Ong v. Chipotle Mexican Grill, Inc. (294 F. Supp. 3d 199, 2018)

KATHERINE POLK FAILLA, United States District Judge

Lead Plaintiffs Metzler Asset Management GmbH and Construction Laborers Pension Trust of Greater St. Louis ("Plaintiffs"), on behalf of themselves and other similarly situated shareholders, bring this securities class action against Defendants Chipotle Mexican Grill, Inc. ("Chipotle" or "the Company"), and Chipotle executives Steven Ells, Montgomery F. Moran, and John R. Hartung (collectively, the "Chipotle Executives" or the "Individual Defendants," and including Chipotle, "Defendants"). Plaintiffs allege, and Defendants do not dispute, that after a rash of food-borne illness outbreaks in late 2014 and 2015, some of which were linked to Chipotle, the value of the Company's stock steeply declined. But while others attribute these losses to the adverse publicity surrounding the outbreaks, Plaintiffs instead claim that they are due, in part or in whole, to the Company's failure to disclose certain granular details and attendant risks of its produce-processing and food-safety procedures.

Plaintiffs have brought securities fraud claims under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b) and 78t(a), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5. The Court previously dismissed Plaintiffs' First Amended Complaint (the "FAC"), and Defendants now move to dismiss the Second Amended Complaint (the "SAC"). Defendants also move to strike an expert witness declaration attached to the SAC. For the reasons that follow, the Court grants Defendants' motion to strike in part, and grants their motion to dismiss in its totality. The Court is as concerned as the parties about food-borne illness outbreaks generally and about those described in the SAC specifically. That said, not all adverse events are the product of corporate misfeasance or nonfeasance, and the Court cannot find on this record that Plaintiffs have adequately pleaded securities fraud.

BACKGROUND

A. Factual Background

The Court's prior opinion considering Defendants' motion to dismiss the FAC provided an extensive discussion of the alleged facts. See Ong v. Chipotle Mexican Grill, Inc. ("Chipotle I "), No. 16 Civ. 141 (KPF), 2017 WL 933108, at *1-5 (S.D.N.Y. Mar. 8, 2017). Nevertheless, given the extensive additions to Plaintiffs' complaint, the Court again outlines the factual allegations, while noting at times where Plaintiffs' allegations have remained the same and where they have changed.

1. The Parties

Plaintiffs bring this case as a class action "on behalf of all purchasers of the common stock of Chipotle between February 5, 2015[,] and February 2, 2016, inclusive" (the "Class Period"). (SAC ¶ 1). "Chipotle is a publicly traded fast-food restaurant chain," which, as of December 31, 2015, operated over 1,900 restaurants in the United States that offer cuisine containing produce items including tomatoes, lettuce, red onion, jalapeños, and cilantro. (Id. at ¶ 20). As of February 4, 2015, Chipotle had more than 31 million shares of common stock issued and outstanding. (Id. ).

The SAC names, as individual defendants, three current and former Chipotle executives. Defendant M. Steven Ells is Chipotle's founder and, during the Class Period, was one of two of the Company's co-Chief Executive Officers, along with Defendant Montgomery F. Moran. (SAC ¶¶ 21-22). Moran was also on Chipotle's Board of Directors during the Class Period. (Id. at ¶ 22). Before serving in these capacities, Moran was Chipotle's outside counsel while working for the Denver law firm of Messner & Reeves, LLC. (Id. ). It is alleged that "[o]n December 12, 2016, in light of the significant fallout from the Class Period food-borne illness outbreaks[,] Moran resigned as co-CEO and director at the Board's request." (Id. ). Defendant John R. Hartung is, and served throughout the Class Period as, Chipotle's Chief Financial Officer. (Id. at ¶ 23). In this capacity, Hartung was responsible for Chipotle's "financial and reporting functions," as well as overseeing information technology; safety, security, and risk; and compensation and benefits. (Id. ).

Plaintiffs allege that, given their positions in the Company during the Class Period, the Chipotle Executives "had access to the adverse undisclosed information about its business, operations, products, operational trends, financial statements, markets and present and future business prospects via internal corporate documents," as well as "conversations and connections with other corporate officers and employees, attendance at management and/or Board meetings and committees thereof and via reports and other information provided to them[.]" (SAC ¶ 26). Drawing from this, along with other allegations, Plaintiffs posit that these Executives, and thus Chipotle, "were aware of[ ] food-borne illness outbreaks at the Company," as discussed more fully below. (Id. at ¶ 44).

2. Chipotle's Food-Safety Practices

The SAC expands on the FAC's discussion of food-safety procedures that Chipotle had in place before, during, and after the Class Period. Before the Class Period, Chipotle received its produce "from a central commissary where it was processed, prepared[,] and tested at least twice for pathogens before being delivered." (SAC ¶ 2). Plaintiffs contend that this is "the industry standard practice in the fast food industry" for ready-to-eat food, as it "allows for much greater control over food safety than at individual restaurants." (Id. at ¶ 63). Commissary food-processing systems also provide "the ability to conduct raw material testing and end product testing." (Id. at ¶ 64). Raw material testing involves testing food products for pathogens at their preliminary arrival at the commissary. (Id. ). Food product that passes these tests is then subject to end product testing, which involves sampling batches of the food at intervals and disposing of any batch that fails. (Id. at ¶¶ 64-65). A negative test result may also trigger procedures for tracing the contaminated product back to its source to prevent further distribution of pathogen-ridden food. (See id. at ¶ 65). Plaintiffs assert that "any professional in the food safety business understands that raw material testing and end product testing are the industry standard for verifying that the food served at individual restaurants is safe." (Id. at ¶ 67).

In late 2014, Chipotle "switch[ed] the cutting and processing of its produce to each of its 1,900 individual restaurants, instead of a central commissary, believing that this would improve taste and freshness." (SAC ¶ 2). In Plaintiffs' view, because this entailed a drastic shift in the method in which Chipotle went about assuring food safety, maintaining the same standard of quality "would have required a detailed hazard analysis of the food safety risks associated with this change in operations." (Id. at ¶ 70; see id. at ¶ 69). Failure to do so would "exponentially increase" the risk that Chipotle would experience food-borne illness outbreaks "as soon as the switch was made," as Chipotle would be unable to recreate the safety mechanisms in place at commissary distributors. (Id. at ¶ 70; see id. at ¶¶ 70-76). Plaintiffs also allege that the switch away from commissary food distribution prevented Chipotle from being able to trace its ingredients back to specific suppliers, which in turn would frustrate investigations into the source of pathogens. (See id. at ¶¶ 82-85).

Plaintiffs further claim that Chipotle maintained a practice of internally auditing the food safety levels at individual locations, rather than what they claim is the "industry standard" of external auditing, which eliminates "the possibility of collusion between the stores and the auditors." (SAC ¶¶ 86-87). Chipotle would also "pre-announce[ ]" the audits, which would allow the restaurants "ample time to hide or mask deficient food safety practices." (Id. at ¶ 88).

