EXHIBIT A 

Case: 1:20-cv-02581 Document #: 60-1 Filed: 03/19/21 Page 1 of 18 PageID #:617
Born v. Quad/Graphics, Inc., Slip Copy (2021)

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2021 WL 736839

Only the Westlaw citation is currently available.

United States District Court, S.D. New York.

Dennis BORN, Marilynn Born, and VALERIE

BLOOM, individually and on behalf of

all others similarly situated, Plaintiffs,

v.

QUAD/GRAPHICS, INC., J. Joel

Quadracci, and David J. Jonan, Defendants.

19-CV-10376 (VEC)

|

Signed 02/25/2021

Attorneys and Law Firms

Gregory Bradley Linkh, Glancy Prongay & Murray LLP,

New York, NY, Lesley Frank Portnoy, Glancy Prongay &

Murray LLP, Los Angeles, CA, David Stein, Gibbs Law

Group, Oakland, CA, Eric H. Gibbs, Girard, Gibbs & De

Bartolomeo, San Francisco, CA, Javier Bleichmar, Ross

Mitchell Shikowitz, Bleichmar Fonti & Auld LLP, New York,

NY, for Plaintiffs.

Joseph S. Allerhand, Stacy Nettleton, Nicole Elizabeth

Prunetti, Tania Matsuoka, Weil Gotshal & Manges LLP,

Robert Allen Scher, Foley & Lardner, LLP, New York, NY,

Bryan B. House, Foley & Lardner, Milwaukee, WI, for

Defendants.

OPINION AND ORDER

VALERIE CAPRONI, United States District Judge

*1 Plaintiffs in this putative securities fraud class action

are on a fruitless endeavor to manufacture a fraud case out

of a stock drop that followed a company (in a struggling if

not dying industry) announcing that it would not meet its

2019 financial projections and was reducing its dividend.

Plaintiffs have sued Quad/Graphics, Inc. (“Quad”) and two

of its senior executives, J. Joel Quadracci, Quad's Chairman,

President, and Chief Executive Officer, and David J. Honan,

Quad's Executive Vice President and Chief Financial Officer,

on behalf of themselves and all others who purchased or

otherwise acquired Quad's publicly traded class A common

stock between February 21, 2018, and October 29, 2019

(the “Class Period”), alleging claims under Sections 10(b)

and 20(a) of the Securities Exchange Act of 1934, 15

U.S.C. §§ 78j(b), 78t(a), and related regulations. Plaintiffs’

claims concern alleged misrepresentations and omissions

touching on: Quad's corporate transformation plan; Quad's

attempted acquisition of a competitor, LSC Communications,

Inc.; and the nearly contemporaneous sale of a subsidiary

and settlement of SEC charges for Foreign Corrupt Practice

Act (“FCPA”) violations. On May 15, 2020, after having

been appointed lead plaintiff, see Dkt. 53, Alaska Electrical

Pension Fund filed an Amended Complaint (“AC” or

“Complaint”). See Dkt. 67. On July 14, 2020, Defendants

moved to dismiss the Complaint. See Notice of Mot.,

Dkt. 70. For the following reasons, Defendants’ motion is

GRANTED.

BACKGROUND 1

1 At the motion to dismiss stage, the Court accepts

all factual allegations in the pleadings as true and

draws all reasonable inferences in the light most

favorable to Plaintiffs. See Gibbons v. Malone, 703

F.3d 595, 599 (2d Cir. 2013). The Court may also

“consider any written instrument attached to the

complaint, statements or documents incorporated

into the complaint by reference, legally required

public disclosure documents filed with the SEC,

and documents possessed by or known to the

plaintiff upon which it relied in bringing the suit.”

Tongue v. Sanofi, 816 F.3d 199, 209 (2d Cir.

2016) (quoting ATSI Commc'ns, Inc. v. Shaar

Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007)).

Similarly, the Court may “take judicial notice of

the fact that press coverage, prior lawsuits, or

regulatory filings contained certain information,

without regard to the truth of their contents.”

Staehr v. Hartford Fin. Servs. Grp., Inc., 547

F.3d 406, 425 (2d Cir. 2008).

Quad has long had a large footprint in the printing business,

with a significant presence in the magazine, catalog, and

book printing markets. See AC ¶¶ 2, 23. Starting around

2017, Quad, which until this time had been focused on

building scale and breadth in its printing business, recognized

that it was in a declining business sector; to respond

to broad and accelerating declines in the industry, Quad

launched a transformation plan to position itself as a “multiCase: 1:20-cv-02581 Document #: 60-1 Filed: 03/19/21 Page 2 of 18 PageID #:618
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channel,” “marketing services provider.” Id. ¶¶ 2–3, 36–37,

42–43. Quad represented to investors that this transformation

strategy, called Quad 3.0, would allow it to compete more

effectively amid a shifting industry landscape and would

provide additional opportunities for its foundational print

business. See id. ¶¶ 2–3, 42–43. By expanding into other

forms of media while continuing to leverage its strong print

business, Quad sought to provide clients an “integrated stack

of marketing services” in a dynamic industry with an “everexpanding choice of media channels.” Id. ¶¶ 2–3, 42. In

support of its transition, throughout the Class Period, Quad

acquired or increased its stake in several marketing firms. Id.

¶¶ 5, 44–48.

*2 Despite its transition to a marketing services firm,

during the Class Period, Quad's printing business remained its

primary source of revenue and a critically important part of its

business. See, e.g., id. ¶¶ 3, 38, 42. In addition to difficulties

caused by broad declines in the printing business, Quad was

engaged in intense competition with LSC Communications,

Inc. (“LSC”), the other significant player in the magazine,

catalog, and book printing sectors, with executives at both

companies describing the competition as particularly intense

and resulting in a “price war.” See id. ¶¶ 6, 40, 53–55, 67.

On or around October 31, 2018, Quad announced that it had

agreed to acquire LSC in an all-stock transaction valued at

$1.4 billion, positioning the combined company to be one of

the, if not the, largest printing companies in the nation. Id. ¶¶

7, 56–58, 65. Quad disclosed that it expected to achieve “net

synergies” from the acquisition worth approximately $135

million within two years, with the majority of the benefits

coming from “capacity rationalization” and “administrative

efficiencies.” Id. ¶¶ 57, 63.

In February 2019, Quad announced its 2019 financial

guidance, anticipating net sales of $4.05 to $4.25 billion,

adjusted EBITDA of $360 to $400 million, and free cash

flow of $145 million to $185 million, while touting Quad's

quarterly dividend of $0.30 per share. Id. ¶ 8. Quad made

explicit that its 2019 financial guidance did not reflect

the pending LSC acquisition. Id. Even as it announced

disappointing results for the first and second quarters of 2019,

Quad reaffirmed its original 2019 guidance and noted that it

expected to achieve superior financial results in the second

half of the year. Id.

Shortly after Quad announced the planned acquisition of

LSC, the Department of Justice (“DOJ”) began reviewing the

transaction. Defendants provided periodic public updates on

DOJ's review, indicating that it was going “as expected” and

that they anticipated that the deal would be approved. See

id. ¶¶ 182, 194. On June 20, 2019, however, DOJ announced

that it had sued to block Quad's acquisition of LSC. See id.

¶¶ 67–71. Defendants immediately announced that they were

“fully committed to defending the DOJ's lawsuit in court”

and intended to “vigorously defend” the acquisition. Id. ¶ 72.

Quad and LSC jointly asked the federal district court hearing

DOJ's suit to expedite the trial schedule to permit a decision

to be made in advance of the acquisition's “drop-dead date.”

See Dkt. 71-23; Dkt. 71-22. The district court declined to do

so. See Dkt. 71-22. Shortly thereafter, on July 23, 2019, Quad

announced that it was abandoning the LSC acquisition due to

the added costs and uncertainty from the delay, explaining that

the delay caused by the litigation “would have likely eroded a

considerable amount of the expected benefits of the merger.”

AC ¶¶ 72–73. In the wake of the aborted acquisition, LSC cut

its financial guidance and warned of anticipated poor financial

performance; Quad, on the other hand, reaffirmed its original

2019 financial guidance and stated that it was on track to meet

its projections. Id. ¶ 73.

Separately, on September 4, 2019, Quad announced that it

was selling its heavy-duty industrial wood crating business,

Transpak Corporation (“Transpak”), for approximately $10

million. Id. ¶ 75. Quad attributed the sale to the 3.0

transition plan and stated that the net proceeds from the sale

would be “used to reduce debt.” Id. Three weeks later, on

September 26, 2019, Quad announced that it had agreed to

pay approximately $10 million to settle SEC charges that

it had violated the FCPA when its Peru and China-based

subsidiaries engaged in bribery schemes. Id. ¶ 76.

On October 29, 2019, Quad announced that it had missed

its 2019 third-quarter (“3Q19”) projections, was reducing

its 2019 financial guidance, and was cutting its quarterly

dividend by 50% to $0.15 per share. 2See id. ¶¶ 13, 132.

Quad further announced that it had decided to divest its book

business and to engage in additional cost-reduction actions to

accelerate Quad 3.0. Id. The following day, October 30, 2019,

Quad's stock price dropped $6.42 per share and closed at an

all-time low of $4.85 per share, despite steady results across

the rest of the market. Id. ¶ 133. Market analysts expressed

surprise at Quad's announcement, especially given Quad's

affirmance of its guidance a quarter earlier. See id. ¶ 134.

2

Specifically, for 3Q19, Quad reported earnings

per share from continuing operations of -$0.94,

revenue of $944 million, and EBITDA margins

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of -7.4%, all of which fell short of analyst

expectations and represented a drop-off from

Quad's year-over-year or past quarter performance.

See id. ¶ 132. With respect to its 2019 financial

guidance, Quad reduced its expected sales to $3.9

billion from the previous target of $4.05 billion

to $4.25 billion and reduced its free cash flow

estimate to $80 to $100 million from a previous

range of $145 to $185 million. Id.

