
    POPE INVESTMENTS II, LLC, Jayhawk Private Equity Fund, L.P., Guerrilla Partners, LLC, Alder Capital Partners, L.P., Alder Offshore Master Fund, L.P., Paragon Capital, L.P., Daybreak Special Situations Master Fund, Ltd., Aamaxen Transport Group, Inc., Asia Business Management Group, Ltd., Shanghai Anhante (Beijing) Medical Technology Co., Ltd., Plaintiffs-Appellants, v. DEHENG LAW FIRM, Defendant-Appellee, Belmont Partners LLC, Rosewood Securities, LLC, Joseph Meuse, Guzov Ofsink LLC, Darren L. Ofsink, Helen Lv, William H. Luckman, Southern Trust Securities Holding Corp., Defendants.
    No. 13-3250-cv.
    United States Court of Appeals, Second Circuit.
    Sept. 18, 2014.
    
      Theodore Eder, Segal Mccambridge Singer & Mahoney, Ltd., New York, NY, Andrew B. Protzman, Protzman Law Firm, LLC, Kansas City, MO, and Jim McMullen, Shapiro & McMullen, P.A., Leawood, KS, for Plaintiffs-Appellants.
    Harry H. Rimm, Esq. (Karen E. Abra-vanel, on the brief), Sullivan & Worcester LLP, New York, NY, for Defendant-Ap-pellee.
    PRESENT: DEBRA ANN LIVINGSTON, CHRISTOPHER F. DRONEY, Circuit Judges and ALISON J. NATHAN, District Judge.
    
      
       Judge Alison J. Nathan, of the United States District Court for the Southern District of New York, sitting by designation.
    
   SUMMARY ORDER

Plaintiffs-Appellants Pope Investments II, LLC, Jayhawk Private Equity Fund, L.P., Guerrilla Partners, LLC, Alder Capital Partners, L.P., Alder Offshore Master Fund, L.P., Paragon Capital, L.P., Daybreak Special Situations Master Fund, Ltd., Aamaxen Transport Group, Inc., Asia Business Management Group, Ltd., and Shanghai Anhante (Beijing) Medical Technology Co., Ltd. (“Appellants”) filed a complaint against Defendant-Appellee Deheng Law Firm (“Appellee”), and Belmont Partners LLC, Rosewood Securities, LLC, Joseph Meuse, Guzov Ofsink LLC, Darren L. Ofsink, Helen Lv (“Lv”), William H. Luck-man, and Southern Trust Securities Holding Corp. (“Defendants”), alleging violations of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq., (“Exchange Act”) and Securities and Exchange Commission Rule 10b-5, 17 C.F.R. § 240.10b-5, and also alleging various state law claims, including negligent misrepresentation, breach of fiduciary duty, conversion, rescission, and legal malpractice. Appellants amended their complaint three times. After dismissing Appellants’ first two amended complaints with leave to replead, the United States District Court for the Southern District of New York (Stanton, J.) dismissed Appellants’ third amended complaint without leave to replead. The district court dismissed the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure adequately to allege the scienter necessary to make out a claim under Section 10(b) of the Exchange Act and Rule 10b-5. It declined to exercise supplemental jurisdiction over the state law claims because it had dismissed all of the federal law claims. We assume the parties’ familiarity with the underlying facts and procedural history of the case, and with the issues on appeal.

We review a district court’s Rule 12(b)(6) dismissal of a complaint de novo. Goldstein v. Pataki, 516 F.3d 50, 56 (2d Cir.2008). The complaint must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Although all allegations contained in the complaint are assumed to be true, this tenet is “inapplicable to legal conclusions.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). “A claim has facial plausibility 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. “Any complaint alleging securities fraud must satisfy the heightened pleading requirements of the [Private Securities Litigation Reform Act (“PSLRA”) ] and [Federal Rule of Civil Procedure] 9(b) by stating with particularity the circumstances constituting fraud.” ECA & Local 134 IBEW Joint Pension Trust of Chi v. JP Morgan Chase Co., 553 F.3d 187, 196 (2d Cir.2009).

