Nakkhumpun v. Taylor

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS April 7, 2015
Elisabeth A. Shumaker
TENTH CIRCUIT Clerk of Court
PATIPAN NAKKHUMPUN,
individually and on behalf of all
others similarly situated,
Plaintiff - Appellant,
v. No. 14-1060
DANIEL J. TAYLOR; CARL E.
LAKEY; KEVIN K. NANKE; JOHN
R. WALLACE,
Defendants - Appellees.
Appeal from the United States District Court
for the District of Colorado
(D.C. No. 1:12-CV-01038-CMA-CBS)
Stuart W. Emmons, Federman & Sherwood, Oklahoma City,
Oklahoma (William B. Federman, Federman & Sherwood, Oklahoma
City, Oklahoma, with him on the briefs) for Appellant.
Eric Landau, Jones Day, Irvine, California (Erica L. Reilley, Jones
Day, Irvine, California, and Kevin H. Logan, Jones Day, Washington,
D.C., with him on the brief) for Appellees.
Before TYMKOVICH, HOLMES, and BACHARACH, Circuit
Judges.
BACHARACH, Circuit Judge.
Mr. Patipan Nakkhumpun, the lead plaintiff in this securities
class action, represents investors who purchased securities in Delta
Petroleum Corporation between March 11, 2010, and November 9,
2011 (the class period). The defendants are former officers and a
board member of Delta who allegedly violated § 10(b) of the
Securities Exchange Act of 1934 (15 U.S.C. § 78j(b)) and Rule 10b-
5 1 of the Securities and Exchange Commission by misleading
investors through statements about (1) a proposed transaction with
Opon International, LLC and (2) Delta’s financial condition.
The district court granted the defendants’ motion to dismiss,
holding that Mr. Nakkhumpun had failed to allege (1) loss causation
regarding the statement about the Opon deal and (2) falsity regarding
the statements about Delta’s financial condition. Mr. Nakkhumpun
moved for leave to amend, and the district court denied the motion on
the ground of futility.
On appeal, the parties dispute whether Mr. Nakkhumpun has
adequately pleaded
 falsity, scienter, and loss causation as to the statement
about the Opon transaction, and
1
In district court, Mr. Nakkhumpun also invoked § 20(a) of the
Securities Exchange Act. But, he does not appeal the disposition of
his § 20(a) claims.
2
 falsity and scienter as to the statements about Delta’s
financial condition.
We conclude:
1. Mr. Nakkhumpun has adequately alleged falsity, scienter,
and loss causation on the statement about the Opon
transaction.
2. Mr. Nakkhumpun has failed to adequately allege falsity
or scienter for each statement about Delta’s financial
condition.
Thus, we affirm in part and reverse in part.
I. Standard of Review
In this appeal, we engage in de novo review of both orders by
the district court: a dismissal under Federal Rule of Civil Procedure
12(b)(6) and a denial of leave to amend under Rule 15. 2
Dismissals under Rule 12(b)(6) are reviewed de novo. Slater v.
A.G. Edwards & Sons, Inc., 719 F.3d 1190, 1196 (10th Cir. 2013).
2
Upon dismissal of the action, Mr. Nakkhumpun filed a 1½-page
motion for vacatur and reconsideration of the judgment, contending
that entry of judgment was premature until the district court decided
whether to allow amendment of the complaint. Appellant’s App., vol.
6, at 1428-31. After Mr. Nakkhumpun moved for vacatur and
reconsideration, the district court considered whether to allow
amendment, concluding that it would be futile. Appellant’s App., vol.
7, at 1857. With that ruling, the motion for vacatur and
reconsideration became moot: Mr. Nakkhumpun wanted the court to
consider the proposed amendment, and the court did so. As a result,
the court denied the motion for vacatur or reconsideration on the
ground of mootness. Id.Mr. Nakkhumpun states that he appealed this ruling, but does
not give any reason to question the district court’s determination
based on mootness. Appellant’s Opening Br. at 1-3.
