United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 24, 2010 Decided December 28, 2010
No. 09-7167
IN RE: INTERBANK FUNDING CORP SECURITIES LITIGATION,
MONICA BELIZAN, AND ALL OTHERS SIMILARLY SITUATED, ET
AL.,
APPELLANTS
v.
RADIN GLASS & CO, LLP,
APPELLEE
Appeal from the United States District Court
for the District of Columbia
(No. 1:02-cv-01490)
Michael G. McLellan argued the cause for appellants. With
him on the briefs were Burton H. Finkelstein, Donald J. Enright,
and Tracy D. Rezvani.
Michael L. Martinez argued the cause and filed the brief for
appellee.
Before: KAVANAUGH, Circuit Judge, EDWARDS and
SILBERMAN, Senior Circuit Judges.
2
Opinion for the Court filed by Senior Circuit Judge
EDWARDS.
EDWARDS, Senior Circuit Judge: In 2002, plaintiff-
appellant Monica Belizan, on behalf of herself and a class of
similarly situated persons, filed a complaint against, inter alia,
defendant-appellee Radin Glass & Co., LLP (“Radin”). Belizan
alleged that she purchased securities of InterBank Funding
Corporation (“Interbank”), and, in doing so, relied on materially
false misrepresentations and omissions by Radin, Interbank’s
auditor, made in violation of section 10(b) of the Securities
Exchange Act of 1934, 15 U.S.C. § 78j(b), and Securities and
Exchange Commission (“SEC”) Rule 10b-5,
17 C.F.R. § 240.10b-5. After Belizan consolidated her action
with a related action in 2003, the District Court granted a motion
to dismiss filed by Radin and then-defendant CIBC World
Markets Corp. (“CIBC”). In re Interbank Funding Corp. Sec.
Litig., 329 F. Supp. 2d 84 (D.D.C. 2004). This court vacated the
District Court’s order of dismissal, because the District Court
failed to adequately explain why it dismissed the appellants’
complaint with prejudice. Belizan v. Hershon (“Belizan I”), 434
F.3d 579 (D.C. Cir. 2006). On remand, the District Court again
dismissed the appellants’ suit, because there was no indication
that appellants would be able to cure the deficiencies in their
pleadings. In re Interbank Funding Corp. Sec. Litig., 432 F.
Supp. 2d 51, 55 (D.D.C. 2006). On appeal, this court again
vacated in part and remanded the section 10(b) and Rule 10b-5
claims for the District Court to re-evaluate the appellants’
allegations of scienter. Belizan v. Hershon (“Belizan II”), 495
F.3d 686, 691-92 (D.C. Cir. 2007).
Before the District Court for the third time, appellants
moved for leave to amend their complaint against Radin
pursuant to FED. R. CIV. P. 15(a). The District Court denied the
motion and again dismissed appellants’ suit with prejudice. In
re Interbank Funding Corp. Sec. Litig., 668 F. Supp. 2d 44
3
(D.D.C. 2009). The District Court held that the appellants’
proposed amendment was futile because the draft complaint
failed to adequately plead the reliance element of a securities
fraud claim – i.e., “the causal link between the defendant’s
misconduct and the plaintiff[s’] decision to buy . . . securities,”
Emergent Capital Inv. Mgmt., LLC. v. Stonepath Grp., Inc., 343
F.3d 189, 197 (2d Cir. 2003). Appellants argue that the District
Court erred in its decision not to apply the “Affiliated Ute
presumption” of reliance. See Affiliated Ute Citizens v. United
States, 406 U.S. 128, 153 (1972). Had the District Court found
the presumption applicable, appellants’ amended complaint
would have properly pled all elements of a cause of action under
SEC Rule 10b-5.
We agree with the District Court that the Affiliated Ute
presumption is inapplicable here. In Affiliated Ute, the Supreme
Court applied a presumption of reliance in a situation “involving
primarily a failure to disclose.” 406 U.S. at 153. Appellants
contend that because their action primarily relies on Radin’s
alleged omissions, they should benefit from a presumption of
reliance. We disagree. The complaint is focused on appellants’
claim that Interbank’s financial statements, which Radin attested
were accurate and in accord with Generally Accepted
Accounting Principles (“GAAP”), did not reveal Interbank’s
alleged “Ponzi scheme.” Thus, the gravamen of the appellants’
complaint is that, by certifying Interbank’s materially false
financial statements, Radin affirmatively misrepresented
Interbank’s financial situation. Because, as appellants concede,
the Affiliated Ute presumption of reliance does not apply to
affirmative misrepresentations, appellants’ proposed amendment
to their complaint would be futile. We therefore affirm the
District Court’s order denying appellants’ motion for leave to
amend.
