In Re: Rockefeller Center Properties, Inc. Securities Litigation, Charal Investment Company Inc., a New Jersey Corporation C.W. Sommer & Co., a Texas Partnership, on Behalf of Themselves and All Others Similarly Situated Alan Freed Jerry Crance Helen Scozzanich Sheldon P. Langendorf Rita Walfield Robert Flashman Renee B. Fisher Foundation Inc. Frank Debora Wilson White Stanley Lloyd Kaufman, Jr. Joseph Gross v. David Rockefeller Goldman Sachs Mortgage Co. Goldman Sachs Group Lp Goldman Sachs & Co. Whitehall Street Real Estate Limited Partnership v. Wh Advisors Inc. v. Wh Advisors Lp v. Daniel M. Neidich Peter D. Linneman Richard M. Scarlata Frank Debora Wilson White Stanley Lloyd Kaufman, Jr. Joseph Gross, Charal Investment Company Inc., a New Jersey Corporation C.W. Sommer & Co., a Texas Partnership, on Behalf of Themselves and All Others Similarly Situated Alan Freed Jerry Crance Helen Scozzanich Sheldon P. Langendorf Rita Walfield Robert Flashman Renee B. Fisher Foundation Inc. Frank Debora Wilson White St

Citation: 311 F.3d 198Docket: 01-1755

Court: Court of Appeals for the Third Circuit; November 7, 2002; Federal Appellate Court

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The case involves an appeal concerning the acquisition of Rockefeller Center Properties, Inc. (RCPI) by a consortium led by David Rockefeller and Goldman Sachs. The dispute centers on a proxy solicitation process wherein the proxy statement provided by the Investor Group allegedly misrepresented the financial condition of RCPI and failed to disclose ongoing negotiations for the sale of approximately 20% of the property to General Electric/NBC prior to the shareholder vote. Shareholders claim that these omissions constituted fraud under federal securities laws, misleading them into voting for the merger and depriving them of potential investment value. The Investor Group sought to dismiss the Shareholders' Second Amended Complaint, which the District Court granted, leading to the current appeal by the Shareholders challenging the dismissal.

The District Court determined that the Shareholders did not satisfy the heightened pleading standards for securities fraud under Rule 9(b) of the Federal Rules of Civil Procedure and the Private Securities Litigation Reform Act of 1995, leading to an affirmation of the District Court's judgment. The appeal stems from the Shareholders' Second Amended Complaint, which introduced new allegations. The court accepts the well-pleaded allegations in the complaint as true while reviewing the facts, considering documents referenced in the complaint without converting the motion to dismiss into one for summary judgment.

Rockefeller Center consists of several commercial and retail buildings in Manhattan, controlled by the Rockefeller family through related entities. Prior to 1996, the Rockefeller Group, Inc. owned the Property via two partnerships, Rockefeller Center Properties and RCPI Associates. RCPI, established as a real estate investment trust (REIT) in 1985, funded the Partnerships with a $1.3 billion loan, sourced from an IPO and convertible debenture offerings.

By Fall 1994, RCPI faced financial difficulties and sought additional financing of $225 million from Goldman Sachs and Whitehall to avoid default on debenture payments. The financing deal allowed Goldman Sachs to loan $150 million and Whitehall to provide $75 million in debentures, in exchange for equity interests and a Goldman Sachs Board seat.

The Shareholders argue that the 1994 financing agreement was unfavorable for RCPI, specifically citing a "cash-sweep" provision that required RCPI to remit excess cash directly to Goldman Sachs, adversely affecting liquidity. Additionally, an anti-dilution provision in the agreement required any competing bidder for RCPI to exceed Goldman Sachs' bid by over $1.00 per share, further restricting potential sales.

RCPI continued to face significant financial challenges despite a $225 million cash infusion in late 1994. On May 11, 1995, the Partnerships halted all interest payments on a mortgage loan to RCPI and filed for Chapter 11 bankruptcy protection. This situation prompted RCPI to realize it could not meet its obligations on debentures without those interest payments, leading it to explore recapitalization options. A competitive bidding process ensued, attracting multiple bidders, including three leading groups: the Zell Group (led by Samuel Zell, with GE/NBC as a tenant of 20% of the Property), Gotham Partners, L.P. (which held 5.6% of RCPI's shares), and the Investor Group.

