The opinion of the court was delivered by: Buchwald, District Judge.
This is a class action brought on behalf of those who
purchased the American Depository Shares issued by defendant
Turkcell Iletisim Hizmetleri A.S. ("Turkcell") in an initial
public offering in July 2000. Plaintiff class alleges violations
of sections 11 and 15 of the Securities Act of 1933. The
defendants include Turkcell, its underwriters, Goldman Sachs
International, Morgan Stanley & Co. International Limited,
Credit Suisse First Boston (Europe), Lehman Brothers
International AG London, and UBS AG, its Chief Executive
Officer, Cuneyt Turktan, and its Chief Financial Officer Ekrem
Tokay. Now pending is the defendants' joint motion to dismiss
the claims, pursuant to Fed.R.Civ.P. 12(b)(6). For the reasons
discussed below, the motion is granted in part and denied in
This complaint stems from alleged omissions in a Prospectus
issued by Turkcell, a mobile communications service provider in
Turkey, in connection with an initial public offering of
American Depository Shares in July 2000. The Prospectus was
filed with the SEC on or about June 26, 2000, and became
effective on or about July 10, 2000.
Plaintiffs make two distinct claims. First, they allege that
defendants failed to
disclose material information regarding the rate at which
customers were disconnected from the service (the "churn rate"),
a key factor for evaluating mobile phone companies.
Specifically, Turkcell's Prospectus states that its churn rate
was 0.3% for the three months ending on March 31, 2000.
Plaintiffs allege that the Prospectus omitted the fact that
Turkcell's churn rate did not include subscribers whose service
had been disconnected but with respect to whom Turkcell had not
yet completed the legal process accompanying disconnection.
According to a Morgan Stanley Dean Witter report, at a meeting
with stock analysts on September 20, 2000, Turkcell allegedly
stated that there were up to 700,000 customers who had been
disconnected but as to whom Turkcell had not yet completed the
accompanying legal process and who had, therefore, not been
included in Turkcell's calculation of its churn rate.
Plaintiffs second allegation concerns Turkcell's failure to
include financial statements for the quarter ending June 30,
2000. The Prospectus contained audited financial statements for
the fiscal years ending December 31, 1997, 1998, and 1999. It
also contained unaudited financial statements for the quarters
ending March 31, 1999, and March 31, 2000. Plaintiffs allege
that this data showed a series of increases in operating income
through the first quarter of 2000. On August 11, 2000, Turkcell
released financial results for the first half of 2000, which
showed that operating income fell by 9% from the first quarter
of 2000 to the second quarter of 2000.
Plaintiffs initially filed suit on November 22, 2000, and the
various class actions were consolidated on March 8, 2001. By
letter dated May 4, 2001, defendants sought leave to move to
dismiss the complaint and set forth their proposed arguments. On
May 23, 2001, the Court sent a letter to counsel confirming
plaintiffs' advice to chambers that they would not seek to amend
their complaint in response to the motion to dismiss. This Court
heard oral arguments on defendants' motion to dismiss on October
I. Standard on a Motion to Dismiss
For purposes of a motion to dismiss, we are required to accept
as true the factual assertions in the complaint. Zinermon v.
Burch, 494 U.S. 113, 118, 110 S.Ct. 975, 108 L.Ed.2d 100
(1990); Charles W. v. Maul 214 F.3d 350, 356 (2d. Cir. 2000).
Additionally, for purposes of a Fed.R.Civ.P. 12(b)(6) motion, a
complaint is deemed to include any statements or documents
incorporated in it by reference, Rothman v. Gregor,
220 F.3d 81, 88 (2d Cir. 2000), Cosmas v. Hassett, 886 F.2d 8, 13 (2d
Cir. 1989), as well as publicly disclosed documents required
that have been filed with the SEC. Rothman, 220 F.3d at 88;
Cortec Industries, Inc. v. Sum Holding L.P., 949 F.2d 42,
47-48 (2d Cir. 1991).
II. Applicability of the Rule 9(b) Heightened Pleading
As a threshold issue, defendants assert that the Fed.R.Civ.P.
9(b) heightened pleading standard for fraud claims applies to
this complaint and that, therefore, plaintiffs must plead their
claims with particularity. The case law is unclear as to whether
claims under section 11 of the Securities Act must allege facts
with particularity, or whether they are subject to the more
liberal standards of Fed.R.Civ.P. 8(a)(2). There are numerous
decisions in this district that have found that, where section
11 claims sound in fraud, the heightened pleading requirements
of Rule 9(b) apply. See In re Complete Management Inc.,
153 F. Supp.2d 314, 340 (S.D.N.Y. 2001); In re N2K Inc. Securities
Litigation, 82 F. Supp.2d 204, 210 n. 10 (S.D.N.Y. 2000). But
see In re AnnTaylor Stores Securities Litigation, 807 F. Supp. 990,
1003 (S.D.N.Y. 1992) (stating that "courts have long held
that Rule 9(b) does not apply to a Section 11 claim."). The
Second Circuit has not yet ruled on this issue, in fact
expressly reserving any discussion of it. See In re N2K Inc.
Securities Litigation, 202 F.3d 81 n. 1 (2d Cir. 2000).
In this case, we need not determine whether section 11 claims
that sound in fraud require satisfaction of the heightened
pleading requirements of Rule 9(b). At oral argument, plaintiffs
argued that, if the Court found that Rule 9(b) applied, it
should also find that they have alleged the who, what, when, and
where, and why of their claim, notwithstanding the apparent
admission in their brief that "[d]efendants are correct that the
Complaint does not plead fraud with particularity." See Luce v.
Edelstein, 802 F.2d 49, 54 (holding that Rule 9(b) requires
that plaintiff specify the time, place, speaker, and content of
the alleged fraudulent ...