IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 13-30580

PUBLIC EMPLOYEES’ RETIREMENT SYSTEM OF MISSISSIPPI, 

PUERTO RICO TEACHERS’ RETIREMENT SYSTEM,

Plaintiffs–Appellants

v.

AMEDISYS, INCORPORATED; WILLIAM F. BORNE; DALE E. REDMAN; 

ALICE SCHWARTZ; LARRY GRAHAM; GREGORY H. BROWNE; JOHN F. 

GIBLIN; JEFFREY D. JETER,

Defendants–Appellees

______________________________________________________________________

DAVID ISMAN,

 Plaintiff 

v.

AMEDISYS, INCORPORATED; WILLIAM F. BORNE; DALE E. REDMAN,

 Defendants-Appellees

_______________________________________________________________________

ARIK DVINSKY, etc.,

 Plaintiff

v. 

AMEDISYS, INCORPORATED; WILLIAM. F. BORNE; DALE E. REDMAN;

United States Court of Appeals

Fifth Circuit

FILED

October 2, 2014

Lyle W. Cayce

Clerk

 Case: 13-30580 Document: 00512790599 Page: 1 Date Filed: 10/02/2014
No. 13-30580JOHN F. GIBLIN; GREGORY H. BROWNE,

JOHN F. GIBLIN; GREGORY H. BROWNE,

 Defendants-Appellees

______________________________________________________________________

MELVIN W. BRINKLEY,

 Plaintiff

v. 

AMEDISYS, INCORPORATED; WILLIAM F. BORNE; DALE E. REDMAN,

 Defendants-Appellees

Appeal from the United States District Court

for the Middle District of Louisiana

Before STEWART, Chief Judge, and DENNIS, Circuit Judge, and 

GILSTRAP, District Judge1.

JAMES RODNEY GILSTRAP, District Judge:

Plaintiffs–Appellants Public Employees’ Retirement System of 

Mississippi and Puerto Rico Teachers’ Retirement System (collectively, 

“PERSM” or “Plaintiffs”) are the Lead Plaintiffs and, on behalf of the Class,

filed suit under Sections 10(b) and 20(a) of the Securities Exchange Act of 

1934 (“Exchange Act”) against Defendants–Appellees Amedisys, Inc. 

(“Amedisys”) and seven current or former board members of Amedisys 

including the company’s chairman and CEO William Borne, and officers Dale 

1 District Judge for the Eastern District of Texas, sitting by designation.

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E. Redman, Larry Graham, Gregory Browne, John F. Giblin, Alice Ann 

Schwartz, and Jeffrey Jeter (collectively, “Defendants”) claiming that 

Amedisys defrauded investors by concealing a Medicare fraud scheme.

PERSM alleges that despite knowledge or reckless disregard of Amedisys’s 

unlawful billing practices, Defendants issued materially false and misleading 

public statements to cause Amedisys securities to be traded at materially 

inflated prices from August 2, 2005 through September 28, 2010 (the relevant 

“Class Period”). As information concerning such fraudulent practices became 

known, the value of Amedisys securities dropped precipitously, which caused 

PERSM and the Class to suffer significant financial loss.

The district court granted a motion to dismiss for failure to state a 

claim under Federal Rule of Civil Procedure 12(b)(6) and dismissed the 

lawsuit with prejudice. The Plaintiffs then filed a motion for reconsideration 

of the order granting dismissal and a request for leave to file an amended 

complaint, which the district court summarily denied. We reverse and 

remand.

I. FACTUAL AND PROCEDURAL BACKGROUND

Amedisys is a publicly traded corporation that provides home health 

services to patients with chronic health problems. Amedisys is compensated 

through Medicare’s Prospective Payment System (PPS) reimbursements 

based on the number of in-home visits provided to a given patient within the 

course of a sixty-day treatment period, called an “episode.” Medicare 

payments represent roughly 90% of the company’s reimbursements for 

services rendered from 2005-2009.

