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___________ No. 02-3374

___________ RETURN ON EQ UITY GROUP, INC. ; J OSEPH KILRAINE; JOAN DAS PI N; N ATI ONAL CAP IT AL CORP ORATI ON; CONSULT ANTS F OR BUSI NESS AND IND USTRY, Appellants,
v. M PM TE CH NO LO GIE S, IN C.; M ICH AE L L UC IAN O, ind ividua lly and in his ca pacity as Chairm an and Chief E xecutive O fficer and D irector; GLEN HJORT , indi viduall y and i n his capac ity as Chief Financial Of ficer a nd as Dire ctor; R OB ER T D . LIT TL E, ind ividua lly and in h is ca pa ci ty as Corpor at e Se cr et ary an d Di re ct or ; L . C RAI G SMIT H, individually and in his cap acity as Corporate C ounsel an d as D irector; MYRON KATZ, i ndi vi dua ll y andin hi s c apa ci tyas Dir ector ; RI CHARD APPLEBY, i ndi vid ual lyand i n hi s capaci tyas Di rec tor ; MICHAEL POR TER ; ABC COR POR ATIO NS 1-5, Fictitious defendants; JOH N A ND JAN E DO ES 1-5, Fictiti ous defendants.

___________ On A ppeal from the Ord er of the U nited States D istrict Court

for the Dis tri ct of New Jersey (Civil Action No. 02 -CV -425(JA P)) Distri ct Court J udge: The Honorable J oel A. Pis ano

___________ Argued on April 7, 2003 Be for e: A LIT O, F UE NT ES , GR EE NB ER G, Circuit Judges (Opinion Fi led: May 20, 2003)2 _____________________ Steven B. St ein (argued) Stein & Stein 164 Rou te 10 West Succasunna, NJ 07876 Attorn ey for A ppella nts John M. Toriel lo (ar gued) Joseph P. Augustine Holl and & Kni ghtLLP 195 Broadway New Y ork, NY 10007 Attorneyfor Appellees

_______________________ OPINI ON OF THE COURT

_______________________ FU EN TE S, Circuit

Judge
. Plaintiffs, Return on Equity Group, Inc. , tw o of its related entities, an d tw o of its executi ves (co llectiv ely, “RO E”) comm enced the present action against MPM Technologies, Inc. and s evera l of its of ficers (c ollecti vely, “MPM ”) in conne ction wit h the al leged termination of cert ain consul ting agreements between the parties. ROE asserted two cl ai ms of securities fraud p ursuant to section 10(b) o f t he S ecu rities E xch ang e A ct, 15 U.S .C. § 7 8j(b), and secti on 20(a), 15 U.S.C. § 78t . ROE’s Complaint al so incl uded three claim s broughtpursuant

to New Jerseystate law for brea ch of contr act, fraud and misrepresent ation1 Because we agree with t he firs t of the two alte rnati ve rati onales advanced by t he Distri ct Court, we need not addres s the se cond. 3 under the N ew Jersey C onsu mer F raud Ac t, and tra de libe l. M PM m oved to dis miss the Complaint i n its entirety , which the District Court granted. As to the s tatelaw clai ms, the Dis tri ct Court he l d t hat thepresence of a valid and enfo rceab le forum selec tion cl ause desi gnating t he Superior

Court of New J ersey, M orris County, as the situs of alllitigati on aris ing outof the consulting agreements compell ed the dismis sal of

those clai ms. ROE does not contes t the Dis tri ct Court’ s decis ion in t his re gard, and its state law claims are not before us. With regard to the securiti es fraud cl aims, t he Court note d e xclusi ve juri sdiction pursuant to 15 U.S .C. § 7 8aa. N everth eless, the Distric t Cou rt held th at (1) RO E fa iled to alle ge an essential e lement of s ecurit ies fraud-- the purcha se, s ale, or tr ansfer of MPM stock; and (2) even i f it c ould prove a t ran sfer o f M PM stock , RO E fa iled to a llege f raud with particu larity as requi red by Rule 9(b) of the Federa l Rules of Ci vil Pr ocedure. We agree that ROE failed to alle ge any cogni zable t ransfer of MPM stock and, theref ore, wil l affi rm the judgmentof the Distric t Cou rt. 1 In addition, we will deny ROE ’s request, made for the fir st time o n app eal, to am end its C om plaint. I. R OE purport s to be a management consulting firm, speci aliz ing in merge rs and2 We write sole ly for the be nefit of the parties and, therefore, review the factual backg round o nly to the extent necessa ry to inform our d ecision today. The D istrict Court performed a thorough revi ew of the factua l background i n its decisi on on the underl yi ng mo tion to d ism iss. See Return on Equity Group, Inc. v. MPM Technologies , Inc. , No. 02-CV -425, slip op. at 3-7 (D .N.J. July 25, 2002). 4 acquisiti ons. 2 It al so clai ms to be a speci alis t in rev iving compani es in poor financi al conditi on. MPM is a hol ding company with subs idi aries in the bus iness of designi ng, buildi ng , installing , and s ervicin g ind ustrial air p ollution systems. M PM is a pu blic
cor porati on whose stock traded on the Nasdaq National Market during t he time p erio d relevant to t

