1996 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

7-18-1996

In Re: Westinghouse

Precedential or Non-Precedential:

Docket 95-3156

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Recommended Citation

"In Re: Westinghouse" (1996). 1996 Decisions. Paper 106.

http://digitalcommons.law.villanova.edu/thirdcircuit_1996/106
 UNITED STATES COURT OF APPEALS 

 FOR THE THIRD CIRCUIT 

 ____________ 

 

 No. 95-3156 

 ____________ 

 

 In Re: WESTINGHOUSE SECURITIES LITIGATION 

 MARGARET ALESSI, GLORIA BERTINATO, MICHAEL C. 

 CHRISTNER, ANNA MARIE EROSHEVICH, TOBY FEUER, 

 KANWAL K. GUPTA, M.D., MATTHEW HARLIB, STANLEY 

 HERSHFANG, ARNOLD M. JACOB, LOUISE JACOB, DAVID 

 JAROSLAWICZ, DAVID KIRSCHNER, NATHAN 

 KLEINHANDLER, GERRY KRIM, PETER LAGORIO, NELSON 

 LOVINS, DONALD McLENNAN, JACOB JOSEPH MILLER, DR. 

 ALEXANDER MILLER, THOMAS MITCHELL, EDWARD 

 MURABITO, MICHAEL E. NOGAY, JOSEPH RASCHAK, 

 RICHARD SCHWARTZCHILD, DR. MICHAEL SLAVIN, DR. 

 MICHAEL SOLOMON, SELMA SOLOMON, SPRING CREEK 

 CARDIOMEDICAL CENTER, RUTH STEPAK, JIM THOMPSON, 

 PATRICIA J. VANARTSDALEN, ALBERT ZUCKER, 

 

 Appellants 

 ____________________ 

 ON APPEAL FROM THE UNITED STATES DISTRICT COURT 

 FOR THE WESTERN DISTRICT OF PENNSYLVANIA 

 (D.C. Civil No. 91-00354) 

 ____________________ 

 

 Argued: November 2, 1995 

 Before: NYGAARD, ALITO, and SAROKIN, Circuit Judges 

 

 (Opinion Filed: July 18, l996) 

 ____________________ 

 ARTHUR N. ABBEY (Argued) 

 JOSHUA N. RUBIN 

 ABBEY & ELLIS 

 212 East 39th Street 

 New York, NY 10016 

 JULES BRODY 

 MELISSA R. EMERT 

 STULL, STULL & BRODY 

 6 East 45th Street 

 New York, NY 10017 
 HOWARD A. SPECTER 

 DAVID J. MANOGUE 

 SPECTER LAW OFFICES, P.C. 

 The Koppers Building, 26th Floor 

 Pittsburgh, PA 15219 

 JEFFREY W. GOLAN 

 GERALD J. RODOS 

 BARRACK, RODOS & BACINE 

 2001 Market Street 

 3300 Two Commerce Square 

 Philadelphia, PA 19103 

 RICHARD A. FINBERG 

 BERGER, KAPETAN, MEYERS, ROSEN, 

 LOUIK & RAIZMAN 

 200 Frick Building 

 Pittsburgh, PA 15219 

 DONALD P. ALEXANDER 

 GREENFIELD & RIFKIN

 344 West Lancaster Avenue 

 P. O. Box 259 

 Haverford, PA 19041

 Attorneys for Appellants 

 ROBERT E. ZIMET (Argued) 

 JOSEPH GUGLIELMELLI

 MAURA B. GRINALDS 

 SKADDEN, ARPS, SLATE, MEAGHER & 

 FLOM 

 919 Third Avenue 

 New York, NY 10022

 J. TOMLINSON FORT 

 REED SMITH SHAW & McCLAY 

 James H. Reed Bldg.

 435 Sixth Avenue 

 Pittsburgh, PA 15319 

Attorneys for Appellees, Shearson Lehman Brothers Inc., Goldman, 

Sachs & Co., Lazard Freres & Co. Lehman Brothers International, 

Ltd., Goldman Sachs International, Ltd. and Lazard Brothers & 

 Co., Ltd. 

 DENNIS J. BLOCK (Argued) 

 STEPHEN A. RADIN 

 ROBERT F. CARANGELO, JR. 

 MARY LOU PETERS, 

 WEIL, GOTSHAL & MANGES 

 767 Fifth Avenue 
 New York, NY 10153 

 JOSEPH A. KATARINCIC 

 KATARINCIC & SALMON

 2600 CNG Tower 

 625 Liberty Avenue 

 Pittsburgh, PA 15222 

Of Counsel: 

WILLIAM F. STOLL, JR. 

HENRY W. EWALT 

ROBERT L. KAUFMAN 

VANESSA J. BROWN 

Westinghouse Electric 

 Corporation Law Department 

Six Gateway Center 

Pittsburgh, PA 15222 

Attorneys for Appellees, Robert E. Faust, Warren H. Hollinshead, 

 Paul E. Lego, William A. Powe, Robert F. Pugliese, Theodore 

Stern, Westinghouse Electric Corporation, Westinghouse Financial 

 Services, Inc. and Westinghouse Credit Corporation 

 ELDON OLSON 

 General Counsel 

 RODMAN W. BENEDICT 

 Associate General Counsel 

 Price Waterhouse LLP 

 1285 Avenue of the Americas 

 New York, New York 10019 

 FRANK CICERO, JR. 

 ROBERT J. KOPECKY (Argued) 

 JEFFREY L. WILLIAN 

 KIRKLAND & ELLIS 

 200 East Randolph Drive 

 Chicago, IL 60601 

Of Counsel: 

ARTHUR J. SCHWAB 

JAMES D. MORTON 

BUCHANAN INGERSOLL 

600 Grant Street 

Pittsburgh, PA 15219 

(Of Counsel) 

 Attorneys for Appellee, Price Waterhouse LLP 

ALITO, Circuit Judge: 
 This is an appeal from three orders dismissing all of 

the plaintiffs' claims in a consolidated class action securities 

fraud complaint. The orders were based on Federal Rules of Civil 

Procedure 8, 9(b), and 12(b)(6). We affirm in part, reverse in 

part, and remand for further proceedings. 

 I. 

 A. Plaintiffs in this case are all purchasers of 

publicly traded Westinghouse Electric Corporation 

("Westinghouse") securities. Plaintiffs purchased Westinghouse 

common stock between March 28, 1989, and October 22, 1991 ("the 

class period"). 

 Defendants include Westinghouse, Westinghouse Financial 

Services, Inc. ("WFSI") (a wholly owned subsidiary of 

Westinghouse), Westinghouse Credit Corporation ("WCC") (which is 

owned by WFSI), and certain directors and senior officers of 

these companies (the "individual defendants"). (We will refer to 

the above defendants collectively as the "Westinghouse 

defendants.") The other defendants are Price Waterhouse (the 

independent accountant for the Westinghouse companies), and a 

proposed defendant class of underwriters (the "underwriter 

defendants") involved in a May 1991 public offering of 

Westinghouse common stock. 

 B. The relevant allegations of plaintiffs' complaint, 

which were set forth in detail by the district court, see In re 

Westinghouse Securities Litigation, 832 F. Supp. 948 (W.D. Pa. 

1993), may be summarized as follows. During the 1980's, WCC grew 

rapidly by committing substantial funds to the financing of real 

estate developments and highly leveraged transactions. In the 

late 1980's, however, WCC experienced an increase in defaults in 

its real estate loans and in delinquencies in other transactions. 

As a result, WCC suffered billions of dollars of losses, and the 

Westinghouse defendants feared a drop in WCC's commercial paper 

ratings. To protect those ratings, they concealed the losses, 

which allegedly totalled between $2.6 and $5.3 billion, through 

improper accounting and reporting techniques. 

 Prior to February 1991, Westinghouse management decided 

that WCC needed a cash infusion if it was to maintain its 

commercial paper ratings. Westinghouse developed a major 

restructuring plan, which it announced on February 27, 1991. 

Under that plan, Westinghouse decided to "downsize" WCC by 

selling or restructuring nearly one-third of its assets that had 

previously been held on a long-term basis. Westinghouse knew 

that selling and restructuring so many non-performing or 

underperforming assets in the market that existed at the time 

would result in significant losses. Westinghouse thus took a 

$975 million pre-tax charge against fourth quarter 1990 earnings 

to be applied to loan loss reserves and to cover estimated 

losses. The press release and other documents issued by 

Westinghouse in connection with these actions stated that they 

decisively addressed WFSI's and WCC's problems. Plaintiffs 

allege that these statements were materially false when made in 

that defendants knew (or recklessly disregarded facts 
demonstrating) that reserves remained inadequate as of that time. 

Plaintiffs point to a statement by James Focareta, WCC's 

president from early 1990 to early 1991, in which he acknowledged 

that the $975 million writeoff was known to be insufficient. 

Focareta said: "The number that was used ($975 million) was a 

number developed for something else . . . . Every Westinghouse 

credit manager knew that was not sufficient . . . . The Keystone 

Kops were involved, clearly." App. 1134. 

 Plaintiffs assert that Westinghouse further compounded 

the harm to investors by raising $500 million through a May 1991 

stock offering. Westinghouse offered 19 million shares of its 

common stock for sale to the investing public at $26.50 per share 

on May 9, 1991. Plaintiffs allege that the Prospectus and 

Registration Statement filed with the Securities and Exchange 

Commission ("SEC") in May 1991, as well as other documents 

(including the Annual Report) that were incorporated by reference 

therein, contained material misrepresentations and omissions. 