DISCUSSION

I. Standard of Review and Elements of a Section 10(b)

Claim

*3 To survive a motion to dismiss under Rule 12(b)(6),

“a complaint must allege sufficient facts, taken as true, to

state a plausible claim for relief.” Johnson v. Priceline.com,

Inc., 711 F.3d 271, 275 (2d Cir. 2013) (citing Bell Atl.

Corp. v. Twombly, 550 U.S. 544, 555–56 (2007)). In general,

“a complaint does not need to contain detailed or elaborate

factual allegations, but only allegations sufficient to raise

an entitlement to relief above the speculative level.” Keiler

v. Harlequin Enters. Ltd., 751 F.3d 64, 70 (2d Cir. 2014)

(citation omitted). The Court accepts all factual allegations

in the complaint as true and draws all reasonable inferences

in the light most favorable to the plaintiff. See Gibbons v.

Malone, 703 F.3d 595, 599 (2d Cir. 2013). The Court is not,

however, “bound to accept as true a legal conclusion couched

as a factual allegation.” Ashcroft v. Iqbal, 556 U.S. 662,

678 (2009) (quoting Twombly, 550 U.S. at 555)).

Section 10(b) of the Securities Exchange Act makes it

unlawful to “use or employ, in connection with the purchase

or sale of any security ... any manipulative or deceptive

device or contrivance in contravention of such rules and

regulations as the Commission may prescribe.” 15 U.S.C.

§ 78j(b). The SEC's implementing rule, Rule 10b–5, makes it

unlawful to “make any untrue statement of a material fact or

to omit to state a material fact necessary in order to make the

statements made, in light of the circumstances under which

they were made, not misleading.” 17 C.F.R. § 240.10b–5. To

state a claim under these provisions, a plaintiff must plead

six elements: “(1) a material misrepresentation or omission

by the defendant; (2) scienter; (3) a connection between the

misrepresentation or omission and the purchase or sale of a

security; (4) reliance upon the misrepresentation or omission;

(5) economic loss; and (6) loss causation.” Pac. Inv. Mgmt.

Co. v. Mayer Brown LLP, 603 F.3d 144, 151 (2d Cir. 2010)

(quoting Stoneridge Inv. Partners v. Sci.-Atlanta, Inc., 552

U.S. 148, 157 (2008)).

Notably, in addition to the general pleading requirements

set forth in Twombly and its progeny, a “complaint

alleging securities fraud must satisfy the heightened pleading

requirements” of Federal Rule of Civil Procedure 9(b) and the

Private Securities Litigation Reform Act (“PSLRA”) of 1995

“by stating with particularity the circumstances constituting

fraud.” ECA & Loc. 134 IBEW Joint Pension Tr. of Chi.

v. JP Morgan Chase Co., 553 F.3d 187, 196 (2d Cir. 2009)

(citing Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S.

308, 319–20 (2007)). To satisfy Rule 9(b), a securities fraud

complaint based on alleged misstatements or omissions must

“(1) specify the statements that the plaintiff contends were

fraudulent, (2) identify the speaker, (3) state where and when

the statements were made, and (4) explain why the statements

were fraudulent.” Anschutz Corp. v. Merrill Lynch & Co.,

690 F.3d 98, 108 (2d Cir. 2012) (quoting Rombach v.

Chang, 355 F.3d 164, 170 (2d Cir. 2004)). Further expanding

the pleading requirements of Rule 9(b), the PSLRA requires

that “securities fraud complaints specify each misleading

statement; that they set forth the facts on which a belief that a

statement is misleading was formed; and that they state with

particularity facts giving rise to a strong inference that the

defendant acted with the required state of mind.” Id. (cleaned

up).

II. The Amended Complaint Fails to Plead Fraud with

Particularity

As this Court and others have held, “failing to meet Rule 9(b)

and the PSLRA's pleading requirements alone is reason to

dismiss a complaint.” Plumbers & Steamfitters Loc. 773

Pension Fund v. Danske Bank, No. 19-CV-235, 2020 WL

4937461, at *3 (S.D.N.Y. Aug. 24, 2020); see also Boca

Raton Firefighters & Police Pension Fund v. Bahash, 506

F. App'x 32, 37–38 (2d Cir. 2012). Plaintiffs in this circuit

have long been on notice that a complaint predominantly

“marked by lengthy block quotes followed by pro forma

reasons why the statements quoted are allegedly false ...

fails to state a claim because it is insufficiently particular

under the PSLRA.” Constr. Laborers Pension Tr. for S.

Cal. v. CBS Corp., 433 F. Supp. 3d 515, 530 (S.D.N.Y.

2020) (citing Bahash, 506 F. App'x at 37–38); see

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also Tabor v. Bodisen Biotech, Inc., 579 F. Supp. 2d

438, 453 (S.D.N.Y. 2008) (“Plaintiffs[’] use of large block

quotes from SEC filings and press releases, followed by

generalized explanations of how the statements were false

or misleading[, is] not sufficient to satisfy the heightened

pleading requirements.”); In re Alcatel Sec. Litig.,

382 F. Supp. 2d 513, 534 (S.D.N.Y. 2005) (“Plaintiffs list

various statements—often setting forth lengthy quotations

from various releases by Defendants’ officers and securities

analysts—then follow each with a similar (in most cases

identical) laundry list of ‘specific’ reasons why the statements

are allegedly false.... This method is deficient under the

pleading standards.”). To survive a motion to dismiss,

a securities fraud complaint “must do more than simply

assert that a statement is false—‘[it] must demonstrate with

specificity why that is so.’ ” In re Lululemon Sec. Litig., 14

F. Supp. 3d 553, 571 (S.D.N.Y. 2014) (quoting Rombach,

355 F.3d at 174), aff'd, 604 F. App'x 62 (2d Cir. 2015).

*4 Here, Plaintiffs employ a 100-page, 268-paragraph

Complaint, of which 69 paragraphs spanning over 30 pages

are dedicated to reciting Defendants’ statements during the

Class Period. See AC ¶¶ 138–206. Broken down by fiscal

quarter, Plaintiffs excerpt statements from nearly every public

disclosure document and related investor call Quad conducted

during the Class Period, relying primarily on bolded text

in half-page block quotations to identify the allegedly

misleading statements. See, e.g., id. ¶ 177. After each

subsection of the Complaint pertaining to a particular fiscal

quarter, Plaintiffs include a substantially similar paragraph

containing some variation of the same five or so generalized,

conclusory statements. The conclusory statements boil down

to: All of the statements within the previous five to twenty

paragraphs were false and misleading because they failed

to disclose that the pace of the Quad 3.0 transition needed

to be “significantly and rapidly accelerated to offset secular

declines in the Company's print business,” that the true

purpose of Quad's acquisition of LSC was the elimination of

a competitor, without which Quad would be unable to meet

its financial projections, and (where relevant) that Quad's true

reason for selling Transpak was to generate cash to pay the

FCPA-related SEC settlement. See id. ¶¶ 147, 152, 158, 164,

184, 195, 206. Plaintiffs also include some formulation of an

allegation decrying Defendants’ statements regarding Quad's

book and packaging businesses, claiming that Defendants

failed to disclose that they were “non-core assets” subject to

divestment to support Quad 3.0 even though those businesses

had actual and future growth prospects. See id. ¶¶ 147, 158,

184. While in a couple of these paragraphs Plaintiffs point to a

specific type of statement — such as those discussing Quad's

quarterly dividend — the explanation for why the statement

is allegedly false or misleading can be reduced to the same

conclusory assertions articulated above. See, e.g., id. ¶ 164.

This type of pleading is insufficient to support Plaintiffs’

allegations that over 18 months’ worth of statements, only

marginally winnowed down for purposes of the Complaint,

are all false or misleading. Plaintiffs’ “selective” bolding

does little to assist the Court in identifying the falsity

of Defendants’ statements because, in many instances,

Plaintiffs bold almost the entirety of a multi-paragraph block

quotation. See, e.g., id. ¶¶ 161, 176, 204. While Plaintiffs’

Complaint may not be the most egregious instance of “puzzle

pleading” this Court has seen, the Court is nonetheless

unable to meaningfully distinguish Plaintiffs’ Complaint

from others filed in this circuit that have been dismissed

for failure to plead fraud with the requisite particularity.

Plaintiffs’ Complaint does little to “describe[ ] what

portion of each quotation constitutes a false representation,”

instead “placing the burden on the Court to sort out the

alleged misrepresentations and then match them with the

corresponding adverse facts.” CBS Corp., 433 F. Supp. 3d at

530 (cleaned up).

As discussed extensively below, Plaintiffs’ failure to plead

fraud with the requisite particularity is a fatal flaw that

marks their entire Complaint and inhibits Plaintiffs from

successfully alleging either falsity or scienter. Plaintiffs’

Complaint is marked by an utter lack of particularized factual

allegations, as is evident in the seven generalized paragraphs

Plaintiffs rely on to demonstrate why all of Defendants’

Class Period statements were false or misleading. Plaintiffs’

reference to these assertions as “facts” does nothing

to transform generalized statements into particularized

allegations. Ultimately, Plaintiffs repeatedly fall back on

their same conclusory statements without alleging specific

facts and without adequately explaining with the required

specificity how 30 pages worth of statements, spanning an

18-month Class Period, support Plaintiffs’ theory of fraud.

See 15 U.S.C. § 78u-4(b)(1) (“[T]he complaint shall specify

each statement alleged to have been misleading, the reason or

reasons why the statement is misleading, and, if an allegation

regarding the statement or omission is made on information

and belief, the complaint shall state with particularity all

facts on which that belief is formed.” (emphasis added)). The

Complaint is, therefore, dismissed for failing to meet the

heightened pleading standards of Rule 9(b) and the PSLRA.

