Nova Scotia Health Employees' Pension Plan v. Comerica Incorporated

• Court: Court of Appeals for the Ninth Circuit
• Decided: February 6, 2026
• Docket: 24-7673
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS FEB 6 2026 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

NOVA SCOTIA HEALTH EMPLOYEES' No. 24-7673 PENSION PLAN, Lead Plaintiff, D.C. No. 2:23-cv-06843-SB-JPR Plaintiff - Appellant,

and MEMORANDUM*

DAVID RAMOS,

Plaintiff,

v.

COMERICA INCORPORATED; CURTIS C. FARMER; JAMES J. HERZOG,

Defendants - Appellees.

Appeal from the United States District Court for the Central District of California Stanley Blumenfeld, Jr., District Judge, Presiding

Submitted February 4, 2026** Pasadena, California

Before: LEE, KOH, and DE ALBA, Circuit Judges.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). Appellants Nova Scotia Health Employees’ Pension Plan (“NSHEPP”) and

David Ramos brought this putative securities class action under Sections 10(b) and

20(a) of the Securities Exchange Act and Rule 10b-5 against Appellees Comerica

Incorporated (“Comerica”); Comerica’s CEO, Curtis C. Farmer (“Farmer”); and

Comerica’s CFO, James J. Herzog. On appeal, Appellants argue that the district

court erred in dismissing the Third Amended Complaint (“TAC”) for failure to

state a claim, denying leave to amend, and denying reconsideration. We have

jurisdiction under 28 U.S.C. § 1291, and we affirm.

We review the district court’s dismissal of a complaint for failure to state a

claim de novo. “On review, we accept the plaintiffs’ allegations as true and

construe them in the light most favorable to plaintiffs.” In re Gilead Scis. Sec.

Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) (quoting Gompper v. VISX, Inc., 298

F.3d 893, 895 (9th Cir. 2002)). “The court need not, however, accept as true

allegations that . . . . are merely conclusory, unwarranted deductions of fact, or

unreasonable inferences.” Sprewell v. Golden State Warriors, 266 F.3d 979, 988

(9th Cir. 2001) (citation omitted), amended on other grounds, 275 F.3d 1187 (9th

Cir. 2001). “We review the denial of leave to amend for an abuse of discretion, but

we review the question of futility of amendment de novo.” B&G Foods N. Am.,

Inc. v. Embry, 29 F.4th 527, 534 (9th Cir. 2022) (quoting United States v. United

Healthcare Ins. Co., 848 F.3d 1161, 1172 (9th Cir. 2016)). We review denial of a

2 motion for reconsideration for abuse of discretion. Phelps v. Alameida, 569 F.3d

1120, 1131 (9th Cir. 2009).

1. NSHEPP alleged that Comerica, as Financial Agent of the Department

of Treasury’s Bureau of Fiscal Service’s (“Fiscal Service”) Direct Express

program, violated the governing regulations and contractual requirements of the

Direct Express program, and that Comerica and its executives committed securities

fraud by hiding the violations. The district court correctly dismissed the TAC for

failure to adequately allege that Appellees’ fraud caused Appellants’ loss.

Loss causation, “i.e., a causal connection between the material

misrepresentation and the loss” is a basic element of a Section 10(b) claim. Dura

Pharms., Inc. v. Broudo, 544 U.S. 336, 342 (2005).1 “So long as the complaint

alleges facts that, if taken as true, plausibly establish loss causation, a Rule

12(b)(6) dismissal is inappropriate.” Gilead, 536 F.3d at 1057.

“Loss causation is established if the market learns of a defendant’s

fraudulent act or practice, the market reacts to the fraudulent act or practice, and a

plaintiff suffers a loss as a result of the market’s reaction.” In re Oracle Corp. Sec.

Litig., 627 F.3d 376, 392 (9th Cir. 2010). “The most common way for plaintiffs to

1 NSHEPP’s Section 20(a) claim depends on its Section 10(b) claim. See Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 990 (9th Cir. 2009) (“Section 20(a) claims may be dismissed summarily . . . if a plaintiff fails to adequately plead a primary violation of section 10(b).”).

3 prove that the truth became known is to identify one or more corrective

disclosures. A corrective disclosure occurs when information correcting the

misstatement or omission that is the basis for the action is disseminated to the

market.” In re BofI Holding, Inc. Sec. Litig., 977 F.3d 781, 790 (9th Cir. 2020)

(internal quotes and citations omitted).

NSHEPP alleged that three corrective disclosures revealed risks regarding

Comerica’s probability of being renewed as Financial Agent for the Direct Express

Program.2 The district court correctly concluded that none of these alleged

disclosures established loss causation.

