Court Opinion

ID: 6342860
Source: CourtListenerOpinion
Date Created: 2022-05-20 22:00:21.286847+00
Date Added: 2024-06-11T09:19:29.574080
License: Public Domain

United States Court of Appeals
                       For the First Circuit

No. 20-1857

  JORGE PONSA-RABELL; CARINA PEREZ-CISNEROS ARMENTEROS; MARILU
  CADILLA-REBOLLEDO, by herself and on behalf of her children's
                            accounts,

                       Plaintiffs, Appellants,

                 YGRC MINOR CHILD; CIRC MINOR CHILD

                             Plaintiffs,

                                 v.

 SANTANDER SECURITIES LLC; SANTANDER BANCORP; SANTANDER HOLDINGS
 USA, INC.; BANCO SANTANDER PUERTO RICO; BANCO SANTANDER, S.A.,

                       Defendants, Appellees.

            APPEAL FROM THE UNITED STATES DISTRICT COURT
                  FOR THE DISTRICT OF PUERTO RICO

          [Hon. Gustavo A. Gelpí, Chief U.S. District Judge]

                               Before

                Thompson and Howard, Circuit Judges,
                   and Woodcock,* District Judge.

     Eric M. Quetglas-Jordan, with whom José F. Quetglas-Jordán,
Quetglas Law Offices, and Quetglas Law Firm, P.S.C. were on brief,
for appellants.
     Francesca Eva Brody, with whom Andrew W. Stern, Nicholas P.
Crowell, James O. Heyworth, Sidley Austin LLP, Néstor M. Méndez,
Jason R. Aguiló Suro, and Pietrantoni Méndez & Alvarez LLC were on

     *   Of the District of Maine, sitting by designation.
brief, for appellees.

                        May 20, 2022

                           - 2 -
           THOMPSON, Circuit Judge.       Before us is a dispute between

brokerage customers of Santander1, who, lacking a crystal ball,

purchased special Puerto Rico securities during a recession in

Puerto Rico, but before the crash of the bond market.                       These

purchasers (we'll refer to them as the "Ponsa-Rabell plaintiffs"

or   "plaintiffs"   hereafter)    brought     a    securities      class    action

against Santander asserting claims under federal securities laws

and Puerto Rico law.      The district court adopted the Report and

Recommendation of the magistrate judge, dismissing all claims.                 On

appeal,   the    Ponsa-Rabell   plaintiffs        dispute   only    the    federal

securities claims (more on that later).             Our take, reviewing with

fresh eyes, is that the district court got it right, so we affirm.

                                BACKGROUND2

           The    Ponsa-Rabell    plaintiffs        purchased      Puerto    Rico

Municipal Bonds (PRMBs) and other securities heavily concentrated

      1In an effort to declutter the opinion of hard-to-remember
abbreviations, the defendants-appellees here will be collectively
referred to as "Santander." The parties named in the complaint
are Santander Securities, LLC (SSLLC), Santander Holdings USA,
Inc. (SHUSA), Banco Santander, S.A. (BSSA), Santander Bancorp
(Bancorp), and Banco Santander Puerto Rico (BSPR). Bancorp and
BSPR were substituted for FirstBank Puerto Rico by order of this
court on March 30, 2021, pursuant to Fed. R. App. P. 43(b). The
Ponsa-Rabell plaintiffs have informed this court that the claims
subject to this appeal are solely against SSLLC.
      2All facts are taken from the complaint and accepted as true
on a motion to dismiss, and we disregard any conclusory
allegations. O'Brien v. Deutsche Bank Nat'l Tr. Co., 948 F.3d 31,
35 (1st Cir. 2020). We may also consider documents attached to
the complaint and incorporated by reference therein. Id.

                                  - 3 -
in PRMBs, including Puerto Rico Closed End Funds (PRCEFs) and

Puerto Rico Open End Funds (PROEFs) (to avoid overcomplicating

things, we'll refer to them collectively as "PRMB securities")

from December 1, 2012, to October 31, 2013 (the "Class Period").

