Martin v. Quartermain

17-2135
Martin v. Quartermain

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
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COURT=S 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 ASUMMARY ORDER@). A
PARTY CITING TO 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 1st day of May, two thousand eighteen.

PRESENT:
DENNIS JACOBS,
RICHARD C. WESLEY,
DEBRA ANN LIVINGSTON,
Circuit Judges.
_____________________________________

GARY MARTIN, SANDRA LEE REYES-
TROYER,
Consolidated-Plaintiffs-Appellants,

MICHAEL YEO,
Consolidated-Plaintiff-Movant-Appellant,

PRETIUM GROUP, TIM KOSOWSKI, individually and on behalf of
all others similarly situated,
Plaintiffs,

RANDALL DAMGAR, DENNIS P. SWEENEY,
MARTIN MAYER, DIANA GARCIA,
Consolidated-Plaintiffs,

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 -v.- 17-2135

ROBERT ALLAN QUARTERMAIN,
KENNETH C. McNAUGHTON,
PRETIUM RESOURCES INC.,
Defendants-Appellees,

PETER ADRIAN JOHAN DE VISSER,
Consolidated-Defendant-Appellee,

JOSEPH J. OVSENEK, JOHN SMITH, ROSS MITCHELL,
TOM S.Q. YIP, SILVER STANDARD RESOURCES INC.,
Defendants.
____________________________________

FOR DEFENDANTS-APPELLEES AND
CONSOLIDATED-DEFENDANT-APPELLEE: Daniel J. Kramer (with
William B. Michael and Neil
P. Kelly on the brief),
Paul, Weiss, Rifkind,
Wharton & Garrison LLP, New
York, NY.

FOR PLAINTIFFS-APPELLANTS: JEREMY A. LIEBERMAN (with
Michael Grunfeld on the
brief), Pomerantz LLP, New
York, NY; Laurence M.
Rosen, The Rosen Law Firm,
P.A., New York, NY.

Appeal from a judgment of the United States District
Court for the Southern District of New York (Broderick,
J.).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,
AND DECREED that the judgment of the district court is
AFFIRMED.

Holders of stock in Pretium Resources, Inc. brought
this putative class action in the United States District
Court for the Southern District of New York (Broderick,
J.), alleging that Pretium and three of its officers

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(collectively “Pretium”) violated Sections 10(b) and 20(a)
of the Securities Exchange Act of 1934, as well as Rule
10b-5 promulgated thereunder. See 15 U.S.C. §§ 78j(b),
78t(a); 17 C.F.R. § 240.10b–5. On motion by Pretium, the
district court dismissed the Second Consolidated Amended
Class Action Complaint (the “complaint”) with prejudice.
We affirm that dismissal on de novo review. See Employees’
Ret. Sys. v. Blanford, 794 F.3d 297, 304 (2d Cir. 2015).
We assume the parties’ familiarity with the underlying
facts, the procedural history, and the issues presented for
review.

To prevail in this securities-fraud action, the
plaintiffs would need to establish the existence of “(1) a
material misrepresentation or omission by the defendant;
(2) scienter; (3) a connection between the
misrepresentation or omission and the purchase or sale of a
security; (4) reliance upon the misrepresentation or
omission; (5) economic loss; and (6) loss causation.”
Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, 552
U.S. 148, 157 (2008). At the motion-to-dismiss stage, the
plaintiffs must contend with the heightened pleading
requirements of both Federal Rule of Civil Procedure 9(b)
and the Private Securities Litigation Reform Act, which
together require plaintiffs to plead the circumstances
purportedly constituting fraud with particularity. The
plaintiffs pleaded the facts underlying their claim as
follows. See Chambers v. Time Warner, Inc., 282 F.3d 147,
152 (2d Cir. 2002) (“[T]he complaint is deemed to include
any written instrument attached to it as an exhibit or any
statements or documents incorporated in it by reference.”
(quoting Int'l Audiotext Network, Inc. v. Am. Tel. & Tel.
Co., 62 F.3d 69, 72 (2d Cir. 1995) (per curiam))).

