Migliaccio v. K-Tel International, Inc.

briefing a schedule specify will Clerk briefs. filing supplemental ROBERTSON, Petitioner- Mark Appellant,

v. Director, De- COCKRELL, Texas

Janie Justice, Institu- partment of Criminal INTERNATIONAL, K-TEL INC. In re: Division, Respondent-Appellee. tional LITIGATION SECURITIES No. 00-10512. Pasquale Migliaccio; Cor Creative Care Appeals, Court United States Reudolph; poration; Morton Glen Fifth Circuit. Henry Werres; Rea; Kahn; David Igal Mammon; Seymour; Neil Claude Aug. Jerry Booth; Joseph Litton, Dr.; Er Henley, Schaffer, & Schaffer Randy Murchison; lich; Gary Ewin; Tim TX, Petitioner-Appellant. Houston, Williams; Rev. R.G. D. Stanford TX, Austin, Johnson; Marshall, Murray for Moore; Eliza Larry N. Edward Alves; Alpert; Societe beth Arthur Respondent-Appellee. Anand, Ravi Privee

Financiere and all others themselves behalf of situated, Appellants, similarly REHEARING PETITION FOR ON Inc.; Philip Kives; International, K-tel EN BANC Kives, Appellees, Lawrence Commission, Exchange Securities Appellants. Amicus on Behalf KING, Judge, and Chief Before No. 00-3210. HIGGINBOTHAM, DAVIS,

JOLLY, Appeals, United States Court SMITH, WIENER, JONES, Eighth Circuit. GARZA, BARKSDALE, EMILIO M. 17, 2001. Submitted: Oct. STEWART, BENAVIDES, DeMOSS, CLEMENT, 7, 2002. PARKER, Filed: Aug. DENNIS Judges. Circuit En Banc Rehearing Rehearing and 2, 2002.* Denied: Oct. BY THE COURT: in active service of the Court A member petition for poll

having requested majority of the en banc

rehearing having voted service in active

judges banc, en rehearing granting

favor this cause shall IS ORDERED

IT oral en banc with by the court

be reheard fixed. to be a date

argument on hereafter * rehearing en banc. grant petition for Judge Murphy would Judge McMillian and Halebian, York, (D.Minn.2000). argued,

John New NY We affirm the district (Richard Loekride, Gregg A. M. Fishbein court’s well opinion. reasoned Kamber, brief), and A. Scott on the for

appellant. I. BACKGROUND Torre, Luis De La argued, Washington, D.C., International, (K-tel) K-tel appellants Inc. through certain of its current and former officers Lerner, York, Jonathan argued, J. New directors, Kives, Philip and Lawrence (Lea Kuck, NY Hollinger Haber Jacob Kieves,3 Weiner, Fischer, David Corey Cambronne, brief), Karl L. ap- (defendants Jeffrey Koblick and appel- pellee. lees), markets and distributes entertain- WOLLMAN,1 Before Judge, Chief ment and products, consumer including MURPHY, RILEY, Circuit Judges. pre-recorded compilations. music During period, the relevant time K-tel common RILEY, Circuit Judge. stock was publicly NASDAQ traded on the appellants The appeal the district (NMS). System National Market ap- court’s2 dismissal of their pellants constitute a class of those who denial of their motion to amend. ap acquired K-tel common stock between May pellants allege appellees committed se 8, 1998, and a.m. 11:36 on November 10(b) curities fraud in violation of section (the Class). The Class alleged that Exchange Securities Act of 1934 during the period they class (the suffered dam- Act), Exchange 78j(b), § 15 U.S.C. ages as a result of violations K-tel of and related Securities and Exchange Com (SEC) provisions anti-fraud mission of federal Rule 10b-5 securi- failing to 78(b); § make certain ties laws. accounting adjustments 15 U.S.C. 17 C.F.R. compliance (1995). § with Generally Accepted Ac 240.10b-5 (GAAP) counting Principles by and failing 5,May 1998, On K-tel announced the timely make a disclosure regarding a financial quarter results for the ending NASDAQ delisting letter. The district 31, 1998, March reported a decline court dismissed the for failure to 8, 1998, sales and income. May On K- allege the accounting violations with the tel filed with 10-Q the SEC its Form for requisite particularity under Fed.R.Civ.P. quarter 31, (the the ending March 9(b) and plead for failure to facts “giving 10-Q), March echoing negative infor- rise to a strong inference that the defen mation previously disclosed. The March acted with required dant[s] state of 10-Q represented tangible mind” as net by dictated Private Securities (the Litigation Act), Reform Act excess million. During period $4 Reform 78u-4(b)(2). Int'l, § In re 5, 1998, 15 U.S.C. K-tel May 9, to June K-tel’s Inc. Sec. Litig., 107 F.Supp.2d 994 price share dropped from $11.25. Roger 1. The Honorable L. stepped Wollman captions 3.The case in both the district court Judge down as Chief of the United States spell and this Court this individual's name as Appeals Court Eighth for the Circuit Lawrence remaining "Kives.” The docu- close January of business on 2002. He ments filed with both courts reflect the name by has been succeeded the Honorable David Therefore, spelled Kieves. this court will R. Hansen. reference him as Kieves. 2. The Montgomery, Honorable Ann D. United Judge States District for the District of Minne- sota. between individual defendants by sold four an extension after October On 8, 1998, and 1998.4 From May June K-tel, company by requested time 17, 1998, to November there 10-K, report filed June an annual

filed Form by other transactions only two end- SEC, year fiscal K-tel’s with the defendants; 10-K, on November K- individual In the June ing June 27,200 shares purchased Koblick equity a shareholders’ tel disclosed options, of stock through the exercise K-tel was $3,774,000,thereby representing 17, 1998, day filing after November tangible net million $226,000 the $4 below 15,000 10-Q, sold September Fischer continued requirement minimum asset alleged the individual The Class shares. NASDAQ. listing million from received $41 over defendants 19, 1998, National Asso- October On during stock of K-tel common the sales NASD) (the Dealers of Securities ciation period. class tangible net as- K-tel’s K-tel that notified 10-K, complaint, had fallen amended In its three-count sets, upon the June based 10(b) neces- level of section minimum the Class violations the million below $4 made no Rule 10b-5 listing. Exchange K-tel Act and based of the sary for continued of either in- at this time material adverse upon the omission of announcement public 19,1998 delisting reckless dis- knowing or receipt of the October its formation (Count I); hearing for a request its false statements letter semination meet the time to defendants of temporary extension the individual violations However, 20(a) requirement. Act tangible Exchange asset based net of the section 10, K-tel November conduct alleged wrongful on November upon their regarding announcements public (Count II); made the individual and violations an Online for Playboy Exchange partnership of section 20A defendants partnership and another music store online of common upon sales based their Act III, (Count III). with Microsoft. arrangement II and In Counts stock against individual raised claims Class 16, 1998, K-tel filed its November On Kives, Kieves, and Koblick. defendants Sep- ending 10-Q quarter for the Form challenge the appeal the Class does On 10-Q). The (September tember two of these dismissal court’s district information re- 10-Q September included counts. also results and financial negative garding 19, 1998 NASD the October receipt that a continuous alleged The Class actually delisted as was not K-tel letter. with in combination scheme fraudulent 19, let- 1998 NASD of the October

result of the individu- trades some large stock ter. to the securities gave rise defendants al alleged, I. As in violations Count law transactions common stock

A series by two circum- was characterized during scheme occurred defendants by individual First, two alleged ac- the Class 2.7 stances. almost period. Specifically, the class K-tel’s gleaned counting violations were K-tel common stock shares of million 30,000 May million; (Fischer shares on Kives, sold alleged: who owned complaint 4. The 2,202,303 shares) stock, 8, 1998, (6,000 November 17 and on sold of K-tel’s common 42% 9, 1998, 11, 18, 1998, (24,000 June May and which are shares between and shares million; 1998, sold no Kieves approx- $26 period) for over for the class of or outside end peri- during 82,178 the class stock $532,000); of common shares Koblick sold imately and 1998, od; Weiner, resigned August who 1998, 8, approximately May for shares 1998, 8, 390,000 May between shares sold $2.6 million. $11.7 approximately May and filings. SEC The Class asserts K-tel nection with purchase knew or sale of a $1,498 in March 1998 of a million loss due security.” Alpern United, v. UtiliCorp to the poor performance Inc., of a (8th subsidiary Cir.1996) required by and K-tel was GAAP to write- § (quoting 78j(b) 15 U.S.C. and Herman & off the assets of the subsidiary Huddleston, its MacLean v. 459 U.S. 10-Q

