[DO NOT PUBLISH]

IN THE UN ITED STATES COURT OF APPEALS

FOR THE ELE VENTH CIRCUIT

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__ __ __ __ __ __ __ __ __ __ __ No. 1 2- 12 19 6 Non -Arg um en t Ca le nd ar

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__ __ __ __ __ __ __ __ __ __ __ D.C. Dock et No. 8 :1 0- cv -0 23 17 -SDM- MAP

MARGARET J AYNE KINNE TT, in di vi du al ly and on be ha lf o f al l o th ers si m il arl y si tu at ed , et al .,
ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll Pl ai nt iff s,

OKLAHOMA FIREFIGHTERS PENSION AND RETIREMENT SYSTEM,

ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll l Mo va nt -Ap pe ll an t,

ve rs us
STRAYER EDUCATION, INC., ROBERT S. SILBER MAN, MARK C. BR OW

N, KARL MCDONNELL,

ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll l Defen da nt s- App el le es

.

__ __ __ __ __ __ __ __ __ __ __ __ App eal fro m

th e Uni te d S ta te s Di st ric t Co ur t for th e Mi dd le Dis tri ct of F lo rid a

__

__ __ __ __ __ __ __ __ __ __ __ (Dece m be r 13 , 20 12 ) Case: 12-12196 Date Filed: 12/13/2012 Page: 1 of 8Befo re HULL, MARCUS an d M ARTIN, Cir cu it Ju dg es

.

PER CURI AM:
App el la nt O kla

hom a Fi re fi ght ers Pen si on an d Ret ire m en t Sy st em ap pe al s fro m

th e di st ric t co ur t’s fin al jud gm en t in fav or of App el le es St rayer Edu cat io n, In c.,

Ro be rt S. Si lb erm an , Mar k C. Bro wn, an d Karl McDo nn el l (co ll ect iv el y , “ St rayer”).

The di st ric t co ur t, ad op ti ng in fu ll th e rep or t and reco m m en da ti on of th e m ag is tra te
jud ge , di sm is se d App el la nt ’s co m pl ai nt , whi ch al le ge d, on be ha lf of al l pe rs on s who

pu rch as ed St rayer c om m on st oc k be twe e n N ov em be r 1, 20 07 an d Ja nu ary 7 , 2 01 1,

th at Str ay er h ad m ad e fal se or m is le ad in g st at em en ts du rin g th at pe rio d c on cern in g

it s recr ui tm en t an d en ro ll m en t pr act i ces , i n vi ol at io n of se ct io ns 10 (b ) an d 20 (a) of

t h e Secu rit ie s Exc ha ng e Act of 19 34 , 15 U.S.C. §§ 78 j(b) an d 78 t(a ). On ap pe al , 1

App el la nt arg ue s th at th e di st ric t co ur t erre d in co nc lu di ng th at App el la nt ha d fai le d

to sa ti sf y al l th ree el em en ts of a se cu rit ie s frau d cl ai m ((1 ) a f a l s e or m is le ad in g

Section 10(b) of

the Exchang e Ac t provides: 1

I t shall be unlawful f

or any person, dire ctly

or indirec tly , ... [t ]o use or employ , in

connec tion with the purchase or sale of any secur ity ... any manipulative or dece ptive device or contriva nce in c ontrave ntion of such rules a nd reg ulations as the Commiss ion may

presc ribe a s nece ssary

or appr opriate in the public inter est or for the pr otection of investors.
15 U.S.C. § 78j(b). Section 20(a) of the Exchang e Ac t provides for liability of “c ontrolling persons” who aid and a

bet “a ny person liable unde r any

provision of this chapter

or of a ny rule or reg ulation thereunde r.” 15 U .S.C. § 78t (a)

.
2

Case: 12-12196 Date Filed: 12/13/2012 Page: 2 of 8st at em en t; (2 ) sc ie nt er; an d (3 ) lo ss cau sa ti on ) an d in di sm is si ng th e co m pl ai nt

