Bryant v. Avado Brands, Inc.

that a produce sufficient to establish defendant was evidence or an expert witness to purposes a using “firearm” for of sustain identify a “firearm.” 924(c)(1). ing a conviction under case, present In the there was suf Beverly, United States v. 99 F.3d 570 ficient evidence for a rational jury to con Cir.1996); Taylor, United States v. beyond clude a reasonable doubt that the (1st 967, Cir.1995); United States device that Hunt carried awas “firearm.” Moore, (7th 563, v. 25 F.3d 568-69 Cir. The Government offered testimony the 1994); Jones, v. 16 F.3d United States who, two witnesses at range, close ob (2d Cir.1994); 490-91 v. United States point served Hunt a gun at them. Fur Jones, Cir.1990); 907 F.2d thermore, photo bank surveillance States, Parker v. United 801 F.2d graphs and videotape of the crime (D.C.Cir.1986). Parker, for ex clearly show holding appears Hunt what ample, evidence that defen gun. jury be a The in this case had the dant had used a real robbing firearm while evidence before it and a drew reasonable testimony lay bank was from two wit object inference that the in Hunt’s hand nesses that he had carried a and had “gun” gun was real toy. We leave threatened to ... “[b]low [their] head[s] Parker, that decision undisturbed. off.” 801 F.2d at 1383. The Dis trict of Columbia held that Circuit

testimony adequate support was IV. Conclusion 924(c) defendant’s conviction. Id. at reasons, foregoing For the Hunt’s con- 1385. The with a Second Circuit dealt viction is affirmed. case, similar situation in In that Jones. AFFIRMED. eyewitnesses three robbery bank tes tified that the defendant had carried a handle, gun pushed

silver with a white had back, gun into a bank employee’s Jones, pointed

had it at another.

at 491. acknowledged The Second Circuit

that none of the had witnesses observed gun range weapon close or were however,

experts. noted, Id. It also BRYANT, John On behalf of himself government prove was not similarly situated; all others Rob gun “sophisticated toy” was not a East, al., Plaintiffs-Appel ert C. et operating gun. other facsimile of an Id. lees, The court it concluded that was for the jury evidence, to weigh the including BRANDS, INC.; AVADO E. witnesses’ Thomas testimony, determine Dupree, al., et object whether the Defendants- displayed the bank Appellants. by the defendant in fact a “firearm.” Id. No. 98-9253. find opinions per We these to be Appeals, United States Court of join

suasive and these other circuits in Eleventh Circuit. 924(c) holding that a conviction by lay testimony sustained witness that a Sept. defendant carried or a gun. used We re ject government the idea that must certainty

show to a scientific defen

dant carrying projec a device that fires explosive. gov

tiles means of an gun

ernment need not offer the itself into Persons, Sawicki, N.

Theodore J. Oscar Atlanta, GA, Jordak, Jr., E. Davi- A. John Garrard, Burch, Burch, Blasingame, son Athens, GA, PC, Ashley, & Bryant Defendants-Appellants. Chitwood, Mobley, D. C.

Martin Christi We vacate the order entered the dis- Atlanta, GA, Harley, & Thomas Chitwood trict court and remand the case for further Egler, Caputo, Joseph E. James A. D. proceedings opinion. consistent with this Blanck, Daley, Katherine L. Eric A. Isaac- son, Simon, Weiss, STATEMENT Milberg, B. OF Leonard FACTS Bershad, Lerach, LLP, Hynes & San Die- Accepting well-pleaded all facts in the CA, Goldschmid, go, Harvey J. Securities true,1 complaint as we assume the follow- Com’n, DC, Exchange Washington, & South, ing Inc., facts. Apple publicly Plaintiffs-Appellees. traded on the National Association of Se-

curities Quotations Dealers Automated (“NASDAQ”) market under symbol the “APSO,” corporation was a that owned ANDERSON, Before Chief Judge, operated and restaurants, several chain in- HILL, COOK*, Senior Judge, Circuit “Applebee’s cluding Neighborhood Grill Judge. Senior District Bar,” Pablo’s,” “Don “Harrigan’s,” and “Tomato Rumba’s.”2 Defendant ANDERSON, Judge: Chief Dupree, Thomas E. Jr. served as its Chief Officer; Executive Defendant Erich J. INTRODUCTION Booth served as its Chief Financial Offi- This is a securities action class lawsuit cer; Redus, Frazier, and Defendants brought by South, Apple shareholders of McLeod also served as high-ranking offi- (now Inc.”) Brands, Inc. known as “Avado cers during period,3 the class defined against corporation the and several of its complaint May as 1995 through (“Plaintiffs”) Bryant officers. et al. al- September 24, During period, 1996. (“Defendants”) lege Dupree et al. Apple pursued South an aggressive expan- made false misleading statements and plan, sion acquiring additional restaurants material omissions in order to inflate the and expanding geographic its reach. value of the company’s stock in violation of May Apple acquired “Ap- South Exchange Securities and Act of 1934. plebee’s” restaurants located the Mid- The district court denied Defendants’ Mo- west Corporation. from the Marcus Ac- Dismiss, tion to but because of the novel Plaintiffs, cording to integrating these new questions presented under the Private Se- Apple restaurants into South’s business Litigation curities Reform Act of proved model a difficult and ultimately (West seq. 78u-4 et Supp.1999) unprofitable (“Reform Alegedly, task. Act”), the assimila- certified its order for in- failure, tion was a hurt company’s terlocutory pursuant review to 28 U.S.C. 1292(b). core accepted peti- This Court business —its restaurants located in tion order to set applicable out the law. the Southeast —as well. In addition to the * Cook, Jr., 308,- Honorable Julian complaint alleges Abele Senior U.S. amended that he sold Judge District for the (40% Eastern District of Apple shares his South stock Michigan, sitting designation. holdings) his over the course of the class period. 1. At the stage, motion to dismiss Defendant David P. Frazier served as all well- true, pleaded accepted facts are Apple as and the President and a director of South dur- reasonable inferences therefrom are con ing period: the class The amended light strued plain most favorable to the 512,704 alleges Apple that he sold shares of Inc., Adjustment, tiff. See Hawthorne v. Mac period. South common stock within the class 1998). Cir. John Defendant G. McLeod served as Senior Vice-President of Human al- Resources and Apple changed South its name in 1998 to 100,000 legedly during sold more shares Brands, Avado Inc. and now trades under the period. Dupree class Defendants and Booth symbol "AVDO.” apparently any Apple did not sell of their during period. South stock the class 3. Defendant Marc D. Redus served Execu- Apple tive Vice President and as an South during period. director the class Plaintiffs’ mar- impact profit positively rants would acquisition associated difficulties 17%, much as 13% raising them gins, restaurants “Applebee’s” by 30% over grow would EPS earlier Apple South’s Corporation,

