     14-1906-cv
     Lucas v. Icahn

                          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.

 1            At a stated term of the United States Court of Appeals
 2       for the Second Circuit, held at the Thurgood Marshall United
 3       States Courthouse, 40 Foley Square, in the City of New York,
 4       on the 25th day of June, two thousand fifteen.
 5
 6       PRESENT: DENNIS JACOBS,
 7                GUIDO CALABRESI,
 8                GERARD E. LYNCH,
 9                              Circuit Judges.
10
11       - - - - - - - - - - - - - - - - - - - -X
12       STEPHEN LUCAS,
13                Plaintiff-Appellant,
14
15       CHARLES SILSBY, individually and on
16       behalf of all others similarly
17       situated,
18                 Plaintiff,
19
20                    -v.-                                               14-1906-cv
21
22       CARL C. ICAHN, ROBERT C. FLEXON, CLINT
23       FREELAND, KEVIN T. HOWELL, THOMAS W.
24       ELWARD, E. HUNTER HARRISON, MICHAEL J.
25       EMBLER, VINCENT J. INTRIERI, SAMUEL
26       MERKSAMER,
27                Defendants-Appellees,
28

                                                  1
 1   DYNEGY, INC.,
 2            Defendant.*
 3   - - - - - - - - - - - - - - - - - - - -X
 4
 5   FOR APPELLANT:             NICHOLAS I. PORRITT, Levi &
 6                              Korsinsky LLP, New York, New
 7                              York.
 8
 9   FOR APPELLEES:             DOUGLAS P. BAUMSTEIN (Glenn M.
10                              Kurtz and Kimberly A. Haviv, on
11                              the brief), White & Case LLP,
12                              New York, New York.
13
14        Appeal from a judgment of the United States District
15   Court for the Southern District of New York (Koeltl, J.).
16
17        UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED
18   AND DECREED that the judgment of the district court be
19   AFFIRMED.
20
21        Stephen Lucas appeals from the judgment of the United
22   States District Court for the Southern District of New York
23   (Koeltl, J.), dismissing his complaint for failure to state
24   a claim. He appeals only the dismissal of his section 10(b)
25   and Rule 10b-5 claim as to defendants Robert C. Flexon,
26   Clint Freeland, and Samuel Merksamer (the “10b-5
27   Defendants”), who served as officers or directors of Dynegy,
28   Inc. (“Dynegy”), Dynegy Holdings, Inc. (“Dynegy Holdings”),
29   or both. We assume the parties’ familiarity with the
30   underlying facts, the procedural history, and the issues
31   presented for review.
32
33        We review de novo the dismissal of a complaint for
34   failure to state a claim. Capital Mgmt. Select Fund Ltd. v.
35   Bennett, 680 F.3d 214, 219 (2d Cir. 2012). “To state a
36   claim under § 10(b) and the corresponding Rule 10b–5, a
37   plaintiff must plead that the defendant, in connection with
38   the purchase or sale of securities, made a materially false
39   statement or omitted a material fact, with scienter, and
40   that the plaintiff’s reliance on the defendant’s action
41   caused injury to the plaintiff.” Ganino v. Citizens
42   Utilities Co., 228 F.3d 154, 161 (2d Cir. 2000).

         *
            The Clerk of Court is respectfully directed to amend
     the official caption in this case to conform with the
     caption above.
                                  2
 1        As relevant here, Lucas alleges that, at the direction
 2   of the 10b-5 Defendants, Dynegy made misrepresentations to
 3   investors in a September 2, 2011 press release and a
 4   November 14, 2011 filing with the Securities and Exchange
 5   Commission.
 6
 7        In those disclosures, Dynegy stated that, as part of a
 8   restructuring effort, it was acquiring from Dynegy Holdings1
 9   certain assets with a “fair value” of approximately $1.25
10   billion and, in exchange, would provide “this value” in the
11   form of an “Undertaking” to make payments on debt owed by
12   Dynegy Holdings. Lucas does not dispute that the mechanics
13   of the Undertaking were accurately described: Dynegy was
14   required to make principal and interest payments through
15   2026 totaling approximately $1.25 billion. He argues that
16   the disclosures were nevertheless misleading because they
17   implied that the Undertaking itself had a fair market value
18   of $1.25 billion, whereas (Lucas alleges) the Undertaking
19   was worth substantially less when appropriately discounted
20   for present value and risk.
21
22        Like the district court, we think it is a close
23   question whether the disclosures were misleading at all. It
24   was not asserted that the Undertaking was worth $1.25
25   billion; the $1.25 billion figure was used to describe the
26   assets to be acquired by Dynegy (in exchange for the
27   Undertaking). Furthermore, it is implausible that any
28   reasonable investor would think that a payment stream over a
29   period of fifteen years has a present value equal to the
30   face value of total payments.
31
32        In any event, we need not decide whether the
33   disclosures were misleading because, even if they were,
34   Lucas has not adequately pleaded that the 10b-5 Defendants
35   acted with scienter. A claim under section 10(b) and Rule
36   10b-5 is adequately pleaded only if there are sufficient
37   allegations of “an intent to deceive, manipulate or
38   defraud.” Kalnit v. Eichler, 264 F.3d 131, 138 (2d Cir.
39   2001) (citation and internal quotation marks omitted).
40   “[T]o be adequate, scienter allegations must give rise to a
41   strong inference of fraudulent intent . . . either with
42   motive and opportunity allegations or with allegations
43   constituting strong circumstantial evidence of conscious


         1
              The transaction also involved other corporate
     entities related to Dynegy and Dynegy Holdings.
                                  3
 1   misbehavior or recklessness.” Id. at 138-39 (citations and
 2   internal quotation marks omitted); see also Novak v. Kasaks,
 3   216 F.3d 300, 306 (2d Cir. 2000).
 4
 5        There are no such allegations here. To the contrary,
 6   Dynegy fully and accurately disclosed the mechanics of the
 7   Undertaking, including all the information an investor would
 8   need to perform a valuation. Lucas argues that it would
 9   have been very difficult for the average investor to
10   actually perform such a valuation, even with the information
11   provided. That is beside the point: such disclosure is
12   flatly inconsistent with an intent to mislead investors as
13   to the value of the Undertaking, especially in the absence
14   of an affirmative statement as to that value.
15
16        For the foregoing reasons, and finding no merit in
17   Lucas’s other arguments, we hereby AFFIRM the judgment of
18   the district court.
19
20                              FOR THE COURT:
21                              CATHERINE O’HAGAN WOLFE, CLERK
22




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