Pretium acquired a gold-mining site known as the
Brucejack Project (“the Project”) in 2010. It then hired
several independent experts to assist with various aspects
of the Project’s development. Snowden Mining Industry
Consultants (“Snowden”), retained to estimate the quantity
of gold that the Project could produce, issued a report

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(“the Snowden Report”) in 2012, recommending that Pretium
mine a sample of the Project to confirm the estimate before
undertaking full-scale mining. Pretium made the results of
the Snowden Report public and hired Strathcona Mineral
Services Ltd. (“Strathcona”) to oversee and report on a
sampling program. Pretium announced that it would release
results from the program as they were received, but that
Strathcona would report on the overall program at its
conclusion. The program commenced in June 2013.

In a series of public filings and press releases issued
over the next few months, Pretium reported favorable
results from the sampling program and expressed continued
faith in Snowden’s estimates. One such press release
announced the discovery of the “Cleopatra Vein,” “an
extreme grade mineralization deposit that had been
projected [in] the [Snowden] Report.” App’x at 124.
Pretium disclosed very specific details concerning the
Cleopatra Vein’s location and narrow dimensions. It then
explained that “[p]lanning [wa]s underway with [Strathcona]
. . . to increase the portion of the . . . sample” that
would be drawn from “the higher grade” area that included
the Cleopatra Vein. Id. (first and third alterations in
original) (internal quotation marks omitted). The same
press release provided updated results from the sampling
program, using italicized headers to distinguish the
results attributable to the Cleopatra Vein from the results
attributable to the rest of the sample. Subsequent press
releases confirmed the sampling program’s shift toward the
Cleopatra Vein and indicated Pretium’s continued confidence
in Snowden’s “projection of high-grade gold mineralized
domains” in the Project. Id. at 165 (internal quotation
marks and emphasis removed).

Pretium’s October 9, 2013 press release announced that
Strathcona was resigning prior to the completion of the
sampling program and without issuing a report on it. In a
press release issued roughly two weeks later, Pretium
disclosed Strathcona’s opinion that Pretium’s previous
public statements suggesting that Snowden’s estimates

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remained viable were “erroneous and misleading.” Id. at
125 (internal quotation marks and emphasis removed).
Pretium’s stock price declined by roughly 30% on the day of
each October press release. Three days after the second
press release was issued, the plaintiffs commenced this
securities-fraud action.

The gravamen of the plaintiffs’ claim is that Pretium
artificially inflated the value of its stock by making
materially false and misleading statements about the
sampling program. The plaintiffs, however, fail to state a
claim for securities fraud because none of the three
Pretium statements (or sets of statements) alleged to be
fraudulent actually constituted “a material
misrepresentation or omission.” Stoneridge Inv. Partners,
LLC, 552 U.S. at 157. We address those three statements in
turn.

1. The complaint alleges that Pretium defrauded
investors by expressing continued faith in Snowden’s
estimates, notwithstanding--and without disclosing--
Strathcona’s view that the sampling program was not bearing
out those projections. This claim fails because the
complaint does not adequately plead that the Pretium
statements at issue were false or misleading. Contrary to
the plaintiffs’ contention, these were statements of
Pretium’s opinion, rather than assertions of purported
fact.1 They are therefore subject to the standard set forth

1 “[E]xpressions of optimism [and] projections about
the future” are quintessential opinion statements. In re
Int'l Bus. Machs. Corp. Sec. Litig., 163 F.3d 102, 107 (2d
Cir. 1998). Estimates, in particular, constitute a well-
established species of opinion. See, e.g., Fait v. Regions
Fin. Corp., 655 F.3d 105, 111 (2d Cir. 2011)
(“[E]stimate[s] . . . will vary depending on the particular
methodology and assumptions used,” rendering them
“subjective.”).
The plaintiffs’ contention that the estimates at issue
are not opinions is further belied by the record. In a

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in Omnicare, Inc. v. Laborers Dist. Council Constr. Indus.
Pension Fund, 135 S.Ct. 1318 (2015), “for analyzing whether
a statement of opinion” is false or misleading. Tongue v.
Sanofi, 816 F.3d 199, 209 (2d Cir. 2016). “[M]eeting the
[Omnicare] standard . . . is no small task for an
investor.” Id. at 210 (internal quotation marks and
citation omitted).