During the first part of the Class Period through December 31, 2007, 

the Medicare PPS provided a flat fee of approximately $2,200 for treatment of 

a patient with at least five but fewer than ten therapy visits in an episode. If 

the number of therapy visits within the episode increased to ten or more, 

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Medicare paid approximately $2,200 more, essentially doubling the amount 

of reimbursement for services rendered for that patient. Medicare eliminated 

the ten-visit threshold on January 1, 2008 and revised the PPS to implement

thresholds for increased reimbursements upon the occurrence of six, fourteen, 

and twenty therapy visits during an episode. This 2008 revision remained in 

effect throughout the remainder of the Class Period. 

Under federal law, home health companies are entitled to Medicare 

reimbursement only for providing medically necessary services. 42 U.S.C.A. §

1395n(a)(2)(A)-(B). PERSM alleges that Defendants committed fraud by 

pressuring Amedisys employees into providing medically unnecessary 

treatment visits to patients in order to hit the most lucrative Medicare 

reimbursement thresholds. In the course of this fraudulent conduct, the 

Complaint alleges that Defendants made a series of materially false and 

misleading statements beginning on August 2, 2005, which artificially 

inflated the price of Amedisys stock throughout the Class Period. 

The Complaint alleges the truth of Amedisys’s misrepresentations 

became publicly known through a series of five partial disclosures. As the 

truth gradually leaked into the market, the artificial inflation was removed 

and the value of Amedisys securities significantly declined, causing economic 

loss to the Lead Plaintiffs and other members of the Class.

The first alleged partial disclosure is an online report published by 

Citron Research on August 12, 2008 that raised questions about Amedisys’s 

accounting and Medicare billing practices. On the same day, the price of 

Amedisys’s stock dropped 17.86% or $11.80 per share to close at $54.27. 

During a conference call with various investment firms on October 28, 2008 

to discuss its third quarter earnings, Amedisys touted its billing-related 

compliance programs and reassured investors that “compliance is central to 

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everything we do as a company . . . Amedisys is a leader in disclosing detailed 

information.”

The second alleged partial disclosure came about with the resignations 

of Amedisys’s President and CEO, Larry Graham, and the Chief Information 

Officer, Alice Ann Schwartz. This announcement was made on September 3, 

2009 in a press release stating that the two executives were leaving “to 

pursue other interests.” On that day, Amedisys’s stock dropped 21.68% or 

$9.42 per share to close at $34.04. 

The third alleged partial disclosure is an article published by the Wall 

Street Journal (WSJ) on April 26, 2010, reporting on Amedisys and including 

a detailed analysis of Medicare data indicating that the company might be 

“taking advantage of the Medicare reimbursement system.” The WSJ enlisted 

Henry Dove, a Yale professor, to analyze Medicare records to determine how 

often between 2005 and 2008 various home health companies sent therapists 

to patients’ homes during a 60 day treatment period and whether such visits 

coincided with Medicare financial incentives. Professor Dove’s results 

revealed a questionable pattern of home visits clustered around 

reimbursement targets. After the 2008 change in Medicare’s PPS threshold, 

the percentage of Amedisys patients getting 10 visits (the prior threshold) 

dropped by 50% while the percentage that got 14 visits (a new threshold) rose 

33%, and the percentage getting 20 visits (another new threshold) increased 

41%. Additionally, the article quoted a former Amedisys nurse as saying that 

“I was told ‘we have ten visits to get paid,’” and “[t]he tenth visit was not 

always medically necessary.” Within the WSJ Article was a statement from 

an Amedisys spokesperson, Kevin LeBlanc, declaring any suggestion that the 

company may have increased its number of therapy visits to receive higher 

reimbursements is “both incendiary and inaccurate.” The next day, 

Amedisys’s stock dropped 6.58% or $3.98 per share to close at $56.52. 

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The fourth alleged partial disclosure is a combination of three 

government investigations into Amedisys’s billing practices that commenced 

during the remainder of the Class Period. On May 12, 2010, the WSJ 

reported that the Senate Finance Committee (SFC) had launched an 

investigation to determine whether Amedisys deliberately boosted the 

number of home therapy visits to trigger higher Medicare reimbursements. 

