Eastern District Of New York Narrows Opt-Out Securities Suit Against Iron-Ore Mining Company.

On March 10, 2026, Judge Eric Komitee of the United States District Court for the Eastern District of New York partially dismissed an opt-out securities action against an iron-ore mining company (“Company”) and certain of its executives arising out of the alleged collapse of two Company dams in Brazil in 2015 and 2019. Orbis Global Equity LE Fund, et al., v. Vale S.A., et al., No. 21-cv-6590 (E.D.N.Y.). Plaintiffs’ complaint largely tracked a related class action in the same court, which principally asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act (“Exchange Act”) and Rule 10b-5. See In re Vale S.A. Sec. Litig., No. 19-cv-526 (E.D.N.Y.). However, the opt-out action also asserted (i) a Section 18 claim, (ii) new alleged misstatements and a “scheme liability” theory, and (iii) a state common law fraud claim. The Court found that plaintiffs’ Section 18 claim was timely under American Pipe but narrowed the Section 10(b) claim by dismissing an individual defendant, finding the new alleged misstatements inactionable, and rejecting plaintiffs’ scheme liability theory.

Plaintiffs allege that the Company’s dam in Mariana, Brazil collapsed in 2015, allegedly causing loss of life and property damage. Subsequently, defendants allegedly made numerous statements touting improvements to the Company’s dam safety and risk management practices and allegedly attesting to the safety and stability of its dams. In 2019, a second dam collapsed, allegedly causing even greater destruction, and the Company’s stock price dropped. The class action ensued in 2019; plaintiffs opted out and brought their action in 2021.

The Court found plaintiffs’ Section 18 claim timely under American Pipe & Construction Co. v. Utah (referred to above as “American Pipe”). Defendants argued the claim was time-barred because it was premised on misstatements made between 2015 and 2019, outside the two-year limitation period, and that the class’s Section 10(b) claim did not toll plaintiffs’ Section 18 claim because the claims’ legal standards differ. The Court disagreed, holding that whether American Pipe applies depends upon the extent of overlap of the “factual bases” between the two claims overlap, not the legal theories, citing Cullen v. Margiotta, 811 F.2d 698, 719 (2d Cir. 1987), overruled on other grounds, Agency Holding Corp. v. Malley-Duff & Assocs., Inc., 483 U.S. 143 (1987). The Court concluded that both claims rested upon the same allegations about false and misleading statements, and that scienter allegations under Section 10(b) would also be relevant to Section 18’s “good faith” affirmative defense.

As to plaintiffs’ Section 10(b) claim, the Court first dismissed an individual defendant to whom plaintiffs did not plausibly attribute a single alleged misstatement, rejecting plaintiffs’ group-pleading theory as prohibited under Janus Capital Group, Inc. v. First Derivative Traders, 564 U.S. 135, 141 (2011). The Court then determined that plaintiffs’ four new alleged misstatements—which, in essence, include alleged statements touting, in broad terms, that the Company’s disclosure controls were effective—constituted inactionable puffery because they were too generalized, vague, and bereft of detail about what procedures were effective or how they operated. Finally, the Court dismissed the scheme liability theory because plaintiffs merely paired the alleged misrepresentations with conclusory assertions that defendants “employed devices, schemes, and artifices to defraud.”

The Court also dismissed the state common law fraud claim as statutorily barred under the Securities Litigation Uniform Standards Act (“SLUSA”), which prohibits state securities fraud claims in a covered class action. The Court concluded the opt-out action qualified because it was pending in the same court as, and deemed relevant to, the class action.