17‐1180‐cv Saleh Altayyar, et al. v. Etsy, Inc., et al.
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 COURTʹS 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 ʺSUMMARY ORDERʺ). 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 24th day of April , two thousand eighteen.
PRESENT: RICHARD C. WESLEY, DENNY CHIN, Circuit Judges, DENISE COTE, District Judge.*
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SALEH ALTAYYAR, ANDREW HUANG, SARAH CHANG, and MARY M. GILTENAN, Individually and on Behalf of All Others Similarly Situated, Plaintiffs‐Appellants,
ARTHUR CERVANTES, MICHAEL WEISS, Intervenor‐Plaintiffs,
v. 17‐1180‐cv
ETSY, INC., CHAD DICKERSON, KRISTINA SALEN, JAMES W. BREYER, M. MICHELE BURNS,
* Denise Cote, of the United States District Court for the Southern District of New York, sitting by designation.
JONATHAN D. KLEIN, FRED WILSON, GOLDMAN SACHS & CO., MORGAN STANLEY & CO. LLC, ALLEN & COMPANY LLC, LOOP CAPITAL MARKETS LLC, THE WILLIAMS CAPITAL GROUP, L.P., Defendants‐Appellees. *
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FOR PLAINTIFFS‐APPELLANTS: MATTHEW L. TUCCILLO (Jeremy A. Lieberman, Jennifer B. Sobers, on the brief), Pomerantz LLP, New York, New York.
FOR DEFENDANTS‐APPELLEES STEPHEN P. BLAKE (James G. GOLDMAN SACHS & CO. LLC, Kreissman, Jonathan K. Youngwood, on the MORGAN STANLEY & CO., LLC, brief), Simpson Thacher & Bartlett, New York LOOP CAPITAL MARKETS, LLC, New York. AND THE WILLIAMS CAPITAL GROUP, L.P.:
FOR DEFENDANTS‐APPELLEES JOSEPH R. PALMORE (Kayvan B. Sadeghi, ETSY, INC., CHAD DICKERSON, Joel C. Haims, Seth W. Lloyd, on the brief), KRISTINA SALEN, JAMES W. Morrison & Foerster LLP, New York, New BREYER, M. MICHELE BURNS, York, and Washington, D.C. JONATHAN D. KLEIN, AND FRED WILSON:
Appeal from the United States District Court for the Eastern District of
New York (Donnelly, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.
* Mary M. Giltenan is the court‐appointed lead plaintiff. The Clerk of Court is respectfully directed to amend the official caption to conform to the above.
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In this putative class action, plaintiffs‐appellants Mary M. Giltenan,
individually and on behalf of all others similarly situated, Saleh Altayyar, Andrew
Huang, and Sarah Chang appeal from the district courtʹs judgment entered March 23,
2017 granting the motion to dismiss of defendants‐appellees Etsy, Inc. (ʺEtsyʺ), its Chief
Executive Officer Chad Dickerson, Chief Financial Officer Kristina Salen, Directors
James Breyer, M. Michele Burns, Jonathan Klein and Fred Wilson, and underwriters
Goldman Sachs & Co., Morgan Stanley & Co., Allen & Company LLC, Loop Capital
Markets LLC, and The Williams Capital Group, L.P. The district court explained its
reasoning in a memorandum decision and order issued March 16, 2017.1 We assume
the partiesʹ familiarity with the underlying facts, procedural history, and issues on
appeal.
Etsy is an online forum that allows individuals to buy and sell handmade
items, vintage goods, and craft supplies. Plaintiffs are investors who purchased or
acquired Etsy securities and allege that defendants made material misstatements and
omissions that artificially inflated Etsyʹs stock price, causing the plaintiffs to suffer a
loss when the stock price dropped. Plaintiffsʹ claims largely originated from analyst
reports, including one issued by Wedbush Securities (the ʺWedbush Noteʺ), which
suggested that Etsy was doing a poor job at identifying and removing items from its
1 The memorandum decision and order is stamped March 16, 2016 and signed March 15, 2016, but was actually filed on March 16, 2017.
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marketplace that (1) did not meet its terms and guidelines or (2) infringed trademarks
or copyrights. According to the plaintiffs, the revelations in these notes resulted in a
decline in Etsyʹs stock value, which is the basis for the plaintiffsʹ claim of injury.