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III. Plaintiffs Have Not Pled a Material Misstatement or

Omission

Even if Plaintiffs’ Complaint were properly categorized as

something other than “puzzle pleading” such that it met

the heightened requirements of Rule 9(b) and the PSLRA,

Plaintiffs have failed to allege that any of Defendants’

material statements were false or misleading. For a plaintiff

to properly plead a claim of securities fraud, the alleged

statement or omission must be both material, such that it

“would have been viewed by the reasonable investor as

having significantly altered the total mix of information

available,” Basic Inc. v. Levinson, 485 U.S. 224, 231–

32 (1988) (cleaned up), and false or misleading, “evaluated

not only by literal truth, but by context and manner of

presentation,” Singh v. Cigna Corp., 918 F.3d 57, 63 (2d

Cir. 2019) (cleaned up).

*5 “To base a claim on an omission — such as failing

to disclose a material business risk — a plaintiff must also

plead that the defendant had a duty to disclose the omitted

fact.” CBS Corp., 433 F. Supp. 3d at 531 (citing StratteMcClure v. Morgan Stanley, 776 F.3d 94, 101 (2d Cir. 2015)).

While Section 10(b) and Rule 10b-5 “do not create an

affirmative duty to disclose any and all material information,”

Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 44

(2011), speakers have a duty to disclose when a statement

would otherwise be “inaccurate, incomplete, or misleading”

without the omitted material, Stratte-McClure, 776 F.3d

at 101 (quotation omitted). See also Meyer v. JinkoSolar

Holdings Co., 761 F.3d 245, 250 (2d Cir. 2014) (“Even when

there is no existing independent duty to disclose information,

once a company speaks on an issue or topic, there is a duty

to tell the whole truth.”).

Although Plaintiffs contend that Defendants’ statements

“ma[k]e up ‘a network of interrelated lies, each one

slightly distinct from the other, but all collectively aimed

at perpetuating a broader, material lie,’ ” they concede

that the statements about which they are complaining can

be bucketed into three general categories: (1) statements

concerning Quad's 3.0 plan and the pace at which the 3.0

transition had to occur in order to offset general declines in the

printing business and to meet its 2019 financial projections;

(2) statements concerning Quad's attempted acquisition of

LSC; and (3) statements concerning Quad's sale of Transpak.

See Pl. Resp. at 8 (quoting In re Vivendi, S.A. Sec. Litig.,

838 F.3d 223, 250 (2d Cir. 2016)). For each category, there is

a dearth of particularized facts to support Plaintiffs’ assertions

that Defendants’ statements were false or misleading; instead,

Plaintiffs rely almost entirely on conclusory statements

concerning what Defendants were obligated to disclose to

prevent their statements from being “half-truths.” In re

Vivendi, S.A., 838 F.3d at 240. Because Plaintiffs have failed

to plead particularized, factual material that would permit

the Court to infer that Defendants’ statements were false

or misleading when made, Plaintiffs have failed to allege

adequately that any of Defendants’ statements were false or

misleading.

1. Statements Concerning the Quad 3.0 Transition

Plan

While Plaintiffs challenge a vast swath of Defendants’

statements concerning the Quad 3.0 transition, Defendants

accurately identify the gist of Plaintiffs’ gripe as: “Quad

‘failed to disclose that the pace of Quad's 3.0 transition needed

to be significantly and rapidly accelerated to offset secular

declines in the Company's print business.’ ” Defs. Mem.

at 13 (citing AC ¶¶ 147, 152, 158, 164, 184, 195, 206).

Plaintiffs take issue with Defendants’ statements concerning

Quad's success in “executing, aggressively implementing,

and ‘accelerating’ its Quad 3.0 transition.” Pl. Resp. at 9;

see also, e.g., AC ¶¶ 138, 139, 151, 156, 162, 165, 166,

167, 176, 189. Plaintiffs also contend that Defendants made

misleading statements concerning the potential for Quad 3.0

to offset organic declines in Quad's print business. See Pl.

Resp. at 9; see also, e.g., AC ¶¶ 139, 142, 144, 167, 176–

77, 189. Relatedly, Plaintiffs argue that Defendants misled

investors by giving the impression that Quad's acquisitions

and investments would sufficiently accelerate Quad 3.0 so

that Quad could offset organic print revenue declines and

meet its 2019 financial projections. See Pl. Resp. at 9; see

also, e.g., AC ¶¶ 138–39, 140, 143, 148, 151, 154, 162, 165–

66, 171, 176, 180, 200. Plaintiffs’ theory is that, combined

with allegedly false statements concerning Defendants’ intent

to prioritize and maintain its “affordable and sustainable

dividend,” see, e.g., AC ¶¶ 139, 150, 155, 156, 161, 163,

168, 188, 191, 199, 201, 204, and their allegedly misleading

statements promoting the strength of Quad's book business,

see, e.g., id. ¶¶ 145–46, 157, 172, 175, 192, Defendants’

statements regarding the Quad 3.0 transition “created a

misleading picture of Quad's business” by failing to disclose

that Quad 3.0 was not proceeding quickly enough to allow

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Quad to meet its 2019 projections or to offset declines in the

print business. Pl. Resp. at 9.

*6 Plaintiffs do not, however, plead any facts from which

the Court could infer that Defendants knew or should have

known that they needed to expedite the pace of Quad 3.0 in

order to meet their 2019 projections or that the transition plan

was not proceeding as publicly disclosed during the Class

Period. Plaintiffs similarly fail to identify any information

in Defendants’ possession that they should have disclosed

to avoid making misleading disclosures concerning Quad

3.0 or Quad's internal state of affairs. Instead, Plaintiffs

simply invoke their repeated mantra that “Defendants failed

to disclose that the pace of the 3.0 transition needed to be

significantly and rapidly accelerated at all times.” Id. Yet,

in citing to the Complaint to support their contention that

they have adequately alleged particularized facts, Plaintiffs

cite only to paragraphs containing that exact same assertion,

engaging the Court in a veritable hyperloop of conclusory

allegations. See AC ¶¶ 51, 147, 152, 158, 164, 184, 195,

206. 3

3

Plaintiffs rely on two cases to argue that they have

adequately alleged falsity by demonstrating that

“Defendants’ Class Period statements painted a

far different picture than their end-of-Class Period

disclosure.” Pl. Resp. at 10. But those cases are

not analogous. In each case Plaintiffs cite, the

complaint contained particularized facts to show

that the impression the defendant created of a

particular state of affairs differed materially from

what actually existed. See In re Alstom SA Sec.

Litig., 406 F. Supp. 2d 433, 453 (S.D.N.Y. 2005)

(highlighting specific information concerning

defendant's role in financing certain purchases that

rendered their statements misleading); Yellowdog

Partners LP v. CURO Grp. Holdings, 426 F.

Supp. 3d 864, 871 (D. Kan. 2019) (stressing

that the plaintiffs’ complaint was “detailed and

contain[ed] specific allegations” and that plaintiffs

“alleged specific facts that should have been

disclosed” (emphasis added)). Here, Plaintiffs

allege no “specific facts” that needed to be

disclosed to give an accurate depiction of Quad's

3.0 transition plan.

The nearest Plaintiffs come to supporting their allegations of

falsity are a handful of allegations concerning the nature of

the competition between Quad and LSC. See AC ¶¶ 53–55,

67. Accepting these allegations as true, as the Court must at

this stage, and even construing them as broadly as possible,

allegations concerning the “cutthroat” competition between

Quad and its chief rival do little, if anything, to support

Plaintiffs’ argument that dozens of Defendants’ statements

discussing Quad 3.0 were false or misleading. Without more,

the fact that Quad and LSC were engaged in a “price

war” is patently insufficient to demonstrate that Defendants

were required to disclose that Quad 3.0 was proceeding too

slowly to meet Quad's 2019 financial projections or to offset

general declines in the printing business. This is especially

true in light of Defendants’ frequent disclosures during the

Class Period that ongoing changes to the print industry were

inhibiting Quad's performance and that Quad continued to

experience organic declines in its print business. See Defs.

Mem. at 5–6; see also AC ¶¶ 148, 153, 160, 167, 177,

178, 185, 197 (quoting Defendants’ public disclosures that

Quad's organic sales continued to decline despite boosts from

acquisitions and investments).

Without any particularized facts upon which to base their

argument, Plaintiffs instead rely entirely on Quad's disclosure

at the conclusion of the Class Period and the market's

reaction to it. 4 As discussed below in the context of loss

causation, Defendants’ 3Q19 disclosures did not contain any

admission that Defendants knew Quad 3.0 had not been

proceeding apace or any statement correcting Defendants’

past disclosures concerning the Quad 3.0 transition. Plaintiffs

quote Defendants as stating only that Quad was taking

“decisive actions” to “further accelerate” Quad 3.0. AC ¶ 210.

But that is not a corrective disclosure, and it is ineffective

to cast doubt on the truth of Defendants’ prior statements

regarding Quad 3.0. See Lentell v. Merrill Lynch & Co.,

396 F.3d 161, 175 n.4 (2d Cir. 2005) (finding that for a

statement to constitute a corrective disclosure, it must “reveal

to the market the falsity of the prior” statements). Further,

Plaintiffs’ cited cases do not support the proposition that

market reaction alone is sufficient to satisfy Plaintiffs’ burden

to plead falsity. See In re Ply Gem Holdings, Inc. Sec Litig.,

No. 14-CV-3577, 2016 WL 5339541, at *4 (S.D.N.Y. Sept.