Senator Charles Grassley was quoted as saying: “It appears that either the 

home health care reimbursement policy is flawed, some companies are 

gaming the system, or both. We’re working to figure out what’s going on.” The 

next day, Amedisys issued a public statement attempting to downplay the 

importance of the SFC investigation and to otherwise reassure its investors: 

“The letter of inquiry received from Senators Grassley and Baucus references 

an article published recently in The Wall Street Journal. The article told an 

incomplete story about the value of home health to patients, their families, 

and the overall healthcare system.” Despite these reassurances, however, the 

company’s stock dropped 7.97% or $4.48 per share to close at $51.73. Next, on 

June 30, 2010, Amedisys issued a press release announcing that it had 

received a notice of formal investigation from the Securities and Exchange 

Commission (SEC) and a subpoena for documents. On July 1, 2010, 

Amedisys’s stock dropped 10.55% or $4.64 per share to close at $39.34. 

Finally, on September 28, 2010, Amedisys issued yet another press release 

disclosing that it had received a civil investigative demand from the 

Department of Justice (DOJ) pursuant to the False Claims Act, which sought 

a wide range of documents relating to its “clinical and business operations, 

including reimbursement and billing claims submitted to Medicare.” That 

day, Amedisys’s stock dropped 15.51% or $4.41 per share to close at $24.02.

The fifth and final alleged partial disclosure occurred between the 

commencement of the SEC and DOJ investigations. On July 12, 2010, 

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Amedisys announced disappointing second quarter operating results to its 

shareholders. As a result, its stock price declined 24.13% or $8.45 per share

to close at $26.57 the next day. During an earnings call on July 13, the 

company’s chairman and CEO, William Borne, stated that “the decline in our 

volume of recertifications more than offset our growth in admissions for this 

quarter . . . We are very disappointed with these results.”

Following the poor second quarter operating results, various Amedisys 

officers attributed the decline in the recertification rates to “distractions” or 

“external factors” relating to the investigations, as well as “behavioral” 

changes of the clinicians not seeking recertifications. In fact, Amedisys 

admitted in the Form 10-Q that its “internal episodic-based recertification 

growth has decreased from 10% in the second quarter of 2009 to a negative 

9% for the second quarter of 2010.” The decline in recertifications continued 

through the third quarter of 2010, with Amedisys reporting: “We have 

continued to experience a decline in the number of recertifications over 2009 

and expect the trend to continue into the fourth quarter.”

In sum, Amedisys’s stock price declined from $66.07 per share on 

August 11, 2008 (prior to the Citron report) to $24.02 per share on September 

28, 2010. A series of class action lawsuits were filed against the Defendants 

in June and July of 2010. The suits were consolidated and PERSM was 

designated the Lead Plaintiff in October 2010. Defendants filed a motion to 

dismiss under Federal Rule of Civil Procedure (FRCP) 12(b)(6), which was 

granted by the district court. The district court held that PERSM failed to 

adequately plead loss causation, an essential element of their claims under 

Section 10(b) of the Exchange Act. In granting dismissal, the district court 

reviewed each of the above five partial disclosures and found that none alone 

was sufficient to constitute a corrective disclosure for purposes of pleading 

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loss causation. The Complaint was dismissed with prejudice on June 28, 

2012. 

After the case was dismissed, PERSM sought reconsideration of the 

order granting the motion to dismiss and also moved for leave to file a first 

amended complaint. The district court denied reconsideration and leave to 

amend citing the reasons provided in its original ruling. 

PERSM timely appealed the district court’s decision granting the 

motion to dismiss. PERSM also appeals the denial of its motion for 

reconsideration and for leave to file an amended complaint, as well as the 

dismissal of this action with prejudice. 

II. JURISDICTION

Appellants seek review of a final judgment of the district court. 

Accordingly, this Court has jurisdiction pursuant to 28 U.S.C. § 1291.

III. STANDARD OF REVIEW

We review the district court’s grant of a motion to dismiss under FRCP 

12(b)(6) de novo, “accepting all well-pleaded facts as true and viewing those 

facts in the light most favorable to the plaintiff.” Toy v. Holder, 714 F.3d 881, 

883 (5th Cir. 2013) (citing Bustos v. Martini Club Inc., 599 F.3d 458, 461 (5th 

Cir. 2010)). “To survive a motion to dismiss, a complaint must contain 

sufficient factual matter, accepted as true, to state a claim to relief that is 

plausible on its face.” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009))

(internal quotation marks and citation omitted); see also Bell Atlantic Corp. v. 

Twombly, 550 U.S. 544, 570 (2007). 

