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Singh v. Cigna Corp.

United States Court of Appeals for the Second Circuit

October 2, 2018, Argued; March 5, 2019, Decided

No. 17-3484-cv

Opinion

 [*59]  José A. Cabranes, Circuit Judge:

This case presents us with a creative attempt to recast corporate mismanagement  [*60]  as securities fraud. The attempt relies on a simple equation: first, point to banal and vague corporate statements affirming the importance of regulatory compliance; next, point to significant regulatory violations; and voila, you have alleged a prima facie case of securities fraud! The problem with this equation, however, is that such generic statements do not invite reasonable reliance. They are not, therefore, materially misleading, and so cannot form the basis of a fraud case.

Lead-Plaintiff Minohor Singh, on behalf of himself and other shareholders, ("Plaintiffs") appeals from an October 2, 2017 judgment of the United States District Court for the District of Connecticut (Vanessa L. Bryant, Judge) dismissing this class action alleging violations of federal securities laws by Cigna Corporation ("Cigna") and certain of its officers (jointly, "Defendants"). Plaintiffs claim that certain of Defendants' statements [**3]  were materially misleading, constituting fraud under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission ("SEC") Rule 10b-5. The District Court determined that the alleged misstatements do not constitute fraud under the relevant legal standards and granted Defendants' motion to dismiss. We conclude that a reasonable investor would not rely on the challenged statements as representations of regulatory compliance. Accordingly, we affirm.

I. BACKGROUND

Cigna's Acquisition of Healthspring:

In early 2012, Cigna, a multi-national health services organization incorporated in Delaware, purchased HealthSpring Inc., a successful regional Medicare insurer based in Nashville, Tennessee, for $3.8 billion.3 The goal of the acquisition was to bring Cigna into the fast-growing Medicare insurance market, complementing Cigna's commercial health business with Medicare offerings as current Cigna customers aged. Initially, the acquisition appeared to produce benefits: within a year, HealthSpring had become Cigna's largest source of revenue.

Defendants' Statements Concerning Regulatory Compliance:

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918 F.3d 57 *; 2019 U.S. App. LEXIS 6637 **; Fed. Sec. L. Rep. (CCH) P100,368

MINOHOR SINGH, Individually and On Behalf of All Others Similarly Situated, Lead Plaintiff-Appellant, v. CIGNA CORPORATION, DAVID CORDANI, THOMAS A. MCCARTHY, HERBERT A. FRITCH, RICHARD APPEL, Defendants-Appellees.1

Prior History:  [**1] On Appeal from the United States District Court for the District of Connecticut.

Lead Plaintiff-Appellant Minohor Singh, individually and on behalf of all other similarly situated, ("Plaintiffs") appeals from an October 2, 2017 judgment of the United States District Court for the District of Connecticut (Vanessa L. Bryant, Judge) dismissing this class action alleging violations of federal securities laws by Cigna Corporation ("Cigna") and certain of its officers (jointly, "Defendants"). Plaintiffs claim that certain of Defendants' statements were materially misleading, constituting fraud under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission ("SEC") Rule 10b-5. The District Court determined that the alleged misstatements do not constitute fraud under the relevant legal standards and granted Defendants' motion to dismiss. We conclude that a reasonable investor would not rely on the challenged statements as representations of regulatory compliance. Accordingly, we affirm.

Singh v. Cigna Corp., 277 F. Supp. 3d 291, 2017 U.S. Dist. LEXIS 159516 (D. Conn., Sept. 28, 2017)

CORE TERMS

Cigna, compliance, regulations, quotation, environmental, investor, regulatory compliance, notices, acquisition, misleading, brackets, Ethics, marks, stock

Civil Procedure, Pleading & Practice, Pleadings, Complaints, Appeals, Standards of Review, De Novo Review, Securities Law, Securities Exchange Act of 1934 Actions, Implied Private Rights of Action, Elements of Proof, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Postoffering & Secondary Distributions, Heightened Pleading Requirements, Elements of Proof, Materiality, Materiality, Puffery