20-1643-cv

New England Carpenters Guaranteed Annuity and Pension Funds v. AmTrust Financial Services, Inc.

United States Court of Appeals

For the Second Circuit

August Term, 2020

(Argued: June 4, 2021 Decided: August 23, 2023)

Docket No. 20-1643-cv

_____________________________________

NEW ENGLAND CARPENTERS GUARANTEED ANNUITY AND 

PENSION FUNDS,

Lead Plaintiff-Appellant,

STANLEY NEWMARK, IRVING LICHTMAN REVOCABLE LIVING TRUST, 

JUPITER CAPITAL MANAGEMENT,

Plaintiff-Movant-Appellants,

SHARON ALBANO, Individually and On Behalf of All Others Similarly 

Situated,

Consolidated-Plaintiff-Movant-Appellant,

JOHN SACHETTI, Individually and On Behalf of All Others Similarly 

Situated,

Consolidated-Plaintiff,

JOEL RUBEL, Individually and On Behalf of All Others Similarly Situated,

Plaintiff,

v.
2

DONALD T. DECARLO, SUSAN C. FISCH, ABRAHAM GULKOWITZ, 

GEORGE KARFUNKEL, JAY J. MILLER,

Consolidated-Defendants-Appellees,

AMTRUST FINANCIAL SERVICES, INC., BARRY D. ZYSKIND, RONALD E. 

PIPOLY, JR., BDO USA, LLP, RBC CAPITAL MARKETS, LLC, UBS 

SECURITIES LLC, CITIGROUP GLOBAL MARKETS INC., KEEFE, 

BRUYETTE & WOODS, INC., MORGAN STANLEY & CO. LLC,

Defendants-Appellees.

_____________________________________

Before:

LOHIER, NARDINI, Circuit Judges, and KOVNER, Judge.*

The Appellants, investors in the securities of AmTrust Financial Services, Inc.,

appeal from a judgment of the United States District Court for the Southern 

District of New York (Kaplan, J.) dismissing their complaint for failure to 

state a claim under Sections 11, 12, and 15 of the Securities Act of 1933 and 

Section 10(b) of the Securities Exchange Act of 1934 against AmTrust, various 

AmTrust corporate officers and board members, AmTrust’s outside auditor, 

and multiple underwriters of AmTrust’s sale of securities. The District Court 

determined that certain public misstatements relating to AmTrust’s 

recognition of revenue generated by its extended warranty contracts and the 

expenses associated with its payment of discretionary employee bonuses 

were non-actionable statements of opinion. We conclude that these 

misstatements of opinions were actionable under the circumstances alleged in 

the Appellants’ complaint. We identify no error in the District Court’s 

dismissal of the Appellants’ remaining claims. We therefore AFFIRM in 

* Judge Rachel P. Kovner, of the United States District Court for the Eastern District 

of New York, sitting by designation.
3

substantial part, VACATE in part, and REMAND the case for further 

proceedings.

ANDREW S. LOVE (Susan K. Alexander, Robbins 

Geller Rudman & Dowd LLP, San Francisco, CA; 

Samuel H. Rudman, David A. Rosenfeld, Mark T. 

Millkey, William J. Geddish, Avital O. Malina, 

Robert D. Gerson, Vincent M. Serra, Robbins Geller 

Rudman & Dowd LLP, Melville, NY; Jeremy A. 

Lieberman, Pomerantz LLP, New York, NY; Thomas 

J. McKenna, Gainey McKenna & Egleston, New 

York, NY; Kim E. Miller, Kahn Swick & Foti, LLC, 

New York, NY, on the brief), Robbins Geller Rudman 

& Dowd LLP, San Francisco, CA, for PlaintiffsAppellants. 

STEVEN M. FARINA (John S. Williams, Matthew J. 

Greer, on the brief), Williams & Connolly LLP, 

Washington, D.C., for Defendants-Appellees 

AmTrust Financial Services, Inc., Barry D. Zyskind, 

Ronald E. Pipoly, Jr., Donald T. DeCarlo, Susan C. 

Fisch, Abraham Gulkowitz, George Karfunkel, and 

Jay J. Miller.

TIMOTHY E. HOEFFNER (Jason D. Gerstein, Ludwig

von Rigal, on the brief), McDermott Will & Emery 

LLP, New York, NY, for Defendant-Appellee BDO 

USA, LLP.

GREGG L. WEINER (Christopher Thomas Brown, 

Ropes & Gray LLP, New York, NY; William T. 

Davison, Ropes & Gray LLP, Boston, MA), Ropes & 

Gray LLP, New York, NY, for Defendants-Appellees 

Morgan Stanley & Co. LLC, Citigroup Global 

Markets Inc., UBS Securities LLC, RBC Capital

Markets, LLC, and Keefe, Bruyette & Woods, Inc.
4

LOHIER, Circuit Judge:

When is a statement of opinion that reflects some subjective judgment

nevertheless actionable under the federal securities laws? 

On April 4, 2017, AmTrust Financial Services, Inc., one of the country’s 

largest publicly traded property and casualty insurers, restated five years of 

its financial results to correct what it acknowledged were significant errors in 

its annual and quarterly reports filed with the Securities and Exchange 

Commission (“SEC”). Among other things, AmTrust disclosed that it had 

improperly recognized most of the expected revenue from certain extended 

warranty contracts at the start rather than over the life of the contracts. 

AmTrust also reported that it had improperly accounted for certain 

discretionary employee bonuses by treating the bonuses as expenses in the 

year they were paid rather than the year they were earned by employees. 

AmTrust’s restatement spurred the Appellants in this case, all investors 

in AmTrust securities,1 to sue AmTrust, its officers (the “Officer Defendants,”

and, together with AmTrust, the “AmTrust Defendants”), members of its 

1 The named plaintiffs are New England Carpenters Guaranteed Annuity and 

Pension Funds, Stanley Newmark, Irving Lichtman Revocable Living Trust, Jupiter 

Capital Management, Sharon Albano, John Sachetti, and Joel Rubel.
5

board of directors (the “Director Defendants”),2 its former auditor,3 and 

certain underwriters of AmTrust securities (the “Underwriter Defendants”),4

for misstating the company’s financial condition and results in violation of

Sections 11, 12 and 15 of the Securities Act of 1933 (the “Securities Act”), and 

Section 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange 

Act”) and the corresponding Rule 10b-5.

The United States District Court for the Southern District of New York 

(Kaplan, J.) dismissed the third amended complaint (the “Complaint”) under 

Federal Rule of Civil Procedure 12(b)(6), holding that none of the 

misstatements were actionable under the securities laws. We agree with the 

District Court’s dismissal of the claims relating to most of the misstatements, 

and we therefore AFFIRM in substantial part. But as we explain below, we 

disagree with the District Court’s dismissal of the Appellants’ claims under 

2 The Officer Defendants are Barry D. Zyskind (at all relevant times AmTrust’s 

President and Chief Executive Officer (“CEO”)) and Ronald E. Pipoly Jr. (at all 

relevant times AmTrust’s Executive Vice President and Chief Financial Officer

(“CFO”)). The Director Defendants are Donald T. DeCarlo, Susan C. Fisch, 

Abraham Gulkowitz, George Karfunkel, and Jay J. Miller.

3 BDO USA, LLP (“BDO”).

4 RBC Capital Markets, LLC, UBS Securities LLC, Citigroup Global Markets Inc., 

Keefe, Bruyette & Woods, Inc., and Morgan Stanley & Co. LLC.
6

Sections 11, 12(a)(2), and 15 of the Securities Act against AmTrust, its officers 

and directors, and the Underwriter Defendants related to AmTrust’s

accounting for revenue generated by its extended warranty contracts and the 

expenses associated with discretionary employee bonuses. We therefore 

VACATE the judgment insofar as it dismisses those claims and REMAND to 

the District Court for further proceedings consistent with this opinion. 

BACKGROUND

I. Factual Background

The following facts, which we assume to be true for purposes of this 

appeal, are drawn from the Complaint and the documents it incorporates by 

reference. See Litwin v. Blackstone Grp., L.P., 634 F.3d 706, 708 (2d Cir. 2011).