March filing, May filed 1998. K- (1983)); 103 S.Ct. 74 L.Ed.2d 548 see tel wrote down in that assets amount by also In re Corp. Navarre Sec. Litig., 299 March Additionally, the Class al- 2002 WL slip op. at 8 leged K-tel failed to disclose future losses Cir.2002). provides Rule 10b-5 that it million subsidiary, related is unlawful: also in violation GAAP. The al- Class any person, directly indirectly or ... leged such overstating of assets (a) employ any device, scheme, To or 10-Q March and the later June 10-K is a defraud, artifice to violation of GAAP and is evidence of fraud (b) To any make untrue statement of a and scienter because K-tel’s inclusion of material fact or to omit to state the overstated concealed its inability material fact necessary in order to to comply with the minimum necessary made, make the statements in the tangible requirement net asset for contin- light of the circumstances under listing ued on the NMS. made, mislead- Second, the alleged Class K-tel’s failure ing, or to disclose publicly October (c) act, engage To in any practice, or NASD letter is evidence of fraudulent in- course of business which operates or tent. The Class K-tel’s failure to would operate as a fraud or deceit disclose the letter in the period four-week upon any person, in connection with after it was received was a material omis- purchase sale of security. or sion during period because K-tel was (1995). § 17 C.F.R. 240.10b-5 in press involved extolling releases proceed order to brought claims company’s alia, including, business inter 10(b) pursuant 10b-5, section new Rule partnerships Playboy Online and required Class is Microsoft. show four ele- (1) misrepresentations ments: or omis- The district court granted K-tel’s motion sions of material operated fact or acts that 9(b) pursuant dismiss all claims to Rules as a rule; fraud deceit in violation of the 12(b)(6) Federal Rules of Civil (2) causation, analyzed often in terms of Procedure, § 78u-4(b)(2), 15 U.S.C. reliance; (3) materiality and scienter on finding the amended failed to part defendants; (4) eco- allege with sufficient particularity either nomic harm caused the fraudulent ac- material misrepresentations or facts giving tivity occurring connection with pur- the rise to a strong inference of scienter. chase and sale a security. See 17 Further, the district court denied leave to 240.10b-5; § C.F.R. In re Navarre Corp., amend complaint the again and entered 735, 1760458, 299 F.3d 2002 slip op. WL judgment for K-tel and the individual de- 9. Alpern, 84 F.3d at 1533-34. fendants. We review the complaint dismissal of a

II. DISCUSSION for failure to upon state claim which 10(b) Exchange § Act novo, and related relief may granted de affirming prohibit rules any “the use of ‘manipulative the district court if plaintiffs the cannot deceptive or or device contrivance’ in con- prove any set of facts would entitle

889 Id.; of mind.6 also Na- See In re state see In re requested. to the relief them 735, 735, F.3d 2002 Corp., 299 WL varre 299 Corp., F.3d 2002 WL Navarre doing, In we slip op. at 8. so slip op. at 9-10. liberally, taking all complaint the construe Furthermore, because the deci true, rejecting allegations as but factual complaint sion to to dismiss failure conclusory or assertions law catch-all findings, state a claim no factual involves Id. unwarranted inferences. we owe no deference to district court. pleading embodies the The Reform Act5 v. Corp., Abels Farmers Commodities 259 9(b). Id. at Fed.R.Civ.P. requirement of (8th Cir.2001). may F.3d “[W]e complaint Reform Act the Under the affirm judgment the district court’s each “specify also statement must supported by basis the record.” Wisdom misleading, reason have been or Bank, v. First F.3d Midwest why misleading, the statement reasons (citation (8th Cir.1999) omitted). The and, ... if is made on infor allegation an consider, may court addition to the belief, shall state complaint mation and pleadings, materials “embraced particularity all facts on which the with part and materials that pleadings” 78u-4(b)(1). § is formed.” 15 U.S.C. belief public Corp. record. Porous Media v. addition, requires “with the Reform Act Corp., Pall Cir. alleged” act or omission respect each 1999); Tree, 270 see also Green F.3d at complaint particu with that a must “state strong infer larity giving facts rise first We will address issues sur- acted with the ence that the defendant rounding pleading particularity with § mind.” required state of 15 U.S.C. 78u- accounting related to violations. 4(b)(2). standards, pleading unique These cases, attempt an to securities Particularity— Pleading A. fraud litigation restrain securities abuses GAAP pleading by hind practice as the such In re Corp., Navarre sight. Generally Accepted Princi- Accounting (cita slip op. at

2002 WL GAAP, ples, general or are “a series of omitted). tions principles followed accountants.” Unit- Coop., ed v. Basin Elec. Power States requirements The Reform Act (8th Cir.2001). specifi- F.3d More a motion to dismiss in modify review of cally, “are the official standards GAAP First, disregard significant ways. “we two the American Institute of Cer- adopted by ‘catch-all’ ‘blanket’ assertions do (the ‘AICPA’), a tified Accountants Public up particularity require live not association, through private professional Florida State Bd. ments statute.” Admin, groups three successor it established: Corp., Tree Fin. Green Procedure, (8th Cir.2001). Second, Accounting Committee on 645, 660 (the ‘APB’), Principles Board Accounting plead specific giving must facts Accounting Financial required inference” and the Standards “strong rise to a Cir.2001). Although opinion Green our 5. The Reform Act is the 1995 amendment to Exchange Act. Sixth in Hel Tree cited the Circuit's decision Tree, wig, we do Green gone has far as to 6. The Sixth Circuit so hold Helwig’s adopted state believe that Green Tree "plaintiffs only are entitled most competing plausible "the of ment about most plausible competing of See Hel inferences.” Circuit. as law of this inferences” Inc., 540, Vencor, (6th 553 wig v. 251 F.3d 890 ‘FASB’).” (the (internal 1760458, op. v. slip

Board Ganino Citizens WL 15 cita (2d Co., 154, n. 4 omitted); 228 F.3d 160 Utils. tion see also DSAM Global Val Cir.2000). Inc., Software, ue v. Fund Altris 288 F.3d 385, Cir.2002); City 390 Philadel sources, are 19 of “There different GAAP Cos., Inc., 1245, phia Fleming v. 264 F.3d any might present number of which con (10th Cir.2001) (“Only 1261 where such particular of a flicting treatments account allegations accounting [GAAP violations or ing question.” Guernsey v. Mem’l Shalala 1232, 131 87, 101, 115 irregularities] coupled with Hosp., 514 U.S. S.Ct. are evidence (1995). 106 The sources for L.Ed.2d irregularities the violations or publications include GAAP official consist the result the defendant’s fraudulent opinions, APB ing of FASB Statements may intent they mislead investors (ARB). Accounting and Research Bulletins claim.”); sufficient to state Ziemba v. “Included GAAP are the Financial Ac Int’l, Inc., 1194, Cascade 256 F.3d (‘FAS’) counting published by Standards (11th Cir.2001) cases) (citing (Allegations Elec., [FASB].” Basin at 786. alone, GAAP, standing of “violations of ... being particularity GAAP “are far from canonical do satisfy require not 9(b).”). set of rules that will ensure identical ac- ment Rule Under the Reform counting treatment of identical transac- Act, the circumstances the fraud must rather, [GAAP], a range tions. tolerate of be with particularity, including stated treatments, leaving ‘reasonable’ the choice time, place “such matters as and con among management.” alternatives as, false representations, tents of as well C.I.R., Thor Power Tool Co. v. 439 U.S. identity person ... and what 544, 99 S.Ct. 58 L.Ed.2d 785 up thereby.... was obtained or given This (1979) (footnote omitted); see also Guern- what, who, when, where, means the Mem’l, sey U.S. S.Ct. 1232 2000, Inc., how.” Parnes v. Gateway GAAP (finding single-source from a “[f]ar (8th Cir.1997). 549-50 Concluso- accounting rulebook” and “not [a]lueid ry allegations satisfy pleading do rules,” encyclopedic set of pre-existing and requirements of Act. the Reform Id. at and, changes “GAAP even one Carter-Wallace, 549; In re Sec. Litig., Inc. indeterminate”). point, is often “When (2d Cir.2000). 220 F.3d arise, such conflicts the accountant is di- case, In this the Class viola hierarchy rected to consult an elaborate tions of Financial Accounting GAAP Standard sources determine which treat- (FAS 121) fact, ment Id. In Accounting to follow.” Financial Stan “[i]n the (FAS 5). pronouncement, event there is no official Generally, dard 5 the Class al profession, of the accounting consensus leged K-tel violated FAS 121 and FAS 5 textbooks, example, manifested in 10-Q, when it filed May the March determines Hosp. GAAP.” Providence representing tangible its net as Shalala, Toppenish n. 7 sets were excess of million. The $4 (9th Cir.1995). 10-Q, Kives, signed by March individuals Fischer, Weiner, stated relevant As our recently Court said: “Al part: legations of GAAP are insuffi violations Company an formed cient, alone, [sic] standing to raise an inference media-buying and U.S. infomercial-mar- Only of scienter. where these keting subsidiary, performed me- coupled with evidence of corresponding might buying parties intent dia fraudulent be sufficient.” services third In re Navarre Corp., through also marketed products infom- have been report should in one As of ments parties. third by produced ercials make out reports do not in earlier made 31, 1988[sic], to accumulated due March IMC- fraud.” Acito v. Company of securities $1,300,000the claim to date losses (2d Inc., Cir. buy- 47 F.3d Group, these media ERA most curtailed has not be 1995). its need “Corporate officials now focus and will operations ing responsible dis- for only they clairvoyant; businesses —music primary existing marketing, reasonably response facts and direct material revealing those tribution retailing Kasaks, Internet newly launched its Novak and to them.” available (2d Cir.2000); In re see also business. F.3d 735, 2002 WL F.3d Corp., 299 Navarre K-tel contin- alleged Similarly, the Class Acito, 12; 47 F.3d op. slip the through scheme the fraudulent ued Act the the Reform 53. Under The on October 10-K filed June particulari “facts or further allege must state- identical an almost made 10-K June de that, true, that the if demonstrate 10-Q but included ties March the as did ment of, to, knowledge or June had access through losses fendants accumulated the public their contradicting million. amount information $2.3 the assets tangible In re net made.” represented 10-K when statements June all of by signed was and 2002 WL million Corp., below $4 Navarre defendants. individual op. at 11. slip the fraud eases many securities makes is What the Class by arguing K-tel counters there is that often relying complicated is more by hindsight fraud only alleging ar- true at to what is in order to assume that amounts no reason later write-off made it was plaintiff have been discovers should the the moment write-offs gue the to points alleged K-tel Specifically, at the moment also true earlier. “$800,000 was alleged therefore complaint which misrepresentation, and quarter during earnings charged misrepresen- to alleged simply because $698,000 September ended current state conflicts tation the six- during earnings charged was have must facts, charged statement 31, 1999.” March ended period month must set plaintiff [A] false.... been $1,498,000, the equal two amounts These con- circumstances forth, part as the subsid- was the Class amount why fraud, explanation an stituting in March K-tel loss known iary’s or was untrue statement disputed complaint alleged Additionally, ivhen made. misleading be incurred would losses future million at 1260 Philadelphia, City of contracts; howev- subsidiary’s this due Litig., Sec. In re GlenFed (quoting arrived how specify it er, fails to the Class banc)). Cir.1994) (en 1541, 1548-49 include figure does not figure. this 1. FAS 121. losses accumulated million of additional $1 accounting 10-Q 121 relates March FAS (difference between long-lived disposal of 10-K) impairment breaks Class June intangibles. increments, alleg- identifiable million and certain assets and $.7 into $.3 amount should 121: million FAS Specifically, ing at least $.3 10-Q as in the March been disclosed long-lived [R]equires 8,1998. May incurred held intangibles to certain identifiable entity be reviewed by an and used pleading countenance cannot “[W]e ” changes events whenever impairment Tree, 270 .... Green hindsight fraud carry- that the indicate in circumstances that state “Mere at 662. ever, ing may by amount of an asset not be re- the assets intended the Class performing coverable. In the review for subsidiary unspecified include the itself or entity recoverability, the should estimate items,” “infomercials and other media we expected the future cash flows to result implicated. 121 is unconvinced FAS the use asset eventu- of the and its found, agree, The district court and we expect- al If the sum disposition. “‘long-lived items assets’ include such as ... ed future cash is less than the flows land, buildings, equipment and furniture.” asset, impair- amount the carrying of an K-tel, In re F.Supp.2d. at 1000 (listing Otherwise, ment loss an recognized. “ sources). accounting ‘Identifiable intan- impairment recognized. loss is not gibles’ include items patents, such as fran- http://ac- summary FAS available at chises, and trademarks.” Id. The assets counting.rutgers.edu/raw/fasb/map/in- alleged by the Class are not long-lived dex.html. assets or intangibles. identifiable There- subject The the alleged Class asset fore, law, as a matter of the Class has FAS 121 review is the Infomercial Subsid- failed to facts allege triggering 121. FAS iary. impairment No review for the of this Rather 10-Q. argue than the district court asset was reflected in the March law, The alleged required by Class K-tel was erred as a matter and submit con perform 121 to FAS the review because a trary sources, states, accounting Class change in cur- circumstances—namely the untenably, the district court made its de tailing operations and stated losses— termination a finding. as factual While recoverability indicated the carrying allegations complaint contained in the subsidiary amount of the assets should may withstand standard pleading, notice impairment. have been assessed for allegations such pled partic were not Class further an assessment would ularity required by the Reform Act in have revealed obligation pursuant K-tel’s terms of a alleging basis for implicating $1,498,000 121 to FAS write-off cost assets, FAS 121 specifying and further of non-useable infomercials and other me- carrying impairment amount and the purchased subsidiary. dia K- items of such See v. FTP assets. Greebel Soft $800,000 charged earnings tel later for ware, Inc., (1st Cir.1999) quarter September 30, ending (plaintiffs presented invoices, purchase or $698,000 period during the six-month ders, and other documentation to substan 31,1999. ending March contentions). tiate their argues complaint K-tel contains no Furthermore, has Class faded to particularized allegation supporting the allege any for why basis source $1,498,000 figure or the asset or assets $1,498,000 should have been written off in subject Further, to FAS 121 assessment. March pursuant to FAS rather K-tel contends the has to al- Class failed in September than March 1998 and lege implicating facts violation of FAS pursuant accounting other rules. Ac- 121. K-tel concludes Class failed to cordingly, the Class related to allege showing facts FAS 121 been had FAS 121 fail lack particularity. triggered and violated. Although change in circum FAS oper curtailing

