Case 1:18-cv-07796-VEC Document 78 Filed 04/12/19 Page 1 of 23

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

CONSTRUCTION LABORERS PENSION TRUST
FOR SOUTHERN CALIFORNIA, GENE SAMIT
and JOHN LANTZ, Individually and on Behalf of All
Others Similarly Situated,
Plaintiffs,
vs.

)

)
)
) Consolidated Action No. 1:18-cv-07796
)
)
)
ORAL ARGUMENT REQUESTED

)

CBS CORPORATION et al.,
Defendants.

)
)
)

)

MEMORANDUM OF LAW IN SUPPORT OF DEFENDANT LESLIE MOONVES’S
MOTION TO DISMISS PLAINTIFF’S AMENDED COMPLAINT

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TABLE OF CONTENTS
Page
PRELIMINARY STATEMENT ................................................................................................... 1
FACTUAL BACKGROUND ........................................................................................................ 2
A.

Moonves Signed An Aspirational Letter In The Introduction Of
CBS’s Business Conduct Statement .......................................................... 2

B.

Moonves Adopted CBS’s Statements That Talented Executives
Are An Important Part Of CBS’s Business................................................ 4

C.

Moonves Made General Comments About Workplace Sexual
Harassment And CBS’s Financial Performance ........................................ 5

ARGUMENT ................................................................................................................................. 5
I.

PLEADING REQUIREMENTS FOR A SECTION 10(b) CLAIM...................... 5

II.

PLAINTIFF FAILS TO STATE A CLAIM UNDER SECTION 10(b)................ 7

III.

IV.

A.

Plaintiff Fails To Allege Facts Giving Rise To Any Actionable
Omission .................................................................................................... 7

B.

Plaintiff Cannot Base Its Claim On Statements Of Optimism Or
Puffery........................................................................................................ 9

PLAINTIFF FAILS TO ALLEGE A STRONG INFERENCE OF
SCIENTER .......................................................................................................... 10
A.

Motive Cannot Be Inferred From Pre-Arranged Stock Sales .................. 10

B.

Plaintiff Fails To Allege Circumstantial Evidence To Support A
Strong Inference Of Scienter ................................................................... 11

BECAUSE PLAINTIFF FAILS TO ALLEGE A PRIMARY
VIOLATION UNDER SECTION 10(b), ITS SECTION 20(a) CLAIM
MUST ALSO BE DIMISSED ............................................................................. 17

CONCLUSION ............................................................................................................................ 17

i

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TABLE OF AUTHORITIES
CASES
Andropolis v. Red Robin Gourmet Burgers, Inc.,
505 F. Supp. 2d 662 (D. Colo. 2007) .......................................................................................14
ATSI Commc’ns Inc. v. Shaar Fund, Ltd.,
493 F.3d 87 (2d Cir. 2007).........................................................................................................6
Barrett v. PJT Partners, Inc.,
No. 16-cv-2841, 2017 WL 3995606 (S.D.N.Y. Sept. 8, 2017) (Caproni, J.) ............................2
Bettis v. Aixtron SE,
No. 16 Civ. 00025, 2016 WL 7468194 (S.D.N.Y. Dec. 20, 2016) ..........................................12
Fries v. N. Oil & Gas, Inc.,
285 F. Supp. 3d 706 (S.D.N.Y. 2018)................................................................................ 13-14
Harris v. AmTrust Fin. Servs., Inc.,
135 F. Supp. 3d 155 (S.D.N.Y. 2015) (Caproni, J.) ..................................................................6
Hershfang v. Citicorp,
767 F. Supp. 1251 (S.D.N.Y. 1991).........................................................................................13
In re AstraZeneca Sec. Litig.,
559 F. Supp. 2d 453 (S.D.N.Y. 2008)......................................................................................15
In re Gildan Activewear, Inc. Sec. Litig.,
636 F. Supp. 2d 261 (S.D.N.Y. 2009)................................................................................10, 11
In re Lions Gate Entm’t. Corp. Sec. Litig.,
165 F. Supp. 3d 1 (S.D.N.Y. 2016) .........................................................................................14
In re Lululemon Sec. Litig.,
14 F. Supp. 3d 553 (S.D.N.Y. 2014)........................................................................................11
In re Merrill Lynch & Co., Inc.,
273 F. Supp. 2d 351 (S.D.N.Y. 2003)........................................................................................2
In re Pfizer, Inc. Sec. Litig.,
538 F. Supp. 2d 621 (S.D.N.Y. 2008)......................................................................................10
In re PXRE Grp., Ltd., Sec. Litig.,
600 F. Supp. 2d 510 (S.D.N.Y. 2009)................................................................................ 11-12
In re Sanofi Sec. Litig.,
87 F. Supp. 3d 510 (S.D.N.Y. 2015), aff’d sub nom. Tongue v. Sanofi, 816
F.3d 199 (2d Cir. 2016)............................................................................................................16
ii

