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dismissing claims related to use of shipping backlogs because plaintiffs failed to allege with particularity the "amount of revenue implicated," explaining that plaintiffs failed to "provide any facts about the source of such information, stating only, and generally, that 'the early shipments depleted the order backlog for Foundry's product in the fourth quarter of 2000 by approximately $5.2 million'"
Summary of this case from In re Nimble Storage Sec. Litig.Opinion
Master File No. C 00-4823 MMC; (Docket No. 123)
August 29, 2003
Patrick J. Coughlin, Randi D. Bandman, John K. Grant, Shirley H. Huang, Milberg Weiss Bershad Hynes Lerach, San Francisco, CA
Sandy A. Liebhard, Bernstein Liebhard Lifshitz, New York, N.Y.
Shirli Fabbri Weiss, Robert W. Brownlie, Mark H. Hamer, Gray Gary Ware Freidenrich, San Diego, CA
William S. Lerach, Milberg Weiss Bershad Hynes Lerach, San Diego, CA
Susan D. Resley, Gray Gary Ware Freidenrich, San Francisco, CA
David Priebe, Roy K. McDonald, Gray Gary Ware Freidenrich, Palo Alto, CA
ORDER GRANTING DEFENDANTS' MOTION TO DISMISS PLAINTIFFS' FIFTH AMENDED COMPLAINT
Before the Court is defendants' motion to dismiss plaintiffs' Fourth Amended Complaint pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure, and the Private Securities Litigation Reform Act of 1995 ("PSLRA"), filed April 7, 2003. The matter came on regularly for hearing on June 13, 2003. John K. Grant and Shirley H. Huang of Milberg Weiss Bershad Hynes Lerach LLP appeared on behalf of plaintiffs. Shirli Fabbri Weiss and Roy K. McDonald of Gray Gary Ware Freidenrich LLP appeared on behalf of defendants. Having considered the papers submitted in support of and in opposition to the motion, and the arguments of counsel, the Court hereby rules as follows.
As discussed infra, because the Court subsequently allowed plaintiffs to file a Fifth Amended Complaint, the Court will consider the instant motion as a motion to dismiss the Fifth Amended Complaint.
In addition to Foundry Networks, Inc. ("Foundry"), the individual defendants, and the positions they held during the class period, are: Bobby R. Johnson, Jr. ("Johnson"), Foundry's Chief Executive Officer ("CEO") and Chairman of the Board; Timothy D. Heffner ("Heffner"), Foundry's Vice President for Finance and Administration and Chief Financial Officer ("CFO"); Lee Chen ("Chen"), Foundry's Vice President for Software Engineering and Quality and Assurance; Robert W. Shackleton ("Shackleton"), Foundry's Vice President for North American Sales; Ken K. Cheng ("Cheng"), Foundry's Vice President for Marketing and Product and Program Management; and H. Earl Ferguson ("Ferguson"), Foundry's Vice President for Hardware Engineering. (See Id. ¶ 19(a)-(f).)
BACKGROUND
The underlying facts are discussed in the Court's prior orders filed June 6, 2002 and February 14, 2003, and are incorporated herein by reference.In its February 14, 2003 order, the Court granted, with leave to amend, defendants' motion to dismiss plaintiffs Third Amended Complaint ("TAC"), in which plaintiffs asserted a claim under § 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78j(b), and Rule 10b-5 of the Securities and Exchange Commission ("SEC"), 17 C.F.R. § 24O.10b-5, as well as a claim based on control person liability under § 20(a) of the Exchange Act, 15 U.S.C. § 78t(a). The Court found that plaintiffs had failed to adequately plead that any of the six sets of statements in question were false or misleading, and that plaintiffs had failed to plead facts sufficient to raise a strong inference of scienter. On March 17, 2003, plaintiffs filed their Fourth Amended Complaint which asserts, as did the TAC, a claim under § 10(b) of the Exchange Act and Rule 10b-5 of the SEC, and under § 20(a) of the Exchange Act, in addition to a new claim for insider trading under § 20A of the Exchange Act, 15 U.S.C. § 78t-1. On April 7, 2003, defendants filed the instant motion.
On June 13, 2003, the Court conducted a hearing on defendants' motion to dismiss plaintiffs Fourth Amended Complaint, upon conclusion of which the Court deemed the matter submitted. On June 19, 2003, plaintiff filed a motion, by which plaintiff sought an order from the Court allowing briefing on plaintiffs request to file a Fifth Amended. Complaint The Fifth Amended Complaint is essentially identical to the Fourth Amended Complaint with the single exception that it includes one additional paragraph for purposes of alleging an additional false statement. On July 1, 2003, the Court granted plaintiffs' request, and on July 15, 2003 plaintiffs filed a Motion to Supplement Complaint and Further Opposition to Defendants' Motion to Dismiss, to which defendants, on July 29, 2003, filed opposition. Both the Motion to Supplement and the opposition thereto address at length the additional allegations set forth in the Fifth Amended Complaint and the sufficiency thereof to support a claim under § 10(b). By separate order filed concurrently herewith, the Court has granted plaintiffs' Motion to Supplement, by which plaintiffs are afforded leave to file their Fifth Amended Complaint. Because the parties have been afforded arrive opportunity to address the additional allegations contained therein, the Court will consider the Motion to Dismiss, as supplemented by the briefing on the Motion to Supplement, as if the Motion to Dismiss had been directed in the first instance to the Fifth Amended Complaint (hereafter "FAC").
LEGAL STANDARD
A. Rule 12(b)(6)
Under Rule 12(b)(6), a complaint should not be dismissed unless a plaintiff can prove "no set of facts in support of his claim that would entitle him to relief." See Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). In ruling on a motion to dismiss, the court must accept a plaintiffs factual allegations as true and construe them in the light most favorable to plaintiff. See Gompper v. VISX, Inc., 298 F.3d 893, 895 (9th Cir. 2002). "[C]onclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim." Epstein v. Washington Energy Co., 83 F.3d 1136, 1139 (9th Cir. 1996).
B. Section 10(b) and the PSLRA
Section 10(b) of the Exchange Act states that "[i]t shall be unlawful for any person . . . [t]o use or employ, in connection with the purchase or sale of any security . . . any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe." See 15 U.S.C. § 78j(b). A plaintiff bringing a claim for securities fraud must show: (1) a false and misleading statement or omission of material fact; (2) scienter; (3) reliance; and (4) damages. See Paracor Fin., Inc. v. General Electric Capital Corp., 96 F.3d 1151, 1157 (9th Cir. 1996).