On December 4, 2015, after Chipotle was involved in a number of food-borne illness outbreaks (discussed more fully below), the Company "disclosed that it had begun high-resolution testing of produce as part of its remediation plan." (SAC ¶ 77). High-resolution testing is a form of end product testing "that uses a larger number of samples based on the timing of manufacturing ... or the lot size," and it "can only take place at commissaries or food factories." (Id. ). According to Plaintiffs, "this means that Chipotle had switched back to commissary preparation for its produce by the time of this disclosure." (Id. at ¶ 78). As another remedial measure, on February 8, 2016, Chipotle closed all of its restaurants to train employees in food safety. (Id. at ¶ 90). Plaintiffs allege that this decision indicates "that employees were not properly safety trained before the[ ] outbreaks." (Id. ).

3. Food-Borne Illness Outbreaks

As opposed to the seven food-borne illness outbreaks detailed in the FAC, see Chipotle I , 2017 WL 933108, at *2, the SAC alleges that "Chipotle experienced no fewer than thirteen food-borne illness outbreaks during the Class Period, many of which have still not been disclosed to the public" (SAC ¶ 92). Specifically, Plaintiffs premised the FAC on the following outbreaks, all of which took place in 2015:

(i) an outbreak of E. coli ... in July [2015] in Washington State; (ii) an outbreak of Norovirus in August [2015] in Washington; (iii) an outbreak of Norovirus in August [2015] in California; (iv) an outbreak of Salmonella in August [2015] in Minnesota; (v) an outbreak of E. coli ... in October [2015] in Washington, Oregon, California, Illinois, Maryland, Minnesota, New York, Ohio, Pennsylvania, Delaware, and Kentucky; (vi) an outbreak of E. coli ... in November [2015] in Kansas, North Dakota, and Oklahoma; and (vii) an outbreak of Norovirus in December [2015] in Massachusetts.

Chipotle I , 2017 WL 933108, at *2.

In addition to these outbreaks, the SAC describes the following outbreaks involving Chipotle customers:

(viii) an outbreak of Salmonella beginning in December 2014 involving customers in Wisconsin, Massachusetts, New Jersey, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Washington; (ix) an outbreak of Salmonella beginning in February 2015 involving customers in New York, Wisconsin, Ohio, Texas, and Massachusetts; (x) an outbreak of E. coli beginning in March 2015 involving customers in California, Connecticut, and Nevada; (xi) an outbreak of Salmonella in May 2015 involving customers in New Jersey, Kentucky, and New York; (xii) an outbreak of Salmonella beginning in July 2015 involving customers in New York; and (xiii) an outbreak of E. coli beginning in October 2015 involving customers in California, Colorado, and Oregon.

(See SAC ¶¶ 93-110, 187-90). Plaintiffs' discovery of the additional outbreaks are a result of requests for documents from the Center for Disease Control and Prevention (the "CDC") and state and local health officials. (See id. at ¶ 92). In total, these outbreaks in the operative complaint include "(i) five Salmonella outbreaks; (ii) five E. Coli outbreaks; and (iii) three Norovirus outbreaks." (Id. (footnote call numbers omitted)). All of the outbreaks-and the degree, if any, to which they were connected by public health officials to Chipotle-are discussed individually in the remainder of this section.

a. The December 2014 Multistate Salmonella Outbreak

From December 2014 through February 2015, 31 individuals in several states fell ill after being exposed to Salmonella. (SAC ¶ 94). "Within this group, the CDC found a link to four Chipotle customers, with at least one coming from Wisconsin and the others coming from at least one or more of the following states: Massachusetts, New Jersey, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Washington." (Id. ). The SAC acknowledges, however, that "[t]he CDC did not conclusively link a specific ingredient or supplier as the source of this outbreak." (Id. at ¶ 95).

b. The February 2015 Multistate Salmonella Outbreak

From February 22, 2015, to June 5, 2015, 30 individuals in several states fell ill after being exposed to Salmonella. (SAC ¶ 97). "Within this group, the CDC found a link to eight Chipotle customers: four from a combination of New York, Wisconsin[,] and Ohio, two from Texas, and two from Massachusetts." (Id. ). Documents from the Massachusetts Department of Public Health indicate that an employee of Corporate Wellness, an agent of Chipotle, "was apprised that this outbreak was plaguing Chipotle customers in Massachusetts by no later than May 13, 2015, and that these sicknesses had been observed in mid-April 2015." (Id. at ¶ 98). In addition, Chipotle employees "participated in the response to the Massachusetts portion of this outbreak by at least May 18, 2015." (Id. ). Again, however, "[t]he CDC did not conclusively link a specific ingredient or supplier as the source of this outbreak." (Id. at ¶ 99).

c. The March 2015 Multistate E. Coli Outbreak

From March 23, 2015, through May 14, 2015, six individuals in multiple states fell ill after being exposed to E. coli. (SAC ¶ 101). "Within this group, the CDC found a link to five or six Chipotle customers from a combination of California, Connecticut[,] and Nevada." (Id. ). Yet again, "[t]he CDC did not conclusively link a specific ingredient or supplier as the source of this outbreak." (Id. at ¶ 102).

d. The May 2015 Multistate Salmonella Outbreak

Beginning on May 26, 2015, 79 individuals in multiple states fell ill after being exposed to Salmonella. (SAC ¶ 104). "Within this group, the CDC found a link to 19 Chipotle customers from New Jersey, Kentucky[,] and New York during the time period of July 7, 2015[,] to July 15, 2015." (Id. ). On August 24, 2015, the CDC and Food and Drug Administration (the "FDA") held a conference call with Chipotle representatives "to discuss the ongoing investigation and to request supplier information for the six Chipotle restaurants involved in the outbreak." (Id. at ¶ 105). But "[b]ecause the CDC was unable to conclusively link a specific ingredient or supplier as the source of this outbreak, the CDC's and FDA's investigations" ceased on October 13, 2015. (Id. at ¶ 107).

e. The July 2015 New York Salmonella Outbreak

From "mid-July to mid-August 2015," six Chipotle customers from New York fell ill after being exposed to Salmonella. (SAC ¶ 109). "These were all of the individuals associated with Salmonella that were identified as part of this outbreak." (Id. ). "The CDC did not," however, "conclusively link a specific ingredient or supplier as the source of this outbreak." (Id. ).

f. The July 2015 Washington E. Coli Outbreak

"In late July 2015," the Washington State Department of Health traced an outbreak of E. coli to a Chipotle restaurant in Seattle. (SAC ¶ 111). The outbreak sickened five people between July 28 and 31, 2015. (Id. ). "[B]y at least August 3, 2015, Chipotle was apprised of this outbreak and was involved in testing restaurant employees for the presence of E. coli[.]" (Id. at ¶ 112). But "[t]he CDC did not conclusively link a specific ingredient[ ] or supplier[ ] as the source of this outbreak." (Id. at ¶ 111).