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In re Sanofi Sec. Litig.,
155 F. Supp. 3d 386 (S.D.N.Y. 2016)........................................................................................8
In re UBS AG Sec. Litig.
No. 07 Civ. 11225, 2012 WL 4471265 (S.D.N.Y. Sept. 28, 2012) .........................................12
Kalnit v. Eichler,
264 F.3d 131 (2d Cir. 2001).................................................................................................6, 11
Kleinman v. Elan Corp.,
706 F.3d 145 (2d Cir. 2013).....................................................................................................17
Lapin v. Goldman Sachs Grp., Inc.,
506 F. Supp. 2d 221 (S.D.N.Y. 2006)......................................................................................17
Lopez v. CTPartners Exec. Search, Inc.,
173 F. Supp. 3d 12 (S.D.N.Y. 2016)......................................................................................8, 9
N. Collier Fire Control & Rescue Dist. Firefighter Pension Plan & Plymouth Cty.
Ret. Ass’n v. MDC Partners, Inc.,
No. 15 CIV. 6034 (RJS), 2016 WL 5794774 (S.D.N.Y. Sept. 30, 2016) ................................12
Novak v. Kasaks,
216 F.3d 300 (2d Cir. 2000).......................................................................................................6
Panther Partners, Inc. v. Ikanos Comm’s, Inc.,
538 F. Supp. 2d 662 (S.D.N.Y. 2008)......................................................................................12
Plumbers & Steamfitters Local 773 Pension Fund v. Canadian Imperial Bank of
Commerce,
694 F. Supp. 2d 287 (S.D.N.Y. 2010)................................................................................13, 14
Retail Wholesale & Dep’t Store Union Local 338 Ret. Fund v. Hewlett-Packard
Co.,
845 F.3d 1268 (9th Cir. 2017) .......................................................................................9, 14, 15
Rombach v. Chang,
355 F.3d 164 (2d Cir. 2004)...................................................................................................6, 7
Santa Fe Indus., Inc. v. Green,
430 U.S. 462 (1977) ...................................................................................................................6
Schaffer v. Horizon Pharma PLC,
No. 16-CV-1763, 2018 WL 481883 (S.D.N.Y. Jan. 18, 2018) ...............................................15
Singh v. Cigna Corp.,
918 F.3d 57 (2d Cir. 2019).........................................................................................................9

iii

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Tellabs, Inc. v. Makor Issues & Rights, Ltd.,
551 U.S. 308 (2007) .............................................................................................................6, 16
Tongue v. Sanofi,
816 F.3d 199 (2d Cir. 2016).......................................................................................................8
STATUTES & RULES
15 U.S.C. § 78j(b) .................................................................................................................. passim
15 U.S.C. § 78u-4(b)(2) ...................................................................................................................6
17 C.F.R. § 240.10b5-1 ..................................................................................................................11
17 C.F.R. § 240.12b-23 ................................................................................................................3, 4
Fed. R. Civ. P. 9(b) ......................................................................................................................1, 6
Fed. R. Civ. P. 12(b)(6)....................................................................................................................1

iv

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Defendant Leslie Moonves respectfully submits this memorandum of law in support of his
motion to dismiss the Amended Complaint filed by Lead Plaintiff Construction Laborers Pension
Trust for Southern California (the “Amended Complaint” or “AC”), pursuant to Rules 9(b) and
12(b)(6) of the Federal Rules of Civil Procedure and the Private Securities Litigation Reform Act
(“PSLRA”).
PRELIMINARY STATEMENT
The Court should dismiss the Amended Complaint against Moonves because it fails
adequately to allege either that he made false statements or that he acted with scienter.
The crux of the Amended Complaint’s allegations against Moonves are two-fold. First,
Plaintiff alleges that several routine statements, including CBS’s warning about the loss of key
personnel and Moonves’s comments on CBS’s financial results press release, are false and
misleading because Moonves’s supposed conduct and CBS’s supposed culture amounted to an
“undisclosed risk that Moonves would have to leave his positions at the Company.” AC ¶ 6.
Second, Plaintiff infers that CBS’s customary Business Conduct Statement (“BCS”), CBS’s
generic legal proceeding disclosure, and Moonves’s off-the-cuff remarks about the cultural impact
of the #MeToo movement are misleading because of the supposed conduct of Moonves and CBS
employees more generally. Id. ¶¶ 123, 125, 128. Plaintiff ignores the innocuous context of these
statements and in any event fails to establish that any of these generic statements are false or
misleading, much less that they support a claim of securities fraud.
Plaintiff’s scienter arguments fare no better. Plaintiff’s allegations amount to claiming
Moonves’s statements were false because he should have known his employment at CBS was in
jeopardy and, without him, CBS’s “financial stability and success” would be impacted. Id. ¶ 3.
But to infer such scienter, Plaintiff improperly relies on an incomplete internal investigation and
newspaper articles about the #MeToo movement to imply that otherwise dubious allegations

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regarding decades old personal conduct somehow are the makings of securities fraud. Not only is
it implausible that Moonves could have foreseen his departure from CBS at the time of the alleged
statements, but this argument relies on Moonves’s supposed knowledge of mere allegations of past
wrongdoing, largely unconnected to CBS. As the Amended Complaint establishes, Moonves
maintains that the allegations against him of misconduct more than a decade ago are not true and
that he did not act improperly. Id. ¶¶ 145, 149. Thus, at the time of Moonves’s statements, he had
no reason to believe his departure was imminent and, in fact, he believed the truth of his statements.
The Amended Complaint does not allege otherwise. This is precisely the type of fraud by hindsight
lawsuit that the heightened requirements of the PSLRA were designed to weed out at the pleading
stage. Accordingly, the Amended Complaint should be dismissed with prejudice.
FACTUAL BACKGROUND1
A.

