21-2042-cv

SEC v. Rio Tinto

United States Court of Appeals

for the Second Circuit

AUGUST TERM 2021

No. 21-2042

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff-Appellant,

v.

RIO TINTO PLC, RIO TINTO LIMITED, THOMAS ALBANESE, AND GUY ROBERT ELLIOTT,

Defendants-Appellees.

ARGUED: MAY 19, 2022

DECIDED: JULY 15, 2022

ON REVIEW OF AN INTERLOCUTORY ORDER OF THE UNITED STATES DISTRICT COURT 

FOR THE SOUTHERN DISTRICT OF NEW YORK 

Before: JACOBS, WESLEY, NARDINI, Circuit Judges.

On this interlocutory appeal from the United States District Court for the 

Southern District of New York (Torres, J.), we consider whether Lentell v. Merrill 

Lynch & Co., 396 F.3d 161 (2d Cir. 2005), on which the district court relied to 

hold that misstatements and omissions alone do not suffice for scheme liability

under Rule 10b-5(a) and (c), has retained its vitality after the Supreme Court’s 
2

decision in Lorenzo v. SEC, 139 S. Ct. 1094 (2019), which held that dissemination 

of a false statement could sustain a scheme liability claim. We conclude that 

Lentell remains sound. Affirmed.

____________________

EMILY TRUE PARISE, Senior Litigation Counsel (Dan M. 

Berkovitz, General Counsel; Michael A. Conley, 

Solicitor; Dominick V. Freda, Assistant General 

Counsel; Hope Hall Augustini, Martin Totaro, Senior 

Litigation Counsel, on the brief), Securities & Exchange 

Commission, Washington, D.C. for Plaintiff-Appellant.

THOMAS H. DUPREE JR., Gibson, Dunn & Crutcher LLP, 

Washington, D.C. (Mark A. Kirsch, Jennifer L. Conn, 

Avi Weitzman, Gibson, Dunn & Crutcher LLP, New 

York, NY; Mark A. Perry, Richard W. Grime, Kellam M. 

Conover, Gibson, Dunn & Crutcher LLP, Washington, 

D.C., on the brief), for Defendants-Appellees Rio Tinto 

plc and Rio Tinto Limited.

SARAH L. LEVINE, Jones Day, Washington, D.C. (James 

P. Loonam, Jones Day, New York, NY; Matthew J. 

Rubenstein, Jones Day, Minneapolis, MN, on the brief), 

for Defendant-Appellee Thomas Albanese.

KANNON K. SHANMUGAM, Paul, Weiss, Rifkind, 

Wharton & Garrison LLP, Washington, D.C. (Theodore 

V. Wells, Jr., Walter G. Ricciardi, Geoffrey R. Chepiga, 

Livia Fine, Paul, Weiss, Rifkind, Wharton & Garrison 

LLP, New York, NY, on the brief), for DefendantAppellee Guy Robert Elliott.

Tara S. Morrissey, U.S. Chamber Litigation Center, 

Washington, D.C.; Carter G. Phillips, Kwaku A. 
3

Akowuah, Sidley Austin LLP, Washington, D.C.; 

Eamon P. Joyce, James R. Horner, Sidley Austin LLP, 

New York, NY, for Amicus Curiae Chamber of 

Commerce of the United States of America.

Jeffrey S. Bucholtz, Marisa C. Maleck, King & Spalding 

LLP, Washington, D.C., for Amici Curiae Law 

Professors Joseph Grundfest, Todd Henderson, Adam 

Pritchard, Andrew Vollmer, and Karen Woody.

