Arata v. Standard Lithium Ltd.

25-2821-cv Arata v. Standard Lithium Ltd. UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL. At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 13th day of November, two thousand twenty-six. PRESENT: REENA RAGGI, ALISON J. NATHAN, MARIA ARAÚJO KAHN, Circuit Judges, _____________________________________ Curtis T. Arata, individually and on behalf of all others similarly situated, Plaintiff-Appellant, James Gloster, Plaintiff, v. 25-2821-cv Standard Lithium Ltd., Robert Mintak, Kara Norman, Andrew Robinson,  Defendants-Appellees. _____________________________________ FOR PLAINTIFF-APPELLANT: JOHN C. ROBERTS JR., Glancy Prongay Wolke & Rotter LLP, Bainbridge Island, WA, Kara M. Wolke, Glancy Prongay Wolke & Rotter LLP, Los Angeles, CA, Gregory B. Linkh, Rebecca Dawson, Glancy Prongay Wolke & Rotter LLP, New York, NY. FOR DEFENDANTS-APPELLEES: ALEXANDER C. DRYLEWSKI, William J. O’Brien, Sarah E. Danehy, Skadden, Arps, Slate, Meagher & Flom LLP, New York, NY. Appeal from a judgment of the United States District Court for the Eastern District of New York (Eric R. Komitee, J.). UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the judgment of the district court, entered on September 29, 2025, is AFFIRMED. Plaintiff-Appellant Curtis T. Arata is the lead plaintiff for a putative class of investors who purchased shares on the New York Stock Exchange of Standard Lithium Ltd., a company that works on extracting lithium from brine. He alleges that the company, and certain of its officers, violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as well as Rule 10b-5. The district court granted Defendants’ motion to dismiss in full. We assume the parties’ familiarity with the underlying facts and procedural history, to which we refer only as necessary to explain our decision.  Standard Lithium develops properties where lithium is extracted from brine for use in various products, including batteries. In 2019, the company built a pilot lithium extraction plant in Arkansas. This “Demonstration Plant” began operations the following year. In press releases and financial statements, the company touted the successful operations of its Plant and the novel nature of its technology. But, according to Arata, Standard Lithium and its officers misled investors. He alleges the company overstated its production capabilities, misrepresented its progress, and wrongly described its technology as novel and proprietary. In support, the complaint relies on reports published by institutional short sellers—investors who profit when the price of a security falls. “We review a district court’s grant of a motion to dismiss de novo, accepting as true all factual claims in the complaint and drawing all reasonable inferences in the plaintiffs’ favor.” Smith v. Gap, Inc., 177 F.4th 405, 408 (2d Cir. 2026) (alteration accepted). “To state a claim for relief under § 10(b) and Rule 10b-5, 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 reliance was the proximate cause of its injury.” Id. at 408–09. “In addition, because such a claim sounds in fraud, the plaintiff ‘must state with particularity the circumstances constituting fraud.’” Altimeo Asset Mgmt. v. Qihoo 360 Tech. Co., 19 F.4th 145, 150 (2d Cir. 2021) (quoting Fed. R. Civ. P. 9(b)). “Under this heightened pleading standard, plaintiffs must do more than say that the statements were false and misleading; they must demonstrate with specificity why and how that is so.” City of Hialeah Emps.' Ret. Sys. v. Peloton Interactive, Inc., 153 F.4th 288, 295 (2d Cir. 2025) (citation modified). We agree with the district court that Arata failed to plausibly allege any actionable misrepresentation or omission by Defendants. We begin with the statements that Standard Lithium was producing “large volumes” of lithium carbonate and operating its Demonstration Plant “at scale.” Joint App’x 67, 75. The challenges to these statements hinge on language that first appeared in an August 22, 2019 press release, which stated that the Demonstration Plant was “designed” to process brine at a rate “equivalent to an annual production of between 100–150” tons of lithium carbonate. See, e.g., Joint App’x 21, 57, 70–71. Arata alleges that “large volumes” and “at scale” were accordingly false insofar as they suggested the Plant was producing 100–150 tons. But that figure described the capacity of the design, not the Plant’s actual output. Statements that the Plant was “produc[ing] large volumes” or “being operated at scale,” see Joint App’x 67, 75, were not claims that production volumes had hit any particular level. And “at scale” described the transition from lab testing to a full-sized Demonstration Plant. Such statements are therefore not plausibly pled to be false. Nor is it plausible that they would have materially misled a reasonable investor, given their generality and subjectivity. See City of Pontiac Policemen’s & Firemen’s Ret. Sys. v. UBS AG, 752 F.3d 173, 183 (2d Cir. 2014). We next turn to the claim that Standard Lithium misrepresented its lithium recovery rate. Arata alleges that the company falsely stated that its “lithium recovery rate is about 90%.” Appellant’s Br. at 20–21, 31–32 (citing Joint App’x 72–73, 202, 750). But the sentences surrounding this number clarify that it was “supported by bench scale metallurgical testing and mini-pilot plant testing program results” and was “not yet . . . commercially proven.” Joint App’x 202–03. Put simply, the 90% figure referred to prior lab testing; it did not state or imply that the company had achieved any particular rate at the Demonstration Plant. The complaint does not allege that the figure is false with respect to lab testing. Because “a reasonable investor reads each statement . . . in light of all its surrounding text,” Gap, 177 F.4th at 409, Arata has not plausibly pled that the recovery rate statements were false or materially