The Zell Group gained an initial advantage, entering a letter of intent with RCPI on August 16, 1995, that provided a $10 million loan to cover immediate obligations. This was followed by a formal agreement on September 11, 1995, wherein the Zell Group proposed a $250 million capital investment for a 50% equity interest in a new entity to acquire RCPI's assets, while also planning to refinance $700 million of RCPI's debt. The agreement allowed for termination in favor of a superior proposal.

On September 12, 1995, the Partnerships filed a reorganization plan relinquishing ownership of Rockefeller Center to RCPI. Bidding intensified with various offers, including one from Goldman Sachs and the Investor Group on October 1, 1995, to acquire all outstanding shares of RCPI for $7.75 per share, which would eliminate the shareholders' equity interest. The Investor Group proposed to capitalize the new entity with $440 million. Throughout this process, RCPI's Board engaged with bidders, and on September 18, 1995, Goldman Sachs stated it had no plans to sell any of the Rockefeller Center buildings.

On October 5, 1995, the Zell Group revised its recapitalization proposal by reducing its ownership stake, increasing the rights offering to RCPI shareholders, and agreeing to pay $33 million to Goldman Sachs for consent. The RCPI Board allegedly did not respond to this enhanced proposal. On October 27, the Zell Group offered $1.16 billion, primarily in cash, to buy RCPI's mortgage loan, estimating a buyout price for shareholders between $7.49 and $9.00 per share, contingent on negotiations with Goldman Sachs. Again, the RCPI Board reportedly did not respond.

On November 7, 1995, RCPI's Board approved a cash-out merger with the Investor Group, agreeing to acquire all outstanding shares for $8.00 each, citing this bid as financially superior to the Zell Group's offer. The merger required shareholder approval, with a provision for a $200 million rights offering at no less than $6 per share if the merger was rejected. 

RCPI filed a preliminary proxy statement with the SEC in December 1995, followed by a final proxy statement on February 14, 1996, which included a letter from RCPI's Chairman and President to shareholders. The shareholders alleged that the proxy statement contained misleading information. It emphasized the Board's unanimous approval of the merger agreement, asserting it was in the best interest of RCPI and its shareholders, supported by an opinion letter from PaineWebber, Inc.

The proxy statement portrayed a dire financial outlook for RCPI, detailing past market downturns, liquidity issues, and the bankruptcies of its Partnerships. It warned of potential bankruptcy if recapitalization failed and characterized the Zell Group's proposals as carrying significant risk of legal challenges that could delay or prevent their execution. It also highlighted risks for shareholders if they retained their interest in RCPI, including reliance on a single asset and anticipated cash flow deficits.

Shareholders were cautioned in the proxy statement that rejection of the Investor Group's proposal could lead to complications regarding the Rights Offering, potentially requiring consent from the Whitehall Group, litigation, or the initiation of a Chapter 11 case by RCPI. The proxy also indicated that failure to approve the Merger Agreement could result in significant uncertainties for RCPI.

The Shareholders claimed that RCPI misrepresented the Investor Group's plans for post-acquisition operations, which involved raising at least $430 million in new debt financing to repay existing obligations. While the plans suggested consistency with past practices, the proxy statement acknowledged that these financing plans could evolve based on market conditions.

Additionally, the Shareholders alleged that the proxy statement provided misleading estimates of Rockefeller Center's value. It relied on a 1994 appraisal valuing the complex at $1.25 billion but failed to include the appraisal's note that the property might be worth more if sold in pieces and did not account for anticipated market recovery in 1995.

The proxy statement also detailed the relationship between GE/NBC and RCPI, including a lease modification in September 1995 that added a guarantee from GE for financing purposes. The Shareholders argued that the proxy omitted important negotiations over the potential outright purchase of office space by GE/NBC from RCPI.

