17‐4142‐cv Pipefitters Union Local 537 Pension Fund v. American Express Co.

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 8th day of May, two thousand nineteen.

PRESENT: AMALYA L. KEARSE, RICHARD C. WESLEY, DENNY CHIN, Circuit Judges.

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PIPEFITTERS UNION LOCAL 537 PENSION FUND, Plaintiff‐Appellant,

PLUMBERS & STEAMFITTERS LOCAL 137 PENSION FUND, individually and on behalf of all others similarly situated, Plaintiff,

v. 17‐4142‐cv

AMERICAN EXPRESS COMPANY, KENNETH I. CHENAULT, JEFFREY C. CAMPBELL, Defendants‐Appellees.

-------------------------------------x FOR PLAINTIFF‐APPELLANT: THOMAS A. DUBBS, Labaton Sucharow LLP, New York, New York; Samuel H. Rudman, Douglas S. Wilens, Robbins Geller Rudman & Dowd LLP, Melville, New York, and Boca Raton, Florida.

FOR DEFENDANTS‐APPELLEES: STEPHEN L. ASCHER (Richard F. Ziegler, Jeremy H. Ershow, on the brief), Jenner & Block LLP, New York, New York.

Appeal from a judgment of the United States District Court for the

Southern District of New York (Gardephe, J.).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,

ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.

Plaintiff‐appellant Pipefitters Union Local 537 Pension Fund (ʺPipefittersʺ)

appeals the district courtʹs November 28, 2017 judgment dismissing its amended

complaint (the ʺComplaintʺ), alleging that defendants‐appellees American Express

Company and two of its executives (collectively, ʺAmExʺ) violated federal securities

laws. By memorandum opinion and order entered September 30, 2017, the district

court granted AmExʹs motion to dismiss the Complaint pursuant to Rule 12(b)(6) of the

Federal Rules of Civil Procedure. We assume the partiesʹ familiarity with the

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

The Complaint concerns AmExʹs co‐branding agreement with Costco

Canada (the ʺCostco Canada Agreementʺ), the non‐renewal of which was announced in

2 September 2014, and its separate co‐branding agreement with Costco United States (the

ʺCostco U.S. Agreementʺ), the non‐renewal of which was announced in February 2015.

In relevant part, the Complaint asserts that AmEx violated the securities laws by

making (1) ʺmaterially false and misleading statements concerning the renewal of the

Costco U.S. Agreementʺ and (2) ʺmaterially false and misleading statements contrasting

the Costco Canada Agreement [with] the Costco U.S. Agreement, which [AmEx] had a

duty to update.ʺ J. Appʹx at 65‐69 (capitalizations omitted). Pipefitters argues that the

district court erred in dismissing these claims.1

ʺWe review the grant of a motion to dismiss de novo, accepting as true all

factual claims in the complaint and drawing all reasonable inferences in the plaintiffʹs

favor.ʺ Singh v. Cigna Corp.,

(2d Cir. 2019) (internal quotation marks

omitted). To avoid dismissal of a cause of action under Section 10(b) of the Securities

Exchange Act of 1934, a complaint must plausibly allege ʺ(1) a material

misrepresentation (or omission); (2) scienter, i.e., a wrongful state of mind; (3) a

connection with the purchase or sale of a security; (4) reliance; (5) economic loss; and (6)

loss causation.ʺ

(internal quotation marks and alteration omitted).

A misrepresentation is material if (1) ʺthere is a substantial likelihood that

a reasonable person would consider it important in deciding whether to buy or sell

shares of stockʺ and (2) it ʺsignificantly altered the total mix of information made

1 Pipefitters does not appeal the dismissal of the other causes of action contained in the Complaint.

3 availableʺ to a reasonable investor.

(internal quotation marks omitted). The

statement must be misleading, ʺevaluated not only by literal truth, but by context and

manner of presentation.ʺ

(internal quotation marks omitted). ʺOn a motion to

dismiss, a complaint may not be properly dismissed unless the misstatements are so

obviously unimportant to a reasonable investor that reasonable minds could not differ

on the question of their importance.ʺ IBEW Local Union No. 58 Pension Tr. Fund &

Annuity Fund v. Royal Bank of Scotland Grp., PLC,

(2d Cir. 2015)

(internal quotation marks omitted).

I. Duty to Update

On September 18, 2014, Bloomberg reported that the Costco Canada

Agreement would not be renewed. The article quoted an AmEx representative as

saying, ʺThis is very specific and exclusive to Canada. There are separate contracts for

AmExʹs U.S. Costco Relationship.ʺ J. Appʹx at 68.2 On October 15, 2014, AmEx held a

conference call, during which AmExʹs Senior Vice President and Chief Financial Officer

Jeffrey Campbell reiterated:

[W]e have separate agreements with Costco in each of the several markets where we maintain a partnership, and have a longer and more significant relationship with Costco in the US, dating back over 15 years. As with any long‐term partnership, we work with Costco on an ongoing basis to find ways to drive value for both parties going forward, never losing sight of the fact that we are serving the same customers.