DENNIS JACOBS, Circuit Judge:

The Securities and Exchange Commission (“SEC”) brought scheme liability 

claims in a 2017 enforcement action against Rio Tinto plc, Rio Tinto Limited, and 

its CEO and CFO, pursuant to Rule 10b-5(a) and (c), promulgated under Section 

10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), and pursuant to 

Section 17(a)(1) and (3) of the Securities Act of 1933 (“Securities Act”).1 Citing 

Lentell v. Merrill Lynch & Co., 396 F.3d 161 (2d Cir. 2005) (“Lentell”), the United 

States District Court for the Southern District of New York (Torres, J.) dismissed 

the scheme liability claims in a March 2019 order (the “Dismissal Order”) on the 

ground that the conduct alleged constituted misstatements and omissions only, 

1 For brevity, throughout this opinion, these provisions are referred to as “Rule 

10b-5” and “Section 17(a)” without reference to the Exchange Act or the 

Securities Act.
4

and is therefore an insufficient basis for scheme liability. See SEC v. Rio Tinto 

plc, No. 17 Civ. 7994, 2019 WL 1244933, at *15–16 (S.D.N.Y. Mar. 18, 2019).

In 2020, the SEC urged the district court to reconsider the dismissal in light 

of the Supreme Court’s intervening decision in Lorenzo v. SEC, 139 S. Ct. 1094 

(2019) (“Lorenzo”), which held that an individual who disseminated a false 

statement (but did not make it) could be liable under the scheme subsections. Id.

at 1100. In the SEC’s view, Lorenzo expanded the scope of scheme liability so 

that allegations of misstatements and omissions alone are sufficient to state a 

scheme liability claim. The district court denied reconsideration. See SEC v. Rio 

Tinto plc, No. 17 Civ. 7994, 2021 WL 818745, at *1 (S.D.N.Y. Mar. 3, 2021). 

Lorenzo observes that the subsections of Rule 10b-5 and Section 17(a) are not 

hermetically sealed. On this interlocutory appeal, the SEC contends that Lorenzo

thereby abrogates Lentell. We disagree. While Lorenzo acknowledges that there 

is leakage between and among the three subsections of each provision, the 

divisions between the subsections remain distinct. Until further guidance from 

the Supreme Court (or in banc consideration here), Lentell binds: misstatements 

and omissions can form part of a scheme liability claim, but an actionable scheme 
5

liability claim also requires something beyond misstatements and omissions, such 

as dissemination. Accordingly, we affirm. 

I

The question presented on appeal is whether misstatements and 

omissions--without more--can support scheme liability pursuant to Section 10(b) 

of the Exchange Act and Rule 10b-5(a) and (c) promulgated thereunder, and 

Securities Act Section 17(a)(1) and (3). The answer lies in the interplay of the

three subsections of Rule 10b-5, and the interplay of the three subsections of 

Section 17(a). Rule 10b-5 and Section 17(a), which largely mirror each other, both

consist of a “misstatement subsection” that is sandwiched between two “scheme 

subsections.” 

Rule 10b-5 provides:

It shall be unlawful for any person, directly or 

indirectly, by the use of any means or instrumentality of 

interstate commerce, or of the mails or of any facility of 

any national securities exchange,

(a) To employ any device, scheme, or artifice 

to defraud,

(b) To make any untrue statement of a material 

fact or to omit to state a material fact necessary in order 

to make the statements made, in the light of the 
6

circumstances under which they were made, not 

misleading, or

(c) To engage in any act, practice, or course of 

business which operates or would operate as a fraud or 

deceit upon any person,

in connection with the purchase or sale of any security. 

17 C.F.R. § 240.10b-5. As clarified in Janus Capital Group, Inc. v. First Derivative 

Traders, 564 U.S. 135 (2011) (“Janus”), only the “maker” of a misstatement, i.e., 

the person with ultimate authority over the statement, can have primary liability 

under Rule 10b-5(b). Id. at 142. 

Section 17(a) provides:

It shall be unlawful for any person in the offer or 

sale of any securities (including security-based swaps) 

or any security-based swap agreement . . . by the use of 

any means or instruments of transportation or 

communication in interstate commerce or by use of the 

mails, directly or indirectly—

(1) to employ any device, scheme, or artifice to 

defraud, or

(2) to obtain money or property by means of 

any untrue statement of a material fact or any omission 

to state a material fact necessary in order to make the 

statements made, in light of the circumstances under 

which they were made, not misleading; or

(3) to engage in any transaction, practice, or 

course of business which operates or would operate as a 

fraud or deceit upon the purchaser.
7

15 U.S.C. § 77q.2

II

The following background is based on the district court’s recitation of the 

facts, as supplemented by allegations in the complaint. 