Omnicare identified three ways in which a statement of
opinion can be false or misleading: (1) “the speaker d[oes]
not hold the belief . . . professed”; (2) the “fact[s] []
supplied” in support of the belief professed are “untrue”;
or (3) the speaker “omits information” that “makes the
statement misleading to a reasonable investor.” Tongue,
816 F.3d at 210 (internal quotation marks and citation
omitted). The plaintiffs fail to adequately allege any of
these kinds of falsity.

As to the first kind, all the relevant allegations in
the complaint suggest that, despite Strathcona’s contrary
opinion, Pretium believed that Snowden’s estimates would
prove accurate. The “opinions and findings” in the Snowden
Report were “presum[ptively] . . . unbiased and fact-
based,” given Snowden’s status as an independent expert.
App’x at 141. While Strathcona’s views were entitled to
the same presumption, Strathcona’s job was to “report on”
the full sampling program, not to provide interim mineral
estimates. Id. at 122. To the extent that Strathcona was
to weigh in on Pretium’s mineral estimates, it was to do so

public filing, Pretium specifically explained to investors
that (1) any disclosure of figures for mineral resources or
mineral reserves “that may be presented by us . . . are and
will only be estimates”; (2) “[t]he estimating of mineral
reserves and mineral resources is a subjective process that
relies on the judgment of the persons preparing the
estimates”; and (3) such “estimates are imprecise and
depend, to a certain extent, upon analysis of drilling
results and statistical inferences that may ultimately
prove to be inaccurate.” App’x at 397.

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at the conclusion of the sampling program, “after
compilation of all data.” Id. at 467. For that reason,
Pretium insisted that Strathcona’s views were “premature,”
id. at 125, given that they were based on only
“approximately 20% of the underground drilling results,”
id. at 146 (internal quotation marks omitted). Pretium
also expressed concerns (echoed by Snowden) that aspects of
the sampling program on which Strathconoa relied in forming
its opinion were “flawed.” Id. at 152 (internal quotation
marks omitted).

These facts defeat an inference that Pretium believed
Strathcona and therefore disbelieved its own assertions of
confidence in Snowden’s estimates. Accordingly, the
plaintiffs fail to plead the first kind of falsity.

As to the second kind of falsity, often referred to as
“objective falsity,” see, e.g., Tongue, 816 F.3d at 208,
the plaintiffs do not plausibly allege that any of the
facts supplied by Pretium in support of its estimates were
untrue; they allege merely that Pretium should have drawn
different conclusions from those facts. Allegations of
that sort do not give rise to a claim of objective falsity.
See id. at 214 (“Plaintiffs’ allegations regarding
Defendants’ stated opinion . . . [do] little more than
[raise] a dispute about the proper interpretation of data,
a dispute this Court [has] rejected as a basis for
liability.”). The record in this case illustrates why that
is so.2

The plaintiffs’ argument is primarily focused on the

2 At the conclusion of the sampling program, Snowden
actually increased its mineral estimates, casting doubt on
Strathcona’s reading of the initial results from the
program. While this revised estimate was issued after the
class period and therefore has no bearing on our holding,
it illustrates why merely alleging that a statement of
opinion was incorrect does not suffice to plead objective
falsity.

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third kind of falsity: they argue that Pretium’s failure to
disclose Strathcona’s doubts about Snowden’s estimates
rendered Pretium’s expressions of confidence in those
estimates materially misleading. In particular, the
plaintiffs argue that they were led to believe incorrectly
that Pretium’s opinion statements “align[ed] with the
information in [Pretium’s] possession.” Omnicare, 135
S. Ct. at 1329. This argument is unavailing.