According to a communications director for Seattle & King County Public Health, "Chipotle knew about and participated in the testing for the outbreak," and "the CDC was made aware of this outbreak in July [2015], but no public disclosure was made because it took a long time to link this outbreak to Chipotle." (SAC ¶ 113). Thus, when "the link was discovered, Washington state health officials had determined that this outbreak posed no ongoing risk to the public." (Id. ). The "outbreak was not publicly disclosed until November 10, 2015, when The Oregonian published an article entitled 'Chipotle Involved in 4th Outbreak This Year That Was Kept Secret.' " (Id. at ¶ 116).

g. The August 2015 California Norovirus Outbreak

Starting on August 18, 2015, a Chipotle restaurant in Simi Valley, California experienced a Norovirus outbreak that left 243 customers ill. (SAC ¶ 117). In response, on August 20, 2015, Chipotle closed its Simi Valley location to the public and initiated a corporate policy known as the "Norwalk Protocol." (Id. at ¶ 118). The Norwalk Protocol was Chipotle's policy for responding to a suspected Norovirus outbreak that required Chipotle to close any location at which two or more customers complain of food-borne illness, after which the restaurant would dispose of any food items and bleach cooking and food-handling surfaces. (Id. at ¶ 118 n.12). The Simi Valley location did not inform customers or public health officials of the outbreak, but instead posted a sign during its closure stating that the restaurant was "closed for the rest of the day due to a severe staffing shortage." (Id. at ¶ 118).

One day later, on Friday, August 21, 2015, the restaurant reopened with a new crew of employees from other Chipotle locations, and the following day, Chipotle contacted the Ventura County Environmental Health Division to provide notice that 17 Simi Valley Chipotle employees were suffering from gastrointestinal illness and had been replaced with other Chipotle employees. (SAC ¶¶ 119-20). The following Monday, Ventura County health officials determined that nine Chipotle employees had contracted Norovirus, although the officials could not carry out their normal testing because of the remedial measures taken as a result of the Norwalk Protocol. (Id. at ¶ 121).

"On September 14, 2015, the Ventura County (CA) Environmental Health Division issued a Notice of Violation to Chipotle," noting among other violations that Chipotle failed to notify the Health Division "when it was first aware of sick employees." (SAC ¶ 126). This was not the only government action resulting from the Norovirus outbreak: In December 2015, Chipotle received "a Federal Grand Jury Subpoena from the U.S. District Court for the Central District of California in connection with an official criminal investigation being conducted by the U.S. Attorney's Office for the Central District of California, in conjunction with the [FDA]'s Office of Criminal Investigations." (Id. at ¶ 128). Chipotle first disclosed the subpoena on January 6, 2016, in a Form 8-K filed with the Securities and Exchange Commission ("SEC"). (Id. ). According to a Form 10-K that Chipotle filed on February 7, 2017, for the fiscal year ending December 31, 2016, the investigation remains ongoing. (Id. at ¶ 129).

h. The August 2015 Washington Norovirus Outbreak

From August 22, 2015, to September 1, 2015, Chipotle experienced a Norovirus outbreak at its restaurant in Hazel Dell, Washington. (SAC ¶ 130). Plaintiffs claim that before they filed the FAC in this action, this outbreak was "never ... publicly acknowledged," and, further, that Plaintiffs discovered it by accessing "email communications between Washington State Department of Health officials and Chipotle corporate executives." (Id. at ¶ 131). According to those emails, a Chipotle employee at the Hazel Dell location reported to work sick and remained at work "for four hours and was vomiting." (Id. at ¶ 132). In response, Chipotle initiated the Norwalk Protocol, indicating "that at least two Chipotle customers were sickened." (Id. at ¶¶ 133-35). On December 21, 2015, Clark County Public Health officials completed a report on the outbreak "verif[ying] that 22 individuals were sickened," including 18 customers and four employees. (Id. at ¶ 136).

i. The August 2015 Minnesota and Wisconsin Salmonella Outbreak

"Beginning around August 24, 2015," 22 Minnesota Chipotle locations and five Wisconsin locations experienced a Salmonella outbreak. (SAC ¶ 137). In total, 95 individuals reported ill, 64 of whom were Minnesota Chipotle customers and 19 of whom were Wisconsin Chipotle customers. (Id. ). "According to the CDC," its "investigation into this outbreak was hindered by Chipotle's inability to trace its ingredients to the point of sale," and "[t]he CDC never conclusively linked a supplier or farm to this outbreak." (Id. at ¶ 139). "By September 3, 2015, ... an epidemiologist with the Minnesota Department of Health[ ] had informed Chipotle ... of [the] outbreak." (Id. at ¶ 140).

On September 10, 2015, the Minnesota Department of Health published a press release stating that 45 cases of Salmonella had been identified. (SAC ¶ 146). The Minnesota Department of Health published an additional release on September 16, 2015, announcing "that tomatoes were the source of this Salmonella outbreak, that 64 Minnesota customers had been sickened[,] and 22 Minnesota Chipotle locations had been linked to the outbreak, and that Chipotle had switched its supplier for tomatoes in light of this outbreak." (Id. at ¶ 150). Ultimately, however, the Minnesota Department of Health was not "able to conclusively link a specific Chipotle supplier or farm to the tomatoes that were the suspected cause of this outbreak." (Id. at ¶ 155). This outbreak nevertheless "had a negative impact on the Company's operations and financial performance." (Id. at ¶ 156).

j. The October 2015 Multistate E. Coli Outbreak

"On October 30, 2015, the Washington State Department of Health" notified Chipotle that, on October 17, 2015, it had identified an E. coli outbreak at multiple Chipotle locations in Washington and Oregon. (SAC ¶ 157). The following day, Chipotle closed 43 restaurants in those states. (Id. at ¶ 158). In similar fashion to the Simi Valley closure, Chipotle "post[ed] signs on the closed Oregon restaurants blaming the closures on 'equipment issues,' " and "similar signs were observed at several closed Chipotle locations in Washington that were blamed on 'supply issues.' " (Id. at ¶ 159). Also on October 31, the CDC became involved in the response to the outbreak, after it had been "apprised of the numerous food-borne illness outbreaks at Chipotle that had already taken place during the Class Period." (Id. at ¶¶ 160-61).