A. First Disclosure and Alleged Re-concealment

The first alleged disclosure is a May 29, 2023 American Banker article (“AB

Article”) that NSHEPP alleges revealed compliance issues with two third-party

vendors. The AB Article revealed information from nonpublic documents

indicating that Comerica’s two third-party vendors, i2c Inc. (“i2c”) and Conduent

Business Services (“Conduent”), had failed to follow regulatory and contractual

requirements for processing Direct Express cardholder disputes. Among other

violations in processing cardholding disputes, the AB Article revealed that i2c had

2 Before the district court, NSHEPP also argued that various analyst reports correlated with “small price drops” constituted corrective disclosures. The district court concluded that none of the reports constituted corrective disclosures because these reports largely pre-dated the AB Article and were unrelated to the Direct Express program. None of these reports are a basis for NSHEPP’s appeal.

4 processed Direct Express cardholder disputes in Pakistan, which violated the

FAA’s requirement that all Direct Express services be provided in the United

States by United States citizens or lawful permanent residents. The AB Article also

summarized already public information showing that Comerica had long been

subject to various complaints and investigations regarding its compliance

deficiencies and dispute processing procedures, including a congressional

investigation in 2018, a class action lawsuit in 2019, and audits by the Treasury’s

Office of Inspector General (“OIG”) with reports published in 2014, 2017, and

2020.

Because Comerica’s stock price decline following the AB Article was

modest, typical, and quickly reversed, NSHEPP has not plausibly alleged that the

fraud disclosed by the AB Article caused Comerica’s drop in stock price. Where

there is a “quick and sustained [stock] price recovery after the modest . . . drop”

that follows the alleged corrective disclosure, the recovery “refutes the inference

that the alleged concealment of [the] fact caused any material drop in the stock

price.” Wochos v. Tesla, Inc., 985 F.3d 1180, 1198 (9th Cir. 2021). A fall in share

price of 10% or less may be considered modest. See Metzler Inv. GMBH v.

Corinthian Colleges, Inc., 540 F.3d 1049, 1064 (9th Cir. 2008) (holding that

plaintiff failed to plead loss causation where defendant’s “stock recovered very

shortly after the modest 10% drop”).

5 Specifically, Comerica’s stock decreased by a total of 7.4% over two days

after the AB Article was published on May 29, 2023, which is smaller than the 10%

drop that this court considered “modest” in Metzler, 540 F.3d at 1064.

Additionally, the May 30 and 31, 2023 price decreases followed a trend of

declining stock prices over the previous several days. This drop was well within

Comerica’s typical stock price movement and reversed over the next two days.

Beginning June 2, 2023 through late September 2023, for approximately four

months, Comerica’s stock price remained higher than it had been before the AB

Article was published.

There is no merit to NSHEPP’s argument that the reversal in Comerica’s

stock price was caused by a letter from Farmer (“Farmer Letter”), published in

American Banker on June 1, 2023. NSHEPP alleges that the Farmer Letter misled

the market to believe that “the Direct Express program issues were limited to a

single vendor, were a surprise to Comerica, and were resolved in 2020.”

Specifically, NSHEPP argues that the following five statements were false or

misleading:

• “The scope of the Direct Express program requires coordinating many stakeholders and working diligently to ensure that federal regulations are being followed.”

• “Comerica took steps to protect Direct Express users when it became aware that a third-party vendor had not followed program protocols for reviewing customer inquiries.”

6 • “These steps were taken in cooperation with the Fiscal Service in 2020.”

• “[W]e continue to perform regular assessments, including independent audits to ensure the program is managed in compliance with applicable requirements with ongoing oversight from the Fiscal Service and Treasury Department.”

• “We . . . act quickly if we find issues – from addressing individual customer concerns to oversight of vendors.”

NSHEPP has not adequately pled that the Farmer Letter made false or

misleading statements or omissions that “affirmatively create[d] an impression of a

state of affairs that differs in a material way from the one that actually exists.”

Brody v. Transitional Hosps. Corp., 280 F.3d 997, 1006 (9th Cir. 2002). An

omission is materially misleading if there is a “substantial likelihood that [the

document] would have been viewed by the reasonable investor as having

significantly altered the total mix of information available” to investors. Retail

Wholesale & Dep’t Store Union Loc. 338 Ret. Fund v. Hewlett-Packard Co., 845

F.3d 1268, 1274 (9th Cir. 2017) (citation modified).

The first statement is simply an expression of the requirements of the Direct

Express program and is neither false nor misleading regarding Comerica’s

compliance practices.

The next three statements are not alleged to be false, and no “reasonable

investor” would have considered the statements made or information omitted to

have changed the “total mix of information available.” Retail Wholesale & Dep’t

7 Store Union Loc. 338 Ret. Fund, 845 F.3d at 1274 (citation modified). Put another

way, a reasonable investor would not have concluded that only one of Comerica’s

vendors had compliance issues or that all compliance issues with both vendors had

been resolved in 2020 based on Comerica’s claim that it had taken steps to address

unspecified compliance issues with one of its vendors in 2020. The AB Article

itself made clear that Comerica continued to have issues with third-party vendor

compliance past 2020, as it reported on a lawsuit regarding issues with Comerica

and Conduent’s Direct Express dispute processing with a class period of 2015 to

2022 and a Consumer Financial Protection Bureau investigation into Comerica’s

dispute processing practices since at least 2021. Critically, the Farmer Letter did

not deny the primary revelation of the AB Article, which was that one vendor has

dispute processing centers located in Pakistan, or indicate that the issue had been

resolved in 2020.

