Opinion
CASE NO. 98-7334-DIMITROULEAS
March 20, 2001
FINAL ORDER OF DISMISSAL
THIS CAUSE is before the Court on Plaintiffs' Motion for Reconsideration [DE 76], Defendants Technical Chemicals Products, Inc. ("TCPI") and Jack L. Aronowitz's ("Aronowitz") Motion to Dismiss Second Amended Class Action Complaint [DE 81], Defendants' Motion for Leave to File in excess of page limit [DE 82] and Plaintiffs' Motion for Leave to File in excess of page limit [DE 84]. The Court has carefully considered the motions, and is otherwise fully advised in the premises.
I. PROCEDURAL BACKGROUND
Plaintiffs commenced this suit on behalf of themselves and all others similarly situated by filing an Amended Consolidated Class Action Complaint [DE 29] seeking damages for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Securities and Exchange Commission Rule 10b-5. Plaintiffs' complaint alleged that TCPI embarked on a scheme to trick investors, analysts, and potential marketing partners and distributors into believing that TCPI was on the verge of introducing to the market a revolutionary blood glucose monitoring system for diabetics, when in fact TCPI knew that it did not even have a plan for FDA submission, and knew that such a system was years away from marketability. Plaintiffs contend that these misrepresentations and omissions artificially inflated the market price of TCPI's common stock during the proposed class period. Plaintiffs further allege that, in ignorance of this artificial inflation, and in reliance on Defendants' false and misleading statements, they acquired TCPI common stock during the class period and, as a result, suffered losses. Defendants filed a motion to dismiss, which was granted by this Court with leave to amend.
While the Court agrees with Defendants that the proposed three-year class period is extraordinarily long for a suit of this nature, it does not reach Defendants' statute of limitations argument.
Plaintiffs have moved to reconsider the Court's Order dismissing the Amended Complaint, and also filed their Second Amended Consolidated Class Action Complaint (hereinafter "Amended Complaint") [DE 77]. Defendants then filed the instant motion, contending that Plaintiffs' amended complaint should also be dismissed for the same reasons 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"). 15 U.S.C. § 78u-4 et seq. Specifically, Defendants argue that Plaintiffs have (1) failed to plead fraud with particularity; (2) failed to adequately plead scienter; and (3) failed to defeat Defendants' argument that the challenged statements are protected by the PSLRA's safe harbor for forward-looking statements. Defendants also assert that, as Plaintiffs have failed to state a claim under Rule 10b-5, the Court must also dismiss Plaintiffs' § 20(a) claim.
II. FACTUAL BACKGROUND
On a motion to dismiss, the Court accepts the well-pleaded facts in the complaint as true. TCPI researches, develops, markets, and manufactures medical diagnostic and drug-delivery devices. During the relevant time period, Aronowitz was TCPI's chairman, president, and chief executive officer. The organization's principal focus since 1995 has been its non-invasive, transdermal glucose patch system ("the TD Glucose System" or "the System"). The TD Glucose System includes two components: disposable transdermal patches and a monitoring reflectance meter. TCPI designed the TD Glucose System to consist of a small disposable patch which is placed upon a clean area of skin for approximately five minutes, where it absorbs interstitial fluids, which are then monitored by the reflectance meter to measure glucose levels. In order for the TD Glucose System to work successfully, the glucose levels from the interstitial fluid measured by the reflectance meter must consistently correlate to actual blood glucose levels. The development of such a device would be a boon to the many diabetics who must accurately monitor their blood glucose levels on at least a daily basis, presently by sticking their finger with a metal pin-like stick to draw blood that is then measured for glucose. To date, no device is available to relieve diabetic patients of the discomfort of the "finger-stick method" of glucose monitoring. A successful device would capture potentially billions of dollars for the developer and manufacturer.
Aronowitz is sued both individually and in his capacity as a controlling person of TCPI.
Plaintiffs allege that throughout the class period TCPI and Aronowitz knowingly and/or recklessly made a series of false and misleading statements regarding the progress of TCPI's development of the TD Glucose System. Those statements appeared in public filings with the SEC, in numerous TCPI press releases, and were disseminated by defendants to the public through press reports and securities analysts' reports. The result was that TCPI's stock price allegedly traded at artificially inflated prices.
