FILED U.S. COURT OF AP P E A LS E LE V EN T HC IRC U IT SEPTEMBER 18, 2006 THOMAS K. KAH

N CLERK [ P UB L I S H] I N THE UN I TE D STATE S C OU RT OF APPE ALS F O R T H E E L E V E N T H C IR C U IT

________________________ N o. 05- 14365

________________________ D . C . D ocketN o. 02 -023 32 -C V -J O F -1 H A R R Y W A G N E R , on behal f o f h i m sel f an d al l o th ers s im ila r ly s itu a te d , P la in tif f - A p p e lla n t JO H N R . W E L L S , on behal f o f h i m sel f an d al l o th ers s im ila r ly s itu a te d , A L F R E D JA C O B S O N , on behal f of h i m sel f an d al l o th ers si m i l arl y s itu a te d , C o n s o lid a te d P la in tif f s - A p p e lla n ts , v ersu s FI RS T HORI ZON PHA RM ACEUTI CAL C O R P O R A T I O N , M A H E N D R A G . S H A H , J O H N N . K A P O O R , B A L A J I V E N K A T A R A M A N , J O N S . S A X E , e t a l., D e f e n d a n ts - A p p e lle e s .Honora ble Arthur L . Alarc on, United States Circuit Judg e for the Ninth Circuit, sitt ing * by designation. 2 ________________________ A pp ea l fr om the U ni t ed S t at es D i stri ctC ou rt f o rth e N o r th e r n D is tr ic t o f G e o r g ia

_________________________ ( S e p t e m b e r 18, 2006) B e f o r e E D M O N D S O N , C h ie f J u d g e , a n d B I R C H a n d A L A R C O N , C ir c u it * Ju d g es. B IR C H , C i rc ui tJudg e: I n thi s appe a l , w e de t e r m i ne tha te ve n s e c ur i t i e s c l a i m s w i thouta f r a ud el em entm ustbe pl ed w i th p art i cul ar i ty pursuantt o F eder al R ul e of C i vi l P roce du re 9 (b ) w h en th at n o n fr au d se cu riti es claim is alleg ed to b e p ar t o f a d ef en d an t’ s f r a udul e ntc onduc t . W e a l s o r e m i nd di s tr i c tc our t s of the i rs upe r vi s or y obl i ga t i on t o sua spon t e order re pl ea di ng pu rs uantt o F eder al R ul e of C i vi l P roce du re 12 (e ) w hen a shot gu n com pl ai ntfa i l s t o adequ at el y l i nk a c ause of ac t i on t o i t s f ac tual predi ca t es . A pp l yi ng these det erm i nat i on s t o thi s c as e, w e V A C A T E the di stri ct c our t ’ s or de r s a nd R E M A N D W I T H I N S T R U C T I O N S t o or de rr e pl e a di ng.

I . B AC KG RO UN D T hi s s e c ur i t i e s c l a s s a c t i on a l l e ge s vi ol a t i ons of both the S e c ur i t i e s A c t , 153

U . S . C . § 77a , e ts e q. , a nd the E xc ha nge A c t , 15 U . S . C . § 78a , e ts e q. B e c a us e the c a s e i s be f

or e us on a m ot i on t o di s m i s s , w e dr a w a l l i nf e r e nc e s i n f

a vorof the pl ai nt i ff s. S ee B ry antv. A vado B ra nd s, Inc. , 18 7 F . 3d 12 71 , 12 73 n. 1 (11 th C i r. 1 9 9 9 ). T h e cl ass o f p l ai n t i ffs i n th i s case co n si st s o f al l p eo p l e w h o trad ed F i rst H o ri zo n secu ri t i es b etw een 2 4 A p ri l 2 0 0 2 an d 2 9 A p ri l 2 0 0 3 . A su b cl ass o f th ese p lain ti ff s c o n sists o f th o se p eo p le w h o p u rc h as ed co m m o n sto ck in F irst H o rizo n ’s se cond ary off

er i ng , re l yi ng on a 5 M ar ch 20 03 R egi stra t i on S t at em ent , w hi ch w as s ubs e que nt l y a m e nde d. F i rs tH ori zon i s aph arm ac eut i ca l s c om pany thatm arket s a nd se l l s, bu tdo es notde ve l op, pr e s c r i pt i on drugs . F i r s tH or i z on f oc us e s i t s m a r ke t i ng e f