The final allegedly misleading statement, that Comerica “act[s] quickly if

[it] finds issues,” is the kind of “mildly optimistic, subjective assessment [that]

hardly amounts to a securities violation” and that instead has been considered

“non-actionable puffing.” In re Cutera Sec. Litig., 610 F.3d 1103, 1111 (9th Cir.

2010). “[P]rofessional investors, and most amateur investors as well, know how to

devalue the optimism of corporate executives.” Id. (quoting VeriFone Sec. Litig.,

784 F. Supp. 1471, 1481 (N.D. Cal. 1992), aff’d, 11 F.3d 865 (9th Cir. 1993)).

8 B. Second Disclosure

The second disclosure is the May 23, 2024 announcement of an enforcement

agreement between the Office of the Comptroller of the Currency and Comerica’s

wealth management subsidiary, which had no involvement in the Direct Express

program (“OCC Enforcement Agreement”). NSHEPP has not plausibly alleged

that the market understood the OCC Enforcement Agreement to reveal risks to

Comerica’s chance of being renewed as Financial Agent for the Direct Express

program. The OCC Enforcement Agreement concerned a wealth management

subsidiary with no involvement in the Direct Express program. The only analyst

report linking the OCC Enforcement Agreement to the Direct Express program

was published on May 24, 2024, a day after the OCC Enforcement Agreement was

announced, and concluded that the OCC Enforcement “shouldn’t” impact

Comerica’s chances for renewal. Comerica’s stock saw a modest increase of $0.53,

or 1.05%, on May 24, 2024.

NSHEPP also has not plausibly alleged that the OCC Enforcement

Agreement revealed that Comerica’s previous statements regarding Comerica’s

financial reporting process were false or misleading. To the extent that analysts

hypothesized that there was potential for widespread fraudulent conduct at

Comerica, loss causation is not pled where a disclosure reveals only a “‘risk’ or

‘potential’ for widespread fraudulent conduct.” Metzler, 540 F.3d at 1064.

9 C. Third Disclosure

The third disclosure is the July 19, 2024 announcement that the Fiscal

Service had preliminarily decided to not renew Comerica as Financial Agent for

the Direct Express program. NSHEPP has not plausibly alleged that the market

understood the Fiscal Service’s preliminary decision to not renew Comerica as

Direct Express Financial Agent as revealing fraud. A plaintiff must show that the

market reacted to a fraudulent act itself rather than “the purported ‘impact’ of the

alleged fraud.” Oracle, 627 F.3d at 392. None of the alleged disclosures mention

compliance issues in the Direct Express program, and none even speculate that the

nonrenewal decision was a result of Comerica’s noncompliance. NSHEPP has not

adequately pled that the market reacted to Comerica’s alleged fraud rather than

“the far more plausible reason for the resulting drop,” which is that Comerica lost a

highly lucrative contract. Metzler, 540 F.3d at 1065.

2. The district court did not abuse its discretion in denying leave to

amend. Leave to amend is properly denied where “the complaint could not be

saved by any amendment.” Leadsinger, Inc. v. BMG Music Pub., 512 F.3d 522,

532 (9th Cir. 2008) (citation modified). NSHEPP has offered various materials

both to the district court and on appeal to show that the pleadings could be

strengthened, but none of these materials are relevant. NSHEPP has not argued that

any of these materials constitute corrective disclosures. Further, none of the

10 materials strengthen the corrective disclosures alleged. All documents post-date the

three corrective disclosures alleged, and none strengthen NSHEPP’s argument that

fraud was removed from the market before the additional documents were

published. Because the additional materials are not relevant, we deny NSHEPP’s

request for judicial notice (Dkt. 27). See Khoja v. Orexigen Therapeutics, Inc., 899

F.3d 988, 1000 n.5 (9th Cir. 2018) (“An irrelevant fact could hardly be an

adjudicative fact.”) (quoting 21B Charles Alan Wright & Kenneth W. Graham, Jr.,

Federal Practice and Procedure § 5104, at 156 (2d ed. 2005)).

Because the district court has twice dismissed the complaint for failure to

plead loss causation and these additional materials would not strengthen

NSHEPP’s loss causation claim, amendment would be futile, and it was not an

abuse of discretion to deny leave to amend.

3. The district court did not abuse its discretion in denying NSHEPP’s

motion for reconsideration. NSHEPP has identified no clear errors of law or fact,

newly discovered evidence, or changes in controlling law that would leave this

court “with the definite and firm conviction that a mistake has been committed.”

Smith v. Clark Cnty. Sch. Dist., 727 F.3d 950, 955 (9th Cir. 2013) (quoting United

States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948)).

AFFIRMED.