19‐1132‐cv
Axar Master Fund, Ltd., et al v. Bryan K. Bedford, Joseph P. Allman

                                  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 23rd day of March, two thousand twenty.

PRESENT:            GERARD E. LYNCH,
                    DENNY CHIN,
                                         Circuit Judges,
                    PAUL A. ENGELMAYER,
                                         District Judge.*
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x

AXAR MASTER FUND, LTD., MAN GLG SELECT
OPPORTUNITIES MASTER LP,
                    Plaintiffs‐Appellants,

                              ‐v‐                                                  19‐1132‐cv

BRYAN K. BEDFORD, JOSEPH P. ALLMAN,
                     Defendants‐Appellees,




          *    Judge Paul A. Engelmayer, of the United States District Court for the Southern
District of New York, sitting by designation.
MARK L. PLAUMANN, ROBERT L. COLIN,
DANIEL P. GARTON, NEAL S. COHEN,
                    Defendants.

‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x

FOR PLAINTIFFS‐APPELLANTS:                                   SHARAN NIRMUL, Kessler Topaz Meltzer &
                                                             Check, LLP, Radnor, Pennsylvania.

FOR DEFENDANTS‐APPELLEES:                                    JAY B. KASNER (Scott D. Musoff, Michael M.
                                                             Powell, Austin R. Winniford, on the brief),
                                                             Skadden, Arps, Slate, Meagher & Flom LLP,
                                                             New York, New York.

                    Appeal from the United States District Court for the Southern District of

New York (Kaplan, J.).

                    ON CONSIDERATION WHEREOF, IT IS HEREBY ORDERED,

ADJUDGED, AND DECREED that the judgment and order of the district court

are AFFIRMED.

                    Plaintiffs‐appellants Axar Master Fund, Ltd., and Man GLG Select

Opportunities Master LP (ʺplaintiffsʺ) appeal from a judgment entered March 30, 2018,

dismissing their securities fraud claims, under sections 10(b) and 20(a) of the Securities

Exchange Act of 1934, 15 U.S.C. §§ 78j(b), 78t(a), and common law fraud claims against

defendants‐appellees Bryan K. Bedford and Joseph P. Allman (ʺdefendantsʺ). Plaintiffs

also appeal a post‐judgment order entered March 27, 2019, denying their motion to

amend, or alternatively set aside, the judgment pursuant to Federal Rules of Civil

Procedure 59(e) and 60(b) and for leave to file an amended complaint pursuant to

                                                                 2
Federal Rule of Civil Procedure 15(a). We assume the partiesʹ familiarity with the

underlying facts, the procedural history of the case, and the issues on appeal.

              The facts alleged in the complaint are assumed to be true. Plaintiffs are

investment funds and minority shareholders of Republic Airways Holdings Inc.

(ʺRepublicʺ), a regional airline that carries passengers for several major airlines.

Plaintiffsʹ suit arises from Republicʹs difficulties in flying the hours required under its

codeshare agreements with three major airline partners, including Delta Airlines

(ʺDeltaʺ). As a consequence of these operational struggles, Republic attempted to

modify its codeshare agreements with its partners. Delta initially objected, but

eventually agreed to reduce Republicʹs flying hours. Between May and August 2015,

Republic made a variety of statements both in its filings with the Securities Exchange

Commission (the ʺSECʺ) and on quarterly earning calls that described its ongoing

discussions with partners to reduce its flying schedules, including a disclosure in a May

2015 SEC filing that Republic had ʺagreed with our [partners] to reduce schedules . . . in

the second half of 2015.ʺ Appʹx at 28.

              In October 2015, Delta sued Republic for breach of contract based on

Republicʹs failure to maintain adequate pilot staffing levels under the codeshare

agreement. In response to the litigation, Republic made several public statements

refuting Deltaʹs allegations that it was in breach of contract and characterizing Deltaʹs

lawsuit as ʺunfoundedʺ and ʺwithout merit.ʺ Appʹx at 33, 34. Republic disclosed in an


                                              3
SEC filing that it was working with its codeshare partners ʺto reduce levels of flying

during the second half of 2015 and beyond,ʺ and also warned that there could be ʺno

assurance that these efforts to reach consensual agreements . . . [would] be successful.ʺ

Appʹx at 161.

