_____________ No. 96-1521WM

_____________ Scott L. Silver, on behalf of * himself and all others * similarly situated, * * Appellant, * Appeal from the United States * District Court for the Western v. * District of Missouri. * H&R Block, Inc.; Thomas M. * Block; Ozzie Wenich, * * Appellees. *

_____________ Submitted: December 12, 1996 Filed: January 23, 1997

_____________ Before FAGG, FLOYD R. GIBSON, and LOKEN, Circuit Judges.

_____________ FAGG, Circuit Judge.

Scott L. Silver, an investor in H&R Block, Inc.'s common stock , brought this action against H&R Block, its president and chief executive officer, Thomas M. Block, and its controller and vice-president of finance , Ozzie Wenich, asserting federal and state securi ties fraud claims. See 15 U.S.C. § 78j(b) (1994); 17 C.F.R. § 240.10b-5 (1 996). Silver contends H&R Block made materially false and misleading public statements reported in news articles on Octo ber 27 and 28, 1994, the first and second days after the Internal Revenue Service terminated its direct deposit indicator (DDI) , on which H&R Block's refund anticipation loan (RAL) program relied. I n Silver's view, H&R Block's October statements were too optimistic about th e effect of the IRS cha nge, and thus artificially inflated the price of H&R Block's stock. Silver contends Block disclosed the true adverse impact of the IRS

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change on November 22, causing the stock price to fall 17%. Eight day s later, on November 30, Silver filed this action. In his complaint, Silver selectively quoted the October statements withou t attaching the full text.

H&R Block filed a motion to dismiss under Federal Rule of Civi l Procedure 12(b)(6) and submitted the entire text of the October statements with the mo tion. The parties then filed a joint motion to stay al l discovery pending a decision on the motion to dismiss. Later, the court advised the parties t hat because it would consider the entire text of the statem ents, which were technically not presented in the complaint, th e court would convert H&R Block's motion to one for summary judgment. The parties filed supplem ental briefs and Silver filed a Rule 56(f) affidavit stati ng discovery was necessary. Without permitting discovery, th e district court grante d summary judgment to H&R Block, holding the October statements were not misleading as a matter of la w. Silver appeals, and we affirm.

To preva il on his securities fraud claims, Silver must show, amon g other things, that H&R Block made materially misleading statements o r omissions. See Alpern v. Utilicorp United, Inc. , 84 F.3d 1525, 1533-3 4 (8th Cir. 1996); Fecht v. Price Co. , 70 F.3d 1078, 1080 (9th Cir. 1995), cert. denied , 116 S. Ct. 1422 (1996). Whether a public statement i s misleading is a mixed question normally for the trier of fact. See Fecht , 70 F.3d at 1081. The issue is appropriately decided as a matter of law, however, when reasonable minds could not differ. See id. at 1081, 1082. In other words, if no reasonable investor could conclude public statements , taken together and in context, were misleading, then the issue i s appropriately resolved as a matter of law. See In re Syntex Corp. Secs. Litig. , 95 F.3d 922, 926 (9th Cir. 1996); I. Meyer Pincus & Assocs., P.C. v. Oppenheimer & Co. , 936 F.2d 759, 761 (2d Cir. 1991).

### -3- Silver contends the statements were misleading, but does not dispute their con tent. The first statement ran in the Dow Jones News Wire o n October 27:
H&R Block said tod ay that it is reviewing its approach to Refund Ant icipation Loans (RAL) in light of the Internal Revenu e Service's announce ment that it will eliminate the procedure that it uses to notify electronic filers of expected refunds. Th e Company plans to explore with its lending group the possibilit y of developing a new refund-related product for the 1995 ta x sea son that will offer customers speed, affordability an d convenience and at the same time control the risk to lenders. .

