Court Opinion

ID: 4299142
Source: CourtListenerOpinion
Date Created: 2018-07-30 16:00:30.600645+00
Date Added: 2024-06-11T07:49:31.492040
License: Public Domain

FILED
                                                             United States Court of Appeals
                                                                     Tenth Circuit

                                                                      July 30, 2018
                                      PUBLISH
                                                                   Elisabeth A. Shumaker
                     UNITED STATES COURT OF APPEALS                    Clerk of Court

                                 TENTH CIRCUIT

 DAVID HAMPTON,

       Plaintiff - Appellant,

 and

 TY MESSERLI, individually and on
 behalf of all others similarly situated,

       Plaintiff,

 v.                                                    No. 16-1417

 ROOT9B TECHNOLOGIES, INC.;
 JOSEPH J. GRANO, JR.; KENNETH
 T. SMITH,

       Defendants - Appellees.

                    Appeal from the United States District Court
                            for the District of Colorado
                      (D.C. No. 1:15–CV-02152-MSK-MEH)

Nicholas I. Porritt, of Levi & Korsinsky LLP, Washington, D.C. (Alexander A.
Krot, III, of Levi & Korsinsky LLP, Washington, D.C., and Kip B. Shuman and
Rusty E. Glenn, of The Shuman Law Firm, Denver, Colorado, with him on the
briefs), for Plaintiff-Appellant.

Nina F. Locker, of Wilson Sonsini Goodrich & Rosati Professional Corporation,
Palo Alto, California (Steven Guggenheim, Joni L. Ostler, Evan L. Seite, of
Wilson Sonsini Goodrich & Rosati Professional Corporation, Palo Alto,
California, and Holly Stein Sollod, Christina F. Gomez, Cici Cheng, of Holland &
Hart LLP, Denver, Colorado, with her on the briefs) for Defendants-Appellees.
Before HARTZ, KELLY, and HOLMES, Circuit Judges.

HOLMES, Circuit Judge.

      This appeal arises from the district court’s dismissal of Plaintiff-Appellant

David Hampton’s securities-fraud class action against Defendants-Appellees

root9B Technologies, Inc. (“root9B”), a provider of cybersecurity products and

services, Joseph J. Grano, Jr., root9B’s Chief Executive Officer and Chairman,

and Kenneth T. Smith, root9B’s former Chief Financial Officer (collectively,

“Defendants”). Mr. Hampton brought this action pursuant to §§ 10(b) and 20(a)

of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b) & 78t(a), and

Securities and Exchange Commission (“SEC”) Rule 10b-5, 17 C.F.R. § 240.10b-

5, claiming that root9B made false or misleading statements in connection with

the purchase or sale of securities.

      Mr. Hampton identified two statements that he alleges were false or

misleading and material: (1) a letter from Mr. Grano to investors—language from

which was repeated in a number of SEC filings—attesting that root9B was

differentiated from competitors by its “proprietary hardware and software,”

Aplt.’s App. at 15 (Am. Class Compl., dated Jan. 4, 2016); and (2) a press release

and associated report published by root9B in which the company claimed to have

detected a planned cyber attack against a number of international financial

                                         2
institutions, id. at 30. He further alleges that the individual defendants—i.e., Mr.

Grano and Mr. Smith—are jointly and severally liable under § 20(a).

      The district court dismissed Mr. Hampton’s claims, finding that he had

failed to sufficiently plead that the identified statements were false or misleading.

Mr. Hampton appeals, and exercising jurisdiction pursuant to 28 U.S.C. § 1291,

we affirm.

                                          I

      root9B provides “cybersecurity, regulatory risk mitigation, and energy and

controls solutions” through three business lines: Cyber Solutions, Business

Advisory Solutions, and Energy Solutions. Aplees.’ Resp. Br. at 1. In November

2013, Premier Alliance Group, Inc. (“Premier Alliance”), a publicly-traded

company, acquired root9B LLC in exchange for cash and restricted shares of

Premier Alliance common stock. On October 17, 2014, Mr. Grano, the Chief

Executive Officer and Chairman of Premier Alliance, published a letter to

shareholders announcing plans to rebrand Premier Alliance as root9B

Technologies, Inc. The rebranding took place on December 1, 2014. Mr. Grano

explained that the rebranding reflected a business strategy focused on growing the

cybersecurity business.

