UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 03-2188

LAWRENCE F. GLASER; MAUREEN GLASER,

individually and on behalf of Kimberly, Erin,

Hannah, and Benjamin Glaser,

Plaintiffs - Appellants,

versus

ENZO BIOCHEM, INCORPORATED; HEIMAN GROSS;

BARRY WEINER; ELAZAR RABBANI; SHARIM RABBANI;

JOHN DELUCCA; DEAN ENGELHARDT; JOHN DOE 1-50,

Defendants - Appellees,

and

RICHARD KEATING; DOUG YATES,

Defendants.

Appeal from the United States District Court for the Eastern

District of Virginia, at Alexandria. Gerald Bruce Lee, District

Judge. (CA-02-1242-A)

Argued: September 30, 2004 Decided: March 21, 2005

Before WILKINSON, GREGORY, and SHEDD, Circuit Judges.

Affirmed in part, reversed in part, and remanded by unpublished

opinion. Judge Shedd wrote the opinion, in which Judge Gregory

joined. Judge Wilkinson wrote an opinion concurring in part and

dissenting in part.
2

ARGUED: Michael J. Rovell, Chicago, Illinois, for Appellants.

Donald Howard Chase, MORRISON, COHEN, SINGER & WEINSTEIN, New York,

New York, for Appellees. ON BRIEF: Lisa I. Fair, LAW OFFICES OF

MICHAEL J. ROVELL, Chartered, Chicago, Illinois, for Appellants.

Robert R. Vieth, Patricia T. Giles, COOLEY GODWARD, L.L.P., Reston,

Virginia; David A. Piedra, MORRISON, COHEN, SINGER & WEINSTEIN, New

York, New York, for Appellees Enzo Biochem, Incorporated, Barry

Weiner, Elazar Rabbani, Sharim Rabbani, John DeLucca, and Dean

Englehardt. K. Stewart Evans, Jr., PEPPER HAMILTON, L.L.P.,

Washington, D.C., for Appellee Heiman Gross.

Unpublished opinions are not binding precedent in this circuit.

See Local Rule 36(c).
3

SHEDD, Circuit Judge:

The plaintiffs, Lawrence F. Glaser and his family, appeal the

dismissal of their claims for federal securities fraud, conspiracy,

and common law fraud against Enzo Biochem, Inc. (“Enzo”) and

individual defendants Barry Weiner, Elazar Rabbani, Shahram

Rabbani, Dean Engelhardt, John DeLucca, and Heimon Gross. After

denying the plaintiffs leave to amend their complaint, the district

court dismissed the federal securities fraud claim based on the

applicable statute of limitations and dismissed the remaining

claims for failure to state a claim upon which relief could be

granted. For the reasons that follow, we affirm in part, reverse

in part, and remand for further proceedings.

I.

Enzo is a publicly traded biotechnology company engaged in

research and development of treatments to combat the human

immunodeficiency virus (“HIV”) and other diseases. During the

period from 1994 to 2000, Glaser purchased more than one million

shares of Enzo stock. According to the plaintiffs’ amended

complaint, Enzo, through press releases and statements made by its

officers, exaggerated the preliminary success of a new HIV

treatment in 2000 and misled investors concerning the prospects for

marketing that treatment. As a result, Glaser continued to

purchase Enzo stock at a time when Enzo’s officers and directors
1

Because we are reviewing a Rule 12(b)(6) dismissal, we “must

take all well-pleaded material allegations of the [amended]

complaint as admitted and view them in the light most favorable to

the plaintiff.” De Sole v. United States, 947 F.2d 1169, 1171 (4th

Cir. 1991). 

4

were selling their stock at inflated prices. After Enzo’s stock

price dropped precipitously in the spring of 2000, Glaser was left

holding more than one million shares, many of which had been

purchased on margin. Glaser and his wife were forced into

bankruptcy.1 

The plaintiffs specifically complain about statements made by

Enzo officers during the January 12, 2000, annual shareholders’

meeting. At that meeting, Enzo manager Dean Engelhardt announced

that Enzo had developed a new treatment to combat HIV. According

to Engelhardt, this new treatment was like a “roach motel,” where

“the virus goes in but does not come out.” J.A. 267. Engelhardt

stated that although the Food and Drug Administration (“FDA”) would

not allow him to say that Enzo had cured AIDS, Enzo’s new treatment

“works” and it kills the virus. J.A. 267. The amended complaint

alleges that these statements were false because preliminary trials

had not, in fact, yielded results that would satisfy the FDA’s

efficacy requirements for such a treatment.