2 The alleged misstatements are drawn from the Complaint. Emphases are omitted throughout.

4

Pipefitters contends that these statements implied the continuation of the Costco

U.S. Agreement and became false and misleading and triggered a duty to update when

the prospects of renewal of the Costco U.S. Agreement deteriorated ‐‐ that is, when

Costco likened AmEx to a ʺketchupʺ supplier and described AmEx as ʺjust another

vendor.ʺ Id. at 32 (ʺIf I can get cheaper ketchup somewhere else, I will.ʺ). On

February 12, 2015, AmEx issued a press release confirming that the Costco U.S.

Agreement would expire in 2016.

ʺA duty to update may exist when a statement, reasonable at the time it is

made, becomes misleading because of a subsequent event.ʺ In re Intʹl Bus. Machs. Corp.

Sec. Litig.,

(2d Cir. 1998). There is, however, ʺno duty to update vague

statements of optimism or expressions of opinion,ʺ ʺstatements [that] are not material,ʺ

or statements that are ʺnot forward looking and do[] not contain some factual

representation that remains ʹaliveʹ in the minds of investors as a continuing

representation.ʺ

The district court correctly concluded that AmEx was under no duty to

update the October 15, 2014 statements as a matter of law because they concerned only

existing facts that were not forward looking. Pipefitters argues that the statements had

a ʺforward intent and connotation.ʺ Appellantʹs Br. at 19‐20 (quoting Backman v.

Polaroid Corp.,

(1st Cir. 1990) (en banc)). Its reliance on Backman is

misplaced. There, the First Circuit held that ʺ[e]ven if forward‐looking, [the statement]

5 remained precisely correctʺ and thus did not trigger a duty to update.

.

The same is true of the statements here. It was and remained true after the ʺketchupʺ

comment that the Costco Canada Agreement was ʺvery specific and exclusive to

Canada,ʺ that ʺ[t]here [were] separate contracts for AmExʹs U.S. Costco relationship,ʺ

and that AmEx had a ʺlonger and more significant relationship with Costco in the US,

dating back over 15 years.ʺ J. Appʹx at 68. Campbellʹs statement that AmEx ʺwork[s]

with Costco on an ongoing basis to find ways to drive value for both parties going

forward,ʺ

was at worst an ʺexpression[] of . . . corporate optimism,ʺ which ʺ[did] not

give rise to securities violations,ʺ Rombach v. Chang,

(2d Cir. 2004). To

the extent these statements implicitly downplayed the risk that the non‐renewal of the

Costco Canada Agreement foretold the non‐renewal of the Costco U.S. Agreement, such

a connotation was ʺnot sufficiently concrete, specific or material to impose a duty to

update.ʺ In re Intʹl Bus. Machs. Corp. Sec. Litig.,

; see also In re Time Warner

Inc. Sec. Litig.,

(2d Cir. 1993). For these reasons, the district court

correctly concluded that AmEx had no duty to update and dismissed the claim.

II. Materially Misleading Statements

On January 21, 2015, AmEx held its fourth quarter 2014 earnings call.

Responding to a question about when investors ʺmight hear on the Costco U.S. deal,ʺ

Campbell responded:

Well, I appreciate the question. Costco is a very important and long‐term partner of ours. Our U.S. relationship goes back to the 1990s. We think weʹve been great partners and have created a lot

6 of value for their members, our [c]ard [m]embers and for both companies. I would point out to you that I donʹt think weʹve said anything about any ongoing discussions weʹre having with Costco. Obviously, with very important partners we are always working every day to evolve the relationship to make it better and frankly to make sure itʹs working for both parties. You can presume weʹre doing that with Costco as weʹre doing it with all of our partners at any time and if and when we have any news as we did with Delta, which we chose to renew early, we would certainly tell you.

J. Appʹx at 44. Pipefitters alleges that these statements amount to a denial ʺthat AmEx

was making any special efforts with respect to the Costco U.S. Agreement,ʺ which

purportedly ʺwas misleading because it signaled that there were no active, ongoing

negotiations with Costco concerning renewal of the Costco U.S. Agreement.ʺ

Appellantʹs Br. at 23‐24. In fact, according to the Complaint and documents

incorporated by reference, AmEx and Costco had begun preliminary negotiations at

least two months earlier.

The district court correctly concluded that no reasonable investor could

have found Campbellʹs statements false, misleading, or incomplete. Campbell did not

state that no negotiations with Costco were underway nor did he state that AmEx was

only working with its partners on routine matters. He instead told investors that they

could ʺpresumeʺ that AmEx was working with its ʺvery important partners . . . every

day to evolve the relationship to make it better.ʺ J. Appʹx at 44. And he prefaced this

vague statement by noting that he did not ʺthink [AmEx has] said anything about any

ongoing discussions [it was] having with Costco.ʺ

Moreover, Campbellʹs reference

7 to the early renewal of its co‐branding agreement with Delta, which AmEx did not

discuss until a renewal was announced, only confirmed that AmEx would not comment

on renewal negotiations with Costco while such negotiations were underway. See

(ʺ[I]f and when we have any news as we did with Delta, . . . we would certainly tell

you.ʺ). No reasonable investor could have interpreted these statements as denying the

existence of any ongoing renewal discussions with Costco. Thus, the district court

properly granted AmExʹs motion to dismiss.

* * *

We have considered all of Pipefittersʹs remaining arguments and find

them to be without merit. For the foregoing reasons, the judgment of the district court

is AFFIRMED.

FOR THE COURT: Catherine OʹHagan Wolfe, Clerk of Court

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