which their beliefs are based. See supra (describing the PSLRA's pleading
requirements for allegations plead on information and belief). For
example, Plaintiffs do not plead all of the relevant facts on which they
base their belief that Secure recognized revenue on the DMS contract
during the fourth quarter of 1998, or that the amount of prematurely
recognized revenue was in excess of $1,520,621. Similarly, Plaintiffs
fail to plead the facts on which they base their belief that Taggart
conceived of the idea of "sticking the Sidewinders in a warehouse and
putting a circle around them." CCC ¶ 68.
C. Other Issues
Defendants argue that several of their statements that are identified
in the CCC were mere puffery or true statements of historical fact, and
thus are not actionable. Plaintiffs argue that such statements are
sometimes actionable. However, as discussed above, Plaintiffs have yet to
identify specifically which of these other statements were indeed
allegedly false or misleading when made, and have not plead with
particularity the reasons why they were false or misleading when made. The
Court cannot evaluate the substantive merits of these allegations until
Plaintiffs clarify precisely which statements were allegedly false or
misleading when made and why.
Similarly, although the parties have briefed the issue of whether
Plaintiffs' allegations raise a strong inference of deliberate
recklessness, that issue is not ripe for adjudication. In order to
determine whether Plaintiffs have adequately plead scienter, the Court
must consider the complaint in its entirety. See Silicon Graphics, 183
F.3d at 985. Because Plaintiffs must, as a result of this order,
substantially amend their complaint, it makes little sense to consider
whether the CCC raises a strong inference of deliberate recklessness, and
the Court does not do so.*fn4
Finally, the parties dispute whether, assuming that Plaintiffs have
stated a § 10(b) claim against at least some Defendants, Plaintiffs
have stated § 10(b) or § 20(a) claims against Regester, Taggart,
Smith and Hughes. Defendants argue that the lack of any allegation that
any of these Defendants made an actionable misstatement or omission bars
liability. However, the Court agrees with Plaintiffs that they have plead
facts sufficient to establish, at least at the pleading stage, that the
"group published information" presumption applies to Regester, Taggart,
Smith and Hughes.
"Group published information" is information contained in documents
such as prospectuses, registration statements, annual reports and press
releases. See Wool, 818 F.2d at 1440. The "group published information"
presumption allows plaintiffs to rely "upon a presumption that the
allegedly false and misleading `group published information' complained
of is the collective action of officers and directors." In re GlenFed,
Inc. Sec. Litig., 60 F.3d 591, 593 (9th Cir. 1995). Defendants argue that
the PSLRA abolished the group published information presumption, but no
Ninth Circuit case has so held. Moreover, the majority of the district
courts in the Ninth Circuit that have addressed the issue have concluded
that the group published information presumption survives the PSLRA.
See, e.g., In re PETsMART, Inc. Sec. Litig., 61 F. Supp.2d 982, 997
(D.Ariz. 1999) ("the doctrine survives the PSLRA"); Pegasus Holdings v.
Ctrs. of Am., Inc., 38 F. Supp.2d 1158, 1165 (C.D.Cal. 1998)
("non-speaking defendants may be held liable on a "group pleading'
theory"); In re Stratosphere Corp. Sec. Litig., 1 F. Supp.2d 1096, 1108
(D.Nev. 1998) ("Defendants offer no case authority for their proposition
that group pleading has been sub silentio abolished by the PSLRA, and
this Court declines to adopt such a proposition"); In re Silicon
Graphics, Inc. Sec. Litig., 970 F. Supp. 746, 759 (N.D.Cal. 1997); but
see Allison v. Brooktree Corp., 999 F. Supp. 1342, 1350 (C.D.Cal. 1998).
For the foregoing reasons, the Court GRANTS Defendants' motion to
dismiss Plaintiffs' CCC (Docket No. 31). Plaintiffs' counter-motion to
strike the McGurran declaration is DENIED as moot (Docket No. 35). The
Court dismisses Plaintiffs' CCC with leave to amend in accordance with
this order. Plaintiffs shall serve and file their first amended
consolidated complaint within forty-five days of the date of this order.
Unless the Court orders otherwise or the parties stipulate to a longer
period in which Defendants may respond, Defendants shall respond to the
first amended consolidated complaint within twenty days of service.