Defendants' alleged fraud consisted of touting the TD Glucose System's effectiveness and reliability, describing the System as on the verge of being perfected by TCPI, approved by the FDA, and ready for commercial distribution within six to twelve months. Plaintiffs allege that the facts in Defendants' possession indicated that the technology and test results did not support the Company's and Aronowitz's consistently positive and optimistic statements about the stage of the System's development; the timing of submission of the System to the FDA for approval; or the imminence of the ID Glucose System's generating sales and revenue for TCPI.
Plaintiffs allege that Defendants perpetrated the fraud for the purpose of artificially inflating the price of TCPI stock. The benefits to Defendants of the resulting increase in price included available funding for TCPI's continued operations and Aronowitz's own compensation; and Aronowitz' receipt of proceeds from a stock offering at the inflated price and by increasing the value of his personal holdings of TCPI common stock. As a result of the fraudulent statements, TCPI's stock reached a high selling price of $22.375 per share during the class period, and was selling at $3.75 per share by the end of the class period, when Forbes magazine published an article in which a Dr. Robert Goldstein, who was in no way connected with TCPI, warned that devices like the one TCPI supposedly was on the verge of marketing are five to ten years away from actual marketing viability. According to Plaintiffs, the Forbes magazine article marks the end of the class period by having exposed the false and misleading character of Defendants' prior representations.
After the end of the class period and the filing of this action, in a February 14, 1999, newspaper article, Aronowitz stated: "[T]he [TD Glucose System] is a couple of years from the market with or without FDA approval." Plaintiffs contend that this "admission" demonstrates the falsity of Aronowitz' repeated earlier representations that the final development. FDA approval, and marketing of the System were imminent.
The other specific statements alleged by Plaintiffs to be misleading and material include: statements in the April 12, 1996 TCPI 10-Q SEC report that the patch was in early stage trials with results that correlate favorably to finger stick devices; an article from November 5, 1997 in which Aronowitz is quoted as stating "we are demonstrating a finished working system" (Amended Complaint ¶¶ 57-58); and a TCPI press release from June 4, 1997 in which the company states it is "on target" for clinical trials. See pages 11-12 of Plaintiffs' Opposition to Defendants' Motion to Dismiss Second Amended Complaint [DE 85].
All references to "¶" numbers refer to the Second Amended Complaint.
III. DISCUSSION
A. Rule 9(b) 12(b)(6)
A motion to dismiss for failure to state a claim merely tests the sufficiency of the complaint; it does not decide the merits of the case. See Milburn v. United States, 734 F.2d 762. 765 (11th Cir. 1984). The Court must construe the complaint in the light most favorable to the plaintiff and accept the factual allegations as true. See SEC v. ESM Group, Inc., 835 F.2d 270, 272 (11th Cir.), cert. denied sub nom, Peat Marwick Main Co. v. Tew, 486 U.S. 1055 (1988). A court should not grant a motion to dismiss "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief" Conley v. Gibson, 355 U.S. 41, 45-6 (1957) (citations omitted). Nonetheless, to withstand a motion to dismiss, the complaint must allege facts sufficiently setting forth the essential elements of a cause of action. Moreover, in all averments of fraud there is a heightened pleading standard and a plaintiff must state with particularity the circumstances constituting fraud. See Fed.R.Civ.P. 9(b). Even more strict than Rule 9(b) are the pleading requirements of the PSLRA. 15 U.S.C. § 78u-4. et seq.
Consideration of matters beyond the complaint is generally improper in the context of a motion to dismiss. See Milbum, 734 F.2d at 765. However, "a court, when considering a motion to dismiss in a securities fraud case, may take judicial notice . . . of relevant public documents required to be filed with the SEC, and actually filed." Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1278 (11th Cir. 1999).
B. Section 10(b). SEC Rule 10b-5, and the PSLRA
Section 10(b) of the Securities Exchange Act of 1934 makes it unlawful for any person "[t]o use or employ, in connection with the sale of any security . . . any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [SEC] may prescribe." 15 U.S.C. § 78j(b). One such rule is Rule 10b-5, which makes it unlawful "[t]o 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." 17 C.F.R. § 240.10b-5.
To allege securities fraud under Rule 10b-5, a plaintiff must show: (1) a misstatement or omission, (2) of material fact, (3) made with scienter, (4) on which the plaintiff relied, (5) that proximately caused the plaintiffs injury. Bryant, 187 F.3d at 1281. The PSLRA further requires that "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." 15 U.S.C. § 78u-4(b). The PSLRA also requires that "the complaint shall . . . state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind." Id. If a plaintiff fails to meet the aforementioned pleading requirements, the Court must dismiss the complaint on the motion of any party. Id.