3
Typically, we review denial of leave to amend for abuse of
discretion. Gohier v. Enright, 186 F.3d 1216, 1218 (10th Cir. 1999).
But, we exercise de novo review when a court denies a request to
amend on the ground that amendment would be futile. Merida
Delgado v. Gonzales, 428 F.3d 916, 921 (10th Cir. 2005). Because
the district court deemed Mr. Nakkhumpun’s proposed amendment to
be futile, we engage in de novo review for both the dismissal and the
denial of leave to amend.
In conducting de novo review, we accept the well-pleaded
allegations of the complaint and construe them in the light most
favorable to the plaintiff. In re Gold Res. Corp. Sec. Litig., 776 F.3d
1103, 1108 (10th Cir. 2015). We consider the complaint as a whole,
along with the documents incorporated by reference into the
complaint or publicly filed with the Securities and Exchange
Commission. Slater v. A.G. Edwards & Sons, Inc., 719 F.3d 1190,
1196 (10th Cir. 2013).
II. Heightened Pleading Requirements
To plead securities fraud under § 10(b) of the Securities
Exchange Act and Rule 10b-5 of the Securities and Exchange
Commission, a plaintiff must plausibly allege that a defendant made
statements that
1. contained false or misleading statements of material fact,
4
2. related to the purchase or sale of a security,
3. were made with intent to defraud investors or conscious
disregard of a risk that shareholders would be misled
(scienter),
4. led to reliance by the plaintiff, and
5. caused the plaintiff’s loss (loss causation).
Adams v. Kinder-Morgan, Inc., 340 F.3d 1083, 1095 (10th Cir.
2003); see City of Philadelphia v. Fleming Cos., 264 F.3d 1245, 1260
(10th Cir. 2001) (defining recklessness).
On the first element (falsity), a plaintiff must plead the fraud
with particularity. Fed. R. Civ. P. 9(b). To satisfy this requirement,
Mr. Nakkhumpun had to specify each fraudulent statement, explain
why the statement was misleading, and allege with particularity his
basis for believing that the statement was false. 15 U.S.C. § 78u-
4(b)(1).
On the third element (scienter), a plaintiff must allege facts
that create a strong inference that the defendants acted with the
intent to deceive shareholders or in reckless disregard of a risk that
shareholders would be misled. Adams, 340 F.3d at 1096. These
alleged facts must be susceptible to an inference of scienter that is
“at least as compelling as” any competing inference. Tellabs, Inc. v.
Makor Issues & Rights, Ltd., 551 U.S. 308, 324 (2007).
5
III. Opon Transaction
In March 2010, Delta issued a press release announcing a
preliminary agreement with Opon International, LLC. Opon would
pay $400 million to Delta for a 37.5% non-operating interest in
Delta’s core assets, known as the Vega Area assets. The defendants
anticipated closing by June 1, 2010.
Between March 2010 and June 2010, the defendants issued
additional statements reiterating the $400 million price, disclosing
that Opon and Delta were trying to get financing and explaining that
an extension of time would be needed to close the deal. 3 Then, in a
July 2010 Delta press release, Mr. Daniel Taylor (Delta’s Chairman
of the Board) announced termination of the Opon deal:
While Opon was unable to arrange financing for a
transaction on terms acceptable to us, we remain
confident in the value of our Vega Area asset, and intend
to further delineate that value as we consider the
Company’s other strategic alternatives.
Appellant’s App., vol. 7, at 1679-80.
3
Mr. Nakkhumpun brought additional claims based on these
statements, and the district court dismissed the claims based on a
failure to allege scienter or loss causation. On appeal, Mr.
Nakkhumpun has made only cursory arguments about the falsity of
these statements. By failing to develop these arguments, Mr.
Nakkhumpun waived appellate review concerning the falsity of these
statements. See Utahns for Better Transp. v. United States Dep’t of
Transp., 305 F.3d 1152, 1175 (10th Cir. 2002) (“[I]ssues will be
deemed waived if they are not adequately briefed.”).
