OPINION & ORDER This case arises from alleged fraudulent financial reporting by Shiloh Industries, Inc. (“Shiloh” or “the Company”), a publicly-traded manufacturer of automotive materials. The Court dismissed Plaintiffs’ initial complaint because it failed to plead with particularity that any defendant had the requisite scienter to be held liable for securities fraud. On a motion for reconsideration, the Court declined to vacate the dismissal, but granted Plaintiffs leave to amend their initial complaint for the limited purpose of alleging facts demonstrating that Shiloh (as a corporate defendant) had the requisite scienter. Plaintiffs then filed a Second Amended Class Action Complaint (“SACAC”), which Defendants now move to dismiss. For the reasons stated below, Defendants’ motion to dismiss the SACAC is GRANTED.I. BACKGROUND1Shiloh supplies equipment to the automotive and commercial vehicle markets and other industrial customers. It specializes in materials and designs that reduce vehicle weight and increase fuel efficiency, as well as products that mitigate the harshness of vehicles, due to their noise and vibration. Shares of Shiloh, which is headquartered in Ohio, are publicly traded on the Nasdaq Stock Market.In 2015, an accountant at Shiloh’s Wellington, Ohio, Facility (“the Wellington Facility”) sounded the alarm on possible fraudulent accounting. In response, Shiloh launched an internal investigation. The investigation revealed that the Wellington Facility’s Controller, Eric Halterman, had been intentionally understating the Facility’s costs. When Halterman’s data was consolidated into the Company’s financial reports, the effect was to falsely inflate Shiloh’s net income. After Shiloh publicly announced the investigation, its share price fell. The share price dropped again after the Company restated its financials and admitted to investors that its internal controls on reporting were materially weak. A putative class of Shiloh shareholders then filed this suit.So far, Plaintiffs have failed to convince the Court that they have a plausible claim. Plaintiffs filed their initial complaint on September 21, 2015. (ECF No. 1.) On February 21, 2016, Plaintiffs filed an amended complaint, which they corrected on February 23, 2016. (ECF Nos. 23, 28.) Plaintiffs’ Corrected Amended Class Action Complaint, referred to herein as the First Amended Class Action Complaint (“FACAC”), alleged that Shiloh violated Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Securities and Exchange Commission (“SEC”) Rule 10(b)-5 by materially misstating its finances to investors in 2014 and 2015. Plaintiffs also named Shiloh’s CEO, Ramzi Hermiz, and its Vice President of Finance, Thomas M. Dugan, as defendants, alleging they individually violated SEC Rule 10(b)-5 and Sections 10(b) and 20(a) of the Exchange Act. On March 23, 2017, the Court dismissed the claims against all three defendants because Plaintiffs failed to plead with particularity that either Hermiz or Dugan had the requisite scienter for the alleged violations. See Thomas I, 2017 WL 1102664, at *6. Subsequently, on April 6, 2017, Plaintiffs requested that the Court reconsider the dismissal with respect to the claims against Shiloh as a corporate defendant. (ECF No. 40.) The Court granted Plaintiffs leave to amend the FACAC for the “limited purpose” of “rectify[ing] factual deficiencies and satisfy[ing] the pleading standard with respect to their corporate scienter claim.” Thomas v. Shiloh Indus., Inc., No. 15-CV-7449 (KMW), 2017 WL 2937620, at *5 (S.D.N.Y. July 7, 2017) (“Thomas II”). Thus, the sole issue in this round of pleading is whether Plaintiffs have sufficiently alleged corporate scienter so as to state a claim against Shiloh as a corporate defendant; no claims remain with respect to Hermiz or Dugan as individual defendants.Plaintiffs filed the SACAC on August 4, 2017, which Defendants now move to dismiss. (ECF Nos. 45, 47.) For purposes of deciding the motion to dismiss pursuant to Rule 12(b)(6), the Court assumes that all factual allegations contained in the SACAC are true, but does not apply this principle to legal conclusions. See Wilson v. Dantas, 746 F.3d 530, 535 (2d Cir. 2014) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).The new allegations in the SACAC focus on the scienter of Halterman, the Wellington Facility Controller, and on Brian Harvey, Halterman’s boss at the time of the alleged fraud. As the Wellington Facility Controller, Halterman was responsible for accounting at the Wellington Facility, overseeing four employees. SACAC32. Halterman reported to Group Controller Harvey. Id. In his role as the Wellington Controller, Halterman was tasked with providing updates on the Wellington Facility’s financials during weekly two-to-three hour meetings at which controllers from Shiloh’s various plants discussed their budgets and financial forecasts with Shiloh’s Vice President. Id.
32, 63. According to Plaintiffs, this task meant that Halterman “functionally” reported directly to Shiloh’s Vice President. Id.32. In 2014 and 2015, Halterman perpetrated an accounting fraud that resulted in Shiloh overstating its net income in public securities filings. Id.
