     13-1980-cv
     In re: Merrill Lynch & Co., Inc.

                          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 24th day of June, two thousand fourteen.
 5
 6       PRESENT: DENNIS JACOBS,
 7                PIERRE N. LEVAL,
 8                ROSEMARY S. POOLER,
 9                              Circuit Judges.
10
11       - - - - - - - - - - - - - - - - - - - -X
12       LOUISIANA PACIFIC CORPORATION,
13                Plaintiff-Appellant,
14
15                    -v.-                                               13-1980-cv
16
17       MERRILL LYNCH & CO., INC., and MERRILL
18       LYNCH, PIERCE, FENNER & SMITH,
19       INCORPORATED,
20                Defendants-Appellees.1
21       - - - - - - - - - - - - - - - - - - - -X
22




                1
                  The Clerk of Court is directed to amend the case
         caption as above.
                                                  1
 1   FOR APPELLANT:             SHAWN RAITER (with Paul A. Sand
 2                              on the brief), Larson King, LLP,
 3                              St. Paul, Minnesota.
 4
 5                              Mark A. Fuchs, Vice President,
 6                              General Counsel and Corporate
 7                              Secretary, Louisiana Pacific
 8                              Corporation, Nashville,
 9                              Tennessee, on the brief.
10
11   FOR APPELLEES:             ANDREW STERN (with Alex J.
12                              Kaplan and Tom A. Paskowitz on
13                              the brief), Sidley Austin LLP,
14                              New York, New York.
15
16        Appeal from a judgment of the United States District
17   Court for the Southern District of New York (Preska, C.J.).
18
19        UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED
20   AND DECREED that the judgment of the district court be
21   AFFIRMED.
22
23        Plaintiff-appellant Louisiana Pacific Corporation
24   (“Louisiana Pacific”) appeals from a final judgment, entered
25   on April 17, 2013, dismissing with prejudice all of
26   Louisiana Pacific’s claims against Merrill Lynch & Co., Inc.
27   (“Merrill”), and Merrill Lynch, Pierce, Fenner & Smith
28   Incorporated (“MLPFS”) (collectively, “Defendants”). See
29   La. Pac. Corp. v. Money Mkt. 1 Institutional Inv. Dealer,
30   851 F. Supp. 2d 512 (S.D.N.Y. 2012).2 We assume the
31   parties’ familiarity with the underlying facts, the
32   procedural history of the case, and the issues on appeal.
33
34        Between February 2007 and July 2007, Louisiana Pacific
35   purchased more than $50 million in auction rate securities
36   (“ARS”) at auctions managed by Defendants. When Defendants


         2
              Louisiana Pacific also brought suit against
     Deutsche Bank Securities, Inc. (“Deutsche Bank”) and Money
     Market 1 Institutional Investment Dealer (“MM1”). These
     matters were transferred to the Southern District of New
     York for coordinated pretrial proceedings by the Judicial
     Panel on Multidistrict Litigation, after which Louisiana
     Pacific’s claims against Deutsche Bank were severed and
     remanded to the Northern District of California. Louisiana
     Pacific obtained a default judgment against MM1.
                                  2
 1   withdrew their support from the ARS market on February 13,
 2   2008, Louisiana Pacific was left holding illiquid long-term
 3   financial instruments. See generally Wilson v. Merrill
 4   Lynch & Co., 671 F.3d 120, 123-28 (2d Cir. 2011).
 5
 6        On these basic facts, Louisiana Pacific asserts claims
 7   against MLPFS for market manipulation and material
 8   misstatements or omissions under section 10(b) of the
 9   Exchange Act and Rule 10b-5 promulgated thereunder. See 15
10   U.S.C. § 78j(b); 17 C.F.R. § 240.10b-5. It also asserts a
11   control-person liability claim against Merrill Lynch & Co.
12   under section 20(a) of the Exchange Act. See 15 U.S.C.
13   § 78t(a). Finally, it asserts claims against Defendants
14   under California law and common law.
15
16        We review de novo the district court’s dismissal of
17   these claims, accepting all non-conclusory factual
18   allegations as true and drawing all reasonable inferences in
19   the Louisiana Pacific’s favor. Generally, a complaint must
20   plead sufficient facts to “raise a right to relief above the
21   speculative level” and to “state a claim to relief that is
22   plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S.
23   544, 555, 570 (2007). Louisiana Pacific’s securities fraud
24   claims must be pleaded “with particularity” and, to the
25   extent an allegation is made on information and belief, “all
26   facts on which that belief is formed” must also be pleaded
27   with particularity. 15 U.S.C. § 78u-4(b)(1) (2012); see
28   also ATSI Communs., Inc. v. Shaar Fund, Ltd., 493 F.3d 87,
29   101 (2d Cir. 2007) (“Because a claim for market manipulation
30   is a claim for fraud, it must be pled with particularity
31   under [Federal Rule of Civil Procedure] 9(b).”).
32
33   A.   Federal Securities Fraud Claims
34
35        To state a misrepresentation claim under section 10(b)
36   and Rule 10b-5, the complaint must “allege that the
37   defendant[s] (1) made misstatements or omissions of material
38   fact, (2) with scienter, (3) in connection with the purchase
39   or sale of securities, (4) upon which the plaintiff relied,
40   and (5) that the plaintiff’s reliance was the proximate
41   cause of its injury.” Stoneridge Inv. Partners, LLC v.
42   Scientific-Atlanta, 552 U.S. 148, 157 (2008). To state a
43   market manipulation claim, the complaint must “allege (1)
44   manipulative acts; (2) damage (3) caused by reliance on an
45   assumption of an efficient market free of manipulation; (4)
46   scienter; (5) in connection with the purchase or sale of
47   securities; (6) furthered by the defendant’s use of the