Beginning on the first of November, media outlets "began reporting that Chipotle locations had been closed due to an E. coli outbreak." (SAC ¶ 162). This news "[a]lmost immediately ... began having a significantly negative impact on Chipotle's common stock price and same-store sales." (Id. at ¶ 163). A day following the reports in the press, the FDA notified Chipotle "that the 'FDA, CDC[,] and the states [were] working together to respond to this outbreak.' " (Id. at ¶ 164). And a day following that, on November 3, 2015, a spokesman for the Oregon Public Health Division publicly announced that the produce under consideration as the source of the outbreak was cilantro, romaine lettuce, and tomatoes. (Id. at ¶ 166). On that same date, Chipotle issued a press release addressing the outbreak. (Id. at ¶ 167).

The following day, November 4, 2015, the CDC publicly announced the status of its investigation into the outbreak online, and the CDC periodically updated that announcement. (SAC ¶¶ 168-69). These updates reflected that the "investigation was ongoing," which, in Plaintiffs' view, "meant that the CDC believed there was an ongoing threat to the public because the specific cause of the outbreak had not yet been identified and/or because several weeks' time had not yet passed since the last reported case." (Id. at ¶ 169). By November 17, 2015, the CDC connected the outbreak "to Chipotle customers in California, Minnesota[,] and New York, in addition to those in Oregon and Washington," and Chipotle was apprised of those illnesses no later than that same date. (Id. at ¶¶ 170-71). The CDC reported these findings online on November 20, 2015. (Id. at ¶ 172).

On December 4, 2015, the CDC updated its reporting once more to reflect seven additional ill people in California, Illinois, Maryland, Ohio, Pennsylvania, and Washington. (SAC ¶ 173). The update provided further that among the individuals for whom information was available, "whole genome sequencing has been performed" on the strain of E. coli producing the outbreak from ill people in Washington, California, Minnesota, and New York. (Id. at ¶ 174). The testing indicated that isolates of that strain taken from those individuals "were highly related genetically to one another," thus suggesting that "illnesses outside the Pacific Northwest [were] related to the illnesses in Oregon and Washington." (Id. ).

"On December 21, 2015, the CDC provided another" update "reporting that 53 people were ill in Washington, Oregon, California, Illinois, Maryland, Minnesota, New York, Ohio[,] and Pennsylvania." (SAC ¶ 175). The update provided further that "the most recent person reporting Chipotle exposure became ill on November 10, 2015, and 'CDC and state and local public health partners are continuing laboratory surveillance ... to identify additional ill persons and to interview them.' " (Id. ).

The CDC finally closed its investigation on February 1, 2016, when it calculated a final count of those infected by E. coli consisting of 55 people across 11 states, ranging from one- to 94-years old. (SAC ¶ 176). The CDC was unable, however, to link the outbreak to a particular ingredient or supplier conclusively. (Id. ).

k. The October 2015 Multistate E. Coli Outbreak

Beginning in late October 2015, four Chipotle customers from California, Colorado, and Oregon fell ill as a result of an E. coli outbreak. (SAC ¶ 187). No other individuals with the same strain of E. coli were identified as being linked to this outbreak, and the CDC failed to suspect or link any ingredient to the outbreak. (Id. ). By November 24, 2015, the CDC notified Chipotle that it was monitoring the outbreak. (Id. at ¶ 188). The CDC's investigation lasted as late as December 21, 2015. (Id. at ¶ 189).

l. The November 2015 Multistate E. Coli Outbreak

Beginning on November 18, 2015, an E. coli outbreak "was traced to" Chipotle customers in Kansas, North Dakota, and Oklahoma. (SAC ¶ 177). Five people fell ill as a result of the outbreak. (Id. ). Chipotle was aware of this outbreak "no later than when the CDC learned about these individuals' illnesses, which was on or about November 26, 2015." (Id. at ¶ 178).

On December 21, 2015, the CDC announced these outbreaks and that two Chipotle restaurants, one in Oklahoma and one in Kansas, were involved in the outbreak. (SAC ¶ 182). On that same date, The New York Times also reported on the outbreak. (Id. at ¶ 184). The report noted that according to the CDC, the strain of E. coli detected in both the October and November 2015 outbreak was "rare, with the CDC seeing it previously on only three other occasions," but that the DNA of the E. coli differed from the October outbreak to the November outbreak, "meaning that the two outbreaks were unrelated and likely came from different ingredient sources." (Id. at ¶¶ 183-84).

On February 1, 2016, the CDC "officially closed its investigation" into the October and November 2015 outbreaks. (SAC ¶ 186). The CDC confirmed that the two outbreaks had "different DNA profile[s]." (Id. ). Once again, the CDC did not conclusively identify the source of the E. coli outbreak. (Id. ).

m. The December 2015 Massachusetts Norovirus Outbreak

On December 7, 2015, a Chipotle restaurant in Brighton, Massachusetts, experienced a Norovirus outbreak. (SAC ¶ 191).

"According to Chipotle, 143 customers were reported ill" and "Norovirus was the confirmed source of this outbreak." (Id. ). An email from a Chipotle employee to a CDC official indicated that an employee reported to work sick on December 3 and was vomiting, yet the store did not initiate the Norwalk Protocol. (Id. at ¶¶ 193-94). The restaurant remained open at least until December 7. (Id. at ¶ 194).

4. Chipotle's Remedial Measures and the Market's Response

Although seven of the above-described outbreaks were not publicly disclosed immediately, negative publicity stemming from other outbreaks during the Class Period "was significant enough to cause the Company to institute drastic remediation efforts." (SAC ¶¶ 196-97). In relation to the October 2015 multistate E. coli outbreak, Chipotle issued a press release on November 3, 2015, stating that the Company was undertaking "immediate steps to assist investigators," as well as "[r]etaining two preeminent food safety consulting firms ... to help the [C]ompany assess and improve upon" its food-safety standards. (Id. at ¶ 198). On December 4, 2015, Chipotle issued another press release detailing the recommendations the Company had received from its food-safety consultants, including "high-resolution testing of all fresh produce ... before [it is] shipped to restaurants," and "[e]nhanc[ed] internal training to ensure that all employees thoroughly understand the [C]ompany's high standards for food safety and food handling." (Id. at ¶ 199). Also on December 4, 2015, Chipotle issued a Form 8-K detailing the "adverse impact" of the October 2015 multistate E. coli outbreak on the Company's financial and operating results in the fourth quarter of 2015. (Id. at ¶ 200).

The Individual Defendants also made public statements about Chipotle's remedial measures. On December 8, 2015, at the Sanford C. Bernstein Consumer Summit, Ells stated that the Company made "system-wide" changes, including dicing tomatoes in a commissary because the Company "found it impossible" to "test every tomato coming into the restaurants." (SAC ¶ 201). Moran echoed this changed approach, stating that the Company would transport romaine lettuce to restaurants "having been already washed and tested." (Id. ). Hartung emphasized the costs associated with the Company's remediation efforts, stating, "when it's all said and done we're going to have really safe food and the investment's probably going to be outsized." (Id. ).