f or t s on the phy s i c i a ns w ho pr e s c r i be the drugs butonl y s e l l s the drugs t o w hol e s a l e r s , drug s to r e c h a in s , r e ta il m e r c h a n d is e r s , a n d , o c c a s io n a lly , d ir e c tly to r e ta il p h a r m a c ie s . P l a i nt i f f s a l l e ge tha tthe r e i s a di s c onne c tbe tw e e n F i r s tH or i z on’ s m a r ke t i ng ef fort s a nd i t s s al es such thatre po rt s of i ncre as ed pres cr i pt i on s by physi ci ans m ay nota c c ur a t e l y r e f

l e c ti nc r e a s e d s a l e s f

r om F i r s tH or i z on t o i t s di s tr i but or s a nd ret ai l ers. T he se cond ary off

er i ng thatun derpi ns the S ec uri t i es A ctcl ai m w as c o m p le te d to f

in a n c e th e a c q u is itio n o f a n e w p r o d u c t lin e , S u la r , w h ic h is a n a n tihypert ensi ve drug . P l ai nt i ff s c on t end t hatF i rs tH ori zon n ee ded t o m ai nt ai n m arket4

c o n f id e n c e in th e irs e c u r itie s in o r d e rto k e e p th e tr a d in g p r ic e o f th e irs to c k a t a pr i c e tha tw oul d br i ng i n e nough c api t a l f orthe num be rof

s ha r e s F i r s tH or i z on desi re d t o add t o t he m arket . P l ai nt i ff s a l l ege thatF i rs tH ori zon, there fore , e m pl oy e d a f

r a udul e nts c he m e t o c ontr ol the r e ve nue gr ow th. T he gi s tof the f r a u d u le n t s c h e m e w a s to p u s h m o r e in v e n to r y in to th e s u p p ly c h a in a n d to reco g n i ze rev en u e w i th o u ti n creased m ark etd em an d fo r th e p ro d u ct , th ati s, w i th o u ti n creased sal es b y th e p ro d u ct ’ s d i stri b u t o rs an d ret ai l ers. R evi ew i ng the defendant s’ m ot i on s t o d i sm i ss , the di stri ctcourtconcl ud ed thatthe pl ai nt i ff

s “ fa i l [e d] t o l i nk thei r s peci fi c a l l egat a t o the causes of ac t i on pl ed i n the i rc om pl a i nt ” a nd tha tthi s f a i l ur e m e a nttha tthe pl a i nt i f f s ha d notm e tthe pl ea di ng re qu i re m ent s of R ul e 9(b) a nd the P ri vat e S ec uri t i es L i t i gat i on R ef orm A c t, 1 5 U .S .C . § 7 8 u - 4 ( b ) ( “P S L R A ” ) . R 6 - 6 8 a t 3 6 . A n tic ip a tin g a m o tio n to a m e nd, the c our tc ondi t i one d a ny s uc h a m e ndm e nton the pa y m e ntof the d e f e n d a n ts ’ c o s ts a n d f

e e s a s s o c ia te d w ith th e m o tio n to d is m is s . T he pl ai nt i ff

s f i l ed a m ot i on t o l i ftthatcond i t i on . T he di stri ctcourtdeni ed thatm ot i on and o bserved t hatbo th p art i es had “ defaul t ed” on t he “ court ’ s off er . ” R 6 - 7 7 a t 7 . T h e c o u r t th e n “e x te n d [ e d ] s u b s ta n tia lly th e s a m e o f f e r :” d e f e n d a n ts w e r e t o s ubm i ta c l a i m f orf e e s a nd c os t s w i th i nf

or m a t i on s uf

f i c i e ntt o a l l ow the courtt o d et erm i ne thei r r ea sonabl enes s, and p l ai nt i ff s w er e t o fi l e a n am endedFirst Horizon challeng es the propriety of this appeal, arguing that we lac k jurisdiction 1 beca use the a ppeal is untimely

followingthe plaintiffs’ de cision not to appeal the initial order conditioning amendment. However, be causethe district court entertaine d the plaintiffs’ motion to reviewthe condition on that first order , the order never re sulted in a final order for purposes of appeal. The plaintiffs did timely appeal the second order, which bec ame f inal at the expiration of the stated c ondition. S ee V an Poyck v. Single tary, 11 F.3d 146, 148 ( 11th Cir. 1994) (per curiam). We have jurisdiction to review both order s. Ba rfield v. B rierton, 883 F .2d 923, 930 (11th Cir. 1989) (“ [T] he appe al from a final judgment draw s in question all prior non-final order s and ruling s which produc ed the judgment.”). 5 c o m p la in t “w ith th e u n d e r s ta n d in g th a t P la in tif f s w ill h a v e to p a y s o m e r e a s o n a b le f e e f orthe D e f