6
Mr. Nakkhumpun alleges that Mr. Taylor’s July 2010 statement
misled investors about the true reason for termination of the Opon
deal. According to Mr. Nakkhumpun, the deal failed because Opon
refused to pay $400 million after its further study had led to a lower
valuation. Based on this new valuation, Opon tendered a new offer
for less than $400 million. As a result of Mr. Taylor’s statement, Mr.
Nakkhumpun alleges that investors were misled into believing that
Opon had remained willing to pay $400 million for the 37.5%
interest.
The district court agreed that the statement contained false or
misleading statements of material fact. But, the court concluded that
Mr. Nakkhumpun had failed to allege loss causation.
In reviewing the subsequent motion for leave to amend, the
district court concluded that Mr. Nakkhumpun’s proposed
amendments adequately pleaded loss causation. But, the district court
regarded amendment as futile because Mr. Nakkhumpun had failed to
allege scienter.
On appeal, Mr. Nakkhumpun argues that he has alleged all of
the required elements for securities fraud under § 10(b) and Rule
10b-5. The defendants challenge the allegations involving falsity,
scienter, and loss causation. Because we conclude that Mr.
Nakkhumpun has adequately alleged these elements, we reverse and
7
remand on the claim involving Mr. Taylor’s July 2010 statement
about termination of the Opon deal.
A. Falsity
At oral argument, the defendants argued for the first time in
this appeal that Mr. Taylor’s statement was true. Oral Arg. at 31:20-
31:40. But, Mr. Taylor’s statement would have been false if a
reasonable person would have understood it to be “inconsistent with
the facts on the ground.” In re Level 3 Commc’ns, Inc. Sec. Litig.,
667 F.3d 1331, 1343 (10th Cir. 2012).
We conclude that Mr. Nakkhumpun has adequately pleaded
falsity. In the complaint, he alleged that Mr. Taylor had
attributed the termination of the Opon deal to Opon’s
lack of financing when the actual facts were that Opon
determined the assets to be worth far less than $400
million. As explained by [Opon’s former CEO], the deal
was terminated not because of Opon’s lack of financing
but because Opon determined that the 37.5% interest in
the Vega Area assets was not worth $400 million.
Appellant’s App., vol. 7, at 1680. According to Mr. Nakkhumpun,
Opon retracted its $400 million offer and replaced it with a lower
offer, leading Delta’s Board to tell Opon “to ‘take a hike.’”
Appellant’s App., vol. 6, at 1648 (quoting Confidential Informant 3).
Together, these factual allegations entail a false statement when Mr.
Taylor attributed the impasse to Opon’s inability to obtain financing.
8
The defendants argue that the July 2010 statement was not false
because
 Mr. Taylor’s July 2010 statement was consistent with the
Opon CEO’s characterization of why the deal had
terminated, and
 Mr. Nakkhumpun’s allegations were limited.
We reject these arguments because they are waived and would fail on
the merits.
The arguments are waived because they were raised for the first
time in oral argument. See Corder v. Lewis Palmer Sch. Dist. No. 38¸
566 F.3d 1219, 1235 n.8 (10th Cir. 2009) (noting that arguments
made for the first time at oral argument are considered waived).
The arguments would also fail on the merits. The defendants
assert that Mr. Taylor’s July 2010 statement would have alerted
investors that the “real estate [did]n’t support the price.” Oral Arg. at
34:04-34:15. After all, if the deal failed because of an inability to get
financing, lenders might have been valuing the assets at less than
$400 million. And, if lenders were wary of that price, shareholders
should have been on notice that at least one third-party had valued
the Vega Area assets at less than $400 million.
The defendants’ new contention is misguided. Lenders might
have declined financing for many reasons. As the defendants say,
lenders might have stayed away based on their low valuation of the
9
Vega assets. But, there are other possible reasons, such as problems
with Opon’s creditworthiness.
The existence of multiple explanations is what made Mr.
Taylor’s statement misleading. The Opon CEO’s explanation was
unambiguous: He said the deal had fallen apart because Opon offered
Delta a lower price after valuing the Vega assets at less than $400
million. Investors might have reacted differently if they had known
of Opon’s revaluation of the assets, eliminating the need to speculate
on why Opon had been unable to obtain financing.
