Second Circuit Holds General Statements of Regulatory Compliance Cannot Sustain Securities Fraud Claim

"3 The complaint alleged that at the same time Cigna was making these statements, a Medicare insurer, HealthSpring Inc., which Cigna had just acquired, was experiencing a series of regulatory compliance failures in its Medicare operations.4 Specifically, during the time period after Cigna had made the statements touting its compliance efforts in the Form 10-Ks and after it had published its Code of Ethics, it received more than seventy-five notices from the Centers for Medicare and Medicaid Services (CMS), a federal agency within the United States Department of Health and Human Services that administers the Medicare program, for a variety of regulatory compliance infractions.5 In fact, CMS determined that Cigna had "'substantially failed to comply with CMS requirements' regarding coverage determinations, appeals, benefits administration, compliance program effectiveness and similar matters" and had a "longstanding history of noncompliance with CMS requirements. '"11 Cigna's stock price again fell, and Plaintiffs filed an amended securities fraud complaint extending the class period through the later disclosure and stock price drop.12 On September 28, 2017, the United States District Court for the District of Connecticut, Hon. Vanessa L. Bryant, dismissed the complaint for failure to allege materially false statements and scienter.13 She held that, among other things, the Code of Ethics statements "reflect the precise meaning" of "puffery. "23 The court held that representations that the company prioritized "adequate diversification of risk" and "avoidance of undue concentrations," [were] too open-ended and subjective to constitute a guarantee that [the company] would not accumulate a $100 billion RMBS portfolio, comprising 5% of [its] overall portfolio, or 16% of its trading portfolio.24 And City of Pontiac itself built upon ECA, Local 134IBEW Joint Pension Trust of Chicago v. JP Morgan Chase Co.,23 in which the Second Circuit held that statements about the defendant bank's risk management and integrity were inactionable generalizations, cautioning that "[p]laintiffs conflate the importance of a bank's reputation for integrity with the materiality of a bank's statements regarding its reputation" and declining to broaden the scope of the securities laws to statements that "almost every investment bank makes," stating that "[n]o investor would take such statements seriously in assessing a potential investment. '"27 According to the court, they amounted to "g