his di spute. The parties e ntered into an initial agre eme nt in S epte mber 2000 (the “September Agreement”) in which ROE agreed to provi de consulting services to MPM . This a greement entai led the “l end-lea se” of an ROE executive to MPM . Although the agreement also set t he price for ROE’s servi ces, MPM could elect to pay ROE in cash or in MPM stock. To th is da y, there i s no clear

statement from ROE as to whether theywere paid i n cash or i n stock. Ac cord ing to RO E, on e of its n otable achie vem ents in the consul ting ar rangement was the commencement of

negotiations for MP M to acquire ST 2EP, a comp any in a li ne of business
co mp l em en t ary t o MP M. In November 2000, ROE conten ds thatthe parti es sought to revis e the Sept ember Agreement to exte nd an d solid ify the rela tionsh ip betw een R OE and M PM . The se eff orts resul ted in addit

ional c ontract s which contemplated an ROE executive working ful l-time for M PM for a fiv e-yea r term .3 As w e have stated before, controll ing person liabil itypursuant section 20(a) is a

der ivati ve c laim pre mis ed o n an ind epe nde nt v iolat ion of th e fe der al se cur ities la ws . See In re Rockefel ler , 311 F .3d at 2 11. T heref ore, ou r analysis o f RO E’s se ction 1 0(b) c laim is equally applicable to its claim pu rsuant to section 2 0(a). 5 According to ROE, the rel ations hip between the parti es deteriorated soon thereafter. Although the Complaint is not a model of clarity, parti cularl y with respect to the a llegations of fraud, t he fraud ulent cond uct ap paren tly relates to a d ispute b etwe en the parties a s to MP M’s potenti al dis closur e obligations to its sha reho lders in the event of its acquisi tion of ST2 EP. R OE ’s provision of consulting serv ices to M PM ended soon there after. II. Our review of a D istrict Co urt’s gra nt of a mo tion to d ismiss is plen ary. See In re Rockefelle r Center Proper ties , Inc. Securities Lit

igati on , 311 F.3d 198, 215 (3d Cir. 2002 ). We are o blig ed to app ly the sa me stan dar ds a ppl ied b y the D istrict Co urt. See id. Therefore, for p urpo ses of this appe al, we accept the well-pl eaded all egati ons in ROE’s Complaint as true. III. We agree w ith the Distri ct Court that ROE failed to al lege an es senti al el ement of securi ties fraud pursu ant t o section 10 (b). 3 We have often stated th at one of the thresh old elem ents of a s ection 10(b ) claim is a well-pl eaded all egati on of a materi al misrepresent ation
or om ission in connecti on with the pur cha se o r sale of s ecu rities. See We iner v. Q uake r Oa ts Co. , 129 F.3 d 31 0, 31 5 (3 d C ir. 19 97)
. RO E’s alle gations relat

ing to purchase, s ale, or tr ansfer are, at best , perpl exing. The4 Nor is theinherent indefi nitene ss of ¶ 27 cure d by the equall y ambiguous all egation i n ¶ 6 th at “P lai nti ffs are eit her s hareh olde rs or

owed shares of MPM Tec hno logies c om mo n stoc k, and we re dam aged thereb y.” Section 10(b ) requ ires a w ellpleaded allegation of purchase, sal e, or transfer of securi ties. 6 only detai led ass erti on of stock t ransfer is st ated entirel y as a theore tica l possibili ty : “[u]nde r the terms of the Sept ember Agr eement , MPM would have the right to make pay ment to ROE of its acquisi tion fe es in common stoc k at thecurrent market pri ce it

trades for at thetime of closi ng or cas h.” C om pl. at ¶ 27 (em phasis add ed). RO E’s allegation estab lishes no m ore than that MPM could choose it s method of payment and that payment in st ock was one of the two choices. The Distri ct Court c orrectly observed that, without more, the mere st atement of the the oretica l possib ility of a stock t ransfer was not suffi cient

to all ege a purchas e, sale, or transfer of securit

ies. 4 IV. Fi na lly, RO E ask s us to remand the cas e in order to permit

it to amend the Co mp laint,
even though it

never fi led a prope r mo tion to ame nd in the D istrict Co urt. W e w ill deny this eleventh-hour re quest t o cure ROE’s defecti ve pleadi ng. It is well -settled t

hat when judgment has been entered, th e presumpti on favoring liber al am end me nts is rev erse d. See Werner v. Werner , 267 F.3d 288, 296 (3d Cir. 200 1). Under these circumstance s, l eave to amend becomes the “l ong-odd exception rat her than t he rule .” Id . (quoting The Dartmouth Review v. Dartmouth College , 889 F.2d 13, 22 (1st Cir. 1989)). At o ral argu men t, we a ttemp ted to give ROE a full and fair opportunity to set forth spec ific alle gations of purchase, sale, or tr ansfer of MPM stock. Once again, ROE failed to7

state how an am endm ent w ould cure th e def icienc ies in its Complaint. The mere repetiti on of these uns pecifi ed all egat ions i n ROE’s briefs, and again at oral argument, convi nces us that l eave to amend would not serve the inte rest s of just ice. V. For the reaso ns set f orth ab ove, w e w ill affirm the jud gm ent of the D istrict Co urt, and
we will de ny leave to am end th e Co mp laint.8

______________________________ TO THE CLERK OF COU RT: Kindly file the fore going opini on.
By the C ourt, /s/ Juli o M. Fuentes Circuit Judge