                On February 25, 2016, Republic filed for bankruptcy protection under

Chapter 11. On March 24, 2016, Republic restructured its agreement with Delta,

modifying the compensation and operational terms between the parties, affording

Republic debtor‐in‐possession financing, providing for dismissal of Deltaʹs breach of

contract claims, and awarding Delta a $170 million unsecured claim in the bankruptcy

proceeding. In response to the public announcement of the Delta restructuring,

Republicʹs share prices increased. Plaintiffs ‐‐ through an ad hoc committee of equity

holders ‐‐ objected to Deltaʹs $170 million unsecured claim as an overpayment to resolve

the litigation that Republic had asserted was meritless. The bankruptcy court rejected

plaintiffsʹ objection and approved the settlement in its entirety. Plaintiffs appealed and

a district court affirmed the bankruptcy courtʹs order.

                Plaintiffs filed the instant suit on January 20, 2017, alleging that Republic

‐‐ through statements made by its executives and filed with the SEC ‐‐ misrepresented

both its beliefs that the Delta litigation was meritless and the status of negotiations with

Delta and other codeshare partners. Plaintiffs asserted securities and common law




                                                4
fraud claims and control person liability against defendants. Defendants moved to

dismiss the complaint for failure to plead with particularity and failure to state a claim.

              On March 29, 2018, the district court granted defendantsʹ motion to

dismiss. The district court held that the complaint failed to state a claim for securities

fraud because plaintiffs failed to allege an actionable misrepresentation and, in the

alternative, failed to plead loss causation, and that the same deficiencies required

dismissal of plaintiffsʹ common law fraud and control person liability claims. On April

27, 2018, plaintiffs filed a motion to amend, or alternatively to set aside, the judgment

pursuant to Rules 59(e) and 60(b) and for leave to file an amended complaint pursuant

to Rule 15(a). On March 26, 2019, the district court issued a memorandum opinion

denying plaintiffsʹ motion in all respects. This appeal followed.

                                   DISCUSSION

I.     Dismissal of Fraud Claims

              We review de novo a district courtʹs dismissal for failure to state a claim,

assuming all well‐pleaded factual allegations to be true. S. Cherry St., LLC v. Hennessee

Grp., 573 F.3d 98, 103‐04 (2d Cir. 2009). To state a claim under Section 10(b) and Rule

10b‐5, a plaintiff ʺmust prove (1) a material misrepresentation or omission by the

defendant; (2) scienter; (3) a connection between the misrepresentation or omission and

the purchase or sale of a security; (4) reliance upon the misrepresentation or omission;

(5) economic loss; and (6) loss causation.ʺ Pac Inv. Mgmt. Co. v. Mayer Brown LLP,


                                              5
603 F.3d 144, 151 (2d Cir. 2010) (quoting Stoneridge Inv. Partners v. Scientific‐Atlanta, Inc.,

552 U.S. 148, 157 (2008)).

              Even assuming without deciding that plaintiffs plausibly alleged an

actionable misrepresentation, we affirm the district courtʹs dismissal of plaintiffsʹ

complaint on the ground that plaintiffs failed to plausibly allege loss causation. ʺLoss

causation is the causal link between the alleged misconduct and the economic harm

ultimately suffered by the plaintiff.ʺ Lentell v. Merrill Lynch & Co., 396 F.3d 161, 172 (2d

Cir. 2005) (internal quotation marks omitted). A plaintiff can establish loss causation by

showing that ʺthe loss was foreseeable and caused by the materialization of the risk

concealed by the fraudulent statement.ʺ ATSI Commc’ns, Inc. v. Shaar Fund, Ltd.,

493 F.3d 87, 107 (2d Cir. 2007). To plead loss causation, plaintiffs must allege ʺthat the

subject of the fraudulent statement or omission was the cause of the actual loss

suffered.ʺ Suez Equity Invʹrs, L.P. v. Toronto‐Dominion Bank, 250 F.3d 87, 95 (2d Cir.

2001). In other words, plaintiffs must allege ʺthat the misstatement or omission

concealed something from the market that, when disclosed, negatively affected the

value of the security.ʺ Lentell, 396 F.3d at 173.

