Court Opinion

ID: 804206
Source: CourtListenerOpinion
Date Created: 2012-07-12 17:40:01+00
Date Added: 2024-06-11T18:00:11.417629
License: Public Domain

United States Court of Appeals
                     For the First Circuit

No. 11-2250

   IN RE: BOSTON SCIENTIFIC CORPORATION SECURITIES LITIGATION.
                            __________

          APPEAL FROM THE UNITED STATES DISTRICT COURT

                FOR THE DISTRICT OF MASSACHUSETTS

         [Hon. Douglas P. Woodlock, U.S. District Judge]

                             Before

                 Torruella, Boudin and Thompson,
                         Circuit Judges.

     William H. Narwold with whom Gregg S. Levin, James M. Hughes,
William S. Norton, J. Brandon Walker, Motley Rice LLC, Sherrie R.
Savett, Barbara A. Podell, Phyllis M. Parker, Berger & Montague,
P.C., Leslie R. Stern and Berman DeValerio were on brief for
appellants Steelworkers Pension Trust and KBC Asset Management NV.
     Robert J. Kaler with whom David Himelfarb, Edward W. Little,
Jr. and McCarter & English LLP were on brief for appellees Boston
Scientific Corporation, J. Raymond Elliott, Samuel R. Leno,
Fredericus A. Colen, and James R. Tobin.

                          July 12, 2012
            BOUDIN, Circuit Judge.        This case charging securities

fraud was brought in the district court as a class action on behalf

of   a   proposed   class   of    shareholders   of   Boston   Scientific

Corporation ("Boston Scientific").         Boston Scientific is a large

publicly traded company that makes and sells medical devices; it

produces numerous products across a range of medical fields,

operates in multiple countries and employs over 25,000 people. The

charges made, now common when a company's stock price declines

suddenly, rest on the following allegations and background facts.

            A substantial portion of Boston Scientific's sales in

late 2008 and early 2009--around 30 percent--were of cardiac rhythm

management ("CRM") devices handled by a group within the company

devoted to such products. CRM devices are implantable devices that

use electric pulses to treat a patient's cardiac condition; they

include pacemakers and implantable cardioverter defibrillators

("ICDs").    The devices are typically marketed and sold directly to

physicians by Boston Scientific's CRM sales staff, which in the

period with which the suit is concerned consisted of about 1,100

employees.

            In August 2009, Boston Scientific began an audit of CRM

sales expense reports from recent trips of sales representatives

who accompanied physician customers on tours of Boston Scientific

manufacturing facilities.        Twenty one sales reps were questioned

about whether food and entertainment provided exceeded permissible

                                    -2-
limits; and in September Boston Scientific received a subpoena from

the   U.S.    Department   of   Health    and   Human   Services   ("HHS"),

requesting information about contributions made by CRM to charities

with ties to physicians or their families.         Neither the audit nor

the subpoena were initially disclosed to the public.

             On October 20, 2009, the first day of the class period

stated in the later-filed complaint, Boston Scientific announced

its results for the third quarter of 2009, and issued a press

release noting that although CRM product sales had increased by

eight percent during the quarter, the CRM group's level of growth

was disappointing. During a conference with investors and analysts

that day, Raymond Elliott (President and CEO of Boston Scientific)

and Samuel Leno (Executive Vice President and President of the CRM

group) made encouraging statements about CRM sales prospects.

             Specifically, the men said that current growth was slower

than expected because they had underestimated the time it would

take to bring 150 newly hired sales representatives up to normal

productivity levels; that the prospect of increased market share

existed as the new hires completed training over nine to twelve

months; that "[w]e have solid growth in our CRM business, and we

have also added a number of people on the sales force on a global

basis," and that "the outlook is still positive but mixed as it

relates to market growth expectations."