Moonves Signed An Aspirational Letter In The Introduction Of CBS’s
Business Conduct Statement

Plaintiff attempts to attribute to Moonves statements included in the BCS by virtue of
CBS’s Proxy Statements, which inform investors that such statements were available on CBS’s
website. AC ¶¶ 100-04, 119-20, 134-35. The Proxy Statements describe the BCS as containing
CBS’s “commitment to providing equal employment opportunities and a bias-free and harassmentfree workplace environment,” but the descriptions make no mention of sexual conduct or

1

Moonves denies the allegations in the Amended Complaint and reserves the right to challenge
the allegations if the Court denies this motion. The background contained herein is drawn from
allegations in the Amended Complaint, which are accepted as true solely for the purpose of this
motion. See Barrett v. PJT Partners, Inc., No. 16-cv-2841, 2017 WL 3995606, at *3 (S.D.N.Y.
Sept. 8, 2017) (Caproni, J.). The background also is drawn from “public disclosure documents
required by law to be, and that have been, filed with the Securities and Exchange Commission.”
In re Merrill Lynch & Co., Inc., 273 F. Supp. 2d 351, 357 (S.D.N.Y. 2003).
2

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misconduct. Ex.2 11 (Apr. 2018 Proxy) at 5.3 The Proxy Statements did not incorporate the BCS.
As Plaintiff tacitly concedes, the Proxy Statements do not reprint in full the BCS or include it as
an exhibit. See Ex. 11 (Apr. 2018 Proxy); AC ¶¶ 100, 119, 134; see also 17 C.F.R. § 240.12b-23
(requirements to incorporate by reference include “[a]n express statement that the specified matter
is incorporated by reference” and “copies of any information . . . incorporated . . . shall be filed as
an exhibit”).
Moreover, Plaintiff does not and cannot allege that Moonves signed the Proxy Statements.
See generally AC.4 In fact, CBS’s Proxy Statements were signed each year by its Corporate
Secretary, not Moonves. Ex. 11 (Apr. 2018 Proxy) at 90. Although Moonves signed a letter at
the beginning of the BCS, that letter is not in the Proxy Statements. AC ¶ 102; Ex. 11 (Apr. 2018
Proxy) at 5.
In any event, Moonves’s letter to CBS employees at the beginning of the BCS made
generalized, aspirational statements that CBS was “committed to maintaining the highest standards
in everything we do,” that CBS was “guid[ed]” by “a strong and established ethical code,” and
that all CBS employees had “a responsibility to uphold the highest standards of ethical and
appropriate business actions.” Ex. 12 (BCS) (emphasis added); see AC ¶ 102. Moonves did not
state in the letter that all CBS employees had complied with the BCS in all instances and did not

2

The term “Ex.” refers to the exhibits annexed to the Declaration of Mary Eaton in Support of the
Motion by CBS Corporation and Certain Individual Defendants to Dismiss the Amended
Complaint.
3

The current BCS is dated 2016, and its adoption was disclosed as early as April 2016 on the April
2016 Proxy, indicating the document, and all statements therein, predate the class period.
4

Moonves signed only an opening letter at the beginning of each year’s Proxy Statement, inviting
Class A shareholders to attend CBS’s annual shareholders’ meeting. See Ex. 11 (Apr. 2018 Proxy).
These letters made no representations about, or comments on, the accuracy of the contents of the
Proxy Statements. Id.
3

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address CBS’s historical enforcement or application of the policy. Ex. 12 (BCS). The letter did
not comment upon Moonves’s own compliance with the policy and did not address the then
inchoate allegations of his supposed past conduct. Id. Again, Plaintiff does not and cannot allege
that Moonves’s letter said any of these things. AC ¶ 102.
B.

Moonves Adopted CBS’s Statements That Talented Executives Are An
Important Part Of CBS’s Business

Plaintiff also alleges that Moonves’s statements include CBS’s annual Form 10-K and
Form 10-Q filings. In February of each year between 2016 and 2018, CBS’s Form 10-K included
statements describing the importance of talented executives to its past and future success. AC ¶¶
95, 115, 127.5 In particular, these statements explained that CBS’s success “depends upon the
continued efforts, abilities and expertise of its chief executive officer and other key employees,”
that those employees’ “unique combination of skills and experience . . . would be difficult to
replace,” and that the future loss of those employees “could have a material adverse effect on the
Company.” Id. Plaintiffs allege that these warnings to investors about the importance of executive
talent and the potential impact of their loss were incorporated by reference into each of CBS’s
Form 10-Qs filed each quarter between May 2016 and May 2018. Id. ¶¶ 96-97, 114, 116-17, 122,
139.6
As CBS’s CEO, Moonves provided annual certifications pursuant to the Sarbanes-Oxley
Act that were included as exhibits to CBS’s Form 10-Ks and 10-Qs. These certifications explained
that the Form 10-Ks and 10-Qs did not contain any false statements of material fact or misleading

5

The statements in CBS’s Form 10-K filed with the SEC in February 2016 were made outside the
class period, as were the statements in CBS’s Form 10-Qs filed in May and July 2016—all of
which Plaintiff expressly acknowledges. AC ¶¶ 95-97.
6

CBS’s Form 10-Qs did not expressly incorporate the Form 10-Ks by reference, nor were the
Form 10-Ks attached to the Form 10-Qs as exhibits. See 17 C.F.R. § 240.12b-23(b).
4

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material omissions, and that the financial information contained therein fairly presented CBS’s
financial condition in all material respects. AC ¶ 29. See also, e.g., Ex. 4 (Feb. 2018 Form 10-K)
at Exhs. 31.A & 32.A; Ex. 5 (May 2016 Form 10-Q) at Exhs. 31.A & 32.A. Plaintiff has made no
allegations disputing the financial information in CBS’s SEC filings. See generally AC.
C.