Marcus Plaintiffs, According to years. next five Rumba’s” res- “Tomato acquisition misrepresent continued to Defendants similarly prov- allegedly was chain taurant opera- acquired restaurants’ of the status expected. than profitable much less ing tions, rosy outlook maintaining Plaintiffs, Apple South’s According perpetu- Apple enabling South growth, two ac- that these knew top management of its stock upward movement ate the problems internal creating were quisitions company’s ex- facilitate the as to price so affect eventually negatively would diluting the value without pansion (“EPS”), Earnings Per Share company’s Plaintiffs holdings. insider Defendants’ in problems these failed to disclose but Apple period, during class claim stock Apple high South’s maintain order shares, than million sold more South positive out- attendant analysts’ price and securities, and in debt million plus $125 con- allege that such it. Plaintiffs look on Frazier, Re- that Defendants allege also ac- necessary was to finance cealment than dus, sold more $19.6 McLeod debt. and to reduce bank quisitions Apple in holdings personal of their million Plaintiffs, management According to South. Apple South’s accompanied problems assert that Defendants’ further Plaintiffs in a resulted into Midwest expansion precip- misrepresentations omissions turnover, forcing Apple South high rate of Apple stock climb of South’s itated the from its managers experienced to transfer share, it traded per where from $15.25 shore in the Southeast to core restaurants period, of the class May the start The operations. relocated up its Midwest share, by high, its all-time per to $28.25 profit improve were unable managers 24, 1996, September On May of 1996. restaurants, Moreover, the core margins. by period, summarized the class close of experienced employees, deprived now court, Apple Bryant see the district Apple South well. a decline as suffered South, Inc., F.Supp.2d develop- adverse reacted these allegedly (M.D.Ga.1998), announced Defendants cutting re- employees and by firing ments (1) of 18 Apple acquisition South’s that: EPS in to meet short-term tail costs order territo- and related franchise restaurants estimates, of ser- causing the overall level neg- had Corporation from the Marcus ries return decline and the customer vice to business; impacted Apple atively South’s diminish, com- thereby tainting the base (2) the 30-35% would not reflect EPS prospects. Plaintiffs long-term pany’s likely not growth forecasted would despite problems, these (3) EPS; contend Apple South exceed 1995 allegedly management was top expan- its 1996 and 1997 scaling was back sophisticated internal of a aware because Shortly the announce- plans. after sion reports, daily sales system information ment, Apple stock fell price of South pursue its Apple South continued by 40% to $12.25. while conceal- aggressively, model growth true, the district Taking these facts de- material information

ing negative al- Plaintiffs had court concluded jeop- likely have would scribed above that counts enumer- claim on both leged good viability of that ardized the continued pursuant to the Se- ated in the model. growth (1) Act 1934: count Exchange curities 10(b), Moreover, Apple 15 U.S.C. allege that Section Plaintiffs one under promulgated problems 78j(b), § as- and Rule 10b-5 South concealed 240.10b-5; and thereunder, strategy but 17 C.F.R. expansion sociated with its 20(a), (2) under Section two misrepresented direction count affirmatively 78t(a). F.Supp.2d Bryant, 25 taking com- U.S.C. strategy in which holding, district at In so restau- analysts that the new pany, telling Motion to certain granted Plaintiffs Strike DISCUSSION documents that Defendants had attached We address two discrete legal issues in Dismiss, as exhibits to their Motion to appeal. the instant The first involves the pleading ruled that the standard for scien- proper scope of materials a district ter under the Reform Act was that formu court may consider in ruling on a motion lated the Second Circuit—that to dismiss in a securities fraud case. The “strong inference” of scienter could be second what involves standard Plaintiffs (1) by: “alleging raised facts that show the must meet in this Circuit order to plead defendants had a motive opportunity scienter adequately under 15 U.S.C. (2) fraud”; to commit “alleging facts 78u-4(b)(2).4 strong that constitute circumstantial evi dence of conscious misbehavior or reck (citing lessness.” Id. Shields v. Scope A. of Motion to Dismiss Secu- Inc., 1124, 1128 Citytrust Bancorp, rities Fraud (2d Cir.1994)). Noting that court, granting part district yet

Act had “not been addressed an Strike, Plaintiffs’ Motion to ruled that cer court,” appellate remarking and further proffered tain exhibits5 the Defendants that “there is a distinct opin difference of as attachments to their Motion to Dismiss among ion the district courts that have considered, could not be because the docu proper interpreta considered the statute’s ments embodied matters tion,” plead outside the the district court recommended that ings. Bryant, F.Supp.2d 25 at permit our Court 1376-77. interlocutory appeal an 1292(b). pursuant to 28 The attachments to the U.S.C. Motion Dismiss Bryant, F.Supp.2d 25 at 1383. We accord were documents filed with the Securities ingly appeal. allowed the (“SEC”),6 Exchange proffered Commission Apple Quarterly Report 4. We M South’s construe the district on court’s certification quarter ending 10-Q Form for the certifying under 28 only 31, March 1996 questions, these two which would seem to be controlling questions of law as to which Apple Quarterly Report N South's on may ground there be substantial for differ- quarter ending 10-Q July Form for the or, event, opinion; any ence of we exercise 2, 1995 our only ques- discretion to address these two parties expend tions. The much of their Apple Quarterly Report 0 South’s on alia, addressing, briefs argu- inter several 10-Q quarter ending form Oc- relating sufficiency ments allega- to the of the 1, tober 1995 tions. We arguments, decline to address such any arguments Apple other other than P Letter to the two South’s Shareholders 19, 1995, dated course, October and Notice of issues indicated in the text. Of to the Special Meeting of Shareholders to be previous extent that the district court’s view 17, held November 1995 sufficiency allegations of the is affected by today our decision on the two issues we do Q Apple Report South’s Annual on Form decide, the district court will on remand re- year ending 10-K for the December light opinion. consider in of this 31, 1995 5. The following district court included the Apple Prospectus Supplement R South’s summary of the stricken exhibits in its order: 23,May dated 1996 Bryant, Description F.Supp.2d at

Exhibit any by 6.If of the documents excluded Changes K Statements of in Beneficial SEC, district filed .court were not with the 4s, Ownership, September Form dated ruling respect district court’s 1, 1995, such and March by documents will not be affected our deci- sion because Defendants conceded at oral ar- Apple Quarterly Report L South's on gument they challenging appeal quarter ending 10-Q were Form for the ruling excluding June the district court's publicly filed documents. Kramer, the Cortee Citing stage. miss of two support defenses: by Defendants that: court noted by afforded protection the “safe-harbor” decides a motion creat- a district court judicially its When 78u-5 15 U.S.C. alleging securities to dismiss doc- “bespeaks caution” equivalent, the ed public fraud, consider it review and it could concluded The court trine.7 law be documents motion at the defense not consider either filed with actually have been defenses both stage because to dismiss Plaintiff has SEC, particularly where included cautionary statements upon relied prof- defendant’s put on notice been documents, district which the in the SEC these documents. fer of were outside already ruled court had considered not be and could pleadings district court concluded at 47. The Id. a mo- motion into converting the has quoted without above the “rule that because Circuit, summary judgment. Eleventh adopted tion for not been opinions on Eleventh Circuit’s and the concluding, the district to create an In so not leave room subject do rule,” the court argument general rejected exception Defendants’ to the at the judicially general noticed from the rule could be “not deviate exhibits would 12(b)(6) on the rule Circuit’s stage, argument by adopting an based the Second F.Supp.2d v. in Kramer opinions Bryant, Industries.” Cortee Second Circuit’s (2d Inc., review of thorough at 1376.8 After Time Warner Indus., law, of the Sec- approve Cir.1991), Inc. Sum case and Cortec relevant judicially L.P., practice noticing Cir. ond Circuit’s Holding required by 1991). legally publicly filed SEC relevant Cortee held filed with the SEC publicly un judicially noticed documents could stage. to dismiss to dis motion 201 at the motion der Fed.R.Evid. accompanied by are projections that protects "for- harbor nature Reform safe

