United States Second Circuit

In this putative securities fraud class action, plaintiff-investors allege that defendants made material misstatements and omissions in an effort to conceal defendant Morgan Stanley's exposure to and losses from the subprime mortgage market, and that as a result, plaintiffs suffered financial loss when Morgan Stanley's stock prices dropped following public disclosure of the truth. Order granting defendants' motions to dismiss is affirmed, where: 1) the district court properly dismissed plaintiffs' claim that defendants' omissions violated Securities Exchange Act section 10(b) and Rule 10b-5, because the second amended complaint does not give rise to a strong inference of scienter; and 2) though plaintiffs adequately alleged that defendants breached their Item 303 duty to disclose (17 C.F.R. section 229.303(a)(3)(ii)), for the breach to be actionable under section 10(b), plaintiffs were required to adequately plead each element of a Rule 10b-5 securities fraud claim, which they did not.

Appellate Information

• Decided 01/12/2015
• Published 01/12/2015

Judges

• Livingston

Court

• United States Second Circuit

Counsel