OFI Asset Management v. Cooper Tire & Rubber

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________

No. 15-2664
_____________

OFI ASSET MANAGEMENT;
TIMBER HILL LLC,
individually and on behalf of all others similarly situated,
Appellants

v.

COOPER TIRE & RUBBER;
ROY ARMES;
BRADLEY HUGHES
_______________

On Appeal from the United States District Court
for the District of Delaware
(D.C. No. 1-14-cv-00068)
District Judge: Hon. Richard G. Andrews
_______________

Argued March 1, 2016

Before: AMBRO, JORDAN, and SCIRICA, Circuit Judges.

(Opinion Filed: August 22, 2016)
_______________
Jonathan H. Beemer
Vincent R. Cappucci
Andrew J. Entwistle
Entwistle & Cappucci
299 Park Avenue
20th Floor
New York, NY 10171

James A. Harrod [ARGUED]
Lauren A. Ormsbee
Bernstein Litowitz Berger & Grossmann
1251 Avenue of the Americas
44th Floor
New York, NY 10020
Counsel for Appellants

2
Marjorie P. Duffy
Jones Day
325 John H. McConnell Boulevard
Suite 600
P.O. Box 165017
Columbus, OH 43215

Stephen C. Norman
John A. Sensing
Potter, Anderson & Corroon
1313 N. Market Street
6th Floor
Wilmington, DE 19801

Adrienne F. Mueller
Geoffrey J. Ritts [ARGUED]
Jones Day
901 Lakeside Avenue
North Point
Cleveland, OH 44114
Counsel for Appellees
_______________

OPINION OF THE COURT
_______________

JORDAN, Circuit Judge.

This suit is what remains from a failed merger between
Cooper Tire & Rubber Company (“Cooper”) and Apollo
Tyres Ltd. (“Apollo”). OFI Asset Management and Timber
Hill LLC – purporting to act for themselves and other

3
similarly situated investors (collectively, “OFI”)1 – filed this
securities class action in the United States District Court for
the District of Delaware against Cooper and two of its
officers. OFI claims that, during the course of merger
negotiations between Cooper and Apollo, the defendants
made material misrepresentations in statements to investors,
resulting in violations of federal securities laws. The District
Court dismissed OFI’s complaint in its entirety. OFI now
appeals, complaining that the District Court improperly
managed the presentation of arguments and wrongly
dismissed the case. Because we conclude that the District
Court acted within its discretion on case management and was
correct in its decision that OFI failed to allege sufficient facts
to support its claims, we will affirm.

I. BACKGROUND

A. FACTUAL BACKGROUND2

Cooper is a one-hundred-year-old tire manufacturer
based in Findlay, Ohio. The individual defendants, Roy
Armes and Bradley Hughes, were, respectively, Cooper’s
Chief Executive Officer and Chief Financial Officer during
the time relevant to this action. Cooper’s international
operations included Cooper Chengshan Tire Company, Ltd.
(“CCT”) in China, a joint venture formed in 2006, 65% of

1
For simplicity, we will refer to OFI in the singular.
2
We recount the facts in the light most favorable to
OFI. See Kanter v. Barella, 489 F.3d 170, 177 (3d Cir.
2007).

4
which was owned by Cooper. Chengshan Group
(“Chengshan”), led by Chairman Che Hongzhi (“Che”),
owned the remaining 35% of CCT. As of mid-2013, CCT
was Cooper’s most profitable manufacturing facility,
contributing approximately 25% of Cooper’s revenue and
profits.

Cooper’s presence in China was a key motivation
behind Apollo’s efforts to merge with Cooper. Those efforts
began in August 2012, when Apollo suggested the possibility
of buying Cooper for $22.75 per share. Flirtation progressed
to “serious” discussions in January 2013. (J.A. at 55, ¶ 48).
Between late 2012 and June 2013 (the “negotiation period”),
Cooper explored merger opportunities with Apollo as well as
other parties. In January 2013, Chengshan indicated that it,
with unidentified partners, might submit a bid for Cooper.

On March 7, 2013, Cooper met with Apollo to discuss
the details of a potential deal, including Che’s possible
reaction to the merger. Armes asserted that “Cooper did not
know how Chairman Che would react” and that his reaction
could be anything from favorable to antagonistic; it was
possible he would “really support it,” “sell his 35% stake,” or
“try to undermine” it. (J.A. at 41, 55-56, ¶¶ 8, 50.) Cooper
and Apollo also addressed (among other contingencies) the
possibility that a union representing Cooper employees, the
United Steelworkers Union (“USW”), would file grievances
if a transaction were announced.

On April 10, “Party C,” which allegedly was a
consortium including Chengshan, communicated that it
intended to make a proposal to purchase Cooper. While Party
C was in frequent communication with Cooper during the

5
negotiation period, it never made a definitive proposal.
During this period, Apollo and Cooper met with Che, who
expressed opposition to a merger between Cooper and Apollo
and suggested that he would prefer to “keep things going the
way that [they] were.” (J.A. at 41, ¶ 8.)

On June 12, Cooper and Apollo announced that they
had entered into an agreement whereby Apollo would acquire
Cooper for approximately $35 per share, a figure amounting
to some $2.5 billion and representing a 40% premium over
Cooper’s thirty-day volume-weighted average price.

The Merger Agreement contained several disclaimers,
one of which noted that the “representations and warranties
… set forth herein shall be true and correct in all respects ...
both when made … and as of the Closing Date.” (J.A. at
169.) The SEC Form 8-K that accompanied the Agreement
warned against reliance on the Agreement, saying “[t]he
Merger Agreement contains representations and warranties
made by [Cooper] and the Apollo Parties to, and solely for
the benefit of, each other. … You should not rely on the
representations and warranties in the Merger Agreement as
characterizations of the actual state of facts about the
Company or the Apollo Parties.” (Opening Brief in Support
of Motion to Dismiss, Ex. G, at 3, OFI Risk Arbitrages v.
Cooper Tire & Rubber Co., No. 14-cv-68-RGA (D. Del.
Dec. 15, 2014), ECF No. 54.)

The Merger Agreement also included an extensive
series of warranties. Those warranties provided, among other
things, that Cooper “or one of its Subsidiaries has exclusive
possession of each Owned Real Property and Leased Real
Property” referenced in the Agreement (J.A. at 165), that

6
there was no “pending or … threatened … labor strike or
lock-out or any material dispute, walk-out, work stoppage or
slow-down involving [Cooper] or any of its Subsidiaries”
(J.A. at 164), and that Cooper maintained “effective”
“internal control over financial reporting” (J.A. at 162).

The reaction at CCT’s facility to the merger
announcement was negative. CCT workers went on strike on
June 21. Although they returned to work on June 28, they
resumed their strike a few weeks later on July 13. The
workers finally returned to work on August 17 but they
denied Cooper officials access to the facility, and they also
stopped producing Cooper-branded tires. By August 19, CCT
had stopped providing financial information to Cooper.
Cooper disclosed that fact in its next public filing, the
August 30 Proxy Statement. In the meantime, on August 9,
Cooper filed its 10-Q for the quarter ending June 30. That
document disclosed a “temporary work stoppage” and a
complaint filed by CCT’s union. Cooper reported no material
changes to its internal controls during that quarter, but it
warned that the as-yet “temporary” CCT strike could hurt
future performance if it persisted. (J.A. at 141.)

The merger announcement also elicited a labor dispute
in the United States. On August 1, the USW filed grievances
alleging that the proposed merger violated its collective
bargaining agreements. Cooper and Apollo sought expedited
arbitration to preserve the timeline for closing the merger.
The arbitrator ultimately ruled in favor of the USW and
barred Cooper from selling two of its plants to Apollo,
“unless and until the [USW] ha[s] entered into agreements
with” Apollo. (J.A. at 149). Cooper disclosed the arbitration
result to shareholders in an 8-K filing on September 19, 2013,

7
and it included assurances that it and Apollo were “continuing
discussions with the [USW] with an aim of reaching an
amicable resolution quickly to minimize any impact on the
original closing schedule” and that the two companies
“remain firmly committed to the strategic rationale for the
Merger … and are optimistic that a mutually beneficial
settlement can be reached.” (J.A. at 149.) As a result of this
new hurdle, Apollo asked Cooper on September 25 to accept
a price reduction. Cooper declined. That fact was not
disclosed to shareholders, even though they were slated to
vote on the merger five days later.