A plaintiff alleging a cause of action for securities fraud is subject to "heightened pleading" standards as set forth in the PSLRA.See In re Silicon Graphics Inc. Sec. Litiq., 183 F.3d 970, 974 (9th Cir. 1999). Under the PSLRA, a plaintiff in a private securities fraud action alleging material misstatements or omissions must "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." See 15 U.S.C. § 78u-4(b)(1).
The PSLRA also provides that "the complaint shall, with respect to each such act or omission alleged to violate this chapter [the Securities Exchange Act of 1934], state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind." See 15 U.S.C. § 78u-4(b)(2). In this circuit, as a general matter, the required state of mind is "deliberate or conscious recklessness." See No. 84 Employer-Teamster Joint Council Pension Trust Fund v. America West Holding Corp., 320 F.3d 920, 931 (9th Cir. 2003) (quoting Silicon Graphics, 183 F.3d at 979.) If the challenged. statement is forward-looking, however, the requisite state of mind is "actual knowledge." See Id. (quoting 15 U.S.C. § 78u-5(c)(1)). In determining whether plaintiffs' allegations are sufficient to raise a strong inference of scienter, a court must consider (1) "the total of plaintiffs' allegations," even though some allegations may be individually lacking, and (2) "all reasonable inferences capable of being drawn from the allegations, including inferences unfavorable to the plaintiffs." See America West, 320 F.3d 920, 938 (9th Cir. 2003) (internal quotations and citations omitted.)
Because "falsity and scienter in private securities fraud cases are generally strongly inferred from the same set of facts," the Ninth Circuit has incorporated the falsity and scienter requirements "into a single inquiry." See Ronconi v. Larkin 253 F.3d 423, 429 (9th Cir. 2001); see also America West, 320 F.3d at 932 (noting courts "generally examines the falsity and scienter requirements at the same time.") In conducting this inquiry, a court is to determine whether "particular facts in the complaint, taken as a whole, raise a strong inference that defendants intentionally or with deliberate recklessness made false or misleading statements to investors." See Ronconi v. Larkin, 253 F.3d at 429.
DISCUSSION
The Court first examines plaintiffs' revised allegations as to statements previously alleged to be false or misleading. The Court next addresses the allegedly false statement set forth in the first instance in plaintiffs' FAC. Lastly, the Court addresses plaintiffs' new § 20A claim for insider trading.
A. Section 10(b) Claim: Statements Previously Alleged
Defendants argue that the FAC does not cure the deficiencies detailed in the Court's prior order dismissing the TAC. Specifically, defendants contend that with respect to plaintiffs' claim for securities fraud, (1) plaintiffs have failed to adequately plead that the statements were false or misleading, (2) plaintiffs have failed to plead sufficient facts to give rise to a strong inference that defendants acted with the requisite scienter, and (3) the forward-looking statements on which plaintiffs rely are not actionable under the PSLRA's "Safe Harbor" provisions.
As noted, the Court found that plaintiffs' TAC failed to adequately plead facts sufficient to show that any of the six sets of statements upon which plaintiffs relied were false or misleading. In their opposition to defendants' motion to dismiss, plaintiffs state that they "have amended their Complaint with respect to statements made in (1) defendants' October 17, 2000 conference call and (2) an October 24, 2000 interview of [defendant and Foundry CEO] Bobby Johnson published on November 13, 2000 in The Wall Street Transcript," but that they "have not materially amended their Complaint with respect to the September 6, 2000 statements, the September 7, 2000 conference call, the October 17, 2000 press release or the November 14, 2000 Form 10-Q filing." (See Opp. at 1:18-22, n. 3.) Although plaintiffs "incorporate their prior arguments by reference" with respect to such latter statements, plaintiffs "do not ask the Court to reconsider the prior ruling on these statements." (See Id.)
Accordingly, the Court examines herein plaintiffs' allegations only as to the statements made in the October 17, 2000 conference call and the October 24, 2000 interview. Plaintiffs' opposition addresses four such statements: (1) the October 17, 2000 statement that Foundry was "comfortable with a full year 2000 revenue target of approximately $400 million," (2) the October 24, 2000 statement that Foundry was seeing "good overall demand"; (3) the October 24, 2000 statement that Foundry's "biggest challenge [was] to . . . continue to meet demand"; and (4) the October 24, 2000 statement that Foundry "plan[ned] to continually increase quarterly profits each and every quarter." (See Opp. at 2; FAC ¶¶ 36, 42.)
In evaluating the sufficiency of these allegations, the Court hereby GRANTS defendants' Request for Judicial Notice, filed April 7, 2003, wherein defendants request judicial notice of various press releases and SEC filings.
Although plaintiffs' FAC quotes verbatim numerous statements made in the October 17, 2000 conference call, (see FAC ¶ 36.) plaintiffs' opposition to the instant motion relies exclusively on this one particular statement.
Plaintiffs argue that the statements made at the October 24, 2000 interview should be deemed to have been made as of November 13, 2003, the publication date of the interview in The Wall Street Transcript. Plaintiffs allege, as they have in the previous complaints, that Johnson and Foundry "maintained the ability to correct and/or revise the statements in the article" between the time the interview took place and the time it was published." (See FAC ¶ 42.) In its June 6, 2002 order dismissing the SAC, the Court noted that plaintiffs had failed to plead any facts supporting this allegation. See 15 U.S.C. § 78u-4(b)(1)(B) (providing plaintiff must "state with particularity all facts" supporting plaintiffs belief that statement is false or misleading). Neither plaintiffs' TAC nor FAC introduced any new facts in support of the allegation. As a consequence, the statements are properly deemed made as of October 24, 2003, the date defendant Johnson made the statements to The Wall Street Transcript.
As plaintiffs concede, defendants' October 17, 2002 revenue forecast and October 24, 2000 profit forecast are forward-looking statements.See America West, 320 F.3d at 936 ("A `forward-looking statement' is any statement regarding (1) financial projections, (2) plans and objectives of management for future operations, (3) future economic performance, or (4) the assumptions `underlying or related to' any of these issues.") Accordingly, to adequately allege scienter with respect to such statements, plaintiffs must plead with particularity facts giving rise to a strong inference that the defendant acted with actual knowledge that the statements were false or misleading. The two remaining statements, that Foundry was seeing "good overall demand" and that Foundry's "biggest challenge [was] to continue to meet demand," concern then existing conditions and, consequently, are not forward-looking. See id. at 937 (finding the statements "the settlement agreement's provisions will not have a material adverse effect on the Company's operations" and "we are not anticipating any major increase in maintenance costs or the costs of oversights going forward" were not forward-looking because each was "a description of the present effects" of a settlement agreement) Accordingly, the requisite state of mind as to these statements is deliberate or conscious recklessness.
