Frank v. Dana Corp.

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 11a0145p.06

UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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HOWARD FRANK, Individually and on behalf

Plaintiffs, --
of all others similarly situated,

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No. 09-4233

,
>
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PLUMBERS & PIPEFITTERS NATIONAL

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PENSION FUND; SEIU PENSION PLANS
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MASTER TRUST; WEST VIRGINIA LABORERS
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PENSION TRUST FUND,
Plaintiffs-Appellants, -
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v.
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DANA CORPORATION, -
Defendant, -
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MICHAEL J. BURNS; ROBERT C. RICHTER,
Defendants-Appellees. -
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Appeal from the United States District Court
for the Northern District of Ohio at Toledo.
No. 05-07393—James G. Carr, District Judge.
Argued: January 21, 2011
Decided and Filed: May 25, 2011
Before: MARTIN and STRANCH, Circuit Judges; THAPAR, District Judge.*

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COUNSEL

ARGUED: Joseph D. Daley, ROBBINS, GELLER, RUDMAN & DOWD, San Diego,
California, for Appellants. Joel W. Sternman, KATTEN MUCHIN ROSENMAN, LLP,
New York, New York, for Appellees. ON BRIEF: Joseph David Daley, ROBBINS,

*
The Honorable Amul R. Thapar, United States District Judge for the Eastern District of
Kentucky, sitting by designation.

1
No. 09-4233 Frank, et al. V. Dana Corp., et al. Page 2

GELLER, RUDMAN & DOWD, San Diego, California, for Appellants. Joel W.
Sternman, KATTEN MUCHIN ROSENMAN, New York, New York, for Appellees.

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OPINION
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BOYCE F. MARTIN, JR., Circuit Judge. This is a class-action securities fraud
case reaching this Court for the second time. Initially, Plaintiffs filed a consolidated
complaint alleging that Michael Burns and Robert Richter, chief executive officer and
chief financial officer respectively of Dana Corporation, violated sections 10(b) and
20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b), 78t(a), and Rule 10b-
5, 17 C.F.R. § 240.10b-5 (2009). Plaintiffs claim that Burns and Richter made false
statements regarding Dana’s financial health in violation of section 10(b), and were
controlling persons regarding false statements made by “Dana and other employees” in
violation of section 20(a). Defendants-appellees Burns and Richter filed a motion to
dismiss pursuant to Rules 8, 9(b), and 12(b)(6) of the Federal Rules of Civil Procedure
and the heightened pleading standard of the Private Securities Litigation Reform Act of
1995.1 The district court granted the motion based upon this Court’s rule in Helwig v.
Vencor, Inc., 251 F.3d 540, 553 (6th Cir. 2001), which held that securities plaintiffs must
plead a strong inference of scienter, meaning that scienter must be the most plausible
inference that could be drawn from the facts. Plaintiffs appealed that decision, and this
Court remanded to the district court to apply the Supreme Court’s then-recent decision
in Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 324 (2007), which held
that a strong inference does not mean that scienter must be the most plausible inference,
but rather at least as plausible as any other non-culpable inference. Upon remand, Burns
and Richter filed another motion to dismiss, which the district court granted by applying
the rule from Tellabs. Plaintiffs appeal. For the following reasons, we REVERSE the
district court’s order granting dismissal. Plaintiffs have adequately pleaded their section
10(b) and section 20(a) claims.

1
Having filed for bankruptcy, Dana is no longer a party to this litigation.
No. 09-4233 Frank, et al. V. Dana Corp., et al. Page 3

I. BACKGROUND

A detailed explanation of the factual and procedural background in this matter
can be found in this Court’s earlier opinion in this case. See Frank v. Dana Corp., 547
F.3d 564, 567-69 (6th Cir. 2008). Nevertheless, we summarize the pertinent facts and
add a few not included in the previous opinion.

Burns was the chief executive officer and Richter the chief financial officer of
Dana Corporation, an auto parts manufacturer. As part of their roles, during each fiscal
quarter of the class period (April 21, 2004-October 7, 2005), they signed Dana’s filings
with the Securities and Exchange Commission, announced Dana’s quarterly earnings
through press releases and conference calls, and signed Dana’s section 302 certificates
in compliance with the Sarbanes-Oxley Act. Additionally, Burns and Richter assured
investors that Dana used sound accounting controls. As all publicly traded companies
do, Dana reported its actual and projected earnings per share for quarterly and annual
periods. During the class period, both the actual and projected earnings reports were
positive. In fact, many of the actual earnings were large improvements over earnings
from the previous years. Dana announced that it was able to continue posting profits
despite the rapidly increasing price of steel because it had achieved “cost efficiencies.”
Relatedly, Burns continuously made positive, optimistic remarks to investors about
Dana’s profitability and growth during the class period.