PRMBs are bonds used by the Puerto Rican government to finance

their "commercial operations." Buyers of the PRMBs loan the issuer

money in exchange for a set number of interest payments.        Issuers

guarantee payment of the monthly yield and principal by a certain

maturity date.

           The PRMB securities were marketed to the public through

prospectuses that were specific to each fund.         The prospectuses

(also called offering statements or official statements) disclosed

the   fund's   investment    objectives,     risk   factors,   and   tax

consequences, among other useful information.         Relevant to this

dispute,   these   prospectuses   included    specific   sections    that

clearly described the investment risks attendant to investment in

each particular fund.       Despite the potential risks, the PRMB

securities were attractive investments for Puerto Rico residents

for some years, as they generally offered higher interest than

comparable investments and were exempt from Puerto Rico and U.S.

income and estate taxes.

           Prior to and throughout the Class Period, Puerto Rico

was experiencing an economic recession.       Given the nature of the

PRMB securities (as we just discussed), investing in them during

                                  - 4 -
a recession was risky.         As of December 2012, the PRMB securities'

funds were highly concentrated in PRMBs and highly leveraged. This

is because during the recession, Puerto Rico issued billions of

dollars in PRMB securities, which it used to pay off existing

debts, or as the complaint complains, used "debt to pay debt."

The sales of PRMB securities were not used to help stimulate (or

in this case, revive) the Puerto Rican economy "or alleviate its

social needs."       During the Class Period, Puerto Rico's deficit

increased to approximately $2.2 billion, and eventually, those

debts became unpayable.

            In 2012, various public sources began issuing warnings

about the increasing risks attendant to holding PRMB securities.

The complaint helpfully provides some examples of information that

was   in   the    public     sphere    regarding    Puerto      Rico's   economic

shakiness.        This includes: a March 2012 Breckinridge Capital

Advisors    report    that    warned    Puerto     Rico   was    "flirting    with

insolvency" and that someday the Commonwealth may be unable to

repay its debts; the fact that on August 8, 2012, Moody's Investor

Service    ("Moody's")     lowered     Puerto    Rico's   general    obligation

("GO")     bond   credit     rating    to   Baa1,    raised     concerns     about

outstanding government debt, and advised that "[c]onservative

investors with concentrated exposure to any single borrower in the

municipal market should pursue portfolio diversification"; and, on

December 13, 2012 (just days after the Class Period begins),

                                       - 5 -
Moody's downgraded Puerto Rico's credit rating again to Baa3, just

above junk bond status (i.e., not "investment grade").

          As previewed by these public statements on the overall

infirmity of the Puerto Rico economy in 2012 and 2013, so too was

the municipal bond market suffering, exemplified by a period of

heightened volatility, rising yields, and downward pressure on the

price of PRMBs.     The bond market eventually crashed in the fall of

2013, resulting in financial losses for all those who invested in

PRMB securities.

          Because Santander knew that the PRMB securities were

risky, it actively tried to rid itself of its inventory.              When

Moody's downgraded Puerto Rico's GO rating to Baa3 (i.e., basically

junk bond status), Santander began reducing its PRMB securities

inventory at a more rapid clip because of its concern of risk

exposure given the direction of the market.          While Santander was

ridding itself of PRMB securities, it was also selling them to the

Ponsa-Rabell plaintiffs.      By October of 2013, the market for PRMB

securities had crashed.       In the meantime, Santander managed to

reduce its PRMB inventory from $35 million to $105,000, and its

PRCEF inventory from $9.2 million to $6.8 million.              The Ponsa-

Rabell plaintiffs weren't as lucky, and suffered severe economic

losses following the crash.         Their complaint alleges that had the

risks of investing in the PRMB securities been disclosed by

Santander,   they    would   have    never   purchased   PRMB   securities.

