In Re Boston Scientific Corp. Securities Litigation , 686 F.3d 21 ( 2012 )

United States Court of Appeals
For the First Circuit
No. 11-2250
IN RE: BOSTON SCIENTIFIC CORPORATION SECURITIES LITIGATION.
__________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Douglas P. Woodlock, U.S. District Judge]
Before
Torruella, Boudin and Thompson,
Circuit Judges.
William H. Narwold with whom Gregg S. Levin, James M. Hughes,
William S. Norton, J. Brandon Walker, Motley Rice LLC, Sherrie R.
Savett, Barbara A. Podell, Phyllis M. Parker, Berger & Montague,
P.C., Leslie R. Stern and Berman DeValerio were on brief for
appellants Steelworkers Pension Trust and KBC Asset Management NV.
Robert J. Kaler with whom David Himelfarb, Edward W. Little,
Jr. and McCarter & English LLP were on brief for appellees Boston
Scientific Corporation, J. Raymond Elliott, Samuel R. Leno,
Fredericus A. Colen, and James R. Tobin.
July 12, 2012
BOUDIN, Circuit Judge. This case charging securities
fraud was brought in the district court as a class action on behalf
of a proposed class of shareholders of Boston Scientific
Corporation ("Boston Scientific"). Boston Scientific is a large
publicly traded company that makes and sells medical devices; it
produces numerous products across a range of medical fields,
operates in multiple countries and employs over 25,000 people. The
charges made, now common when a company's stock price declines
suddenly, rest on the following allegations and background facts.
A substantial portion of Boston Scientific's sales in
late 2008 and early 2009--around 30 percent--were of cardiac rhythm
management ("CRM") devices handled by a group within the company
devoted to such products. CRM devices are implantable devices that
use electric pulses to treat a patient's cardiac condition; they
include pacemakers and implantable cardioverter defibrillators
("ICDs"). The devices are typically marketed and sold directly to
physicians by Boston Scientific's CRM sales staff, which in the
period with which the suit is concerned consisted of about 1,100
employees.
In August 2009, Boston Scientific began an audit of CRM
sales expense reports from recent trips of sales representatives
who accompanied physician customers on tours of Boston Scientific
manufacturing facilities. Twenty one sales reps were questioned
about whether food and entertainment provided exceeded permissible
-2-
limits; and in September Boston Scientific received a subpoena from
the U.S. Department of Health and Human Services ("HHS"),
requesting information about contributions made by CRM to charities
with ties to physicians or their families. Neither the audit nor
the subpoena were initially disclosed to the public.
On October 20, 2009, the first day of the class period
stated in the later-filed complaint, Boston Scientific announced
its results for the third quarter of 2009, and issued a press
release noting that although CRM product sales had increased by
eight percent during the quarter, the CRM group's level of growth
was disappointing. During a conference with investors and analysts
that day, Raymond Elliott (President and CEO of Boston Scientific)
and Samuel Leno (Executive Vice President and President of the CRM
group) made encouraging statements about CRM sales prospects.
Specifically, the men said that current growth was slower
than expected because they had underestimated the time it would
take to bring 150 newly hired sales representatives up to normal
productivity levels; that the prospect of increased market share
existed as the new hires completed training over nine to twelve
months; that "[w]e have solid growth in our CRM business, and we
have also added a number of people on the sales force on a global
basis," and that "the outlook is still positive but mixed as it
relates to market growth expectations."
-3-
On November 6, 2009, Boston Scientific publicly disclosed
the HHS subpoena (a month-and-a-half after receiving it) in a
quarterly report filed with the SEC (see note 2, below), noting
that "[w]e are currently working with the government to understand
the scope of the subpoena." In this same SEC report, the company
reiterated the gist of the October remarks of the two officers,
predicting that "additional [CRM] sales representatives will
generate incremental net sales in future periods."
In either late November or early December 2009, Boston
Scientific began to fire some of the twenty-one audited CRM sales
representatives. On December 1, Elliott was asked by a moderator
during a healthcare conference call what had surprised him so far
in his first six months as CEO. He responded,
I think, Tim, because I've been there a bit as
a director, there probably wasn't as many
surprises really. But I think the market
change probably downward a bit on the ICD side
affected sort of our viewpoint in CRM as a bit
of a downside.