e nda nt s ’ f

e e s a nd c os t s a s s oc i a t e d w i th the m ot i ons t o di s m i s s . ” I d. a t7–8. T he c our tnot e d tha tthe pl a i nt i f f s c oul d the n r e a r gue the r e a s ona bl e ne s s of the defendant s’ re qu es t ed expenses and w hether the courtshou l d i m po se them at a ll. P l a i nt i f

f s a l l ow e d the c ondi t i one d pe r i od t o e xpi r e a nd f i l e d a not i c e of appe a l c ha l l e ngi ng both or de r s . O n appe a l the pl a i nt i f f s c ont i nue t o a r gue the 1 m er i t s of w hether the com pl ai ntst at ed a c l ai m and w hether the di stri ctcourt pr ope r l y c ondi t i one d a m e ndm e ntof the c om pl a i nt . A s di s c us s e d i n the s ubs e que nt se ct i on , w e s tri ke a di ff er entpath, concl ud i ng thatthe com pl ai nti s s o d ef i ci entthat the c our ts houl d ha ve s ua s pont e or de r e d r e pl e a di ng.

I I . DI S CUS S I ON W e r e v ie w d e n o v o a d is tr ic t c o u rt o r d e rg r a n tin g a m o tio n to d is m is s . O x f o r d A s s e t M g m t., L td . v . J a h a r is , 2 9 7 F .3 d 1 1 8 2 , 1 1 8 7 ( 1 1 th C ir . 2 0 0 2 ) . F ir s t,6

w e d e te r m in e w h e n n o n f r a u d c la im s u n d e rth e S e c u r itie s A c t m u s t b e p le d w ith pa r t i c ul a r i ty . S e c ond, w e r e vi e w the di s tr i c tc our t ’ s c onc l us i ons a boutw he the rthe p la in tif f s m e t th e irh e ig h te n e d p le a d in g b u r d e n . A . W h e n N o n f

r a u d C la im s M u s t B e P le d w ith P a r tic u la r ity S e c t i on 11 of

the S e c ur i t i e s A c tc r e a t e s a c a us e of a c t i on a ga i ns tpe r s ons p r e p a r i n g a n d s i g n i n g ma t e r i a l l y mi s l e a d i n g r e g i s tr a t i o n s t a t e me n t s . 1 5 U . S. C. § 77k( a ) . A r e gi s tr a t i on s t a t e m e ntc a n be m i s l e a di ng e i the rby c ont a i ni ng a n untrue s t a t e m e ntorby om i tt i ng f a c t s tha ta r e ne c e s s a r y t o pr e ve ntothe rs t a t e m e nt s f r om be i ng m i s l e a di ng. I d. T he r e i s no s t a t e of m i nd e l e m e ntt o a § 11 c l a i m , a nd l i a bi l i ty i s “ vi r tua l l y a bs ol ut e , e ve n f ori nnoc e ntm i s s t a t e m e nt s . ” H e r m a n & M a c L e a n v . H u d d le s to n , 4 5 9 U .S . 3 7 5 , 3 8 2 , 1 0 3 S . C t. 6 8 3 , 6 8 7 ( 1 9 8 3 ) . L i kew i se , § 1 2(a) (2) e xt ends si m i l arl i abi l i ty t o m i sr epre se nt at i on s i n p rospec tuses and o ra l com m un i ca t i on s. S ee 15 U . S . C . § 7 7l (a )( 2). Iti s c l ea r thatnei ther a l l e ga t i ons of

f r a ud nors c i e nt e ra r e ne c e s s a r i l y pa r tof e i the rof the s e c l a i m s . F or thi s r e a s on, w e r e f

e rt o the s e tw o c l a i m s a s “ nonf r a ud” c l a i m s i n thi s opi ni on. T he qu es t i on pres ent ed t o u s, ho w ever , re gards w hether there ar e c i r c um s t a nc e s w he n F e de r a l R ul e of C i vi l P r oc e dur e 9( b) w oul d r e qui r e nonf r a ud s e c u r itie s c la im s to b e p le d w ith p a r tic u la r ity . O u rs is te rc ir c u its s p lit o n th isPlaintiffs argue on appe al that the def endant underwriter s aredifferent from the rest of 2 thede fend ants in t