Ultimately, after reviewing the proxy, the Shareholders approved the Investor Group's bid on March 25, 1996. Subsequently, on April 23, 1996, the Investor Group entered an agreement with GE/NBC to sell a portion of Rockefeller Center for $440 million, a transaction disclosed by RCPI only in an amendment to its Schedule 13-D filing on April 25, 1996.

The Shareholders' Second Amended Complaint alleges three violations of federal securities law by the Investor Group. Count One asserts a violation of Section 14(a) of the Securities Exchange Act and Rule 14a-9, which prohibits misleading proxy solicitations. Count Two claims a violation of Section 10(b) and Rule 10b-5, addressing manipulative practices in securities transactions, including omissions and misrepresentations related to negotiations between RCPI and NBC/GE. Count Three alleges individual defendants violated Section 20(a), which holds controlling persons liable for violations committed by those they control, unless they acted in good faith. The requirements for alleging violations under these statutes differ; scienter is necessary for Rule 10b-5 but not for Section 14(a). All claims must demonstrate material misrepresentations or omissions. Importantly, Section 20(a) liability relies on the establishment of an independent violation, which in this case is hindered by the dismissal of Rule 10b-5 claims against UJB, preventing the imposition of liability on the individual defendants under Section 20(a).

Three statutory claims brought by the Shareholders, despite their differences, all hinge on allegations of fraudulent misrepresentations or omissions, necessitating well-pleaded allegations of fraud. Under Rule 10b-5, a plaintiff must demonstrate that a defendant made a materially false or misleading statement or failed to disclose a material fact. The Shareholders allege that members of the Investor Group were negotiating with GE/NBC to sell a portion of Rockefeller Center before the Shareholders' vote, claiming that omissions from the proxy statement were misleading and rendered other statements fraudulent. To survive a motion to dismiss, the Shareholders must substantiate their fraud theory with specific allegations.

The Shareholders cite seven events to support their claims of negotiations between the Investor Group and GE/NBC regarding the sale of 20% of Rockefeller Center. Key events include:

1. In February 1996, Goldman Sachs allegedly suggested to GE/NBC that they should buy leased space at Rockefeller Center for over $400 million, with negotiations continuing through February and March.
2. On March 24, 1996, the night before the proxy vote, Goldman Sachs's Sheridan Sheckner allegedly discussed further negotiations with GE Capital and NBC, indicating that an outright purchase could resolve multiple negotiation points.
3. A May 6, 1996 Wall Street Journal article reported that GE and NBC had been negotiating with various parties, including Rockefeller and Goldman Sachs, since November 1995, with NBC's Executive VP stating that numerous options were explored.
4. A June 6, 1996 New York Daily News article quoted an NBC Executive VP affirming that NBC had been considering the transaction since 1995, which could yield $440 million in upfront capital for potential new owners. 

These allegations form the basis of the Shareholders' claims of fraudulent conduct related to the sale negotiations.

The Shareholders allege that a draft letter agreement dated February 20, 1996, between the Partnerships and GE/NBC, in conjunction with an April 23, 1996 sale agreement, supports their claims of fraudulent omissions and misrepresentations. The draft letter, allegedly sent at the request of Goldman Sachs, allowed GE/NBC to take control of various systems at Rockefeller Center. The subsequent sale agreement references this draft letter, suggesting that negotiations occurred prior to the proxy vote. Additionally, during bankruptcy proceedings, Shareholders claim that statements made by counsel for the Partnerships indicated ongoing discussions regarding a significant transaction with NBC prior to the proxy vote, including a proposed deal for NBC to acquire substantial leasing space for approximately $440 million. Another statement acknowledged previous consideration of a transaction with GE that did not materialize.

On May 22, 1996, the Investor Group purportedly represented in a letter to the New York State Department of Law that a plan of reorganization would involve transferring certain rights and titles to NBC. This appeal marks the second time the Court has addressed the Shareholders' action; the first involved the dismissal of their First Consolidated Amended Class Action Complaint. The District Court previously converted a motion to dismiss regarding sale negotiations into a summary judgment, concluding that the Shareholders did not provide evidence that defendants were aware of the sale details during the proxy statement or that such information would be material to investors. The Court upheld the summary judgment on the air rights claim but found the conversion of the motion regarding sale negotiations inappropriate, leading to a remand for further consideration in light of a recent legal precedent.