stances occurred ations, FAS 5 establishes standards financial may implicate FAS complaint allege particular accounting reporting failed to loss contin- subject If, to FAS 121 how- gencies. assessment. FAS 5: what explain spe- to income does not

[R]equires by charge accrual disclosure) (and for an estimated loss cific information was available and how if two conditions contingency from loss reasonably could be loss estimated are met: 10-Q the March 10-K. or June Accord- (a) ingly, prior allegations the Class related to available to issu- FAS information indi- 5 also lack particularity. of the financial statements fail for of

ance an probable that it is asset cates impaired liability or a had had been B. Scienter at the date of the been incurred explicitly required Scienter is statements, and financial Act, statutory the Exchange text of (b) reasonably of can the amount loss acknowledged but is an essential ele estimated. 10(b) ment of a Rule section and 10b-5 5, summary http://ac- available at

FAS Hochfelder, claim. Ernst See Ernst & v. counting.rutgers.edu/raw/fasb/map/in- 185, 193, 425 96 U.S. 47 S.Ct. dex.html. (1976); Tree, L.Ed.2d 668 Green 270 F.3d required The Class FAS K-tel 653; at Alpern, 84 F.3d at 1534. “[W]e charge make million to income to a $1.8 view the investors’ amended to future obli- subsidiary’s and disclose determine whether forth set facts likely losses. The Class al- gations and give reason strong to believe that leged subsidiary: that the there or wrongdo was reckless intentional under obligated perform a. to one Was ing.” Corp., In re Navarre likely or more contracts 1760458,slip op. 16. WL at additional future losses result (over approximately million Traditionally, there three already which had and above those First, establishing methods of scienter. reported) during the been twelve may scienter be established facts 31, 1999; period ended March month demonstrating embracing “a mental state deceive, manipulate, intent or defraud.” already b. sustained no less [than] Had Hochfelder, 425 at n. U.S. S.Ct. (over million in additional losses $.3 1375; 1534; Helwig, at Alpern, 84 F.3d losses of and above the accumulated Second, allegations 548. 251 F.3d at while $1,300,000 reported) which had been sufficient, are not negligent conduct 1998 date of May filing Hochfelder, 425 96 S.Ct. U.S. 10-Q, of the March 1998 Form conduct which rises to the level of severe an and would suffer additional $.7 may be sufficient to meet recklessness million losses June K requirement. P’ship S scienter & Again, provide any the Class fails to N.A., Bank, Continental or sources for the basis (8th Cir.1991). sufficient conduct is Such amounts, than later financial other disclo unreasonable “highly limited to omissions fails by K-tel. The Class sure made involving “an ex misrepresentations” or contracts or circumstances specify any departure from the standards of treme time the March that K-tel knew the care, presenting] ... a dan ordinary 10-Q 10-K would result June buyers ger misleading or sellers which particu specified Merely stating losses. or is so is either known to the defendant a corresponding lar dollar amount without the defendant must been obvious that basis is insufficient under the source or Parnes, v. Barnett (citing it.” Id. Woods Reform Act. See 550. aware of Lauderdale, 2) Bank Fort keep the desire to prices stock high (11th Cir.1985)). compensation.” increase officer Id. However, alleging the defendants misrep Recently, we determined the ef resented corporate performance in order fect of the third method of establishing a keep prices stock inflated while selling strong scienter, inference of allegations of Novak, stock is sufficient. 216 F.3d at motive and opportunity. op “[M]otive contrast, evidence that the indi portunity relevant,” are generally par but vidual defendants ticularly important abstained from trading to establishing scienter may is showing a of unusual heightened allegations or undercut mo Aci motive. to, to meet 54; tive the Reform Tree, 47 Act standard. F.3d at see Green 270 F.3d Tree, Green 270 F.3d at 660. Additionally, same, at (noting 663 but finding allega no the facts giving rise to opportu motive and tions of insider trading). may nity support also a to “reason believe We with agree the Second Circuit. the misrepresentation defendant’s was More specifically, we have found where an knowing or reckless.” Id. Finally, without individual defendant will benefit to an un- a showing of motive or opportunity “other degree, usual upon based magnitude the allegations tending to show scienter would a compensation package tied to earnings have to be particularly strong order to timing of an overstatement of Id.; meet the Reform Act standard.” see earnings, motive is sufficiently pled. In also re Corp., Navarre 299 F.3d Tree, Green 270 However, F.3d at 661. 2002 slip WL op. at 16-17. general desire to maintain a high cred- Generally, the issue whether it rating or amake company appear attrac- particular a intent existed is a question of potential tive to buyers may be thin “too a fact jury. for the Press v. Chemical Inv. reed on which to hang an inference (2d Corp.,

Servs. 166 F.3d Cir. scienter.” at Id. “ 1999). Since ‘conclusory allegations’ do satisfy the pleading requirements of 1. Accounting violations. 9(b),” Rule provide must above, As allegations discussed of GAAP factual basis for allegations of scienter. violations, alone, are insufficient Carter-Wallace, re to state a Inc. Litig., Sec. claim 40; Parnes, securities fraud. F.3d see In re Navarre F.3d at 549- Corp., 50. Additionally, unsupported 2002 WL allegations slip regard op. to motives generally possessed 15. The Class alleged K-tel knew corporate all directors and officers are was reckless not knowing prior filing to insufficient as a matter of law. See Kalnit 10-Q the March that a subsidiary or its Eichler, (2d Cir.2001); impaired had been and that K-tel Tree, Green 270 F.3d at (finding was required by FAS 121 to write-off the desire “universally among corpora held assets in the $1,498,000. amount of The tions and their executives ... does not Class claimed such knowledge was evident contribute significantly to an inference of in K-tel’s stated intention to curtail subsid- scienter”). The “plaintiffs must assert iary activities. It contended the write-off personal concrete and to benefit the indi was not timely completed with purpose vidual defendants resulting of inflating prices stock until after the Kalnit, fraud.” 264 F.3d at 139. delisting issue was resolved and the indi-

