Giraudon v. Innovative Industrial Properties, Inc. — Entry #72: MEMORANDUM OPINION
Case: Giraudon v. Innovative Industrial Properties, Inc. mdd · 1:25-cv-00182
filed January 17, 2025
What this document is
Docket entry #72 · filed May 27, 2026
MEMORANDUM OPINION. Signed by Chief Judge George Levi Russell, III on 5/27/2026. (bm5s, Deputy Clerk)
Who is involved
- Alain Giraudon
- Alan D. Gold
- Ben Regin
- Catherine Hastings
- City of Birmingham Retirement and Relief System
- David Smith
- Dr. Richard A. Blocker
- Innovative Industrial Properties, Inc.
- Kelly R. Johnson
- Paul E. Smithers
- Utility Board Retirement System City of Key West
- Yolanda Castaneda
Why we have it
We follow this case because it names a company we track, although that company is not a party:
- Applied Digital: its former name “FLIGHT SAFETY TECHNOLOGIES INC” appears in a filing in this case.
…Co-Lead Counsel. $1.2 million. • Flight Safety Technologies, Inc., (D. Conn.). Rosen Lead Counsel. $1…
A free copy from the RECAP archive of federal court filings (mirrored at the Internet Archive), retrieved October 21, 2026. Federal court filings are public records.
Document text
44 page(s), 89,996 characters, converted from the PDF's text layer · plain text.
Full text
Case 1:25-cv-00182-GLR Document 72 Filed 05/27/26 Page 1 of 44
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
ALAIN GIRAUDON, individually and *
on behalf of all others similarly situated,
*
Plaintiffs,
* Civil Action No. GLR-25-182
v.
*
INNOVATIVE INDUSTRIAL
PROPERTIES, INC., et al., *
Defendants. *
***
MEMORANDUM OPINION
THIS MATTER is before the Court on Defendants Innovative Industrial Properties,
Inc. (“IIPR”), Alan Gold, Paul Smithers, David Smith, Benjamin C. Regin, and Catherine
Hastings’ (collectively, “Defendants”) Motion to Dismiss (ECF No. 60). The Motion is
ripe for disposition, and no hearing is necessary. See Local Rule 105.6 (D.Md. 2025). For
the reasons set forth below, the Court will grant the Motion.
I. BACKGROUND
This litigation arises from alleged violations of the Securities Exchange Act of 1934
(“SEA”). (Am. Compl. ¶ 1, ECF No. 50). Lead Plaintiff City of Birmingham Retirement
and Relief System (“Birmingham”) brings this action individually and on behalf of all
others who acquired IIPR securities between February 26, 2024, and March 28, 2025, (the
“Class Period”). (Id. at 4).1
1
Unless otherwise noted, citations to page numbers refer to the pagination assigned
by the Court’s Case Management/Electronic Files (“CM/ECF”) system.
Case 1:25-cv-00182-GLR Document 72 Filed 05/27/26 Page 2 of 44
A. Factual Background2
IIPR is a publicly traded real estate investment trust that invests in and rents
properties to state-licensed cannabis companies, primarily. (Id. ¶¶ 13, 21). Via sale-
leaseback transactions, IIPR purchases properties from these companies, then leases those
properties back to the companies. (Id. ¶ 56). The tenant-companies pay rent monthly, and
a portion of the rent proceeds—IIPR’s primary source of income—goes to IIPR’s investors
as dividends and stock buybacks. (Id. ¶¶ 2, 22).
IIPR’s focus on the cannabis industry involves some risk. Most significantly, the
sale of recreational cannabis remains illegal under federal law, exposing IIPR’s tenants to
unfavorable tax treatment and lower profitability. (Id. ¶¶ 57–58). IIPR also has
acknowledged some recent industry drawbacks: declining cannabis prices; increased labor
and production costs; labor shortages; and “global supply chain issues.” (Id. ¶ 59). Despite
these risks, Defendant Gold—IIPR’s co-founder and Executive Chairman, (id. ¶ 14)—
stated that the sale-leaseback model has produced “above average returns” for IIPR, (id.
¶ 57). Indeed, the federal illegality of selling recreational cannabis precludes cannabis
companies from obtaining traditional bank loans, which enables IIPR, operating as a sort
of non-traditional bank for the cannabis companies, to charge higher rents than the
companies may have paid in interest on traditional bank loans. (Id.).
2
Unless otherwise noted, the Court takes the following facts from the Consolidated
Class Action Complaint (ECF No. 50) and accepts them as true. See Erickson v. Pardus,
551 U.S. 89, 94 (2007).
2
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IIPR’s investors, including Birmingham, were aware of the risks involved in IIPR’s
business model. (Id. ¶ 60). As such, they valued the risk mitigation efforts that IIPR said it
implemented: “robust due diligence practices”; monitoring tenants’ finances; visits to
tenants’ operation sites; and meetings with tenants. (Id.). According to Birmingham, even
as some tenants experienced losses and increased expenses during the Class Period, IIPR
made new investments in its tenants and assured its investors that it continued to monitor
its tenants’ finances regularly. (Id. ¶¶ 60–61). Birmingham now alleges that these
assurances were materially false or misleading. (Id. ¶¶ 64–65).
1. The Defaulting Tenants
Birmingham asserts that four of IIPR’s largest tenants—PharmaCann, Inc.
(“PharmaCann”), 4Front Ventures Corp. (“4Front”), Gold Flora, LLC, and Tilt Holdings,
Inc. (“Tilt”) (collectively, the “Defaulting Tenants”)—were struggling during the Class
Period and that IIPR misled investors into believing Defendants were monitoring the
situation closely and that business remained good. (Id. ¶¶ 3–4, 27). Specifically, before and
during the Class Period, the Defaulting Tenants were failing to pay taxes and invoices,
warning investors that the companies may not be able to continue as going concerns,
experiencing “mounting expenses” and “limited cash flow,” and struggling to raise capital.
(See id. ¶¶ 67–74). Eventually, in March 2025, all four companies defaulted on their
obligations to IIPR, and the price of IIPR’s common stock plummeted as a result. (Id.
¶¶ 82–83).
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a. PharmaCann, Inc.
PharmaCann, a vertically integrated cannabis company, was IIPR’s “largest and
longest-standing tenant.” (Id. ¶ 29). It had eleven leases with IIPR that constituted 17% of
IIPR’s total contractual rent as of December 31, 2024. (Id. ¶ 30). Birmingham points to one
of those leases as having a financial disclosure agreement that required PharmaCann to
provide IIPR audited annual financial statements, unaudited quarterly financial statements,
and copies of “budgets, forecasts and investor materials”—information that would not have
been available to the public. (Id. ¶ 32). In February 2024, IIPR added a “cross-default
provision” to PharmaCann’s leases such that a default under any one of PharmaCann’s
leases would trigger a default under all its leases. (Id. ¶ 33).
Before and during the Class Period, PharmaCann was unable to pay its taxes in
multiple states, which led to tax liens against it totaling approximately $500,000 by March
2025. (Id. ¶ 67). PharmaCann also failed to pay many vendors and third parties, prompting
one vendor to file a lawsuit in December 2024 for over $1,000,000 in unpaid invoices. (Id.
¶ 68(a)). PharmaCann defaulted on six of its leases in December 2024, which triggered
defaults under all eleven leases. (Id. ¶ 82). IIPR and PharmaCann reached an agreement to
resolve the defaults in January 2025. (Id.). PharmaCann defaulted again under nine of its
leases in March 2025, and IIPR announced its plan to evict PharmaCann. (Id.).
b. 4Front Ventures Corp.
4Front “owns, operates, and manages cannabis cultivation and manufacturing
facilities” in a few states. (Id. ¶ 34). It had four leases with IIPR that constituted 5.7% of
IIPR’s total contractual rents as of December 31, 2024. (Id. ¶ 35). Birmingham points to
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one of 4Front’s leases as having a financial disclosure provision that required 4Front and
the tenant-subsidiary of 4Front to provide IIPR audited quarterly financial documents and
consolidated annual financial statements—non-public information. (Id. ¶ 36).
4Front failed to pay all its tax obligations for the 2022 to 2023 period. (Id. ¶ 67).
Consequently, in April 2024, Illinois and California filed tax liens against 4Front for
$1,561,245 and $19,648 in back taxes, respectively, and in January 2025, the U.S.
government filed a tax lien against 4Front for $15,000,000. (Id.). 4Front also failed to pay
third parties, leading to at least three lawsuits in 2024—one for $68,000 in unpaid invoices,
another for $25,000 in unpaid marketing fees, and a third for over $100,000 in unpaid
invoices. (Id. ¶ 68(b)). 4Front experienced net losses and had negative working capital in
2022, 2023, and 2024 (during the Class Period) and warned its investors that auditors
doubted whether 4Front could continue as a going concern. (Id. ¶¶ 69–70). 4Front
struggled to cover its expenses and attempted to obtain a $10,000,000 loan from a specialty
finance firm in 2023 but received only $4,400,000 “due to its inability to satisfy certain
covenants.” (Id. ¶ 73(b)). Ultimately, 4Front defaulted on its rent obligations in March
2025, and IIPR announced its intent to evict 4Front. (Id. ¶ 83).
c. Gold Flora, LLC
Gold Flora, like PharmaCann, is a vertically integrated cannabis company. (Id.
