Opinion ID: 778688
Heading Depth: 3
Heading Rank: 1

Heading: Direct Statements

Text: 34 The first heightened pleading requirement Congress enacted for securities fraud cases under 10b-5 is that the complaint must specify each false statement or misleading omission and explain why the omission was misleading. 15 U.S.C. § 78u-4(b)(1). The purpose of this heightened pleading requirement was generally to eliminate abusive securities litigation and particularly to put an end to the practice of pleading `fraud by hindsight.' In re Vantive Corp., 283 F.3d at 1084-85 (quoting In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 988 (9th Cir.1999)). The investors fail to plead the existence of any facts or further particularities that, if true, demonstrate that the defendants had access to, or knowledge of, information contradicting their public statements when they were made. 35 Mere allegations of fraud are insufficient, even under the pre-PSLRA pleading standard. See Parnes, 122 F.3d at 549. Some of the direct statements alleged to be fraudulent by the investors are: Paulson's November 25, 1998, statement that Navarre had hired an undisclosed investment bank to take its NetRadio unit public soon; statements attributed to defendants generally that Navarre would complete the NetRadio IPO by the end of the year; Paulson's December 9, 1998, statement to CNBC that Navarre planned to file a registration statement within sixty days; Paulson's January 1999 statement during a conference call that he was reasonably comfortable that the NetRadio IPO would occur by early February 1999; and the allegation that on February 8, 1999, the defendants retreated from a prior announcement but still confirmed plans for an IPO within the next several weeks. Any remaining allegations concern statements made by analysts and news reporters, which the investors allege represent a direct statement or quotation by a Navarre insider or an endorsement of or failure to correct widely disseminated reports. 36 The general allegations contained in the amended complaint are inadequate under the heightened pleading standard of the PSLRA. The amended complaint fails to indicate why these statements would have been false or misleading at the several points in time in which it is alleged they were made. See In re Vantive Corp., 283 F.3d at 1086. Simply alleging that defendants made a particular statement at a given time, without providing further particulars about who made the statement or when, and then showing in hindsight that the statement is false misses the PSLRA pleading requirement. Corporate officials need not be clairvoyant; they are only responsible for revealing those material facts reasonable available to them. Novak, 216 F.3d at 309. For example, the investors allege in paragraph thirty-four of the amended complaint that [d]efendants knew or were reckless in not knowing that it would be impossible to file even a registration statement until March 1999, but give no particulars as to why this must be true. Why would the defendants have known of this impossibility? The failure to plead this why with particularity in this example is indicative of the failings of the investors' amended complaint. In sum, the investors' failure to plead their allegations of fraudulent misstatements and omissions with particularity is insufficient and fatal under the PSLRA. 37