23, 2016) (“Though market reaction alone is ‘too blunt an

instrument to be depended on’ to determine whether a single

omission is material, especially ‘where a disclosure contains

many revelations,’ Plaintiff excerpts two analyst reports

that point directly to the alleged omissions as justification

for reduced stock-price expectations.” (quotation omitted));

In re Citigroup Inc. Sec. Litig., 753 F. Supp. 2d 206,

236 (S.D.N.Y. 2010) (relying on the market's reaction to

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corrective disclosures only as additional support after finding

that plaintiffs adequately alleged that certain undisclosed

information was material to investors’ valuation). In short,

Plaintiffs have failed to allege that Defendants’ statements

concerning the Quad 3.0 transition were false or misleading. 5

4

Plaintiffs object that Defendants inappropriately

seek to impose a heightened pleading

standard pursuant to which Plaintiffs’ Complaint

must include confidential witness statements,

contemporaneous internal documents, or the like.

See Pl. Resp. at 10–11 (citing Ok. Firefighters

Pension & Ret. Sys. v. Lexmark Int'l, Inc., 367

F. Supp. 3d 16, 38 (S.D.N.Y. 2019)). While

Plaintiffs are correct that they need not point

to a confidential informant or specific internal

document that conclusively reveals Defendants’

alleged fraud, Plaintiffs must fulfill their obligation

to plead facts with particularity demonstrating that

Defendants’ statements or omissions were false

or misleading – not simply that things turned

out different. Here, Plaintiffs fail to allege any

facts, whether derived from confidential witness

statements, contemporaneous insider documents,

or elsewhere, that reveal Defendants’ statements

concerning Quad 3.0 and the speed at which it was

proceeding were false or misleading.

5

Plaintiffs’ assertion that Defendants’ statements

promoting Quad's book business were misleading

is also completely unsupported by any

particularized factual allegations in the Complaint,

supported solely by the fact that Quad decided in

third quarter 2019 to divest its book business as part

of its move to accelerate the Quad 3.0 transition.

See, e.g., AC ¶¶ 158, 162, 184. But, again, there are

no facts alleged that would permit the Court to infer

that positive statements about the book business

were false or misleading when made. The same

analysis applies to Defendants’ statements that they

anticipated that the company would continue to pay

a $0.30 per share quarterly dividend. See, e.g., id.

¶¶ 139, 150, 155, 188, 199.

2. Statements Concerning the LSC Acquisition

*7 Plaintiffs’ arguments concerning Defendants’ LSCrelated statements are less easily distilled into a single mantra,

as Plaintiffs challenge statements pertaining to each stage

of the failed acquisition. Plaintiffs’ general theory, however,

appears to be that by failing to disclose facts regarding the

uber-competitive battle between Quad and LSC, Defendants’

statements — including those regarding “general ‘pricing

pressures’ in the market and ‘net synergies’ to be gained from

acquiring LSC” — were misleading because investors were

unable to properly “evaluate risks to Quad's business, the

need to rapidly accelerate Quad 3.0, and how the failed LSC

acquisition would reignite the war between LSC and Quad.”

Pl. Resp. at 14 (quoting AC ¶¶ 139, 174). 6

6

Plaintiffs also seem to allege that Defendants

should have disclosed that the LSC acquisition

“stood to significantly bolster Quad's books

business.” See Pl. Resp. at 13 n.9 (citing AC ¶

59). This appears to have been readily apparent

to the market, however, as seen in multiple

contemporaneous analyst reports released in the

wake of the acquisition announcement. See Dkt.

71-15 at 2 (“[T]he acquisition will substantially

increase QUAD's presence in book publishing ...

[which] represents about 28% of [LSC's] annual

revenue ....”). Even if it were not, Plaintiffs never

make clear how Defendants’ failure to disclose

another potential benefit of the merger makes

the statements Defendants did make false or

misleading.

Plaintiffs again fail to allege facts from which the Court

can plausibly infer that any of Defendants’ Class Period

statements regarding the ultimately-failed LSC acquisition

were false. Instead, Plaintiffs attempt to stretch a handful of

particularized allegations far beyond their capacity to support

Plaintiffs’ claim that Defendants’ statements were false or

misleading. While Plaintiffs may have adequately alleged

that there was intense competition between Quad and LSC,

Plaintiffs have failed to allege adequately that the existence

of such competition rendered any of Defendants’ public

statements regarding the LSC acquisition false or misleading.

As an initial matter, Plaintiffs vastly overstate the import

of their allegations describing the nature of the competition

between Quad and LSC. Plaintiffs contend that their

Complaint “lays bare the hypercompetitive environment

between Quad and LSC.” Pl. Resp. at 13. Borrowing from

the DOJ's antitrust complaint seeking to block the LSC

acquisition, Plaintiffs quote insiders at Quad and LSC who

described the competition as a “price war” and a “blood bath,”

and alleged that the company's respective CEOs “want[ed] to

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beat each other into oblivion.” AC ¶¶ 53, 55, 67. Plaintiffs

also cite internal Quad documents for the proposition that

the companies held a combined 69% share of the catalog

printing market and to show that Quad and LSC were the only

companies in the book printing sector that could “offer the

largest [p]ublishers a complete solution.” Id. ¶¶ 54–55, 67.

Plaintiffs further allege, without attribution, that Quad and

LSC “controlled more than half of all publication printing for

magazines.” Id. ¶ 53. Finally, Plaintiffs allege that both Quad

and LSC feared losing existing accounts and prospective

clients to the other, which colored each company's business

activity and allowed customers to play one off the other. Id.

¶¶ 53–55. 7

7

The Court notes that some of the information

Plaintiffs have copied from DOJ's antitrust

complaint appears to have been derived from

internal LSC documents, not internal Quad

documents. See, e.g., id. ¶ 53 (“The ferocity

of Quad and LSC's competition prompted LSC's

magazine head to avoid any negative changes to

customer accounts out of fear of the customer

going back into the market and LSC ‘get[ting] into

a blood bath with Quad.’ ”); id. ¶ 55 (quoting

internal LSC executives). The Court is unwilling

to infer that Defendants’ statements were false or

misleading based on inside information from LSC.

*8 In the Court's view, Plaintiffs do little more than describe

a particularly competitive dynamic between the two major

players in a markedly consolidated industry. Plaintiffs argue,

however, that, in addition to showing that “Quad was engaged

in a brutal and undisclosed ‘price war’ with its largest

competitor,” Plaintiffs’ LSC-related allegations reveal that

this price war “was negatively impacting Quad's financial

results and the success of the 3.0 transition.” Pl. Resp.

at 13. Plaintiffs similarly argue that Defendants’ continued

affirmance of its 2019 financial guidance — and perhaps the

guidance itself — both before and after the LSC acquisition

fell apart was misleading because Defendants failed to

disclose that Quad would be unable to meet its financial

projections without eliminating the price war with LSC. See

id. at 14–15, 16 n.11. Thus, Plaintiffs contend, Defendants

should have disclosed that the “true reason” for acquiring

LSC was to eliminate its primary competitor and end the price

war. See, e.g., AC ¶¶ 131, 164.

Plaintiffs, however, plead no facts, let alone particularized

facts, to support their contention that Quad knew it would be

unable to meet its 2019 financial projections or that Quad 3.0

could not succeed absent elimination of LSC as a competitor.

Instead, Plaintiffs are left to support conclusory assertions in

their brief with conclusory allegations from their Complaint.

See Pl. Resp. at 13–15 (citing AC ¶¶ 6, 66, for statements

such as, “[w]ithout eliminating LSC and ending the ongoing

blood bath for customers between the two companies, Quad

would simply be unable to implement its Quad 3.0 transition

at the speed necessary to offset the secular declines in the

print industry and achieve its 2019 guidance”). Plaintiffs fail

to allege a single fact tying the impact of the competition

between Quad and LSC to the pace at which the Quad 3.0

transition needed to proceed in order for Quad to meet its

2019 financial projections or offset general printing business

declines. Further, the Court cannot infer from Plaintiffs’

allegations describing the competition between LSC and

Quad that Defendants knew or should have known, either at

the time they established Quad's 2019 financial projections

or after abandoning the LSC acquisition or anytime between,

that Quad would be unable to achieve its guidance without

eliminating LSC as a competitor. 8 Plaintiffs’ allegations are

simply insufficient to allow the Court to infer that Quad knew

it would be unable to achieve its financial projections and

could not carry out its Quad 3.0 plan unless it acquired LSC

and ended the alleged price war. 9

8

There is some dispute between the parties

whether LSC's decision to reduce its own 2019

guidance after the acquisition fell through can

support Plaintiffs’ argument that Defendants’

statements reaffirming Quad's 2019 guidance were

misleading. See AC ¶¶ 10, 73; Defs. Mem. at

19 n.35; Pl. Resp. at 14 n.10. The Court agrees

with Defendants that the fact that LSC cut its

projections following the failure of the acquisition

has little, if any, bearing on whether Defendants’

statements were false or misleading. LSC was

an entirely distinct business, and Plaintiffs have

failed to demonstrate that the two companies

were so similar that it could not have been

reasonable for Defendants to expect Quad to

meet its guidance while LSC simultaneously

concluded that it would fall far short of meeting its

projections. Plaintiffs’ argument that Defendants’

cases are distinguishable is also unavailing. That

the factual setting — a failed merger — differs

from those in the cited cases does not diminish

the overarching principle that the circumstances

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facing one company tend to shed little light on those

facing a competitor. See Ret. Bd. of Policemen's

Annuity & Benefit Fund of Chi. v. FXCM Inc.,

333 F. Supp. 3d 338, 352 (S.D.N.Y. 2018)

(“[I]nformation about [Defendants’] competitors

provides no information about Defendants’

conduct or knowledge.” (cleaned up)); In re

Wachovia Equity Sec. Litig., 753 F. Supp. 2d

326, 356 (S.D.N.Y. 2011) (“[T]hat Wachovia's

practices were distinguishable from those of their

competitors in some ways and not in others is

not fraud, especially when Defendants made no

attempt to represent otherwise.”).