                                    -3-
          On November 6, 2009, Boston Scientific publicly disclosed

the HHS subpoena (a month-and-a-half after receiving it) in a

quarterly report filed with the SEC (see note 2, below), noting

that "[w]e are currently working with the government to understand

the scope of the subpoena."       In this same SEC report, the company

reiterated the gist of the October remarks of the two officers,

predicting   that   "additional    [CRM]   sales   representatives   will

generate incremental net sales in future periods."

          In either late November or early December 2009, Boston

Scientific began to fire some of the twenty-one audited CRM sales

representatives.    On December 1, Elliott was asked by a moderator

during a healthcare conference call what had surprised him so far

in his first six months as CEO.      He responded,

          I think, Tim, because I've been there a bit as
          a director, there probably wasn't as many
          surprises really.    But I think the market
          change probably downward a bit on the ICD side
          affected sort of our viewpoint in CRM as a bit
          of a downside.

          On December 9 and 10, 2009, an unspecified number of CRM

sales representatives were fired.          Also on December 10, Boston

Scientific filed a registration statement and prospectus with the

SEC, announcing a public offering of $2 billion in senior notes.

Both the prospectus and a supplement filed on the closing date of

the offering, December 14, listed as one of fifty-one factors that

could cause actual results to differ materially from forward-

                                    -4-
looking statements Boston Scientific's "ability to retain key

members of our CRM sales force and other key personnel."

           Days   earlier,   on   December   11   or   12,   2009,   Boston

Scientific fired a Divisional Vice President of Sales of CRM

devices, who managed one of three sales regions in the United

States and according to the complaint "played a key role in

crafting and implementing pricing, sales, marketing, strategy, and

other key policies for [Boston Scientific's] CRM devices."             The

complaint alleged that in all, ten members of the CRM sales force

were fired for their "repeated[]" breaches of Boston Scientific's

internal code of ethics.

           On January 12, 2010, Elliott participated in another

healthcare conference call. Although not focusing on the CRM group

in particular, Elliott touted Boston Scientific's "stable, large,

experienced" and "very successful" sales force. He stated that the

"sales execution that we talked about building in the last five or

six months is now going out into play" and that "[w]e've already

done a ton of work in the last six months to get rid of unnecessary

distractions and litigation that goes beyond the norm."

           However, about a week before, on January 4, 2010, the

Boston Scientific's previously discharged Divisional Vice President

had been hired by one of Boston Scientific's competitors, St. Jude

Medical.   The complaint also stated that "many" of the other nine

fired CRM sales group members were also hired by St. Jude Medical.

                                   -5-
On February 11, when Boston Scientific announced its fourth quarter

2009 results, it revealed the firing and St. Jude's subsequent

hiring of the CRM sales representatives.         Elliott said:

           [W]e didn't like the response of St. Jude
           Medical to the disciplinary actions we took
           during December. We exited from our Company
           several sales representatives and Managers who
           among other things repeatedly breached our
           healthcare professional Code of Conduct. St.
           Jude has chosen to quickly hire many of our
           departed staff . . . . We cannot control what
           others do. . . . In the short haul, we will
           for certain lose sales, but I believe in the
           long haul we will be held in high regard by
           those that count for our efforts in the
           healthcare professionals arena.

           On the same day as these remarks, the price of Boston

Scientific common stock dropped from $8.29, the closing price on

the previous day, to a low of $7.39, and closed down about 10

percent, which the complaint alleged was a "direct and proximate

result of the February 11, 2010 pre-opening announcements."

Several months later, Boston Scientific said that the disciplinary

actions   and   an    unrelated   product   advisory     related   to   unsafe

outcomes in certain CRM devices had led to $16 million globally in

lost sales for the first quarter of 2010--a period in which the CRM

sales revenue was $538 million.

