Opinion ID: 1253901
Heading Depth: 3
Heading Rank: 2

Heading: JPMC's Statements Regarding Its Integrity and Risk Management

Text: Plaintiffs allege that JPMC made numerous misrepresentations regarding its highly disciplined risk management and its standard-setting reputation for integrity. SAC ¶ 3 (internal quotation marks omitted). Plaintiffs point to statements such as the assertion that JPMC had `risk management processes [that] are highly disciplined and designed to preserve the integrity of the risk management process,' id.; that it `set the standard' for `integrity,' id.; and that it would `continue to reposition and strengthen [its] franchises with a focus on financial discipline,' id. ¶ 391 (emphasis omitted). See also id. ¶¶ 336, 354, 380, 400, 472, 474, 479, 481. These statements, according to Plaintiffs, were misleading because JPMC's poor financial discipline led to liability in the WorldCom litigation and involvement in the Enron scandal. Id. at ¶¶ 188-240, 636-39. Furthermore, Plaintiffs argue that the statements were material because they related to the integrity and risk-management practices of an investment bank. According to Plaintiffs, the significance of a bank's reputation is undeniable. Therefore, because the misleading statements at issue related to the bank's reputation, Plaintiffs conclude that the statements would necessarily be relied upon by a reasonable investor and qualify per se as material. The statements highlighted by Plaintiffs are no more than puffery which does not give rise to securities violations. See Lasker v. N.Y. State Elec. & Gas Corp., 85 F.3d 55, 59 (2d Cir.1996). The statements are too general to cause a reasonable investor to rely upon them. As in Lasker, these statements did not, and could not, amount to a guarantee that its choices would prevent failures in its risk management practices. See id. at 58 (The Company could not guarantee and did not guarantee ... that its investment choices would yield increased future earnings. (internal quotation marks omitted)). JPMC's statements were merely generalizations regarding JPMC's business practices. Such generalizations are precisely the type of `puffery' that this and other circuits have consistently held to be inactionable. Lasker, 85 F.3d at 59; see also San Leandro, 75 F.3d at 811 (stating that such puffery cannot have misled a reasonable investor). Plaintiffs conflate the importance of a bank's reputation for integrity with the materiality of a bank's statements regarding its reputation. While a bank's reputation is undeniably important, that does not render a particular statement by a bank regarding its integrity per se material. In Lasker, it was undisputed that the financial integrity of the utility was important to its investors; but we still found that the broad, general statements regarding the utility's financial integrity could not reasonably be relied upon as a guarantee that the company's actions would in no way impact [its] finances. Lasker, 85 F.3d at 59 (internal quotation marks omitted). Here also, JPMC's statement that it `set the standard for best practices in risk management techniques,' SAC ¶ 336, like its other similar statementsis so general that a reasonable investor would not depend on it as a guarantee that JPMC would never take a step that might adversely affect its reputation. No investor would take such statements seriously in assessing a potential investment, for the simple fact that almost every investment bank makes these statements. See Lasker, 85 F.3d at 58. Finding that JPMC's statements constitute a material misrepresentation would bring within the sweep of federal securities laws many routine representations made by investment institutions. We decline to broaden the scope of securities laws in that manner.