                                          A

      Mr. Hampton alleges that root9B issued, during and after the rebranding,

the two misleading statements underlying this dispute.

                                          3
      First, in the aforementioned October 17 letter to investors, Mr. Grano

identified, as a competitive strength of root9B, its “proprietary hardware and

software designed to combat the new methodologies being utilized by state-

sponsored and sophisticated individual hackers.” Aplt.’s App. at 23–24; id. at

241 (Form 8-K, dated Oct. 17, 2014 (“Grano letter”)). That statement was

repeated in SEC filings on November 14, 2014, March 31, 2015, and May 15,

2015. Following Mr. Grano’s letter, root9B raised $11.5 million over three stock

and option offerings in February and March of 2015. Defendants filed a post-

effective amendment to the registration statement on May 1, 2015, pursuant to

which Mr. Grano and other root9B “insiders” were able to sell shares to the

public. Id. at 68–70.

      Second, root9B announced, via a press release on May 12, 2015, that it had

uncovered and defeated plans by a state-sponsored team of Russian hackers,

known as Sofacy or APT28, to target several international financial institutions

(“Sofacy statements”). Id. at 30–37, 249–50 (root9B Uncovers Planned Sofacy

Cyber Attack Targeting Several International and Domestic Financial

Institutions, PR N EWSWIRE , dated May 12, 2015). root9B claimed that this was

“the first and only known Sofacy attack to be discovered, identified, and

reported” before the attack began. Id. at 32 (emphasis omitted). root9B

contemporaneously published a report entitled “APT28 Targets Financial

Markets: Root9B Releases Zero Day Hashes” (“APT28 Report”) explaining its

                                         4
basis for attributing the planned attack to Sofacy. Id. at 31, 251–59 (APT28

Targets Financial Markets: Root9B Releases Zero Day Hashes, R OOT 9B. COM ,

dated May 10, 2015). Mr. Grano gave a televised interview on Fox Business on

May 14, 2015, during which he discussed the Sofacy statements and said that he

was aware of the evidence upon which root9B attributed the attack to Sofacy.

Following the announcement, the price of root9B’s stock rose 42% between May

11, 2015 and May 19, 2015, to an “all-time trading high of $2.51.” Id. at 37.

                                         B

      Mr. Hampton alleges that two subsequent articles that challenged root9B’s

statements caused the company’s inflated share price to fall.

      First, on May 20, 2015, “cybersecurity expert” and former reporter Brian

Krebs published an article entitled “Security Firm Redefines APT: African

Phishing Threat” (“Krebs article”) on his security news blog, challenging

root9B’s attribution of the attack to Sofacy. Id. at 44, 120–22 (Brian Krebs,

Security Firm Redefines APT: African Phishing Threat, K REBS ON S ECURITY ,

dated May 20, 2015). Mr. Krebs claimed that root9B had “scant evidence” to

support its attribution of the attack to Sofacy. Id. at 45, 122. According to Mr.

Krebs, root9B based the attribution in large part upon the use of a domain known

to be used by Sofacy. However, based in part on his claim that this server was

associated with a number of bad actors in the world of cyberattacks, Mr. Krebs

concluded that the attack was more likely a “run-of-the-mill bank phishing

                                         5
scam[]” perpetrated by “Nigerian scammers.” Id. at 45, 122. The article claimed

that this conclusion was corroborated by the “chief scientist” of “one of the

security firms that first published the initial findings on the Sofacy/APT28 group

back in October 2014.” Id. at 46, 122. Mr. Hampton claims that, as a result of

the Krebs article, root9B’s share price fell by 8%, from $2.51 on May 19, 2015 to

$2.32 on May 21, 2015.