As in the TAC, plaintiffs allege that the above statements were false or misleading for six reasons. First, plaintiffs allege that despite Foundry's favorable third quarter results, defendants knew, based on several internal documents and discussions, that demand for their products was decreasing as a result of weak sales and demand in July 2000. (See FAC ¶¶ 41, 43.) Second, plaintiffs allege that Foundry had "significantly increas[ed] the number of contingency sales deals it made with its customers" in order to offset the slowing demand for Foundry's products. (See FAC ¶¶ 41, 43.) Third, plaintiffs allege that Foundry "concealed the fact that the third quarter results had only been achieved by making early shipment of product that had been ordered for shipment later in the fourth quarter," thus decreasing fourth quarter sales. (See FAC ¶¶ 41, 43.) Fourth, plaintiffs allege that defendants knew that fourth quarter demand had been reduced based on internal shipment and forecast reports that revealed that Foundry was "forecasting and shipping approximately 25% below prior projections and that sales revenue had dropped approximately 20%." (See FAC ¶¶ 41, 43.) Fifth, plaintiffs allege that according to a "senior networking executive" for one of Foundry's competitors, "demand was declining in October of 2000 and [there was] a substantial lack of new orders at that time, particularly in the ISP business area where his company had a significant overlap with Foundry in the same projects." (See FAC ¶ 28.) Sixth, plaintiffs allege that defendants knew of the weakening demand in the fourth quarter because Foundry sales personnel had indicated they would not be able to meet their sales quotas in the fourth quarter and thereafter requested lower quotas. (See FAC ¶¶ 27(d), 29.)
In its February 14, 2003 order, the Court found that each of these allegations was deficient. For the reasons discussed in the court's prior orders dated June 6, 2002 and February 14, 2003, and for the reasons discussed below, although plaintiffs have bolstered several of these allegations with new facts, the allegations remain insufficient under the PSLRA to show that defendants actually knew the statements in question were false or misleading when made, or were deliberately reckless in making such statements.
1. Weak Demand
The FAC again alleges, as in the TAC, that the statements in question were false or misleading when made because defendants knew, by July 2000, that demand for Foundry's products was weakening. Specifically, plaintiffs allege, as in the TAC, that (1) during a semi-annual National Sales Conference in July 2000, Johnson and Robert W. Shackleton, Foundry Vice President — North American Sales, "indicated that Foundry expected slowing sales trends and softening demand" (see FAC ¶ 25(a)); (2) Johnson circulated a company-wide e-mail "on or about July 20, 2000," discussing "poor month-to-date sales results" (see FAC ¶ 25(b)); (3) Foundry's "internal actual-to-plan July 2000 reports revealed that Foundry was failing to make its internal July sales plan . . . and was suffering a 30% miss for that month" (see id.); and (4) Johnson, in late September 2000, circulated a memorandum that "discussed the slowing sales to ISPs." (See FAC ¶ 26.)
"ISPs" are Internet Service Providers.
As noted in the Court's prior orders, even assuming plaintiffs' allegations are sufficient to demonstrate that Foundry in fact experienced disappointing sales in July 2000, such allegations, in light of the record third quarter revenues experienced by
Foundry as of the end of September 2000, are insufficient to demonstrate that the statements made by defendants were false or misleading when made* on October 17, 2000 and October 24, 2000. Plaintiffs offer no additional facts, but argue that the statements at the July conference demonstrate defendants knew at that time that demand for Foundry's products was weak and would continue to weaken. (See Opp. at 14.) The fact that Foundry executives remarked at a sales meeting in July 2000 that they anticipated "slowing sales trends and softening demand," however, fails to raise an inference that defendants' revenue and profit forecast statements, or statements respecting demand, were false or misleading when made several months later in October 2000. No facts are alleged indicating either the time period to which the statement "slowing sales trends and softening demand" refers, or the effect of any such "slowing" or "softening." Indeed, Foundry had been experiencing strong growth, in each quarter, from Foundry's first quarter 1998 and it continued to do so through the third quarter 2000. Plaintiffs' allegations as to the September 2000 memorandum do not assist in clarifying the above-noted ambiguities as plaintiffs' description of that memorandum is itself ambiguous, providing no facts as to the period, extent or effect of the slowing sales "discussed" therein. Without such additional facts, and in light of Foundry's record third quarter revenues in September 2000, plaintiffs' allegations remain insufficient to demonstrate either that the statements were false or to raise the requisite strong inference of scienter.
To the extent that plaintiffs' allegations as to contingency sales and early shipments draw into question the strength of Foundry's third quarter results, such allegations, as discussed infra, remain inadequate.
Foundry's quarter-over-quarter growth from first quarter 1998 through third quarter 2000 is evidenced in Foundry's Forms 10-K and 10-Q filed with the SEC. (See Reply at 10; Resley Decl. Exs. B-1, B-2, B-3.)
2. Contingency Sales
In its prior orders, the Court found insufficient plaintiffs' allegations as to contingency sales because plaintiffs had failed to allege: (1) any facts demonstrating that Foundry increased the number of contingency sales in response to decreasing demand, (2) the number of contingency sales actually made and the significance of these sales to Foundry's total business revenues, (3) facts indicating whether Foundry ever recognized any of these contingent sales as revenue, let alone in violation of generally accepted accounting principles ("GAAP"), and (4) whether any such contingency sales resulted in product returns caused by a customer's inability to pay. Plaintiffs were notified that, in order to satisfy the particularity requirement of the PSLRA, additional information was needed, such as the number of contingency sales actually made, to whom they were made, the risks associated with such sales and the significance of these sales to Foundry's total business revenues.