¶ 38). It had three leases with IIPR that constituted 2.9% of IIPR’s total contractual rent as
of December 31, 2024. (Id. ¶ 39). Like PharmaCann and 4Front, Gold Flora struggled to
pay its vendors, resulting in lawsuits. (Id. ¶ 68(c)). In September 2024, a California court
entered a $6,000,000 judgment against Gold Flora for failure to pay the consideration in
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an asset purchase agreement, and in October 2024, a supplier sued Gold Flora for more
than $250,000 in unpaid invoices. (Id.). Gold Flora also suffered from net losses and had
negative working capital in 2022, 2023, and 2024 (during the Class Period), and it warned
investors of auditors’ doubts that Gold Flora could continue as a going concern. (Id. ¶¶ 69–
70). Gold Flora struggled to raise funding to pay off its debts and, faced with limited
options, secured a private loan of $6,900,000 with a high interest rate of about 40%. (Id.
¶ 73(a)). By March 27, 2025, Gold Flora owed over $52,000,000 to lenders and over
$60,000,000 to unsecured creditors and filed a petition for dissolution. (Id. ¶ 68(d)). Gold
Flora ultimately defaulted on its rent obligations to IIPR in March 2025, and IIPR
announced its intent to evict Gold Flora. (Id. ¶ 83).
d. Tilt Holdings, Inc.
Tilt is “a business solutions provider to the global cannabis industry” that had two
leases with IIPR constituting 2.2% of IIPR’s total contractual rent as of December 31, 2024.
(Id. ¶ 42–43). Tilt, like 4Front and Gold Flora, reported net losses and had negative
working capital in 2022, 2023, and 2024 (during the Class Period) and warned investors of
auditors’ doubts that it could continue as a going concern. (Id. ¶¶ 69–70). Tilt also had
difficulties raising capital after a change in one supplier’s payment terms in 2023 forced
Tilt to obtain additional financing and seek waivers from default provisions in other
agreements. (Id. ¶ 73(c)). Tilt was still paying default rates of 24% and 25% as of
December 31, 2024. (Id.). Tilt eventually defaulted on its obligations to IIPR alongside the
other Defaulting Tenants in March 2025, and IIPR announced its intent to evict Tilt. (Id.
¶¶ 82–83).
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2. Defendants’ Statements During the Class Period
Birmingham alleges that, as the Defaulting Tenants’ financial conditions declined,
Defendants made either materially false or materially misleading statements regarding
IIPR’s oversight of its tenants and its investments in the Defaulting Tenants during the
Class Period. (Id. at 29, 67). Birmingham specifically points to statements in IIPR’s U.S.
Securities and Exchange Commission (“SEC”) filings, press releases, earnings conference
calls, and analyst and media reports as the bases of its allegations. (Id. at 4).
a. Oversight and Monitoring of Tenants
On February 27, 2024, IIPR filed a Form 10-K with the SEC (“FY23 10-K”) in
which it stated that it “utilitze[d] rigorous underwriting standards for evaluating
acquisitions and potential tenants to ensure that they meet our strategic and financial
criteria,” “evaluate[d] the credit quality of [its] tenants and any guarantors on an ongoing
basis,” “monitor[ed] the payment history data for all of [its] tenants and, in some
instances, . . . monitor[ed] [its] tenants by periodically conducting site visits and meeting
with the tenants to discuss their operations.” (Id. ¶¶ 86–87, 89). The FY23 10-K also stated
that IIPR’s management team “perform[ed] due diligence investigations of [IIPR’s]
potential tenants, related guarantors and their properties, operations and prospects, of
which there is generally little or no publicly available operating and financial information.”
(Id. ¶ 91).
On March 4, 2024, IIPR published a “Company Presentation” on its website. (Id.
¶ 95). One slide in the presentation covered IIPR’s “Underwriting & Monitoring”
processes, which included “[e]valuation of financial projections,” “[d]etailed review of
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financial statements, strategic initiatives, and growth plans,” [q]uarterly reviews and
requests for information pertaining to financials and ongoing operations of all properties,”
and “[m]eetings with tenants to talk through operations and financials.” (Id. at 34).
On August 6, 2024, Defendants held a conference call with investors and investment
analysts in which Defendants Gold, Regin (IIPR’s Chief Investment Officer, (id. ¶ 17)),
and Smithers (IIPR’s co-founder, President, and Chief Executive Officer, (id. ¶ 15))
commented on IIPR’s “highly selective” underwriting process, the continued success of
the sale-leaseback concept, and the “quality and strength of [their] tenants” as “some of the
best operators in the industry,” (id. ¶¶ 101, 103, 106, 110, 114).
On November 7, 2024, Defendants held an earnings call with investors and
investment analysts. (Id. ¶ 117). Analysts asked about tenants that paid partial or no rent in
the past, how Defendants handled those situations, and Defendants’ decision to continue
investing in those tenants’ businesses. (Id. ¶¶ 118, 127, 134). Gold and Smithers
emphasized their continued monitoring of their tenants and discussed their varying
approach to unusual issues, like supply chain issues during the COVID-19 pandemic,
versus their “aggressive” approach when a tenant stops paying rent altogether. (Id. ¶¶ 119,
123). Gold also, in response to a question about Defendants’ continued investments in
tenants even though issues seemed to arise just as quickly as they were resolved, stated that
“we’ve been paid a very high adjusted rate of return for what we believe is a very—a much
lower risk—risk profile.” (Id. ¶¶ 127–28). Regin further defended Defendants’ investments
in tenants that had faced some issues recently, explaining that they “look at each of these
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situations individually, and we’re looking to maximize [the] value of our portfolio, and we
feel very positive about the future resolution for these issues.” (Id. ¶ 131).
On December 20, 2024, IIPR announced that PharmaCann defaulted on all its
leases. (Id. ¶ 139). Birmingham alleges that “Defendants moved quickly to assure investors
that matters with PharmaCann were being handled appropriately and being resolved
quickly.” (Id. ¶ 140). Then, on January 30, 2025, IIPR issued a press release stating that it
reached an agreement with PharmaCann to resolve the defaults. (Id. ¶ 141). IIPR reiterated
the resolution of those defaults in another press release on February 19, 2025. (Id. ¶ 145).
Then on February 21, 2025, IIPR filed a Form 10-K with the SEC (the “FY24 10-K”),
reporting its financial results for the fourth quarter and 2024 overall. (Id. ¶ 149). The FY24
10-K explained that PharmaCann defaulted in December 2024 and that IIPR and
PharmaCann resolved the defaults in January 2025 by amending PharmaCann’s leases such
that rent was reduced or abated for all its properties. (Id.). IIPR stated that it used security
deposits to cover the two months of defaulted rent. (Id.). According to Birmingham, the
FY24 10-K also “reiterated the many misstatements made in the FY23 10-K . . . .” (Id.).
On February 20, 2025, Defendants held another conference call in which Smithers
told investors and investment analysts that Defendants “reached a comprehensive
resolution to PharmaCann’s defaults that included, among other things, PharmaCann
recommencing rent payments on 9 of 11 leases in February, a required capital infusion by
PharmaCann investors and a junior secured note issued to [IIPR].” (Id. ¶¶ 152–53). When
asked about the risk for Defendants’ tenant base moving forward, particularly for the year
2026, Gold suggested that such concerns were premature, and that Defendants were
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monitoring the maturity of their tenants’ debts closely. (Id. ¶¶ 156–57). Gold and Regin
also reiterated Defendants’ commitment to monitoring and working closely with their
tenants. (Id. ¶¶ 161, 164, 168, 172).
Birmingham alleges that all these statements were materially false or misleading
because Defendants “misled investors into believing that IIPR performed sufficiently
robust and comprehensive due diligence on, and monitoring of, its tenants” when in fact
their tenants were struggling financially. (Id. ¶ 173) In Birmingham’s view, Defendants
either did not conduct the monitoring that they told investors they had, or Defendants did
conduct such monitoring and concealed or misrepresented the truth of the tenants’ financial
situations. (Id. ¶ 173)
b. Investments in the Defaulting Tenants
In its February 26, 2024 press release and FY23 10-K, IIPR stated that it amended
one of its lease agreements with PharmaCann “to increase the improvement allowance by
$16.0 million, adjust base rent accordingly and extend the lease term.” (Id. ¶¶ 176, 178).
Regin mentioned this lease amendment during the February 27, 2024 conference call. (Id.
¶ 184). IIPR also “touted a new amendment to 4Front’s lease” in the FY23 10-K that
reduced the base rent for nine months (until September 30, 2024), deferred the payback of
the security deposit, and increased the base rent for the rest of the lease term. (Id. ¶ 180).
During the February 27, 2024 conference call, Regin informed investors and
analysts that IIPR executed a lease amendment with PharmaCann to provide an additional
$16 million of construction funding for a property in New York “as PharmaCann executes
on its strategy to expand production capacity after being awarded an adult-use production
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license” in late 2023. (Id. ¶ 184). One analyst asked what Defendants were “seeing on the
ground” in New York and asked how they “expect[ed] the market to evolve going
forward.” (Id. ¶ 187). Regin stated that Defendants were “happy to see the additional retail
licenses being issued” and that, despite “some historical challenges,” Defendants “very
much like[d] the position that [their] tenant partners [were] in” in New York. (Id.). Regin
commented that there was a “tremendous amount of value in” PharmaCann’s New York
property and said, “I think it sets PharmaCann up very well to take advantage of the
wholesale opportunities that we’re going to see.” (Id.).