1. Particularity and Scienter
Plaintiffs' complaint fails to plead with sufficient particularity the facts upon which Plaintiffs base their belief that Defendants made actionably false and misleading statements or omissions. In order to plead facts with particularity, "a plaintiff must provide a list of all relevant circumstances in great detail:" In re Silicon Graphics Inc. Sec. Lit., 183 F.3d 970, 984 (9th Cir. 1999); see also Greebel v. FTP Software, Inc., 194 F.3d 185, 197 (1st Cir. 1999); Malim v. Ivax Corp., 17 F. Supp.2d 1345, 1360 (S.D. Fla. 1998).Even if Plaintiffs' complaint contained adequate particularity and corroborating details to satisfy the PSLRA's requirements for pleading false or misleading statements, Plaintiffs have failed to allege scienter with sufficient particularity. Plaintiffs must plead with particularity "that a defendant acted with a severely reckless state of mind . . . to state a claim for civil liability under § 10(b) and Rule 10b-5." Bryant, 187 F.3d at 1282-83. Allegations that the defendant had the motive and opportunity to commit fraud are not, standing alone, sufficient to establish severe recklessness. Id. at 1285-86.
"`Severe recklessness is limited to those highly unreasonable omissions or misrepresentations that involve not merely simple or even inexcusable negligence, but an extreme departure from the standards of ordinary care, and that present a danger of misleading buyers or sellers which is either known to the defendant or is so obvious that the defendant must have been aware of it.'" Bryant, 187 F.3d at 1282 n. 18 (quoting McDonald v. Alan Bush Brokerage Co., 863 F.2d 809, 814 (11th Cir. 1989)).
Plaintiffs in the instant case rely on unnamed scientists' allegations; (2) internal reports and test results; and (3) certain statements by Defendants that contradicted earlier statements. Plaintiffs' Complaint focuses on the representations regarding TCPI's progress and development of the TD Glucose System, and the company's projections for FDA approval and commercial distribution of the System. For example, in paragraph 28, Plaintiffs allege that,
[o]n April 12, 1996, . . . TCPI issued a release stating that the Company expected to begin full clinical trials during the second half of 1996, subject to completion of production quality Glucose Patches. With regard to FDA approval, the Company reiterated that the Glucose Patch should be eligible for expedited 510(k) approval, but added there could be no assurance that the FDA would consider the Glucose Patch for expedited approval.
Plaintiffs further allege that TCPI was "unable to complete a functioning test," and that
TCPI's statements about the stage of its development of the Glucose Patch were false and misleading. As defendants knew but failed to disclose when their statements were made: (1) there had never been any organized clinical trials of the Glucose Patch; (2) the experimental work on developing the two components of a successful Glucose Patch — a process to get glucose to migrate through the skin and a system to accurately derive blood glucose levels from glucose levels in the fluid transferred to the Patch through the skin — was in a very early stage; (3) TCPI scientists told Aronowitz that while the process theoretically might work, its development would take substantially more than a year, might very well take a great deal longer, and could very well be ultimately unsuccessful; (4) there was no organized plan in place to submit the Glucose Patch to the FDA for approval, nor could there be until the completion of extensive additional experimental work, followed by clinical tests; and (5) the funding for critical experimental work was not being made by the Company. For example, the department responsible for developing a glucose transfer system had their budget cut in 1996 to approximately $25,000 per month after fixed expenses — an amount Aronowitz knew was woefully insufficient for the tasks assigned.
¶ 29.
Plaintiffs' allegations regarding lack of clinical trials and that development of the two components of a successful system was in "a very early stage" are conclusory, and Plaintiffs offer no support for why full clinical trials could not begin in approximately six months, even if it was true that those components were in an early stage of development. While it is clear today, that these statements were wrong, and that development of a final product was far off, Plaintiffs have not plead the particularity required to allege why these statements were misleading and showed scienter at the time they were made.
