In re Sunedison, Inc. (300 F. Supp. 3d 444, 2018)

CASTEL, U.S.D.J.

SunEdison, Inc. ("SunEdison," or the "Company") was briefly one of the world's largest renewable-energy companies. As described in the Second Amended Consolidated Securities Class Action Complaint (the "Complaint"), from 2014 to 2016, SunEdison's management made a series of disastrous and short-sighted business decisions, many of which grew out of urgent liquidity needs caused by the Company's expansion. It filed for Chapter 11 bankruptcy protection in 2016,

According to plaintiffs, while SunEdison scrambled to raise financing, defendants made a series of material misstatements and omissions about the true state of affairs. In August 2015, SunEdison raised $650 million through an offering of preferred shares (the "Preferred Offering"). Plaintiffs allege that in connection with the Preferred Offering, material misstatements and omissions were made or approved by management, board members and underwriters, thereby violating sections 11 and 12(a)(2) of the Securities Act of 1933, 15 U.S.C. §§ 77k, 77l (the "Securities Act").

Plaintiffs also allege that from August 7, 2014 through April 4, 2016 (the "relevant period"), Ahmad Chatila, who was SunEdison's Chief Executive Officer, and Brian Wuebbels, who was its Chief Financial Officer, knowingly made material misstatements and omissions about SunEdison's liquidity and financial strength, resulting in the artificial inflation of the Company's share price. They allege that Chatila and Wuebbels violated sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. §§ 78j(b) and 78t(a), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5.

All defendants move to dismiss plaintiffs' Securities Act claims, on the basis that the Complaint fails to allege any material misstatement or omission in the offering documents connected to the Preferred Offering. Separately, Chatila and Wuebbels move to dismiss all claims brought under section 10(b) and Rule 10b-5, and urge both that the Complaint fails to allege that they made any material misstatements and omissions and that it fails to raise a cogent and compelling inference of scienter. Finally, defendant KPMG, LLP ("KPMG") moves to dismiss the Securities Act claim brought against it in its capacity as SunEdison's external auditor.

Plaintiffs have identified dozens of statements that they believe are actionable. As will be explained, in nearly every instance, the Complaint has failed to allege that these statements omitted or misstated material information. Corporate mismanagement is not a violation of the federal securities laws. Both the Securities Act and the Exchange Act require factual allegations that show a material misstatement or omission. The Private Securities Litigation Reform Act ("PSLRA") also requires claims under section 10(b) and Rule 10b-5 to be supported by facts that raise a cogent and compelling inference of scienter.

On plaintiffs' Securities Act claims, the Court concludes that the Complaint has alleged that defendants omitted material information about the existence of an August 2015 margin call on a margin loan by the Company, and omitted the existence of a high-interest loan that the Company allegedly took to from Goldman Sachs in order to pay down that margin call. The Court also concludes that, for the purposes of the Securities Act claims, the Company's descriptions of lender recourse available on certain debts owed by SunEdison were so contradictory and confusing that they amounted to a material misstatement.

As to plaintiffs' fraud claims under section 10(b) and Rule 10b-5 of the Exchange Act, the Complaint has adequately alleged that defendant Chatila recklessly misrepresented the projected point in time at which SunEdison expected to generate cash. The Complaint otherwise fails to identify a material misstatement or omission that was made with scienter. The Complaint repeatedly fails to connect allegations of corporate mismanagement, including the purported looting of a SunEdison subsidiary, with a reckless misstatement or omission made to investors. With the exception of Chatila's projection about cash generation, the motion to dismiss plaintiffs' claims under section 10(b) and Rule 10b-5 is therefore granted.

Lastly, KPMG's motion to dismiss is granted in full. The Complaint has failed to plausibly allege that KPMG misrepresented its compliance with relevant accounting standards when it audited the Company's financial reporting and opined on its financial controls, as set forth in its Form 10-K for fiscal year 2014.

BACKGROUND

A. Overview of the Parties.

The Municipal Employees' Retirement System of Michigan ("MERS") is lead plaintiff in this action. (Compl't ¶ 1.) MERS manages the retirement and employee-benefit plans of approximately 800 municipalities in Michigan. (Compl't ¶ 18.) It holds $9.3 billion in assets. (Compl't ¶ 18.) MERS purchased SunEdison's common stock during the relevant period. (Compl't ¶ 18.) The second named plaintiff, the Arkansas Teacher Retirement System ("ATRS"), manages retirement benefits for Arkansas's public-school employees, and has $15.5 billion in total assets. (Compl't ¶ 19.) ATRS purchased shares in SunEdison's Preferred Offering. (Compl't ¶ 19.) MERS and ATRS purport to bring claims on behalf of those who purchased common stock in SunEdison, sellers of publicly traded put options of SunEdison common stock, and purchasers of preferred SunEdison shares in the August 2015 Preferred Offering. (Compl't ¶ 1, 535.)

During the relevant period, defendant Ahmad Chatila was the president and CEO of SunEdison, as well as a director of the Company. (Compl't ¶ 21.) He was also chairman of the board of SunEdison's two "YieldCo" subsidiaries, Terraform Power ("TERP") and Terraform Global ("Global"). (Compl't ¶ 21.) Defendant Brian Wuebbels was Executive Vice President, Chief Administrative Officer and CFO of SunEdison. (Compl't ¶ 22.) Wuebbels also was president and CEO of both TERP and Global from November 2015 through March 30, 2016. (Compl't ¶ 22.) Plaintiffs' claims under section 10(b) and Rule 10b-5 are brought only against Chatila and Wuebbels.

Additional defendants are alleged to have violated the Securities Act. Plaintiffs bring Securities Act claims against members of SunEdison's board of directors at the time of the Preferred Offering (the "Director Defendants"), the underwriters of the preferred offering (the "Underwriter Defendants"), and KPMG, the Company's outside auditor. (Compl't ¶¶ 431-51.)

SunEdison itself is not a defendant in this case, and, as of the date of this Memorandum and Order, is covered by the Bankruptcy Code's automatic stay provision, 11 U.S.C. § 362. (Compl't ¶ 24.)

B. Overview of SunEdison's Business.

During the relevant period, SunEdison was one of the world's largest renewable energy companies. (Compl't ¶ 25.) It maintained two separate business segments. (Compl't ¶ 25.) The first segment, known as a "DevCo," developed new renewable energy projects. (Compl't ¶ 26.) The second segment is known as a "YieldCo." (Compl't ¶ 25.)

