Rules of Civil Procedure, and which requires that the circumstances constituting fraud be stated with particularity. Fed.R.Civ.P. 9(b); Alfus, 745 F. Supp. at 1521; In re Thortec Securities Litigation, Fed. Sec. L. Rep. (CCH) 94,330 (N.D. Cal. Jan. 25, 1989) (allegations of conspiracy must be pleaded with particularity). To survive a motion to dismiss, plaintiff must allege with sufficient factual particularity that defendants reached some explicit or tacit understanding or agreement. Roberts, 670 F. Supp. at 1484 (proof of a conspiracy does not require a showing of an explicit agreement; a demonstration of a tacit agreement is enough); see also Halberstam v. Welch, 227 U.S. App. D.C. 167, 705 F.2d 472, 479 (D.C. Cir. 1983). It is not enough to show that defendants might have had a common goal unless there is a factually specific allegation that they directed themselves toward this wrongful goal by virtue of a mutual understanding or agreement. Roberts, 670 F. Supp. at 1484.
In our March 30, 1990 order, we dismissed plaintiff's allegations of conspiracy for failure to state a claim, and granted her leave to plead the existence of an agreement and specific facts concerning the agreement. Alfus, 745 F. Supp. at 1521. In the amended complaint, plaintiff purports to have corrected this deficiency. She alleges that the individual defendants were Pyramid insiders who were privy to proprietary business information, and that they operated as a collective entity in receiving information about the company, and conducting Pyramid business through formal resolutions. Amended Complaint paras. 59-60. The individual defendants also allegedly acted collectively to approve and issue periodic reports to the SEC and to Pyramid shareholders, even though the defendants were aware of the allegedly false and misleading nature of these statements. Id. PP 60-61.
These allegations, however, are insufficient to allege a tacit understanding or agreement. "There is no authority for inferring conspiratorial conduct from the fact of corporate position or responsibility." In Re Thortec Securities Litigation, Fed. Sec. L. Rep. (CCH) P 94,330 at 92,160 (N.D. Cal. Jan. 25, 1989). Claims that each defendant performed a wrongful act cannot, by itself, create an inference of a conspiratorial agreement. Roberts, 670 F. Supp. at 1485. For these reasons, we must find that plaintiff has failed to amend her complaint to plead with the requisite heightened particularity that the individual defendants acted with explicit or tacit agreement to commit an act in furtherance of an agreement to commit violations of our securities laws. Accordingly, plaintiff's claims of conspiracy are dismissed with prejudice.
F. Insider Trading Claims and the Foreign Corrupt Practices Act
In our previous order, we dismissed plaintiff's insider trading claims for lack of standing because plaintiff did not allege that she traded contemporaneously with any of the defendants. Alfus, 745 F. Supp. at 1521-23. Although plaintiff does not directly assert this claim in the Amended Complaint as a separate cause of action, defendants maintain that plaintiff implies the cause of action by requesting the relief of disgorgement of insider trading profits by individual defendants.
Plaintiff admits that no separate cause of action for insider trading is intended. Plaintiffs' Memorandum in Opposition to Motion to Dismiss, at 27. Accordingly, the prayer for disgorgement of insider trading profits is stricken from the Amended Complaint.
Likewise, plaintiff concedes that any reference to the Foreign Corrupt Practices Act is set forth for the purpose of establishing scienter, and is not a separate claim. Thus, we dismiss any claims of a violation of this Act for failure to state a claim.
G. Item 303 of Regulation S-K
In paragraph 56 of the Amended Complaint, plaintiff alleges that Pyramid's annual and quarterly reports were "materially misleading" because they violated Item 303 of Regulation S-K (17 C.F.R. § 229.303) in failing to disclose "the known adverse facts about Pyramid." Amended Complaint para. 56. Plaintiff apparently maintains that the company had a duty to disclose significant known trends or uncertainties under Rule 10b-5, pursuant to Item 303.
This court continues to find that defendants did not violate Rule 10b-5 by failing to comply with Item 303. The Securities and Exchange Commission stated in a May 1989 release interpreting Item 303 that the Item's standard of disclosure (i.e. reasonably likely to have material effect),
governs the circumstances in which Item 303 requires disclosure. The probability/magnitude test for materiality approved by the Supreme Court in Basic, Inc. v. Levinson, [485 U.S. 224,] 108 S. Ct. 978, [99 L. Ed. 2d 194] (1988), is inapposite to Item 303 disclosure.
SEC Release No. 33-6835, 6Fed. Sec. L. Rep. (CCH) P73,193, n.13 at 62,843 (May 18, 1989). Thus, demonstration of a violation of the disclosure requirements of Item 303 does not lead inevitably to the conclusion that such disclosure would be required under Rule 10b-5. Such a duty to disclose must be separately shown. Accordingly, plaintiff's claims of violations of Item 303 are dismissed.
For all of the reasons discussed above, defendants' motion to dismiss plaintiff's Amended Complaint is denied for the class period October 31, 1988 to March 23, 1989, except that:
(1) Plaintiff's claims of conspiracy are dismissed with prejudice against all defendants, including defendant Rollnick;
(2) Plaintiff's separate causes of action for insider trading and violations of the Foreign Corrupt Practices Act are dismissed; plaintiff's prayer for the disgorgement remedy is stricken from the complaint;
(3) Any allegations in the Amended Complaint of violations of Item 303 of Regulation S-K are dismissed.
IT IS SO ORDERED.