Moonves Made General Comments About Workplace Sexual Harassment
And CBS’s Financial Performance

Finally, Plaintiff alleges that Moonves directly made two supposedly misleading
statements in late 2017 and early 2018. First, Plaintiff alleges that Moonves commented generally
on the impact of the #MeToo movement during an interview with Variety in November 2017. AC
¶¶ 8, 125. Moonves did not make any statement—nor was he asked—about his own sexual
conduct or the conduct of others at CBS during this interview, and Plaintiff does not allege that he
did. See id.
Second, Plaintiff alleges that Moonves commented on CBS’s strong financial performance
for the fourth quarter of 2017 in a February 2018 press release. Id. ¶ 126. This commentary had
nothing to do with—and did not mention—Moonves’s own sexual conduct, allegations of sexual
harassment at CBS, or the #MeToo movement. Ex. 7 (Feb. 15, 2018 Form 8-K) at Exh. 99 at 1.
Again, Plaintiff does not allege that it did. AC ¶ 126.
ARGUMENT7
I.

PLEADING REQUIREMENTS FOR A SECTION 10(b) CLAIM
To state a claim under Section 10(b) of the Exchange Act, a “plaintiff must allege that the

defendant (1) made misstatements or omissions of material fact, (2) with scienter, (3) in connection
with the purchase or sale of securities, (4) upon which the plaintiff relied, and (5) that the plaintiff’s

7

Moonves adopts solely the legal arguments in the memorandum of law filed on behalf of CBS
and the other defendants in this action as to why Plaintiff’s claims against CBS and all other
defendants should also be dismissed.
5

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reliance was the proximate cause of its injury.” ATSI Commc’ns Inc. v. Shaar Fund, Ltd., 493
F.3d 87, 105 (2d Cir. 2007); Kalnit v. Eichler, 264 F.3d 131, 138 (2d Cir. 2001). Securities fraud
claims are subject to the heightened pleading requirements of the PSLRA, which require Plaintiff
to “specify each statement alleged to have been misleading, [and] the reason or reasons why the
statement is misleading.” Rombach v. Chang, 355 F.3d 164, 170 (2d Cir. 2004) (alteration in
original). Federal Rule of Civil Procedure 9 requires Plaintiff to “state with particularity the
circumstances constituting fraud.” Fed. R. Civ. P. 9(b); Novak v. Kasaks, 216 F.3d 300, 306 (2d
Cir. 2000). Conclusory and unsupported allegations are insufficient and must be disregarded.
ATSI, 493 F.3d at 99.
The PSLRA also requires Plaintiff to “state with particularity facts giving rise to a strong
inference that the defendant acted with the required state of mind,” taking into account plausible
opposing inferences. 15 U.S.C. § 78u-4(b)(2); Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551
U.S. 308, 326 (2007). It is not sufficient to “allege facts from which an inference of scienter
rationally could be drawn.” Tellabs, 551 U.S. at 323 (emphasis in original). Rather, an inference
of scienter “must be more than merely ‘reasonable’ or ‘permissible’—it must be cogent and
compelling, thus strong in light of other explanations.” Id. at 324. The Amended Complaint fails
to satisfy these stringent pleading requirements and must be dismissed.
Further, the U.S. Supreme Court has held that federal securities laws do “not seek to
regulate transactions which constitute no more than internal corporate mismanagement.” Santa
Fe Indus., Inc. v. Green, 430 U.S. 462, 479 (1977); Harris v. AmTrust Fin. Servs., Inc., 135 F.
Supp.3d 155, 171 (S.D.N.Y. 2015) (Caproni, J.) (“[S]ection 10(b) was not designed to regulate
corporate mismanagement.”).

Plaintiff’s allegations amount to, at most, claims of internal

6

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corporate mismanagement from many years ago. Such allegations fail to assert a securities fraud
and should be dismissed on this ground as well.
II.

PLAINTIFF FAILS TO STATE A CLAIM UNDER SECTION 10(b)
A.

Plaintiff Fails To Allege Facts Giving Rise To Any Actionable Omission

Plaintiff cannot adequately allege that Moonves’s statements were false. Indeed most of
Moonves’s statements are generalized, and the Amended Complaint illustrates that Plaintiff
actually agrees with those statements. Specifically, the bulk of the statements on which Plaintiff
attempts to build its claim are generic statements from CBS’s SEC filings that the company’s
success depended on the unique talents of its executives, including Moonves. AC ¶¶ 95-97, 11417, 122, 139.8 Plaintiff does not dispute this statement. To the contrary, it spends multiple pages
of the Amended Complaint recounting Moonves’s rise to prominence in the entertainment
industry, referring to Moonves as CBS’s “secret weapon” and “central to CBS’s success.” Id. ¶¶
3, 37-42. As part of that narrative, Plaintiff describes CBS’s “33rd consecutive quarter of EPS
[earnings per share] growth” with Moonves at the helm, yet attempts to paint as misleading the
almost exact same description of the company’s financial performance in Moonves’s February
2018 comment to CBS’s press release. Compare id. ¶ 42, with id. at ¶ 126.9

