UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ------------------------------------------------------------------------x IN RE MERRILL LYNCH & CO., INC. : RESEARCH REPORTS SECURITIES LITIGATION : 02 MDL 1484 (MP) ------------------------------------------------------------------------x IN RE MERRILL LYNCH & CO., INC. : 24/7 REAL MEDIA, INC. : 02 CV 3210 (MP) RESEARCH REPORTS SECURITIES LITIGATION : ------------------------------------------------------------------------x IN RE MERRILL LYNCH & CO., INC. : INTERLIANT, INC. : 02 CV 3321 (MP) RESEARCH REPORTS SECURITIES LITIGATION : ------------------------------------------------------------------------x DECISION AND ORDER APPEARANCES FOR PLAINTIFFS: APPEARANCES FOR DEFENDANTS: KAPLAN FOX & KILSHEIMER LLP SKADDEN, ARPS, SLATE, (By Frederic S. Fox, Laurence D. King, MEAGER & FLOM LLP Donald R. Hall, of counsel) (By Jay B. Kasner, Edward J. Yodowitz, 805 Third Avenue, 22nd Floor Scott D. Musoff, Joanne Gaboriault) New York, NY 10022 Four Times Square Tel: (212) 687-1980 New York, NY 10036 Tel: (212) 735-3000 Plaintiffs’ Liaison Counsel Attorneys for Defendants COHEN, MILSTEIN, HAUSFELD & Merrill Lynch & Co., Inc. and TOLL, P.L.L.C. Merrill Lynch, Pierce, Fenner (By Herbert E. Milstein, Steven J. Toll, & Smith Incorporated Joshua S. Devore, of counsel) 1100 New York Avenue, N.W. FOLEY & LARDNER West Tower, Suite 500 (By Douglas M. Hagerman, Washington, DC 20005 James D. Ossyra, of counsel) Tel: (202) 408-4600 321 North Clark Street, Suite 2100 Chicago, Illinois 60610 Lead Counsel for the Interliant Class Tel: (312) 832-4500 Co-Chairs of Plaintiffs’ Executive Committee Samuel J. Winer SHAPIRO HABER & URMY LLP 3000 K Street, N.W., Suite 500 (By Edward F. Haber, Michelle Blauner, Washington, D.C. 20007 Theodore M. Hess-Mahan, of counsel) Tel: (202) 672-5300 75 State Street Boston, MA 02109 Attorneys for Defendant Tel: (617) 439-3939 Henry Blodget Co-Chairs of Plaintiffs’ Executive Committee 1 FINKELSTEIN, THOMPSON & LOUGHRAN (By Donald G. Thompson, Donald J. Enright, Conor R. Crowley, Adam T. Savett, of counsel) 1050 30th Street, N.W. Washington, DC 20007 Tel: (202) 337-8000 Lead Counsel for the 24/7 Class Member of Plaintiffs’ Executive Committee RABIN, MURRAY & FRANK LLP (By Jacqueline Sailer, Eric J. Belfi, Sharon M. Lee, of counsel) 275 Madison Avenue, 34th Floor New York, NY 10016 Tel: (212) 682-1818 Co-Chairs of Plaintiffs’ Executive Committee POLLACK, Senior District Judge. Defendants Merrill Lynch & Co., Inc. (ML & Co.) and its wholly-owned subsidiary Merrill Lynch, Pierce, Fenner & Smith Inc. (MLPF&S) move to dismiss the amended class action complaints in the 24/7 Real Media, Inc. (24/7) and Interliant, Inc. (Interliant) consolidated actions for, inter alia, (1) failure to state a claim upon which relief can be granted, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, and (2) failure to plead fraud with particularity, as required by the Private Securities Litigation Reform Act of 1995 (Reform Act) (see 15 U.S.C. § 78u-4(b)) and Rule 9(b) of the Federal Rules of Civil Procedure. Individual defendant Henry Blodget (Blodget) joins the motion.1 For the reasons set forth below, the motion is granted. 1 “Defendants” is used collectively to refer to the corporate and individual defendants together throughout this opinion. 2 LEGAL STANDARDS — RULE 12(b)(6) AND FRAUD ALLEGATIONS In deciding a motion to dismiss under Rule 12(b)(6), this Court, “accepting all factual allegations in the complaint as true and drawing all reasonable inferences in the plaintiffs’ favor,”2 must dismiss the action if “it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.”3 The Court’s role is “to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof.”4 “General, conclusory allegations need not be credited, however, when they are belied by more specific allegations of the complaint.”5 In the fraud context, plaintiffs do not enjoy a “license to base claims . on speculation and conclusory allegations.”6 Federal Rule of Civil Procedure 9(b) requires that “[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” The Second Circuit has held that, at a minimum, the complaint must identify 2 Ganino v. Citizens Utilities Co., 228 F.3d 154, 161 (2d Cir. 2000); see Friedl v. City of New York, 210 F.3d 79, 83 (2d Cir. 2000); Koppel v. 4987 Corp., 167 F.3d 125, 130 (2d Cir. 1999). Only “well-pleaded” allegations are accepted as true, see Albright v. Oliver, 510 U.S. 266, 268 (1994). 3 In re Scholastic Corp. Secs. Litig., 252 F.3d 63, 69 (2d Cir. 2001) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73 (1984)); I. Meyer Pincus & Assoc., P.C. v. Oppenheimer & Co., Inc., 936 F.2d 759, 762 (2d Cir. 1991) (same). 