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IV. DISCUSSION

We address the district court’s grant of the motion to dismiss for failure 

to plead loss causation. 

A. The District Court’s Ruling On Failure To Plead Loss Causation

In cases involving publicly traded securities and purchases or sales in 

public securities markets, the action’s basic elements are “(1) a material 

misrepresentation (or omission), (2) scienter, i.e., a wrongful state of mind, (3) 

a connection with the purchase or sale of a security, (4) reliance, often 

referred to in cases involving public securities markets (fraud-on-the-market 

cases) as ‘transaction causation,’ (5) economic loss, and (6) ‘loss causation,’

i.e., a causal connection between the material misrepresentation and the 

loss.” Lormand v. US Unwired, Inc., 565 F.3d 228, 238–39 (5th Cir. 2009) 

(citing Dura Pharmaceuticals, Inc., et al. v. Broudo, et al., 544 U.S. 336, 341–

42 (2005)).

The Supreme Court in Dura and Twombly identified the basic 

principles of pleading loss causation under FRCP 8(a)(2) as setting forth a 

standard of “plausibility,” or something beyond the mere possibility of loss 

causation. Twombly, at 557–58; Dura, 544 U.S. at 346 (stating that the 

plaintiff need only adequately allege and prove the traditional elements of 

causation and loss for recovery in private securities fraud actions). For a 

complaint to adequately plead this requirement, it need only set forth “a 

short and plain statement of the claim showing that the pleader is entitled to 

relief” and provide the defendant with “fair notice of what the plaintiff’s claim 

is and the grounds upon which it rests.” Dura, 544 U.S. at 346 (citing Conley 

v. Gibson, 355 U.S. 41, 47 (1957)). The loss causation element, as codified in 

the Private Securities Litigation Reform Act (PSLRA), provides that “the 

plaintiff shall have the burden of proving that the act or omission of the 

defendant . . . caused the loss for which the plaintiff seeks to recover 

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damages.” 15 U.S.C. § 78u-4(b)(4). Accordingly, the issue before us is whether 

the Plaintiffs adequately alleged that the Defendants’ misrepresentations (or 

omissions) proximately caused the Plaintiffs’ economic loss. 

To establish proximate causation, the plaintiff must allege that when 

the “relevant truth” about the fraud began to leak out or otherwise make its 

way into the marketplace, it caused the price of the stock to depreciate and, 

thereby, proximately caused the plaintiff’s economic harm. Lormand, 565 

F.3d at 255 (citing Dura 544 U.S. at 342). Loss causation in fraud-on-themarket cases can be demonstrated circumstantially by “(1) identifying a 

‘corrective disclosure’ (a release of information that reveals to the market the 

pertinent truth that was previously concealed or obscured by the company’s 

fraud); (2) showing that the stock price dropped soon after the corrective 

disclosure; and (3) eliminating other possible explanations for this price drop, 

so that the factfinder can infer that it is more probable than not that it was 

the corrective disclosure—as opposed to other possible depressive factors—

that caused at least a ‘substantial’ amount of price drop.” FindWhat Investor 

Group v. FindWhat.com, 658 F.3d 1282, 1311–12 (11th Cir. 2011) (emphasis 

added).

PERSM alleged in its Complaint that it suffered economic loss from 

declines in Amedisys’s stock price in response to a series of five partial 

disclosures gradually exposing the nature of Amedisys’s business practices 

and the extent of the risks associated with such practices. The district court 

evaluated each of the five alleged partial disclosures and concluded that none 

of them amounted to a corrective disclosure for purposes of pleading loss 

causation. We first discuss what constitutes a corrective disclosure. Then, we 

will consider each of the alleged partial disclosures in turn.

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1. Corrective Disclosures

There is little precedent directly addressing to what extent fraud must 

become known by the market before it can constitute a corrective disclosure—

or revelation of the pertinent truth—for purposes of pleading loss causation 

in a private securities action. There is, however, case law on the sufficiency of 

pleading proximate causation that is instructive to our analysis.