9

Plaintiffs cite to In re Henry Schein, Inc. Sec. Litig.,

No. 18-CV-1428, 2019 WL 8638851, at *10–11

(E.D.N.Y. Sept. 27, 2019), to argue that while

Quad's ability to achieve its 2019 guidance may

not have been dependent on revenues from the

LSC acquisition, its ability to achieve its financial

projections was dependent on ending the QuadLSC price war. See Pl. Resp. at 15. In Henry Schein,

the court found defendants’ statements touting the

competitiveness of the industry were misleading

in light of plaintiff's allegations demonstrating

that defendants were simultaneously engaged

in undisclosed anticompetitive behavior, namely

“collud[ing] with its competitors to block new

buyers from entering the market.” Id. at *10.

Here, Plaintiffs allege nothing of the sort, as

Quad was openly seeking to acquire the company

known to be its primary competitor. Plaintiffs’

primary argument is merely that Quad did not

disclose details illuminating the precise nature

of that competition. As discussed, Plaintiffs do

not adequately allege that ending this price war

was critical to Quad's performance. Furthermore,

the fact that DOJ determined such a merger

would be bad for competition does not mean that

Quad was engaged in undisclosed anticompetitive

behavior in seeking to acquire a competitor. Cf.

Tanaskovic v. Realogy Holdings Corp., No. 19-

CV-15053, 2021 WL 211049, at *14 (D.N.J.

Jan. 21, 2021) (finding that the existence of a

DOJ investigation into alleged anticompetitive

practices is insufficient to demonstrate that

defendants acted in an anticompetitive way,

absent particularized allegations). In all cases like

Henry Schein of which this Court is aware, the

plaintiffs had adequately alleged particularized

facts showing that defendants were engaged in

patently anticompetitive behavior while publicly

stating that they were engaged in competition.

See, e.g., In re Mylan N.V. Sec. Litig., No.

16-CV-7926, 2018 WL 1595985, at *7 (S.D.N.Y.

Mar. 28, 2018); In re Sotheby's Holdings,

Inc., No. 00-CV-1041, 2000 WL 1234601, at *4

(S.D.N.Y. Aug. 31, 2000). Plaintiffs, therefore,

have not adequately alleged that Defendants’

repeated reaffirmance of Quad's 2019 guidance

was misleading because they failed to disclose

additional information regarding its competitive

stance vis-à-vis LSC.

*9 Absent particularized allegations supporting their theory,

Plaintiffs are left with nothing more than Quad's end-ofClass-Period disclosure of poor 3Q19 financial results, a

reduction in Quad's 2019 fiscal guidance, and a business

decision to accelerate Quad 3.0 to show that Defendants’

earlier statements about being “on track” to meet its financial

targets, maintain its dividend, and successfully implement

Quad 3.0 were false or misleading when made. While the

October 2019 disclosures may support the suspicion that

Quad's management team had been overly optimistic when

it set the company's financial guidance for 2019, they do

not support an inference that Defendants’ prior statements

concerning the LSC acquisition were false or misleading.

See Ok. Firefighters Pension & Ret. Sys. v. Student

Loan Corp., 951 F. Supp. 2d 479, 498 (S.D.N.Y. 2013)

(“[A]t best, plaintiffs’ theory is one of underestimation in

hindsight[,] ... reli[ant] on conclusory allegations to mask

the legally insufficient contention at its core, which is

that defendants could not have possibly believed their own

estimates, since plaintiffs interpret those estimates to have

proven inadequate.”).

Plaintiffs also fail to allege adequately that Defendants’

public statements describing the motivations behind the

proposed LSC acquisition were misleading because they

failed to include additional detail on the nature of Quad

and LSC's competition. As Plaintiffs seemingly concede,

Defendants had no independent duty to disclose the nature

of Quad's competition with LSC; Plaintiffs, therefore, must

show that Defendants’ statements about the LSC acquisition

were misleading absent additional disclosure concerning the

hypercompetitive battle between the two companies. See

Caiola v. Citibank, N.A., N.Y., 295 F.3d 312, 331 (2d Cir.

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2002) (“[U]pon choosing to speak, one must speak truthfully

about material issues.”). Unless Defendants’ “silence would

make other statements misleading or false,” they had no

duty to disclose any additional detail about the Quad-LSC

competition. Glazer v. Formica Corp., 964 F.2d 149, 157

(2d Cir. 1992) (quotation omitted).

Defendants’ statements announcing the LSC acquisition and

the benefits to be gained from the acquisition largely disclosed

much of what Plaintiffs assert was missing, although in

more circumscribed and less jarring terms. Throughout the

Class Period, Defendants openly disclosed the existence of

extreme pricing pressures in the print industry due to excess

capacity and increased consolidation. See, e.g., AC ¶ 173. In

announcing the LSC acquisition, Defendants disclosed that

they expected the acquisition to result in the “elimination

of duplicative functions, capacity rationalization, greater

operational efficiencies and greater efficiencies in supply

chain management.” Id. ¶¶ 161, 174. Defendants also

acknowledged that the LSC acquisition fit within Quad's

strategy of pursuing “value-driven industry consolidating

acquisitions.” Id. ¶ 171.

The touchstone of whether a statement is misleading under

federal securities laws is whether a reasonable investor

would find it to be so. See Basic, 485 U.S. at 234. The

Court is unable to find that a reasonable investor could

have been misled about the motivations or implications of

Quad's planned acquisition of LSC based on Defendants’

public statements. 10 The Court's inability to infer that the

statements were misleading is bolstered by contemporaneous

statements by market analysts: They readily understood that

Quad was acquiring its primary competitor, which would have

an impact on pricing in the print industry. See Dkt. 71-15 at

1 (stating that “QUAD announced the acquisition of its #1

competitor” and, “[a]ssuming a smooth integration, by 2020

we estimate QUAD's ... share of the U.S. commercial print

industry will almost double to 11%”); Dkt. 71-16 at 1 (noting

that “[t]he proposed deal would combine the industry's two

leaders in long-run print” and that “we have to assume the deal

would, over[ ]time, have positive ramifications on industry

pricing trends which generally averaged an annual decline

of 1%-2%”); Dkt. 71-18 at 1–2 (referring to LSC as Quad's

“largest commercial printing peer,” projecting “immediate

cost and revenue synergies” because “QUAD and [LSC] have

a significant overlap in magazine and catalog customers,”

and predicting “wide-scale improvement in printing unit

economics”). 11 Because Plaintiffs have failed to allege facts

showing that Quad's “true reason” for acquiring LSC was

to end a price war and eliminate competition, and because

Defendants adequately disclosed the expected benefits from

the LSC acquisition and were under no obligation to describe

pejoratively their reasoning for acquiring LSC, Plaintiffs have

not adequately alleged that statements regarding the LSC

acquisition were false or misleading.

10 The Court also agrees with Defendants that they

had “no obligation to negatively mischaracterize

its reason for the acquisition.” Defs. Mem. at

17; see also In re MGT Cap. Invs., Inc. Sec.

Litig., No. 16-CV-7415, 2018 WL 1224945, at

*11 (S.D.N.Y. Feb. 27, 2018) (“Companies need

not draw negative inferences or characterize their

behavior in a pejorative way in order to comply

with the securities laws.” (citing Singh v. Schikan,

106 F. Supp. 3d 439, 448 (S.D.N.Y. 2015)).

11 Plaintiffs argue that Defendants’ “improperly

appended” exhibits — including the analyst reports

cited here — cannot be considered on a motion

to dismiss without converting the motion to one

for summary judgment. Pl. Resp. at 8 n.5. The

Second Circuit, however, has held that district

courts can take judicial notice of analyst reports

for the fact that they contain certain information

without considering the truth of the matters asserted

and can do so without converting a motion to

dismiss to a motion for summary judgment. See

Colbert v. Rio Tinto PLC, 824 F. App'x 5, 10

n.5 (2d Cir. 2020) (“[W]e can take notice of the

fact that there was such coverage and reports by

investment analysts in April 2012, several months

before the November SEC filing in question.”);

Staehr, 547 F.3d at 425; see also In re TakeTwo Interactive Sec. Litig., 551 F. Supp. 2d 247,

284 n.23 (S.D.N.Y. 2008). Nevertheless, while it

is appropriate for the Court to consider the content

of analyst reports following the announcement of

Quad's acquisition of LSC for what investment

analysts said of the proposed transaction at that

time, even without considering the reports, the

Court would still find that Plaintiffs have failed to

allege facts from which the Court can infer that

Defendants’ statements about the proposed merger

were false or misleading.

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*10 Plaintiffs next contend that Defendants’ description of

DOJ's antitrust review as “going as planned” or “as expected”

was misleading because, again, they omitted material facts

describing the hypercompetitive price war raging between

Quad and LSC. See Pl. Resp. at 15–16 (quoting AC ¶¶ 182,

194). Plaintiffs argue that Defendants had an obligation to

disclose facts about the nature of the competition between

Quad and LSC “that could impact the review process” in order

to present a “complete,” albeit “less favorable,” assessment

of the ongoing DOJ review. Id. Plaintiffs’ argument is a non

sequitur: the level of competitiveness in the market is neither

here nor there in terms of whether an antitrust review is

proceeding as expected.

Putting aside the illogic of Plaintiffs’ argument, Plaintiffs

have failed to allege the particularized facts that Defendants

were obligated to disclose when publicly commenting on the

DOJ review process. Instead, Plaintiffs speak in generalities

about what would have made Defendants’ statements not

misleading, arguing that Defendants had to “reveal the

unusual and profit-sapping price war between the two

companies.” Id. at 16 n.11. The Court does not agree that

Defendants were required to disclose corporate executives’

hyperbolic characterizations of the corporate rivalry to keep

their statements about the progress of the DOJ antitrust review

from being misleading.