4
I. BACKGROUND
“[A] district court has discretion to deny a motion to amend
on grounds of futility where the proposed pleading would not
survive a motion to dismiss.” Nat’l Wrestling Coaches Ass’n v.
Dep’t of Educ., 366 F.3d 930, 945 (D.C. Cir. 2004).
Consequently “our review in this instance is, for practical
purposes, identical to review of a Rule 12(b)(6) dismissal based
on the allegations in the amended complaint.” Platten v. HG
Bermuda Exempted Ltd., 437 F.3d 118, 132 (1st Cir. 2006). On
review of a motion to dismiss, we “treat the complaint’s factual
allegations as true . . . and must grant [appellants] the benefit of
all inferences that can be derived from the facts alleged.” Holy
Land Found. for Relief & Dev. v. Ashcroft, 333 F.3d 156, 165
(D.C. Cir. 2003) (ellipsis in original) (citation and quotation
omitted). Therefore, the facts recited below are drawn from
appellants’ proposed amended complaint.
Interbank was formed in 1996 with the purpose of buying
distressed loans and restructuring or rehabilitating those loans
for a profit. Proposed Second Consolidated Am. Class Action
Compl. for Violation of the Fed. Securities Laws ¶ 26 (“Second
Amended Complaint”), No. 1:02-cv-01490 (D.D.C. Oct. 20,
2008), reprinted in Appendix (“App.”) 62. Between 1996 and
1999, Interbank formed a succession of wholly-owned funds
that offered private placement notes to investors. Id. ¶ 19, App.
60. These were five-year notes that bore interest between eight
and twelve percent annually, plus a share of the fund’s gross
profits. Id. Shortly after the first fund commenced operations,
Interbank established a “related party transaction policy,” under
which Interbank itself purchased a loan from a fund if there was
a question about whether the loan would be collected before the
fund’s scheduled liquidation. Id. ¶ 42, App. 65-66. With
respect to these transactions, Interbank paid the fund the full
amount outstanding on an acquired loan even if the loan was
uncollectable. Id. ¶ 43, App. 66. As a result, the fact that a loan
5
had gone bad was not disclosed to prospective investors to the
Interbank fund that sold the loan, id. ¶ 44, App. 66, and
Interbank was able to tap fresh offering proceeds to pay off
earlier noteholders, id. ¶ 46, App. 66-67.
Although Radin publicly attested to the accuracy of
Interbank’s balance sheets and private placement memoranda on
many occasions – typically averring that these documents were
“in conformity with generally accepted accounting principles,”
id. ¶¶ 52-71, App. 68-77 – Radin did not comply with GAAP or
Generally Accepted Auditing Standards (“GAAS”) in its audits.
For example, Radin endorsed financial statements that did not
disclose Interbank’s related-party transfers, id. ¶ 82, App. 80;
Radin reviewed financial documents that did not disclose
specific amounts of one of the funds’ loan losses, id. ¶ 91-94,
App. 82; and the audited financial statements did not state that
some of the Interbank funds were co-obligors with Interbank on
a line of credit, id. ¶ 115, App. 86. Appellants’ complaint also
alleges that “superimposed over each of these
misrepresentations is a single constant omission: the class
members were not informed they were investing in a Ponzi
scheme.” Id. ¶ 76, App. 79.
Belizan first filed a complaint against Radin and numerous
other defendants in July 2002, alleging violations of section
10(b) of the Securities Exchange Act of 1934 and SEC Rule
10b-5 (“Section 10 claims”). Compl. for Violation of the Fed.
Securities Laws, No. 1:02-cv-01490 (D.D.C. July 26, 2002).
Belizan’s complaint was consolidated with a related action, and,
in September 2003, the named plaintiffs filed an amended
complaint against, inter alia, Radin and broker-dealer CIBC. In
addition to the Section 10 claims, this complaint alleged
violations of section 11 of the Securities Act of 1933 (“Section
11 claims”), 15 U.S.C. § 77k, against Radin for filing a series of
materially false and misleading registration statements.
6
Consolidated Am. Class Action Compl. for Violation of the Fed.