As plaintiffs' FAC adds no new facts respecting contingency sales, the above-referenced deficiencies remain. Indeed, plaintiffs now state, for purposes of the instant motion, they are not asserting the contingency sales violated GAAP. Although plaintiffs argue that Foundry approximately doubled its contingency sales "in reaction to the weakened demand for Foundry's products," (see Opp. at 16), plaintiffs fail to offer any facts to show such connection, nor do plaintiffs allege any facts to show whether, and to what extent, an increase in contingency sales would affect Foundry's reported fourth quarter revenues. Barring any such facts, plaintiffs' conclusory assertion that an increase in contingency sales resulted from weakened demand fails to provide any support for plaintiffs' allegation that the statements in question were false or misleading, or that defendants acted with the requisite degree of scienter. See Epstein v. Washington Energy Co., 83 F.3d 1136, 1139 (9th Cir. 1996) ("conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim.")
3. Early Shipments
In the TAC, plaintiffs alleged that Foundry CEO Johnson had "directed the sales and shipping departments to go ahead and ship product in September that customers had indicated should not to be shipped until the fourth quarter," and that these "unauthorized early shipments" resulted in Foundry's ability "to report record third quarter revenues." (See TAC ¶ 26(d)) In its February 14, 2003 order, the Court found these allegations were insufficient, as plaintiffs had failed to allege facts (1) reflecting the source of information as to the allegations; (2) indicating whether any such products were returned, to support the assertion that the shipments were "unauthorized" or sent without customer approval; (3) respecting the number of such early deliveries, the number of customers affected, or the identity of any such customers affected; (4) showing that demand actually had decreased or that Foundry had initiated the early shipments in order to conceal weakening demand for its products; (5) showing that any decrease in Foundry's internal forecast was in fact the result of the early shipments; (6) setting forth the amount of revenue that such early shipments involved represented; and (7) indicating whether Foundry violated GAAP by engaging in any such practice.
Plaintiffs FAC supplies additional facts as to (1) the source of plaintiffs' information as to the alleged early shipments and (2) the amount of revenue affected by such shipments. Plaintiffs now allege that a former Foundry finance employee, alleged in the TAC to have provided plaintiffs with this information, was told by a "sales order section manager" that "Johnson had directed" the early shipments. (See FAC ¶ 27(d).) The FAC also includes, for the first time, allegations that a Foundry sales manager was "told by sales representatives that . . . management was insisting that orders scheduled for shipment in the fourth quarter of 2000 be sent in September so that revenue could be recognized in the third quarter," and that sales representatives, "includ[ing] Craig Hedges, Martina Pavloff and Scott Banning" were "concerned and complained that the order pipeline had been depleted by Foundry's third quarter shipments." (See FAC ¶ 29.) In addition, plaintiffs allege, without identifying a source, that the early shipments served to shift approximately $5.2 million in revenues from the fourth quarter to the third quarter. (See FAC ¶ 27(d).)
Plaintiffs revised allegations respecting the alleged early shipments remain insufficient. As the court in Silicon Graphics noted, in order to satisfy the particularity requirement of the PSLRA, a "plaintiff must provide, in great detail, all the relevant facts forming the basis of her belief." Silicon Graphics, 183 F.3d at 985. Here, although the FAC alleges that two Foundry employees claim, based on conversations with sales personnel, that "Johnson" and "management" had directed the early shipments, the FAC fails to plead any facts demonstrating that the early shipments were initiated in order to offset weakening demand for Foundry's products, rather than for some other reason. Indeed, plaintiffs have removed from the FAC allegations made in the TAC that the early shipments were unauthorized or sent without customer approval. Whereas the TAC alleged that Foundry customers had indicated the products "should not be shipped," until the fourth quarter and that the early shipments were "unauthorized," the FAC states only that the customers had indicated the shipments "were not required "until the fourth quarter and includes no allegation that the shipments were "unauthorized." (See TAC ¶ 26(d), FAC ¶ 27(d).)
Moreover, plaintiffs fail to plead with the requisite particularity their new allegation regarding the amount of revenue implicated by the alleged early shipments. Plaintiffs fail to provide any facts about the source of such information, stating only, and generally, that "the early shipments depleted the order backlog for Foundry's product in the fourth quarter of 2000 by approximately $5.2 million." See FAC ¶ 27(d); ABC Arbitrage v. Tchuruk, 291 F.3d 336, 352 (5th Cir. 2001) (noting that an informant must be described "with sufficient; particularity to support the probability that the person in the position occupied by the source would possess the information alleged); In re Secure Computing Corp. Sec. Litig., 120 F. Supp.2d 810, 817 (N.D. Cal. 2000) ("[I]f Plaintiffs make an allegation that is based on a statement from a witness, they must reveal all facts about that witness that were material to the formation of their belief that the witness' statement is accurate.") This omission is particularly significant given plaintiffs' failure to allege any new facts to address other deficiencies noted in the Court's prior order as to the number of customers affected by the early shipments, the identity of any such customers, and whether any such products were in fact returned.
Lastly, even assuming, arquendo, that plaintiffs revised allegations as to early shipments have been pled with sufficient particularity, such allegations are insufficient to show defendants knew that fourth quarter revenues would be significantly depleted. The amount of revenue by which plaintiffs allege Foundry's order backlog was depleted, $5.2 million, is comparatively minor, representing only 4.6% of Foundry's reported third quarter revenues of $113 million, and only 4.1% of the $128 million forecasted for the fourth quarter. A transfer in such amount fails to adequately demonstrate falsity, as it does not show that Foundry would not be able to meet its revenue or profit forecasts or that Foundry was not seeing good customer demand. Moreover, plaintiffs allege no facts demonstrating that defendants failed to take these early shipments into account in issuing Foundry's public revenue and profit forecasts in October 2000. Finally, a transfer of such limited magnitude is insufficient to raise the requisite strong inference that the defendants acted with knowledge or with deliberate recklessness as to the falsity of the statements in question.
In that Foundry had already reported revenues of $272 million, for the first three quarters of 2000, a revenue forecast of $400 million for the year implies a forecast of $128 million in revenue for the fourth quarter. (See Opp. at 2.)
Indeed, plaintiffs themselves allege that Foundry had experienced a 30% decrease in revenues in July, (see FAC ¶ 25(b)), and Foundry nonetheless was able to recover and post record revenues of over $113 million in the third quarter, a figure well above Foundry's projections for that quarter, even if one discounts the $5.2 million.
As defendants note, any showing of scienter is additionally undermined by the fact that, despite plaintiffs' contention that the early shipments were motivated by defendants desire to bolster third quarter revenue and sell their shares of Foundry stock, Foundry's third quarter revenues of $113.2 million exceeded analysts' projections by approximately $13 million, a number far in excess of the $5.2 million allegedly transferred to the third quarter to bolster the third quarter numbers. (See FAC Exs. A, E, F, H.)