On December 9 and 10, 2009, an unspecified number of CRM
sales representatives were fired. Also on December 10, Boston
Scientific filed a registration statement and prospectus with the
SEC, announcing a public offering of $2 billion in senior notes.
Both the prospectus and a supplement filed on the closing date of
the offering, December 14, listed as one of fifty-one factors that
could cause actual results to differ materially from forward-
-4-
looking statements Boston Scientific's "ability to retain key
members of our CRM sales force and other key personnel."
Days earlier, on December 11 or 12, 2009, Boston
Scientific fired a Divisional Vice President of Sales of CRM
devices, who managed one of three sales regions in the United
States and according to the complaint "played a key role in
crafting and implementing pricing, sales, marketing, strategy, and
other key policies for [Boston Scientific's] CRM devices." The
complaint alleged that in all, ten members of the CRM sales force
were fired for their "repeated[]" breaches of Boston Scientific's
internal code of ethics.
On January 12, 2010, Elliott participated in another
healthcare conference call. Although not focusing on the CRM group
in particular, Elliott touted Boston Scientific's "stable, large,
experienced" and "very successful" sales force. He stated that the
"sales execution that we talked about building in the last five or
six months is now going out into play" and that "[w]e've already
done a ton of work in the last six months to get rid of unnecessary
distractions and litigation that goes beyond the norm."
However, about a week before, on January 4, 2010, the
Boston Scientific's previously discharged Divisional Vice President
had been hired by one of Boston Scientific's competitors, St. Jude
Medical. The complaint also stated that "many" of the other nine
fired CRM sales group members were also hired by St. Jude Medical.
-5-
On February 11, when Boston Scientific announced its fourth quarter
2009 results, it revealed the firing and St. Jude's subsequent
hiring of the CRM sales representatives. Elliott said:
[W]e didn't like the response of St. Jude
Medical to the disciplinary actions we took
during December. We exited from our Company
several sales representatives and Managers who
among other things repeatedly breached our
healthcare professional Code of Conduct. St.
Jude has chosen to quickly hire many of our
departed staff . . . . We cannot control what
others do. . . . In the short haul, we will
for certain lose sales, but I believe in the
long haul we will be held in high regard by
those that count for our efforts in the
healthcare professionals arena.
On the same day as these remarks, the price of Boston
Scientific common stock dropped from $8.29, the closing price on
the previous day, to a low of $7.39, and closed down about 10
percent, which the complaint alleged was a "direct and proximate
result of the February 11, 2010 pre-opening announcements."
Several months later, Boston Scientific said that the disciplinary
actions and an unrelated product advisory related to unsafe
outcomes in certain CRM devices had led to $16 million globally in
lost sales for the first quarter of 2010--a period in which the CRM
sales revenue was $538 million.
In May 2010, Boston Scientific responded to a number of
inquiries from the SEC regarding Boston Scientific's filing for the
first quarter of 2010. One such inquiry was whether the
-6-
disciplinary actions had impacted the decline in CRM sales in the
fourth quarter of 2009. Boston Scientific stated:
[T]he aforementioned terminations of 10 sales
personnel represented less than one percent of
our U.S. CRM sales force and had an immaterial
impact on our net sales during the fourth
quarter of 2009. We expect we will experience
the impact of these terminations during 2010;
however, our intent is to replace these
positions throughout 2010 and recapture lost
revenue in 2011 and beyond. In future
filings, to the extent our businesses
experience significant changes in revenues
from period to period, we will discuss all
material factors contributing to these
changes.
On April 9, 2010, plaintiffs--a union pension trust and
an investment management company--filed the present suit in the
district court against Boston Scientific, Elliott, Leno and a third
officer on behalf of a putative class of those who had purchased
the company's stock during the "class period" of October 20, 2009,
to February 10, 2010. The complaint charged securities fraud in
violation of sections 10(b) and 20(a) of the Securities Exchange
Act, 15 U.S.C. §§ 78j(b), 78t(a) (2006), and associated
regulations, 17 C.F.R. § 240.10b-5 (2010).
The heart of the complaint was that the already-recounted
statements--made on October 20, November 6, December 1, 10 and 14,
2009, and on January 12, 2010--violated the anti-fraud provisions
of section 10(b).1 After further proceedings, the district court
1
The complaint's claim under second section 20(a) is
derivative of the section 10(b) claim and needs no separate
-7-
granted the defendant's motion to dismiss, In re Bos. Scientific
Corp. Sec. Litig., No. 10-10593, 2011 WL 4381889 (D. Mass. Sept.