Securities Laws, No. 1:02-cv-01490 (D.D.C. Sept. 29, 2003).
The District Court granted Radin and CIBC’s motion to
dismiss all of the appellants’ claims with prejudice. In re
Interbank Funding Corp. Sec. Litig., 329 F. Supp. 2d 84 (D.D.C.
2004). In particular, the District Court disposed of appellants’
Section 10 claims on the grounds that they failed to adequately
plead scienter or causation, and did not plead with the
particularity required by FED. R. CIV. P. 9(b) and the Private
Securities Litigation Reform Act. Id. at 94. The court also
dismissed the Section 11 claims. Id. at 94-95. This court
vacated the District Court’s order of dismissal and remanded
because the District Court “fail[ed] adequately to
explain . . . why it dismissed Belizan’s complaint with
prejudice.” Belizan I, 434 F.3d at 584 (emphasis added).
On remand, the District Court again dismissed all claims
against Radin and CIBC – explaining that it was dismissing the
claims with prejudice because “there was no indication that
plaintiffs were capable of making additional allegations,
consistent with their prior pleadings, that would cure the
deficiencies in the claims against CIBC and Radin.” In re
Interbank Funding Corp. Sec. Litig., 432 F. Supp. 2d 51, 55
(D.D.C. 2006). Back before this court on appeal, we vacated the
District Court’s order in part. We affirmed the District Court’s
dismissal of the Section 11 claims. Belizan II, 495 F.3d at 692-
93. With respect to the Section 10 claims, however, we noted
that the allegations in appellants’ proposed complaint
concerning scienter “specifically allege[d] that CIBC and Radin
had access to particular pieces of information that would have
revealed [Interbank]’s allegedly fraudulent and GAAP violating
inter-fund transfers.” Id. at 692 (quotation omitted). We
therefore remanded for the District Court to evaluate appellants’
pleading in light of Tellabs, Inc. v. Makor Issues & Rights, Ltd.,
551 U.S. 308 (2007), in which the Supreme Court held that a
7
“‘strong inference’ of scienter . . . ‘must be more than merely
plausible or reasonable – it must be cogent and at least as
compelling as any opposing inference of nonfraudulent intent.’”
Belizan II, 495 F.3d at 691 (quoting Tellabs, 551 U.S. at 314).
Following our remand, the District Court approved a
settlement agreement between appellants and CIBC, leaving
Radin as the lone remaining defendant. In the meantime,
appellants moved to file a proposed amended complaint against
Radin under FED. R. CIV. P. 15(a). The proposed complaint
alleged only Section 10 claims. The District Court denied the
motion on the ground that the proposed amendment would be
futile because it did not adequately plead reliance. In re
Interbank Funding Corp. Sec. Litig., 668 F. Supp. 2d 44 (D.D.C.
2009). The appellants proffered three legal theories as to why
they had sufficiently alleged reliance: (1) they had properly pled
direct reliance; (2) they were entitled to a presumption of
reliance under Affiliated Ute; and (3) they were entitled to a
presumption of reliance through the “fraud-created-the-market”
theory.
The District Court rejected all three arguments. The trial
court easily disposed of appellants’ allegations of direct reliance,
noting that appellants did not seriously contest this point. Id. at
49 & n.5. The District Court then pointed out that the Affiliated
Ute presumption applies when reliance is impossible to prove,
a situation not present in this case:
Reliance is not “impossible to prove” in this case because
Radin did offer positive statements: Radin repeatedly
declared that Interbank’s financial disclosures were
materially fair and in conformance with generally accepted
accounting principles. Indeed, plaintiffs’ proposed
amended complaint lists at least eighteen separate
affirmative statements by Radin certifying the Interbank
funds’ balance sheets.
8
Id. at 51. The District Court also noted that the Affiliated Ute
presumption does not apply “[w]here positive statements form
a central part of the alleged fraud such that the evidentiary
problems inherent in proving reliance on a nondisclosure are not
present.” Id. (brackets in original) (quotation omitted). Finally,
the District Court refused to apply the fraud-created-the-market
presumption of reliance, finding that, even assuming the validity
of the fraud-created-the-market theory – which some circuits
have applied “to those cases in which the securities were not
qualified legally to be issued, and . . . there was a scheme to
defraud or act to defraud,” e.g., T.J. Raney & Sons, Inc. v. Fort
Cobb, 717 F.2d 1330, 1333 (10th Cir. 1983) – appellants did not
connect Radin’s alleged fraud to the securities’ unmarketability.