The YieldCos included two subsidiaries under SunEdison's control: Terraform Power ("TERP") and Terraform Global ("Global"). (Compl't ¶¶ 2, 25, 27.) SunEdison formed TERP in July 2014. (Compl't ¶ 28.) TERP's business focused on economically developed energy markets, including the United States. (Compl't ¶ 28.) SunEdison formed Global in July 2015, with the intent that its business would focus on developing markets including Brazil, India and China. (Compl't ¶ 28.)

The two YieldCos were publicly traded companies that owned completed energy facilities. (Compl't ¶ 27.) As the DevCo, SunEdison developed new energy projects, which, once completed, it sold to the YieldCos.

(Compl't ¶ 27.) SunEdison exercised control over TERP and Global through ownership of more than 90 percent of their voting shares and by carrying out day-to-day management, accounting and regulatory duties. (Compl't ¶ 28.)

SunEdison's separation of its DevCo business and its two YieldCo spinoffs was explained as a measure that would bring favorable returns to investors. (Compl't ¶ 30.) The Company's DevCo business expected to generate a steady cash flow from the sale of its completed projects to the YieldCos. (Compl't ¶ 30.) As public companies, the YieldCos would purchase the DevCo's developments using money raised in stock offerings. (Compl't ¶ 30.) SunEdison also believed that because the YieldCos functioned as captive buyers for its projects, it could reduce financing costs and "get superior value for those projects." (Compl't ¶ 30.) In addition, as a major shareholder of the YieldCos, SunEdison would profit from any dividends that they issued. (Compl't ¶ 30.)

C. Overview of SunEdison's Expansion and Collapse.

Plaintiffs allege that after SunEdison adopted its two-tiered, DevCo and YieldCo business model, management undertook a series of disastrous measures that ultimately drove the Company to bankruptcy. The Court will discuss in detail the defendants' allegedly material misstatements and omissions below, but an overview of SunEdison's decline is useful context for plaintiffs' theories of liability.

From 2013 to 2015, SunEdison pursued an aggressive growth strategy, during which its debt ballooned from $2.6 billion to $10.7 billion. (Compl't ¶ 32.) The Company went on an acquisition spree. In the summer of 2015, SunEdison announced eleven major transactions, a partial list of which includes the purchase of companies such as Latin America Power Holding, B.V. ("Latin American Power") and Continuum Wind Energy Limited; acquisition of wind-power plants in Idaho and Oklahoma; acquisition of a solar-panel installer in the United Kingdom; and construction of a wind-power project in Maine. (Compl't ¶¶ 42-43.) Not all of these acquisitions were consummated, including the planned acquisition of Latin American Power.

SunEdison required significant financing to complete these transactions. As will be discussed, plaintiffs allege that SunEdison's expansion strategy left it with a constant need to obtain additional financing on favorable terms. When the Company did not have ready access to cash, payment to key vendors was delayed or never made. The Complaint alleges that the Company made material omissions or misstatements about the terms of outside funding that it obtained in 2015, including the existence of a margin call on a previously disclosed margin loan, the terms of a high-interest loan from Goldman Sachs, and certain creditors' ability to take recourse against SunEdison itself.

The Complaint highlights two loans obtained by SunEdison. On January 29, 2015, SunEdison took out a $410 million margin loan (the "Margin Loan") in order to finance the purchase of First Wind LLC, a company it was jointly acquiring with TERP. (Compl't ¶ 33.) Under the Margin Loan agreement, SunEdison agreed to the prepayment or the posting of additional collateral in the event that the common stock of TERP fell below a set price. (Compl't ¶ 34.) On or about August 7, 2015, TERP's share price fell below that threshold, thus triggering a margin call that allegedly sent the Company scrambling for cash. (Compl't ¶ 332.) Although the Margin Loan had been disclosed to investors, the Company did not publicly acknowledge the margin call until August 25, 2015, one week after the Preferred Offering.

The Complaint also describes a high-interest, second-lien loan (the "Second-Lien Loan") that SunEdison took from Goldman Sachs in August 2015. (Compl't ¶ 102.) Under this "secretly negotiated" loan, SunEdison borrowed $169 million at 9.25% interest, plus an origination fee of $9 million. (Compl't ¶ 102.) Plaintiffs state that "this enormously high rate" and the fact that the loan carried a second lien reflected that SunEdison was a "cash-strapped" company whose assets had already been pledged to other, first-lien loans. (Compl't ¶ 102.) According to the Complaint, the Second-Lien Loan was taken in order to make payments on the margin call. (Compl't ¶ 118.) Like the margin call, the existence and terms of the Second-Lien Loan were not disclosed in the offering documents.

On August 17, 2015, SunEdison announced the Preferred Offering of 650,000 convertible preferred securities priced at $1,000 per share. (Compl't ¶ 120.) On that same date, SunEdison filed an offering prospectus and a shelf registration statement. (Compl't ¶ 120.) The Preferred Offering was underwritten by the Underwriter Defendants, and was "for general corporate purposes." (Compl't ¶ 120.) Plaintiffs' Securities Act claims are based entirely on the offering documents and the documents that they incorporated by reference. According to the Complaint, when SunEdison's financial conditions were fully revealed, the value of these preferred shares dropped from $1,000 per share to $23 per share. (Compl't ¶ 7.)

As depicted in the Complaint, some of SunEdison's liquidity problems arose because the Company was plagued by ineffective internal financial controls, which defendants Chatila and Wuebbels certified as effective under the Sarbanes-Oxley Act. Plaintiffs allege that the Company never integrated the accounting systems of its corporate acquisitions, and that, with no unified accounting system, its employees used a "piecemeal" approach that "made it impossible" to know what SunEdison owed its creditors. (Compl't ¶¶ 70-73.) The Company attempted to consolidate all financial data into a single Excel spreadsheet, which one manager called "literally the most complicated spreadsheet" he had ever seen. (Compl't ¶ 76.) Plaintiffs assert that Excel spreadsheets are not acceptable accounting platforms because they lack input controls, so that one error can generate a domino effect of inaccuracies. (Compl't ¶¶ 76-78.)

The Complaint identifies subsequent disclosures that the Company made from August 2015 through April 2016 and the correlated drops in share price, which, plaintiffs allege, reflected the market's reaction to learning the truth about SunEdison's dwindling liquidity. (Compl't ¶¶ 123-253.) Among other things, the Complaint also alleges that SunEdison's cash-strapped DevCo business coerced Global into purchasing a project for $231 million, and did so after firing dissenters in Global's management and installing new board members. (Compl't ¶¶ 181-214.) In March 2016, the Company announced that it was delaying the filing of its annual 10-K, and acknowledged weaknesses in the Company's internal controls. (Compl't ¶¶ 237-44.) On March 28, 2016, the press reported that the SEC had commenced an investigation of SunEdison. (Compl't ¶ 245-47.)