The defendants also challenge the falsity element by focusing
on allegations that Mr. Nakkhumpun didn’t make. 4 But, the question
is the adequacy of the allegations that were made. Those were
sufficient on the element of falsity.
4
At oral argument, the defendants pointed to four allegations
that were absent from Mr. Nakkhumpun’s complaint but would have
supported the falsity element:
1. “Plaintiffs do not attack any of the financial statements.”
2. “Opon is not alleged to have made any contemporaneous
statements in 2010.”
3. “Even after four years, the Opon CEO never says that Mr.
Taylor was wrong . . . or that financing could have been
arranged.”
4. “Opon’s CEO never says that he communicated the
results of the internal diligence to Mr. Taylor.”
Oral Arg. at 31:30-34:16.
10
B. Scienter
Mr. Nakkhumpun also adequately alleged scienter.
For scienter, a defendant must act with “‘a mental state
embracing intent to deceive, manipulate, or defraud,’ or
recklessness.” Adams v. Kinder-Morgan, Inc., 340 F.3d 1083, 1105
(10th Cir. 2003) (quoting City of Phila. v. Fleming Cos., 264 F.3d
1245, 1259 (10th Cir. 2001)). To plead scienter, Mr. Nakkhumpun
had to allege that
1. Mr. Taylor knew about the “‘danger of misleading buyers
and sellers’” or
2. the danger was “so obvious that [Mr. Taylor] must have
been aware of it.”
Dronsejko v. Thornton, 632 F.3d 658, 665 (10th Cir. 2011) (quoting
City of Phila., 264 F.3d at 1258).
To determine if Mr. Nakkhumpun has adequately alleged
scienter, we compare the “inferences urged by the plaintiff” with
“competing inferences rationally drawn from the facts alleged.”
Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 314
(2007). In comparing the inferences, we accept Mr. Nakkhumpun’s
factual allegations as true and assess them holistically. Id. at 326.
With these factual allegations, we must decide whether “a reasonable
person [would] deem the inference of scienter at least as strong as
any opposing inference.” Id.11
We conclude that a reasonable person would consider the
inference of scienter at least as compelling as the defendants’
alternative inference. Thus, Mr. Nakkhumpun has adequately alleged
scienter.
1. The Inference of Scienter
In denying leave to amend, the district court concluded that
Mr. Nakkhumpun’s way of proving scienter would actually disprove
scienter. We disagree.
a. Consistency with Scienter
Mr. Nakkhumpun’s scienter inference is that the defendants
“misstated the reason that the Opon negotiations [had] broke[n] down
in order to ‘signal[] to potential strategic partners—and,
consequently, to mislead shareholders—that the announced $400
million price accurately reflected the value of those assets.’”
Appellant’s App., vol. 7, at 1851. The district court concluded that
this inference cut against scienter: If the false statement was
designed to attract a buyer and maximize shareholder value, the
district court thought the intention would have been to help
shareholders rather than to deceive them. Id.In our view, this rationale is flawed. Scienter is not limited to
situations in which a defendant acted with the primary purpose of
misleading shareholders; scienter also exists when a defendant acted
12
with a reckless disregard of a substantial likelihood of misleading
investors. In re Level 3 Commc’ns, Inc. Sec. Litig., 667 F.3d 1331,
1343 n.12 (10th Cir. 2012); see Anixter v. Home-Stake Prod. Co., 77
F.3d 1215, 1233 (10th Cir. 1996) (“This circuit still maintains that
recklessness . . . is sufficient scienter for finding civil § 10(b)
primary violations.”).
If Mr. Taylor mischaracterized the impasse in order to entice
prospective buyers, he should have realized the obvious risk that
existing and potential shareholders would also be misled and that
they might rely on the mischaracterization to their detriment.