7. The Act’s specif serving cautionary meaningful as statements ward-looking statements” involved, fraud liability private in securities as warnings so to basis ic of the risks qualify "forward- as the statements suits if re that actual caution” to investors "bespeak 78u-5(i)(l)(A)- §§ U.S.C. looking” under 15 differ, shielding thereby the state sults (F), statutory condi- any and meet one liability. § Rule 10b-5 ments from 78u~5(c)(l)(A)- §§ U.S.C. forth in 15 tions set Assoc., Sterling/Austin Saltzberg v. TM 78u-5(i)(l) (B). § "for- defines 15 U.S.C. curiam)(holding Cir.1995)(per encompassing, ward-looking as statements” cautionary language private in explicit revenues, alia, projections such inter alleged rendered placement memorandum estimates, 78u-5(i)(l)(A), § see 15 U.S.C. EPS them not and made immaterial misstatements management’s regarding future statements "bespeaks caution” doc under actionable § 78u- objectives, plans see U.S.C. trine). 5(i)(l)(B), regarding future and statements U.S.C. performance. See 15 economic § by to "general rule” dis- 8. referred The 78u5(i)(l)(C). 12(b): based on Fed.R.Civ.P. trict court is the nature of economic in statements above, forecasts, are con- those listed such as for failure of ... to dismiss If motion may garner "forward-looking” and sidered upon pleading claim which to state a harbor, 15 statutory safe protection granted, outside can be matters relief 1) 78u-5(c): they § if are identified U.S.C. forward-looking excluded presented are and not pleading accompa- and are statements court, treated as one the motion shall language, cautionary appropriate nied disposed of as summary judgment and for 2) 78u-5(c)(l)(A)(i); if such U.S.C. see 15 parties all shall be provided in Rule immaterial, U.S.C. see statements present opportunity to all given reasonable 3) 78u-5(c)(l)(A)(ii); plaintiff fails if the pertinent to such motion made material were prove statements made Rule falsity. See 15 their knowledge of actual words, matters outside presenting In other 78u-5(c)(l)(B). 12(b)(6) mo- pleadings converts the doctrine, safe "bespeaks caution” summary judgment. a motion for tion into oper- counterpart, judicially created harbor's similarly, protecting statements ates point The starting is FecLR.Evid. questioned.” 201(b)(2). Fed.R.Evid. judicial authorizes courts to take This of course includes related docu- notice specified circumstances.9 ments that bear on the adequacy of the (f) “[©judicial Subsection states that no- disclosure as well as actually documents tice may any be taken at stage of the alleged to contain inadequate or mis- proceeding.” Employing Fed.R.Evid. leading statements. We stress that our Kramer, the Second in Circuit 937 F.2d at holding public relates disclosure docu- 774, allowed an Offer to Purchase and required by ments filed, law to be Statement, Proxy Joint pub- filed, as documents actually SEC, with the and not to SEC, licly filed with the proper to be other forms of press disclosure such as subjects notice at the motion to releases or announcements at sharehold- stage. dismiss The Second Circuit’s rea- er meetings.

soning is instructive: Id. at 774. The Fifth Circuit in Lovelace It highly impractical and inconsis- Inc., Spectrum Software tent with preclude Fed.R.Evid. 201 to (5th Cir.1996) permitted also rele district court from considering such doc- vant required by law to be uments when faced with a motion to filed and which were actually filed with dismiss a securities action based on the SEC be considered on a motion to allegations of material misrepresenta- dismiss in a case, securities fraud First,