Plaintiffs' remaining allegations are likewise unaccompanied by the particularity required by the PSLRA. Plaintiffs allege that, although Defendants represented that substantial sums would be spent on research and development of the TD Glucose System, funding for the System was actually cut. The only specific fact Plaintiffs state is that "the department responsible for developing a glucose transfer system had their budget cut in 1996 to approximately $25,000 per month after fixed expenses; an amount Aronowitz knew was woefully insufficient . . ." (¶ 29). This fact, however, leaves several unanswered questions: By what amount was the budget cut? Why was the new amount "woefully insufficient"? How did funding during the remainder of the proposed class period compare to 1996?
Even assuming that Plaintiffs cross the PSLRA's particularity threshold, all of TCPI's statements about anticipated funding are unquestionably forward-looking statements. Plaintiffs have failed to allege with particularity that the statements were made with actual knowledge of their falsity. See 15 U.S.C. § 78u-5(c)(1)(B)(i).
To support their claims, Plaintiffs rely heavily upon allegations concerning certain unnamed scientists who possessed—and allegedly shared with Defendants—information exposing the lack of any reasonable basis for TCPI's projections about development and distribution of the TO Glucose System. According to the complaint:
TCPI's own scientists warned Aronowitz that completion of the product could take years, and could ultimately prove unsuccessful. Key glucose measurement correlations for the interstitial body fluids removed by the Glucose Patch still need to be developed. At least three TCPI scientists also informed management that it was impossible to predict a time for submission of the product for FDA approval, and that numerous and significant scientific developments would have to be made before such a determination could be made. Despite the repeated warnings from three knowledgeable scientists who were directly involved in the development of the Patch, Aronowitz and the Company continued to tout the pending completion of the product while knowing that finalization of the Glucose Patch was years away at best.
(Complaint ¶ 24). Although this paragraph contains a bit more detail than paragraph 27 of the previously dismissed complaint, Plaintiffs still fail to adequately explain the information in the scientists' possession, why it was reliable, or any other relevant details. What "significant scientific developments" would have to be made? More important. what specific facts support the allegation that the Company's development projections were unsupported by facts in TCPI's possession at the time the company made the projections?
In addition, in paragraphs 36 and 37, Plaintiffs continue to argue that Defendants knew due to communication with "TCPI scientists" that the Glucose Patch could not reliably measure blood sugar levels, that development would take years, and that the problems with calibration to individual patients would take years before TCPI could even begin FDA trials. Again, these allegations fail to plead with sufficient particularity the facts upon which Plaintiffs base their belief that Defendants made actionably false and misleading statements or omissions. The Court would expect a complaint based in large part on the information these scientists possessed —information that made Defendants' public statements fraudulent— to contain at least some specifics as well as facts indicating their reliability. In addition, as to Plaintiffs' argument that they need not identify their sources, this Court is mindful of the Second Circuit's conclusions as to anonymity of sources, but this Court, as it has before, follows the other courts that have not sustained complaints under the PSLRA based upon anonymous sources.
While the Court notes that Plaintiffs have provided the names with regard to the allegation previously in paragraph 40, and now in paragraph 38 of the Second Amended Complaint, that a scientist went to the brokerage company handling TCPI's stock offering with his concerns about the viability of the patch, this information explains the "who," but not the specifics as to "why" the Defendants' statements were fraudulent.
Compare Novak v. Kasaks, 216 F.3d 300 (2nd Cir. 2000) with Romani v. Shearson Lehman Hutton, 929 F.2d 875, 878 (11th Cir. 1991) (approved but superceded by statute as described in Greebel v. FTP Software, Inc., 194 F.3d 185, 193-194 (1st Cir. 1999)); In re Green Tree Financial Corp., 61 F. Supp.2d 860, 872 (D.Minn. 1999) (additional cases cited therein). Defendants argue in reply that even the Novak case implicitly questioned whether former employees, as is the allegation here, really need anonymity, which may be needed for whistle blowers still employed by the company in question.
Moreover, in amending their complaint, Plaintiffs continue to fail to analyze statements in context instead of highlighting select parts of larger statements to allege fraud. For example, Plaintiffs contend that TCPI falsely represented that it had a working system ready for FDA submission and marketing when the company stated that "development of TCPI's non-invasive glucose monitoring system has been completed . . ." ¶ 48; see also ¶¶ 59, 73-74. The full statement reads: "In addition, development of TCPI's non-invasive glucose monitoring system has been completed and calibration of meter-emulators for clinical trials is being finalized. Clinical trials are anticipated to begin late in the third quarter of this year . . ." ¶ 48. While optimistic, clearly the statement contemplates the possibility that the System might fail during clinical trials. In context, no reasonable investor would have understood that TCPI was representing that it had a "finished" product, ready for FDA approval and commercial distribution.