In re Interbank Funding Corp. Sec. Litig., 668 F. Supp. 2d at
52-53.
Appellants timely appealed the District Court’s decision to
deny their motion, contesting only the District Court’s refusal to
invoke the Affiliated Ute presumption.
II. ANALYSIS
Rule 15(a)(2) instructs district courts to “freely give leave
[to amend a pleading] when justice so requires.” FED. R. CIV. P.
15(a)(2). “When the district court denies a motion for leave to
amend under Rule 15(a), we review its decision for abuse of
discretion bearing in mind that the rule is to be construed
liberally.” Belizan I, 434 F.3d at 582 (citation omitted).
However, a district court may properly deny a motion to amend
if the amended pleading would not survive a motion to dismiss.
See Foman v. Davis, 371 U.S. 178, 182 (1962) (noting that
“futility of amendment” is permissible justification for denying
Rule 15(a) motion); see also Platten v. HG Bermuda Exempted
Ltd., 437 F.3d 118, 132 (1st Cir. 2006) (noting that review in a
case of this sort is akin “to review of a Rule 12(b)(6) dismissal
based on the allegations in [an] amended complaint”). In these
circumstances, the standard of review is de novo. See Gonzalez-
9
Vera v. Townley, 595 F.3d 379, 381 (D.C. Cir. 2010) (standard
of review for motion to dismiss).
“To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face. A claim has facial plausibility
when the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949
(2009) (citation and quotation omitted). For legal conclusions,
however, “the tenet that a court must accept as true all of the
allegations contained in a complaint is inapplicable.” Id.
Appellants, on appeal, seek reversal of the District Court’s
denial of their Rule 15(a) motion on the ground that they
properly pled all elements of a cause of action under SEC Rule
10b-5. Rule 10b-5 makes it unlawful for any person, in
connection with the purchase or sale of any security:
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to
omit to state a material fact necessary in order to make the
statements made, in the light of the circumstances under
which they were made, not misleading, or
(c) To engage in any act, practice, or course of business
which operates or would operate as a fraud or deceit upon
any person.
17 C.F.R. § 240.10b-5. To prevail under Rule 10b-5, the
appellants here must demonstrate, in connection with their
purchase of Interbank securities, that (1) a material
misrepresentation or omission was made “with an intent to
deceive, manipulate, or defraud”; (2) they reasonably relied on
that misrepresentation or omission; and (3) they suffered an
economic loss as a result. Media Gen., Inc. v. Tomlin, 532 F.3d
10
854, 858 (D.C. Cir. 2008) (quotation omitted). Only the reliance
prong of this test is at issue in this appeal.
In Affiliated Ute, the Supreme Court permitted the plaintiffs
to benefit from a presumption of reliance. Affiliated Ute
involved a bank that served as the transfer agent for all shares of
a stock that had been issued to each “mixed-blood” member of
the Ute Indian Tribe. The stock represented, inter alia, “all
unadjudicated or unliquidated claims against the United States”
and “all gas, oil, and mineral rights of every kind . . . to which
the mixed-blood members of the said tribe [were entitled].” 406
U.S. at 136. Two assistant managers of the bank devised a
scheme to purchase shares from mixed-bloods for themselves
and other non-Indians for less than fair market value. Id. at 148.
The Court held that the managers possessed an affirmative duty,
under SEC Rule 10b-5, to disclose to the mixed-blood sellers
that they had a financial interest in the transactions. Id. at 153.
The Court explained:
It is no answer to urge that, as to some of the petitioners,
these defendants may have made no positive representation
or recommendation. The defendants may not stand mute
while they facilitate the mixed-bloods’ sales to those
seeking to profit in the non-Indian market the defendants
had developed and encouraged and with which they were
fully familiar. The sellers had the right to know that the
defendants were in a position to gain financially from their
sales and that their shares were selling for a higher price in
that market.
Id. The Court then held that “[u]nder the circumstances of this
case, involving primarily a failure to disclose, positive proof of
reliance is not a prerequisite to recovery.” Id.
