Case Information
*2 Before: SCIRICA, Chief Judge, Judge, United States Court of Appeals for RENDELL and ALARCÓN*, the Ninth Circuit, sitting by designation. Circuit Judges.
*3 Michael J. Chepiga [ARGUED] the District Court dismissed the action Simpson, Thacher & Bartlett under Fed. R. Civ. P. 12(b)(6). In re 425 Lexington Avenue Adams Golf, Inc. Sec. Litig. , 176 F. Supp. New York, NY 10017 2d 216 (D. Del. 2001). For the reasons Counsel for Appellees Lehman Bros. that follow, we will affirm in part and Holdings, Banc of America Securities reverse in part.
LLC, and Ferris Baker Watts
I A OPINION OF THE COURT
When Barney Adams founded Adams Golf in 1987, the Company was a golfing components supplier and a contract RENDELL, Circuit Judge. manufacturer. Over the years, it grew to become a designer and manufacturer of its In this securities case, plaintiff- own custom-fit golf clubs. After having shareholders brought an action under the much success by introducing a high-end Securities Act of 1933 against Adams golf club, called Tight Lies, the Company Golf, Inc., a manufacturer of golf offered its shares to the public. On July equipment, and certain of its officers and 10, 1998, an Initial Public Offering underwriters. The plaintiffs contended (“IPO”) of 5,575,000 shares of the that the Company’s registration statement Company’s common stock was made at and prospectus contained materially false $16 per share, accompanied by the or misleading statements in violation of requisite registration statement and sections 11, 12(a)(2), and 15 of the prospectus. Securities Act. Among other things,
Adams Golf’s public offering materials
indicated that the Company sold its golf
equipment exclusively
retailers and that the golf industry was
plaintiffs alleged that Adams Golf omitted
i n f o r m a t i o n c o n t r a ry
flourishing. In their complaint, the
representations, i.e., that unauthorized
clubs, and that retailers industry-wide were
carrying an oversupply of golf equipment.
retailers were selling Adams Golf’s golf
Finding that neithеr the unauthorized retail
claim upon which relief could be granted,
nor the oversupply allegations stated a
to authorized
t o
t h e s e
the IPO and those who purchased their
shares from the secondary market soon
consisted of those who purchased directly
from the defendant-underwriters during
after the IPO. Citing to
Ballay v. Legg Mason Wood Walker, Inc.
, 513 U.S. 561 (1995) and
Alloyd Co.
,
In their complaint, the plaintiffs profitable margins and contend that the defendants misrepresented maximize sales of Adams’ and omitted material facts in the products.
registration statement and prospectus.
First, the plaintiffs argue that the The registration statement made clear that, defendants failed to disclose that its as part of its limited distribution revenues were artificially inflated by a arrangement, the Company “does not sell “gray market” distribution of Adams Golf its products through price sensitive general golf clubs. Second, the plaintiffs argue discount warehouses, department stores or that the defendants failed to disclose the membership clubs.” existence of an industry-wide oversupply
of golf equipment. The facts with respect Prior to the IPO, however, Adams to these two sets of allegations will be Golf had learned that Tight Lies golf clubs explored in more detail. were being sold by Costco, a discount
warehouse. On June 9, 1998, one month 1 before the reg istration statement’s effective date, the Company issued a press Adams Golf sold its golf сlubs only release in which it acknowledged that an to authorized dealers. As its registration unauthorized dealer was selling its statement explained: signature product. Indeed, the plaintiffs
To preserve the integrity of alleged that prior to the IPO, Costco its image and reputation, the possessed over 5,000 Tight Lies clubs in C o m p a n y l i m i t s i t s its inventory. In the press release, Adams distribution to retailers that Golf stated it was “concerned” about market premium quality golf Costco’s sale of the golf clubs “because equipment and provide a Costco [w as] no t an authorized high level of customer distributor.” Concerned enough that, s e r v ic e a n d tec hn ic a l according to the press release, Adams Golf expertise. . . . The Company initiated legal proceedings, by filing a bill believes its selective retail of discovery against Costco, to determine d i s tr i b ut i o n h e l p s its “whether Costco’s claims that they had r e t a il e r s t o m a i n ta i n properly acquired