More important, however, Plaintiffs’ Complaint is bereft of

(1) any particularized allegations regarding the nature of

the competition between Quad and LSC that rendered DOJ

antitrust approval particularly unlikely 12 or (2) information

at Defendants’ disposal that cast doubt on the likelihood

of receiving DOJ approval. Plaintiffs’ description of the

Quad-LSC relationship as exceptionally competitive and

their inclusion of a handful of insider statements from

Quad and LSC executives to support that description,

in conjunction with allegations describing the companies’

combined prowess in certain subsectors of the printing

industry, do not come close to raising an inference that

statements describing the review as proceeding “as expected”

are false or misleading. Plaintiffs must allege facts from

which the Court can plausibly infer that Defendants knew or

should have known that the “cutthroat competition” between

Quad and LSC or their collective market share in specific

subsectors would render DOJ approval unlikely in order for

Defendants’ statements about the DOJ review process to be

misleading. 13 See In re Bristol Myers Squibb Co. Sec.

Litig., 586 F. Supp. 2d 148, 160 (S.D.N.Y. 2008) (“The

requirement to be complete and accurate, however, does not

mean that by revealing one fact ... one must reveal all others

that, too, would be interesting ... but means only such others,

if any, that are needed so that what was revealed would not

be so incomplete as to mislead.” (cleaned up)). Plaintiffs have

failed to make that showing, and Plaintiffs may not rely on

the fact that DOJ ultimately sued to block the acquisition to

fill their pleading gap.

12 It was public knowledge that Quad and LSC

were significant competitors in the magazine,

catalog, and book printing businesses. See AC

¶ 53–55; see also, e.g., Dkt. 71-16 at 1 (“The

proposed deal would combine the industry's two

leaders in long-run print.”). That public knowledge

would put reasonable investors on alert that

approval of the transaction from DOJ's Antitrust

Division was not assured. That some market

analysts expected DOJ to assess the merger in

terms of the combined company's market share

in the overall commercial printing business rather

than in particular subsectors does not mean that

a reasonable investor would have understood

Defendants’ disclosures to signal that DOJ's

approval was assured. See Dkt. 71-20 at 1–2

(describing Quad and LSC as “the two largest

commercial printers in the U.S.” but expressing

surprise at DOJ's request for additional information

on the acquisition because the combined entity

would “control no more than 11% ... of the U.S.

commercial printing industry”).

13 At the time of the proposed merger, industry

analysts predicted that the combined company

would control approximately 11% of the “U.S.

commercial printing industry.” See, e.g., Dkt. 71-20

at 2. While the Court does not credit this statement

for its truth, it supports the Court's conclusion that

absent allegations demonstrating that Defendants

knew or should have known that DOJ would

likely oppose the merger because of the combined

company's market share in submarkets within the

overall printing industry, Plaintiffs have failed

adequately to allege that Defendants’ statements

regarding the progress of DOJ's review were

misleading.

*11 This case is plainly distinguishable from those on which

Plaintiffs rely. First, Plaintiffs fail to allege that Defendants

received any indication from DOJ that the review was not

proceeding “as expected” or that the transaction was unlikely

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to be approved. See In re Sprint Corp. Sec. Litig., 232 F.

Supp. 2d 1193, 1219–20 (D. Kan. 2002) (citing particularized

facts that defendants failed to disclose including that DOJ had

suggested to defendants that merger approval was unlikely

and that other negative events had occurred during the review

process). Plaintiffs similarly fail to plead facts showing

that Defendants were aware that the level of competition

between Quad and LSC was likely to lead DOJ to challenge

the merger. See Tomaszewski v. Trevena, Inc., No. 18-

CV-4378, 2020 WL 5095865, at *7–8 (E.D. Pa. Aug. 28,

2020) (finding misleading defendant's statement that he was

hopeful for patent approval because of defendant's reliance on

information already rejected by regulators). Notwithstanding

the fact that the DOJ review process did not turn out as

Defendants expected, Plaintiffs have failed adequately to

allege that Defendants’ expression of optimism during the

review process was misleading.

Finally, Plaintiffs argue that Defendants’ decision to abandon

the acquisition “at the slightest sign of delay and less

than one month after committing to ‘vigorously defend’ the

acquisition” is sufficient to plead falsity. See Pl. Resp. at 16–

17; AC ¶¶ 72–73. While the proximity between Defendants’

forceful proclamations of their intention to defend DOJ's

attempt to block the acquisition and their subsequent

abandonment of that position may arouse suspicion, given

the surrounding context and Plaintiffs’ failure to plead any

particularized allegations showing that Defendants did not

intend to defend the acquisition at the time they made those

statements, the Court finds that Plaintiffs have not adequately

alleged that Defendants’ statements were misleading.

In arguing their point, Plaintiffs rely on Martinek v.

AmTrust Fin. Servs., No. 19-CIV-8030, 2020 WL 4735189

(S.D.N.Y. Aug. 14, 2020). There is a critical factor, however,

that distinguishes this case from Martinek. In Martinek, the

defendants repeatedly stated that the company's stock would

continue to be listed on a public exchange after a planned

merger, but less than two months after the merger closed,

the defendants delisted the company's stock. Id. at *12.

The Martinek court held that “the very fact that Defendants

decided to delist the preferred shares barely two months

after the Merger closed — on bases that were known to

Defendants at the time they represented that they ‘will’

maintain the listings — strongly suggests that Defendants

knew this statement to be false when made.” Id. (emphasis

added).

Here, however, Plaintiffs have not pointed to any information

known to Defendants at the time they announced their

intention to defend the acquisition that ultimately motivated

them to abandon it. Instead, Plaintiffs omit a critical,

subsequent development that appears to explain Defendants’

about-face: the district court's decision not to set an expedited

trial schedule. See Dkt. 71-23; Dkt. 71-22. 14 Absent any

factual allegation that Defendants did not intend to defend the

acquisition in court at the time they announced they would

— i.e., facts tending to show “contemporaneous falsity”

— especially in consideration of the significant intervening

event, Plaintiffs’ allegations are insufficient to give rise to

an inference that Defendants’ stated intention to defend the

LSC acquisition was false or misleading when made. See

In re China Mobile Games & Ent. Grp., Ltd. Sec. Litig.,

No. 14-CV-4471, 2016 WL 922711, at *4 (S.D.N.Y. Mar. 7,

2016) (“Plaintiffs fail to allege any actionable misstatements

or omissions, because they do not allege contemporaneous

falsity.” (citing Novak v. Kasaks, 216 F.3d 300, 309 (2d

Cir. 2000)).

14 As with the analyst reports, the Court may take

judicial notice of publicly filed documents in prior

litigation, although not for the truth of the matters

asserted. See Int'l Star Class Yacht Racing

Ass'n v. Tommy Hilfiger U.S.A., Inc., 146 F.3d

66, 70 (2d Cir. 1998). The Court, therefore, takes

judicial notice of the fact that Quad and LSC

jointly requested an expedited trial schedule, with

a bench trial to begin around October 1, 2019

(well before the October 30, 2019, expiration date

contained in the Quad-LSC merger agreement),

and that the district court thereafter set the case

for trial beginning on November 14, 2019 (after

the expiration date). See Dkt. 71-23; Dkt. 71-22;

see also Dkt. 71-19. The Court also notes that,

even were it unable to consider these prior litigation

documents, Plaintiffs incorporate by reference

into the Complaint Quad's July 23, 2019, press

release discussing Quad's decision to abandon the

acquisition in light of the district court's decision,

providing another basis on which the Court may

consider this information. See AC ¶ 73.

*12 In short, Plaintiffs have failed adequately to allege

falsity with respect to any of Defendants’ statements

concerning the LSC acquisition.

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3. Statements Concerning Quad's Sale of Transpak15

15 Plaintiffs dedicate over 50 paragraphs and

nearly 15 pages of their Complaint to detailing

Quad's FCPA violations that have no connection

whatsoever to Plaintiffs’ purely speculative theory

of fraud regarding Quad's sale of Transpak. See

AC ¶¶ 77–130. The Court gives zero credence to

Plaintiffs’ transparent attempt to draw attention to

Defendants’ unrelated misdeeds in order to bolster

Plaintiffs’ case.

Finally, Plaintiffs argue that Defendants’ statement that Quad

would use the $10 million in proceeds from the sale of

Transpak to pay down debt was false or misleading in light

of Quad's announcement less than one month later of a

settlement with the SEC in which it agreed to pay nearly

the same amount to settle FCPA charges. 16 See Pl. Resp.

at 17; see also AC ¶ 76. This is pure speculation and is

plainly insufficient to survive a motion to dismiss. 17 See

Twombly, 550 U.S. at 555 (“Factual allegations must

be enough to raise a right to relief above the speculative

level.”). The cases Plaintiffs cite in support stand only for the

proposition that allegations demonstrating that a defendant

continually represented that it would act in a certain way

and shortly thereafter acted in a completely contrary way

can raise an inference that the statements were false when

made. See Martinek, 2020 WL 4735189, at *12; see

also Fecht v. Price Co., 70 F.3d 1078, 1083–84 (9th

Cir. 1995) (finding “shortness of time” between optimistic

statements and decision to terminate a program to be

“circumstantial evidence that the optimistic statements were

false when made”). Without any particularized allegation that

Defendants did not, in fact, use the proceeds to pay down debt

and did not intend do so at the time of the sale, Plaintiffs may

have alleged coincidence, but they have come up woefully

short of alleging any false or misleading statements. 18

16 While Plaintiffs repeatedly state that Quad paid

the SEC nearly $10 million in settlement of the

FCPA violations, in their Complaint, Plaintiffs also

allege that, in October 2019, Quad paid “a total

of more than $13 million to resolve the scandal.”

AC ¶ 235. It is unclear whether this covers the $10

million paid to the SEC in combination with $3.2

million Quad agreed to pay the Peruvian antitrust

authority INDECOPI beginning in January 2020

or represents some other settlement payment. See

AC ¶ 212. In any event, this allegation further

weakens Plaintiffs’ speculative theory, eliminating

the similarity in dollar amounts and leaving only

the proximity in time.