During the same conference call, Defendant Hastings—IIPR’s Chief Operating
Officer, (id. ¶ 18)—explained that IIPR amended one of 4Front’s leases for a property in
Illinois to reduce the base rent through September 2024 because the property had been
“under development since August 2021” and “experienced significant delays to get
permanent power delivered to the building,” (id. ¶ 190). Hastings said the building secured
permanent power in January 2024 and that Defendants “look[ed] forward to this project’s
completion in the near future.” (Id.). Hastings also reported that IIPR extended the term of
all four of its leases with 4Front. (Id.).
On May 8, 2024, IIPR released its financial results for the first quarter of 2024. (Id.
¶ 193). IIPR filed its Form 10-Q with the SEC (the “1Q24 10-Q”) the following day. (Id.).
The 1Q24 10-Q reported IIPR’s $16 million construction funding investment in
PharmaCann’s New York property and the extension of the lease on that property. (Id.
¶ 194). The 1Q24 10-Q also reported the extensions of 4Front’s leases and the January
2024 amendment to 4Front’s lease on the Illinois property that had construction delays.
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(Id. ¶ 196). Additionally, the 1Q24 10-Q stated that in April 2024, IIPR amended 4Front’s
lease on the Illinois property “to provide an additional improvement allowance of $1.6
million” and to adjust the base rent. (Id.). Finally, the 1Q24 10-Q announced a new lease,
executed in March 2024, with a tenant later identified as Gold Flora. (Id. ¶ 198).
On May 9, 2024, Defendants held a conference call with investors and analysts to
discuss IIPR’s 2024 first quarter results. (Id. ¶ 201). Regin Stated that IIPR executed two
new leases with Gold Flora. (Id. ¶ 202). In discussing these and other new leases, Regin
commented on “the strength of the [tenant-]operators and the credit upgrades” that
Defendants felt they received from the new leases. (Id.). Regin also mentioned the
additional $1.6 million that IIPR invested in 4Front’s Illinois property “to round out
development” of that facility. (Id. ¶ 205).
On August 5, 2024, IIPR released its financial results for the second quarter of 2024.
(Id. ¶ 208). IIPR filed its Form 10-Q with the SEC (the “2Q24 10-Q”) the following day.
(Id.). Birmingham highlights the same information in the 2Q24 10-Q as in the 1Q24 10-Q
regarding the $16 million investment in PharmaCann’s New York property, the extension
of that lease, the extension of 4Front’s four leases, and the amendments to 4Front’s lease
on the Illinois property, including the $1.6 million improvement allowance. (Id. ¶¶ 209,
211). The 2Q24 10-Q also stated that IIPR executed two new leases with Gold Flora in
March 2024 (as reported in the 1Q24 10-Q) and May 2024. (Id. ¶ 213).
On November 6, 2024, IIPR released its financial results for the third quarter of
2024. (Id. ¶ 216). IIPR filed its Form 10-Q with the SEC (the “3Q24 10-Q”) the following
day. (Id.). The 3Q24-10-Q repeated the same information from the 1Q24 10-Q and the
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2Q24 10-Q regarding the investments in PharmaCann’s and 4Front’s properties, the
amendments to some of those leases, and the new leases with Gold Flora. (Id. ¶¶ 217, 219,
221).
Birmingham alleges that by “touting” their investments in the Defaulting Tenants
without disclosing the Defaulting Tenants’ dire financial situations, Defendants misled
investors into believing that those investments would bring in more revenue when in fact
the Defaulting Tenants were on their way to defaulting on their rent obligations. (Id. ¶ 220).
3. IIPR Stock Fluctuations
After reporting its financial results for the third quarter of 2024, IIPR issued a press
release on November 6, 2024, explaining that it applied $1.4 million of security deposits
towards unpaid rents on four properties leased to 4Front, one property leased to Tilt, and
one property leased to another tenant. (Id. ¶ 225). The press release also stated that IIPR
collected partial rent payments from 4Front, Tilt, and another tenant in October 2024 and
applied $0.9 million in security deposits to those rents. (Id.). On November 6, 2024, IIPR’s
common stock price fell $9.34 per share (7.06%) down to $123 per share. (Id. ¶ 227).
On November 7, 2024, IIPR held an earnings call in which it reported revenue of
$76.5 million, which was less than the consensus estimate of $77.5 million and less than
the $77.8 million in revenue reported for the same period in 2023. (Id. ¶ 224). Birmingham
alleges that IIPR blamed the 2023 to 2024 revenue decrease, in part, on $1.3 million of
uncollected rents and fees during the third quarter of 2024. (Id.). During the earnings call,
Smith also explained that IIPR applied the rest of 4Front’s security deposits, $0.5 million,
to cover October rents and that IIPR expected to collect rent from 4Front that was “well
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below what [was] contractually do [sic] for the fourth quarter.” (Id. ¶ 226). On November
7, 2024, IIPR’s common stock price fell another $12.93 per share (10.51%) down to about
$110.70 per share. (Id. ¶ 227). According to Birmingham, investment analysts believed the
drop in IIPR’s stock price was the result of the unpaid rents and raised concerns regarding
IIPR’s “emergent tenant issues.” (Id. ¶ 228).
On December 20, 2024, IIPR issued a press release explaining that, on December
19, PharmaCann defaulted on six of its eleven leases, resulting in $4.2 million in unpaid
rent, fees, and tax and insurance payments. (Id. ¶¶ 230–31). IIPR applied security deposits
to cover the unpaid rent and imposed late penalties, plus interest. (Id.). The press release
further stated that, due to the recent lease amendments, the six defaults triggered defaults
under all eleven of PharmaCann’s leases, and that IIPR intended to “enforce its rights under
the Leases aggressively,” potentially through eviction proceedings. (Id. ¶¶ 232–33). After
the press release was issued on December 20, 2024, IIPR’s common stock price fell $21.68
per share (22.74%) to about $73.66 per share. (Id. ¶ 234). Investment analysts expressed
concerns regarding “the magnitude of PharmaCann’s default” and the “[h]ealth of IIPR’s
[t]enant [b]ase,” particularly as to whether other tenants were in “similar distress.” (Id.
¶¶ 235–37).
On January 30, 2024, IIPR issued another press release reporting that IIPR resolved
the PharmaCann defaults by, among other things, covering rent for December 2024 and
January 2025 with security deposits and imposing penalties. (Id. ¶ 239). Investment
analysts considered this a “welcome, but partial remedy of investor concerns.” (Id. ¶ 241).
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That day, IIPR’s common stock price increased $6.71 per share (10.11%) to about $73.05
per share. (Id. ¶ 240).
On March 14, 2025, after the markets closed, IIPR issued a press release stating that
PharmaCann defaulted on nine of its eleven leases for the month of March 2025, leading
to $2.7 million in unpaid rent, fees, and tax and insurance payments. (Id. ¶ 242). As in
December 2024, IIPR explained that it intended to “enforce its rights under the Leases
aggressively,” potentially through eviction proceedings. (Id.). IIPR’s common stock price
fell $5.41 per share (7.7%) to $64.21 by March 17, 2025. (Id. ¶ 243). Investment analysts
expressed concerns regarding the second default, suggested that “other tenants might be
facing similar difficulties,” and advised against investing in IIPR at that time. (Id. ¶ 244).
On March 28, 2025, after the markets closed, IIPR issued another press release
stating that 4Front, Gold Flora, and Tilt defaulted, leading to $13.1 million in unpaid rent,
fees, and tax and insurance payments. (Id. ¶ 246). Again, IIPR stated that it intended to
“pursue its rights under such leases aggressively,” including through eviction, if necessary.
(Id.). According to Birmingham, “IIPR presented these defaults as part of ‘a significant
tenant replacement and renewal initiative aimed at enhancing the performance of its real
estate portfolio and driving long-term value for shareholders.’” (Id. ¶ 247). IIPR
acknowledged that challenges in the cannabis industry “negatively impacted the ability of
certain of [its] tenants to make their lease payments,” and stated that it “believes that it will
be better served by proactively seeking to refresh a substantial portion of its tenant base
with more financially viable long-term tenants to better position [IIPR] for sustainable
growth and improved financial performance.” (Id.) After IIPR issued this press release, its
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common stock price fell $9.66 per share (15.15%) to $54.09 per share by March 31, 2025.
(Id. ¶ 248).
Birmingham contends that Defendants engaged in a “fraudulent scheme to
artificially inflate the price of [IIPR’s] securities” through allegedly false or misleading
statements and that, once “Defendants’ prior misrepresentations and other fraudulent
conduct were revealed” in November 2024 through March 2025, IIPR’s stock price
plummeted. (Id. ¶ 250).
B. Procedural Background
On January 17, 2025, Alain Giraudon filed a Class Action Complaint in this Court,
individually and on behalf of all others who acquired IIPR securities during the Class
Period, alleging violations of the SEA. (Compl. at 1–2, 18–22, ECF No. 1). The Court later
appointed Birmingham as Lead Plaintiff. (Apr. 22, 2025 Mem. Op. at 11, ECF No. 38; Apr.
4, 2025 Order at 2, ECF No. 39). On June 23, 2025, Birmingham filed an Amended
Complaint, alleging two counts against all Defendants for: violations of § 10(b) of the SEA
and SEC Rule 10b-5 (Count I); and violations of § 20(a) of the SEA (Count II). (Am.
Compl. ¶¶ 274–80). Defendants filed the instant Motion to Dismiss on August 22, 2025.
(ECF No. 60). Birmingham filed an Opposition on October 21, 2025, (ECF No. 65), and
Defendants filed a Reply on November 20, 2025, (ECF No. 68).
