Montgomery County Employees' Retirement Fund v. Vitacost.com, Inc., 2013 U.S. App. LEXIS 9155

Vitacost conducted an IPO in Sept. 2009; the prospectus described roles of Gorsek and Bjornstad and stated Gorsek lacked policy-making authority and could be delisted if overstepping bounds.
Pre-IPO, Vitacost pursued manufacturing in-house to boost margins; Gorsek was founder/Chief Operations Architect until mid-2009 while Bjornstad led manufacturing; both departures were contemplated shortly after the IPO.
The prospectus warned that key personnel departures could adversely affect results and disclosed plans to expand as demand grew, including potential new facilities and space constraints.
Post-IPO, Gorsek and Bjornstad were allegedly pushed out; internal actions and FDA interactions followed, including a December 2009 FDA labeling instruction and a March-April 2010 facility relocation/operational issues.
Vitacost faced manufacturing/distribution problems, stock price declines in 2010, and eventual NASDAQ delisting concerns; plaintiffs alleged these events evidenced omissions or misstatements in the prospectus.
Plaintiffs asserted claims under §§ 11, 12(a)(2), and 15 of the Securities Act based on alleged omissions/misstatements tied to the IPO and growth projections.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Materiality of omitted terminations	Gorsek/Bjornstad terminations were material to investors.	Prospectus disclosed roles and restrictions; departures would not alter total mix.	Omission immaterial as a matter of law.
Materiality of Las Vegas facility relocation plans	Pre-IPO search and relocation plan were misleading about timing.	Prospectus allowed for expansion/remodeling; no guarantee of current facility stay.	No plausible material misstatement.
FDA regulatory violations as omissions	Linked FDA issues to undisclosed regulatory risk.	No omission; prospectus disclosed regulatory risks and potential penalties.	No material omissions regarding FDA compliance.
Growth projections and growth strategy under forward-looking safe harbor	Projections were inaccurate due to internal disruptions and departures.	Safe harbor applies; forward-looking statements accompanied by cautionary language.	Appellees protected by safe harbor; no plausible misstatement.
Plausibility of §11/12(a)(2) claims as to overall mismanagement	Taken collectively, mismanagement supports misstatements/omissions.	Corporate mismanagement alone cannot support §11/12(a)(2) claims absent material misstatement.	District court properly dismissed.

Ashcroft v. Iqbal, 556 U.S. 662 (Supreme Court 2009) (plausibility pleading standard)
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (Supreme Court 2007) (pleading standard requiring plausible facts)
Basic Inc. v. Levinson, 485 U.S. 224 (Supreme Court 1988) (materiality test for omissions)
Oxford Asset Mgmt., Ltd. v. Jaharis, 297 F.3d 1182 (11th Cir. 2002) (materiality of omissions under securities law)
S.E.C. v. Morgan Keegan & Co., 678 F.3d 1233 (11th Cir. 2012) (materiality and statistical inference in securities cases)
S.E.C. v. Ginsburg, 362 F.3d 1292 (11th Cir. 2004) (context of materiality and investor expectations)
Pinter v. Dahl, 486 U.S. 622 (Supreme Court 1988) (liability under §12(a)(2) and purchaser-seller scope)
Ehlert v. Singer, 245 F.3d 1313 (11th Cir. 2001) (truth-on-claim standards for §15 claims)
Leib v. Hillsborough Cnty. Pub. Transp. Comm'n, 558 F.3d 1301 (11th Cir. 2009) (de novo review of Rule 12(b)(6) motions)
Bickley v. Caremark RX, Inc., 461 F.3d 1325 (11th Cir. 2006) (pleading standard and scienter considerations)
Mizzaro v. Home Depot, Inc., 544 F.3d 1230 (11th Cir. 2008) (weight given to confidential witness testimony)