AmTrust provides workers’ compensation, commercial automobile 

insurance, general liability, and extended service and warranty coverage. As 

relevant to this appeal, AmTrust promotes and markets extended service 

plans (“ESPs”)—essentially extended warranties. AmTrust receives two types 

of revenue from its ESP business. First, AmTrust and its subsidiaries sell 

contractual liability insurance to various retailers, covering the obligations 

that the retailers assume as part of the ESPs. Second, retailers pay AmTrust 
7

“for marketing and administrative services,” including “call center services,” 

related to the ESPs. Joint App’x 67, 82. During the relevant time, AmTrust 

“recognize[d] revenue related to promotion, marketing and administration 

services at the time of the sale of ESP[s]” but “defer[red] a portion of service 

revenue based upon an estimate of administrative services to be provided in 

future periods.” Joint App’x at 82.

Starting in 2010, AmTrust made a number of acquisitions that fueled 

much of its corporate growth. The acquisition most relevant to this appeal 

closed in 2010, when AmTrust bought Warrantech, a publicly traded 

company focused on providing ESPs and warranty programs for retailers, 

dealers, distributors, and manufacturers that became, after the acquisition, a 

core part of AmTrust’s business. Prior to the acquisition, the SEC had 

investigated Warrantech’s practice of recognizing the full amount of the 

revenue it received from its ESPs and other service contracts at the time the 

contract was entered and the initial sale of services commenced (we will at 

times refer to this as the “time-of-sale” approach). The SEC had instructed

Warrantech instead to recognize the revenue generated by those contracts on 

a straight-line basis over the life of the contracts. Warrantech publicly
8

announced that it would comply with the SEC’s guidance, abandoned its 

time-of-sale approach, and revised its method of recognizing revenue relating 

to the ESPs. For reasons that are unclear, AmTrust, though aware of the 

SEC’s prior guidance to the contrary, reverted back to the original time-of-sale 

approach after it acquired Warrantech. 

From 2012 to 2016 the price of AmTrust stock, which traded on the 

NASDAQ Global Market, skyrocketed. The company’s gross written 

premiums, a central measure of its financial condition, grew from $2.75 billion 

to $7.95 billion. Yet as early as 2013, financial commentators and analysts 

began speculating publicly about AmTrust’s actual financial condition. One

commentator reported that AmTrust may have used accounting gimmicks to 

inflate its earnings and net equity. A financial journal, Barron’s, questioned

AmTrust’s accounting practices.

The bad press failed to slow AmTrust’s growth. In November 2015 

AmTrust filed a preliminary prospectus supplement and prospectus 

supplement with the SEC announcing an offer of 5 million shares of common 

stock (the “November 2015 Offering”) pursuant to a registration statement 

filed on June 11, 2015 (the “2015 Registration Statement”). The transaction, 
9

underwritten by Defendants Citigroup Global Markets Inc. (“Citigroup”) and 

Morgan Stanley & Co. LLC (“Morgan Stanley”), occurred on November 11, 

2015 and raised $320 million. In September 2016 AmTrust filed another

preliminary prospectus supplement and prospectus supplement under the 

2015 Registration Statement, this time announcing that the company planned 

to offer American depositary shares in a transaction (the “September 2016 

Offering”) underwritten by Morgan Stanley, UBS Securities LLC (“UBS”), 

RBC Capital Markets, LLC (“RBC”), and Keefe, Bruyette & Woods, Inc. 

(“KBW”). The prospectus supplement accompanying the September 2016 

Offering incorporated by reference AmTrust’s annual financial report on 

Form 10-K for the year ending December 31, 2015, its 10-Q report for the 

quarter ending March 31, 2015, and various other reports the company had 

previously filed with the SEC. The September 2016 Offering raised $278.2 

million. 

AmTrust’s prospects took a turn for the worse in 2017. In February and 

March 2017 AmTrust announced that accounting errors had prompted it to 

delay the filing of its 10-K for the year ending December 31, 2016 and that it 

needed more time to complete its consolidated financial statements. On April 
10

4, 2017, AmTrust finally filed its Form 10-K for 2016. The 2016 10-K included 

restated financial results for the years ending December 31, 2012, 2013, 2014,

2015, and 2016, as well as each interim period during 2015 and 2016. The

restatement revealed that the company’s income and earnings had been 

significantly overstated since 2012.5 

The restatement identified two material accounting errors. First, 

according to a press release that AmTrust issued describing the errors, 

AmTrust had mistakenly relied on the “upfront recognition of a portion of 

warranty contract revenue associated with administration services, . . . instead 

of deferring recognition of the revenue over the life of the contract.” Joint 

App’x 208. In other words, AmTrust had “historically recognized the 

majority of revenue related to administrative services at the time of sale of 

ESP,” but had “revised its application of the revenue recognition guidance to 

5 To use the annual financial results for 2015 as an example, the errors meant that 

income before other income, income taxes, equity in earnings of unconsolidated 

subsidiaries and non-controlling interest was overstated by 16.79 percent; income 

before income taxes, equity in earnings of unconsolidated subsidiaries and noncontrolling interest was overstated by 17.04 percent; net income was overstated by 

11.56 percent; net income attributable to AmTrust common stockholders was 

overstated by 12.62 percent; diluted earnings per share was overstated by 12.45

percent; comprehensive income was overstated by 22.94 percent; and 

comprehensive income attributable to AmTrust Financial Services, Inc. was 

overstated by 23.55 percent. See Joint App’x 213–14. 
11

record revenue related to administration services on a straight-line basis over 

the term of the ESP contracts.” Joint App’x 80. The second accounting error 

was that discretionary employee “bonuses . . . were expensed in the year paid 

but . . . should have been accrued [as an expense] in the year earned based 

on” accepted accounting standards. Joint App’x 208. The restatement also 

identified other “miscellaneous adjustments” to AmTrust’s financial 

statements that the company concluded were not material.6 Joint App’x 208. 

II. Procedural Background

The Appellants commenced this putative class action in March 2017, 

after AmTrust first publicly disclosed the accounting errors at issue in this 

case. Although there are two slightly different class periods during which the 

Appellants purchased AmTrust securities—the first between February 14, 

2013 and April 10, 2017 (the “AmTrust Class Period”) and the second between 

March 3, 2014 and April 10, 2017, during which BDO served as AmTrust’s 

outside auditor (the “BDO Class Period”)—for our purposes, the distinction is 

immaterial. The Appellants eventually filed a second amended complaint 

asserting claims under Sections 11, 12(a)(2), and 15 of the Securities Act, 15 

6 Although the Appellants challenged other statements below, they do not press 

those arguments on appeal and, as a result, we do not consider them.
12

U.S.C. §§ 77k, 77l(a)(2), 77o, Sections 10(b) and 20(a) of the Exchange Act, 15 

U.S.C. §§ 78j(b), 78t(a), and Rule 10b–5, 17 C.F.R. § 240.10b–5. The District 

Court dismissed the second amended complaint without prejudice, 

concluding for the most part that the alleged misstatements were 

nonactionable statements of opinion. The Appellants filed a third amended 

complaint (the operative complaint here), which the District Court also 

dismissed, largely for the same reasons, this time with prejudice.

This appeal followed. 

DISCUSSION

We review the District Court’s dismissal under Rule 12(b)(6) de novo, 

accepting all factual allegations as true and drawing all reasonable inferences 

in favor of the Appellants. Olagues v. Icahn, 866 F.3d 70, 74 (2d Cir. 2017).