During the same January 12 meeting, Enzo’s president, Barry

Weiner, reported that Enzo planned to open three more clinics by

the end of the fiscal year to treat HIV and AIDS patients. J.A.

267. Each clinic would be able to treat 9,500 patients at a charge
2

Clinical trials for new treatments are conducted in phases.

Phase I trials involve a smaller number of patients and primarily

assess the safety and preliminary efficacy of the treatment. Phase

II trials involve a larger number of patients and are focused on

the ultimate efficacy of the treatment. 

5

of $30,000 per patient. The amended complaint alleges that this

representation was false because Enzo did not have permission from

the FDA to open any new clinics, nor had Enzo even sought such

permission. Weiner also stated that Enzo had submitted its Phase

I trial data to the FDA and that the company was awaiting approval

to proceed to Phase II trials.2 J.A. 268. In fact, Enzo did not

even have Phase I data in hand that it could submit to the FDA at

that time.

Weiner made further representations concerning the so-called

HGTV-43 vector, a key component of a new gene therapy developed by

Enzo. In a process called transduction, the HGTV-43 vector would

deliver certain genes to human cells. With this new gene, these

cells were engineered to enhance immune responses. Weiner stated

at the January 12 meeting that Enzo scientists had been able to

reduce the time period required for successful transduction from a

period of up to three months to a period of only eighteen hours;

that HGTV-43 was able to achieve levels of stable transduction to

patients’ non-growing blood stem cells greater than 30%; and that

the HGTV-43 vector was ready for commercialization. J.A. 268-69.

In a press release regarding Enzo’s gene therapy and the HGTV-43

vector, Enzo also stated that it was exploring expansion of its
6

clinical trials. J.A. 269. Weiner failed to mention, however,

that Enzo had modified its transduction protocol due to the absence

of any positive data from initial research or that this lack of

positive data had slowed down the development of Enzo’s gene

therapy and delayed clinical trials. Despite Weiner’s assurance

that the HGTV-43 vector was ready for commercialization, Enzo had

not marketed that product by the time the plaintiffs filed their

complaint. 

Although share prices for Enzo usually fluctuated by

approximately $1 per share to $3 per share after annual meetings

and trading volumes average only two million shares, in the eight

trading days after the January 12 meeting Enzo’s stock price soared

$90 per share -- from $43 to $133 -- at a trading volume of more

than thirteen million shares. 

Within a few months after the January 12 meeting, one Enzo

director sold all of his holdings, valued at approximately $2

million. Three of Enzo’s five directors sold a total of 600,000

shares at $81 per share, and Engelhardt, who made several of the

statements at issue in this case, sold 5,000 shares at $70 per

share. Enzo’s stock price began to decline immediately, and within

two weeks it was down to $35 per share. 

In response to this devaluing of the stock, Enzo managers

issued a press release assuring investors that “[t]he recent

activity of the stock merely mirrors the general weakness that has
7

affected the entire biotech industry and in no way reflects Enzo’s

intrinsic value.” J.A. 274. This press release further stated

that a clinical study at the University of California was moving

toward its final stages; HGTV-43 had successfully delivered certain

genes to blood stem cells outside the human body; following

transduction and infusion into patients, the genetically engineered

cells continue to survive and behave in a manner consistent with

the goals of the treatment; an abstract concerning the therapy had

been accepted for presentation to the American Society of Gene

Therapy in June 2000; Enzo knew of no other therapy that had

achieved the results that Enzo’s gene therapy achieved; and plans

for Phase II clinical studies were proceeding. J.A. 274-75. This

press release misrepresented key facts concerning Enzo’s gene

therapy. Enzo’s trials had not yielded particularly positive

results, and in some cases produced negative results; Enzo failed

to mention that the data it collected was based on only five

patients; and Enzo had not applied for Phase II approval, nor did

it have a schedule in place for Phase II testing. 

Once its stock price dropped to $35, Enzo issued another press

release. According to this release, all remained well with Enzo,

the ongoing clinical trials were on schedule, and Enzo had no

explanation for the collapse in the stock price. J.A. 277. These

statements were false in that Enzo had no schedule in place for the

ongoing clinical trials, and Enzo did have at least a partial
8

explanation for the drop in stock price, i.e., the transfer of

600,000 shares by top-level managers. 

