14-165-cv 

Westchester Teamsters v. UBS 

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 COURT=S 

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 ASUMMARY ORDER@). A PARTY CITING 

TO 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 27th day of February, two thousand fifteen. 

PRESENT: 

PETER W. HALL,

GERARD E. LYNCH, 

SUSAN L. CARNEY,

Circuit Judges. 

_____________________________________ 

Westchester Teamsters Pension Fund & 

Teamsters Local 456 Annuity Funds, 

Plaintiffs-Appellants, 

v. 14-165-cv 

UBS AG, Oswald J. Grübel, John Cryan, 

Carsten Kengeter, Philip J. Lofts, 

Defendants-Appellees.

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_________________________________ 

FOR PLAINTIFFS-APPELLANTS: STEVEN F. HUBACHEK (Eric Alan 

Isaacson, Tor Gronborg, Brian O. 

O’Mara, on the brief), Robbins Geller 

 

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 The Clerk of Court is requested to amend the caption as indicated. 
Rudman & Dowd LLP, San Diego, 

CA. 

FOR DEFENDANTS-APPELLEES: MARK A. KIRSCH (Marshall R. King, 

Caitlin J. Halligan, Lisa H. Rubin, Seth 

M. Rokosky, on the brief) Gibson, 

Dunn & Crutcher LLP, New York, 

NY. 

Appeal from an order of the United States District Court for the Southern District of New 

York (Forrest, J.). 

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND 

DECREED that the judgment of the district court is AFFIRMED. 

This appeal involves claims under Section 10(b) of the Securities Exchange Act of 1934 

and the Securities and Exchange Commission’s Rule 10b-5, which prohibit a person from 

“making any material misstatement or omission in connection with the purchase or sale of any 

security.” Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398, 2407 (2014). PlaintiffsAppellants, Westchester Teamsters Pension Fund and Teamsters Local 456 Annuity Funds 

(“Plaintiffs”) appeal the district court’s order granting the motion to dismiss of DefendantsAppellees, UBS AG, Grübel, Cryan, Kengeter and Lofts (“Defendants”), on the grounds that 

Plaintiffs failed adequately to plead violations of the Securities and Exchange Act of 1934 

allegedly occurring during the period from November 17, 2009 through September 15, 2011. We 

assume the parties’ familiarity with the underlying facts, the procedural history of the case, and 

the issues on appeal. 

 We review de novo the grant of a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6), 

construing the complaint liberally, accepting all factual allegations in the complaint as true, and 

drawing all reasonable inferences in the plaintiff’s favor. Roth v. Jennings, 489 F.3d 499, 510 (2d 
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Cir. 2007). As a general matter, “[t]o survive a motion to dismiss, a complaint must contain 

sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” 

City of Pontiac Policemen’s & Firemen’s Ret. Sys. v. UBS AG, 752 F.3d 173, 179 (2d Cir. 2014) 

(quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). To make out a claim for violation of 

section 10(b) and Rule 10b-5, the facts pleaded must demonstrate “(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.” Halliburton Co., 134 

S. Ct. at 2407 (internal quotation marks omitted). The complaint must also satisfy the heightened 

pleading requirements of Rule 9(b) and the Private Securities Litigation Reform Act of 1995, 

which require that “securities fraud complaints specify each misleading statement . . . [and] state 

with particularity facts giving rise to a strong inference that the defendant acted with the required 

state of mind.” City of Pontiac Policemen’s & Firemen’s Ret. Sys., 752 F.3d at 184 (internal 

quotation marks omitted). 

 We affirm the judgment of the district court on the basis that Plaintiffs failed adequately 

to plead scienter, and thus we do not address the district court’s analysis of the remaining 

elements of their securities fraud claim.2

 To plead scienter so as to survive a motion to dismiss, a 

 

2

 We disagree with the district court’s suggestion in its analysis of the first element (material misrepresentation or 

omission) that Plaintiffs had to show that a Defendant “k[new] (or ha[d] reason to know) at the time that he was 

making an alleged statement that the statement was in fact false.” C.D.T.S. v. UBS AG, No. 12 Civ. 4924, 2013 WL 

6576031, at *4 (S.D.N.Y. Dec. 13, 2013). Plaintiffs need not demonstrate Defendants had knowledge or a belief that 

they were making “a material misrepresentation or omission” in order to satisfy the element. Rather, to prove this 
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plaintiff must state “with particularity facts giving rise to a strong inference that the defendant 

acted with the required state of mind,” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 

308, 326 (2007) (internal quotation marks omitted) by either “alleging facts (1) showing that the 

defendants had both motive and opportunity to commit the fraud or (2) constituting strong 

circumstantial evidence of conscious misbehavior or recklessness,” ATSI Commc’ns, Inc. v. 

Shaar Fund, Ltd., 493 F.3d 87, 99 (2d Cir. 2007). In analyzing whether the complaint meets this 

standard, this Court considers “plausible opposing inferences.” Tellabs, Inc., 551 U.S. at 323. A 

strong inference of scienter is one that “a reasonable person would deem . . . cogent and at least 

as compelling as any opposing inference one could draw from the facts alleged.” Id. at 324. 

 We agree with the district court that Plaintiffs failed to allege sufficient facts to establish 

scienter either through a showing of “motive and opportunity” or of “conscious misbehavior or 

recklessness” on the part of Defendants. ATSI Commc’ns, Inc., 493 F.3d at 99. That is, there are 

no facts alleged that demonstrate Defendants had an intent to deceive, manipulate, or defraud 

investors when Defendants described their ostensibly robust risk management systems and 

internal controls. ECA, Local 134 IBEW Joint Pension Trust of Chicago v. JP Morgan Chase 

Co., 553 F.3d 187, 198 (2d Cir. 2009). Nor are there allegations supporting a conclusion that 

Defendants “benefitted in some concrete and personal way from the purported fraud.” Id. 

(internal quotation marks omitted). Furthermore, none of Plaintiffs’ generalized allegations 

demonstrate recklessness, i.e. “an extreme departure from the standards of ordinary care . . . to 

 first element Plaintiffs need show only that a false statement was made or that an omission of material fact occurred. 

In re Int'l Bus. Machines Corporate Sec. Litig., 163 F.3d 102, 106 (2d Cir. 1998). 
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the extent that the danger was either known to the defendant or so obvious that the defendant 

must have been aware of it.” Id. (internal quotation marks omitted). Plaintiffs have offered no 

plausible explanation as to why Defendants would turn a blind eye to the possibility that 

unauthorized trading was exposing UBS to billions of losses. Rather, the much stronger opposing 

inference is mismanagement—Defendants simply were not monitoring the company’s risk as 

effectively as they had assured investors and as they themselves believed. Absent adequate 

pleading the courts cannot simply infer that Defendants knew or were reckless in not knowing 

that their generalized representations regarding risk management were false simply because they 

were made while a rogue trader incurred a massive loss. 

 We have considered all of Plaintiffs’ remaining arguments and find them to be without 

merit. Accordingly, we AFFIRM the district court’s grant of summary judgment. 

 FOR THE COURT: 

Catherine O=Hagan Wolfe, Clerk