On April 21, 2016, SunEdison and 25 affiliated entities filed petitions for bankruptcy protection in the Bankruptcy Court of this District. (Compl't ¶ 254.) SunEdison claimed more than $16 billion in debt, inclusive of debts held by TERP and Global. (Compl't ¶ 254.)

MOTION TO DISMISS STANDARD.

A. Rule 12(b)(6) Standard.

To survive a motion to dismiss under Rule 12(b)(6), "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 Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). Legal conclusions are not entitled to the presumption of truth, and a court assessing the sufficiency of a complaint disregards them. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. Instead, the Court must examine only the well-pleaded factual allegations, if any, "and then determine whether they plausibly give rise to an entitlement to relief." Id. at 679, 129 S.Ct. 1937. The Complaint must include non-conclusory factual allegations that " 'nudge[ ]' " its claims " 'across the line from conceivable to plausible.' " Id. at 680, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955 ).

In addition to considering the Complaint's allegations, a court "may consider any written instrument attached to the complaint, statements or documents incorporated into the complaint by reference, legally required public disclosure documents filed with the SEC, and documents possessed by or known to the plaintiff and upon which it relied in bringing the suit." ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007).

When claims brought under sections 11 and 12(a)(2) of the Securities Act are premised on fraudulent conduct, courts will apply the heightened scrutiny of Rule 9(b), Fed. R. Civ. P., to those claims. See, e.g., Rombach v. Chang, 355 F.3d 164, 170-71 (2d Cir. 2004). Although plaintiffs' claims under sections 11 and 12(a)(2) of the Securities Act overlap with their section 10(b) and Rule 10b-5 claims under the Exchange Act, defendants do not urge that Rule 9(b) applies to the Securities Act claims. The Court therefore reviews plaintiffs' Securities Act claims pursuant to Rule 8(a), Fed. R. Civ. P., and not the heightened particularity standard of Rule 9(b). See generally Hutchison, 647 F.3d 479, 484 (2d Cir. 2011) (reviewing Securities Act claims under notice-pleading standard when plaintiffs disclaim fraud and defendants "do not contend otherwise.").

B. The Heightened Pleading Required by Rule 9(b) and the PSLRA.

A plaintiff bringing claims under section 10(b) and Rule 10b-5 must "satisfy the heightened pleading requirements of the [PSLRA] and Rule 9(b) of the Federal Rules of Civil Procedure." Indiana Pub. Ret. Sys. v. SAIC, Inc., 818 F.3d 85, 92 (2d Cir. 2016), cert. granted sub nom. Leidos, Inc. v. Indiana Pub. Ret. Sys., --- U.S. ----, 137 S.Ct. 1395, 197 L.Ed.2d 553 (2017).

"[T]he PSLRA specifically requires a complaint to demonstrate that the defendant made '[m]isleading statements and omissions ... of a material fact,' 15 U.S.C. § 78u-4(b)(1), and acted with the '[r]equired state of mind' (the 'scienter requirement'), id. § 78u-4(b)(2)." Emp. Ret. Sys. of Gov't of the Virgin Islands v. Blanford, 794 F.3d 297, 305 (2d Cir. 2015). "The plaintiff may satisfy this requirement by alleging facts (1) showing that the defendants had both motive and opportunity to commit the fraud or (2) constituting strong circumstantial evidence of conscious misbehavior or recklessness." ATSI, 493 F.3d at 99. " '[I]n determining whether the pleaded facts give rise to a 'strong' inference of scienter, the court must take into account plausible opposing inferences.' " Id. (quoting Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 336, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007) ). A complaint "therefore must allege with particularity facts that give rise to 'a strong inference' that [defendants] acted consciously and recklessly in omitting or misrepresenting financial information." Indiana Pub. Ret. Sys., 818 F.3d at 93.

Similarly, Rule 9(b) states: "In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." "To satisfy the pleading standard for a misleading statement or omission under Rule 9(b), a complaint must '(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent.' " Emp. Ret. Sys. of Gov't of the Virgin Islands, 794 F.3d at 305 (quoting Rombach, 355 F.3d at 170 ). "This pleading constraint serves to provide a defendant with fair notice of a plaintiff's claim, safeguard his reputation from improvident charges of wrongdoing, and protect him against strike suits." ATSI, 493 F.3d at 99.

DISCUSSION.

I. DEFENDANTS' MOTION TO DISMISS THE SECURITIES ACT CLAIMS ARE GRANTED IN PART AND DENIED IN PART.

A. Overview of the Securities Act.

Counts Three through Five allege that all defendants violated provisions of the Securities Act. The Securities Act claims relate in their entirety to the Preferred Offering of August 2015, in which SunEdison announced the sale of $650 million in preferred shares. These claims are directed to statements and omissions made in the registration statement, the prospectus supplement, and SunEdison's earlier SEC filings incorporated by reference therein (the "Offering Documents").

Plaintiffs allege that defendants violated the Securities Act by making material misstatements and omissions related to SunEdison's liquidity and available cash, omitting information concerning the margin call of August 2015, omitting the Second-Lien Loan, misrepresenting the availability of creditor recourse against SunEdison's debt, misstating the adequacy of internal controls in a certification by Chatila and Wuebbels and by omitting a description of Company liquidity trends required by Item 303 of the SEC rules. (Compl't ¶¶ 452-78.) Plaintiffs allege that the Underwriter Defendants failed to perform adequate due diligence on statements contained in the offering documents. (Compl't ¶¶ 480-82.)