Even though Burns’s and Richter’s statements painted a publicly rosy picture,
some divisions of Dana were wilting. Fifty percent of the company’s drive shaft division
was operating at a loss, and its light axle division was also suffering. Additionally, the
price of steel, one of the company’s biggest supply costs, jumped seventy-five to 120
percent in late 2004, but Burns and Richter demanded that each factory grow earnings
by six percent.

Then, on September 15, 2005, Burns and Richter announced that Dana would be
reducing its earnings projections by fifty percent because of the rising cost of steel,
likely restating its financial statements for the second quarter of 2005, and possibly
No. 09-4233 Frank, et al. V. Dana Corp., et al. Page 4

writing down tax-deferred assets. With this announcement, Dana’s stock fell twenty
percent that day and continued to decline thereafter.

On October 10, Burns and Richter announced that investors should no longer rely
upon Dana’s financial statements for 2004 and the first half of 2005, those statements
would be restated, and Dana had discovered “material weaknesses” in its accounting
systems. With this announcement, Dana’s stock fell thirty-five percent that day and
continued to decline thereafter.

On December 30, Dana restated its earnings for the first two quarters of 2005,
reducing net income by $44 million. On January 17, 2006, Dana reported a $1.27 billion
loss for the third quarter of 2005 and a reduction of its tax-deferred assets by $918
million through a “valuation allowance.”

In February 2006, the Securities and Exchange Commission began a formal
investigation into Dana’s accounting methods. Dana defaulted on millions of dollars of
debt near that time before ultimately filing for bankruptcy on March 3, the same day that
Richter retired.

II. DISMISSAL OF PLAINTIFFS’ CLAIMS

Following our earlier remand in this case, the district court granted Burns and
Richter’s second motion to dismiss, again finding that Plaintiffs had failed to adequately
plead scienter for their section 10(b) claim. The district court also dismissed the section
20(a) claim, finding that Plaintiffs had failed to plead a requisite underlying claim and
that they had failed to plead that Burns and Richter did not act in good faith. On appeal,
Plaintiffs argue that their claims were adequately pleaded to survive a motion to dismiss,
and also that the district court improperly denied their request to file an amended
complaint.
No. 09-4233 Frank, et al. V. Dana Corp., et al. Page 5

A. Standard of Review

We review grants of Rule 12(b)(6) motions de novo. Courie v. Alcoa Wheel &
Forged Prods., 577 F.3d 625, 629 (6th Cir. 2009). “To survive a motion to dismiss,
[plaintiffs] must allege ‘enough facts to state a claim to relief that is plausible on its
face.’” Traverse Bay Area Intermediate Sch. Dist. v. Mich. Dep’t of Educ., 615 F.3d
622, 627 (6th Cir. 2010) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
All facts in the complaint must be accepted as true. Courie, 577 F.3d at 629 (citing
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)).

B. Section 10(b) Claims

“To state a securities fraud claim under Section 10(b), a plaintiff ‘must allege,
in connection with the purchase or sale of securities, the misstatement or omission of a
material fact, made with scienter, upon which the plaintiff justifiably relied and which
proximately caused the plaintiff’s injury.’” Frank, 547 F.3d at 569 (quoting In re
Comshare Inc. Sec. Litig., 183 F.3d 542, 550 (6th Cir. 1999)). Regarding the scienter
requirement, the Private Securities Litigation Reform Act requires that “plaintiffs must
‘state with particularity facts giving rise to a strong inference that the defendant acted
with the required state of mind.’”2 Konkol v. Diebold, Inc., 590 F.3d 390, 396 (6th Cir.
2009) (citing 15 U.S.C. § 78u-4(b)(2)). Scienter may take the form of “knowing and
deliberate intent to manipulate, deceive, or defraud, and recklessness.” Id.
“Recklessness is defined as ‘highly unreasonable conduct which is an extreme departure
from the standards of ordinary care. While the danger need not be known, it must at
least be so obvious that any reasonable man would have known of it.’” PR Diamonds,
Inc. v. Chandler, 364 F.3d 671, 681 (6th Cir. 2004) (quoting Mansbach v. Prescott, Ball

