The opinion of the court was delivered by: Shirley Wohl Kram, U.S.D.J.
On March 13, 2007, Plaintiff M.F. Henry ("Henry") filed a Third Amended Complaint (the "TAC") alleging that corporate defendant Marsh & McLennan Companies, Inc. ("MMC" or the "Company"), as well as various MMC directors (the "Director Defendants")*fn1 violated section 14(a) of the Securities Exchange Act and Securities & Exchange Commission ("SEC") Rule 14a-9.*fn2 The defendants have moved for dismissal pursuant to principles of res judicata, Rules 12(b)(6) and 9(b) of the Federal Rules of Civil Procedure, and the Private Securities Litigation Reform Act of 1995 ("PSLRA"). For the reasons that follow, the Court grants the defendants' Rule 12(b)(6) motion and dismisses the TAC with prejudice.
Familiarity with the general context of this litigation is presumed. See generally In re Marsh & McLennan Cos. Sec. Litig., 501 F. Supp. 2d 452 (S.D.N.Y. 2006) ("Marsh I"); see also In re Marsh & McLennan Cos. Sec. Litig., 04 Cv. 8144 (SWK), Dkt. No. 159 (explaining Henry's entry into the litigation). The Court limits its discussion here to those facts and circumstances pertinent to the instant motion.
On February 10, 2005, Henry filed an action in this District on behalf of herself and derivatively on behalf of MMC, see generally Henry v. Greenberg, 05 Cv. 2020 (RMB), Dkt. No. 1, averring federal securities law violations stemming from the New York State Attorney General's allegations that MMC had engaged in illegal bid rigging. See Marsh I, 501 F. Supp. 2d at 459, 461-65 (explaining factual allegations as related by securities litigation plaintiffs). The case was assigned to Judge Berman and was consolidated with the shareholder derivative litigation pending before him. Henry v. Greenberg, 05 Cv. 2020 (RMB), Dkt. Nos. 3-4. Henry later amended her complaint to include claims against MMC's directors under sections 10(b), 14(a), and 20(a) of the Securities Exchange Act (the "Henry Securities Claims"). In re Marsh & McLennan Cos. Derivative Litig., 04 Cv. 8516 (RMB), Conf. Tr., Mar. 16, 2005. On June 12, 2006, Judge Berman severed the Henry Securities Claims from the shareholder derivative litigation pending before him so that those claims could be transferred to this Court for consideration in connection with the consolidated securities class action litigation then pending before it (the "Consolidated Securities Litigation"). In re Marsh & McLennan Cos. Derivative Litig., 04 Cv. 8516 (RMB), Conf. Tr., June 12, 2006. As Henry's section 10(b) and 20(a) claims were directly subsumed by the Consolidated Securities Litigation, the Court ordered Henry to file an amended complaint solely addressing her section 14(a) claim by August 18, 2006. In re Marsh & McLennan Cos. Sec. Litig., 04 Cv. 8144 (SWK), Dkt. No. 129. After a series of procedural missteps, see In re Marsh & McLennan Cos. Sec. Litig., 04 Cv. 8144 (SWK), Dkt. No. 159, Henry eventually filed the TAC on March 13, 2007. In re Marsh & McLennan Cos. Sec. Litig., 04 Cv. 8144 (SWK), Dkt. No. 165-2.
In the TAC, Henry alleges that MMC and the Director Defendants violated section 14(a) and Rule 14a-9 by making false statements of material fact and fraudulent omissions in Proxy Statements disseminated on March 31, 2005, and March 30, 2006, in connection with MMC's Annual Meetings of Shareholders held on May 19, 2005, and May 18, 2006.*fn3 (Pl.'s Compl. ¶ 128, 131.). The Proxy Statements pertained to voting concerning, inter alia, the re-election of certain sitting directors; a proposed exchange, under the Company's Equity Compensation Plans, of "certain stock options held by the Company's employees that are 25% or more 'underwater'" (the "Options Exchange") (Pl.'s Compl. ¶ 129); and the ratification of the appointment of Deloitte & Touche LLP ("D&T") as Marsh's auditor. Henry identifies three disclosure failures that correspond with each of these votes. Specifically, Henry alleges that the 2005/06 Proxy Statements failed to disclose (1) the extent to which the entire Board of Directors was responsible for wrongdoing that caused the Company substantial financial harm; (2) that the Options Exchange would benefit many officers of the Company and its subsidiaries who were direct participants in the wrongdoing described in the TAC; and (3) that D&T had failed to fulfill its professional duties as independent auditor of the Company's financial statements and had a long history of similar failures. (Pl.'s Compl. ¶ 131.)