tions or omissions. the docu- quoted the reasoning given by the Second ments are required by law to be filed Circuit above. Id. at 1018 n. 1. The Fifth SEC, with the and no question “[sjuch serious Circuit held that documents should as to their authenticity can exist. Sec- be only considered for the purpose de ond, the very documents are the docu- termining what statements the documents ments are alleged contain, to contain the not to prove the truth of the docu misrepresentations various or omissions ments’ contents.” Id. at 1018. Several and are not relevant prove the truth district courts our Circuit have likewise of their contents but employed to determine this reasoning in considering de what Third, the documents stated. fendants’ filings relevant SEC 12(b)(6) See, whose stage. alleges e.g., Physician In re such legally Corp. documents are Am. Litig., deficient can Sec. F.Supp.2d (S.D.Fla.1999); hardly prejudice show resulting from v. IVAX Mal Corp., (S.D.Fla. the court’s studying of F.Supp.2d the documents. 1998). Were courts to refrain court judi Malin that considering noted documents, cially noticing such complaints SEC quoted that documents at the 12(b)(6) only stage in securities fraud misleading portions selected suits was of such consistent with Congress’ documents in could not be intent draft dismissed 12(b)(6) Act, ing is, the Reform weeding Rule even out though they would be non-meritorious suits at possi doomed to the earliest failure. Foreclos- ble ing stage, F.Supp.2d resort such fur to might documents lead ther noted that: complaints to solely filed extract nui- to sance settlements. Finally, we believe reasoning [Because] the behind convert- circumstances, that under such 12(b)(6) ing district a Rule motion to dismiss may court judicial take notice of the into a for summary motion judgment is contents public of relevant disclosure require to the nonmovant receive documents to be filed with the notice of the movant’s in submissions SEC “capable as facts of accurate and order to relevance, address their .... ready by determination resort to sources where those publicly submissions are whose accuracy filed, cannot reasonably be and indeed where the plaintiff has 201(b) 9. provides judicial- Fed.R.Evid. that “a ready of accurate determination resort ly noticed subject fact must be one not to to accuracy sources reasonably whose cannot (2) dispute capable reasonable in questioned.” that it is ... be When questioned. reasonably be cannot complaint, framing the in them relied to deter- only relevant are documents largely dissi- is SEC of notice necessity the are or disclosures what statements mine pated. therein, can be there contained actually omitted). (citation Id. at can authenticity, nor as to question little mind, and fol- in principles With these or disclo- statements that such the fact law, hold that we case foregoing lowing the be reason- filed publicly thus were sures to dis- a motion considering court, when general- filings SEC ably questioned. case, take fraud in a securities miss most accurate the recognized as ly deter- (for of purpose the judicial notice public information of source authoritative the documents statements mining what company. about the the truth of prove to and not contain contents)10 SEC public of relevant of relevant notice Taking documents’ stage the is filed with to dismiss be required to at the motion filings documents believe aim of filed. We the overall SEC, actually with consistent also this in documents securities curbing abusive considering the SEC Reform Act— permitted of component important the instant case manner in An litigation. with the structuring is consistent was goal Fed.R.Evid. achieving Act, and is not of frivo- of dismissal permit overall aims to legislation 12(b)(6), common stage of inconsistent earliest feasible at the lous cases fairness, of this Cir- the law the cost to notions thereby reducing litigation, derivation, its cuit. to company, and ac- shareholders, defending baseless in taking provides Fed.R.Evid. 104-369, at Rep. No. H.R. Conf. tion. See subject are not of facts judicial notice (1995), reprinted they are dispute to reasonable Examples of 679, 730-31. U.S.C.C.A.N. ready determina- of accurate capable 78u-5(e)11 are 15 U.S.C. foregoing accuracy the whose to sources by resort tion only show to documents to use the SEC expressly seek lim- Circuit in Lovelace The Fifth contain, and documents such statements what permissible consideration ited the con- the documents’ prove the truth of the determination not public documents occasion we have no Accordingly, contain. documents tents. what statements might Lovelace, or not SEC documents Such limitation whether F.3d at 1018. address case where Kramer judicially Circuit’s in some other implicit Second noticed Kramer, (giving was at issue. at 774 of those documents truth decision. See Therefore, support of the on remand party reason either part its second should documents, only for "are relevant fact that the documents use the rule the seek to SEC but determining their statements contents prove purpose the truth what not to contain, stat- the documents but also actually what to determine contents, case, propriety of ed”). instant the documents’ prove the truth of arose in considering the SEC documents to consider prefer for tire district of the statements requirements the of in which truth context whether the instance first the would not rele- be the documents whether it is made in satisfied are Fed.R.Evid. vant; rather, only relevance would the for such documents to consider appropriate actually con- Indeed, the documents what statements decline to sought. purpose the attached to dismiss motion interlocutory appeal tain. Defendants' any in this issues address support defens- of two in SEC documents the decided. expressly issues than the two other by provided protection the "safe-harbor” es: forward-looking state- § 78u-5 for 15 U.S.C. 78u-5(e) provides: § 11. ments, “bespeaks caution” doctrine. the Dispositive Motion in- requirement of both defenses An essential upon sub- any to dismiss based motion On cautionary meaningful showing of volves a section, (c)(1) shall court this the section appears SEC it statements. com- any cited consider statement only to what show are relevant documents cautionary accom- statement any plaint and the SEC documents cautionary statements statement, forward-looking panying the contain, truth of matters to determine not dispute, subject to material which are of this Because in the documents. asserted by cited defendant. context, case in this we assume defendants 78u-4(b)(3)(B).12 and 15 U.S.C. The for- such an opportunity to be heard with re- mer section directs a court to consider spect propriety to the judicial of taking cautionary statement at the motion to dis- notice.13 stage particular miss circum- Allowing consideration of relevant SEC specified stances in that section. If the filings is also consonant with common no- requirements satisfied, section are tions of fairness. We have already noted cautionary must statement be considered ample opportunity to challenge the by the court though even it was not itself propriety of taking judicial notice. As the in complaint. included The latter sec- Second Kramer, Circuit noted in prevent- provides tion stay discovery during ing from considering courts entirety pendency of a dismiss, motion to again a company’s relevant filings SEC would under the circumstances set forth in the plaintiffs allow who have done no more section. Like the two foregoing mecha- pull than snippets from the documents out Act, nisms in set out taking of context to survive dismiss, a motion to company’s notice of a filings SEC notwithstanding the fact that dismissal 12(b)(6) at the Rule stage furthers the would appropriate have been if the state- purpose considering at the earliest feasi- ments had been Kramer, read in context. stage

ble protection the “safe-harbor” af- 774. at by forded 15 U.S.C. 78u-5 as well as the “bespeaks caution” doctrine. Finally, persuaded we are that the case

We do not judi- believe that permitting law of this Circuit does not foreclose the cial in notice this manner is inconsistent result we reach today. The district court 12(b)(6). with Rule prohibition relied on Ware v. Associated Milk Produc against going outside of alleged the facts ers, Inc., (5th Cir.1980), 614 F.2d 413 in protects against party its progeny, in refusing consider being caught by surprise when documents proffered SEC filings by Defendants. The outside the pleadings presented are at that Ware, court in citing and quoting from 5A early stage. case, However the instant Wright Miller, Charles Alan & R. Arthur the typical case, securities fraud Federal Practice and Procedure 1366 at Plaintiffs were well aware of the SEC (2d ed.1990) stated that “the conver Indeed, filings. Plaintiffs state expressly 12(b)(6) sion of a Rule motion to sum in their Amended Complaint that their al- mary judgment place takes ‘whenever mat legations upon are “based the investigation ters outside the pleading presented counsel, of their which included a review ” Ware, accepted the court.’ Apple South’s SEC filings.” Complaint F.2d at Concluding 414. it that was bound ¶ Moreover, when Defendants at- language, this district refused tached the SEC documents to their Motion to consider the SEC records offered Dismiss, Plaintiffs moved to strike the Defendants connection with their Mo words, SEC documents. In other Plain- tion to Bryant, Dismiss. See 25 F.Supp.2d ample tiffs had notice and opportunity to at 1376-77. challenge propriety of considering the SEC stage litiga- We find distinguishable. Ware Ware Indeed, 201(e) tion. Fed.R.Evid. assures did not concept address the of taking judi- 78u-4(b)(3)(B) 12. 15 U.S.C. provides: 201(e) 13. provides: Fed.R.Evid. Stay Discovery of Opportunity to be heard. any private arising action under this A party upon timely request is entitled to an chapter, discovery all proceed- and other opportunity propriety to be heard as to the ings stayed during shall be pendency the of dismiss, taking judicial of any notice the tenor of motion the to unless the upon any finds the matter notification, party prior motion of noticed. In the that absence of particularized discovery necessary pre- is to request may the be made after prevent serve evidence or preju- to undue judicial notice has been taken. dice to party. that 1280 body of (D.Conn.1992). this Given 701 at the public records of SEC cial notice public records permitting precedent affi with 12(b)(6) dealt but instead stage, consid- to be records public SEC especially dismiss, to a motion attached to