 In October 2000, Enzo issued a press release reporting that

“new data on the first individual treated in the Phase I clinical

trial of HGTV-43, the company’s HIV-1 gene medicine product, show

that after nine and one-half months Enzo engineered cells have

successfully engrafted the patient’s bone marrow and were spawning

new . . . cells designed to fight the virus.” J.A. 285-86.

Contrary to this statement, Enzo disclosed data in March 2001

showing that engraftment had actually failed. 

The devaluation of Enzo stock resulted in significant losses

for Glaser. By April 2000, Glaser held more than one million

shares of Enzo stock, and he was forced to liquidate these holdings

in order to cover debts for shares purchased on margin. Glaser and

his wife ultimately filed for bankruptcy protection. 

During the course of his bankruptcy proceeding, Glaser came to

believe that Enzo was involved in a “massive securities fraud” and

sought discovery from Enzo concerning that fraud. J.A. 740A. The

bankruptcy court granted Glaser’s motion for discovery. In March

2002 -- more than a year after filing his motion for discovery in

the bankruptcy court -- Glaser filed a complaint alleging federal

securities fraud and common law fraud against Enzo. Glaser

voluntarily dismissed this initial complaint. In August 2003,

Glaser and his family initiated this lawsuit by filing a new
9

complaint alleging violations of federal securities laws, civil

conspiracy, and common law fraud. 

The district court dismissed the federal securities fraud

claim on the ground that the applicable one-year statute of

limitations had run before the complaint was filed. The district

court then dismissed the plaintiffs’ conspiracy claim as a matter

of law, ruling that federal securities laws do not contemplate

liability for conspiracy just as they do not for aiding and

abetting. Finally, the district court dismissed the plaintiffs’

common law fraud claim on the grounds that the plaintiffs failed to

allege (1) that the specified misrepresentations concerned material

facts or (2) that they actually relied on any such

misrepresentations. Although the plaintiffs sought leave to amend

their complaint further, the district court ruled that any

repleading would be futile and denied the request. The plaintiffs

now appeal each of these adverse rulings.

II.

The district court dismissed the plaintiffs’ federal

securities fraud claim against Enzo based on the statute of

limitations. The plaintiffs argue that their claim is timely under

the one-year statute of limitations provided in the Securities

Exchange Act. Even if their claim is not timely under the
10

Securities Exchange Act, the plaintiffs contend that it is timely

under the Sarbanes-Oxley Act. 

A.

The statute of limitations for a securities fraud claim under

the Securities Exchange Act is one year, and it begins to run when

the plaintiff is put on inquiry notice of the facts constituting

the alleged violation. 15 U.S.C. § 78i(e); Lampf, Pleva, Lipkind,

Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 363 (1991). A

plaintiff’s awareness of the possibility of fraud, not complete

exposure of the fraud, triggers inquiry notice. Brumbaugh v.

Princeton Partners, 985 F.2d 157, 162 (4th Cir. 1993). “Merely

bringing suit after the scheme has been laid bare . . . will not

satisfy the requirements of due diligence when there have been

prior warnings that something was amiss.” Id. Where the

underlying facts are undisputed, the question whether the

plaintiffs were on inquiry notice may be decided as a matter of

law. Id. We review de novo the district court’s ruling that the

plaintiffs filed this lawsuit more than one year after being put on

inquiry notice of possible fraud. Franks v. Ross, 313 F.3d 184,

192 (4th Cir. 2002).

Glaser was on inquiry notice as early as February 7, 2001,

when he sought discovery from Enzo in the bankruptcy court. Glaser

explained to the bankruptcy court that he was seeking discovery

because he had already “gathered evidence to suggest a massive
3The plaintiffs argue that their failure to file within one

year of inquiry notice should be excused because Enzo “stonewalled

and obstructed their discovery” during the period from May 2001 to

February 2003. This argument is meritless. As we have explained,

the plaintiffs had sufficient knowledge on February 7, 2001, to be

on inquiry notice. Even if Enzo’s subsequent conduct in discovery

delayed the plaintiffs’ full understanding of the alleged fraud, it

did not prevent the plaintiffs from filing a complaint within one

year of inquiry notice. 

11

securities fraud and the manipulation of Enzo stock both inside and

outside the company, the exact scope of which is presently

unknown.” J.A. 740A. Indeed, the amended complaint filed in this

case states that the plaintiffs “sought to substantiate their

suspicions concerning their belief that securities fraud had been

committed by using Bankruptcy Rule 2004,” which governs discovery.

