UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

August Term 2023

(Argued: January 24, 2024 Decided: February 3, 2025)

No. 22-3076

–––––––––––––––––––––––––––––––––––– IN RE: SHANDA GAMES LIMITED SECURITIES LITIGATION ________________________

DAVID MONK,

Lead-Plaintiff-Appellant,

ASTOR BK REALTY TRUST, on behalf of itself and all others similarly situated,

Plaintiff,

-v.-

SHANDA GAMES LIMITED, YINGFENG ZHANG, LI YAO, LIJUN LIN, HENG WING CHAN, YONG GUI, SHAOLIN LIANG, DANIAN CHEN,

Defendants-Appellees,

CAPITALCORP LIMITED, CAPITALHOLD LIMITED,

Defendants.

––––––––––––––––––––––––––––––––––––

1 Before: LIVINGSTON, Chief Judge, JACOBS, and LOHIER, Circuit Judges.

Plaintiff-Appellant David Monk challenges the district court’s dismissal of his § 10(b) securities fraud case for failure to state a claim. Monk alleges that materially misleading proxy materials issued by Shanda Games Limited (“Shanda”) as part of a freeze-out merger caused him to accept the merger price instead of exercising his appraisal rights. The United States District Court for the Southern District of New York (Carter, J.) dismissed Monk’s claims on the ground that he failed properly to allege loss causation. We hold that the district court erred in dismissing Monk’s claims. We agree with the district court that City of Pontiac Policemen’s and Firemen’s Retirement System v. UBS AG, 752 F.3d 173 (2d Cir. 2014), created a limited exception (for foreign securities purchased on foreign exchanges) to the general rule, set forth in Morrison v. National Australia Bank Ltd., 561 U.S. 247 (2010), that “transactions in securities listed on a domestic exchange” fall within the scope of § 10(b), as this case does. City of Pontiac, 752 F.3d at 179- 181 (quoting Morrison, 561 U.S. at 267). We further conclude that Monk has adequately alleged material misstatements; that federal law governs the adverse interest exception to imputation for scienter in § 10(b) cases; and that the scienter of the conflicted directors—who had the motive and opportunity to deflate the merger price for their own financial gain—can be imputed to the company. We also agree with the district court that Monk may invoke the rebuttable presumption of fraud-on-the-market to satisfy transaction causation because he relied on the market price to decide not to exercise his appraisal rights. We disagree with the district court’s conclusion with respect to certain misrepresentations and on loss causation and hold that Monk adequately pleaded loss causation. We therefore AFFIRM in part and VACATE in part the judgment of the district court.

Judge Lohier joins the opinion of the court and files a concurring opinion. Judge Jacobs dissents in a separate opinion. FOR PLAINTIFF-APPELLANT: JAKE BISSELL-LINSK, Labaton Keller Sucharow LLP, New York, NY (Carol C. Villegas, Labaton Keller Sucharow LLP, New York, NY & Jeremy A. Lieberman,

2 Michael Grunfeld, Pomerantz LLP, New York, NY, on the brief) FOR DEFENDANTS-APPELLEES: ABBY F. RUDZIN, O’Melveny & Myers