misleading. We next consider the statement that “with the final stages of commissioning and integration almost finished, [Standard Lithium is] now in the final stages of running the only continuous, 24/7 start-to-finish brine-to-carbonate plant in North America.” Joint App’x 68. Arata contends that this September 1, 2021 statement was false and misleading because the company was nowhere near the final stages of launching commercial operations. But context shows that the references to the project being “almost finished” and in its “final stages” did not concern when commercial operations might commence but rather the timeline for “commissioning and integrat[ing]” an equipment component and combining two plants into “the only continuous, 24/7 start- to-finish brine-to-carbonate plant in America.” Joint App’x 68. There is no well-pled allegation that this was not the case. The next statements at issue appear in the October 12, 2021 press release. Standard Lithium announced that its team had spent “many tens-of-thousands of hours . . . over the past few years proving and de-risking [its] lithium extraction technology at pre-commercial scales.” Joint App’x 70 (emphasis omitted). It added that “[i]t is because of [its] large-scale technology proof that [the company] can hope to deploy it, in the future, on [its] other assets in the region.” Id. Arata contends that “large-scale technology proof” and “de-risking” were false and misleading, since the company was far from proving its technology and faced mounting risks. As an initial matter, these statements largely concerned a different project (the South-West Arkansas Lithium Project), not the Demonstration Plant at issue here. With respect to the Demonstration Plant, Arata has not alleged that the term “large-scale technology proof” required a specific recovery rate or annual production target such that it was a false or misleading descriptor of operations. And the representation that Standard Lithium had spent years “de-risking” is not alleged to have been false and was sufficiently general that it did not trigger a duty for the company to disclose all conceivable risks associated with its technology. See Gap, 177 F.4th at 412. In addition, neighboring language cautioned that the process of “proving and de-risking” had only occurred “at pre- commercial scales,” making clear that commercial viability had not been established. Joint App’x 70. These statements are therefore not plausibly pled to have been false or materially misleading. We also reject the argument that Defendants made false or misleading statements about Standard Lithium’s intellectual property. In an October 22, 2021 document, Standard Lithium stated that it had “developed a suite of Intellectual Property (‘IP’) related to novel technologies,” and that this “IP suite is protected by a series of patent applications[.]” Joint App’x 70–71. In a January 20, 2022 press release, the company described its technology as “proprietary” and “novel.” Joint App’x 75. Arata claims that Standard Lithium misled investors with these statements. Appellant’s Br. at 23, 46. The complaint pleads that the technology was unremarkable and notes that the company failed to disclose that the U.S. Patent and Trademark Office (USPTO) had denied at least one of its three patent applications. Appellant’s Br. at 23, 46–47 (citing Joint App’x 33– 34, 71–72). Arata has failed to plausibly allege that Standard Lithium’s technologies were not “novel” or “proprietary”—terms that extend beyond the holding of patents. That at least one patent application had been provisionally denied does not undermine this conclusion. As the district court recognized, “a product can be novel without being novel enough to receive a patent,” Special App’x 37, and the USPTO ultimately issued the patents that were initially unsuccessful, Appellee’s Br. at 45.  We affirm dismissal for the independent reason that Arata fails to plead scienter. Doing so requires that securities fraud plaintiffs “state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.” 15 U.S.C. § 78u-4(b)(2)(A). Plaintiffs may satisfy this requirement by “alleging facts (1) showing that the defendants had both motive and opportunity to commit the fraud or (2) constituting strong circumstantial evidence of conscious misbehavior or recklessness.” New England Carpenters Guaranteed Annuity & Pension Funds v. DeCarlo, 122 F.4th 28, 48 (2d Cir. 2024) (citation modified). Arata has demonstrated neither. He contends that Defendants sought to “stave off” Standard Lithium’s “collapse.” Appellant’s Br. at 55 (emphasis omitted). But this motive is far too generalized to constitute the “concrete and personal” benefit needed to satisfy scienter. See ECA, Loc. 134 IBEW Joint Pension Tr. v. JP Morgan Chase Co., 553 F.3d 187, 198–99 (2d Cir. 2009). Without a motive, allegations of conscious misbehavior or recklessness “must be correspondingly greater” and show “highly unreasonable behavior or that which evinces an extreme departure from the standards of ordinary care.” Ark. Pub. Emps. Ret. Sys. v. Bristol-Myers Squibb Co., 28 F.4th 343, 355 (2d Cir. 2022) (citation modified). Arata’s allegations fall short of this standard. Finally, we also affirm the dismissal of the claims against the individual Defendants. Section 20(a) “provides that individual executives, as controlling persons of a company, are secondarily liable for their company’s violations of the Exchange Act.” Altimeo Asset Mgmt., 19 F.4th at 152. Because Arata fails to allege a primary violation under Section 10(b) and Rule 10b–5, we affirm the dismissal of the claims under Section 20(a). CONCLUSION We have considered the parties’ remaining arguments and find them to be without merit. Accordingly, we AFFIRM the judgment of the district court. We GRANT Defendants-Appellees’ unopposed motion to supplement the record. FOR THE COURT: Catherine O’Hagan Wolfe, Clerk of Court