On December 16, 2015, Ells and Moran were interviewed by CNBC's Jim Cramer. (SAC ¶ 202). During the interview, Ells stated that the Company "couldn't do ... high-resolution testing in the restaurants" and that the new procedures would "bring[ ] the risk of contamination in [a] tomato, for example, to near zero when we do it in the central commissary." (Id. ). Plaintiffs posit that this "indicated that Chipotle had initiated a move back to central commissary preparation for produce." (Id. ). Ells made similar remarks at a January 2016 "ICR Conference." (Id. at ¶ 203).

On January 19, 2016, Chipotle issued an additional press release detailing its remediation efforts. (SAC ¶ 204). The press release stated that the Company would implement "comprehensive new food safety programs," which included high-resolution testing and "[c]hanges to food prep and food handling practices." (Id. ). The press release also announced that the Company would hold a national employee meeting on February 8, 2016, during which every Chipotle restaurant would be closed. (Id. ). And indeed, on that date, "Chipotle closed all of its restaurants and held a food safety symposium for all of its employees." (Id. at ¶ 208).

On January 28, 2016, the U.S. Attorney's Office for the Central District of California served Chipotle with a subpoena that superseded the prior subpoena and "broaden[ed] the scope of the criminal investigation." (SAC ¶ 205). Chipotle expressed its intention to cooperate fully, and as of the Company's 2016 Form 10-K, the investigation remains ongoing. (Id. ).

On the final day of the Class Period, February 2, 2016, Chipotle held a conference call in which the Individual Defendants participated. (SAC ¶ 206). During the call, Ells reiterated his earlier comments on the Company's plan to rework its food-safety procedures, stating, for instance, that "[t]he plan is designed to prevent unsafe food from ever entering our restaurants through the use of extensive testing and through washing in central kitchens." (Id. ). Moran stated, in relevant part, "[w]e are also completing a comprehensive food tracing system that will allow us to locate each ingredient we use from its source," and that "the CDC has confirmed [that the E. coli investigation] is behind us and resolved, which helps to serve as an all-clear signal to our customers that may have been hesitant in recent months." (Id. ). Hartung again emphasized the financial costs of the Company's remedial efforts. (Id. ).

On February 5, 2016, Chipotle filed a Form 10-K for the fiscal year ending December 31, 2015. (SAC ¶ 207). The Form "included pages of new information and risk disclosures pertaining to Chipotle's food-safety practices, the risk of Chipotle experiencing food-borne illness outbreaks, Chipotle's food safety remediation efforts, and the fallout from the seven food-borne illness outbreaks that the Company experienced during the Class Period." (Id. ).

Chipotle also undertook a number of hiring decisions that reflected an emphasis on changing its food-safety management. On March 15, 2016, the Company disclosed that it had hired a new Executive Director of Food Safety; this occurred during the same month in which Chipotle's Director of Quality Assurance and Food Safety during the Class Period departed from the Company. (See SAC ¶¶ 209-10). The new Executive Director of Food Safety has since "led a comprehensive assessment and enhancement of Chipotle's food safety practices" and designed a "Food Safety Advisory Council" within the Company. (Id. at ¶¶ 219-20). Also, on May 11, 2016, "media outlets reported that, in late 2015, Chipotle hired two food safety experts in addition to" the consultants whom the Company had already hired. (Id. at ¶ 211).

Since the Class Period food-borne illness outbreaks, the Chipotle Board has been the target of a number of derivative shareholder actions. (SAC ¶ 212). In particular, the SAC points to two such actions filed in the U.S. District Court for the District of Colorado in the second half of 2016. (Id. at ¶¶ 212-13). Plaintiffs assert that the "redacted complaint" in one such action, Lashkari v. Ells , No. 1:16 Civ. 3180 (D. Colo.), "establishes that the most senior executives and directors at Chipotle had knowledge of, or recklessly disregarded, the pervasive food safety problems at the Company by at least August 2015 and did nothing to stop their continued proliferation." (Id. at ¶ 216).

Chipotle's financial results for 2016, presented in conjunction with its 2016 Form 10-K, reflect a substantial drop in profitability for the Company. (SAC ¶ 221). Specifically, for 2016, Chipotle reported $22.9 million in earnings, "compared with $475.6 million in earnings for fiscal year 2015," which represents a "95.2% drop in profitability year-over-year." (Id. ). "The Company directly attributed this drop to the negative fallout from the numerous Class Period [food-borne illness] outbreaks[.]" (Id. ).

B. The Alleged Material Misrepresentations or Omissions

Based on the above factual allegations, Plaintiffs point to six statements or categories of statements by Defendants that are alleged to have been false or misleading when made. These alleged misstatements and omissions are contained in financial statements filed by Chipotle with the SEC and in press releases issued by the Company.

1. The Commissary Switch Omissions

The first statement that Plaintiffs claim is false and misleading, contained in Chipotle's 2014 Form 10-K, reads as follows: "Our food is prepared from scratch, with the majority prepared in our restaurants while some is prepared with the same fresh ingredients in larger batches in commissaries." (SAC ¶¶ 222-23). The 2014 Form 10-K also states, "We may be at a higher risk for food-borne illness outbreaks than some competitors due to our use of fresh produce and meats rather than frozen, and our reliance on employees cooking with traditional methods rather than automation." (Id. at ¶ 222). Plaintiffs claim these statements were "materially false and misleading when made because the 2014 Form 10-K omitted and failed to disclose that the risk associated with Chipotle's produce was even greater following a transition in late 2014 to in-store processing of produce instead of commissary preparation." (Id. at ¶ 223 (emphasis omitted)).

Building on this theory, Plaintiffs also allege that the following statement was materially false and misleading: "There have been no material changes in our risk factors since our annual report on Form 10-K for the year ended December 31, 2014." (SAC ¶ 225). This statement is contained in Chipotle's Forms 10-Q for the fiscal quarters ending March 31, 2015, filed April 22, 2015 ("April 2015 Form 10-Q"); June 30, 2015, filed July 22, 2015 ("July 2015 Form 10-Q"); and September 30, 2015, filed October 21, 2015 ("October 2015 Form 10-Q"). (Id. at ¶¶ 225-26). Plaintiffs also contend that the October 2015 Form 10-Q was materially false and misleading because it failed to disclose the food-borne illness outbreaks that had only been discovered by Plaintiffs' counsel; that such outbreaks harmed the Company's operations and financial performance; that the Company failed to take sufficient remedial steps to prevent further outbreaks; and that as these outbreaks were disclosed to the public, "they were reasonably expected to have an increased damaging effect on the Company's operations and financial performance." (Id. at ¶ 227).