      Second, on June 15, 2015, an anonymous author known as Pump Stopper

published an article entitled “ROOT9: -82.5% Downside [o]n Management Fraud

Allegations, Cyber Failure [a]nd Bankruptcy - Strong Sell” (“Pump Stopper

article”) on the website SeekingAlpha.com. Aplt.’s App. at 46, 95–119 (Pump

Stopper, Root9: -82.5% Downside On Management Fraud Allegations, Cyber

Failure And Bankruptcy - Strong Sell, S EEKING A LPHA , dated June 15, 2015). In

the article, the author claimed that the financial results reported for the Cyber

Solutions sector of root9B’s business reflected “a one-time[,] low margin

hardware installation,” and the resale and installation of a product called Digital

Shield. 1 Id. at 47. The author allegedly based his or her claims on an interview

      1
             The Pump Stopper article included, in pertinent part:

                     Since [root9B’s] “cyber” product is so obviously a bad
             joke . . . I felt compelled to double check with the company in
             case I missed something, how can there be nothing of value at
             [root9B?] . . . I called [CFO Smith] to get more perspective on
             . . . the company’s product claims.

                                          6
with Mr. Smith, root9B’s CFO. Mr. Hampton claims that, as a result of the Pump

Stopper article, root9B’s share price fell by 9% on June 15, 2015 on heavy

trading, from $1.87 to $1.70. The share price fell an additional 40%, to $1.02, by

June 23, 2015.

                                         II

      Securities-fraud claims were first filed in the United States District Court

for the Central District of California by Ty Messerli, on behalf of others similarly

situated. Those claims were transferred to the District of Colorado on September

29, 2015. A magistrate judge granted Mr. Hampton’s motion for appointment as

lead plaintiff, which was unopposed. See Hampton v. Root9B Techs., Inc., Dist.

Ct. No. 15-cv-02152-MSK-MEH, Doc. 18, at 1–2 (Order, dated Oct. 14, 2015).

      Mr. Hampton filed an amended class-action complaint on January 4, 2016,

                     I was told a large portion of “cyber” was actually a
             one-time low margin hardware installation, projects [root9B] will
             be apparently moving away from going forward . . . . Best I can
             tell, another component of revenue is largely what appears to me
             [to be] an old training and certification service for a product
             [root9B] acts as a reseller for. During our conversation, [Smith]
             didn’t even seem to know what the product was called! . . .

                    [I]t appears to me [that root9B’s] cyber claims are also
             based on a product called Digital Shield, a product [root9B]
             resells, and installs for other companies and municipalities with
             a price point of $3,600 - [root9B] is going to have to do an
             impossible amount of reselling this old “training module” to
             justify the current market capitalization of $134 million!

Aplt.’s App. at 47 (emphases omitted).

                                         7
alleging violations of Securities Exchange Act §§ 10(b) and 20(a), and SEC Rule

10b-5, and also purporting to represent a class of “all persons who acquired

root9B securities between October 17, 2014 and June 15, 2015, inclusive.”

Aplt.’s App. at 13, 15. Defendants moved to dismiss the amended complaint on

February 18, 2016. Mr. Hampton filed a brief in opposition to the motion to

dismiss.

      The district court, adopting in part and rejecting in part the magistrate

judge’s recommendation, entered an opinion and final judgment on September 21,

2016 that granted Defendants’ motion to dismiss all claims. Aplt.’s App. at 404

(Op. & Order Granting Mot. to Dismiss, dated Sept. 21, 2016), 417 (Final J.,

dated Sept. 21, 2016). The district court held that Mr. Hampton had failed to

state a claim under § 10(b) or § 20(a) because his “allegations [were] insufficient

to allege that either [the proprietary-hardware statements or the Sofacy statements

were] false.” Id. at 410.

      The court acknowledged that Mr. Hampton’s assertion of falsity with

regard to the proprietary-hardware statements relied on the Pump Stopper article

and Defendants’ deletion of the statements from subsequent SEC filings. The

court found it “entirely unclear” how Mr. Hampton sought to equate the

proprietary-hardware statements with the Pump Stopper article’s description of “a

onetime low margin hardware installation.” Id. at 411. The court noted that,

while it was possible that the two phrases referred to the same hardware, Mr.

