18-1669
Steamfitters’ Indus. Pension Fund v. Endo Int’l, PLC

                               UNITED STATES COURT OF APPEALS
                                   FOR THE SECOND CIRCUIT

                                           SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED
BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY
MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE
NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY
OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.



        At a stated Term of the United States Court of Appeals for the Second Circuit, held at the
Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York on the
29th day of April, two thousand nineteen.

Present:         AMALYA L. KEARSE,
                 RALPH K. WINTER,
                 ROSEMARY S. POOLER,
                            Circuit Judges.

_____________________________________________________

THE STEAMFITTERS’ INDUSTRY PENSION FUND,
THE STEAMFITTERS’ INDUSTRY SECURITY BENEFIT
FUND,

                                   Plaintiffs-Appellants,

                          v.                                                 18-1669-cv

ENDO INTERNATIONAL PLC, RAJIV KANISHKA
LIYANAARCHIE DE SILVA,
SUKETU P. UPADHYAY, PAUL CAMPANELLI,

                        Defendants-Appellees.1
_____________________________________________________

Appearing for Appellants:          Douglas Wilens, Robbins Geller Rudman & Dowd LLP (Samuel
                                   H. Rudman, David A. Rosenfeld, Mark T. Millkey, on the brief),
                                   Boca Raton, FL


1
    The Clerk of the Court is directed to amend the caption as above.
Appearing for Appellees:       Roman Martinez, Latham & Watkins LLP (James E. Brandt, Jeff
                               G. Hammel, Thomas Giblin, Benjamin W. Snyder, on the brief),
                               Washington, D.C.

Appeal from the United States District Court for the Southern District of New York (Furman, J.).

     ON CONSIDERATION WHEREOF, IT IS HEREBY ORDERED, ADJUDGED,
AND DECREED that the order of said District Court be and it hereby is AFFIRMED.

         Appellants the Steamfitters’ Industry Pension Fund and the Steamfitters’ Industry
Security Benefit Fund (the “Funds”) appeal from the April 27, 2018, order of the United States
District Court for the Southern District of New York (Furman, J.), denying their motions for
relief from the district court’s January 17, 2018, judgment pursuant to Rules 59(e) and 60(b)(6)
of the Federal Rules of Civil Procedure and for leave to file a fourth amended complaint pursuant
to Rule 15(a)(2) of the Federal Rules of Civil Procedure. See generally Friedman v. Endo Int’l
PLC (Friedman II), No. 16 CV-3912 (JMF), 

(S.D.N.Y. Apr. 27, 2018). The
district court had previously dismissed the Funds’ third amended securities fraud complaint
against Endo International PLC (“Endo”) and several of its past and present executives, Rajiv
Kanishka Liyanaarchie De Silva, Suketu P. Upadhyay, and Paul Campanelli (collectively,
“Defendants”). See generally Friedman v. Endo Int’l PLC (Friedman I), 16 CV-3912 (JMF),

(S.D.N.Y. Jan. 16, 2018). We assume the parties’ familiarity with the
underlying facts, procedural history, and specification of issues for review.

   I. Legal Standards

        “We review denial of leave to amend under an ‘abuse of discretion’ standard.” Hutchison
v. Deutsche Bank Sec. Inc., 

, 490 (2d Cir. 2011). However, where, as here, a district
court’s “denial of leave to amend is based on a legal interpretation, such as a determination that
amendment would be futile,” we review its decision de novo. 

futility as we would a motion to dismiss, determining whether the proposed
complaint contains enough facts to state a claim to relief that is plausible on its face.” Ind. Pub.
Ret. Sys. v. SAIC, Inc., 

, 92 (2d Cir. 2016) (internal quotation marks omitted). “In
making this determination, we consider any written instrument attached to [the complaint] as an
exhibit or any statements or documents incorporated in it by reference, as well as public
disclosure documents required by law to be, and that have been, filed with the SEC, and
documents that the plaintiffs either possessed or knew about and upon which they relied in
bringing the suit.” Stratte-McClure v. Morgan Stanley, 

, 100 (2d Cir. 2015)
(alteration in original) (internal quotation marks omitted).

        In addition, a securities fraud plaintiff “must also satisfy the heightened pleading
requirements of the Private Securities Litigation Reform Act (‘PSLRA’) and Rule 9(b) of the
Federal Rules of Civil Procedure.” Ind. Pub. Ret. 