By the use of "is being finalized" and "are anticipated to begin," this statement is clearly forward looking ( see infra).
Plaintiffs also analyze Defendants' March 30, 1998, press release statement out of context. Plaintiffs contend that the company represented that it had a finished product when it stated that it could demonstrate a "fully operational . . . system." Amended Complaint ¶ 73. Once again, the full statement makes clear that testing was continuing: "We are extremely pleased to have this opportunity to demonstrate our fully operational Non-Invasive Glucose Monitoring System. . . . TCPI has completed approximately 30% of its registration clinical studies. . . ." ¶ 73; see also ¶ 57 ("demonstrating a finished working system suitable for clinical trial use")).
Plaintiffs also allege that, after the end of the class period and the filing of this action, in a February 14, 1999, newspaper article, Aronowitz stated: "[T]he [TD Glucose System] is a couple of years from the market with or without FDA approval." Amended Complaint¶ 95. Plaintiffs contend that this "admission" was directly contrary to, and thus demonstrates Aronowitz' knowledge of the falsity of Defendants' repeated earlier representations that the final development, FDA approval, and marketing of the System were imminent. The Court must reject this hindsight approach to alleging fraud. To explain why a statement is fraudulent, "[t]he complaint must set forth an `explanation as to why the disputed statement was untrue or misleading when made. . . . This can be done most directly by pointing to inconsistent contemporaneous statements or information (such as internal reports) which were made by or available to the defendants.'" McNamara v. Bre-X Minerals Ltd., 57 F. Supp.2d 396, 404 (E.D. Tex. 1999) (quoting In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1548-49 (9th Cir. 1994)) (emphasis added).
In consideration of the entire Second Amended Complaint, and the cases put forth by Plaintiffs, the Court concludes that Defendants are still entitled to dismissal because Plaintiffs have failed to plead the facts necessary to give rise to a strong inference that the Defendants acted with the required state of mind.
To the extent Plaintiffs rely on statements in analysts' reports and press releases, asserting that Defendants made the false and misleading statements to reporters and securities analysts intending that their comments would be published or otherwise passed on to the public. Although the Court accepts that direct quotations of Defendants are actionable, Plaintiffs have failed to allege a sufficient factual basis for treating other statements by reporters and analysts as actionable against Defendants. See, e.g., In re Syntex, 855 F. Supp. 1086 (N.D. Cal. 1994), aff'd 95 F.3d 922 (9th Cir. 1996); Zeid v. Kimberley, 973 F. Supp. 910, 920 (N.D. Cal. 1997). The Court notes that in Plaintiffs' Opposition memorandum, Plaintiffs do not rely on statements by reporters or analysts that are contained in the Second Amended Complaint.
2. Forward-Looking Statements
Under the PSLRA, the Securities Exchange Act of 1934 was amended to include a "safe harbor" from liability for certain forward-looking statements. See 15 U.S.C. § 78u-5(e)(1). Under the safe harbor, corporations and individual defendants may minimize or avoid exposure for forward-looking statements by providing "meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement." 15 U.S.C. § 78u-5(c)(1)(A)(i); see also Ivax Corp., 182 F.3d at 803-07. The Eleventh Circuit held in Ivax that the cautionary statement need not "explicitly mention the factor that ultimately belies a forward-looking statement" Ivax, 182 F.3d at 807. Moreover, even if cautionary language is not provided by corporations or individual defendants to accompany forward-looking statements, plaintiffs must demonstrate that the defendants made the forward-looking statements with "actual knowledge" that the statements were "false or misleading." 15 U.S.C. § 78u-5(c)(1)(B).While the Eleventh Circuit has described the forward-looking statement inquiry as requiring "piecemeal examination of the statements found in a company communication," see Ivax Corp., 182 F.3d at 804, the court also pointed out that statements must be read in context. Id. at 805. Defendants' statements regarding the timing of FDA approval and marketability are forward-looking in context, and the Court declines Plaintiffs' invitation to parse out factual statements that, when read in context, do not convey what Plaintiffs assert. As explained above, Defendants' statements that as early as 1997 the TD Glucose System "has been completed," and that Aronowitz, in 1998, stated that he could demonstrate a "fully operational" System, cannot be read in context by any reasonable investor to mean that the System was ready for FDA submission, or was ready to be placed on the market. Each allegedly "factual" statement was followed by statements of expectations and plans for further stages of testing, the exact risk factor, marketability after FDA approval, that ultimately made the forward-looking statement be wrong.
