15‐408‐cv
Harbinger Capital Partners LLC, et al. v. Deere & Company et al.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST
CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
ʺSUMMARY ORDERʺ). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON
ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second
Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in
the City of New York, on the 7th day of December, two thousand fifteen.
PRESENT: ROBERT D. SACK,
DENNY CHIN,
RAYMOND J. LOHIER, JR.,
Circuit Judges.
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HARBINGER CAPITAL PARTNERS LLC, HARBINGER
CAPITAL PARTNERS II LP, HARBINGER CAPITAL
PARTNERS MASTER FUND I, LTD., HARBINGER
CAPITAL PARTNERS SPECIAL SITUATIONS FUND, LP,
HARBINGER CAPITAL PARTNERS SPECIAL
SITUATIONS GP, LLC, HGW GP, LTD, HGW HOLDING
COMPANY, LP, HGW US GP CORP., HGW US
HOLDING COMPANY, LP, CREDIT DISTRESSED
BLUE LINE MASTER FUND, LTD, GLOBAL
OPPORTUNITIES BREAKAWAY LTD.,
Plaintiffs‐Appellants,
SOL PRIVATE CORP.,
Plaintiff,
v. 15‐408‐cv
DEERE & COMPANY, GARMIN INTERNATIONAL,
INC., TRIMBLE NAVIGATION LIMITED,
UNITED STATES GPS INDUSTRY COUNCIL,
Defendants‐Appellees,
COALITION TO SAVE OUR GPS,
Defendant.
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FOR PLAINTIFFS‐APPELLANTS: DAVID M. FRIEDMAN, Marc E.
Kasowitz, Daniel R. Benson, Christine A.
Montenegro, Kasowitz, Benson, Torres &
Friedman LLP, New York, New York;
Gary M. Elden, Todd C. Jacobs, Daniel M.
Hinkle, Shook, Hardy & Bacon, LLP,
Chicago, IL.
FOR DEFENDANT‐APPELLEE DEERE & Kenneth I. Schacter, Ari M. Selman,
COMPANY: Morgan, Lewis & Bockius LLP, New
York, NY.
FOR DEFENDANT‐APPELLEE GARMIN MEIR FEDER, Phillip Le B. Douglas, Ian
INTERNATIONAL, INC.: Samuel, Jones Day, New York, New York;
Michael D. Hays, Cooley LLP,
Washington, D.C.
FOR DEFENDANT‐APPELLEE TRIMBLE William A. Isaacson, J. Wells Harrell,
NAVIGATION LIMITED: Boies, Schiller & Flexner LLP,
Washington, D.C.; Stuart H. Singer, Boies,
Schiller & Flexner LLP, Fort Lauderdale,
FL.
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FOR DEFENDANT‐APPELLEE UNITED Steven R. Schindler, Schindler Cohen &
STATES GPS INDUSTRY COUNCIL: Hochman LLP, New York, NY.
Appeal from the United States District Court for the Southern District of
New York (Berman, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.
Plaintiffs‐Appellants (collectively ʺHarbingerʺ) appeal from a judgment
entered on February 10, 2015, by the United States District Court for the Southern
District of New York (Berman, J.), dismissing Harbingerʹs third amended complaint (the
ʺComplaintʺ). Harbinger asserted securities fraud and related claims under federal and
state law. The district court explained its reasoning in a memorandum and order filed
February 5, 2015. We assume the partiesʹ familiarity with the underlying facts and
procedural history of the case.
Harbinger, an investment fund, invested in LightSquared, Inc.
(ʺLightSquaredʺ), a company that sought to develop a new wireless broadband
communications network. Three of the Defendants‐Appellees (the ʺManufacturer
Defendantsʺ) are manufacturers and sellers of global positioning system (ʺGPSʺ)
devices, which are dependent on the use of wireless spectrum. The remaining
Defendant‐Appellee is a nonprofit corporation that serves as an advocate for the GPS
industry. In the Complaint, Harbinger alleged, inter alia, that Manufacturer Defendants
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deliberately designed their GPS receivers to experience ʺoverload interferenceʺ from
out‐of‐band receptions (ʺOOBRʺ) that would render the receivers ineffective and that
defendants fraudulently concealed and misrepresented this fact even though they were
aware that LightSquaredʹs plan to develop its new wireless network would cause such
OOBR interference. The district court below dismissed the Complaint in its entirety
under Federal Rules of Civil Procedure 12(b)(6) and 9(b).