The Supreme Court in Dura set forth the controlling standard for 

pleading proximate causation in a private securities fraud-on-the-market 

case: “[O]rdinary pleading rules are not meant to impose a great burden upon 

a plaintiff. But it should not prove burdensome for a plaintiff who has 

suffered an economic loss to provide a defendant with some indication of the 

loss and the causal connection that the plaintiff has in mind.” 544 U.S. at 347

(holding that an inflated purchase price alone cannot satisfy the proximate 

causation element). Relying on Dura, this Circuit explained in Lormand that 

to establish proximate causation, the plaintiff must prove that when the 

“relevant truth” about the fraud began to leak out, it caused the price of stock 

to depreciate and thereby proximately cause the plaintiff’s economic loss. 565 

F.3d at 255. Thus, the plaintiffs are required to allege the truth that emerged 

was “related to” or “relevant to” the defendants’ fraud and earlier 

misstatements.2 The answer, therefore, turns on the meaning of “relevance.”

This Circuit has previously observed that the standard of “relevance” in 

an evidentiary context is not a steep or difficult one to satisfy. Lormand, 565 

F.3d at 256 n.20. The test for “relevant truth” simply means that the truth 

disclosed must make the existence of the actionable fraud more probable than 

2 Lormand refers to Greenberg v. Crossroads Systems, Inc., 364 F.3d 657, 666 (5th 

Cir. 2004), a case involving proof of loss causation at the summary judgment stage holding 

that a plaintiff must prove on the merits that the negative “truthful” information causing 

the decrease in price is related to an alleged earlier misrepresentation. 565 F.3d at 256. The 

evidentiary burden at the initial pleadings stage is much less stringent.

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it would be without that alleged fact, taken as true. Id.; see also Spitzberg v. 

Houston American Energy Corp., --- F.3d ---, No. 13-20519, 2014 WL 3442515 

at *8 (5th Cir. Jul. 15, 2014) (concurring with Lormand on the applicable 

standard for pleading corrective disclosure). We agree with the Lormand and 

Spitzberg Courts and find this test to be the appropriate standard to measure 

corrective disclosures as they pertain to the adequacy of alleging loss 

causation at the initial pleadings stage.

This test for “relevant truth” is consistent with similar opinions of our 

sister courts. See In re Williams Sec. Litig.—WCC Subclass., 558 F.3d 1130, 

1140 (10th Cir. 2009) (finding that to be corrective, a disclosure need only 

relate back rather than precisely mirror the earlier misrepresentation); 

FindWhat, 658 F.3d at 1311–12 (11th Cir. 2011) (holding that a “corrective 

disclosure” can be demonstrated circumstantially); In re REMEC Inc. Sec. 

Litig., 702 F. Supp. 2d 1202, 1266–67 (S.D. Cal. 2010) (“A ‘corrective 

disclosure’ is a disclosure that reveals the fraud, or at least some aspect of the 

fraud, to the market.”). A corrective disclosure can come from any source, and 

can “take any form from which the market can absorb [the information] and 

react,” Matthew L. Fry, Pleading and Proving Loss Causation in Fraud–on–

the–Market–Based Securities Suits Post–Dura Pharmaceuticals, 36 Sec. Reg. 

L.J. 31, 64–71 (2008), so long as it “reveal[s] to the market the falsity” of the 

prior misstatements. Lentell v. Merrill Lynch & Co., 396 F.3d 161, 175 n. 4 

(2d Cir. 2005). 

Nor does the corrective disclosure have to be a single disclosure; rather, 

the truth can be gradually perceived in the marketplace through a series of 

partial disclosures. Lormand, 565 F.3d at 261. “Thus besides a formal 

corrective disclosure by a defendant followed by a steep drop in the price of 

stock, the market may learn of possible fraud from a number of sources: e.g.,

from whistleblowers, analysts’ questioning financial results, resignations of 

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CFOs or auditors, announcements by the company of changes in accounting 

treatment going forward, newspapers and journals, etc.” In re Enron Corp. 

Sec., Derivative & “ERISA” Litig., No. MDL-1446, 2005 WL 3504860 at *16 

(S.D. Tex. 2005) (citations omitted).

2. The Five Partial Disclosures

We now review each of the five partial disclosures plead in the 

Complaint against the test for “relevant truth,” but we consider them 

collectively in determining whether a corrective disclosure has occurred.

a. 2008 Citron Report

The Citron Report is admittedly inconclusive, ending with a statement 

that “it is not yet concluding that Amedisys is committing Medicare fraud, 

but there are many indications that this inquiry needs deeper scrutiny.” 