(citation omitted). Those
heightened standards require a complaint to “stat[e] with particularity the circumstances
constituting fraud.” ECA & Local 134 IBEW Joint Pension Tr. of Chicago v. JP Morgan Chase
Co., 

, 196 (2d Cir. 2009).



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   II. Leave to Amend Procedures

         The Funds first argue that the district court employed improper leave to amend
procedures by indicating that, because the Funds’ motion for leave to amend came after the
district court entered judgment, a “more exacting standard” should apply. Friedman II, 

, at *1-2. However, we need not decide whether the district court would have erred by
applying such a standard because it did not do so. Instead of relying on a heightened leave to
amend standard or the fact that it had previously given the Funds an opportunity to amend their
complaint before ruling on Defendants’ motion to dismiss, the district court explicitly stated that,
“whether or not” it applied a “more exacting standard,” the Funds’ “motion falls short, as their
proposed amendments are futile.” 

see also 

(“[B]ecause Plaintiffs’ proposed
Fourth Amended Complaint is futile, the Court will not grant leave to amend.”). Futility is a
proper reason for denying a motion for leave to amend. See Foman v. Davis, 

, 182
(1962).

   III. Futility

       The Funds next argue that the district court erred by holding that amendment was futile
because their proposed fourth amended complaint still failed to state securities fraud claims
under Section 10(b) and 20(a) of the Exchange Act. 15 U.S.C. §§ 78j(b), 78t(a). The Funds’
proposed fourth amended complaint premises liability on alleged violations of SEC Rule 10b-5,
17 C.F.R. § 240.10b-5(b), and Item 303 of SEC Regulation S-K, 17 C.F.R § 229.303. The
Funds’ theory is, in sum, that Defendants left investors with the false impression that, after
acquiring Par Pharmaceutical Holdings Inc. (“Par”), Endo would not be making any drastic
changes to its generics business, Qualitest Pharmaceuticals (“Qualitest”). However, according to
the Funds, Defendants executed a secret plan to transform Endo’s generics business, abandoning
Qualitest’s business model in favor of Par’s.

       A. Rule 10b-5

        As relevant here, Rule 10b-5 makes it unlawful “[1] [t]o make any untrue statement of a
material fact or [2] to omit to state a material fact necessary in order to make the statements
made, in the light of the circumstances under which they were made, not misleading.” 17 C.F.R.
§ 240.10b-5(b). “[T]o fulfill the materiality requirement there must be a substantial likelihood
that the disclosure of the omitted fact would have been viewed by the reasonable investor as
having significantly altered the total mix of information made available.” Basic Inc. v. Levinson,

, 231 32 (1988) (internal quotation marks omitted); see also United States v. Litvak,

, 175 (2d Cir. 2015) (“A misrepresentation is material under Section 10(b) where
there is a substantial likelihood that a reasonable investor would find the . . . misrepresentation
important in making an investment decision.” (alternation in original) (internal quotation marks
omitted)). Section “10(b) and Rule 10b–5(b) do not create an affirmative duty to disclose any
and all material information.” Matrixx Initiatives, Inc. v. Siracusano, 

, 44 (2011).
Nevertheless, a duty to disclose may exist under Rule 10b-5 where the failure to do so would
make a corporate statement a “half-truth”—a “statement[] that [is] misleading under the second




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prong of Rule 10b-5 by virtue of what [it] omit[s] to disclose.” In re Vivendi, S.A. Sec. Litig., 

, 239-40 (2d Cir. 2016).

        Here, Defendants signaled all along that they planned significant changes at Qualitest.
Although the Funds emphasize Defendants’ use of the word “complementary” to suggest that
they represented to investors that Endo would continue to operate Qualitest and Par in parallel,
Endo, in fact, abandoned the Qualitest name altogether, instead renaming its generics business
Par Pharmaceutical, an Endo International Company. Moreover, when Endo announced its
acquisition of Par, it also told investors that Par’s CEO, Campanelli, would lead the new
combined generics business. And in the first quarterly report it filed after closing the Par deal,
Endo disclosed that it was restructuring its generics business. Endo Int’l PLC, Quarterly Report
(Form 10-Q), at 9 (Nov. 9, 2015).

