The district court granted the defendants' motion to dismiss. See Ganino v. Citizens Utilities Co., 56 F. Supp.2d 222 (D.Conn. 1999). Focusing on the issue of materiality, the court quoted a newspaper article which observed that "`[m]ost auditors — and their corporate clients — define materiality as any event or news that might affect a company's earnings, positively or negatively, by 3% to 10%. . . . [it] has become standard practice in corporate America.
Instead, Ganino noted that the lower court had relied upon this reasoning. 228 F.3d 166 (citing Ganino v. Citizens Utils. Co., 56 F. Supp. 2d 222, 227 (D. Conn. 1999)).
The Second Circuit recently reversed a district court's dismissal on materiality grounds of a securities fraud action, holding that the district court had erred in relying exclusively on comparison of the magnitude of misreported financial figures with overall revenues. Ganino v. Citizens Utilities Co., 228 F.3d 154 (2d Cir. 2000), reversing 56 F. Supp.2d 222 (D. Coma. 1999). We do not rely on such a "single numerical benchmark."
There is ample authority supporting the proposition that when it is clear that a particular financial misstatement could not possibly be significant to a reasonable investor due to its small magnitude, a court may properly determine on a motion to dismiss that the misstatement was immaterial as a matter of law. See Parnes, 122 F.3d at 547 (overstatement of assets by $6.8 million, 2% of company's total assets, immaterial as a matter of law); Glassman v. Computervision Corp., 90 F.3d 617, 633 n. 26 (1st Cir. 1996) (overstatement of revenues by 3%-9% immaterial); Ganino v. Citizens Utilities Co., 56 F. Supp.2d 222, 227 (D. Conn. 1999) (1.7% overstatement of revenue immaterial). The prospectus disclosed that Rubbermaid had revenues exceeding $2.3 billion per year in 1996 and 1997, and that its 1998 revenues were on track to match or exceed that amount.