II. DISCUSSION
A. Standard of Review
The purpose of a Rule 12(b)(6) motion is to “test[] the sufficiency of a complaint,”
not to “resolve contests surrounding the facts, the merits of a claim, or the applicability of
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defenses.” King v. Rubenstein, 825 F.3d 206, 214 (4th Cir. 2016) (quoting Edwards v. City
of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999)). A complaint fails to state a claim if it
does not contain “a short and plain statement of the claim showing that the pleader is
entitled to relief,” Fed.R.Civ.P. 8(a)(2), or does not “state a claim to relief that is plausible
on its face,” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible “when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. “Threadbare recitals of the elements of
a cause of action, supported by mere conclusory statements, do not suffice.” Id. Though
the plaintiff is not required to forecast evidence to prove the elements of the claim, the
complaint must allege sufficient facts to establish each element. Goss v. Bank of Am.,
N.A., 917 F.Supp.2d 445, 449 (D.Md. 2013) (quoting Walters v. McMahen, 684 F.3d 435,
439 (4th Cir. 2012)), aff’d, 546 F.App’x 165 (4th Cir. 2013).
In considering a Rule 12(b)(6) motion, a court must examine the complaint as a
whole, accept the factual allegations in the complaint as true, and construe the factual
allegations in the light most favorable to the plaintiff. See Albright v. Oliver, 510 U.S. 266,
268 (1994); Lambeth v. Bd. of Comm’rs of Davidson Cnty., 407 F.3d 266, 268 (4th Cir.
2005). But the court need not accept unsupported or conclusory factual allegations devoid
of any reference to actual events, United Black Firefighters v. Hirst, 604 F.2d 844, 847 (4th
Cir. 1979), or legal conclusions couched as factual allegations, Iqbal, 556 U.S. at 678
(quoting Twombly, 550 U.S. at 555).
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B. Analysis
Defendants move to dismiss the Amended Complaint for failure to state a claim.
(Defs.’s Mem. L. Supp. Mot. Dismiss [“Mot. Dismiss”] at 18–36, ECF No. 60-1).3 As
explained in greater detail below, the Court finds that Birmingham fails to allege facts
sufficient to satisfy the elements of its two claims and will dismiss the Amended
Complaint.
1. Count I – Violations of § 10(b) of the SEA and SEC Rule 10b-5
In Count I of the Amended Complaint, Birmingham asserts violations of § 10(b) of
the SEA and SEC Rule 10b-5 against all Defendants. (Am. Compl. ¶¶ 274–78). “Section
10(b) of the [SEA] prohibits the use of ‘any manipulative or deceptive device or
contrivance’ in connection with the sale of a security in violation of the SEC rules.” Yates
v. Mun. Mortg. & Equity, LLC, 744 F.3d 874, 884 (2014) (quoting 15 U.S.C. § 78j(b)).
SEC Rule 10b-5, in turn, makes it unlawful:
3
Defendants first move to dismiss the Amended Complaint as prolix. (Mot. Dismiss
at 15). A plaintiff’s compliance with Rule 8’s “short and plain statement” requirement is
left to the Court’s discretion. Plumhoff v. Cent. Mortg. Co., 286 F.Supp.3d 699, 702
(D.Md. 2017) (quoting Stone v. Warfield, 184 F.R.D. 553, 555 (D.Md. 1999)).
Birmingham’s Amended Complaint is lengthy, but Defendants consented to, and the Court
granted, Birmingham’s request to file the excess pages. (See Mot. File Excess Pages at 1–
2, ECF No. 49; June 24, 2025 Order, ECF No. 53). Although the Amended Complaint is
sometimes repetitive, it is not so redundant, disorganized, or uninterpretable to warrant
dismissal under Rule 8, particularly given the heightened pleading standard Birmingham
must satisfy. Contra Plumhoff, 286 F.Supp.3d at 704 (dismissing complaint under Rule 8
because it was “way too long, detailed and verbose for either the Court or the defendants
to sort out the nature of the claims or evaluate whether the claims are actually supported
by any comprehensible factual basis” (quoting Belanger v. BNY Mellon Asset Mgmt.,
LLC, 307 F.R.D. 55, 58 (D.Mass 2015))). The Court, therefore, will not dismiss the
Amended Complaint on this ground.
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(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit
to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which
they were made, not misleading, or
(c) To engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon any person.
17 C.F.R. § 240.10b-5. To state a claim under § 10(b), a plaintiff must allege: “(1) a
material misrepresentation or omission by the defendant; (2) scienter; (3) a connection
between the misrepresentation or omission and the purchase or sale of a security; (4)
reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation.”
Yates, 744 F.3d at 884 (quoting Stoneridge Inv. Partners v. Scientific–Atlanta, Inc., 552
U.S. 148, 157 (2008)). The plaintiff also must satisfy the heightened pleading requirements
of Federal Rule of Civil Procedure 9(b) and the Private Securities Litigation Reform Act
(“PSLRA”). Rule 9(b) requires a plaintiff to “state with particularity the circumstances
constituting fraud,” which include “the time, place, and contents of the false
representations, as well as the identity of the person making the misrepresentation and what
he obtained thereby.” Weidman v. Exxon Mobil Corp., 776 F.3d 214, 219 (4th Cir. 2015)
(quoting Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir.
1999)). Likewise, the PSLRA demands a heightened level of specificity:
[As to any misleading statements or omissions,] the complaint
shall specify each statement alleged to have been misleading,
the reason or reasons why the statement is misleading, and, if
an allegation regarding the statement or omission is made on
information and belief, the complaint shall state with
particularity all facts on which that belief is formed.
[As to scienter,] the complaint shall, with respect to each act or
omission alleged to violate this chapter, state with particularity
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facts giving rise to a strong inference that the defendant acted
with the required state of mind.
15 U.S.C. § 78u-4(b)(1), (b)(2)(A).
Here, Defendants challenge the sufficiency of the Amended Complaint as to
elements one (material misrepresentation or omission) and two (scienter).4 (Mot. Dismiss
at 19, 28–29). The Court will address each element in turn.
a. Material Misrepresentation or Omission
As to the first element, Birmingham points to thirty-four statements Defendants
made during the Class Period as allegedly material misrepresentations or omissions. (See
Am. Compl. ¶¶ 87, 89, 91, 95, 103, 106, 110, 114, 119, 123, 128, 131, 141, 145, 149, 153,
161, 168, 177, 178, 180, 184, 190, 194, 196, 198, 202, 205, 209, 211, 213, 217, 219, 221).
To be actionable, these statements and omissions must meet three requirements: (1) they
must be factual (i.e., “demonstrable as being true or false”); (2) the statements must be
false or the alleged omissions “must render the statement[s] misleading”; and (3) the
statements or omissions must be material. In re Marriot Int’l, Inc. Customer Data Sec.
Breach Litig., 543 F.Supp.3d 96, 110 (D.Md. 2021) (quoting Longman v. Food Lion, Inc.,
197 F.3d 675, 682 (4th Cir. 1999)). As to materiality:
A statement or omission of fact is material if there is a
substantial likelihood that a reasonable purchaser or seller of a
security (1) would consider the fact important in deciding
whether to buy or sell the security or (2) would have viewed
4
In one sentence, Defendants argue briefly that Birmingham also fails to establish
elements four (reliance) and six (loss causation). (Mot. Dismiss at 33–34). Defendants,
however, provide no legal analysis to support this contention, either in their Motion or in
their Reply, and the Court will not provide such analysis for them. (See generally id.;
Reply).
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the total mix of information made available to be significantly
altered by disclosure of the fact.
Id. (quoting Longman, 197 F.3d at 683). Regarding omitted information, “Section 10(b)
and Rule 10b-5 ‘do not create an affirmative duty to disclose any and all material
information.’” In re Marriot, 543 F.Supp.3d at 111 (quoting Matrixx Initiatives, Inc. v.
Siracusano, 563 U.S. 27, 44 (2011)). But disclosure is required “when necessary to
make . . . statements made, in the light of the circumstances under which they were made,
not misleading.” Id. (quoting Matrixx, 563 U.S. at 44). Thus, “companies can control what
they have to disclose under [§ 10(b) and Rule 10b-5] by controlling what they say to the
market.” Id. (quoting Matrixx, 563 U.S. at 45).
i. Statements about Tenant Oversight and Due Diligence
As described above, Birmingham alleges that Defendants made material
misrepresentations and omissions during the Class Period regarding their due diligence
practices and monitoring of their tenants. (See Am. Compl. at 29–66). The focus of these
statements, generally, is that Defendants “utilize[d] rigorous underwriting standards,”
conducted thorough due diligence investigations of potential tenants, and were “aware of
what[] [was] going on with [their] tenants” during the Class Period. (Am. Compl. ¶¶ 87,
119; see id. at 29–66). Birmingham alleges that these statements were materially false or
misleading because at the time they were made, the Defaulting Tenants were struggling
financially, which adequate due diligence and monitoring would have revealed, and
because they gave investors the false impression that Defendants conducted sufficient
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oversight “such that IIPR would have known the true financial condition of the Defaulting
Tenants well before those tenants defaulted.” (Id. ¶ 88).
To start, some of the challenged statements constitute “puffery” or opinions and,
consequently, are not actionable. In re Marriot, 543 F.Supp.3d at 111 (“Statements of
opinion or puffery generally are not actionable.”). Statements of puffery are “loosely
optimistic statements that are so vague, so lacking in specificity, or so clearly constituting
the opinions of the speaker, that no reasonable investor could find them important to the
total mix of information available.” In re Emergent BioSolutions Inc. Secs. Litig., No.