The Third Circuit has applied the Affiliated Ute
presumption in a case involving (1) failures to disclose, i.e.,
“pure omissions”; and (2) failures to clarify “true but misleading
11
statements” relating to investment research, i.e.,“half-truths,
which, although analytically closer to lies than to nondisclosure,
are obviously closer to omissions than are pure
misrepresentations.” Hoxworth v. Blinder, Robinson & Co., 903
F.2d 186, 202 (3d Cir. 1990) (citation, ellipsis, and internal
quotation marks omitted). The Second and Tenth Circuits
likewise have not followed a formulaic approach in these mixed
cases, applying the presumption when reliance on a negative
would be practically impossible to prove. Joseph v. Wiles, 223
F.3d 1155, 1162 (10th Cir. 2000); Wilson v. Comtech
Telecomms. Corp., 648 F.2d 88, 93 (2d Cir. 1981). On the other
hand, the Fourth, Fifth, Ninth, and Eleventh Circuits have
applied the Affiliated Ute presumption more restrictively.
Regents of Univ. of Cal. v. Credit Suisse First Boston (USA),
Inc., 482 F.3d 372, 384 (5th Cir. 2007) (“primarily based on
omissions”); Binder v. Gillespie, 184 F.3d 1059, 1064 (9th Cir.
1999) (“cases that primarily allege omissions”); Cox v. Collins,
7 F.3d 394, 396 (4th Cir. 1993) (“only nondisclosure”); Cavalier
Carpets, Inc. v. Caylor, 746 F.2d 749, 756 (11th Cir. 1984)
(“primarily omission cases”).
No court of appeals has applied the Affiliated Ute
presumption in a case involving a claim that primarily alleges
affirmative misrepresentations. See, e.g., Johnston v. HBO Film
Mgmt., Inc., 265 F.3d 178, 192 (3d Cir. 2001) (“[N]o
presumption arises in cases of alleged misrepresentations.”);
Joseph, 223 F.3d at 1162 (“Affiliated Ute’s holding is limited to
omissions as opposed to affirmative misrepresentations.”); Akin
v. Q-L Invs., Inc., 959 F.2d 521, 529 (5th Cir. 1992) (“The Ute
presumption, however, operates only in omissions cases, not
where plaintiffs assert positive misrepresentations of material
information.”). Indeed, appellants concede that they would not
be entitled to a presumption of reliance in a case in which they
merely alleged that the defendants did not disclose that their
affirmative misrepresentations were false. Appellants’ Reply
Br. at 6.
12
Appellants argue that their claims are instead premised on
Radin’s alleged omission of the fact that Interbank operated as
a Ponzi scheme in Interbank’s financial statements, which Radin
audited. Most of these financial statements were balance sheets.
Second Amended Complaint ¶¶ 52-71, App. 68-77. A balance
sheet reflects a company’s financial position at a particular point
in time by showing assets (resources controlled by the
company), liabilities (creditors’ claims on the company’s
resources), and stockholders’ equity (stockholders’ claims on the
company’s resources). The accounting model of a balance sheet
can be represented by the following equation:
Assets = Liabilities + Stockholders’ Equity.
See FRED PHILLIPS ET AL., FUNDAMENTALS OF FINANCIAL
ACCOUNTING 12-13 (3d ed. 2011). The balance sheets of a
profitable company would show increasing assets and
concomitant increases in stockholders’ equity over time as the
company’s investments gained value. By contrast, the balance
sheets of a Ponzi scheme – which “generally describes a
pyramid-type investment scheme where investors are paid
profits from newly attracted investors promised large returns on
their principal investments,” In re Fin. Federated Title & Trust,
Inc., 309 F.3d 1325, 1327 n.2 (11th Cir. 2002) – would show
decreasing assets as available cash is depleted to pay out
promised rates of return to investors. Because the Ponzi
scheme’s liabilities would not decrease as new investors
continued to contribute capital, the balance sheets would show
decreasing stockholders’ equity as the scheme paid out rates of
return. Consequently, appellants’ characterization of Radin’s
failure to disclose the Ponzi scheme as an omission is off the
mark. The label “Ponzi scheme” is simply a popular
characterization of a fraudulent business practice that an
accurate representation of the balance sheets would reveal. In
order to operate as a Ponzi scheme, Interbank’s financial
statements necessarily misrepresented the company’s financial
13
position in order to attract new investors, and Radin
affirmatively misrepresented the accuracy of these statements by
stating that they fairly presented Interbank’s financial position
and conformed with GAAP.