                                         8
Hampton’s “obligation under [Rule] 12(b)(6) require[d] him to plead something

more than . . . mere possibility.” Id. at 412. It further reasoned that even if the

two phrases referred to the same hardware, (1) there was no “inherent[]

inconsisten[cy]” between the characterizations “proprietary” and “low margin,”

and (2) there was no inherent inconsistency between the characterizations

“proprietary” and “re-sale.” Id. at 411–12. The court was further unconvinced by

the deletion of the “proprietary hardware” language from the SEC filings because

Defendants had in fact deleted “an entire block of text promot[ing] several ways

in which [root9B] believed its business was different from its competition.” Id. at

412–13. root9B’s later SEC filings also disclosed that “‘revenue . . . from

hardware resales . . . was not repeated in’ subsequent quarters,” and that re-sales

would be “discontinued,” which “explained[ed] why [root9B] ceased touting its

hardware as ‘proprietary’ in late-2015.” Id. at 413.

      The district court similarly rejected Mr. Hampton’s claim with regard to the

Sofacy statements. After concluding that Mr. Hampton’s allegation of falsity

rested entirely on the Krebs article, the court found that the Krebs article merely

offered an alternative explanation, but did not offer proof that root9B’s attribution

was false. The court arrived at this conclusion even after determining that

root9B’s Sofacy-based claim was a statement of fact, rather than a statement of

opinion, which had the effect of holding Mr. Hampton to a less-demanding

pleading standard.

                                           9
      Because the district court found that Mr. Hampton had not sufficiently

alleged that either set of statements was, in fact, false, the court did not reach the

other elements of Mr. Hampton’s claim under § 10(b). The court did, however,

express “profound doubts” that Mr. Hampton had sufficiently pleaded either

scienter or loss causation. Aplt.’s App. at 415 n.6.

      Mr. Hampton timely appealed from the district court’s judgment.

                                          III

      “Because this is an appeal from a motion to dismiss, we accept all

well-pleaded facts, as distinguished from conclusory allegations, as true.” Adams

v. Kinder-Morgan, Inc., 340 F.3d 1083, 1088 (10th Cir. 2003). And we conduct a

“de novo review of the dismissal.” Anderson v. Spirit Aerosystems Holdings,

Inc., 827 F.3d 1229, 1237 (10th Cir. 2016). Furthermore, “notwithstanding the

usual rule that a court should consider no evidence beyond the pleadings on a

[Federal] Rule [of Civil Procedure] 12(b)(6) motion to dismiss, ‘the district court

may consider documents referred to in the complaint if the documents are central

to the plaintiff’s claim and the parties do not dispute the documents’

authenticity.’” 2 Alvarado v. KOB-TV, L.L.C., 493 F.3d 1210, 1215 (10th Cir.

      2
              Consistent with this proposition, Mr. Hampton does not dispute that
the district court properly considered in resolving Defendants’ motion to dismiss
the SEC filings discussed herein, the Krebs Article, the Pump Stopper Article, the
Sofacy Statement, and the APT28 Report. In conducting our de novo review, we
consider these materials as well.

                                          10
2007) (quoting Jacobsen v. Deseret Book Co., 287 F.3d 936, 941 (10th Cir.

2002)).

                                            A

       Section 10(b) and Rule 10b-5 create an implied private cause of action

arising from fraud in the purchase or sale of securities. See Halliburton Co. v.

Erica P. John Fund, Inc., --- U.S. ----, 134 S. Ct. 2398, 2407 (2014). The

regulation prohibits “any untrue statement of a material fact or [omission of] a

material fact necessary in order to make the statements made, in the light of the

circumstances under which they were made, not misleading[,] . . . in connection

with the purchase or sale of any security.” 17 C.F.R. § 240.10b-5.

      To state a claim under § 10(b) and Rule 10b-5, a plaintiff must plausibly

allege that:

               [A] defendant made statements that[:] (1) contained false or
               misleading statements of material fact, (2) related to the purchase
               or sale of a security, (3) were made with intent to defraud
               investors or conscious disregard of a risk that shareholders would
               be misled (scienter) , (4) led to reliance by the plaintiff, and (5)
               caused the plaintiff’s loss (loss causation).

Nakkhumpun v. Taylor, 782 F.3d 1142, 1146–47 (10th Cir. 2015); accord In re

Zagg, Inc. Sec. Litig., 797 F.3d 1194, 1200 (10th Cir. 2015); City of Philadelphia

v. Fleming Cos., 264 F.3d 1245, 1257–58 (10th Cir. 2001).

