The opinion of the court was delivered by: Denise Cote, District Judge
MEMORANDUM OPINION & ORDER
This Document Relates to: ALL ACTIONS
An April 9, 2007 Opinion granted in part Lead Plaintiff's motion for reconsideration in this putative class action. In re Converium Holding AG Sec. Litig., No. 04 Civ. 7897 (DLC), 2007 WL 1041480 (S.D.N.Y. Apr. 9, 2007) ("Reconsideration Opinion"). The motion sought reconsideration of the December Opinion granting in part the defendants' motions to dismiss claims pleaded under the Securities Act of 1933 (the "Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act"). In re Converium Holding AG Sec. Litig., No. 04 Civ. 7897 (DLC), 2006 WL 3804619 (S.D.N.Y. Dec. 28, 2006) ("December Opinion"). This Opinion addresses certain issues in the defendants' motions to dismiss the Exchange Act Sections 10(b) and 20(a) claims that the December Opinion did not reach and the Reconsideration Opinion did not resolve. For the following reasons, those portions of the motions to dismiss addressed in this Opinion are denied.
As described in greater detail in the December Opinion, the Lead Plaintiffs sued Converium Holding AG ("Converium"), its officers, directors, former parent company, and lead underwriters for Converium's December 2001 initial public offering ("IPO"). Prior to the IPO, Converium was a wholly owned subsidiary of defendant Zurich Financial Services ("ZFS"). Converium is a multinational reinsurer, and these consolidated class actions followed the collapse of its North American business unit in September 2004. The thrust of the complaint is that the defendants hid from investors that Converium's loss reserves were hundreds of millions of dollars less than they needed to be to cover Converium's exposure.
The December Opinion dismissed several claims, including the Exchange Act Section 10(b) claim against ZFS and the Exchange Act Section 10(b) claim brought by purchasers in the IPO against Converium and the Officer Defendants.*fn1 See December Opinion, 2006 WL 384619, at *10-13, *18. The December Opinion also dismissed as time barred the Securities Act claims against all defendants, and Lead Plaintiff's motion for reconsideration on those claims was denied. The Reconsideration Opinion, however, granted reconsideration of the Exchange Act Section 10(b) claim against Converium and the Officer Defendants for statements made in connection with the IPO to the extent that the claim is brought on behalf of purchasers in the after-market. See Reconsideration Opinion, 2007 WL 1041480, at *2.
On September 4, 2007, an Order was issued preliminarily approving a settlement between Lead Plaintiffs and (1) ZFS; (2) Converium directors Terry G. Clarke, Peter C. Colombo, George F. Mehl, Jurgen Förterer, Anton K. Schnyder, Derrell J. Hendrix, and George G.C. Parker (the "Director Defendants"); and (3) the IPO underwriters (the "Zurich Settlement"). The Zurich Settlement renders moot several issues raised in defendants' motion to dismiss that the Reconsideration Opinion would have otherwise required the Court to address here -- namely, whether the complaint pleads control-person liability against ZFS and the Director Defendants (other than Terry G. Clarke, against whom Section 20(a) claims were not brought) and whether this Court has personal jurisdiction over Director Defendants Colombo, Mehl, Förterer, and Schnyder.
In light of the Reconsideration Opinion and the Zurich Settlement, the only issues that must be resolved here are (1) whether the amended complaint alleges facts giving rise to a strong inference that the Registration Statement and Prospectus for the IPO ("IPO Documents") contain material misrepresentations or omissions that were made with scienter by Converium and the Officer Defendants, and (2) whether the amended complaint pleads loss causation in connection with those IPO Documents.
The standard for pleading under Rules 8(a) and 9(b) and the PSLRA is detailed in the December Opinion, 2006 WL 3804619, at *8-10, and incorporated by reference here.
A. Section 10(b) Liability in Connection with the IPO Documents
The standard for Section 10(b) liability detailed in the December Opinion, 2006 WL 3804619, at *10, is also incorporated by reference here. The Lead Plaintiffs brought claims under Section 10(b) of the Exchange Act against ZFS, Converium, and the Officer Defendants. After dismissing those claims against ZFS, the December Opinion found that the Lead Plaintiffs had not adequately alleged reliance in connection with the IPO itself since there is no presumption that the market for IPO shares is efficient. December Opinion, 2006 WL 3804619, at *10-12, *13. The Reconsideration Opinion considered after-market purchasers, and found that the complaint's allegations were sufficient to support the traditional presumption of reliance for Exchange Act claims in the after-market.
Converium and the Officer Defendants had moved to dismiss the Section 10(b) claim against them on the ground that Lead Plaintiffs failed to plead, with the requisite particularity, facts giving rise to a strong inference that any material misrepresentation or omission was made with scienter. They argue that the complaint fails to allege that the defendants had motive to commit fraud, and that the complaint fails to allege that any misleading statement or omission was made as a result of conscious behavior or recklessness. These arguments, similar to those made by Converium and the Officer Defendants in connection with their post-IPO statements, may be swiftly rejected here.
A strong inference of scienter exists when there are allegations that a defendant "knew facts or had access to information suggesting that [the company's] public statements were not accurate." Novak v. Kasaks, 216 F.3d 300, 311 (2d Cir. 2000). As the Supreme Court recently clarified, "'in determining whether the pleaded facts give rise to a "strong" inference of scienter, the court must take into account plausible opposing inferences.'" ATSI Commc'n, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 99 (2d Cir. 2007) (quoting Tellabs, Inc. v. Makor Issues & Rights, Ltd., 127 S.Ct. 2499, 2510 (2007)). "For an inference of scienter to be strong, 'a reasonable ...