On August 30, Cooper issued its Proxy Statement,
which described its intent to “work toward resolving [the
CCT labor] issues and returning the facility to full, normal
operation again as soon as possible.” (J.A. at 201.) Although
Cooper warned that it could not “assure [investors] that any
of our expectations … will be achieved,” the Proxy
nevertheless concluded that “[n]either the [CCT] strike nor
the plant slowdown are expected to have an effect on the
consummation of the merger.” (J.A. 182, 201.)

The Proxy also detailed the events leading up to the
Merger Agreement, identifying all suitors other than Apollo
by pseudonyms. It did not identify Party C as being affiliated
with Chengshan. The Proxy included projections that Cooper
had shared with Apollo and other potential purchasers during
the negotiation period, as well as projections Cooper provided
to its bankers to form a fairness opinion regarding the merger.
But the Proxy was explicit that the projections were included
“only because this information was provided to [Apollo],
certain other potential purchasers and [Cooper’s] financial
advisor” during negotiations. (J.A. at 197.) It cautioned that

8
the projections were based on “assumptions that may now be
outdated” and instructed that “[y]ou should not regard the
inclusion of these projections … as an indication that Cooper
[or] [Apollo] … considered or consider the projections to be
necessarily predictive of actual future events, and you should
not rely on the projections as such.” (J.A. at 198.) The Proxy
also stated that the projections were “aspirational … rather
than likely projections,” and it was candid that Cooper would
not “make other projections public in the future.” (Id.)

On September 30, Cooper stockholders approved the
merger with Apollo. That approval was announced in an 8-K
and was accompanied by a statement from Armes describing
the planned merger as a “compelling transaction” and
asserting that the resulting company would have a “strong
global footprint that includes a presence in ... the fastest
growing geographies of India and China.” (J.A. at 110, ¶ 86.)
The 8-K did not mention Apollo’s continued requests for a
price reduction.

Having secured stockholder approval, Cooper reached
out to Apollo to close the deal. It refused, and Cooper filed
suit against Apollo on October 4, 2013 in the Delaware
Chancery Court, seeking to force Apollo to consummate the
deal according to the terms of the Merger Agreement.
Cooper asserted that Apollo had failed in its duty to use its
“reasonable best efforts” to reach an agreement with the
USW, as required by the arbitration decision issued the
previous month, and that, but for that failure, the merger
could have closed as planned. Cooper Tire & Rubber Co. v.
Apollo (Mauritius) Holdings Pvt. Ltd., No. CV 8980-VCG,
2013 WL 5977140, at *1 (Del. Ch. Nov. 9, 2013) (“Cooper
Chancery Case”). Apollo, in response, asserted that Cooper

9
had not satisfied all of the conditions precedent for the
closing, citing in particular the inadequate provision of
financial data. Id. The case generated substantial discovery
and culminated in a three-day trial in early November 2013.
Id.

On November 8, following an unsuccessful
interlocutory appeal, the Court of Chancery denied Cooper’s
request for specific performance. Id. The Court found that
Apollo had not, by that point, breached the duty to exercise
“reasonable best efforts” in negotiating a new agreement with
the USW, but it instructed that Apollo must continue those
negotiations as required by the Merger Agreement. Id.
Having resolved the claim for immediate injunctive relief, the
Court declined to rule on whether Cooper had, in fact, met the
conditions precedent for the closing, describing the question
as “hotly contested.” Id. That question thus remained
unresolved.

No significant progress was made toward closing, and
on December 30, 2013, Cooper formally terminated the
planned merger, telling investors via webcast that the
financing for the deal had fallen through and that it was “a
reality that the [Merger Agreement] both companies signed
on June 12 [would] not be consummated by Apollo.” (J.A. at
90, ¶ 134.)

B. PROCEDURAL BACKGROUND

In January 2014, OFI filed this action in the District
Court. (J.A. at 24.) Its amended complaint (the “Complaint”)
alleges that Cooper violated Sections 10(b), 14(a), and 20(a)
of the Securities Exchange Act of 1934 (the “’34 Act”),

10
codified at 15 U.S.C. §§ 78j(b), 78n(a), and 78t(a). Cooper
moved to dismiss the Complaint for failure to satisfy the
heightened pleading burden that, under the Private Securities
Litigation Reform Act of 1995 (the “PSLRA”), applies to
securities fraud claims. Oral argument on the motion to
dismiss was granted, and, because the claims center on
allegations that Cooper told falsehoods, the District Court
ordered OFI to submit a letter “identifying and verbatim
quoting” the five most compelling examples it could muster
of false or fraudulent statements by Cooper, with three factual
allegations demonstrating the falsity of each statement and
three factual allegations supporting a finding of scienter as to

11
the making of the statements.3 (J.A. at 31 (Docket entry No.
60).) The Court stated that oral argument would focus on
OFI’s response. (Id.)

On March 11, 2015, the District Court heard two hours
of argument on Cooper’s motion to dismiss and OFI’s
allegations. During argument, the Court also requested
supplemental information, which the parties subsequently
provided.

The District Court ultimately granted Cooper’s motion
to dismiss, determining that OFI had failed to state a claim

3
The order stated:

Plaintiff is requested to submit a letter by
March 4 identifying and verbatim quoting its
five most compelling false or fraudulent
statements, including the date on which they
were made, with two paragraphs in support of
each statement, one identifying no more than
three factual allegations in support of the falsity,
with each factual allegation citing the paragraph
of the amended complaint in which it appears,
and the second identifying no more than three
factual allegations as to why at least one of the
individual defendants knew it was false, again
with citations to the amended complaint’s
paragraphs for support. No legal argument. Oral
argument is to focus on Plaintiff’s letter.

(J.A. at 31.)

12
that satisfied the pleading standard of the PSLRA. The Court
determined that the statements identified as problematic by
OFI were either not false or misleading, were “forward-
looking” statements protected by the safe harbor established
by the PSLRA, lacked a sufficient showing of scienter, or
suffered from some combination of those infirmities. OFI
Risk Arbitrages v. Cooper Tire & Rubber Co., No. 14-cv-68-
RGA, 2015 WL 4036179 (D. Del. July 1, 2015). OFI timely
appealed.

II. DISCUSSION4

A. STANDARD OF REVIEW

Our review of the District Court’s dismissal of OFI’s
Complaint is plenary. See Great W. Mining & Mineral Co. v.
Fox Rothschild, LLP, 615 F.3d 159, 163 (3d Cir. 2010).
When ruling on a motion to dismiss under Rule 12(b)(6), a
court must “accept as true all [factual] allegations in the
complaint and all reasonable inferences that can be drawn
therefrom, and view them in the light most favorable to the
plaintiff.” Kanter v. Barella, 489 F.3d 170, 177 (3d Cir.
2007) (quoting Evancho v. Fisher, 423 F.3d 347, 350 (3d Cir.
2005)). Ordinarily, it is sufficient to plead facts that do no
more than raise an allegation to the level of plausibly
warranting relief. See Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007) (to survive a motion to dismiss, a complaint

4
The District Court had federal question jurisdiction
under 28 U.S.C. § 1331. We have jurisdiction to review the
final judgment of the District Court pursuant to 28 U.S.C.
§ 1291.

13
must contain “enough facts to state a claim to relief that is
plausible on its face”). But in cases alleging securities fraud,
plaintiffs must “satisfy the heightened pleading rules codified
in” the PSLRA. Institutional Inv’rs Grp. v. Avaya, Inc., 564
F.3d 242, 252 (3d Cir. 2009).

“[T]o restrict abuses in securities class-action
litigation,” In re Suprema Specialties, Inc. Secs. Litig., 438
F.3d 256, 276 n.8 (3d Cir. 2006) (internal quotation marks
omitted), the PSLRA requires that the complaint must
“specify each statement alleged to have been misleading, the
reason or reasons why the statement is misleading, and, if an
allegation regarding the statement or omission is made on
information and belief, the complaint shall state with
particularity all facts on which that belief is formed,” id. at
276 (quoting 15 U.S.C. § 78u-4(b)(1)(B)). This standard
“requires plaintiffs to plead the who, what, when, where and
how: the first paragraph of any newspaper story.” Avaya, 564
F.3d at 253 (internal quotation marks omitted). A complaint
must also “state with particularity facts giving rise to a strong
inference that the defendant acted with the required state of
mind,” U.S.C. § 78u-4(b)(2)(A), specifically “scienter,”
which is defined in this context as a “knowing or reckless”
mental state “embracing intent to deceive, manipulate, or
defraud.” Avaya, 564 F.3d at 252 (internal quotation marks
omitted).