We review the district courtʹs dismissal of the Complaint for failure to
state a claim de novo. Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002). To
survive a Rule 12(b)(6) motion to dismiss, a complaint must plead ʺenough facts to state
a claim to relief that is plausible on its face.ʺ Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007). ʺAny complaint alleging securities fraud must satisfy the heightened pleading
requirements of the [Private Securities Litigation Reform Act, 15 U.S.C. § 78u‐4(b),] and
Fed. R. Civ. P. 9(b) by stating with particularity the circumstances constituting fraud.ʺ
ECA & Local 134 IBEW Joint Pension Tr. of Chi. v. JP Morgan Chase Co., 553 F.3d 187, 196
(2d Cir. 2009).
A. Fraud
The district court held that Harbinger lacked standing to sue under § 10(b)
of the Securities and Exchange Act of 1934, 15 U.S.C. § 78j(b), and Securities and
Exchange Commission Rule 10b‐5 (ʺRule 10b‐5ʺ), 17 C.F.R. § 240.10b‐5, because the
connection between defendantsʹ omissions and Harbingerʹs investment was ʺtoo remote
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to sustain an action.ʺ LightSquared Inc. v. Deere & Co., Nos. 13 Civ. 8157 (RMB), 13 Civ.
5543 (RMB), 2015 WL 585655, at *18 (S.D.N.Y. Feb. 5, 2015) (quoting In re NYSE
Specialists Sec. Litig., 503 F.3d 89, 102 (2d Cir. 2007)). Harbinger argues that because
ʺ[d]efendantsʹ omissions directly concerned LightSquared,ʺ there is a direct causal link
between the fraud and the investment. Appellantsʹ Br. 44. There is no relevant
difference between Harbinger and the plaintiffs in Nortel Networks. See Ontario Pub.
Serv. Emps. Union Pension Tr. Fund v. Nortel Networks Corp., 369 F.3d 27, 29‐34 (2d Cir.
2004). Harbinger purchased LightSquaredʹs stock based on LightSquaredʹs ʺoptimistic
projectionsʺ about the feasibility of its plan given defendantsʹ alleged failure to disclose
their receiversʹ design issues for their own business reasons. See id. at 29. Accordingly,
just as in Nortel Networks, the connection between defendantsʹ omissions about the
shortcomings of its receivers and Harbingerʹs purchase of LightSquaredʹs stock was ʺtoo
remote to sustain an actionʺ under § 10(b) and Rule 10b‐5. In re NYSE Specialists Sec.
Litig., 503 F.3d at 102. Harbinger therefore lacks statutory standing to pursue its federal
securities fraud claim here.
Moreover, Harbinger has failed to adequately plead fraud. Under both
federal and New York law, an omission is actionable only if the defendant had a duty to
disclose. See SEC v. DiBella, 587 F.3d 553, 563 (2d Cir. 2009) (ʺUnder section 10(b) and
Rule 10b‐5, an omission is actionable under the securities laws only when the buyer is
subject to a duty to disclose the omitted facts.ʺ (internal quotation marks omitted));
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Nissan Motor Acceptance Corp. v. Scialpi, 94 A.D.3d 1067, 1067 (2d Depʹt 2012) (ʺWhere
the fraud claim at issue is based on an omission or concealment of a material fact, the
plaintiff must demonstrate that the defendant had a duty to disclose material
information and failed to do so.ʺ).
ʺNew York recognizes a duty by a party to a business transaction to speak
in three situations: first, where the party has made a partial or ambiguous statement, on
the theory that once a party has undertaken to mention a relevant fact to the other party
it cannot give only half of the truth; second, when the parties stand in a fiduciary or
confidential relationship with each other; and third, ʹwhere one party possesses
superior knowledge, not readily available to the other, and knows that the other is
acting on the basis of mistaken knowledge.ʹʺ Brass v. Am. Film Techs., Inc., 987 F.2d 142,
150 (2d Cir. 1993) (citations omitted) (quoting Aaron Ferer & Sons Ltd. v. Chase Manhattan
Bank, N.A., 731 F.2d 112, 123 (2d Cir. 1984)). Similarly, under Rule 10b‐5, a duty to
disclose ʺmay arise when there is ʹa corporate insider trad[ing] on confidential
information,ʹ a ʹstatute or regulation requiring disclosure,ʹ or a corporate statement that
would otherwise be ʹinaccurate, incomplete, or misleading.ʹʺ Stratte‐McClure v. Morgan
Stanley, 776 F.3d 94, 101 (2d Cir. 2015) (alteration in original) (quoting Glazer v. Formica
Corp., 964 F.2d 149, 157 (2d Cir. 1992)).