davits stage with- to dismiss the motion ered at material evidentiary of clearly the sort to conversion an automatic requiring out 12(b)(6) at the appropriate not that are con- stage, judgment we summary the re treatise that the note also stage. We run today does not ruling our that fident court, Mil Wright & Ware by the lied on to allegiance its stated or afoul of Ware Procedure, also Practice Federal ler’s 12(b). Rule adjudication to the respect with states Tallant, 710 Kennedy v. case is A closer determining 12(b)(6) “[i]n that: motions Cir.1983), (11th in this 711 F.2d motion, 12(b)(6) grant to whether that cer- in a footnote Court commented allega the considers primarily the court there were at issue prospectuses tain stock matters of although complaint, the tions in properly and not pleadings the outside ac into may be taken ... record public id. See to dismiss. on a motion considered & Arthur Wright Alan 5A Charles count.” however, persuaded, 6. We are at 718 n. and Procedure Miller, Practice Federal R. pre- not does Kennedy footnote that the ed.1990). (2d courts Several at 299 1357 judicially in this Circuit courts vent ex have rationale and this employed have on file records public noticing relevant public record matters pressly reviewed notice SEC, judicial the the and have to dismiss motions on ruling in to the argued apparently not concept was con the information relied on expressly Fall, 266 Webster See v. Kennedy panel.14 for as a basis their records in those tained 148, 149, 511, 69 L.Ed. 507, 45 S.Ct. U.S. Servs., Credit v. CSC Henson rulings. See “[questions which (1925)(noting 411 that Cir.1994); (7th 280, Inc., 284 F.3d 29 record, brought neither merely lurk Weisman, 803 F.2d v. Corp. Indem. MGIC ruled the court nor to attention Cir.1986). Indeed, indicat (9th 500, 504 having considered as to be upon, are not cases, nu earlier, in securities fraud ed prece- to constitute been so decided as SEC docu treated courts have dents”). merous capable being public records ments reasons, hold foregoing For the to the motion dismiss at judicially noticed at the authorized court was the district (5th Lovelace, 78 F.3d at 1018 See stage. to stage take dismiss motion to Brown, Cir.1996); Menowitz re- public documents relevant notice of Cir.1993); Kramer, 937 36, 39 SEC, and actu- be filed with to quired (2d Cir.1991); Realty Sec. In re FAC determining filed, purpose for the ally (E.D.N.C. 416, F.Supp. contain.15 Litig., documents what statements Abramson, in extent, court erred 1997); Inc. v. the district Real Estate To J/H at- (E.D.Pa.1995); were Fer 952, striking certain documents F.Supp. dismiss,16 motion 698, to tached to Defendants’ F.Supp. Corp., 802 Travelers ber v. docu- rely truth of the to on the parties seek de- that the Kramer indicates 14. Our research contents, Circuit, present the party must 937 F.2d at ments’ cision from Second opin- 774, employ We no reported offer case the district court. was the first issue to ion, however, Fed.R.Evid. judicial notice SEC whether filings motion to at the for judicially order to consider SEC noticed be case should in this converting the motion stage without dismiss in those contained matters truth summary judgment. Kramer was into one supra. See note documents. Kennedy was decid- whereas decided unlikely judicially making it ed in docu allowed authentic have courts 16.Other Kennedy prospectuses noticing SEC, ments, filed with or whether possibilities perceived realm of within they if on motion dismiss be considered argued and decided. case was when complaint and plaintiffs into are referred central, integral, to his claim. holding today not mean does Again, our Tunnell, F.3d Inc., Branch v. should proffered SEC documents Indus., Cir.1994); F.2d at Cortec prove the truth order judicially noticed in ( Cir.1991); also Pension see either of the contents. If Benefit documents' 2d those 1281 remand, and on shall same in a consider omit to state a material fact necessary in manner not opin- inconsistent with this order to made, make the statements in ion.17 light of the circumstances under which they made, were not misleading,” 17

B. Scienter § C.F.R. 240.10b-5. To allege securities 10b-5, fraud under Rule plaintiff We turn a to the second must issue ad 1) 2) show: omission, a misstatement or opinion dressed this standard —what 3) fact, 4) material scienter, made with Plaintiffs must plead meet in order to 5) plaintiff relied, on which proximate adequately scienter under 15 U.S.C. ly caused his 78u-4(b)(2) injury. See Ross v. Bank § in this Circuit. Plaintiffs in South, N.A., (11th 723, 885 F.2d 728 Cir. 10(b) § the instant case bring suit under 1989)(en banc). In the appeal, instant Act, the Exchange making it unlawful for address the requirement scienter after the any person “[t]o use or employ, connec passage of the Reform Act to sustain a tion with purchase any or sale of secu 10(b) private claim § under and Rule 10b- ... rity any manipulative deceptive de 5 in this Circuit. vice or contrivance in contravention of such rules and regulations as the [SEC] In Ernst & Hochfelder, Ernst v. 425 may prescribe,” 78j(b), § 185, U.S.C. 12, 1375, U.S. 194 n. 96 S.Ct. 1381 n. 10b-5, making it “[t]o unlawful make (1976), 47 L.Ed.2d 668 Supreme any Court, untrue statement of material fact or to in holding that negligence in- Indus., Inc., Corp. Guar. v. White Consol. pleadings” "outside the are considered. 1993); Therefore, Cir. Romani v. if a is deemed document so central Hutton, Shearson Lehman 929 F.2d to the claim so as not to be "outside the (1st Cir.1991). n. 3 The Ninth Circuit calls pleadings,” may then it be considered on a practice incorporation this reference giving motion dismiss without the other the Graphics doctrine. See In re Silicon Inc. Sec. 10-day notice necessary that is when matters Litig., Branch, Cir.1999) 183 F.3d (citing outside the pleadings are considered. The 454). expressly ap at In underlying premise of the doctrine seems to Branch, proving of the doctrine Ninth be that if the document was indeed so central Circuit, quoting Wright Alan Charles & Ar to the claim that it served as a basis for the Miller, thur R. Federal Practice and Procedure complaint, plaintiffs then already must have 762-63, (2d ed.1990), Civil 2d at stat " it, been aware of thus do not need the ed that plaintiff 'when [the] fails to intro protection 10-day period. of the notice We pertinent part duce document as of his decline to address this doctrine in the instant pleading, may [the] defendant introduce the case because conceded part Defendants at exhibit as oral attacking his motion Branch, argument pleading',” they relying were not F.3d at 454. Fed. 10(c) rather, purported appeal; R.Civ.P. is the doctrine in this foundation for Defendants ability the defendant's only to force the court seek consideration the SEC docu consider dismiss at the attachments motion to pursuant ments concept notice stage, 10(c), pursuant ''[a] 201(b). specified by Fed.R.Evid. But see 15 copy any written instrument which is an 78u-5(e) (providing for consider pleading part exhibit to a is a thereof for all cautionary ation of statements the motion Thus, purposes.” is that rationale when a stage particular to dismiss circum files based on a docu stances). See Corp., also v. Ivax Harris ment but fails to attach that document to the (11th Cir.1999), F.3d 799 pan where a recent complaint, document, may the defendant so attach the apparently el of this employed this doc therefore, document, litigation trine in the context. securities one that could have or rather in fairness have complaint,