 In October 1991, Westinghouse determined and announced 

that the restructuring plan had to be accelerated. Additional 

assets of $3.1 billion were designated as being held for sale or 

restructuring. Westinghouse took a $1.68 billion pre-tax charge 

in anticipation of further losses it expected to suffer. 

Plaintiffs allege that defendants knew as early as October 1990 

that a charge of this magnitude was inevitable and that 

defendants' statements to the contrary over the course of that 

year and contemporaneous with the October 1991 announcement were 

materially false. Plaintiffs claim that they paid artificially 

inflated prices of from $21.75 to $39.375 per share in contrast 

to Westinghouse's closing price of $15.875 after the announcement 

of the October 1991 charge. 

 C. The first of the class action complaints 

consolidated herein was filed in February 1991, just after 

Westinghouse announced the restructuring plan. In May 1991, the 

magistrate judge granted plaintiffs limited discovery to prepare 

a consolidated complaint. In March 1992, the magistrate judge 

ordered that Westinghouse make available to plaintiffs documents 

related to over 500 active investment files. Plaintiffs filed 

the Consolidated Amended Class Action Complaint ("the first 

amended complaint") in June 1992. 

 The first amended complaint alleged violations of the 

following provisions: sections 10(b) and 20 of the Securities 

Exchange Act of 1934 ("Exchange Act"), 15 U.S.C.  78j(b), 78t, 

and Rule 10b-5, 17 C.F.R.  240.10b-5, against all defendants 

(count I); sections 11 and 15 of the Securities Act of 1933 

("Securities Act"), 15 U.S.C.  77k, 77o, against all defendants 

(count II); section 12(2) of the Securities Act, 15 U.S.C. 

77l(2), against all defendants except Price Waterhouse (count 

III); separate violations of sections 11 and 15 against all 

defendants except for the underwriter defendants (count IV); 

separate violations of section 12(2) against the Westinghouse 

defendants (count V); and negligent misrepresentation against all 

defendants (count VI). 

 In August 1992, defendants moved to dismiss all counts 

of the first amended complaint under Federal Rules of Civil 
Procedure 9(b) and 12(b)(6). In an opinion and order entered on 

July 29, 1993, the district court granted defendants' motion. 

See In re Westinghouse Securities Litigation, 832 F. Supp. 948 

(W.D. Pa. 1993) (Westinghouse I). Count I and a small piece of 

count VI were dismissed without prejudice to repleading, while 

counts II-V and most of count VI were dismissed with prejudice. 

 Plaintiffs filed the Second Consolidated Amended Class 

Action Complaint ("the second amended complaint") in September 

1993. Plaintiffs repled all of their claims, including those 

that had been dismissed with prejudice (stating that such claims 

were being repled verbatim solely to preserve their appellate 

rights). In December 1993, defendants moved to dismiss the 

second amended complaint under Federal Rules of Civil Procedure 

8, 9(b), and 12(b)(6). In March 1994, plaintiffs cross-moved to 

supplement the second amended complaint. 

 In January 1995, the district court granted defendants' 

motion to dismiss the second amended complaint. See In re 

Westinghouse Securities Litigation, Civ. No. 91-354, Opinion and 

Order entered January 23, 1995, App. 310-46 (Westinghouse II). 

Counts II-VI were dismissed without discussion, since they had 

already been dismissed with prejudice in Westinghouse I. Many of 

the claims in count I were dismissed with prejudice, and the 

remainder of the claims in count I were dismissed without 

prejudice to repleading in accordance with Rule 8. The district 

court also denied as moot plaintiffs' motion to supplement the 

second amended complaint. 

 Plaintiffs filed a "Notice of Intention to Stand on 

Second Consolidated Amended Class Action Complaint," in which 

they informed the district court that they would not be amending 

the complaint; rather, plaintiffs stated that they were going to 

"stand" on the complaint and seek immediate appellate review. 

App. 347. The district court then dismissed plaintiffs' 

remaining claims from count I with prejudice and closed the case. 

See App. 350-51 (Memorandum Order entered March 1, 1995). This 

appeal followed. 

 On appeal, plaintiffs argue that the district court 

improperly dismissed various of their section 10(b) claims under 

Rule 8; misapplied the "bespeaks caution" doctrine; improperly 

found that plaintiffs failed to plead fraud with particularity; 

mistakenly found that plaintiffs failed to plead materiality; and 

erroneously dismissed the section 12(2) claims. Plaintiffs also 

argue that the district court should have granted their motion to 

supplement the second amended complaint. Finally, plaintiffs 

argue that this case should be assigned to a new district judge. 

 

 II. 

 A. We turn first to plaintiffs' challenge to the 

district court's Rule 8 dismissal. Rule 8(a) provides that any 

pleading that includes a claim for relief shall contain "a short 

and plain statement of the claim showing that the pleader is 

entitled to relief." Fed. R. Civ. P. 8(a)(2). Rule 8(e) further 

provides that "[e]ach averment of a pleading shall be simple, 

concise, and direct." Fed. R. Civ. P. 8(e)(1). "Taken together, 

Rules 8(a) and 8(e)(1) underscore the emphasis placed on clarity 
and brevity by the federal pleading rules." 5 Wright & Miller, 

Federal Practice and Procedure  1217 at 169 (2d ed. 1990). 

 We review the district court's decision to dismiss 

claims under Rule 8 for an abuse of discretion. E.g., Kuehl v. 

F.D.I.C., 8 F.3d 905, 908 (1st Cir. 1993), cert. denied, 114 S. 

Ct. 1545 (1994); 5 Wright & Miller,  1217 at 175. "It is well 

settled that the question on review `is not whether we would have 

imposed a more lenient penalty had we been sitting in the trial 

judge's place, but whether the trial judge abused his discretion 

in imposing the penalty he did.'" Kuehl v. F.D.I.C., 8 F.3d at 

908-09 (citation omitted). 

 The district court's January 1995 opinion and order 

provided that "with respect to those aspects of Count One that 

survive the instant Opinion and Order, plaintiffs are granted 30 

days from this date within which to replead in conformity with 

the requirements of Rule 8." Westinghouse II, Op. at 21, App. 

330; Order at 35, App. 344. The district court added that 

"[f]ailure to comply with this Order will result in the dismissal 

of plaintiffs' claims with prejudice." Id. 

 On February 21, 1995, plaintiffs filed a "Notice of 

Intention to Stand on Second Consolidated Amended Class Action 

Complaint." Plaintiffs stated as follows: 

 Plaintiffs have carefully weighed the

 merits of repleading against seeking 

 immediate appellate review. They 

 respectfully give notice of their intention 

 to stand on the Complaint. See, Shapiro v. 

 UJB Financial Corp., 964 F.2d 272 (3d Cir.

 1992). 

App. 348. The district court then dismissed with prejudice all 

of plaintiffs' remaining claims, stating as follows: 

 On January 20, 1995, this Court 

 dismissed plaintiffs' Second Amended Class

 Action Complaint. As that Opinion and Order 

 explained, with respect to those aspects of 

 Count One of plaintiffs' Second Amended 

 Complaint that survived the January 20, 1995 

 Opinion and Order, plaintiffs were granted 30 

 days from that date within which to replead 

 in conformity with the requirements of Rule 8 

 of the Federal Rules of Civil Procedure. The 

 Opinion and Order specifically stated that

 failure to replead within 30 days would 

 result in the dismissal of plaintiffs' claims 

 with prejudice. 

 

 Instead of filing an amended complaint, 

 plaintiffs filed a Notice of Intention to 

 Stand on Second Consolidated Amended Class

 Action Complaint, indicating that they had

 "carefully weighed the merits of repleading 

 against seeking immediate appellate review." 

 

 Accordingly, . . . it is hereby ORDERED 
 that all remaining claims in plaintiffs' 

 Second Amended Class Action Complaint are 

 dismissed with prejudice. 

App. 350-51 (Memorandum Order entered 3/1/95). 

 B. Plaintiffs argue first that the Rule 8 dismissal 

without prejudice in Westinghouse II should be reversed because 

the district court imposed inconsistent pleading standards on 

them. Plaintiffs contend that the Westinghouse I opinion 

required them to draft the second amended complaint with 

tremendous specificity. They argue that the district court in 

effect required that they violate Rule 8 (if they violated Rule 8 

at all) in order to comply with Rule 9(b). See Plfs' Br. at 44- 

46. We disagree. 

 It is well settled that "the particularity demands of 

pleading fraud under Rule 9(b) in no way negate the commands of 

Rule 8." Vicom, Inc. v. Harbridge Merchant Services, Inc., 20 

F.3d 771, 776 (7th Cir. 1994) (citations omitted); see generally5 Wright & 

Miller,  1281 at 520-21 (pleading fraud with 

particularity under Rule 9(b) should be done consistently with 

the general philosophy of Rule 8); 2A Moore's Federal Practice 

8.13, at 8-58 (2d ed. 1995) (the requirements of Rule 8 apply 

"even where the Rules command particularity, as in the pleading 

of fraud under Rule 9(b)") (footnote omitted). 