The vidual Second Circuit defendants had completed has found in millions “1) sufficient motives to include of dollars Further, desire in insider trading. corporation for the appear profitable to Class the failure to write-off overstating employment generalized are in an continued too resulted impaired assets Kalnit, assets, earnings. Finally, worth and and are insufficient. net See 10-Q was the March claimed allegations may Class at 139. While such misleading materially false and when if sufficient the benefit an individual operations had subsidiary been stated unusual, Tree, defendant Green subsidiary had con- curtailed because pled in allegations no such in ad- obligations which would result tract allege failed this case. Class how million about ditional losses or what extent the compen- defendants’ in May 1998. required disclosure FAS employment or continued tied sation was degree, or to what if price any, to stock knowing over- alleged K-tel’s The Class benefitted. in violation of GAAP defendants statement of assets It K- evinces fraudulent intent. claimed The motive related to deteriorating due tel’s asset base pled delisting insufficiently support sustained, expected to sus- the losses finding strong of a inference of fraudu tain, subsidiary. Class con- assuming intent. Even viola lent GAAP imposed K-tel deferred GAAP tended occurred, alleged tions the Class has no artificially to maintain write-offs in order support to facts inference that million, an of over NAS- asset base $4 in the individual defendants violated GAAP require- value DAQ’s minimum net asset June, reports to March or the avoid listing. allegedly The ment for deferral allegation delisting. The Class assumes by of the sale of stocks four facilitated the knew the defendants would be receiv prior public individual defendants disclo- would, fact, ing delisting letter and delisting. The possibility of the sure The K-tel delisted. record shows was defen- alleged further the individual Class delisted, rep though even the June 10-K dants, company, by of the executives was company resented below NAS 8, 1998, May of the facts sur- least knew DAQ listing continued requirements for rounding improper accounting conduct. delisting the NASD letter sent was K-tel Specifically, the Class concluded stat- Further, an intent October ed to curtail the activities of its intentions past “curtail” certain activities based on thereby subsidiary, acknowledging the not, itself, flag losses does raise red Finally, nature impaired assets. nearly need be million magnitude of the alleged Class the sheer has immediately written off. The Class exhibit scienter. GAAP violations allege demonstrating facts K-tel failed to multiple The motives Class the intent to defraud. had (a) including in- the individual defendants stock, common flating price of K-tel’s in contends massive Class (b) NASDAQ avoiding delaying or de- trading evidence of the defendants’ sider (c) listing, deferring adverse effects through inflating commit motive to fraud (d) NASDAQ delisting, increasing compen- price. trading ac insider “[U]nusual stock (e) price, directly tied to stock sation period may tivity during permit the class with K-tel. The protecting employment bad faith and scienter.” an inference of sup- allegations are insufficient motive Acito, Here, however, the 47 F.3d at 54. port will them in scienter. We address alleged only conclusory statements Class reverse order. unusual or sus that the insider sales were speculative conclusory and picious. Such above, general As stated alle re allegations are insufficient. See prices, stock gations of a desire increase Comshare, Inc., Litig., Sec. compensation maintain increase officer or Cir.1999). (6th delivering company’s Class failed to news that causes a prior allege history sales for the price go suggestive stock down is not or the number defendants even of shares Greebel, 194 withholding information.” Greebel, held by each. See (finding no sales were made plaintiffs’ provide failure to infor- (holding a big before “event” was made known to regarding mation sales made insiders at neg- public, and sales were made after period permitted times outside the class no information ative was disclosed before Therefore, comparison). possibility of disclosed); positive was see information allege Class failed to facts to show the Inc., Zonagen Nathenson v. trading activity was unusual or how was Cir.2001) (decrease in stock price unusual. allegedly misleading pre- after disclosure Additionally, taking each defendant indi- cluded action under fraud-on-the-market vidually decreases inference of scien- Therefore, theory). to the similar Greebel Kieves, company president ter. in Octo- find, court, “[a]lthough we the total sum previously 1998 and the board of ber the ... large, plaintiffs pro- involved was directors, sold no shares of common stock trading duced no evidence that the out during the period. class Kieves’s conduct Greebel, ordinary suspicious.” actually argument. undercuts the Class’s 194 F.3d at 207. Acito, 47 See F.3d at 54. trading If we were to conclude the 890,000 Weiner sold shares between provides circumstantial evidence of scien- 8,1998, May 26, 1998, May approx- ter, the claim would still fail because the imately million. Weiner’s conduct $11.7 trading did with not coincide false or mis materially impact should the scienter statements, leading required which is analysis he resigned because company as survive dismissal. In re See Navarre Greebel, president August 1998. See 735, 1760458, Corp., 299 slip F.3d 2002 WL (“It 206 not unusual is for op. possible at 20. it Accordingly, is not a leaving company, individuals like [defen- “strong a draw inference” of scienter shares.”). dant], to sell (a) based on the alleged accounting viola complaint alleged remaining de- (b) the alleged improper trading. tions 8, 1998, fendants sold May shares between 9,1998, period during June a when the delisting 2. October 1998 letter. price experienced steady stock a decline approximately from Specifi- $34 $11.25. alleged The Class K-tel’s failure to dis- Kives, cally, who owned 42% of K-tel’s 19, delisting close October letter stock, 2,202,303 common sold shares be- received, when or at contemporane- least May 11, 9, 1998, tween and June for announcements, public ous with other is million; 6,000 over Fischer sold $26 shares evidence of a of strong inference fraudu- 8, 1998, May for approximately lent intent because the failure created a $195,000; 82,178 and Koblick sold shares material omission. 8, 1998, May for approximately agree We with the district court million. As in the complaint, on that strong the Class failed to show a 5, 1998, May K-tel announced the financial inference scienter. We will assess this results the quarter ending March only claim regard delisting to the which a decline in included sales and allegations, namely, letter income. On whether May K-tel filed its 10-Q, echoing negative materiality requirement March meet the informa- secu tion previously 240.10b-5; “Selling § disclosed. after fraud. See 17 rities C.F.R. “would Generally, Material information is 1533-34.7 84 F.3d at Alpern, significance actual in the have assumed is public a statement of whether the issue deliberations the reasonable sharehold law question of misleading a mixed is Indus., er.” U.S. 96 S.Ct. TSC H R v. & Block jury. fact for the Silver 2126; Press, F.3d This see at 538. (8th Cir.1997). Inc., requires “delicate assess determination decided as a appropriately issue is “The the inferences a ments of ‘reasonable however, law, when reasonable matter given from a set shareholder’ would draw words, if In other not differ. minds could infer significance of facts and the of those pub could conclude no investor reasonable Indus., him.” TSC ences to U.S. statements, together and in con taken lic contrast, 450, 96 2126. In a fact is S.Ct. is text, misleading, then the issue a reasonable investor “[w]here immaterial a matter of law.” resolved as appropriately misrepresentation. swayed” by could not been (citation omitted); Press, 166 F.3d see Id. s, 122 F.3d at 546. Parne complaint that “Accordingly, a at 538. soft, vague, Immaterial include statements misrepresentations alleges only immaterial puffing hyperbole. or obvious statements ... ‘insuperable an bar relief presents (finding prediction “signifi at 547 a Id. proper.” a such dismissal immaterial). growth” is cant rnes, (quoting 122 F.3d at 546 Pa argues K-tel failure its to disclose Corp., v. Xerox Fusco prior letter to November delisting (8th Cir.1982)). part a cannot considered material if is sub A fact is showing of scienter because it did not have stantially likely “that the disclosure duty delisting a letter. to disclose would have been viewed omitted fact parties duty to disclose agree signifi having the reasonable investor as 1) only regulation, when letter arises the ‘total mix’ of information cantly altered disclosure; 2) requires rule dis statute or Levinson, Basic Inc. available.” made required voluntary prevent closure is 224, 231-32, 978, 99 108 S.Ct. 485 U.S. 3) misleading; or being statement (1988) omitted) (citation L.Ed.2d 194 engaging in insider the defendants materiality (adopting standard of Corp., trading. See Backman Polaroid Inc., Indus., Cir.1990) (en banc). Northway, (1st Inc. v. 426 10, TSC 12-13 agree S.Ct. 48 L.Ed.2d K-tel had no parties U.S. 96 In this case the 10(b) regulation, (1976), pursuant and Rule 10b- duty for section to disclose Parnes, claims); rule.8 at 546. statute or see and, allegation regarding an the state- pleading re- if 7. The Reform Act outlines made on information misleading ment or omission is quirements upon a for claim based belief, complaint state with shall statements and omissions follows: is particularity all facts on which belief any private arising under this In action formed. alleges chapter plaintiff which the in 78u-4(b)(1). § 15 U.S.C. See the defendant— (A) an of a mate- made untrue statement Notably, of the facts after the occurrence fact; lawsuit, rial passed giving to this the NASD rise (B) a material fact neces- omitted to state receipt require disclosure of rules which sary order to make the statements delisting a letter within seven calendar made, light circumstances in days trading halt. Association of or face a made, Dealers, Inc., misleading; not Manual Mar- Securities NASD 4815(b) specify Nasdaq Mar- ketplace each statement Rule Stock shall (Nov.2000) available misleading, the reason ket Section IM-4120-2 to have been why misleading, http://secure.nasdr.com. the statement is or reasons “Materiality alone is not suffi ing at options now, several looking we’re cient place a company under duty several strategic opportunities for our disclosure.” In re Danek Group, Company that would Sofamor be very premature to Inc., (6th Cir.1997). In right now, announce including most tradi- fact, “[s]ilence, absent a disclose, duty is tional financing options: a secondary offer- not misleading under Rule 10b-5.” Basic ing, perhaps partnering up with somebody Inc., 485 U.S. at 239 n. 108 S.Ct. 978. strategic venture with regard to our “A arises, duty however, if there have been sales.” inaccurate, incomplete or misleading dis Finally, November after the closures.” Sailors v. Northern States market, close of the prior but to filing the Co., Power Cir.1993). September 10-Q, K-tel reported its finan- Therefore, “even absent a duty to speak, cial results for quarter ending Septem- party who discloses material facts in con 30, 1998, ber by press release. The Class nection with securities transactions as alleged only that the November press a duty speak sume[s] fully truthful release not did include information about ly on subjects.” those Helwig, 251 F.3d at the October 1998 delisting letter, nor (internal quotations and citation omit did it include enough information to deter- ted). However, the requirement to mine whether K-tel was in compliance with dump all known information with every the listing requirements. The Class does public announcement, but the law requires however, allege, K-tel common stock “an actor to provide complete and non- closed down per $8 share the next day. misleading information with respect to the subjects on which he first two statements, speak." undertakes to relating (internal Id. quotations to Playboy Online and citation omit Microsoft were not ted) added). (emphasis case, rendered misleading this based upon K-tel’s argues Class public four failure to statements disclose the receipt made of the de- by K-tel rendered listing misleading the letter. omission While the fact K-tel had public aof disclosure received regarding the delisting the de- letter may have been listing letter. material, no duty to disclose triggered was by the partnering statements. The de- public first statement made by K-tel listing letter was unrelated to the subject November 1998. K-tel’s vice matter of the statements. president corporate development stated, with regard to the new partnership agree- K-tel’s third statement, made ment with Playboy Online: “We expect the CNBC, Kieves on is so vague, cautionary Playboy/K-tel Music Store to compete with and such obvious puffing that no reason leading online music services such as able investor would have relied on it. See CDNow, Inc., N2K, Inc., Amazon.com, Parnes, 122 547. Specifically, Inc.” Kieves stated it would “very prema

