Appeal from the United States District Court for the Western District of Wisconsin. No. 3:09-CV-00610-Stephen L. Crocker, Magistrate Judge.
The opinion of the court was delivered by: Williams, Circuit Judge.
Before MANION, WOOD, and WILLIAMS, Circuit Judges.
AnchorBank and Plumb Trust
Company, the Trustee for an AnchorBank investment fund, filed a civil suit against Clark A. Hofer, an employee of AnchorBank, alleging that Hofer engaged in a collusive trading scheme in violation of the Securities Ex-change Act of 1934. Hofer moved to dismiss, asserting that the complaint was inadequately pleaded, and the court granted the motion to dismiss with prejudice.
AnchorBank and Plumb appealed, and we find that the plaintiffs' complaint sufficiently pleads a violation pursuant to Federal Rules of Civil Procedure 8(a) and 9(b), the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act. The complaint adequately stated with particularity the circumstances constituting the securities fraud, and the economic loss impact on the plaintiffs as a result of the fraud. Therefore, we reverse the decision of the district court and remand the case for further proceedings consistent with this opinion.
AnchorBank FSB and AnchorBank Unitized Fund (the Fund), whom we will refer to collectively as AnchorBank, filed a complaint against Clark Hofer on October 5, 2009. The complaint alleged that Hofer and two co-conspirators, all of whom were employees of AnchorBank, violated sections 9(a) and 10(b) of the Securities Exchange Act of 1934 when they engaged in a collusive trading scheme by coordinating their purchase and sale of units in the Fund, which was an investment option in their individual 401(k) accounts. The complaint also alleged violations of Wisconsin's securities law and brought common law claims for breach of fiduciary duty and unjust enrichment. The two co-conspirators were not named in the suit against Hofer because they settled with AnchorBank before it initiated suit. Hofer moved to dismiss the complaint against him under Federal Rules of Civil Procedure 9(b) and 12(b)(6). Seeking to remedy the deficiencies Hofer cited in his motion to dismiss, AnchorBank filed an amended complaint. Hofer then moved to dismiss the first amended complaint. The district court granted the motion, dismissing the first amended complaint without prejudice.
AnchorBank filed a second amended complaint, adding Plumb Trust Company, the Trustee for the Fund, as an additional plaintiff. AnchorBank and Plumb also added, among other things, a paragraph describing examples of trading activity by Fund participants "M" and "H", and stated that both M and H sold their Fund shares "at a lower price as a direct result of the Collusive Trading Activity by Hofer and the other co-conspirators." Second Am. Compl. at ¶ 66. Hofer moved to dismiss the second amended complaint. The district court granted the motion, and dismissed the plaintiffs' complaint with prejudice. It found that AnchorBank and Plumb had satisfied all of the pleading requirements except for loss causation. It also found that it was improper for the plaintiffs to include the references to M and H because it amounted to an attempt to pursue a claim on behalf of other individuals. The court also declined to exercise supplemental jurisdiction over the plaintiffs' state law claims. AnchorBank and Plumb appealed. At issue before us is whether the court erred in granting Hofer's motion to dismiss AnchorBank and Plumb's second amended complaint.*fn1
Motion to Dismiss Should Not Have Been Granted
We review de novo a district court's decision to dismiss a complaint for failure to state a claim on which relief can be granted. Stayart v. Yahoo! Inc., 623 F.3d 436, 438 (7th Cir. 2010). In evaluating the sufficiency of the complaint, we view it in the light most favorable to the plaintiff, taking as true all well-pleaded factual allegations and making all possible inferences from the allegations in the plaintiff's favor. Wilson v. Price, 624 F.3d 389, 391 (7th Cir. 2010). Our task in reviewing the sufficiency of a complaint is "necessarily a limited one. The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Caremark, Inc. v. Coram Healthcare Corp., 113 F.3d 645, 648 (7th Cir. 1997) (citation omitted).
"Although the bar to survive a motion to dismiss is not high, the complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Bonte v. U.S. Bank, N.A., 624 F.3d 461, 463 (7th Cir. 2010) (internal citations and quotations omitted). A "plaintiff must do better than putting a few words on paper that, in the hands of an imaginative reader, might suggest that something has happened to her that might be redressed by the law." Swanson v. Citibank, N.A., 614 F.3d 400, 403 (7th Cir. 2010) (emphasis in original). And to survive a motion to dismiss in a complex case, a complaint must sufficiently plead allegations to allow a judgment that the claim has the possible merit that justifies the time and expense required in litigating the case. Stark Trading v. Falconbridge Ltd., 552 F.3d 568, 574 (7th Cir. 2009).
In their second amended complaint, AnchorBank and Plumb alleged that Hofer engaged in a collusive trading scheme in violation of sections 9(a) and 10(b) of the Securities Exchange Act of 1934. To satisfy the pleading requirements in their case, AnchorBank and Plumb had to meet the general pleading requirements of Federal Rules of Civil Procedure 8(a) and 9(b). See Smith v. Medical Benefit Adm'rs Group, Inc., 639 F.3d 277, 281 (7th Cir. 2011); Tricontinental Indus., Ltd. v. PricewaterhouseCoopers, LLP, 475 F.3d 824, 833 (7th Cir. 2007). They also needed to satisfy the pleading requirements of sections 9(a) and 10(b) of the Securities Exchange Act of 1934. Sullivan & Long, Inc. v. Scattered Corp., 47 F.3d 857, 864-65 (7th ...