Martin v. PNC Financial Services Group, Inc.

Full title: BARBARA K. MARTIN v. PNC FINANCIAL SERVICES GROUP, INC

Court: United States District Court, E.D. Pennsylvania

Date published: Jul 25, 2003

CIVIL ACTION NO. 02-CV-7191 (E.D. Pa. Jul. 25, 2003)

Opinion

CIVIL ACTION NO. 02-CV-7191

July 25, 2003

MEMORANDUM AND ORDER

BRUCE KAUFFMAN, District Judge

Plaintiff Barbara K. Martin brings this action against Defendant PNC Financial Services Group, Inc. alleging violations of anti-fraud provisions of the federal securities laws in connection with PNC's financial reporting obligations.¹ Now before the Court is Defendant's Motion to Dismiss the Complaint. For the following reasons, the Court will grant the Motion and dismiss the Complaint without prejudice.

1 Although the Complaint contains no counts and does not clearly allege any particular cause of action, it alleges that Defendant "violated the financial reporting, record keeping, and anti-fraud provisions of the federal securities laws." (Complaint ¶ 6.)

I. Background

Taking all well-pleaded allegations as true, the relevant facts are as follows. From 1999 through 2002, Defendant engaged in a series of misrepresentations designed to inflate its paper profits. (Complaint ¶ 4.) Among other things, Defendant exaggerated its profits by more than 50 percent, hid $726 million in troubled or risky loans and venture-capital investments, and filed a series of false financial reports. (Complaint ¶ 12.) Plaintiff relied to her detriment upon Defendant's materially false and misleading disclosures of financial information when she purchased Defendant's common stock for an artificially high price. (Complaint ¶¶ 6-7.) Once Defendant's misrepresentations became public, the price of Defendant's common stock dropped and Plaintiff lost almost half of her investment. (Complaint ¶ 8, 14.)

II. Analysis

To state a claim of securities fraud under Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), 78t(a), and Rule 10-b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5, a plaintiff must establish: (1) that the defendant made a materially false or misleading statement or omitted a material fact necessary to make a statement not misleading; (2) that the defendant acted with scienter; and (3) that the plaintiff's reliance on the defendant's misstatement or omission caused the injury. In re Burlington Coat Factory Sec. Litig. , 114 F.3d 1410, 1417 (3d Cir. 1997). Furthermore, because Section 10(b) and Rule 10b-5 claims sound in fraud, a plaintiff must also satisfy the heightened pleading standard of Rule 9(b) of the Federal Rules of Civil Procedure. Id. at 1417-18. Rule 9(b) provides that "[i]n all averments of fraud or mistake the circumstances constituting fraud or mistake shall be stated with particularity." Fed.R.Civ.P. 9(b). The Third Circuit has described this standard as requiring Plaintiff's to plead "the who, what, when, where, and how: the first paragraph of any newspaper story." In re Advanta Corp. Sec. Litig. , 180 F.3d 525, 534 (3d Cir. 1999) (internal citations omitted).

The Private Securities Litigation Reform Act of 1995 ("PSLRA"), 15 U.S.C. § 78u-4, imposes additional pleading requirements for the elements of a securities fraud claim.² Advanta , 180 F.3d at 534-35. Under the PSLRA, a complaint must "specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement . . . is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed." 15 U.S.C. § 78u-4(b)(1). With respect to each act alleged to be the basis of the violation, the complaint also must "state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind." 15 U.S.C. § 78u-4(b)(2). If a complaint fails to comply with the specific pleading requirements of the PSLRA, dismissal of the complaint is statutorily mandated. 15 U.S.C. § 78u-4(b)(3)(A).

2 The PSLRA both supplements and supersedes Rule 9(b) by imposing additional, heightened-pleading requirements on claims alleging securities fraud. See Advanta, 180 F.3d at 530.

Plaintiffs Complaint lacks the particularity required by 9(b) and the PSLRA. It fails to identify a single allegedly false or misleading statement. Rather, it merely alleges generally that "Defendant made materiall[y] false and misleading disclosures of financial information . . ." (Complaint ¶ 6.) Furthermore, it does not meet the PSLRA's heightened standard for pleading scienter, as the general allegations provided do not give rise to a strong inference that Defendant acted with the required state of mind. Accordingly, because such general allegations fall short of the heightened-pleading requirements of 9(b) and the PSLRA, the Complaint must be dismissed. 15 U.S.C. § 78u-4(b)(3)(A).

III. Conclusion

For the foregoing reasons, the Court will grant Defendant's Motion to Dismiss and will dismiss the Complaint without prejudice to the filing within twenty days of an Amended Complaint that satisfies the pleading requirements of 9(b) and the PSLRA. An appropriate Order follows.

ORDER

AND NOW, this ___ day of July, 2003, upon consideration of Defendant's Motion to Dismiss (docket no. 3), Plaintiffs Response (docket no. 7), and Defendant's Reply (docket no. 8), IT IS ORDERED that the Motion is GRANTED for the reasons stated in the accompanying Memorandum. Accordingly, Plaintiffs Complaint is DISMISSED WITHOUT PREJUDICE. Plaintiff is granted leave to amend the Complaint within twenty (20) days of her receipt of this Order. It is FURTHER ORDERED that Defendant's Motion to Strike Plaintiffs Untimely Answer to the Motion to Dismiss (docket no. 8) is DENIED as moot.³