As the district court pointed out, ʺHarbinger fails to allege that it had any
relationship with Defendants, let alone a ʹspecial relationship of trust or confidence.ʹʺ
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LightSquared, 2015 WL 585655, at *19. The Complaint does not allege that Harbinger
engaged in commercial dealings with defendants, or that defendants had a fiduciary
relationship with Harbinger, or that defendants made a partial or ambiguous statement
that required additional disclosure to avoid misleading Harbinger. The only time
Harbinger alleged that defendants directly communicated with a representative of
Harbinger was at the ITU working group meeting. There, Harbinger merely alleged
that, in response to a prompt to ʺprovide information to address any concerns regarding
the potential for the GPS receivers to experience OOBR as a result of transmissions from
the LightSquared Band,ʺ ʺnone of the Defendants raised any OOBR issues related to the
proposed LightSquared network.ʺ Joint Appʹx 124‐25.
Harbinger also seeks to rely on the superior knowledge doctrine, but the
reliance is misplaced. ʺ[A] duty to disclose due to one partyʹs superior knowledge . . .
ordinarily arises only in the context of business negotiations where parties are entering
a contract.ʺ Ray Larsen Assocs., Inc. v. Nikko Am., Inc., No. 89 Civ. 2809 (BSJ), 1996 WL
442799, at *5 (S.D.N.Y. Aug. 6, 1996). Harbinger was not engaged in business
negotiations with any of the defendants, and defendants had no obligation to disclose
information regarding OOBR inference on the basis of their purported superior
knowledge.
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We agree with the district court that Harbinger has failed to state a claim
for securities fraud under § 10(b) or Rule 10b‐5, or a state law claim under New York
law for fraud.
B. Control Person Liability
Harbinger appeals the district courtʹs dismissal of its control‐person
liability claim under § 20(a) of the Exchange Act. ʺTo establish a prima facie case of
control person liability, a plaintiff must show (1) a primary violation by the controlled
person, (2) control of the primary violator by the defendant, and (3) that the defendant
was, in some meaningful sense, a culpable participant in the controlled personʹs
fraud.ʺ ATSI Commcʹns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 108 (2d Cir. 2007). Because
Harbinger did not adequately plead a primary violation under § 10(b) and Rule 10b‐5,
its control‐person liability claims cannot be sustained, and the district court properly
dismissed this claim.
C. Negligent Misrepresentation
Harbingerʹs negligent misrepresentation claim fails for substantially the
same reasons that the fraud claim fails. ʺ[L]iability for negligent misrepresentation has
been imposed only on those persons who possess unique or specialized expertise, or
who are in a special position of confidence and trust with the injured party such that
reliance on the negligent misrepresentation is justified.ʺ Kimmell v. Schaefer, 89 N.Y.2d
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257, 263 (1996). Again, as the district court pointed out, Harbinger did not allege that it
had any relationship with defendants. See LightSquared, 2015 WL 585655, at *19.
D. Section 349 of the New York General Business Law
Harbinger argues that the district court erred by dismissing its claim for
deceptive business practices under Section 349(a) of the New York General Business
Law. The district court properly dismissed this claim because, in this context, the
defendantsʹ alleged omissions ʺd[id] not constitute consumer‐oriented conduct.ʺ See
N.Y. Univ. v. Contʹl Ins. Co., 87 N.Y.2d 308, 320‐21 (1995).
E. Equitable Estoppel
Harbinger appeals the district courtʹs dismissal of its equitable estoppel
claim. Equitable estoppel ʺprecludes a party at law and in equity from denying or
asserting the contrary of any material fact which he has induced another to believe and
to act on in a particular manner.ʺ Holm v. C.M.P. Sheet Metal, Inc., 89 A.D.2d 229, 234
(4th Depʹt 1982). Contrary to Harbingerʹs assertions, equitable estoppel ʺdoes not
operate to create rights otherwise nonexistent; it operates merely to preclude the denial
of a right claimed otherwise to have arisen.ʺ Id. Given that Harbingerʹs claims have
failed on their merits, there are no defenses that defendants can be estopped from
pursuing. Therefore, the district court properly dismissed this claim.
* * *
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We have reviewed Harbingerʹs remaining arguments and conclude they
are without merit. Accordingly, we AFFIRM the judgment of the district court.
FOR THE COURT:
Catherine OʹHagan Wolfe, Clerk
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