OFI primarily alleges that Cooper made material
misrepresentations to shareholders in violation of § 10(b) of
the ’34 Act. “The [Supreme] Court [has] prescribed a three-
step process for considering a motion to dismiss in a § 10(b)
action.” Winer Family Trust v. Queen, 503 F.3d 319, 327 (3d
Cir. 2007) (citing Tellabs, Inc. v. Makor Issues & Rights, Ltd.

14
551 U.S. 308, 322-23 (2007)). First, as with all motions
under Rule 12(b)(6), we must “accept all factual allegations
in the complaint as true.” Tellabs, 551 U.S. at 322. Second,
we “must consider the complaint in its entirety, as well as
other sources courts ordinarily examine when ruling on Rule
12(b)(6) motions to dismiss, in particular, documents
incorporated into the complaint by reference, and matters of
which a court may take judicial notice.” Id. Third, “in
determining whether the pleaded facts give rise to a ‘strong’
inference of scienter, the court must take into account
plausible opposing inferences.” Id. at 323. Only a complaint
that provides sufficiently particularized factual pleading and
gives rise to a strong inference of scienter can survive a
motion to dismiss.

In addition to establishing a heightened pleading
standard, the PSLRA provides a so-called “safe harbor” that
immunizes certain “forward-looking” statements from §10(b)
liability. That immunity applies if either the “forward-
looking statement is … identified as [such], and is
accompanied by meaningful cautionary statements identifying
important factors that could cause actual results to differ
materially from those in the forward-looking statement” or
the plaintiff fails to prove the forward-looking statement “was
made with actual knowledge by [the speaker] that the
statement was false or misleading … .”5 15 U.S.C. § 78u-
5(c)(1).

5
“The term ‘forward-looking statement’ is broadly
defined in the statute … .” Avaya, 564 F.3d at 255. The
definition captures a wide range of statements, including
those

15
 That disjunctive statutory test provides two distinct
entrances to the safe harbor.6 The first requires the use of
“meaningful cautionary statements” regarding the forward-
looking statement. 15 U.S.C. § 78u-5(c)(1)(A)(i). “[A]
vague or blanket (boilerplate) disclaimer which merely warns
the reader that the investment has risks will ordinarily be
inadequate to prevent misinformation. To suffice, the

containing a projection of revenues, income
(including income loss), earnings (including
earnings loss) per share, capital expenditures,
dividends, capital structure, or other financial
items”; statements of “the plans and objectives
of management for future operations, including
plans or objectives relating to the products or
services of the issuer”; or statements of “future
economic performance, including any such
statement contained in a discussion and analysis
of financial condition by the management or in
the results of operations included pursuant to
the rules and regulations of the [SEC].

Id. (quoting 15 U.S.C. § 78u-5(i)(1)(A)-(C)).
6
The statute in fact provides a third entrance to the
safe harbor by immunizing statements that are “immaterial.”
15 U.S.C. § 78u-5(c)(1)(A)(ii). But, since the regulation
based on § 10(b) already imposes a materiality requirement,
17 CFR 240.10b-5, that entrance is not relevant in cases
claiming a § 10(b) violation.

16
cautionary statements must be substantive and tailored to the
specific future projections, estimates or opinions in the
[documents] which the plaintiffs challenge.” GSC Partners
CDO Fund v. Washington, 368 F.3d 228, 243 n.3 (3d Cir.
2004) (internal quotation marks omitted). However, even in
the absence of such meaningful cautionary language, the
second entrance to the safe harbor is available to “immunize[]
from liability any forward looking statement [if] … the
plaintiff fails to show the statement was made with actual
knowledge of its falsehood.” Avaya, 564 F.3d at 254. Thus,
any forward-looking statement is protected if it is either
accompanied by “substantive and tailored” cautionary
statements or if the plaintiff fails to show “actual knowledge
of falsehood.”

B. SCIENTER AND CASE MANAGEMENT

Before delving into the details of OFI’s allegations, we
first address OFI’s broader complaint that the District Court
mismanaged the debate over the motion to dismiss. OFI
protests that the District Court erred first by failing to
consider all of the alleged misrepresentations and then by
failing to consider holistically the allegations of scienter. OFI
attributes both errors, at least in part, to how the Court
managed the presentation of arguments; in particular, it
complains of the Court’s order requiring OFI to focus
argument on only five “artificial[ly] select[ed]” allegations of
misstatements. (Opening Br. at 24.)

OFI’s umbrage is unfounded. A District Court enjoys
substantial discretion in managing complex disputes,
particularly when, as in this case, the claims become
unwieldy. See In re Westinghouse Sec. Litig., 90 F.3d 696,

17
703 (3d Cir. 1996) (confirming that a court acted within its
discretion in dismissing an “unnecessarily complicated and
verbose” complaint for failure to adhere to Rule 8 of the
Federal Rules of Civil Procedure). OFI’s Complaint stretches
to nearly 100 pages and 245 paragraphs, throughout which it
interweaves allegations about the factual circumstances
surrounding the merger with citations to the specific
statements it avers are misrepresentations. As pled, the
Complaint presents an extraordinary challenge for application
of the highly particularized pleading standard demanded by
the PSLRA. This is true not only due to the length of the
Complaint, but also its lack of clarity. It is difficult to discern
precisely which statements OFI alleges to be actionable, let
alone what specific facts are asserted to support each such
allegation. The District Court rightly demanded that OFI
make its contentions more clear, and the efficacy of that
demand is borne out by OFI’s letter in response to that order,
which is much more comprehensible than the Complaint.
(See Letter from Andrew J. Entwistle and James A. Harrod
dated March 4, 2015, OFI Risk Arbitrages v. Cooper Tire &
Rubber Co., No. 14-cv-68-RGA (D. Del.), ECF No. 61.) OFI
itself acknowledged during the hearing that its arguments
“need[ed] to be organized in some way.” (J.A. at 244.) Now
that OFI has come to us with the same kind of broad
averments that drove the District Court to demand specificity,
we find ourselves more than sympathetic to that Court’s
position.

OFI contends that, as a result of the District Court’s
improperly constraining order, there were six additional
“misrepresented and concealed material facts” and omissions

18
that the Court did not consider: 7 1) statements in the Merger
Agreement regarding internal controls for financial reporting,
2) the characterization in the 10-Q of the strike as a
“temporary work stoppage” by a “unionized workforce,” 3)
statements in the Proxy Statement regarding internal controls
for financial reporting, 4) misleading statements in the
September 19, 2013 8-K filing regarding the effect of the
USW arbitration decision on the merger, 5) an omission in
that same 8-K of the fact that Apollo “refus[ed] to close the
Merger absent a price reduction,” and 6) the characterization
in the September 30, 2013 8-K of the merger as a
“compelling transaction” that would create a strong global
company. (Opening Br. at 29 & n.4.)

Yet at no point before the District Court did OFI
protest that these were important issues that required the
Court’s attention, let alone did OFI point to particularized
facts to support such an argument.8 Its kitchen-sink pleading

7
Though OFI enumerates five such
misrepresentations, it actually shoehorned a sixth in through a
footnote. It took the same approach in its letter to the District
Court, as noted by the Court during the argument on the
motion to dismiss. (See J.A. at 210 (wherein it refers to OFI’s
disobedience to its order limiting the number of arguments
they were to highlight, stating, “I see that [OFI] couldn’t,
actually, follow my instructions, or they could follow my
instructions, but decided to add in some stuff of their own.”).)
8
And, in fact, OFI’s briefing before us continues this
trend. It neglects to address its allegations regarding “internal
controls” language in the Proxy Statement, and the three
complaints related to the 8-K filings receive superficial

19
has been a hindrance at every stage of these proceedings.
There is some irony, then, to OFI’s criticism of the District
Court’s effort to bring order to the sweeping denunciations in
the Complaint. It was OFI’s job to frame a comprehensive
set of allegations to support its claims for relief. When the
District Court tried to give OFI an assist by ordering greater
specificity, the latter in fact did a much better job of framing
the issues. But here we are now, facing OFI’s objection that
arguments it did not prioritize when given the chance to do so
are somehow critical to its case. The reality is that the
specific allegations considered by the District Court were not
selected at random, but were the several chosen by OFI.
They were its best arguments, and the District Court found
them all unavailing. OFI was permitted to bring its most
compelling arguments to the table, and, when it did, it made
no meaningful objection to the limitations imposed by the
District Court. Under the circumstances, the Court’s
approach was not problematic.9

treatment at best. Only the internal control assertions from
the Merger Agreement and the characterization of the work
stoppage in the 10-Q are supported by developed arguments.
That the treatment OFI gave to ostensibly important
additional issues was so minimal, and was dwarfed by the
treatment of the issues that were squarely before and
addressed by the District Court, only reinforces our
conclusion that OFI’s complaint that the District Court
ignored important allegations is without merit.
9
We should not be misunderstood on this point. It is
certainly possible for a court to go too far in limiting the
number or character of arguments it will consider, but the