J.A. 291. Thus, by the time Glaser filed his motion for discovery

on February 7, he was aware of “evidence of the possibility of

fraud,” and the limitations period began to run. Brumbaugh, 985

F.2d at 162. The plaintiffs did not file this lawsuit, however,

until August 2002, more than one year after the date on which they

were put on inquiry notice of possible securities fraud.3

B.

The plaintiffs seek to take advantage of the two-year

limitations period provided by § 804(a) of the Sarbanes-Oxley Act,

which took effect on July 30, 2003. Sarbanes-Oxley Act of 2002,

Pub. L. No. 107-204, 116 Stat. 745, 804 (2002) (“Sarbanes-Oxley”).

The plaintiffs filed their original complaint prior to the

enactment of Sarbanes-Oxley but voluntarily dismissed that action.
12

They filed the present complaint after the enactment of SarbanesOxley in an attempt to take advantage of the extended limitations

period. 

The plaintiffs’ refiling after Sarbanes-Oxley took effect did

not revive any claim that was otherwise barred by the statute of

limitations. As the Supreme Court has noted, “extending a statute

of limitations after the pre-existing period of limitations has

expired” essentially creates a new cause of action by reviving an

otherwise “moribund cause of action.” Hughes Aircraft Co. v.

United States ex rel. Schumer, 520 U.S. 939, 950 (1997); accord In

re Enterprise Mortgage, ___ F.3d ___, 2004 WL 2785776, at *4;

Chenault v. United States Postal Serv., 37 F.3d 535, 539 (9th Cir.

1994). Section 804(c) of Sarbanes-Oxley, however expressly

indicates an intention not to create any new causes of action.

Although § 804(b) states that the new two-year statute of

limitations “shall apply to all proceedings . . . that are

commenced on or after the date of enactment of [Sarbanes-Oxley],”

this language does not clearly express an intention to revive

otherwise stale claims. See In re Enterprise Mortgage Acceptance

Co., LLC, Sec. Litig., ___ F.3d ___, 2004 WL 2785776, at *3-*4 (2d

Cir. Dec. 6, 2004). We agree with the district court that

Sarbanes-Oxley does not revive the plaintiffs’ otherwise untimely

securities fraud claim. 
13

III.

The plaintiffs next argue that the district court erred in

dismissing their conspiracy claim against the individual

defendants. The Supreme Court held in Central Bank, N.A. v. First

Interstate Bank, N.A., 511 U.S. 164 (1994), that there is no civil

liability for aiding and abetting a violation of § 10(b). Id. at

177. “[T]he statute prohibits only the making of a material

misstatement (or omission) or the commission of a manipulative act.

The proscription does not include giving aid to a person who

commits a manipulative or deceptive act.” Id. (internal citations

omitted). Following Central Bank, we have stated that “a

misrepresentation must be directly attributable to [the defendant]

and not to some other person.” Gariety v. Grant Thornton, LLP, 368

F.3d 356, 369 (4th Cir. 2004).

The rationale of Central Bank with respect to aiding and

abetting applies equally to civil conspiracy. See 511 U.S. at 200

n.12 (Stevens, J., dissenting) (stating that “[t]he Court’s

rationale would sweep away the decisions recognizing that a

defendant may be found liable in a private action for conspiring to

violate § 10(b) and Rule 10b-5”). The statute itself makes no

mention of liability for conspiracy, and recognizing such liability

would allow plaintiffs to “circumvent the reliance requirement,” a

key limitation on securities fraud claims. Id. at 180. Thus, we

conclude that there can be no civil liability for conspiracy to
14

commit securities fraud. Accord Dinsmore v. Squadron, Ellenoff,

Plesent, Sheinfeld & Sorkin, 135 F.3d 837, 841 (2d Cir. 1998); In

re GlenFed, Inc., Sec. Litig., 60 F.3d 591, 592 (9th Cir. 1995). 

Our conclusion is not altered by the post-Central Bank

enactment of 15 U.S.C. § 78t(e), which authorizes criminal

prosecution of persons who aid and abet securities law violations.

Nothing in this provision creates a private right of action for

aiding and abetting. See Ziemba v. Cascade Int’l, Inc., 256 F.3d

1194, 1205 n.6 (11th Cir. 2001); Wright v. Ernst & Young LLP, 152

F.3d 169, 176 (2d Cir. 1998). In sum, the district court properly

followed the reasoning of Central Bank and dismissed the

plaintiffs’ conspiracy claims as a matter of law.