Plaintiffs allege that all defendants violated section 11 of the Securities Act. (Compl't ¶ 504-08.) "Section 11 of the Securities Act prohibits materially misleading statements or omissions in registration statements filed with the SEC." In re Morgan Stanley Info. Fund Sec. Litig., 592 F.3d 347, 358 (2d Cir. 2010) (citing 15 U.S.C. § 77k(a) ). "To state a claim under section 11, the plaintiff must allege that: (1) she purchased a registered security, either directly from the issuer or in the aftermarket following the offering; (2) the defendant participated in the offering in a manner sufficient to give rise to liability under section 11; and (3) the registration statement 'contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading.' " Id. at 358-59 (quoting 15 U.S.C. § 77k(a) ). Section 11 " 'imposes strict liability on issuers and signatories, and negligence liability on underwriters,' for material misstatements or omissions in a registration statement." Fed. Hous. Fin. Agency for Fed. Nat'l Mortg. Ass'n v. Nomura Holding Am., Inc., 873 F.3d 85, 99 (2d Cir. 2017) (quoting NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., 693 F.3d 145, 156 (2d Cir. 2012) ). For a statement of opinion to be actionable under section 11, a plaintiff must plausibly allege that the opinion was not honestly held by the speaker at the time that the statement was made. See Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund, --- U.S. ----, 135 S.Ct. 1318, 1326-27, 191 L.Ed.2d 253 (2015).

Plaintiffs also allege that the Underwriter Defendants violated section 12(a)(2) of the Securities Act. (Compl't ¶¶ 519-527.) "Section 12(a)(2) provides similar redress where the securities at issue were sold using prospectuses or oral communications that contain material misstatements or omissions." In re Morgan Stanley, 592 F.3d at 359 (citing 15 U.S.C. § 77l (a)(2).) Section 12(a)(2) claims may be brought against a "statutory seller," which includes those who successfully solicited the purchase of the security in service of their own financial interests. Id."[T]he elements of a prima facie claim under section 12(a)(2) are: (1) the defendant is a 'statutory seller'; (2) the sale was effectuated 'by means of a prospectus or oral communication'; and (3) the prospectus or oral communication 'include[d] an untrue statement of a material fact or omit[ted] to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading.' " Id. (quoting 15 U.S.C. § 77l (a)(2) ).

The Second Circuit has characterized sections 11(a) and 12(a)(2) as "Securities Act siblings with roughly parallel elements ...." Id. Section 11 imposes " 'virtually absolute' liability" as to issuers, while other defendants under sections 11 and 12(a)(2) "may be held liable for mere negligence." Id."Moreover, unlike securities fraud claims pursuant to section 10(b) of the [Exchange Act], plaintiffs bringing claims under sections 11 and 12(a)(2) need not allege scienter, reliance, or loss causation." Id.

Finally, plaintiffs allege that Chatila, Wuebbels and the Director Defendants are liable as control persons under section 15 of the Securities Act, 15 U.S.C. § 77o . (Compl't ¶¶ 528-33.) Section 15 establishes joint and several liability for any control person, and requires a plaintiff to prove both a primary violation and control by defendants over a primary violator. FHFA, 873 F.3d at 99.

B. The Complaint Has Plausibly Alleged Material Omissions and Misstatements Concerning Aspects of the Company's Borrowing Arrangements, but Defendants' Motion to Dismiss Is Otherwise Granted.

1. Plaintiffs' Securities Act Claims Directed to the Strength of the Company's Liquidity Are Dismissed.

According to the Complaint, defendants materially misrepresented the strength and prospects of SunEdison's liquidity in its 10-K for 2014, as well as in its 10-Qs for the first and second quarters of 2015. (Compl't ¶¶ 453-55.) These filings were incorporated into the Offering Documents by reference.

Each of the three filings contains the following passage, which plaintiffs claim was materially false and misleading:

We believe our liquidity will be sufficient to support our operations for the next twelve months, although no assurances can be made if significant adverse events occur, or if we are unable to access project capital needed to execute our business plan.

(Compl't ¶¶ 453-55.) The three filings also stated that "[w]e expect cash on hand, 2015 operating cash flows, project finance debt, the Solar Energy credit facility, the Terraform term loan and project construction facility to provide sufficient capital to support the acquisition and construction phases of our currently planned projects for 2015 and otherwise meet our capital needs for the remainder of 2015." (Compl't ¶¶ 453-55.)

According to the Complaint, these statements were materially false and misleading because, at the time that they were made, "the Company was already suffering from a liquidity crisis." (Compl't ¶ 456.) The Complaint alleges that in 2014 and 2015, SunEdison was not paying essential vendors, and that its cash shortfalls had become the subject of weekly calls among the Company's senior management. (Compl't ¶¶ 456-58.)

For claims under both the Exchange Act and the Securities Act, the PSLRA creates a "safe harbor" for forward-looking statements. 15 U.S.C. § 77z-2(c) (Securities Act); Id. § 78u-5(c) (Exchange Act). For the Securities Act, the PSLRA provides that in a private action, a person "shall not be liable" for claims based on "an untrue statement" or "material omission" if the forward-looking statement is identified as forward-looking, and "is accompanied by meaningful cautionary statements identifying important factors that could cause the actual results to differ materially from those in the forward-looking statement ...." Id. § 77z-2(c)(1)(A)(i). There is no duty to update a forward-looking statement. Id. § 77z-2(d).

The provision governing for the Exchange Act similarly states: "On any motion to dismiss based upon subsection (c)(1), the court shall consider any statement cited in the complaint and any cautionary statement accompanying the forward-looking statement, which are not subject to material dispute, cited by the defendant." Id. § 78u-5(e).

To qualify as a forward-looking statement, language need not "be contained in a separate section or specifically labeled" as "forward-looking." Slayton v. Am. Exp. Co., 604 F.3d 758, 769 (2d Cir. 2010). "[T]he facts and circumstances of the language used in a particular report will determine whether a statement is adequately identified as forward-looking." Id. It is a "common-sense proposition" that a statement that "projects results in the future" and uses "words such as 'expect' " are forward-looking. Id.

Similarly, courts have adopted a "bespeaks caution" doctrine, pursuant to which " 'alleged misrepresentations in a stock offering are immaterial as a matter of law [if] it cannot be said that any reasonable investor could consider them important in light of adequate cautionary language set out in the same offering.' " Rombach, 355 F.3d at 173 (quoting Halperin v. eBanker USA.com, Inc., 295 F.3d 352, 357 (2d Cir. 2002) ).

It is also relevant that the plaintiffs point to statements made in the Management's Discussion and Analysis ("MD & A") sections of the filings. "[T]he purpose of the MD & A is to present the company's business 'as seen through the eyes of those who manage [it].' " Slayton, 604 F.3d at 767 (quoting Commission Guidance Regarding Management's Discussion and Analysis of Financial Condition and Results of Operations, 68 Fed. Reg. 75,056, 75,056 (Dec. 29, 2003) ). "Congress explicitly included 'a statement of future economic performance ... contained in a discussion and analysis of financial condition by the management' in its definition of a forward-looking statement, 15 U.S.C. § 78u-5(i)(1)(C)...." Slayton, 604 F.3d at 767.