“An opinion statement . . . is not [] misleading
[simply because] an issuer knows, but fails to disclose,
some fact cutting the other way.” Id. This is true even
when the “fact” cutting the other way is the contrary
opinion of an expert or authority. See Tongue, 816 F.3d at
212. That is because “[r]easonable investors understand
that opinions sometimes rest on a weighing of competing
facts” and input. Omnicare, 135 S. Ct. at 1329.

“[W]hether an omission makes an expression of opinion
misleading always depends on context.” Id. at 1330. “[A]n
omission that renders misleading a statement of opinion
when viewed in a vacuum may not do so once that statement
is considered, as is appropriate, in a broader frame.” Id.
That broader frame includes “the customs and practices of
the relevant industry.” Id. Accordingly, we must consider
the statements at issue “in light of all [] surrounding
text, including hedges [and] disclaimers” and the context
of an investment in a gold mine. Id. at 1329–30; see also
Kleinman v. Elan Corp., plc, 706 F.3d 145, 153 (2d Cir.
2013) (“Disclosure is required only when necessary to make
statements made, in the light of the circumstances under
which they were made, not misleading.” (internal quotation
marks, citations, and alteration omitted)). Pretium’s
statements, viewed in context, were not misleading.

First, gold mining is a volatile industry and making an
investment in a gold mine is therefore inherently risky.
This risk is part of the “broader frame” of the industry in
which these plaintiffs invested when they purchased stock
in Pretium and the Project. See Omnicare, 135 S. Ct. at

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1330. The nature of that risk is enhanced where, as here,
the mine is still under development, the physical
infrastructure is not fully in place, and the mine’s
developers do not yet have complete information about its
economic viability. In recognition of those risks, Pretium
emphasized the preliminary nature of its development of the
Project by qualifying its press releases with a warning
that any figures it disclosed would “only be estimates,”
resulting from a “subjective process that relies on
[Pretium’s] judgment” and “inferences that may ultimately
prove to be inaccurate.” App’x at 397.

Second, Strathcona was hired to “oversee” the “work
required to be completed” prior to beginning excavation for
the sampling program and to evaluate the data that the
sampling program produced. Id. at 1519. It was not hired
to give or evaluate interim reports. Accordingly, Pretium
explained in advance of its statements that investors could
“expect[]” to receive “Strathcona’s report on the [sampling
program]” at the program’s conclusion, once “all data” had
been “compil[ed].” Id. at 467 (emphasis added).
Strathcona, however, left before it issued the report.

Pretium’s disclaimers made manifest that its views were
entirely its own, preliminary, and subject to a forthcoming
independent audit. Additionally, Strathcona’s opinions
about other matters--including its concerns about the
initial results of the sampling program or how those
preliminary results compared to Snowden’s report--were not
relevant to the narrow purpose for which Pretium retained
Strathcona. Pretium was therefore entitled to investigate
and confirm that Strathcona’s opinion about the preliminary
findings from the sampling program was valid. See
Omnicare, 135 S. Ct. at 1330 (“Investors do not, and are
right not to, expect opinions contained in [official
statements] to reflect baseless, off-the-cuff judgments.”).

Although investors “[c]ertainly . . . would have been
interested in knowing about [Strathcona’s] feedback, and
perhaps would have acted otherwise had the feedback been

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disclosed,” the securities laws do not “impose liability
merely because an issuer failed to disclose information
that ran counter to [the] opinion [it] expressed.” Tongue,
816 F.3d at 212. Pretium was not under a duty to disclose
Strathcona’s opinions and plaintiffs therefore fail to
plausibly allege a nondisclosure that “misle[d] in a manner
that is actionable.”3 Id. at 214.

