Opinion
Master File No. 02-8088.
November 15, 2004
ORDER AND REASONING
AND NOW, this 15th day of November, 2004, upon consideration of Defendants Motion to Strike (Doc. 50), Plaintiffs Response, and Defendants Reply, it is hereby ORDERED that Defendants Motion is GRANTED. Paragraph 178 is STRICKEN from the Complaint, and Defendant Anania is DISMISSED from the above-captioned case. The Court's reasoning follows.
The controversy before the Court involves allegedly misleading statements made by Defendant Anania, the Chief Information Officer (CIO) of Cigna Corp., during an October 15, 2001, speech. Because the Court finds that Plaintiffs have not adequately pleaded scienter, it will strike ¶ 178 of their Complaint. Defendant Anania is dismissed from this case, there being no remaining claims against her.
The first hurdle facing the Parties is the subject-matter of Defendant Anania's October speech. Plaintiffs contend that the lecture concerned the Transformation project, the (allegedly) botched project at the core of this case, while Defendants contend that the lecture was a discussion of another information technology (IT) project. Defendants have provided this Court with a transcript of Defendant Anania's remarks, but this transcript does not prove that the lecture's topic and scope was unequivocally not the Transformation project. Defendants initial argument, that Defendant Anania never made any statements about Transformation, must therefore be rejected.
Defendants next argue that Defendant Anania's statements could not be material. The Court does not yet have enough information to determine whether this is true. The issue of materiality is a mixed question of law and fact. Ieradi v. Mylan Lab., Inc., 230 F.3d 594, 599 (3d Cir. 2000) (citing TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 450 (1976)). When alleged misrepresentations or omissions are so obviously unimportant to an investor that reasonable minds cannot differ on the question of materiality, dismissal is warranted. However, where there is room for differing opinions on the issue of materiality, the question should be left for jury determination. Id. (internal citations omitted). Plaintiffs have not, as Defendants note, made any showing that Defendant Anania's statements were discovered by the press and by investors. But this does not automatically foreclose the possibility that the statements had absolutely no impact on the calculus of Cigna's investors. Plaintiffs have made allegations concerning the mission-critical nature of Cigna's IT projects; any information about them, and about the quality of their leadership, could have conceivably affected the marketplace. See Compl. at ¶ 55-57, 62. The Court must conclude that there is some room for differing opinions on the materiality of Defendant Anania's statements. Defendants other criticisms of ¶ 178 turns largely on their (disputed) version of the October lecture. As such, the Court cannot grant their Motion to the extent that it relies on this line of reasoning. Defendants persuasively argue, however, that Plaintiffs have not adequately pleaded scienter.
Scienter may be shown by establishing a motive and opportunity to commit fraud, or by setting forth facts that constitute circumstantial evidence of either reckless or conscious behavior.In re Advanta Corp. Sec. Litig., 180 F.3d 525, 533-34 (3d Cir. 1999). [A reckless statement must] present a danger of misleading buyers or sellers that is either known to the defendant or is so obvious that the actor must have been aware of it. Id. at 535 (internal citations omitted). Against this backdrop, Plaintiffs scienter allegations are indeed weak. Plaintiffs claim that they have pleaded scienter based on Defendant Anania's representations that she knew how critical volume testing was, despite her later admission that Cigna did not perform the volume testing that was proven necessary after the fact. Compl. at ¶ 17(f)(i), (ii). This allegation does not, however, indicate that Defendant Anania was aware, or should have been aware, that her October statements were false or misleading at the time she made them. Plaintiffs citations to the Complaint add nothing to their allegations, as none of the paragraphs cited address Defendant Anania's state of mind at the time of her speech. None of the paragraphs cited by Plaintiffs allege, or create an inference, that Defendant Anania ignored July, 2001, problems such that her statements in October would be recklessly or intentionally misleading. In fact, Defendant Anania's statements, read in context, only give rise to her expression of a sensitivity for the importance of stress-testing — a sentiment that is not actually refuted by the paragraphs of the Complaint cited by Plaintiffs. The remainder of Plaintiffs scienter allegations do not contain, or refer to, facts showing that Defendant Anania knew of unaddressed problems with Cigna systems in October, when she made her speech. To state a securities fraud claim under Section 10(b) of the Securities and Exchange act of 1934, and SEC Rule 10b-5, a plaintiff must plead, among other things, knowledge or recklessness on the part of the defendant. Advanta, 180 F.3d at 537. Plaintiffs have failed to adequately plead their case against Defendant Anania; there being no other claims in Plaintiffs Complaint against her, she shall be dismissed from this action.
AND IT IS SO ORDERED.