According to defendants, the statements concerning Company liquidity were forward-looking and accompanied by meaningful cautionary language about the Company's need to continue raising funds, as well as the warning that such funding may not be available. The Form 10-K for 2014 and the two Form 10-Qs for the first quarter of 2015 each stated:

In addition to our need to maintain sufficient liquidity from cash flow from our operations and borrowing capacity under our credit facilities, we will need to raise additional funds in the future in order to meet the operating and capital needs of our renewable energy system development business..... However, there can be no assurances that such project financing or equity will be available to us, or available on terms and conditions we find acceptable. We may not be able to sell renewable energy projects or secure adequate debt financing for such projects on favorable terms, or at all, at the time when we need such funding.

In the event that we are unable to raise additional funds, our liquidity will be adversely impacted, we may not be able to maintain compliance with our existing debt covenants and our business will suffer. If we are able to secure additional financing, these funds could be costly to secure and maintain and could significantly impact our earnings and liquidity.

(See, e.g., Bartlett Dec. Ex. 2 at 16; Ex. 9 at 50; Ex. 10 at 61.)

The 10-K for 2014 contained additional, similar language. It stated that if the Company could not fund its debt service obligations, it "could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to sell assets or operations, seek additional capital or restructure or refinance our indebtedness." (Bartlett Dec. Ex. 2 at 33.) It stated that an inability to generate sufficient cash flows "would materially and adversely affect our financial position and results of operations and our ability to satisfy our debt obligations." (Id. ) In bolded and italicized language, the 10-K cautioned that SunEdison "may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful. " (Bartlett Dec. Ex. 2 at 33; emphasis in original.) It stated, "If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to sell assets or operations, seek additional capital or restructure or refinance our indebtedness." (Bartlett Dec. Ex. 2 at 33.)

The 10-K and two 10-Qs stated that "[w]e believe" liquidity "will be sufficient ... for the next twelve months," while cautioning in the same sentence that this could change based on adverse events or an inability to "access project capital ...." (Compl't ¶¶ 453-55.) This statement of belief about liquidity over the course of a year, qualified by an acknowledgment of the risk of adverse events, is identified as a forward-looking statement with a cautionary statement identifying risk factors that could alter expected results. See 15 U.S.C. § 77z-2(c)(1)(A)(i). The Court concludes that these descriptions of the Company's liquidity positions are non-actionable under the PSLRA's safe-harbor provisions.

Likewise, the statement that "[w]e expect cash on hand" and other funding sources to "meet our capital needs for the remainder of 2015" is a qualified and forward-looking statement. A statement about what the speaker "expect[s]" is forward-looking. See, e.g., Slayton, 604 F.3d at 769.

The Court further concludes that the three SEC filings include meaningful cautionary language about the Company's need for additional liquidity. This language expressly alerts investors that SunEdison will "need to raise additional funds in the future" in order to meet operating needs. (Bartlett Dec. Ex. 10 at 61.) It makes "no assurances" that financing will be available on "acceptable" terms, and warns that new financing might not be available at all. (Id. ) In a bolded and italicized passage quoted above, the Company warned that it may not be able to generate cash sufficient to service its debt, and may not succeed in other alternative debt-servicing measures. (Bartlett Dec. Ex. 2 at 33.) It warned of "substantial liquidity problems" if it could not service its debt. (Bartlett Dec. Ex. 2 at 33.)

These warnings to the investing public were "meaningful cautionary statements" that "identif[ied] important factors that could cause actual results to differ materially from those in the forward-looking statement." 15 U.S.C. § 78u-5(c)(1)(A)(i). These warnings were "not boilerplate" and adequately "conveyed substantive information." Slayton, 604 F.3d at 772.

Because plaintiffs' claims are directed to forward-looking statements accompanied by meaningful cautionary language, the statements about liquidity contained in the 2014 Form 10-K and the Form 10-Qs for the first two quarters of 2015 are non-actionable. Plaintiffs' claims under both the Exchange Act and the Securities Act directed to statements by the Company concerning its ongoing liquidity are therefore dismissed.

2. The Complaint Does Not Plausibly Allege a Violation of SEC Item 303.

For similar reasons, defendants' motion is granted to the extent that plaintiffs claim that defendants failed to adequately disclose or explain liquidity trends likely to affect the Company.

Item 303 of SEC Regulation S-K, 17 C.F.R. § 229.303 requires disclosure of trends and uncertainties that may affect a company. To plausibly allege a violation of Item 303, a plaintiff must identify a trend that "was already known and existing," and allege that "the trend or uncertainty ... was reasonably likely to have a material impact" on the registrant's financial condition. Litwin v. Blackstone Grp., L.P., 634 F.3d 706, 716 (2d Cir. 2011). Item 303 specifically requires registrants to "[i]dentify any known trends or any known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in the registrant's liquidity increasing or decreasing in any material way." 17 C.F.R. § 229.303(a)(1). Item 303 defines "liquidity" as "the ability of an enterprise to generate adequate amounts of cash to meet the enterprise's needs for cash." Id. at Instr. 5.

"[F]ailing to comply with Item 303 by omitting known trends or uncertainties from a registration statement or prospectus is actionable under Sections 11 and 12(a)(2) of the Securities Act of 1933."

Stratte-McClure v. Morgan Stanley, 776 F.3d 94, 101 (2d Cir. 2015). "Item 303's disclosure obligations, like materiality under the federal securities laws' anti-fraud provisions, do not turn on restrictive mechanical or quantitative inquiries." Panther Partners Inc. v. Ikanos Commc'ns, Inc., 681 F.3d 114, 122 (2d Cir. 2012). The Second Circuit has identified actionable Item 303 violations when a company is silent about the known threats posed by a trend or uncertainty. See Litwin, 634 F.3d at 718-19 (actionable failure to disclose how national deterioration of the real-estate market could affect registrant's vast real-estate portfolio); Panther Partners, 681 F.3d at 121-22 (actionable failure to disclose known "defect issue" in computer chips that jeopardized the registrant's "relationship with clients who at the time accounted for the vast majority of its revenues."); Indiana Pub. Ret. Sys., 818 F.3d at 95-96 (actionable failure to disclose acts of employee fraud that jeopardized existing and future contracts).