                                  3
 1   mails or any facility of a national securities exchange.”
 2   ATSI, 493 F.3d at 101.
 3
 4        Having conducted an independent and de novo review of
 5   the record in light of these principles, we affirm the
 6   dismissal of these claims. See La. Pac. Corp., 851 F. Supp.
 7   2d at 525-28 (S.D.N.Y. 2012).
 8
 9        Louisiana Pacific’s misstatement and manipulation
10   claims boil down to two basic points: (1) MLPFS’s support
11   bidding affected the clearing rate of the auctions and (2)
12   MLPFS’s ARS market activities created a false appearance of
13   liquidity and thereby artificially inflated prices paid for
14   ARS. We have thrice rejected this theory of liability on
15   the grounds that investors were sufficiently on notice of
16   the liquidity risks inherent in ARS (and the market was
17   therefore not misled) because the SEC cease-and-desist order
18   dated May 31, 2006 and Defendants’ online disclosure of its
19   ARS practices and procedures sufficiently disclosed that
20   auction managers could--and did--intervene in, and set
21   clearing rates for, their own auctions. See Cellular South
22   Inc. v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 516 F.
23   App’x 30, 32 (2d Cir. 2013) (summary order), Anschutz Corp.
24   v. Merrill Lynch & Co., 690 F.3d 98, 108-09 (2d Cir. 2012);
25   Wilson, 671 F.3d at 131-32.
26
27        Like the plaintiffs in Anschutz, Louisiana Pacific has
28   attempted has attempted to save its claims by leveraging a
29   passage in Wilson leaving open the possibility that a
30   “hypothetical complaint” might state a claim by alleging
31   that, “as of the time of [plaintiff’s] purchase, Merrill
32   [and/or MPFLS] presently intended to place bids in every
33   single auction, knew that each auction would fail if it did
34   not place these bids, and signaled to its ARS investors that
35   these securities were genuinely liquid.”3 Wilson, 671 F.3d

         3
              Plaintiffs may be placing more weight on that
     passage than it can bear. As explained in Wilson, “[e]ven
     if we were to construe the complaint as attempting to plead
     that Merrill, at least for a time, placed support bids in
     every single auction for Merrill ARS, we do not see how that
     allegation can be actionable given Merrill’s disclosure that
     it ‘may routinely’ place such bids.” 671 F.3d at 133; see
     also Anschutz, 690 F.3d at 110 (explaining that after the
     website disclosure, investors who had purchased “had the
     option to buy, sell, or hold the ARS at issue. By that
     time, [such investors] w[ere] fully informed of Merrill
                                  4
 1   at 139. Louisiana Pacific’s allegations, however, are
 2   materially indistinguishable from those in Anschutz and
 3   Wilson. “In short, the [complaint] fails to state a claim
 4   for violation of the federal securities laws, not because it
 5   lacks magic words prescribed by Wilson, but because, like
 6   the complaint[s] we rejected in [Wilson and Anschutz],”
 7   Louisiana Pacific’s “generalized and conclusory allegations
 8   are not ‘well-pleaded.’” Anschutz, 690 F.3d at 110 (citing
 9   Wilson, 671 F.3d at 139); see also Appellees’ Br. 30-38
10   (comparing the material allegations of Louisiana Pacific’s
11   complaint with those filed by the Wilson and Anschutz
12   plaintiffs).4
13
14   B.   State Law & Common Law Claims
15
16        After a de novo review of the record, we conclude that
17   Louisiana Pacific’s state law and common law claims were
18   properly denied for substantially the same reasons stated by
19   the district court. See La. Pac. Corp., 851 F. Supp. 2d at
20   530-31.
21
22        For the foregoing reasons, and finding no merit in
23   Louisiana Pacific’s other arguments, we hereby AFFIRM the
24   judgment of the district court.
25
26                               FOR THE COURT:
27                               CATHERINE O’HAGAN WOLFE, CLERK
28




     Lynch’s ARS practices, and [those that still decided to hold
     [have no actionable claim for fraud].”). How Rule 10b-5
     claims against these Defendants could survive such holdings
     is unclear. Cf. Gurary v. Winehouse, 190 F.3d 37, 45 (2d
     Cir. 1999) (“The gravamen of manipulation is deception of
     investors into believing that prices at which they purchase
     and sell securities are determined by the natural interplay
     of supply and demand, not rigged by manipulators.”).
          4
              Having concluded that Louisiana Pacific failed to
     state a claim for any primary violation of the securities
     laws, we affirm the district court’s dismissal of its
     Section 20(a) claim alleging that Merrill Lynch & Co. is
     liable as a controlling person. See SEC v. First Jersey
     Sec., Inc., 101 F.3d 1450, 1472 (2d Cir. 1996).
                                  5