I. The Securities Act Claims Against the AmTrust Defendants

and the Director Defendants

We begin with the Appellants’ claims against the AmTrust Defendants 

and the Director Defendants under Sections 11 and 15 of the Securities Act, as 

well as their claims against AmTrust under Section 12(a)(2) of the Securities 

Act. The Act requires that companies issuing securities make a “full and fair 

disclosure of information” in connection with a public offering. Pinter v.
13

Dahl, 486 U.S. 622, 646 (1988); see Fed. Hous. Fin. Agency for Fed. Nat’l 

Mortg. Ass’n v. Nomura Holding Am., Inc., 873 F.3d 85, 98 (2d Cir. 2017). The 

Act aims to protect investors and to “achieve a high standard of business 

ethics in the securities industry.” Lorenzo v. SEC, 139 S. Ct. 1094, 1103 (2019) 

(quotation marks omitted); see also SEC v. First Jersey Sec., Inc., 101 F.3d 1450, 

1466 (2d Cir. 1996). It thus permits purchasers of a public company’s 

securities to sue the company and certain corporate officers for any material 

misstatements or for the omission of material information in the company’s 

registration statements filed with the SEC. 

Section 11 of the Act, for example, provides:

In case any part of the registration statement, 

when such part became effective, contained an 

untrue statement of a material fact or omitted to 

state a material fact required to be stated therein or 

necessary to make the statements therein not 

misleading, any person acquiring such security 

. . . [may] sue.

15 U.S.C. § 77k(a); see Omnicare, Inc. v. Laborers Dist. Council Const. Indus.

Pension Fund, 575 U.S. 175, 179 (2015). So “[i]n the event of such a misdeed, 

the statute provides for a cause of action by the purchaser of the registered 

security against the security’s issuer, its underwriter, and certain other 
14

statutorily enumerated parties.” In re Morgan Stanley Info. Fund Sec. Litig., 

592 F.3d 347, 358 (2d Cir. 2010). “Section 15, in turn, creates liability for 

individuals or entities that ‘control[ ] any person liable’ under section 11.” Id.

(quoting 15 U.S.C. § 77o). And as relevant to this appeal, Section 12(a)(2) 

similarly imposes liability on any person who offers or sells a security by 

means of a prospectus containing material misrepresentations or omissions.7 

Appellants’ principal challenge under the Securities Act relates to the 

two accounting errors described above that AmTrust identified in its 

restatement as materially affecting its reported income during the relevant 

7 Section 12(a)(2) provides, in relevant part:

Any person who . . . offers or sells a security . . . by the 

use of any means or instruments of transportation or 

communication in interstate commerce or of the mails, 

by means of a prospectus or oral communication,

which includes an untrue statement of a material fact 

or omits to state a material fact necessary in order to 

make the statements, in the light of the circumstances 

under which they were made, not misleading (the 

purchaser not knowing of such untruth or omission), 

and who shall not sustain the burden of proof that he 

did not know, and in the exercise of reasonable care 

could not have known, of such untruth or omission, 

shall be liable . . . to the person purchasing such 

security from him . . . . 

15 U.S.C. § 77l(a)(2).
15

time: (1) its recognition of revenue from administration services based on the 

time-of-sale approach; and (2) its decision to record discretionary bonus 

payments as expenses the year in which they were paid rather than the year 

in which the bonuses were actually earned. 

Relying largely on the Supreme Court’s decision in Omnicare and our 

decision in Fait v. Regions Financial Corp., 655 F.3d 105 (2d Cir. 2011), the 

District Court determined that AmTrust’s financial statements reflected the 

exercise of subjective judgment and were thus non-actionable statements of 

opinion. Cf. Omnicare, 575 U.S. at 184 (noting that an executive who 

expressed “a view, not a certainty” “could not be liable for a false statement of 

fact”). We respectfully disagree with this particular conclusion of the very 

able and experienced District Judge, who did not have the benefit of our latest 

guidance in this area. See Abramson v. Newlink Genetics Corp., 965 F.3d 165 

(2d Cir. 2020).

In Fait, we explained that “when a plaintiff asserts a claim under 

section 11 or 12 based upon a [defendant’s alleged] belief or opinion . . .

liability lies only to the extent that the statement was both objectively false 

and disbelieved by the defendant at the time it was expressed.” Fait, 655 F.3d 
16

at 110. But we have since recognized that the Supreme Court in Omnicare, 

which was decided after Fait, unequivocally “rejected the proposition that 

there can be no liability based on a statement of opinion unless the speaker 

disbelieved the opinion at the time it was made.” Abramson, 965 F.3d at 175. 

By pointing out that a statement of opinion, even if believed, may nonetheless 

be actionable if it contains a factual misstatement or is rendered misleading by 

the omission of material facts, Omnicare expanded the scope of issuer liability 

for statements of opinion. Nevertheless, Fait continues to guide us in 

distinguishing between a statement of fact and a statement of opinion in the 

first place.

So what distinguishes a fact from an opinion under the federal 

securities laws? In general, a fact is “a thing done or existing or an actual 

happening,” while an opinion is “a belief, a view, or a sentiment which the 

mind forms of persons or things.” Omnicare, 575 U.S. at 183 (quotation marks 

omitted). A statement of fact “expresses certainty about a thing,” while a 

statement of opinion does not. Id. Statements of opinion often include 

qualifying language (like “I believe” or “I think”) that conveys a lack of 

certainty about the thing being expressed, marks the statement as reflecting 
17

the speaker’s impression or point of view rather than an objective truth, and 

makes it easier to identify the statement as one of opinion rather than fact. 

See id. at 183–84.

But not all statements of opinion include such qualifying language. In 

Fait, for example, we held that unqualified estimates of goodwill and loan 

loss reserves were statements of opinion because the estimates were clearly 

“subjective . . . rather than objective factual matters.” Fait, 655 F.3d at 111 

(quotation marks omitted). Certain statements address issues so plainly 

subjective, we reasoned, that the statement is one of opinion not just by virtue 

of the words used but also because of the nature of the information conveyed. 

In Fait, we characterized the inquiry as turning on whether the relevant 

statement reflects the speaker’s determination of “a matter of objective fact” 

or instead expresses the speaker’s judgment about a matter that lacks “any 

objective standard.” Id. at 109–10 (quotation marks omitted). The latter 

statement, we said, is “inherently subjective.” Id. at 113.

The rule we articulated in Fait was narrowly invoked in the context of 

estimates of goodwill and loan loss reserves, both of which we characterized 

as inherently requiring a substantial exercise of judgment. Estimates of 
18

goodwill “depend on management’s determination of the ‘fair value’ of the 

assets acquired and liabilities assumed.” Id. at 110. Absent “any objective 

standard such as market price that” the company “should have but failed to 

use in determining” the value of its assets, “an estimate of the fair value of 

those assets will vary depending on the particular methodology and 

assumptions used.” Id. at 110–11. Likewise, in Omnicare, the Supreme Court 

described an opinion variously as a statement that “in ordinary usage . . . does 

not imply . . . definiteness . . . or certainty,” or as a statement that “rest[s] on 

grounds insufficient for complete demonstration.” 575 U.S. at 183 (quotation 

marks omitted). 

If a statement turns on the exercise of subjective judgment, a plaintiff 

will be unable to establish that it is false merely by showing that other 

reasonable alternative views exist. Where those alternatives exist, the speaker 

making the statement (expressing an opinion) can choose among them 

without running afoul of the federal securities provisions at issue here. See

Omnicare, 575 U.S. at 189–90 (“Reasonable investors understand that opinions 

sometimes rest on a weighing of competing facts.”) This is true even if most 

of the existing facts cut against the statement.
19

But opinions lead double lives. Most obviously, as the Supreme Court 

clarified in Omnicare and our Court more recently observed in Abramson, an 

opinion may implicitly convey “facts about how the speaker has formed the 

opinion—or, otherwise put, about the speaker’s basis for holding that view.” 

Omnicare, 575 U.S. at 188. In the context of a securities transaction, a 

reasonable investor expects that opinion statements “rest on some meaningful 

. . . inquiry,” “fairly align[] with the information in the issuer’s possession at 

the time,” and do not “reflect baseless, off-the-cuff judgments,” id. at 188–90; 

see Virginia Bankshares, Inc. v. Sandberg, 501 U.S. 1083, 1093 (1991) (noting 

that even “conclusory terms in a commercial context are reasonably 

understood to rest on a factual basis that justifies them as accurate, the 

absence of which renders them misleading”). If, for example, “a registration 

statement omits material facts about the issuer’s inquiry into or knowledge 

concerning a statement of opinion, and if those facts conflict with what a 

reasonable investor would take from the statement itself,” then the issuer may 

be liable under Section 11’s omissions clause even though the statements 

convey an opinion. Omnicare, 575 U.S. at 189. “By increasing the ability of 

plaintiffs to plead material omissions with respect to statements of 
20

opinion. . . , Omnicare reduced the significance of district courts’ classification 

of statements as those of fact or opinion.” Abramson, 965 F.3d at 176.