      The Private Securities Litigation Reform Act of 1995 (“PSLRA”), 15

U.S.C. § 78u-4(b), adjusts the general pleading standard applicable under Federal

                                            11
Rule of Civil Procedure 12(b)(6), which requires a plaintiff to plead “sufficient

factual matter, accepted as true, to ‘state a claim to relief that is plausible on its

face.’” S.E.C. v. Shields, 744 F.3d 633, 640 (10th Cir. 2014) (quoting Ashcroft v.

Iqbal, 556 U.S. 662, 678 (2009)); accord Pirraglia v. Novell, Inc., 339 F.3d 1182,

1187 (10th Cir. 2003). Specifically, under the PSLRA, a plaintiff must meet a

heightened pleading standard with regards to the first and third elements of a

securities-fraud claim: that is, respectively, as to whether the statements at issue

were false or misleading, and whether the defendant acted with the requisite

scienter. § 78u-4(b)(1)–(2); see Adams, 340 F.3d at 1095–96.

      Relevant to this appeal, the PSLRA requires a plaintiff to identify “each

statement alleged to have been misleading, the . . . reasons why the statement is

misleading, and, if an allegation regarding the statement or omission is made on

information and belief, [that] the complaint shall state with particularity all facts

on which the belief is formed.” § 78u-4(b)(1). To satisfy this statutory burden, a

plaintiff must “explain why the statement was misleading, and allege with

particularity his basis for believing that the statement was false.” Nakkhumpun,
782 F.3d at 1147.

      In reviewing the sufficiency of a plaintiff’s pleadings, we “evaluat[e] the

facts alleged in a complaint to determine whether, taken as a whole, they support

a reasonable belief that the defendant’s statements identified by the plaintiff were

false or misleading.” Adams, 340 F.3d at 1099. In doing so, we evaluate:

                                           12
             (1) the level of detail provided by the facts stated in a complaint;
             (2) the number of facts provided; (3) the coherence and
             plausibility of the facts when considered together; (4) whether
             the source of the plaintiff’s knowledge about a stated fact is
             disclosed; (5) the reliability of the sources from which the facts
             were obtained; and (6) any other indicia of how strongly the facts
             support the conclusion that a reasonable person would believe
             that the defendant’s statements were misleading.

Id.

      “To meet the [pleading] standard, plaintiffs are not required to disclose the

documentary or personal sources from which they learned the facts alleged . . . .

[T]he PSLRA did heighten the standard of pleading securities fraud, [however,]

and where a plaintiff does not identify the sources of the facts stated in the

complaint, the facts alleged . . . will usually have to be particularly detailed,

numerous, plausible, or objectively verifiable by the defendant before they will

support a reasonable belief that the defendant’s statements were false or

misleading.” Id. at 1103.

      There is a meaningful distinction between statements of opinion and

statements of fact; the former require a plaintiff to meet a higher pleading

standard. “[P]ure statements of opinion,” Omnicare, Inc. v. Laborers Dist.

Council Constr. Indus. Pension Fund, --- U.S. ----, 135 S. Ct. 1318, 1327 (2015),

and “statements of optimism that are not capable of objective verification” are not

material misstatements unless they inaccurately represent “the speakers’ beliefs

concerning then-present factual conditions,” Grossman v. Novell, Inc., 120 F.3d
13
1112, 1119, 1123 (10th Cir. 1997). “[S]tatements of opinion or belief must rest

on ‘a factual basis that justifies them as accurate, the absence of which renders

them misleading.’” Id. at 1123 (quoting Va. Bankshares, Inc. v. Sandberg, 501
U.S. 1083, 1093 (1991)).

      Having reviewed the applicable law, we address, in turn, Mr. Hampton’s

arguments that the district court erred in dismissing his claims based on root9B’s

proprietary-hardware and Sofacy statements. We conclude—as to both sets of

statements—that Mr. Hampton fails to sufficiently plead the first prong—i.e., that

root9B made materially false statements. Accordingly, we reject Mr. Hampton’s

contentions of error and uphold the district court’s dismissal of his amended

complaint.

                                          B

      We first address the alleged falsity of the proprietary-hardware statements.

As discussed above, Mr. Hampton alleges that root9B’s statements were false

based on (1) the Pump Stopper article (which in turn relied on an alleged

interview with CFO Smith), and (2) the subsequent omission of the relevant

statements from root9B’s SEC filings. The district court dismissed Mr.