Adams’ Tight Lies fairway woods for resale were accurate.” The plaintiffs further alleged that the unauthorized distribution was not limited 1933 Act. However, the District Court to Costco and included “sales by other ruled those secondary market unauthorized discount retailers and purchasers could sue under section 11 of international gray market distributors.” the Act. These determinations have not been challenged by the parties and so we This unauthorized inventory created do not pass upon them. *5 a “gray market,” according to the clubs, and that the Company “does not plaintiffs. The complaint defines “gray believe that the gray marketing of its market” to sim ply refer to “the product can be totally eliminated.” unauthor ize d distribu ti o n of th e
Company’s products to discount retailers.” 2 The complaint sets out the several
ostensible consequences of this gray The complaint also states that by market. The plaintiffs alleged that the omitting any mention of an industry-wide Company initially experienced a rise in glut of golf equipment carried by retailers, sales as products were diverted to the certain passages in Adams Golf’s unauthorized distributors. According to registration statement were materially their complaint, “[t]he short-term income misleading. Specifically, the plaintiffs generated by sales to the gray market also refer to the statement that “[t]he Company skewed the Company’s overall financial believes its prompt delivery of products appearance, creating the false impression enables its retail accounts to maintain of heightened sales and profitability at the smaller quantities of inventory than may time of the IPO, according to the historical be required with other golf equipment financial statements contained in the manufacturers.” Further, the plaintiffs R e g i s tr a t io n S t a t e m e n t a n d t h e argue that forward-looking statements Prospectus.” Seeking a better deal, contained in the offering materials, consumers bought their Tight Lies clubs including the belief that “a number of from cheaper, unauthorized sources. With trends are likely to increase the demand for their sales diminished, authorized dealers Adams’ products” painted too rosy a then reduced their orders for Adams Golf picture of the golf industry, particularly in equipment. In time, the ultimate result for light of the problem of retail oversupply. [2] the Company was an overall drop in
revenue.
The record indicates that 238. The Court ruled as to both the gray oversupply did eventually come to market and the retail oversupply claims adversely affect Adams Golf’s bottom line. that Adams Golf’s registration statement Indeed, the first quarter report for 1999 contained neither false, nor misleading indicated that the Company had suffered statements, nor any material omissions. In disappointing financial results, partly response, the рlaintiffs filed a motion to owing to an “oversupply of inventory at amend its complaint pursuant to Fed. R. the retail level, a condition that weakened Civ. P. 59(e) and 15, which the District club sales industry wide over the last 12 Court denied in a subsequent order. The months, [and] has resulted in substantial plaintiffs timely appealed both rulings of reductions in retailer purchases.” the District Court. We have jurisdiction to
consider this appeal pursuant to 28 U.S.C.
B § 1291. The District Court granted the II defendants’ motion to dismiss for failure
to state a claim upon which relief may be This Court reviews Rule 12(b)(6) granted. Adams Golf , 176 F. Supp. 2d at dismissals de novo , accepting all well-
pleaded allegations as true and drawing all
growth in the number of
golf courses; (ii) increasing
interest in golf from women,
junior, and minority golfers;
(iii) the large numbers of
and 50s, the age when most
golfers entering their 40s
often and increase their
golfers begin to play more
Anthony v. Council
under any set of facts which could be
are certain that no relief could be granted
Cir. 2003). We may not affirm unless we
,
the correspondingly large
*7
The 1933 Act creates federal duties,
establish his prima facie case.”);
Shapiro
particularly involving registration and
v. UJB Fin. Corp.
,
Litigation Reform Act of 1995 apply to the Section 11 provides a right of action to 1934 Act alone. The District Court purchasers: accordingly ruled that the plaintiffs’
In case any part of the complaint was subject only to the liberal registration statement, when notice pleading standard of Fed. R. Civ. P. such part became effective, 8.