In April 2011, defendants Rio Tinto plc and Rio Tinto Limited (together, 

“Rio Tinto”) acquired an exploratory coal mine in Mozambique (the “Mine”). 

The Mine’s $3.7 billion purchase price was premised on assumptions that the 

Mine would produce a certain volume and quality of coal, that the majority of 

the coal could be barged down the Zambezi River, and that the rest could be

transported by existing rail infrastructure.

Over the ensuing months, the defendants learned that the coal quality was 

poorer than expected; that the Mozambican government would not permit 

transport of the coal by barge; and that the transport of coal by rail would require 

infrastructure costing upwards of $16 billion--and might not be permitted in any 

event. At a meeting in Brisbane on May 11, 2012, management from the Mine 

2 Janus applies to Rule 10b-5(b), and therefore it is not directly applicable to 

“Section 17(a)(2), which does not explicitly predicate liability on having ‘made’ a 

statement.” See SEC v. Knight, 694 F. App’x 853, 856 n.2 (2d Cir. 2017), as 

amended (June 7, 2017). 
8

informed CEO Thomas Albanese and CFO Guy Robert Elliott that, based on the 

various emerging obstacles, the Mine’s net present value was negative $680 

million. (Albanese and Elliott are defendants in this action, along with Rio 

Tinto.)

In the months before and after the Brisbane meeting, Rio Tinto was issuing 

financial statements and preparing auditing papers. The complaint alleges that 

these documents contained false statements and omissions, including 

representations about transportation options and the amount and quality of coal 

reserves. Importantly, the SEC alleges that none of the documents disclosed that 

the Mine’s valuation was impaired:

• The 2011 Annual Report, signed by Albanese and Elliott and filed with the 

SEC in March 2012, valued the Mine at its $3.7 billion acquisition price. 

• A bond offering floated on the New York Stock Exchange that same month

incorporated the 2011 Annual Report by reference. 

• Rio Tinto’s Controller’s Group (“Controller”) consolidated the information 

from the Mine for review during Audit Committee meetings, which were 

attended by Rio Tinto’s independent auditors, as well as by Albanese and 

Elliott. Neither the First Controller’s Paper (generated in advance of the 

June 18, 2012 Audit Committee meeting) nor the Second Controller’s Paper 

(generated in advance of the July 30, 2012 Audit Committee meeting)

identified impairment indicators or recorded an impairment. 

• Rio Tinto submitted an “Impairment Paper” directly to its independent 

auditors, which likewise did not record an impairment or identify an 

impairment indicator.
9

• The Audit Committee and the independent auditors relied on the 

Controller’s Papers and the Impairment Paper to decide whether to impair 

the Mine. Thus the Half Year 2012 Report (“HY2012 Report”), filed with 

the SEC on August 9, 2012, and signed by Albanese and Elliott, carried the 

Mine at a value of over $3 billion.

• Rio Tinto issued $3 billion in bonds a few days later, and the offerings

incorporated the HY2012 Report and the 2011 Annual Report. 

• The Third Controller’s Paper (together with the First and Second 

Controller’s Papers and the Impairment Paper, the “Papers”), which was 

prepared in advance of the November 26, 2012 Audit Committee meeting, 

likewise indicated a recoverable value of $4 to $5 billion (which meant that 

no impairment was likely to be required). 

For their part, Rio Tinto’s in-house valuation team disagreed with the

over-$3 billion valuation. In August 2012, the team initiated a review that valued 

the Mine in the range of negative “$4.9 billion to $300 million.” Joint App’x 82 

¶ 151. In late 2012, the head of the valuation team informed Albanese and Elliott

about the shrunken valuation, and then informed the Chairman of Rio Tinto’s 

Board. Following an investigation, at a meeting on January 15, 2013, the Board 

approved an 80 percent impairment, valuing the Mine at $611 million. In 2014, 

Rio Tinto again impaired the Mine, this time to $119 million. In October 2014, 

the Mine was sold for $50 million. 
10

III

A

The SEC brought this twelve-count enforcement action on October 17, 

2017, alleging that Rio Tinto should have taken an impairment on the Mine 

earlier than it did, and that the Papers, SEC filings, and the defendants failed to 

disclose the setbacks, or timely correct the valuation. At issue now are counts 

one and three, which allege that the defendants violated Rule 10b-5 and Section 

17(a), respectively, by making fraudulent misstatements and omissions and by 

engaging in a scheme to defraud. 