his a c tio n b e c a

us etheon ly

c laim m a dea g ains t th e m aro sein t he§ 1 1 c onte xt; that is , th e rewa s n o f

ra ud c a us eof a c tio n ag ains t th eun derwri ters . Se eIn reSup rema Specialties, Inc. Sec. Litig., 438 F .3d 256, 272–73 (3d Cir. 2006). We nee d not addre ss whether thi s distinc tio n ma

ke s a dif ferenc ebe c a

us etheplaintif

fs pre sse d this a

rgument f or thefirs t ti me on appeal. See Tanner Advertising Group, L .L .C. v. Fayette County , GA, 451 F .3d 777, 787 (11th Cir. 2006) (en banc) . 7 m a tt e r . C om pa r e C a l . P ub. E m pl oy e e s ’ R e t . S y s . v. C hubb C orp. , 394 F . 3d 126, 161 ( 3d C i r . 2004) ; R om ba c h v. C ha ng, 355 F . 3d 164, 171 ( 2d C i r . 2004) ; L one S t arL adi es Inv. C l ub v. S chl ot zs ky’ s, Inc. , 23 8 F . 3d 36 3, 36 8 (5t h C i r. 20 01 ); In re S t ac E l ec s. S ec . L i t i g. , 89 F . 3d 13 99 , 14 04 –0 5 (9t h C i r. 19 96 ), w i th In re N a tio n s m a r t C o rp . S e c . L itig ., 1 3 0 F .3 d 3 0 9 , 3 1 4

– 1 5 ( 8 th C ir . 1 9 9 7 ) . I n lin e w ith the m aj ori ty of c i rc ui t s t o add re ss the m att er , w e hol d thatR ul e 9(b) app l i es w hen th e m is r e p r e s e n ta tio n ju s tif y in g r e lie f

u n d e rth e S e c u r itie s A c t is a ls o a lle g e d to s uppor ta c l a i m f

orf r a ud unde rthe E xc ha nge A c ta nd R ul e 10( b) - 5. 2 R ul e 9( b) r e qui r e s tha t , “ [ i ] n a l l a ve r m e nt s of f r a ud orm i s t a ke , the c i r c um s t a nc e s c ons t i tut i ng f r a ud orm i s t a ke s ha l l be s t a t e d w i th pa r t i c ul a r i ty . ” T he ru l e req u i res th i s p art i cu l ari ty i n o rd er t o “ al ert [] d efen d an t s t o th e p reci se m i sco n d u ctw i th w h i ch th ey are ch arg ed an d [t o ] p ro t ect [] d efen d an t s ag ai n st s p u r io u s c h a r g e s o f

im m o r a l a n d f

r a u d u le n t b e h a v io r .” D u r h a m v . B u s . M g m t. A s s o c s ., 8 4 7 F .2 d 1 5 0 5 , 1 5 1 1 ( 1 1 th C ir . 1 9 8 6 ) ( q u o ta tio n s o m itte d ) . “[ T ]h e ru le e ns ur e s tha tthe de f

e nda ntha s s uf

f i c i e nti nf or m a t i on t o f

or m ul a t e a de f

e ns e by p u ttin g it o n n o tic e o f

th e c o n d u c t c o m p la in e d o f . . . [ a n d ] p r o te c ts d e f

e n d a n ts8

fr om harm t o t hei r goo dw i l l and reput at i on . ” H arri son v . W es t i ng ho use S avannah R iv e rC o ., 1 7 6 F .3 d 7 7 6 , 7 8 4 ( 4 th C ir . 1 9 9 9 ) ( q u o ta tio n s o m itte d ) . T h e tw in p u rp o s e s o f