 Having reviewed plaintiffs' second amended complaint, 

we cannot say that the district court abused its discretion in 

dismissing the viable portion of count I, without prejudice to 

repleading, pursuant to Rule 8. The second amended complaint is 

unnecessarily complicated and verbose. The text of the complaint 

rambles for more than 600 paragraphs and 240 pages, including a 

50-plus page "overview" of the alleged wrongful conduct. The 

district court, through the two rounds of difficult motions, had 

narrowed plaintiffs' claims. The court then ordered plaintiffs 

to submit a third amended complaint containing only those 

allegations relevant to what were, in the court's view, the 

remaining viable claims. This does not seem to us to constitute 

an abuse of discretion; indeed, it makes a tremendous amount of 

sense. See generally In re Glenfed, Inc. Securities Litigation, 

42 F.3d 1541, 1544 (9th Cir. 1994) (en banc) ("We see nothing to 

prevent the district court, on remand, from requiring, as a 

matter of prudent case management, that plaintiffs streamline and 

reorganize the complaint before allowing it to serve as the 

document controlling discovery, or, indeed, before requiring 

defendants to file an answer."). 

 C. We further hold that the district court did not 

abuse its discretion when it dismissed with prejudice the 

otherwise viable claims from count I following plaintiffs' 

decision not to replead those claims in accordance with Rule 8. 

The district court expressly warned plaintiffs that failure to 

replead the remaining claims in compliance with Rule 8 would 

result in the dismissal of those claims. The dismissal with 

prejudice that followed plaintiffs' decision not to amend was not 

an abuse of discretion. See, e.g., 5 Wright & Miller,  1217 at 

178 (dismissal with prejudice appropriate where party refuses to 

file an amended and simplified pleading). As we recently stated 
in a different but analogous context, "it is difficult to 

conceive of what other course the court could have followed." 

Spain v. Gallegos, 26 F.3d 439, 455 (3d Cir. 1994) (affirming 

dismissal with prejudice where plaintiff refused to go forward 

with remaining claims). 

 D. Defendants attempt to go further. They argue that 

all of plaintiffs' claims -- including those that had been 

dismissed with prejudice under Rules 9(b) and 12(b)(6) in 

Westinghouse I and Westinghouse II -- were also dismissed with 

prejudice on Rule 8 grounds and that this dismissal was proper. 

Thus, according to defendants, 

 [e]ven if this Court were to reverse any 

 portion of the District Court's ruling 

 dismissing portions of [the second amended

 complaint] with prejudice on grounds other

 than Rule 8, plaintiffs still would be bound 

 by their irrevocable election to stand on 

 their Second Amended Complaint, which still 

 will constitute "a flagrant violation of the 

 requirements of Rule 8." 

West. Br. at 20 (quoting Westinghouse II, Op. at 20, App. 329). 

There is slim support for defendants' argument in Westinghouse 

II, where the court stated that "plaintiffs' Second Amended 

Complaint shall be dismissed in its entirety for failure to plead 

in conformity with the requirements of Rule 8." Op. at 21, App. 

330. On the whole, however, we do not agree with defendants' 

characterization of what the district court did. As we 

understand the record, the district court, having already 

dismissed certain claims with prejudice on non-Rule 8 grounds in 

Westinghouse I and Westinghouse II, did not later dismiss those 

claims again for failure to comply with Rule 8. 

 First, we note that the district court specifically 

ordered plaintiffs not to include in the third amended complaint 

any claims except for those that survived Westinghouse II. 

Westinghouse II, Op. at 21, App. 330; Order at 35, App. 344. 

Thus, even if plaintiffs had repled and filed a third amended 

complaint, the claims that had been dismissed on grounds other 

than Rule 8 could not have been included. Because plaintiffs 

were permitted to replead only those claims that survived 

Westinghouse II, it seems implausible to suggest that their 

decision not to replead could have had any effect on any claims 

other than those that the district court sustained in 

Westinghouse II. 

 Second, the district court's Memorandum Order of March 

1, 1995, is the only order in the record that dismisses any claim 

or claims with prejudice under Rule 8, and that order quite 

clearly applies to only those claims that had survived dismissal 

with prejudice on other grounds in Westinghouse I and 

Westinghouse II. That order explicitly states that "it is hereby 

ORDERED that all remaining claims in plaintiffs' Second Amended 

Class Action Complaint are dismissed with prejudice." App. 350- 

51 (emphasis added). Thus, we reject defendants' argument that 

either Westinghouse II or the court's March 1, 1995 Memorandum 

Order dismissed any claims with prejudice under Rule 8 that had 
already been dismissed on their merits. 

 E. Defendants next argue that if we do not hold that 

all of the plaintiffs' claims were properly dismissed under Rule 

8, we should nevertheless decline to review the dismissal of 

claims in Westinghouse I and Westinghouse II on non-Rule 8 

grounds. Defendants contend that "interlocutory orders -- such 

as the District Court's July 1993 and January 1995 Orders, which 

contain all of the District Court's non-Rule 8 rulings appealed 

by plaintiffs -- do not merge into and are not encompassed by 

final orders where plaintiffs engage in a strategy intended to 

create an avenue for this Court to reach issues not subject to 

interlocutory appeals." West. Br. at 21 (emphasis in original). 

Defendants rely on Marshall v. Sielaff, 492 F.2d 917 (3d Cir. 

1974) (affirming dismissal for lack of prosecution and choosing 

not to reach underlying substantive issue decided in prior 

interlocutory order) and Sullivan v. Pacific Indem. Co., 566 F.2d 

444 (3d Cir. 1977) (dismissing for lack of an appealable order 

where appellant did not challenge dismissal for failure to 

prosecute but attempted to appeal prior interlocutory order 

denying motion for class certification). Plaintiffs counter that 

they followed the procedure expressly approved by this court in 

Shapiro v. UJB Financial Corp., 964 F.2d at 278-79 ("a plaintiff 

can convert a dismissal with leave to amend into a final order by 

electing to stand upon the original complaint") (citing Borelli 

v. City of Reading, 532 F.2d 950, 951-52 (3d Cir. 1976)). SeePlfs' Rep. 

Br. at 8. We find the defendants' argument 

unpersuasive. 

 First, we reject the suggestion (see Westinghouse Br. 

at 20) that we lack jurisdiction to review the district court's 

rulings in Westinghouse I and Westinghouse II. "The principle is 

well-settled in this circuit that an order dismissing a complaint 

without prejudice is not a final and appealable order, unless the 

plaintiff no longer can amend the complaint because, for example, 

the statute of limitations has run, or the plaintiff has elected 

to stand on the complaint." Newark Branch, N.A.A.C.P. v. 

Harrison, 907 F.2d 1408, 1416-17 (3d Cir. 1990) (citations and 

footnotes omitted) (emphasis added); see also Bethel v. 

McAllister Brothers, Inc., 81 F.3d 376, 381 (3d Cir. 1996); 

Deutsch v. United States, 67 F.3d 1080, 1083 (3d Cir. 1995); 

Welch v. Folsom, 925 F.2d 666, 668 (3d Cir. 1991); Trevino-Barton 

v. Pittsburgh National Bank, 919 F.2d 874, 877-78 (3d Cir. 1990). 

In UJB, the plaintiffs stood on their complaint with respect to 

claims that had been dismissed without prejudice under Rule 9(b). 

They argued that their allegations satisfied Rule 9(b) and that 

they were not required to make any further amendments. This 

court concluded that it had jurisdiction to consider the merits 

of the Rule 9(b) dismissal and explained: 

 [W]e have held that a plaintiff can convert a 

 dismissal with leave to amend into a final

 order by electing to stand upon the original 

 complaint. See, e.g., Borelli v. City of 

 Reading, 532 F.2d 950, 951-52 (3d Cir. 1976) 

 ("Only if the plaintiff . . . declares his

 intention to stand on his complaint . . . the 
 order becomes final and appealable"). 

 Plaintiffs here stood on their complaint, but 

 defendants contend that this was not enough. 

 They maintain that we lack jurisdiction 

 because plaintiffs failed to obtain an 

 explicit dismissal with prejudice. We do not 

 agree. 

964 F.2d at 278 (alterations in UJB). The court thus considered 

whether plaintiffs' allegations that had been dismissed without 

prejudice actually satisfied Rule 9(b). 

 Here, when plaintiffs elected to stand on the second 

amended complaint rather than replead the remaining claims in 

compliance with Rule 8, the remaining claims were dismissed with 

prejudice, and the case was closed in the district court. Under 

the authorities discussed above, there is no doubt that the 

district court's dismissal of the case with prejudice was a 

reviewable, final order. We therefore reject the defendants' 

contentions to the extent that they challenge our appellate 

jurisdiction. 

 Furthermore, we see no prudential grounds for declining 

to review the merits of the district court's dismissal of claims 

on non-Rule 8 grounds in Westinghouse I and Westinghouse II. 

Under the "merger rule," prior interlocutory orders merge with 

the final judgment in a case, and the interlocutory orders (to 

the extent that they affect the final judgment) may be reviewed 

on appeal from the final order. See, e.g., Silver v. Mendel, 894 

F.2d 598, 601 (3d Cir.), cert. denied, 496 U.S. 926 (1990); 

Elfman Motors, Inc. v. Chrysler Corp., 567 F.2d 1252, 1253 (3d 

Cir. 1977) ("the appeal from a final judgment draws in question 

all prior non-final orders and rulings which produced the 

judgment") (citation omitted). Under this rule, the district 

court's orders in Westinghouse I and Westinghouse II merged with 

the final order dismissing the remaining claims with prejudice 

and closing the case and thus would ordinarily be subject to 

review on appeal from the final order. 