              Plaintiffs failed to sufficiently allege loss causation because they alleged

no plausible connection between the alleged misrepresentations and their claimed

investment loss. Plaintiffs asserted that defendantsʹ purported misstatements concealed

a risk that Republicʹs equity would be diluted by claims granted to Delta and other


                                               6
partners during bankruptcy reorganization, and that this alleged risk materialized

when Republic entered into those restructuring agreements. Plaintiffs vaguely asserted

that because the settlement agreements granted unsecured claims to Republicʹs

codeshare partners exceeding Republicʹs equity value at the beginning of the

bankruptcy proceedings, this resulted in ʺdirect and proximateʺ losses.1 In other words,

plaintiffs argued that the sum of the settlement agreements would ʺdilute [the] equity

recovery on a dollar‐for‐dollar basisʺ of ʺplaintiffsʹ existing investments in Republic.ʺ

Appʹx at 53. This dilution theory was fundamentally flawed, however, because

plaintiffs failed to allege how Republicʹs reorganization plan caused them any economic

injury that is not wholly speculative. As the district court observed, ʺ[p]laintiffs fail[ed]

to allege that they will receive even one cent less than they would have received had

Republic not entered into the settlements.ʺ S. Appʹx at 29. We find persuasive the

district courtʹs conclusion in the separate bankruptcy proceeding that the restructuring

settlement would impact plaintiffs only if ʺin the absence of the additional $170 million

allowed unsecured claim, [Republicʹs] valuation indicates that there is hope for some



1       Specifically, plaintiffs alleged that ʺRepublicʹs purported equity value of $590 million as
of January 31, 2016 would be substantially offset by at least $975 million to potentially over $1
billion dollars in claims in the Bankruptcy Case.ʺ Appʹx at 52‐53. Plaintiffs pointed to three
settlement agreements: (1) the March 24, 2016 settlement with Delta, granting Delta an
unsecured claim of $170 million; (2) the May 27, 2016 settlement with United Airlines, granting
United a $193 million general unsecured claim; and (3) the September 2, 2016 settlement with
American Airlines, granting American a $250 million general unsecured claim. According to
plaintiffs, the ʺ$613 million of previously undisclosed liabilitiesʺ diluted the value of plaintiffsʹ
investments in Republic, thus resulting in ʺsubstantial losses.ʺ Appʹx at 53.
                                                  7
recovery by the equity holders. But [plaintiffs] cannot make such a showing and have

not even tried. . . . [Plaintiffs] have no idea whether [Republic] is already sufficiently

under water that even in the absence of this settlement they would never stand to

recover a penny.ʺ In re: Republic Airways Holdings Inc., No. 16‐cv‐3315 (KBF), 2016 WL

2621990, at *2 (S.D.N.Y. May 6, 2016). Accordingly, after analyzing plaintiffsʹ dilution

theory, the district court correctly dismissed the complaint on the alternative ground

that plaintiffs failed to plausibly allege loss causation.2

II.    Denial of Leave to Amend, or Alternatively to Set Aside, the Judgment and of
       Leave to Amend the Complaint

               Next, plaintiffs argue that the district court erred in denying its motion to

amend, or alternatively set aside, the judgment pursuant to Rules 59(e) and 60(b) and

for leave to file an amended complaint pursuant to Rule 15(a). ʺA party seeking to file

an amended complaint postjudgment must first have the judgment vacated or set aside

pursuant to Fed. R. Civ. P. 59(e) or 60(b).ʺ Ruotolo v. City of New York, 514 F.3d 184, 191

(2d Cir. 2008). Leave to amend shall be ʺfreely give[n] . . . when justice so requires.ʺ

Fed. R. Civ. P. 15(a)(2). Leave to amend need not be granted, however, where the

proposed amendments would be futile in that they could not cure the complaintʹs



2
         Because the elements of claims for federal securities fraud and New York common law
fraud are nearly identical, we also affirm the district courtʹs dismissal of plaintiffsʹ common law
fraud claims after concluding that plaintiffs failed to state a claim for federal securities fraud.
See, e.g., Newman v. Family Mgmt. Corp., 530 F. Appʹx 21, 24 (2d Cir. 2013) (summary order).
Plaintiffs have waived their control person liability claim under Section 20(a) of the Securities
Exchange Act by failing to challenge the district courtʹs dismissal of that claim on appeal.
                                                 8
deficiencies. Krys v. Pigott, 749 F.3d 117, 134 (2d Cir. 2014). Where the district courtʹs

denial of leave to amend ʺis based on a legal interpretation, such as futility,ʺ we review

the district courtʹs ruling de novo. Balintulo v. Ford Motor Co., 796 F.3d 160, 164 (2d Cir.