The defendant Lawrence ture” to Kieves made more, announce anything a cau two statements on 10, tionary November 1998. note rendering the statement im Kieves announced, with regard part- to the material as a matter of law. See id. at nership with Microsoft: Furthermore, “Microsoft’s ex- 548. Kieves seemed to de tensive online outreach to the consumer tentatively is scribe the strategic partner ain league of its own will ships further which had already been announced enhance the K-Tel Express brand name saying, “perhaps up partnering with across the Internet.” Additionally, Kieves somebody in a strategic venture with re appeared on CNBC stating: “We’re look- gard to our sales.” Such statements are Hanson, a v. Knapp on of motion to amend.” perpetuate to fraud enough specific not Furthermore, (8th Cir.1999). 786, 183 F.3d General- See id. the market. implicate de- the does not to ly, the statement the denial of a motion we review letter, immaterial state- nor was the listing amend for abuse of discretion. Id. Howev- misleading without disclosure ment made er, the to our review of denial of leave letter. of the futility de novo upon amend based is upon where the failure such denial based dis publicly results The financial complaint to of the amended state claim. 1998, may have on November closed ex & See United States rel. Gaudineer by failure also misleading been rendered Comito, Iowa, v. L.L.P. 269 F.3d At delisting notice of the letter. to include (8th Cir.2001). least, jury ques be a very such would the Silver, 105 F.3d at 396. tion. See case, present denying In the the Class linked and under subject closely matter is amend, the district court stated leave colored assumptions were at least lying failed, the Class had with nine months determination does the letter. This com- elapsing filing between discussion, however. end the complaint, plead plaint the amended individual defen- argued The Class particularity to raise a facts sufficient omission, dants, material by reason of the Further, strong inference of scienter. disclose the letter obligated to either court, mat- hearing district after fact, de- trading. or abstain ter, found insufficient evidence that trading until the did abstain from fendants complaint. Class could cure the amended filing with the had been disclosed letter During hearing, the Class told the 10-Q September on November already alleged it knew court had what just days four after November plead and admitted it could not certain 12, 1998, re- of financial public disclosure precision. greater claims with alleged no individual complaint sults. provides support The Class no further June sold shares between defendants appeal explain how it for this court and no other and November particu- complaint add would amend the allegedly oc- significant event or harm Davis, larity. See Brandt No- days four between curred within the (8th Cir.1999) (finding abuse of no 12 and vember “explain failed to party discretion where law, find, a matter Accordingly, we complaint he amend the to save how would delisting prior letter failure disclose claim”); Wisdom v. First Midwest 16, 1998, give rise to to November does not Bank, Bluff, Poplar “strong inference” scienter. (8th Cir.1999) al- not be (“parties should complaint their without lowed to amend to Amend D. Motion showing could be how Finally, the district the Class contends claim”). save the meritless amended to denying court its discretion abused complaint for a replead leave to its Class pre the circumstances Under argu- find merit this third time. We no sented, the abuse of discretion we find ment. than applicable rather standard is because as a matter specific allegation futile find Rule 15 of the Federal Under law, it futile district court found to Procedure, to amend leave Rules Civil amendments were no actual amend where freely justice so granted “when should Therefore, the district we find 15(a). possible. “However, Fed.R.Civ.P. requires.” deny- did not its discretion court abuse a valid reason for denial futility constitutes ing leave to amend the complaint. We Many relevant facts in securities cases would also affirm the denial of the motion may not be discoverable the pleading to amend under the de novo standard. stage they because are known only by key insiders. See re Navarre Corp. Sec. III. CONCLUSION Litig., 735, 2002 WL slip Congress has obviously plead- raised the op. Cir.2002). at 14 This espe- can be ing bar for securities fraud complaints. cially true if the alleged fraud concerns a President William Clinton vetoed the Re- special purpose business entity which does form on Act December because appear corporate balance sheet he disagreed with the intent of the Confer- as here. Whether or not appellants can ence Committee in “erectpng] a higher ultimately prove their allegations, or even barrier to bringing suit than any ex- now withstand an eventual summary judgment isting-one so high that even the ag- most motion, is not at issue at this stage. The grieved investors with the painful most case, in this especially those losses may get tossed out of court before relating to the nature and timing of both prove chance to their case.” the disclosure corporate information and 141 Cong. Rec. (daily S19035 ed. Dec. trading, insider meet the new pleading 1995) (veto message Clinton). of President standards are sufficient to withstand a With the President’s message hand, 12(b)(6) Rule motion. Congress overrode the veto. K-tel’s motion to dismiss was properly I. granted. Accordingly, we affirm the judg- ment of the district court. The allegations in the amended com- plaint set out significant facts related K- to MURPHY, Circuit Judge, dissenting. tel and its failed subsidiary. sequence I respectfully dissent. The primary of alleged events in relation to each other goals of the federal securities laws are to and to the actions of appellees is of critical protect investors and promote full dis importance in determining whether al- closure of information, relevant Ernst & legations are sufficient. For that reason it Ernst v. Hochfelder, U.S. necessary to recount the allegations S.Ct. (1976), L.Ed.2d 668 and here in considerable detail. there was no indication in the Reform Act During 1997 price