DLB-21-955, 2023 WL 5671608, at *16 (D.Md. Sep. 1, 2023) (quoting Sinnathurai v.
Novavax, Inc., No. TDC-21-2910, 2022 WL 17585715, at *18 (D.Md. Dec. 12, 2022)).
Such statements are unactionable unless they are worded as guarantees or the speaker does
not reasonably believe their statement. In re Marriot, 543 F.Supp.3d at 119 (quoting IBEW
Local Union No. 58 Pension Tr. Fund & Annuity Fund v. Royal Bank of Scot. Grp., PLC,
783 F.3d 383, 392 (2d Cir. 2015)).
Here, Gold stated during the August 6, 2024 earnings call that “the sale-leaseback
concept is our basic business model that we’ve been following since [sic] for the last 8
years, and it seems to be—it has continued to produce what we think are below average
risks with above average returns.” (Am. Compl. ¶ 103). Also during that call, Regin stated,
“we really feel that we have some of the best operators in the industry in our portfolio and
have continued to support them over the years,” and Smithers later stated, “we believe that
there are tenants that because of supply chain issues or getting up to speed with the
changing environment that there will be some difficulties. But in general, we’re very—as
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[Regin] and [Hastings] has [sic] indicated, we’re very pleased with the quality and strength
of our tenants.” (Id. ¶¶ 110, 114). Additionally, during the November 7, 2024 earnings call,
Gold stated, “[t]he difference [between IIPR and other real estate companies] is we’ve been
paid a very high adjusted rate of return for what we believe is a very—a much lower risk—
risk profile.” (Id. ¶ 128). These statements, which “utilize[e] opinion and exaggeration” to
describe the strengths of IIPR’s tenants and business model generally are not worded as
guarantees, and Birmingham does not allege that Defendants did not believe these opinions
at the time they expressed them. In re Emergent, 2023 WL 5671608, at *16 (quoting Dunn
v. Borta, 369 F.3d 421, 431 (4th Cir. 2004)). The statements, therefore, are unactionable
under § 10(b).
Statements of opinion, like statements of puffery, are unactionable under § 10(b),
unless (1) “the speaker does not actually hold the stated belief”; (2) the statement “contains
an embedded statement of fact that is false”; or (3) “the statement omits material facts about
the speaker’s ‘inquiry into or knowledge concerning a statement of opinion’ and those
facts ‘conflict with what a reasonable investor would take from the statement itself.’” In re
Marriot, 543 F.Supp.3d at 119 (quoting Omnicare, Inc. v. Laborers Dist. Council Const.
Indus. Pension Fund, 575 U.S. 175, 184–85 (2015)). As to the third category, “[t]he
investor must identify particular (and material) facts going to the basis for the issuer’s
opinion . . . whose omission makes the opinion statement at issue misleading to a
reasonable person reading the statement fairly and in context.” Omnicare, 575 U.S. at 194.
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In this case, during the November 7, 2024 earnings call, Regin stated:
I just wanted to touch on your question on [4Front]. I mean we
did make an investment in the Illinois facility to round out
construction there. We do have four individual leases with
[4Front], but that is by far the largest, and there was significant
delays in construction, which understandably had an impact on
the overall cash flow.
That asset is in Illinois, which is one of the top 5 markets in the
U.S. We feel very confident in the Illinois market. And as
[Smithers] described, we look at each of these situations
individually, and we’re looking to maximize value of our
portfolio, and we feel very positive about the future resolution
for these issues [in the Illinois facility].
***
This asset, given the size and what we think this is going to
produce once this is fully up and running, is going to be very
meaningful to their business overall going into 2025. We really
like the Illinois market. We think it’s going to be a tremendous
boost to their business once . . . [the] Illinois building is fully
operational.
(Am. Compl. ¶¶ 131, 135). Birmingham alleges that these statements are misleading
because Regin omitted facts regarding Defendants’ allegedly insufficient due diligence and
the Defaulting Tenants’ financial situations. (Id. ¶¶ 132, 136). As explained below,
however, Birmingham does not allege sufficient facts demonstrating that Defendants did
not conduct due diligence or relevant research before Regin expressed this opinion.
Birmingham also does not allege what information Defendants knew about the Defaulting
Tenants’ financial situations when Regin made this statement. See Handal v. Innovative
Indus. Props., Inc., 157 F.4th 279, 297 (3d Cir. 2025) (“[I]n the third Omnicare scenario,
the speaker is aware of what she is omitting or that there is foreseeably material information
that could affect the veracity of her opinion and that she has failed to investigate.”). Even
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assuming Regin knew that 4Front was struggling with taxes, unpaid invoices, and raising
capital before the November 7 earnings call, this information would not render misleading
Regin’s opinions regarding the business potential of 4Front’s Illinois facility following
IIPR’s construction investment.
As to the remaining statements, Birmingham’s allegations that Defendants “did not
have a rigorous tenant-oversight process” or did not conduct “sufficiently robust and
comprehensive due diligence on, and monitoring of, its tenants” fail for a few reasons.
(Am. Compl. ¶ 88). To start, in some of the challenged statements, Defendants did not
“promise[] that [their] diligence would meet any particular standard of thoroughness.”
Handal, 157 F.4th at 295. For example, in the FY23 10-K and FY24 10-K, IIPR states:
We evaluate the credit quality of our tenants and any
guarantors on an ongoing basis. In addition, we monitor the
payment history data for all of our tenants and, in some
instances, we monitor our tenants by periodically conducting
site visits and meeting with the tenants to discuss their
operations.
***
We rely on our management team to perform due diligence
investigations of our potential tenants, related guarantors and
their properties, operations and prospects, of which there is
generally little or no publicly available operating and financial
information.
(Am. Compl. ¶¶ 89, 91, 149).5 Even if Defendants conducted subpar due diligence and
“missed obvious red flags,” that fact would not render these statements false or misleading
5
Defendants make similar statements in the investor presentation (specifically those
regarding quarterly reviews and meetings with tenants) and during the February 20, 2025
earnings call. (Am. Compl. ¶¶ 95, 114, 119, 168).
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because they contain no promises that Defendants’ due diligence would meet a certain
standard. See Handal, 157 F.4th at 295.
In other statements, Defendants characterize their underwriting and oversight
practices as meeting a certain degree of thoroughness. For example, in the FY23 10-K and
FY24 10-K, IIPR states: “We utilize rigorous underwriting standards for evaluating
acquisitions and potential tenants to ensure that they met our strategic and financial
criteria.” (Am. Compl. ¶¶ 87, 149). Similarly, during the August 6, 2024 earnings call,
Regin stated:
[Defendants] are still highly selective on the types of
opportunities in markets we like with tenants we like as we
have been since our inception.
***
We, of course, will look at new opportunities to work with new
operators as we see fit with management teams that we like that
have strong financials, track record of performance in the same
rigorous underwriting criteria that we’ve used historically for
our existing tenants.
(Id. ¶¶ 106, 110).6 Birmingham, however, relies on mere speculation to reach the
conclusion that Defendants’ due diligence efforts did not meet the standards described in
the challenged statements. The two cases that Birmingham cites for support are
distinguishable. (See Lead Pl.’s Opp’n Def.s’ Mot. Dismiss [“Opp’n”] at 20–21, ECF No.
65). In In re Genworth Financial Inc. Securities Litigation, 103 F.Supp.3d 759 (E.D.Va.
2015), the defendant told investors in 2013 that it was conducting a “deep review” of its
6
Defendants make similar statements in the investor presentation (specifically those
regarding “detailed” reviews of background and management and “detailed” financial
underwriting) and during the February 20, 2025 earnings call. (Am. Compl. ¶¶ 95, 157,
161, 164, 172).
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business, but the defendant later admitted that its last “deep review” occurred in 2012 and
that the scope of the 2013 review was much narrower. Id. at 766–67, 772–74. Similarly, in
In re James River Group Holdings, Ltd. Securities Litigation, No. 3:21-cv-444 (DJN), 2023
WL 5538218 (E.D.Va. Aug. 28, 2023), the defendants told investors that they “continually
monitor[ed] reserves using new information” and concluded that their reserves were
“reasonable” and “appropriate,” but former employees’ deposition testimonies and the
defendants’ internal documents showed that the defendants had no internal policy for
monitoring reserves and that they kept reserves artificially low. Id. at *3–4, 11. Here,
Birmingham does not allege that Defendants admitted to not conducting the due diligence
they described, nor does Birmingham cite to testimony or internal documents
demonstrating the falsity or misleading nature of Defendants’ due diligence statements.7
Even if not false, Birmingham alleges that Defendants’ statements are “‘materially
misleading’ half-truths” in that Defendants conducted due diligence and regular monitoring
of its tenants but “‘failed to disclose to investors what they knew about the Defaulting
Tenants’ and their dire financial positions, which misled investors as to the risk of investing
in IIPR.” (Opp’n at 20 (quoting Am. Compl. ¶¶ 87–88)). This argument fails as well.
7
In another portion of the challenged statements, Defendants do not mention their
due diligence practices at all. (See Am. Compl. ¶ 123 (discussing how Defendants work
with tenants who face operating issues); id. ¶¶ 141, 145, 149, 153 (announcing and
discussing the resolution of PharmaCann’s first default)). Birmingham alleges that these
statements are false for the same reason as the due diligence-related statements: because
IIPR allegedly “did not have a rigorous tenant-oversight process . . . .” (Id. ¶¶ 125, 142,
146, 150, 154). The absence of rigorous due diligence practices, however, would not render
these statements false, as Defendants do not mention such practices in these statements.
