Y. 2012)

(Freddie Mac’s public use of the word “subprime” did not give

rise to liability where that term had no “universally accepted

definition,” and where employees adopted “changing internal

definitions” of the term). Contrary to Arata’s suggestion, id.

¶ 5, Standard Lithium never defined “proof of concept” to

include a ninety-percent recovery rate or a particular

production quota — not in the December press release, and not in

any other prior statement.

The Company did, however, appear to define “start-to-

finish” proof of concept in the December release. The best

reading of that release is that it explains the three elements

10 At least one district court has described the phrase “proof of

concept” as a “vague” term that cannot be objectively falsified. See Jackson

v. Fischer, 2015 WL 1143582, at *6-8 (D. Ariz. Mar. 13, 2015).

of “start-to-finish” proof of concept. Immediately after the

opening sentence touts “start-to-finish proof of concept,” the

second sentence expounds on three elements of that phrase: (1)

direct lithium extraction, (2) conversion to an “intermediate”

product, and (3) conversion of that product to lithium

carbonate. December Press Release 1. The press release never

mentions a ninety-percent recovery rate or an annual production

target as essential prerequisites to “start-to-finish proof of

concept.” And because Arata does not dispute that the three

criteria the release does mention were in fact met, he cannot

argue that the December release was false or misleading.11 See

Gagnon v. Alkermes PLC, 368 F. Supp. 3d 750, 767 (S.D.N.Y. 2019)

(pointing to surrounding sentences in Form 10-K to define the

phrase “customary pharmaceutical company practices,” and

concluding that “[a]gainst this backdrop, the challenged

statements cannot be said to be untrue or materially

misleading”).

The release did quote the Company’s president

(Robinson) as stating that the Company had converted lithium to

11 Similar logic applies to Arata’s claim that LANXESS later disputed

Standard Lithium’s December announcement of proof of concept. The Hindenburg

Report quoted an unnamed LANXESS spokesperson as saying, in early 2022, that

there were “still some steps to go” for the LANXESS Project, and that LANXESS

and Standard Lithium would “see how we work together once proof-of-concept is

there.” Id. ¶¶ 190-91. This did not falsify the December release. The

LANXESS spokesperson never defined proof of concept or said that it required

a ninety-percent recovery rate. And Arata does not allege that Standard

Lithium materially omitted to disclose any disagreement by LANXESS about

whether and how proof of concept was achieved.

“better than battery quality” on a “large scale.” December

Press Release 4. But “large scale” is definitionally vague,

too. See Sask. Healthcare, 718 F. Supp. 3d at 385 (the word

“large” is “to a large extent neither quantifiable nor factual,

but rather subject to interpretation,” and therefore not

actionable). And the release included qualifying language that

was more specific: it stated that the Demonstration Plant was

operating at a “pre-commercial scale” and remained on the path

“towards commerciali[z]ation.” Id. ¶¶ 48-49 (emphases added).

3. Statements About Future LANXESS Project

Performance

Arata next challenges Standard Lithium’s statements

about the future commercial performance of the LANXESS Project.

Specifically, he challenges (1) the claim that the LANXESS

Project was “scalabl[e]” or “economically viable,” see Am.

Compl. ¶¶ 121-22, 130-31, 150-51; and (2) the preliminary

economic assessment’s base case estimate — which Standard

Lithium referenced in several financial disclosures — that the

LANXESS Project would be worth just under $1 billion, which

assumed (among other things) a recovery rate that “is about

90%.” Id. ¶¶ 84-85; Preliminary Econ. Assessment 159.

Importantly, the PEA did not say that the Demonstration Plant’s

recovery rate was ninety percent. Indeed, as noted above,

Standard Lithium never suggested as much. Rather, the PEA

assessed what the LANXESS Project would be worth if the Project

achieved that rate.

Statements concerning the future viability or

performance of a resource extraction project are statements of

opinion. In re Pretium Res. Inc. Sec. Litig., 256 F. Supp. 3d

459, 477 (S.D.N.Y. 2017) (projections about gold mine’s future

performance were statements of opinion), aff’d sub nom. Martin

v. Quartermain, 732 F. App’x 37 (2d Cir. 2018). So, to plead

the falsity of those statements, Arata must allege that (1) “the

supporting fact[s] [Standard Lithium] supplied were untrue,” (2)

“the speaker did not hold the belief [he or] she professed,” or

(3) “the speaker omit[ted] information whose omission [made] the

statement misleading to a reasonable investor.” Tongue v.