                                    - 6 -
Santander replies that all risks were adequately disclosed to the

Ponsa-Rabell plaintiffs by Santander, and that the investment

risks they complain of were generally known to the public.

                                 HOW WE GOT HERE

               Four years after the bond market crashed, the Ponsa-

Rabell plaintiffs filed their initial complaint against Santander.

They have amended their complaint a few times, leaving us with

what they style the Third Amended Complaint (for our purposes,

just the "complaint").           In broad strokes, the complaint alleges

that       Santander   devised   a   "scheme   to   defraud"   investors   into

purchasing the PRMB securities by omitting information about the

state of the market (and thus the riskiness of the investment),

and about its own program to rid itself of PRMB securities, in

violation of Section 10(b) and Rule 10b-5 of the Exchange Act of

1934 (the "securities claims").            In addition to the securities

claims, the Ponsa-Rabell plaintiffs also brought claims under

Section 17(a) of the 1933 Securities Act and Puerto Rico law.3

       In addition to the securities claims, the district court's
       3

Opinion and Order Adopting Report and Recommendation notes that
the Ponsa-Rabell plaintiffs concede that there is no private right
of action under Section 17(a).    The district court declined to
exercise supplemental jurisdiction over the claims under Puerto
Rico law. In their appeal, the Ponsa-Rabell plaintiffs briefly
state that the district court should exercise supplemental
jurisdiction over their state law claims because their federal law
claims should not be dismissed.      We decline to address this
contention not only because it is waived for lack of development
(see United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990)),
but also because our decision today is that the federal law claims

                                       - 7 -
Santander moved to dismiss the complaint, and the magistrate judge

recommended    dismissal.         The    Ponsa-Rabell     plaintiffs     filed

objections to the magistrate judge's Report and Recommendation,

Santander responded in turn, and the district court adopted the

Report and Recommendation in its entirety, dismissing the federal

law   claims   with   prejudice    and   the   state    law   claims   without

prejudice, entering judgment.        A notice of appeal timely followed.

                                   ANALYSIS

           At issue here are the Ponsa-Rabell plaintiffs' federal

securities claims under Section 10(b)            and Rule 10b-5 of the

Exchange Act of 1934, which we will explain in more detail (along

with each party's position) in just a moment.            "We review de novo

the district court's dismissal of a securities fraud complaint for

failure to state a claim under Rule 12(b)(6)."                Mehta v. Ocular

Therapeutix, Inc., 955 F.3d 194, 205 (1st Cir. 2020).             "To survive

a motion to dismiss, a complaint must contain sufficient factual

matter, accepted as true, to 'state a claim to relief that is

plausible on its face.'"          Ashcroft v. Iqbal, 556 U.S. 662, 678

(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570

(2007)).   "[W]e may affirm the dismissal 'on any basis available

fail, and therefore, the supplemental jurisdiction claim must
fail, too. See Borrás-Borrero v. Corporación del Fondo del Seguro
del Estado, 958 F.3d 26, 36-37 (1st Cir. 2020). Further, Santander
moved to dismiss for lack of personal jurisdiction against BSSA.
The district court granted the motion to dismiss as to this claim,
and the Ponsa-Rabell plaintiffs do not raise this issue on appeal.

                                    - 8 -
in the record.'"    Yan v. ReWalk Robotics Ltd., 973 F.3d 22, 30

(1st Cir. 2020) (quoting Lemelson v. U.S. Bank Nat'l Ass'n, 721

F.3d 18, 21 (1st Cir. 2013)).