c o n t a in e d a n u n t r u e
statement of a material fact Section 12(a)(2) provides that any or omitted to state a material defendant who: fact required to be stated offers or sells a security . . . by therein or necessary to make means of a prospectus or oral the statements therein not communication, which includes an misleading . . . . untrue statement of a material fact 15 U.S.C. § 77k(a). or omits to state a material fact *8 argue that both their claims concerning the Costco’s unauthorized possession of golf gray market distribution and the existence clubs did not constitute a material of a retail oversupply meet the above omission. Adams Golf, 176 F. Supp. 2d at pleading minima. Further, they contend
that the District Court improperly denied their motion to amend the complaint, In addition to materiality, the District which they filed pursuant to Fed. R. Civ. Court required the plaintiffs to show that P. 59(e) (motion to amend or alter the an omission or misstatement was known to judgment) and Fed. R. Civ. P. 15 (motion the Company at the time of the IPO. to amend the pleadings). We consider Adams Golf , 176 F. Supp. 2d at 233 each set of claims in turn. (“While the plaintiffs build their case around Adams Golf statements appearing
A after the IPO date, in order to state a claim for material omission, the plaintiffs [sic] The plaintiffs alleged that by allegations must identify that this alleged omitting any mention of what they undisclosed material risk was known and characterize as a gray market problem, material at the time of the IPO.” (emphasis Adams Golf rendered the registration supplied)). This is not correct. Sections statement false or misleading, specifically 11 and 12(a)(2) are virtually absolute those claims concerning the Company’s liability provisions, which do not require reliance on a network of authorized plaintiffs to allege that defendants distributors. The District Court found that possessed any scienter. Huddleston , 459
U.S. at 382. As this Court has held: There are substantial differences necessary in order to make between the elements a plaintiff the statements, in the light must establish under § 10 and Rule of the circumstances under 10b-5 of the Securities Exchange which they were made, not Act of 1934 and under §§ 11 and misleading (the purchaser 12(2) of the Securities Act of 1933. not knowing of such untruth Under the former, the plaintiffs or omission), and who shall must pleаd not only that the not sustain the burden of d e f e n d a n t s m a d e m a t e r i a l proof that he did not know, o m i s s i o n s a n d / o r and in the exercise of misrepresentations, but also that reasonable care could not they reasonably relied on them and have known, of such untruth that the defendants acted with or omission, shall be liable . knowledge or recklessness. In . . to the person purchasing contrast, §§ 11 and 12(2) impose no such security from him . . . . such requirements.
15 U.S.C. § 77
l
.
In re Donald J. Trump Casino Sec.
*9
234 (“In sum, plaintiffs have not alleged
reasonable minds cannot differ on the
support for their proposition that the fact
question of materiality is it appropriate for
that an unauthorized discount retailer had
the district court to rule that the allegations
illegally obtained a number of Adams Golf
are inactionable as a matter of law.”
clubs constituted a material risk at the time
Shapiro
,
To support its determination that
Materiality is ordinarily an issue left
the gray market claim lacked materiality,
to the factfinder and is therefore not
the District Court observed that Costco
typically a matter for Rule 12(b)(6)
possessed what it considered a “limited
dismissal.
Weiner v. Quaker Oats Co.
,
number” of golf clubs at the time of the
the golf club industry more generally. In a Perhaps animated by this concern, t i g h t l y c o m p e t i ti v e m a r k e t , t h e the Company issued a press release on maintenance of exclusivity among Adams June 9, 1998, one month prior to going Golf’s network of authorized dealers may public, noting that it had filed an equitable have been vital, and the Company’s bill of discovery to investigate the touting this mode of distribution seems to unauthorized inventory. According to the imply that it is. Indeed, in its registration press release, “Adams Golf became statement, the Company indicated that its concerned when it learned that Costco was distribution system allowed it “to maintain selling their Tight Lies fairway woods profits and maximize sales of Adams Golf because Costco is not an authorized products.” In light of such considerations, distributor.” While not all company press the possession of 5,000 golf clubs in the releases publicize material information, we hands of a nationwide, discount retailer recognize that a company often chooses to may have been material, since it may have issue an extraordinary press release when “altered the ‘total mix’ of information” it needs to disseminate important available to a reasonable investor. NAHC , information to its investors. In light of this 306 F.3d at 1331. But without further p u b l i c a c k n o w l e d g m e n t o f th e factual development, the answer to this u n a u t h o r iz e d i n v e n t o r y a n d i t s materiality inquiry is far from plain. announcement of legal action, and our
obligation
to draw all
reasonable
The District Court also reasoned
inferences in favor of the plaintiffs, we are
the gray market problem was
hard pressed to see how the existence of
immaterial because it was an “isolated
5,000 golf clubs for sale at a discounter,
incident” and not part of a “known trend.”