Sanofi, 816 F.3d 199, 210 (2d Cir. 2016). The amended complaint

contains no facts supporting the second pathway, so we focus on

the first and third.

Arata has not adequately alleged falsity. His

argument as to the first pathway hinges on Standard Lithium’s

alleged claim that the Demonstration Plant was achieving a

ninety-percent recovery rate. And his argument as to the third

pathway is that Standard Lithium omitted to mention the AOGC

data undercutting the claim of a ninety-percent recovery rate.

But as discussed above, see Part III.B.1.b, Standard Lithium

never claimed the Demonstration Plant was achieving such a rate.

Instead, the PEA merely assumed such a rate for purposes of

valuing the LANXESS Project, see Prelim. Econ. Assessment 159,

while Standard Lithium’s other disclosures said, based on lab-

scale testing, that LiSTR “increases recovery efficiencies to as

much as >90%.” Am. Compl. ¶ 80; 2020 Annual Information Form

18-19. And even if the Company had much such a statement, Arata

could not allege falsity merely by parroting the allegations in

the Blue Orca Report. See Part III.B.1.c.

Arata’s challenges to the PEA — which was incorporated

into Standard Lithium’s annual reports and other SEC filings —

also fail under the PSLRA safe harbor and the bespeaks-caution

doctrine. The safe-harbor provision forecloses liability for

certain “forward-looking statements.” 15 U.S.C. § 78u-5(c). It

defines “forward-looking statement” to include any statement

concerning the “objectives of management for future operations”;

any statement of “future economic performance; and statements

“of the assumptions underlying” those kinds of claim. Id. §

78u-5(i)(1). The safe-harbor provision shields a speaker from

liability when the speaker’s forward-looking statement is

“accompanied by meaningful cautionary statements” indicating

that “actual results [could] differ materially from those in the

forward-looking statement,” or “if the plaintiff fails to prove

that the forward-looking statement was made or approved by an

executive officer with actual knowledge by that officer that the

statement was false or misleading.” Slayton v. Am. Express Co.,

604 F.3d 758, 762 (2d Cir. 2010).

Similarly, under the bespeaks-caution doctrine, “[a]

forward-looking statement accompanied by sufficient cautionary

language is not actionable because no reasonable investor could

have found the statement materially misleading.” Iowa Pub.

Emps.’ Ret. Sys. v. MF Glob., Ltd., 620 F.3d 137, 141 (2d Cir.

2010). But “generic and mere boilerplate words of caution” do

not suffice. City of Austin Police Ret. Sys. v. Kinross Gold

Corp., 957 F. Supp. 2d 277, 301 (S.D.N.Y. 2013). Instead, the

cautionary language must “directly relate to the risk that

brought about plaintiffs’ loss.” Halperin v. eBanker USA.com,

Inc., 295 F.3d 352, 359 (2d Cir. 2002).

Here, the PEA valued the LANXESS Project at $989

million, based in part on the “assumption” — Arata’s own word —

that Standard Lithium “could achieve a lithium recovery of about

90%.” Am. Compl. ¶¶ 39, 167, 168 (emphasis added). Arata

contends that because this underlying recovery-rate assumption

was wrong, the Company must have known that the valuation was

also wrong, yet failed to tell investors as much. Id. ¶¶ 101,

137, 168, 169. But Standard Lithium’s statements regarding the

PEA contain ample cautionary language warning investors of the

assumptions that went into the valuation — including as to

recovery rate specifically — and the reasons why that valuation

might not be realized. Standard Lithium informed investors

that:

•

“The [PEA] included herein are preliminary in

nature . . ., and there is no certainty that the PEAs

will be realized.” 2021 Annual Information Form 6.

•

“The final product lithium recovery is about 90%. The

production process parameters are supported by bench

scale metallurgical testing and mini-pilot plant

testing program results. Readers are cautioned that

statements relating to the production process and

recovery are based on using a processing technology

that has not yet been commercially proven and there is

a risk that actual results, performance, prospects and

opportunities could differ materially from those

expressed or implied by such forward-looking

information.” Id. at 15–20.