On remand, the District Court allowed the Shareholders to file a Second Amended Complaint, which centered on allegations regarding sale negotiations and included additional factual claims and a Section 20(a) claim under the Securities Exchange Act. The Investor Group subsequently filed a motion to dismiss this complaint, prompting the Shareholders to seek to strike the Investor Group's motion, asserting that the District Court had previously evaluated the "futility standards" when allowing the amendment. The Shareholders contended that the court had implicitly found the Second Amended Complaint met the heightened pleading standards of Rule 9(b) and the Reform Act. 

On March 12, 2001, the District Court ruled that it based its decision on Rule 15(a) of the Federal Rules of Civil Procedure, which favors granting leave to amend. Because the court had not considered the futility standards, it denied the motion to strike. Upon reviewing the Second Amended Complaint, the court assessed the seven events cited by the Shareholders as evidence of pre-vote sale negotiations, concluding that none met the heightened pleading requirements. Consequently, the court granted the Investor Group’s motion to dismiss the complaint, leading the Shareholders to file an appeal.

The District Court had jurisdiction under 15 U.S.C. § 78aa, and the appellate court has jurisdiction over the final order per 28 U.S.C. § 1291, applying a plenary review standard. This review encompasses the dismissal for failure to state a claim and interpretations of federal securities laws. The appellate court will use the same standards as the District Court, emphasizing that the inquiry under Rule 12(b)(6) requires accepting all well-pleaded allegations as true and drawing reasonable inferences for the non-moving party, focusing on whether the plaintiffs should be allowed to present evidence for their claims.

Dismissal under Rule 12(b)(6) is only appropriate when it is clear that the plaintiff cannot prove any set of facts that would entitle them to relief. Courts are not required to accept unsubstantiated assertions or legal conclusions presented in a complaint. Legal conclusions disguised as factual allegations do not receive the presumption of truthfulness. Rule 9(b) imposes a heightened pleading requirement for fraud claims, mandating that the circumstances of fraud be stated with particularity. This standard, particularly rigorous in securities fraud cases, does not require every detail but necessitates some precision in the allegations. The rationale behind Rule 9(b) includes providing defendants with notice of claims, protecting their reputations, and reducing frivolous lawsuits aimed at settlement extraction. However, courts may relax these requirements when the necessary factual information is primarily within the defendant's control. Nonetheless, vague or conclusory allegations remain insufficient. To adequately plead a claim under Rule 10b-5, a plaintiff must demonstrate specific false representations or omissions of material fact, the knowledge of their falsity by the maker, ignorance by the recipient, intent for the recipient to act on the information, and resultant damages. Furthermore, specificity is necessary to identify the source of the alleged fraudulent misrepresentation, including the identification of the individual responsible for the statements. Rule 9(b) requires that plaintiffs provide essential factual context akin to the opening paragraph of a news article to support their claims of securities fraud.

The excerpt addresses the heightened pleading requirements imposed on plaintiffs alleging securities fraud under the Reform Act, specifically citing 15 U.S.C. § 78u-4(b)(1) and its relationship to Rule 9(b). It emphasizes the necessity for plaintiffs to detail each allegedly misleading statement, the reasons for its misleading nature, and, if based on information and belief, to specify the factual basis for that belief. The Reform Act was enacted to curb abuses in securities class actions, including opportunistic lawsuits following stock price changes, targeting financially capable defendants, coercive settlement tactics through discovery, and manipulation by class action attorneys. The legislative intent was to create a uniform and stringent pleading standard that heightens the specificity required beyond Rule 9(b), necessitating a clear account of the who, what, when, where, and how of the alleged misconduct. The District Court evaluated the allegations from Shareholders against these standards but found them lacking, leading to the Shareholders' appeal claiming misinterpretation of the events. Ultimately, the analysis concluded that the Shareholders did not meet the necessary pleading criteria.