p r o v id in g n o tic e a n d p r o te c tin g r e p u ta tio n g u id e o u rd e c is io n in de t e r m i ni ng the s c ope of R ul e 9( b) ’ s r e a c h. W e a ckno w l edge thatF eder al R ul e of C i vi l P roce du re 8(e) al l ow s apl ai nt i ff t o pl e a d i n the a l t e r na t i ve a nd not e tha ts e pa r a t e c ount s of the c om pl a i ntm us tbe r e a d s e pa r a t e l y . T hus , i f a c om pl a i ntw e r e t o s t a t e pr ope r l y a c l a i m f orba tt e r y a nd f r a u d , th e a lle g a tio n s s u r r o u n d in g th e f r a u d c la im w o u ld h a v e to b e s ta te d w ith p a r tic u la r ity w h e r e a s th e a lle g a tio n s s u r r o u n d in g th e b a tte r y c la im w o u ld o n ly ne e d be s t a t e d i n a c c or da nc e w i th not i c e pl e a di ng s t a nda r ds . H ow e ve r , the §§ 11 and 1 2(a) (2) c l ai m s i n t hi s c as e a re di ff er entfr om the previ ou s hypothet i ca l i n t hat the com pl ai ntal l eges thatthe m i sr epre se nt at i on ati ss ue i n the no nfraud cl ai m s a re a ls o th e b e g in n in g o f

— o ro th e r w is e p a r t o f

— th e p r e d ic a te f

r a u d f o rth e R u le 1 0 ( b ) ( 5 ) s e c u r itie s f

r a u d c la im . W e c o n c lu d e th a t a § 1 1 o r§ 1 2 ( a ) ( 2 ) c la im m u s t b e p le d w ith p a r tic u la r ity w he n the f

a c t s unde r l y i ng the m i s r e pr e s e nt a t i on a ts t a ke i n the c l a i m a r e s a i d t o be p a r t o f a f r a u d c la im , a s a lle g e d e ls e w h e r e in th e c o m p la in t. I t is n o t e n o u g h to cl ai m thatal t ernat i ve pl ea di ng sa ves the no nfraud cl ai m s f rom m aki ng an a lle g a tio n o f

f r a u d b e c a u s e th e r is k to th e d e f e n d a n t’s r e p u ta tio n is n o t p r o te c te d .9

I t w o u ld s tr a in c r e d u lity to c la im th a t R u le 9 ( b ) s h o u ld n o t ap p ly in th is a lle g a tio n : T h e d e f e n d a n t is a n o g o o d d e f

r a u d e r , b u t, e v e n if

h e is n o t, th e p la in tif

f c a n s till r e c o v e rb a s e d o n th e s im p le u n tru th o f th e o th e r w is e f

r a u d u le n t s ta te m e n t. N o ris i te nough t o pr e s e nta ge ne r a l di s c l a i m e ri n a n a tt e m ptt o i m m uni z e the nonf r a ud c l a i m s f r om the R ul e 9 r e qui r e m e nt s , f orthe s a m e c om m on s e ns e r e a s ons . T he pu rpose of the rul e i s t o p rot ec ta def endant ’ s goo d w i l l and reput at i on w hen t hat d e f e n d a n t’s c o n d u c t is a lle g e d to b e f r a u d u le n t. T hi s c on cl usi on do es no tadd n ew el em ent s t o the no nfraud cl ai m s, no r does i te l e va t e the pl e a di ng s t a nda r d w he n the c l a i m i s nota l l e ge d t o ha ve be e n pa r tof a n o th e rf r a u d - b a s e d c la im . I f

w o u ld - b e p la in tif

f s b r in g a § 1 1 o r§ 1 2 ( a ) ( 2 ) c la im w i tho utal l egi ng the m i sr epre se nt at i on ati ss ue i n the cl ai m w as fr audu l ent , they w ou l d avo i d t he hei gh t ened pl ea di ng re qu i re m ent s of R ul e 9(b). O n the ot her ha nd, i f the w oul d- be pl a i nt i f

f s a r e c l a i m i ng tha tthe § 11 or§ 12( a ) ( 2) m i s r e pr e s e nt a t i on i s pa r ta nd pa r c e l of a l a r ge rf

r aud, the n the rul e ’ s pr ot e c t i ve purpos e a tt a c he s a nd the pl a i nt i f f s m us tpl e a d w i th pa r t i c ul a r i ty . I n a c om pl a i nt s ubj e c tt o R ul e 9( b) ’ s pa r t i c ul a r i ty r e qui r e m e nt , pl a i nt i f f s r e t a i n the dua l bur de n of pr ovi di ng s uf

