Amorosa v. GENERAL ELECTRIC COMPANY

Background

Dominic F. Amorosa and Dominic F. Amorosa, Esq., Profit Sharing Plan sued General Electric Company and its former Senior Vice President and Chief Financial Officer, Jeffrey Bornstein. The plaintiffs asserted common-law fraud and federal securities-fraud claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5. Their claims concerned alleged misstatements about General Electric’s factoring of accounts receivable—selling receivables to obtain cash—and whether the practice was used to generate short-term cash flow or manage credit risk.

After the court dismissed an earlier complaint because the factual allegations were secondhand, the plaintiffs filed a Second Amended Complaint. The defendants moved to dismiss it under Federal Rules of Civil Procedure 9(b) and 12(b). The court granted that motion.

Reasons for the Ruling

The court held that many claims were barred by the five-year statute of repose in 28 U.S.C. § 1658(b)(2). A statute of repose sets an absolute deadline measured from the challenged conduct. Because the Second Amended Complaint was filed on September 13, 2022, claims based on misstatements made before September 13, 2017 could not proceed if those specific statements had not been identified in either of the earlier complaints. The court identified claims based on General Electric’s 2015 Form 10-K, remarks during July and October 2016 earnings calls, General Electric’s third-quarter 2016 Form 10-Q, and remarks during a January 20, 2017 earnings call as falling within that bar. Those claims were dismissed with prejudice.

The court then addressed claims based on statements it treated as timely. It rejected claims concerning Bornstein’s April 21, 2017 conference-call remarks because the court had previously considered and dismissed similar claims and the plaintiffs alleged no new facts that would change that result. Claims based on General Electric’s 2016 Form 10-K and third-quarter 2017 Form 10-Q also failed because the plaintiffs could not rely on confidential-witness statements that had supported earlier related proceedings.

The court also found that the claim concerning Bornstein’s January 20, 2017 earnings-call remarks was not adequately pleaded. The plaintiffs relied on a slide allegedly used to prepare Bornstein for the call, but the complaint alleged that the slide was consistent with his statements. The court said this did not support an inference that Bornstein knew the statements were false. It also found that the plaintiffs’ other allegations of knowledge and intent were conclusory and that repeated allegedly false statements, by themselves, did not establish the required state of mind for securities fraud.

Additional Claims and Disposition

The court dismissed the Section 20(a) controlling-person claim because the plaintiffs had not adequately pleaded a primary violation of the Exchange Act. The court declined to exercise supplemental jurisdiction over the common-law fraud claim, meaning the federal court declined to decide that state-law claim after dismissing the federal claims. That claim was dismissed without prejudice to refiling it in state court.

The court declined to grant leave to amend. The plaintiffs had already received two opportunities to amend, had been warned that the prior opportunity was a final chance, did not request another amendment, and did not identify facts that would cure the pleading defects.

The court therefore granted the defendants’ motion to dismiss, directed the Clerk to enter judgment and close the case, and retained jurisdiction to decide whether sanctions should be imposed under Rule 11(b). The opinion allowed any party seeking sanctions to file a supported motion within three weeks of the opinion, with an opposition due within two weeks after that motion.