. . As a result of con cerns relating to fraudulent tax refund claims by taxpayers, the IRS reported yesterday that , beginning with the upcoming 1995 tax season, it will eliminate the Direct Deposi t Indicator (DDI). . . . The DDI was a key element of the RA L pro grambecause it helped control the risk of loan losses an d thus encouraged participating financial insti tutions to make RALs under relatively favorable terms to taxpayers. The consequences o f the IRS decision are potentially significant to H&R Block, Inc. The Company believes that financia l institutions providing RALs may institute certain measures t o offs et the anticipated increased credit risk that would resul t from th e removal of the DDI. These measures may include a n increase in cost to the consumer or the adoption of mor e stringent criteria for use in the loan approval process.
H&R Block company-owned and franchised offices electronicall y filed ab out 7.5 million or 56% of the total tax returns file d elec tronically in the U.S. during the 1994 tax season

. App roximately one-third of Block's electronically filed return s were for taxpayers who did not use the Company's tax preparation service. Electronic filing fee volume in fiscal 1994 wa s $202,266,000. In addition, the RAL banks paid H&R Block Ta x Services and its franchises a $7 license fee for each RAL made to an H&R Block electronic filing customer. . . .

. . . . The next day, the following article appeared in the Wall Street Journal : New Treasury Department procedures designed to curb fraud

### -4- related to electro nic filing of tax returns are being criticized by H&R Block, Inc., which says the change will hurt its loa n business. Block . . . said the consequences to it ar e "potentially significant."

. . . . Ozzie Wenich, H&R Block's vice president of finance, said in an interview that the change means the government will no longe r tell lenders whether there is a government lien against a taxpayer who is du e a refund. As a result, lenders basing loans on expecte d refunds will be taking on more risk. . . . He sai d that while the change could hurt Block's business in refund

anticipation loans , it could also gain some business because the changes could put smaller competitors out of business.
Mr. Wenich estimated that about 75% of the 13 million taxpayers who filed electronically in the 1994 tax season received a refund-anticipatio n loan. He said Block filed about 7.5 million of the total electronic returns.
Block . . . said it plans to explore with its lending group the possibility of coming up with a new refund-related product.

. . . .
Silver contends these two October st atements were misleading because they omitted predictions contained in H&R Block's November 22 press releas e about its projected earnings for the 1995 tax se ason, ending the following Apr il. In its discussion of the IRS's decision to eliminate DDI, th e November 22 release stated it was likely that re venues and earnings of H&R Block Tax Services wo uld decline in fiscal 1995, and it was possible that Block Financial Corporation would report lower earnings or a loss.
The gist of the October statements is that the IRS's termination of DDI is bad news for H&R Block. The October 27 article explains why DDI wa s
a key element of the RAL program and the financial importance of the RAL program to H&R Block and its subsidiary, Block F inancial Corporation. The October 28 article states the IRS change "will hurt [Block's] loa n business" and the

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consequences are pote ntially significant to the company. As a whole, the October statements cautioned investors rather than encouraged them, an d would not mislead any reasonable investor. See In re Syntex , 95 F.3d at 928. Rather than contradicting the October statements, the Novembe r state ment merely quantifies the same message. It would be improper t o infer that the October statements warning invest ors were misleading simply from the lack of a specific financial projection. Likewise, we canno t infer that the statements were false or misleading from the movement of th e stoc k price alone, as Silver suggests, given the abundance of marke t variables.

Silver contends the district court committed error in grantin g summary judgment without allowing discovery or addressing his Rule 56(f) affid avit. We need not reach the discovery issue because the distric t court could have granted H&R Block's motion to d ismiss rather than convert the motion to one for summary judgment. It is true that when a motion to dismis s presents matters outside the pleadings, the motion is generall y treate d as one for summary judgment. See Fed. R. Civ. P. 12(b)

. Nevert heless, in this case, the district court could have properl y considered the complete statements in granting t he motion to dismiss. See In re Syntex , 95 F.3d at 926; I. Meyer Pincus , 936 F.2d at 762. Silver's entire la wsuit is based only on the statements, and he does not disput e their content. See I. Meyer Pincus , 936 F.2d at 762. Silver cannot defea t
a motion to dismiss by choosing not to attach the full statements to the complaint. See id. In considering a motion to dismiss, courts accept the plaintiff's factual allegations as true, but rej ect conclusory allegations of law an d unwarranted inferences. See In re Syntex , 95 F.3d at 926

. Applying these principles, we conclude reasonable minds could only agree the challenged statem ents were not misleading, so Rule 12(b)(6) dismissal is proper. See id. at 928.
We thus affirm the district court on this alternative ground.

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Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.