f i c i e ntpa r t i c ul a r i ty a s t o the f r a ud w hi l e m a i nt a i ni ng a s e ns e of b r e v i ty a n d c l a r i ty i n th e d r a f t i n g o f th e c l a i m, i n a c c o r d w i th Ru l e 8 . Se e D u r h a m, 847 F . 2d a t1511.With this observation, we do not pa ss on whether therearesufficient fac tual predic ates 3 in the larg e fact sec tion prior to the substantive counts that would state a c laim with the require d pa rticula ri ty . Wearesim

ply no tin gthat th e reareno t eno ugh f a c ts in th esu

bs tantivec ounts , dis re g ardingtheinc or

po ratio n c la

us e s. Ag ain, we do not pa ss on whether thereexis t enough fac ts in the complaint to survive a 4 motion to di smiss. W e agreewith the district court that the plaintiffs a re require d to better explain what fac ts support their claims for relief. 10 B. M o t i o n To D i s mi s s th e Se c u r i t i e s a n d Ex c h a n g e A c tCl a i ms T h e d istrict co u rt’s b as is fo r its R u le 1 2 (b )( 6 ) d ism issa l w as th e p lain ti ff’s “f a ilu r e to lin k th e irs p e c if ic a lle g a ta to th e c a u s e s o f a c tio n p le d in th e ir c om pl a i nt . ” R 6- 68 a t36. T he c our tc onc l ude d tha tthi s f a i l ur e t o l i nk r e s ul t e d i n a pl ea di ng thatdi d n otperm i tthe courtt o d i sc ern w hether acl ai m had b ee n st at ed w ith th e p a r tic u la r ity r e q u ir e d b y R u le 9 ( b ) a n d th e P S L R A . T h u s , th e c o u r t d id n o tad d ress th e actu al m eri t s o f th e S ecu ri t i es A ctan d secu ri t i es frau d cl ai m s. R e vi e w i ng the c om pl a i nt , w e a gr e e w i th the di s tr i c tc our ti n thi s r e ga r d: the r e a r e tw o pr obl e m s w i th the c om pl a i nttha tde m ons tr a t e t o us the i nappr opr i a t e ne s s of

a l l ow i ng the m a tt e rt o pr oc e e d. F i r s t , the s pe c i f i c c ount s of the com pl ai nt , w here i n t he pl ai nt i ff dem ar ca t es hi s c ause of ac t i on , ar e i n su ffi ci en t l y d et ai l ed fo r p u rp o ses o f R u l e 9 (b ), as t o th e S ecu ri t i es A ctcl ai m s, an d fo r p u rp o ses o f R u l e 9 (b ) an d th e P S L R A , as t o th e E x ch an g e A ctcl ai m s. 3 S ec on d, the el em ent s of these cl ai m s a re al so i nsuffi ci ent l y l i nk ed t o the l ar ge fa ct se ct i on thatproceeds the coun t s. T hese l egal concl usi on s, ho w ever , do no tbear 411

on the m e r i t s of

unde r l y i ng c l a i m s , be c a us e , a s the di s tr i c tc our ts a i d, “ [ w ] i thout a n y o b v io u s m e a n s o f

c o n n e c tin g P la in tif

f’s c a u s e s o f

a c tio n w ith th e a lle g a ta u n d e r l y i n g th o s e c a u s e s , th e c o u r ti s u n a b l e t o d e t e r mi n e w h e th e rPl a i n t i f f’ s c l a i ms a r e m e r ito r io u s o rp r e c is e ly th e k in d o f ab u s iv e litig a tio n C o n g r e s s s o u g h t to p r e v e n t.” R 6 - 6 8 a t 2 8 . T h e c o m p la in t a t is s u e in th is c a s e is a p r o v e rb ia l s h o tg u n p le a d in g . S hot gun pl e a di ngs a r e thos e tha ti nc orpor a t e e ve r y a nt e c e de nta l l e ga t i on by r e f e r e nc e i nt o e a c h s ubs e que ntc l a i m f orr e l i e f ora f f i r m a t i ve de f

e ns e . M a gl ut a v. S a m pl e s , 256 F . 3d 1282, 1284 ( 11th C i r . 2001) ( pe rc ur i a m ) . “ [ S ] hot gun pl e a di ngs w r e c k h a v o c o n th e ju d ic ia l s y s te m .” B y r n e v . N e z h a t, 2 6 1 F .3 d 1 0 7 5 , 1 1 3 0 ( 1 1 th C i r. 20 01 ). S uch p l ea di ng s di vertal re ady s tre t ched j ud i ci al re source s i nt o d i sput es th a t a r e n o t s tru c tu r a lly p r e p a r e d to e f f ic ie n tly u s e th o s e r e s o u r c e s . W e i l l us tr a t e thi s pr obl e m w i th C ountI V of the c om pl a i nt , w hi c h l a y s out the pl ai nt i ff