Therefore, Mr. Nakkhumpun has pleaded facts indicating that
Mr. Taylor was at least reckless in disregarding the risk that his
statement would mislead existing and potential shareholders.
b. Facts Supporting an Inference of Scienter
Mr. Nakkhumpun’s inference of scienter is supported by the
facts alleged in the complaint.
i. Mr. Nakkhumpun’s Allegations
Mr. Nakkhumpun adequately pleaded four facts:
1. Opon retracted the $400 million offer because Opon
executives decided that the assets were not worth $400
million.
2. Mr. Taylor knew that the transaction had fallen apart
because Opon valued the assets at less than $400 million.
13
3. Mr. Taylor conditioned the market to believe that Opon
had agreed that the assets were worth $400 million.
4. Mr. Taylor knew that his July 2010 statement had implied
that Opon continued to value the assets at $400 million.
Together, these alleged facts create a plausible inference that Mr.
Taylor recklessly disregarded the likelihood that his statements
would mislead existing and prospective shareholders.
First, Mr. Nakkhumpun adequately pleaded that the deal had
fallen apart because Opon retracted its $400 million offer. These
allegations are largely based on statements by Confidential Informant
3, the President and Chief Executive Officer of Opon. He said that
after conducting due diligence, Opon determined that a 37.5%
interest in the Vega Area assets was not worth $400 million. As a
result, Opon retracted the $400 million price and “the deal to
purchase the assets for $400 million ‘fell apart in the spring.’”
Appellant’s App., vol. 6, at 1647 (quoting Confidential Informant
3). 5 Opon offered Delta’s Board a lower price for the assets in the
spring of 2010. We do not know what the lower price was or
precisely when it was made. But, Opon’s CEO recalled that the new
5
Opon’s withdrawal of the $400 million offer is also recounted
by Mr. Nakkhumpun’s Confidential Informant 5, who was a
Controller at Delta from 2002 to 2012. See Appellant’s App., vol. 7,
at 1649-50.
14
offer “‘was a much tougher deal than what [Opon had] proposed
originally.’” Id. (quoting Confidential Informant 3).
Second, Mr. Nakkhumpun alleged that Mr. Taylor had known
that the deal fell apart because Opon retracted its $400 million offer.
These allegations are based on statements attributed to Opon’s CEO
and Delta’s former Vice President of Corporate Development and
Investor Relations. Opon’s CEO stated he had dealt directly with
Mr. Taylor when Opon retracted the $400 million offer, adding that
Delta’s Board further rejected Opon’s new offer and told Opon “to
‘take a hike.’” Id. at 1648 (quoting Confidential Informant 3). In
addition, Confidential Informant 1, Delta’s former Vice President of
Corporate Development and Investor Relations, stated that the new
offer had offended Mr. Taylor. Id. at 1643.
Third, Mr. Nakkhumpun alleged that Delta executives had
conditioned the market to believe that Opon remained committed to
the $400 million price. Delta, Mr. Taylor, and the other defendants
had allegedly conditioned the market by repeatedly announcing that a
$400 million price was a part of the proposed transaction:
 On March 18, 2010, Delta issued a press release,
announcing that it had entered a non-binding letter of
intent with Opon. The letter announced Delta’s proposed
sale to Opon of a 37.5% non-operating working interest
15
in the Vega Area assets for $400 million. The deal was
expected to close around June 1, 2010. 6
 On May 10, 2010, Delta released an earnings press
release, quoting Defendant John Wallace, Delta’s then-
Present and Chief Operating Officer: “We continue to
work with our potential partner, Opon International, in
moving toward the signing of definitive agreements and
closing of the transaction.” The press release added that
“[t]he consummation of the transaction [was] contingent
upon Opon’s ability to arrange financing and [was]
subject to customary due diligence, negotiation and
execution of definitive binding agreements.” According
to the press release, the parties were continuing with the
transaction and Delta understood that Opon’s financing
efforts were ongoing. 7
 On May 10, 2010, Mr. Taylor and Mr. Wallace
participated in a conference call with market participants,
discussing Delta’s financial results for the first quarter of
2010. In the call, Mr. Taylor said: “As we announced in
March we have signed a letter of intent with Opon
International to sell a 37.5% [sic] of working interest in
our properties in the Vega area of the Piceance Basin
along with warrants to purchase Delta Common stock for
$400 million in total. We continue to work with Opon in
their financing efforts and are working towards signing a
definitive purchase and sale agreement.” 8
 On June 1, 2010, Delta issued a press release, announcing
“an extension to the expected time frame to sign a
definitive Purchase and Sale Agreement with [Opon].”
