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

- Appell ant , STANLEY NEWMARK, IRVING LICHTMAN REVOCABLE LIVING TRUST, JUPITER CAPITAL MANAGEMENT , Plaintiff

- Movant

- Appellants, SHARON ALBANO, Individually and On B ehalf of A ll O thers S imilarly S ituated , 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

- Defendant s - Appe llees, AMTRUST FINANCIAL SERVICES, INC., BARRY D. ZYSKIND, RONALD E. PIPOLY, JR., BDO USA, LLP, RBC CAPITAL MARKETS, LLC, UBS SECURITIES LLC, CITIGR OUP GLOBAL MARKETS INC., KEEFE,

BRUYETTE & WOODS, INC., MORGAN STANLEY & CO. LLC , Defendant s - Appe ll ee s .

_____________________________________ 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. ) dismiss ing the ir complaint for failure to state a clai m under Section s 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 Distri ct 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 t h e se mis statements 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

. A NDREW S. L OVE (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; Jerem y 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 Plaintiffs

Appellants

. S TEVEN M. F ARINA (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 G ulkowitz, George K arfunkel, and Jay J. Miller.
T IMOTHY E. H OEFFNER (Jason D. Gerstein, Ludwi g von Rigal, on the brief ), McDermott Will & Emery LLP, New York, NY, for Defendant

- Appellee BDO USA, LLP

. G REGG L. W EINER (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, Br u yette & 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 contrac ts. AmTrust also reported that it had improperly account ed 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

. Am T rust’s restatement spurred the A ppellants in this case, all investors in Am T rust securities , 1 to sue Am T rust , 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 Jo el Rubel

.5 board of directors (the “Director Defendants”) , 2 its former auditor, 3 and
certain underwriters of Am T rust securities (the “Underwriter Defendants”) , 4
for misstating the company’s financial condition and results in violation of
Section s 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

. T he 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) , h olding that none of the

m isstatements were actionable under the securities laws

. W e agree with the
District Court’s dismissal of the claims relating to most of the mis statements, 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 (“C F O”) ). The Director Defendants are Donald T. DeCarlo, Susan C. Fisch, Abraham Gulkowitz, George K arfunkel, and Jay J. Miller.

3 BDO USA, LLP (“BDO”).

4 RBC Capital Markets, LLC, UBS Securities LLC, Citigroup Global M arkets 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 warrant y contracts and the
expenses associated with discretionary employee bonuses . We therefore
VACATE the judgment insofar as it dismisse s 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. AmTr ust 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 AmTrust7 “for marketing and administrati ve 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, Am T rust 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 provid ing ESPs and warranty programs for retailers, dealers, distributors, and manufacturers that became, after the acquisition, a core part of AmTrust’s business. P rior to the acquisition , t he S EC had investigated Warrantech’s practice of r ecognizing the full amount of the
revenue it received from its ESPs and other service contract s at the time the
contract was entered and the initial sale of services commenced (we will at
times refer to this as the “t ime

- of

- sale” approach) . The SEC had instructed
Warrantech instead to recognize the revenue generated by those contract s on a straight

- line basis over the life of the contracts

. Warrantech publicly8 an nounced that it would comply with the SEC’s guidance , abandoned its
time

- of

- sale approach, and revised its method of r ecogni zing 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 Gl obal Market, skyrocketed

. T he 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 s p eculat ing publicly about AmTrust ’s a ctual 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 b ad 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 R egistration S tatement ” )

. The transaction ,9 underwritten by Defendants Citigroup Global Markets Inc. (“Citigroup”) and Morgan Stanley & Co. LLC (“Morgan Stanley”) , occurred on November 11,
2015 and rais ed $320 million

. I n September 2016 AmTrust filed a nother preliminary prospectus supplement and prospectus supplement under the
2015 R egistration S tatement , 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
O ffering 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 e nding March 31, 2015, and various other reports the company had previously filed with the SEC

. The September 2016 O ffering raised $278.2
million. AmTrust’s prospects took a turn for the worse in 2017. In February and
March 2017 AmTrust announc ed 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 i t s consolidated financial statements. On April10 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, 201 4 , 201 5 , 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 recogni tion 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 reco gnition 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 incom e taxes, equity in earnings of unconsolidated subsidiaries and non

controlling 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; dil uted 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 t he 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, 20 14 and April 10, 2017 , during which BDO served as AmTrust’s
outside auditor (the “BDO Class Period”)