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First, as to the “red flags” described in the Amended Complaint, Birmingham does
not allege whether or when Defendants became aware of such information. For example,
Birmingham alleges that:
no later than January 30, 2024, PharmaCann was unable to pay
its state tax obligations in Ohio, New York, and Illinois,
resulting in these states filing numerous tax liens against
PharmaCann for unpaid taxes totaling nearly half a million
dollars by the end of the Class Period. Similarly, 4Front was
not paying all of its federal income taxes for the period 2022 to
2023, which on January 3, 2025, resulted in the U.S.
government filing a tax lien against 4Front for $15,000,000.
Illinois and California also placed tax liens on 4Front in April
2024 for failure to pay $1,561,245 and $19,648 in back taxes,
respectively.
(Am. Compl. ¶ 67). Birmingham does not allege that Defendants learned of these unpaid
taxes before, contemporaneously with, or after the filings of the tax liens and, therefore,
does not adequately allege that Defendant knew about these tax issues before making any
of the challenged statements. The same can be said regarding the unpaid invoices and
resulting lawsuits, the Defaulting Tenants’ “going concern” warnings, and the issues with
raising capital, (see id. ¶¶ 68–73)—Birmingham does not allege when Defendants
allegedly learned of those red flags and, therefore, does not adequately allege that
Defendants knew of this information prior to any of the challenged statements, In re Under
Armour Sec. Litig., 342 F.Supp.3d 658, 680 (D.Md. 2018) (“To be actionable, a statement
or omission must have been misleading at the time it was made; liability cannot be imposed
on the basis of subsequent events.” (quoting In re NAHC, Inc. Sec. Litig., 306 F.3d 1314,
1330 (3d Cir. 2002))).
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Even if Defendants did learn of these red flags prior to making the challenged
statements, investors also had access to that information through public records (i.e., tax
liens, court filings, and SEC filings). (Opp’n at 12 (stating that “facts about each Defaulting
Tenant’s dire financial distress . . . c[a]me from SEC disclosures, public sources, and court
filings”)). Disclosure of information that is “already publicly available does not materially
alter the ‘total mix’ of available information” and, therefore, omission of that information
is immaterial. Smith v. Cir. City Stores, Inc., 286 F.Supp.2d 707, 721 (E.D.Va. 2003); see
also Hillson Partners Ltd. P’ship v. Adage, Inc., 42 F.3d 204 (4th Cir. 1994) (“‘The
securities laws require disclosure of information that is not otherwise in the public
domain,’ not information that has already been publicly—indeed, officially—disclosed by
the company.” (quoting Sailors v. N. States Power Co., 4 F.3d 610, 613 (8th Cir.1993))).
Consequently, Defendants’ alleged failure to disclose the red flags contemporaneously
with the challenged statements is excusable because that information was “made credibly
available to the market by other sources.” Raab v. Gen. Physics Corp., 4 F.3d 286, 289 (4th
Cir. 1993) (quoting In re Apple Computer Sec. Litig., 886 F.2d 1109, 1115 (9th Cir.
1989)); see also In re Constellation Energy Grp., Inc. Secs. Litig., 738 F.Supp.2d 614, 628
(D.Md. 2010) (finding no material misrepresentation in part because plaintiff failed to
allege that defendant “knew more than the market did about [financial services firm’s]
volatile situation prior to [its] bankruptcy such that [defendant] should have specifically
disclosed the risks posed by [defendant’s] counterparty relationship to” the financial
services firm).
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Second, Birmingham fails to plead materiality as to any non-public information that
Defendants allegedly obtained from the Defaulting Tenants. Birmingham alleges that
Defendants had access to non-public financial information from the Defaulting Tenants
due to the disclosure requirements in some tenants’ leases. (See Am. Compl. ¶¶ 32, 36, 40,
44, 75–76). Birmingham, however, does not state what information Defendants allegedly
obtained or if it differed from what was available to the market via public record and,
consequently, has not demonstrated that a reasonable investor “would have viewed the total
mix of information made available to be significantly altered by disclosure of” that
information. In re Marriot, 543 F.Supp.3d at 110 (quoting Longman, 197 F.3d at 683).
Birmingham also does not allege when Defendants allegedly obtained non-public
financial information from the Defaulting Tenants. Birmingham assumes that Defendants
obtained financial information from all four Defaulting Tenants based on disclosure
requirements in one of IIPR’s leases with PharmaCann and one of its leases with a Gold
Flora subsidiary. (Am. Compl. ¶¶ 32, 36, 40, 44). Per those two disclosure requirements—
which, based on Birmingham’s descriptions, were not exactly the same, (id. ¶¶ 32, 36)—
Birmingham speculates that all the Defaulting Tenants were required to, and did, provide
quarterly and year-end financial information to Defendants, (id. ¶¶ 40, 44). Although the
Court views all allegations in the light most favorable to Birmingham at this stage of the
proceedings, see Albright, 510 U.S. at 268, the Court need not “accept as true allegations
that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences,”
Veney v. Wyche, 293 F.3d 726, 730 (4th Cir. 2002) (quoting Sprewell v. Golden State
Warriors, 266 F.3d 979, 988 (9th Cir. 2001)); see also Twombly, 550 U.S. at 555 (“Factual
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allegations must be enough to raise a right to relief above the speculative level . . . .”). And
the Court declines to accept as true these conclusory inferences within inferences.
Finally, Birmingham’s overall argument that Defendants misled investors about the
risks of investing in IIPR by touting their due diligence and monitoring practices is
unreasonable given the detailed and repeated warnings Defendants made regarding such
risks, including the possibility that IIPR’s tenants could default. For example, in IIPR’s
FY23 10-K, after stating that its management team conducts due diligence investigations,
IIPR acknowledged the potential limitations of its due diligence efforts and the possibility
of default:
We may not learn of all the material information we need to
know regarding these businesses through our investigations,
and these businesses are subject to numerous risks and
uncertainties, including but not limited to regulatory risks and
the rapidly evolving market dynamics of each state’s regulated
cannabis program. As a result, it is possible that we could enter
into a sale-leaseback arrangement with tenants or otherwise
lease properties to tenants that ultimately are unable to pay rent
to us, which could adversely impact our cash available for
distributions.
Many of our existing tenants are, and we expect that many of
our future tenants will be, companies with limited histories of
operations that are not profitable when they enter triple-net
leasing arrangements with us and, therefore, may be unable to
pay rent with funds from operations.
***
Some of our tenants may be subject to significant debt
obligations and may rely on debt financing to make rent
payments to us. Tenants that are subject to significant debt
obligations may be unable to make their rent payments if there
are adverse changes in their business plans or prospects, the
regulatory environment in which they operate or in general
economic conditions. In addition, the payment of rent and debt
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service may reduce the working capital available to tenants for
the start-up phase of their business. Furthermore, we may be
unable to monitor and evaluate tenant credit quality on an on-
going basis.
(FY23 10-K at 26, ECF No. 60-5 (emphasis added)).8 IIPR also notified investors of
previous defaults by other tenants:
In July 2022, Kings Garden defaulted on its obligations to pay
rent at all of the properties it leases with us, and pursuant to a
confidential, conditional settlement agreement executed on
September 11, 2022 between us and Kings Garden, we
terminated the leases for two properties that were in
development or redevelopment as of December 31, 2023 and
regained possession of those properties. In September 2023,
we regained possession of the four remaining properties that
Kings Garden had occupied, where Kings Garden paid
stipulated rent during its period of occupancy until September
20, 2023.
In November 2022, Parallel defaulted on its obligations to pay
rent at one of our properties in Pennsylvania, and we regained
possession of that property in October 2023. In February 2023,
Parallel also defaulted on its obligations to pay rent at one of
our properties in Texas, and we regained possession of that
property in March 2023.
In November 2022, Green Peak defaulted on its obligations to
pay rent at one of our properties in Michigan. In March 2023,
a receiver was appointed over substantially all of Green Peak’s
assets, and we subsequently regained possession of one
property that was under redevelopment as a regulated cannabis
cultivation and processing facility and three retail properties in
8
The parties do not challenge the authenticity of the documents that Birmingham
references in its Amended Complaint and which Defendants attach as exhibits. The Court,
therefore, may rely on these documents when ruling on Defendants’ motion to dismiss. In
re USEC Sec. Litig., 190 F.Supp.2d 808, 812–13 (D.Md. 2002) (“In ruling on a motion
to dismiss a securities fraud complaint, the Court is entitled to rely on public documents
quoted by, relied upon, incorporated by reference in or otherwise integral to the complaint,
and such reliance does not convert such a motion into one for summary judgment.”), aff’d
and remanded sub nom., Cohen v. USEC, Inc., 70 F.App’x 679 (4th Cir. 2003).
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Michigan. We also expect to regain possession of the
remaining regulated cannabis cultivation and processing
facility still occupied by the receiver on March 1, 2024.
(Id. at 27). IIPR references or restates the same warnings and the same or additional default
notifications in its other SEC filings and at the beginning of each conference call that
Birmingham quotes in the Amended Complaint. (See FY24 10-K at 26–28, ECF No. 60-
6; 1Q24 10-Q at 65, ECF No. 60-7; 2Q24 10-Q at 39, ECF No. 60-8; 3Q24 10-Q at 71,
ECF No. 60-9; Feb. 27, 2024 Earnings Call at 3, ECF No. 60-11; May 9, 2024 Earnings
Call at 3, ECF No. 60-12; Aug. 6, 2024 Earnings Call at 3, ECF No. 60-13; Nov. 7, 2024
Earnings Call at 3, ECF No. 60-14; Feb. 20, 2025 Earnings Call at 3, ECF No. 60-15).
