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Fogel v. Wal-Mart de México Sab de CV

United States District Court, S.D. New York

February 21, 2018

MICHAEL FOGEL, individually and on behalf of all others similarly situated, Plaintiff,



         On February 27, 2017, the Court terminated this action when it dismissed Plaintiff Michael Fogel's Second Amended Complaint with prejudice, thus denying leave to file a Third Amended Complaint. The Second Amended Complaint brought class-action claims for securities fraud against Defendants Walmart de México SAB de CV (“Wal-Mex”), its employees Ernesto Vega and Scot Rank, and Wal-Mart Stores, Inc. (“Wal-Mart”). Plaintiff now moves under Federal Rule of Civil Procedure 59(e) to amend the judgment to provide that the dismissal of the Second Amended Complaint was without prejudice and to allow Plaintiff to file a Third Amended Complaint. For the reasons that follow, the Court denies the motion.


         A. The Second Amended Complaint

         1. Plaintiff's Allegations

         Due to the Court's previous comprehensive discussion of the facts, allegations, and procedural posture of this case, the Court mentions here only what is necessary to resolve the instant motion. See Fogel v. Wal-Mart de México SAB de CV, No. 13 Civ. 2282 (KPF), 2017 WL 751155, at *2-5 (S.D.N.Y. Feb. 27, 2017). According to the Second Amended Complaint (“SAC”), which relies in large part on a 2012 New York Times article, Wal-Mex employees and executives participated in a bribery scheme involving payments to Mexican intermediaries that were designed to expedite the company's ability to build retail locations and expand its operations in Mexico. Id. at *3-4. This scheme was allegedly the subject of an internal investigation by Wal-Mart in 2005 and 2006. Id. at *3.

         The SAC claimed that, given their knowledge of these investigations, Wal-Mex, Wal-Mex executives Ernesto Vega and Scot Rank, and Wal-Mart made material misrepresentations and omissions regarding the alleged bribery scheme in Wal-Mart's Annual Reports for the years 2004 through 2011; Wal-Mex's website; Wal-Mart's December 8, 2011 Form 10-Q for the third fiscal quarter of 2012; and press releases and reports published by its Audit & Corporate Practice Group in January through April of 2012. See Fogel, 2017 WL 751155, at *5. Based on these allegations, the SAC included claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b) and 78t(a), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5. Id. at *1.

         2. The Court Dismisses the SAC and Denies Leave to Amend

         The Court dismissed the SAC on February 27, 2017, citing several different grounds on which Plaintiff's claims failed. See Fogel, 2017 WL 751155, at *19. The Court dismissed two groups of the claims as untimely, based on the five-year statute of repose or the two-year statute of limitations contained in the Sarbanes-Oxley Act of 2002, Pub. L. 107-204, 116 Stat. 801 (codified as amended at 28 U.S.C. § 1658). First, based on the SAC's filing date of April 7, 2016, the Court held that the Sarbanes-Oxley Act's five-year statute of repose barred any claims based on statements made before April 5, 2008, including any statements in the 2004, 2005, or 2006 Annual Reports. Fogel, 2017 WL 751155, at *9. Second, under Sarbanes-Oxley's two-year statute of limitations, the Court dismissed all claims raised after April 24, 2014, which included those against Wal-Mart and Rank and all claims other than those in Plaintiff's original complaint (or “OC”) against Wal-Mex and Vega. Id. at *9-12.[2] The Court reasoned that the claims against Wal-Mex and Vega that were alleged in the First Amended Complaint did not relate back to Plaintiff's timely claims in the OC under Federal Rule of Civil Procedure 15. Id.

         The remainder of Plaintiff's timely allegations failed to state a claim under Sections 10(b) and 20(a) and Rule 10b-5. See Fogel, 2017 WL 751155, at *13-18. The Court reasoned that Plaintiff's Section 10 and Rule 10b-5 claims failed to plead adequately the requisite element of scienter, as Vega's alleged scienter was premised solely on his status within the corporation, and no employee acted with scienter that could be imputed to Wal-Mex. See Id. at *15-16. In addition, Plaintiff's timely claims failed to plead an actionable misrepresentation or omission, but rather were mere “puffery” or were not demonstrably false under the heightened pleading standard applicable to securities fraud claims. See Id. at *17. Finally, the Court dismissed any alleged scheme-liability claim as either untimely or insufficiently distinct from an alleged misstatement, and dismissed the Section 20(a) claim for control-person liability in light of Plaintiff's failure to allege a primary securities violation. Id. at *17-18.

         The Court also denied Plaintiff's request for leave to amend the SAC and file a Third Amended Complaint (“TAC”), finding that such amendment would be futile. Fogel, 2017 WL 751155, at *18-19. In doing so, the Court specifically noted that Plaintiff had “been afforded a more-than-ample opportunity to allege his claims, ” and that in granting Plaintiff leave to file the SAC, “the Court indicated … that it did not anticipate further amendment requests.” Id. at *19. The Court also found that despite having three chances to plead a valid claim, Plaintiff's core allegations remained the same. Id.

         B. Plaintiff Moves to Amend the Judgment and to File a Third Amended Complaint

         Undeterred, on March 23, 2017, Plaintiff filed a motion to alter the judgment to allow Plaintiff to amend the SAC. (Dkt. #118).[3] The motion includes interrogatory responses that Wal-Mart had filed in a parallel securities case involving similar allegations against the company, along with a proposed TAC. (See Dkt. #120-1, -4). On April 28, 2017, Defendants filed an opposition to the motion (Dkt. #132), and on May 9, 2017, Plaintiff replied to the opposition (Dkt. #135). After reviewing these submissions, the Court struck them from the docket on August 2, 2017, finding unacceptable both the “tone” and “formatting” of Plaintiff's brief, as well as both “parties' formatting stratagems” to circumvent the Court's page limitations. (Dkt. #142).[4] The Court thus ordered the parties to file replacement briefs that eschewed footnotes and other “formatting shenanigans.” (Id.).

         On September 4, 2017, Plaintiff filed a replacement motion and brief in support of the motion. (Dkt. #143). On October 2, 2017, Defendants filed a replacement opposition brief (Dkt. #145), and on October 16, 2017, Plaintiffs a replacement brief replying to Defendants' opposition (Dkt. #146).


         A. Applicable Law

         “A party seeking to file an amended complaint postjudgment must first have the judgment vacated or set aside pursuant to [Federal Rules of Civil Procedure] 59(e) or 60(b).” Ruotolo v. City of New York, 514 F.3d 184, 191 (2d Cir. 2008) (citing Nat'l Petrochemical Co. of Iran v. M/T Stolt Sheaf, 930 F.2d 240, 244-45 (2d Cir. 1991)). Here, Plaintiff moves under Rule 59(e), which reads in full, “[a] motion to alter or amend a judgment must be filed no later than 28 days after the entry of the judgment.” Although “Rules 59(a)-(d) by their terms apply only to cases that have been tried, Rule 59(e) is not limited by its language to judgments entered after trial, ” and where, as here, a case is “dismissed on motion … ...

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