20
 This is true even though OFI contends that the District
Court erred by failing to follow Tellabs’s instructions “to
consider the allegations of scienter holistically,” and that the
Court instead drew “conclusions concerning scienter [that]
were limited to specific alleged misstatements and isolated
allegations rather than the fraudulent scheme as a whole.”
(Opening Br. at 26.) While we agree that scienter must be
considered holistically, we are persuaded that the District
Court did precisely that.10 OFI predicates its claim of error
on the fact that the Court asked it at oral argument to walk
through its scienter arguments one at a time and addressed
them in the same fashion in its opinion. That the Court was
thorough in explaining why it found scienter lacking as to
each asserted misrepresentation does not suggest that it did
not consider the allegations as a whole. To the contrary, it
explicitly cited Tellabs, and its analysis shows that it
understood the full allegations of the amended Complaint and
yet found OFI’s scienter argument lacking.

District Court did nothing to abuse its broad case
management discretion in this instance.
10
Our conclusion here is based on a holistic reading of
the District Court’s opinion. Because we agree with the
Court that OFI’s assertions are baseless, its limited
explication of its scienter analysis suffices. We do note,
however, that in closer cases than this one the District Court
would be well served to grapple with the question of scienter
with more explicit reference to the broader context.

21
 While it would have been helpful for the District
Court to explicitly note that it had considered all the
arguments presented by the Complaint and assessed scienter
holistically, the Court’s opinion persuades us that it did so.
We perceive no error in the District Court’s conclusion that
OFI failed to sufficiently plead scienter or in the Court’s
management of the arguments leading to that conclusion.

22
 C. SECTION 10(B)

Section § 10(b) of the ’34 Act prohibits the use of “any
manipulative or deceptive device or contrivance in
contravention of such rules and regulations as the [Securities
and Exchange] Commission may prescribe … .” 15 U.S.C.
§ 78j(b). The SEC has in turn promulgated Rule 10b-5,
which makes it unlawful for any person 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 … in connection with the purchase or sale of any
security.” 11 17 C.F.R. § 240.10b-5.

To state a claim for securities fraud under § 10(b), a
plaintiff must plead: (1) a material misrepresentation in
connection with the purchase or sale of a security; (2)
scienter, i.e., a wrongful state of mind in the party making the
representation; (3) reliance by the plaintiff; (4) economic loss;
and (5) “loss causation, i.e., a causal connection between the

11
The Supreme Court has recently spoken about how
to determine whether a statement was an “untrue statement of
material fact” and whether it was “misleading,” at least in the
context of an alleged violation of § 11 of the Securities Act of
1933. See Omnicare, Inc. v. Laborers Dist. Council Constr.
Indus. Pension Fund, 135 S. Ct. 1318 (2015). The parties
here mentioned that case only in passing, and Cooper noted
that our Court has yet to determine whether Omnicare applies
to § 10(b) claims. Given that the parties have not
meaningfully addressed that question and there is no
necessity to address it, we leave it for another day.

23
material misrepresentation and the loss.” Dura Pharm., Inc. v.
Broudo, 544 U.S. 336, 341-42 (2005) (internal quotation
marks and original emphasis omitted).

OFI alleges that various communications by Cooper to
the public contained material misstatements or omissions in
violation of § 10(b). Those communications include the
Merger Agreement between Cooper and Apollo published on
June 12, 2013; Cooper’s 10-Q for the second quarter
published on August 9, 2013; the Proxy Statement for the
merger published on August 30, 2013; and two 8-K filings
published on September 19 and 30, 2013. We address OFI’s
arguments seriatim.

i. The June 12, 2013 Merger Agreement

OFI says that the warranties in the Merger Agreement
contained three material misrepresentations by Cooper – 1)
that it had “exclusive possession” of the CCT facilities, 2)
that it had “effective” “internal control over financial
reporting” by the CCT joint venture, and 3) that it was not
aware of any “threatened . . . labor strike or lock-out or any
material dispute, walk-out, work stoppage or slow-down
involving the Company or any of its Subsidiaries.” (J.A. at
66, 102, 162, 164-65.)

We note first that the Merger Agreement also
expressed two significant caveats. One was in Section 7.2(a),
wherein the parties agreed that the “representations and
warranties … set forth herein shall be true and correct in all
respects (without giving effect to any materiality or ‘Material
Adverse Effect’ qualifications contained therein) both when
made . . . and as of the Closing Date.” (J.A. at 169.) Cooper

24
asserts that this provision required that the statements in the
Agreement be true only on the date it was signed, June 12,
2013, and the date of closing, a date which never occurred
due to the merger’s failure.

The second caveat was a lengthy disclaimer that read:

The Merger Agreement contains representations
and warranties made by the Company and the
Apollo Parties to, and solely for the benefit of,
each other. The assertions embodied in the
representations and warranties contained in the
Merger Agreement are qualified by information
in confidential disclosure letters provided by the
parties to each other in connection with the
signing of the Merger Agreement. … You
should not rely on the representations and
warranties in the Merger Agreement as
characterizations of the actual state of facts
about the Company or the Apollo Parties, since
they were only made as of the date of the
Merger Agreement and are modified in
important part by the underlying disclosure
letters. Moreover, certain representations and
warranties in the Merger Agreement were used
for the purpose of allocating risk between the
Company and the Apollo Parties rather than
establishing matters as facts. Finally,
information concerning the subject matter of the
representations and warranties may have
changed since the date of the Merger
Agreement, which subsequent information may

25
 or may not be fully reflected in the companies’
public disclosures.

(Opening Brief in Support of Motion to Dismiss,
Exhibit G at 3, OFI Risk Arbitrages v. Cooper Tire &
Rubber Co., No. 14-cv-68-RGA (D. Del. Dec. 15,
2014), ECF No. 54 (emphasis added)). With these
caveats in mind, we turn to the three alleged
misrepresentations.

a. “Exclusive Possession”

The first alleged misrepresentation is the Merger
Agreement’s statement that Cooper “‘or one of its
Subsidiaries ha[d] exclusive possession of each Owned Real
Property and Leased Real Property,’ including the CCT
facilities.” (J.A. at 102, ¶ 163.) OFI asserts that this statement
was materially misleading because “Chengshan – and not
Cooper – effectively controlled CCT’s facilities.” (Opening
Br. at 30.) OFI points principally to three things to support its
claim of misrepresentation – first, that “at least on[ce] … in
the past few years … Chengshan denied Cooper management
access to the [CCT] facility,” 12 (J.A. at 65, ¶ 73); second, that

12
OFI contends, at length, that Cooper admitted this to
be a fact during the Chancery Court litigation. Cooper
disagrees. Whether there was an admission, however, is
irrelevant. Even taking the underlying assertion as true and
admitted, it is insufficiently particular to support OFI’s
allegation of misrepresentation, as discussed below.
Consequently, we need not determine if such an admission
was made.

26
Chengshan and Che had “deep ties and embedded
relationships with the Chinese government,” (Opening Br. at
34); and third, that CCT had independent computer systems
to which Cooper allegedly had limited access (J.A. at 64,
¶ 72). OFI claims those allegations were corroborated by
confidential witnesses13 who said that “Cooper had
‘apparently very little’ control over CCT,” that “Chengshan
‘pretty closely controlled CCT,’” and that CCT’s independent
financial system resulted in Cooper being “closed off” from
CCT’s financial information.14 (J.A. at 64, ¶¶71-72.)

13
The Complaint included comments from three
confidential witnesses, all of whom were said to be former
Cooper employees, identified by their role and tenure (e.g.,
“Confidential Witness[] 1 [was] the Global Manager of
Internal Audit … from 2010 through May 2013” (J.A. at 63)).
The parties vigorously dispute the weight we should accord to
the statements made by these individuals. Because our
standard for evaluating confidential witness statements is well
defined, see Avaya, 564 F.3d at 263, and because the
statements in this case, even if fully credited, are either
irrelevant or insufficiently particularized to support OFI’s
§ 10(b) claims, we make no comment on this disagreement.
14
OFI also asserts that the fact that CCT locked
Cooper out of the facility after the Merger Agreement is
evidence that they never had control of the facility. Such post
hoc reasoning is inappropriate when evaluating what Cooper
knew at the time the merger was announced, and we decline
OFI’s invitation to engage in it.