Accordingly, plaintiffs' allegations as to early shipments remain insufficient to demonstrate either that the statements were false when made or to raise the requisite strong inference of scienter.
4. Internal Reports
Plaintiffs' TAC alleged that defendants knew that fourth quarter demand had been reduced based on two types of internal reports: "a shipment report that showed actual shipments for the month-to-date" ("shipment report"), and "a forecast report that projected shipments for the remaining weeks and months of the current quarter and for the following quarter" ("forecast report"). (See TAC ¶ 26(a).) In its February 14, 2003 order, the Court found that plaintiffs' pleadings lacked sufficient detail to meet the requirements of the PSLRA. See Silicon Graphics, 183 F.3d at 985 (holding where plaintiff relies on internal reports, plaintiff must provide "adequate corroborating details," which include "at least some specifics from those reports as well as such facts as may indicate their reliability")-Specifically, the Court held that although plaintiffs had pled enough facts as to the reliability of the reports, plaintiffs had failed to plead an "adequate description" of the reports' content.See Silicon Graphics, 183 F.3d at 985 ("Nor does [plaintiff] include an adequate description of [the internal reports'] contents which we believe — if they did exist-would include countless specifics regarding ASIC chip shortages, volume shortages, negative financial projections, and so on."); see also Lipton v. Pathogenesis Corp., 284 F.3d 1027, 1036 (9th Cir. 2002) (holding allegations insufficient where plaintiffs failed to plead, inter alia, "in any detail, the contents of any such report or the purported data").
As described in greater detail infra, the "forecast report" is simply a report of existing orders scheduled for shipment during the current and following quarter.
Additionally, assuming, arquendo, the internal reports had been pled with the requisite particularity, the Court found the factual allegations as to the content of the shipment reports and forecast reports were insufficient to demonstrate falsity or scienter. Specifically, the Court found that plaintiffs had failed to plead facts showing what Foundry's internal fourth quarter forecast report had been prior to the alleged 25% decrease and, critically, that plaintiffs had failed to plead facts showing the relationship between the internal shipment/forecast reports and the public forecast, or how the information from the internal reports was utilized by Foundry in arriving at its public forecast. Rather, as the Court noted, plaintiffs' TAC merely assumed that there would be no changes in revenue stream within the quarter itself, and that the public forecast statement would be based solely on the shipments forecasted at the beginning of the quarter. Consequently, the Court found, without further information as to how the reports were utilized by Foundry, the allegations as to the internal reports were insufficient to raise a strong inference that defendants, in their public forecasts, intentionally or with deliberate recklessness made false or misleading statements to investors.
In the FAC, plaintiffs have revised their allegations as to the internal reports. As discussed below, however, those allegations, both as to the shipment reports and the forecast reports, remain inadequate.
a. Shipment Reports
Plaintiffs FAC adds several facts respecting the content of the shipment reports. In particular, plaintiffs now allege that their source, a former finance employee with Foundry, became aware, in October 2000, of a decrease in shipments because he could finish processing invoices by midday, whereas "in prior quarters it would take the entire day to process invoices." (See FAC ¶ 27(e).) The employee "compared shipping reports during October and November with shipments for the months in the prior quarter," which "comparison revealed that both invoices and total dollar volume shipped had decreased at least 20%." (See id.) The employee noted that "[i]n the previous quarter the shipment reports indicated that Foundry issued approximately 400 to 500 invoices a week, but beginning in October the invoices dropped to 320 to 400 invoices a week with a similar drop in revenue shipments," and the "proportion of large shipments (over $10,000) dropped from approximately 55% of the invoices in September to 40% in October." (See Id..)
The above allegations set forth, with adequate specificity, the content of the shipment reports in question. Nevertheless, the shipment reports fail to raise a strong inference that defendants intentionally or with deliberate recklessness made false or misleading statements to investors. Defendants' revenue forecast was made on October 17, 2000, and the statements that Foundry "plan[ned] to continually increase quarterly profits each and every quarter," was seeing "good overall demand," and that Foundry's "biggest challenge [was] to . . . continue to meet demand," were made on October 24, 2000. Consequently, defendants had, at best, two weeks of October shipment reports available to them before issuing their public forecast and an additional week before making their statements respecting demand and quarterly profits. As set forth in greater detail below, in light of the fact that plaintiffs fail to include allegations as to the manner in which Foundry's public forecast was derived, the fact that internal shipment reports showed that shipments per week for the first few weeks of October were lower than "shipments for the months in the prior quarter," (see FAC ¶ 27(e)), is insufficient to show that either the revenue or profit forecasts were false or misleading when made. (See FAC ¶ 27(e).) Nor would any such decrease, without more, suffice to show the statements that Foundry was experiencing "good overall demand" and that its "biggest challenge [was] to . . . continue to meet demand" were false or misleading when made. Defendants fail to plead with particularity any facts establishing that a decrease in shipments for two to three weeks indicated that Foundry was not experiencing "good overall demand" or that "continu[ing] to meet demand" was not Foundry's biggest challenge, let alone facts sufficient to raise a strong inference that defendants either knew these statements were false or misleading, or made the statements with deliberate recklessness as to their falsity.
As plaintiffs note in their opposition, revenues and profits are closely connected. (See Opp. at 19.)
b. Forecast Reports
Plaintiffs make only one change in their allegations as to the content of the forecast reports. Plaintiffs' TAC had alleged: "When the forecast shipments report was printed at the end of September and again during October, Foundry's revenue forecast for the fourth quarter had fallen approximately 25% below the prior September forecast." (See TAC ¶ 26(d).) Plaintiffs FAC amends this sentence to read as follows: "When the forecast shipments report was printed at the end of September and again during October,
Foundry's revenue forecast for October had fallen approximately 25% below the prior
September forecasts and the forecast for November was approximately 5% less than the October forecast." (See FAC ¶ 27(d).) As with the TAC, plaintiffs' FAC fails to adequately allege the content of the forecast reports. Accordingly, this allegation is not pled with the particularity required by the PSLRA.
