D.J. WU, et al., Plaintiffs,
JOHN CRUMPTON STOMBER, et al., Defendants.
AMY BERMAN JACKSON, United States District Judge
This matter is before the Court on plaintiffs’ motion for leave to file an amended consolidated complaint and to amend the judgment pursuant to Federal Rules of Civil Procedure 15(a)(2) and 59(e). Plaintiffs have also appealed the judgment, which was entered on August 13, 2012. Since plaintiffs have not satisfied the requirements of Rule 59(e), and the proposed amendments do not cure the flaws in the complaint that was the subject of the Court’s prior Memorandum Opinion, the motion will be denied.
The facts giving rise to this lawsuit are set out in detail in the Court’s Memorandum Opinion of August 2012. Mem. Op. [Dkt. # 74] at 1–18. The Carlyle Capital Corporation (“CCC”) was an off-shore investment for sophisticated investors. CCC Offering Memorandum (“Off. Mem.”) [Dkt. # 52-3] at cover, 13. Its primary business consisted of buying residential mortgage-backed securities using “a very high degree of leverage.” Id. at 12–13. CCC securities were initially sold to investors through private placements in 2006, and then they were sold to a select group of buyers in a global offering of shares in July 2007 (the “Offering”). Original Consolidated Am. Compl. [Dkt. # 42] ¶¶ 30, 41. In preparation for the Offering, CCC issued an Offering Memorandum on June 19, 2007, and a Supplemental Offering Memorandum (“Supplement”) on June 29, 2007 (together “Offering documents”). [Dkt. #s 52-3 and 52-6]. In March of 2008, CCC entered into liquidation as conditions in the real estate market and the global economy deteriorated. Compl. ¶¶ 61, 142; see Mem. Op. at 1–18.
Plaintiffs are CCC investors who filed suit against CCC, its management firm, two affiliates of the management firm, and CCC’s directors and officers. Compl. ¶¶ 4–22. They brought the action pursuant to Federal Rules of Civil Procedure 23(a) and (b)(3) on behalf of two proposed classes: (1) “all persons who purchased or otherwise acquired Class B Shares or Restricted Depository Shares (“RDSs”) of CCC in its Offering and were damaged thereby”; and (2) “all persons who purchased or otherwise acquired Class B Shares of CCC in market purchases during the period from July 4, 2007 through March 17, 2008 . . . and were damaged thereby . . . .” Id. ¶ 30. The gravamen of plaintiffs’ claim was that the June 19, 2007 Offering Memorandum was materially false and misleading because while it disclosed the risk that liquidity issues that would threaten the company could occur, it omitted information that would have alerted investors to the fact that those events had already begun to occur. AM Tr. at 20:5– 21:3. Plaintiffs also contended that after the Offering, defendants continued to conceal the worsening financial condition of the company until CCC collapsed in March of 2008. See, e.g., Compl. ¶¶ 127-28.
A. Complaints: Initial Filings, Amendments, and Consolidation
Plaintiffs initially filed four related cases:
• Phelps v. Stomber, 11-cv-1142. Plaintiffs filed this action on June 21, 2011, alleging violations of federal securities laws against CCC’s management firm, two affiliates of the management firm, and CCC’s directors and officers;
• Phelps v. Carlyle Capital Corp., 11-cv-1143. Plaintiffs filed a second action on June 21, 2011, alleging the same violations of federal securities law as in Phelps v. Stomber against CCC;
• Glaubach v. Carlyle Capital Corp., 11-cv-1523. Plaintiff Jonathan Glaubach filed this action on August 24, 2011, asserting one claim under the laws of the United Kingdom against CCC, its management firm, two affiliates of the management firm, and CCC’s directors and officers; and
• Wu v. Stomber, 11-cv-2287. Plaintiff Wu and four other plaintiffs filed an action in New York state court, asserting claims of common law fraud, negligent misrepresentation, and violations of Dutch statutory laws against CCC, its management firm, two affiliates of the management firm, and CCC’s directors and officers. The case was removed to federal court and subsequently transferred to the D.C. District Court on December 14, 2011.
On October 7, 2011, the Court granted plaintiffs’ motion to consolidate both of the Phelps actions, 11-cv-1142 and 11-cv-1143, and the Glaubach action, 11-cv-1523. Order [Dkt. # 22]. At the time of the consolidation, the Wu action had not yet been transferred to this Court, so it was not consolidated with the others. After the consolidation, plaintiffs filed amended complaints with the Court’s permission. Glaubach Am. Compl. [Dkt. # 32]; McLister Group (the plaintiffs in Phelps) Am. Compl. [Dkt. # 27]. On November 16, 2011, after considering the competing motions for appointment as lead plaintiff, filed by the McLister Group [Dkt. # 3] and plaintiff Glaubach [Dkt. # 4], the Court found that the McLister Group best satisfied the requirements and purpose of the lead plaintiff procedure in the Private Securities Litigation Reform Act of 1995 (“PSLRA”), 15 U.S.C. § 78u–4. Mem. Op. and Order [Dkt. # 37] at 1. It therefore granted the McLister Group’s motion and denied Glaubach’s motion. Id. Glaubach subsequently filed a motion for reconsideration [Dkt. # 40], which was denied. [Dkt. # 64].
