Court Opinion

ID: 4181
Source: CourtListenerOpinion
Date Created: 2010-04-24 19:37:37+00
Date Added: 2024-06-11T09:37:55.350874
License: Public Domain

09-1370-cv
Condra v. PXRE Group, Ltd.

                                      UNITED STATES COURT OF APPEALS
                                         FOR THE SECOND CIRCUIT

                                              SUMMARY ORDER
        Rulings by summary order do not have precedential effect. Citation to summary orders
filed after January 1, 2007, is permitted and is governed by this court’s Local Rule 32.1 and
Federal Rule of Appellate Procedure 32.1. In a brief or other paper in which a litigant cites a
summary order, in each paragraph in which a citation appears, at least one citation must either
be to the Federal Appendix or be accompanied by the notation: “(summary order).” A party
citing a summary order must serve a copy of that summary order together with the paper in
which the summary order is cited on any party not represented by counsel unless the summary
order is available in an electronic database which is publicly accessible without payment of fee
(such as the database available at http://www.ca2.uscourts.gov/ ). If no copy is served by
reason of the availability of the order on such a database, the citation must include reference to
that database and the docket number of the case in which the order was entered.

       At a stated term of the United States Court of Appeals for the Second Circuit, held at the
Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New York,
on the twenty-first day of December, two thousand and nine.

PRESENT:

          GUIDO CALABRESI,
          JOSÉ A. CABRANES,
          BARRINGTON D. PARKER,
                               Circuit Judges.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
CHAD CONDRA,

                     Plaintiff-Appellant,

STEPHEN GOLDBERGER , individually, and on behalf of all others
similarly situated,

                     Plaintiff,

STEVEN KLEIN , RALPH LOWRY , and ELDON H. VOSS,

                     Consolidated-Plaintiffs,

                                                                     1
                     -v.-                                                                  No. 09-1370-cv

PXRE GROUP LTD ., JEFFREY L. RADKE , JOHN M. MODIN ,
and GUY HENGESBAUGH ,

                     Defendants-Appellees.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

FOR PLAINTIFF-APPELLANT:                                                                   MARC I. GROSS, Pomerantz
                                                                                           Haudek Grossman & Gross LLP,
                                                                                           New York, NY.

FOR DEFENDANTS-APPELLEES:                                                                  JONATHAN K. YOUNGWOOD
                                                                                           (Bruce D. Angiolillo, Janet A.
                                                                                           Gochman, of counsel) Simpson
                                                                                           Thacher & Bartlett LLP, New
                                                                                           York, NY, for defendant-appellee
                                                                                           PXRE Group, Ltd.

                                                                                           Jonathan R. Tuttle, Scott N. Auby,
                                                                                           David S. Karp, Debevoise &
                                                                                           Plimpton LLP, Washington, D.C.,
                                                                                           for defendant-appellee Radke.

                                                                                           Brad S. Karp, Jonathan H.
                                                                                           Hurwitz, Joshua D. Anders, New
                                                                                           York, NY, for defendant-appellee
                                                                                           Hengesbaugh.

                                                                                           M. William Munno, Justin M.
                                                                                           Garbaccio, Seward & Kissel LLP,
                                                                                           New York, NY, for defendant-appellee
                                                                                           Modin.

      Appeal from a March 4, 2009 order of the United States District Court for the Southern District
of New York (Richard J. Sullivan, Judge).

    UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment of the District Court be AFFIRMED.

        Plaintiff-appellant Chad Condra, lead plaintiff in this securities fraud class action, appeals from
the District Court’s order dismissing the class plaintiffs’ complaint, which alleges claims under §§ 10(b)
and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated by the Securities and
Exchange Commission. This class action arises out of statements made by defendants-appellees
PXRE Group Ltd. (“PXRE”), Jeffrey L. Radke, John M. Modin, and Guy Hengesbaugh (together,
“defendants”), regarding the losses that PXRE, a reinsurance company, would be exposed to in the wake
of Hurricane Katrina as well as the company’s procedures for calculating loss. We assume the parties’
familiarity with the remaining facts, procedural history, and issues on appeal.

                                                                      2
         On appeal, plaintiffs argue that the District Court erred in dismissing their complaint on the
basis that it fails to raise a strong inference of scienter so as to survive a motion to dismiss. Specifically,
plaintiffs assert that the District Court erred by (1) holding that the Chief Actuary’s opinion was
insufficient to infer sceinter, (2) finding that the magnitude of PXRE’s understatement of losses,
absolutely and relative to its peers, did not support an inference of scienter, and (3) discounting
defendants’ motive and opportunity in making their alleged misstatements about PXRE’s losses.
Plaintiffs also argue for the first time on this appeal that the District Court should have imputed to
defendants knowledge of “core operations” of the company to support a finding of scienter or,
alternatively, that defendants’ duty of inquiry supports the inference of scienter.

           We review de novo the District Court’s decision dismissing a complaint pursuant to Rule
12(b)(6), see Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002). “To survive dismissal, [a]
plaintiff must provide the grounds upon which his claim rests through factual allegations sufficient ‘to
raise a right to relief above the speculative level.’” ATSI Commc’ns., Inc. v. Shaar Fund, Ltd., 493 F.3d 87,
98 (2d Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)).

          To plead scienter under the Private Securities Litigation Reform Act of 1995, Pub. L. 104-67,
109 Stat. 737 (codified as amended in scattered sections of 15 U.S.C.) sufficiently to survive a motion to
dismiss a plaintiff must allege with particularity “facts giving rise to a strong inference that the defendant
acted with the required state of mind”—an intent to deceive, manipulate, or defraud. 15 U.S.C. § 78u-
4(b)(2). A plaintiff may establish a “strong inference” of scienter by alleging either “(1) that defendants
had the motive and opportunity to commit fraud, or (2) strong circumstantial evidence of conscious
misbehavior or recklessness.” ECA v. JP Morgan Chase Co., 553 F.3d 187, 198 (2d Cir. 2009). In
assessing allegations of scienter we must consider “all of the facts alleged, taken collectively,” and must
also “take into account plausible opposing inferences.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551
U.S. 308, 322-23 (2007). The inference of scienter must be “at least as compelling as any opposing
inference of nonfraudulent intent.” ECA, 553 F.3d at 198 (citation omitted).

           In a thorough, well-reasoned opinion, the District Court granted defendants’ motion to dismiss
under Rule 12(b)(6) of the Federal Rules of Civil Procedure, holding that plaintiffs failed to sufficiently
plead scienter under either of the two prongs of the scienter test required by our holding in ECA. After
considering plaintiffs’ complaint and all of the arguments on appeal, we dismiss plaintiffs’ claims
substantially for the reasons stated by the District Court’s careful order and opinion of March 4, 2009.
See In re PXRE Group, Ltd., Sec. Litig., 600 F. Supp. 2d 510 (S.D.N.Y. 2009).

                                                   CONCLUSION

         Accordingly, we AFFIRM the judgment of the District Court.

                                                 FOR THE COURT,

                                                 Catherine O’Hagan Wolfe, Clerk of Court

                                                 By _______________________________

                                                       3