In February 1996, a Goldman Sachs employee suggested to GE/NBC that for approximately $400 million, they could secure capital lease treatment, depreciation rights, and a purchase option for 93% of fair market value in 2022, proposing that GE/NBC should buy the leased space at Rockefeller Center. However, this assertion does not establish that any actual sale negotiations occurred between the Investor Group and GE/NBC or indicate any intent to proceed with a sale. The District Court found that the suggestion merely indicated that a Goldman Sachs employee considered a sale, without evidence of meaningful interaction or advice to the Investor Group regarding a sale of Rockefeller Center.

Additionally, the allegation lacks the specificity required by Rule 9(b) and the Reform Act, as it does not identify the speaker's authority or connection to the Investor Group. Further, on March 24, 1996, Sheridan Sheckner of Goldman Sachs allegedly told GE Capital and NBC that purchasing the leased property could resolve several negotiation points. While this does identify the speaker and audience, it similarly fails to substantiate that the Investor Group intended to sell. Sheckner's statement reflects his personal consideration, not the Investor Group's intent. The discussions at that time focused on alternative arrangements rather than a sale, with GE expressing no interest in ownership of the Rockefeller Center, prioritizing a modified lease agreement instead.

Sheckner's statement is not considered part of ongoing negotiations for selling a portion of Rockefeller Center nor indicative of the Investor Group's intent to finalize a sale, as required by Rule 9(b) and the Reform Act. The Shareholders must provide specific evidence of negotiations related to a sale, which Sheckner's statement does not satisfy. The May 6, 1996 WSJ Article indicates that GE and NBC had discussions with various parties over two years, including negotiations with Rockefeller and Goldman Sachs starting in November 1995. However, it fails to clarify when these discussions transitioned into sale negotiations, particularly prior to the Shareholders' vote on March 25, 1996. Similarly, a June 6, 1996 article by Rick Cotton of NBC notes that after the bankruptcy of Rockefeller Center, NBC explored several options to meet its needs, eventually considering purchasing its leased space, but does not specify when this consideration began or the intentions of the Investor Group. Lastly, the Shareholders reference the April 23, 1996 sale agreement as evidence of the sale to GE/NBC for $440 million, but it does not provide the necessary details to support their claims.

The Shareholders assert that a sale agreement included a draft letter from February 20, 1996, wherein NBC took control of certain systems in its occupied space. They argue that since the Partnerships filed a Second Amended Joint Plan of Reorganization on February 8, 1996, which is referenced in the sale agreement, the Investor Group must have anticipated the sale at that time. The District Court, however, concluded that "contemplated" in the sale agreement refers to how the sale proceeds would be paid per the reorganization plan, not to prior negotiations. This interpretation indicates that the payment of $440 million would comply with the reorganization plan's requirements, rather than suggesting the sale was under consideration in February 1996. The lack of evidence for a potential sale in the reorganization plan supports this view.

Regarding the incorporation of the February 20 letter into the sale agreement, the court found that the timeline does not support the Shareholders' claims. GE/NBC's negotiation for control over physical systems does not imply that sale negotiations were occurring at that time; rather, it suggests a desire for more operational control as a lessee. The progression from lease options to potential sale arrangements indicates that negotiations evolved over time, without evidence of prior sale discussions before the March 25, 1996 proxy vote.

Additionally, during a May 6, 1996 bankruptcy hearing, counsel mentioned ongoing discussions regarding a transaction with NBC, and the bankruptcy court expressed surprise at the announcement of the sale. Nonetheless, these statements do not substantiate the Shareholders' claim that negotiations with GE/NBC occurred before the proxy vote, as they do not provide a clear timeline or evidence of pre-vote discussions.

Shareholders assert that revelations from the bankruptcy hearing support their claim of the Investor Group's intent to finalize a sale. However, the statements regarding negotiation timing are vague, lacking precision required by Rule 9(b) and the Reform Act, failing to clarify when negotiations began or when intent was formed. The District Court highlighted that "several weeks" before May 6, 1996, could refer to a period after the Shareholders' vote, meaning there is no evidence that negotiations occurred at a time requiring disclosure.