Plaintiffsʹ ʺrevised amendedʺ complaint (the ʺComplaintʺ) alleges that Etsy
and its officers violated Section 10(b) of the Securities Exchange Act of 1934 (the
ʺExchange Actʺ), 15 U.S.C. § 78tj(b) (Count I); Etsyʹs officers violated Section 20(a) of the
Exchange Act, 15 U.S.C. § 78t(a) (Count II) and Section 15 of the Securities Act of 1933
(the ʺSecurities Actʺ), 15 U.S.C. §§ 77o (Count V); and all defendants violated Sections 11
and 12(a)(2) of the Securities Act, 15 U.S.C. §§ 77(k), 77(a)(2) (Counts III‐IV). The district
court dismissed the Complaint with prejudice for failure to state a claim. Plaintiffs
We review de novo a district courtʹs order granting a motion to dismiss.
Stratte‐McClure v. Morgan Stanley, 776 F.3d 94, 99‐100 (2d Cir. 2015). A complaint must
contain ʺenough facts to state a claim to relief that is plausible on its face.ʺ Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 570 (2007). In an Exchange Act case, we apply a heightened
pleading requirement imposed by the Private Securities Litigation Reform Act, 15
U.S.C. § 78u‐4, and Federal Rule of Civil Procedure 9(b), which requires a plaintiff to
ʺstate with particularity the circumstances constituting fraud.ʺ Fed. R. Civ. P. 9(b); see
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also Anschutz Corp. v. Merrill Lynch & Co., 690 F.3d 98, 108 (2d Cir. 2012).2 We conclude
that plaintiffsʹ appeal is without merit and affirm substantially for the reasons set forth
by the district court in its thorough and well‐reasoned order.
To state a claim under Section 10(b) and 10b‐5, a plaintiff must allege, inter
alia, that each defendant ʺmade misstatements or omissions of material fact.ʺ Stratte‐
McClure, 776 F.3d at 100 (quoting ATSI Commcʹns Inc. v. Shaar Fund, Ltd., 493 F.3d 87,
105 (2d Cir. 2007)). If the plaintiff chooses to challenge an opinion as a
misrepresentation, she must allege that the statement was ʺboth objectively false and
disbelieved by the defendant at the time it was expressed.ʺ Fait v. Regions Fin. Corp., 655
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17‐1180‐cv Saleh Altayyar, et al. v. Etsy, Inc., et al.
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 COURTʹS 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 ʺSUMMARY ORDERʺ). 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 24th day of April , two thousand eighteen.
PRESENT: RICHARD C. WESLEY, DENNY CHIN, Circuit Judges, DENISE COTE, District Judge.*
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x
SALEH ALTAYYAR, ANDREW HUANG, SARAH CHANG, and MARY M. GILTENAN, Individually and on Behalf of All Others Similarly Situated, Plaintiffs‐Appellants,
ARTHUR CERVANTES, MICHAEL WEISS, Intervenor‐Plaintiffs,
v. 17‐1180‐cv
ETSY, INC., CHAD DICKERSON, KRISTINA SALEN, JAMES W. BREYER, M. MICHELE BURNS,
* Denise Cote, of the United States District Court for the Southern District of New York, sitting by designation.
JONATHAN D. KLEIN, FRED WILSON, GOLDMAN SACHS & CO., MORGAN STANLEY & CO. LLC, ALLEN & COMPANY LLC, LOOP CAPITAL MARKETS LLC, THE WILLIAMS CAPITAL GROUP, L.P., Defendants‐Appellees. *
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FOR PLAINTIFFS‐APPELLANTS: MATTHEW L. TUCCILLO (Jeremy A. Lieberman, Jennifer B. Sobers, on the brief), Pomerantz LLP, New York, New York.
FOR DEFENDANTS‐APPELLEES STEPHEN P. BLAKE (James G. GOLDMAN SACHS & CO. LLC, Kreissman, Jonathan K. Youngwood, on the MORGAN STANLEY & CO., LLC, brief), Simpson Thacher & Bartlett, New York LOOP CAPITAL MARKETS, LLC, New York. AND THE WILLIAMS CAPITAL GROUP, L.P.:
FOR DEFENDANTS‐APPELLEES JOSEPH R. PALMORE (Kayvan B. Sadeghi, ETSY, INC., CHAD DICKERSON, Joel C. Haims, Seth W. Lloyd, on the brief), KRISTINA SALEN, JAMES W. Morrison & Foerster LLP, New York, New BREYER, M. MICHELE BURNS, York, and Washington, D.C. JONATHAN D. KLEIN, AND FRED WILSON:
Appeal from the United States District Court for the Eastern District of
New York (Donnelly, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.