2
In Helwig, 251 F.3d at 552, we enumerated a non-exhaustive list of factors that do not
necessarily establish scienter, but are “usually relevant” to its analysis: (1) insider trading at a suspicious
time or in an unusual amount; (2) divergence between internal reports and external statements on the same
subject; (3) closeness in time of an allegedly fraudulent statement or omission and the later disclosure of
inconsistent information; (4) evidence of bribery by a top company official; (5) existence of an ancillary
lawsuit charging fraud by a company and the company’s quick settlement of that suit; (6) disregard of the
most current factual information before making statements; (7) disclosure of accounting information in
such a way that its negative implications could only be understood by someone with a high degree of
sophistication; (8) the personal interest of certain directors in not informing disinterested directors of an
impending sale of stock; and (9) the self-interested motivation of defendants in the form of saving their
salaries or jobs.
No. 09-4233 Frank, et al. V. Dana Corp., et al. Page 6

& Turben, 598 F.2d 1017, 1025 (6th Cir. 1979)). Recklessness is not negligence, but
more “‘akin to conscious disregard.’” Id. (quoting In re Comshare, 183 F.3d at 550).

The Supreme Court recently explained three steps a court must follow when
faced with a 12(b)(6) motion in a section 10(b) action. See Tellabs, 551 U.S. at 322-324.
First, all of the plaintiff’s factual allegations must be accepted as true. Id. at 322.
Second, the complaint and other sources normally considered by a court when ruling on
a 12(b)(6) motion must be considered in their entirety, including “documents
incorporated into the complaint by reference, and matters of which a court may take
judicial notice.” Id. “The inquiry . . . is whether all of the facts alleged, taken
collectively, give rise to a strong inference of scienter, not whether any individual
allegation, scrutinized in isolation, meets that standard.” Id. at 322-23. Third, “the court
must take into account plausible opposing inferences” when determining whether there
is a strong inference of scienter. Id. at 323. “A complaint will survive . . . only if a
reasonable person would deem the inference of scienter cogent and at least as compelling
as any opposing inference one could draw from the facts alleged.” Id. at 324.

1. Plaintiffs’ allegations supporting an inference of scienter

i. Internal reports

Plaintiffs claim that Burns and Richter received internal reports and information
showing that Dana was under financial distress, yet they continually made false, positive
statements regarding Dana’s financial health. They allege that several internal reports
and meetings should have informed Burns and Richter that their statements were false.
First, they point to “tracker reports” that were compiled daily and weekly by accountants
at each of Dana’s factories and detailed sales, cost of materials, and inventory. These
reports showed that some of Dana’s factories were not meeting their budgets.
Additionally, in order to meet the required mark of six percent growth, some factory-
level accountants falsified these tracker reports. Next, these reports were consolidated
into “production reports” every month and sent to various controllers at Dana
No. 09-4233 Frank, et al. V. Dana Corp., et al. Page 7

headquarters. Then, these production reports were the subject of weekly meetings
conducted by Richter.

Second, Plaintiffs refer to financial and operational reports, which Richter helped
prepare for monthly and annual meetings, listing total revenues, total inventory, total
returns on sales, variances in forecasted versus actual income, and earnings growth.

Third, Plaintiffs claim that quarterly “SAD reports” showed the variances in the
projected and actual performances of Dana’s factories. These reports were also sent to
controllers at headquarters, with whom Richter met regularly.

Fourth, Plaintiffs cite the failing drive shaft division, for which earnings were
down fifty percent. Along with the rising cost of steel and fuel and other distressed
product divisions, Plaintiffs assert that these conditions should have alerted Burns and
Richter that their extremely positive earnings statements were incorrect.