 Defendants, however, invoke an exception to the merger 

rule pursuant to which courts decline to reach prior 

interlocutory rulings where to do so would undermine the policy 

against piecemeal appeals. See generally, e.g., Sere v. Board of 

Trustees of Univ. of Illinois, 852 F.2d 285, 288 (7th Cir. 1988) 

("Although the general rule is that rulings on interlocutory 

orders are encompassed within a subsequent final judgment and may 

be reviewed as part of that judgment, the rule is inapplicable 

where adherence would reward a party for dilatory and bad faith 

tactics.") (citations omitted). The line of cases relied upon by 

defendants stands for the proposition that a dismissal with 

prejudice for failure to prosecute frequently bars review of 

previously entered interlocutory orders. Without addressing the 

potential scope of this exception to the merger rule, see Fassett 

v. Delta Kappa Epsilon (New York), 807 F.2d 1150, 1155 n.6 (3d 

Cir. 1986) (dictum declining to extend Sullivan holding beyond 

class certification context), cert. denied, 481 U.S. 1070 (1987), 

we conclude that the exception has no application here. The 

failure-to-prosecute cases upon which defendants rely are 
distinguishable from plaintiffs' decision in this case to stand 

on the second amended complaint -- a decision that we regard as 

squarely governed by our holding in UJB. We are confident that 

our review of the merits of the orders in Westinghouse I and 

Westinghouse II will not "invite the inundation of appellate 

dockets with requests for review of interlocutory orders [or] 

undermine the ability of trial judges to achieve the orderly and 

expeditious disposition of cases." Cf. Marshall v. Sielaff, 492 

F.2d at 919. 

 To summarize our holdings thus far, we have concluded 

that the district court did not err in dismissing with prejudice 

under Rule 8 those claims that were not dismissed with prejudice 

on other grounds in Westinghouse I and Westinghouse II; that the 

claims that were dismissed with prejudice in Westinghouse I and 

Westinghouse II on non-Rule 8 grounds were not later dismissed 

with prejudice under Rule 8 as well; and that it is

jurisdictionally proper and appropriate for us to consider 

whether the district court erred in dismissing these claims 

pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6) in 

Westinghouse I and Westinghouse II. 

 We exercise plenary review over these dismissals. See, 

e.g., UJB, 964 F.2d at 279. Moreover, we must accept as true 

plaintiffs' factual allegations, and we may affirm the district 

court's dismissals only if it appears certain that plaintiffs can 

prove no set of facts entitling them to relief. Id. at 279-80 

(citation omitted). 

 In ruling on the two rounds of motions, the district 

court considered various undisputedly authentic documents 

attached to plaintiffs' complaint or defendants' motions to 

dismiss. Because plaintiffs' claims are based upon these 

documents, they were properly considered as part of defendants' 

motions to dismiss. E.g., In re Donald J. Trump Casino 

Securities Litigation, 7 F.3d 357, 368 n.9 (3d Cir. 1993), cert.denied, 

114 S. Ct. 1219 (1994) (citing Pension Benefit Guar. 

Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 

1993), cert. denied, 114 S. Ct. 687 (1994)). 

 III. 

 Plaintiffs' claims under section 10(b) of the Exchange 

Act and under sections 11 and 12(2) of the Securities Act all 

require, among other things, that plaintiffs allege a materialmisstatement 

or omission. See Trump, 7 F.3d at 368 n.10. 

Defendants argued in the district court that any misstatements 

they may have made with respect to the adequacy of WCC's loan 

loss reserves were not material. Defendants contended, under the 

"bespeaks caution" doctrine, that their cautionary language 

regarding the adequacy of WCC's loan loss reserves rendered 

immaterial any alleged misrepresentations. The district court 

largely accepted this argument. In Westinghouse I, the court 

dismissed most of the allegations regarding loan loss reserves 

contained in the first amended complaint, see 832 F. Supp. at 

973-77, 985-86, and in Westinghouse II, the court clarified that 

no cautionary language immunized defendants' alleged 

misstatements occurring prior to February 27, 1991. Thus, under 
the two opinions and orders, the allegations regarding alleged 

misstatements about loan loss reserves that were made on or after 

February 27, 1991, were dismissed under the "bespeaks caution" 

doctrine. We now turn to plaintiffs' challenge to this 

dismissal. 

 As we explained in Trump, "`bespeaks caution' is 

essentially shorthand for the well-established principle that a 

statement or omission must be considered in context, so that 

accompanying statements may render it immaterial as a matter of 

law." 7 F.3d at 364. We described the doctrine as follows: 

 The application of bespeaks caution 

 depends on the specific text of the offering 

 document or other communication at issue, 

 i.e., courts must assess the communication on 

 a case-by-case basis. Nevertheless, we can 

 state as a general matter that, when an 

 offering document's forecasts, opinions or

 projections are accompanied by meaningful 

 cautionary statements, the forward-looking

 statements will not form the basis for a 

 securities fraud claim if those statements

 did not affect the "total mix" of information 

 the document provided investors. In other

 words, cautionary language, if sufficient,

 renders the alleged omissions or 

 misrepresentations immaterial as a matter of 

 law. 

 

 . . . Of course, a vague or blanket 

 (boilerplate) disclaimer which merely warns 

 the reader that the investment has risks will 

 ordinarily be inadequate to prevent 

 misinformation. To suffice, the cautionary 

 statements must be substantive and tailored 

 to the specific future projections, estimates 

 or opinions in the prospectus which the 

 plaintiffs challenge. 

 

 . . . [T]he prospectus here truly 

 bespeaks caution because, not only does the 

 prospectus generally convey the riskiness of 

 the investment, but its warnings and 

 cautionary language directly address the 

 substance of the statement the plaintiffs 

 challenge. 

7 F.3d at 371-72 (citation omitted); see also Kline v. First 

Western Government Securities, Inc., 24 F.3d 480, 489 (3d Cir.) 

("Trump requires that the language bespeaking caution relate 

directly to that by which plaintiffs claim to have been misled.") 

(citation omitted), cert. denied, 115 S. Ct. 613 (1994). In 

Trump, we concluded that given the "extensive yet specific 

cautionary language, a reasonable factfinder could not conclude" 

that the alleged misrepresentation "would influence a reasonable 
investor's investment decision." Trump, 7 F.3d at 369; see alsoid. at 373 

("no reasonable jury could conclude that the subject 

projection materially influenced a reasonable investor"). 

 Plaintiffs' loan loss reserves claims under sections 11 

and 12(2) are based solely on alleged misstatements in 

Westinghouse's May 1991 Registration Statement and Prospectus and 

documents incorporated therein. The reserves claims under 

section 10(b) are based upon those documents as well as other 

alleged misstatements addressing the adequacy of the loan loss 

reserves. The essence of plaintiffs' allegations is that 

defendants knowingly or recklessly misrepresented (i) the 

adequacy of WCC's loan loss reserves and (ii) compliance with 

Generally Accepted Accounting Principles ("GAAP") in establishing 

the reserves. 

 With regard to plaintiffs' section 10(b) claims, the 

district court concluded that the warnings, "far from being 

Pollyanish, pointed to still darker clouds on the horizon if the 

economy generally, and real estate markets specifically, did not 

improve. . . . Accordingly, despite sufficient allegations of 

scienter and materiality, defendants' alleged misrepresentations 

about the adequacy of Westinghouse and WCC loan loss reserves 

were so strongly qualified by clear warnings about the future 

that plaintiffs' causes of action . . . must be dismissed under 

the `bespeaks caution' doctrine." 832 F. Supp. at 976. The 

court reached a similar conclusion with regard to plaintiffs' 

claims under sections 11 and 12(2). See id. at 985-86 (finding 

that Westinghouse's prospectus "`virtually bristles with 

warnings'" and that its statements regarding the adequacy of its 

reserves were "remarkably equivocal") (citation omitted). 

 Defendants contend that all of the above claims were 

properly dismissed because any alleged misstatements are 

immaterial when considered in the context of cautionary language 

contained in various filings with the SEC. See Westinghouse I, 

832 F. Supp. at 974-76 (summarizing non-prospectus warnings and 

quoting from numerous Westinghouse filings). In defense of the 

district court's decision, Westinghouse's brief highlights the 

following excerpts from the May 1991 Registration Statement and 

Prospectus, which typify the warnings on which the defendants 

rely: 

 As part of the reclassification of the $3.4 

 billion of assets, the Company reclassified 

 for sale approximately $654 million of 

 marketable securities. . . . This portfolio 

 will be liquidated as soon as practicable;

 however, future deterioration in market value 

 could result in additional losses prior to

 sale . . . . 

 The $3.4 billion in higher-risk and 

 underperforming assets reclassified as held 

 for sale or restructuring included $2.4 

 billion in receivables. As such, these 

 receivables had and continue to have a high 
 probability of becoming non-earning assetsduring the expected 

period of liquidation . . 

 . . 

 Of the $2.4 billion of receivables held for 

 sale or restructuring, at March 31, 1991, 

 approximately $700 million were non-earning, 

 up from $481 million at December 31, 1990. . 

 . . Real estate owned in assets held for 

 sale or restructuring was approximately $335 

 million at March 31, 1991, up from $285 

 million at December 31, 1990. 

 Of the remaining $8.0 billion in receivables 

 in WFSI's ongoing portfolio, non-earning 

 receivables totaled approximately $180 

 million at March 31, 1991, up from $71 

 million at December 31, 1990. Reduced 

 earning receivables totaled approximately 

 $725 million at March 31, 1991, up from $605 

 million at December 31, 1990. Real estate

 owned was approximately $175 million at March 

 31, 1991, up from $85 million at December 31, 

 1990. 

 At March 31, 1991, WFSI's valuation 

 allowances related to assets held for sale or 

 restructuring, and the allowances for credit 

 losses related to the assets in the ongoing 

 portfolio, amounted to $1.013 million and 

 $306 million, respectively. Management 

 believes that under current economic 

 conditions such allowances should be adequate 

 to cover future losses that may occur. 