Hampton’s claims because it found that the Pump Stopper article’s statements and

the omission of the “proprietary hardware and software” language from

subsequent filings did not disprove root9B’s earlier claims that it offered

proprietary hardware. See Aplt.’s App. at 411–13. We agree with the district

                                         14
court’s conclusions for a number of reasons.

      First, Mr. Hampton cannot show that the “low margin hardware

installation” and resale products that the Pump Stopper article identifies—which

Mr. Hampton claims refers to “a third-party’s hardware,” Aplt.’s Opening Br. at

25—are in fact the same products that the Grano letter and related SEC filings

refer to as “proprietary hardware and software.” Therefore, Mr. Hampton

necessarily falters in demonstrating that the “proprietary” label was false or

misleading because he cannot raise a plausible inference that the label does not fit

the products it references. Indeed, aside from citing to “[t]he stock market’s

reaction to the” alleged revelation of the Pump Stopper article, Mr. Hampton

points to no facts that push his allegation beyond a mere possibility. Aplt.’s

Opening Br. at 26.

      Second, the exclusion of the “proprietary hardware and software” language

from subsequent SEC filings does not provide sufficient evidence that the

language was removed on account of the Pump Stopper article’s representations;

rather, a reasonable reading of the language that replaced the “propriety hardware

and software” language is that it simply provides greater details regarding the

products comprising that hardware or software.

      Specifically, Mr. Hampton offers four filings featuring the “proprietary

hardware and software” language prior to the Pump Stopper article. The first of

these is the Form 8-K disclosure of Grano’s letter itself. The second and third

                                         15
are, respectively, the Form 10-Q quarterly disclosure and the Form 10-K annual

disclosure covering the period in which Grano sent the letter to investors; these

filings would naturally include information like Grano’s rebranding update. The

final filing is the May 15, 2015 Form 10-Q. The relevant language in that filing

largely repeated the language from the annual disclosure:

             In the latter half of 2014, the Company launched and announced
             the repositioning of the Company’s business and adjustment to its
             strategy to focus on cybersecurity and regulatory risk mitigation.
             . . . The strategic change in focus was driven by several factors
             [including] our expertise, capabilities and proprietary solutions
             in the cyber security sector . . . . [O]ur cyber security segment is
             differentiated in four ways[, including our] proprietary hardware
             and software designed to combat the new methodologies being
             utilized by state-sponsored and sophisticated individual hackers.
             . . . During 2015, we are building an Adversarial Pursuit
             Operations Center to expand our ability to deliver these services
             as well as continuing to develop our proprietary products.

Aplt.’s App. at 41–42 (emphasis omitted).

      Mr. Hampton then identifies two post-Pump-Stopper-article filings from

which the “proprietary hardware and software” language was omitted: a Form 10-

Q quarterly disclosure filed on August 14, 2015, and a Form 10-Q quarterly

disclosure filed in November 2015. Id. at 48–51. The “Outlook” section, in

which the above language appeared in the previous Form 10-Q, is rewritten nearly

identically in both subsequent filings:

             The Company acquired root9B, its wholly owned cybersecurity
             business at the end of 2013. In 2014, root9B began expanding
             the number of subject matter experts it employs . . . and
             developed and enhanced its offensive and defensive cyber

                                             16
             operations platforms and tools. These efforts have resulted in the
             development of Orion[,] an Active Adversarial Pursuit (HUNT)
             platform[;] Orkos which identifies compromised credentials and
             supports predictive remediation[;] Cerberus which provides host
             based security analytics and breach monitoring[;] and Event
             Horizon which provides non attributable network access that
             allows users to connect to a secure managed tunnel for web,
             e-mail and file transfers. . . . We plan to discontinue the re-sale
             of hardware and focus on the development, sale and licensing of
             root9B’s tools at significantly higher margins. . . . We are still
             in the early stages of commercialization . . . .

Id. at 51 (emphasis omitted). Far from abandoning claims about the existence of

root9B’s “proprietary hardware and software,” this new language is more

reasonably read as providing greater details about the “platforms and

tools”—which were under development by root9B’s team of “subject matter

experts”—that constitute the previously referenced proprietary hardware or

software. Id. The omission of the “propriety hardware and software” language

from these later filings, therefore, offers little, if any, support for Mr. Hampton’s

assertion that the earlier statements referred to the same products identified by the

Pump Stopper article.