8

Plaintiff also asserts that CBS’s description of certain legal proceedings in its February 2018
Form 10-K was “materially false and misleading.” AC ¶¶ 128-29. Since the accompanying
descriptions of why this statement was supposedly misleading do not identify a single legal
proceeding that should have been disclosed, the description in the Form 10-K cannot possibly be
false or misleading. See id. ¶¶ 98, 123. In fact, there were no such legal proceedings regarding
Moonves’s alleged misconduct at any time during the class period.
9

The Amended Complaint mentions two public statements that Moonves made in reaction to The
New Yorker’s publication of two articles discussing his alleged personal sexual misconduct from
between 13 and 35 years ago. AC ¶¶ 145, 149. Plaintiff does not and cannot allege that these
statements were misleading, so they cannot serve as the basis for Plaintiff’s claim. See Rombach,
355 F.3d at 170.
7

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Plaintiff similarly fails to allege the falsity of the sole statement it identifies that Moonves
made about the #MeToo movement or sexual harassment more generally. Moonves’s November
2017 interview with Variety—during which he was not asked a single question about his own
conduct—included only his opinions. See AC ¶¶ 8, 125. Specifically, the Amended Complaint
quotes Moonves as saying: “It’s a watershed moment . . . [i]t’s important that a company’s culture
will not allow for this. And that’s the thing that’s far-reaching. There’s a lot we’re learning.
There’s a lot we didn’t know.” Id. He made no objective claims, much less a guarantee of his or
CBS’s conduct. Id. Plaintiff has not alleged that Moonves did not actually hold the beliefs he
described about the scope of the #MeToo movement or that his genuine stated beliefs were at all
relevant, much less material, to an investor. See Tongue v. Sanofi, 816 F.3d 199, 209-10 (2d Cir.
2016); AC ¶¶ 98, 123, 125, 129. The Amended Complaint therefore fails to allege that any
statement in this interview was false.
Since Plaintiff cannot show that any of these statements is false, it must demonstrate that
Moonves either (a) had a duty to disclose additional information or (b) omitted information related
to these statements that rendered them materially misleading. Plaintiff fails to do this as well. A
company has no generalized duty to disclose alleged corporate mismanagement, and therefore
Plaintiff must identify a specific statutory duty to disclose such information. See In re Sanofi Sec.
Litig., 155 F. Supp. 3d 386, 403 (S.D.N.Y. 2016). The sole source of such a duty that Plaintiff has
offered, Item 303 of Regulation S-K, does not impose a duty to disclose an alleged culture of
sexual harassment in the workplace, even if the information might eventually become public
through news reports. Lopez v. CTPartners Exec. Search, Inc., 173 F. Supp. 3d 12, 35-36
(S.D.N.Y. 2016) (denying applicability of Item 303 where the defendant’s culture of harassment
was eventually the subject of an exposé in the New York Post). Courts faced with similar

8

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accusations that executives engaged in sexual misconduct—which here allegedly occurred decades
ago—have held that the lack of disclosure of such allegations is not actionable. Id. at 29-30 (“The
securities laws . . . decidedly do not prohibit any misrepresentation . . . of immaterial facts, even if
it induces reactions from investors that, in hindsight or otherwise, make the misrepresentation
appear material.” (emphasis in original) (internal quotation marks omitted)); Retail Wholesale &
Dep’t Store Union Local 338 Ret. Fund v. Hewlett-Packard Co., 845 F.3d 1268, 1277 (9th Cir.
2017) (affirming motion to dismiss Section 10(b) claim based in part on CEO’s undisclosed sexual
harassment). Those principles are particularly compelling here since the allegations are all more
than a decade old and largely unrelated to the period of time that Moonves worked at CBS.
B.

Plaintiff Cannot Base Its Claim On Statements Of Optimism Or Puffery

Moonves’s statements in his letter introducing the BCS also are quintessential puffery that
“[a] reasonable stockholder would not ‘consider . . . important in deciding whether to buy or sell
shares of stock.’” Singh v. Cigna Corp., 918 F.3d 57, 63 (2d Cir. 2019). Since the letter made no
comment on Moonves’s own compliance with the BCS or even CBS’s past success enforcing the
policy generally, its statements about CBS’s commitment to the policy were “transparently
aspirational.” Hewlett-Packard Co., 845 F.3d at 1276, 1278. Exchange Act claims built on
generalized policies attesting to a company’s honesty and integrity must be dismissed. See Lopez,
173 F. Supp. 3d at 28-29.10 Similarly, Moonves’s comments during his interview with Variety
simply described the zeitgeist of the #MeToo movement without making any concrete statements
about CBS or his personal conduct. AC ¶¶ 8, 125.

10

Although Plaintiff alleges that CBS’s Proxy Statements mention a Supplemental Code of Ethics
for Senior Financial Officers in a discussion related to the BCS, the Amended Complaint does not
allege that Moonves made any public statement about this ethics policy analogous to the letter he
wrote about the BCS. See AC ¶ 105.
9

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III.

PLAINTIFF FAILS TO ALLEGE A STRONG INFERENCE OF SCIENTER
Plaintiff’s scienter allegations also are defective. Plaintiff must “state with particularity

facts giving rise to a strong inference that [each] defendant acted with the required state of mind.”
In re Pfizer, Inc. Sec. Litig., 538 F. Supp. 2d 621, 635 (S.D.N.Y. 2008) (alteration in original). In
the Second Circuit, a complaint may satisfy this requirement “by alleging facts (1) showing that
defendants had both motive and opportunity to commit the fraud or (2) constituting strong
circumstantial evidence of conscious misbehavior.” Id. Plaintiff’s allegations undercut any such
inference.
A.