outside the protected distribution network,
Adams Golf
,
result consequences for a company. An aberrant event such as an oil tanker crash may nevertheless be material in the eyes of a company. Analogously, even if the unauthorized inventory of golf clubs was a reasonable investor in the unlucky oil one-time occurrence, it may have posed significant consequences for Adams Golf’s in immediate and negative The District Court found that the “Bill release [prior to the IPO] are consistent of Discovery and the issuing of the press it was in fact Adams Golf’s policy not to with the defendants [sic] contentions that authorize ‘distribution of the Company’s products to discount retailers.’” 176 F. Supp. 2d at 233. Yet such “consistency” is
On appeal, the defendants contend
that the fact that the gray market was not
material is reflected by the absence of any
decline in share value when the market
In re Burlington
release. They rely on leаrned of it in the January 7, 1999 press
, 844
Acme Propane, Inc. v. Tenexco, Inc. See
upon by the defendants are inapposite. Cir. 1988) (no
F.2d 1317, 1323 (7 th obligation to disclose information on
relevant state laws as statutes are in the
public domain);
Rodman v. Grant Found.
,
not salient to a materiality inquiry. Adams
608 F.2d 64, 70 (2d Cir. 1979) (no
Golf may have been working resolutely, in
obligation to disclose motivation of
conformance with its stated policy, to
corporate officers to maintain corporate
solve its unauthorized inventory situation.
control and prevent hostile takeovers as
But a company’s effort to manage a
such intentions are “universal.”);
Seibert v.
problem does not by itself discharge its
Sperry Rand Corp.
,
facts in the above cases.
The defendants also argue that the
Further, we
find
the
June 9, 1998
pre
-IPO press release
defendants’ citation
to
this Cоurt’s
sufficed to inform the public of Costco’s
decision in
Klein v. General Nutrition Co.
,
unauthorized inventory of Tight Lies
186 F.3d 338 (3d Cir. 1999), to be even
clubs. They argue that if information
further afield.
Klein
involved securities
regarding any gray market problem was
traded on the secondary market. We held
placed in the public domain through its
that the market “promptly digested current
pre-IPO press release, the Company would
information regarding GNC from all
have had no obligation to mention it in
publicly-available sources and reflected
their offering materials.
First, this
that information in GNC’s stock price.”
contention of course contradicts the
Id.
at 338. But there is no indication that
defendants’ claim that the stock price did
there was any such efficient market in
not drop after the investing public
first
Adams Golf shares prior to the IPO.
learned of the gray market problem on
Accordingly, we cannot conclude that the
January 7, 1999. Second, the cases relied
pre-IPO press release in this case, issued a
*12
Doe v. GTE Corp.
,
important to reasonable investors, it
follows that its release will have a Mindful of this Court’s dismissal negligible effect on the stock price.” Id. at standard for immateriality, and our 1425. But Burlington Coat Factory was a obligation to draw reasonable inferences in Rule 10b-5 case brought under the 1934 the plaintiffs’ favor, we cannot agree with Act, which requires that plaintiffs plead the District Court’s conclusion that the loss causation, i.e., allege that the material gray market issue was obviously misstatement or omission caused a drop in unimpоrtant to a reasonable investor. Of the stock price. Actions brought under the course, ultimately, Costco’s inventory of 1933 Act are, however, critically different. Tight Lies golf clubs may be found to be Under sections 11 and 12(a)(2), plaintiffs immaterial, but that is for a factfinder to do not bear the burden of proving determine in light of a developed record. causation. It is the defendants who may
assert, as an affirmative defense, that a
A determination that information
lower share value did not result from any
missing from a registration statement and
nondisclosure or false statement.
See
15
prospectus is material does not end our
U.S.C. §§ 77k(e), 77
l
(b). While a
analysis. We must also decide whether the
defendant may be able to prove this
issuer had the duty to disclose that material
“negative causation” theory, an affirmative
fact such that its omission made the
defense may not be used to dismiss a
statement misleading.
See Zucker v.
plaintiff’s complaint under Rule 12(b)(6).