Finally, Plaintiffs point to Burns’s and Richter’s positions as chief executive
officer and chief financial officer respectively as evidence that they had access to
accounting systems and internal information that were contrary to their positive external
statements.

ii. Statements regarding accounting systems

Plaintiffs find fault with Burns’s statements that he and Richter had evaluated
Dana’s accounting systems and found them to be sound, and that he and Richter were
receiving direct reports of accounting information, when the accounting systems were
actually functioning improperly.

iii. Magnitude of false statements

Plaintiffs argue that the size of Dana’s false accounting statements adds to the
inference of scienter when viewed with the other factors. Dana amended its financial
statements to account for a loss of $44 million and eventually had to reduce its tax-
deferred assets by $918 million. The company overstated its net income for the first
quarter of 2004 by twelve percent, the second quarter of 2004 by ten percent, the fourth
No. 09-4233 Frank, et al. V. Dana Corp., et al. Page 8

quarter of 2004 by 3.6 percent, the first quarter of 2005 by 12.5 percent, and the second
quarter of 2005 by seventy percent.

iv. Temporal proximity of Dana’s positive and corrective
statements

Plaintiffs claim that Burns and Richter were reckless in making their false
statements because the statements were quickly followed by contrary company
announcements. Up until September 15, 2005, Burns’s and Richter’s statements
regarding Dana and its financial performance had been positive. On September 15,
however, Burns and Richter announced that Dana would be reducing its earnings
projections by fifty percent, likely restating its financial statements for the second
quarter of 2005, and possibly writing down tax-deferred assets. Other similarly negative
announcements followed until March 3, 2006, when Dana filed for bankruptcy.

v. Motivation to earn bonuses and make Dana appear healthy

Plaintiffs claim that Burns and Richter were motivated by bonuses and job
security to make Dana appear to be financially healthy when it was not. More
specifically, Plaintiffs claim that Burns and Richter stood to gain millions in bonuses that
were directly tied to “reported” net income and earnings, and that Dana was able to use
positive earnings projections to obtain loans imperative for its survival.

vi. Richter’s retirement

Plaintiffs argue that Richter’s retirement from Dana supports a strong inference
of scienter because it occurred within months of the time that Dana first discovered its
accounting errors and at the same time as Dana’s bankruptcy filing.
No. 09-4233 Frank, et al. V. Dana Corp., et al. Page 9

vii. False Sarbanes-Oxley certifications

Plaintiffs argue that Burns and Richter signing Sarbanes-Oxley certifications that
accompanied Dana’s false financial filings supports a strong inference of scienter.

viii. SEC investigation of Dana’s accounting practices

Plaintiffs claim that the investigation into Dana’s accounting practices by the
Securities and Exchange Commission supports a strong inference of scienter.

2. The holistic approach to reviewing scienter pleadings

In the past, we have conducted our scienter analysis in section 10(b) cases by
sorting through each allegation individually before concluding with a collective
approach. Cf. Konkol, 590 F.3d at 397-404; Ley v. Visteon Corp., 543 F.3d 801, 809-14
(6th Cir. 2008); PR Diamonds, Inc., 364 F.3d at 684. However, we decline to follow that
approach in light of the Supreme Court’s recent decision in Matrixx Initiatives, Inc. v.
Siracusano, 131 S. Ct. 1309 (2011). There, the Court provided for us a post-Tellabs
example of how to consider scienter pleadings “holistically” in section 10(b) cases. Id.
at 1323-25 (quoting Tellabs, 551 U.S. at 326) (internal quotation marks omitted).
Writing for the Court, Justice Sotomayor expertly addressed the allegations collectively,
did so quickly, and, importantly, did not parse out the allegations for individual analysis.
Id. at 1324-25. This is the only appropriate approach following Tellabs’s mandate to
review scienter pleadings based on the collective view of the facts, not the facts
individually. Tellabs, 551 U.S. at 322-23 (“The inquiry . . . is whether all of the facts
alleged, taken collectively, give rise to a strong inference of scienter, not whether any
individual allegation, scrutinized in isolation, meets that standard.”). Our former method
of reviewing each allegation individually before reviewing them holistically risks losing
the forest for the trees. Furthermore, after Tellabs, conducting an individual review of
myriad allegations is an unnecessary inefficiency. Consequently, we will address the
Plaintiffs’ claims holistically.
No. 09-4233 Frank, et al. V. Dana Corp., et al. Page 10

3. Plaintiffs’ allegations support an inference of scienter when viewed
holistically

It is uncontested that Burns and Richter made false statements, such as those
concerning positive projected earnings, the soundness of Dana’s accounting systems, and
Dana’s ability to continue to prosper in light of the rising cost of materials because of
cost efficiencies. The question before us is whether Plaintiffs have adequately alleged
that they made those statements with scienter so as to survive a motion to dismiss.