4 Geisler v. Petrocelli, 616 F.2d 636, 639 (2d Cir. 1980); see Ricciuti v. New York City Transit Auth., 941 F.2d 119, 124 (2d Cir. 1991). 5 Hirsch v. Arthur Andersen & Co., 72 F.3d 1085, 1092 (2d Cir. 1995) (citing Jenkins v. S & A Chaissan & Sons, Inc., 449 F. Supp. 216, 227 (S.D.N.Y. 1978)); see 5A Charles A. Wright & Arthur R. Miller, Federal Practice & Procedure § 1363, at 464–65 (2d ed. 1990); see also In re American Express Co. Shareholder Litig., 39 F.3d 395, 400–401 & n.3 (2d Cir. 1994) (“[C]onclusory allegations of the legal status of the defendants’ acts need not be accepted as true for the purposes of ruling on a motion to dismiss.”) (collecting cases). 6 San Leandro Emergency Medical Group Profit Sharing Plan v. Philip Morris Cos., Inc., 75 F.3d 801, 813 (2d Cir. 1996) (quoting Wexner v. First Manhattan Co., 902 F.2d 169, 172 (2d Cir. 1990)); see also Segal v. Gordon, 467 F.2d 602, 607 (2d Cir. 1972) (“Mere conclusory allegations to the effect that defendant’s conduct was fraudulent or in violation of Rule 10b-5 are insufficient.”) (quoting Shemtob v. Shearson, Hammill & Co., 448 F.2d 442, 444 (2d Cir. 1971)). 3 the statements plaintiff asserts were fraudulent and why, in plaintiff’s view, they were fraudulent—specifying who made them and where and when they were made.7 This particularity requirement is reinforced by the Reform Act, in which Congress required that all private securities class action complaints alleging material misrepresentations or omissions “shall specify each statement alleged to have been misleading [and] the reason or reasons why the statement is misleading.”8 In deciding a Rule 12(b)(6) motion, the Court may consider the following materials: (1) facts alleged in the complaint and documents attached to it or incorporated in it by reference,9 (2) documents “integral” to the complaint and relied upon in it, even if not attached or incorporated by reference,10 (3) documents or information contained in defendant’s motion 7 Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir. 1993). 8 15 U.S.C. § 78u-4(b)(1). 9 Rothman v. Gregor, 220 F.3d 81, 88 (2d Cir. 2000) (“For purposes of a motion to dismiss, we have deemed a complaint to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference . .”) (citing Cosmas v. Hassett, 886 F.2d 8, 13 (2d Cir. 1989)); Stuto v. Fleishman, 164 F.3d 820, 826 n.1 (2d Cir. 1999) (citing Newman & Schwartz v. Asplundh Tree Expert Co., 102 F.3d 660, 662 (2d Cir. 1996)) (same). While the Second Circuit has stated that “limited quotation does not constitute incorporation by reference,” Cosmas v. Hassett, 886 F.2d 8, 13 (2d Cir. 1989) (quoting Goldman v. Belden, 754 F.2d 1059, 1066 (2d Cir. 1985)), the “line between incorporating by reference and not doing so . is fine,” Key v. Chase Manhattan Bank, N.A., 1990 WL 113185, at *4 (S.D.N.Y. July 30, 1990) (citing Ruff v. Genesis Holding Corp., 728 F. Supp. 225, 227 n.2 (S.D.N.Y. 1990) (“Because the PPM was referred to extensively throughout the Complaint, rather than merely quoted from sporadically, we regard it as having been incorporated by reference into the Complaint.”) (distinguishing Cosmas)). See also Oppenheimer, 936 F.2d at 762 (“[W]e examine the prospectus together with the allegations contained on the face of the complaint. We do so . despite the fact that the complaint contains only ‘limited quotation’ from that document.”). 10 See International Audiotext Network, Inc. v. American Tel. and Tel. Co., 62 F.3d 69, 72 (2d Cir. 1995) (“Although the amended complaint in this case does not incorporate the Agreement, it relies heavily upon its terms and effect; therefore, the Agreement is ‘integral’ to the complaint, and we consider its terms in deciding whether [plaintiff] can prove any set of facts that would entitle it to relief.”); Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 48 (2d Cir. 1991) (“[T]he district court . could have viewed [the documents] on the motion to dismiss 4 papers if plaintiff has knowledge or possession of the material and relied on it in framing the complaint,11 (4) public disclosure documents required by law to be, and that have been, filed with the Securities and Exchange Commission,12 and (5) facts of which judicial notice may properly be taken under Rule 201 of the Federal Rules of Evidence.13 PROLOGUE The two cases before the Court are part of a large group assigned to this Court by the Multidistrict Panel for consolidated administration. These cases, and the New York Attorney General’s report which precipitated them, brought to specific public attention certain aspects of because there was undisputed notice to plaintiffs of their contents and they were integral to plaintiffs’ claim); Oppenheimer, 936 F.2d at 762 (“The prospectus is integral to the complaint.