                            LEGAL FRAMEWORK

          Bear with us as we outline a few legal frameworks that

will guide this analysis.     We'll start by previewing the relevant

provision of the Securities Exchange Act of 1934.          Section 10(b)

of the Securities Exchange Act makes it unlawful for any person to

"use or employ, in connection with the purchase or sale of any

security . . . any manipulative or deceptive device or contrivance

in contravention of such rules and regulations as the Commission

may prescribe as necessary or appropriate in the public interest

or for the protection of investors."           15 U.S.C. § 78j(b).       The

accompanying regulation, Rule 10b–5, makes it unlawful to "make

any untrue statement of a material fact or to omit to state a

material fact necessary in order to make the statements made, in

the light of the circumstances under which they were made, not

misleading." 17 C.F.R. § 240.10b–5(b). Rule 10b-5 "is coextensive

with the coverage of [Section] 10(b)."          S.E.C. v. Zandford, 535

U.S. 813, 816 n.1 (2002).

          To   successfully   make   out   a   Section   10(b)   claim,    a

plaintiff is required to plead six elements:             "(1) a material

misrepresentation   or   omission;   (2)   scienter   [legal     speak   for

knowledge]; (3) a connection with the purchase or sale of a

                                 - 9 -
security; (4) reliance; (5) economic loss; and (6) loss causation."

In re Biogen Inc. Sec. Litig., 857 F.3d 34, 41 (1st Cir. 2017)

(citing Fire & Police Pension Ass'n of Colo. v. Abiomed, Inc., 778

F.3d 228, 240 (1st Cir. 2015)).        Only the first two elements of

the   Ponsa-Rabell   plaintiffs'    Section   10(b)   claim   --   material

misrepresentation or omission and scienter -- are at issue in this

appeal.   To preview what's to come, because we do not find that

the Ponsa-Rabell plaintiffs have pled an actionable omission, we

can avoid a lengthy analysis on whether they pled scienter.

           "To establish a material misrepresentation or omission,

[the Ponsa-Rabell plaintiffs] must show that [the] defendants made

a materially false or misleading statement or omitted to state a

material fact necessary to make a statement not misleading." Ganem

v. InVivo Therapeutics Holdings Corp., 845 F.3d 447, 454 (1st Cir.

2017) (citation omitted).    "[W]hether a statement is 'misleading'

depends on the perspective of a reasonable investor."              Omnicare,

Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund, 575

U.S. 175, 186 (2015).     "Information is material if a reasonable

investor would have viewed it as 'having significantly altered the

total mix of information made available.'"       Miss. Pub. Emps.' Ret.

Sys. v. Bos. Sci. Corp., 523 F.3d 75, 85 (1st Cir. 2008) (quoting

Gross v. Summa Four, Inc., 93 F.3d 987, 992 (1st Cir. 1996)).            We

consider the entirety of the relevant facts available at the time

of the allegedly misleading statement, not simply the words of the

                                   - 10 -
statement itself.      See In re Smith & Wesson Holding Corp. Sec.

Litig., 669 F.3d 68, 75-77 (1st Cir. 2012).              "[I]f an alleged

omission   involves   speculative        judgments   about    future   events,

materiality will depend at any given time upon a balancing of both

the indicated probability that the event will occur and the

anticipated magnitude of the event in light of the totality of

[Santander's] activity."       Hill v. Gozani, 638 F.3d 40, 57 (1st

Cir. 2011) (cleaned up).           We review that "totality" from the

perspective of what Santander knew at the time, meaning "[the

Ponsa-Rabell plaintiffs] may not plead 'fraud by hindsight.'"              ACA

Fin. Guar. Corp. v. Advest, Inc., 512 F.3d 46, 62 (1st Cir. 2008)

(quoting Shaw v. Dig. Equip. Corp., 82 F.3d 1194, 1223 (1st Cir.

1996)).

           The second legal framework in play comes from the Private

Securities Litigation Reform Act (PSLRA), which governs complaints

alleging securities fraud (like the one before us).4               The PSLRA

imposes a heightened pleading standard on complaints alleging

securities   fraud    in   order   "to    curb   frivolous,    lawyer-driven

     4  The Ponsa-Rabell plaintiffs briefly argue that the
magistrate judge imposed a higher pleading standard when reviewing
their claims than what is required under the federal securities
laws without supporting that contention with law or explaining
what they believe to be the appropriate standard of review. We do
not agree with the Ponsa-Rabell plaintiffs, most notably because
the argument is underdeveloped and lacks supporting detail.
Zannino, 895 F.2d at 17.    We therefore decline to address that
argument at length.