Moreover, even assuming that the forecast reports are pled with sufficient particularity, plaintiffs again have failed to allege any facts showing that a decrease reflected in Foundry's internal forecast reports demonstrates that defendants knew that the statements respecting revenue, profit and demand were false when made or that defendants were deliberately reckless in making such statements. As the Court in its prior order surmised from the allegations in the TAC, and is now made clear in the FAC, (see FAC ¶ 27(a)), the internal forecast reports were generated mechanically by a software program, reflecting only a "snapshot/as of the date of the report, of existing orders scheduled to be shipped during that quarter and the following quarter. (See Feb. 14, 2003 Order at 15:20.) In its prior order, the Court found this snapshot, without more, insufficient to demonstrate falsity or scienter. The FAC fails to provide any new factual allegations to cure this deficiency. First, plaintiffs again fail to allege the amount of forecasted revenue reflected in Foundry's earlier internal forecast report, i.e., the report prepared prior to the alleged 25% decrease. Second, plaintiffs again fail to allege facts regarding the relationship between any internal forecast report and the public forecast, specifically, how the information contained in an internal forecast report was utilized by Foundry in determining its public forecast. See In re Harmonic, 163 F. Supp.2d 1079, 1094 (N.D.Cal. 2001) (noting plaintiffs "do not indicate how such information was utilized at [defendant corporation], or by whom.") Rather, plaintiffs assume, as in the TAC, that the public forecast was based solely on orders placed at the beginning of the quarter, without taking into account changes in revenue stream within the quarter itself or any other factors Foundry may have considered in determining its public forecast. For the reasons set forth in the Court's prior order, plaintiffs' allegations, without such additional facts, remain insufficient to raise a strong inference that defendants intentionally or with deliberate recklessness made false or misleading statements in their public forecasts, as there is no sufficient showing that Foundry could not have met its revenue and profit projections.
Accordingly, the allegations as to internal reports fail to demonstrate that the statements in question were false or misleading when made, or to raise the requisite strong inference of scienter.
5. Statements by Networking Executive
In its June 6, 2002 order, the Court held that statements made by an unidentified competitor regarding demand for the competitor's services were insufficient to demonstrate the level of demand for Foundry products, as there was no showing that Foundry was in the same economic position as the unidentified entity. As plaintiffs have not amended or offered any new facts respecting this allegation, it remains inadequate.
6. Requests from Sales Personnel
Plaintiffs TAC alleged that "during September 2000, Foundry's sales personnel had indicated, based on the current sales forecast, that they did not believe that they would be able to meet their sales quotas in the fourth quarter," and thereafter "asked to have their quotas reduced, but were refused." (See TAC ¶ 26(d)). In its February 14, 2003 order, the Court found this allegation insufficient because the identification of the "sales personnel" was too general and there were no allegations with respect to whom they made their request, the manner in which they received the information giving rise to their alleged concerns, or the extent to which they sought to have their quotas reduced. (See February 14, 2003 Order at 13-14.)
The FAC adds several facts to bolster this allegation. To information supplied by a former Foundry finance employee, the FAC adds the following:
At the beginning of October, the witness learned about arguments between the sales force and management. Sales representatives were looking at falling to 30% short, or more, for the quarter and complained that the quotas were completely unrealistic based on the depleted pipeline. The witness recalls conversations with Kathy Henley and Ben Taft, that sales representatives wanted their quotas reduced to be commensurate with Foundry's drop in business.
(See FAC ¶ 27(d).) Additionally, the FAC contains allegations that a Foundry sales manager, not referenced in the TAC, states that (1) sales representatives, "includ[ing] Craig Hedges, Martina Pavloff and Scott Banning," were "concerned and complained that the order pipeline had been depleted by Foundry's third quarter shipments," (2) "fourth quarter sales were `dead' from the beginning of the quarter due to the fact that Foundry had drained the channel with the early shipments," and (3) "[t]he sales representatives warned management that their sales quotas were unrealistic due to the depleted pipeline for orders." (See FAC ¶ 29.)
Plaintiffs revised allegations remain insufficient for several reasons. First, the information from the finance employee remains vague and uncertain. No mention is made of who Kathy Henley and Ben Taft are, or what the source of their information is respecting sales representatives allegedly "want[ing] their quotas reduced to be commensurate with Foundry's drop in business." Moreover, plaintiffs fail to specify the source of the finance employee's information that "[s]ales representatives were looking at falling 25 to 30% short, or more, for the quarter and complained that the quotas were completely unrealistic based on the depleted pipeline." Finally, the statement that this employee "learned about" arguments between the sales force and management raises more questions than it answers. The source of the employee's knowledge is not stated, let alone who in "management" engaged in any such arguments. Accordingly, these allegations are not made with the requisite particularity, and do not cure the deficiencies noted in the Court's prior order.
Nor are the statements by the Foundry sales manager pled with the requisite particularity. Although three sales representatives are identified, Craig Hedges, Martina Pavloff and Scott Banning, the information that these individuals "were concerned and complained that the order pipeline had been depleted by Foundry's third quarter shipments" is too vague to demonstrate the falsity of any statement at issue herein. Equally vague is the statement by this individual that "fourth quarter sales were `dead' from the beginning of the quarter due to the fact that Foundry had drained the channel with the early shipments." It is unclear what is meant by the phrase "fourth quarter sales were dead "as a result of early shipments, given that the early shipments are alleged to have involved only $5.2 million in revenue. Lastly, the statement that "[t]he sales representative: warned management that their sales quotas were unrealistic due to the depleted pipeline for orders" fails to demonstrate knowledge or deliberate recklessness as to falsity. Not only is the FAC vague as to whether "the sales representatives" refers to the three named representatives or to other, unnamed representatives, but, as with the information provided by the finance employee discussed above, it is unclear who in Foundry `management" was so warned, and under what circumstances.
