Opinion ID: 38583
Heading Depth: 2
Heading Rank: 3

Heading: F. Supp. 2d 576, 640 (S.D. Tex. 2003).

Text: The initial dismissal of GECC’s claims, as There, outside directors of Enron claimed, in discussed above, was based on the Texas their motion to dismiss, that their reliance on Business Corporation Act, which entitles Arthur Andersen’s audit opinions insulated officers and directors to rely in good faith on them from liability under § 11 of the Securities the reports of accountants. See TEX. BUS. Act of 1933, 15 U.S.C. 577k. The court, CORP. ACT arts. 2.41(c), 2.42(c). According however, concluded that the director’s to the district court, in light of the statute, “It reliance, and the good faith thereof, were factis hard to envision that officers and directors specific determinations that could not be might have exercised greater care than resolved on a motion to dismiss. Id. ensuring that the financial statements used to represent their company’s financial conditions In response, the non-accounting defendants and the underlying accounting principles upon point to an analogous Delaware statute. In which they were based have been approved by that state, as in Texas, directors are entitled to independent accounting experts.” rely in good faith on the opinions rendered within the realm of expertise of the person On appeal, GECC contends that the protec- giving the advice. Construing this Delaware tion afforded by the Texas statute must be statute in Brehm v. Eisner, 746 A.2d 244, 261 pleaded as an affirmative defense and is not an (Del. 2000), the court indicated that the appropriate ground on which to dismiss a pleading burden is on the plaintiff to allege claim on a rule 12(b)(6) motion. In support of such facts as would make reliance on the this argument, GECC points to analogous expert opinion unreasonable. After holding provisions contained in federal securities laws that the plaintiffs must rebut the presumption and the cases applying them. of good faith reliance, the court noted, “That is not to say, however, that a rebuttal of the For instance, in Griffin v. Paine Webber, presumption of proper reliance on the expert Inc., 84 F. Supp. 2d 508, 512-13 (S.D.N.Y. under Sect ion 141(e) cannot be pleaded in a 2000), investors brought a claim under § 12 of properly framed complaint setting forth the Securities Act of 1933 alleging false regis- particularized facts creating reason to believe tration and prospectus claims. See 15 U.S.C. that the Old Board’s conduct was grossly § 771(a)(2). Section 12, however, also negligent.” contains an exception for those who submitted a false registration or prospectus because they The instant defendants cannot cloak themdid not or could not know of the falsity or selves in the protection of the Texas statute at omission despite the exercise of reasonable this early stage of the proceedings. Article 7 2.42(c) affords protection for the reliance on The district court’s initial dismissal of the opinions of public accountants where that GECC’s claim, though well intentioned, was in reliance is “in good faith and ordinary care.” error. The parties further dispute whether TEX. BUS. CORP. ACT art. 2.42(c). Perhaps GECC should have been allowed to amend its GECC’s pleadings (specifically, the complaint. In light of our decision that it was attachments thereto)8 negate any allegation a mistake to dismiss the original complaint, we that the defendants did not act with reasonable need not reach that question. care. Our inquiry, however, does not end there. For the protection of the Texas statute The judgment is REVERSED, and this to attach, the reliance on an accountant’s matter is REMANDED for further opinion must be in good faith. proceedings. The attachment of the Form 10K to GECC’s complaint does nothing to demonstrate the defendants’ good faith. Although the Brehm court concluded that a Delaware statute conferred a presumption of good faith, no such presumption is apparent on the face of the Texas statute, and we decline to devise one by judicial fiat. A showing that the reliance was taken in good faith must be made by defendants in support of an affirmative defense based on the statute. If they are able to make such an uncontroverted showing after GECC has had a chance to conduct discovery, summary judgment will be appropriate.9 At this early stage, however, termination of GECC’s suit is premature. 8 Documents attached to a complaint are con- sidered part of the plaintiff’s pleadings. See FED. R. CIV. P. 10(c); Centers v. Centennial Mortgage, Inc., 398 F.3d 930, 933 (7th Cir. 2005) (quoting 5 CHARLES A. WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE: CIVIL 2D § 1327, at 766 (1990) (“[A] plaintiff may plead himself out of court by attaching documents to the complaint that indicate that he or she is not entitled to judgment.”). 9 See 2 JAMES WM. MOORE ET AL., M OORE’S FEDERAL PRACTICE § 8.02[2], at 8-8.1 to 8-9 (3d ed. 2005). 8