Opinions are thus actionable under Section 11 of the Securities Act not 

only when “the speaker did not hold the belief she professed,” Omnicare, 575 

U.S. at 185–86, but also if the statement of opinion contains embedded 

statements of fact that are untrue, or the statement omits information whose 

omission conveys false facts about the speaker’s basis for holding that view 

and makes the opinion statement misleading to a reasonable investor, id. at 

186–88; see Abramson, 965 F.3d at 175; Fait, 655 F.3d at 111 (noting that 

opinion “statements may be actionable if they misstate the opinions or belief 

held, or, in the case of statements of reasons, the actual motivation for the 

speaker's actions, and are false or misleading with respect to the underlying 

subject matter they address” (emphasis omitted)). The standard for opinion 

liability presents “no small task for an investor” seeking to plead that an 

opinion is misleading. Omnicare, 575 U.S. at 194.

So one of the more straightforward ways a statement of opinion may be 

actionable is if it contains an embedded statement of fact that is not true. In 

other words, the opinion may be false or misleading if the embedded fact is 
21

not one as to which reasonable minds can differ. This occurs where, for 

example, there is an accepted method for assessing whether the statement is 

true, but the statement is not justified by the accepted method and clearly 

contradicts the facts on which it purports to rest. Consider the following 

example from Abramson: 

A statement structured, ‘I believe that x is so 

because y has occurred,’ contains the factual and 

falsifiable statement, ‘y has occurred.’ If y has in 

fact not occurred, the statement of opinion is 

actionable because an embedded but complete 

‘statement of a material fact’ . . . can be proven 

false.

Abramson, 965 F.3d at 175.

Statements of opinion are also actionable as false or misleading under 

Section 11’s omission clause if the opinion “omits material facts about the 

issuer’s inquiry into or knowledge concerning a statement of opinion, and if 

those facts conflict with what a reasonable investor would take from the 

statement[of opinion] itself.” Omnicare, 575 U.S. at 188; see Abramson, 965 

F.3d at 175 (“[P]laintiffs can allege that a statement of opinion, without 

providing critical context, implied facts that can be proven false.”). “With 

respect to this [alternative] basis for challenging a statement of opinion, 
22

Omnicare held that the appropriate perspective for identifying whether a 

statement of opinion implies facts is that of the reasonable investor.” 

Abramson, 965 F.3d at 175.

Mindful of these background principles, we conclude that the 

Appellants have stated a claim under Section 11 of the Securities Act against 

the AmTrust Defendants and the Director Defendants based on AmTrust’s 

past recognition of revenue for extended warranty contracts using the time of 

sale approach, as well as its practice of recording discretionary bonuses as 

expenses when they were paid rather than earned.8 For the same reasons, we 

vacate the District Court’s dismissal of the Appellants’ Section 12(a)(2) claims 

against AmTrust arising from the same misstatements. See In re Morgan 

Stanley Info. Fund Sec. Litig., 592 F.3d at 359. 

8 The District Court dismissed the Appellants’ control-person liability claim under 

Section 15 of the Securities Act against AmTrust’s officers and directors because it 

found no primary liability under Section 11. Because we conclude that the 

Appellants have stated a claim for primary liability for the statements about the 

accounting treatment of warranty contracts and bonuses, we vacate the District 

Court’s dismissal of the corresponding Section 15 claims against Zyskind, Pipoly, 

DeCarlo, Fisch, Gulkowitz, Karfunkel, and Miller and remand for further

proceedings consistent with this opinion. See In re Morgan Stanley Info. Fund Sec. 

Litig., 592 F.3d at 358 (noting that “the success of a claim under section 15 relies, in 

part, on a plaintiff’s ability to demonstrate primary liability under section[] 11”).
23

The Appellants claimed that the Defendants were also liable for 

improper reporting of acquisition costs, foreign exchange gains and losses, 

software costs, interest expenses, intercompany transactions, and other 

accounting-related statements. They do not challenge the District Court’s 

dismissal of those claims on appeal, and we therefore affirm the judgment 

insofar as it dismissed the claims. We focus instead, as do the Appellants, on 

the claims relating to the extended warranty contracts and the bonuses. 

A. The Extended Warranties

We turn first to AmTrust’s practice of recognizing “upfront” most of 

the revenue generated from its extended warranty contracts during the

relevant time. In a March 2017 media release, AmTrust clarified that this 

revenue recognition practice was “based on the interpretation of ASC 

[Accounting Standards Codification] 605, Revenue Recognition, used in the 

previously filed financial statements related to multiple-element revenue 

recognition.” Joint App’x 670. The company conceded, however, that it 

should have instead “deferr[ed] recognition of the revenue over the life of the 
24

contract.”9 Joint App’x 670. The restatement acknowledged that the time-ofsale approach resulted in material misstatements regarding AmTrust’s 

income and revenue associated with the warranty contracts. Specifically, it 

explained: 

The Company has historically recognized the 

majority of revenue related to administration 

services at the time of the sale of ESP. However, 

the Company revised its application of the 

revenue recognition guidance to record revenue 

related to administration services on a straight-line 

basis over the term of the ESP contracts. This 

correction of an error, which created an 

overstatement of service and fee income and an 

overstatement of other expenses that were also 

recognized upfront in current periods, required a 

restatement of the Company’s previously issued 

financial statements.

Joint App’x 568 (emphasis added).

On appeal, AmTrust describes its initial representations about the 

revenue related to administrative services for ESPs as statements of opinion, 

9 The Accounting Standards Codification (“ASC”) is the “source of authoritative 

generally accepted accounting principles,” commonly referred to as “GAAP,” 

published by the Financial Accounting Standards Board (“FASB”) “to be applied by 

nongovernmental entities” such as AmTrust. Financial Accounting Standards 

Board, Accounting Standards Codification: Overview and Background 105-10-05-1 

(2020), https://asc.fasb.org/1943274/2147479442; see also Ind. Pub. Ret. Sys. v. SAIC, 

Inc., 818 F.3d 85, 93 (2d Cir. 2016) (relying on FASB standards as a source of GAAP).
25

not fact, because its determination of when to recognize the revenue 

associated with ESPs was a subjective judgment call. In particular, AmTrust 

explains that its pre-restatement decision to recognize this revenue upfront 

was “based on its interpretation of the accounting guidance regarding 

‘multiple-element revenue recognition,’” including ASC 605-25-25-5. 

AmTrust Br. 31. ASC 605-25-25-5 governs when a “delivered item or items 

shall be considered a separate unit of accounting.” Under that accounting 

standard, revenue from these multi-element arrangements (also known as 

bundled contracts or sales) can be recognized upon delivery only if the 

contracts or services “have value to the customer on a standalone basis.” ASC 

605-25-25-5(a), superseded by Accounting Standard Update No. 2014-09 (May 

28, 2014). Lastly, AmTrust observes that a contract or service has “value on a 

standalone basis if [it is] sold separately by any vendor or the customer could 

resell [it] on a standalone basis.” Id. 

The company suggests that assessing value to the customer on a 

standalone basis — that is, determining whether the administrative services 

revenue received from vendors who administer the warranty programs is 

separable from revenue generated by the warranty coverage provided to 
26

customers — is an inherently subjective enterprise. The problem with this 

argument is that AmTrust has never actually contended that its customers can 

resell the administrative services associated with the warranty contracts at 

issue here on a standalone basis or that vendors are able to sell them 

separately. Nothing in the Complaint suggests that doing so is even possible, 

and although AmTrust maintains that there are other ways to determine a 

contract’s “value on a standalone basis” under the services section of ASC 605 

that require judgment calls, nothing in the text of ASC 605, including ASC 

605-25-55-1, on which AmTrust also relies, refers to other methods for

determining value. 