Conducting thorough due diligence does not mean that the risks Defendants warned its
investors about would not materialize, and Birmingham provides no allegations to suggest
that a reasonable investor would believe otherwise. See In re Marriot, 543 F.Supp.3d at
115 (rejecting plaintiff’s argument that defendant’s statements regarding due diligence
related to its integration with another entity misled investors into thinking there were “no
issues that would impede the merger” because “‘[w]orking hard’ on due diligence and
integration does not mean that there would be no issues, and Plaintiff provide[d] no factual
allegations to support the proposition that a reasonable investor would believe otherwise”).
For all the reasons stated above, Birmingham fails to allege sufficient facts showing
that Defendants’ statements regarding due diligence and monitoring were either false or
materially misleading.
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ii. Statements about Investments in Defaulting Tenants
In the second category of statements, Birmingham alleges that Defendants made
material misrepresentations and omissions during the Class Period regarding their
investments in the Defaulting Tenants and amendments to their leases. (See Am. Compl.
at 67–89). Birmingham alleges that these statements were materially misleading because
such statements “put in play the issue of what Defendants knew about [the Defaulting
Tenants] that would undercut Defendants’ touting of IIPR’s new investment[s],” and by
failing to disclose such information, the challenged statements “misled investors into
believing that additional investments in [the Defaulting Tenants] were beneficial to IIPR”
and would “generate additional rental revenues, when, in reality, . . . [the Defaulting
Tenants were] in dire financial straits and would soon not be able to pay rent.” (Id. ¶ 179).
Birmingham’s allegations that these statements are misleading fail for some of the
same reasons as above. First, information about the red flags was available in the public
record. (See Opp’n at 12). Thus, Defendants’ failure to disclose those red flags to its
investors contemporaneously with their statements regarding investments in the Defaulting
Tenants and amendments to their leases is excusable because information on those red flags
was “made credibly available to the market by other sources.” Raab, 4 F.3d at 289
(quoting In re Apple, 886 F.2d at 1115). Second, Birmingham pleads insufficient facts
demonstrating what non-public information Defendants knew and when they learned that
information and, as a result, has not demonstrated that a reasonable investor “would have
viewed the total mix of information made available to be significantly altered by disclosure
of” that information. In re Marriot, 543 F.Supp.3d at 110 (quoting Longman, 197 F.3d at
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683). Birmingham, therefore, has failed to plead sufficient facts to satisfy element one as
to any of the challenged statements.
a. Scienter
Even if Birmingham had satisfied the first element, the Complaint fails on the
second element: scienter. “To meet the scienter requirement for a Section 10(b) and Rule
10b-5 claim, a plaintiff ‘must show that the defendant acted with “a mental state embracing
intent to deceive, manipulate, or defraud.”’” Id. at 142 (quoting Zak v. Chelsea
Therapeutics Int’l Ltd., 780 F.3d 597, 606 (4th Cir. 2015)). To make this showing, “a
plaintiff must allege that the defendant made the misleading statement or omission
intentionally or with ‘severe recklessness’ regarding the danger of deceiving the
plaintiff . . . A showing of mere negligence will not suffice.” Id. (quoting Tchrs.’ Ret. Sys.
of LA v. Hunter, 477 F.3d 162, 183–84 (4th Cir. 2007)). Recklessness, in this context,
encompasses acts that are “so highly unreasonable and such an extreme departure from the
standard of ordinary care as to present a danger of misleading the plaintiff 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. (quoting Matrix Cap. Mgmt. Fund, LP v. BearingPoint, Inc., 576 F.3d
172, 181 (4th Cir. 2009)).
The PSLRA further imposes a heightened pleading standard for this element: a
plaintiff must allege particularized facts demonstrating a “strong inference that the
defendant acted with the required state of mind.” 15 U.S.C. § 78u-4(b)(2)(A). A “strong
inference” is “more than merely plausible or reasonable—it must be cogent and at least as
compelling as any opposing inference of nonfraudulent intent.” Tellabs v. Makor Issues &
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Rts., Ltd., 551 U.S. 308, 314 (2007). The plaintiff must satisfy this pleading requirement
as to each individual defendant and, for corporate defendants, the plaintiff must
demonstrate that at least one authorized agent of the corporation acted with the requisite
state of mind. In re Marriot, 543 F.Supp.3d at 142 (citing Tchrs.’ Ret. Sys. of LA, 477 F.3d
at 183–84).
To determine whether a plaintiff has satisfied this standard, a court must engage in
a holistic analysis, considering “whether all of the facts alleged, taken collectively, give
rise to a strong inference of scienter, not whether any individual allegation, scrutinized in
isolation, meets that standard.” Tellabs, 551 U.S. at 323. Additionally, the court’s analysis
must be comparative, considering “not only inferences urged by the plaintiff . . . but also
competing inferences rationally drawn from the facts alleged.” Id. at 314. A complaint will
survive this analysis only “if the malicious inference is at least as compelling as any
opposing innocent inference.” Yates, 744 F.3d at 885 (quoting Zucco Partners, LLC v.
Digimore Corp., 552 F.3d 981, 991 (9th Cir. 2009)).
Here, Birmingham alleges that there is a strong inference of scienter because:
(1) Defendants repeatedly told investors that they were
engaged in oversight of IIPR’s tenants through due diligence
and ongoing monitoring; (2) there were myriad red flags with
the finances at four of IIPR’s largest tenants, which showed
that these tenants were at high risk of default; (3) IIPR’s
“robust due diligence” and “ongoing monitoring,” as the
process was explained by Defendants, should have detected
these red flags; therefore, it is plausible to infer either (a) IIPR
was not doing the oversight it represented to investors, and
Defendants’ statements like “we have said that we are
monitoring all of our tenants, and we are monitoring all our
tenants” ([Am. Compl.] ¶ 165) were intentionally meant to
deceive; or (b) the oversight did happen and Defendants either
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chose not to share the known red flags with investors or
disregarded those red flags.
(Opp’n at 29). In support of this argument, Birmingham cites Gold, Regin, Smithers, and
Hastings’ (collectively, the “Individual Defendants”) senior positions at IIPR and IIPR’s
small size; their personal involvement in the tenant oversight process and the preparation,
filing, and review of IIPR’s SEC filings; the alleged nature of due diligence investigations
as a “core operation” of IIPR’s business; and Gold, Smithers, and Hastings’ alleged
financial motives to engage in fraud. (Opp’n at 30–33; Am. Compl. ¶¶ 252–54). Even when
viewed holistically, these allegations do not support a strong inference of scienter.
Birmingham is correct that, as stated in several challenged statements, the Individual
Defendants held senior positions within IIPR and were involved in due diligence
investigations and monitoring of potential and current tenants. (See, e.g., March 4, 2024
Presentation at 17, ECF No. 60-16 (identifying Individual Defendants as members of
“Senior Management Team”); FY23 10-K at 26 (“We rely on our management team to
perform due diligence investigations of our potential tenants, related guarantors and their
properties, operations and prospects . . . .”); Feb. 20, 2025 Earnings Call at 9, 13 (“[W]e
are, of course, watching each of our tenants and working with them very
closely. . . . [W]e’re watching all of our tenants. We are doing deep dives into every single
one of our tenants, including the strongest ones and the single state operators.”)).
Defendants do not dispute that due diligence is a core operation of IIPR, nor do they dispute
that the Individual Defendants assisted in preparing, filing, and reviewing IIPR’s SEC
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filings. (See, e.g., FY23 10-K at 87 (showing signatures of Smithers and Gold, among
others not named in this lawsuit)).
Allegations regarding seniority and involvement in core operations are relevant to
the Court’s analysis, “provided, of course, that they are accompanied by particularized
allegations that a defendant was aware of problems in those operations.” In re Emergent,
2023 WL 5671608, at *26. “[W]e cannot impute factual knowledge to individuals merely
based on their professional position or because ‘such knowledge relates to the business’s
core operations.’” San Antonio Fire & Police Pension Fund v. Syneos Health Inc., 75 F.4th
232, 242 (4th Cir. 2023) (quoting KBC Asset Mgmt. NV v. DXC Tech. Co., 19 F.4th 601,
612 (4th Cir. 2021)).
In this case, Birmingham does not provide detailed allegations demonstrating that
the Individual Defendants knew that their due diligence process was deficient, if indeed it
was. Birmingham suggests that, had sufficient due diligence investigations occurred, then
the Individual Defendants would have known that the Defaulting Tenants were heading
towards default. (Opp’n at 30). “But that proposition, in effect, merely argues that [the
Individual] Defendants negligently performed due diligence . . . [a]nd mere negligence
cannot support a § 10(b) claim.” San Antonio Fire & Police Pension Fund, 75 F.4th at 242.