IV.

The plaintiffs next challenge the dismissal of their common

law fraud claim. Under Virginia law, a plaintiff seeking to

recover for fraud must allege: (1) a false representation, (2) of

a material fact, (3) made intentionally and knowingly, (4) with

intent to mislead, (5) reliance by the party misled, and (6)

resulting damage to the party misled. Bank of Montreal v. Signet

Bank, 193 F.3d 818, 826 (4th Cir. 1999) (applying Virginia law);

Richmond Metro. Auth. v. McDevitt St. Bovis, Inc., 507 S.E.2d 344,

346 (Va. 1998). 
15

At issue in this appeal are twelve alleged misrepresentations

concerning Enzo’s development of a new HIV treatment and gene

therapy. The first category of misrepresentations includes

statements made by Engelhardt at the January 12 shareholders

meeting:

• “It works, they both work,” referring to Enzo’s

gene therapy treatments for HIV and Hepatitis B.

• The “virus goes in but does not come out,” and Enzo

has killed the virus.

The second category of misrepresentations include Enzo president

Weiner’s statements at the January 12 meeting:

• Enzo would be opening three more clinics to treat

HIV/AIDS patients by the end of fiscal year 2000.

• Enzo had submitted Phase I data to the FDA and was

awaiting Phase II approval.

• Enzo scientists had reduced the time required for

HGTV-43 transduction from up to three months to

eighteen hours.

• The HGTV-43 vector achieves levels of stable

transduction greater than 30%.

• The HGTV-43 vector was ready for commercialization.

The final category of statements consists of statements made by

Enzo in various press releases issued after the January 12 meeting:

• Enzo was exploring expansion of the trials for its 

gene therapy.

• The University of California clinical study was

moving to its final stages, an abstract was to be

presented to the American Society of Gene Therapy

in June 2000, Enzo knew of no other system that

achieved the results that its gene therapy had
16

achieved, and plans for Phase II trials were

proceeding.

• The HGTV-43 vector successfully delivered certain

genes to blood stem cells and engineered cells

continued to survive after transduction.

• All remained well and on schedule.

• Data from the first person treated in the Phase I

trial of HGTV-43 showed successful engraftment of

engineered cells into the patient’s bone marrow.

Accepting the material allegations of the amended complaint as

admitted and viewing them in the light most favorable to the

plaintiffs, DeSole, 947 F.2d at 1171, these representations were

false. Nevertheless, the district court dismissed the plaintiffs’

fraud claim on the grounds that (1) none of these

misrepresentations concerned a material fact, and (2) the

plaintiffs had failed to allege that they reasonably relied on

these misrepresentations. We disagree. 

A.

Under Virginia law, recovery for fraud requires proof that the

fact misrepresented be material and substantially affect the

interests of the plaintiff. J.E. Robert Co. v. J. Robert Co., Inc.

of Va., 343 S.E.2d 350, 345 (Va. 1986) (citing Packard Norfolk,

Inc. v. Miller, 95 S.E.2d 207, 211 (Va. 1956)). A fact is material

if it “influences a person to enter into a contract,” or if it

“deceives him and induces him to act,” or if “without it the

transaction would not have occurred.” Packard Norfolk, 95 S.E.2d

at 211-12. Unfulfilled promises or statements as to future events
17

typically do not constitute material facts that will support a

fraud claim, and “[s]tatements which are vague and indefinite in

their nature and terms, or are merely loose, conjectural or

exaggerated, go for nothing.” Tate v. Colony House Builders, Inc.,

508 S.E.2d 597, 599 (Va. 1999). Similarly, “commendatory

statements, trade talk, or puffing, do not constitute fraud because

statements of this nature are generally regarded as mere

expressions of opinion.” Lambert v. Downtown Garage, Inc., 553

S.E.2d 714, 717 (Va. 2001). 

There can be no doubt that the efficacy of Enzo’s new HIV

treatment -- including both the direct treatment and the gene

therapy -- is a material fact for Enzo investors. The fact that

Enzo’s treatment works or does not work would be important to any

investor’s decisionmaking. Likewise, the progress of clinical

trials for Enzo’s new treatment would be an important fact to

consider in deciding whether to buy or sell Enzo shares. Thus, all

statements concerning the efficacy of Enzo’s treatment or the

actual progress of clinical trials satisfy the materiality

requirement. See Packard Norfolk, 95 S.E.2d at 211-12.