In further support of their respective arguments, both the Appellants 

and AmTrust turn to ASC 605-20-25-3, which provides: 

[R]evenue from separately priced extended 

warranty or product maintenance contracts shall 

be deferred and recognized in income on a 

straight-line basis over the contract period except 

in those circumstances in which sufficient 

historical evidence indicates that the costs of 

performing services under the contract are 

incurred on other than a straight-line basis. 

ASC 605-20-25-3 (emphasis added), superseded by Accounting Standards 

Update No. 2014-09 (May 28, 2014). On one hand, the Appellants suggest that 
27

ASC 605-20-25-3 establishes an objective standard that generally requires the 

recognition of this revenue on a straight-line basis. On the other hand, 

AmTrust defends the District Court’s decision by relying on the exception 

contained in ASC 605-20-25-3, claiming that the determination of whether 

historical evidence is sufficient to permit non-straight-line treatment is “a 

quintessential question of judgment” and that the standard is thus inherently 

subjective. AmTrust Br. 30–31. 

For its part, the District Court concluded that the restated financial 

statements were non-actionable opinions because determining the sufficiency 

of historical evidence that would support incurring costs on a non-straightline basis “inherently requires a subjective judgment as to whether the 

exception applies.” Spec. App’x 89. As the District Court itself recognized, 

however, the determination that AmTrust’s statements are opinion, not fact, is 

not necessarily the end of the analysis. Spec. App’x 42 (“The claim will 

survive . . . if plaintiffs have alleged adequately that the statement was an 

untrue or misleading statement of opinion.”); see Abramson, 965 F.3d at 176. 

The Appellants respond that they have alleged the objectively 

determinable absence of historical evidence necessary to support the non-
28

straight-line accounting approach that AmTrust applied. See Joint App’x 152 

(“ASC Topic No. 605 . . . does not permit the method of recognition employed 

by AmTrust without historical evidence demonstrating the appropriateness of 

such method, historical evidence AmTrust acknowledges it never 

possessed.”). AmTrust’s reliance on the sufficiency of historical evidence to 

justify its accounting treatment, the Appellants contend, runs headlong into 

the Complaint’s allegation, which at this stage we accept as true, that there 

was in fact no historical evidence to support its approach. 

We agree with the Appellants that subjective judgments about the 

sufficiency of historical evidence to support a particular accounting treatment 

presuppose the existence of some historical evidence. Indeed, AmTrust now 

acknowledges that it should have recorded revenue for its warranty contracts 

on a straight-line basis in reliance on ASC 605-20-25-3. And no one disputes 

that GAAP permits time-of-sale recognition only if some historical evidence 

justified doing so. At the pleading stage, we think the alleged absence of such 

evidence, if accepted as true, means that AmTrust’s representations about the 

warranty contract revenue reported in its historical consolidated financial 

statements misled investors to conclude that the company was aware of some 
29

historical evidence in support of recognizing the revenue on a non-straightline basis, when in (alleged) fact it was not. In other words, AmTrust is 

plausibly alleged to have “sa[id] one thing and [held] back another.” 

Omnicare, 575 U.S. at 192. 

We therefore conclude that AmTrust’s financial statements relating to 

the warranty contract revenue reported in its historical consolidated financial 

statements were actionable statements of opinion under Section 11, and we 

vacate the District Court’s dismissal of the Appellants’ Section 11 claims

against the AmTrust Defendants and the Director Defendants arising from 

those statements.

B. The Discretionary Bonuses

We turn next to AmTrust’s practice of expensing certain discretionary 

employee bonuses in the year the bonuses were paid rather than the year the 

bonuses were earned. 

According to the Complaint, in its restatement AmTrust “admitted that 

the financial statements it issued to investors during the relevant period were 

presented in violation of GAAP by failing to timely accrue compensation 

related expenses.” Joint App’x 83. Specifically, AmTrust explained that:
30

In prior years, the Company had expensed 

discretionary bonuses paid to its employees in the 

year the bonuses were paid because the Company 

did not consider the discretionary bonuses to be 

“probable,” which is the standard required for 

accrual. Upon review of ASC 270, Interim 

Reporting, and ASC 450, Contingencies, 

management determined that its application was 

incorrect because, even though the bonuses were 

discretionary, the bonuses should have been 

estimated and expenses assigned to interim 

periods so that the interim periods bear a 

reasonable portion of the anticipated annual 

amount. 

Joint App’x 83.

The parties agree that ASC 450 applies to determine how to account for 

these bonuses. Under ASC 450-20-25-2, companies should expense costs 

when it is “probable” that a liability has been incurred and when “[t]he 

amount of loss can be reasonably estimated” within a range.10 AmTrust 

asserts that its decision to expense bonuses in the period they were paid 

rather than earned in its previously issued consolidated financial statements 

is a classic exercise of subjective judgment. Suggesting to investors that it is 

not “probable” that the company would pay bonuses at a future time is, the 

10 See also ASC 450-10-55-3 (“Amounts owed for services received. . . are not 

contingencies even though the accrued amounts may have been estimated; there is 

nothing uncertain about the fact that those obligations have been incurred.”)
31

company asserts, merely stating a non-actionable opinion. Even assuming 

without deciding that these are statements of opinion, we are not persuaded. 

In our view, there is some reason to conclude that the Appellants have 

plausibly alleged that AmTrust’s method of deferring the recognition of 

expenses related to bonuses until the bonuses were paid (thus delaying the 

charge to income) was objectively improper rather than an exercise of 

subjective judgment. In particular, the Appellants allege that AmTrust had a 

practice of paying bonuses. The Complaint thus plausibly alleges that there 

was no basis to conclude that the continued payment of earned bonuses was 

not “probable” and that such bonuses therefore could not be expensed when 

earned. There is no dispute that the bonuses at issue on appeal were earned 

during the relevant periods and, as AmTrust’s restatement eventually 

acknowledged, that they should have been expensed during those periods. 

Although multiple accounting standards may have been relevant to 

determining when to expense a bonus, all of the standards in play here 

support the position that the bonuses should have been expensed in the year 
32

they were earned, not the year they were paid.11 We are not aware of a GAAP 

provision on which AmTrust relied that suggests otherwise. And the fact that 

these GAAP standards, together or alone, are subject to misreading, 

misinterpretation, or misapplication, as happened here, does not necessarily 

mean that they entail an exercise of subjective judgment. 

But we do not need to decide whether these financial statements are 

statements of fact or, as AmTrust asserts, statements of opinion. See

Abramson, 965 F.3d at 176. Even if they are statements of opinion (because, 

say, determining whether it is “probable” that the corporate officers would 

exercise their discretion to pay the bonuses at a future time is a matter of 

subjective judgment), we conclude that the statements are nonetheless

actionable because the Complaint adequately alleges that it was improbable 

that the earned bonuses would not be paid. Accepting that allegation as true 

makes it quite plausible that the AmTrust Defendants did not base the 

company’s statements of probability on a “meaningful . . . inquiry,” that their 

statements did not “fairly align[] with the information in the issuer’s 

11 Under ASC 450-10-55, bonuses should have been expensed as incurred during the 

relevant period. ASC 710-10-25 likewise required AmTrust to expense an 

employee’s right to be compensated when earned. And ASC 270 required the 

bonuses to be expensed as incurred in interim periods. 
33

possession at the time,” and that there was no basis for AmTrust to state that 

the bonuses should be expensed in the year they were paid rather than 

earned. Omnicare, 575 U.S. at 188-89.

For these reasons, we conclude that the Complaint states a claim under 

Section 11 against the AmTrust Defendants and the Director Defendants

arising from AmTrust’s misrepresentation of reported income in its historical 

consolidated financial statements based on the erroneous accounting 

treatment relating to bonus payments. 

