13-4039-cv
Boca Raton Firefighters and Police Pension Fund v. Bahash

                                      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 8th
day of September, two thousand fourteen.

PRESENT:    JOSÉ A. CABRANES,
            CHESTER J. STRAUB,
            DEBRA ANN LIVINGSTON,
                          Circuit Judges.
_____________________________________

CLAUDE A. REESE, INDIVIDUALLY
AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,

                    Plaintiff,

BOCA RATON FIREFIGHTERS AND POLICE PENSION FUND,

                    Plaintiff-Appellant,

                                 v.                                      No. 13-4039-cv

ROBERT J. BAHASH, THE MCGRAW-HILL COMPANIES, INC.,
HAROLD MCGRAW, III,

            Defendants-Appellees.
_____________________________________

FOR PLAINTIFF-APPELLANT:                                    SUSAN K. ALEXANDER (Andrew S. Love,
                                                            Robbins Geller Rudman & Dowd LLP, San
                                                            Francisco, CA; Samuel H. Rudman, Mark T.
                                                            Millkey, Erin W. Boardman, Robbins Geller
                                                            Rudman & Dowd LLP, Melville, NY; David J.
                                                                   George, Robert J. Robbins, Robbins Geller
                                                                   Rudman & Dowd LLP, Boca Raton, FL;
                                                                   Robert Sugarman, Sugarman & Susskind,
                                                                   Coral Gables, FL, on the brief), Robbins Geller
                                                                   Rudman & Dowd LLP, San Francisco, CA.

FOR DEFENDANTS-APPELLEES:                                          SUSAN BUCKLEY (Floyd Abrams, Tammy L.
                                                                   Roy, Jason M. Hall, on the brief), Cahill Gordon
                                                                   & Reindel LLP, New York, NY.

       Appeal from an order of the United States District Court for the Southern District of New
York (Sidney H. Stein, Judge).

     UPON DUE CONSIDERATION WHEREOF, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the order of the District Court is AFFIRMED.

         Plaintiff Boca Raton Firefighters and Police Pension Fund, on behalf of itself and a putative
class of former shareholders of The McGraw-Hill Companies, Inc. (“McGraw-Hill”), appeals from
the District Court’s September 24, 2013 order denying plaintiff’s motion for relief from judgment
pursuant to Federal Rule of Civil Procedure 60(b)(2) and plaintiff’s motion for leave to amend its
complaint pursuant to Federal Rules of Civil Procedure 15(a) and (d). We assume the parties’
familiarity with the underlying facts, the procedural history of the case, and the issues on appeal.

                                                  BACKGROUND

         Plaintiff brought this putative securities fraud class action nearly seven years ago against The
McGraw-Hill Companies, Inc. and two of its executive officers alleging violations of the Securities
and Exchange Act of 1934. Plaintiff alleges that the company’s financial services division, Standard
& Poor’s (“S&P”), made material misstatements touting the integrity, independence, and surveillance
of its ratings of residential mortgage-backed securities (“RMBS”) and collateralized debt obligations
(“CDOs”) when, according to plaintiff, ratings criteria were in fact driven by defendants’ desire to
preserve market share, please clients, and increase profits. After nearly five years of litigation and
affording plaintiff multiple opportunities to amend its complaint, the District Court dismissed
plaintiff’s second amended complaint for failure to state a claim pursuant to Federal Rule of Civil
Procedure 12(b)(6). Reese v. McGraw-Hill Cos., No. 08 Civ. 7202, 2012 WL 9119573 (S.D.N.Y. Mar.
30, 2012). We affirmed. See Boca Raton Firefighters & Police Pension Fund v. Bahash, 506 F. App’x 32 (2d
Cir. 2012).

        Several months after this Court affirmed the District Court’s dismissal, plaintiff filed a
motion for relief from judgment and a motion for leave to amend its complaint. Plaintiff cited
supposedly “newly discovered evidence”—in the form of a complaint filed by the U.S. Department
of Justice against McGraw-Hill and S&P in the U.S. District Court for the Central District of
California, and a previously sealed deposition transcript of S&P’s former head of RMBS ratings
from another case—which plaintiff contends cures the defects in its second amended complaint.1
After thoroughly reviewing plaintiff’s lengthy submissions, the District Court denied the motions,
finding that the new evidence “would not have changed [the District] Court’s previous ruling and is
1        We previously denied plaintiff’s motion to take judicial notice of the deposition transcript during plaintiff’s
prior appeal. Boca Raton, 506 F. App’x at 36 n.4.


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cumulative of plaintiffs’ previous allegations in its nature and purpose, if not in all its details.” Reese v.
McGraw-Hill Cos., 293 F.R.D. 617, 623 (S.D.N.Y. 2013).2 This appeal followed.