[11]
Quasha
,
arrangements were false or misleading in
light of the omitted gray market problem. B While we agree with the District Court that
none of these statements in the registration We next turn to the plaintiffs’ statement was technically false, we claims regarding an oversupply of golf disagree with the Court’s conclusion that equipment among retailers. As noted the statements were obviously not above, the plaintiffs contend that the misleading. omission of this oversupply rendered two
sets of statements in the offering matеrials The relevant statements in the materially misleading: 1) the specific offering mat erials indicated that representation that “[t]he Company distribution was limited to certain retailers believes its prompt delivery of products and that the Company “does not sell its enables its retail accounts to maintain products through price sensitive general smaller quantities of inventory than may discount warehouses.” The District Court be required with other golf equipment properly found that Costco’s unauthorized manufacturers”; and 2) the general possession of Adams Golf clubs could not forward-looking statements concerning the be reasonably taken to make those trends “likely to increase the demand” for statements false, for there was no Adams Golf products. We agree with the allegation that Adams Golf itself sold golf District Court that neither of these clubs to unauthorized retailers. But while statements were materially misleading by technically true, those statements may have the omission of these industry conditions. nevertheless led a reasonable investor to
conclude that the selective distribution
Adams Golf’s specific claims to
model was functioning properly, i.e., that
nimble delivery and relatively smaller
this method was exclusive, and therefore
inventory were not rendered false or
that unauthorized retailers were not selling
misleading in light of any alleged industry-
significant quantities of its Adams Golf
wide oversupply of golf equipment. The
merchandise. Reasonable minds could
offering materials merely indicated that
disagree as to whether the omitted fact of
stores had fewer Adams Golf clubs in their
*14
inventories than the equipment of other
Further, the plaintiffs make much of
manufacturers. The statement cannot
the Company’s April 12, 1999 press
reasonably be taken to mean that “Adams
release, announcing financial results for
Golf retailers were not carrying excess
the first quarter of 1999, in which,
inventory,” as plaintiffs allege. Those
according to their complaint, “defendants
retailers may very well have had bloated
d i s close d
fo r at
least 1 2
inventories.
But
they may have
months—since we ll prior
to
the
maintained a relatively smaller inventory
IPO— there had been an ‘oversupply of
of Adams Golf equipment while carrying
inventory at the retail level’ on an
a surplus of merchandise produced by
industry-wide basis.” Initially, we observe
Adams Golf’s competitors. We find that
that Adams Golf was not duty-bound to
plaintiffs’ allegations concerning retailers’
disclose general industry-wide trends
excess supplies of
other companies
’
easily discernable from
information
equipment simply cannot render false or
already available in the public domain.
misleading that portion of the registration
See Klein
,
domain”);
Whirlpool Fin. Corp. v. GN
Holdings, Inc.
,
prove their allegations that Adams Golf’s
1995) (“The nondisclosure of . . . industry-
rivals were suf fering
from
retail
wide trends is not a basis for a securities
oversupрly and were taking “corrective
fraud claim.”);
Tenexco
, 844 F.2d 1317,
action
to address
the
industry-wide
1323–24 (“The securities laws require the
oversupply” problem at the time of Adams
disclosure of information that is otherwise
Golf’s IPO, these allegations are of no
not in the public domain.”). Moreover, all
moment. Whatever financial problems
the April 12, 1999 press release seemed to
other manufacturers and retailers may have
acknowledge was that retailers of golf
struggled with,
the securities
laws
equipment had experienced generally
obligated Adams Golf to disclose material
sluggish sales for over a year. As
information concerning its own business
discussed above, however, there is nothing
and not necessarily the details relating to
contradictоry or
inconsistent about
its competitors.
See Trump Casino
, 7 F.3d
retailers with excess inventories in general
at 375 (holding that “the issuer of a
and the Company’s representation that
security [need not] compare itself in
those same retailers kept a smaller
myriad ways to its competitors, whether
inventory of Adams Golf clubs
in
favorably or unfavorably. . . .”);
Wielgos v.
particular. Accordingly, we find that
Commonwealth Edison Co.
,
business ahead were mitigated by the The plaintiffs also alleged that the discussion of the several factors that could retail oversupply affecting golf industry have caused poor financial results. retailers also rendered misleading the Accordingly, we agree with the District forward-looking statements made in the Court that plaintiffs’ allegations regarding registration statement. In particular, the the forward-looking statements must also plaintiffs argued that those forecasts were succumb to the motion to dismiss. “misleading with respect to the prospects
for growth in the golf industry.” Those We conclude that the plаintiffs can statements included sanguine prospects for prove no set of facts that would the golf industry and the rising popularity demonstrate that either the specific of the sport more generally. But we have representation as to prompt delivery and firmly held that “[c]laims that these kinds retailers’ inventory of Adams Golf of vague expressions of hope by corporate equipment or the general forward-looking managers could dupe the market have been statements was materially misleading. As almost uniformly rejected by the courts.” reasonable minds could not disagree on Burlington Coat Factory , 114 F.3d at this issue, we affirm the District Court’s 1427. dismissal of the plaintiffs’ retail
oversupply claims as a matter of law.