17 To the extent Plaintiffs challenge any of

Defendants’ other statements concerning the

prospects for the growth of Quad's packaging

business, that argument similarly fails for

failure to plead adequately particularized

facts demonstrating the falsity of Defendants’

statements. See Pl. Resp. at 17 (citing AC ¶ 146).

18 In addition to arguing that Plaintiffs failed

adequately to allege falsity, Defendants also

argue that Plaintiffs have failed to allege

materiality for certain statements and that a

number of Defendants’ complained-of statements

are protected under the PSLRA safe harbor for

forward-looking statements. See Defs. Mem. at 14–

17, 18–19; see also Defs. Reply at 4–7. Although

the Court is inclined to agree with Defendants, at

least with respect to certain challenged statements,

because the Court finds that Plaintiffs have failed

to allege adequately falsity with respect to any of

Defendants’ Class Period statements — preventing

Plaintiffs from adequately alleging any material

misstatements or omissions — the Court need

not parse through 30 pages of complained-of

statements to ascertain which are inactionable or

immaterial as a matter of law.

The Court notes, however, that its decision not

to examine further the issues of materiality

and the PSLRA safe harbor is not driven by

Plaintiffs’ assertion that Defendants’ arguments

on these issues are insufficiently developed for

the Court to consider. See Pl. Resp. at 19, 21.

While Defendants did not identify each allegedly

immaterial or safe-harbor-protected statement in

Plaintiffs’ Complaint, that is as much a product

of the volume of statements Plaintiffs allege

were misleading as anything else. Nevertheless,

Defendants adequately identify certain categories

of statements covered by their arguments and cite

examples from the Complaint. See Defs. Mem. at

14–16 (citing AC ¶¶ 138, 146, 151, 156, 159, 165,

167, 170, 171, 176, 188, 190); Defs. Reply at 4–

7 (same). The heightened pleading requirements

under Rule 9(b) and the PSLRA apply only to

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Plaintiffs’ Complaint, not Defendants’ motion.

Were it necessary, Defendants’ papers provide a

sufficiently developed basis upon which the Court

could determine whether certain of the challenged

statements are immaterial or protected as

forward-looking statements warranting dismissal

of Plaintiffs’ Complaint.

IV. Plaintiffs Have Not Pled Facts Giving Rise to a

Strong Inference of Scienter

*13 Just as Plaintiffs’ pleading deficiencies inhibit their

ability to plead falsity adequately, so too do they prevent

Plaintiffs from adequately pleading scienter. The PSLRA

requires that a securities fraud complaint “state with

particularity facts giving rise to a strong inference” that the

defendant acted with “a mental state embracing intent to

deceive, manipulate, or defraud.” 15 U.S.C. § 78u–4(b)(2)

(A); Tellabs, 551 U.S. at 319 (quoting Ernst & Ernst

v. Hochfelder, 425 U.S. 185, 193 n.12 (1976)). To plead

scienter, a plaintiff must allege “facts (1) showing that the

defendants had both motive and opportunity to commit the

fraud or (2) constituting strong circumstantial evidence of

conscious misbehavior or recklessness.” ATSI Commc'ns,

Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 99 (2d Cir. 2007) (citing

Ganino v. Citizen Utils. Co., 228 F.3d 154, 168–69 (2d

Cir. 2000)). In considering whether a plaintiff has pleaded

facts giving rise to a strong inference of scienter, “the court

must take into account plausible opposing inferences.” Id.

(quoting Tellabs, 551 U.S. at 323). A plaintiff has alleged

a strong inference of scienter “only if a reasonable person

would deem the inference of scienter cogent and at least as

compelling as any opposing inference one could draw from

the facts alleged.” Tellabs, 551 U.S. at 324.

To adequately plead motive, “plaintiffs must assert a concrete

and personal benefit to the individual defendants resulting

from the fraud”; motives “generally possessed by most

corporate directors and officers do not suffice.” Kalnit v.

Eichler, 264 F.3d 131, 139 (2d Cir. 2001). The Second Circuit

has therefore held that motive “entail[s] concrete benefits that

could be realized by one or more of the false statements and

wrongful nondisclosures alleged.” Novak, 216 F.3d at 307

(quoting Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124,

1130 (2d Cir. 1994)).

Plaintiffs’ proffered theory of motive is that Defendants

sought to inflate artificially the price of Quad stock to

acquire LSC in an all-stock deal for fewer shares than

would otherwise have been required absent the fraudulentlyinflated stock price. 19 See Pl. Resp. at 27; AC ¶¶ 131.

Unaccompanied by the desire to achieve some articulable

goal, a general allegation that defendants sought to inflate

the price of a company's stock falls far short of the PSLRA's

pleading requirements. See, e.g., In re PXRE Grp., Ltd.,

Sec. Litig., 600 F. Supp. 2d 510, 532 (S.D.N.Y. 2009) (“The

alleged motivation of a corporation to raise money to prevent

the negative ramifications of a resultant drop of a credit rating

or a stock price—even if such a drop would allegedly threaten

the ‘survival’ of a company—is far too generalized (and

generalizable) to allege the proper ‘concrete and personal’

benefit required by the Second Circuit.” (citing Kalnit,

264 F.3d at 142)). Plaintiffs’ theory of motive is more

particularized than the general desire to increase Quad's stock

price, although only marginally so.

19 Whether or not included in a “Background” section

of Plaintiffs’ Complaint, as Defendants contend,

see Defs. Reply at 8 & n.16, Plaintiffs plainly

alleged this theory of motive in their Complaint.

See AC ¶ 131. The Court, therefore, may properly

consider it on Defendants’ motion to dismiss.

Whether it is supported by particularized facts is

another matter entirely.

As Plaintiffs point out, the Second Circuit has held that, “in

some circumstances, the artificial inflation of stock price in

the acquisition context may be sufficient for securities fraud

scienter.” Rothman v. Gregor, 220 F.3d 81, 93 (2d Cir.

2000); see also In re Complete Mgmt. Inc. Sec. Litig., 153

F. Supp. 2d 314, 328 (S.D.N.Y. 2001) (“[A]rtificial inflation

of a stock price in order to achieve some more specific

goal may satisfy the pleading requirement.”). Nevertheless,

Plaintiffs overstate the point in arguing that such an allegation

is alone “a sufficient motive for pleading scienter.” Pl. Resp.

at 27. The Second Circuit explicitly cautioned that “[w]hether

sufficient motive could be shown solely by an allegation

of a high stock price artificially maintained in the context

[of] one impending acquisition might well depend on the

particular circumstances of the case.” Rothman, 220 F.3d

at 94; see also In re Complete Mgmt., 153 F. Supp. 2d

at 328 (describing as “highly fact-intensive” and “extremely

contextual” the analysis of whether “the desire to maintain an

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inflated stock price” to achieve a specific goal is “sufficiently

specific support for an allegation of scienter”).

*14 Here, Plaintiffs assert in a completely conclusory

fashion that Defendants sought to artificially inflate Quad's

stock price to complete the LSC acquisition. See AC ¶

131. Plaintiffs do not plead any particularized facts to

support their motive allegation, such as facts demonstrating

that the inflation of Quad's stock price was necessary to

consummate the LSC acquisition. See In re Vivendi

Univ., S.A. Sec. Litig., 381 F. Supp. 2d 158, 185 (S.D.N.Y.

2003) (“Scienter may be imputed ... to defendants when

defendants[ ] were motivated to inflate company stock prices

as a means to effectuate a specific acquisition that would

not otherwise be possible without fraudulently inflating stock

prices.” (emphasis added)), aff'd sub nom. In re Vivendi,

S.A., 838 F.3d 223. Plaintiffs’ allegation, seemingly pled in

passing, that Quad's “artificially inflated stock price enabled

Quad's attempt to acquire LSC in an all-stock transaction

worth $1.4 billion,” AC ¶ 131, does not suffice to plead

motive, especially in light of the tendency to interpret

“narrowly” the Second Circuit's guidance that “artificial

inflation of stock price in the acquisition context may be

sufficient for securities fraud scienter.” In re Agnico-Eagle

Mines Ltd. Sec. Litig., No. 11-CIV-7968, 2013 WL 144041,

at *12 (S.D.N.Y. Jan. 14, 2013) (quoting Rothman, 220

F.3d at 93). A narrow interpretation is further warranted

where, as here, any effort by Defendants to achieve an allstock acquisition of LSC using the fewest shares possible

would have redounded to Quad's shareholders’ benefit.

See Kalnit, 264 F.3d at 141 (“[A]ny intent to defraud

Comcast cannot be conflated with an intent to defraud the

shareholders ... [as] achieving a superior merger [would]

benefit[ ] all shareholders, including the defendants.”).

Plaintiffs also fail to explain how their motive allegation can

support their sweeping theory of fraud covering the entirety

of Defendants’ alleged material misstatements and omissions

throughout the 18-month Class Period. Even were the Court to

credit Plaintiffs’ theory of motive with respect to Defendants’

actions and statements leading up to the announcement of the

LSC acquisition, it does not explain Defendants’ motive with

respect to their statements after Quad announced the LSC

acquisition — or, at the very least, after deciding to abandon

the LSC acquisition. Plaintiffs’ theory entirely fails to allege

scienter with respect to Defendants’ alleged fraud connecting

the Transpak sale to the SEC settlement. “[T]he link between

the [LSC] acquisition and the alleged misconduct simply is

not close enough to strengthen the inference of an intent to

defraud” across the entirety of the Class Period. ECA &

Loc. 134, 553 F.3d at 201.

Perhaps acknowledging the infirmity of their motive

allegation, Plaintiffs assert that they are primarily relying

on allegations that purportedly demonstrate that Defendants

acted recklessly or with knowledge that their statements were

false or misleading. See Pl. Resp. at 23–26. Because Plaintiffs

have failed adequately to allege motive, “the strength of the

circumstantial allegations must be correspondingly greater.”