2. The Quality Assurance Omissions

Second , Plaintiffs allege that the following statement, contained in Chipotle's 2014 Form 10-K, under the heading "Quality Assurance and Food Safety," is materially false or misleading:

We are committed to serving safe, high quality food to our customers. Quality and food safety are integrated throughout our supply chain and everything we do; from the farms that supply our food all the way through to our front line. We have established close relationships with some of the top suppliers in the industry, and we actively maintain a limited list of approved suppliers from whom our distributors must purchase. Our quality assurance department establishes and monitors our quality and food safety programs for our supply chain. Our training and risk management departments develop and implement operating standards for food quality, preparation, cleanliness and safety in the restaurants. Our food safety programs are also designed to ensure that we comply with applicable federal, state and local food safety regulations.

(SAC ¶¶ 250-51 (emphasis omitted)).

Plaintiffs contend this statement was

materially false and misleading when made because Defendants omitted and failed to disclose that Chipotle's quality assurance department did not adequately monitor Chipotle's food safety programs, that in 2015 Chipotle failed to live up to its own food safety standards, that Chipotle executives ignored internal [safety, security, and risk ("SSR") ] audit reports designed to assess numerous food safety metrics in individual Chipotle restaurants, that these SSR audits were inherently deficient because the industry standard was to use external, not internal, audits and because Chipotle would pre-announce the audits to the restaurants, thereby allowing them time to cover up deficiencies, and that there were insufficient controls and procedures in place to ensure that operating standards had been properly implemented and adhered to.

(SAC ¶ 251). Plaintiffs also contend Defendants had a duty to disclose that Chipotle's late-2014 transition away from commissary produce preparation "greatly increase[ed] the risk of food-borne illness being contracted from its produce." (Id. at ¶ 252). In addition, Plaintiffs tether this theory to the alleged misstatements in the Company's Forms 10-Q as identified above. (See id. at ¶¶ 253-54).

3. The Traceability Omissions

Third , Plaintiffs claim that a statement contained in Chipotle's 2014 Form 10-K regarding the Company's use of a variety of produce types and produce suppliers, including "local or organic produce" and "farmers markets," was materially false or misleading. (SAC ¶ 289). The allegedly false or misleading statement reads as follows: "These produce initiatives may make it more difficult to keep quality consistent, and present additional risk of food-borne illnesses given the greater number of suppliers involved in such a system and the difficulty of imposing our quality assurance programs on all such suppliers." (Id. (emphasis omitted)). Plaintiffs argue that this statement was "false and misleading when made because Defendants omitted and failed to disclose that, regardless of the number of suppliers used by the Company, Chipotle lacked any ability during the Class Period to effectively or accurately trace ingredients through its supplier system[.]" (Id. at ¶ 290 (emphasis omitted)). Plaintiffs also claim this statement created a duty to disclose "that any produce-related food-borne illness outbreak from those suppliers would cause additional harm to Chipotle because" the Company lacked the ability to trace any contaminated produce back to its supplier. (Id. at ¶ 291). As with the alleged misstatements above, Plaintiffs also tie the alleged misstatements in the Company's Forms 10-Q to this alleged misstatement. (Id. at ¶ 292).

In addition, Plaintiffs claim that the following statements in Chipotle's November 3 and 10, 2015 press releases, respectively, were materially false and misleading: "no cause [for the October 2015 multistate E. coli outbreak] has yet been identified by investigating health officials," and "[n]o cause has been established between this issue [i.e. , the October 2015 multistate E. coli outbreak] and any ingredient." (SAC ¶¶ 293-94). Plaintiffs claim that these statements were "materially false and misleading when made" because they triggered a duty for Defendants to disclose that because Chipotle lacked the ability to trace contaminated ingredients to a specific supplier, a cause for the outbreak would not have been identifiable, and that this inability would prolong any investigation into the outbreak by the CDC. (See id. at ¶ 295).

4. The Guidance Misstatements and Omissions

Fourth , Plaintiffs claim that the following statements, contained in both Chipotle press releases announcing financial results for the first and second fiscal quarters of 2015 and Chipotle's Forms 8-K filed April 21, 2015, and July 21, 2015, were materially false and misleading: "For 2015, management expects ... [l]ow-to-mid single digit comparable restaurant sales increases." (SAC ¶¶ 326-28). Plaintiffs allege this statement was "materially false and misleading when made because Defendants did not have a reasonable basis to issue such guidance," given that the Company switched away from commissary produce processing, followed faulty food-safety monitoring protocols, and lacked the capability to trace any contaminated produce to its source. (Id. at ¶ 327; see id. at ¶ 329).

Similarly, Plaintiffs allege that statements contained in both a Chipotle press release announcing the Company's financial results for the third fiscal quarter in 2015 and the Company's October 20, 2015 Form 8-K, were materially false and misleading. (SAC ¶ 330). Those statements included an estimated sales performance for 2015 identical to those in the Forms 8-K above, as well as an expectation for 2016 of "[l]ow-single digit comparable restaurant sales increases." (Id. ). Plaintiffs allege that these statements were "false and misleading when made," in addition, because when Defendants made them, "Chipotle had experienced numerous food-borne illness outbreaks" that negatively impacted the Company's performance, that Chipotle failed to take sufficient remedial measures to avoid further outbreaks, and that the Company would suffer further damage when the outbreaks were publicized. (Id. at ¶ 331).

5. The Item 303 and Item 305 Omissions

Fifth , based on the facts alleged above, Plaintiffs contend that Chipotle's 2014 Form 10-K, and the Company's Forms 10-Q for the first, second, and third financial quarters of 2015, omitted information required by Items 303 and 503 of SEC Regulation S-K, 17 C.F.R. §§ 229.303, 229.503. (See SAC ¶¶ 344-45, 351). Plaintiffs claim these filings failed to satisfy Item 303 by omitting description of "any unusual or infrequent events or transactions or any significant economic changes that materially affected the amount of reported income," and "any known trends or uncertainties that have had or that the [Company] reasonably expects will have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations." (Id. at ¶ 346). As to Item 503, Plaintiffs claim Chipotle's 2014 Form 10-K failed to disclose sufficiently a "discussion of the most significant factors that make the [securities] speculative or risky," and that the 10-Q Forms failed to provide " 'any material changes from risk factors as previously disclosed' in Chipotle's 2014 Form 10-K." (Id. at ¶ 351).

6. The November 2015 Press Release Misstatement

Sixth and finally, Plaintiffs contend that a November 10, 2015 Chipotle press release was materially false and misleading. (SAC ¶ 358). The press release was issued shortly after the October 2015 multistate E. coli outbreak, and stated that " '[h]ealth officials have concluded that there is no ongoing risk from this incident[,]' and that there was 'no ongoing threat' related to" the October 2015 multistate E. coli outbreak. (Id. ). Plaintiffs contend that these statements "were materially false and misleading when made because they misrepresented" that investigations into the outbreak remained open and ongoing, that there remained "an ongoing public health risk and/or threat from this outbreak," and the statements omitted "that Chipotle lacked a reasonable basis to make representations on behalf of public health officials[.]" (Id. at ¶¶ 359-60).