                                   - 11 -
litigation, while preserving investors' ability to recover on

meritorious claims."         In re Bos. Sci. Corp. Sec. Litig., 686 F.3d

21, 29–30 (1st Cir. 2012) (quoting Tellabs, Inc. v. Makor Issues

&   Rights,   Ltd.,    551   U.S.     308,    322   (2007)).        "A    plaintiff's

complaint     must    'specify   each    statement        alleged    to    have    been

misleading, [and] the reason or reasons why the statement is

misleading' . . . [and] 'state with particularity facts giving

rise to a strong inference that the defendant acted with the

required state of mind.'"           Id. at 30 (quoting 15 U.S.C. § 78u–

4(b)(1), (2)).       "Taken together, the [PSLRA] requirements make it

easier to identify the issues and to dismiss flawed complaints at

the complaint stage." Id. "[A]lthough 'the PSLRA does not require

plaintiffs to plead evidence . . . a significant amount of "meat"

is needed on the "bones" of the complaint.'"                  Ganem, 845 F.3d at

455 (quoting Hill, 638 F.3d at 56).             And finally, plaintiffs "must

also   meet    the    Rule   9(b)     standard      for    pleading       fraud    with

particularity."        ACA Fin. Guar. Corp., 512 F.3d at 58.                      "[T]he

plaintiff must not only allege the time, place, and content of the

alleged misrepresentations [or omissions] with specificity, but

also the 'factual allegations that would support a reasonable

inference that adverse circumstances existed at the time of the

offering,     and     were    known     and     deliberately        or    recklessly

disregarded by defendants.'"            Greebel v. FTP Software, Inc., 194

                                       - 12 -
F.3d 185, 193-94 (1st Cir. 1999) (quoting Romani v. Shearson Lehman

Hutton, 929 F.2d 875, 878 (1st Cir. 1991)).

           With that out of the way, here's our take, which can be

summed up by simply saying what a district court colleague said

way back when: "[r]ule 10b-5 [and Section 10(b) are] not insurance

against an investment loss."    Kennedy v. Josephthal & Co., Inc.,

635 F. Supp. 399, 405 (D. Mass. 1985), aff'd, 814 F.2d 798 (1st

Cir. 1987).   Accordingly, we proceed with dispatch.

                             OMISSIONS

           In their complaint, the Ponsa-Rabell plaintiffs plead

that there were allegedly material omissions (rather than any

affirmative   misrepresentations   on    the    part   of   Santander).

Generally, an omission is actionable under Rule 10b-5 only where

there is an affirmative duty to disclose.      Basic Inc. v. Levinson,

485 U.S. 224, 239 n.17 (1988) ("Silence, absent a duty to disclose,

is not misleading under Rule 10b-5."). Plaintiffs carry the burden

of showing "that defendants . . . omitted to state a material fact

necessary to make a statement not misleading."      Ganem, 845 F.3d at

454 (quoting Geffon v. Micrion Corp., 249 F.3d 29, 34 (1st Cir.

2001)).   "[T]he mere possession of material, nonpublic information

does not create a duty to disclose it."         Hill, 638 F.3d at 57

(quoting Cooperman v. Individual, Inc., 171 F.3d 43, 49 (1st Cir.

1999)) (cleaned up).   Essentially, in order to get past "go" on a

motion to dismiss, a plaintiff must first identify a statement

                               - 13 -
made by defendants, show how the omission rendered that statement

misleading, and finally establish that there was a duty to disclose

the omitted information.