Motive Cannot Be Inferred From Pre-Arranged Stock Sales

Plaintiff alleges Moonves had motive to commit fraud exclusively by reference to his sale
of 2,640,000 shares of CBS stock during the putative class period.11 AC ¶¶ 91-92. But insider
trading can imply scienter only if the timing and amount of the defendant’s trading were “unusual
or suspicious.” In re Gildan Activewear, Inc. Sec. Litig., 636 F. Supp. 2d 261, 272 (S.D.N.Y.
2009). Nowhere does the Amended Complaint allege that Moonves’s sales deviated from his
normal trading practices or that there was any connection between the timing of the sales and the
dissemination of the alleged misstatements. Indeed, over half of the 2,640,000 shares were sold
before November 2017, when Moonves supposedly first became aware of allegations against him.
See AC ¶ 92. And Moonves’s trades stopped in May 2018 and did not occur at all during the
summer and fall of 2018, when the exposé articles about his alleged misconduct were published.
Id. ¶¶ 63, 91, 149.
More importantly still, the Amended Complaint omits that every stock sale at issue was

11

These 2,640,000 shares sold by Moonves during the putative class period includes the 1,000,000
shares sold by Moonves between mid-December 2017 and May 2018, the period in which Plaintiff
alleges Moonves was aware of percolating media inquiries. AC ¶ 92.
10

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made pursuant to a Rule 10b5-1 trading plan. Trades “made pursuant to a non-discretionary Rule
10b-5-1 trading plan . . . undermine[] any allegation that the timing or amounts of the trades was
unusual or suspicious.” Gildan, 636 F. Supp. 2d at 272; In re Lululemon Sec. Litig., 14 F. Supp.
3d 553, 585 (S.D.N.Y. 2014) (“Trades made pursuant to a Rule 10b5-1 trading plan do not give
rise to a strong inference of scienter.”); Ex. 32 (Moonves Form 4s). Moreover, it is undisputed
that even after those sales, Moonves remained a very substantial holder of CBS stock.
B.

Plaintiff Fails To Allege Circumstantial Evidence To Support A Strong
Inference Of Scienter

Because Plaintiff fails to allege that Moonves had any cognizable motive to commit
securities fraud on investors, “the strength of the circumstantial allegations must be
correspondingly greater.” Kalnit, 264 F.3d at 142. Under this alternative theory, a plaintiff must
show that the defendant’s conduct was “at the least, conduct which is highly unreasonable and
which represents an extreme departure from the standards of ordinary care to the extent that the
danger was either known to the defendant or so obvious that the defendant must have been aware
of it.” Id. The Amended Complaint is devoid of facts supporting an inference of Moonves’s
scienter, much less the heightened standard applicable here.
1.

Moonves’s Position As CEO Does Not Amount to Scienter

Plaintiff alleges an inference of Moonves’s scienter because he was aware of “widespread
conduct” at CBS which supposedly “emanated” from Moonves. AC ¶¶ 5, 169. As a preliminary
matter, Moonves’s role as CEO is not sufficient to establish scienter. In re PXRE Grp., Ltd., Sec.
Litig., 600 F. Supp. 2d 510, 538 (S.D.N.Y. 2009) (finding allegations that defendants “must have
known” facts “due to their positions” and “intimate corporate culture” fail to support an inference

11

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of scienter).12 Additionally, Moonves could not have been responsible for the alleged sexual
misconduct of CBS employees within the class period, by virtue of decades old allegations against
him, which if taken as true, predate his time as CEO and by and large predate his tenure at CBS.
2.

Moonves’s Departure Does Not Give Rise To An Inference of Scienter

The crux of the scienter allegations against Moonves, particularly with regard to the Form
10-K statements, are that he knew he would be departing CBS. But Plaintiff cannot establish its
case through such impermissible “fraud by hindsight.” See Panther Partners, Inc. v. Ikanos
Comm’s, Inc., 538 F. Supp. 2d 662, 672 (S.D.N.Y. 2008) (“[a]n earlier statement is not somehow
made misleading simply because it failed to foretell a . . . problem which later materialized”);
Bettis v. Aixtron SE, No. 16 Civ. 00025, 2016 WL 7468194, at *11 (S.D.N.Y. Dec. 20, 2016)
(holding that an ultimately unsuccessful transaction is not sufficient to show earlier optimistic
statements were fraudulent). For Moonves to have acted with the requisite scienter at the time the
statements were made, he would have had to foresee the confluence of several unpredictable
events, including accusations from certain women in his distant past (which he continues to deny),
the extensive media coverage thereof, CBS’s decision to launch an internal investigation, his own
departure from CBS, and CBS’s unilateral decision after the class period to treat his departure as
a termination for cause on alleged grounds that included reasons other than sexual misconduct
allegations. AC ¶ 157.13 Such speculative allegations based on hindsight are not enough to plead

12

Further, Moonves’s mere signing of the Form 10-Ks and other public filings is not dispositive
on the element of scienter. N. Collier Fire Control & Rescue Dist. Firefighter Pension Plan &
Plymouth Cty. Ret. Ass’n v. MDC Partners, Inc., No. 15 Civ. 6034 (RJS), 2016 WL 5794774, at
*22 (S.D.N.Y. Sept. 30, 2016) (finding plaintiff’s “bare allegations that certain defendants signed
SEC filings” “insufficient” to establish scienter).
13

To be clear, Moonves’s departure in itself does not give rise to an inference of scienter. In re
UBS AG Sec. Litig. No. 07 Civ. 11225, 2012 WL 4471265, at *18 (S.D.N.Y. Sept. 28, 2012)
(rejecting forced personnel resignations and terminations as support for an inference of scienter).
And Plaintiff alleges no facts connecting Moonves’s departure to the alleged securities fraud.
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scienter.
3.