By contrast, Weiner’s statements that (1) Enzo would open

three new clinics within the fiscal year and (2) the HGTV-43 vector

was ready for commercialization are not actionable because they

amount to unfulfilled promises or statements as to future events.

See Tate, 508 S.E.2d at 599. The statement in a press release that
4As an additional ground for dismissal, we conclude that the

plaintiffs’ allegations with respect to Weiner’s statements that

(1) Enzo would open three new clinics to treat HIV/AIDS patients

within the fiscal year and (2) the HGTV-43 vector was ready for

commercialization, as well as the statement in a press release that

Enzo was exploring expansion of its clinical trials, are

allegations of “fraud by hindsight.” See Hillson Partners Ltd.

P’ship v. Adage, Inc., 42 F.3d 204, 209 (4th Cir. 1994) (“Where

fraudulent projections are alleged, the plaintiff must . . .

identify in the complaint with specificity some reason why the

discrepancy between a company’s optimistic projections and its

subsequently disappointing results is attributable to fraud. . . .

Mere allegations of ‘fraud by hindsight’ will not satisfy the

requirements of Rule 9(b).”). The plaintiffs alleged simply that

(1) Enzo did not, in fact, open three new clinics, (2) the HGTV-43

vector was not, in fact, commercialized, and (3) the clinical

trials were not, in fact, expanded. The plaintiffs did not allege

that these statements were known to be false when made.

18

“all remained well” at Enzo is vague and indefinite, a commendatory

statement, or puffery that cannot give rise to an actionable fraud

claim. See Lambert, 553 S.E.2d at 717; Tate, 508 S.E.2d at 599.4

B.

“In order to prove reliance, a plaintiff must demonstrate that

its reliance upon the [defendant’s] representation was reasonable

and justified.” Hitachi Credit Am. Corp. v. Signet Bank, 166 F.3d

614, 629 (4th Cir. 1999) (applying Virginia law) (internal

quotations omitted); see also Bank of Montreal, 193 F.3d at 827

(stating that “[i]n all cases of fraud [under Virginia law] the

plaintiff must prove that it acted to its detriment in actual and

justifiable reliance on the defendant’s misrepresentation (or on

the assumption that the concealed fact does not exist)”). With
5

The district court discussed the Form 10-K in its analysis of

materiality under the federal securities laws. Under Virginia law,

the district court’s concern about the Form 10-K is more

appropriately addressed as a matter of reliance rather than

materiality. 

19

respect to representations concerning concrete facts, we have noted

that “[t]he touchstone of reasonableness is prudent investigation,”

and a plaintiff cannot claim to reasonably rely upon a

misrepresentation when he “makes a partial inquiry, with full

opportunity of complete investigation, and elects to act upon the

knowledge obtained from the partial inquiry.” Hitachi Credit, 166

F.3d at 629 (citing Harris v. Dunham, 127 S.E.2d 65, 71-72 (Va.

1962)). 

The plaintiffs alleged that they retained and continued to

purchase Enzo stock in reliance on the good news coming from

Engelhardt, Weiner, and the various press releases touting the new

HIV treatment’s preliminary success. J.A. 262, 270, 271, 277, 287,

293, 294. The district court ruled, however, that the plaintiffs

could not have reasonably relied upon these misrepresentations

because Enzo’s Form 10-K contained a “disclaimer” that should have

put the plaintiffs on notice that Phase I trials did not actually

test the efficacy of Enzo’s treatment.5 

We disagree. The Form 10-K states that “Phase I trials,

concerned primarily with the safety and preliminary effectiveness

of the drugs, involve fewer than 100 subjects. Phase II trials

normally involve a few hundred patients and are designed primarily
20

to demonstrate effectiveness in treating or diagnosing the disease.

. . .” J.A. 696 (emphasis added). This “disclaimer” actually

suggests that the Phase I trials of Enzo’s HIV treatment did test

the efficacy of that treatment, if only to a preliminary degree,

and the district court’s assertion that these trials “merely tested

whether the drug was safe in order to proceed to Phase II,” J.A.

48, is simply unsupported. Thus, we cannot say, for purposes of a

motion to dismiss, that the plaintiffs’ alleged reliance upon the

various misrepresentations was unreasonable or unjustified as a

matter of law. 

V.

