Fan v. StoneMor Partners LP

927 F.3d 710 (2019) United States Court of Appeals for the Third Circuit 2019-06-20

private securities fraud class action; dismissal of consolidated amended complaint under Rule 12(b)(6) and PSLRA affirmed (result: claimant-lost)

Facts

  1. 5 Importance to a reasonable investor not pleaded
    For example, StoneMor stated in a press release that its "primary source of cash from which to pay partner distributions ... is operating cash flow."
  2. 5 Importance to a reasonable investor not pleaded
    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."
  3. 5 Importance to a reasonable investor not pleaded
    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.
  4. 5 Importance to a reasonable investor not pleaded
    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.
  5. 5 Importance to a reasonable investor not pleaded
    Thus, these statements Plaintiffs identify as fraudulently misleading are rendered immaterial given the pertinent disclosures.
  6. 5 Importance to a reasonable investor not pleaded
    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.
  7. 5 Importance to a reasonable investor not pleaded
    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."
  8. 5 Importance to a reasonable investor not pleaded
    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.