•

“Exploring and developing natural resource projects

bears a high potential for all manner of risks.

Additionally, few exploration projects successfully

achieve development due to factors that cannot be

predicted or foreseen. Moreover, even one such factor

may result in the economic viability of a project

being detrimentally impacted, such that it is neither

feasible nor practical to proceed.” Id. at 38.

•

“[T]here can be no assurance that results obtained in

small-scale laboratory tests, pilot plants or the

Demonstration Plant will be duplicated in larger scale

tests under on-site conditions or during production.”

Id.

These and other cautionary statements explained the

assumptions and risks to which the PEA was subject, including

the very risks to which Arata now ascribes his losses. See

Martin, 732 F. App’x at 42 (mining company’s estimates were non-

actionable where company “emphasized the preliminary nature of

its development” and warned that its assessment “may ultimately

prove to be inaccurate”). The statements about the PEA

therefore fall within the safe harbor and the bespeaks-caution

doctrine.

4. Statements About Proprietary or Novel Technology

Finally, Arata challenges statements that Standard

Lithium had developed “proprietary” and “novel” technologies for

directly extracting lithium. See, e.g., Am. Compl. ¶¶ 94, 113.

These statements were false, he says, because the technology was

only “based on three patent applications [Standard Lithium]

purchased in December 2018 from a one-man engineering shop,” and

because the Patent and Trademark Office had denied patent

protection to LiSTR on the ground that it was insufficiently

novel. E.g., id. ¶ 159.

At the outset, the provenance of the LiSTR patent

applications says nothing about their novelty or value. A

patent application bought from a “one-man engineering shop”

could just as easily transform an industry as one bought from a

commercial-scale research laboratory. In any event, Standard

Lithium did clearly disclose the origins of the LiSTR patent

applications in its 2020 annual report to shareholders, and

therefore cannot have misled its investors about them. In re

Curaleaf Holdings, Inc. Sec. Litig., 519 F. Supp. 3d 99, 107

(E.D.N.Y. 2021) (“[D]ismissal is appropriate where the complaint

is premised on the nondisclosure of information that was

actually disclosed.”); see 2020 Annual Information Form 11.

Furthermore, Standard Lithium’s use of the word

“proprietary” was not plausibly false or misleading,

notwithstanding the prior rejection of the patent application.

“[T]he legal definition of proprietary technology is broader

than simply holding a patent . . . .” Tabor v. Bodisen Biotech,

Inc., 579 F. Supp. 2d 438, 451 (S.D.N.Y. 2008). The word simply

means “[o]f, relating to, or holding as property.” Proprietary,

Black’s Law Dictionary (12th ed. 2024). Arata does not dispute

that Standard Lithium owns the rights to the LiSTR technology,

so he cannot claim that Standard Lithium inaccurately described

it as “proprietary.”

Standard Lithium’s use of the word “novel” also was

not plausibly false or misleading. Arata relies mainly on the

fact that LiSTR was denied patent protection on novelty grounds.

E.g., Am. Compl. ¶ 159.12 But a product can be novel without

being novel enough to receive a patent. Udin v. J. Kaufman Iron

Works, Inc., 342 F. Supp. 1090, 1095 (S.D.N.Y. 1972) (“An

invention which has been made, and which is new in the sense

12 Arata also relies on the Hindenburg Report’s conclusion, based on

conversations with unnamed “industry sources,” that LiSTR was not a novel

technology. Pl.’s Opp’n Br. 24; Am. Compl. ¶ 76. But there is no evidence

that Arata independently validated those anonymous sources’ claims, so the

Court will not rely upon them. See Long Miao v. Fanhua, Inc., 442 F. Supp.

3d 774, 804 (S.D.N.Y. 2020) (refusing to credit statements in short-seller

report attributed to “anonymous interviewees” absent any independent

corroboration by counsel).

that the same thing has not been made before, may still not be

patentable if the difference between the new thing and what was

known before is not considered sufficiently great to warrant a

patent.” (emphasis omitted)). Thus, the alleged non-

patentability of LiSTR says nothing about the truth of Standard

Lithium’s assertions of novelty. In addition, the statement

that LiSTR was a “novel” breakthrough in lithium extraction was

subjective, and therefore non-actionable. See, e.g., Yan v.

