City of Taylor Gen. Emp. Retirement Sys. v. Astec Indus., Inc., 29 F.4th 802

Astec manufactured modular wood-pellet plants and sold two major deals: Hazlehurst (2013 loan of $60M expecting refinancing) and Highland (2015 cash sale for $152.5M that included a 30-day “Reliability Run” requirement and a full-refund clawback if not met; the clawback was not disclosed to investors).
Both plants suffered severe performance and design problems (inability to burn wood, frequent shutdowns, spontaneous combustion risks, low output), undermining Hazlehurst’s ability to refinance and preventing Highland from meeting the Reliability Run.
CEO Benjamin Brock repeatedly made public statements portraying the pellet business as progressing well while allegedly knowing of the plants’ failures; Brock sold ~60,000 shares in May 2018 for about $3.1–$3.2M shortly before full public disclosure of the Highland clawback.
Astec disclosed problems in October 2017 and more detail in a March 2018 10-K; in July 2018 Astec exited Highland (paying a large penalty and taking write-offs), and the stock dropped significantly.
Investors filed a putative class action under §10(b)/Rule 10b-5 and §20(a) against Astec, Brock, Malcolm Swanson, and David Silvious; the district court dismissed under Rule 9(b)/PSLRA and for failure to plead scienter. Plaintiffs appealed.
The Sixth Circuit affirmed dismissal as to Swanson (plaintiffs abandoned appeal) and Silvious (forfeiture and merits), but reversed as to Brock and Astec and remanded.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the complaint satisfied Rule 9(b) and the PSLRA for misstatements/omissions	Complaint identifies who said what, where, when, and why each statement was misleading	Complaint is a “puzzle pleading” — long quotes plus generalized fraud allegations insufficient	Rule 9(b)/PSLRA satisfied; district court erred in dismissing on this ground
Whether plaintiffs pleaded scienter (strong inference) as to CEO Brock	Brock knew of plant failures (internal reports, site visits, frequent calls), made misleading upbeat statements, and sold stock suspiciously timed and sized	Statements reflect optimism; no strong inference of knowing or reckless conduct	Strong inference of scienter adequately pleaded as to Brock (reversed dismissal)
Whether plaintiffs pleaded scienter as to CFO Silvious and Exec. Swanson	Plaintiffs alleged company reports signed by Silvious and oversight role of Swanson	Plaintiffs abandoned Swanson claim on appeal; failed to meaningfully argue Silvious on appeal	Swanson: affirmed dismissal (abandoned). Silvious: dismissal affirmed (forfeited on appeal and, on merits, insufficient scienter)
Whether §20(a) control-person claims survive	Control claims follow if underlying §10(b) claims survive against individuals	Control claims depend on viability of underlying §10(b) claims	§20(a) survives as to Brock (because §10(b) against him survives); fails as to Swanson and Silvious

Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) (establishes the strong-inference scienter test and holistic analysis)
Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading must state a plausible claim)
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for complaints)
La. Sch. Emps. Ret. Sys. v. Ernst & Young, LLP, 622 F.3d 471 (6th Cir. 2010) (Rule 9(b) and PSLRA pleading requirements in securities cases)
Helwig v. Vencor, Inc., 251 F.3d 540 (6th Cir. 2001) (Helwig factors for scienter analysis)
Doshi v. Gen. Cable Corp., 823 F.3d 1032 (6th Cir. 2016) (recklessness standard and application of Helwig factors)
In re Omnicare, Inc. Sec. Litig., 769 F.3d 455 (6th Cir. 2014) (imputing scienter of high managerial agent to the corporation)
United States ex rel. Garst v. Lockheed-Martin Corp., 328 F.3d 374 (7th Cir. 2003) (a complaint may be "windy but understandable" and should not be dismissed for imperfect pleading)