Plaintiffs rely on two cases from this district in which the district court held that "warnings" by sales personnel as to projected revenue supported a finding of scienter. See In re PeopleSoft. Inc., 2000 WL 1737936 (N.D. Cal.); In re HI/FN. Inc. Securities Litigation, 2000 WL 33775286 (N.D. Cal.) Plaintiffs reliance is misplaced. In HI/FN, the court was presented with particularized allegations demonstrating that sale personnel had confronted executives within top management with regard to revenue forecasts. The plaintiffs provided detailed allegations as to a quarterly sales meeting attended by the company's sales staff and its Chief Executive Officer, wherein the sales staff presented a revenue forecast of $43 million for the upcoming fiscal year, and the Company's Chief Executive Officer "angrily wrote over this forecast, replacing it with a $65 million projection." See HI/FN, 2000 WL 33775286 at *2. Further, plaintiffs therein described additional, specific meetings between the sales staff and the defendants, providing specific allegations as to the dates and locations of the meetings, the particular defendants in attendance, and the information conveyed therein. See HI/FN, 2000 WL 33775286 at *8. Arguably, the allegations regarding the confrontations in PeopleSoft are less particularized. There, the plaintiffs had alleged that "field representatives were telling management in loud and highly confrontational terms that quotas and budgets could not be met, so contentiously that management fired the naysayers." See PeopleSoft, 2000 WL 1737936 at *3. InPeopleSoft, as in HI/FN, however, the plaintiffs had demonstrated the falsity of the revenue and earnings forecast statements there at issue by including specific allegations regarding significant problems with particular, and important, customers and accounts. See HI/FN, 2000 WL 33775286 at *8-9; PeopleSoft, 2000 WL 1737936 at *2.
Here, plaintiffs have provided only generalized allegations of employee comments and complaints about quotas, without specifying the particular occasions on which such comments and/or complaints were made or to which, if any, of the defendants herein such remarks were conveyed. In addition, unlike inHI/FN and PeopleSoft, plaintiffs rely on more general allegations concerning the demand for Foundry's products, without including the type of specific, concrete allegations as to problems with customers or accounts sufficient to establish the falsity of the statements in question herein, let alone raise a strong inference of scienter.
Accordingly, plaintiffs' allegations regarding requests from sales personnel fail to demonstrate that the statements in question were false or misleading when made, or to raise the requisite strong inference of scienter.
7. Proximity
Plaintiffs argue that the temporal proximity of the alleged misrepresentations in October 2000 and the disclosure of Foundry's second quarter results on December 19, 2000, in plaintiffs' words, the "revelation of the bad news," is evidence of scienter. (See Opp. at 19-20.) Assuming events separated by an interval of nearly two months can be characterized as "proximate," such proximity may only serve to "bolster" a complaint; proximity alone is not sufficient to satisfy the requirements of the PSLRA. See Ronconi v. Larkin, 253 F.3d 423, 437 (9th Cir. 2001).
8. Scienter: Stock Sales
In its prior orders, the Court held that plaintiffs' allegations regarding defendants' stock sales were insufficient to raise an inference of scienter As plaintiffs plead no new facts respecting such sales, the allegations remain inadequate in that regard.
9. Scienter: Totality of Plaintiffs Allegations
As discussed above, plaintiffs' allegations are insufficient to establish that defendants made false or misleading statements with the requisite state of mind. When considered together in their entirety, defendants' allegations remain insufficient. Plaintiffs have failed to plead facts sufficient to raise a strong inference that defendants made false or misleading statements with the requisite scienter. At most, the allegations may give rise to a "reasonable inference" that defendants knew the statements in question were false when made. "The existence of a `reasonable inference,' however, does not satisfy the PSLRA's requirement that plaintiffs allege particular facts that give rise to a `strong inference' of scienter on the part of [d]efendants." See In re Read-Rite Corp. Sec. Litig., 335 F.3d 843, 848-49 (9th Cir. 2003.)
In light of the Court's holding that plaintiffs have failed to adequately allege falsity and scienter, the Court need not reach defendants' argument that the forward-looking statements on which plaintiffs rely are not actionable under the PSLRA's "Safe Harbor" provisions.
Accordingly, plaintiffs have failed to state a claim based on statements made in the October 17, 2000 conference call or October 24, 2000 interview in The Wall Street Transcript, or upon any of the other statements on which plaintiffs relied prior to the filing of the FAC.
B. Section 10(b) Claim: December 2000 Statement
Plaintiffs' FAC includes a new allegation of a false statement, specifically, that Foundry Treasurer Mike Iburg (" Iburg") and Foundry Director of Product Marketing Marshal Eisenberg ("Eisenberg "),20 made a false statement to an analyst at a Lehman Brothers conference held between December 6, 2000 and December 8, 2000, which statement was published in a December 8, 2000 Lehman Brothers' report titled "Internet Infrastructure Industry Update" ("Update"). (See McDonald Decl. Ex. A.)21 The Update contains the following paragraph:
During the Lehman Brothers 2nd Annual T3 Conference in Orlando, Florida, we hosted a dinner with Marshall Eisenberg, Director of Product Marketing, and Michael Iburg, Treasurer, of Foundry Networks: With management reiterating that business remains on tract [sic], we continue to believe that fundamentals remain solid for Foundry and believe the company remains well placed to meet or potentially exceed our high-end fourth, quarter revenue target of 130.2 million (+15% QoQ).
(See McDonald Decl. Ex. A.)
Defendants raise four arguments as to why the amendment is unavailing: (1) plaintiffs cannot impute the analyst's forecast as to fourth quarter revenue to defendants; (2) the statement "business remains on track" is not actionable as a matter of law; (3) even if the statement were actionable, plaintiffs fail to allege facts sufficient to establish either falsity or scienter; and (4) plaintiffs fail to connect the alleged statement with any of the defendants. (See Opp. to Mot. to Suppl. Compl. at 2.)
Defendants argue that the only portion of the Update that can be attributed to Iburg and Eisenberg is the statement prefaced by "management reiterat[es]," specifically, that "business remains on tract [sic]," and that the additional statement, "we continue to believe that fundamentals remain solid for Foundry and believe the company remains well placed to meet or potentially exceed our high-end fourth quarter revenue target of $130.2 million," is no more than the opinion of the analyst, for which defendants cannot be held liable. (See Opp. to Mot. to Suppl. Compl. at 2.) Plaintiffs do not argue that defendants are liable for the analyst's prediction as to Foundry's fourth quarter revenues, but only for the statement that "business remains on track."22
Defendants next argue that "[a] statement that a company's business or product is "on track" is general optimism and is immaterial*as a matter of law." ( See Opp. to Mot. to Suppl. Compl. at 2.) As noted, a claim under § 10(b) requires a false or misleading statement or omission of material fact. See Paracor Fin., 96 F.3d at 1157. "No matter how untrue a statement may be, it is not actionable if it is not the type of statement that would significantly alter the total mix of information available to investors." See In re Apple Computer, Inc. Sec. Litig., 243 F. Supp.2d 1012, 1025, (N.D.Cal. 2002): see also Basic v. Levinson, 485 U.S. 224, 231-32 (1988) (holding with respect to omissions, to fulfill the materiality requirement under § 10(b), "there must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the `total mix' of information made available") (internal quotation and citation omitted).