Generalized Allegations Of Sexual Misconduct From Newspaper
Articles And CBS’s “Investigation” Do Not Give Rise To Scienter

Plaintiff’s scienter allegations regarding Moonves’s conduct are largely based on media
reports of alleged conduct that occurred well before the putative class period and an internal
investigation that concluded after the putative class period. See, e.g., AC ¶¶ 18, 49, 55, 56. This
is not—and cannot—be the basis of a claim of securities fraud during the class period.
Plaintiff cobbles together newspaper articles of Moonves’s purported conduct. But this
theory amounts to nothing more than allegations of wrongdoing by third parties. Courts repeatedly
have rejected the use of newspaper and magazine articles to plead scienter.

Plumbers &

Steamfitters Local 773 Pension Fund v. Canadian Imperial Bank of Commerce, 694 F. Supp. 2d
287, 300 (S.D.N.Y. 2010) (granting motion to dismiss and rejecting Plaintiff’s use of newspaper
and magazine articles to plead scienter); Hershfang v. Citicorp, 767 F. Supp. 1251, 1259 (S.D.N.Y.
1991) (granting motion to dismiss when “Plaintiffs have stitched together a patchwork of
newspaper clippings and proclaimed the result a tale of securities fraud”). Here, instead of
satisfying the rigorous requirement of scienter, Plaintiff relies almost exclusively on articles in The
New Yorker, The New York Times and The Wall Street Journal, suggesting that Moonves acted
wrongfully decades ago in personal matters unrelated to CBS. AC ¶¶ 14, 49, 55-56, 78. In fact,
all but one alleged instance occurred before Moonves was CEO, and the majority of the allegations
predate his time at CBS.14 Id. ¶¶ 49, 55-56. Such ancient and unconnected allegations, which

Plaintiff cites CBS’s post class period determination regarding the alleged grounds for Moonves’s
termination, which not only included cooperation with the internal investigation among other
factors, but made no reference to Moonves’s role in any securities fraud. AC ¶ 157; Ex. 10 (Dec.
18, 2018 Form 8-K) at Exh. 99 at 1.
14

Even if this decades old conduct might amount to a violation of some company’s policies at the
time of such alleged conduct, such a possible violation falls far short of scienter. Fries v. N. Oil
13

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Moonves has denied, are wholly irrelevant to a claim of scienter to commit securities fraud based
on the statements made during the purported class period. In an attempt to conjure up scienter
from allegations that are otherwise unrelated to CBS, Plaintiff argues that Moonves “should have
known” that the generic statements at issue were false because there was a rising swell in the news
known as the #MeToo movement. AC ¶¶ 7, 44-48 (arguing the #MeToo movement “alters the
landscape surrounding sexual misconduct in the workplace”). Plaintiff misunderstands the rigor
and focus of the scienter requirement enforcing the securities laws. Such generalized awareness
of unrelated events does not come close to establishing scienter for securities fraud, that is, an
intentional attempt to mislead investors during the class period. See, e.g., Plumbers & Steamfitters,
694 F. Supp. 2d at 300 (dismissing claim in light of coverage of the 2008 recession; “knowledge
of a general economic trend does not equate to harboring” scienter).
Plaintiff also erroneously attempts to create scienter by pointing to CBS’s incomplete
internal investigation.15 Courts around the country repeatedly have held, however, that even
ongoing investigations relevant to securities fraud fail to establish recklessness. See, e.g., In re
Lions Gate Entm’t. Corp. Sec. Litig., 165 F. Supp. 3d 1, 24 (S.D.N.Y. 2016) (holding SEC
investigation is insufficient to plead scienter); Andropolis v. Red Robin Gourmet Burgers, Inc.,
505 F. Supp. 2d 662, 687-88 (D. Colo. 2007) (granting motion to dismiss despite internal
investigation that uncovered CEO’s misconduct). Here, the investigation did not relate at all to
any fraud of investors. And in any event, Plaintiff acknowledges that the investigation was not

& Gas, Inc., 285 F. Supp. 3d 706, 722 (S.D.N.Y. 2018) (holding CEO’s “alleged violations of the
Code of Business Conduct . . . do not establish fraudulent intent”); Hewlett-Packard Co., 845 F.3d
at 1278 (finding that where a CEO’s conduct was inconsistent with “general ethical values
espoused within” company’s conduct statement did not amount to scienter).
15

Moonves obviously disputes both the process and subsequent conclusions of CBS’s purported
internal investigation. That dispute is irrelevant to this motion to dismiss.
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completed until after the class period. Consequently, the Amended Complaint rests entirely on
unproven allegations against Moonves regarding attenuated personal conduct from many years
ago. AC ¶ 18.16 Indeed, as acknowledged in the Amended Complaint, Moonves absolutely denies
the CBS Board’s subsequent conclusions of cause for dismissal under his contract. Id. ¶¶ 145,
149. In short, Plaintiff’s allegations based upon newspaper articles and an ongoing internal
investigation are insufficient to show scienter. Schaffer v. Horizon Pharma PLC, No. 16-CV1763, 2018 WL 481883, at *13 (S.D.N.Y. Jan. 18, 2018) (rejecting Plaintiff’s argument that an
on-going investigation was “sufficient to give rise to a requisite cogent and compelling inference
of scienter”).
4.