           In May 2010, Boston Scientific responded to a number of

inquiries from the SEC regarding Boston Scientific's filing for the

first   quarter      of   2010.   One   such   inquiry    was   whether   the

                                     -6-
disciplinary actions had impacted the decline in CRM sales in the

fourth quarter of 2009.        Boston Scientific stated:

                [T]he aforementioned terminations of 10 sales
                personnel represented less than one percent of
                our U.S. CRM sales force and had an immaterial
                impact on our net sales during the fourth
                quarter of 2009. We expect we will experience
                the impact of these terminations during 2010;
                however, our intent is to replace these
                positions throughout 2010 and recapture lost
                revenue in 2011 and beyond.         In future
                filings,   to   the  extent   our   businesses
                experience significant changes in revenues
                from period to period, we will discuss all
                material   factors   contributing   to   these
                changes.

                On April 9, 2010, plaintiffs--a union pension trust and

an investment management company--filed the present suit in the

district court against Boston Scientific, Elliott, Leno and a third

officer on behalf of a putative class of those who had purchased

the company's stock during the "class period" of October 20, 2009,

to February 10, 2010.         The complaint charged securities fraud in

violation of sections 10(b) and 20(a) of the Securities Exchange

Act,       15   U.S.C.   §§   78j(b),    78t(a)   (2006),   and   associated

regulations, 17 C.F.R. § 240.10b-5 (2010).

                The heart of the complaint was that the already-recounted

statements--made on October 20, November 6, December 1, 10 and 14,

2009, and on January 12, 2010--violated the anti-fraud provisions

of section 10(b).1        After further proceedings, the district court

       1
      The complaint's claim under second section 20(a) is
derivative of the section 10(b) claim and needs no separate

                                        -7-
granted the defendant's motion to dismiss, In re Bos. Scientific

Corp. Sec. Litig., No. 10-10593, 2011 WL 4381889            (D. Mass. Sept.

19, 2011), holding that the 2009 statements were not materially

false or misleading, while the allegations of scienter as to the

January 2010 statement were inadequate.

              The named plaintiffs now appeal.         Our review of the

dismissal is de novo and we assume as true the raw facts as alleged

in the complaint and draw reasonable inferences in favor of the

side opposing dismissal.         García-Monagas v. De Arellano, 674 F.3d

45, 47 (1st Cir. 2012).          That solicitude does not extend to the

legal conclusions or characterizations, Ashcroft v. Iqbal, 556 U.S.

662, 678 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555

(2007), or avoid the statutory requirement that "the complaint

shall . . . state with particularity facts giving rise to a strong

inference that the defendant acted with the required state of

mind."       15 U.S.C. § 78u-4(b)(2).

              Section 10(b) Obligations.         To state a section 10(b)

claim,   a    plaintiff   must    sufficiently    allege   "(1)   a   material

misrepresentation or omission; (2) scienter; (3) a connection with

the purchase or sale of a security; (4) reliance; (5) economic

loss; and (6) loss causation."        Miss. Pub. Employees' Ret. Sys. v.

Bos. Scientific Corp., 523 F.3d 75, 85 (1st Cir. 2008).                    The

discussion. ACA Fin. Guar. Corp. v. Advest, Inc., 512 F.3d 46, 67-
68 (1st Cir. 2008).

                                      -8-
district court, as already noted, found that the challenged 2009

statements failed the first requirement and we begin our discussion

with them.

          Section 10(b) "do[es] not create an affirmative duty to

disclose any and all material information."             Matrixx Initiatives,

Inc. v. Siracusano, 131 S. Ct. 1309, 1321 (2011); accord Hill v.

Gozani, 638 F.3d 40, 57 (1st Cir. 2011).           Instead, it extends to

omissions only where affirmative statements are made and the

speaker fails to "reveal [] those facts that are needed so that

what was revealed would not be so incomplete as to mislead."            Hill,

638 F.3d at 57 (1st Cir. 2011) (emphasis and internal quotation

mark omitted).    And the distortion must be "material."           17 C.F.R.

§ 240.10b-5.

          Omitted information is considered material if there is a

"substantial likelihood that the disclosure of the omitted fact

would have     been   viewed   by   the    reasonable   investor   as   having

significantly altered the total mix of information made available."