— for our purposes, the distinction is
immaterial

. T he 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, 77 l (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 s econd a mended c omplaint without prejudice , concluding for the most part that the alleged mis statements were nonactionable statements of opinion

. The Appellants filed a t hird a mended

c omplaint ( the operative complaint here ) , which the District Court also
dismissed , large ly for the same reasons , this time with prejudice

. T his 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

. T he 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 al so 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 : I n 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, a ny 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 other14 statutorily enumerated parties.” In re Morgan Stanley Info. Fund Sec. Litig. , 592 F.3d 347, 358 (2d Cir. 2010). “Section 15, in turn, creates liab ility 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 ma terial 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 bo nus 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 Abramso n 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.3d16 at 110. But we have since recognized that the Supreme Court in Omnicare , which was decided afte r 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, ev en 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 s tatement 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, mar ks the statement as reflecting17 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 obj ective 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 th e 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 obje ctive 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 of18 goodwill “depend on management’s determination of the ‘fair value’ of the assets acquired and liabilities assumed.” Id. at 110. Absent “any objective
standa rd 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 de monstration.” 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 a lternatives 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

so metimes 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 inves tor 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 re gistration 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 of20 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 p rofessed,” Omnicare , 575 U.S. at 18 5

– 8 6 , 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 ma kes 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 statement s 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 e mbedded statement of fact that is not true

. In other words, the opinion may be false or misleading if the embedded fact is21 not one as to which reasonable minds can differ . This occurs w here, 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. C onsider 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.
S tatements 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 usin g 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 t he 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 ap peal, 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 exten ded warranty contracts during the
relevant time . In a March 2017 media release , AmTrust c larified 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 the24 contract.” 9 Joint App’x 670. The restatement acknowledged that the time

- of

sale 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 , requi red 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

st andard , 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 ser vice 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 t he administrative services revenue received from vendors who administer the warranty programs is separable from revenue generated by the warranty coverage provided to26 customers

— is an inherently subjective enterprise. The problem with this argument is th at 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 C omplaint suggest s 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
determin ing 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 that27 ASC 605

- 2 0

- 25

- 3 establishes an objective standard that generally requires the recognition of this revenue on a straight

- line basis. On the other hand,
Am T rust 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

- straight

line basis “ inherently requires a subjective judgme nt 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

sur vive .

. . 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 evide nce 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 appropriaten ess 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 C omplaint’s allegation, wh ich 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
p resuppose 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

- s ale 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 histor ical consolidated financial
statements misled investors to conclude that the company was aware of some29 historical evidence in support of recognizing the revenue on a non

- straight

line basis, when in (alleged) fact it was not. In other words, AmTrust is pl ausibly 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 Defendant s 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 C omplaint, in its restatement AmTrust “admitted that
the financial stat ements 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 discre tionary 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, Co ntingencies , 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 thes e 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 (thu s 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 r estatement 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 year32 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 e ntail 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. E ven if they are statements of opinion (becau se, 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 t he C ompla int adequately allege s that it was im probable
that the earned bonuses would not be paid

. A ccept ing that allegation as true makes it quite plausible that t he 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 re quired 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 t han
earned. Omnicare , 575 U.S. at 188

- 89

. For these reasons, we conclude that the C omplaint 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 executive s regarding , among other things, the accuracy of AmTrust’s financial reporting, its conformity with GAAP, and the effectiveness of Am Trust’s disclosure controls and procedures

. The District Court concluded that these
certifications were non - actionable statements of opinion. We agree. First, the Officer Defendants, Zyskin d (the CEO) and Pipoly (the C F O) , 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 Secti on 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

. The ir 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

. S ee Joint App’x 103

– 04, 153 . T here
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 t he 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 acknowledg ed a failure of internal controls. T he Appellants insist that t he reversal compels the inference that the SOX

12 For the reasons discussed below, we dis agree with the Appellants that the existence of the Warrantech SEC guidance letter demonstrate s that the officers knew the financial reports were false or misleading or did not comply with GAAP , even with all reasonable inferences draw n in the Appellants ’ favor

.35 certifi cations 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, t he C omplaint fails to adequately allege that the AmTrust executives
who si gned 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, t he C omplaint 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 th ese reason s , we affirm the District Court’s dismissal of the Appellants’ Section 11 claims relating to the SOX certifications

.

