United States District Court, D. Vermont
KYLE MONTANIO, Individually and on Behalf of All Others Similarly Situated, Plaintiff,
KEURIG GREEN MOUNTAIN, INC., BRIAN P. KELLEY, NORMAN H. WESLEY, BARBARA D. CARLINI, JOHN D. HAYES, A.D. DAVID MACKAY, MICHAEL J. MARDY, HIND A MILLER, DAVID E. MORAN, JOSE OCTAVIO REYES LAGUNES, SUSAN SALTZBART KILSBY, ROBERT A. STEELE, JAB HOLDINGS B.V., ACORN HOLDINGS B.V., and MAPLE HOLDINGS ACQUISITION CORP., Defendants.
OPINION AND ORDER ON MOTION FOR RECONSIDERATION OR,
ALTERNATIVELY, TO REOPEN THE JUDGMENT TO MODIFY DISMISSAL TO
BE WITHOUT PREJUDICE AND PERMIT LEAVE TO FILE AMENDED
PLEADING (DOC. 55)
Geoffrey W. Crawford, Judge United States District Court.
a direct shareholder class action lawsuit in which the lead
plaintiff, Kyle Montanio, a former shareholder of Keurig
Green Mountain, Inc. ("Keurig"), has sued Keurig,
Keurig's former CEO, members of Keurig's former Board
of Directors, and the corporate investors that bought out
Keurig in a deal completed in March 2016. Plaintiff alleges
that, in connection with the proposed merger, Defendants
disseminated a materially false and misleading proxy
statement, in violation of Sections 14(a) and 20(a) of the
Securities Exchange Act of 1934, 15 U.S.C. §§
78n(a), 78t(a), and Rule 14a-9, 17 C.F.R. § 240.14a-9.
moved to dismiss the first amended complaint for failure to
state a claim. (Docs. 27, 32.) The court granted the motions,
dismissed the case, and entered judgment. (Docs. 52, 53.)
has now moved for reconsideration, or, in the alternative,
for the court to reopen the judgment and permit Plaintiff to
file a second amended complaint. (Doc. 55.) The court assumes
familiarity with its prior Opinion and Order (Doc. 52).
Montanio v. Keurig Green Mountain, Inc., 237
F.Supp.3d 163 (D. Vt. 2017).
may consider a motion for reconsideration filed under Federal
Rule of Civil Procedure 59(e). Assoc, for Retarded
Citizens of Conn., Inc. v. Thome, 68 F.3d 547, 553 (2d
Cir. 1995). Motions for reconsideration should not be used to
repackage arguments previously rejected. Robinson v.
Disney Online, 152 F.Supp.3d 176, 185 (S.D.N.Y. 2015).
Rule 59(e) is not intended to provide "a second bite at
the apple." Analytical Surveys, Inc. v. Tonga
Partners, L.P., 684 F.3d 36, 53 (2d Cir. 2012). A motion
for reconsideration under Rule 59(e) is properly brought
under one of four theories: the judgment depends upon a
manifest error of fact or law, there is newly discovered or
previously unavailable evidence, it is necessary to prevent a
manifest injustice, or there has been an intervening change
in controlling law. Charles Alan Wright, et al., 11 Federal
Practice & Procedure § 2810.1 (3d ed. 2012).
motion for reconsideration focuses on one aspect of the
court's prior opinion: its conclusion that the complaint
failed to allege any basis to conclude that the Board's
opinion in favor of applying a 50% probability weighting to
its projections for Keurig Kold was objectively false (Doc.
52 at 12-16). The motion for reconsideration argues that the
court overlooked important facts alleged in the complaint and
therefore incorrectly distinguished the complaint in this
case from the one at issue in In re Hot Topic, Inc.