ReWalk Robotics Ltd., 973 F.3d 22, 32 (1st Cir. 2020) (claim of

“breakthrough” medical device was puffery); City of Edinburgh

Council v. Pfizer, Inc., 754 F.3d 159, 173 (3d Cir. 2014) (claim

of “breakthrough drug” was puffery).

C. Scienter

Dismissal is also appropriate as to the individual

defendants because Arata fails to raise a “strong inference” of

scienter. Novak v. Kasaks, 216 F.3d 300, 306 (2d Cir. 2000).

Scienter is “a mental state embracing intent to deceive,

manipulate, or defraud.” Tellabs, Inc. v. Makor Issues & Rts.,

Ltd., 551 U.S. 308, 319 (2007). An inference of scienter is

strong only when it is “cogent and at least as compelling as any

opposing inference of nonfraudulent intent.” Id. at 314. To

raise a strong inference, a complaint must “state with

particularity facts” showing (1) that defendants had the motive

and opportunity to commit fraud, or (2) strong circumstantial

evidence of conscious misbehavior or recklessness. ECA, Loc.

134 IBEW Joint Pension Tr. v. JP Morgan Chase Co., 553 F.3d 187,

197-98 (2d Cir. 2009). Against this extremely strict legal

landscape, Arata has not made either showing.

1. Motive

Arata has not adequately alleged a specific motive to

defraud investors. In general, plaintiffs may not rely on

“motives possessed by virtually all corporate insiders,” such as

the desire to maintain a high stock price “in order to increase

executive compensation or prolong the benefits of holding

corporate office.” Novak, 216 F.3d at 307. Instead, they must

“allege that defendants benefitted in some concrete and personal

way from the purported fraud.” Id. at 307-08(emphasis added).

The “ordinary” example of adequate motive is the “desire to

profit from extensive insider sales.” Id. at 308.

Here, the complaint does not allege that the

individual defendants realized any concrete and personal benefit

from the alleged fraud, such as the sale of their own shares of

stock. See In re Gentiva Sec. Litig., 932 F. Supp. 2d 352, 372

(E.D.N.Y. 2013) (“Typically, a plaintiff must show that officers

made false statements in order to sell their own shares at a

profit.”). Instead, Arata primarily alleges that the defendants

“were motivated to issue materially false and misleading

statements so that Standard Lithium could raise cash at inflated

levels to infuse much needed funds into the Company” based on

Standard Lithium’s need for fundraising to remain a going

concern. Am. Compl. ¶ 194; see also id. ¶¶ 192–96. But the

need to raise capital and stave off a company’s collapse is the

type of generalized motive that is insufficient to allege

scienter. In re PXRE Grp., Ltd., Sec. Litig., 600 F. Supp. 2d

510, 532–33 (S.D.N.Y.) (collecting cases), aff’d sub nom. Condra

v. PXRE Grp. Ltd., 357 F. App’x 393 (2d Cir. 2009); see also

Tabak v. Canadian Solar Inc., 549 F. App’x 24, 28-29 (2d Cir.

2013).

2. Conscious Misbehavior or Recklessness

Arata also has not adequately alleged that the

defendants’ actions constituted conscious misbehavior or

recklessness. When a complaint has “failed to demonstrate” an

adequate motive to defraud, it “must produce a stronger

inference of recklessness,” and “the strength of the

circumstantial allegations must be correspondingly stronger.”

Kalnit v. Eichler, 264 F.3d 131, 142–43 (2d Cir. 2001).13

Reckless conduct means “conduct which is highly unreasonable and

which represents an extreme departure from the standards of

13 While the applicable standard involves “conscious misbehavior or

recklessness,” the case law treats the two terms as synonymous. See, e.g.,

In Re Carter-Wallace, Inc. Sec. Litig., 220 F.3d 36, 39 (2d Cir. 2000) (“To

survive dismissal under the ‘conscious misbehavior’ theory, the appellants

must show that they alleged reckless conduct by the appellees ....”); Kalnit

v. Eichler, 85 F. Supp. 2d 232, 243 n.5 (S.D.N.Y. 1999) (“Although courts

often refer to ‘conscious misbehavior’ or ‘recklessness,’ the terms appear to

be legally interchangeable.”).

ordinary care to the extent that the danger was either known to

the defendant or so obvious that the defendant must have been

aware of it.” Novak, 216 F.3d at 308. That is, a plaintiff

must allege that the defendant acted with “a state of mind

approximating actual intent, and not merely a heightened form of

negligence.” Stratte-McClure v. Morgan Stanley, 776 F.3d 94,

106 (2d Cir. 2015).