Finally, the plaintiffs argue that they should have been

granted leave to amend their complaint. We review the district

court’s decision to deny the plaintiffs’ motion to amend for abuse

of discretion. Foman v. Davis, 371 U.S. 178, 182 (1962); GE Inv.

Private Placement Partners II v. Parker, 247 F.3d 543, 548 (4th

Cir. 2001). Although leave to amend should “be freely given when

justice so requires,” Fed. R. Civ. P. 15(a), the district court may

deny leave to amend for reasons “such as undue delay, bad faith or

dilatory motive on the part of the movant, repeated failure to cure

deficiencies by amendments previously allowed, undue prejudice to

the opposing party by virtue of the allowance of the amendment,

futility of amendment, etc.” Foman, 371 U.S. at 182. Because we
21

conclude that the federal securities fraud and conspiracy claims

were barred as a matter of law, we agree with the district court

that any amendment as to these claims would be futile. To the

extent that the plaintiffs argue that they should have been

permitted to amend their complaint to include a claim for

conspiracy to commit common law fraud, we conclude that the

district court did not abuse its discretion in ruling that the

plaintiffs’ “many opportunities . . . to present their claim”

warranted denial of the motion to amend. See Foman, 371 U.S. at

182 (recognizing that leave to amend may be denied because of

“repeated failure to cure deficiencies by amendments previously

allowed”). As the plaintiffs have adequately alleged a claim for

common law fraud, amendment of perceived deficiencies in that claim

is unnecessary. Of course, we do not foreclose any future

amendments that may be appropriate under Fed. R. Civ. P. 15(a).

VI.

The district court properly dismissed the plaintiffs’ federal

securities fraud and conspiracy claims as a matter of law. Because

the plaintiffs sufficiently alleged common law fraud under Virginia

law, however, we reverse the district court’s dismissal of that
6In sum, only eight of the twelve identified

misrepresentations remain for consideration on remand. The

statements concerning the opening of new clinics, the readiness of

HGTV-43 for commercialization, and Enzo’s exploring expansion of

clinical trials, as well as the statement that all remained well at

Enzo despite the drop in stock price, were properly dismissed as

bases for the plaintiffs’ common law fraud claim.

22

claim and remand the case for further proceedings consistent with

this opinion.6

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED
23

WILKINSON, Circuit Judge, concurring in part and dissenting in

part:

I concur in much of the majority opinion. The federal claims

were properly dismissed as time-barred, and the conspiracy claims

were properly dismissed as well. But as to the Virginia common law

fraud claims, I do not believe that two of the eight remaining

statements are actionable because they are too general.

Specifically, representations that “it works, they both work,” and

that the “virus goes in but does not come out,” seem far too brief

and too general to state a claim in fraud. 

All of this is a matter of Virginia law. Nowhere has the

Virginia Supreme Court come close to saying that statements of this

general a nature present a viable basis for a fraud claim. Quite

the opposite: the court has expressly rejected claims predicated on

expressions of opinion, unfulfilled promises, statements as to

future events, puffing, “dealer talk,” or “booster statements.”

The Virginia Supreme Court has repeated that:

[i]t is well settled that a misrepresentation . . . must

be of an existing fact, and not the mere expression of an

opinion. The mere expression of an opinion, however

strong and positive the language may be, is no fraud.

Such statements are not fraudulent in law, because . . .

they do not ordinarily deceive or mislead. Statements

which are vague and indefinite in their nature and terms,

or are merely loose, conjectural or exaggerated, go for

nothing, though they may not be true, for a man is not

justified in placing reliance upon them. 

Mortarino v. Consultant Eng’g Servs., Inc., 467 S.E.2d 778, 781

(Va. 1996) (quoting Saxby v. So. Land Co., 63 S.E. 423, 424 (Va.
24

1909)). While the majority acknowledges that unfulfilled promises

or future statements cannot be actionable, the Virginia Supreme

Court has added that neither “can ‘booster’ statements of

enthusiastic agents be depended upon. They are to be expected.”

King v. Commercial Fin. Co., 175 S.E. 733, 736 (Va. 1934) (internal

citation omitted).