C. Procedural Background

Plaintiffs filed the initial complaint in this action on January 8, 2016 (Dkt. #1), and on June 17, 2016, Plaintiffs amended their Complaint (Dkt. #49). On March 8, 2017, the Court granted Defendants' motion to dismiss the FAC. (Dkt. #79). In doing so, the Court held that alleged misstatements in Chipotle's 2014 Form 10-K, April 2015 Form 10-Q, and July 2015 Form 10-Q were not actionable because no alleged facts showed that they were inaccurate or "support[ed] an inference that any Defendants were aware of [any] heightened risk" associated with in-store produce preparation, and that statements "regarding Chipotle's food-safety programs and protocols [were] generalized statements that courts in this Circuit have consistently deemed inactionable puffery." Chipotle I , 2017 WL 933108, at *11-12.

As to alleged misstatements in Chipotle's October 20, 2015 Form 8-K, October 2015 Form 10-Q, November 10, 2015 press release, and an October 20, 2015 conference call, the Court held that although these statements may have been actionable, the Court was "skeptical" that they were material "given the highly publicized nature of the outbreaks documented in the Complaint," but even so, the claims based on these statements failed because the FAC did not sufficiently allege scienter. Chipotle I , 2017 WL 933108, at *12-13, *15-19. And because Plaintiffs' § 10(b) and Rule 10b-5 claims failed, their § 20(a) claims for control-person liability failed as well. Id. at *19. The Court thus dismissed the FAC but granted Plaintiffs leave to amend, while cautioning "that additional clarity need not require additional length," and "expect[ing] that Plaintiffs will consider carefully the Court's observations in [its] Opinion." Id.

Consequently, Plaintiffs filed the SAC on April 7, 2017, which includes as an exhibit the Declaration of L. Scott Donnelly, Ph.D. (the "Donnelly Declaration"). (Dkt. #80). On June 7, 2017, Defendants moved to dismiss the SAC and to strike the Donnelly Declaration along with any paragraphs in the SAC relying on the Donnelly Declaration. (See Dkt. #83-87). Plaintiffs opposed these motions on August 7, 2017 (Dkt. #90-92), and Defendants replied to the opposition on September 6, 2017 (Dkt. #94-95).

After briefing on the instant motions closed, Plaintiffs submitted several additional letters in an effort to shore up their arguments. On November 1, 2017, Plaintiffs provided a letter "to apprise the Court of facts and information obtained ... as part of [Plaintiffs'] ongoing investigation into the events detailed in the [SAC]." (Dkt. #96). Defendants responded to this letter two days later (Dkt. #97), and on November 6, 2017, the Court endorsed Defendants' letter, stating that Plaintiffs' letter "relies on factual allegations not contained in the [SAC] and responds to arguments raised in Defendants' reply papers," therefore, "[i]n the absence of a motion to amend or a motion to convert the pending motion to dismiss into a motion for summary judgment, the Court does not believe that it can consider Plaintiffs' newly-proffered factual information" (Dkt. #98). On November 8, 2017, Plaintiffs wrote the Court again "to clarify ... that Plaintiffs do not intend to file a motion to amend ... at this time." (Dkt. #99).

Plaintiffs wrote the Court yet again on December 13, 2017, to apprise the Court of a "recent decision from the Second Circuit that," Plaintiffs argued, "further supports denial of Defendants' motion to dismiss." (Dkt. #100 (footnote call number omitted)). That "recent decision" was a summary order by the Second Circuit, Christine Asia Co. Ltd. v. Ma , No. 16-2519-cv, 718 Fed.Appx. 20, 2017 WL 6003340 (2d Cir. Dec. 5, 2017) (summary order). Defendants responded to the letter on December 22, 2017. (Dkt. #101). The Court has considered these submissions, along with the parties' briefing.

DISCUSSION

A. Defendants' Motion to Strike Is Granted in Part

Before addressing the adequacy of the pleadings, the Court must determine what documents it may properly consider. In that vein, Defendants move to strike the Donnelly Declaration and those paragraphs of the SAC that rely on it. Declarant L. Scott Donnelly holds a Ph.D. in Food Science and is "the former Director of Product Safety for the Nutritional Business Unit of Wyeth (Pfizer) Pharmaceuticals." (Donnelly Decl. ¶¶ 1-6). The Declaration offers Donnelly's opinion on food-safety standards and practices for fast-food companies; the effects of Chipotle's alleged shift away from commissary produce processing; Chipotle's alleged inability to trace its ingredients to their source; and the efficacy of other food-safety practices at Chipotle. (See id. at ¶¶ 15-42). As set forth herein, the Court agrees that it may not consider the Declaration in judging the sufficiency of the SAC. Moreover, the Court will not consider any conclusory allegations in the SAC that are based on the Declaration, although it will consider well-pleaded factual allegations that cite to the Declaration.

1. Applicable Law

Federal Rule of Civil Procedure 12(f) allows a court to "strike from a pleading ... any redundant, immaterial, impertinent, or scandalous matter." Federal courts have discretion to decide whether to grant a motion to strike. Gaughan v. Rubenstein , 261 F.Supp.3d 390, 412 (S.D.N.Y. 2017) (quoting Orientview Techs. LLC v. Seven for All Mankind, LLC , No. 13 Civ. 538 (PAE), 2013 WL 4016302, at *3 (S.D.N.Y. Aug. 7, 2013) ), appeal withdrawn , No. 17-2490, 2017 WL 7532583 (2d Cir. Dec. 6, 2017). Although courts generally disfavor motions to strike, a court may grant a motion to strike where "the pleading is obviously insufficient as a matter of law." Orientview Techs. , 2013 WL 4016302, at *3.

In the context of ruling on a motion to dismiss, courts are generally limited to considering facts alleged in the complaint, any written instrument attached to a complaint as an exhibit pursuant to Federal Rule of Civil Procedure 10(c), and any document incorporated into a complaint by reference. Gant v. Wallingford Bd. of Educ. , 69 F.3d 669, 674 (2d Cir. 1995). Rule 10(c) provides that "[a] copy of a written instrument that is an exhibit to a pleading is part of the pleading for all purposes." The Second Circuit considers such "written instrument" to include only "legal document[s] that define rights, duties, entitlements, or liabilities, such as a statute, contract, will, promissory note, or share certificate." Smith v. Hogan , 794 F.3d 249, 254-55 (2d Cir. 2015) (quoting BLACK'S LAW DICTIONARY (10th ed. 2014)) (refusing to consider plaintiff's affidavit attached to complaint that did not "evidenc[e] legal rights or duties" nor "set[ ] forth the legal basis for [plaintiff's] claims").