Birmingham also fails to provide particularized allegations demonstrating whether
or when the Individual Defendants learned of the red flags. See In re Emergent, 2023 WL
5671608, at *26–27 (finding inference of scienter as to certain defendants who—as shown
in emails, confidential witness testimonies, and personal admissions—had actual
knowledge of “red flags,” but not as to other defendants for whom plaintiffs did not include
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sufficient allegations of actual knowledge). Birmingham asks the Court to infer from the
financial disclosure requirements in two of IIPR’s leases—one with PharmaCann and one
with a subsidiary of 4Front—that all IIPR’s leases have such disclosure requirements; that
the Individual Defendants received financial information from all the Defaulting Tenants
(i.e., quarterly and annual financial statements and “budgets, forecasts and investor
materials”); and that the Individual Defendants received that information before making
the challenged statements. (Am. Compl. ¶¶ 32, 36, 40, 44). Birmingham also invites the
Court to infer from descriptions of IIPR’s due diligence processes (i.e., “Detailed review
of financial statements, strategic initiatives, and growth plans”; “Quarterly reviews and
requests for information pertaining to financials and ongoing operations of all properties”;
“Meetings with tenants to talk through operations and financials,” (March 4, 2024
Presentation at 14)) that the Individual Defendants learned about the red flags and other
unspecified non-public financial information before making the challenged statements, and
that the information obtained indicated that the Defaulting Tenants were headed towards
default, (Opp’n at 30). While these allegations may support a plausible inference of
scienter, such stacking of “inference upon inference” cannot satisfy the heightened § 10(b)
pleading standard. San Antonio Fire & Police Pension Fund, 75 F.4th at 243.
Even if the Court infers that the Individual Defendants knew of the red flags before
making the challenged statements, “[s]imply knowing this information would not be
enough for scienter. [The Individual] Defendants would also have to know—or, at a bare
minimum, be reckless to a risk—that declining to share that information would render”
their statements about due diligence, investments, and lease amendments misleading to
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investors. Id.; see also In re Constellation, 738 F.Supp.2d at 637 (“Even assuming
[defendant placed the financial services firm on its internal credit-watch list before the firm
filed for bankruptcy], it cannot be reasonably inferred that simply because [defendant] was
concerned, along with the rest of the market, about [the firm’s] financial condition in the
summer of 2008, it intentionally or recklessly concealed a material exposure to a company
it somehow knew was on the verge of bankruptcy.”). Birmingham does not plead sufficient
facts indicating that the Individual Defendants acted with such intent or reckless disregard,
especially given Defendants’ extensive disclosures regarding the many financial
challenges IIPR’s tenants likely would face and the risk of default. (See, e.g., FY23 10-K
at 26–39); see also In re Marriot, 543 F.Supp.3d at 153 (finding that defendants’ repeated
disclosures that they “may not be able to keep up with information, security, and privacy
requirements and [were] not impervious to cyberattacks . . .weigh[ed] against an inference
of scienter that the Individual Defendants were intentional or severely reckless in leading
investors to believe the opposite”).
In addition to seniority and involvement in core operations, Birmingham alleges that
Gold, Smithers, and Hastings were motivated to engage in fraud because a portion of their
2024 compensation depended on IIPR achieving certain “performance goals.” (Am.
Compl. ¶¶ 256–59). Gold, Smithers, and Hastings all received Performance Share Units
(“PSU”) in 2022, each of which “represented the right to receive one share of IIPR common
stock if the applicable performance goals were achieved” by the end of 2024. (Id. ¶¶ 256,
258). These PSUs would vest in December 2024, and the value of the PSUs depended on
the relative performance of IIPR’s common stock from January 2022 to December 2024.
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(Id. ¶ 256). Thus, according to Birmingham, Gold, Smithers, and Hastings had an incentive
to keep the price of IIPR common stock artificially high to increase the cash dividends they
would receive on their PSUs. (Id. ¶ 257).
“Allegations that a defendant ‘would personally benefit from a special bonus’ may
support scienter.” City of Southfield Gen. Emps.’ Ret. Sys. v. Advance Auto Parts, Inc.,
167 F.4th 637, 647 (4th Cir. 2026) (quoting Boykin v. K12, Inc., 54 F.4th 175, 186 (4th
Cir. 2022)). But “motivations to . . . increase one’s own compensation are common to
every company and thus add little to an inference of fraud.” Id. (quoting Cozzarelli v.
Inspire Pharms. Inc., 549 F.3d 618, 627 (4th Cir. 2008)). Moreover, although Defendants
made sometimes optimistic statements regarding due diligence, investments, and lease
amendments, they also made lengthy and oft-repeated risk warnings; they announced
unfulfilled rent obligations and explained IIPR’s response to such; and they disclosed the
first PharmaCann default immediately—just one day after it occurred. (See, e.g., FY23 10-
K at 26–39 (risk disclosures); Nov. 7, 2024 Earnings Call at 5–6 (discussing some tenants’
unpaid rent obligations and IIPR’s response); Am. Compl. ¶¶ 230–31 (Dec. 20, 2024 press
release announced that PharmaCann defaulted on Dec. 19, 2024)). These risk disclosures,
discussions of unpaid rent, and quick self-reporting, all of which caused IIPR’s common
stock price to decrease and resulted in Gold, Smithers, and Hastings having to forfeit their
PSUs, (Am. Compl. ¶ 260), weigh against an inference of intent to defraud, see In re
Marriot, 543 F.Supp.3d at 153 (finding that repeated risk disclosures weighed against
inference of scienter); Yates, 744 F.3d at 892 (finding the fact that defendants “continued
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to update investors about newly discovered weaknesses tend[ed] to negate an inference that
the defendants acted with an intent to defraud”).
Overall, Birmingham has shown that the Individual Defendants held senior
positions at IIPR and participated in IIPR’s core operations. But without detailed
allegations showing that the Individual Defendants had actual knowledge of any
deficiencies in their due diligence or actual knowledge of the red flags, these allegations
“are not sufficient to raise a strong inference of scienter. If they were, every corporate
executive who participates in the day-to-day management of his company would be
exposed to liability for securities fraud.” In re Criimi Mae, Inc. Sec. Litig., 94 F.Supp.2d
652, 661 (D.Md. 2000). Birmingham also has shown that Gold, Smithers, and Hastings
may have been financially motivated to keep IIPR’s common stock price artificially high
to increase their compensation in December 2024. But Defendants’ regular announcements
regarding certain tenants’ struggles and quick disclosure of PharmaCann’s first default,
which, at least in part, caused Gold, Smithers, and Hastings to lose out on their extra
compensation, weighs against an inference of scienter. See In re Marriot, 543 F.Supp.3d at
153; Yates, 744 F.3d at 892.
As Birmingham says in its Opposition, its allegations arguably create a plausible
inference that (1) Defendants did not conduct the oversight they claimed to be conducting
and, thus, intentionally deceived investors when they touted their rigorous due diligence
processes, or (2) Defendants did conduct such due diligence, discovered the red flags, and
then intentionally concealed those red flags from investors or recklessly disregarded the
risk that failing to disclose those red flags would render their statements misleading to
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investors. (Opp’n at 29). But the PLSRA requires more than a plausible inference of
scienter; it requires a strong inference of scienter. See Tellabs, 551 U.S. at 314. And the
facts alleged here do not meet that higher standard. The more compelling inference is that,
even assuming the Individual Defendants knew of the red flags before making the
challenged statements, they believed that they adequately warned investors of the risks
inherent to IIPR’s business, that additional investments and lease amendments would help
address any financial distress and enable tenants to continue to pay rent, and that signs of
financial distress among certain tenants did not foreclose or render misleading optimistic
statements or announcements regarding investments, lease amendments, and due diligence
processes. Birmingham, therefore, has failed to plead sufficient facts showing that the
Individual Defendants acted with the requisite state of mind and, as a result, has failed to
satisfy this element as to IIPR as well. In re Marriot, 543 F.Supp.3d at 142 (citing Tchrs.’
Ret. Sys. of LA, 477 F.3d at 183–84). Accordingly, the Court will dismiss Count I of the
Amended Complaint.
2. Count II – Violations of § 20(a) of the SEA
In Count II of the Amended Complaint, Birmingham alleges violations of § 20(a)
of the SEA. (Am. Compl. ¶¶ 279–80). Section 20(a) of the SEA imposes joint and several
liability upon “[e]very person who, directly or indirectly, controls any person liable under
any provision of [15 U.S.C. §§ 78a–78rr] or of any rule or regulation thereunder” to the
same extent as the liable, controlled person, “unless the controlling person acted in good
faith and did not directly or indirectly induce” the violative actions. 15 U.S.C. § 78t(a).
“[T]o state a claim under § 20(a), a plaintiff must allege: ‘(1) a predicate violation of
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§ 10(b) and (2) control by the defendant over the primary violator.’” In re Constellation,
738 F.Supp.2d at 638–39 (quoting In re Mut. Funds Inv. Litig., 566 F.3d 111, 129–30 (4th
Cir. 2009), rev’d sub nom. on other grounds, Janus Cap. Grp., Inc. v. First Derivative
Traders, 564 U.S. 135 (2011)). Because § 20(a) requires a “predicate violation of § 10(b),”
if a plaintiff fails to state a claim under § 10(b) or SEC Rule 10b-5, then the plaintiff also
fails to state a claim under § 20(a). Id. (quoting In re Mut. Funds Inv. Litig., 566 F.3d at
130).
Here, as stated above, Birmingham cannot state a claim under § 10(b) or SEC Rule
10b-5. Consequently, Birmingham has failed to satisfy the first element of a § 20(a) claim,
see id. at 638–39 (quoting In re Mut. Funds Inv. Litig., 566 F.3d at 130), and the Court will
dismiss Count II of the Amended Complaint.
III. CONCLUSION
For the foregoing reasons, the Court will grant Defendants’ Motion to Dismiss the
Consolidated Class Action Complaint (ECF No. 60). A separate Order follows.
Entered this 27th day of May, 2026.
/s/
George L. Russell, III
Chief United States District Judge
44