. Afte r

care fu l re vi ew, we affi rm

.
W e rev ie w a di st ric t co ur t’s or de r di sm is si ng a co m pl ai nt de no vo

. Fi nd W ha t

In ve st or Gro up v. Fi nd W ha t.co m , 65 8 F.3 d 12 82 , 12 95 ( 1 1 t h C i r

. 20 11 ). At th e

mo t i on to di sm is s st ag e, we acce pt al l well -p le ad ed fact s as tru e, an d co ns tru e th e

reas on ab le in fere nc es th eref ro m in th e li gh t m os t fav or ab le to th e pl ai nt iff

. Garfi el d

v. NDC Hea lt h C or

p., 4 66 F.3d 12 55 , 12 61 (11 th Cir . 20 06 ).

To s ta te a cl ai m

un de r § 1 0( b) , a pl ai nt iff m us t al le ge :
(1 ) a m at eri al m is rep res en ta ti on or om is si on ; (2 ) m ad e wit h sc ie nt er; (3 )

a co nn ect io n wit h th e pu rch as e or sa le of a se cu rit y ; (4) reli an ce on th e
m is st at em en t or o m is si on ; (5 ) eco no m ic lo ss [i.e ., d am ag es ]; a nd (6 ) a
c au sa l co nn ect io n be twee n th e m at eri al m is rep res en ta ti on or om is s i o n
an d t he lo ss , com m on ly call ed “ lo ss cau sa ti on .”

Fi nd W ha t, 65 8 F.3 d at 12 95 (q uo ta ti on om it te d; em ph as is ad de d) ; se e Dur a Ph arm s.,

In c. v. Brou do , 54 4 U.S. 33 6, 34 1- 42 (2 00 5)

. Bec au se al l si x elem en ts are req ui red

in or de r to st at e a § 10 (b ) cl ai m , an d be cau se we co nc lu de th at th e el eme n t mo st

st ark ly ab se nt fro m App el la nt ’s pl ead in g was lo ss cau sa ti on , th at is th e on ly on e we

ad dr es s h ere.

The lo ss cau sa ti on el em en t req ui res th at a de fen da nt ’s frau d be bo th th e bu t-f or

a nd pr ox im at e cau se of a pl ai nt iff ’s la te r lo ss es

. Fi nd W ha t, 65 8 F.3 d at 1 3 0 9 ; c f

.
Dur a Ph arm ., In c. v. Bro ud o, 54 4 U.S. 33 6, 34 4- 45 (2 00 5) (n ot in g th e “ co m m on -la w

3 Case: 12-12196 Date Filed: 12/13/2012 Page: 3 of 8ro ot s of th e se cu rit ie s frau d act io n” an d ba si n g it s lo ss cau sa ti on an al y si s on

co m m on -la w to rt cau sa ti on ). Thu s, th e pl ai nt iff m us t sh ow th at th e de fen da nt ’s frau d

-- as op po se d to so m e ot he r fact o r
- - p r o x i m at el y cau se d hi s cl ai m ed lo ss es

. Dur a,

54 4 U.S. at 34 2- 43 ; Fi nd W ha t, 65 8 F.3 d at 13 09

. Fu rt h e r , a p l a i n ti ff m ay no t

es ta bl is h lo ss cau sa ti on by si m pl y al le gi ng a se cu rit y was pu rch as ed at an art ifi ci al ly

in fla te d pr ic e. Dur a, 54 4 U.S. at 34 2- 43 , 34 7. Howev er, th e pl ai nt iff ne ed no t sh ow

th at th e de fen da nt ’s m is co nd uc t was th e “ so le an d ex cl us iv e cau se ” of hi s in jury; he

ne e d on ly sh ow th at th e de fen da nt ’s act was a “ su bs ta nt ia l” or “ si gn ifi can t

co nt rib ut in g cau se .” Fi nd W ha t, 65 8 F.3 d at 13 09 ; Ro bb in s v. Kog er Pro pe rti es , In c.,