We conclude that Plaintiffs have adequately pleaded a strong inference of
scienter when viewing the factors holistically. Burns and Richter ask us to infer that
failed accounting systems are to blame here, and we find that inference plausible.
However, the inference that Burns and Richter recklessly ignored the falsity of their
external statements is at least as plausible as the faulty accounting inference. Burns and
Richter were the top two executives of an auto parts manufacturer, and they reported
gangbuster earnings during a period of time when the entire auto industry was spiraling
toward bankruptcy. They filed these reports, made positive public statements, and
asserted the veracity of their financials to government authorities all while one of their
key product lines was operating at fifty percent of earnings, multiple factories failed to
meet their budgets, and the price of steel rose seventy-five to 120 percent. It is difficult
to grasp the thought that Burns and Richter really had no idea that Dana was on the road
to bankruptcy. From the first public statement that Dana’s earnings statements might be
false, the company fell to its demise in a matter of nine months. Burns and Richter only
appear more culpable when considering the loan obtained by Dana, which almost surely
would have been denied if the company’s true financial status was publicly reported, and
the bonuses that Burns and Richter stood to earn.

Accordingly, the inference that Burns and Richter recklessly disregarded the
falsity of their extremely optimistic statements is at least as compelling to us as their
excuse of failed accounting systems. Plaintiffs have adequately pleaded a strong
inference of scienter. Cf. Matrixx Initiatives, Inc., 131 S. Ct. at 1324 (holding that
plaintiffs alleged a strong inference when defendant issued a misleading press release
No. 09-4233 Frank, et al. V. Dana Corp., et al. Page 11

suggesting its over-the-counter pharmaceutical product did not cause anosmia, defendant
had not tested its product for anosmia, there was insufficient scientific evidence at the
time to determine whether it caused anosmia, and defendant had informed an
independent scientist that it had hired a consultant to review the product out of concern
over anosmia, asked that scientist to participate in animal studies, prohibited another
scientist from using the product’s name when he presented a study showing that the
product caused anosmia, and organized a “a panel of physicians and scientists in
response to [his] presentation”); cf. also Miss. Pub. Emps.’ Ret. Sys. v. Boston Scientific
Corp., 523 F.3d 75, 79-80, 93 (1st Cir. 2008) (holding that plaintiffs alleged a strong
inference of scienter when defendant withheld information about its medical stent
product, defendant had reports from Europe and the United States that a defect in the
stent caused medical problems in patients, defendant corrected the defect in a new model
and built up a reserve inventory of the corrected product rather than releasing it, there
was a close temporal proximity between the statements and the third recall of the
defective products, and there was alleged insider trading before the recalls).

C. Section 20(a) “Controlling Person” Claim

Plaintiffs also claim that Burns and Richter acted as “controlling persons” in the
section 10(b) violation, which would constitute a violation of section 20(a) of the
Securities Exchange Act, 15 U.S.C. § 78t(a) (2006), which states that:

Every person who, directly or indirectly, controls any person liable under
any provision of this chapter or of any rule or regulation thereunder shall
also be liable jointly and severally with and to the same extent as such
controlled person to any person to whom such controlled person is liable
(including to the Commission in any action brought under paragraph (1)
or (3) of section 78u(d) of this title), unless the controlling person acted
in good faith and did not directly or indirectly induce the act or acts
constituting the violation or cause of action.

Section 20(a) claims are predicated upon at least one underlying violation committed by
a controlled party. See Ley, 543 F.3d at 818; PR Diamonds, 364 F.3d at 696-97.
No. 09-4233 Frank, et al. V. Dana Corp., et al. Page 12

The district court dismissed Plaintiffs’ section 20(a) claim against Burns and
Richter for two reasons. First, the court found that Plaintiffs failed to “sufficiently plead
a[n underlying] violation of securities law by Dana, its employees, or [Burns or Richter]”
because they had failed to adequately plead scienter in their section 10(b) claim.
Second, the district court found that Plaintiffs had failed to adequately plead that Burns
and Richter did not act in good faith, a defense listed in section 78t(a). The district
court’s reasoning is faulty and Plaintiffs adequately pleaded their section 20(a) claim for
the following reasons.