s’ cl ai m s f

or se curi t i es fr aud agai nstF i rs tH ori zon and the i nd i vi du al de f e nda nt s . T he f

i r s tpa r a gr aph, num be r e d 199, s t a t e s , “ P l a i nt i f f s r e pe a ta nd r e a l l e ge the a l l e ga t i ons s e tf or th a bove a s though f

ul l y s e tf or th he r e i n. ” R 2- 43 ¶ 1 9 9 . N o f

u r th e rr e f

e r e n c e is m a d e to th e p r e v io u s a lle g a tio n s in th e c o m p la in t, l e a vi ng the r e a de rt o w onde rw hi c h pr i orpa r a gr aphs s uppor tthe e l e m e nt s of the f r a ud c l a i m . F ol l ow i ng thi s pr i orpa r a gr aph i nc orpor a t i on c l a us e , the c om pl a i ntOn appe al the plaintiffs ha ve demonstrated their a

bility to cite spec ifically

to the 5 fac tual pa ragra ph s th at su

bs tanti atethe ir

c laims . Wee xpe c t th at kind of c onne c tiv ity

wo uld a llo w thedis tric t c ourt

to de terminewh e ther t

heplaintif

fs havestate d a

c laim. 12 g e n e r a lly a v e r s a s e c u r itie s f r a u d c la im . In paragraph 20 0, the pl ai nt i ff s c l ai m thatthe defendant s c arri ed ou ta pl an t o de c e i ve the i nve s t i ng publ i c , w hi c h r e s ul t e d i n the m a r ke ttr a di ng the defe nd ant s’ se curi t i es atan ar t i fi ci al l y hi gh pri ce . T he nextpara graph al l eges that the defendant s use d u nt rue s t at em ent s or om i tt ed m at er i al st at em ent s thatre sul t ed i n t he fr aud. T he com pl ai ntthen d i sc usse s the defendant s’ du ty t o truthful l y r eport i nve s t i ng i nf

or m a t i on t o the publ i c . T he ne xttw o pa r a gr aphs s um m a r i z e how the i ndi vi dua l de f

e nda nt s a r e ge ne r a l l y r e l a t e d t o the a l l e ga t i ons of f r a ud. T he pl a i nt i f f s the n a l l e ge tha tthe y tr a de d dur i ng the c l a s s pe r i od, w e r e una w a r e of the fal si ty o f th e d efen d an t s st at em en t s, an d w ere i n j u red b y th e frau d . T h ese a lle g a tio n s c o v e r , in a g e n e r a l m a n n e r , th e e le m e n ts o f a s e c u r itie s f

r a u d c la im unde rR ul e 10( b) - 5, 17 C . F . R . § 240. 10b- 5. S e e Z i e m ba v. C a s c a de I nt ’ l , I nc . , 256 F . 3d 11 94 , 12 02 (11t h C i r. 20 01 ). T he c e ntr a l pr obl e m i s tha tthe f a c tua l pa r t i c ul a r i ty of

the f i r s t175 pa r a gr aphs i s notc onne c t e d t o the othe rw i s e ge ne r a l l y pl e d c l a i m i n a ny m ean i n g fu l w ay. T h e co n cern w e ad d ress t o d ay i s stru ctu ral an d d o es n o tex p ress 5 a n opi ni on on the m e r i t s of the c l a i m . T he l a c k of

c onne c t i on be tw e e n theWe note that, although the complaint considered by the cour t was the plaintiff’ s 6 “Consolidated Amende d Class Action Complaint,” this is the first complaint to which the defendants filed a motion to dismiss (or a ny other re sponsive document). SeeR2-43 and R2- 46–48. 13 s ubs t a nt i ve c ounta nd the f a c tua l pr e di c a t e s i s the c e ntr a l pr obl e m w i th e a c h of the e n u m e r a te d c o u n ts in th e c o m p la in t, b e c a u s e c o u r ts c a n n o t p e r f o r m th e ir ga t e ke e pi ng f

unc t i on w i th r e ga r d t o the a ve r m e nt s of f r a ud. I ti s nottha tw e know thatthe pl ai nt i ff