 However, a further or more prolonged downturn 

 in the economy or in the real estate, 

 securities or certain other markets could 

 have a negative effect on the ability of 

 WFSI's borrowers to repay and on asset values 

 generally and could result in additional 

 increases in non-earnings assets, 

 restructured loans and, ultimately, increases 

 in allowances for losses in both assets held 

 for sale or restructuring and receivables in 

 the balance of WFSI's portfolio. 

Westinghouse Br. at 29-30 (quoting App. 748-49) (emphasis and 

ellipses in Westinghouse brief). 

 Plaintiffs argue that this and other similar cautionary 

language was insufficient because it implied, consistently with 

the alleged misstatements by Westinghouse officials, that 

defendants believed, as of February 1991 and thereafter, that the 

loan loss reserves were and would remain adequate "under current 

economic conditions." Plaintiffs contend that defendants' 
statements regarding the adequacy of the loan loss reserves were 

materially false when made because defendants knew that the 

reserves were and would remain inadequate, even without any 

future or prolonged economic downturn. Plaintiffs allege that 

Westinghouse management and other defendants knew that the 

February 1991 charge was inadequate to cover current and expected 

future losses. Plaintiffs assert that defendants knew that WCC's 

loan portfolio was overstated by between $2.6 billion and $5.3 

billion immediately prior to the first writedown of $975 million 

in February 1991. Pointing to internal documents suggesting that 

Westinghouse believed that the $975 million charge was "credible" 

and "affordable," plaintiffs argue that defendants should have 

been concerned with whether the charge complied with GAAP. 

Plaintiffs also point to the statement by former WCC President 

James Focareta, in which he allegedly acknowledged that 

Westinghouse officials knew in February 1991 that the $975 

million charge was insufficient. See App. 1134. 

 Having carefully reviewed the cautionary language on 

which the defendants and the district court relied, we find that 

these statements do not sufficiently counter the alleged 

misrepresentations, i.e., that the defendants knowingly or 

recklessly misrepresented the adequacy of the loan loss reserves 

and compliance with GAAP. If, as plaintiffs say, defendants 

knowingly or recklessly misrepresented the adequacy of the loss 

reserves to protect against known losses and known risks in light 

of the then-current economic conditions, it follows that 

defendants' cautionary statements about the future did not render 

those misrepresentations immaterial. In our view, a reasonable 

investor would be very interested in knowing, not merely that 

future economic developments might cause further losses, but that 

(as plaintiffs allege) current reserves were known to be 

insufficient under current economic conditions. A reasonable 

investor might well be willing to take some chances with regard 

to the future of the economy, but might be quite unwilling to 

invest in a company that knew that its reserves were insufficient 

under current conditions and knew it would be taking another 

major write-down in the near future (as plaintiffs allege). 

Thus, notwithstanding the cautionary language stressed by 

defendants, we think that there is a substantial likelihood that 

defendants' alleged misrepresentations -- i.e., that the loan 

loss reserves were established in compliance with GAAP and were 

believed to be adequate to cover expected future losses given the 

then-existing economic conditions -- would have assumed actual 

significance to a reasonable investor contemplating the purchase 

of securities. We therefore cannot say that the cautionary 

language rendered the alleged misrepresentations immaterial as a 

matter of law. See Kline, 24 F.3d at 489 (rejecting bespeaks 

caution argument where purported cautionary language did not 

sufficiently counter alleged misstatements and omissions); seealso Fecht 

v. The Price Company, 70 F.3d 1078, 1082 (9th Cir. 

1995) ("Inclusion of some cautionary language is not enough to 

support a determination as a matter of law that defendants' 

statements were not misleading.") (emphasis in original) 

(citation omitted), cert. denied, 116 S. Ct. 1422 (1996); 
Rubinstein v. Collins, 20 F.3d 160, 171 (5th Cir. 1994) 

(reiterating view that "`[t]o warn that the untoward may occur 

when the event is contingent is prudent; to caution that it is 

only possible for the unfavorable events to happen when they have 

already occurred is deceit'") (footnote omitted). In short, we 

cannot conclude that the alleged misrepresentations would have 

been "so obviously unimportant to an investor that reasonable 

minds cannot differ on the question of materiality." UJB, 964 

F.2d at 281 n.11 (citation omitted). Dismissal of the loan loss 

reserves claims for the period after February 27, 1991 was thus 

improper, and we reverse this aspect of the orders entered in 

Westinghouse I and Westinghouse II. 

 IV. 

 Plaintiffs next challenge the district court's 

dismissal of various other portions of their section 10(b) 

claims. To state a securities fraud claim under section 10(b) 

and rule 10b-5, a private plaintiff must plead the following 

elements: (1) that the defendant made a misrepresentation or 

omission of (2) a material (3) fact; (4) that the defendant acted 

with knowledge or recklessness and (5) that the plaintiff 

reasonably relied on the misrepresentation or omission and (6) 

consequently suffered damage. E.g., UJB, 964 F.2d at 280. Also, 

because section 10(b) claims sound in fraud, the circumstances 

constituting the fraud must be stated with particularity. Seeid. at 284; 

In re Craftmatic Securities Litigation, 890 F.2d 628, 

645 (3d Cir. 1989); Fed. R. Civ. P. 9(b). "Rule 9(b) requires a 

plaintiff to plead (1) a specific false representation of 

material fact; (2) knowledge by the person who made it of its 

falsity; (3) ignorance of its falsity by the person to whom it 

was made; (4) the intention that it should be acted upon; and (5) 

that the plaintiff acted upon it to his damage." UJB, 964 F.2d 

at 284 (citing Christidis v. First Pennsylvania Mortgage Trust, 

717 F.2d 96, 99 (3d Cir. 1983)). 

 Plaintiffs argue first that the district court 

improperly dismissed the section 10(b) claims against the 

Westinghouse defendants relating to Westinghouse's alleged 

concealment of nonearning receivables and inadequate internal 

controls. Plaintiffs further contend that the district court 

erred in dismissing the section 10(b) claim against Price 

Waterhouse. Plaintiffs also challenge the district court's 

dismissal of their claim that one of the underwriter defendants 

intentionally misled the public in the May 1991 offering. We 

will consider each of plaintiffs' arguments. 

 A. Nonearning receivables, also known as nonaccrual 

loans or nonearning loans, are defined as "[l]oans on which 

accrual of interest has been suspended because collectibility is 

doubtful." American Institute of Certified Public Accountants 

("AICPA"), Audits of Finance Companies 108 (1994); see alsoAmerican 

Bankers Association, Banking Terminology 244 (3d ed. 

1989) (defining nonearning asset as "[a]n asset that does not 

produce income, such as . . . required reserves, or a nonaccrual 

loan"). Plaintiffs allege that Westinghouse manipulated its 

nonearning receivables accounts to overstate the quality of its 
receivables portfolio. 

 The district court essentially found that plaintiffs 

had not pled facts explaining with particularity how 

Westinghouse's statements concerning nonearning receivables were 

false and misleading or violated GAAP. The district court thus 

dismissed these allegations under Rules 12(b)(6) and 9(b) as 

"conclusory rather than factual." 832 F. Supp. at 967-68; seealso 

Westinghouse II, Op. at 4-6, App. 313-15. The court found 

that plaintiffs, with the benefit of hindsight, were merely 

challenging Westinghouse's judgment as to when collectibility on 

the loans became doubtful. Id. We disagree. 

 Plaintiffs allege that the Westinghouse defendants 

arbitrarily moved loans from nonearning to earning status just 

before mandated public reporting when, in fact, nothing had 

changed regarding the likelihood of collection. Plaintiffs 

contend that they have pled specific facts permitting the 

inference that defendants were intentionally concealing loan 

losses. We agree. Plaintiffs are not merely challenging 

defendants' judgment regarding when collectibility became 

doubtful; instead, plaintiffs allege that defendants changed the 

classification of the loans when nothing regarding collectibility 

had occurred. Plaintiffs allege that specific loans had at least 

three of the eight AICPA earmarks for nonearning status both 

before and after they were removed from nonearning status. On a 

motion for summary judgment, defendants may be able to show why 

the status of these loans consistently changed just prior to the 

time of reporting, and they may be able to establish that no 

reasonable factfinder could find for plaintiffs. At this stage, 

however, we cannot say that plaintiffs have failed to state a 

claim or have failed to plead fraud with sufficient

particularity. We therefore reverse this aspect of the district 

court's orders. 

 B. Plaintiffs also allege that Westinghouse 

fraudulently overstated the quality of its internal controls, in 

violation of section 10(b). Westinghouse indisputably made 

representations throughout the class period regarding the 

adequacy of its internal controls. Plaintiffs essentially 

contend that those statements were made without a reasonable 

basis and with knowledge of or in reckless disregard of facts 

suggesting their falsity. 

 Plaintiffs' claim is based primarily on an internal 

report prepared following an anonymous tip alleging inadequate 

internal accounting controls. After rejecting the assertions of 

the anonymous tip, the November 1990 report discussed 

recommendations for improving internal controls and addressing 

some overall concerns that the auditors had identified. See App. 

939-53. 

 The district court found that "[t]he fact that the 

internal auditors also recommended improvements in valuation 

methods and tighter standards for internal valuations does not 

support plaintiffs' claim that in its Form 10K's Westinghouse 

fraudulently or even inaccurately represented its internal 

controls as adequate." 832 F. Supp. at 979; see alsoWestinghouse II, at 

8-9 ("plaintiffs' assertions amount to 
nothing more than `fraud by hindsight' allegations, based on the 

premise that the internal controls turned out to be

inadequate."). We agree that plaintiffs have failed to plead any 

facts supporting their conclusory allegation that Westinghouse 

fraudulently misrepresented the adequacy of its internal 

controls. We therefore affirm dismissal of this aspect of the 

section 10(b) claim. 