27
 These alleged facts, taken together and as true, do not
show that the identified statement was false. First and
foremost, we agree with the District Court that the statement
refers exclusively to the possession of real property. That
being the case, we similarly agree that all the factual
assertions regarding computer systems and ties to the Chinese
government are not relevant, as they provide no reason to
conclude that Cooper did not possess the CCT facility.

Thus, the only factual allegations that could suggest
the identified statement was false are those relating to the
alleged lock-out of Cooper personnel by CCT at some
previous date and the testimony of the confidential witnesses
about the lack of “control” over CCT by Cooper. Neither of
those allegations is sufficiently particularized to support the
conclusion upon which OFI insists – that Cooper “never” had
exclusive control of the CCT facility. OFI’s assertion
regarding the “lock-out,” (Opening Br. at 37), lacks any detail
as to when the incident occurred, who was kept out, and what
transpired during the incident and afterward. It does not
provide any truly useful information about the status of the
CCT facility and does not support the assertion that OFI
would ultimately need to prove – that Cooper lacked
“exclusive possession” of the CCT facility on June 12, 2013.
Indeed, the high-specificity pleading standard set out by the
PSLRA is intended to preclude our giving credence to
allegations such as these, which fail to “plead the who, what,
when, where and how” of a supposed misrepresentation.
Avaya, 564 F.3d at 253. The confidential witness testimony,
in addition to suffering from similarly fatal vagueness, is also
not sufficiently on point. At best, the confidential witness
statements demonstrate that Chengshan was the principal
entity running the CCT joint venture. Even if true, that

28
conclusion does not mean that Cooper lacked possession of
the underlying real property on the date in question. The
District Court thus rightly concluded that the “exclusive
possession” statement was not actionable.

b. Internal Controls

OFI next alleges falsity in the Merger Agreement’s
statement that Cooper “maintains internal control over
financial reporting [that is] effective in providing reasonable
assurance regarding … prevention or timely detection of
unauthorized acquisition, use or disposition of the Company’s
assets that could have a material effect on its financial
statements.” (J.A. at 162.) OFI’s argument is predicated on
CCT’s financial system having been independent of
Cooper’s. That undisputed fact meant that Cooper relied on
CCT to submit its financial data to Cooper’s headquarters on
a monthly basis to be incorporated into the company’s
broader financial reporting systems. OFI does not, however,
allege that Cooper had experienced any difficulty with that
arrangement in the past, let alone anything that would call
into question its efficacy in detecting fraud that could
materially affect Cooper’s financial statements.15 Having
failed to plead any such facts, OFI relies on general assertions
about the “illusory” nature of Cooper’s “purported control”
over CCT. (Opening Br. at 36.) Such statements lack the

15
While CCT did ultimately prevent Cooper from
gaining access to the financial information, there is no
evidence that it did so until August 19, 2013. That event thus
has no bearing on the truth or falsity of Cooper’s June 13,
2013 assertions in the Merger Agreement.

29
necessary particularity required by the PSLRA and add no
weight to OFI’s argument.

c. Threatened Strikes

OFI contends that Cooper’s statement regarding
threatened or pending labor strikes was a misrepresentation.
Specifically, it points to the statement in the Merger
Agreement that there was not “pending or … threatened, nor
has there been for the past five years, any labor strike or lock-
out or any material dispute, walk-out, work stoppage or slow-
down involving [Cooper] or any of its Subsidiaries.” (J.A. at
164.) That statement was materially misleading, OFI argues,
with respect to both the workers at CCT and Cooper-
employed members of the USW.

Beginning with the CCT labor disruption, OFI points
to the allegation that Cooper knew that Chengshan would
oppose the merger, based on a May 15, 2013 meeting at
which Cooper and Apollo executives spoke with Che.
Beyond that, OFI relies on general assertions about Che’s
alleged power over CCT, the same assertions that underpin its
“exclusive possession” argument, insisting that we should
infer knowledge on the part of Cooper that, “once the Merger
Agreement was announced,” Che’s opposition would lead to
“a ‘threatened labor strike.’” (Opening Br. at 37-38.) We
decline to connect those dots. That is the kind of inferential
leap the PSLRA’s heightened pleading standard is meant to
prevent. How Che would react was an unknown. The
Complaint contains no facts regarding the history of labor
relations at CCT that show a strike was threatened or that
Cooper knew a post-announcement strike was likely. In fact,
the Complaint indicates that Che might have been supportive,

30
with the allegation that he was willing to go along if
compensated. That a strike was later initiated at the CCT
facility after the agreement was announced is of no moment.

Turning to Cooper’s United States operations, OFI
also asserts that Cooper “knew [that] the USW would view
the Merger as a violation of its collective bargaining
agreement given Cooper’s failure to abide by certain
successorship clauses in the agreement.” (Opening Br. at 38.)
As evidence of this knowledge, OFI points to statements by
Cooper’s and Apollo’s lawyers before the Court of Chancery
that they anticipated the USW would take the position that the
successorship provision applied to the merger and that they
would need to devise a solution. OFI also points to testimony
that the attorneys expected the USW to file grievances on the
issue and agreed to set up an expedited arbitration procedure
to ensure that those grievances did not hold up the closing.
However, OFI acknowledged that all of the actions taken by
Cooper’s and Apollo’s lawyers were in preparation for the
possibility that the USW would challenge the merger. The
Complaint includes a statement by one of Cooper’s lawyers
that “Cooper executives believed” that they ought to “‘try to
convince the Steelworkers that the [successorship] provision
did not apply’” to the merger. (J.A. at 67, ¶ 78.)

As the District Court properly recognized, all that OFI
has pled with particularity is that there was risk of a dispute
with the USW and that Cooper was aware of and was
preparing for that risk. But “[p]reparing for responses to a
major announcement does not mean that [Cooper] knew
which responses would occur,” and relying on the fact that
the USW did ultimately file grievances is “an attempt to
prove fraud by hindsight,” something our Court has long

31
rejected. (J.A. at 12 (citing Cal. Pub. Employees’ Ret. Sys. v.
Chubb Corp., 394 F.3d 126, 158 (3d Cir. 2004)).) Nothing in
the pleadings points to knowledge on the part of Cooper that a
material dispute with the USW was either pending or
threatened as of June 12, 2013. The fact that labor action
followed does not make Cooper’s statement false. Taken
together and as true, OFI has failed to plead more than an
awareness by Cooper that adverse labor action was possible.
That falls well short of demonstrating with particularity that
Cooper was aware of a pending or threatened labor action at
the time the Merger Agreement was announced. As a result,
Cooper’s representation about a material labor dispute was
not materially false. The District Court properly found OFI’s
claim in that regard to be wanting.

ii. The August 9, 2013 10-Q Filing

OFI next turns to the 10-Q statement filed by Cooper
on August 9 for the fiscal quarter ending June 30, 2013,
alleging two misrepresentations are in that document: 1) the
statement that Cooper had maintained sufficient internal
controls over its financial reporting, and 2) its
characterization of the strike at CCT, in particular its start
date, its “temporary” nature, and the motivating force behind
it.

a. Internal Controls

OFI targets as misleading the statement in Cooper’s
10-Q that there were “no other changes in the Company’s
internal controls over financial reporting during the quarter
ended June 30, 2013 that have materially affected, or are
reasonably likely to materially affect, the Company’s internal

32
controls over financial reporting.” (J.A. at 143.) The
argument here mirrors OFI’s argument about Cooper’s
representations in the Merger Agreement concerning internal
controls. (See supra § C.1.b.) There is, however, the
additional allegation that CCT effectively shut Cooper out the
facility before the end of the reporting period on June 30 and
out of its financial system by early July. OFI further asserts
that Cooper failed in its duty to update its 10-Q once it knew
that there were material changes to its control over financial
reporting.