* Mary M. Giltenan is the court‐appointed lead plaintiff. The Clerk of Court is respectfully directed to amend the official caption to conform to the above.
‐ 2 ‐
In this putative class action, plaintiffs‐appellants Mary M. Giltenan,
individually and on behalf of all others similarly situated, Saleh Altayyar, Andrew
Huang, and Sarah Chang appeal from the district courtʹs judgment entered March 23,
2017 granting the motion to dismiss of defendants‐appellees Etsy, Inc. (ʺEtsyʺ), its Chief
Executive Officer Chad Dickerson, Chief Financial Officer Kristina Salen, Directors
James Breyer, M. Michele Burns, Jonathan Klein and Fred Wilson, and underwriters
Goldman Sachs & Co., Morgan Stanley & Co., Allen & Company LLC, Loop Capital
Markets LLC, and The Williams Capital Group, L.P. The district court explained its
reasoning in a memorandum decision and order issued March 16, 2017.1 We assume
the partiesʹ familiarity with the underlying facts, procedural history, and issues on
appeal.
Etsy is an online forum that allows individuals to buy and sell handmade
items, vintage goods, and craft supplies. Plaintiffs are investors who purchased or
acquired Etsy securities and allege that defendants made material misstatements and
omissions that artificially inflated Etsyʹs stock price, causing the plaintiffs to suffer a
loss when the stock price dropped. Plaintiffsʹ claims largely originated from analyst
reports, including one issued by Wedbush Securities (the ʺWedbush Noteʺ), which
suggested that Etsy was doing a poor job at identifying and removing items from its
1 The memorandum decision and order is stamped March 16, 2016 and signed March 15, 2016, but was actually filed on March 16, 2017.
‐ 3 ‐
marketplace that (1) did not meet its terms and guidelines or (2) infringed trademarks
or copyrights. According to the plaintiffs, the revelations in these notes resulted in a
decline in Etsyʹs stock value, which is the basis for the plaintiffsʹ claim of injury.
Plaintiffsʹ ʺrevised amendedʺ complaint (the ʺComplaintʺ) alleges that Etsy
and its officers violated Section 10(b) of the Securities Exchange Act of 1934 (the
ʺExchange Actʺ), 15 U.S.C. § 78tj(b) (Count I); Etsyʹs officers violated Section 20(a) of the
Exchange Act, 15 U.S.C. § 78t(a) (Count II) and Section 15 of the Securities Act of 1933
(the ʺSecurities Actʺ), 15 U.S.C. §§ 77o (Count V); and all defendants violated Sections 11
and 12(a)(2) of the Securities Act, 15 U.S.C. §§ 77(k), 77(a)(2) (Counts III‐IV). The district
court dismissed the Complaint with prejudice for failure to state a claim. Plaintiffs
We review de novo a district courtʹs order granting a motion to dismiss.
Stratte‐McClure v. Morgan Stanley, 776 F.3d 94, 99‐100 (2d Cir. 2015). A complaint must
contain ʺenough facts to state a claim to relief that is plausible on its face.ʺ Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 570 (2007). In an Exchange Act case, we apply a heightened
pleading requirement imposed by the Private Securities Litigation Reform Act, 15
U.S.C. § 78u‐4, and Federal Rule of Civil Procedure 9(b), which requires a plaintiff to
ʺstate with particularity the circumstances constituting fraud.ʺ Fed. R. Civ. P. 9(b); see
‐ 4 ‐
also Anschutz Corp. v. Merrill Lynch & Co., 690 F.3d 98, 108 (2d Cir. 2012).2 We conclude
that plaintiffsʹ appeal is without merit and affirm substantially for the reasons set forth
by the district court in its thorough and well‐reasoned order.