 C. Plaintiffs argue that the district court, by 

"compartmentalizing the evidence and wiping the slate clean after 

considering each component," failed to give weight to the 

"totality of the pleadings." Plfs' Br. at 25. We have 

instructed that the district courts should engage in precisely 

the sort of analysis undertaken by the district court in this 

case, see, e.g., UJB, 964 F.2d at 284; Craftmatic, 890 F.2d at 

640, and we therefore find no merit in this argument. 

 In addition, plaintiffs' discussion of Rule 9(b) 

suggests that the district court improperly required them to 

plead defendants' state of mind with particularity. See Plfs' 

Br. at 18-20 (relying on In re Glenfed, Inc. Securities 

Litigation, 42 F.3d 1541 (9th Cir. 1994) (en banc)). We do not 

see any evidence of such a requirement in the district court's 

opinions, and we therefore find plaintiffs' legal argument 

irrelevant. 

 D. Plaintiffs also appeal from dismissal of certain 

aspects of their section 10(b) claim against Price Waterhouse 

arising out of Price Waterhouse's 1988 and 1989 audits. The 

district court granted Price Waterhouse's motion to dismiss in 

Westinghouse II based on plaintiffs' failure to plead any facts 

suggesting fraud on the part of Price Waterhouse with respect to 

the 1988 and 1989 audits. Westinghouse II, at 21-30, App. 330- 

39. The district court concluded that plaintiffs failed to state 

a fraud claim both with respect to whether Price Waterhouse 

fraudulently violated Generally Accepted Accounting Standards 

("GAAS") in its 1988 and 1989 audits and with respect to whether 

Price Waterhouse knew that Westinghouse's 1988 and 1989 financial 

statements failed to comply with GAAP and fraudulently stated 

otherwise. The district court found that the only factual 

allegations contained in the second amended complaint relevant to 

plaintiffs' section 10(b) claims against Price Waterhouse related 

to the 1990 audit. 

 Although plaintiffs cite various GAAS standards, they 

nowhere explain how Price Waterhouse knowingly or recklessly 

violated those standards in performing its 1988 and 1989 audits. 

For example, plaintiffs' complaint fails to allege any facts 

supporting their conclusory allegation that Price Waterhouse 

failed to follow GAAS in determining whether Westinghouse's 2.5% 

loss reserves were reasonable in 1988 and 1989. Moreover, as 

Price Waterhouse properly argues, plaintiffs do not allege that 

Price Waterhouse failed to consider the adequacy of

Westinghouse's internal controls in planning the scope of or in 

executing the 1988 and 1989 audits; nor do plaintiffs allege that 

Price Waterhouse opined on the adequacy of Westinghouse's 

internal controls in those audits. 

 Plaintiffs' GAAP arguments are similarly unavailing. 
Under Christidis, plaintiffs must allege facts that give rise to 

an inference that Price Waterhouse knew or was reckless in not 

knowing that Westinghouse's financial statements failed to comply 

with GAAP. 717 F.2d at 100; see also Eisenberg v. Gagnon, 766 

F.2d 770, 776-78 (3d Cir.), cert. denied, 474 U.S. 946 (1985). 

There are no facts cited in plaintiffs' second amended complaint 

supporting an inference that Price Waterhouse knew or was 

reckless in not knowing that Westinghouse was using speculative, 

inflated values in valuing receivables. Moreover, although Price 

Waterhouse concedes that it knew that Westinghouse set its loss 

reserves at 2.5% of total assets in audit years 1988 and 1989, 

this fact provides no support for plaintiffs' allegation that 

Price Waterhouse knew that Westinghouse was violating GAAP in 

those years. Assuming that Westinghouse violated GAAP during 

1988 and 1989, plaintiffs nonetheless fail to allege facts 

suggesting that Price Waterhouse intentionally or recklessly 

misrepresented Westinghouse's compliance with GAAP.

 In short, plaintiffs fail to allege any facts 

supporting an inference that Price Waterhouse made fraudulent 

misrepresentations in its 1988 and 1989 audit opinions. 

Plaintiffs' allegations do not support an inference that Price 

Waterhouse could not reasonably and in good faith have opined 

that the financial statements as a whole fairly presented the 

financial condition of Westinghouse in accordance with GAAP. We 

therefore affirm the district court's order dismissing the 

section 10(b) claims against Price Waterhouse arising out of 

Price Waterhouse's 1988 and 1989 audits. 

 E. Plaintiffs also challenge the district court's 

dismissal of their section 10(b) claims against Lazard Freres 

("Lazard"), one of the underwriter defendants. In addition to 

dismissing these claims under the "bespeaks caution" doctrine, 

the district court dismissed them on the ground that plaintiffs 

failed to plead any facts supporting section 10(b) liability 

against Lazard. See Westinghouse I, 832 F. Supp. at 979-81; 

Westinghouse II, at 33-34, App. 342-43. In Westinghouse I, the 

district court found that the documents upon which plaintiffs 

relied could not bear the construction placed on them by 

plaintiffs. 832 F. Supp. at 979-81; see also Westinghouse II, at 

33, App. 342. We agree. 

 Plaintiffs place primary reliance on Lazard's December 

2, 1990, Progress Report and on a document entitled "Westinghouse 

Electric -- Board Meeting Q & A," developed for use at the 

February 27, 1991, Board meeting. See App. 1428-41 (Progress 

Report); App. 1134-36 (Q & A). Plaintiffs also rely on a report 

prepared by Westinghouse in September 1990. See App. 918-36. 

 In the Progress Report, Lazard recommended "serious 

consideration of a comprehensive restructuring program which 

could include a one-time charge to earnings." App. 1435. Lazard 

also explained that "[t]he possible restructuring outlined 

earlier implies the ultimate disposition of roughly $3.2 billion 

or 55% of non-real estate assets and at least $1.5 billion of 

real estate (problem real estate totalled $1.5 billion or 37% of 

the portfolio at September 30, 1990)." App. 1440 (emphasis in 

original). In the proposed question and answer script, Lazard 
suggested the following response to the question, "Are the 

reserves adequate?": "Given the results of each of these review 

processes, the charge taken today is clearly reasonable but was 

at the low end of the range identified by management in 

conjunction with the strategic review performed by Lazard." App. 

1135. 

 Based on the above sources, plaintiffs argue that 

Lazard knew that the February 1991 charge was inadequate to 

protect against known and likely losses. We agree with the 

district court, however, that the documents on which plaintiffs 

rely simply do not support their conclusory allegations and that 

plaintiffs fail to allege facts supporting their section 10(b) 

claims against Lazard. These claims were properly dismissed in 

Westinghouse I and Westinghouse II. 

 V. 

 Defendants argued in the district court that 

plaintiffs' allegations regarding loan loss reserves and nonearning loans in count I were subject to dismissal as being 

quantitatively immaterial as a matter of law (separate and apart 

from the "bespeaks caution" doctrine). In Westinghouse I, the 

district court rejected defendants' argument, finding that the 

allegations of wrongfully understated reserves were sufficiently 

substantial when compared to Westinghouse's net income for the 

relevant time periods. 832 F. Supp. at 971-73. In Westinghouse 

II, defendants argued that plaintiffs failed to allege a material 

misrepresentation or omission during the time period of March 28, 

1989, through March 28, 1990 (i.e., the first year of the class 

period) with respect to their allegations regarding the loan loss 

reserves and nonearning loans. Westinghouse II, Op. at 13-18, 

App. 322-27. The district court agreed and dismissed these 

claims for the first year of the class period. Id.

 Plaintiffs challenge this aspect of Westinghouse II, 

Plfs' Br. at 34-38, and defendants counter that all of the 

allegations regarding nonearning assets and loan loss reserves 

(not merely those for the first year of the class period) could 

and should have been dismissed on quantitative materiality 

grounds. West. Br. at 39-45. Assuming without deciding that 

defendants' latter argument (which was not raised on defendants' 

motion to dismiss the second amended complaint) is properly 

before us, we find it to be without merit. We thus turn to the 

dismissal of plaintiffs' claims for the first year of the class 

period. 

 As referred to earlier in our discussion of the 

"bespeaks caution" doctrine, "[a]n omitted fact is material if 

there is a `substantial likelihood that, under all the 

circumstances, the omitted fact would have assumed actual 

significance in the deliberations of the reasonable

shareholder.'" UJB, 964 F.2d at 281 n.11 (quoting T.S.C. Indus., 

Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976)). "In other 

words, the issue is whether there is a substantial likelihood 

that the disclosure would have been viewed by the reasonable 

investor as having `significantly altered the "total mix" of 

information' available to that investor." Id. Moreover, 
"[m]ateriality is a mixed question of law and fact, and the 

delicate assessments of the inferences a reasonable shareholder 

would draw from a given set of facts are peculiarly for the trier 

of fact." Id. (citing T.S.C., 426 U.S. at 450). Therefore, 

"[o]nly if the alleged misrepresentations or omissions are so 

obviously unimportant to an investor that reasonable minds cannot 

differ on the question of materiality is it appropriate for the 

district court to rule that the allegations are inactionable as a 

matter of law." Id. 