Speculation of wrongdoing cannot by itself arise to a corrective disclosure. 

Providing investors with what is in effect insurance against market losses 

due to media speculation is outside the purview of federal securities laws. 

While the information disclosed in the 2008 Citron Report does not alone

make the existence of the actionable fraud more probable than not, it must be 

considered within the totality of all such partial disclosures. 

b. Schwartz and Graham Resignations

We concur with the district court that the announcement of the 

resignations of Amedisys’s Chief Operating Officer, Larry Graham, and Chief 

Information Officer, Alice Ann Schwartz “to pursue other interests” also does 

not in and of itself constitute a corrective disclosure. The market’s decline of 

21.68% following the announcement, while not insignificant, could have 

simply been a market reaction to sudden news that two key executives had

left the company. While nothing in the resignation announcement alone 

reveals the truth behind earlier misstatements or provides notice to the 

Defendants of what the causal connection might be between the relevant 

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economic loss and the misrepresentations regarding compliance with 

Medicare billing practices, this too may constitute a portion of the totality 

that we must consider. See Williams, 558 F.3d at 1140 (stating that the 

leaked truth must relate back to the earlier misrepresentation rather than 

come from some other plausibly depressive information about the company). 

c. April 26, 2010 WSJ Article

The district court found that the WSJ Article does not, as a matter of 

law, constitute a corrective disclosure because the article proclaims on its face 

that its analysis was “based on publicly available Medicare records,” and as 

such, does not reveal any new information to the marketplace. While it is 

generally true that in an efficient market, any information released to the 

public is presumed to be immediately digested and incorporated into the price 

of a security, it is plausible that complex economic data understandable only 

through expert analysis may not be readily digestible by the marketplace.

Under a Rule 12(b)(6) analysis, it is plausible that, as the Appellants allege, 

the efficient market was not aware of the hidden meaning of the Medicare 

data that required expert analysis, especially where the data itself is only 

available to a narrow segment of the public and not the public at large. Thus,

although a disclosure of mere confirmatory information will not cause a 

change in the stock price because the current price already reflects the 

information available, we find it plausible that this information was not 

merely confirmatory. 

Appellant’s point that various independent analysts have characterized 

the WSJ Article as “new news” also plausibly counters the argument that the 

sources used in the article have previously been made public. At the pleading 

stage, this Court does not find the WSJ Article should be justifiably pushed 

aside simply because the data it was based upon may have been technically 

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available to the public, given that the raw data itself had little to no 

probative value in its native state. 3

d. Investigations Initiated by the SFC, SEC, DOJ, and Amedisys’s 

Disappointing Second Quarter 2010 Earnings Report

As an initial matter, Defendants assert that Plaintiffs’ argument 

concerning the 2010 second quarter earnings report as a corrective disclosure 

was waived by Plaintiffs’ failure to adequately brief it. Defendants’ argument 

has some force; nonetheless, notice exists despite the marginal briefing. We 

hold that the argument was not waived and we consider it in our analysis.

We agree with the district court that generally, commencement of 

government investigations on suspected fraud do not, standing alone, amount 

to a corrective disclosure. Meyer v. Greene, 710 F.3d 1189, 1200–01 (11th Cir. 

2013) (holding that the commencement of an SEC investigation was not a 

corrective disclosure because the SEC never issued any finding of 

wrongdoing); Loos v. Immersion Corp., --- F.3d ---, No. 12-15100, 2014 WL 

3866084 (9th Cir. Aug. 7, 2014) (holding that a press release announcing an 

internal investigation, without more, is insufficient to establish loss 

causation); In re Dell Inc., Sec. Litig., 591 F. Supp. 2d 877, 909-10 (W.D. Tex. 

2008) (holding that the disclosure of an SEC investigation absent a revelation 

of prior misrepresentation does not constitute a corrective disclosure). 

However, the investigations launched by the SFC (on May 12, 2010), the SEC 

(on June 30, 2010), and the DOJ (on September 28, 2010) into Amedisys’s 

suspected gaming of the Medicare reimbursement system must be viewed 

together with the totality of the other alleged partial disclosures.