The Shareholders attempt to imply fraud by linking co-defendant David Rockefeller, a principal of RGI, to the Investor Group’s obligations. The District Court clarified that RGI is not a defendant and that the relevant disclosure obligations pertain to the Partnerships in the bankruptcy context, separate from the Investor Group's duties regarding proxy solicitation. The statements do not clarify who negotiated, when, or the specifics of negotiations in February 1996, leaving the Shareholders' conclusions based on speculation.

The bankruptcy court's comments on "inadequate or inappropriate" disclosures pertain specifically to the Partnerships, not the Investor Group, indicating the Shareholders miscontextualized these statements. Moreover, the Shareholders have not demonstrated actual negotiations between GE/NBC and the Investor Group before the proxy vote, nor any fraudulent misrepresentation or omission related to these claims.

Shortly after the bankruptcy hearing, RCPI wrote to the New York State Department of Law on May 22, 1996, seeking to validate a prior "no-action letter" regarding the upcoming title transfer to GE/NBC. The Shareholders emphasize a specific line from this letter.

The Partnerships filed for federal bankruptcy protection, proposing a reorganization plan that involves transferring fee title to certain units (including reversionary rights) to NBC and all remaining units to RCPI. The Shareholders believe that negotiations for the sale to NBC were underway by February 8, 1996, based on the timing of the reorganization plan. However, this interpretation is flawed as the bankruptcy court only addressed the GE/NBC sale during a May 6, 1996 hearing. Therefore, the February 8 plan could not have factored in this sale, which was not recognized until May 6. The reorganization plan was dynamic and could adapt to changes, including the eventual sale after the Shareholders' vote. The May 22, 1996 letter aimed to assure the Department of Law that the sale to GE/NBC complied with the reorganization plan. The timeline of events indicates that after the initial plan was filed, negotiations for the GE/NBC sale occurred post-vote, with the bankruptcy court confirming the sale's alignment with the plan on May 6, followed by a request for the Department of Law's approval on May 22. The Shareholders' claims of fraud, alleging that the Investor Group had prior negotiations about the sale, lack sufficient factual support as required by Rule 9(b) and the Reform Act. The District Court concluded the Shareholders' allegations did not meet the necessary standards for fraud claims, and their argument about the court ignoring the Rule 12(b)(6) standard neglects the Reform Act's established pleading requirements.

Subsections 21D(b)(1) and (b)(2) of the Act impose heightened pleading requirements for plaintiffs alleging securities fraud, as highlighted in the referenced case law. Both the Private Securities Litigation Reform Act (PSLRA) and Federal Rule of Civil Procedure 9(b) establish independent, threshold pleading standards that, if unmet, can lead to dismissal without consideration of Rule 12(b)(6). The Court noted that a complaint could satisfy Rule 12(b)(6) yet still fail under Rule 9(b). Dismissal can occur for not meeting the PSLRA's particularity requirements, which necessitates that plaintiffs provide specific factual allegations to support their fraud claims. The Shareholders contended that the District Court improperly analyzed their allegations in isolation rather than collectively, arguing that a totality-of-the-circumstances approach would reveal a reasonable inference of pre-vote negotiations for a sale of Rockefeller Center. However, the Court maintained that fraud allegations must be individually assessed for factual particularity, and if none independently meet the requirement, the complaint is subject to dismissal under the PSLRA. The Court also emphasized that a totality-of-the-circumstances approach is typically reserved for cases with unusually suspicious circumstances, such as insider trading, where mere stock sales by officers during alleged non-public information possession do not automatically suggest fraudulent intent.