s c anno tst at e acl ai m bu tra ther thatw e do n otkn ow w hether they h a v e . T h is is b e c a u s e th e p la in tif f s h a v e n o t c o n n e c te d th e irf a c ts to th e irc la im s in a m a n n e rs u f

f ic ie n t to s a tis f

y R u le 9 ( b ) . N one the l e s s , w e di s a gr e e tha tdi s m i s s a l w a s the appr opr i a t e c our s e of a c t i on for the di stri ctcourtt o t ake a tthi s j un cture i n the l i t i gat i on . A s the di stri ctcourt c onc l ude d, “ the pr obl e m w a s nottha tP l a i nt i f f s di d nota l l e ge e nough f a c t s , or fa i l ed t o rec i t e m agi c w ords; the prob l em l ay i n the fa ctthatw hi l e P l ai nt i ff s i ntr oduc e d a gr e a tde a l of f a c tua l a l l e ga t i ons , the a m e nde d c om pl a i ntdi d not cl ea rl y l i nk any of tho se fa ct s t o i t s c ause s of a ct i on . ” R 6-77 at6. W e di sa gree w ith th e d is m is s a l o f

th is c a s e b e c a u s e th e s e o b s e r v a tio n s s o u n d m o r e c le a r ly in R ul e 12( e ) ’ s r e m e dy of

or de r i ng r e pl e a di ng f

ora m or e de f

i ni t e s t a t e m e ntof

the cl ai m , ra ther than i n R ul e 12(b)(6)’ s r em edy of di sm i ss al for f ai l ure t o st at e a cl ai m . In fa ct , the courtno t ed thatthere w as “ no re peat ed fa i l ure on P l ai nt i ff’ s part to d r a f t a c o n f o r m in g c o m p la in t.” I d . 6We a rec ogniza

nt o f Wagner v . D a e wo o H e avy Ind us . Am. C or

p. , 3 14 F .3 d 5 41 (1 1th 7 Cir. 2002) (en ba

nc). Tha t caserec ognizes the potential for abusethat follows allowing plaintiffs to appeal dismi ssed complaints as longas the district cour t free ly permits amendment. I d. at 54 2–43 . B e c a

us eof thewa y were so lvethi s c a se , w edo no t ha vetheoppo rt

un ity to p a ss on thequ e sti on

of ho w c on dition e d amendments wo uld c omp lic ateWagner’ s o therw ise straightforwa

rd rule. 14 G i v en th e d i stri ctco u rt ’ s p ro p er co n cl u si o n s th atth e co m p l ai n tw as a s h o tg u n p le a d in g a n d th a t th e p la in tif f s ’ f a ile d to c o n n e c t th e irc a u s e s o f a c tio n to the fa ct s a l l eged, the prop erre m edy w as t o o rderre pl ea di ng sua s po nt e. S ee B y r ne , 261 F . 3d a t1133. T he F i f th C i r c ui tha s obs e r ve d the ut i l i ty of e m pl oy i ng 7 R ul e 12(e) re pl ea di ng s t o cl ar i fy fr aud cl ai m s i n o rdert o o bt ai n the re qu i re d d egre e of f a c tua l pa r t i c ul a r i ty . S e e C a t e s v. I nt ’ l T e l . & T e l . C orp. , 756 F . 2d 1161, 1180 ( 5 th C ir . 1 9 8 5 ) . I I I . CONCL US I ON I n thi s appe a l , w e de t e r m i ne d tha te ve n s e c ur i t i e s c l a i m s w i thouta f r a ud e l e m e ntm us tbe pl e d w i th pa r t i c ul a r i ty pur s ua ntt o R ul e 9( b) w he n tha tnonf r a ud s e c ur i t i e s c l a i m i s a l l e ge d t o be pa r tof a de f e nda nt ’ s f

r a udul e ntc onduc t . S e c ond, w e r e v ie w e d th e d is tr ic t c o u r t’s d e te r m in a tio n th a t th e p la in tif f s h a d f a ile d to s ta te a c la im , b u t w e c o n c lu d e th a t th e p r o p e rd is p o s itio n r e q u ir e s th e p la in tif f s to re pl ea d t hei r c om pl ai nt . A pp l yi ng these det erm i nat i on s t o thi s c as e, w e VA C A TE the or de r s di s c us s e d i n thi s opi ni on a nd RE MAND W I T H I NS T RU CT I ON S to15

or de rr e pl e a di ng.