Opinion ID: 2366732
Heading Depth: 1
Heading Rank: 10

Heading: Legal Standard of Materiality

Text: Materiality is an inherently fact-specific finding, Basic Inc. v. Levinson, 485 U.S. 224, 236, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988), that is satisfied when a plaintiff alleges a statement or omission that a reasonable investor would have considered significant in making investment decisions, Ganino v. Citizens Utils. Co., 228 F.3d 154, 161-62 (2d Cir.2000) (citing Basic, 485 U.S. at 231, 108 S.Ct. 978). [10] [T]here must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the `total mix' of information made available. Id. at 162 (alteration in original) (internal quotation marks omitted). However, it is not necessary to assert that the investor would have acted differently if an accurate disclosure was made. Id. Rather, when a district court is presented with a Rule 12(b)(6) motion, `a complaint may not properly be dismissed . . . on the ground that the alleged misstatements or omissions are not material unless they are so obviously unimportant to a reasonable investor that reasonable minds could not differ on the question of their importance.' Id. (quoting Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir.1985)); see also TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 450, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976) (noting that even at the summary judgment stage, the determination [of materiality] requires delicate assessments of the inferences a `reasonable shareholder' would draw from a given set of facts and the significance of those inferences to him, and these assessments are peculiarly ones for the trier of fact). [W]e have consistently rejected a formulaic approach to assessing the materiality of an alleged misrepresentation. Ganino, 228 F.3d at 162; see also ECA & Local 134 IBEW Joint Pension Trust v. JP Morgan Chase Co., 553 F.3d 187, 204 (2d Cir.2009) (While Ganino held that bright-line numerical tests for materiality are inappropriate, it did not exclude analysis based on, or even emphasis of, quantitative considerations.). In both Ganino and ECA & Local 134, we cited with approval SEC Staff Accounting Bulletin No. 99, 64 Fed.Reg. 45,150 (1999) [hereinafter SAB No. 99], which provides relevant guidance regarding the proper assessment of materiality. See ECA & Local 134, 553 F.3d at 197-98; Ganino, 228 F.3d at 163-64. As the SEC stated, [t]he use of a percentage as a numerical threshold, such as 5%, may provide the basis for a preliminary assumption that . . . a deviation of less than the specified percentage with respect to a particular item . . . is unlikely to be material. . . . But quantifying, in percentage terms, the magnitude of a misstatement. . . cannot appropriately be used as a substitute for a full analysis of all relevant considerations. SAB No. 99, 64 Fed.Reg. at 45,151; see also ECA & Local 134, 553 F.3d at 204 (noting that a five percent numerical threshold is a good starting place for assessing. . . materiality (emphasis added)). Accordingly, a court must consider both `quantitative' and `qualitative' factors in assessing an item's materiality, SAB No. 99, 64 Fed.Reg. at 45,151, and that consideration should be undertaken in an integrative manner. See Ganino, 228 F.3d at 163; see also In re Kidder Peabody Sec. Litig., 10 F.Supp.2d 398, 410-11 (S.D.N.Y. 1998); SAB No. 99, 64 Fed.Reg. at 45,152 (Qualitative factors may cause misstatements of quantitatively small amounts to be material. . . .). In this case, the District Court confronted a Rule 12(b)(6) motion, a motion for which plaintiffs need only satisfy the basic notice pleading requirements of Rule 8. So long as plaintiffs plausibly allege that Blackstone omitted material information that it was required to disclose or made material misstatements in its offering documents, they meet the relatively minimal burden of stating a claim pursuant to Sections 11 and 12(a)(2), under which, should plaintiffs' claims be substantiated, Blackstone's liability as an issuer is absolute. Where the principal issue is materiality, an inherently fact-specific finding, the burden on plaintiffs to state a claim is even lower. Accordingly, we cannot agree with the District Court at this preliminary stage of litigation that the alleged omissions and misstatements are so obviously unimportant to a reasonable investor that reasonable minds could not differ on the question of their importance. Ganino, 228 F.3d at 162 (internal quotation marks omitted).