3 Appellants use the Declaration of Rena Conti, Ph. D. (originally attached to the 

motion for reconsideration) to show that the Medicare data used by Professor Dove was 

difficult to obtain and that his analysis required significant professional expertise to 

accomplish. 

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Plaintiffs’ allegations began with media speculation into a possibility of 

Medicare fraud and calling for deeper scrutiny into Amedisys’s practices. 

Then, two executives departed the company and the WSJ published a frontpage article on the questionable statistical correlation between Amedisys’s inhome health visits and Medicare’s financial incentives. Shortly thereafter, 

both the SEC and SFC initiated investigations into Amedisys’s billing 

practices, in response to the media’s call for scrutiny. Amedisys announced its 

disappointing second quarter 2010 operating results and Amedisys’s stock 

price plummeted 24.13%. Amedisys executives explained the poor 

performance was due to a decline in the volume of patient recertifications 

that they attribute to “behavioral” responses from their clinicians in light of 

the pending governmental investigations. On September 28, 2010, 

Amedisys’s stock price dropped again by 15.51% when the DOJ investigation 

was announced. Between the 2008 Citron Report and commencement of the 

DOJ investigation, Amedisys stock declined a statistically significant 63.6%.

According to the Complaint, Defendants made materially false and 

misleading statements about their compliance to artificially inflate the price 

of Amedisys securities throughout the Class Period. Once Amedisys was 

placed under the spotlight of government scrutiny for Medicare fraud, its 

earnings dropped significantly because its employees could no longer 

continue exploiting Medicare reimbursements. After each negative partial 

disclosure, Defendants attempted to mitigate the impact of those disclosures 

by making contemporaneous misstatements to the market and prevented the 

full truth from being revealed at once. As a result, PERSM and the other 

Class members purchased Amedisys securities at artificially inflated prices 

and suffered economic loss when the artificial inflation dissipated and the 

price of these securities declined in response to the series of partial 

disclosures revealing the true nature of Amedisys’s business practices. 

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Taking the above facts as true, the 2008 Citron Report, the Swartz and 

Graham resignations, the 2010 WSJ Article and the above governmental 

investigations, coupled with Amedisys’s second quarter 2010 earnings report,

collectively constitute and culminate in a corrective disclosure that 

adequately pleads loss causation for purposes of a Rule 12(b)(6) analysis. This 

holding can best be understood by simply observing that the whole is greater 

than the sum of its parts. The district court erred in imposing an overly rigid 

rule that government investigations can never constitute a corrective 

disclosure in the absence of a discovery of actual fraud.4 5 “To require, in all 

circumstances, a conclusive government finding of fraud merely to plead loss 

causation would effectively reward defendants who are able to successfully 

conceal their fraudulent activities by shielding them from civil suit.” In re 

Questcor Sec. Litig., No. SA CV 12-01623 2013 WL 5486762 at *22 (C.D. Cal. 

4 The district court relies on In re Almost Family in much of its evaluation of the 

partial disclosures. 2012 WL 443461 (W.D. Ky. Feb. 10, 2012) (holding that the April 26, 

2010 WSJ Article and commencement of the SFC and SEC investigations do not constitute 

corrective disclosures because neither event made a specific allegation of fraud or disclosed 

any actual misconduct). However, of the four publicly traded home health companies under 

investigation by the SFC, Almost Family alone was effectively exonerated by the Senate 

Report released on October 3, 2011. Therefore, Almost Family is distinguishable from this 

case as well as two related cases involving the companies found to be abusing the Medicare 

system, LHC Group and Gentiva. See City of Omaha Police and Fire Retirement Sys. v. 

LHC Group, Inc., et al., No. 6:12-1609, 2013 WL 1100819 (W.D. La. Mar. 15, 2013) (holding 

that the amended complaint adequately alleged the investigations by the SFC and SEC as 

corrective disclosures and properly pled loss causation); In re Gentiva Sec. Litig., 932 F. 

Supp. 2d 352, 388 (E.D.N.Y. Mar. 25, 2013) (holding that an announcement of a 

governmental investigation into the precise subject matter which forms the basis of the 

fraudulent practices at issue can qualify as a partial corrective disclosure for purposes of 

loss causation).