that its purpose K-tel’s shares was to undercut those ranged from $4.38, goals $1.75 protect and K-tel violators from meritori formed a buying media ous claims. Although infomercial pleading standards marketing subsidiary. securities fraud subsidiary cases ac- have been strengthened cumulated significant Act, losses Reform March it does not require appellees proven case be curtailed operations its or prevent point some during a case from 1998. Before going forward negative to discovery when information there about alle subsidiary gations that corporate was reported, appellees insiders had en announced in hanced motive April, and opportunity that they commit would undertake a fraud and knew facts promising suggesting their online venture and a 2-for-l public statements were materially split. stock inaccu price K-tel’s share rose more rate. Florida State Bd. Admin. v. than tenfold on the strength of these an- Green Tree Fin. Corp., 645, 661, nouncements, on April (8th Cir.2001). 5,1998. $33.94 May to therefore and $4,949,000 of assets ble K-tel like companies traded Publicly on shares K-tel’s of listing the maintain the Secu- with reports quarterly file must company A market. Nasdaq stock the (SEC) Commission Exchange and rities tangi- in net $4,000,000 at have least a must of quarters three first of the each for listed, and remain in to order assets ble due within reports are the and year, fiscal impaired seriously delisting would 17 C.F.R. quarter. end of the days of On stock. K-tel of value and liquidity the ending March quarter For the § 249.308a. 10- the March filed appellees day the that in losses operating reported 31,1998, K-tel share. per at $31.44 closed stock Q, K-tel’s a Form in and May 5 on release press was filing May filing, May 8 May following 8. The the filing on 10-Q month the ap- SEC consecutive of tangible four assets least net at first of reported the which five operating the million, quarterly of four reported that filings proximately $5 to primarily due in named were defendants losses insider corporate These losses. tangible net of K-tel large blocks very K-tel’s and subsidiary, sold complaint9 mini- approxi- below to amounted eventually declined sales Their stock. on listing outstanding K-tel stock continued for of all mately 32% requirement mum shares), was and 8,316,668 May (2,680,481 of filing Nasdaq. million. which $40 over quarter of proceeds for the 10-Q reaped Form K-tel’s and officer signed executive It was chief Kives, K-teFs 1998. March ended directors, sold Fischer, and of Weiner, board and of its Kives, chairman appellees Weiner, $26,312,153. $1,173,000 for of for 2,202,303 shares losses pre tax reported resignation of his gains until tax K-tel pre of compared president quarter, for 390,000 shares previous sold period August, same $492,000in the officer, Fischer, financial' subsidiary chief $11,755,420. that reported also It year. Koblick, an $195,660. $1,300,000 6,000 shares of sold losses accumulated had director, sold president cur- vice been had executive operations itsof that most Kieves, the $2,661,005. 82,178 shares tailed. sell not did who appellee individual only ap- alleges that amended a mem- was period, May during the stock May 8 of time at the knew pellees that directors of board of K-tel’s ber knowing, in not reckless were filing, or he only when manager and became time already sustained had subsidiary that October, 1998. president appointed obli- it was that $1,498,000 and losses relating From contracts under perform gated indi- owned shares K-tel ap- number losses in future likely result would underlying documents appellees al- vidual Appellants million. proximately $1.8 may calcu- percentages pleadings, in the contained sheet balance that lege sold Kives their transactions. about lated be- earnings company filing overstated holdings entire of his 39% approximately foreseeable actual show it did cause ranging prices share period this during these further It losses. individ- The other to $10.95.10 alleg- sheet the balance nondisclosures their 49% least sold appellees tangi- ual net report appellees edly enabled of K-tel’s 42% approximately owned Kives Weiner Fischer appears It September as of outstanding 8,335,668 shares complaint, the amended served never shares). beginning 3,500,980 At the (i.e. parties treated them court district but the From 5,703,283 shares. May he owned respect all action and dismissed 2,202,303 sold he to June May 8 defendants. named thus May period during the His sales shares. holdings. his 39% approximately liquidated aggregate holdings11 prices share rang- by ments appellees, the subsidiary’s opera- ing from $34.25 to The daily $22.51. clos- tions had been curtailed although it was ing price of K-tel’s shares dropped from continuing to run up losses. When appel- $33.22 during period to'$11.25 this of insid- began lees to sell their stock immediately er trading. after they poor disclosed quarterly results on May the accumulated losses im- The requires SEC publicly traded com- paired assets of the panies subsidiary had to file reports annual within 90 days been accrued on K-tel’s of the end balance of a sheet. fiscal year, 17 C.F.R. year Fiscal § results were 249.310, released in and K-tel Octo- filed its report annual ber that revealed large year operating fiscal ending losses June 1998 on and net tangible October insufficient 1998.12 The re- October 13 filing main listed on signed Kives, Nasdaq was by Fischer, market. Kobliek, Kieves, pleadings, and and it reasonable was inferences audited account- them, thus ing allege firm a sequence Andersen, Arthur which in- LLP. It re- ported siders touted a net favorable operating $2,407,000 information loss of about company, for fiscal sold year shares opposed own, of their to gain $3,204,000 only later revealed year fiscal 1997. true financial The annu- condi- report al tion of K-tel. attributed negative K-tel’s cash

flow primarily to losses of the defunct A pattern similar for the fall media buying subsidiary and stated: “As but with less insider trading. 30,1998, of June due to accumulated losses November appellees publicly announced a $2,300,000, the Company had curtailed strategic partnership with Playboy On- most of these media buying operations.” line and an agreement to include K-tel’s The October 13 filing pegged also K-tel’s online music store on The Microsoft Net- tangible net assets at $3,774,000, an Shopping work’s Channel.14 signifi- More amount below Nasdaq’s $4,000,000 mini- cantly, Kieves is alleged to appeared mum requirement for continued listing. on CNBC November 1998 when he K-tel’s shares closed at after $5.38 stated that K-tel was “looking several filing. strategic opportunities.. .including most Key allegations in the com- amended traditional financing options [including] ” plaint state that April appellees an- secondary offering.... These announce- nounced a new venture and a stock split ments drove K-tel’s price share up from that increased the value of K-tel stock Appellees $32.63. press issued a tenfold, and then sold off their own stock thereafter, release November for millions of dollars in May and June. projected losses for the quarter end- This was that, time according to state- ing September 30, 1998.15 K-tel’s share 11. The appellees individual other than ground Kives receipt that its of material informa- 478,178 sold shares during period. the May tion from subsidiaries delayed. had been September 11, 1998, ofAs the total number of amended complaint alleges that the filing late shares held affiliates of K-tel part other than appellees' strategy delay disclo- 555,313. Kives was Fischer owned at least sure and hide K-tel’s true financial condition. 24,000 of them liquidated because he November, amount in 1998. During May copyA press release included in the period, the appellees individual other than record shows quoted Kives was in it. Kives apparently liquidated from 49% 95% aggregate their holdings. quoted Kieves was press release. 12. K-tel had received a two week extension of press 15. The quoted release Kives and Kieves filing deadline from the SEC on the and listed Fischer as a contact.