            In their blue brief, the Ponsa-Rabell plaintiffs take up

lots of pages trying get past the go.              Through the use of a nifty

chart,   the      Ponsa-Rabell        plaintiffs   identify      two   disclosures

contained    in     a    fund   prospectus     generated     when    the   fund   was

initially    offered,         which   they   contend   are    fatally      defective

because of information Santander omitted.                  The disclosures read

first: "[t]here is no Assurance that a Secondary Market for the

Offered Bonds will Develop" and second "the Underwriters are not

obligated to do so [meaning to guarantee a secondary market] and

any such market making may be discontinued at any time at the sole

discretion     of       the   Underwriters."       These   two      statements    are

misleading, plaintiffs contend, in light of Santander's failure to

disclose a couple of material facts which plaintiffs say were

necessary in order to make what facts Santander did disclose not

misleading, to wit, the deteriorating market conditions in Puerto

Rico and Santander's economic take on those conditions, and second,

Santander's failure to disclose that they were ridding their own

inventory of PRMB securities and doing so at an accelerated pace.5

     5 The Ponsa-Rabell plaintiffs seem to allege a laundry list
of omissions as the magistrate judge noted, which include: "[t]he
events and circumstances in Puerto Rico's economy that led to
increased risk in the PRMB market"; "[t]he nature of the risks

                                        - 14 -
The two statements Santander did disclose are misleading in light

of   the   alleged   omissions,   say   the   Ponsa-Rabell   plaintiffs,

because, in a nutshell (as we understand the argument), (1) they

were made prior to Santander reducing their PRMB inventory; (2)

they were not made at the time they purchased the securities during

Class Period; and (3) even if the information that was omitted was

public, it did not relieve Santander of its duty to disclose the

information to them at the point of purchase.        In other words, we

take plaintiffs' argument to mean that Santander, by plaintiffs'

light, was under an ongoing obligation to update its prospectuses

with the information they allege was material (and omitted).

involved in purchasing PRMBs"; "[Santander's] concerns about the
risks involved in owning PRMBs"; "[t]hat [Santander] had begun
reducing its PRMB inventory because of the risks involved in owning
such inventory"; "[t]hat Moody's had downgraded Puerto Rico's GO
and related debt rating to Baa3"; "[t]hat the Moody's downgrade
had further intensified [Santander's] concerns regarding the risks
related to PRMBs"; "[t]hat [Santander] accelerated its efforts to
reduce its inventory of PRMBs as a result of the Moody's
downgrade"; "[t]hat [Santander] was liquidating its inventory of
PRMBs because it considered PRMBs too risky"; "[t]hat [Santander]
had closed its trading desk to new PRMB purchases and that
[Santander] had stopped purchasing PRMBs that its customers sought
to sell"; "[t]hat [Santander's] decision to cease purchasing PRMBs
could reduce their liquidity"; "[t]he reasons why [Santander] was
liquidating its PRMB inventory"; and "[t]hat the risks associated
with PRMBs were relevant to the purchase of PRCEFs and PROEFs
because they were heavily concentrated and leveraged in PRMBs."
Our take is that all of this boils down to two overarching
omissions:    the state of the economy and its effect on the
riskiness of PRMBs, and Santander hastily ridding itself of its
PRMB inventory.

                                  - 15 -
            Taking the two alleged omissions one by one, we start

with the Ponsa-Rabell plaintiffs' claim that Santander should have

disclosed to them information regarding the deteriorating market

conditions for Puerto Rico bonds.            Unfortunately, the Ponsa-Rabell

plaintiffs' contention is not in line with our precedent -- and as

our colleagues have said, "[i]t is not a material omission to fail

to point out information of which the market is already aware."

Baron v. Smith, 380 F.3d 49, 57 (1st Cir. 2004) (citing In re

Donald Trump Casino Sec. Litig., 7 F.3d 357, 377 (3d Cir. 1993)).

Indeed,   the   Ponsa-Rabell       plaintiffs'     own   complaint    points   to

public statements about the deteriorating economy in Puerto Rico,

quoted supra.        Our case law is clear.         Santander was simply not

under any duty to repeat information already known or readily

accessible to investors.          See id.