With respect to the misstatements and omissions claims, the SEC cited the

2011 Annual Report, the HY2012 Report, the Papers, the bond offerings, and 

statements made during various meetings and investor calls. With respect to the

claims of scheme liability, the SEC cited corruption of the auditing process--

specifically, the failure to correct statements made to the Audit Committee and 

auditors. The defendants moved to dismiss counts one and three for failure to 

state a claim on which relief can be granted. See Fed. R. Civ. P. 12(b)(6).

Relevant to this appeal is the dismissal of the scheme liability claims. 

Citing Lentell, the Dismissal Order ruled that scheme liability does not exist 
11

when “the sole basis for such claims is alleged misrepresentations or omissions,” 

and that here, all of the alleged “actions” and “conduct” forming the basis for

scheme liability were misstatements or omissions. SEC v. Rio Tinto plc, No. 17 

Civ. 7994, 2019 WL 1244933, at *15–16 (S.D.N.Y. Mar. 18, 2019) (dismissing the 

scheme liability claims alleged pursuant to Rule 10b-5(a) and (c)); see also id. at 

*16 (dismissing the scheme liability claims alleged pursuant to Section 17(a)(1) 

and (3) for the same reasons). The district court pointed to certain examples of 

these misstatements and omissions, which included the 2011 Annual Report, 

statements in the bond offerings, false statements to shareholders, and the failure 

to disclose information learned at the Brisbane meeting. Id.3 

About a week after the Dismissal Order issued, the Supreme Court held in 

Lorenzo that an individual who disseminated a false statement, but who did not 

make it, could be liable under the scheme subsections. 139 S. Ct. at 1100. The 

3 The district court also dismissed most of the misstatements and omissions

claims that were alleged pursuant to the misstatement subsections (Rule 10b-5(b) 

and Section 17(a)(2)). 

But the district court did not dismiss a narrow swathe of misstatements alleged

pursuant to Rule 10b-5(b), which Albanese made after the meeting in Brisbane. 

The district court also sustained the part of the Section 17(a)(2) claim seeking 

injunctive relief against Rio Tinto with respect to the HY2012 Report and August 

2012 bond offering documents. These claims are being litigated in the district 

court. 
12

SEC moved to reconsider the dismissal of the scheme liability claims, arguing

that Lorenzo expanded the scope of the scheme subsections such that 

misstatements and omissions alone could form the basis for scheme liability. 

The district court declined to reconsider, ruling that Lorenzo held that the 

dissemination of false information provides a basis for scheme liability--not that 

“misstatements alone are sufficient to trigger scheme liability.” SEC v. Rio Tinto 

plc, No. 17 Civ. 7994, 2021 WL 818745, at *2 (S.D.N.Y. Mar. 3, 2021). There is no 

allegation that the Rio Tinto defendants disseminated false statements; the SEC 

alleged “only that [the defendants] failed to prevent misleading statements from 

being disseminated by others.” Id. 

B

As the procedural history shows, the SEC has exerted substantial effort to 

shoehorn its allegations into a claim for scheme liability. The SEC’s position, 

however, would undermine two key features of Rule 10b-5(b).

For one, Janus Capital Group, Inc. v. First Derivative Traders, 564 U.S. 135 

(2011), limits primary liability under Rule 10b-5(b) to the “maker” of a statement, 

id. at 142; as neither Albanese nor Elliott made the statements in the Papers or 
13

the SEC filings, they cannot be primarily liable under Rule 10b-5(b). But with an 

expanded conception of scheme liability, the SEC might seek to prove that 

Albanese and Elliott are primarily liable under the scheme subsections for 

participation in the making of the misstatements.