Basic Inc. v. Levinson, 485 U.S. 224, 231-32 (1988) (internal

quotation marks omitted).           When information merely creates a

possibility that an event affecting the company will later occur,

materiality

          "will depend at any given time upon a
          balancing of both the indicated probability
          that the event will occur and the anticipated
          magnitude of the event in light of the
          totality of the company activity."

                                     -9-
Id. at 238 (quoting SEC v. Tex. Gulf Sulphur Co., 401 F.2d 833, 849

(2d Cir. 1968) (en banc), cert. denied, 394 U.S. 976 (1969)).

            Why companies do not have to disclose immediately all

information that might conceivably affect stock prices is apparent:

the burden and risks to management of an unlimited and general

obligation    would   be     extreme     and    could    easily      disadvantage

shareholders in numerous ways (e.g., if a new invention were

prematurely disclosed to competitors or a take-over plan to the

target company). So the securities laws forbid false or misleading

statements    in   general     but     impose    more    specific      disclosure

obligations only in particular circumstances.2

            The October 20, 2009, statements.           Given the materiality

threshold, the October 20, 2009, statements, which predicted a

"positive    but   mixed"    outlook    in     CRM   sales   while    noting   the

continuing training of the 150 new sales representatives, were not

false or misleading.        The shareholders argue that the statements

were misleading because they failed to inform investors that the

future outlook was further "mixed" because of the "imminent"

firings of the audited personnel.

     2
      Pertinently, under statutory authority, 15 U.S.C. § 78m(a),
the SEC requires annual and quarterly reports providing specified
information, including financial statements and risk factors, Form
10-K; Form 10-Q, and disclosure of especially important events
whenever they occur, Form 8-K; notably, this last form does not
require disclosure of personnel changes other than ones involving
a director or principal officer. Form 8-K, Item 5.02.

                                       -10-
               But the firings were over a month away, and the complaint

itself states that the internal investigation (which began in

August) was still "ongoing."          Not only was the outcome uncertain--

eventually only 10 sales representative were removed while 150 new

ones   were     being    hired--but   the     total   number     of   those    being

interrogated represented only about two percent of the CRM sales

force,   and     CRM    sales   themselves    were    only   a   portion      of   the

company's business.

               The November 6, 2009, statement.         This statement, after

disclosing the HHS subpoena and harking back to the hiring of 150

new    sales    representatives,      repeated    the    company's     view        that

"additional [CRM] sales representatives will generate incremental

net sales in future periods." Although the audit and investigation

had been completed, there is no indication that the company had at

this time decided to fire anyone, let alone enough individuals to

dent the prospects of more revenues down the line from 150 new

hires.

               Also insufficient is the challenge to the other November

6, 2009, statement alleged to be materially                  misleading, namely,

that "[w]e are currently working with the government to understand

the scope of the [HHS] subpoena."             The plaintiffs make no attempt

to explain why this bland statement is misleading; and it surely is

not rendered incomplete or a "half-truth," Backman v. Polaroid

Corp., 910 F.2d 10, 16 (1st. Cir. 1990), by the failure to mention

                                       -11-
the internal audit based on the company's internal ethics code and

pertaining to a different set of sales practices.

          December 1, 2009, statement.          The next statement alleged

to be materially misleading was Elliott's December 1, 2009, answer

to a moderator's question that there had not been that many

"downside surprises" since he had become a CEO other than reduced

revenues of certain CRM devices.            Even if a limited number of

firings had now occurred, Elliott was not asked to disclose every

possible negative in recent history but merely asked what had

surprised him.