            The second alleged omission relates to Santander failing

to disclose that it was ridding itself of PRMB securities.                 They

argue that "[i]f the risks were material enough for Santander to

divest itself of those securities, they certainly were material

enough    for   it    to   have   a   duty    to   disclose   those   risks    to

[plaintiffs] at the time of the purchases."6

     6  The Ponsa-Rabell plaintiffs spill much ink in their
complaint arguing that a duty to disclose can "stem from:      the
Account and Financial Advisor Agreement; the fiduciary and
suitability duties imposed by [the] Securities Exchange Act, FINRA
Rule 2111 and Guidelines; the applicable industry standards and
regulations; MSRB Rule G-17; the fiduciary duties imposed by PR

                                      - 16 -
           In previous cases, we've examined alleged omissions in

other securities fraud cases and bucketed them into two categories

using the oft-employed "Grand Canyon" metaphor7: those where we've

considered the "risk [of failing to disclose a material fact] so

great that it is akin to the Grand Canyon (and therefore a

disclosure   is   misleading   if   it   frames     the   risk    as   merely

hypothetical)" on the one hand, and those that "make[] a situation

merely    risky   (i.e.,   simply   a    ditch)."         Karth   v.    Keryx

Biopharmaceuticals, Inc., 6 F.4th 123, 137 (1st Cir. 2021).             There

is one case in particular that serves as a foil for the claims

brought here, as it deals both with a sudden market downturn and

a company ridding itself of securities while selling them to a

client.   In Tutor Perini Corp., we held that the defendant, Banc

of America Securities ("BAS") had a duty to disclose where the

risks to the company it was advising, Tutor, had "dramatically

Regulation 6078, Section 25.1; and, the general duties of care and
good faith in the performance of a contract established by the
Civil Code. . . ." However, the Ponsa-Rabell plaintiffs do not
sufficiently plead the existence of any of these duties as it
relates to the sale of PRMB securities, and we therefore decline
to consider their arguments further.
     7 The "Grand Canyon" metaphor describes "a situation where
the broker-dealer makes risk disclosures that, given the market's
state, are akin to a hiker 'warn[ing] his . . . companion to walk
slowly because there might be a ditch ahead when he knows with
near certainty that the Grand Canyon lies one foot away.'" Tutor
Perini Corp. v. Banc of Am. Sec. LLC, 842 F.3d 71, 90 (1st Cir.
2016) (quoting In re Prudential Sec. Inc. Ltd. P'ships Litig., 930
F. Supp. 68, 72 (S.D.N.Y. 1996)).

                                - 17 -
changed"     when    the    market       for    auction-rate            securities    ("ARS")

completely collapsed.           842 F.3d at 87.                   There, "BAS knew (but

elected not to disclose) that the ARS market teetered on the brink

of collapse when it encouraged Tutor Perini to snatch up more ARS",

all the while shedding itself of the same securities.                           Id. at 91.

BAS and Tutor held a special relationship, where BAS had promised

to "provide investment solutions that [met Tutor's] needs by

clearly defining the risk/reward of particular securities."                                 Id.

at 87 (internal quotation marks omitted).                           "So, Tutor was more

than just a hiker near the Grand Canyon; it was a hiker that had

hired BAS as a wilderness guide with the explicit instruction to

steer clear of cliffs because of a fear of heights."                                 Karth, 6

F.4th at 137.