Numerous cases have held that "[g]eneral statements of optimism and `puffing' about a company or product are not actionable." See Id.; see also Parnes v. Gateway 2000, Inc., 122 F.3d 539, 547 (8th Cir. 1997) ("[S]oft, puffing statements generally lack materiality because the market price of a share is not inflated by vague statements I predicting growth. No reasonable investor would rely on these statements, and they are certainly not specific enough to perpetrate a fraud on the market.") (internal quotation omitted); Howard Gunty Profit Sharing v. Quantum Corp., 1997 WL 514993 at *4 ("Vague, amorphous statements, like `soft forecasts' which are `mere puffery,' are inactionable because reasonable investors do not consider "soft" statements or loose predictions important in making investment decisions.") (quotingRaab v. General Physics Corporation, 4 F.3d 286, 289-90 (4th Cir. 1993).
Here, defendants cite to several cases in which the court held statements that a company was "on track" were not actionable. InHillson Partners Limited Partnership, 42 F.3d 204 (4th Cir. 1994), the Fourth Circuit found statements that the defendant company was "on track to exceed 1990, [its] record year for net income" and "on track toward reaching [the] previously forecast goal of record full-year profits," were not actionable because the statements were not, inter alia, "specific dollar predictions."See id. at 215-16. In Allison v. Brooktree Corporation, 999 F. Supp. 1342 (N.D.Cal. 1998), the court found the statements "I think we're on track," and "the BtV chipset was on track to ship in July/August," to be inactionable, "vague statements of optimism."See Id. at 1348. And in Copperstone v. TCSI Corporation, 1999 WL 33295869, the court held that the statement "business was on track," was not actionable, because "reasonable investors do not consider `soft' statements or loose predications important in making investment decisions." See id. at *8 n. 5. Here, the "on track" statement is even less specific than the statements in Hillson Partners andAllison, and, as the court observed in Copperstone in evaluating an almost identical statement, is the type of statement "reasonable investors do not consider." See id. at *8 n. 5.
Plaintiffs cite to no case, and the Court is aware of none, wherein it has been held that a general statement such as "business remains on track" is sufficient to support a § 10(b) claim. Indeed, plaintiffs fail to address defendants' argument as to actionability in any respect. Rather, plaintiffs seek to read into the statement the additional words "to report increasing revenues of $128 million for the fourth quarter." (See Mot. to Supp. Compl. at 5:15-16.)
The fact that defendants had earlier made more specific statements as to revenue projections, however, is not, without more, sufficient to alter the character of the later-made statement. If such were the case, the vast majority of otherwise "soft" statements concerning a company's outlook would become actionable, as long as a defendant had earlier made a more specific statement. As a consequence, to recognize such an exception would essentially eviscerate the rule precluding reliance on general statements of optimism. Moreover, the statement at issue herein, "business remains on track," was made almost two months after the public forecasts and includes no cross-reference, even a general one, to any prior statement or report.23 Even the context in which it was made by Iburg and/or Eisenberg is unknown, as the update does not purport to attribute any other statements to them. In sum, the statement is too general, too vague, and too "soft" to be considered material.
Accordingly, the statement that business "remains on track" is not sufficient to support a claim under § 10(b).24
C. Section 20(a)
To plead a prima facie case under § 20(a) of the Exchange Act, 15 U.S.C. § 78t(a), plaintiffs must plead: "(1) a primary violation of federal securities laws; and (2) that the defendant exercised actual power or control over the primary violator." Howard v. Everex Systems, Inc., 228 F.3d 1057, 1065 (9th Cir. 2000). There can be no liability under § 20(a) if a primary violation of § 10(b) is not sufficiently pled. See Heliotrope General Inc. v. Ford Motor Co., 189 F.3d 971, 978 (9th Cir. 1999); Klein v. General Nutrition Companies, Inc., 186 F.3d 338, 344 (3rd Cir. 1999). As plaintiffs have failed to adequately plead a § 10(b) claim, plaintiffs' § 20(a) claim must be dismissed as well.
D. Insider Trading
Plaintiffs' FAC alleges, for the first time, a claim for insider trading in violation of § 20A of the Exchange Act against defendants Chen, Cheng, Ferguson, Johnson and Shackleton. (See FAC ¶ 29.)
Under § 20A of the Exchange Act, "[a]ny person who violates any provision of this chapter or the rules or regulations thereunder by purchasing or selling a security while in possession of material, nonpublic information shall be liable . . . to any person who, contemporaneously with the purchase or sale of securities that is the subject of such violation, has purchased . . . or sold . . . securities of the same class." See 15 U.S.C. § 78t-1.
In order to assert a claim for insider trading in violation of § 20A, a plaintiff must show a predicate violation of the securities laws.See In re VeriFone Sec. Litiq., 11 F.3d 865, 872 (9th Cir. 1993) (dismissing claim under § 20A where plaintiffs failed to allege "actionable independent underlying violation of the [Securities Exchange Act of 1934]"). In light of the Court's holding that plaintiffs have failed to plead a viable claim for securities fraud under § 10(b) of the Exchange Act and Rule 10b-5 of the SEC, plaintiffs' claim for insider trading in violation of § 20A of the Exchange Act likewise fails.
CONCLUSION
For the reasons stated above:1. Defendants' motion to dismiss is hereby GRANTED.
2. Plaintiffs have now had five opportunities to state a claim consistent with the requirements of the PSLRA, and there is no indication that plaintiffs would be able to amend to cure the deficiencies remaining. Accordingly, plaintiffs Fifth Amended Complaint is hereby DISMISSED.
This order closes Docket No. 123.
The Clerk shall close the file.
IT IS SO ORDERED
JUDGMENT IN A CIVIL CASE
Jury Verdict. This action came before the Court for a trial by jury. The issues have been tried and the jury has rendered its verdict.Decision by Court. This action came to trial or hearing before the Court. The issues have been — tried or heard and a decision has been rendered.
IT IS ORDERED AND ADJUDGED
1. Defendants' motion to dismiss is hereby GRANTED.
2. Plaintiffs have now had five opportunities to state a claim consistent with the requirements of the PSLRA, and there is no indication that plaintiffs would be able to amend to cure the deficiencies remaining. Accordingly, plaintiff's Fifth Amended Complaint is hereby DISMISSED.