Second, misstatements and omissions claims brought by private plaintiffs 

under Rule 10b-5(b) are subject to the heightened pleading standard of the 

Private Securities Litigation Reform Act (“PSLRA”). See 15 U.S.C. § 78u-4(b)(1) 

(a complaint alleging misleading statements or omissions “shall specify each 

statement alleged to have been misleading, [and] the reason or reasons why the 

statement is misleading”).4 But this heightened standard does not apply to 

allegations of scheme liability “[b]ecause scheme liability does not require an 

allegation that the defendant made a statement.” Menaldi v. Och-Ziff Cap. 

Mgmt. Grp. LLC, 164 F. Supp. 3d 568, 577 (S.D.N.Y. 2016) (Oetken, J.) (internal 

quotation marks omitted).

Expanding the scope of scheme liability would thereby lower the bar for 

primary liability for securities fraud, along with the pleading standard in cases 

involving private plaintiffs.

4 Of course, the heightened pleading standards of the PSLRA do not apply to 

cases brought by the SEC. 15 U.S.C. § 78u-4(a)(1).
14

***

After the district court denied the SEC’s motion for reconsideration, it 

certified the issue for interlocutory appeal pursuant to 28 U.S.C. 

§ 1292(b). This Court granted the petition for leave to appeal an interlocutory 

order. We are therefore called upon to determine whether, post-Lorenzo,

misstatements and omissions alone can form the basis for scheme liability. 

IV

The facts of Lorenzo bear upon whether reconsideration of the Dismissal 

Order is warranted.

As director of investment banking at an SEC-registered brokerage firm, 

Lorenzo sent two emails to prospective investors; the content of the emails was 

supplied by Lorenzo’s boss and described a potential investment in a company 

that had “confirmed assets” of $10 million. Lorenzo, 139 S. Ct. at 1099. Lorenzo 

knew, however, that the company recently disclosed that its total assets were 

worth under $400,000, and Lorenzo conceded scienter. Id. at 1099–1100. The 

SEC brought enforcement proceedings against Lorenzo (among others). Id. at 

1099.
15

Lorenzo held that the transmission of emails, or “dissemination,” could 

sustain a claim under the scheme subsections that prohibit a “device,” “scheme,” 

“artifice to defraud,” and/or fraudulent “practice.” Id. at 1101 (citing Rule 10b5(a) and (c) and Section 17(a)(1)). This language was held sufficiently broad to 

include dissemination. Id.

Lorenzo further observed that there is “considerable overlap” between the 

subsections of Rule 10b-5 (and, similarly, between the subsections of Section 

17(a)). Id. at 1102. Lorenzo rejected the view that only subsection (b) of Rule 

10b-5 can regulate conduct involving false or misleading statements. Id. So, 

even though Lorenzo did not make the false statement and his conduct was

beyond the reach of Rule 10b-5(b), scheme liability was not precluded. Id. 

Accordingly, the scheme subsections can cover conduct that involves a 

misstatement even if the defendant was not the maker of it. Id.

V

This interlocutory appeal is limited to the legal issue raised in the SEC’s 

motion for reconsideration: can misstatements and omissions alone form the 
16

basis for scheme liability? In our Circuit, this boils down to whether Lorenzo

abrogated Lentell.

We rule that it did not. “[T]o qualify as . . . an intervening decision, the 

Supreme Court’s conclusion in a particular case must have broken the link on 

which we premised our prior decision, or undermined an assumption of that 

decision.” Dale v. Barr, 967 F.3d 133, 142–43 (2d Cir. 2020) (alterations omitted). 

Lentell held that misstatements and omissions cannot form the “sole basis” for 

liability under the scheme subsections. 396 F.3d at 171. Lorenzo held that the 

“dissemination of false or misleading statements with intent to defraud” does 

come within the scheme subsections. 139 S. Ct. at 1100. But misstatements or 

omissions were not the sole basis for scheme liability in Lorenzo. The 

dissemination of those misstatements was key. Since the holdings of Lentell and 

Lorenzo are consistent with one another, Lentell remains vital. 