2. The complaint alleges that Pretium defrauded
investors by touting the results of the sampling program
without disclosing that Pretium had skewed the program

3 Nor do the plaintiffs plausibly allege that Pretium
had a duty to disclose in its August 5, 2013 quarterly
report “the uncertainty that the [] Project did not contain
the quantities and/or grades of material” that Snowden had
projected. App’x at 135. A company must describe in its
quarterly reports “any known trends or uncertainties” that
the company “reasonably expects will have a material . . .
unfavorable impact on . . . revenues or income.” 17 C.F.R.
229.303(a)(3)(ii) (“Item 303”). However, Item 303 applies
only to “known trends or uncertainties.” Ind. Pub. Ret.
Sys. v. SAIC, Inc., 818 F.3d 85, 95 (2d Cir. 2016)
(emphasis in original) (internal quotation marks and
citation omitted), cert. granted sub nom. Leidos, Inc. v.
Ind. Pub. Ret. Sys., 137 S. Ct. 1395 (2017) (held in
abeyance). And the complaint does not plausibly allege
that Pretium had “actual knowledge” of any defect in
Snowden’s estimates. Id.
The complaint makes clear that Pretium did not deem
Strathcona’s preliminary doubts about those estimates
credible. Therefore, the complaint at most alleges that
Pretium was “reckless[] or negligen[t]” in failing to
recognize problems with the Snowden Report, and such
allegations are insufficient to support a claim of
securities fraud based on a violation of Item 303. Id.

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toward the narrow and unrepresentative Cleopatra Vein in
order to yield more favorable data. This claim fails
because it was apparent from Pretium’s disclosures that the
Cleopatra Vein was not representative of the Project
overall.

Pretium issued a press release to announce its
discovery of the Cleopatra Vein, which it described as a
site of “extreme grade mineralization.” App’x at 1550
(emphasis added). Pretium even summarized the drilling
results from the Cleopatra Vein and the rest of the sample
in separately labeled charts, thereby emphasizing the
Cleopatra Vein’s atypical productivity. As to the vein’s
purported narrowness, Pretium disclosed the details of its
location and dimensions, even providing maps of the level
plan and cross-sections of the vein itself.

Pretium also clearly publicized its “[p]lan[] . . . to
increase the portion of the . . . sample” that would be
drawn from the “higher grade” Cleopatra Vein. Id. at 1551.
Successive press releases announced that plan, confirmed
Pretium’s execution of the plan, and stated Pretium’s
intention to continue following through. It is therefore
implausible that a reasonable investor would have been
misled by Pretium’s disclosures in the manner alleged in
the complaint.

3. The complaint alleges that Pretium defrauded
investors by stating that it was planning, with Strathcona,
to increase the portion of the sample drawn from the
Cleopatra Vein when, in fact, “Strathcona was not on board
with [that] plan” to “skew” the sampling program. Id. at
161 (emphasis added). This claim fails because the
plaintiffs do not plausibly allege that the purported
misstatement was material.

A misstatement is material only if “there is a
substantial likelihood that a reasonable shareholder would
consider it important in deciding how to [act].” Hutchison
v. Deutsche Bank Sec. Inc., 647 F.3d 479, 485 (2d Cir.

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2011) (alteration in original) (internal quotation marks
and citation omitted). It is unlikely that a reasonable
shareholder would have considered Strathcona’s
participation in Pretium’s plan “significant [to any]
investment decision[].” Ganino v. Citizens Utils. Co., 228
F.3d 154, 161 (2d Cir. 2000). That is because the
purported fact of Strathcona’s participation did not
“significantly alter[] the total mix of information made
available” to investors about the plan and its
consequences. Hutchison, 647 F.3d at 485 (internal
quotation marks and citation omitted).

Pretium’s announcement made clear that the plan would
skew the sampling program toward the atypically productive
Cleopatra Vein. The suggestion that Strathcona supported
the plan in no way blunted that disclosure. And
Strathcona’s actual view--that the plan would skew the
program--would have merely duplicated, rather than
“significantly altered,” the mix of information before
investors. Id. (internal quotation marks and citation
omitted). Accordingly, the plaintiffs fail to plead the
existence of a material misrepresentation. See Local 134
IBEW Joint Pension Tr. v. JP Morgan Chase Co., 553 F.3d
187, 202 (2d Cir. 2009).

We have considered the plaintiffs’ remaining arguments
and find them to be without merit. For the foregoing
reasons, we AFFIRM the judgment of the district court.

FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court

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