The press release reiterated the $400 million price and
stated that “Delta [was] continu[ing] to work with Opon
in its financing efforts and both parties [were] working
6
Appellant’s App., vol. 7, at 1671.
7
Appellant’s App., vol. 7, at 1673.
8
Appellant’s App., vol. 7, at 1675.
16
towards signing a definitive Purchase and Sale
Agreement.” 9
Mr. Taylor’s May 10, 2010, statement showed he knew Delta had
conditioned the market to believe that Opon remained willing to pay
$400 million for a 37.5% interest in the Vega assets.
Fourth, Mr. Nakkhumpun alleged facts that would have made
Mr. Taylor’s statements misleading. After Delta had conditioned the
market to believe Opon was continuing to offer $400 million, Mr.
Taylor said in July 2010 that the deal had fallen apart because Opon
was unable to obtain financing on the agreed terms. Here, fact-
finders could reasonably infer that someone in Mr. Taylor’s situation
would have recognized the risk of deceiving investors, who
presumably would have attributed the impasse to Opon’s inability to
obtain a loan rather than its unwillingness to pay $400 million for a
37.5% interest in the assets. Based on the prior announcements,
investors could have believed that Opon continued to value the
37.5% interest at $400 million. With this belief, investors would
presumably expect offers from other potential buyers with better
credit than Opon. The risk of misleading investors would have been
obvious.
9
Appellant’s App., vol. 7, at 1678.
17
Based on these four facts alleged in the complaint, Mr.
Nakkhumpun has adequately pleaded that Mr. Taylor acted with
scienter when he announced termination of the Opon deal.
ii. The Defendants’ Challenges to the Scienter Inference
The defendants contend that Mr. Nakkhumpun has not
adequately alleged an inference of scienter for three reasons:
1. Mr. Nakkhumpun did not allege that Mr. Taylor was
motivated to engage in securities fraud.
2. We should not credit the Opon CEO’s view of why the
Opon deal terminated.
3. Mr. Taylor had no duty to disclose Opon’s counteroffer.
We reject each argument.
First, the defendants argue that Mr. Taylor lacked a motive to
engage in securities fraud because his interests and Delta’s were
aligned with the interests of shareholders. This argument would fail
on the merits, legally and factually. Legally, the argument is invalid
because scienter allegations may suffice even without a motive.
Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 325
(2007). Factually, the argument is invalid because Mr. Taylor’s
motives were not aligned with all class members. The class includes
investors who purchased Delta stock after the misleading
announcement in July 2010. Their interests were not aligned with the
18
interests of Mr. Taylor, the Chief Executive Officer of a company
facing the prospect of bankruptcy.
Second, the defendants argue that Mr. Nakkhumpun’s “only
allegations that supposedly cast doubt on Delta’s explanation derive
from the confidential witness statement of the opposing party in the
failed negotiations.” Appellees’ Resp. Br. at 22. Thus, the defendants
suggest that we should not credit Opon’s version of events. But, a
court cannot dismiss a complaint by assessing the credibility of an
informant. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S.
308, 322 (2007).
Third, the defendants argue that Mr. Taylor had no duty to
disclose the counter-offer. For the sake of argument, we can assume
that Mr. Taylor could have chosen to say nothing or announce
termination of the Opon deal without saying what had gone wrong.