On this narrow interlocutory appeal, we have no occasion to determine for

ourselves whether the scheme liability claims in this complaint allege something 

beyond misstatements and omissions. Our analysis is premised on the district 

court’s ruling in the Dismissal Order, which characterized the scheme liability 

claims as a collection of misstatements and omissions. See Rio Tinto plc, 2019 
17

WL 1244933, at *15-16. Because Lentell withstands Lorenzo, and because the 

Dismissal Order ruled that the complaint alleges misstatements and omissions

only, the district court did not abuse its discretion in declining to reconsider the 

dismissal of the scheme liability claims. 

Whether there are ramifications or inferences from Lorenzo that blur the

distinctions between the misstatement subsections and the scheme subsections is 

a matter that awaits further development. Consider, e.g., WPP Luxembourg 

Gamma Three Sarl v. Spot Runner, Inc., 655 F.3d 1039, 1057–58 (9th Cir. 2011), 

abrogated by Lorenzo, 139 S. Ct. at 1094. As our opinion today is limited to the 

legal issue, we make no ruling about the ultimate impact of Lorenzo on this case. 

We do not consider, for example, whether corruption of an auditing process is 

sufficient for scheme liability under Lorenzo, or allegations that a corporate 

officer concealed information from auditors. For now, Lentell tells us that 

misstatements and omissions alone are not enough for scheme liability, and 

Lorenzo tells us that dissemination is one example of something extra that makes 

a violation a scheme. 

We reject the SEC’s argument that Lentell applies only in cases brought by 

private litigants. The SEC advances no credible basis for this argument; and 
18

courts have applied the principle of Lentell in enforcement actions. See, e.g., SEC 

v. Pentagon Cap. Mgmt. PLC, 725 F.3d 279, 287 (2d Cir. 2013); SEC v. Kelly, 817 

F. Supp. 2d 340, 343 (S.D.N.Y. 2011) (McMahon, J.); SEC v. PIMCO Advisors 

Fund Mgmt. LLC, 341 F. Supp. 2d 454, 467 (S.D.N.Y. 2004) (Marrero, J.) (preLentell). The district court reached the same conclusion, observing that the SEC 

“cites no authority from [the Southern District of New York]” to support its 

argument that Lentell applies only to suits brought by private parties. Rio Tinto 

plc, 2019 WL 1244933, at *15.

VI

Maintaining distinctions between the subsections of Rule 10b-5 and 

between the subsections of Section 17(a) is consistent with the text of each. “One 

of the most basic interpretive canons is that a statute should be construed so that 

effect is given to all its provisions, so that no part will be inoperative or 

superfluous, void or insignificant.” Mary Jo C. v. New York State & Loc. Ret. 

Sys., 707 F.3d 144, 156 (2d Cir. 2013) (citation and alteration omitted). Were 

misstatements and omissions alone sufficient to constitute a scheme, the scheme 

subsections would swallow the misstatement subsections. And though Lorenzo
19

ruled that there was “considerable overlap” between the misstatement 

subsections and the scheme subsections, 139 S. Ct. at 1102, it did not announce 

that the misstatement subsections were subsumed. In concluding that Lentell

remains vital, we are respecting the structure that Congress designed.

We know that Lorenzo preserved the lines between the subsections 

because Lorenzo emphasized the continued vitality of Janus Capital Group, Inc. 

v. First Derivative Traders, 564 U.S. 135 (2011). Janus limits primary liability

under Rule 10b-5(b) to the “maker” of a statement, i.e., the person with authority 

over a false statement; individuals who helped draft, research, print, or 

wordsmith the statement at some point in time, but who lacked ultimate control,

cannot be primarily liable. Id. at 142. Using Janus as a backstop, Lorenzo

signaled that it was not giving the SEC license to characterize every misstatement

or omission as a scheme. 139 S. Ct. at 1103. While Lorenzo “may have carved 

out of Janus” liability for disseminating false statements, it did not go so far as to 

create primary liability for “participation in the preparation” of misstatements. 