The defendants now move for dismissal on several grounds. The Director Defendants named in the Consolidated Securities Litigation*fn4 argue that Henry's section 14(a) claims are barred by principles of res judicata. See generally In re Marsh & McLennan Cos. Sec. Litig., 04 Cv. 8144 (SWK), Dkt. No. 172 ("Defs.' 2d Mot."). In the alternative, these defendants join remaining defendants MMC and Michael G. Cherkasky in arguing that (1) the TAC fails under Rule 12(b)(6) to state a claim upon which relief can be granted because the defendants were under no duty to disclose the information omitted from the Proxy Statements; and that the TAC does not satisfy the pleading requirements of Rule 9(b) and the PSLRA because it fails to allege adequately that (2) the defendants possessed scienter, and (3) the claimed omissions were misleading or fraudulent. See generally In re Marsh & McLennan Cos. Sec. Litig., 04 Cv. 8144 (SWK), Dkt. No. 169 ("Defs.' 1st Mot.").
A. Henry's Claim is Not Barred by the Doctrine of Res Judicata
The doctrine of res judicata presumes that "a person should not be twice-vexed by the same claim, and that it is in the interest of society to bring an end to disputes." 18 James Wm. Moore, et al., Moore's Federal Practice ¶ 131.12 (3d ed. 2006). "The doctrine bars 'later litigation if [an] earlier decision was (1) a final judgment on the merits, (2) by a court of competent jurisdiction, (3) in a case involving the same parties or their privies, and (4) involving the same cause of action.'" EDP Med. Computer Sys. v. United States, 480 F.3d 621, 624 (2d Cir. 2007) (quoting In re Teltronics Servs., Inc., 762 F.2d 185, 190 (2d Cir. 1985)) (brackets in original). The burden of establishing res judicata rests with the defendant. Greenberg v. Bd. of Governors of the Fed. Reserve Sys., 968 F.2d 164, 170 (2d Cir. 1992). Should the defendant meet that burden, the doctrine precludes claims based on "issues actually decided in determining the claim asserted in the first action and issues that could have been raised in the adjudication of that claim." Nat'l Labor Relations Bd. v. United Techs. Corp., 706 F.2d 1254, 1259 (2d Cir. 1983).
The Court's dismissal of numerous claims asserted in the Consolidated Securities Litigation, see In re Marsh & McLennan Cos., Inc. Sec. Litig., 04 Cv. 8144 (SWK), 2006 WL 2789860, at *4 (S.D.N.Y. Sept. 27, 2006) ("Marsh II"); Marsh I, 501 F. Supp. 2d at 496, constitutes final judgments on the merits by a court of competent jurisdiction. As a result of Judge Berman's transfer, certain of Henry's claims are subsumed in the Consolidated Securities Litigation. The parties mainly disagree as to whether claims in the Consolidated Securities Litigation and Henry's section 14(a) claim constitute the "same cause of action" for res judicata purposes. See EDP Med. Computer Sys., 480 F.3d at 624.
As an initial matter, however, it is not even clear that the Director Defendants have established privity between Henry and the class plaintiffs in the Consolidated Securities Litigation. "There is no bright line rule for determining when parties are in privity. Rather, privity is a legal determination for the trial court as to whether the relationship between the parties is sufficiently close to support [claim] preclusion." Phillips v. Kidder, Peabody & Co., 750 F. Supp. 603, 607 (S.D.N.Y. 1990). "In general, if the interests of a non-party are represented by a party to the litigation who is vested with the authority of representation, the non-party may be bound by the judgment." Id. (internal quotation marks and citation omitted).
The Director Defendants repeatedly assert that Henry is "a party to the [Consolidated Securities Litigation]." (Defs.' 2d Mot. 2; In re Marsh & McLennan Cos. Sec. Litig., 04 Cv. 8144 (SWK), Dkt. No. 179 ("Defs.' 2d Reply") 1.) Although the Court has consolidated the various securities claims against the defendants and appointed lead plaintiffs pursuant to the PSLRA, see In re Marsh & McLennan Cos., 04 Cv. 8144 (SWK), Dkt. No. 38, the standard for appointing lead plaintiffs under the PSLRA is more lenient than the standard for class certification under Federal Rule of Civil Procedure 23. In fact, in order to qualify as the "most adequate plaintiff" under the PSLRA, the movant must only make a preliminary showing that he or she satisfies some requirements of Rule 23(a). Jolly Roger Offshore Fund LTD v. BKF Capital Grp., Inc., 07 Cv. 3923 (RWS), 2007 WL 2363610, at *4 (S.D.N.Y. Aug. 16, 2007) (quoting Weinberg v. Atlas Air Worldwide Holdings, Inc., ...