Judge Cote Reconsiders Securities Ruling Judge Holwell Issued Before He Left the Bench

In an opinion released yesterday in a securities case arising from a GE stock offering, Judge Cote granted defendants’ motion for reconsideration of the court’s partial denial of their motion to dismiss. Judge Cote agreed with the defendants that the misstatements underlying plaintiff’s Securities Act claims were either inactionable opinion, or immaterial as a matter of law. The ruling dismisses all Securities Act claims, and disposes of all claims against forty-two (of fifty-three) defendants in the case. Judge Cote was not reversing herself, however. The January 12, 2012 order she had been asked to reconsider was authored by Judge Holwell, who stepped down from the bench in February of this year. The primary basis for Judge Cote’s decision was controlling Second Circuit authority that the January 12 order had overlooked:

Although the Court of Appeals had issued Fait v. Regions Financial Corporation, 655 F.3d 105, 110 (2d Cir. 2011), on August 23, 2011, the January Opinion did not address the impact of the Fait decision on its analysis.

The Fait decision – which holds that a statement of opinion is not actionable under the strict liability provisions of the Securities Act unless the speaker disbelieved it at the time he expressed it – came down after the parties briefed and argued the motion to dismiss, but before Judge Holwell issued his ruling..  According to defendants’ moving papers, they alerted Judge Holwell to the Fait decision in an August 26, 2011 letter.