903 on November a.m. 11:30 16, proximately November on $17.63 slid price immediately price stock K-tel’s 1998. 1998.16 by the 32% down was and 20% dropped K- 1998 of October week the During Fisch- per share. at day, the $12.00 of end threaten- Nasdaq letter received tel $247,290 on the for 15,000 shares er sold did appellees shares, but its to delist ing prices at occurred His sales day.18 same after busi- it until or disclose announce not daily the midway between approximately 16 when on November hours ness for the price closing stock’s the and high quarter the 10-Q for Form K-tel’s filed is not sales of the time The exact day.19 Novem- The 30,1998.17 September ending ap- unknown presumably and Kives, by appellees signed filing was ber that is inference possible but pellants, that It disclosed Kieves, Fischer. and before given been could have order the sell the notified been has Company “[t]he oc- if transaction the even the disclosure Company that the Market Stock Nasdaq later. curred net tangible minimum the to meet failed ap- that alleges complaint for continued necessary amended The requirement asset subsidiary’s assets the Market” that Nasdaq National knew pellees the on listing were the its losses that that and impaired no assurance is were “[t]here that and losses attempt those recognizing its certain, that but successful bewill Company ” low also would report sheet same The balance K-tel’s listed.... remain threat $912,000and and price of stock company’s assets tangible the net ered showed Ap- $3,131,000. Nasdaq. listing of losses continued operating its ened quarterly of filing recognition 16 time, delayed November allegedly first pellees For $800,000 Generally Ac loss of of losses, in violation operating an recognized these subsidiary (GAAP), and by the Accounting Practices incurred cepted had been delisting and Nasdaq infomercials certain of of disclosure delayed “write-offs for be- partner assets... new touting a media publicly deferred remaining while letter al such It venture. determined online new management ship and cause allege Appellants nondisclosures strategic realizable.” that leged $698,000due artificially high loss operating price stock another K-tel’s kept recognized millions later was sold subsidiary appellees individual while ending March 10(b) 1934 of the § quarter for the 10-Q in violation K-tel’s shares Act, U.S.C. 15 Exchange 31,1999. Securities 10b-5, 17 C.F.R. Rule related and 78j(b), § K- reported services news major The Underlying § 240.10b-5.20 ap- at letter delisting receipt tel’s be alleged to are appellees individual 20.The ex- decline, Koblick defendant During this 16. 20(a) § under persons as control liable 27,200 shares purchase options to ercised 78t(a), of them and all Act, § U.S.C. per share. $3.06 liable alleged to are except Kieves of mate possession while selling securities accompanies sheet transmittal A17. in violation nonpublic information rial 10-Q received SEC that the shows September Act, § 78t-1. U.S.C. § 20A 16, 1998. November p.m. on 7:11 predi are claims 10(b) 10b-5 Rule §The v. Pru Deviries 20(a) liability, see §to cates $90,000 9,000 shares sold also Inc., Fischer Sec., 18. dential-Bache 18, liability, see Jack 1986), § on November 20A Cir. Co.,& Lynch Merrill v.Co. Ins. Nat’l son Life $21.25, 1994). (2d These Cir. day was Inc., high price for predicate oc- if go sales forward $12. closing price cannot theories $16.03. dismissed. claims prices of curred in the amended are four of li ment from being misleading, if corpo- ters filings, SEC four press company re rate insiders trade on confidential informa- leases from the period in question, and a tion. See Roeder v. Alpha Indus., Inc., graph of K-Tel’s stock performance in cal (1st 26-27 Cir.1987). The year endar 1998. See Porous Media Corp. parties do not dispute that the misrepre- v. Corp., Pall 1077, (8th 1079 sentations alleged in case this would be Cir.1999) (court may take notice public material if proven. questions The on ap- documents in reviewing plead dismissal on peal are whether the pleadings sufficiently ings). allege appellees that made false state- ments or omissions and whether they act- II. ed with scienter. In reviewing de novo a dismissal under Each element of fraud must pled be 12(b)(6), Rule “we must assume all factual particularity. See 9(b) (all Fed.R.Civ.P. allegations in the complaint true,” are elements of fraud except scienter must be “the plaintiff is entitled to all reasonable pleaded with particularity); 15 U.S.C. 78u- inferences that may be drawn from the 4(b)(2) (in action, securities fraud scienter allegations of the complaint.” Florida must pled be with particularity). Never State Admin., Bd. 270 F.3d at 660. As theless, our court has recently recognized scienter, however, the sum of the rea that investors “need not plead.. .precise sonable inferences must be strong order details.. .where subject matter of the proceed to discovery. Id. A complaint fraud is uniquely within the defendants’ only should be dismissed for failure to knowledge or control.” In re Nav arre state a claim if “it appears beyond doubt Corp., 299 F.3d 2002 WL that plaintiff prove can no set of facts 14. respect to the element scienter, in support of his claim which would entitle plaintiff a plead must facts “giving him rise to a relief.” Parnes v. Gateway strong inference,” 15 Inc., U.S.C. 78u-4(b)(2), (8th Cir.1997), quot that the defendant acted ing intentionally Fusco v. or Xerox Corp., 676 F.2d (8th recklessly. Van Cir.1982). Dyke v. Coburn Enter prises, Inc., F.2d Cir. To state a 10(b)21 violation §of or Rule 1989). 10b-5,22 plaintiff a (1) must allege: a false The statement or amended complaint omission of material alleges fact oc that Rives, curring in Weiner, connection purchase with the Fischer signed or Z-tel’s sale of a (2) security; 10-Q March (3) scienter; May reli 1998 and that the ance; (4) damages. filing was Alpern false and misleading Utili- because the Corp United, Inc., 84 balance sheet 1533-34 contained in it failed to rec- (8th Cir.1996). An omission ognize upon occurs subsidiary’s losses and the im- of a duty breach to disclose, which pairment if arises of its violation of State- a statute or regulation requires it, if it is ments of Financial Accounting Standards necessary prevent a voluntary (SFAS) state- 121 and 5. The amended complaint 10(b) prohibits Section “any use of manip- 22. Rule 10b-5 any forbids person "[t]o make deceptive ulative or device or any contrivance” in untrue statement of a material fact or to connection with purchase omit any sale of state material necessary fact security “in contravention of order to made, such make the rules and statements in the regulations light as the may Commission circumstances pre- 'under made, scribe.” 15 U.S.C. 78j(b). § not misleading... in connection purchase with the or sale of security.” § C.F.R. 240.10b-5. possibility reasonable is at least there an- made “who identifies thus may have loss additional anor it a loss made, that what was it nouncement, where Accounting Contin- In re incurred.” been made.” it entailed, when [and] Accounting Financial WL Statement gencies, Corp., Navarre (Financial Account- 5, § is appeal No. issue Standards Bd.1975). An estimated defi- Standards ing amended whether ac- plead “shall contingency adequately a loss did loss because cient condi- if two Id. made.” to income” charge by a when was false crued “why it (1) information available met: tions appel- by three filing, signed May 8 impaired been has an asset that suggests already subsidiary had lees, states will events future probable and by $1,300,000 of losses operating incurred (2) of the loss, the amount and the filing, confirm October 1998, the 31, and March Id. reasonably estimated. the can be that loss shows appellees, four by signed bring rele- seek to standards § additional These an incurred subsidiary the ear- market the between to losses vant information operating $1,000,000 in the 30, opportunity. 1998. While liest and June March subsidiary’s the that claimed filing 8May by that alleges amended The of March as curtailed been had operations May filed on 10-Q was the time March the that filing stated 1998, the October subsidiary had by K-tel’s incurred losses June until not concluded they were for SFAS duty under a triggered appellees that allege pleadings The review impairment an to conduct company subsidiary’s 8 that May of as knew and identifiable assets long term its of and imminent, its losses that was closure to5 SFAS duty under and intangibles had assets either of its impairment con- a loss loss from an estimated disclose to reasonably certain were or occurred sheet. balance company’s on the tingency recog- to failure appellees’ occur, and that not cur- had K-Tel alleged that also It is in losses these any portion nize operations buying media itsof most tailed misleading was sheet 10-Q balance March that filings, but in SEC claimed it later as of GAAP. violation and to “obligated to be continued K-Tel fact designed standards accounting The contracts more or one under perform company’s of a picture a realistic give to in additional result likely which were D.&Kay S. Robert condition. financial mil- approximately $1.8 losses future Accounting Searfoss, Handbook Gerald that believed court district The lion.” ed.1989). (2d 1, at 4 Auditing, ch. and sufficient pled not were assets long-lived that “requires SFAS include not they did because particularity be intangibles identifiable and certain did and contracts terms for reviewed entity be an by used held its any of subsidiary or that specify changes or events whenever impairment an or asset” “long-lived awas property carrying that indicate circumstances sum that intangible,” “identifiable recovera- may not asset anof amount than less flows cash future Impairment Accounting ble.” future amount, that carrying asset’s Long-Lived Assets Long-Lived inevitable. asset losses Of, Statement Disposed Be To Assets bright are not accounting standards No. Accounting Standards Financial requires themof rules, application line Accounting Standards (Financial Summary Guernsey Shalala See calls. judgment corpo- Bd.1995). requires SFAS 115 S.Ct. U.S. Hosp., Mem’l “when contingency loss disclose ration 1232, 131 (1995), L.Ed.2d 106 citing Kay & have not had access to detailed information Searfoss, ch. at 7. The nature of ac about K-tel’s units, business assets, their counting makes it unreasonable to expect or their operations, and it is not necessary securities fraud plaintiffs plead GAAP at this stage plead accounting irregular violations with the most exacting particu greater ities with specificity than was done larity, especially subject “where the matter plaintiffs here. See In re Navarre of the fraud is uniquely within the defen Corp., WL dants’ knowledge or control.” In re Na 14, 15. The amended complaint alleges varre Corp., 299 2002 WL facts sufficient to show that K-tel’s publicly 1760458, at 14. The allegations here con filed balance sheets potentially contained cern operations of and accounting for an material misstatements or omissions under off balance sheet corporate entity so only Rule 10b-5. insiders would normally have access to the relevant amended pleadings information. A in this case subsidiary en gaged in identified specific media buying and statements infomercial attributable marketing might to appellees be presumed allegedly own inflated K-tel’s identifiable intangible assets earnings such copy net tangible hiding rights, licenses, or masters, record specific see Kay losses that were also identified. Searfoss, & 15, ch. 35-36, at as well as long Appellants have not relied on generalized term such equipment, id., see ch. imputations of scienter based on the indi 15, at 2. The allegation that the subsidiary vidual appellees’ positions within the cor was obligated to perform under unprofit poration, In re Advanta Corp. cf. Sec. able contracts should be considered to Litig., (3rd 180 F.3d 539 Cir.1999), gether with other allegations relating to nor is this a case where the pleadings the losses reported after the subsidiary’s fail repeatedly to show who made the al operations were shut down. It is not an leged misstatement, when it made, unreasonable inference that losses occur made, where it was entailed, what it and ring after closure resulted from preexist itwhy was false. In re Navarre Corp., Cf. ing obligations, and reasonable inferences 299 F.3d WL at 14-15. arising from the amended complaint must Appellants here have alleged that each be regarded as true at this stage of the individual appellee signed at least one of case. Florida State Bd. Admin., 270 of K-tel’s SEC filings which blamed the sub F.3d at 660. sidiary for poor K-tel’s performance and A securities fraud complaint need not yet failed to recognize its losses or the allege GAAP violations to establish that a impairment of its assets on the balance material misstatement occurred a com- sheet in of violation GAAP. pany’s financial statement. The account- The amended complaint also ing alleges that standards and requirements the of K-tel breached duty its Rule to 10b-5 are disclose not the “perfectly coextensive.” delisting letter, a Malone v. duty which Microdyne arose Corp., when 26 F.3d appellees Cir.1994). made November Compliance announcements with touting GAAP the provide does not company. The immunity majority from claims 10b-5 liability, that the id. at delisting and letter accountants was unrelated to have been held the subject criminally liable for matter of certify- any of the November ing false or misleading announcements, financial but statements a delisting directly im- even though they pairs followed GAAP. a publicly United traded company’s ability to Simon, v. States (2d F.2d capital 805-06 raise and is therefore highly rele- Cir.1969). Without discovery plaintiffs vant to public statement concerning of inference strong a demonstrate way to alleg- Kieves financing. capitalization height showing of a to make is scienter November CNBC edly appeared commit to opportunity and motive consid- ened company’s discussed Admin., 270 Bd. State Florida financing op- fraud. of traditional “most of eration executive large unusually An offering,” at 660. secondary a [including] tions of indication one is Kieves package that compensation conclude fact could finder a id. opportunity, receipt motive K-tel’s heightened to duty disclose a had of insider majority pattern time. an unusual that delisting letter delisting also See at 656. Id. disclose another. failure is trading that states release press Litig., Sec. Corp. the November re Scholastic letter it but Gregor, question, jury Cir.2001); (2d Rothman created may have that Cir.2000). conclusion puzzling (2d “[I]n reaches then 16 is November it before particular ease, trading to disclose trading failure insider permit lawof matter as a that evidence insufficient circumstantial is time The nondisclosure forward. go trade be case time best knew insider im- may not delisting letter not information inside had she he or cause sales, but insider most is pacted in turn This public. shared that inference reasonable to a contributes kept or she he evidence circumstantial K- inflate deliberately to acted appellees in order public information artificially. price share tel’s Florida advantage.” unfair on the trade require at 656. Admin., “does Act Reform Bd. State every particularity trading insider plead pattern plaintiffs Whether con- beliefs their as the upon fact factors upon such single depends unusual are statements misleading or of stock false cerning sales, percentage timing plead only need Rather, plaintiffs derived profit of based. sold, amount holdings sup- facts insiders particularity of with sufficient the number them, and from Kasaks, 216 Novak beliefs.” those port re Scho In also See at 659. Id. selling. Cir.2000) (emphasis (2d 300, 313-14 F.3d at 74-75. lastic, F.3d 252 “in- that requires court Our original). in alleges suffi- complaint amended The particularity with plead must vestors here sales the insider to show facts cient [an] where, how when, what, who, ways identified each suspicious 299 Corp., scheme,” In re Navarre alleged During Admin. Bd. State Florida WL F.3d individual of five four period, class that burden. met have here appellants between sold to have alleged appellees facts from alleges amended a time holdings at of their and 95% 39% appellees that be inferred could could nondisclosures when know, that reason knew, had or so price share inflated artificially have was filing May 8 K-tel’s sheet balance than to more amounted proceeds sales that Novem- Kieves’ that made when false his hold- 39% sold Kives million. $41 op- financing K-tel’s 10 discussion ber mil- $26 approximately received ings the time. misleading was tions codefend- individual His sales. his lion of their 49% at least sold apparently III. ants $15 approximately holdings for aggregate require standards pleading new drawn may be inference An million. par- with “state plaintiff fraud securities for these motive that in- strong ato rise giving ticularity facts than rather profit personal sales scien- acted a defendant ference” need. institutional 78u-4(b)(2). important One ter, 15 U.S.C. This is not a ease only where a single This is not a case in which the timing of benefitted, see, insider e.g., San Leandro the sales undercuts the allegations of Emergency Med. Group Sharing fraud, and the insider sales here Profit did not Plan v. Philip Cos., Inc., Morris occur before the alleged fraud took place, (2d Cir.1996), or where a signifi In see re Corp. Vantive Sec. Litig., 283 cant number of insiders have not benefit- (9th F.3d Cir.2002) (38% not ted all. See In re Corp., Advanta 180 suspicious because majority of oc- sales (inference F.3d at 540 weakened when only curred before fraud could occurred), four of seven individual defendants trad at a particularly disadvantageous time ed); Acito v. IMCERA Group, Inc., 47 within the period, class Ronconi, see (2d Cir.1995) (inference under (69% F.3d at 435 not suspicious because mined when only one of four individual sales occurred near point lowest in stock traded). defendants Fives may have bene- price during period). class contrast, most, fitted the but the allegations on mo the insider sales here occurred when the tive are not undercut by the fact that price share was near peak, its at the time appellees different profited unequally from when the alleged fraudulent scheme to the alleged scheme. Florida State Bd. suppress unfavorable information would Admin., 270 F.3d at 664-65. It is not have had the most significant impact on suspicious for an insider to sell relatively price. small percentage of his holdings, see Ron The situation here is not unlike the Sec- Larkin, coni v. ond Circuit case Stevelman v. Alias Re- Cir.2001) (17% not suspicious); Acito, 47 Inc., (2d. search Cir.1999). A (11% F.3d at 54 not suspicious); Rothman, president and CEO that case sold 40% (9.3% 220 F.3d at 95 suspicious), but his company holdings for million, a larger when percentage is sold the tim and several other liquidated insiders un- ing of the sales is critical to determine known percentages of their holdings. Id.

