UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT ____________

No. 21-1147 ____________ CITY OF WARREN POLICE AND FIRE RETIREMENT SYSTEM, Individually and on behalf of all others similarly situated, Appellant

v.

PRUDENTIAL FINANCIAL, INC.; CHARLES F. LOWREY; KENNETH Y. TANJI; ROBERT M. FALZON ____________

On Appeal from the United States District Court for the District of New Jersey (D.C. No. 2-19-cv-20839) District Judge: Honorable Stanley R. Chesler ____________

Argued: October 27, 2021

Before: GREENAWAY, JR., KRAUSE, and PHIPPS, Circuit Judges.

(Filed: June 13, 2023) ____________

Joseph D. Daley ROBBINS GELLER RUDMAN & DOWD 655 West Broadway, Suite 1900 San Diego, CA 92101 Peter S. Pearlman COHN LIFLAND PEARLMAN HERRMANN & KNOPF Park 80 West, Plaza One 250 Pehle Avenue, Suite 401 Saddle Brook, NJ 07663 Daniel J. Pfefferbaum [Argued] Shawn A. Williams ROBBINS GELLER RUDMAN & DOWD One Montgomery Street, Suite 1800 San Francisco, CA 94104 Douglas Wilens ROBBINS GELLER RUDMAN & DOWD 225 North East Mizner Boulevard, Suite 720 Boca Raton, FL 33432

Counsel for City of Warren Police and Fire Retirement System

2 David D. Cramer Tricia B. O’Reilly WALSH PIZZI O’REILLY & FALANGA Three Gateway Center 100 Mulberry Street, 15th Floor Newark, NJ 07102 Maeve L. O’Connor [Argued] Susan R. Gittes Aasiya F.M. Glover DEBEVOISE & PLIMPTON 66 Hudson Boulevard New York, NY 10001

Counsel for Prudential Financial, Inc.; Charles F. Lowrey; Kenneth Y. Tanji; and Robert M. Falzon

_______________________

OPINION OF THE COURT _______________________

PHIPPS, Circuit Judge. Insurance companies typically set aside funds, known as reserves, to pay for anticipated benefit claims by their policyholders. As an exercise of actuarial judgment, a wide range of considerations bear on the determination of the amount to hold in reserves. And because circumstances change, an insurer’s reserves may vary over time. But in this case, one of the country’s largest publicly traded life insurance companies suddenly announced that it would need to increase

3 its reserves by $208 million and that, in addition to a one-time charge in that amount, its earnings would be reduced by $25 million per quarter for the foreseeable future. After that news, the company’s stock price dropped by more than twelve percent over two days.

A municipal retirement system that had purchased the company’s common stock before the announcement now alleges that the company knew beforehand of problems with its reserves and misled investors about those issues. On that premise, the retirement system filed this putative class action against the company and three of its corporate executives, alleging securities fraud under § 10(b) and § 20(a) of the Securities Exchange Act of 1934.

In response to the retirement system’s amended complaint, the insurance company and the executives moved to dismiss for failure to state a claim for relief. They argued that, under the heightened pleading standard for securities-fraud claims, the retirement system’s complaint failed to plausibly allege three necessary elements of its claims: false or misleading statements; loss causation; and scienter.

The District Court granted that motion and dismissed the complaint with prejudice. It determined that the retirement system did not adequately plead falsity, and for that reason, it did not evaluate the sufficiency of the complaint’s loss causation or scienter allegations. The retirement system then brought this appeal.