             Upon a diligent search of plaintiffs' complaint, we've

found   no     allegations          of    a     special           relationship,      or    any

particularized investment instructions plaintiffs may have given

Santander, that would support a duty to disclose the allegedly

omitted information pled by the Ponsa-Rabell plaintiffs, facts

that were crucial to our holding in Tutor Perini Corp.                               The best

factual support the Ponsa-Rabell plaintiffs drum up in support of

their   claims      that    Santander         had     a    duty    to    disclose    the   two

allegedly     omitted       facts    are       that       (1)     their    purchases       were

"solicited" (meaning Santander recommended the purchases) and (2)

their   investment         objectives          were       to   "preserve     capital"       and

                                          - 18 -
"current fixed income."           We take their argument to be that because

Santander recommended the purchases, knowing at the time of sale

that their investment objectives were conservative, Santander was

somehow recommending to them an unsuitable investment.8                     Whether

or not this assertion is true we cannot determine because the

Ponsa-Rabell plaintiffs simply do not plead sufficient allegations

allowing us to do so.            In Tutor Perini Corp. (in contrast to the

Ponsa-Rabell plaintiffs' complaint here), the plaintiffs pled that

BAS   made   a    special       promise   to    outline    the     risks   of   their

investment, and that BAS did in fact know the ARS market meltdown

was occurring (i.e., the risks were materializing), and failed to

inform Tutor.          No such allegations about Santander's actions or

inactions    are       present   here.9        As   we   earlier    explained    when

describing       the    legal    principles     that     guide   our   analysis,   a

"plaintiff's complaint must 'specify each statement alleged to

have been misleading [and] the reason or reasons why the statement

      8The Ponsa-Rabell plaintiffs are also wrong in arguing that
the magistrate judge erred in noting that the plaintiffs failed to
state what kind of investors they were and that the complaint did
not specify why the Ponsa-Rabell plaintiffs may have been attracted
to the PRMB securities. Neither of these facts have bearing on
the outcome, as they are mentioned by the magistrate judge only to
illustrate how bare the complaint is of facts.
      9To be clear, we are not indicating that proof of a special
relationship between a securities purchaser and seller is always
necessary to establish a Section 10(b) securities violation.
Rather, what we are addressing in our analysis here is the Ponsa-
Rabell plaintiffs' specific claims as they have chosen to frame
them in their complaint.

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is misleading' . . . [and] 'state with particularity facts giving

rise to a strong inference that the defendant acted with the

required state of mind.'"   In re Bos. Sci. Corp. Sec. Litig., 686

F.3d at 30 (quoting 15 U.S.C. § 78u–4(b)(1), (2)).       However, as

the magistrate judge so eloquently observed in his Report and

Recommendation,

     [h]ere,   plaintiffs   have    not    described    specific
     statements by defendants that they wish to challenge.
     The complaint alleges that [Santander] affirmatively
     contacted plaintiffs and recommended that they purchase
     PRMB    securities.         Presumably,      [Santander's]
     representatives must have made some statement in order
     to solicit plaintiffs' purchases, for instance, by
     saying,   "I   recommend   that     you   purchase    these
     securities."    But the complaint provides no details
     whatsoever    regarding    the     contents     of    those
     communications other than to allege that the statements,
     whatever they were, failed to include certain details.

          Bottom line here, while finding oneself in a ditch is no

picnic in a meadow, it is also not dining at the edge of the Grand

Canyon.

          Because we conclude there is no actionable omission, we

have no need to address the remaining scienter dispute.10

     10Even if the Ponsa-Rabell plaintiffs had managed to identify
an omission that rendered a statement made by Santander misleading,
nowhere in the complaint do they set forth facts that Santander
had knowledge, or scienter, which is "a mental state embracing
intent to deceive, manipulate, or defraud." Tellabs, Inc., 551
U.S. at 319 (quoting Ernst & Ernst v. Hochfelder et al., 425 U.S.
185, 193-94 & n.12 (1976)). As the Supreme Court has reminded,
evidence of fraudulent intent, as required to state a plausible
claim under Section 10(b), must be "at least as compelling as any
opposing inference of nonfraudulent intent." Id. at 314.

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                            CONCLUSION

          Spying no error with the district court's conclusion,

and reviewing for ourselves with fresh eyes, we affirm. Each party

shall bear its own costs.

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