It is worth noting what OFI does not say. At no point
does it challenge the accuracy or completeness of the
financial information contained in the 10-Q, nor does it claim
that the 10-Q omits or misstates any financial information
relating specifically to CCT and its finances. The assertion is
limited to an allegedly false claim of control over financial
reporting. But OFI itself asserted that August 19, 2013 was
the date as of which “Cooper could not collect information in
its finance and accounting system to provide either internal or
external financial reporting.” (J.A. at 71, ¶ 86.) That this
allegation in the Complaint appends to that date the
parenthetical “(but most likely in early July)” is
inconsequential. (Id.) Because these pleadings must be
particularized under the PSLRA, a bald assertion that the date
was “most likely” earlier, without more, is insufficient to
support the allegation that Cooper’s claim that their internal
controls were operating normally was materially misleading.
See Avaya, 564 F.3d at 253. Working from the facts that
were pled with particularity, Cooper lost its ability to gather
CCT’s financial information ten days after the filing, and over
a month after the reporting period closed. Thus any claim of
falsity must be based on the same theory propounded with

33
respect to the Merger Agreement – namely that CCT’s
separate financial system made any alleged control by Cooper
“illusory.” As already discussed, that theory is without
sufficient factual support to be actionable under §10(b).

Presumably in anticipation of that problem, OFI points
to the requirements of 17 CFR § 229.308(c) and pivots to an
assertion that Cooper had a duty to update its 10-Q. That
regulation demands that parties “[d]isclose any change in the
registrant’s internal control over financial reporting,” 17 CFR
§ 229.308(c), but the requirement to update is tied to the
evaluations called for by 17 CFR §§ 240.13a-15(d) and
240.15d-15(d), both of which demand reporting of changes
that “occurred during … the issuer’s fiscal quarter[].”
Nothing in the pleading suggests that there was, in fact, a
change in Cooper’s internal controls during the quarter
ending June 30, the relevant reporting period for the 10-Q.
That being the case, there was no requirement to update.16

16
Even if Cooper’s statements regarding the internal
controls proved false, OFI has failed to sufficiently plead
scienter. Specifically, the assertion that Cooper, Armes, or
Hughes, with an “intent to deceive, manipulate, or defraud,”
Avaya, 564 F.3d at 252 (internal quotation marks omitted),
withheld information about a loss of internal controls in this
10-Q is undermined by the fact that they reported having
suffered exactly that loss only a few weeks later in Cooper’s
August 30, 2013 Proxy Statement. It is unclear why Cooper
would risk litigation at a critical time by materially
misrepresenting a fact, only to disclose the same fact mere
weeks later. The more plausible inference – that Cooper
simply did not lose control of the financial systems until

34
 b. CCT Strike

OFI’s other complaint regarding the 10-Q alleges a
material misrepresentation in its statement about the strike at
CCT, specifically Cooper’s failure to identify Chengshan as
the root cause of the strike and Cooper’s characterization of
the strike as temporary.17

Beginning with allegations regarding the source of the
strike, OFI claims that Cooper’s statement that “[t]he
unionized work force at [CCT] implemented a work
stoppage,” (J.A. at 146), was misleading because Cooper
knew that the strike “was orchestrated and implemented by
Chengshan (not the ‘unionized workforce’),” (Opening Br. at
40). In support of that assertion, OFI points to a meeting
between Cooper executives and Che that took place on
July 10, 2013. At that meeting, the objective of which was to
end the strike, Armes took notes indicating that Che wanted
to stop the merger and would support the strike. OFI also
points to Armes’s testimony wherein he confirmed that

August 19, 2013, when they admit they did – precludes the
“strong inference” necessary to support OFI’s claim.
17
OFI also says in its brief that the 10-Q includes
misstatements about the timing of the strike. OFI did not
raise that issue in the Complaint, nor did it ever mention the
issue before the District Court. Consequently, that argument
is waived. See DIRECTV Inc. v. Seijas, 508 F.3d 123, 125
n.1 (3d Cir. 2007) (“It is well established that arguments not
raised before the District Court are waived on appeal.”).

35
Cooper had been told that “Che was behind all that was going
on” at CCT. (A70, ¶ 83.)

In its defense, Cooper asserts that it had no legal
obligation to speculate about who was behind the strike and
that any omission on that score did not make its statement
materially misleading. There is some force to that response.
To say that workers implemented a strike does not say who
planned or motivated it. But, even taking the statement that
the “unionized workforce [at CCT] implemented a work
stoppage” (J.A. at 146) as implying that the strike originated
with the union and its leadership, not management, it is still
not actionable because the facts pled do not give rise to a
“strong inference of scienter” while “tak[ing] into account
plausible opposing inferences,” Winer Family Trust, 503 F.3d
at 327 (quoting Tellabs, 551 U.S. at 323). The strong
inference must arise in the context of “all of the facts alleged,
taken collectively … .” Tellabs, 551 U.S. at 323 (emphasis in
original). Here, while the Complaint might, with some strain,
be sufficient to state with particularity that there had been a
misrepresentation, it still fails to raise a “strong inference”
that Cooper, Armes, and Hughes were acting with a “mental
state embracing intent to deceive, manipulate, or defraud.”
Avaya, 564 F.3d at 252 (internal quotation marks omitted).

The identified statement was a single phrase buried
within a filing that encompassed dozens of pages. Beyond
general assertions about the gains to Armes and Hughes if the
merger successfully closed, OFI did not plead any facts
demonstrating that the extra information about Che’s support
for the strike would have materially affected the closing of
the merger. That being the case, it is unclear what Cooper,
Armes, and Hughes stood to gain from this relatively minor

36
misrepresentation, if that’s what it was. Other “plausible
opposing inferences,” including that the statement was simply
imprecise or received little attention due to the context in
which it was made, seem more likely than the inference that
Cooper, Armes, or Hughes intentionally made this particular
statement to defraud investors.

OFI’s post hoc scouring of countless pages of
documents for a stray and inartfully phrased comment that
can be argued to be technically false seems like just the sort
of litigation maneuver the PSLRA was meant to eliminate.
One purpose of the statute is to prevent disappointed investors
from treating every imprecise statement during a transaction
as an invitation to file a lawsuit. Cf. H.R. Rep. No. 104-369,
at 31-32 (1995) (Conf. Rep.) (noting that the statute aims to
“discourage frivolous litigation” and “abusive practices,”
including “the routine filing of lawsuits against issuers of
securities and others whenever there is a significant change in
an issuer’s stock price, without regard to any underlying
culpability of the issuer, and with only faint hope that the
discovery process might lead eventually to some plausible
cause of action”).

OFI further alleges, however, that because Cooper
brought up the topic of the strike, it undertook a duty to
accurately “convey the impact and nature of the strike and
shutdown,” which duty it breached by calling the strike a
“temporary work stoppage.” (Opening Br. at 40.) But
because the description of the strike’s nature is a forward-
looking statement and is surrounded by cautionary language,
it is protected by the PSLRA safe harbor provision. Adjacent
to its acknowledgment of the July 13, 2013 work stoppage,
Cooper noted that, “[i]f the Company is unable to resolve this

37
labor dispute or if there were to be an additional work
stoppage or other work disruption, [Cooper’s] business and
operating results could suffer.” (J.A. at 146.) Elsewhere in
the document, where it referred to the strike as “temporary,”
Cooper also noted that, if there were “[a]n extended work
stoppage at [CCT, it] could negatively affect the Company’s
future financial performance.” (J.A. at 141.)18 The 10-Q’s
acknowledgement of the business effects of the then-active
strike, and its reference to the implications of that stoppage
persisting or later being renewed, provided sufficient notice to
the reader about the specific risks attached to the forward-
looking statement. Consequently, we conclude that Cooper’s
statement classifying the work stoppage as “temporary” falls
within the PSLRA safe harbor for forward-looking statements
and adds no strength to OFI’s § 10(b) claim.

iii. The August 30, 2013 Proxy Statement

OFI complains next of the Proxy Statement released
by Cooper on August 30, 2013. According to OFI, Cooper
misled investors about the outlook for the merger by
providing misleading projections, by underplaying the
severity and effect of the strike at CCT, and by failing to

18
Of note, the 10-Q also includes, in various places,
warnings that it is filled with forward-looking statements, that
those statements ought not be considered to be assurances,
and that labor problems could confound any projections.

38
adequately disclose that rival suitor “Party C” was actually
Chengshan.19

a. Projections

OFI argues that “Cooper’s financial projections
presented in the Proxy Statement were objectively false
because they were materially greater than the projections used
internally and presented to Apollo just weeks earlier.”
(Opening Br. at 51.) The Complaint alleges that the forecasts
provided to Apollo between July 21 and August 9, 2013
included a substantial drop in projected revenue and operating
profits relative to the projections shared in the Proxy.20 The
projections included in the Proxy Statement are in fact more
favorable than those that Cooper provided to Apollo in late
July and early August, but that does not make the Proxy
Statement false.