11 6 F .3d 14 41 , 14 47 (11 th Cir . 19 97 ).
App el la nt cl ai m s th at as a res ul t of St rayer’ s frau d co nc ern in g it s recru it m en t

an d en ro ll m en t pr act ic es , ne w st ud en t en ro ll m en ts de crea se d by 20 %, whi ch in tu rn

lo wered th e st oc k pr ic e. App el la nt pr im ari ly fo cu se s it s lo ss -cau sa ti on al le ga ti on s on

st at em en ts m ad e in a qu es ti on -an d- an s wer se ss io n fo ll owi ng a Ja nu ary 10 , 20 11 ,

co nf eren ce cal l th at St rayer he ld wit h in ve st or s. Dur in g th is se ss io n, St rayer’ s CEO

Si lb erm an ha d t he fol lo win g e xc ha ng e wit h a na lyst Am y Ju nk er pri or to tra di ng on

Ja nu ary 10 , 20 10 :

AMY JUNKER, ANA LY ST, ROBERT BAIRD: I’m ho pi ng y ou can jus t to uc h a li t t l e b i t on an y ad di ti on al co lo r on why y ou th in k st art s ha ve de gr ad ed s o mu c h s in ce la st qu art er. Do y ou st il l be li ev e th at

4 Case: 12-12196 Date Filed: 12/13/2012 Page: 4 of 8n e g a t i v e pr es s is ki nd of th e on ly pl au si bl e ex pl an at io n as y ou ta lk ed

ab ou t la st qu art er? W ere y ou se ei ng an y ev id en c e th at st ud en ts ha ve b e co m e pe rh ap s m or e de bt av ers e or an y of th e reas on s th at y ou ’re ge tt in g fro m th e st ud en ts th em se lv es to in di cat e why th is is ha pp en in g?

ROBERT SILBERM AN: Su re. I m ean Karl [Mc Don ne ll ] is he re, an d he can co m

m en t as w el l. I do n’t kn ow of an y sp eci fic se t of co nc ern s wit h reg ard to pr ic in g or de bt cap aci ty. Our ne w st ud en t en ro ll m en t was fai rly co ns is te nt acro ss al l of ou r ge og rap hi c r e g io ns in te rm s of th e im pa ct

. So I wou ld -- th ere is no th in g geo gr ap hi c th at I wou ld lo ok at

.
I do th in k th at ne ga ti ve pu bl ic it y an d jus t a ge ne ral se ns e of -- y ou ha ve to be ar in m in d th e di ffi cu lt y th at st u d e n t s go th ro ug h in te rm s of de ci di ng to go ba ck to sc ho ol , th ere is al way s a lo t of reas on s no t to do it , an d th e ne ga ti ve pu bl ic it y in th e la st fo ur or fiv e m on th s cert ai nl y ha s ha d a n i m pa ct . W e ha ve al so be en I wou ld ad m it so m ewh at di st ract ed in te rn al ly he re ov er t h e la st two or th ree m on th s jus t in de al in g wit h

so m e of th e ram ifi cat io ns of no t jus t th e pu b l i c i t y b ut th e act ua l go ve rn m en ta l ac ti vi ty.