In addition, the three statements Plaintiffs focus on in their opposition to Defendants' motion, the April 12, 1996 10-Q report, the June 4, 1997 press release, and the November 5, 1997 article containing Aronowitz's quotes, all are forward looking statements. The April 12, 1996 Prospective paragraph cited to by Plaintiffs states that "the company expects to begin full clinical trials . . . during . . . 1996." (emphasis added). ¶ 33. The same paragraph states that "there can be no assurance that the FDA will consider the TD Glucose System for . . . approval, or if considered, . . . will receive . . . approval." Id. There can be no doubt that the April 12, 1996 statement was forward looking, explicitly mentioned the chief risk factor, namely, FDA approval.
The June 4, 1997 press release, regarding the signing of an exclusive six month contract with SmithKlineBeecham, a leading healthcare company, also stated that "TCPI is on target with its original plan to have this product available for marketing in 1998. . . . [W]e expect the clinical trials of our . . . System will be completed and a corresponding filing made with the Food and Drug Administration." ¶ 46. Clearly, this statement is a projection of what may happen, and implies that FDA approval is required. Although not explicit, a reasonable investor should be cautious that if a filing is to made, the FDA may or may not approve a new medical device.
Finally, Plaintiffs' opposition relies on a quote from Aronowitz appearing in a November 5, 1997 article in the Palm Beach Daily Business Review. ¶ 57. In this article, it is reported that the "finished working system" which is arguably a statement of past fact, "will . . . [be] on the market by late 1998 or early 1999." This quote and then paraphrase of what Aronowitz may have said, in context, is forward looking regarding the marketability prospects of the product and that the "finished system" is only suitable for clinical trial use. Given that this particular alleged material misrepresentation is not from a company document or press release but from a newspaper article, and although mindful of this Court's comment above in footnote 9 regarding acceptance of direct quotations as being actionable, the absence of explicit cautionary language in a newspaper article does not eliminate that safe harbor for such quotations since the document is not a company document subject to editorial control by the Defendants. Thus, in context, this quotation does contain cautionary language since it states that the product is "finished" to be used in clinical trials, a phase on the road to marketability that requires government approval, something from which a reasonable investor should take caution.
3. Controlling Person Liability
Section 20(a) of the Securities Exchange Act of 1934 provides that "[e]very person who, directly or indirectly, controls any person liable under any provision of this chapter or of any rule or regulation thereunder shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable. . . ." 15 U.S.C. § 78t(a). It is axiomatic that there can be no controlling person liability when the allegedly controlled person has no liability, Id.; see also Brown v. Entar Group, Inc., 84 F.3d 393, 396-97 (11th Cir. 1996). As Plaintiffs have failed to adequately plead a Rule 10b-5 violation by TCPI, there can be no § 20(a) liability on the part of Aronowitz. Therefore, the Defendants are entitled to dismissal of the Plaintiffs' § 20(a) claim.
IV. CONCLUSION
Plaintiffs have failed to plead fraud with the particularity required by the PSLRA. Moreover, Plaintiffs' allegations fail to give rise to the requisite "strong inference of the required state of mind," with regard to both forward-looking statements ("actual knowledge") and non-forward-looking statements ("severe recklessness"). Having failed to properly plead a Rule 10b-5 violation, Plaintiffs' § 20(a) claim must also be dismissed. Accordingly, it is ORDERED AND ADJUDGED as follows:
1. Plaintiffs' Motion for Reconsideration [DE 76] is hereby DENIED;
2. Defendants' Motion to Dismiss Second Amended Class Action Complaint [DE 81] is hereby GRANTED;
3. Defendants' Motion for Leave to File in excess of page limit [DE 82] is hereby GRANTED;
4. Plaintiffs' Motion for Leave to File in excess of page limit [DE 84] is hereby GRANTED;.
5. Plaintiffs' Second Amended Consolidated Class Action Complaint is hereby DISMISSED WITH PREJUDICE;
6. Any other pending motions are hereby DISMISSED as moot;
7. The Clerk may close this case.