      Third, as the district court noted, even assuming arguendo that Mr.

Hampton was able to link the “proprietary hardware” language, which root9B’s

SEC filings spoke of, to the Pump Stopper article’s reference to “low margin

hardware installation,” his claim fails because there is nothing inherently

inconsistent between those two statements. See Aplt.’s App. at 412. Mr.

Hampton attacks this reasoning, arguing that the district court’s discussion

                                          17
“disregards that the crux of Plaintiff’s allegations concerning the ‘proprietary

hardware’ statements was not the amount of margins [root9B] was receiving from

selling the ‘hardware,’ but whether the hardware root9B was selling was in fact

‘proprietary’ to root9B.” Aplt.’s Opening Br. at 32. However, the district court

specifically and persuasively addressed this issue by stating that Mr. Hampton’s

claim was meritless “[a]bsent evidence that reveal[ed] that the ‘proprietary

hardware’ in question was off-the-shelf equipment equally available to [root9B’s]

customers or competitors.” Aplt.’s App. at 412. And, on appeal, Mr. Hampton

still fails to show that it is anything more than merely possible that the

proprietary hardware at issue was in fact freely available to root9B’s potential

customers and competitors—as opposed to being controlled by root9B and subject

to its restrictions or limitations. 3

       Accordingly, because Mr. Hampton fails to plead sufficient facts to show

that root9B’s proprietary-hardware statements were false or misleading, we

uphold the district court’s conclusion on this issue.

                                          C

       We next address Mr. Hampton’s Sofacy-based claim. Relying on the Krebs

article, Mr. Hampton asserts that root9B’s Sofacy press release, its APT28 report,

       3
              Mr. Hampton obliquely concedes that the term “proprietary” refers to
products “developed by root9B or exclusively licensed by it.” Aplt.’s Reply Br.
at 9. That concession undermines his argument with regard to root9B’s resale of
its proprietary products because he fails to allege that the products were not
resold pursuant to an exclusivity agreement.

                                          18
and Mr. Grano’s Fox Business interview misattributed the source of the planned

cyberattack that root9B claimed to have uncovered.

      Before reaching the merits of the claim, we turn to the question of whether

root9B’s attribution of the planned attack was a statement of fact, which is subject

to a comparatively lower pleading standard, or a statement of opinion. See

generally MHC Mut. Conversion Fund, L.P. v. Sandler O’Neill & Partners, L.P.,

761 F.3d 1109 (10th Cir. 2014) (Gorsuch, J.) (discussing the distinction between

statements of fact and statements of opinion). The district court found that the

attribution was “an assertion of fact, not a mere statement of opinion,” thus

reviewing, and ultimately rejecting, Mr. Hampton’s claim based on the less-

demanding pleading standard. Aplt.’s App. at 413. Although the parties dispute

whether the district court erred in concluding so, we need not decide the issue:

even assuming arguendo that root9B’s attribution of the attack to Sofacy was a

statement of fact, Mr. Hampton cannot prevail; that is, he cannot surmount even

the lower pleading hurdle.

      Mr. Hampton challenges the accuracy of root9B’s attribution based entirely

on the Krebs article. See Aplt.’s App. at 44–46. That article states that “a closer

look at the details behind [the] report suggests the actors in question were

relatively unsophisticated Nigerian phishers who’d simply registered a bunch of

new fake bank Web sites.” Id. at 121. The article claims to reach this conclusion

based on “an analysis of the domains” used by the attackers, and finds “scant

                                         19
evidence” to connect the “key email addresses and physical addresses . . . used in

common across all of the fake bank domains . . . to the Sofacy APT gang.” Id. at

122. According to the article, the “sole connection” supporting root9B’s

attribution is “a domain name server previously associated with Sofacy activity,”

but the article asserts that “Sofacy is hardly the only bad actor using that dodgy

name server.” Id. The Krebs article notes that most of the domains discussed in

the root9B report were apparently registered to a handful of email addresses,

including three “emails [that] have long been associated with phishing sites

erected by apparent Nigerian scammers.” Id. The article claims to find

corroboration from the vice president and chief scientist of “one of the security

firms that first published the initial findings on the Sofacy/APT28 group.” Id.