Doc . 40 at 8 7, ¶ 19 9 (em

ph as es ad de d) . From th is ex ch an ge , App el la nt arg ue s t ha t

St rayer ad m it te d th at a cau se in th e dr o p i n ne w st ud en t st art s was th at it ha d be en

fo rced by th e go ve rn m en t to ch an ge it s r e c r u i t m en t pr act ic es

. Fu rth er, sa y s
App el la nt , St rayer ad m it te d th at it s pr io r pr act ic es ha d be en co nt rary to go ve rn m en t

gu id el in es -- an d were no t th e pa ss iv e recr ui tm en t ta ct ic s th at St rayer ha d rep res en te d

th at it us ed to in ve st or s -- an d th at th es e im pr op er pr act ic es le d to de crea se d st ud en t

en ro ll m en t, an d t hu s, l owe r st oc k p ric es

.
Howev er, as th e di st ric t co ur t reas on ed , t h e s e st at em en ts do no t rev eal th at

St r ay er was ad m it ti ng th at it ha d en ga ge d in im pr op er recr ui tm en t an d en ro ll m en t

5 Case: 12-12196 Date Filed: 12/13/2012 Page: 5 of 8pr act ic es , th at th os e al le ge d i m pr op er p ract ic es eit he r bo ls te red or we re i nt en de d t o

bo ls te r st ud en t en ro ll m en t nu m be rs , th at pr io r st ud en t en ro ll m en t nu m be rs were th e

r e su lt of im

pr op er recr

ui tm en t an d en ro ll m en t pr act ic es , th at St rayer im pl eme n t e d

in te rn al refo rm s as to th e al le ge d im pr op er pr act ic es , or t h a t a n y refo rm s affe ct ed

en ro ll m en t nu m

be rs

. In de ed , Si lb erma n s ai d no th in g ab ou t St rayer’ s recr ui tm en t

pr act ic es du rin g th e rel ev an t ex ch an ge

. If an y th in g, th e s t a t e ment s in di cat e th at

de al in g wit h go ve rn m en ta l act iv it y is a ti m e-co ns um in g ta sk th at di s t ract s

m an ag em en t at te nt io n fro m ru nn in g th e un iv ers it y , an d th at St rayer b e l i ev ed an y

de cl in e in en ro ll m en t de riv ed fro m th e ne ga ti ve pr es s su rro un d i ng th e go ve rn m en t

act iv it y wit h res pe ct to th e fo r-p ro fit se co nd ary ed uc at io n in du st ry , no t an y ch an ge s

in it s re cru it m en t o r en ro ll m en t p ract ic es

.
In sh or t, th e ad m is si on th at St rayer’ s e n ro ll m en ts were effe ct ed by

“ go ve rn m en ta l act iv it y ” do es no t r ev eal th at St rayer’ s en ro ll m en t pr act ic es ha d no t

pr ev io us ly co nf

or m ed w i t h th e go ve rn m en t st an da rd s, as co di fie d in th e Hig he r

Edu cat io n Act or St rayer’ s i n te rn al co de of et hi cs , or th at St rayer m od ifi ed it s

en ro ll m en t pr act ic es be cau se of go ve rn m en t sc ru ti ny. App el la nt arg ue s th a t i t is

am bi gu ou s wha t S i l b e r man was refe rri ng to , an d th at th is am bi gu it y sh ou ld no t be

res ol ve d ag ai ns t App el la nt on a m ot io n to di sm is s. Howev er, th e Su pr em e Co ur t ha s

sa id th at fact ua l all eg at io ns in a co m pl ai nt “ m us t be eno ug h to rai se a ri gh t t o re li ef

6 Case: 12-12196 Date Filed: 12/13/2012 Page: 6 of 8ab ov e th e sp ec u la ti ve le ve l,” Bel l Atl an ti c Co rp or at io n v. Twom bl y , 5 50 U.S. 5 44 ,
55 5 (2 00 7) , an d th at “ [a] cl ai m ha s faci al pl au si bi li ty whe n th e pl ai nt iff pl ead s fact ua l

co nt en t th a t a l lo ws th e co ur t to dr aw th e reas on ab le in fere nc e th at th e de fen da nt is

li ab le fo r th e m is co nd uc t al le ge d,” Ash cro ft v. Iq ba l , 5 5 6 U

. S

. 66 2, 67 8 (2 00 9)