Under the PSLRA, scienter is adequately pled “only if a reasonable person would deem the inference of scienter cogent and at least as compelling as any opposing inference one could draw from the facts alleged.” Matrixx Initiatives, Inc. v. Siracusano, — U.S. -, 131 S.Ct. 1309, 1324, 179 L.Ed.2d 398 (2011) (internal quotation marks omitted). Scienter “can be established either (a) by alleging facts to show that defendants had both motive and opportunity to commit fraud, or (b) by alleging facts that constitute strong circumstantial evidence of conscious misbehavior or recklessness.” Ganino v. Citizens Utils. Co., 228 F.3d 154, 168-69 (2d Cir.2000) (internal quotation mark omitted).

We agree with the district court that Appellants have not alleged sufficient facts to establish scienter under this standard. Appellants implicitly argue that Appellee is liable for the actions of Lv, alleging that Appellee had motive because embezzled funds were deposited into (1) an account of Jerga Management Limited, a company in which Appellee’s supposed agent, Lv, was a director, and (2) accounts owned by Shao Gan Hua (“Shao”), who Appellants allege is now Lv’s husband. But, as the district court explained, Appellants’ allegations regarding the deposit into the account of Jerga Management Limited are not sufficient to establish motive because Appellants gave “no indication of how many other directors than Lv are on its board, the extent to which Lv is involved in company management, whether she had personal access to any company funds, or the relative size of the deposit in comparison to Jerga Management Limited’s other assets.” J.A. 430. Thus, “there is no possible way to speculate about whether she was even aware of the deposit.” Id. And Appellants’ allegations regarding the deposits into Shao’s accounts are not sufficient to establish motive because Appellants have not alleged facts showing that Lv was married to Shao at the time of the alleged misrepresentation. By Appellants’ own admission, at the time the transactions at issue closed, Lv was only “close personal friends with Shao.” J.A. 75.

Appellants also have not alleged specific facts showing conscious misbehavior or recklessness by Appellee. While Appellants make several conclusory allegations, as the district court stated, they do not “specifically identify any report or statement from which defendants should have learned that Shao intended to embezzle the money or that the [transactions at issue] were a sham, or that the invested funds were not flowing as intended.” J.A. 427.

Appellants argue that Lv’s knowledge that the funds would be embezzled can be inferred from an email she sent on September 4, 2008, asking brokers who helped bring the parties together “to act as a bridge between Kamiek [the entity from which Shao withdrew the funds] and the Investors [the parties who invested the funds that were allegedly embezzled] to avoid legal action and help negotiate a compromise.” Appellants Br. at 12. But Appellants’ allegations do not contain any information about the dispute for which Lv was suggesting a compromise. It is not at all clear from the facts of the complaint whether this email was based on Lv’s knowledge of Shao’s embezzlement, or whether it instead pertained to some other facet of the deal over which there could have been a dispute. Furthermore, the email was sent well after the alleged misrepresentation occurred. Thus, even if it did pertain to Shao’s embezzlement of funds, it would not necessarily indicate knowledge that Shao planned to embezzle the funds at the time of the alleged misrepresentation. Given these facts, the inference that the email indicates Lv’s knowledge of the scheme is not “at least as compelling” as the inference Lv did not know that the funds would be embezzled at the time of the alleged misrepresentation.' Matrixx, 131 S.Ct. at 1324.

Because we find that Appellants have not alleged sufficient facts to make out a violation of Section 10(b) of the Exchange Act and Rule 10b-5 even if Appellee could be held liable for Lv’s actions, we do not need to reach the question of whether Appellee can be held liable for Lv’s actions in this case. Because the district court properly dismissed Appellants’ federal law claims, it did not err in declining to exercise supplemental jurisdiction over Appellants’ state law claims. See 28 U.S.C. § 1367(c)(3).

We have reviewed Appellant’s remaining arguments and find them to be without merit. For the foregoing reasons, the judgment of the district court is AFFIRMED.  