19, 2011), holding that the 2009 statements were not materially
false or misleading, while the allegations of scienter as to the
January 2010 statement were inadequate.
The named plaintiffs now appeal. Our review of the
dismissal is de novo and we assume as true the raw facts as alleged
in the complaint and draw reasonable inferences in favor of the
side opposing dismissal. García-Monagas v. De Arellano, 674 F.3d
45, 47 (1st Cir. 2012). That solicitude does not extend to the
legal conclusions or characterizations, Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555
(2007), or avoid the statutory requirement that "the complaint
shall . . . state with particularity facts giving rise to a strong
inference that the defendant acted with the required state of
mind." 15 U.S.C. § 78u-4(b)(2).
Section 10(b) Obligations. To state a section 10(b)
claim, a plaintiff must sufficiently allege "(1) a material
misrepresentation or omission; (2) scienter; (3) a connection with
the purchase or sale of a security; (4) reliance; (5) economic
loss; and (6) loss causation." Miss. Pub. Employees' Ret. Sys. v.
Bos. Scientific Corp., 523 F.3d 75, 85 (1st Cir. 2008). The
discussion. ACA Fin. Guar. Corp. v. Advest, Inc., 512 F.3d 46, 67-
68 (1st Cir. 2008).
-8-
district court, as already noted, found that the challenged 2009
statements failed the first requirement and we begin our discussion
with them.
Section 10(b) "do[es] not create an affirmative duty to
disclose any and all material information." Matrixx Initiatives,
Inc. v. Siracusano, 131 S. Ct. 1309, 1321 (2011); accord Hill v.
Gozani, 638 F.3d 40, 57 (1st Cir. 2011). Instead, it extends to
omissions only where affirmative statements are made and the
speaker fails to "reveal [] those facts that are needed so that
what was revealed would not be so incomplete as to mislead." Hill,
638 F.3d at 57 (1st Cir. 2011) (emphasis and internal quotation
mark omitted). And the distortion must be "material." 17 C.F.R.
§ 240.10b-5.
Omitted information is considered material if there is a
"substantial likelihood that the disclosure of the omitted fact
would have been viewed by the reasonable investor as having
significantly altered the total mix of information made available."
Basic Inc. v. Levinson, 485 U.S. 224, 231-32 (1988) (internal
quotation marks omitted). When information merely creates a
possibility that an event affecting the company will later occur,
materiality
"will depend at any given time upon a
balancing of both the indicated probability
that the event will occur and the anticipated
magnitude of the event in light of the
totality of the company activity."
-9-
Id. at 238 (quoting SEC v. Tex. Gulf Sulphur Co., 401 F.2d 833, 849
(2d Cir. 1968) (en banc), cert. denied, 394 U.S. 976 (1969)).
Why companies do not have to disclose immediately all
information that might conceivably affect stock prices is apparent:
the burden and risks to management of an unlimited and general
obligation would be extreme and could easily disadvantage
shareholders in numerous ways (e.g., if a new invention were
prematurely disclosed to competitors or a take-over plan to the
target company). So the securities laws forbid false or misleading
statements in general but impose more specific disclosure
obligations only in particular circumstances.2
The October 20, 2009, statements. Given the materiality
threshold, the October 20, 2009, statements, which predicted a
"positive but mixed" outlook in CRM sales while noting the
continuing training of the 150 new sales representatives, were not
false or misleading. The shareholders argue that the statements
were misleading because they failed to inform investors that the
future outlook was further "mixed" because of the "imminent"
firings of the audited personnel.
2
Pertinently, under statutory authority, 15 U.S.C. § 78m(a),
the SEC requires annual and quarterly reports providing specified
information, including financial statements and risk factors, Form
10-K; Form 10-Q, and disclosure of especially important events
whenever they occur, Form 8-K; notably, this last form does not
require disclosure of personnel changes other than ones involving
a director or principal officer. Form 8-K, Item 5.02.