Moreover, Adams Golf was not entirely upbeat about its future. The C registration statement referred to a series
of risks facing an investor, including the After the dismissal of their prospects of lagging demand for the complaint, plaintiffs filed a motion under Company’s products, competitive products Fed. R. Civ. P. 59(e) to amend or alter the from rivals, unseasonable weather patterns judgment so as to add new allegations by that could diminish the amount of golf virtue of Fed. R. Civ. P. 15. They sought played, and an overall decline in
discretionary con sumer spendin g. Applying the “bespeaks caution” doctrine, cautionary statements can render the this Court has held that meaningfully a matter of law. EP Medsystems, Inc. v. forward-looking statements immaterial as alleged omissions or misrepresentations of their complaint once before. After filing The plaintiffs hаd already amended the plaintiffs amended their complaint on their original complaint on June 11, 1999, May 17, 2000, the “Consolidated and Amended Class Action” complaint. It was *16 to introduce “new” factual allegations granted.
about both the gray market and retail
oversupply claims. The District Court
We have held that “[w]here a timely
denied the motion in a subsequent order,
motion to amend judgment is filed under
which ruling we review for abuse of
Rule 59(e), the Rule 15 and 59 inquiries
discretion.
Cureton v. Nat’l Collegiate
turn on the same factors.”
Id.
These
Athletic Ass’n
,
Parker
,
that the District Court did not err in refusing to open the judgment of dismissal when plaintiffs clearly relied on this amended complaint that the District “misplaced confidence” in their original Court dismissed under Rule 12(b)(6). *17 pleading. Cureton , 252 F.3d at 274. III Moreover, as the District Court reasoned,
the proposed amendments would not have For the foregoing reasons, we will remedied the pleading deficiencies and affirm the District Court’s dismissal of the would thus have been futile. plaintiffs’ claims relating to retail
oversupply and wе will reverse the Accordingly, we find that the dismissal of those claims relating to the District Court did not abuse its discretion gray market and remand for further in dismissing the plaintiffs’ motion under proceedings consistent with this opinion. Rules 59(e) and 15. Cf. Lorenz v. CSX
Corp. , 1 F.3d 1406, 1414 (3d Cir. 1993)
(finding that district court did not abuse its
discretion in light of plaintiff’s
“unreasonable delay” and futility of
proposed amendments).
Notes
[2] In particular, the offering materials About five months after the IPO, on indicated that: January 7, 1999, Adams Golf issued a In 1997, wholesale sales of golf press release anticipating disappointing equipment in the U.S. reached an fourth quarter 1998 results. The Company estimated $2.4 billion. Wholesale stated that sales would continue to suffer sales of golf clubs increased at an as a result of the “gray market distribution estimated compound annual growth of its products to a membership warehouse rate of approximately 13% over the club.” Further, according to the plaintiffs’ 5-year period from 1992-1997. The complaint, Adams Golf acknowledged, in Company believes that a number of its Form 10-K filed in March of 1999, that trends are likely to further increase despite its best efforts, a membership the demand for Adams' products. warehouse club had possession of its golf These trends include: (i) significant
[3] Plaintiffs also brought claims under p o p u l a t i o n o f ‘ E c h o B o o m e r s , ’ w h o a r e section 15 of the 1933 Act. A form of beginning to enter their 20s, derivative liability, section 15 permits the age of when golfers investors to recover, on a joint and several generally take up the sport; basis, from “control persons” who would and (v) the rapid evolution be otherwise liable under sections 11 and of golf club designs and 12(а)(2). 15 U.S.C. § 77o. But because materials. the District Court dismissed the sections 11 and 12(a)(2) claims, it did not, nor need
[13] Plaintiffs contend that the applicable
s t a n d a r d o f
r e v i e w o f
f u t i l i t y
determinations is
de novo
, relying upon
our decision in
Burlington Coat Factory
,