.
Mo reo ve r, sp eci fic to th e si tu at io n at ha nd , th e S u pr em e Co ur t ha s ex pr es sl y

de m an de d a co m

pl ai nt to al le ge “ so m et hi ng be y on d th e m ere po ss i b i l i t y of lo ss

cau sa ti on .” Twom

bl y , 55 0 U.S. at 55 7 (c it in g Du ra, 5 44 U.S. at 3 47 ).
Here, with ou t any ex pl ic it m en ti on of St rayer’ s re cru it m en t prac ti ces or ev en

an y ch an ge in an y

of i ts po li ci es , i t is si m

pl y no t reas on ab le to in fer th at Si lb erm an

was so m eh ow co nc ed in g th at St rayer ha d en ga ge d in im pr op er recr ui ti ng or ha d be en

fo rced to ch an ge it s recr ui ti ng pr act ic es to th e de tri m en t of it s st oc k pr ic es

. As we’ve

sa id , whi le am

bi gu it ie s ar e co ns tru ed in th e li gh t m os t fav or ab le to th e n on m ov an t,

“ un warra nt ed de du ct io ns of fact ” are no t ad m it te d as tru e in a mo t i o n t o di sm is s.

Ald an a v. Del Mo nt e Fres h Pro du ce, N.A., In c., 41 6 F.3 d 12 42 , 12 46 , 12 48 (1 1t h Ci r.

20 05 ) (q uo ta ti on om it te d)

. Tha t is ex act ly wha t App el la nt is ur gi ng th e co ur ts to do

.
Acco rd in gl y , si nc e no th in g in th e st at em en ts co rrec ts an y pr io r di sc lo su res by St rayer

or rev eal s an y om is si on s on St rayer’ s pa rt th at ne ga ti ve ly affe ct ed th e pr ic e of St rayer

co m m on st oc k, App el la nt ha s fai le d to ad eq ua te ly al le ge lo ss cau sa ti on

. The di st ric t

co ur t d id no t er r in di sm is si ng App el la nt ’s Sect io n 1 0( b) cla im

.

7 Case: 12-12196 Date Filed: 12/13/2012 Page: 7 of 8Nor do we fin d an y erro r in th e di st ric t co ur t’s di sm is sa l of App el la nt ’s Sect io n

20 (a) cl ai m

. To st at e a cl ai m un de r § 20 (a), the App el la nt ne ed ed to al le ge th at : (1 )

St rayer co m

m it te d a pr im ary vi ol at io n of th e se cu rit ie s la ws; (2 ) th e in di vi du al

de fen da nt s po ss es se d th e po wer to co nt ro l th e ge ne ral bu si ne ss affa irs of St rayer; an d
(3 ) th e in di vi du al de fen da nt s p os se ss ed th e req ui si te po wer to di rect ly o r in di rect ly

co nt ro l or in flu en ce th e sp eci fic co rp or a te po li cy whi ch res ul te d in th e pr im ary

l ia bi li ty. Mi zzar o v. Hom e Dep ot , In c., 54 4 F.3 d 12 30 , 12 37 (1 1t h C i r

. 2 0 0 8 )

.
Bec au se a pr im ary vi ol at io n of th e se cu rit ie s la ws co ns ti tu te s an es se nt ia l el em en t of

a § 20 (a) de riv at iv e cl ai m , a pl ai nt iff ad eq ua te ly p le ad s a § 2 0 ( a ) cl ai m on ly wh ere

th e pl ai nt iff ad eq ua te ly pl ead s a pr im ary vi ol at io n. Id

. As we’ve di sc us se d, App el la nt

fai le d to ad eq ua te ly pl ead a vi ol at io n of § 10 (b ), an d th eref or e, App el la nt fai le d to

ad eq ua te ly ple ad a § 2 0( a) co nt ro l-p ers on cla im . See i d. at 12 55

.
AFFIRMED.

8 Case: 12-12196 Date Filed: 12/13/2012 Page: 8 of 8