After the appointment of the lead plaintiff, on December 5, 2011, plaintiffs filed a consolidated amended complaint alleging eleven counts including claims of securities fraud under sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b), 78t(a), and SEC Rule 10b-5, 17 C.F.R. § 240.10b-5. Compl. ¶¶ 156–74, 192–208. The complaint also included common law fraud and negligent misrepresentation allegations, as well as claims under the laws of the United Kingdom and the Netherlands. Id. ¶¶ 175–91, 209–27.
B. Motion to Dismiss
On January 17, 2012, defendants moved to dismiss the consolidated complaint, pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6) and the PSLRA, for failure to state a claim upon which relief can be granted. Defs.’ Mots. to Dismiss [Dkt. #s 51 and 52]; Defs.’ Replies [Dkt. #s 62 and 63]. Plaintiffs opposed the motions. Pls.’ Mem. of Points and Authorities in Opp. to Mots. to Dismiss (“Pls.’ Opp. to Defs.’ Mots. to Dismiss”) [Dkt. # 56]. On March 13, 2012, plaintiffs also moved to strike certain exhibits submitted in support of defendants’ motion to dismiss, as well as the factual assertions based on those exhibits. Pls.’ Mem. in Support of Mot. to Strike [Dkt. # 58-1]; Pls.’ Reply in Support of Mot. to Strike [Dkt. # 61]. Defendants opposed the motion. [Dkt. #s 59 and 60].
On May 23, 2012, the Court held a hearing on the motions to dismiss. At the motions hearing and in a minute order issued the following day, the Court denied plaintiffs’ motion to strike. PM Tr. at 59, 62; Minute Order (May 24, 2012). The Court also ordered plaintiffs to create a chart that listed every statement in the Offering documents that they alleged was false as well as every omission that they alleged was actionable because it rendered the Offering documents to be false. PM Tr. 63-68; see also Pls.’ 2012 Chart [Dkt. # 66-1]. Defendants were then permitted to complete a second column pointing out when and where they contended the allegedly omitted facts had actually been disclosed and responding to the alleged affirmative misrepresentations as well. Defs.’ 2012 Chart [Dkt. # 67-1].
C. August 2012 Opinion and Subsequent Filings
On August 13, 2012, the Court issued its opinion granting defendants’ motion to dismiss. Mem. Op. [Dkt. # 74]. The Court divided plaintiffs’ claims into four categories: (1) federal securities claims pertaining to the Offering; (2) federal securities claims pertaining to the aftermarket; (3) common law claims pertaining to the Offering; and (4) common law claims pertaining to the aftermarket. Id. at 20-21. It then resolved them as follows:
• Federal Offering Claims: dismissed for failure to allege a materially misleading statement or omission and failure to allege loss causation, Mem. Op. at 29-53; • Federal Aftermarket Claims: dismissed under Morrison v. Nat l Australia Bank, 130 S.Ct. 2869 (2010), Mem. Op. at 22-24;
• Common Law Offering Claims: dismissed for failure to allege a materially misleading statement or omission and for failure to plead reliance, Mem. Op. at 53-57; and • Common Law Aftermarket Claims: dismissed for failure to plead reliance, Mem. Op. at 59-60.
The Court also dismissed the claim brought under the laws of the United Kingdom because the shares were not offered in the United Kingdom and for several other reasons. See Mem. Op. at 60-64. The Court also granted defendants’ motion to dismiss the Wu case. Mem. Op. at 64-66.
On September 10, 2012, plaintiffs filed a motion pursuant to Rules 15(a)(2) and 59(e) for leave to file an amended consolidated complaint and to amend the judgment. Pls.’ Mot. for Leave to File Am. Consolidated Compl. and/or to Amend J. (“Pls.’ Mot.”) [Dkt. # 75]; see also Am. Consolidated Compl., Ex. A to Pls.’ Mot. (“Am. Compl.”) [Dkt. # 75-1]. The proposed amended consolidated complaint alleges four claims: (1) claims under Section 10(b) of the Exchange Act and Rule 10b-5; (2) claims under Section 20(a) of the Exchange Act; (3) common law fraud; and (4) negligent misrepresentation. Am. Compl. ¶¶ 171-97. Defendants opposed plaintiffs’ motion, Defs.’ Mem. in Opp. to Pls.’ Mot. [Dkt. #s 80 and 81], and ...