          So   while   the   audit    process    was   further   along,   the

connection between the general affirmative statement and the

specific audit is much weaker.              And anyway, the possible or

imminent discharge of a tiny fraction of sales personnel for a

single line of products remains of minimal expected consequence for

a company with global operations and 25,000 employees. This is not

even close to the level at which other cases have found omissions

to be material.3

     3
      E.g., Matrixx Initiatives, Inc. v. Siracusano, 131 S. Ct.
1309, 1313-14 (2011) (finding material evidence of a link between
a drug company's leading product and loss of smell); In re
Cabletron Sys., Inc., 311 F.3d 11, 36 (1st Cir. 2002) (finding
material failing to reveal major delays in a company's important
new product after creating impression that the product was already
available); Aldridge v. A.T. Cross Corp., 284 F.3d 72, 79-80 (1st
Cir. 2002) (finding material to revenue figures the failure to
reveal policy requiring refunds to previous buyers in the event of
a price cut--which the company had already planned to institute).

                                     -12-
            December 10 and 14, 2009, statements.                   Both at the

beginning and end of a public offering period, on December 10 and

14, 2009,   Boston Scientific listed as one of over 50 factors that

could     cause      actual     results       to     differ   materially     from

forward-looking statements the company's "ability to retain key

members   of   our    CRM     sales   force    and    other   key   personnel."

Plaintiffs say that this was misleading because it omitted to say

that by this time about ten CRM sales personnel had been fired,

including one in a relatively senior position.

            That ten representatives out of 1,100 had been fired

while 150 new ones were being trained does not amount to material

information; but it is a closer call whether this is so of the loss

of one of three of the CRM group's Divisional Sales VPs.                   Yet it

was the personal relationship between sales personnel and doctors

that created the main risk that those fired would take business

with them and the number of discharged representatives was still

surpassingly small.

            That the Divisional Vice President would defect to a

competitor and take other discharged salesmen with him was not

plainly foreseeable.          Those discharged for violating the company's

ethics codes could well have been regarded as tainted; and that a

cadre would reappear at a competitor, recruited in part by the

fired Divisional Vice President, came as a surprise to Elliott

                                       -13-
himself, as his February 11, 2010, statement made clear.                   Nor is

the eventual impact of the discharges clear even today.

              The    plaintiffs    make    much   of    the fact   that    Boston

Scientific predicted lost sales of $100 million in its February 11,

2010, conference call and $100 million sounds like a large number,

but, in that same conference call, Boston Scientific projected 2010

revenues of $8.1 billion to $8.5 billion, making the projected loss

just over one percent of revenues and not necessarily a permanent

loss of business.        Also, Boston Scientific attributed the $100

million both to the lost salespeople and an unrelated product

advisory.

             The product advisory, issued December 1, 2009, informed

physicians that several patients had suffered unsafe outcomes (such

as shocks) from certain CRM devices implanted subpectorally.

Although the company did not reveal how much of the $100 million

was attributable to the product advisory, this advisory surely

caused   a   portion    of   the   expected     losses.     In   any     case,    an

undisclosed speculative chance of an event that affects only a very

small proportion of revenues is not material.

             Scienter Requirements.        Section 10(b) is a fraud statute

whose scienter element is satisfied if the speaker acted with

fraudulent     intent   or    knowing      or   reckless   disregard      of     his

obligation    to    disclose.      Auto.    Indus.     Pension   Trust    Fund    v.

Textron, Inc.,      No. 11-2106, 2012 WL 2038098, at *4 (1st Cir. June

                                     -14-
7, 2012).       And claims of scienter are subject to the heightened

pleading requirements of the Private Securities Litigation Reform

Act   ("PSLRA"),          enacted    "to     curb      frivolous,    lawyer-driven

litigation, while preserving investors' ability to recover on

meritorious claims." Tellabs, Inc. v. Makor Issues & Rights, Ltd.,

551 U.S. 308, 322 (2007).

            One reason why securities class actions "pose a special

risk of vexatious litigation,"               Merrill Lynch, Pierce, Fenner &

Smith Inc. v. Dabit, 547 U.S. 71, 86 (2006),                    is that the cost of

defending, coupled with potentially enormous liability, may make it

advisable for the defendant to settle even unlikely or frivolous

claims.    S.    Rep.     No.    104-98,    at    9   (1995),   reprinted   in   1995

U.S.C.C.A.N. 679, 688; see also Bohn & Choi, Fraud in the New-

Issues Market: Empirical Evidence in Securities Class Actions, 144

U. Pa. L. Rev. 903, 979 (1996).

            Further,       the    normal     recovery     for    class   members   is

extremely       modest,    see    Coffee,    Reforming     the    Securities     Class

Action: An Essay on Deterrence and Its Implementation, 106 Colum.

