United States Court of Appeals for the Third Circuit · 2019-06-20
15usc78j: author: Flash3 · QA: FIX (Fable, neov2/cases/TRIAGE-Flash.md)
Case and law context
Role: applied; posture: private securities fraud class action; dismissal of consolidated amended complaint under Rule 12(b)(6) and PSLRA affirmed; result: claimant-lost; claim:
Uncertainty
Element materiality: 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.
Misfit
None recorded
B · Case × element grid
Top-level elements follow claim order in panels of up to six elements. Case rows repeat across panels. Every recorded block retains its holding and basis; multiple blocks are not merged into a case-level verdict. ✓ satisfied · ✗ not satisfied · ○ not reached · · not addressed. Muted blocks are not counted. Sub-element evidence remains on case and element pages.
Elements 1–6 of 12
| Case | Statutory commerce, mails, or exchange facility | Section 78j(b) rulemaking hook | Materially false statement or misleading half-truth | Importance to a reasonable investor | Intent to deceive, manipulate, or defraud | Connection with a covered securities or swap transaction |
|---|---|---|---|---|---|---|
| Fan v. StoneMor Partners LP — 927 F.3d 710 (2019) · United States Court of Appeals for the Third Circuit · 2019 (15usc78j: author: Flash3 · QA: FIX (Fable, neov2/cases/TRIAGE-Flash.md)) | · not addressed | · not addressed | · not addressed | ✗ not · pleadedNot counted: applied/alternative | · not addressed |
Elements 7–12 of 12
| Case | Private plaintiff's purchaser or seller status | Private investor transaction causation | Actual economic loss in private damages action | Causal connection between fraud and economic loss | Fraudulent scheme or deceptive course of business | Additional criminal mental-state requirement |
|---|---|---|---|---|---|---|
| Fan v. StoneMor Partners LP — 927 F.3d 710 (2019) · United States Court of Appeals for the Third Circuit · 2019 (15usc78j: author: Flash3 · QA: FIX (Fable, neov2/cases/TRIAGE-Flash.md)) | · not addressed | · not addressed | · not addressed | · not addressed | · not addressed | · not addressed |
Instances and excluded annotation blocks
| Case | Element | Holding and scope | Pattern | Exact source quotations |
|---|---|---|---|---|
| Fan v. StoneMor Partners LP — 927 F.3d 710 (2019) · United States Court of Appeals for the Third Circuit · 2019 — not · pleaded (15usc78j: author: Flash3 · QA: FIX (Fable, neov2/cases/TRIAGE-Flash.md)) | Importance to a reasonable investor | not Counted merits instance applied / merits basis: pleaded; party: StoneMor Partners L.P. and executives; count: class action securities fraud; subject: party=StoneMor Partners L.P. and executives; count=class action securities fraud 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. | statements that distributions come from operations; 10-Ks and press releases disclosed the borrowing and equity-proceeds funding cycle | For example, StoneMor stated in a press release that its "primary source of cash from which to pay partner distributions ... is operating cash flow."Source: docroot/ir/caselaw/f3d_927.jsonl#/f3d/927/0710-01; Unicode character offsets [7139:7288] (end exclusive); SHA-256 758d0051cf42213a79c979af6fe6eb78b6b7a4a9be5dfe9e531823dda022f995.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.Source: docroot/ir/caselaw/f3d_927.jsonl#/f3d/927/0710-01; Unicode character offsets [10819:11084] (end exclusive); SHA-256 758d0051cf42213a79c979af6fe6eb78b6b7a4a9be5dfe9e531823dda022f995.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.Source: docroot/ir/caselaw/f3d_927.jsonl#/f3d/927/0710-01; Unicode character offsets [12430:12768] (end exclusive); SHA-256 758d0051cf42213a79c979af6fe6eb78b6b7a4a9be5dfe9e531823dda022f995.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."Source: docroot/ir/caselaw/f3d_927.jsonl#/f3d/927/0710-01; Unicode character offsets [14121:14345] (end exclusive); SHA-256 758d0051cf42213a79c979af6fe6eb78b6b7a4a9be5dfe9e531823dda022f995.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.Source: docroot/ir/caselaw/f3d_927.jsonl#/f3d/927/0710-01; Unicode character offsets [9496:9733] (end exclusive); SHA-256 758d0051cf42213a79c979af6fe6eb78b6b7a4a9be5dfe9e531823dda022f995.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."Source: docroot/ir/caselaw/f3d_927.jsonl#/f3d/927/0710-01; Unicode character offsets [8555:8760] (end exclusive); SHA-256 758d0051cf42213a79c979af6fe6eb78b6b7a4a9be5dfe9e531823dda022f995.Thus, these statements Plaintiffs identify as fraudulently misleading are rendered immaterial given the pertinent disclosures.Source: docroot/ir/caselaw/f3d_927.jsonl#/f3d/927/0710-01; Unicode character offsets [11871:11997] (end exclusive); SHA-256 758d0051cf42213a79c979af6fe6eb78b6b7a4a9be5dfe9e531823dda022f995.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.Source: docroot/ir/caselaw/f3d_927.jsonl#/f3d/927/0710-01; Unicode character offsets [14377:14650] (end exclusive); SHA-256 758d0051cf42213a79c979af6fe6eb78b6b7a4a9be5dfe9e531823dda022f995. |
| Fan v. StoneMor Partners LP — 927 F.3d 710 (2019) · United States Court of Appeals for the Third Circuit · 2019 — not · pleaded (15usc78j: author: Flash3 · QA: FIX (Fable, neov2/cases/TRIAGE-Flash.md)) | Intent to deceive, manipulate, or defraud | not Excluded from merits counts applied / alternative basis: pleaded; party: StoneMor Partners L.P. and executives; count: class action securities fraud; subject: party=StoneMor Partners L.P. and executives; count=class action securities fraud 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. | severe-recklessness/disclosed-leveraged-distributions | 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.Source: docroot/ir/caselaw/f3d_927.jsonl#/f3d/927/0710-01; Unicode character offsets [15978:16228] (end exclusive); SHA-256 758d0051cf42213a79c979af6fe6eb78b6b7a4a9be5dfe9e531823dda022f995.A strong inference of scienter "must be cogent and at least as compelling as any opposing inference of nonfraudulent intent."Source: docroot/ir/caselaw/f3d_927.jsonl#/f3d/927/0710-01; Unicode character offsets [15762:15887] (end exclusive); SHA-256 758d0051cf42213a79c979af6fe6eb78b6b7a4a9be5dfe9e531823dda022f995.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.Source: docroot/ir/caselaw/f3d_927.jsonl#/f3d/927/0710-01; Unicode character offsets [14991:15218] (end exclusive); SHA-256 758d0051cf42213a79c979af6fe6eb78b6b7a4a9be5dfe9e531823dda022f995.Thus, we hold that the pleadings do not demonstrate scienter as the PSLRA requires.Source: docroot/ir/caselaw/f3d_927.jsonl#/f3d/927/0710-01; Unicode character offsets [16622:16705] (end exclusive); SHA-256 758d0051cf42213a79c979af6fe6eb78b6b7a4a9be5dfe9e531823dda022f995. |