Atlantica Holdings, Inc. v. Sovereign Wealth Fund Samruk-Kazyna JSC

20-2805-cv
Atlantica Holdings, Inc. v. Sovereign Wealth Fund Samruk-Kazyna JSC

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 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 “SUMMARY ORDER”). 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
18th day of January, two thousand twenty-two.

Present:
DEBRA ANN LIVINGSTON,
Chief Judge,
AMALYA L. KEARSE,
EUNICE C. LEE,
Circuit Judges.
_____________________________________

ATLANTICA HOLDINGS, INC., BALTICA INVESTMENT
HOLDING, INC., BLU FUNDS, INC.,

Plaintiffs-Appellants,

ANTHONY KIBLISKY, JACQUES GLIKSBERG, ALLAN
KIBLISKY,

Plaintiffs,

v. 20-2805-cv

SOVEREIGN WEALTH FUND SAMRUK-KAZYNA JSC,
AKA National Welfare Fund Samruk-Kazyna, BTA
BANK JSC,

Defendants-Appellees.
_____________________________________

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For Plaintiffs-Appellants: MARTIN S. BLOOR (Matthew L. Elkin, on the brief),
Cozen O’Connor, New York, NY.

For Defendant-Appellee BTA Bank JSC: JASON C. VIGNA (Brian L. Muldrew, on the brief),
Katten Muchin Rosenman LLP, New York, NY.

For Defendant-Appellee Sovereign Joseph D. Pizzurro, Jonathan J. Walsh, Samuel J. L.
Wealth Fund Samruk-Kazyna JSC: Ballard, Curtis, Mallet-Prevost, Colt & Mosle, LLP,
New York, NY.

Appeal from a judgment of the United States District Court for the Southern District of

New York (Furman, J.).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND

DECREED that the judgment of the district court is AFFIRMED.

Plaintiffs-Appellants Atlantica Holdings, Inc.; Baltica Investment Holding, Inc.; and Blu

Funds, Inc. appeal from an opinion and order of the district court granting Defendants-Appellees

Sovereign Wealth Fund Samruk-Kazyna JSC (“S-K Fund”) and BTA Bank JSC’s (“BTA

Bank’s”) motion for summary judgment and dismissing Plaintiffs-Appellants’ securities fraud

claims in full. On appeal, Plaintiffs-Appellants argue that the district court erred in finding that

there were no triable issues of fact concerning: (1) the material misstatements or omissions

element of their claims under section 10(b) of the Securities Exchange Act of 1934 (“Exchange

Act”); and (2) the loss causation element of their claims under section 10(b) of the Exchange Act

and Securities Exchange Commission (“SEC”) Rule 10b-5. We assume the parties’ familiarity

with the underlying facts, the procedural history of the case, and the issues on appeal.

In essence, Plaintiffs-Appellants contend that Defendants-Appellees fraudulently induced

them to support the 2010 restructuring of BTA Bank through an information memorandum

(“2010 IM”) that failed to disclose key related-party transactions. These transactions include

three high-interest-rate deposits from S-K Fund into BTA Bank (“Undisclosed S-K Fund

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Deposit”), which resulted in what Plaintiffs-Appellants call a negative carry swap (“NCS”). In

support of their claims, Plaintiffs-Appellants cite a series of alleged omissions or

misrepresentations, including (1) the Undisclosed S-K Fund Deposit; (2) the 2010 IM’s Deed of

Undertaking, which stated that no unauthorized dividends would be paid on S-K Fund’s shares

of BTA Bank; (3) statements from Defendants-Appellees that BTA Bank would continue as a

going concern and achieve required capital ratios levels; (4) statements that S-K Fund made to

the press in 2011 and 2012; and (5) representations that Defendants-Appellees made to investors

in 2012 regarding the possibility of acceleration of BTA Bank’s recovery units. Plaintiffs-

Appellants further allege that BTA Bank’s 2012 financial collapse resulted from the Undisclosed

S-K Fund Deposit and the resultant NCS.

