Court Opinion

ID: 1000245
Source: CourtListenerOpinion
Date Created: 2013-07-04 17:37:13.098732+00
Date Added: 2024-06-11T15:32:59.646724
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

MEAD ANN KRIM, on her own behalf
and on behalf of all others similarly
situated,
Plaintiff-Appellant,

v.

COASTAL PHYSICIAN GROUP,
INCORPORATED; JONATHAN E.
KENNEDY; STEVEN M. SCOTT;
                                                                  No. 98-2361
STEPHEN D. CORMAN,
Defendants-Appellees.

JOHN R. BOOTH, JR.; JAMES D.
CAMPBELL; PHILLIP J. FRANZONI;
ANTHONY J. IADANZA; RICKIE
MENDOZA; ARTHUR PEROS; CAROLE
STANG; RICHARD THURLOW,
Movants.

Appeal from the United States District Court
for the Middle District of North Carolina, at Durham.
Frank W. Bullock, Jr., District Judge.
(CA-97-1126-1)

Argued: September 22, 1999

Decided: November 8, 1999

Before HAMILTON and TRAXLER, Circuit Judges, and
GOODWIN, United States District Judge for the Southern District
of West Virginia, sitting by designation.

_________________________________________________________________

Affirmed by unpublished per curiam opinion.
COUNSEL

ARGUED: Mark Levine, STULL, STULL & BRODY, New York,
New York, for Appellant. William Kearns Davis, BELL, DAVIS &
PITT, P.A., Winston-Salem, North Carolina; Mack Sperling,
BROOKS, PIERCE, MCLENDON, HUMPHREY & LEONARD,
L.L.P., Greensboro, North Carolina, for Appellees. ON BRIEF: Lau-
rie Gengo, THE SANFORD HOLSHOUSER LAW FIRM, Raleigh,
North Carolina; Harvey Greenfield, THE LAW FIRM OF HARVEY
GREENFIELD, New York, New York, for Appellant. James T. Wil-
liams, Jr., James C. Adams, II, BROOKS, PIERCE, MCLENDON,
HUMPHREY & LEONARD, L.L.P., Greensboro, North Carolina; H.
Spencer Barrow, Raleigh, North Carolina; J. Roger Edwards, Raleigh,
North Carolina, for Appellees.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

On October 24, 1997, Mead Ann Krim (Krim) brought this civil
action in the United States District Court for the Middle District of
North Carolina alleging securities fraud against Coastal Physician
Group, Inc. (Coastal) and three of its current and former officers, Ste-
ven Scott, Steven Corman, and Jonathan Kennedy (collectively the
Defendants). In her civil action, Krim sued on behalf of herself and
the class of individuals who purchased one or more shares of the com-
mon stock of Coastal during the time period August 14, 1995 through
August 29, 1997.

Krim filed an amended complaint on October 30, 1997. Her
amended complaint is founded upon the single allegation that the
Defendants misled Coastal investors by failing to disclose the extent
of Coastal's problems with the computer billing system that it used

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prior to installing a new system in 1996. Specifically, Krim's
amended complaint alleges three counts. Count I alleges the Defen-
dants committed securities fraud in violation of§ 10(b) of the Securi-
ties Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5, 17
C.F.R. § 240.10b-5. Count II alleges that Steven Scott, Stephen Cor-
man, and Jonathan Kennedy are liable as control persons under
§ 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78t(a).
Count III alleges the same three men are liable for negligent misrepre-
sentation under North Carolina's common law.

The Defendants timely moved to dismiss Krim's amended com-
plaint for failure to state a claim upon which relief can be granted. See
Fed. R. Civ. P. 12(b)(6). In an exhaustive and thorough memorandum
opinion issued on July 31, 1998, the district court set forth its reasons
for dismissing Krim's amended complaint in its entirety. With respect
to Count I, the district court concluded that the alleged misstatements
and omissions of which Krim complained were not material as a mat-
ter of law and, therefore, were not actionable under§ 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5. As an alternative
basis for dismissing Count I, the district court held that Krim's
amended complaint failed to allege the essential element of scienter
with the detail and specificity required by the Private Securities Liti-
gation Reform Act of 1995, 15 U.S.C. § 78u-4(b)(1)-(2). With respect
to Count II, the district court held that no liability could exist, because
Krim's failure to state a claim against the Defendants for a primary
securities fraud violation precludes imposing control person liability
on the individual defendants under § 20(a) of the Securities Exchange
Act of 1934. Finally, with respect to Count III, the district court
declined to exercise supplemental jurisdiction over the state law claim
in the absence of any federal question claims. See 28 U.S.C.
§ 1367(c)(3). Krim noted a timely appeal to this court of the district
court's dismissal of her amended complaint.

Upon review of the briefs and the record, and after consideration
of oral arguments, we hold the district court was correct in conclud-
ing, with respect to Count I, that the alleged misstatements and omis-
sions were not material as a matter of law and, therefore, are not
actionable under § 10(b) of the Securities Exchange Act of 1934 and
Rule 10b-5. Accordingly, we affirm the district court's dismissal of
Count I on this basis for the reasoning set forth in the district court's

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memorandum opinion.1 See Krim v. Coastal Physician Group, Inc.,
Civ. A. No. 1:97CV01126 (M.D.N.C. July 31, 1998). We further
agree with the district court's reasoning in dismissing Counts II and
III. Accordingly, we affirm the district court's dismissal of Counts II
and III on the reasoning of the district court. See id.

AFFIRMED
_________________________________________________________________
1 Because we are affirming the district court's Rule 12(b)(6) dismissal
of Count I on this basis, we need not and do not address the district
court's alternative basis for dismissing Count I, i.e., that Krim's amended
complaint failed to allege the essential element of scienter with the detail
and specificity required by the Private Securities Litigation Reform Act
of 1995.

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