-10-
But the firings were over a month away, and the complaint
itself states that the internal investigation (which began in
August) was still "ongoing." Not only was the outcome uncertain--
eventually only 10 sales representative were removed while 150 new
ones were being hired--but the total number of those being
interrogated represented only about two percent of the CRM sales
force, and CRM sales themselves were only a portion of the
company's business.
The November 6, 2009, statement. This statement, after
disclosing the HHS subpoena and harking back to the hiring of 150
new sales representatives, repeated the company's view that
"additional [CRM] sales representatives will generate incremental
net sales in future periods." Although the audit and investigation
had been completed, there is no indication that the company had at
this time decided to fire anyone, let alone enough individuals to
dent the prospects of more revenues down the line from 150 new
hires.
Also insufficient is the challenge to the other November
6, 2009, statement alleged to be materially misleading, namely,
that "[w]e are currently working with the government to understand
the scope of the [HHS] subpoena." The plaintiffs make no attempt
to explain why this bland statement is misleading; and it surely is
not rendered incomplete or a "half-truth," Backman v. Polaroid
Corp., 910 F.2d 10, 16 (1st. Cir. 1990), by the failure to mention
-11-
the internal audit based on the company's internal ethics code and
pertaining to a different set of sales practices.
December 1, 2009, statement. The next statement alleged
to be materially misleading was Elliott's December 1, 2009, answer
to a moderator's question that there had not been that many
"downside surprises" since he had become a CEO other than reduced
revenues of certain CRM devices. Even if a limited number of
firings had now occurred, Elliott was not asked to disclose every
possible negative in recent history but merely asked what had
surprised him.
So while the audit process was further along, the
connection between the general affirmative statement and the
specific audit is much weaker. And anyway, the possible or
imminent discharge of a tiny fraction of sales personnel for a
single line of products remains of minimal expected consequence for
a company with global operations and 25,000 employees. This is not
even close to the level at which other cases have found omissions
to be material.3
3
E.g., Matrixx Initiatives, Inc. v. Siracusano, 131 S. Ct.
1309, 1313-14 (2011) (finding material evidence of a link between
a drug company's leading product and loss of smell); In re
Cabletron Sys., Inc., 311 F.3d 11, 36 (1st Cir. 2002) (finding
material failing to reveal major delays in a company's important
new product after creating impression that the product was already
available); Aldridge v. A.T. Cross Corp., 284 F.3d 72, 79-80 (1st
Cir. 2002) (finding material to revenue figures the failure to
reveal policy requiring refunds to previous buyers in the event of
a price cut--which the company had already planned to institute).
-12-
December 10 and 14, 2009, statements. Both at the
beginning and end of a public offering period, on December 10 and
14, 2009, Boston Scientific listed as one of over 50 factors that
could cause actual results to differ materially from
forward-looking statements the company's "ability to retain key
members of our CRM sales force and other key personnel."
Plaintiffs say that this was misleading because it omitted to say
that by this time about ten CRM sales personnel had been fired,
including one in a relatively senior position.
That ten representatives out of 1,100 had been fired
while 150 new ones were being trained does not amount to material
information; but it is a closer call whether this is so of the loss
of one of three of the CRM group's Divisional Sales VPs. Yet it
was the personal relationship between sales personnel and doctors
that created the main risk that those fired would take business
with them and the number of discharged representatives was still
surpassingly small.
That the Divisional Vice President would defect to a
competitor and take other discharged salesmen with him was not
plainly foreseeable. Those discharged for violating the company's
ethics codes could well have been regarded as tainted; and that a
cadre would reappear at a competitor, recruited in part by the
fired Divisional Vice President, came as a surprise to Elliott
-13-
himself, as his February 11, 2010, statement made clear. Nor is
the eventual impact of the discharges clear even today.
The plaintiffs make much of the fact that Boston
Scientific predicted lost sales of $100 million in its February 11,
2010, conference call and $100 million sounds like a large number,
but, in that same conference call, Boston Scientific projected 2010
revenues of $8.1 billion to $8.5 billion, making the projected loss
just over one percent of revenues and not necessarily a permanent
loss of business. Also, Boston Scientific attributed the $100
million both to the lost salespeople and an unrelated product
advisory.
The product advisory, issued December 1, 2009, informed
physicians that several patients had suffered unsafe outcomes (such
as shocks) from certain CRM devices implanted subpectorally.