should been attached to the above, 4, supra, 17. As noted note we ad- see part pleadings considered and thus dress two discrete issues in this interloc- may be reviewed pleading stage at the with utory appeal. we do not address issues converting out into one for sum motion application such as the of the "safe-harbor” short, mary judgment. theory is that protection afforded 15 U.S.C. 78u-5 for such plead document is "outside the forward-looking “bespeaks ings,” statements or the and thus it be considered at the doctrine, 12(b)(6) stage preferring they caution” without transformation ad- into summary judgment posture, as Rule dressed in the first instance the district only requires when documents conversion court. held Circuit The Second results. ferent liability under civil trigger to sufficient cases, plaintiffs fraud in securities 10b-5, scienter that 10(b) defined Rule § and rise to giving facts specific allege to embracing intent must state a “mental as act that the defendants “strong defraud.” inference” deceive, or manipulate, Con civil See scienter. however, clearly precluding requisite Court, ed with open Corp., 808 left v. Fluor expressly Nat’l Bank negligence, necticut liability for Cir.1987). The Ninth included scienter of whether question F.2d in foot- hand, that stated concluded Circuit, The Court the other recklessness. on 9(b) to plaintiffs permitted 12: note Fed.R.Civ.P. specif no and thus generally, the law recklessness areas of aver scienter In certain intentional forth a form of to be set to be needed considered ic facts is liabili- imposing allegation. See purposes support that for to conduct not address GlenFed, Litig., act. need some We Sec. ty Inc. In re whether, banc). cir- Cir.1994)(en some (9th This question here the cumstances, suffi- behavior is reckless was addressed circuits between the split 10(b) § and under liability civil cient for Reform Act. Section resolved and Rule 10b-5. to 78u-4(b)(2) plaintiffs expressly requires rise giving facts particularity question of that “state with the reservation Id. Since Act, that the defendant strong of the Reform passage to a before inference mind.” held issue state address the had with the every to acted circuit added). an action- as can serve (Emphasis that recklessness 10(b) § and Rule of mind under state able Act after the Reform it is clear Although McDonald 10b-5, our See including own. averred longer can no be that scienter Co., F.2d Brokerage Alan Bush v. (1) remain: questions other two generally, Cir.1989). (11th our Cir- particular, In of recklessness well-pled allegations are showing of that a to the rule cuit adheres scienter, or, in other allege to sufficient the scienter satisfies recklessness” “severe “required words, as qualifies what all the Id. circuits While requirement.18 78u-4(b)(2); mind” under state could suffice recklessness agreed (2) opportuni- of motive and allegations requisite scienter sufficient, they are ty commit fraud 10b-5, time of the Reform as of the 78u-4(b)(2) Circuit, or did in the Second facts Act, split as what the circuits were Circuit’s the Second merely borrow plead in must alleging scienter adopt- without language “strong inference” In- dismiss. to survive motion order opportunity test? motive ing its 9(b), pro- which Fed.R.Civ.P. terpreting appealed of the order the time Since ... of fraud all averments “[i]n vides case, four of our sister in the instant from ... constituting fraud the circumstances Sixth, Second, Third, the circuits, also particularity,” but be stated with shall Ninth, opinions inter issued have and the “[m]alice, intent, and oth- knowledge, specifically Act and preting person may mind of condition of er standard.19 addressing its scienter generally,” the Second averred (6th Litig., 183 Sec. F.3d re Comshare distinctly dif- had reached Ninth Circuits aware of must have been defendant "severe reckless- characterizes 18. McDonald it.” follows: ness” as Interna v. Rockwell (quoting Broad at 814 Id. those is limited to "Severe recklessness (5th Cir. F.2d at 961-62 Corp., tional misrepre- or highly unreasonable omissions omitted)). (citation 1981)(enbanc) merely simple or that involve not sentations Corp., 182 ex- negligence, but an In Harris Ivax inexcusable even 1999), acknowledged issue of ordi- the standards departure Cir. treme it, not need care, authority but did danger split present a nary and that be satisfac the case could it because either address misleading buyers sellers grounds. torily on other resolved obvious or is so the defendant known to 1999); In re Graphics Cir. Silicon ing Sec. facts that recklessness, denote severe (9th 970, Cir.1999); Litig., 183 F.3d In re previously standard approved Advanta Corp. Litig., Sec. 180 F.3d Circuit, 525 this see McDonald v. Alan Bush (3rd Cir.1999); Press v. Chemical Inv. Co., Brokerage 809, 863 F.2d Corp., Servs. 166 F.3d Cir. Cir.1989); but we also hold that the Re 1999). The Ninth Circuit reached con form Act codify does not the “motive and urged by clusion closest to that the Defen opportunity” test by the formulated Sec dants the instant appeal -namely that ond Circuit. We now turn to the first of — the Reform Act substantively raised the the two above-mentioned questions, name scienter, required level that allegations ly recklessness whether is still sufficient to showing opportunity motive and to commit allege scienter under the Reform Act. fraud are not sufficient to allege neces sary Act, (i) state of mind under the Reform Recklessness and that required conscious recklessness is question The is fact-specif whether strong scienter, to raise a inference of un ic allegations of recklessness still suffice der the Reform Act. See re In Silicon Reform above, Act. As noted Graphics, hand, 183 F.3d 970. On the other circuits not in are harmony as to this the Second and Third Circuits reached the question. opinion The of the Ninth Circuit same conclusion as the district court below in Graphics Silicon would seem to indicate SEC, and that Plaintiffs and the as amicus that the Reform Act substantively raised curiae, urge us to affirm appeal i.e., — scienter, the required level of while the that a strong inference of scienter can Second, Third, and Sixth Circuits hold that alleged by showing a motive and opportu fact-specific allegations of recklessness are nity to commit fraud or showing cir still sufficient. For the reasons stated be cumstantial denoting evidence reck either low, we hold that a alleging with lessness or conscious misbehavior. See In particularity that a defendant acted with a re Corp. Advanta Litig., Sec. 180 F.3d at severely reckless state of mind still suf Press, 534-35; 166 F.3d at 537-38.20 The fices to state a claim for liability civil un Sixth Circuit course, has taken a middle 10(b) §der and Rule 10b-5. holding that scienter could be alleged by statute, When interpreting pleading facts we give rise to a strong look to its recklessness, plain language, resorting inference of but refusing to legislative history in an accept attempt discern proposition allegations of congressional intent only motive and the lan opportunity to when commit fraud guage plead scienter, were sufficient of the statute is unclear. See unless the Con facts sumer Safety demonstrate the Prod. v. required Syl state of Comm’n GTE mind, vania, Inc., 102, 108, namely that U.S. defendant acted S.Ct. recklessly (1980). or knowingly. See In re 64 L.Ed.2d 766 Coms the in case, hare Litig., Sec. 183 F.3d at 551. stant the operative language As indi cated in below, discussion in Reform Act that a is must “state agreement basic Circuit; with the Sixth we with particularity facts giving rise to a hold that the Reform Act does not prohibit strong inference that the defendant acted practice alleging plead scienter by with the state of mind.” 15 Circuits, Fifth, Two other the First and the clear compatible whether this test [was] with proper have commented on the interpretation 'especially rigorous’ ap- [the First] [Circuit's of the Reform in dicta. Act See Maldonado v. plication in the securities fraud (1st Dominguez, Cir.1998); Maldonado, context.” 137 F.3d at 10 n. 6. Tech., Inc., Williams WMX Williams, The Fifth Circuit in without men- (5th Cir.1997). The First Circuit in Mal- scienter, Act, tioning noted that the Reform expressly donado adopt declined "to review or hand, though apply did not it in the case at issue, Second Circuit case law” on this there- adopted had the same as the Second standard by refusing approve of the Second Circuit’s Williams, Circuit. 112 F.3d at 178. test, opportunity” "motive and it as was "un- it) codify intended to Congress sume 78u-4(b)(2). state “required omitted). (citations Act. not defined mind” is question faced we are fact by the This confirmed conclusion statuto language the above or not Act,