19
OFI also makes a general allegation that Cooper
“falsely and misleadingly assured investors that the Merger
was on track.” (Opening Br. at 44.) However, because it did
not identify specific affirmative assertions in the Proxy that
are false, this claim cannot meet the strictures of the PSLRA.
20
The Complaint also references further revised
projections provided to Apollo in September. Because those
projections were not made until after the release of the
August 30, 2013 Proxy Statement, they shed no light on what
Cooper knew before that date.

39
 The projections attached to the Proxy Statement did
not stand alone as a statement of affirmative fact. Indeed,
their inclusion is accompanied by a lengthy and specific
disclaimer that states:

[The] financial projections set forth below are
included in this proxy statement only because
this information was provided to the Apollo
Parties … in connection with a potential
transaction involving Cooper Tire … You
should not regard the inclusion of these
projections in this proxy statement as an
indication that Cooper Tire, the Apollo
Parties,[or other relevant parties] considered or
consider the projections to be necessarily
predictive of actual future events, and you
should not rely on the projections as such.

(J.A. at 197-98) (emphasis added). It also referred to the
documents as “outdated financial projections” and explicitly
stated that Cooper “d[id] not intend to update” them. (J.A. at
198.)

The projections are plainly not included as statements
of fact. Instead, the only relevant statement of fact is that the
projections were, in fact, the projections that Cooper provided
to Apollo and the financing bank during the negotiation of the
deal. OFI does not allege that Cooper provided Apollo or the
financing bank with some different set of projections during

40
negotiations. Consequently, OFI has not pled falsity as it
relates to the projections.21

b. CCT Strike

Next, OFI contends that Cooper’s claim in the Proxy
Statement that “[n]either the strike nor the plant slowdown
are expected to have an effect on the consummation of the
merger” was a material misrepresentation. (J.A. at 105-06, ¶¶
174-75.) In support, OFI points to its allegation that the Vice
Chairman of Apollo sent an email to Armes three days before
the Proxy Statement went out that referenced the problems
with accessing CCT financial records and stated that, “[w]ith
no control over the financial records, there is little chance we
can get a financing done given the need for your auditors to
sign off,” adding that “the completion of the [merger] may be
jeopardized.” (J.A. at 71-72, ¶ 87.) The weight of that
particularized factual allegation is bolstered, says OFI, by the
allegations that Cooper knew that Che had orchestrated the
strike and had no intention of relenting until the merger was

21
Even if the content of the projections were at issue,
they would be covered by the PSLRA safe harbor codified at
15 U.S.C. § 78u-5(c)(1). The preamble to the projections
directly identifies them as forward-looking statements and is
replete with warnings that they had become “outdated,” that
no party involved considered them to be “predictive of actual
future events,” and that they constituted “aspirational
projections based on a consistent growth rate rather than
likely projections.” (J.A. 198.) Such warnings are well
within the ambit of the safe harbor provision, and the
projections are therefore immunized from any § 10(b) claim.

41
defeated or he received a payoff. With Che ensuring that
Cooper could not access the CCT financial records, and
Apollo insisting that it needed the financial records to
complete the merger, there was, according to OFI, no way
that Cooper could have reasonably believed that the strike
would not impede the merger closing, making any assertion
to the contrary a deliberate and material misrepresentation.

This line of reasoning has significantly better traction
than the rest of OFI’s contentions, but it does not account for
the PSLRA’s safe harbor. The statement regarding the effect
of the strike on the merger includes the word “expected,” a
term that identifies the statement as forward-looking. In its
disclaimer regarding “Forward-Looking Statements,” Cooper
identified a number of relevant factors that “could cause [its]
actual results and events to differ materially from those
expressed or implied by forward-looking statements,”
including “the impact of labor problems, including
disruptions at the Company,” and “changes in [Cooper’s]
relationship with joint-venture partners.” (J.A. at 182.) While
those warnings could have been more direct, Cooper included
considerable detail regarding the CCT strike, and in so doing
supplied sufficient context to constitute cautionary language
with respect to its forecast regarding the strike’s outcome.
Indeed, immediately before the statement about which OFI
complains, the Proxy explained, in detail, that the strike was
underway, that CCT’s employees were “demanding
termination of the merger,” that the strike had started and
stopped before, and that CCT was then denying Cooper
access to the facility and withholding financial information.
(J.A. 201.) Paired with those significant disclosures,
Cooper’s warnings cleared the bar for providing the
“meaningful cautionary statements” required by the PLSRA

42
safe harbor provision. 15 U.S.C. § 78u-5(c)(1). Any
investors reading that section of the Proxy Statement were on
notice of the labor problem and could place in context
Cooper’s statement of general optimism that the situation
would be resolved without affecting the merger.

To try to avoid that conclusion, OFI claims that
Cooper cannot seek the shelter of the safe harbor provision
because Cooper, Armes, and Hughes could not, given the
facts on the ground at CCT, have believed that the strike
would not impede the closing of the merger. Even if that
premise were correct,22 OFI misreads the law. The provisions

22
That contention of intentional falsity is suspect,
given what Cooper, Armes, and Hughes have said about the
Material Adverse Effect clause of the Merger Agreement.
They seem to have believed that clause allowed them to push
the merger forward even in the event of problems at CCT.
The fact that Cooper sued Apollo in the Court of Chancery in
an attempt to obtain just such a result confirms that belief,
and OFI’s Complaint effectively concedes it. (See J.A. at 60-
61, ¶ 63 (“Cooper negotiated a Material Adverse Effect
clause in the Merger Agreement that Cooper believed would
allow it to argue that a negative reaction by Chengshan would
not constitute an event that would permit Apollo to walk
away from the deal.”).) That being the case, it is certainly a
plausible inference that Cooper did not aim to deceive
investors through this expressed optimism, but rather that it
actually believed it could push the merger through even with
the shutdown. However, because we need not reach this
issue, we decline to opine on what Cooper and its officers did

43
of the safe harbor under § 78u-5(c)(1) are disjunctive; they
immunize any forward-looking statement provided that either
it is “accompanied by meaningful cautionary statements,” id.
§ 78u-5(c)(1)(A), or “the plaintiff fails to prove the forward-
looking statement … was made with actual knowledge … that
the statement was false or misleading,” id. § 78u-5(c)(1)(B).
Thus, where a future-looking statement is accompanied by
sufficient cautions, then “the state of mind of the individual
making the statement is irrelevant, and the statement is not
actionable regardless of the plaintiff's showing of scienter.”23
In re Cutera Sec. Litig., 610 F.3d 1103, 1112 (9th Cir. 2010).
See also, e.g., Miller v. Champion Enterprises Inc., 346 F.3d
660, 672 (6th Cir. 2003) (“[I]f the statement qualifies as
‘forward-looking’ and is accompanied by sufficient
cautionary language, a defendant’s statement is protected
regardless of the actual state of mind.”); Edward J. Goodman

or did not believe about the efficacy of the Material Adverse
Effect clause.
23
This conclusion does not necessarily foreclose the
possibility that knowing falsity within the cautionary
language could undermine a claim to protection by the safe
harbor. See, e.g., Asher v. Baxter Int'l Inc., 377 F.3d 727, 734
(7th Cir. 2004), as amended (Sept. 3, 2004) (declining to
dismiss a complaint under the safe harbor provision where the
defendant “omitted important variables from the cautionary
language and so made projections more certain than its
internal estimates at the time warranted”). Because OFI has
not challenged the meaningfulness of Cooper’s cautionary
language on such grounds, however, we need not decide that
question here, and decline to do so.

44
Life Income Trust v. Jabil Circuit, Inc., 594 F.3d 783, 795
(11th Cir. 2010) (“[A]n allegation of actual knowledge of
falsity will not deprive a defendant of protection by the
statutory safe harbor if his forward-looking statements are
accompanied by meaningful cautionary language.”); H.R.
Rep. No. 104-369, at 44 (1995) (Conf. Rep.) (“The first prong
of the safe harbor requires courts to examine only the
cautionary statement accompanying the forward-looking
statement. Courts should not examine the state of mind of the
person making the statement.”).