Securities Litigation, No. CV 13-02939, 2014 WL 7499375
(CD. Cal. May 2, 2014).
court considers the arguments in the order they are presented
in the motion. But first, it discusses an issue relevant to
the analysis of nearly every argument presented: what facts
must be alleged in a complaint to sufficiently state that a
belief or opinion asserted in a proxy statement is
Standard for Section 14(a) and Rule 14a-9 and Alleging
state a claim under Section 14(a) and Rule l4a-9(a), a
plaintiff must allege that: "(1) a proxy statement
contained a material misrepresentation or omission, which (2)
caused plaintiffs' injury, and (3) that the proxy
solicitation itself, rather than the particular defect in the
solicitation materials, was an essential link in the
accomplishment of the transaction." Bond Opportunity
Fund v. Unilab Corp., 87 F.App'x 772, 773 (2d Cir.
2004); accord Police & Fire Ret. Sys. of Detroit v.
SafeNet, Inc., 645 F.Supp.2d 210, 226 (S.D.N.Y. 2009).
statement of belief or opinion-such as the financial
projections at issue in this case- does not get a free pass
in the world of proxy litigation. Such a statement may
constitute a material misrepresentation, if it is both
subjectively false-in that it misstates the actual opinions,
beliefs, or motivation of the speaker-and
objectively false-in that it is "false or misleading
with respect to the underlying subject matter [the statement]
address[es]." Fait v. Regions Fin. Corp., 655
F.3d 105, 111 (2d Cir. 2011) (citing Va. Bankshares, Inc.
v. Sandberg, 501 U.S. 1083, 1091-96 (1991)).
claims under Section 14(a) are subject to a heightened
pleading standard under the Private Securities Litigation
Reform Act ("PSLRA"), 15 U.S.C. § 78u-4(b).
See Bond Opportunity Fund, 87 F.App'x at 773.
Under that statute, a complaint alleging that defendants
"made an untrue statement of material fact" or
material omission must: (1) "specify each statement
alleged to have been misleading"; (2) "the reason
or reasons why the statement is misleading"; and (3)
"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).
court has summarized these standards in this way: a claim
under Section 14(a) "charging that a statement of
opinion ... is materially misleading must allege with
particularity provable facts to demonstrate" both
subjective and objective falsity. Fisher v. Kanas,
461 F.Supp.2d 275, 282 (E.D.N.Y. 2006) (internal
quotation marks omitted). What constitutes a "provable
fact" that "demonstrates objective falsity"?
The court turns to cases evaluating allegations of objective
falsity in similar contexts: claims of securities fraud under
Section 10(b), 15 U.S.C. § 78j(b), and Rule 10b-5, 17
C.F.R. § 240.10b-5.
objective falsity of a financial projection frequently
depends upon pleading and proof of the use of underlying cost
or revenue figures which are untrue or inconsistent with the
real figures. For instance, in In re NovaGold Resources
Inc. Securities Litigation, 629 F.Supp.2d 272, 276
(S.D.N.Y. 2009), the court evaluated whether cost estimates
for a copper and gold mining project were false or
misleading. In a "final feasibility study" for the
project, released in late 2006, the company estimated that
the project would cost $2.2 billion. Id. at 278. The
company continued to tout and publicly rely on that estimate
through fall 2007. Id. at 277-78, 299. But according
to the complaint, the plaintiffs had learned from
confidential informants that internal cost estimates were
$2.7 billion in early 2006, and by summer 2007,
"construction managers were discussing costs approaching
$3.7 billion." Id. at 299. At the end of
November 2007, the company belatedly revised the cost
estimate, increasing it to $5 billion. Id. The court
concluded that, based on these allegations, "[t]he
plaintiff has pleaded with sufficient particularity facts
supporting an inference that [the company] knew that... its
cost estimate of [$2.2 billion was] unreliable and misleading
shortly after release, if not at release." Id.