To state a claim under Section 10(b) and 10b‐5, a plaintiff must allege, inter
alia, that each defendant ʺmade misstatements or omissions of material fact.ʺ Stratte‐
McClure, 776 F.3d at 100 (quoting ATSI Commcʹns Inc. v. Shaar Fund, Ltd., 493 F.3d 87,
105 (2d Cir. 2007)). If the plaintiff chooses to challenge an opinion as a
misrepresentation, she must allege that the statement was ʺboth objectively false and
disbelieved by the defendant at the time it was expressed.ʺ Fait v. Regions Fin. Corp., 655
F.3d 105, 110 (2d Cir. 2011). A statement or omission is material if ʺa reasonable
investor would have considered [it] significant in making investment decisions.ʺ
Ganino v. Citizens Utils. Co., 228 F.3d 154, 161‐62 (2d Cir. 2000) (citations omitted).
Pleading a misrepresentation requires pleading an untrue statement. Omnicare, Inc. v.
Laborers Dist. Council Constr. Indus. Pension Fund, 135 S. Ct. 1318, 1325‐26 (2015). Sincere
statements of opinion are not untrue statements. Id. Similarly, Securities Act claims
under Sections 11 and 12(a)(2) require a plaintiff to plead facts showing that the
2 The heightened pleading requirement applies to certain Securities Act claims. See Rombach v. Chang, 355 F.3d 164, 170 (2d Cir. 2004). As we agree with the district court, however, that the Complaint does not meet the ordinary pleading standards of Federal Rule of Civil Procedure 8, we need not determine whether to apply a heightened pleading standard here. See id. at 171 (noting application of heightened pleading standard).
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defendant made a material misstatement or omission. In re Morgan Stanley Info. Fund
Sec. Litig., 592 F.3d 347, 358‐59 (2d Cir. 2010).
Here, the Complaint fails to allege actionable material misstatements or
omissions. Rather, the purported misstatements consist of vague aspirational
statements, see, e.g., Compl. ¶ 123(b) (ʺWe are committed to helping Etsy sellers who
want to work with responsible, small‐batch manufacturing partners to increase their
production.ʺ) (emphasis omitted); id. ¶ 125(a) (ʺWe cancel transactions if fraud is
detected, and we strive to prohibit bad actors from using our platform.ʺ) (emphasis
omitted); or statements of opinion, see, e.g., id. ¶ 127 (ʺAt Etsy, we believe that our
strength and business success rest in the interdependence among Etsy sellers, Etsy
buyers, responsible manufacturers and our employees ‐‐ in other words, our
community.ʺ) (emphasis omitted); or statements of policy and values, see, e.g., id. ¶ 119
(ʺOur values are integral to everything we do. . . . We are a mindful, transparent and
humane business.ʺ) (emphasis omitted). While the Complaint does rely on some factual
statements, it fails to plausibly allege that they are false or misleading. See Decker v.
Massey‐Ferguson, Ltd., 681 F.2d 111, 115 (2d Cir. 1982); see also Omnicare, 135 S. Ct. at
1318 (distinguishing between statements of fact (e.g., ʺthe coffee is hotʺ) and statements
of opinion (e.g., ʺI think the coffee is hotʺ)).
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As the plaintiffs have not identified any actionable statements, the district
court correctly dismissed Count I.3 As secondary liability under Section 20(a) depends
on a primary violation of Section 10(b), the district court also correctly dismissed Count
II. See Steginsky v. Xcelera Inc., 741 F.3d 365, 371 (2d Cir. 2014). Additionally, the district
court correctly dismissed Counts III‐V as the Securities Act claims also required
allegations of material misrepresentations. 4
We have considered all of the plaintiffsʹ remaining arguments and
conclude they are without merit. Accordingly, we AFFIRM the judgment of the district
court.
FOR THE COURT: Catherine OʹHagan Wolfe, Clerk
3 As we conclude that defendants failed to plead material misrepresentations we need not consider, and express no opinion as to, the issue of scienter. 4 Plaintiffs also argue that the district court erred in effectively denying their request for leave to amend by dismissing their complaint with prejudice. When a plaintiff does ʺnot advise the district court how the complaintʹs defects would be cured,ʺ however, it is not an abuse of discretion to implicitly deny leave to amend. Porat v. Lincoln Towers Cmty. Assoc., 464 F.3d 274, 276 (2d Cir. 2006). Here, plaintiffs requested leave to amend in a cursory manner without any explanation for how they would be able to cure the complaintʹs defects. Accordingly, the district court did not abuse its discretion in denying plaintiffsʹ leave to amend.
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