 The district court recognized that the adequacy of loan 

loss reserves is generally the type of information that would 

significantly influence a reasonable investor. Westinghouse I, 

832 F. Supp. at 972 (citing UJB, 964 F.2d at 281). However, the 

court also tested plaintiffs' complaint to determine whether the 

allegations regarding loan loss reserves were quantitatively 

material in this particular case. The district court stated that 

"[t]he failure to disclose that a loan portfolio is likely to be 

impaired by some de minimis amount may be `relevant' in that it 

is the type of information that investors care about, but of such 

`dubious significance' as to be `trivial,' and `hardly conducive 

to informed decisionmaking,' so that to reasonable shareholders, 

such omission must be immaterial as a matter of law." Id. at 972 

(quoting TSC Industries, 426 U.S. at 448-49). We agree. Seegenerally 

Loss & Seligman, Fundamentals of Securities Regulation137-41, 479-80 

(1995) (quantitative materiality analysis is 

generally appropriate, though not when "such matters as a 

conflict of interest or criminal violations are at issue"); seealso Ferber 

v. Travelers Corp., 802 F. Supp. 698, 708 (D. Conn.

1992) (omission of extent of second mortgages not material in 

relation to overall real estate, investment, and asset 

portfolios); In re First Chicago Corp. Securities Litigation, 769 

F. Supp. 1444, 1454 (N.D. Ill. 1991) (total value of alleged bad 

loan immaterial in relation to size of defendant's real estate 

loan portfolio). 

 Plaintiffs do not dispute that their only allegation 

challenging the adequacy of loan loss reserves prior to the 

fourth quarter of 1989 has to do with one asset that allegedly 

was improperly not written down by $1.278 million during the 

third quarter of that year. See App. 1234. The charge that 

would have followed the write-down of this asset would have 

amounted to merely 0.54% of Westinghouse's net income of $234 

million for that quarter. We agree with the district court 

that this allegation is not sufficiently material to be 

actionable, i.e., there is not a substantial likelihood that this 

information would have assumed actual significance in the 

deliberations of a reasonable investor. Plaintiffs thus allege 

no actionable reserves claims for the period prior to the fourth 

quarter of 1989. The first actionable disclosures alleged in the 

second amended complaint relating to loan loss reserves for the 

fourth quarter of 1989 occurred on March 29, 1990. The district 

court thus properly dismissed the reserves allegations that 

concern the period prior to the March 29, 1990, disclosures. 

 The district court also dismissed the nonearning loans 

allegations relating to the first year of the class period. The 
court found that the assets identified in plaintiffs' complaint 

that allegedly should have been classified as nonearning through 

the fourth quarter of 1989 were barely 1% of Westinghouse's 

current assets for any quarter during that period and were thus 

immaterial. The second amended complaint alleges that prior to 

the fourth quarter of 1989, eight assets were improperly not 

classified as nonearning assets. See App. 1169-76. These 

accounts amount to just 0.51% of Westinghouse's current assets 

for the first and second quarters of 1989 and only 1.2% of 

Westinghouse's current assets for the third quarter of 1989. We 

again agree with the district court that these allegations are 

not sufficiently substantial to be material, and plaintiffs 

therefore allege no actionable nonearning loans claims for the 

period prior to the fourth quarter of 1989. As with the 

reserves claims, the first actionable disclosures alleged in the 

second amended complaint relating to nonearning loans for the 

fourth quarter of 1989 occurred on March 29, 1990. The district 

court thus properly dismissed the nonearning loans allegations 

that relate to the period prior to the March 29, 1990, 

disclosures. 

 VI. 

 A. As discussed above, the district court dismissed 

the section 12(2) claims under the "bespeaks caution" doctrine. 

The district court also dismissed the section 12(2) claims on the 

ground that plaintiffs failed to allege that defendants "offered 

or sold" Westinghouse securities to plaintiffs within the meaning 

of section 12(2). We turn now to plaintiffs' challenge to this 

determination. 

 Section 12(2) provides that a person who "offers or 

sells" newly issued securities by means of a prospectus or oral 

communication that misrepresents or omits material facts is 

liable to the person "purchasing such security from him." 15 

U.S.C.  77l(2). In Pinter v. Dahl, 486 U.S. 622 (1988), the 

Supreme Court stated that although the language of section 12(1) 

"contemplates a buyer-seller relationship not unlike traditional 

contract privity," id. at 642, its scope is not limited only to 

those who pass title. Id. at 642-47. The Court held that the 

term "seller" in the context of section 12(1) includes (1) "the 

owner who passed title, or other interest in the security, to the 

buyer for value" and (2) "the person who successfully solicits 

the purchase, motivated at least in part by a desire to serve his 

own financial interests or those of the securities owner." Id.at 642, 

647. Under Pinter, both direct sellers and those who 

engage in the active solicitation of an offer to buy can be 

"sellers" for purposes of section 12(1). See id. at 646-47. 

 In In re Craftmatic Securities Litigation, 890 F.2d 628 

(3d Cir. 1989), we held that the Supreme Court's definition of 

the term "seller" under section 12(1) applies in actions brought 

under section 12(2). Id. at 634-36; see also UJB, 964 F.2d at 

286-87. Thus, under Pinter and our cases, a section 12(2) seller 

may be one who passes title to the buyer for value (a direct 

seller) or one "who successfully solicits the purchase, motivated 

at least in part by a desire to serve his own financial interests 
or those of the securities owner" (a solicitor seller). Pinter, 

486 U.S. at 643. 

 In Craftmatic, we cautioned that "the language of  12, 

which makes a participant liable to the `person purchasing such a 

security from him . . .,' precludes actions against remote 

sellers, and focuses the inquiry on the relationship between the 

purchaser and the participant, rather than on the latter's degree 

of involvement in the transaction." Craftmatic, 890 F.2d at 636 

(citation omitted). We added with regard to solicitation 

liability that "although an issuer is no longer immunized from 

12 liability, neither is an issuer liable solely on the basis of 

its involvement in preparing the prospectus. The purchaser must 

demonstrate direct and active participation in the solicitation 

of the immediate sale to hold the issuer liable as a  12(2) 

seller." Id. (citations omitted). 

 B. Plaintiffs do not claim that any of the 

Westinghouse defendants were direct sellers. Rather, plaintiffs 

allege that the underwriter defendants purchased the shares from 

Westinghouse and resold them to the public, including plaintiffs. 

E.g., App. 362-63, 366-67. The Westinghouse defendants therefore 

cannot be liable under section 12(2) as direct sellers. Cf. UJB, 

962 F.2d at 287 (plaintiffs not required to allege direct and 

active solicitation where newly offered shares were purchased 

directly through defendant UJB). Plaintiffs further allege as 

follows: 

 593. The section 12 Defendants were 

 sellers of Westinghouse securities within the 

 meaning of Section 12(2) of the Securities

 Act and either sold or promoted the sale of 

 said securities directly to plaintiffs and

 other Class members or solicited plaintiffs 

 and other Class members to buy such 

 securities. In so acting, the Section 12 

 Defendants were motivated by a desire to 

 serve their own financial interests. 

App. 506 (count III); see also App. 511-12 (count V). Plaintiffs 

allege no facts suggesting how any Westinghouse defendants 

directly and actively participated in the solicitation of 

plaintiffs' immediate purchases of Westinghouse stock. 

 The district court dismissed the section 12(2) claims, 

explaining as follows: 

 [P]laintiffs have not alleged that the 

 Westinghouse defendants in fact sold or 

 solicited the purchase of Westinghouse 

 securities, but attempt nonetheless to 

 analogize their allegations to the 

 allegations and holding in Craftmatic by 

 pointing to the similarity of language 

 employed. . . . The conclusory allegation

 that defendants sold or solicited the 

 purchase of securities will withstand a 

 motion to dismiss only if accompanied by 

 allegations of fact that defendants did sell 

 or solicit the purchase of securities. 
Westinghouse I, 832 F. Supp. at 984 (citation and footnote 

omitted) (emphasis in original). Plaintiffs argue that because 

the facts alleged in their complaint are so similar to the 

factual allegations of the complaint sustained in Craftmatic, 

they stated a section 12(2) claim. See Plfs' Br. at 40-41. We 

are constrained to agree. 

 It is certainly true that plaintiffs' section 12(2) 

allegations are not clearly drafted. Plaintiffs do not, for 

example, make clear which defendants are alleged to be direct 

sellers as opposed to solicitor sellers. See UJB, 964 F.2d at 

287 n.17. Nor do plaintiffs allege how the Westinghouse 

defendants, assuming they are alleged to be solicitor sellers, 

directly and actively participated in the solicitation of the 

immediate sales. Further, plaintiffs' allegation that 

defendants "promoted the sale of" securities would not, standing 

alone, give rise to any section 12(2) liability. The district 

court could certainly require that plaintiffs clear up these 

ambiguities on remand. 

 Taken in the light most favorable to plaintiffs, 

however, the complaint does allege that the Westinghouse 

defendants "solicited plaintiffs" to purchase Westinghouse 

securities and that in so doing they were motivated by a desire 

to serve their own financial interests. Contrary to the district 

court's statement, these are factual allegations -- allegations 

plaintiffs will have to prove -- and not bare legal conclusions. 

Under Craftmatic, plaintiffs' allegations are sufficient to 

survive a motion to dismiss under Rule 12(b)(6): "It cannot be 

said at this juncture that plaintiffs can prove no set of facts 

that would entitle them to relief." Craftmatic, 890 F.2d at 637 

(citations omitted). For these reasons, we reverse the district 

court's order dismissing the section 12(2) claims against the 

Westinghouse defendants. 