Allstate Life Ins. Co. v. Robert W. Baird & Co.,
756 F.Supp.2d 1113 (D. Ariz. 2010), the complaint alleged
that projections regarding future events and attendance at a
proposed convention center were false or misleading. The
official projections announced by the defendants were that
the event center would average 133 events annually with a
total attendance of 480, 000. Id. at 1133. The court
found that the complaint sufficiently alleged this projection
to be objectively misleading or false because the projections
"omitted critical information contained" in two
other reports, which relied on demographic data and other
information. Id. at 1132-33. Those reports, which
the defendants had either commissioned or otherwise had
knowledge of, "tend[ed] to indicate that the [metro area
in question] could not be expected to generate the number of
events and attendees that were projected." Id.
at 1132-33. One report estimated that the event center would
"draw approximately 78 events per year with an annual
attendance of approximately 202, 500." Id. The
other estimated 97 to 102 annual events with total attendance
of 321, 000. Id. at 1133. In light of these
allegations, the court concluded, the defendants "may
have disregarded [the other reports] and made event,
attendance, and revenue projections (predicated on event and
attendance calculations) that were unreasonable in light of
the internal data at their disposal." Id.
comparison, allegations of objective falsity are insufficient
when they fail to identify particular facts that undermine or
contradict the basis for the projection at issue. In In
re Salomon Analyst Level 3 Litigation, 350 F.Supp.2d
477, 481 (S.D.N.Y. 2004), the complaint alleged that market
research reports produced by a financial analyst were false
and misleading in their rosy predictions of future success
for specific broadband companies and their recommendations to
buy stock in those companies. The court concluded that the
plaintiffs had failed to allege objective falsity because the
plaintiffs "[had] not identified any objective facts or
data that are misrepresented in the reports."
Id. at 491, 498. The court rejected as insufficient
allegations relating to emails written by other employees
months or years after the reports were issued:
Furthermore, plaintiffs' efforts to undermine the
analysis or models employed by [the analyst] as false or
objectively unreasonable are either refuted on the face of
the reports themselves, or rely entirely on
mischaracterizations of emails written by other SSB
employees months or even years after the allegedly false
research reports, which is plainly insufficient to adequately
plead that the analysis or models were objectively false or
misrepresented the true opinions of Grubman or his staff at
the time the reports were issued.
at 491. Other allegations-including that the analyst's
belief in the demand for internet bandwidth proved wrong,
that his valuation models "predicted very high return
rates, " that he was compensated handsomely for
"his role as evangelist for the broadband future, "
and that there were significant conflicts of interest between
the research and investment banking arms of his employer-were
also insufficient. Id. at 492-93. At best, the court
concluded, these allegations "accuse[d] [the analyst] of
being unduly, even egregiously, optimistic about the future
prospects of these companies, " and that he "was
incompetent, a bad analyst, even careless." Id.
at 491- 92.
Frazier v. VitalWorks, Inc., 341 F.Supp.2d 142, 158 (D.
Conn. 2004), the complaint alleged that VitalWorks, a
software company, issued projections for future revenues for
upcoming fiscal years that were false and misleading.
Id. But the complaint did not identify any facts or
data regarding the expected or actual sales for the two
product lines at issue that would have undermined the
company's statements about current growth and the revenue
projections premised on those statements. Id. at
154, 156-57. As the court explained: "The issue is
whether there exist underlying facts that gave defendants
reason to know that their projections were false and
misleading. Financial projections can be fraudulent if the
company bases them upon sales data or other numbers-current
or historical material facts-that the company knows to be
false or inaccurate." Id. at 158. Because the
complaint "fail[ed] to allege facts showing that the
underlying statements were false, " it failed to state a
claim that the future projections were misleading or
fraudulent. Id. at 158-59.
cases illustrate the principle that a sufficient allegation
of objective falsity requires the pleading of particular
facts that, if themselves proven, would show that the opinion
or projection was based on assumptions contradicted by
real-world facts or on other inaccurate data. It is
insufficient to allege facts which merely suggest the
possibility that the projection might be incorrect. The
allegations must identify with specificity the false data
from which the defendant derived a misleading ...