In Re: Century Aluminum Co.

Under § 11 of the Securities Act of 1933, 15 U.S.C. § 77k, a plaintiff has a cause of action if she proves that her purchased shares were fraudulently issued under a “materially false or misleading registration statement.”

In March 2009, three months after purchasing shares in Century Aluminum Company, Plaintiffs brought suit against Century and others under § 11 of the Securities Act of 1933, 15 U.S.C. § 77k. Under § 11, a plaintiff has a cause of action if she proves that her purchased shares were fraudulently issued under a “materially false or misleading registration statement.” To prevail under that section, the plaintiff must trace the purchased shares back to the pool in the secondary offering. Plaintiffs alleged only that they “purchased Century Aluminum common stock directly traceable to the Company’s Secondary Offering.” Prior to Ashcroft v. Iqbal, this allegation would have been sufficient; however, Iqbal requires that a complaint provide “both fair notice and suggest that the claim has at least a plausible chance of success.” Aftermarket shares require “greater factual specificity” to prove they are traceable to a certain offering when they are issued with multiple registration statements and in multiple offerings. Thus, “Plaintiffs lacked statutory standing under § 11” because they did not adequately allege traceability of their shares, “which should result in failure to state a claim for which relief can be granted, not absence of subject matter jurisdiction.” Therefore, the district court erred in considering extrinsic evidence and granting defendants’ motion to dismiss under Rule 12(b)(1), rather than 12(b)(6). “The 2009 prospectus supplement, referenced in plaintiffs’ complaint, regarding the shares outstanding at the secondary offering could be considered by the court in determining defendant’s 12(b)(6) motion.” AFFIRMED.