17‐1180‐cv

Saleh Altayyar, et al. v. Etsy, Inc., et al.

    

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 24th day of April , two thousand eighteen.

PRESENT: RICHARD C. WESLEY,  

DENNY CHIN,

     Circuit Judges,

    DENISE COTE,

     District Judge.*

   

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SALEH ALTAYYAR, ANDREW HUANG, SARAH

CHANG, and MARY M. GILTENAN, Individually  

and on Behalf of All Others Similarly Situated,

      Plaintiffs‐Appellants,

ARTHUR CERVANTES, MICHAEL WEISS,

                 Intervenor‐Plaintiffs,

     v.                 17‐1180‐cv

ETSY, INC., CHAD DICKERSON, KRISTINA SALEN,

JAMES W. BREYER, M. MICHELE BURNS,  

                                                 

*

    Denise Cote, of the United States District Court for the Southern District of New York,

sitting by designation.
   

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JONATHAN D. KLEIN, FRED WILSON,  

GOLDMAN SACHS & CO., MORGAN STANLEY  

& CO. LLC, ALLEN & COMPANY LLC, LOOP  

CAPITAL MARKETS LLC, THE WILLIAMS  

CAPITAL GROUP, L.P.,

             Defendants‐Appellees. *

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FOR PLAINTIFFS‐APPELLANTS: MATTHEW L. TUCCILLO (Jeremy A.

Lieberman, Jennifer B. Sobers, on the brief),

Pomerantz LLP, New York, New York.

FOR DEFENDANTS‐APPELLEES   STEPHEN P. BLAKE (James G.

GOLDMAN SACHS & CO. LLC,   Kreissman, Jonathan K. Youngwood, on the

MORGAN STANLEY & CO., LLC,   brief), Simpson Thacher & Bartlett, New York

LOOP CAPITAL MARKETS, LLC, New York.

AND THE WILLIAMS CAPITAL  

GROUP, L.P.:   

FOR DEFENDANTS‐APPELLEES JOSEPH R. PALMORE (Kayvan B. Sadeghi,

ETSY, INC., CHAD DICKERSON,   Joel C. Haims, Seth W. Lloyd, on the brief),

KRISTINA SALEN, JAMES W. Morrison & Foerster LLP, New York, New

BREYER, M. MICHELE BURNS, York, and Washington, D.C.

JONATHAN D. KLEIN, AND

FRED WILSON:         

Appeal from the United States District Court for the Eastern District of

New York (Donnelly, J.).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,

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

                                                 

*

    Mary M. Giltenan is the court‐appointed lead plaintiff.  The Clerk of Court is

respectfully directed to amend the official caption to conform to the above.
   

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In this putative class action, plaintiffs‐appellants Mary M. Giltenan,

individually and on behalf of all others similarly situated, Saleh Altayyar, Andrew

Huang, and Sarah Chang appeal from the district courtʹs judgment entered March 23,

2017 granting the motion to dismiss of defendants‐appellees Etsy, Inc. (ʺEtsyʺ), its Chief

Executive Officer Chad Dickerson, Chief Financial Officer Kristina Salen, Directors

James Breyer, M. Michele Burns, Jonathan Klein and Fred Wilson, and underwriters

Goldman Sachs & Co., Morgan Stanley & Co., Allen & Company LLC, Loop Capital

Markets LLC, and The Williams Capital Group, L.P.  The district court explained its

reasoning in a memorandum decision and order issued March 16, 2017.1  We assume

the partiesʹ familiarity with the underlying facts, procedural history, and issues on

appeal.

Etsy is an online forum that allows individuals to buy and sell handmade

items, vintage goods, and craft supplies.  Plaintiffs are investors who purchased or

acquired Etsy securities and allege that defendants made material misstatements and

omissions that artificially inflated Etsyʹs stock price, causing the plaintiffs to suffer a

loss when the stock price dropped.  Plaintiffsʹ claims largely originated from analyst

reports, including one issued by Wedbush Securities (the ʺWedbush Noteʺ), which

suggested that Etsy was doing a poor job at identifying and removing items from its

                                                 

1   The memorandum decision and order is stamped March 16, 2016 and signed March 15,

2016, but was actually filed on March 16, 2017.   
   

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marketplace that (1) did not meet its terms and guidelines or (2) infringed trademarks

or copyrights.  According to the plaintiffs, the revelations in these notes resulted in a

decline in Etsyʹs stock value, which is the basis for the plaintiffsʹ claim of injury.   

Plaintiffsʹ ʺrevised amendedʺ complaint (the ʺComplaintʺ) alleges that Etsy

and its officers violated Section 10(b) of the Securities Exchange Act of 1934 (the

ʺExchange Actʺ), 15 U.S.C. § 78tj(b) (Count I); Etsyʹs officers violated Section 20(a) of the

Exchange Act, 15 U.S.C. § 78t(a) (Count II) and Section 15 of the Securities Act of 1933

(the ʺSecurities Actʺ), 15 U.S.C. §§ 77o (Count V); and all defendants violated Sections 11

and 12(a)(2) of the Securities Act, 15 U.S.C. §§ 77(k), 77(a)(2) (Counts III‐IV).  The district

court dismissed the Complaint with prejudice for failure to state a claim.  Plaintiffs

appeal.   

We review de novo a district courtʹs order granting a motion to dismiss.  