      We agree, however, with the district court’s determination that Mr.

Hampton fails to show that the Sofacy attribution was false or misleading. To be

sure, the Krebs article provides factual allegations regarding the registration of

the domains identified as suspicious by root9B. But, despite Mr. Hampton’s

protestations, we conclude that the Krebs article merely provides an alternative

attribution—i.e., potentially Nigerian scammers—and therefore falls far short of

establishing that the Sofacy attribution was untrue or even misleading. For

example, the Krebs article fails to explicitly state that the Sofacy attribution was

actually untrue, and instead only indicates that it was more likely that the attack

was perpetrated by a different source (i.e., Nigerian scammers). Id. Indeed, the

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article even hedges on its alternative finding by noting that root9B could have

been “holding back key details about their research,” see id. at 45, 122, which, if

true, could presumably impact the Krebs assessment.

      Finally, it is significant that the Krebs article only addresses a portion of

the evidence upon which the Defendants made the attribution. root9B’s APT

report, for example, cites the fact that the Sofacy group had in the “past

attempt[ed] to launch attacks against many of the same targets” and that the

“design of the hack [bore a] striking similarity to the very exploits that have made

Sofacy so feared and respected.” Aplt.’s App. at 256–57. The Krebs article,

however, does not dispute those indicators in any way, nor explain why they

could not have supported root9B’s Sofacy attribution.

      Lastly, we reject Mr. Hampton’s contention that the district court erred by

failing to treat his factual allegations related to the Sofacy matter as true.

Specifically, Mr. Hampton asserts that the district court, by focusing on the fact

that the true attackers may never be known, erred by failing to accept his

allegations that “the Krebs Report attribute[s] the attack to Nigerian hackers or, at

least, not to Sofacy.” Aplt.’s Opening Br. at 39. However, there is no logical

inconsistency between the district court’s belief that the true identity of the

hackers “remains an unsolved mystery,” Aplt.’s App. at 415, and its acceptance of

the fact that the Krebs article—based on its independent analysis—“suggest[ed

that] the actors in question were relatively unsophisticated Nigerian phishers,” id.

                                          21
at 121 (emphasis added). By its terms, the Krebs article does not purport to have

irrefutable proof that the hackers were Nigerians or, more to the point, that

“Sofacy was not the party responsible for the pre-positioned attack.” Aplt.’s

Opening Br. at 39. Therefore, contrary to Mr. Hampton’s assertion, the district

court was not obliged to infer that the Krebs article “establishes”—as a factual

matter—that Sofacy was not involved. 4 Id.

      As Mr. Hampton has failed to plead sufficient facts to establish that

root9B’s statements regarding the Sofacy attack were false or misleading, we

need not reach the remaining prongs of the established securities-fraud analysis,

and uphold the district court’s dismissal of this claim.

                                         IV

      Finally, we reject Mr. Hampton’s challenge to the district court’s dismissal

of his § 20(a) claims. Section 20(a) creates joint and several liability for control

persons of entities found to be liable for violations of securities laws. However,

because we conclude that Mr. Hampton’s § 10(b) claims fail, his § 20(a) claims

      4
              In any event, because we review de novo the complaint’s
averments—and thus independently draw appropriate inferences from
them—whether the district court stumbled in some respect in accepting the truth
of the Krebs averments would ultimately be of little (if any) moment in our
resolution of this appeal. Cf. Rivera v. City & Cty. of Denver, 365 F.3d 912, 920
(10th Cir. 2004) (“Because our review is de novo, we need not separately address
Plaintiff’s argument that the district court erred by viewing evidence in the light
most favorable to the City and by treating disputed issues of fact as undisputed.”);
accord George v. Newman, 726 F. App’x 699, 704 (10th Cir. 2018) (unpublished).

                                         22
necessarily fail; a § 20(a) claim must be premised on a “primary violation of the

securities laws[,]” but no such violation has been established here. Adams, 340
F.3d at 1107. Accordingly, we uphold the district court’s determination on this

issue also.

                                         V

      For the foregoing reasons, we AFFIRM the district court’s judgment.

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