whether of the Reform portion in another the well-established rily erased “actual the employs expressly Congress alleged ade could that scienter rule 15 See for scienter. standard knowledge” reckless denoting facts by pleading quately 78u-5(c)(l)(B)(safe harbor does § U.S.C. that it did not. holdWe behavior. that to statements apply not the defendant by made proves were question the address to Every circuit or they were false that knowledge” “actual held Act of the Reform passage the before Congress wished had misleading). was suffi showing of recklessness that a knowl- with actual replace recklessness to v. Hollinger See allege cient to scienter. of scien- quantum the respect to edge with 1564, 1569- F.2d 914 Capital Corp., Titan 78u-4(b)(2), could § it by required ter (9th Cir.1990); Phillips Petrole In re 70 the it did with expressly, as so have done (3d 1236, 1244 F.2d Litig., um 881 Sec. mentioned provision harbor statutory safe Enter. Cir.1989); v. Dyke Van Coburn 78u-5(e)(l)(B), instead § above, 15 U.S.C. (8th Cir.1989); 1094, 1100 Inc., F.2d 873 “required state the merely reciting that (11th Cir. McDonald, at 814 863 F.2d particularity. plead with must be of mind” 1114, Holmes, 675 F.2d 1989); Hackbart v. the noted, Congress time drafted at the As (10th Cir.1982); v. Rock Broad 1117-18 “re- Act, it was well-established (5th 929, 961-62 F.2d Corp., 642 well Int’l form included mind” some state of quired Prescott, Cir.1981)(en banc); v. Mansbach Congress desired If behavior. of reckless 1017, Turben, F.2d Ball 598 & mind, that state of other require to some Avien, (6th Cir.1979); Inc. 573 v. Cook mind state of is, the other than reckless (1st Cir.1978); Blyth, 685, 692 F.2d Rolf v. by feder- the uniformly held sufficient then Co., Dillon & Eastman Congress would courts, that we believe al Cir.1978); Corp. v. Sun Chem. Sundstrand terms. explicit have so done Cir.1977). (7th 1033, 1044 Corp., 78u-4(b)(2) the clearly clarifies of this well- certainly aware While was Congress alleging scien- for drafting requirements the pleading when precedent established “with facts be stated Indeed, ter, mandating codi that Congress when Act. Reform mind,” “strong inference” it particularity” showing seems state required fied “the ' substantively scienter, codify it does Congress was clear that very to us of scienter. level law reckless actionable change that the well-established ing the state of Rather, “required to refers allege to scienter. it sufficient ness was Commissioner, Act which, mind,” time the at the Reform Savings Ass’n Cottage by drafted, clearly 561-62, 1508- had defined was been S.Ct. 499 U.S. (1991) encompass reckless that courts (noting the federal to L.Ed.2d 589 that particular persuaded areWe establishing decisions behavior. because that makes it “contempo clear plain of the statute part of text legal doctrine were a basis eliminated as was not Congress had recklessness in which context” rary legal Act, and Reform liability under the undis left Congress had acted and history is legislative therefore resort subse principle during legal turbed unnecessary.21 reenactments, pre- would the Court quent that Con- We are satisfied of mind.” Graphics sug- state Silicon the extent that 21. To codify well-estab- gress plainly intended Congress intended gests was of mind the substantive state that some recklessness Act raise lished form law Cir- Ninth requirement, we required believe of mind. state within included plain adhere to the opinion fails cuit’s recognized in the of recklessness form statutory language. Rather meaning of the pas- at the case law time well-established standard, changing substantive than "stringent for- sage of Reform Act existing incorporated explicitly statute standard; that does term recklessness’ mulation to "the refers the statute (ii) Opportunity Motive and this Circuit. In so holding, per we are

to Commit Fraud suaded the reasoning of the Sixth Cir cuit, and that of various district courts Plaintiffs, SEC, and the as amicus curi- within our own Circuit. See In re Coms ae, 78u-4(b)(2)’s argue scienter hare Litig., Sec. 183 F.3d 542 Cir. standard not liability retains for reck- 1999); Carley Capital Group v. Deloitte & lessness, above, as we have held but also Touche, L.L.P., F.Supp.2d 1324, codifies the Second holding Circuit’s (N.D.Ga.1998); Malin v. IVAX Corp., 17 1) adequately pled: scienter can be 1345, 1357(S.D.Fla.1998). F.Supp.2d alleging facts constituting strong circum- stantial evidence of recklessness or con- Act, The Reform or specifically more 2) defendant; scious misbehavior 78u-4(b)(2), governing the requi- by alleging facts which show a motive and site scienter actions pursuant filed opportunity part to commit fraud on the of 10b-5, and Rule express makes no Shields, the defendant. See 25 F.3d at mention of the motive opportunity and test (2d Cir.1994). The district court developed Circuit, in the Second and cer- Plaintiffs, agreed with concluding that: tainly does not expressly codify it. In- Congress explicitly

Because did not stead, 78u-4(b)(2) dis- requires plain- that a well-established, of approve judicial- tiff “state particularity with facts giving ly-created rule [the Second Circuit rise to a strong inference that the defen- test], pleading the Court finds that a dant acted with state of plaintiff may satisfy pleading re- mind.” quirements of a Securities fraud action interpret We this language to mean that motive, with evidence of opportunity, plead must with particularity and recklessness. facts which give rise to a strong inference (footnote Bryant, F.Supp.2d at 1381 that the defendant acted in severely omitted).22 above, As noted the Third Cir- reckless fashion'—“the required state of cuit adopted has also the Second Circuit mind” in many our Circuit for years. See standard. See In re Advanta Corp. Secur. McDonald, 863 F.2d at (collecting Litig., 180 F.3d 525. cases permitting allegations of reckless- follow,