whether they contribute to a strong infer 82. The trading was done during the ence of scienter. period same that the insiders were alleged have overstated corporate It is suspicious earnings. Id. when insider sales occur 82, 85. The court at a concluded time when that “the alleged nondisclosures insider trading alleged.. .in could have combination artificially inflated the stock’s with the timing of the price, misrepresentations, see In re Navarre Corp., 299 F.3d satisfies the pleading requirements 2002 WL of Rule at and that is for the purposes of the what is alleged scienter ele- here. The vast majority of 10(b) ment of section and Rule the sales began 10b-5.” Id. when price K-tel’s share 86. The magnitude and was the approximately of timing May 8, $31.44 on insider trading alleged a price here is nearly similarly ten times higher than before suspicious. Fives sold appellees 39% of his holdings had made their announcements approximately million, $26 of a and new his online co- venture and stock split, defendants apparently sold at nearly and least equivalent 49% of to the stock’s 1998 aggregate holdings for high of approximately which $33.94 occurred on 5,May million, during the time they 1998. The sales al- occurred immediately af to have ter the overstated net alleged F-tel’s tangi- nondisclosures and at the assets. of beginning a prolonged period operat of

ing losses and diminishing net tangible The allegations of insider sales at F-tel assets. reflect greater transactions in magnitude Mi quoting at the WL Geffon than timing in suspicious more and Cir.2001). (1st 29, 36 Corp., re crion in “unusual” deemed sales insider allegations detailed have made Appellants 735, 2002 WL Corp., Navarre sur to sufficient factors of these each defendants of (all individual six 1760458, 19at hold- to dismiss. their of a motion vive 100% and 10% between sold in million). pleadings The $11.5 ings IV. to establish insufficient were case that insider from scienter of inference strong Act Exchange Securities misrep- allege not they did because trades securities because part in enacted was at 20. Id. particularity. resentations and manipulation to susceptible “are prices in the link” “missing such is no There unrea and sudden .resulting in control.. pled Appellants Id. here. allegations 78b. § U.S.C. fluctuations.” sonable where, and how when, what, who, investors protect intended It was and fraud, magnitude infor disclosure promote and to fraud this case sales insider timing at U.S. Hochfelder, mation. fil- appellees’ that inference buttress abandon did Congress S.Ct. mis- or reckless intentional ings contained when objectives overarching these Ad- Bd. State Florida See statements. willing Act, “[o]ur Reform passed (“[I]n cases some min., in favor of inferences draw ness to estab- that circumstantial same under unchanged” remains plaintiff addi- give also opportunity motive lish Ven Helwig v. standards. pleading new defendant’s believe reason tional Cir.2001) 540, 553 Inc., cor, reck- knowing misrepresentation unquestion Congress banc). (en “While less.”). standard pleading ably strengthened K-tel period, the class before year In the Act would fraud, the Reform for securities than higher price aat closed never stock inves protect 'to purpose its serve hardly period, During the class per share. confidence maintain tors ventures online touted publicly appellees it to become markets’ securities sold prices, raised share dramatically Id., claims.” for meritorious choke-point prices holdings their portions large 104-369, at No. Rep. Conf. H.R. quoting lagged $34.25, and from $10.95 ranging & Admin. Cong. (1995), U.S.Code informa- financial disclosing unfavorable at 730. News included to and eventually led tion be viewed must amended delisting letter. appellants. favorable most light in the proceed cannot action fraud A securities alleges It Parnes, 122 F.3d irregu- accounting or violations on “GAAP linked filings which SEC signed appellees Novak, 216 F.3d alone,” larities, standing performance financial poor K-tel’s far alleged have here appellants but March as early subsidiary’s losses alle- that has determined court Our more. appellees Although in- issue scienter relevant gations losses, never about these known conjunction trading “insider clude K- them recognizing delayed theless statements;... disre- misleading false months. of a number sheet tel’s balance ac- information factual current of gard of blocks large they sold time During issue; statement prior to quired mil $41 approximately stock company of evidence shenanigans; accounting “need officials Although corporate lion. self-interest.” solely out taken actions responsi- only “are clairvoyant” Corp., Navarre In re ble for revealing those material facts rea For these reasons the dismissal sonably them,” available to Novak, 216 district court should be reversed, and the F.3d at the corporate insiders here case remanded for discovery and further have been charged in the amended com proceedings.23 plaint with actual knowledge of the subsid

iary’s material losses and the receipt of a

delisting letter at the time when they

signed K-tel’s public various filings. Some

securities fraud complaints give “no reason

to assume that what is true at the moment

plaintiff discovers was also true at the moment the alleged misrepresentation,” Alton R. KELLEY and Jan but the allegations here strongly suggest Kelley, Appellants, May 8 filing and Kieves’ Novem ber 10 statements v. “misleading when made.” City Philadelphia v. Fleming GEORGIA-PACIFIC CORPORATION Cos., Inc., 264 Cir. and Jimmy Marvin Branch, Jr., 2001) (emphasis in original). Appellees.

A fundamental principle of accounting is Kelley, Alton R. Appellant, that losses must be recognized as soon as they are reasonably certain and measura ble, Kay & Searfoss, 8-13, Ch. and Georgia-Pacific Corporation, Appellee. the amended complaint alleges with suffi

cient particularity that No. appellees 01-3728WA. failed to do this. The nature and timing of the United States Court Appeals, alleged nondisclosures, together with the Eighth Circuit. magnitude and timing appellees’ stock sales, meet the heightened pleading re Submitted: Aug. 2, 2002. quirements of the Reform Act. See Florida Filed: Aug. State Admin., Bd. 270 F.3d at 661 (strong inference of scienter based on magnitude of executive compensation

package timing of alleged misstate

ments); Stevelman, 174 F.3d at 86 (strong

inference of scienter based magnitude

of insider sales and timing of alleged mis

statements). Novak, 216 F.3d at 309 Cf. (strong inference of scienter corpo when

rate insiders allegedly delayed markdowns

of worthless inventory). 23. The district court appellants’ denied re- months of the order appointing them lead quest for leave to amend the amended plaintiffs com- Any the case. delay must plaint ground on the attempt to cure been prejudicial to the opposing justify side to its defects would be futile. The record here denial amend, of leave to Buder v. Merrill does suggest not that appellants acted in bad Pierce, Lynch, Smith, Inc., Fenner & faith or dilatory filing the amended (8th Cir.1981), and the record does complaint, filed it within three prejudice. reflect

Case Details

Case Name: Migliaccio v. K-Tel International, Inc.

Court Name: Court of Appeals for the Eighth Circuit

Date Published: Aug 7, 2002

Citation: 300 F.3d 881

Docket Number: 00-3210

Court Abbreviation: 8th Cir.