Arata alleges that the individual defendants “knew”

their statements were false “[b]ecause of their positions with

Standard Lithium, and their access to material information.”

Am. Compl. ¶¶ 26, 182. But “conclusory allegations that a

corporate officer had access to information that contradicted

the alleged misstatements are insufficient to raise a strong

inference of recklessness.” Kinsey v. Cendant Corp., No. 04-CV-

582, 2005 WL 1907678, at *5 (S.D.N.Y. Aug. 10, 2005) (collecting

cases).

The complaint’s allegation that the individual

defendants had knowledge of the fraud because it “concerned

Standard Lithium’s core operations,” Am. Compl. ¶ 183, fares no

better. Under the “core operations” theory, “a court may infer

that a company and its senior executives have knowledge of

information concerning the core operations of a business, such

as events affecting a significant source of revenue.” In re

Aegean Marine Petroleum Network, Inc. Sec. Litig., 529 F. Supp.

3d 111, 174 (S.D.N.Y. 2021). This theory, however, may provide

only “supplemental support for an inference of scienter.” Id.

It is not “independently sufficient to raise a strong inference

of scienter.” Okla. Firefighters Pension & Ret. Sys. v. Lexmark

Int’l, Inc., 367 F. Supp. 3d 16, 37 (S.D.N.Y. 2019). The

plaintiff still must “have adequately alleged facts indicating

that defendants might have known their statements were false or

inaccurate.” Id. at 38.

Under either theory, Arata’s arguments for scienter

hinge on Standard Lithium’s disclosure of data to the AOGC that

allegedly contradicted its public statements. Am. Compl.

¶¶ 186–88. But the fact that Standard Lithium submitted this

data to a public entity with knowledge that it would be publicly

available (at least in some form) undercuts — rather than

bolsters — any inference of scienter. See In re Pretium Res.

Inc. Sec. Litig., No. 18-CV-8199, 2020 WL 953609, at *6

(S.D.N.Y. Feb. 27, 2020) (“Given that the waste rock data would

ultimately become available to the public, Defendants had

virtually no incentive to disclose conflicting data to investors

. . . .”); see also Glaser v. The9, Ltd., 772 F. Supp. 2d 573,

593 (S.D.N.Y. 2011) (“It defies reason that an entity looking to

profit on a fraudulently inflated stock price would hold close

to ninety percent of its shares as share prices fell, while

knowing that the information illuminating the fraud was seeping

into the market.”).

D. Section 20 Claims Against Individual Defendants

The plaintiff also brings claims against Mintak,

Norman, and Robinson under Section 20 of the Exchange Act, which

establishes liability for individuals exercising control over

“any person liable” under that statute or any rule or regulation

promulgated pursuant thereto. 15 U.S.C. § 78t(a). To establish

a prima facie case under Section 20(a), a plaintiff must show:

“(1) a primary violation by a controlled person; (2)control of

the primary violator by the defendant; and (3)that the

controlling person was in some meaningful sense a culpable

participant in the primary violation.” Boguslavsky v. Kaplan,

159 F.3d 715, 720 (2d Cir. 1998).

Because Plaintiff has failed to allege any

misstatements or omissions by Standard Lithium or the individual

defendants that survive a motion to dismiss — in other words, a

primary violation — the Section 20 claims against Mintak,

Norman, and Robinson must also be dismissed. See ECA, 553 F.3d

at 206-07 (affirming dismissal of Section 20 claims “for want of

a primary violation”).

Conclusion

For foregoing reasons, the defendants’ motion to

dismiss the amended complaint is granted. The Clerk of Court is

respectfully directed to enter judgment and close this case.

SO ORDERED.

/s/ Eric Komitee

ERIC KOMITEE

United States District Judge

Dated: September 28, 2025

Brooklyn, New York