L. Rev. 1534, 1545-46 (2006), and the costs of both the company's

defense and what it pays in large legal fees to plaintiffs' counsel

is usually borne indirectly by the stockholders of the defendant

company.    What Congress discerned among the abuses was

            the routine filing of lawsuits . . . whenever
            there is a significant change in an issuer's
            stock price, without regard to any underlying
            culpability of the issuer, and . . . the abuse

                                           -15-
            of the discovery process to impose costs so
            burdensome that it is often economical for the
            victimized party [i.e. the defendant] to
            settle.

H.R. Rep. No. 104-369, at 31 (1995), reprinted in 1995 U.S.C.C.A.N.

730, 730 (Conf. Rep.).          And in response Congress adopted in the

PSLRA   two    pleading       requirements     aimed       at    permitting   early

termination--before          discovery--of     such      "routine      filings"    of

unpromising cases.

            First,     the    PSLRA     requires     a     plaintiff    alleging    a

misleading statement or omission to "specify each statement alleged

to have been misleading [and] the reason or reasons why the

statement is misleading."             15 U.S.C. 78u-4(b)(1).           Second, the

plaintiff must "state with particularity facts giving rise to a

strong inference that the defendant acted with the required state

of mind."     Id. 78u-4(b)(2) (emphasis added).                 Taken together, the

requirements make it easier to identify the issues and to dismiss

flawed complaints at the complaint stage.

            The January 2010 Statements.                 As earlier described,

Elliott made several statements at the January 2010 healthcare

conference call favorable to the company's sales, including a claim

that it had a "stable, large, experienced" and "very successful"

sales force.    Plaintiffs argue that by this time not only were the

firings complete, but at least one, and perhaps more, of the fired

employees     had    been    re-hired     by   one    of     Boston    Scientific's

competitors.     Yet no mention was made of these facts.

                                        -16-
          Neither this nor the other statements supporting the

company's sale force focused on CRM sales personnel; but the next

month, February 2010, when Boston Scientific finally announced the

firings and subsequent hirings of some of the reps by St. Jude, it

predicted lost sales as a result.                  The district court found

material the failure to disclose the threat in January 2010 (which

we will assume to be correct), but also found the statement non-

actionable for lack of adequate allegations of scienter.

          The      PSLRA    requirement     that   a    "strong   inference"    of

scienter be pled requires the complaint to set forth facts making

the inference of scienter "cogent and at least as compelling as any

opposing inference         one   could    draw   from   the facts     alleged."

Tellabs, 551 U.S. at 324.           Thus, when Elliott spoke blandly but

favorably in January 2010 of the strength of the company's sales

force, the facts pled had to provide a clear indication that he was

either dishonest or reckless in not mentioning the defection of up

to ten salespeople to a competitor.

             In cases where we have found the pleading standard

satisfied,   the    complaint      often    contains     clear    allegations   of

admissions, internal records or witnessed discussions suggesting

that at the time they made the statements claimed to be misleading,

the defendant officers were aware that they were withholding vital

                                         -17-
information or at least were warned by others that this was so.4

No such direct evidence is pled in the complaint here.                             The

plaintiffs do not identify any other basis for imputing such

wrongful intent, nor was the omitted information of such powerful

importance that wrongful intent can reasonably be inferred.