5 During oral argument, Amedisys agreed that “actual fraud” is not the only 

standard to evaluate a corrective disclosure; rather, Amedisys argued that a corrective 

disclosure could also reveal the falsity in a prior statement. Semantics aside, we think there 

is little difference between a showing of “actual fraud” and “actual falsity” for purposes of 

pleading loss causation in a fraud-on-the-market case. Requiring allegations that establish 

prior statements of compliance to be actually false is tantamount to a pleading threshold of 

actual fraud by showing a failure to comply. Such a standard is inconsistent with our prior

precedent, including Lormand.

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Oct. 1, 2013). Indeed, “there is no requirement that a corrective disclosure 

take a particular form or be of a particular quality . . . It is the exposure of 

the fraudulent representation that is the critical component of loss 

causation.” In re Bristol Meyers Squibb Co. Sec. Litig., 586 F. Supp. 2d 148, 

165 (S.D.N.Y. 2008) (citations and internal quotation marks omitted).

Accordingly, when this series of events is viewed together and within the 

context of Amedisys's poor second quarter 2010 earnings, it is plausible that 

the market, which was once unaware of Amedisys's alleged Medicare fraud, 

had become aware of the fraud and incorporated that information into the 

price of Amedisys's stock.6

A motion to dismiss challenges the adequacy of the initial pleading. To 

plead loss causation in a private securities action, the complaint need only 

allege facts that support an inference that the Defendants’ misstatements 

and omissions concealed the circumstances that bear upon the loss suffered 

such that Plaintiffs would have been spared all or an ascertainable portion of 

that loss absent the fraud. Lentell, 396 F.3d at 175. Whether the connection 

between Amedisys’s misleading statements and the alleged corrective 

disclosures may ultimately be found too attenuated at a later stage in 

litigation is a highly fact intensive inquiry that need not be reached at this 

6 The SFC Report released on October 3, 2011 concluded that three of the four 

companies under investigation have been taking advantage of the Medicare regulations: 

“Amedisys, LHC Group, and Gentiva encouraged therapists to target the most profitable 

number of therapy visits, even when patient need alone may not have justified such 

patterns.” Additionally, the Senate Report focused its efforts on Amedisys, stating that “the 

home health therapy practices identified at Amedisys . . . at best represent abuses of the 

Medicare home health program. At worst, they may be examples of [Amedisys] defrauding 

the Medicare home health program at the expense of taxpayers.” 

Appellants also mention for the first time in their Reply Brief that Amedisys has 

settled the civil investigation with the DOJ on November 12, 2013 for $150 million. 

Amedisys has also settled related derivative and ERISA claims that were consolidated as 

part of this action. This evidence was not before the district court and could not have been 

considered when the order of dismissal was entered.

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point. The Complaint consists of over 200 pages of allegations regarding, 

among other things, Defendants’ fraudulent Medicare billing practices. 

Where the Complaint sets forth specific allegations of a series of partial 

corrective disclosures, joined with the subsequent fall in Amedisys stock 

value, and in the absence of any other contravening negative event, the 

plaintiffs have complied with Dura’s analysis of loss causation. See also 

Spitzberg, 2014 WL 3442515 at *9 (holding that the plaintiffs sufficiently 

pled loss causation based on the drop in stock price that occurred after the 

corrective disclosure).

Accordingly, a de novo review of the Complaint leads us to conclude 

that as to the element of loss causation, the motion to dismiss should be 

denied. The district court’s application of the “actual fraud” standard to the 

partial disclosures discussed above and when viewed against the stark 

results of Amedisys’s second quarter of 2010 earnings report requires 

reversal and vacating the prior dismissal with this case remanded so that the 

district court can reevaluate these events in light of our holdings.7

B. Leave To File An Amended Complaint

Given our determination that the district court’s dismissal must be 

vacated and the case remanded, we do not reach the issue of whether the 

district court abused its discretion in denying PERSM leave to file an 

amended complaint once judgment was entered. Such must now be viewed as 

moot in light of our holding herein.

V. CONCLUSION

For the foregoing reasons, we REVERSE and VACATE the district 

court’s grant of the motion to dismiss and REMAND this matter for further 

proceedings consistent with this opinion. 

7 We do not reach in the first instance the Defendants’ argument that the Complaint 

failed to plead scienter with sufficient particularity. 

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