1. Pleading an underlying violation

The district court concluded that Plaintiffs failed to plead an underlying violation
because they had failed to plead scienter on the part of Burns, Richter, Dana, or other
Dana employees as part of their section 10(b) claims. This conclusion cannot stand in
light of our contrary determination above. Because Plaintiffs have adequately pleaded
scienter as to Burns and Richter—Dana’s chief executive officer and chief financial
officer—they have also pleaded scienter as to Dana. Cf. City of Monroe Emps. Ret. Sys.
v. Bridgestone Corp., 399 F.3d 651, 688 (6th Cir. 2005) (“Ono’s awareness of the claims
as gleaned from these meetings is directly attributable to Bridgestone because
‘knowledge of a corporate officer or agent acting within the scope of his authority is
attributable to the corporation.’” (alterations and internal quotation marks omitted)); cf.
also Thompson v. RelationServe Media, Inc., 610 F.3d 628, 635 (11th Cir. 2010)
(“Corporations have no state of mind of their own; rather, the scienter of their agents
must be imputed to them.”); Adams v. Kinder-Morgan, Inc., 340 F.3d 1083, 1106 (10th
Cir. 2003) (citation omitted) (“The scienter of the senior controlling officers of a
corporation may be attributed to the corporation itself to establish liability as a primary
violator of § 10(b) and Rule 10b-5 when those senior officials were acting within the
scope of their apparent authority.”). If Burns and Richter acted with scienter in causing
Dana to make false statements, then Dana had scienter with regard to those statements,
too.
No. 09-4233 Frank, et al. V. Dana Corp., et al. Page 13

2. Pleading the failure to act in good faith

The district court incorrectly required Plaintiffs to plead as part of their section
20(a) claim that Burns and Richter did not act in good faith. Although we have never
held that good faith is an affirmative defense that the defendant has the burden of
establishing in a section 20(a) action, many of our sister circuits have. See Laperriere
v. Vesta Ins. Group, Inc., 526 F.3d 715, 721 (11th Cir. 2008); In re Stone & Webster,
Inc., Sec. Litig., 424 F.3d 24, 26 (1st Cir. 2005); Southland Sec. Corp. v. INSpire Ins.
Solutions, Inc., 365 F.3d 353, 384 n.19 (5th Cir. 2004); Dellastatious v. Williams, 242
F.3d 191, 194 (4th Cir. 2001); Donohoe v. Consol. Operating & Prod. Corp., 30 F.3d
907, 912 (7th Cir. 1994). In addition, we have considered a good faith exception similar
to that of section 20(a) in the context of a director liability suit. In McCall v. Scott, 250
F.3d 997, 1000 & n.1 (6th Cir. 2001), we interpreted a provision of a Delaware
corporation’s Certificate of Incorporation that generally limited liability for directors of
the corporation except “for acts or omissions not in good faith.” Id. at 1000. We noted
that “it is not the plaintiff who must establish bad faith at trial, but the defendant who
bears the burden, however slight, to show good faith.” Id. at 1000 n.1 (citation omitted).
The rule from McCall applies here as well and we choose to follow suit with our sister
circuits. Good faith is an affirmative defense in section 20(a) claims and Plaintiffs were
not required to plead that Burns and Richter acted without it.

III. PLAINTIFFS’ MOTION TO AMEND

As part of their response to Burns and Richter’s motion to dismiss, Plaintiffs
informally requested leave from the district court to amend their complaint to include
proposed testimony from confidential sources that would help establish Burns’s and
Richter’s scienter, but they did not file a motion to amend pursuant to Rule 15(a) of the
Federal Rules of Civil Procedure. The district court denied Plaintiffs’ request, and
Plaintiffs appealed that decision. Because the amendments that Plaintiffs seek to make
would purportedly strengthen their section 10(b) claims, and we have held here that the
district court improperly dismissed those claims even without those amendments, we
need not reach this issue.
No. 09-4233 Frank, et al. V. Dana Corp., et al. Page 14

IV. CONCLUSION

Having reviewed Plaintiffs’ allegations holistically, we hold that Plaintiffs
adequately pleaded a strong inference of scienter as part of their section 10(b) claims.
Furthermore, they adequately pleaded their section 20(a) controlling person claim.
Accordingly, we REVERSE the district court’s order granting dismissal.