Even aside from the allegation that Radin failed to disclose
the operation of a Ponzi scheme, other sections of the complaint
confirm that the crux of appellants’ claims are Radin’s
affirmative misrepresentations of Interbank’s financial
statements. For example, the complaint alleges that Radin
publicly attested to the accuracy of numerous Interbank balance
sheets as well as the fact that the balance sheets conformed with
GAAP. Second Amended Complaint ¶¶ 52-71, App. 68-77.
The District Court correctly considered these attestations
“positive statements,” 668 F. Supp. 2d at 51, which
encompassed Radin’s other alleged misdeeds pertaining to the
nondisclosure of Interbank’s inter-fund transfers, loan losses,
and lines of credit secured by a lien on some of the funds’ assets.
Appellants portray these errors as failures to disclose, but “the
tenet that a court must accept as true all of the allegations
contained in a complaint is inapplicable to legal conclusions,”
Iqbal, 129 S. Ct. at 1949, so we need not accept this
characterization. Had the financial statements not included
Radin’s express certification, Radin’s silence about these errors
might have been akin to the silence of the bank managers in
Affiliated Ute, 406 U.S. at 153. But Radin did make express
attestations, which were affirmative misrepresentations that
encompassed the alleged omissions cited in the appellants’
complaint. The Affiliated Ute presumption is therefore
inapplicable.
This analysis is not inconsistent with the Fifth Circuit’s
decision in Akin v. Q-L Investments, Inc., 959 F.2d 521 (5th Cir.
1992), on which appellants heavily rely. Appellants’ Br. at 16
& n. 6. In Akin, the plaintiffs argued that they were entitled to
the Affiliated Ute presumption of reliance for both (1) start-up
14
balance sheets and (2) corporate balance sheets, with respect to
which the defendant accounting firm had furnished reports. The
start-up balance sheets merely indicated the initial capitalization
of the company at issue, along with a brief statement that the
company intended to acquire an apartment complex and offer
partnership interests for sale in the future. Id. at 527. The
corporate balance sheets, by contrast, “included a statement of
assets, liabilities, and shareholders’ equity, a statement of
revenue, expenses, and retained earnings, and a statement of
source and application of funds, along with extensive notes.” Id.
at 528. The Fifth Circuit held that plaintiffs could rely on the
Affiliated Ute presumption for the start-up balance sheets but not
for the corporate balance sheets, because the latter “disclosed
considerable information about the relationship” between the
different entities at issue. Id. at 529-30. Here, the Interbank
financial documents, as described in appellants’ complaint, are
more similar to Akin’s corporate balance sheets than its start-up
balance sheets, because they included a significant amount of
useful information to investors. E.g., Second Amended
Complaint ¶ 69, App. 76 (noting that, in addition to balance
sheets for Interbank fund, Radin audited “related statement of
operations, changes in stockholders’ equity, and cash flow for
each of the years then ended”). To quote the Akin court: “Any
wrong lies in ignoring accounting principles and distorting the
numbers underlying the net worth of [the Interbank funds]. This
is the stuff of misrepresentation and does not entitle plaintiffs to
the Ute presumption.” 959 F.2d at 530.
Finally, appellants press two additional arguments for why
their complaint primarily alleges omissions. First, they contend
that because Radin’s non-disclosure of this Ponzi scheme was of
“primary importance” to their case, they can rely on the
Affiliated Ute presumption. Appellants’ Br. at 17; see also Oral
Arg. Recording 4:27-4:35. But the fact that a fraud is significant
is irrelevant to whether the fraud stems from misrepresentations
or omissions, which is the dispositive inquiry in determining the
15
availability of the Affiliated Ute presumption. Second,
appellants rely on several district court opinions, which they
characterize as holding that the Affiliated Ute presumption
applies if a defendant fails to notify plaintiffs that they invested
in a Ponzi scheme: Katz v. MRT Holdings, LLC, No. 07-61438-
CIV, 2008 WL 4725284 (S.D. Fla. Oct. 24, 2008); Getty v.
Harmon, No. C98-178, 1998 WL 919368 (W.D. Wash. Oct. 23,
1998); Walco Invs., Inc. v. Thenen, 168 F.R.D. 315 (S.D. Fla.
1996); In re Home-Stake Prod. Co. Sec. Litig., 76 F.R.D. 351
(N.D. Okla. 1977). To the extent that these cases are contrary
to the foregoing analysis, we do not find them persuasive.
III. CONCLUSION
For the reasons indicated in the foregoing opinion, the
judgment of the District Court is affirmed.