Stratte‐McClure v. Morgan Stanley, 776 F.3d 94, 99‐100 (2d Cir. 2015).  A complaint must

contain ʺenough facts to state a claim to relief that is plausible on its face.ʺ  Bell Atl. Corp.

v. Twombly, 550 U.S. 544, 570 (2007).  In an Exchange Act case, we apply a heightened

pleading requirement imposed by the Private Securities Litigation Reform Act, 15

U.S.C. § 78u‐4, and Federal Rule of Civil Procedure 9(b), which requires a plaintiff to

ʺstate with particularity the circumstances constituting fraud.ʺ  Fed. R. Civ. P. 9(b); see
   

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also Anschutz Corp. v. Merrill Lynch & Co., 690 F.3d 98, 108 (2d Cir. 2012).2  We conclude

that plaintiffsʹ appeal is without merit and affirm substantially for the reasons set forth

by the district court in its thorough and well‐reasoned order.  

To state a claim under Section 10(b) and 10b‐5, a plaintiff must allege, inter

alia, that each defendant ʺmade misstatements or omissions of material fact.ʺ  Stratte‐

McClure, 776 F.3d at 100 (quoting ATSI Commcʹns Inc. v. Shaar Fund, Ltd., 493 F.3d 87,

105 (2d Cir. 2007)).   If the plaintiff chooses to challenge an opinion as a

misrepresentation, she must allege that the statement was ʺboth objectively false and

disbelieved by the defendant at the time it was expressed.ʺ  Fait v. Regions Fin. Corp., 655

F.3d 105, 110 (2d Cir. 2011).  A statement or omission is material if ʺa reasonable

investor would have considered [it] significant in making investment decisions.ʺ  

Ganino v. Citizens Utils. Co., 228 F.3d 154, 161‐62 (2d Cir. 2000) (citations omitted).  

Pleading a misrepresentation requires pleading an untrue statement.  Omnicare, Inc. v.

Laborers Dist. Council Constr. Indus. Pension Fund, 135 S. Ct. 1318, 1325‐26 (2015).  Sincere

statements of opinion are not untrue statements.   Id.  Similarly, Securities Act claims

under Sections 11 and 12(a)(2) require a plaintiff to plead facts showing that the

                                                 

2   The heightened pleading requirement applies to certain Securities Act claims.  See

Rombach v. Chang, 355 F.3d 164, 170 (2d Cir. 2004). As we agree with the district court, however,

that the Complaint does not meet the ordinary pleading standards of Federal Rule of Civil

Procedure 8, we need not determine whether to apply a heightened pleading standard here.  See

id. at 171 (noting application of heightened pleading standard).  
   

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defendant made a material misstatement or omission.  In re Morgan Stanley Info. Fund

Sec. Litig., 592 F.3d 347, 358‐59 (2d Cir. 2010).   

Here, the Complaint fails to allege actionable material misstatements or

omissions.  Rather, the purported misstatements consist of vague aspirational

statements, see, e.g., Compl. ¶ 123(b) (ʺWe are committed to helping Etsy sellers who

want to work with responsible, small‐batch manufacturing partners to increase their

production.ʺ) (emphasis omitted); id. ¶ 125(a) (ʺWe cancel transactions if fraud is

detected, and we strive to prohibit bad actors from using our platform.ʺ) (emphasis

omitted); or statements of opinion, see, e.g., id. ¶ 127 (ʺAt Etsy, we believe that our

strength and business success rest in the interdependence among Etsy sellers, Etsy

buyers, responsible manufacturers and our employees ‐‐ in other words, our

community.ʺ) (emphasis omitted); or statements of policy and values, see, e.g., id. ¶ 119

(ʺOur values are integral to everything we do. . . . We are a mindful, transparent and

humane business.ʺ) (emphasis omitted).  While the Complaint does rely on some factual

statements, it fails to plausibly allege that they are false or misleading.  See Decker v.

Massey‐Ferguson, Ltd., 681 F.2d 111, 115 (2d Cir. 1982); see also Omnicare, 135 S. Ct. at

1318 (distinguishing between statements of fact (e.g., ʺthe coffee is hotʺ) and statements

of opinion (e.g., ʺI think the coffee is hotʺ)).     
   

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As the plaintiffs have not identified any actionable statements, the district

court correctly dismissed Count I.3  As secondary liability under Section 20(a) depends

on a primary violation of Section 10(b), the district court also correctly dismissed Count

II.  See Steginsky v. Xcelera Inc., 741 F.3d 365, 371 (2d Cir. 2014).  Additionally, the district

court correctly dismissed Counts III‐V as the Securities Act claims also required

allegations of material misrepresentations. 4   

We have considered all of the plaintiffsʹ remaining arguments and

conclude they are without merit.  Accordingly, we AFFIRM the judgment of the district

court.  

     FOR THE COURT:

     Catherine OʹHagan Wolfe, Clerk

                                                 

3   As we conclude that defendants failed to plead material misrepresentations we need not

consider, and express no opinion as to, the issue of scienter.   

4   Plaintiffs also argue that the district court erred in effectively denying their request for

leave to amend by dismissing their complaint with prejudice.  When a plaintiff does ʺnot advise

the district court how the complaintʹs defects would be cured,ʺ however, it is not an abuse of

discretion to implicitly deny leave to amend.  Porat v. Lincoln Towers Cmty. Assoc., 464 F.3d 274,

276 (2d Cir. 2006).  Here, plaintiffs requested leave to amend in a cursory manner without any

explanation for how they would be able to cure the complaintʹs defects.  Accordingly, the

district court did not abuse its discretion in denying plaintiffsʹ leave to amend.