Geoffrey A. Orley Revocable Tr. v. Genovese, 2020 WL 611506, at *7-8, as 

amended (S.D.N.Y. Feb. 7, 2020) (Ramos, J.).

Preserving distinctions between the subsections also assures that private 
20

plaintiffs remain subject to the heightened pleading requirements for Rule 10b5(b) claims. Section b(1) of the PSLRA requires a complaint alleging 

misstatements or omissions to “specify each statement alleged to have been 

misleading, [and] the reason or reasons why the statement is misleading,” 15 

U.S.C. § 78u-4(b)(1), whereas “claims brought under Rule 10b-5(a) and (c) need 

not comport with provision (b)(1) of the PSLRA” because they do not require 

that a misstatement be made, Menaldi v. Och-Ziff Cap. Mgmt. Grp. LLC, 164 F. 

Supp. 3d 568, 577 (S.D.N.Y. 2016) (Oetken, J.) (internal quotation marks omitted). 

An overreading of Lorenzo might allow private litigants to repackage their 

misstatement claims as scheme liability claims to “evade the pleading 

requirements imposed in misrepresentation cases.” In re Alstom SA, 406 F. 

Supp. 2d 433, 475 (S.D.N.Y. 2005) (Marrero, J.). But courts have prohibited 

plaintiffs from recasting their pleadings in this way. See id. (“[A] plaintiff may 

not seek to hold a defendant liable for misleading statements under subsections

(a) and (c) by alleging that the defendant is liable for the misleading statements 

because he or she was a participant in a scheme through which the statements 

were made.”). Lorenzo did not announce a rule contravening this principle. 

Finally, overreading Lorenzo would muddle primary and secondary 
21

liability. This matters because “[a]iding and abetting liability is authorized in 

actions brought by the SEC but not by private parties.” Stoneridge Inv. Partners, 

LLC v. Sci.-Atlanta, 552 U.S. 148, 162 (2008) (citing 15 U.S.C. § 78t(e)); see also

Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 

164, 180 (1994) (“Central Bank”) (holding that Section 10(b)’s private right of 

action does not include suits against aiders and abettors). To respect the line that 

Congress has drawn between primary and secondary liability, subsections (a) 

and (c) have been used historically only “to state a claim against a defendant for 

the underlying deceptive devices or frauds themselves, and not as a short cut to 

circumvent Central Bank’s limitations on liability for a secondary actor’s 

involvement in making misleading statements.” SEC v. Lucent Techs., Inc., 610 

F. Supp. 2d 342, 361 (D.N.J. 2009) (citation and quotation marks omitted).

The SEC’s reading of Lorenzo would likely “revive in substance the 

implied cause of action against all aiders and abettors,” thereby “undermin[ing] 

Congress’ determination that this class of defendants should be pursued by the 

SEC and not private litigants.” Stoneridge, 552 U.S. at 162–63. In sum, a

widened scope of scheme liability would defeat the congressional limitation on 

the enforcement of secondary liability, multiply the number of defendants 
22

subject to private securities actions, and render the statutory provision for

secondary liability superfluous. See 15 U.S.C. § 78t(e). It is telling that Lorenzo

preserves the distinction between primary and secondary liability. See Lorenzo, 

139 S. Ct. at 1103 (“We do not believe . . . that our decision . . . weakens the 

distinction between primary and secondary liability.”); id. at 1104 (“The line we 

adopt today is just as administrable” as the “‘clean line’ between conduct that 

constitutes a primary violation of Rule 10b-5 and conduct that amounts to a 

secondary violation” under Central Bank and Janus). 

CONCLUSION

For the foregoing reasons, we conclude that the district court did not abuse 

its discretion when it declined to reconsider the dismissal of the scheme liability 

claims in light of Lorenzo. Accordingly, we affirm.5

5 The SEC requests that we direct the district court to permit amendment if 

Lorenzo abrogates Lentell. Because we hold that Lentell withstands Lorenzo, the 

SEC’s request is moot.