That being the case, whether Cooper, Armes, or
Hughes believed that statement to be true at the time is
irrelevant, as long as there was sufficient “meaningful
cautionary language.” Since such language was present,
Cooper’s statements regarding the impact of the strike on the
merger agreement are protected by the PSLRA safe harbor
and do not support OFI’s §10(b) claim.

c. “Party C” Omission

The final issue that OFI raises about the Proxy
Statement is Cooper’s failure to identify “Party C” as
Chengshan. In laying out the timeline of merger negotiations
between Cooper and Apollo, and between Cooper and a
number of other parties referred to by pseudonym, the Proxy
Statement reveals the existence of Party C and its role as a
potential purchaser. OFI asserts that, because Cooper told
shareholders of the existence of Party C, it put that party “in
play” such that Cooper was then required to disclose that

45
Party C was a consortium led by Chengshan.24 (Opening Br.
at 45.) Unfortunately for OFI, and as noted by the District
Court, § 10(b) and Rule 10b-5 do not impose liability for
“statements that are simply incomplete,” only those that are
“misleading or untrue.” Winer Family Tr., 503 F.3d at 330.
OFI’s Complaint does not identify any affirmative statement
by Cooper that is rendered untrue or misleading by the
alleged fact that Chengshan was a participant in Party C.

OFI attempts to rescue its assertion by relying on
Shapiro v. UJB Financial Corp. for the proposition that, once
a subject is mentioned, the disclosing party is then “bound to
speak truthfully” on the subject. 964 F.2d 272, 282 (3d Cir.
1992). OFI has misconstrued that obligation. In Shapiro, a
defendant claimed its financial disclosures were the product
of management practices that were “‘adequate,’
‘conservative,’ ‘cautious,’ and the like,” and we concluded

24
It is not obvious that OFI has actually pled with
particularity that Party C was, in fact, a consortium led by
Chengshan. While it refers to that as a fact that was “later
disclosed,” (J.A. at 79, ¶ 106), the Complaint includes very
little substance to back its assertion. It does identify several
references that suggest that Chengshan had a role as one of
the rival suitors, but those factual pleadings do not extend to
the fact that Party C was the anonymous suitor led by
Chengshan. The clearest evidence is a financial news post-
mortem of the deal that reported that Chengshan was a part of
the consortium that acted as a competing bidder and that
further includes some details about Chengshan’s involvement
that match the statements about Party C in the proxy,
including price per share.

46
that, by so describing those practices, “the subject [was] ‘in
play.’” Id. In other words, we held that once a party has
made a characterization on a subject, it is on notice to speak
truthfully about the subject of that characterization. But we
are not faced with such a circumstance here. Cooper
mentioned Party C in the August 30 Proxy Statement only as
part of a much longer story of how the merger came to be.
No reference to Party C included any characterizations that
would trigger a need for additional disclosure. There thus
was no misrepresentation by omission regarding Party C, and
we confirm the conclusions of the District Court to that effect.
In sum, no assertions in the Proxy Statement were material
misrepresentations, and therefore nothing in the document
lends support to OFI’s § 10(b) claim.

iv. The September 8-Ks

Finally, OFI alleges that the 8-Ks released by Cooper
on the 19th and 30th of September 2013 were misleading
because they failed to disclose that the USW arbitration
decision, and Apollo’s reaction to it, had placed the
consummation of the merger in peril. In support of that
allegation, OFI points to the testimony of Cooper’s general
counsel before the Court of Chancery describing Apollo’s
reaction to the USW arbitration decision and Apollo’s stated
concern about the share price for the merger in light of that
decision and the difficulties at CCT. OFI also places great
weight on statements by Armes that, as of late September, he
had “a lot of reservations about whether [the deal] would
close or not.” (J.A. at 82, ¶ 113.) Although the Complaint
alleges that Apollo “demanded a downward modification of
the deal price beginning in September,” (id.), the facts pled
with specificity tell a more tempered story. The USW

47
arbitration decision does appear to have had some influence
on Apollo’s evaluation of the deal, but it is far from clear that
it immediately precipitated a substantial change in position.25
From the Complaint, it is apparent that, while Apollo
expressed its displeasure with the agreed-upon price as of a
meeting on September 17, it only “demanded a price
reduction” over the phone on September 25. (J.A. at 83,
¶ 114.) The first formal request for a price reduction did not
occur until September 28, when two emails from Apollo’s
counsel to Cooper’s counsel requested a price reduction of
$2.50 per share and asserted that the reduction was
“necessary to see the Merger through.” (J.A. at 83, ¶ 114).

Turning first to the 8-K dated September 19, 2013, the
Complaint fails to plead with particularity that Apollo had
requested a price reduction, let alone suggested that the
merger’s closing would be contingent on such a reduction,
prior to the issuance of that 8-K. That being the case, OFI
has not pled what it claims to be a material omission. What’s
more, even if such a request had been made, none of the
statements made by Cooper in that document would have
been rendered false or misleading by the omission of that
development. OFI also complains that Cooper did not

25
The Complaint quotes an Apollo representative as
saying that, in addition to other concerns, “now we have this
arbitration decision and the Steelworkers to deal with,” but
also includes the statement by that same representative that if
they could “fit [the arbitration decision costs] in the financing
great, but if not, they have to come out of somewhere, and
that somewhere was Cooper shareholders … .” (J.A. at 82,
¶ 113.)

48
describe the merger as “imperiled” or in danger in its
communication. (Opening Br. at 52.) But Cooper was under
no obligation to use any adjective, let alone a pejorative one,
to describe the state of the deal. See In Re Donald J. Trump
Casino Sec. Litig. – Taj Mahal Litig., 7 F.3d 357, 375 (3d Cir.
1993) (“We do not mean to suggest that § 10(b) or Rule 10b-
5 requires insiders to characterize ... transactions with
pejorative nouns or adjectives.”) (internal quotation marks
omitted). Consequently, OFI’s allegations as to the
September 19 8-K have no merit.

Turning to the September 30 8-K, OFI complains,
albeit obliquely, that Cooper’s omission of the fact that
Apollo had demanded a price cut amounted to a material
misrepresentation. That argument fails on two fronts. First,
the omission of that fact did not make any affirmative
statement misleading. Again, an omission, standing alone,
does not create a cause of action under § 10(b). See Winer
Family Tr., 503 F.3d at 330 (explaining that, while “[l]iability
may exist under [§10(b)] for misleading or untrue statements,
[it does] not for statements that are simply incomplete”); cf.
Information to be Included in the Report for Form 8-K (SEC
Form 873), Section 1.02, at 5, https://www.sec.gov/about/
forms/form8-k.pdf (“No disclosure is required … during
negotiations or discussions regarding termination of a
material definitive agreement unless and until the agreement
has been terminated.”).

Second, even if Cooper’s failure to disclose the price
reduction demand constituted a material misrepresentation,
OFI has failed to establish a plausible inference of scienter.
Cooper argues persuasively that it did not need to disclose the
demanded price reduction because it believed Apollo had no

49
contractual right to demand such a reduction. That calls into
question whether OFI’s few relevant factual allegations could
give rise to a “strong inference” that Cooper knew the
omission of Apollo’s request constituted a misrepresentation,
Avaya, 564 F.3d at 267-68, especially when taken together
with the fact that the Court of Chancery confirmed Cooper’s
belief on that score (J.A. at 304 (noting that “Apollo lacked
the contractual right to demand renegotiation of the merger
agreement based on the necessity to renegotiate USW
contracts”)). Cooper’s choice not to disclose a request by
Apollo that it was not entitled to make thus does not
constitute an actionable material misrepresentation.

In sum, we find nothing of merit in OFI’s allegations
regarding either of the 8-Ks filed by Cooper in September
2013.

C. SECTIONS 14(A) AND 20(A) CLAIMS

OFI advances two final claims of substantive error,
arguing that the District Court improperly dismissed its
claims under Section 14(a)26 and Section 20(a)27 of the ’34
Act. OFI’s § 14(a) claim is predicated on a finding of a

26
Codified at 15 U.S.C. § 78n(a) and creating a cause
of action for material misrepresentations made in a Proxy
Statement.
27
Codified at 15 U.S.C. § 78t(a) and establishing
derivative liability for supervisors of those committing an
independent violation of federal securities laws, in this case
the alleged § 10(b) violations discussed supra.

50
material misrepresentation in the Proxy Statement and its
§ 20(a) claim is similarly predicated on a finding that a
federal securities law was violated. Having concluded that
the Proxy Statement contained no misrepresentation and that
no laws were broken, we likewise conclude that there was no
error in the District Court’s dismissal of those claims.

III. CONCLUSION

For the foregoing reasons, we will affirm.

51