*2 REINHARDT, Before TROTT and SILVERMAN, Judges. Circuit PER Opinion; CURIAM Concurrence by Judge REINHARDT.
OPINION
PER CURIAM. LLC, Capital,
Eminence lead action securities litigation, class fraud appeals the district court’s dismissal with 12(b)(6) under Fed.R.Civ.P. its first amended consolidated for failure to state a claim. Because the district court failed to sufficient reasons to overcome presumption amend, favor of granting leave to we re- verse the judgment.
I. BACKGROUND We summarize the facts set forth in appellant’s first amended consolidated complaint and assume them to be true for purposes of our Epstein decision. See Co., v. Washington Energy (9th Cir.1996).
A. Facts Inc., Appellee Aspeon, a company based Irvine, California, manufactures and sells touch-screen systems hardware for networks, retail computer such as those used waiters restaurants enter Appellee customer orders.1 Richard Officer, Aspeon’s Stack is Chief Executive appellee Horace Aspeon’s Hertz is Cera, Solomon B. Gold Bennett Cera & former Chief Financial Officer. Lead LLP, Francisco, CA, Sidener San for the LLC, plaintiff Eminence in- Capital, is an plaintiff-appellant. stitutional investor one of the share- tems, Aspeon formerly Sys- known as Javelin Inc. “a had company that the announced Stack Aspeon stock purchased who
holders
September
path
profitability.”
1999 and
clear
between October
(“class
During the class
period”).
29, 2000, Aspeon an-
*3
traded com-
publicly
was a
Aspeon
period,
restating the
be
it would
nounced
the Securities
to file with
required
pany
ques-
period
for the
quarterly results
re-
quarterly
Exchange
and
Commission
18, 2000,
about December
tion. On or
10-Qs, at the
of
end
as Form
ports, known
In its re-
its restatement.
Aspeon filed
At issue
this
financial quarter.
each
ending
10-Q/A
quarter
for the
form
stated
ending
10-Qs
quarters
for the
are the
case
30, 1999,
Aspeon stated
September
1999,
31,
1999,
30,
December
resulting
actually been losses
there had
31, 2000.
and March
previously
from the
of 21%
income loss
accompa-
reports,
initial
of its
In each
10-
In its restated form
reported results.2
releases,
Aspeon painted
by press
nied
31,
ending December
Q/A
quarter
the
for
company’s profitability
picture of
rosy
1999,
losses rather
Aspeon
reported
also
10-Q for
In its
prospects.
financial
and
gains.3
than
1999,
30,
ending September
quarter
10-Q/A
form
for
Finally, in its restated
totaling
reported
revenues
Aspeon
Aspeon
ending March
quarter
an
of 57
represented
million
increase
$20.2
in a
of
resulting
losses
reduction
reported
In its 10-
previous year.
from the
percent
available to shareholders
net
income
ending December
Q
quarter
for
$1,717,000.
Aspeon
The
stock de-
price
total-
reported that revenues
Aspeon
per
2000 to
on October
$1.50
clined
an increase
represented
million
ing $24.3
share,
share on
high
per
of $30
from
year.
previous
from the
percent
of 36
was de-listed
Aspeon
March
release,
press
Stack
accompanying
NASDAQ
January
from the
that these “results demonstrate
stated
management
operate
ability of our
team
History
B. Procedural
original
hardware
profitably
11, 2000, Jay Spechler filed
On October
business.”
incubating
sizable
while
ASP
Stack,
against Aspeon,
suit
a class action
10-Q
ending March
quarter
for the
its
and Hertz
federal district court.
31, 2000,
reported revenues
Aspeon
alleged violations of
sections
compared to
million
million
$21.1
$20.0
10(b)4
20(a)5
Ex-
of the Securities
year.
press
In a
release
previous
from the
deceptive device or contrivance in con-
or
announced a decrease in
2. The restatement
$269,000,
regulations
a reduction in
rules and
as
reported revenue
travention of such
$78,700,
necessary
income of
gross profit
may prescribe
and net
the Commission
quarter, compared
per
for the
public
$.05
share
appropriate
or for
in the
interest
or
previously reported
$.07
net
income
protection of
investors.
quarter.
for the
share
78j(b).