Although the company did not reveal how much of the $100 million
was attributable to the product advisory, this advisory surely
caused a portion of the expected losses. In any case, an
undisclosed speculative chance of an event that affects only a very
small proportion of revenues is not material.
Scienter Requirements. Section 10(b) is a fraud statute
whose scienter element is satisfied if the speaker acted with
fraudulent intent or knowing or reckless disregard of his
obligation to disclose. Auto. Indus. Pension Trust Fund v.
Textron, Inc., No. 11-2106, 2012 WL 2038098, at *4 (1st Cir. June
-14-
7, 2012). And claims of scienter are subject to the heightened
pleading requirements of the Private Securities Litigation Reform
Act ("PSLRA"), enacted "to curb frivolous, lawyer-driven
litigation, while preserving investors' ability to recover on
meritorious claims." Tellabs, Inc. v. Makor Issues & Rights, Ltd.,
551 U.S. 308, 322 (2007).
One reason why securities class actions "pose a special
risk of vexatious litigation," Merrill Lynch, Pierce, Fenner &
Smith Inc. v. Dabit, 547 U.S. 71, 86 (2006), is that the cost of
defending, coupled with potentially enormous liability, may make it
advisable for the defendant to settle even unlikely or frivolous
claims. S. Rep. No. 104-98, at 9 (1995), reprinted in 1995
U.S.C.C.A.N. 679, 688; see also Bohn & Choi, Fraud in the New-
Issues Market: Empirical Evidence in Securities Class Actions, 144
U. Pa. L. Rev. 903, 979 (1996).
Further, the normal recovery for class members is
extremely modest, see Coffee, Reforming the Securities Class
Action: An Essay on Deterrence and Its Implementation, 106 Colum.
L. Rev. 1534, 1545-46 (2006), and the costs of both the company's
defense and what it pays in large legal fees to plaintiffs' counsel
is usually borne indirectly by the stockholders of the defendant
company. What Congress discerned among the abuses was
the routine filing of lawsuits . . . whenever
there is a significant change in an issuer's
stock price, without regard to any underlying
culpability of the issuer, and . . . the abuse
-15-
of the discovery process to impose costs so
burdensome that it is often economical for the
victimized party [i.e. the defendant] to
settle.
H.R. Rep. No. 104-369, at 31 (1995), reprinted in 1995 U.S.C.C.A.N.
730, 730 (Conf. Rep.). And in response Congress adopted in the
PSLRA two pleading requirements aimed at permitting early
termination--before discovery--of such "routine filings" of
unpromising cases.
First, the PSLRA requires a plaintiff alleging a
misleading statement or omission to "specify each statement alleged
to have been misleading [and] the reason or reasons why the
statement is misleading." 15 U.S.C. 78u-4(b)(1). Second, the
plaintiff must "state with particularity facts giving rise to a
strong inference that the defendant acted with the required state
of mind." Id. 78u-4(b)(2) (emphasis added). Taken together, the
requirements make it easier to identify the issues and to dismiss
flawed complaints at the complaint stage.
The January 2010 Statements. As earlier described,
Elliott made several statements at the January 2010 healthcare
conference call favorable to the company's sales, including a claim
that it had a "stable, large, experienced" and "very successful"
sales force. Plaintiffs argue that by this time not only were the
firings complete, but at least one, and perhaps more, of the fired
employees had been re-hired by one of Boston Scientific's
competitors. Yet no mention was made of these facts.
-16-
Neither this nor the other statements supporting the
company's sale force focused on CRM sales personnel; but the next
month, February 2010, when Boston Scientific finally announced the
firings and subsequent hirings of some of the reps by St. Jude, it
predicted lost sales as a result. The district court found
material the failure to disclose the threat in January 2010 (which
we will assume to be correct), but also found the statement non-
actionable for lack of adequate allegations of scienter.
The PSLRA requirement that a "strong inference" of
scienter be pled requires the complaint to set forth facts making
the inference of scienter "cogent and at least as compelling as any
opposing inference one could draw from the facts alleged."
Tellabs, 551 U.S. at 324. Thus, when Elliott spoke blandly but
favorably in January 2010 of the strength of the company's sales
force, the facts pled had to provide a clear indication that he was
either dishonest or reckless in not mentioning the defection of up
to ten salespeople to a competitor.