For the reasons that ness to we re suffice for securities fraud liabili- ject the allegations ty). notion that allegations of motive While op- of motive and fraud, and opportunity to commit standing portunity may be showing relevant to a alone, are recklessness, sufficient to establish scienter in severe we hold that such al- negli intent”), not allow for strongly suggests recklessness as a form of actual we believe Comshare, gence.” 183 F.3d at attempt 550. As noted plain is inconsistent with the above, recognized Further, statutory this Circuit had language. "severe we doubt that recklessness” as an attempt actionable state of mind. would be worth the additional 18, supra. See note uncertainty The "severe recklessness” that would be introduced. Circuit, recognized by our like the actionable circuits, interpret level of We scienter in most other district court's formula- was 22. require tion of the standard to based on the Seventh evidence of Circuit's formulation of recklessness, opportunity Corp. recklessness in motive and or Sundstrand v. Sun Chem. rath- three, Corp., er than evidence of all as the above- quoted Cir.1977)(holding sentence that from the court’s order literal- recklessness amounted ly parties departure to "an reads. The extreme both treat the district the standards ordinary adopting court order presenting] danger care ... as the standard in the is, disjunctive, misleading buyers denoting that that either facts or sellers that is either opportunity motive and known to the defendant or is so or recklessness will obvious that it”). the actor must have been aware suffice to survive motion to dismiss. Be- To the extent cause it is clear that the effort in Silicon district court was Graphics attempt adopting import precisely is an into law its standard based Circuit, super-recklessness, new and uncertain of the we Second will treat the order 550("deliberate having employed

See183 F.3d at or conscious the Second Circuit test recklessness”; "degree of recklessness that verbatim. in- standing [is] alone opportunity and more, sufficient are not without legations, fraud un- allege scienter securities requisite sufficient to demonstrate en- scienter standard quantify We recklessness” the “severe our Circuit. der of severe showing at least a compassing Eleventh Circuit. established op- recklessness, although motive and F.Supp.2d Group, Carley Capital under some fraud to commit portunity purpose of the clear to an inference contribute circumstances secu- to curb abusive Act the Reform recklessness, to conclude decline we severe we believe and because litigation, rities alone, equiva- are its standing they, analysis is opportunity that the motive Act’s reading of lent. Our decline purpose, supported requirement inconsistent scienter phrase “required meaning of plain adopt it. clearly re- language This mind.” state Moreover, well-established unlike standard, a condition to a substantive fers hold precedent uniformly recognized reckless- mind, like willfulness actionable was an ing that recklessness oth- on the opportunity, ness. Motive 10b-5, the motive mind under state of a substantive hand, constitute er do was not well-es analysis opportunity rather, opportunity standard; motive at the the circuits throughout tablished evidence, along of specific kinds are passed. Act that the Reform was to an time might contribute evidence with other Indeed, or willfulness. indicates our research of recklessness inference statutory language— has never test opportunity and conclude motive We not plainly does state of “required in the by our Circuit utilized been mind”-— opportunity, and motive refer to shows research context. 10b-5 Our a not do constitute opportunity motive and em and Ninth Circuits only the Second conclude that of mind. state analysis opportunity and ployed the motive and codify the motive did not Act Reform See, Act. the Reform passage of before the analysis. opportunity 12 F.3d Litig., Fargo re Sec. e.g., In Wells Judge rationale of with the (9th Cir.1993); agree We In re Time War oppor- motive and rejecting the Thrash Litig., 9 F.3d Inc. Sec. ner tunity test: Cir.1993). Moreover, the Sec even within adopted never Circuit has The Eleventh Circuit, analysis, wellspring of the ond “mo- follows the standard that a scienter opportunity and of the motive the status analysis opportunity” tive and uncertain, been having test was somewhat can argument good A Circuit. Second fashion. inconsistent seemingly in a applied opportuni- and that the “motive be made Warner, 9 F.3d Time Compare for securi- the bar lowers ty” standard Thus, at Shields, at 1128. that mandated cases below ties fraud enacted, the Act the time Reform Supreme Court Hochfelder. analysis was cer opportunity motive motive, corpo- ubiquitous Greed is that it was tainly not so well-established management al- upper rate insiders per While we sub silentio. codified manip- to lie opportunity

ways have Act, by referring that the Reform suaded Furthermore, allowing private ulate. mind,” meant “required state to the to dis- proceed actions class securities level as an actionable codify recklessness of motive allegations bare covery upon uni scienter, then recklessness was upset the delicate opportunity would circuits, we to be formly recognized remedy genu- providing balance codify the not intend to that it did conclude strike preventing abusive while ine fraud lesser-known, certain lesser-accepted, and sought Act suits that allega notion that ly well-established will opportunity Motive achieve. to commit opportunity of motive and tions relevant, highly and often ordinarily be Ac to show scienter. are sufficient fraud showing of motive ... [but] relevant import cordingly, we refuse to it into our since I believe our recklessness holding is sufficed, law, case it had not heretofore sufficient dispose appeal. of this

CONCLUSION

We conclude in the Eleventh Cir-

cuit, a securities fraud plead must particular

scienter with give facts that rise strong

to a inference that the defendant severely

acted reckless manner. We reject Plaintiffs’ WRIGHT, adopt invitation to James D. Plaintiff- Second Circuit’s motive and opportunity Appellant, analysis; we hold a showing of mere opportunity motive and is insufficient to CORPORATION, SOUTHLAND a for-

plead scienter. hold that in ruling We also eign corporation 12(b)(6) authorized to do propriety on the of such a dismiss- al, Florida, business judicial take State De- notice of relevant, fendant-Appellee. publicly-filed SEC documents for purpose determining what state- No. 97-3458. ments those contained. United Appeals, States Court of law,

Having thus set out the both as to Eleventh Circuit. pleading under the Reform scienter Circuit, Act in and as to the Sept. notice of SEC documents at the motion to stage, dismiss we remand the case to the

district court for proceedings consistent

with opinion.23 this

VACATED AND REMANDED.

COOK, Senior Judge, District

concurring part dissenting part:

I concur with majority’s holding

that, pursuant to the judicial provi- notice company

sion Fed.R.Evid. disclo-

sure publicly filed with the Se- (SEC)

curities and Exchange Commission

may be considered on a Fed.R.Civ.P.

12(b)(6) motion to dismiss. I also concur

with the majority on the fundamental issue

presented by appeal, namely that alle-

gations of continue recklessness to meet requirement

the scienter under Section

10(b)1 and Rule 10b-5 securities actions

after the advent of the PSLRA.

However, I dissent the last issue

majority addresses I would not question

reach the of whether motive and

recklessness satisfies the scienter factor relevant,

23. Plaintiffs' ply Motion to Strike Defendants' Re- Brief would be and therefore ply stage. Brief is denied as moot. We do not ad- Plaintiffs' motion is at this moot respect dress the merits of issue challenged 78j(b). attachments to the Re- 1. 15 U.S.C.

Case Details

Case Name: Bryant v. Avado Brands, Inc.

Court Name: Court of Appeals for the Eleventh Circuit

Date Published: Sep 3, 1999

Citation: 187 F.3d 1271

Docket Number: 98-9253

Court Abbreviation: 11th Cir.