To be incorporated into a complaint by reference, a plaintiff must "rely on the terms and effect of the document in drafting the complaint." Nicosia v. Amazon.com, Inc. , 834 F.3d 220, 231 (2d Cir. 2016) (quoting Global Network Commc'ns, Inc. v. City of New York , 458 F.3d 150, 156 (2d Cir. 2006) ). "Merely mentioning a document in the complaint will not satisfy this standard[.]" Goel v. Bunge, Ltd. , 820 F.3d 554, 559 (2d Cir. 2016). And "even if a document is 'integral' to the complaint, it must be clear on the record that no dispute exists regarding the authenticity[, relevance,] or accuracy of the document." DiFolco v. MSNBC Cable L.L.C. , 622 F.3d 104, 111 (2d Cir. 2010) (quoting Faulkner v. Beer , 463 F.3d 130, 134 (2d Cir. 2006) ).

2. Analysis

Within the framework outlined above, the Court may not consider the Donnelly Declaration, either as a written instrument under Rule 10(c) or as incorporated into the SAC by reference. Plaintiffs so much as concede that the Declaration does not satisfy Rule 10(c) by arguing solely that the Court may consider the Declaration as being incorporated into the SAC by reference. (See Pl. Strike Opp. 3-6). And for good reason: the Second Circuit has refused to consider affidavits attached to a complaint under Rule 10(c) where they do not provide the rights from which the complaint's claims spring. Smith , 794 F.3d at 255.

So too here: The Declaration was created long after the events giving rise to this litigation and is thus not the type of "written instrument" falling within the purview of Rule 10(c). See, e.g. , Murphy v. Cadillac Rubber & Plastics, Inc. , 946 F.Supp. 1108, 1115 (W.D.N.Y. 1996) (holding that plaintiff's affidavits and resignation letter, and attorney's affirmation were "not 'written instruments' within the meaning of Rule 10(c)"). Indeed, as a useful point of reference, the Fifth Circuit has upheld a district court's decision to strike an expert opinion attached to a complaint in a securities fraud case, noting that "[e]ven if non-opinion portions of an expert's affidavit constitute an instrument pursuant to Rule 10, opinions cannot substitute for facts under the [Private Securities Litigation Reform Act]." Fin. Acquisition Partners LP v. Blackwell , 440 F.3d 278, 285-86 (5th Cir. 2006) ; see also DeMarco v. DepoTech Corp. , 149 F.Supp.2d 1212, 1220-22 (S.D. Cal. 2001) (striking expert opinion attached to complaint in securities fraud case under Rule 10 ); In re Ashworth, Inc. Sec. Litig. , No. 99 Civ. 0121-L (JAH), 2001 WL 37119391, at *3 (S.D. Cal. Dec. 3, 2001) (same).

Nor may the Court consider the Donnelly Declaration as incorporated into the SAC by reference. Although the incorporation-by-reference doctrine "has its greatest applicability in cases alleging fraud"-to test, for instance, the accuracy of SEC filings-"the court is to consider them on a Rule 12(b)(6) motion 'only to determine what the documents stated,' and 'not to prove the truth of their contents. ' " Roth v. Jennings , 489 F.3d 499, 509 (2d Cir. 2007) (quoting Kramer v. Time Warner Inc. , 937 F.2d 767, 774 (2d Cir. 1991) ) (emphases in Roth ). By asking the Court to consider the Donnelly Declaration as part and parcel of the allegations in the SAC, Plaintiffs would have the Court do just that-consider the Donnelly Declaration for the truth of the opinions it contains. And, most fundamentally, the Donnelly Declaration was drafted for the purpose of this litigation ; Plaintiffs therefore could not have relied on its terms while drafting their complaint. See Global Network Commc'ns , 458 F.3d at 157 (concluding that document that "was issued after [the] action was initiated ... logically could not have been contemplated by, much less integral to, the complaint").

Moreover, the Defendants clearly challenge the accuracy of the Donnelly Declaration, which provides a second reason why it may not be incorporated by reference. See DiFolco , 622 F.3d at 111. Indeed, evidentiary uncertainty is a primary reason why courts have refused to consider such submissions at the pleadings stage. See, e.g. , Blackwell , 440 F.3d at 285-86 ("[A]llowing plaintiffs to rely on an expert's opinion in order to state securities claims requires a court to 'confront a myriad of complex evidentiary issues not generally capable of resolution at the pleading stage" and "might require ruling on the expert's qualifications." (quoting DeMarco , 149 F.Supp.2d at 1221 )).

The Court therefore grants Defendants' motion to strike the Donnelly Declaration from the SAC. And although the Court does not grant that portion of Defendants' motion requesting it to strike any paragraphs from the SAC that rely on the Declaration, the Court will not, and indeed cannot, consider any conclusory allegations in the SAC based on the Declaration. See, e.g. , In re Ashworth, Inc. Sec. Litig. , 2001 WL 37119391, at *3 (striking expert declaration and refusing "to accept as true" any paragraphs in complaint alleging expert's "legal conclusions").

B. Defendants' Motion to Dismiss Is Granted in Full

1. Applicable Law

a. Motions to Dismiss Under Federal Rule of Civil Procedure 12(b)(6)

When considering a motion to dismiss under Rule 12(b)(6), a court should "draw all reasonable inferences in [the plaintiff's] favor, assume all well-pleaded factual allegations to be true, and determine whether they plausibly give rise to an entitlement to relief." Faber v. Metro. Life Ins. Co. , 648 F.3d 98, 104 (2d Cir. 2011) (internal quotation marks omitted) (quoting Selevan v. N.Y. Thruway Auth. , 584 F.3d 82, 88 (2d Cir. 2009) ). Thus, "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ).

"While Twombly does not require heightened fact pleading of specifics, it does require enough facts to 'nudge [a plaintiff's] claims across the line from conceivable to plausible.' " In re Elevator Antitrust Litig. , 502 F.3d 47, 50 (2d Cir. 2007) (per curiam) (quoting Twombly , 550 U.S. at 570, 127 S.Ct. 1955 ). "Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of entitlement to relief.' " Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly , 550 U.S. at 557, 127 S.Ct. 1955 ). Moreover, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id.

b. Heightened Pleading Standard

A claim for securities fraud must meet the heightened pleading requirements of Federal Rule of Civil Procedure 9(b) and the Private Securities Litigation Reform Act of 1996 (the "PSLRA"), 15 U.S.C. § 78u-4(b), meaning that the claim must "stat[e] the circumstances constituting fraud with particularity." Special Situations Fund III QP, L.P. v. Deloitte Touche Tohmatsu CPA, Ltd. , 33 F.Supp.3d 401, 423 (S.D.N.Y. 2014). Rule 9(b), which is applicable to any fraud claim, requires a complaint to identify: "[i] the allegedly fraudulent statements, [ii] the speaker, [iii] where and when the statements were made, and [iv] why the statements were fraudulent." Pehlivanian v. China Gerui Advanced Materials Grp., Ltd. , 153