C. SOX Certifications by AmTrust Executives

The remaining Section 11 claims against the AmTrust Defendants are a 

different matter. They rest on certifications by company executives regarding, 

among other things, the accuracy of AmTrust’s financial reporting, its 

conformity with GAAP, and the effectiveness of AmTrust’s disclosure 

controls and procedures. The District Court concluded that these 

certifications were non-actionable statements of opinion. We agree.

First, the Officer Defendants, Zyskind (the CEO) and Pipoly (the CFO), 

attested to (1) the accuracy of AmTrust’s financial reporting, (2) the

effectiveness of the company’s disclosure controls and procedures, and (3) 
34

their disclosure of any weaknesses in internal controls over the company’s

financial reporting in certifications mandated by Section 302 of the Sarbanes 

Oxley Act (“SOX”), 15 U.S.C. § 7241(a); see also 17 C.F.R. §§ 240.13a-14, 

240.13a-15, 240.15d-15. Their certifications about the accuracy of AmTrust’s

financial reporting, including that financial statements were prepared in 

conformity with GAAP, signal that they are opinions by stating that they are

“based on [the] knowledge” of the officer. See Joint App’x 103–04, 153. There 

is no allegation that the opinion is actionable on the ground that it was not

based on the officer’s knowledge.12 Similarly, we conclude that the two other 

challenged SOX certifications relating to (1) disclosure controls and 

procedures, and (2) internal control over financial reporting contain language 

that conveys management’s subjective judgments about the company’s 

internal controls and thus constitute statements of opinion. 

The Appellants point to allegations that AmTrust later reversed course 

and that its restatement acknowledged a failure of internal controls. The 

Appellants insist that the reversal compels the inference that the SOX 

12 For the reasons discussed below, we disagree with the Appellants that the

existence of the Warrantech SEC guidance letter demonstrates that the officers knew

the financial reports were false or misleading or did not comply with GAAP, even 

with all reasonable inferences drawn in the Appellants’ favor. 
35

certifications were not believed when made. But AmTrust’s change of 

opinion, standing alone, does not mean that the original certified opinions 

were disingenuous.13 Nor is a genuinely held opinion that “turned out to be 

wrong” necessarily actionable. Omnicare, 575 U.S. at 186. In any event, as 

noted, the Complaint fails to adequately allege that the AmTrust executives 

who signed the certifications did not believe what they certified. 

Finally, Appellants contend that the certifications were misleading 

because they falsely conveyed the existence of “‘some meaningful . . . 

inquiry’” conducted by the certifying executives. Appellants’ Br. 42 (quoting

Omnicare, 575 U.S. at 188). But here too, the Complaint fails to allege any 

facts that establish a lack of meaningful inquiry, other than the fact that the 

certification turned out to be wrong. 

For these reasons, we affirm the District Court’s dismissal of the 

Appellants’ Section 11 claims relating to the SOX certifications.

13 The Appellants reference in passing on appeal that the SOX certifications 

contained embedded statements of fact. See Appellants’ Br. 41. We conclude that 

the argument is abandoned because the Appellants have failed to develop it. See

Zhang v. Gonzales, 426 F.3d 540, 545 n.7 (2d Cir. 2005). 
36

II. The Exchange Act Claims Against the AmTrust Defendants

The District Court also dismissed the Appellants’ claims against the 

AmTrust Defendants under Section 10(b) of the Exchange Act and Rule 10b-5. 

To survive a motion to dismiss under these provisions, “a plaintiff must 

allege that [each] defendant (1) made misstatements or omissions of material 

fact, (2) with scienter, (3) in connection with the purchase or sale of securities, 

(4) upon which the plaintiff relied, and (5) that the plaintiff’s reliance was the 

proximate cause of its injury.” ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 

F.3d 87, 105 (2d Cir. 2007); see also Ind. Pub. Ret. Sys. v. SAIC, Inc., 818 F.3d 

85, 93 (2d Cir. 2016). Under the Private Securities Litigation Reform Act of 

1995, moreover, a plaintiff must “state with particularity facts giving rise to a 

strong inference that the defendant acted with [scienter].” 15 U.S.C. § 78u–

4(b)(2)(A).

In contrast to the Securities Act claims under Section 11, which do not 

require a showing of scienter,14 the central question with respect to the 

14 As we explained in Fait, “[w]hile issuers are subject to virtually absolute liability 

under section 11, the remaining potential defendants under sections 11 and 12(a)(2) 

[of the Securities Act] may be held liable for mere negligence.” Fait, 655 F.3d at 109 

(cleaned up). And “in contrast to claims brought pursuant to section 10(b) of the 

[Exchange Act], claims under sections 11 and 12 do not require allegations of 

scienter.” Id.
37

Appellants’ claims under the Exchange Act is whether the Complaint

adequately “pleaded facts giving rise to a strong inference that the . . .

Defendants acted with ‘scienter, a mental state embracing intent to deceive, 

manipulate, or defraud.’” In re Advanced Battery Techs., Inc., 781 F.3d 638, 

644 (2d Cir. 2015) (quoting Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 

U.S. 308, 319 (2007)). Scienter may be established by 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, 493 F.3d at 99; see Set Cap. 

LLC v. Credit Suisse Grp. AG, 996 F.3d 64, 78 (2d Cir. 2021). Any allegation of 

conscious misbehavior or recklessness should be “viewed holistically and 

together with the allegations of motive and opportunity” to determine 

whether the complaint supports a strong inference of scienter. Set Cap. LLC, 

996 F.3d at 78. Although “the requisite intent of the alleged speaker of the 

fraud need not be alleged with great specificity,” Chill v. Gen. Elec. Co., 101 

F.3d 263, 267 (2d Cir. 1996), the “inference of scienter must be more than 

merely plausible or reasonable—it must be cogent and at least as compelling 

as any opposing inference of nonfraudulent intent.” Tellabs, 551 U.S. at 314; 
38

see also In re Advanced Battery, 781 F.3d at 644; ECA & Loc. 134 IBEW Joint

Pension Tr. of Chicago v. JP Morgan Chase Co., 553 F.3d 187, 198 (2d Cir. 

2009). 

Keeping that standard in mind, we agree with the District Court that 

the Complaint does not adequately allege that the AmTrust Defendants acted 

with scienter. 

First, the Complaint does not adequately plead scienter based on the 

AmTrust Defendants’ motive and opportunity to commit fraud. Urging 

otherwise, the Appellants rely on the AmTrust Defendants’ financial 

incentives to keep share prices high and to fuel the company’s acquisition 

strategy. But the desire to sustain “the appearance of corporate profitability” 

is not itself the kind of incentive or motivation that raises an inference of 

scienter. Chill, 101 F.3d at 268. The Appellants also direct us to allegations 

that Pipoly and other top executive officers (but, notably, not Zyskind or the 

Board Defendants) sold a significant number of shares of AmTrust stock

during the AmTrust Class Period. In doing so, however, the Appellants

acknowledge that Pipoly’s significant selloff began several months before the 

AmTrust Class Period, a fact that renders his stock sales during this class 
39

period less unusual. See Ark. Pub. Emps. Ret. Sys. v. Bristol-Myers Squibb 

Co., 28 F.4th 343, 355 (2d Cir. 2022).

Nor does the Complaint allege facts that provide “strong circumstantial 

evidence of conscious misbehavior or recklessness.” ATSI Commc’ns, 493 

F.3d at 99. We have explained that “[s]cienter based on conscious 

misbehavior . . . requires a showing of deliberate illegal behavior, a standard 

met when it is clear that a scheme, viewed broadly, is necessarily going to 

injure.” Gould v. Winstar Commc'ns, Inc., 692 F.3d 148, 158 (2d Cir. 2012) 

(quotation marks omitted). Recklessness, meanwhile, entails “an extreme 

departure from the standards of ordinary care . . . to the extent that the danger 

was either known to the defendant or so obvious that the defendant must 

have been aware of it.” ECA, 553 F.3d at 198 (quotation marks omitted). 