Kalnit, 264 F.3d at 142 (quotation omitted).

Plaintiffs fail to plead facts raising a strong inference

that Defendants’ statements were made recklessly or with

conscious disregard of the truth. Despite their assertions to

the contrary, Plaintiffs do not plead with particularity that

Defendants had access to facts or information suggesting

the falsity of their public disclosures. See Novak, 216

F.3d at 308 (“[S]ecurities fraud claims typically have

sufficed to state a claim based on recklessness when they

have specifically alleged defendants’ knowledge of facts or

access to information contradicting their public statements.”).

What Plaintiffs characterize as “facts” of which Defendants

allegedly had knowledge and that contradicted their public

statements are nothing more than conclusory assertions

lacking any basis in fact, at least as plead in Plaintiffs’

Complaint. See Pl. Resp. at 24–25 (describing as “facts”

the need for Quad to accelerate the pace of Quad 3.0

and to address the price war with LSC, among other

conclusory statements). As extensively discussed above,

Plaintiffs’ allegations regarding the nature of the QuadLSC competition, without more, fail to demonstrate that

Defendants had access to information that would cast doubt

on the truthfulness of their public statements. Although

Quad's poor 3Q19 performance and subsequent decision

to accelerate Quad 3.0 may provide hindsight support for

Plaintiffs’ assertions that Quad needed to act much earlier

to accelerate 3.0 in order to meet its financial projections,

Plaintiffs do not provide evidence that Defendants had access

to any information demonstrating as much at the time

Defendants made their allegedly misleading statements. In

re PXRE Grp., 600 F. Supp. 2d at 536 (“Second Circuit cases

uniformly rely on allegations that [1] specific contradictory

information was available to the defendants [2] at the same

time they made their misleading statements.” (quoting In

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re Marsh &Mclennan Cos., Inc. Sec. Litig., 501 F. Supp. 2d

452, 484 (S.D.N.Y. 2006)).

*15 Plaintiffs also point to their scienter-specific allegations

and argue that they are adequate to give rise to

the inference that Defendants acted recklessly or with

conscious disregard of the truth. See AC ¶¶ 24–30

(detailing individual Defendants’ control over Quad and

access to insider information); ¶¶ 217–236 (discussing

individual Defendants’ senior positions and Sarbanes-Oxley

certifications, Quadracci's extensive control over Quad,

the importance of ending the LSC price war and rapidly

accelerating Quad 3.0, and Quad's “historically weak

internal controls”). 20 But absent particularized allegations

of specific information Defendants had at their disposal that

rendered their statements false or misleading, allegations of

circumstantial evidence — such as the individual Defendants’

senior positions, control over Quad, regulatory certifications,

and the relative importance of Quad 3.0 — are not sufficient

to plead scienter, even considered in their totality. See

Jackson v. Abernathy, 960 F.3d 94, 99 (2d Cir. 2020)

(finding an argument that a product or sector was “of

such core importance to the Corporate Defendants that their

senior officers must have known the challenged statements

were false” is, without more, “a naked assertion ... plainly

insufficient to raise a strong inference of ... scienter”);

Strougo v. Barclays PLC, 105 F. Supp. 3d 330, 350

(S.D.N.Y. 2015) (holding that, where the complaint fails to

identify any specific information demonstrating the falsity

of the allegedly actionable statements, “[c]ourts in this

Circuit have long held that accusations founded on nothing

more than a defendant's corporate position are entitled to

no weight” (quoting Plumbers & Steamfitters Loc. 773

Pension Fund v. Canadian Imperial Bank of Com., 694

F. Supp. 2d 287, 300 (S.D.N.Y. 2010)); In re TakeTwo Interactive Sec. Litig., 551 F. Supp. 2d 247, 304–

05 (S.D.N.Y. 2008) (“[A] Sarbanes-Oxley certification is

probative of scienter only if the complaint alleges specific

contrary information ... of which the certifying defendant

had reason to know.” (cleaned up)). In the absence of any

specific information demonstrating the falsity of Defendants’

statements, Plaintiffs may not rely on conclusory assertions

that, based on this circumstantial evidence, it is “virtually

inconceivable” or “absurd to suggest” that Defendants were

not aware of “facts,” to wit: Quad's ability to meet its financial

projections was dependent on expediting the pace of Quad 3.0

or acquiring LSC. See Harris v. AmTrust Fin. Servs., Inc.,

135 F. Supp. 3d 155, 176 (finding that “broad allegations that

Defendants ‘knew’ ” of the falsity of their statements “lack[ ]

the specificity required to plead a securities fraud claim”). 21

20 Much like the rest of Plaintiffs’ allegations

concerning Quad's FCPA violations, see supra

note 15, Plaintiffs’ allegations regarding Quad's

“historically weak internal controls” are not helpful

in their quest to plead scienter when Defendants’

alleged false statements are not logically connected

to any weaknesses in Quad's internal controls.

21 To the extent Plaintiffs seek to raise an inference

of scienter with respect to the alleged Transpakrelated fraud, the Court is unable to find it in

Plaintiffs’ papers. Even had Plaintiffs adequately

alleged facts giving rise to a strong inference

of scienter with respect to Defendants’ Quad

3.0 and LSC-related statements, the Court would

conclude that Plaintiffs failed to allege such facts in

connection with the alleged Transpak-related false

statements.

In short, Plaintiffs have failed to allege facts giving rise to

an inference of scienter more compelling than other nonfraudulent inferences. See Tellabs, 551 U.S. at 324. Of

the more cogent explanations for Defendants’ statements is

this: Defendants, upon realizing that they had miscalculated

the speed at which Quad needed to implement its 3.0

transition amid worse-than-expected performance, decided to

take significant steps to expedite its corporate transition plan

to compete more effectively after failing to consummate the

LSC acquisition.

V. Plaintiffs Have Not Pled Loss Causation

As a final, independent reason to dismiss the Complaint,

Plaintiffs fail to allege adequately loss causation. Loss

causation is “the causal link between the alleged misconduct

and the economic harm ultimately suffered by the plaintiff.”

Emergent Cap. Inv. Mgmt., LLC v. Stonepath Grp., Inc.,

343 F.3d 189, 197 (2d Cir. 2003). To allege loss causation,

“[a]mong other things, the misconduct must be a ‘substantial

factor in the sequence of responsible causation.’ ” Gould

v. Winstar Commc'ns, Inc., 692 F.3d 148, 161 (2d Cir. 2012)

(quoting AUSA Life Ins. Co. v. Ernst & Young, 206 F.3d

202, 215 (2d Cir. 2000)).

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Plaintiffs contend that their burden to demonstrate loss

causation is not overly significant and requires only that they

allege facts raising a reasonable inference that some part of

the decline in Quad's share price was substantially caused by

a disclosure of fraud. See Pl. Resp. at 29 (citing Gould,

692 F.3d at 162). Plaintiffs have not, however, alleged

the existence of any corrective disclosures. Defendants’

October 30, 2019, announcement contained no information

that even remotely suggests that Defendants’ prior statements

regarding Quad 3.0, the LSC acquisition, or the Transpak

sale were false or misleading. See Lentell, 396 F.3d

at 175 n.4. The closest Defendants’ statements come to a

“corrective disclosure” is the announcement of a decision

to take “decisive actions” to “further accelerate” Quad 3.0.

AC ¶ 210. But those statements, which may have announced

a “corrective path” for the company going forward, are

not “corrective” disclosures for purposes of alleging loss

causation. Plaintiffs fail to point to any disclosure by

Defendants that even remotely suggests that they knew

when making their earlier statements about the prospect of

meeting their financial projections that the Quad 3.0 plan was

proceeding too slowly or that they would be unable to meet

their financial targets unless they accelerated Quad 3.0.

*16 Because Plaintiffs fail to allege facts from which

the Court can infer that Defendants’ end-of-Class-Period

disclosures revealed fraud to the market, Plaintiffs are

reduced to relying solely on Defendants’ revelation of poor

financial results and concomitant market dissatisfaction to

allege loss causation. That is simply not enough. See In re

AOL Time Warner, Inc. Sec. Litig., 503 F. Supp. 2d 666, 678–

79 (S.D.N.Y. 2007) (“[I]t is not enough to argue that [the]

audit opinions concealed the risk that [the company] would be

unable to meet future revenue projections, because the mere

failure to meet earnings forecasts is insufficient to establish

loss causation.”); In re Initial Pub. Offering Sec. Litig., 399

F. Supp. 2d 261, 266–67 (S.D.N.Y. 2005) (“If downturns in

stock prices based on such mundane events as failures to meet

forecasts and downward revisions of forecasts were legally

sufficient to constitute disclosures of securities fraud, then

any investor who loses money in the stock market could sue

to recover for those losses without alleging that a fraudulent

scheme was ever disclosed and that the disclosure caused their

losses.”). 22

22 As with Plaintiffs’ arguments concerning scienter,

the Court is entirely unable to divine a theory of loss

causation with respect to the alleged false statement

regarding the proceeds from the Transpak sale.

CONCLUSION

For the foregoing reasons, Defendants’ motion to dismiss is

GRANTED. Because Plaintiffs had an opportunity to amend

their pleadings in response to Defendants’ motion to dismiss,

and because the arguments made in response to the motion

to dismiss give no indication that the Complaint's defects are

curable, Plaintiffs are denied leave to amend. See Fed. R.

Civ. P. 15(a)(2); TechnoMarine SA v. Giftports, Inc., 758

F.3d 493, 505–06 (2d Cir. 2014). The Amended Complaint is

therefore DISMISSED with prejudice.

The Clerk of Court is respectfully directed to close all open

motions and close this case.

SO ORDERED.

All Citations

Slip Copy, 2021 WL 736839

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