In cases where we have found the pleading standard
satisfied, the complaint often contains clear allegations of
admissions, internal records or witnessed discussions suggesting
that at the time they made the statements claimed to be misleading,
the defendant officers were aware that they were withholding vital
-17-
information or at least were warned by others that this was so.4
No such direct evidence is pled in the complaint here. The
plaintiffs do not identify any other basis for imputing such
wrongful intent, nor was the omitted information of such powerful
importance that wrongful intent can reasonably be inferred.
The ten salespeople fired were less than one percent of
Boston Scientific's U.S. CRM sales force and an even smaller
percentage of the overall sales force of which Elliott was speaking
in January 2010. Although a month later the company predicted
losses from the firings, the estimation was just over one percent
of the company's total projected revenues, and (as explained above)
represented the combined effect of both the firings and a negative
product advisory.
The delay is consistent with the fact that at the time of
the January 12, 2010, statements, some or all of the fired
employees had only very recently been hired by St. Jude, and how
much business they might take with them surely required some period
to assess. Cf. Higginbotham v. Baxter Int'l, Inc., 495 F.3d 753,
761 (7th Cir. 2007) ("Taking the time necessary to get things right
is both proper and lawful."). As we stated in New Jersey
Carpenters Pension & Annuity Funds v. Biogen IDEC Inc., a company
4
For example, in In re Cabletron, the plaintiffs alleged that
the company booked entirely fictitious sales, and employees stored
the unsold goods at their homes "at the behest of" the company's
chairman. 311 F.3d at 25.
-18-
may behave "irresponsibly" if it issues an ominous warning about an
uncertain risk that "had not yet been adequately investigated." 537
F.3d 35, 58 (1st Cir. 2008).
In fact, the complaint does not even squarely allege that
the individual defendants knew on January 12, 2010, that St. Jude
had hired some Boston Scientific salespeople, and that cannot be
merely assumed. Maldonado v. Dominguez, 137 F.3d 1, 9-10 (1st Cir.
1998). Recently, where a company omitted mention of its weakened
backlog, scienter was found lacking because "[n]othing in the
complaint suggest[ed] that any of the named officers believed, or
was recklessly unaware" of the problems. Textron, No. 11-2106,
2012 WL 2038098, at *4.
In all events, even if Elliott knew of the St. Jude
hirings, this was at best marginally material for reasons already
indicated, and its marginal materiality not only defeats any
independent inference of deliberate withholding but also makes the
pled facts insufficient for a fact finder to find the "extreme
recklessness in not disclosing the fact" that is the least that is
required to establish scienter. City of Dearborn Heights Act 345
Police & Fire Ret. Sys. v. Waters Corp., 632 F.3d 751, 757 (1st
Cir. 2011).
The plaintiffs argue that the district court erred by
failing to consider their arguments for scienter "holistically," as
Tellabs suggests is proper. 551 U.S. at 326. True, allegations
-19-
that are individually insufficient can sometimes combine together
to make the necessary showing. To take the simplest example, one
known episode of an adverse drug reaction might be meaningless; an
undisclosed collection of repeated and serious adverse reactions
might permit an inference of conscious wrongdoing or recklessness
because the adverse implication is so obvious.
But in this case, a single central risk existed--that
sales personnel might leave and perhaps take some of their business
with them. This risk became greater with succeeding events to the
point that, by January 2010, it was (in the district judge's
plausible view) sufficient that the failure to mention it was a
material omission. But, even so, it was a single risk with a
single potential consequence, namely, real (but quite possibly
temporary) losses while new Boston Scientific salespeople pursued
the same doctors.
If the likely magnitude of the loss was great in relation
to company revenues, and had been so understood by defendants, a
basis would likely exist for concluding that they were dishonest or
at least reckless in failing to mention it. Because the losses,
thereafter identified to the SEC, were extremely modest in relation
to revenues and partly attributable to a different cause, no such
inference exists. Thus, the January 2010 statements do not pass
the PLSRA's heightened pleading standard for scienter.
-20-
Inherent in the PLSRA is the risk that dismissal on the
complaint will leave without remedy some wrongs that discovery or
trial might have disclosed, albeit a risk Congress thought
necessary. Confining ourselves to the pleadings, as we must, there
is clearly insufficient basis to find materiality as to all but the
last of the statements or infer scienter as to the last.
Affirmed.
-21-