             The ten salespeople fired were less than one percent of

Boston Scientific's U.S. CRM sales force and an even smaller

percentage of the overall sales force of which Elliott was speaking

in January 2010.         Although a month later the company predicted

losses from the firings, the estimation was just over one percent

of the company's total projected revenues, and (as explained above)

represented the combined effect of both the firings and a negative

product advisory.

             The delay is consistent with the fact that at the time of

the   January    12,   2010,   statements,       some   or   all    of    the    fired

employees had only very recently been hired by St. Jude, and how

much business they might take with them surely required some period

to assess.      Cf. Higginbotham v. Baxter Int'l, Inc., 495 F.3d 753,

761 (7th Cir. 2007) ("Taking the time necessary to get things right

is    both   proper    and   lawful.").     As    we    stated     in    New    Jersey

Carpenters Pension & Annuity Funds v. Biogen IDEC Inc., a company

       4
      For example, in In re Cabletron, the plaintiffs alleged that
the company booked entirely fictitious sales, and employees stored
the unsold goods at their homes "at the behest of" the company's
chairman. 311 F.3d at 25.

                                     -18-
may behave "irresponsibly" if it issues an ominous warning about an

uncertain risk that "had not yet been adequately investigated." 537

F.3d 35, 58 (1st Cir. 2008).

          In fact, the complaint does not even squarely allege that

the individual defendants knew on January 12, 2010, that St. Jude

had hired some Boston Scientific salespeople, and that cannot be

merely assumed. Maldonado v. Dominguez, 137 F.3d 1, 9-10 (1st Cir.

1998).   Recently, where a company omitted mention of its weakened

backlog, scienter was found lacking because "[n]othing in the

complaint suggest[ed] that any of the named officers believed, or

was recklessly unaware" of the problems.     Textron, No. 11-2106,

2012 WL 2038098, at *4.

          In all events, even if Elliott knew of the St. Jude

hirings, this was at best marginally material for reasons already

indicated, and its marginal materiality not only defeats any

independent inference of deliberate withholding but also makes the

pled facts insufficient for a fact finder to find the "extreme

recklessness in not disclosing the fact" that is the least that is

required to establish scienter.    City of Dearborn Heights Act 345

Police & Fire Ret. Sys. v. Waters Corp., 632 F.3d 751, 757 (1st

Cir. 2011).

          The plaintiffs argue that the district court erred by

failing to consider their arguments for scienter "holistically," as

Tellabs suggests is proper.    551 U.S. at 326.   True, allegations

                                -19-
that are individually insufficient can sometimes combine together

to make the necessary showing.     To take the simplest example, one

known episode of an adverse drug reaction might be meaningless; an

undisclosed collection of repeated and serious adverse reactions

might permit an inference of conscious wrongdoing or recklessness

because the adverse implication is so obvious.

             But in this case, a single central risk existed--that

sales personnel might leave and perhaps take some of their business

with them.    This risk became greater with succeeding events to the

point that, by January 2010, it was (in the district judge's

plausible view) sufficient that the failure to mention it was a

material omission.      But, even so, it was a single risk with a

single potential consequence, namely, real (but quite possibly

temporary) losses while new Boston Scientific salespeople pursued

the same doctors.

             If the likely magnitude of the loss was great in relation

to company revenues, and had been so understood by defendants, a

basis would likely exist for concluding that they were dishonest or

at least reckless in failing to mention it.       Because the losses,

thereafter identified to the SEC, were extremely modest in relation

to revenues and partly attributable to a different cause, no such

inference exists.     Thus, the January 2010 statements do not pass

the PLSRA's heightened pleading standard for scienter.

                                  -20-
           Inherent in the PLSRA is the risk that dismissal on the

complaint will leave without remedy some wrongs that discovery or

trial   might   have   disclosed,    albeit   a   risk   Congress   thought

necessary. Confining ourselves to the pleadings, as we must, there

is clearly insufficient basis to find materiality as to all but the

last of the statements or infer scienter as to the last.

           Affirmed.

                                    -21-