None of the facts alleged in the Complaint—including the “magnitude” of the 

restatement and the duration of the period it covered—satisfy these 

requirements. Joint App’x 213. In determining whether the AmTrust 

Defendants acted with scienter, it is not enough that it took a period of years 

for AmTrust to acknowledge its significant accounting errors. 
40

Finally, the Appellants argue that the AmTrust Defendants did not 

believe their accounting judgments regarding the early recognition of revenue 

on the administration-service fees connected to AmTrust’s warranty program. 

The Appellants allege that AmTrust knew its accounting treatment was 

wrong because Warrantech, the company AmTrust acquired in 2010, 

announced in its Form 10-K for the year ended March 31, 2006, that it had 

changed its revenue-recognition practices regarding its warranty contracts in 

response to SEC guidance. In particular, the Complaint alleges that AmTrust 

must have known, or recklessly disregarded, that the SEC earlier had advised

Warrantech that its time-of-sale approach was improper and that its warranty 

business compelled a straight-line revenue recognition approach. But we 

think that AmTrust’s subsequent resort to a time-of-sale approach for the 

contracts, though wrong, is more plausibly explained by the changes to the 

guiding accounting principles since 2006 to which AmTrust points us, or to 

AmTrust’s negligence.15 See AmTrust Br. 42–44. Negligence, even in a 

“heightened form,” is not sufficient to allege scienter. Novak, 216 F.3d at 312.

15 The Appellants also call our attention to purported “red flags” in the form of press 

coverage criticizing AmTrust’s accounting practices generally, although none of the 

press articles mentions the two central accounting issues that led to AmTrust’s 
41

For these reasons, we conclude that the Complaint fails to raise a strong 

inference of scienter, and we affirm the dismissal of the Appellants’ claims 

against the AmTrust Defendants under Section 10(b) and Rule 10b–5.16 We

also affirm the District Court’s corresponding dismissal of the Appellants’ 

‘control person’ claim under Section 20(a) of the Exchange Act because such a 

claim is “necessarily predicated on a primary violation of securities law.” 

Rombach v. Chang, 455 F.3d 164, 177–78 (2d Cir. 2004). 

III. The Securities Act Claims Against the Underwriter Defendants

The Appellants also assert claims against the Underwriter Defendants 

under Sections 11 and 12(a)(2) of the Securities Act stemming from the two 

securities offerings made pursuant to AmTrust’s 2015 Registration Statement. 

The first is AmTrust’s November 2015 Offering, underwritten by Citigroup 

and Morgan Stanley, of 5 million shares of common stock pursuant to a 

restatement. Given the generality of these media reports, we are not persuaded that 

they support an inference of scienter that is at least as compelling as any opposing 

inference of nonfraudulent intent.

16 We have applied the holding in Omnicare to claims brought under Section 10(b) of 

the Exchange Act. See Tongue v. Sanofi, 816 F.3d 199, 209–10 (2d Cir. 2016). 

Because, as we previously concluded, the Officer Defendants’ certifications are nonactionable statements of opinion, we also affirm the dismissal of the Appellants’

Section 10(b) claims based on these certifications. See City of Omaha, Neb. Civilian 

Emps.’ Ret. Sys. v. CBS Corp., 679 F.3d 64, 67–68 (2d Cir. 2012) (noting that Section 

10(b) and Section 11 claims “share a material misstatement or omission element”). 
42

preliminary prospectus supplement and a prospectus supplement. This 

preliminary prospectus supplement and prospectus supplement, together 

with the 2015 Registration Statement, incorporated by reference AmTrust’s 

annual financial report for 2014 and quarterly financial reports for the first 

three fiscal quarters of 2015. The second offering is AmTrust’s September 

2016 Offering, underwritten by Morgan Stanley, RBC, UBS, and KBW, of 10

million depository shares pursuant to a preliminary prospectus supplement 

and a prospectus supplement that, together with the 2015 Registration 

Statement, incorporated by reference AmTrust’s annual financial report for 

2015 and quarterly financial reports for the first two quarters of 2016. Each of 

the relevant financial reports contained overstated income numbers arising 

from the time-of sale approach for the warranty contracts and the improper 

expensing of bonuses. 

As a threshold matter, three of the Underwriter Defendants—Morgan 

Stanley, UBS, and KBW—contend that the Appellants lack standing to even 

assert Section 12 claims against them in connection with the September 2016 

Offering because the Complaint does not specifically allege that the 
43

Appellants purchased securities from those underwriters.17 Under Section 

12(a)(2), a plaintiff has standing to bring an action against the seller of a 

security only if the plaintiff is “the person purchasing such security from 

them.” Akerman v. Oryx Commc’ns, Inc., 810 F.2d 336, 344 (2d Cir. 1987)

(quotation marks omitted); see also Freidus v. Barclays Bank PLC, 734 F.3d 

132, 141 (2d Cir. 2013) (“In order to have standing under § 12(a)(2), . . .

plaintiffs must have purchased securities directly from the defendants.”); 15 

U.S.C. § 77l(a). A “statutory seller” may include an underwriter who 

successfully solicited the transfer of title from issuer to purchaser in exchange 

for some financial gain.18 Morgan Stanley, UBS, and KBW assert that in a case 

involving multiple underwriters of a single offering, the purchaser of a 

security must in its pleadings specifically identify which underwriter sold the 

17 The Underwriter Defendants do not challenge Appellants’ standing to sue the 

underwriters of the November 2015 Offering—Citigroup and Morgan Stanley—or 

their standing to sue RBC for the September 2016 Offering. 

18 In a similar vein, a purchaser of a security has standing to bring an action under 

Rule 10b–5a against underwriters (and brokers, dealers, and non-issuer sellers) for 

material misstatements about the security “if those entities made material

misstatements about the security, as long as the plaintiff[] purchased or sold the 

securities about which the misstatements were made.” Menora Mivtachim Ins. Ltd. 

v. Frutarom Indus. Ltd., 54 F.4th 82, 88 (2d Cir. 2022); see In re NYSE Specialists Sec.

Litig., 503 F.3d 89, 102 (2d Cir. 2007). 
44

security at issue in order to have standing to sue that underwriter. We have 

not yet addressed this question. 

We conclude that the Appellants have adequately established standing 

under Section 12(a)(2) by alleging that they purchased securities pursuant to 

the “pertinent offering documents” or in the relevant offerings underwritten 

by the defendants. In re Lehman Bros. Sec. & ERISA Litig., 799 F. Supp. 2d 

258, 311 (S.D.N.Y. 2011) (Kaplan, J.). Here, according to the Complaint, the 

Appellants bring their Section 12(a)(2) claims on their own behalf and on 

behalf of “other members of the Securities Act Class who purchased AmTrust 

common stock or [shares sold in connection with the September 2016 

Offering] pursuant to the Prospectuses.” Joint App’x 132 (emphasis added). 

We can reasonably infer from these allegations that the Appellants acquired 

securities from the Underwriter Defendants in connection with the September 

2016 Offering. We are therefore satisfied that the allegations suffice to 

establish the Appellants’ standing in this case. See, e.g., John v. Whole Foods 

Mkt. Grp., Inc., 858 F.3d 732, 736–38 (2d Cir. 2017) (noting that “general 

factual allegations of injury may suffice” to establish standing, “for on a 
45

motion to dismiss we presume that general allegations embrace those specific 

facts that are necessary to support the claim” (cleaned up)). 

Turning to the merits, the District Court dismissed the Appellants’ 

Section 11 and Section 12 claims against the Underwriter Defendants,

concluding that the Appellants had “fail[ed] to allege any untrue or 

misleading statements of material fact or opinion with respect to those 

claims.” Spec. App’x 73. In other words, the District Court dismissed these 

claims, which it described as “identical to those of the Securities Act claims 

asserted against the AmTrust [D]efendants,” for effectively the same reasons 

it dismissed the claims against the AmTrust Defendants. Spec. App’x 73. For 

reasons we have already provided, we disagree with the District Court’s 

conclusion that the reported income statements related to AmTrust’s 

warranty contracts and its employee bonuses were non-actionable opinions. 