2015). We review the district courtʹs denial of plaintiffsʹ motion to alter or vacate the

judgment under Rules 59(e) or Rule 60(b) for abuse of discretion. Schwartz v. Liberty

Mut. Ins. Co., 539 F.3d 135, 150 (2d Cir. 2008) (Rule 59(e)); ISC Holding AG v. Nobel

Biocare Fin. AG, 688 F.3d 98, 109 (2d Cir. 2012) (Rule 60(b)). It is a well‐established rule,

however, ʺthat an appellate court will not consider an issue raised for the first time on

appeal.ʺ In re Nortel Networks Corp. Sec. Litig., 539 F.3d 129, 132 (2d Cir. 2008) (internal

quotation marks omitted); see also Wal–Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96,

124 n.29 (2d Cir. 2005) (ʺThe law in this Circuit is clear that where a party has shifted his

position on appeal and advances arguments available but not pressed below, . . . waiver

will bar raising the issue on appeal.ʺ).

              In this case, plaintiffs waived any argument that an amended complaint

would satisfy loss causation when, in opposing the motion to dismiss, they failed to

argue (and indeed explicitly disclaimed) the artificial inflation theory they now attempt

to replead. As the district court noted, ʺplaintiffs clearly and unequivocally disclaimed

this [artificial inflation] theory of loss causation in numerous other instances prior to the

entry of judgment.ʺ S. Appʹx at 38‐39 n.13. Specifically, plaintiffs represented below

that they ʺare not seeking to recover their out‐of‐pocket losses attributable to the


                                               9
artificial inflation of the Companyʹs shares at the time of their purchases,ʺ District Ct.

Docket No. 31 at 34, and that they ʺdo not allege ʹartificial inflationʹ or seek application

of the ʹfraud on the marketʹ doctrine,ʺ id. at 32. Moreover, during oral argument,

plaintiffs represented to the district court that ʺ[w]e are not alleging that our loss results

from inflation of the share price at the time we purchased.ʺ Appʹx at 214.

               Accordingly, the district court did not abuse its discretion in rejecting

plaintiffsʹ motion for the separate reason that they failed to satisfy the stringent

standards for granting reconsideration under Rule 59 or vacatur under Rule 60(b).3 See

Exxon Shipping Co. v. Baker, 554 U.S. 471, 485 n.5 (2008) (A Rule 59(e) motion ʺmay not be

used to relitigate old matters, or to raise arguments or present evidence that could have

been raised prior to the entry of judgment.ʺ); Kotlicky v. U.S. Fid. & Guar. Co., 817 F.2d 6,

9 (2d Cir. 1987) (in applying for relief under Rule 60(b), the movant must present



3       Because we conclude that the district court did not abuse its discretion in rejecting
plaintiffsʹ motion to alter or vacate the judgment under Rules 59(e) or Rule 60(b), we need not
reach the merits of plaintiffsʹ repackaged theory of loss causation based on the artificial inflation
of Republicʹs stock.
        Finally, we affirm the district courtʹs denial of plaintiffsʹ motion to amend the complaint
pursuant to Rule 15(a) because there is no valid basis to vacate the previously entered
judgment. Natʹl Petrochemical Co. of Iran v. M/T Stolt Sheaf, 930 F.2d 240, 245 (2d Cir. 1991)
(ʺUnless there is a valid basis to vacate the previously entered judgment, it would be
contradictory to entertain a motion to amend the complaint.ʺ). As discussed above, plaintiffs
had the opportunity to amend their pleadings to incorporate the artificial inflation theory before
the entry of judgment and chose not to do so. Therefore, the district court did not err in
denying plaintiffsʹ motion to amend. See State Trading Corp. of India v. Assuranceforeningen Skuld,
921 F.2d 409, 418 (2d Cir. 1990) (ʺWhen the moving party has had an opportunity to assert the
amendment earlier, but has waited until after judgment before requesting leave, a court may
exercise its discretion more exactingly.ʺ).
                                                 10
ʺhighly convincingʺ evidence, ʺshow good cause for the failure to act sooner,ʺ and show

that ʺno undue hardship [would] be imposed on other partiesʺ).

                                       *   *    *

             Accordingly, we AFFIRM the judgment and order of the district court.

                                        FOR THE COURT:
                                        Catherine OʹHagan Wolfe, Clerk




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