                                                    DISCUSSION

        We review a district court’s denial of relief from judgment for abuse of discretion. Devlin v.
Transp. Commc’ns Int’l Union, 175 F.3d 121, 132 (2d Cir. 1999). Rule 60(b)(2) provides that a court
“may relieve a party or its legal representative from a final judgment, order, or proceeding for . . .
newly discovered evidence that, with reasonable diligence, could not have been discovered” within
twenty-eight days after the entry of judgment. Fed. R. Civ. P. 60(b)(2). “A motion for relief from
judgment is generally not favored and is properly granted only upon a showing of exceptional
circumstances.” United States v. Int’l Bhd. of Teamsters, 247 F.3d 370, 391 (2d Cir. 2001). The party
seeking relief from judgment bears the burden of meeting the following “onerous” standard:

                   (1) the newly discovered evidence was of facts that existed at the time
                   of trial or other dispositive proceeding, (2) the movant must have
                   been justifiably ignorant of them despite due diligence, (3) the
                   evidence must be admissible and of such importance that it probably
                   would have changed the outcome, and (4) the evidence must not be
                   merely cumulative or impeaching.

Id. at 392. “Properly applied, Rule 60(b) strikes a balance between serving the ends of justice and
preserving the finality of judgments.” Nemaizer v. Baker, 793 F.2d 58, 61 (2d Cir. 1986). A court
abuses it discretion only when “(1) its decision rests on an error of law or a clearly erroneous factual
finding; or (2) cannot be found within the range of permissible decisions.” Johnson v. Univ. of Rochester
Med. Ctr., 642 F.3d 121, 125 (2d Cir. 2011) (per curiam).

        After review of the record and relevant case law, we conclude that the District Court was
well within its discretion in denying plaintiff’s motion for relief from judgment and motion for leave
to amend for the reasons stated in its September 24, 2013 order. As the District Court found, the
new evidence does not alter the District Court’s and this Court’s previous conclusion that
defendants’ statements regarding the “independence” and “integrity” of their ratings constitute
“mere commercial puffery.” Boca Raton, 506 F. App’x at 34, 37 (citing City of Omaha, Neb. Civilian
Emps.’ Ret. Sys. v. CBS Corp., 679 F.3d 64, 67 (2d Cir. 2012)). Alleged new evidence showing that, for
example, S&P slowed the roll out of a new ratings model that might negatively affect CDO ratings,
S&P analysts discussed that CDO issuers were upset by subprime RMBS ratings downgrades, or
S&P may have been concerned about market share and profits, does not alter the “generic,
indefinite nature” of the statements at issue or demonstrate why they are false. Id. at 37. As the
District Court correctly observed, these statements are too general to cause a reasonable investor to
rely upon them as a guarantee that ratings would not be made without regard to profits, market




2         Plaintiff also filed a motion to file a supplemental brief with additional, recently discovered evidence, which the
District Court also denied in its September 24, 2013 order. Plaintiff does not appeal the denial of that motion.
Appellant’s Br. 6 n.4.



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share, or client feedback. See ECA, Local 134 IBEW Joint Pension Trust of Chicago v. JP Morgan Chase
Co., 553 F.3d 187, 206 (2d Cir. 2009).3

         The District Court also did not abuse its discretion in deciding that the new evidence fails to
demonstrate with particularity why defendants’ statements regarding their surveillance practices were
false. See Fed. R. Civ. P. 9(b) (requiring fraud claims to be “state[d] with particularity”). Alleged new
evidence showing that, for example, RMBS downgrades did not result in immediate downgrades of
CDOs collateralized by those securities, or S&P analysts sometimes based their CDO ratings on
older default rate assumptions, does not demonstrate with particularity why defendants’ statements
that ratings were “reviewed regularly,” or that the surveillance process was “fully integrated,” were
false. Put simply, the alleged misstatements do not state precisely how or when S&Ps ratings would
be updated, and the new evidence does not show with particularity how S&P’s surveillance process
was inconsistent with those statements.

        Because the District Court’s denial of plaintiff’s motion for relief from judgment was well
within its discretion, its denial of plaintiff’s motion for leave to amend was likewise not an abuse of
discretion.

                                                  CONCLUSION

       We have considered all of plaintiff’s remaining arguments and find them to be without merit.
Accordingly, we AFFIRM the September 24, 2013 order of the District Court.


                                                         FOR THE COURT:
                                                         Catherine O’Hagan Wolfe, Clerk




STRAUB, Circuit Judge, dissenting:

        I respectfully dissent because I believe the new evidence to be sufficient to assert that the
statements previously found to be but puffery were not believed when made and may provide the
basis for actionable material misrepresentations with the requisite scienter. Therefore, I would remand
for such further consideration.




3         Plaintiff also argues that the District Court committed legal error by considering the “nature of the statements
themselves” without regard to the context of the new evidence. Appellant’s Br. 30–31; see Matrixx Initiatives, Inc. v.
Siracusano, 131 S. Ct. 1309, 1321 (2011) (stating that materiality is “a fact-specific inquiry” requiring consideration of
“source, content, and context”). The District Court, however, plainly analyzed the alleged misstatements in light of the
new evidence and found that “plaintiffs have not show[n] why these statements are misleading as a result of their new
evidence.” Reese, 293 F.R.D. at 624.


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