There is a reason for this reluctance to allow puffing,

generalities, opinions, or merchant talk to form the basis for a

foray into court. We live in a free enterprise system in which it

is almost inescapable that people will puff their wares. One

cannot, and the law does not, expect companies to disown their own

products. Any reasonable investor, therefore, treats such

statements with a healthy degree of skepticism. The law has never

protected those who do not. See Bank of Montreal v. Signet Bank,

193 F.3d 818, 827 (4th Cir. 1999) (collecting Virginia cases).

This is one reason that the statements at issue are not

actionable, and this reason is further connected with the reliance

element of common law fraud. “[O]ne who seeks to hold another in

fraud must clearly show that he has relied upon the acts and

statements of the other.” Harris v. Dunham, 127 S.E.2d 65, 70 (Va.

1962). Virginia law has long placed investors at their peril when

they incautiously rely on puffing or “booster” statements. In

Akers v. Radford State Bank, 149 S.E. 528 (Va. 1929), the

corporation’s representative had stated that “not a cent of the
25

[stock’s] subscribers’ money would be spent” on a railroad until a

contractor gave bond and let the railroad. Id. at 531. Appellants

alleged that this induced them to subscribe to the stock, but the

Virginia Supreme Court rejected the claim, because appellants did

not “have any right to rely upon these statements . . . [which

were] made at a public booster meeting” held to secure stock

subscriptions. Id. 

Glaser’s claim similarly lacks merit. He has shown great

familiarity with Enzo’s business yet relied recklessly on booster

statements and puffing. The record discloses an astonishing

history of day-trading by buying on margin. As the district court

was careful to note, “Plaintiffs’ brokerage statements evince a

pattern of speculative day-trading, an inherently risky

undertaking, by sophisticated investors, not ‘hapless’ plaintiffs,

who systematically acquired over one million shares over a six-year

period.” Glaser v. Enzo Biochem, Inc., 303 F. Supp. 2d 724, 750

(E.D. Va. 2003). 

Someone who evinces a trading sophistication like Glaser’s

should not receive the special solicitude of the law when he fails

to observe the most basic norms of commercial activity. In Harris,

for instance, after noting that reliance is an essential element of

fraud, the Virginia Supreme Court pointedly observed that one party

“was an experienced businessman” with “business acumen, [a]

familiarity with accounting procedures, and [a] knowledge of
26

financial affairs.” Harris, 127 S.E.2d at 70. Sophisticated

investors -- such as those who have “conducted [their] own

independent investigation into the subject matter of [their]

purchase,” id. -- rely at their peril, because their reliance on

statements like those at issue here are not justifiable. See also

Horner v. Ahern, 153 S.E.2d 216, 219 (Va. 1967) (someone who has

the ability to protect himself with “ordinary care and prudence” is

left by the law “where he has been placed by his own imprudent

confidence”).

The majority’s unwillingness to recognize this legal tradition

in Virginia law would have unfortunate implications if it were ever

adopted by Virginia courts. It is no accident that Virginia law

has developed as it has. Insubstantial suits for securities fraud

simply drain energy from an economy that, in essence, is meant to

remain entrepreneurial. No one doubts that overselling products

like a cure for AIDS would be unfair not only to investors. It

would represent a cruel hoax played against a particularly

vulnerable segment of our society. On the other hand, holding that

statements like the two specifically addressed above are actionable

is to pile multiple legal difficulties on top of the already

difficult medical challenges involved in vaccine production. Such

rulings make it more difficult for vaccines of any sort -- flu,

smallpox, AIDS -- to reach market because many vaccine

manufacturers now face additional legal disincentives to develop
27

them. Over the past thirty years, the number of vaccine

manufacturers in America has declined from twenty-five to a grand

total of five manufacturers today. Denise Grady, Before Shortage

of Flu Vaccine, Many Warnings, N.Y. Times, Oct. 17, 2004, at A1.

It is not novel to attribute the disappearance of manufacturers in

part to legal claims. See, e.g., id. (“Some companies dropped out

because of lawsuits,” while others found it too burdensome “to meet

regulatory standards.”) There may well be multiple causes for the

dwindling numbers of vaccine manufacturers in our country, but it

seems fair to observe that ungrounded suits in fraud will not

assist in reversing the decline.

If the law actually required this consequence, so be it. But

at least the Virginia law of fraud does not. I agree that six of

the twelve statements are more than puffing, although Glaser must

still be able to demonstrate on remand a reasonable reliance upon

them. Even if those six could survive a Rule 12(b)(6) motion, the

other two never could and were properly dismissed by the district

court. It is this failure to strike an appropriate balance between

warranted liability and the unwarranted encouragement of frivolous

securities fraud actions that leads me to dissent in part from the

majority opinion.