§
15 U.S.C.
demonstrated a decrease in
3. The restatement
section,
"controlling per
targeting
5. The
$259,800,
reported
income" of
a re-
"other
sons,”
that:
states
$186,000, a
reported net
income
duction
who, directly
indirectly,
Every person
or
operations' of
in income from
reduction
any provi-
any person liable under
controls
$440,000,
net income of
reduction in
any
regula-
chapter or of
rule or
sion
$269,000.
jointly
also be
tion
shall
liable
thereunder
severally
extent
part
with and to the same
4. The act in
makes it unlawful:
person
person
any
controlled
as such
employ,
To use or
in connection
liable,
person is
un-
whom such controlled
any security registered
purchase
sale of
or
person
controlling
acted in
exchange
less the
or
on a national securities
indirectly
directly
in-
manipulative
did not
or
security
registered, any
faith and
not so
10(b),
§
change Act of
of Rule 10b-5.6 under
and that
it had failed to
satisfy
requirement
the scienter
of its
eight separate
Eventually,
shareholder
10(b) claim,
§
pursuant
to the standards
against Aspeon.
suits were filed
On De-
set forth in the Private
Litiga
Securities
22, 2000,
granted
cember
the district court
tion Reform Act of 1995 and in In re
plaintiff Spechler’s motion to consolidate
Graphics
Silicon
Litig.,
Sec.
6. The rule that: made, they misleading, der which were not or any person, directly It shall be unlawful for act, (c) engage any practice, To indirectly, by any or or court the use of means or commerce, instrumentality operates oper- of business of interstate or would or any facility any upon any person, ate as a fraud or of the mails or of nation- deceit exchange, purchase al securities connection with the or sale of (a)To device, scheme, employ any security. or arti- defraud, § fice to 17 C.F.R. 240.1Ob-5. 1052 clearly not dictate the record does or de- “where any apparent
In the absence of denial, delay, undue bad we been as district court’s clared reason —such part dilatory faith or motive unwilling to affirm absent written find movant, failure to cure de- repeated Antonio, 77 City San ings”); Rolf al- previously by amendments ficiencies (5th Cir.1996); 828-29 F.3d opposing lowed, prejudice undue Am., v. Mesker AFL-CIO Steelworkers of allowance by virtue party (8th Indus., Inc., 94 Bros. amendment, amendment, futility of Cir.1972). should, sought as .leave etc.—the “freely given.” be require, rules Dismissal with appropriate also Allen leave to amend 227. See without 83 S.Ct. Id. Hills, 911 F.2d Beverly de novo review that City it is clear on unless factors, (9th Foman as Cir.1990)(eiting not be saved could amendment”); Hurn v. “previous well Chen, F.3d Chang v. amendment. Heating Plumbing, Fund Trust Ret. (9th Cir.1996). A district court’s fail Cal., F.2d Indus. Piping & S.of relevant factors and to consider the ure *5 Cir.1981). (9th 1254 dismissal should be why articulate equal merit may Not all of factors prejudice prejudice instead of without have As this circuit others weight. an of discretion. See Fo constitute abuse to held, prejudice it is the consideration man, 227; see at 83 S.Ct. 371 U.S. the great carries opposing party that Co. v. Serv-Well also Schreiber Distrib. Programs, Ltd. weight. est See DCD (9th Co., 1393, 1401 F.2d Furniture 806 Cir.1987). (9th 833 F.2d 185 Leighton, Klamath-Lake, Cir.1986); F.2d 701 at inquiry of the Prejudice is the “touchstone 1292-93. 15(a).” Ladies Inv. rule Lone Star under Inc., 238 F.3d 368 Schlotzsky’s Club principles these is Adherence to es States, (5th Cir.2001); Howey v. United in the context of the pecially important (9th Cir.1973)(stating 1190 The a requires PSLRA. PSLRA resulting is the that “the crucial factor a of securities fraud plead to opposing party”); to the cf. specifici unprecedented degree with an (not at Programs, F.2d 186-87 DCD 833 strong to a infer ty “giving and detail rise opposing amendment “bears ing party that re recklessness.” ence of deliberate showing prejudice”). Ab the burden of (9th Graphics, 183 F.3d Silicon strong showing or a prejudice, sent Cir.1999). easy an This is not standard to factors, there ex remaining Foman not intended to be— with—it comply 15(a) Rule a under presumption ists held to it. But plaintiffs must be how to Low granting amend. See favor leave enough detail? When is much detail is an Sys., 117 F.3d rey v. Tex. A & M Univ. recklessness inference of deliberate suffi Cir.1997). (5th A simple denial of strong? bright-line is no ciently There any explanation leave to amend without tell, easy to rule. Sometimes it is but subject to reversal. is a not. The acid test is motion to often is “not an judgment a exercise of Such is that we need bear mind dismiss. We to discretion; that merely it is abuse of dis in the world of notice operating are not spirit cretion inconsistent pleadings. In this technical demand Foman, 371 U.S. at the Federal Rules.” law, drafting of a ing corner of the 227; Pharm. 83 S.Ct. Klamath-Lake complaint can be a matter Bureau, cognizable Serv. Ass’n v. Klamath Med. (9th error. Cir.1983)(noting trial and F.2d 1292-93 Here, where, here, plaintiffs’ the district court concluded allegations were to amend should be denied be frivolous, that leave not plaintiffs were endeavoring had three at “[pjlaintiffs cause ‘bites faith to meet heightened plead- apple’ and defend the dismissal without ing requirements and to comply with court that prejudice only grounds special and, guidance, importantly, most it ap- will that will report committee release pears plaintiffs had a reasonable requisite [required all details successfully chance of stating claim if plead PSLRA].” to case under given opportunity. another with, begin plaintiffs To had not filed REVERSED and REMANDED. substantially complaints three similar al- leging substantially similar theories. This plaintiffs case where took “three REINHARDT, Judge, Circuit apple” by alleging