We review a district court’s grant of summary judgment de novo, “construing the

evidence in the light most favorable to the non-moving party and drawing all reasonable

inferences in its favor.” Ne. Research, LLC v. One Shipwrecked Vessel, 729 F.3d 197, 207 (2d

Cir. 2013) (citations and internal quotation marks omitted). To prevail on a section 10(b) claim,

a plaintiff must prove six elements: “(1) the defendant made a material misrepresentation or

omission; (2) with scienter; (3) in connection with the purchase or sale of a security; (4) reliance;

(5) economic loss; and (6) loss causation.” IBEW Local Union No. 58 Pension Tr. Fund &

Annuity Fund v. Royal Bank of Scotland Grp., PLC, 783 F.3d 383, 389 (2d Cir. 2015) (citation

omitted). Here, the district court awarded summary judgment to Defendants-Appellees based on

the first and sixth elements. We now affirm the district court’s judgment on the basis of the sixth

element.

“Loss causation ‘is the causal link between the alleged misconduct and the economic

harm ultimately suffered by the plaintiff.’” Lentell v. Merrill Lynch & Co., Inc., 396 F.3d 161,

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172 (2d Cir. 2005) (quoting Emergent Cap. Inv. Mgmt., LLC v. Stonepath Grp., Inc., 343 F.3d

189, 197 (2d Cir. 2003)). A misstatement or omission “is the proximate cause of an investment

loss if the risk that caused the loss was within the zone of risk concealed by the

misrepresentations and omissions alleged by a disappointed investor.” Id. at 173 (citations and

internal quotation marks omitted). To establish loss causation, plaintiffs need to show that “the

loss was foreseeable and caused by the materialization of the risk concealed by the fraudulent

statement.” ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 107 (2d Cir. 2007).

Specifically, proof of loss causation requires that plaintiffs “disaggregate” losses caused by

“disclosures of the truth behind the alleged misstatements” from losses that result from other

factors, such as “changed economic circumstances, changed investor expectations, new industry-

specific or firm-specific facts, conditions, or other events.” In re Flag Telecom Holdings, Ltd.

Sec. Litig., 574 F.3d 29, 36 (2d Cir. 2009) (quoting Dura Pharms., Inc. v. Broudo, 544 U.S. 336,

343 (2005)). Plaintiffs-Appellants argue that, because BTA Bank operated in an inefficient

market, loss disaggregation would be “irrelevant.” Plaintiffs-Appellants suggest that the district

court should have employed traditional principles of proximate cause to assess loss causation.

We disagree.

Contrary to Plaintiffs-Appellants’ assertions, proof of loss causation requires loss

disaggregation whether the market is efficient or inefficient. See Nuveen Mun. High Income

Opportunity Fund v. City of Alameda, 730 F.3d 1111, 1123 (9th Cir. 2013) (“[T]he need to

reliably distinguish among the tangle of factors affecting a security’s price is no less urgent in

inefficient markets.”). And here, Plaintiffs-Appellants failed to disaggregate the losses that they

allege were caused by the interest rate associated with the Undisclosed S-K Fund Deposit from

losses that were caused by other factors. See Lattanzio v. Deloitte & Touche LLP, 476 F.3d 147,

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157–58 (2d Cir. 2007) (holding that plaintiffs failed to plead that defendant’s misstatements were

the proximate cause of their losses where non-party misstatements could also have caused

plaintiffs’ loss and they failed to “allege[] facts that would allow a factfinder to ascribe some

rough proportion of the whole loss to [defendant’s] misstatements”). Indeed, “in the first nine

months of 2011, interest payments to S-K Fund accounted for just one fifth of BTA Bank’s

interest expenses.” Atlantica Holdings, Inc. v. Sovereign Wealth Fund Samruk-Kazyna JSC, 477

F. Supp. 3d 88, 110 (S.D.N.Y. 2020). And “BTA Bank projected that its overall negative net

interest margin — in transactions with all counterparties, not only S-K Fund — would amount to

approximately one-tenth of the increase” in its capital shortfall. Id. Thus, even assuming

arguendo that BTA Bank was insolvent at all times following the Undisclosed S-K Fund

Deposit, as Plaintiffs-Appellants contend, it does not thereby follow based on the record here that

all, or even a substantial portion, of Plaintiffs-Appellants’ losses were attributable to the deposit.

We therefore agree with the district court’s determination that Plaintiffs-Appellants presented no

triable issues of fact concerning the loss causation element of their section 10(b) and Rule 10b-5

claims.

* * *

We have considered Plaintiffs-Appellants’ remaining arguments and find them to be

without merit. Accordingly, we AFFIRM the judgment of the district court.

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

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