Plaintiffs allege that defendants violated Item 303 by failing to disclose known trends about SunEdison's liquidity. They allege that SunEdison's liquidity problems were known to defendants. According to the Complaint, Wuebbels participated in weekly "cash calls," where SunEdison management reviewed the status of projects and the cash needed for vendor payments. (Compl't ¶ 65.) Wuebbels allegedly approved all cash distributions to vendors. (Compl't ¶ 65.) The Complaint also describes a January 2015 call led by Chatila, in which a SunEdison employee said that the Company was about to lose telephone service because SunEdison had not paid its bills, and that suppliers were "breathing down their necks" about payments. (Compl't ¶ 65.) Chatila allegedly replied with a "rant" about making sacrifices to rapidly grow the Company. (Compl't ¶ 65.) The Complaint notes that the Company's vendors and creditors ultimately stopped doing business with SunEdison because of its cash shortfalls. (Compl't ¶ 273.)

However, in light of SunEdison's disclosures, the Court concludes that the Company's filings adequately identified and explained the known trends and uncertainties as to its liquidity and need for outside financing. A reasonable investor reviewing filings incorporated into the Offering Documents would have understood that, going forward, SunEdison required a steady infusion of financing from external sources, but that the availability of funding was uncertain. A reasonable investor would have understood that the Company would face dire consequences if outside funding became unavailable. Such an investor would have been informed of the following trends and uncertainties concerning the Company's liquidity situation:

• That SunEdison "continue[d] to incur significant indebtedness to fund our operations and acquisitions and [had] significant pending obligations ...." (Bartlett Dec. Ex. 12 at 69.)

• That "no assurances can be made that we will not require additional sources of liquidity to execute our business plan." (Id. )

• That the Company's "ability to meet our debt service obligations and other capital requirements ... will depend on various factors, including our future operating performance which, in turn, will be subject to general economic, financial, business, competitive, legislative, regulatory and other conditions, many of which are beyond our control." (Id. )

• That "[w]e expect to continue to incur losses, and we expect our operations, including our acquisition activities, to continue to require substantial cash expenditures, cash commitments and third party financing." (Id. )

• That the Company had "a significant amount of indebtedness " that "require[d] significant cash flow from operations and funds from various financing sources that may not be available in the future and as a result our business could be adversely affected, including our ability to develop new projects and fund our regular operational needs. " (Id. at 85; emphasis in original.)

• That "[i]f we are unable to secure additional financing, our earnings, liquidity and ability to develop projects will be adversely impacted and we may not be able to maintain compliance with our existing debt covenants and our business will suffer." (Id. )

These statements identified the trends and uncertainties that plaintiffs claim were omitted. They informed investors that the Company's "significant indebtedness" was "expect[ed] to continue," requiring "significant cash flow" and outside financing, the availability of which was uncertain. The Company disclosed that if financing was unavailable, the Company would face serious adverse consequences.

Because SunEdison identified known trends and uncertainties related to the Company's liquidity needs, plaintiffs have failed to allege an actionable violation of Item 303. See, e.g., Stadnick v. Vivint Solar, Inc., 861 F.3d 31, 39 (2d Cir. 2017) (plaintiffs did not plausibly allege Item 303 violation when the "registration statement included ample warning that its business could be affected by evolving regulatory regimes ....").

Defendants' motion to dismiss is therefore granted as to plaintiffs' claims directed to Item 303.

3. The Complaint Does Not Plausibly Allege that Sarbanes-Oxley Certifications about the Company's Internal Controls Were Materially Misleading.

Plaintiffs allege that Chatila and Wuebbels violated section 11 of the Securities Act by submitting false certifications under the Sarbanes-Oxley Act as to the adequacy of the Company's internal controls. In the Company's Form 10-K for 2014 and its Form 10-Qs for the first two quarters of 2015, Chatila and Wuebbels certified that they had personal knowledge of the Company's internal controls for financial reporting, that they were responsible for the design and maintenance of its internal controls, and that those internal controls were effective. (Compl't ¶¶ 321-23.) The Offering Documents incorporated these filings by reference.

The Court concludes that the Complaint has set forth allegations that describe an inefficient process for consolidating the Company's financial data, and one that was vulnerable to error. But these allegations also fail to identify any inaccurate financial data that was reported as a result. Of the three SEC filings that allegedly contained false certifications of effective internal controls, none are alleged to have included inaccurate financial reporting. With no inaccuracies or other tangible harms identified, plaintiffs have not plausibly alleged that the certifications were false. See In re Braskem S.A. Sec. Litig., 246 F.Supp.3d 731, 758 (S.D.N.Y. 2017) (dismissing claim directed to internal controls over financial reporting when complaint "does not concretely allege that any of [the company's] financial reports were in any way inaccurate.") (Engelmayer, J.).

The Sarbanes-Oxley Act of 2002 requires that for each 10-Q and 10-K filing, company officers must certify that they have reviewed the filing, and must verify its completeness and accuracy. 15 U.S.C. § 7241(a)(1)-(3). It provides that the signing officers are responsible for implementing and maintaining internal controls, and requires them to set forth their conclusions about the effectiveness of the company's internal controls. Id. § 7241(a)(4). These requirements are implemented by SEC rules. See 17 C.F.R. § 229.308 ; 17 C.F.R. § 240.13a-14.

Judge Sweet has described "[m]anagement's assessment of internal control over financial reporting" as "a critical metric for investors because it provided assurance that the Company's financial statements were reliable and in compliance with applicable laws." In re Bear Stearns Companies, Inc. Sec., Derivative, & ERISA Litig., 763 F.Supp.2d 423, 471 (S.D.N.Y. 2011). When a company misrepresents the effectiveness of its internal controls, investors may be left with a false impression of the company's risks and holdings. Id. at 470-71. To be actionable, a defendant's certification about the adequacy of internal controls must have been knowingly false at the time that it was made. See, e.g., In re Eletrobras Sec. Litig., 245 F.Supp.3d 450, 468-69 (S.D.N.Y. 2017) (statements claiming strong internal controls were actionable when defendants were aware of "red flags" that "highlighted significant problems") (Koeltl, J.); In re Sanofi Sec. Litig., 155 F.Supp.3d 386, 402 (S.D.N.Y. 2016) (certifications were not actionable when "plaintiffs fail to allege any facts pertaining to [Sanofi's] internal structure for financial reporting, much less that [Sanofi] lacked adequate internal controls.") (collecting cases). Misrepresentations of the quality of internal controls and inaccurate accounts of management's attempts to improve them can be actionable. See, e.g., Varghese v. China Shenghuo Pharm. Holdings, Inc., 672 F.Supp.2d 596, 606 (S.D.N.Y. 2009) (Marrero, J.); Hall v. The Children's Place Retail Stores, Inc., 580 F.Supp.2d 212, 233-34 (Scheindlin, J.). The use of non-secure spreadsheets that are vulnerable to human error may be evidence of ineffective internal controls. See In re MF Global Holdings Ltd. Sec. Litig., 982 F.Supp.2d 277, 298 (S.D.N.Y. 2013) (Marrero, J.).