Unusual stock sales may imply scienter if their timing and scope raise suspicion. Plaintiffs must demonstrate that trades occurred under circumstances that warrant a strong inference of scienter. The court agrees with the District Court that the facts alleged by the Shareholders do not meet the necessary particularity to substantiate fraud claims. The timing of the sale to GE/NBC, occurring one month post-proxy vote, reflects typical negotiation patterns of financially troubled companies rather than fraudulent intent. Additionally, the alleged correlation between the Investor Group's debt offering and the sale price does not convincingly support the fraud claims, as it would require unrealistic control over fluctuating market factors. The Shareholders' claims appear speculative and do not establish that the Investor Group had prior knowledge of any wrongdoing. Without evidence of pre-vote negotiations or a duty to update disclosures before March 25, 1999, the Investor Group's actions do not constitute fraud. Consequently, the District Court's judgment is affirmed.

A former President and CEO of RCPI and a consultant to the acquiring investors are involved in a dispute with co-defendant David Rockefeller, who was both Chairman of RCPI and a principal of the Rockefeller Group. The parties disagree on the causes of RCPI's financial difficulties. Shareholders argue that the issues were self-inflicted due to substantial short-term debt incurred to retire long-term debt, which failed because of insufficient resources to meet short-term obligations. Conversely, the Investor Group attributes the financial troubles to a downturn in New York's commercial real estate market during the late 1980s and early 1990s.

In previous filings, the Shareholders identified Whitehall as a lender in 1994, but the Second Amended Complaint attributes all $225 million in financing solely to Goldman Sachs, despite RCPI's Form 8-K from December 18, 1994, indicating involvement from both Goldman Sachs and Whitehall, among others. Co-defendant Neidich held a seat on RCPI's Board representing Goldman Sachs. The Investor Group notes that restrictions on the sale of RCPI's assets were stricter than claimed by the Shareholders, highlighting that covenants from the 1994 financing prohibited RCPI from prepaying debt for five years, limiting asset sales during this period.

Though the dates of various proposals differ in previous rulings, the Shareholders' latest allegations in the Second Amended Complaint are regarded as controlling. A rights offering would have allowed existing shareholders to participate in a new share offering potentially at a discount. The Investor Group's bid of $8.00 per share represented a 50% premium over RCPI's stock price prior to the bidding. Additionally, credit lease financing, mentioned in prior rulings, involves selling the right to future lease payments for their present value.

The Shareholders argue that the bankruptcy court's remarks regarding the sale's disclosure support their claims of inadequacy. The court expressed concerns about the transaction's economic implications and indicated that the disclosure statement may not have fully represented the negotiation nature, suggesting it could be inadequate or inappropriate. The Shareholders did not contest this finding on appeal, which limits the review to the court's dismissal motion decision. The appellate review applies a plenary standard akin to that for summary judgment due to the district court's consideration of external documents outside the pleadings. 

Regarding state of mind in allegations, Rule 9(b) permits general averment of malice, intent, and knowledge, while securities fraud claims under Rule 10b-5 require specific facts indicating a strong inference of the defendant's state of mind. The district court focused its analysis on the particularity requirement of the Reform Act, specifically 15 U.S.C. 78u-4(b)(1), and the appellate review will also center on this requirement. 

The Shareholders also reference discussions from September 1995, where GE/NBC allegedly indicated a willingness to invest significantly in lease financing and property ownership options. They note that the economic dynamics of such financing differ markedly from outright ownership, which they implicitly acknowledge by stating GE/NBC was not interested in becoming a part owner of the entire complex despite the potential financial arrangements discussed.

GE/NBC sought to relieve itself from an unfavorable lease and gain control over physical plant systems, which undermined the Shareholders' claims of ongoing sale negotiations as of September 1995. The court in Florida State Board of Administration v. Green Tree Financial Corp. clarified the impact of the Private Securities Litigation Reform Act (PSLRA) on traditional Rule 12(b)(6) analysis, noting that while typically all factual allegations in a complaint are assumed true, the Reform Act requires the dismissal of vague or non-specific assertions that fail to meet particularity standards. The court found it unnecessary to consider the District Court's alternative dismissal rationale regarding the immateriality of alleged omissions. Additionally, the court did not address the Shareholders' request for remand due to alleged bias or conflict of interest, concluding that any potential harm was mitigated by its thorough review of the district court's decision.