13 The A ppellants 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
T he 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 th e se provisions, “a plaintiff must allege that [each] defendant (1) made misstatements or omissions of material fact, (2) with sci enter, (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 t he 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 “i n 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 C omplaint 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 Tech s. , 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 c omplaint supports a strong inference of scienter. Set Cap. LLC , 996 F.3d at 78. Although “the requisite intent of the alleg ed speaker of the fraud need not be alleged with great specificity,” Chill v. Gen

. Elec. Co. , 101 F.3d 263, 267 (2d Cir. 1996), t he “ 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 th at standard in mind, w e agree with the District Court that
the C omplaint does not adequately allege that the AmTrust D efendants acted
with scienter

. First, the C omplaint does not adequately plead scienter based on the
AmTrust Defendants’ motive and opportunity to commit fraud. Urging otherwise, t he 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. T he 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 C lass P eriod

. In doing so , however, the Appellants acknowledge that Pipoly’s significant selloff began several months before the
AmTrust C lass P eriod , a fact that renders his stock sales during th is class39 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 C omplaint allege facts that provide “strong circumstantial
evidence of conscious misbehavior or recklessness.” ATSI Commc’ns , 493
F.3d at 99. W e 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, 15 8 (2d Cir. 2012) (quotation marks omitted). R ecklessness , meanwhile , e ntails “ 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 C omplaint

— including the “magnitude” of the
restatement and the duration of the period it covered

— satisfy these requirements. Joint App’x 2 13

. 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 C omplaint alleges that AmTrust
must have known , or reckles sly 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. N egligence, 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 cri ticizing AmTrust’s accounting practices generally , al though none of the press articles mentions the two central accounting issues that led to AmTrust’s41 For these reasons , we conclude that the C omplaint fail s 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 W e 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 Secur ities 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 f irst is AmTrust’s November 20 15 Offering , underwritten by Citigroup and Morgan Stanley , of 5 million shares of common stock pursuant to a

restatement. Given t he generality of these media reports , we are not persuade d that the y support an inference of scienter that is at least as compelling as any opposing inference of nonfraudulent intent.

16 We have applied t he 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 non actionable 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 Secti on 10(b) and Section 11 claims “share a material misstatement or omission element”)

.42 preliminary prospectus supplem ent 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 s econd 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

. Eac h 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 , t hree 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 C omplaint does not specifically allege that the43 Appellants purchased securities from th ose 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 secur ity 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

. Li tig

. , 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 App ellants have adequately establish ed standing
under Section 12 (a) (2) by alleging that the y 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 C omplaint , 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

commo n 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 . W e 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 a45 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
mi sleading 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
conclu sion that the reported income statements related to Am T rust’s warranty contracts and its employee bonuses were non

- actionable opinions.
I nsofar 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 further46 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 inte rnal controls over financial reporting for each of the years ended December 31,
2 01 3

– 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 (“201 3 Audit Opinion”), which was included in AmTrust’s 2013 Form 10

- K. We begin with the Securities Act claim s . 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 havi ng 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
in accuracy in the AmTrust registration statements that it certified , or in47 financial reports incorporated in those statement s. 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 develop ed the argument in their opening brief challenging the Dist r ict 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 Dist rict 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 201 3 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 A udit O pinion appears in the same guise as the SOX certifications that we have already concluded are non

- actionable opinions. But t he C omplaint allege s 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 review ing 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 S EC 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 material49 misstateme nt 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
mis statements of opinion because t he C omplaint “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

– 4 7, 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 C omplaint, BDO never conducted such an inquiry

. But w e also agree with the District Court that the Appellants’ Section 10(b) and Rule 10b

- 5 claim against BDO must be dismissed because the50 C omplaint d oes not adequately allege that the mis statement in BDO’s 2013
A udit O pinion w as 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 mate rially 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.
G anino 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 ma rks omitted) ; see Litwin , 634 F.3d at 717.
A s the District Court concluded, the C omplaint fail s to allege a ny link
between BDO’s misstatements in the 201 3 A uditor O pinion and the material51 errors contained in AmTrust’s 2013 Form 10

- K. T he audit statements to which the Appellants point we re “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 cont ain are too general for investor s 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 th e 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 claim s against the AmTrust Defendants and the Director Defendants , the Section 12(a)(2) claim s against AmTrust, and the Section 15 claims against the Officer Defendants and Director Defendants ( Zyskind, Pipoly, DeCarlo, Fisch, Gulkowitz, K arfunkel, and Miller ) relating to AmTrust’s accounting for certain warranty contracts and bonuses

. 2. We vacate the dismissal of the Appellants’ claim s 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, f or the r easons set forth above, the judgment o f the District Court is AFFIRMED in part and VACATED in part, and the case is REMANDED for proceedings consistent with this opinion.