In re Turquoise Hill Resources Ltd. Securities Litigation
- Lewis Liman
- 1:20-cv-08585
- U.S. District Court · Southern District of New York
- 17
In re Turquoise Hill v. Rio Tinto: Judge Liman granted reconsideration in part and denied it in part over plaintiffs’ proposed amended complaint.
The ruling affects the securities-litigation plaintiffs by limiting which allegations they may add to the Third Amended Complaint, and affects Rio Tinto, Jacques, and Soirat by defining the claims and allegations that will proceed in the amended pleading.
What happened
In In re Turquoise Hill Resources Ltd. Securities Litigation, defendants asked the court to reconsider its earlier permission for plaintiffs to file a third amended complaint. They argued that the earlier decision was issued before they could respond and that plaintiffs waited too long to add several allegations.
The court took back permission for allegations blaming Rio Tinto for statements by Turquoise Hill, statements by Arnaud Soirat during a November 2018 television interview, and Rio Tinto’s alleged failure to record an impairment charge. The court found that plaintiffs did not show a good reason for missing the amendment deadline and that the late additions would delay the case and prejudice defendants.
Judge Lewis J. Liman allowed plaintiffs to add new Section 10(b) securities-fraud allegations against Jean-Sébastien Jacques because those allegations were based on information first learned in discovery, and defendants did not show undue delay or prejudice. The motion for reconsideration was therefore granted in part and denied in part, and plaintiffs were directed to file the amended complaint by February 28, 2024.
The detailed version
- In re Turquoise Hill Resources Ltd. Securities Litigation · No. 1:20-cv-08585
- Lewis Liman
- Feb. 26, 2024
Background
Defendants Rio Tinto plc, Rio Tinto Limited, Jean-Sébastien Jacques, and Arnaud Soirat moved under Local Civil Rule 6.3 for reconsideration of the part of the court’s January 8, 2024 order that allowed plaintiffs to file a Third Amended Consolidated Class Action Complaint. The January 8 order had granted plaintiffs’ motion for leave to amend after stating that plaintiffs had shown good cause, but the court had not considered defendants’ opposition before issuing that ruling. The opinion states that the court had overlooked a prior stipulation allowing defendants until January 17, 2024, to oppose the amendment motion.
The proposed complaint contained several categories of new allegations. These included allegations against Jacques under Section 10(b) of the Securities Exchange Act based on information obtained during discovery; allegations concerning Soirat’s statements in a November 2018 television interview; allegations seeking to hold Rio Tinto responsible for statements attributed to Turquoise Hill; and allegations that Rio Tinto violated international financial-reporting standards by failing to record an impairment charge relating to Oyu Tolgoi.
Reasons for the ruling
The court applied Federal Rule of Civil Procedure 16(b), which requires good cause to amend a pleading after the deadline in a scheduling order, as well as Rule 15(a)(2), under which permission to amend ordinarily should be freely given when justice requires. The amendment deadline was February 22, 2023, but plaintiffs did not seek permission to file the Third Amended Complaint until December 15, 2023. The court found that plaintiffs identified no information unavailable before the deadline that justified the late addition of the Turquoise Hill statements, Soirat’s television statements, or the impairment allegations.
The court also found that adding those allegations would prejudice defendants and delay the case. Discovery had been ongoing for many months, document discovery was substantially complete, and the proposed additions could require significant additional domestic and international discovery. The court emphasized that identifying alleged misstatements is important in a securities-fraud case because the allegations define the issues for motions to dismiss, discovery, expert analysis, damages, and class certification.
The court reached a different conclusion regarding the proposed Section 10(b) scienter allegations against Jacques. “Scienter” means the required state of mind for a securities-fraud claim. Defendants did not dispute that these allegations were based on information disclosed for the first time in discovery. The court held that this established good cause for the delay and rejected a categorical rule barring amendments based on discovery information. It also found no undue delay or prejudice because Jacques was already a defendant, had participated in discovery, had not yet been deposed, and the proposed claims concerned issues already central to the case.
Disposition
The court granted reconsideration in part and denied it in part. It denied plaintiffs leave to include allegations seeking to hold Rio Tinto liable for Turquoise Hill’s statements, allegations concerning Soirat’s November 2018 television interview, and allegations that Rio Tinto failed to take a needed impairment charge. It denied reconsideration as to the new scienter and Section 10(b) allegations against Jacques and allowed plaintiffs to include those allegations in the Third Amended Complaint. Plaintiffs were ordered to file the amended complaint by February 28, 2024, and the clerk was directed to close the motion docket entry.
Read the full 17-page opinion on CourtListener, the free public archive maintained by the Free Law Project.