In each certification, Chatila and Wuebbels stated that "[b]ased on my knowledge," the filings fairly reflected the Company's finances, including cash flows. (Compl't ¶ 471.) The certifications stated that Chatila and Wuebbels were "responsible for establishing and maintaining disclosure controls and procedures," and that they personally "[d]esigned such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes ...." (Compl't ¶ 471.)

The Complaint includes detailed allegations that describe the alleged infirmities in the Company's internal controls. They include two principal weaknesses: first, the Company failed to integrate the different accounting systems of acquired companies, resulting in a piecemeal, chaotic approach to tracking the Company's finances; second, the Company attempted to consolidate its financial data into an unsecured Excel spreadsheet that contained no input controls and was vulnerable to inaccuracies.

The Complaint describes complications caused by the Company's use of different accounting platforms across different business divisions. The former Head of Global Field Operations at SunEdison has stated that, going back to 2013, the Company failed to integrate acquired entities and internal divisions into a single system for monitoring financial data, resulting in a "poorly built system," a "clunky and broken process" and a "massive disconnect." (Compl't ¶ 70.) The Complaint quotes a senior auditor of SunEdison as stating that the Company used "a cluster of different accounting systems that made it a nightmare for any sort of internal controls to be functional." (Compl't ¶ 72.)

The Complaint also includes detailed descriptions posed by the consolidation of financial data into a single, unsecured Excel spreadsheet. The Complaint alleges that the Company manually consolidated financial data into a single Excel spreadsheet, a practice that began in or around 2009. (Compl't ¶ 76.) The former Head of Global Field Operations called the document "literally the most complicated spreadsheet" he had ever seen, and said that it was internally referred to as the "Brain Damage" spreadsheet." (Compl't ¶ 76.) A senior auditor has stated that use of the Excel document was "a huge problem because Excel has very little security around it" and the document lacked "any sort of IT controls." (Compl't ¶ 78.) There were no input controls to ensure that data was correctly entered by code and category, or to flag likely errors. (Compl't ¶ 78.) According to the Complaint, this meant that incorrect entries could go unnoticed, leading to cascading errors and miscalculations. (Compl't ¶ 78.) Moreover, there were no access controls to the Excel spreadsheet, meaning that any employee "with even minimal security clearance" could alter it. (Compl't ¶ 79.) The Complaint cites to the senior auditor's view that standard accounting software typically tracks who entered data, and that typically material inputs cannot be made without the authorization of a controller. (Compl't ¶ 79.) The Global Head of Field Operations, who left the Company in 2015, is quoted in the Complaint as stating that the document's security was so weak that even after his departure, he could still access the spreadsheet to change entries and review information. (Compl't ¶ 79.)

Viewed together, these allegations describe a confused, inefficient and unsecured process for tracking the Company's financial data. However, the Complaint fails to identify any erroneous financial reporting that resulted. The absence of any actual deficiencies in the Company's financial reporting, or any other tangible harm resulting from the Company's controls, renders implausible plaintiffs' claim that the certifications were false. Similarly, plaintiffs have described vulnerabilities in the Company's use of an unsecured spreadsheet, but they have not identified any instances in which the spreadsheet was improperly accessed or manipulated by an employee, or where use of the spreadsheet resulted in false reporting. In short, the Complaint has included extensive details about the alleged problems with the Company's internal controls, but it has not identified a resulting error.

With no corresponding error in the Company's financial reporting, the Complaint fails to plausibly allege that the certification of effective internal controls was false or misleading. Claims that successfully allege insufficient internal controls typically involve instances where the failure of internal controls led to restated financial results or were accompanied by misconduct. In Dobina v. Weatherford International, Ltd., 909 F.Supp.2d 228, 244-48 (S.D.N.Y. 2012), Judge Kaplan concluded that plaintiffs had alleged with particularity an Exchange Act claim that defendants falsely certified the effectiveness of the Company's internal controls. There, the company at issue had to restate its financial results and acknowledged incorrect historical disclosures as to tax liabilities. Id. at 245. Similarly, in In re Bear Stearns, Judge Sweet concluded that plaintiff adequately alleged a misrepresentation of the effectiveness of internal controls where the company had failed to comply with GAAP in its financial reporting, and left a misimpression that the company was more profitable, better capitalized and had better liquidity access than was actually the case. 763 F.Supp.2d at 484 ; see also In re Braskem, 246 F.Supp.3d at 758 (dismissing claim directed to internal controls over financial reporting when complaint "does not concretely allege that any of [the company's] financial reports were in any way inaccurate."); In re Eletrobras, 245 F.Supp.3d at 468 (statements asserting strong internal controls against fraud were actionable when the company was "ultimately subject to write-offs due to illicit payments ...."); Varghese, 672 F.Supp.2d at 606 (Sarbanes-Oxley certification of effective internal controls was actionable when company allegedly misreported financial data, including false or misleading statements about "net loss, losses per share, and general and administrative expenses ...."); Hall, 580 F.Supp.2d at 232 (complaint alleged false Sarbanes-Oxley certifications with particularity when defendants allegedly knew of stock-option backdating practices and the company misreported compensation expenses).

The Complaint alleges that the Company later acknowledged weaknesses in its internal controls in April 2016, and that these statements show that the Sarbanes-Oxley certifications were knowingly false at the time they were made. But the weaknesses identified in 2016 did not touch on financial reporting. Instead, the Company identified weaknesses in its cash forecasting processes, management's need to more fully discuss risks and adjustments with the Company's board, management's inadequate response to missed cash forecasts, and management's disclosures to the Company board concerning cash flow, including extensions of accounts payable and use of cash committed for projects. (Compl't ¶ 498.) These statements about deficient internal controls related to internal management of cash and management's disclosures to the board, and not to public financial reporting.

The Complaint has alleged facts showing that the Company's methods for consolidating financial data were inefficient, and perhaps even vulnerable to error. However, the plaintiffs have failed to identify any resulting inaccuracies or misstatements of financial reporting. Without any error in financial reporting or other misstatement attributable to the Company's internal controls, the Complaint cannot plausibly allege that the internal controls were, in fact, ineffective.

