United States District Court, D. Delaware
E. MONTEVERDE AND MILES D. SCHREINER, MONTEVERDE &
ASSOCIATES PC, NEW YORK, NY; BLAKE A. BENNETT, COOCH AND
TAYLOR, P.A., WILMINGTON, DE, ATTORNEYS FOR LEAD PLAINTIFF
JON BARRETT AND THE PUTATIVE CLASS.
E. KAZANOFF AND CRAIG S. WALDMAN, SIMPSON THACHER &
BARTLETT LLP, NEW YORK, NY; RACHELLE SILVERBERG AND COREY J.
BANKS, WACHTELL, LIPTON, ROSEN & KATZ, NEW YORK, NY;
RAYMOND J. DICAMILLO AND DANIEL E. KAPROW, RICHARDS, LAYTON
& FINGER, PA., WILMINGTON, DE, ATTORNEYS FOR DEFENDANTS
ENVISION HEALTHCARE CORPORATION, WILLIAM A. SANGER,
CHRISTOPHER A. HOLDEN, JAMES D. SHELTON, MICHAEL L. SMITH,
LEONARD M. RIGGS, CAROL J. BURT, CYNTHIA S. MILLER, KEVIN P.
LAVENDER, JOEY A. JACOBS, STEVEN I. GERINGER, JOHN T
GAWALUCK, AND JAMES A. DEAL.
ANDREWS, U.S. DISTRICT JUDGE.
before me is the Report & Recommendation
("Report") of a United States Magistrate Judge.
(D.I. 44). It addresses Defendants' Motion to Dismiss for
failure to state a claim (D.I. 29) and Plaintiffs Motion to
Strike the Exhibits to Defendants' Motion to Dismiss
(D.I. 33). Defendants filed objections to the Report. (D.I.
47). Plaintiff responded to Defendants' objections. (D.I.
52). The Magistrate Judge's Report is comprehensive, and
I will adopt the factual findings and legal conclusions in
the Report. I do not separately recite any of them except as
I think necessary to explain my decision.
Judges have authority to make recommendations as to the
appropriate resolution of a motion to dismiss pursuant to 28
U.S.C. § 636(b)(1)(B). In the event of an objection,
this Court reviews the objected-to determinations de
reviewing a motion to dismiss pursuant to Federal Rule of
Civil Procedure 12(b)(6), the Court must accept the
complaint's factual allegations as true. See Bell
Ail. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007). Rule
8(a) requires "a short and plain statement of the claim
showing that the pleader is entitled to relief."
Id. at 555. The factual allegations do not have to
be detailed, but they must provide more than labels,
conclusions, or a "formulaic recitation" of the
claim elements. Id. ("Factual assumptions must
be enough to raise a right to relief above the speculative
level... on the assumption that the allegations in the
complaint are true (even if doubtful in fact).") There
must also be sufficient factual matter to state a facially
plausible claim to relief. Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009). The facial plausibility standard is
satisfied when the complaint's factual content
"allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged."
Id. ("Where a complaint pleads facts that are
merely consistent with a defendant's liability, it stops
short of the line between possibility and plausibility of
entitlement to relief." (internal quotation marks
first objection to the Report is that it did not apply the
appropriate legal standards, by: (1) failing to apply the
particularity requirements of Rule 9(b) and the Private
Securities Litigation Reform Act ("the PSLRA"), (2)
failing to analyze whether the plaintiff pled facts
supporting a plausible inference that Defendants knew the
Sensitivity Case Projections were false, (3) failing to
analyze whether the opinion statements were objectively
false, and (4) applying the "bespeaks caution"
doctrine to the wrong statements. (D.I. 47 at 1-8).
claim brought under § 14(a) which is grounded in
allegations of fraud must satisfy the Rule 9(b) particularity
requirements at the pleadings stage, Plaintiffs claim is
grounded in allegations of negligence. (See, e.g.,
D.I. 25 at ¶¶ 98-100). Therefore, the particularity
standards of Rule 9(b) and the PSLRA do not apply to this
case. As the Magistrate Judge stated in her Report, "a
claim is facially plausible when the factual allegations
allow the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged." (D.I.
44 at 4, citing Ashcroft v. Iqbal, 556 U.S. 662, 663
(2009); Bell Ail. Corp. v. Twombly, 550 U.S. 544,
Report's recommendation is based upon an analysis of
various facts contained in the amended complaint that could
support a reasonable inference that the Sensitivity Case
Projections were created to provide a basis for projecting a
low stock price before the acquisition by KKR. These facts
include "the lack of any meaningful change between
February and May 2018, the timing of the creation of the
Sensitivity Case Projections, the fact that the Sensitivity
Case Projections were not given to KKR, and statements made
by executives regarding confidence in the Management Case
Projections." (D.I. 44 at 10). I agree with the
Magistrate Judge in finding Plaintiffs claim sufficiently
further argue that the Report failed to analyze whether each
opinion statement was objectively false, thereby failing to
satisfy "the element of fact that must be established
under § 14(a)." (D.I. 47 at 5, citing Va.
Bankshares, Inc. v. Sandberg, 501 U.S. 1083, 1096
(1991)). For an opinion statement to be actionable, a
plaintiff must allege "that the statement also expressly
or impliedly asserted something false or misleading about its
subject matter" or "was defective as to its subject
matter." Va. Bankshares, 501 U.S. at 1095-96.
In Virginia Bankshares, the Supreme Court explained
that "circumstantial evidence bearing on the facts that
would reasonably underlie the reasons claimed and the honesty
of any statement that those reasons are the basis for a
recommendation or other action," could sufficiently
establish that an opinion statement is "defective,"
i.e., false. Id. at 1092-93, 1095. In the amended
complaint, Plaintiff identifies factual allegations
supporting the inference that the Sensitivity Case
Projections were not "reasonable." (D.I. 25 at
¶72) and that the Merger consideration was not
"fair" (D.I. 25 at ¶76). I agree with the
Magistrate Judge that Plaintiff alleges facts sufficient to
satisfy a conclusion that the description of the
"sensitivities" as "reasonable" is both
subjectively and objectively false.
also argue that the Report misapplied the "bespeaks
caution" doctrine by incorrectly concluding that none of
the cautionary statements were sufficient for Defendants to
evade liability on a motion to dismiss. (D.I. 47 at 8). The
Magistrate Judge concluded, however, that the
"plaintiffs § 14(a) claim is based not on the
contents of the Sensitivity Case Projections themselves, but
rather on defendants' motivation for soliciting the
Sensitivity Case Projections in the first instance and
defendants' alleged representation that the ...