 We note that although fraud is not a necessary element 

of a claim under section 12(2), section 12(2) claims that do 

sound in fraud must be pled with particularity. UJB, 964 F.2d at 

288-89. The district court did not decide, nor do defendants 

argue, that plaintiffs' section 12(2) claims sound in fraud. 

To the extent, if any, that the section 12(2) claims in fact 

sound in fraud, plaintiffs could justifiably be required to plead 

the circumstances constituting fraud with the particularity 

required by Rule 9(b). This is not, however, the theory on 

which the district court rested its decision; nor has it been 

advanced by the parties in this court. 

 C. As to the underwriter defendants, the first amended 

complaint alleges that "[e]ach member of the Underwriter Class 

sold Westinghouse stock to members of the Prospectus Subclass 

during the Class Period." App. 367. Plaintiffs further allege 

that the underwriter defendants sold Westinghouse securities 

"directly to plaintiffs and other Class members." App. 506. 

 The district court dismissed the section 12(2) claims 

against the underwriter defendants, finding that plaintiffs 

failed to allege that the underwriter defendants were statutory 

sellers under section 12(2). The district court explained as 

follows: 
 In Count Three, plaintiffs must allege, 

 to state a viable Section 12(2) cause of 

 action, that the underwriter defendants were 

 "sellers" within the meaning of Section 

 12(2). That is, there must be an allegation 

 that a particular proposed defendant sold or 

 solicited the sale of Westinghouse securities 

 to the individual plaintiffs. Pinter v. 

 Dahl, 486 U.S. at 643-47. This element is

 lacking. 

Westinghouse I, 832 F. Supp. at 987. 

 We agree with the district court that plaintiffs must 

allege that the underwriter defendants were section 12(2) 

sellers, but we do not find support in Pinter for the district 

court's statement that, in order to achieve this, plaintiffs are 

required to allege which underwriter sold securities to each 

plaintiff. Under Pinter, a plaintiff will not succeed on a 

section 12(2) claim unless the plaintiff shows, among other 

things, that the plaintiff bought from or was solicited by a 

specified statutory seller. But Pinter does not address what 

allegations are necessary to plead that a defendant is a seller 

within the meaning of the statute. Absent a particularity 

requirement, plaintiffs must provide a short and plain 

statement showing that the underwriter defendants are statutory 

sellers and that plaintiffs purchased securities from them. 

 We find that plaintiffs satisfied this requirement and 

stated a section 12(2) claim against the underwriter defendants. 

Taken in the light most favorable to plaintiffs, the first 

amended complaint alleges that each of the underwriter defendants 

sold Westinghouse securities directly to plaintiffs and that each 

plaintiff purchased Westinghouse securities directly from an 

underwriter defendant. Cf. Jackson v. First Federal Savings of 

Arkansas, 709 F. Supp. 863, 884 (E.D. Ark. 1988) (dismissing 

section 12(2) claim where plaintiff did not allege that any 

defendant sold him his shares or solicited him to buy his 

shares). The defendants and the district court have not pointed 

to any authority requiring anything further. Although plaintiffs 

did not submit a model pleading, we cannot say they failed to 

state a claim under Rule 12(b)(6). Compare Craftmatic, 890 

F.2d at 637; see also Moore v. Kayport Package Express, Inc., 885 

F.2d 531, 538-39 (9th Cir. 1989) ("While this is not a model form 

of pleading a section 12(2) claim, it satisfies the short and 

plain statement rule of Rule 8(a)(2) which provides that a 

pleading which sets forth a claim for relief shall contain `a 

short and plain statement of the claim showing that the pleader 

is entitled to relief.'") (citation omitted); In re Chambers 

Development Securities Litigation, 848 F. Supp. 602, 625 (W.D. 

Pa. 1994) (sustaining section 12(2) allegations not unlike those 

in this case); Miller v. New America High Income Fund, 755 F. 

Supp. 1099, 1105 (D. Mass. 1991) ("Applying the appropriate 

standard of scrutiny for a Rule 12(b)(6) motion, a set of facts 

establishing the underwriter defendants as `sellers' is clearly 

plausible, although the plaintiffs must later produce facts to 

prove the underwriter defendants' actual participation in the 
activity.") (citation omitted), aff'd, 36 F.3d 170 (1st Cir. 

1994). We therefore reverse the district court's order 

dismissing the section 12(2) claims against the underwriter 

defendants. 

 VII. 

 After defendants filed the motions to dismiss that led 

to Westinghouse II, plaintiffs cross-moved to supplement the 

second amended complaint. See App. 1582-83. Plaintiffs sought 

to add an additional alleged misrepresentation -- Lego's alleged 

October 1990 statement that Westinghouse had only an immaterial 

amount of restructured receivables. 

 Plaintiffs' motion is not discussed at any length in 

Westinghouse II. It is addressed in one sentence of the opinion 

and one sentence of the order. See Westinghouse II, Op. at 21, 

App. 330 (dismissing second amended complaint under rule 8; 

granting plaintiffs 30 days within which to replead surviving 

claims in compliance with rule 8; and denying as moot the crossmotion to supplement); Westinghouse II, Order at 35, App. 344 

("Plaintiffs' cross-motion to supplement the Second Amended 

Complaint (Docket No. 174) is denied as moot."). In their brief 

on appeal, plaintiffs state that "[t]he only possible basis for 

the finding of mootness was the blanket dismissal of the Second 

Complaint under Rule 8." Plaintiffs' Br. at 47. It seems to us 

that this is in fact why the district judge dismissed the motion 

as moot -- because plaintiffs were presumably going to be 

submitting a third amended complaint and would include the newlydiscovered allegation in that complaint. 

 We find no abuse of discretion in this ruling. The 

plaintiffs could have included (and were expected to include) the 

allegation at issue in the third amended complaint. They chose 

not to submit that complaint. The allegation at issue is 

relevant to claims that survived the district court's orders in 

Westinghouse I and Westinghouse II, claims that were dismissed 

with prejudice under Rule 8 only after plaintiffs' decision to 

stand on the second amended complaint. Plaintiffs therefore 

abandoned this allegation when they chose not to submit a third 

amended complaint. 

 VIII. 

 Plaintiffs argue that on remand this case should be 

reassigned to a new district court judge. Plaintiffs rely 

primarily upon the following statement from Westinghouse I: 

 In the early 1980's, WCC hit its stride when 

 it tapped into the booming commercial and 

 residential real estate markets. 

 

 Such success, however, was short-lived. 

 WCC's fortunes collapsed along with the real 

 estate market in the late-1980's, and the 

 price of Westinghouse stock tumbled during

 the class period from a high of $39.75/share 

 to a low of $15.875/share. Now, like so many 

 lending institutions battered by the late-
 1980's real estate bust, Westinghouse, along 

 with its outside accountant and investment

 bankers, is defending against shareholders

 who allege that the company made false and

 misleading statements regarding the health of 

 its financial services units, thereby 

 artificially inflating the price of 

 Westinghouse stock and damaging plaintiffs

 who purchased that stock at what they claim 

 to have been an artificially high price. 

Westinghouse I, 832 F. Supp. at 958 (citations omitted). 

 According to plaintiffs, "[t]his statement suggests 

that plaintiffs' claims have no merit and that their damages were 

caused not by defendants' fraud, but by an economic environment 

visited on defendants." Plfs' Br. at 48. Plaintiffs argue that 

although it was proper for the judge to take judicial notice of 

the downturn in the real estate market, "it was improper for [the 

judge] to attribute plaintiffs' extensive damages to this trend 

rather than to defendants' fraudulent scheme as alleged in the 

Complaints." Plfs' Rep. Br. at 24. Plaintiffs seem to us to 

read too much into the judge's statement, and we note that the 

district judge's comment was not unlike others found in other 

reported decisions. See, e.g., UJB, 964 F.2d at 274 ("This case 

is one of a number of federal securities actions against 

financially troubled banking institutions. After a sharp 

downturn in the financial condition of defendant UJB Financial 

Corporation, its shareholders filed a complaint[.]"); see alsoSerabian v. 

Amoskeag Bank Shares, Inc., 24 F.3d 357, 360 (1st 

Cir. 1994) ("The complaint depicts an increasingly familiar saga 

of a bank that boomed with the real estate market of the early 

1980s, but suffered in the recession and deteriorating market 

that followed.") (citations omitted). 

 As in United States v. Bertoli, 40 F.3d 1384, 1412 (3d 

Cir. 1994), plaintiffs here make "no allegation that [the 

district judge] derived his bias from an extrajudicial source." 

Rather, all the incidents cited involve rulings and statements 

made in deciding motions. "Thus, these incidents will not 

support recusal unless, looked at objectively, `they display a 

deep-seated favoritism or antagonism that would make fair 

judgment impossible.'" Id. (quoting Liteky v. United States, 114 

S. Ct. 1147, 1157 (1994)). Plaintiffs have not identified 

anything suggesting such a favoritism or antagonism, and our 

review of the record reveals none. Finally, we note that, as a 

practical matter, the judge sustained a number of the section 

10(b) claims asserted in count I in both Westinghouse I and 

Westinghouse II. For these reasons, we reject all of plaintiffs' 

contentions raised in support of their reassignment argument. We 

wish to emphasize that requesting reassignment is a grave step; 

it should not be taken lightly or for the purpose of seeking some 

strategic advantage. 

 IX. 

 For the foregoing reasons, we affirm in part and 

reverse in part the district court's orders entered on July 29, 
1993 (Westinghouse I), January 23, 1995 (Westinghouse II), and 

March 1, 1995 (Memorandum Order dated 2/28/95), and we remand for 

further proceedings consistent with this opinion.