The Amended Complaint Negates An Inference Of Moonves’s
Scienter

Plaintiff also has failed to plead facts giving rise to an inference of scienter because there
can be no liability absent knowledge that the statements at issue were false when made. In re
AstraZeneca Sec. Litig., 559 F. Supp. 2d 453, 470 (S.D.N.Y. 2008) (where knowledge is not in
question, “[t]he key . . . is the honest belief of [the defendant] in the truth of information issued to
the public”). Plaintiff does not allege that Moonves did not consider himself key to CBS’s success,
that he thought CBS’s financial results would be materially different than as described, that he did
not think the polices stated in the BCS were actual policies of CBS, or that he thought the #MeToo

16

Plaintiff also attempts to infer scienter from Moonves’s conduct during the internal
investigation. Plaintiff points to newspaper coverage that alleges Moonves “repeatedly lied” and
that he “destroyed evidence.” AC ¶¶ 20, 155. Not only are these unsubstantiated newspaper
allegations, but this conduct is unrelated to the purported statements at issue in the claim of
securities fraud. These newspaper allegations relate to how Moonves supposedly interacted with
the company’s investigators, but say nothing about his alleged intent to deceive investors. See
Hewlett-Packard Co., 845 F.3d at 1271, 1278 (determining an executive’s resignation following
an internal investigation, where he was found to have been misleading to investigators, insufficient
grounds to uphold plaintiffs’ § 10(b) claim for conduct inconsistent with a business ethical code).
15

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movement was not a “watershed moment.”
Instead, Plaintiff’s allegations negate any inference of scienter. Plaintiff alleges that
Moonves has “always understood and respected – and abided by the principle – that ‘no’ means
‘no,’” and he has “never misused [his] position to harm or hinder anyone[].” AC ¶ 145. Plaintiff
further acknowledges that after the second The New Yorker article was published, Moonves said
he had “never before heard such disturbing accusations,” which he deemed “untrue” and “not
consistent with who I am.” Id. ¶ 149. Moonves cannot believe the allegations are untrue while
simultaneously believing both that he engaged in sexual misconduct (which he vigorously denies),
and that such denied conduct would also cause his departure from CBS. See In re Sanofi Sec.
Litig., 87 F. Supp. 3d 510, 534 (S.D.N.Y. 2015), aff’d sub nom. Tongue v. Sanofi, 816 F.3d 199
(2d Cir. 2016) (scienter requires that the defendant “understood that [his] public statements were
inaccurate, or [was] ‘highly unreasonable’ in failing to appreciate that possibility”).
When considered “holistically,” as required under Tellabs, Plaintiff’s scienter allegations
do not satisfy the PSLRA. Tellabs, 551 U.S. at 326. The Amended Complaint effectively fails to
establish that Moonves sought to mislead investors about CBS. Even assuming, arguendo, that
Plaintiff had alleged that Moonves had made a false statement material to CBS investors during
the class period—it does not—the more rational and compelling inference is that Moonves
genuinely and reasonably believed the generic statements attributed him. And certainly, Plaintiff
has made no showing, much less a compelling one, that Moonves believed he would be departing
the company, that there was any truth to the generalized allegations from media articles or that
such allegations would give rise to an internal investigation, much less that he was misleading
investors about CBS.

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IV.

BECAUSE PLAINTIFF FAILS TO ALLEGE A PRIMARY VIOLATION UNDER
SECTION 10(b), ITS SECTION 20(a) CLAIM MUST ALSO BE DIMISSED
Where, as here, Plaintiff fails to plead a claim for violations of Section 10(b) against

Moonves or any other defendant, for the reasons set forth above and in CBS’s brief, its Section
20(a) claims must also be dismissed. Kleinman v. Elan Corp., 706 F.3d 145, 156 n.14 (2d Cir.
2013) (affirming dismissal of Section 20(a) claims for failure to plead predicate violation of §
10(b)). Similarly, Plaintiff cannot plead Moonves’s culpable participation in a primary violation.
Lapin v. Goldman Sachs Grp., Inc., 506 F. Supp. 2d 221, 246 (S.D.N.Y. 2006).
CONCLUSION
For the foregoing reasons, Defendant Moonves respectfully requests that this Court dismiss
Plaintiff’s Amended Complaint with prejudice.

Dated: New York, New York
April 12, 2019

DECHERT LLP

/s/ Andrew J. Levander
Andrew J. Levander
Hector Gonzalez
1095 Avenue of the Americas
New York, NY 10036
andrew.levander@dechert.com
hector.gonzalez@dechert.com
(212) 698-3500
Counsel for Defendant Leslie Moonves

17

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 Case 1:18-cv-07796-VEC Document 78 Filed 04/12/19 Page 23 of 23

CERTIFICATE OF SERVICE
I, the undersigned, hereby certify that on the 12th day of April, 2019, I electronically filed
this Memorandum of Law in Support of Defendant Leslie Moonves’s Motion To Dismiss
Plaintiff’s Amended Complaint For Violations Of The Federal Securities Laws using the
CM/ECF system, which automatically sends notice and a copy of the filing to all counsel of record.

/s/ Andrew J. Levander
ANDREW J. LEVANDER
Counsel for Defendant Leslie Moonves

.