Source: cases/15usc78j/f3d-927-710-fan-v-stonemor-partners.case
Case source: https://www.neochart.com/catalog/cases/f3d/volume_927/0710_01/index.html
Finally, when considering whether an alleged misstatement is material, we pay particular attention to whether or not Defendants sufficiently disclosed facts and information that would render the alleged misrepresentations not misleading.
Materiality may be found when certain information, if disclosed, "would have been viewed by the reasonable investor as having significantly altered the total mix of information available to that investor."
Thus, these statements Plaintiffs identify as fraudulently misleading are rendered immaterial given the pertinent disclosures.
In light of these disclosures, we cannot conclude that the statements contained in Plaintiffs' third category of alleged misrepresentations are material because a reasonable investor would have been aware of the fact that StoneMor used equity proceeds to pay down its debt.
A strong inference of scienter "must be cogent and at least as compelling as any opposing inference of nonfraudulent intent."
Even if we were to hold that StoneMor's alleged misrepresentations were materially misleading, Plaintiffs' claims would still fail because our review of the record does not demonstrate the necessary state of mind by Defendants.
Thus, we hold that the pleadings do not demonstrate scienter as the PSLRA requires.
casedsl 1.2 # author: Flash3 (gemini-3.8-flash-high) # triaged-by: Fable (2026-11-10) case /f3d/927/0710-01 name Fan v. StoneMor Partners LP cite 927 F.3d 710 (2019) court United States Court of Appeals for the Third Circuit date 2019-06-20 url catalog/cases/f3d/volume_927/0710_01/index.html source ir/caselaw/f3d_927.jsonl sha1=23efe05271d5fc40a3ad826edbb207c465c3ee3e chars=18220 # unanimous panel opinion (Restrepo, J.); its footnotes are appended at @17332.. and belong to the same opinion opinion op : majority by Restrepo @0..18220 controlling party p1 : StoneMor Partners L.P. and executives count c1 : class action securities fraud law 15usc78j role applied posture private securities fraud class action; dismissal of consolidated amended complaint under Rule 12(b)(6) and PSLRA affirmed result claimant-lost element materiality : not-satisfied [pleaded] party p1 count c1 route total-mix-and-cautionary-disclosure pattern statements that distributions come from operations; 10-Ks and press releases disclosed the borrowing and equity-proceeds funding cycle fact @7139..7288 [supports] | For example, StoneMor stated in a press release that its "primary source of cash from which to pay partner distributions ... is operating cash flow." fact @10819..11084 [cuts-against] | In its Form 10-Ks issued during the Class Period, StoneMor defined its "Available Cash" as consisting of "cash on hand at the end of that quarter, plus cash on hand from working capital borrowings made after the end of the quarter ... less cash reserves." J.A. 311. fact @12430..12768 [cuts-against] | In each of its annual reports during the Class Period, StoneMor issued GAAP and non-GAAP financials side-by-side, which demonstrated the mathematical reality that StoneMor was not able to fund its distributions primarily from its day-to-day operations because much of that cash was being held in state trusts and was unrecognized by GAAP. fact @14121..14345 [cuts-against] | The Complaint also references a 2016 Quarterly Report, which describes a successful public offering and explains that the "proceeds from the offering were used to pay down outstanding indebtedness under the Credit Facility." rule @9496..9733 | Finally, when considering whether an alleged misstatement is material, we pay particular attention to whether or not Defendants sufficiently disclosed facts and information that would render the alleged misrepresentations not misleading. rule @8555..8760 | Materiality may be found when certain information, if disclosed, "would have been viewed by the reasonable investor as having significantly altered the total mix of information available to that investor." held @11871..11997 | Thus, these statements Plaintiffs identify as fraudulently misleading are rendered immaterial given the pertinent disclosures. held @14377..14650 | In light of these disclosures, we cannot conclude that the statements contained in Plaintiffs' third category of alleged misrepresentations are material because a reasonable investor would have been aware of the fact that StoneMor used equity proceeds to pay down its debt. ? holding: the court decides falsity and materiality together (heading "Falsity and Materiality"; it also says the disclosures "render its alleged misrepresentations not misleading"). Recorded under materiality only, the word the court uses for each of the three categories; no separate statement block. gloss Third Circuit holds that alleged omissions regarding the sourcing of cash distributions from borrowings and equity offerings were rendered immaterial because StoneMor explicitly defined Available Cash, published side-by-side GAAP and non-GAAP numbers, and disclosed using equity offering proceeds to repay credit lines. element scienter : not-satisfied [pleaded] scope alternative party p1 count c1 route strong-inference-pleading pattern severe-recklessness/disclosed-leveraged-distributions fact @15978..16228 [cuts-against] | For each category of statements, as described above, StoneMor's disclosures draw a strong inference that the investors were appraised of the relevant information regarding StoneMor's cycle of equity offerings, cash borrowings, and cash distributions. rule @15762..15887 | A strong inference of scienter "must be cogent and at least as compelling as any opposing inference of nonfraudulent intent." held @14991..15218 | Even if we were to hold that StoneMor's alleged misrepresentations were materially misleading, Plaintiffs' claims would still fail because our review of the record does not demonstrate the necessary state of mind by Defendants. held @16622..16705 | Thus, we hold that the pleadings do not demonstrate scienter as the PSLRA requires. gloss As an alternative holding, the Third Circuit rules that full disclosure of the company's leveraged operating model negates any strong inference of scienter under Tellabs.