bites and re- concurring separately: alleging attempt the same theories an opinion curiam concludes that Instead, pre-existing cure deficiencies. none of the compels relevant factors dis- plaintiffs’ First Amended Consolidated missal without leave to amend. With this Complaint included additional theories not I I separately, result concur. write how- previously alleged. Consequently, it is not ever, express my concern regarding the accurate to imply plaintiffs had filed judicial use of multiple pleadings opinions, in an cliches a tech- attempt cure pre-existing deficiencies. nique that aids neither litigants nor judges, and fails to advance our under- addition, nothing suggests plain- *6 standing particular, of the law. I re- tiffs’ that proffer additional evidence was gret the opinion’s undeservedly use of the forthcoming which would enable them to cliche, common apple” “three bites at the necessary complaint add details to their (even slip op. commonly, more false in “two or made bad faith or for an Indeed, improper apple”) bites at the purpose. opposite employed by also to be existing court, seems the case. The record in district turn lifted it from demonstrates that plaintiffs’ allegations the written prevailing submission they were not frivolous and that were en- party. Such cliches too often in deavoring height- faith to meet the analysis. substitute for reasoned ened pleading requirements governing only Not did the district court here fail acknowledged PSLRA. The district court identify any to of the Foman factors that “plaintiffs allege requisite that with the supported would have dismissal with what, when, who, regarding detail and prejudice, adopted but also effect whom false statements were made.” The “three strikes” rule for securities fraud only plaintiffs district court concluded that no pleading support precedent. has plead sufficiently why to and “fail[ed] how view, appellant the financial were the district court’s had statements false because plaintiffs fail provide requisite detail had “three bites” and deserved no more allegations.” the accounting opportunities comply stringent requirements Simply of the PSLRA. quarrel We do not with the district counting number of times judge’s assessment that the First Amend- cannot, however, has filed a sub- Complaint ed Consolidated was deficient. However, analysis rig- stitute for an of whether the we believe that the district did not orous standards PSLRA been appropriately exercise its discre- by denying plaintiffs tion leave amend met. if (but avoided and which can be by imitation regrettably opinion curiam necessary the same cliche trou-
deliberately) willing reiterates to take the one is en- Metaphors court. by the district used habits one gets If one rid of these ble. they to the extent writing only rich clearly, and to think think more can descrip- something pedestrian to more add necessary politi- toward clearly step is a they dead- opposite; do the tions. Cliches fight so regeneration: cal language nuances of to the en our senses frivolous and English bad against tradi- common law critical to our so often of profes- exclusive concern is not the application interpretation tion. The writers.1 sional statutes, rules, frequently and case law learned the lesson long past It is time we can we discriminate depends on whether sought to teach us. Orwell meaning. The differences of among subtle help us. does not biting apples merits and advan- “great
It is one of the that, law tradition our common tages” of practical of detailed “instead of a series rules, by positive provisions, established circumstances precise to the adapted cases,” we have “broad -and particular which are then comprehensive principles,” America, UNITED STATES by judges applied interpreted Plaintiff-Appellant, particular circumstances
“precise v. Boston & Norway Plains Co. cases.” (1854)(Shaw, R.R., 263, 267 Me. 67 Mass. DOMINGUEZ, Ralph Perez C.J.). process adaptation Defendant-Appellee. tradition, legal embedded in our progress, prose exposition the careful necessitates No. 02-10106. A writing. cliche like “three opinion our Appeals, States Court of a formalistic apple” provides bites at the *7 Ninth Circuit. particu- rule that does not account for the an individual case. larities of Dec. 2002.* Submitted of cliches as substitute problem Filed Jan. acute in analysis particularly for rational is style where our legal profession, deservedly subject writing is often alone, is not ours problem
ridicule. The have an adverse effect however. Cliches thinking, on various modes of some important even more to our are legal analyses than the future welfare George engage. which we As Orwell wrote, century ago: over a half written En- English, especially
Modern spread is full of bad habits which glish, * Orwell, unanimously English panel finds this case suit- George "Politics and the argument. (1946). without oral See able for decision Language," 13 Horizon 34(a)(2). R.App. Fed. P.