Insofar as the District Court dismissed the Appellants’ claims under Section 

11 and Section 12(a)(2) against the Underwriter Defendants arising from those 

two categories of statements, we vacate the dismissal and remand for further 
46

proceedings consistent with this opinion. As to any remaining claims against 

the Underwriter Defendants, we affirm the District Court’s dismissal. 

IV. The Claims Against BDO, AmTrust’s Outside Auditor

Finally, we address the Appellants’ claims against AmTrust’s outside 

auditor, BDO, under Section 11 of the Securities Act in connection with BDO’s

audit reports on AmTrust’s financial statements and its system of internal 

controls over financial reporting for each of the years ended December 31, 

2013–15, and under Section 10(b) of the Exchange Act and Rule 10b-5 in 

connection with its audit report for the year ending December 31, 2013 (“2013

Audit Opinion”), which was included in AmTrust’s 2013 Form 10-K. 

We begin with the Securities Act claims. Section 11 provides in relevant 

part that if “any part of the registration statement . . . contained an untrue 

statement of material fact,” anyone acquiring the associated security may sue 

“every accountant . . . who has with his consent been named as having 

prepared or certified any part of the registration statement or . . . any report or 

valuation which is used in connection with the registration statement.” 15 

U.S.C. § 77k(a)(4). BDO is thus responsible under Section 11 for any material

inaccuracy in the AmTrust registration statements that it certified, or in
47

financial reports incorporated in those statements. Id.; see Miyahira v. 

Vitacost.com, Inc., 715 F.3d 1257, 1265 (11th Cir. 2013); Belizan v. Hershon, 495 

F.3d 686, 692 (D.C. Cir. 2007); see also Herman & MacLean v. Huddleston, 459 

U.S. 375, 381 n.11 (1983).

As BDO observes, the Appellants have not developed the argument in 

their opening brief challenging the District Court’s dismissal of the Section 11 

claim against BDO. The challenge, if it can be called that, appears in a 

footnote. See Norton v. Sam’s Club, 145 F.3d 114, 117 (2d Cir. 1998) (“[A]n 

argument made only in a footnote [i]s inadequately raised for appellate 

review.”). Although the Appellants develop the argument somewhat in their 

reply brief, that is too little too late. See JP Morgan Chase Bank v. Altos 

Hornos de Mexico, S.A. de C.V., 412 F.3d 418, 428 (2d Cir. 2005)

(“[A]rguments not made in an appellant’s opening brief are waived even if 

the appellant . . . raised them in a reply brief.”). We thus conclude that the 

Appellants’ challenge to the dismissal of the Section 11 claim against BDO is 

abandoned, we affirm the District Court’s dismissal of that claim, and we 

proceed to examine the Exchange Act claims against BDO. 
48

The Appellants contend that BDO is liable under Section 10(b) of the 

Exchange Act for the 2013 Audit Opinion, which stated that BDO had 

conducted its audit in accordance with standards promulgated by the Public 

Company Accounting Oversight Board (“PCAOB”), and that the audit 

provided a reasonable basis for BDO to determine that AmTrust’s financial 

statements were fairly presented. Joint App’x 246–47. 

On its face, the 2013 Audit Opinion appears in the same guise as the 

SOX certifications that we have already concluded are non-actionable 

opinions. But the Complaint alleges some key facts that differentiate the 

audit opinion from those certifications. The Appellants allege that the BDO 

engagement partner on the audit, Richard J. Bertuglia, and another BDO 

partner, John W. Green, in fact failed to complete the necessary checks and 

audit work papers before issuing the audit opinion; that they signed several 

audit work papers without reviewing them; and that they failed to verify that 

all the necessary audit work was performed before issuing the opinion. The

Appellants also allege that the SEC later found that (1) Bertuglia had violated 

the PCAOB standards by failing to supervise and exercise due professional 

care, properly examine journal entries for evidence of possible material 
49

misstatement due to fraud, or perform sufficient tests of internal controls and 

substantive audit procedures to support their final opinion, and (2) Green 

violated PCAOB standards by failing to perform the appropriate engagement 

quality review. 

We agree with the District Court that the Appellants have adequately 

alleged that BDO’s audit opinion contained potentially actionable

misstatements of opinion because the Complaint “render[s] it plausible that 

Bertuglia,” who signed the audit opinion, “disbelieved the statement that the 

audit was conducted in accordance with the relevant PCAOB standards.” 

Spec. App’x 78. The Appellants have also adequately alleged that BDO’s 

statement that it “believe[d] [its] audits provide a reasonable basis for [its] 

opinion,” Joint App’x 246–47, would lead a reasonable investor to conclude

that BDO had conducted “some meaningful . . . inquiry,” Omnicare, 575 U.S. 

at 188, when in fact, according to the Complaint, BDO never conducted such 

an inquiry. 

But we also agree with the District Court that the Appellants’ Section 

10(b) and Rule 10b-5 claim against BDO must be dismissed because the 
50

Complaint does not adequately allege that the misstatement in BDO’s 2013 

Audit Opinion was material.

To state a claim under § 10(b) and the 

corresponding Rule 10b–5, a plaintiff must plead 

that the defendant, in connection with the 

purchase or sale of securities, made a materially 

false statement or omitted a material fact, with 

scienter, and that the plaintiff’s reliance on the 

defendant’s action caused injury to the plaintiff.

Ganino v. Citizens Utils. Co., 228 F.3d 154, 161 (2d Cir. 2000). “At the 

pleading stage, a plaintiff satisfies the materiality requirement . . . by alleging 

a statement or omission that a reasonable investor would have considered 

significant in making investment decisions.” Id. at 161–62; see Basic Inc. v.

Levinson, 485 U.S. 224, 231–32 (1988). “[A] complaint may not properly be

dismissed . . . on the ground that the alleged misstatements or omissions are

not material unless they are so obviously unimportant to a reasonable

investor that reasonable minds could not differ on the question of their

importance.” Ganino, 228 F.3d at 162 (quotation marks omitted); see Litwin, 

634 F.3d at 717. 

As the District Court concluded, the Complaint fails to allege any link 

between BDO’s misstatements in the 2013 Auditor Opinion and the material 
51

errors contained in AmTrust’s 2013 Form 10-K. The audit statements to 

which the Appellants point were “so general” in this case “that a reasonable 

investor would not depend on [them] as a guarantee.” ECA, 553 F.3d at 206. 

Appellants’ “claim that these statements were knowingly and verifiably false 

when made does not cure their generality, which is what prevents them from 

rising to the level of materiality required to form the basis for assessing a 

potential investment.” SAIC, 818 F.3d at 97–98 (quotation marks omitted). 

We do not mean to suggest that audit opinions will always fail the materiality 

test because the statements they contain are too general for investors to rely 

on. Rather, in this case, as the District Court held, Appellants have failed “to 

allege any facts relevant to the way or ways in which BDO's failure to 

supervise, review, document, and perform in good faith the 2013 audit would 

have been significant to a reasonable investor in making investment 

decisions.” Spec. App’x 79. We might have come to a different conclusion 

had such facts been alleged. 

For these reasons, we affirm the District Court’s dismissal of the 

Appellants’ Exchange Act claims under Section 10(b) and Rule 10b-5 against 

BDO.
52

CONCLUSION

To summarize: 

1. We vacate the dismissal of the Appellants’ Section 11 claims

against the AmTrust Defendants and the Director Defendants, 

the Section 12(a)(2) claims against AmTrust, and the Section 

15 claims against the Officer Defendants and Director 

Defendants (Zyskind, Pipoly, DeCarlo, Fisch, Gulkowitz, 

Karfunkel, and Miller) relating to AmTrust’s accounting for

certain warranty contracts and bonuses.

2. We vacate the dismissal of the Appellants’ claims under 

Section 11 and Section 12(a)(2) against the Underwriter 

Defendants relating to AmTrust’s accounting for certain 

warranty contracts and bonuses.

3. We otherwise affirm the judgment of the District Court.

We have considered the Appellants’ remaining arguments and 

conclude that they are without merit. Accordingly, for the reasons set forth 

above, the judgment of the District Court is AFFIRMED in part and 

VACATED in part, and the case is REMANDED for proceedings consistent 

with this opinion.