The defendants' motion to dismiss plaintiffs' Securities Act claims directed to the Sarbanes-Oxley certification is therefore granted.

4. The Complaint Alleges an Actionable Omission as to the August 2015 Margin Call.

Plaintiffs allege that the Offering Documents omitted the material fact that, on or about August 7, 2015, "the Company had likely breached the debt covenants under the Margin Loan," thereby triggering a margin call and requiring the Company to post at least $159 million in additional collateral. (Compl't ¶ 332.) The Preferred Offering was announced shortly thereafter, on August 18, 2015.

Defendants argue that the failure to explicitly disclose the margin call was not material because if a reasonable investor reviewed past SEC filings, he or she could have inferred that a margin call had issued based on the price of TERP common stock. For reasons that will be explained, the Court cannot conclude, as a matter of law, that these past disclosures would have informed a reasonable investor of the likely existence of a margin call. The Complaint plausibly alleges a material omission regarding the margin call.

"Section 11 of the Securities Act prohibits materially misleading statements or omissions in registration statements filed with the SEC." In re Morgan Stanley, 592 F.3d at 358 (citing 15 U.S.C. § 77k(a) ). Section 12(a)(2) prohibits material omissions for securities sold using a prospectus. Id. at 359. "For an omission to be actionable, the securities laws must impose a duty to disclose the omitted information." Id. at 360 (quoting Resnik v. Swartz, 303 F.3d 147, 154 (2d Cir. 2002) ). The disclosure duty may be based on an affirmative obligation set by regulation or statute, or it may derive from a necessity to avoid misleading statements contained in offering documents. Id. at 361-66. "[W]hen an offering participant makes a disclosure about a particular topic, whether voluntary or required, the representation must be 'complete and accurate.' " Id. at 366 (quoting Glazer v. Formica Corp., 964 F.2d 149, 157 (2d Cir. 1992) ).

An omission's materiality is a mixed question of law and fact, and a statement's materiality "will rarely be dispositive in a motion to dismiss: '[A] complaint may not properly be dismissed ... on the ground that the alleged misstatements or omissions are not material unless they are so obviously unimportant to a reasonable investor that reasonable minds could not differ on the question of their importance.' " Id. at 360 (quoting ECA, Local 134 IBEW Joint Pension Trust of Chicago v. JP Morgan Chase, 553 F.3d 187, 197 (2d Cir. 2009) ); see also In re ProShares Tr. Sec. Litig., 728 F.3d 96, 102 (2d Cir. 2013) (dismissal is appropriate "where the alleged omission was so obviously unimportant to a reasonable investor that reasonable minds would agree on that omission's unimportance.") (quotation marks omitted).

At the same time, "the materiality hurdle remains a meaningful pleading obstacle," and "the Supreme Court has been 'careful not to set too low a standard of materiality,' for fear that management would 'bury the shareholders in an avalanche of trivial information.' " Id. (quoting Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 131 S.Ct. 1309, 1318, 179 L.Ed.2d 398 (2011) ). "In judging whether an alleged omission was material in light of the information already disclosed to investors, we consider whether there is 'a substantial likelihood that the disclosure of the [omitted material] would have been viewed by the reasonable investor as having significantly altered the total mix of information [already] made available.' " ProShares, 728 F.3d at 102 (emphasis and alterations in original; quoting DeMaria v. Andersen, 318 F.3d 170, 180 (2d Cir. 2003) ); accord Stadnick, 861 F.3d at 37 ("The operative test remains that set forth in DeMaria."). The materiality analysis is "inherently fact-specific." Hutchison v. Deutsche Bank Sec. Inc., 647 F.3d 479, 485 (2d Cir. 2011). Courts consider whether the misstatement or omission implicates a business segment that plays a significant role in the company's operations or profitability, and whether management expects that the misstatement or omission will result in a significant market reaction. Id.

In arguing that omission of the margin call was immaterial, defendants walk through the description of the Margin Loan contained in the Company's Form 10-Q for the first quarter of 2015, which the Offering Documents incorporated by reference. In that filing, SunEdison disclosed that it had entered into the Margin Loan for the purpose of acquiring First Wind Holdings, LLC. (Bartlett Dec. Ex. 9 at 22.) Under the heading "Margin Loan,"

the Form 10-Q stated that on January 29, 2015, a wholly-owned subsidiary of the Company entered into a Margin Loan Agreement "pursuant to which SunEdison guaranteed all of the subsidiary's obligations under the Margin Loan Agreement. Under the Margin Loan Agreement, the subsidiary borrowed $410 million in term loans." (Id. )

The 10-Q stated that the Margin Loan Agreement required that the loan-to-value ratio could not exceed 50% of the value of TERP common stock. (Id. ) In other words, SunEdison pledged at least $820 million in TERP common stock as collateral against the $410 million loan amount. (Sec. Def. Mem. at 13.) If that ratio was not maintained, the Company would be required to post additional cash collateral and/or repay a portion of the loan. (Bartlett Dec. Ex. 9 at 22.) "In addition, the Margin Loan Agreement requires the repayment of all or a portion of the term loans made thereunder upon the occurrence of certain events customary for financings of this nature, including other events relating to the price, liquidity or value of the [TERP] Common Stock ...." (Id. )

That same 10-Q further disclosed that the Company had amended a February 2014 credit agreement in order to facilitate the Margin Loan. (Id. at 23.) That original credit agreement was annexed to SunEdison's Form 10-K for 2014, as Exhibit 10.130. (Bartlett Dec. Ex. 2 at 70.) The amendment defined the term "Margin Loan Pledged Equity" to mean "up to 32,200,000 class B units of common stock ... of [TERP]," "up to "32,200,000 class B Units of TerraForm Power, LLC" and "up to 50% of non-voting membership interests in TerraForm Power, LLC conferring certain incentive distribution rights to SunEdison Holding Corporation by Terraform Power, LLC pursuant to its Organization documents." (Bartlett Dec. Ex. 2 at 73.)

According to defendants, investors could estimate the TERP stock price that would trigger a margin call by reading the 10-Q alongside the February 2014 credit agreement. Defendants explain:

Multiplying that figure [of 32.2 million shares] by the publicly known trading price of [TERP] stock provides an approximation of the value of the margin loan collateral on any given day. Combined with the publicly disclosed requirement of a 2:1 value to loan ratio, investors could readily ascertain when a margin call might be triggered.

(Sec. Def. Mem. at 14.)

Defendants' proposed arithmetic exerc