         Additionally, while the Funds concede that Defendants repeatedly used the word
“transformational” to describe the Par acquisition, they argue that Defendants only used that term
in reference to the increased size and scope of Endo’s generics business. However, Defendants
also repeatedly used the word “transformational” to describe the changes the Par acquisition
would have on Endo’s generics business model. For example, in a May 18, 2015, investor
presentation, Endo described the Par acquisition as an opportunity to “[t]ransform [its] operating
model.” Endo Int’l plc, Par Pharmaceutical Acquisition 6 (May 18, 2015), available at
http://investor.endo.com/static-files/255eb5dc-a091-4731-be24-99088015ae06. That presentation
also noted that the transaction would “[t]ransform [Endo’s] Gx [generics] business.” 

And in a May 18, 2015, press release, Endo similarly stated that the acquisition would
“transform[] its operating model to maximize growth potential and cash flow generation.” Endo
Int’l PLC, Current Report (Form 8-K) ex. 99.1, at 4 (May 18, 2015).

         Moreover, after Endo announced the Par acquisition, it continued to convey to investors
that it did not intend to retain Qualitest’s low-margin business model, instead favoring Par’s
focus on specialized, high barrier-to-entry products. For instance, during an August 10, 2015,
conference call, De Silva told investors that Endo had “a very clear view that the true future at
least for growth oriented companies in the U.S. Generics is around specialty generics, higher
barrier to entry products and that is going to continue to be hard on the commodities side. For us
what is really encouraging is that this is exactly why we are acquiring Par . . . .” Thomson
Reuters, Edited Transcript, ENDP - Q2 2015 Endo International plc Earnings Conference Call
15 (Aug 10, 2015), available at http://investor.endo.com/static-files/4f50a27a-7c10-4b18-9b84-
b296089aa5e9. Once Endo consummated the transaction, it stated in a press release that the new
combined entity would have “a focus on higher barrier-to-entry and first-to-market products.”
Endo Int’l PLC, Current Report (Form 8-K) ex. 99.1, at 1 (Sept. 28, 2015). In that press release,
Campanelli also stated that he looked “forward to helping [Endo] realize the full potential of this
new – and highly specialized – generics business.” 

       Finally, as the district court correctly observed, many of the statements to which the
Funds attach significance are nothing more than puffery. Friedman II, 

, at *2.
They are the sort of vague and optimistic “statements [that] are too general to cause a reasonable
investor to rely upon them,” and thus cannot serve as the basis for a securities fraud claim. ECA
& Local 134 IBEW Joint Pension 

. For example, no reasonable investor



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would attach much meaning, if any, to the remark that Endo hoped to “maintain the magic” of
Par and Qualitest, and they certainly would not rely on such statements. App’x at 49, 60, 64, 65.

        In short, the Funds’ proposed fourth amended complaint fails to plausibly allege that
Defendants made any material misrepresentations—either by affirmative misstatement or by
omission—in connection with the Par acquisition. In the absence of a plausible Rule 10b-5
violation, the district court correctly held that amendment would be futile.

       B. Item 303

        “Item 303’s affirmative duty to disclose in Form 10-Qs can serve as the basis for a
securities fraud claim under Section 10(b).” 

. In order to be a
successful plaintiff, one must adequately allege both that a defendant violated Item 303 and that
the violative omissions were material. 

“According to the SEC’s interpretive release
regarding Item 303, disclosure [under Item 303] is necessary where a trend, demand,
commitment, event or uncertainty is both presently known to management and reasonably likely
to have material effects on the registrant’s financial conditions or results of operations.” Ind.
Pub. Ret. 

(alternation in original) (internal quotation marks omitted).

        Here, the Funds’ allegations fall short because the business strategy decision on which
they rely is not the type of disclosure Item 303 requires. The SEC “has never gone so far as to
require a company to announce its internal business strategies.” 

. We decline to do so now.

       C. Section 20(a)

        To state a claim for so-called “control person liability” under Section 20(a), a plaintiff is
required to establish, among other things, “a primary violation” of the securities laws.
Carpenters Pension Tr. Fund of St. Louis v. Barclays PLC, 

, 236 (2d Cir. 2014)
(internal quotation marks omitted). The Funds have failed to do so; thus, they fail to state a claim
under Section 20(a).

        We have considered the remainder of the Funds’ arguments and find them to be without
merit. Accordingly, the order of the district court hereby is AFFIRMED.

                                                      FOR THE COURT:
                                                      Catherine O’Hagan Wolfe, Clerk




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