But, rather than stay silent or decline to say what had gone wrong,
Mr. Taylor chose to explain to the market why the deal had fallen
apart. Once Mr. Taylor made that choice, he could not give an
explanation that would mislead investors. See Matrixx Initiatives,
Inc. v. Siracusano, __ U.S. __, 131 S. Ct. 1309, 1321-22 (2011)
(stating that disclosure is necessary “‘to make . . . statements made,
in light of the circumstances under which they were made, not
misleading’” (quoting 17 C.F.R. § 240.10b-5(b))). Thus, Mr. Taylor
19
incurred a duty to disclose when he chose to explain why the deal
had fallen apart. See United States v. Gordon, 710 F.3d 1124, 1142
(10th Cir. 2013) (stating that when a party without a duty of
disclosure elects to disclose material facts, he or she must speak
fully to provide information that is complete and is not misleading).
Accordingly, we reject the defendants’ three challenges to the
inference of scienter.
2. At Least as Strong as a Competing Inference
The inference of recklessness is at least as strong as a
competing inference. The defendants contend that “the most plausible
inference to be drawn from Delta’s explanation of why the
negotiations ended was that [Delta] was trying to maximize
shareholder value.” Appellees’ Resp. Br. at 23. But, this inference is
consistent with scienter.
The defendants urge that
 they were under a fiduciary duty to obtain the highest
price for the Vega Area assets, and
 Mr. Taylor was carrying out his fiduciary duty when he
explained the impasse in July 2010.
According to the defendants, “[a]ny inaccuracy in the [July 2010]
statement ‘was only a side-effect of Defendants’ efforts to obtain the
best outcome for . . . shareholders.’” Id.20
This argument implies that the defendants intended to mislead
strategic partners rather than shareholders. But, scienter does not
require the defendants to act with the primary purpose of deceiving
shareholders. Scienter would also exist if Mr. Taylor recklessly
disregarded a likelihood of misleading shareholders even if he did so
out of an effort to fulfill his fiduciary duties. See pp. 12-13, above.
Thus, even if Mr. Taylor was trying to maximize shareholder value,
he would have been acting recklessly in disregarding the risk of
misleading actual and prospective shareholders.
The defendants’ explanation does not preclude a reasonable
inference of recklessness. According to the defendants, they were
attempting to entice potential strategic partners to consider a
partnership with Delta. Because the defendants knew that strategic
partners would conduct their own due diligence and would not
ultimately rely on a $400 million valuation, the defendants imply that
they did not intend to mislead anyone.
But, the press release was directed to the public, not just to
strategic partners. And, shareholders might not have the benefit of
due diligence to assess Opon’s $400 million valuation. Therefore,
Mr. Taylor’s statement created a risk of misleading shareholders to
believe that at least one potential buyer had valued the 37.5% interest
in the Vega assets at $400 million. This risk was readily apparent,
21
creating an inference of scienter that was at least as strong as an
inference of innocence.
3. Summary
Mr. Nakkhumpun has adequately alleged scienter on the part of
Mr. Taylor.
C. Loss Causation
The district judge initially dismissed the Opon-related claim
for failure to allege loss causation. But, in reviewing Mr.
Nakkhumpun’s request for leave to amend, the judge concluded that
the proposed amended complaint contained adequate allegations of
loss causation under a theory of “materialization of a concealed
risk.” We agree.
1. Particularity of Mr. Nakkhumpun’s Allegations
The parties debate whether Federal Rule of Civil Procedure 8
or 9(b) applies to loss causation. We need not resolve this dispute
because Mr. Nakkhumpun’s allegations of loss causation would
suffice under either Rule 8 or 9(b). Mr. Nakkhumpun pleaded
particular facts tying his financial loss to Mr. Taylor’s false
explanation for termination of the Opon deal. Delta’s arguments
involve legal sufficiency of the allegations rather than their
particularity.
22
2. Sufficiency of the Plaintiff’s Allegations on Causation
The district court concluded that the July 2010 statement had
concealed the risk that “the Vega Assets were not marketable at or
near the $400 million price.” 10 Appellant’s App., vol. 7, at 1848. This
risk materialized in November 2011, when Delta announced it had
been unable to secure a buyer.
The court expressed concern about the attenuated relationship
between the false statement and materialization of the risk. But, the
court concluded that the allegations of loss causation sufficed
because the significance of intervening events created a fact issue
that could not be resolved in a motion to dismiss under Rule
12(b)(6). Id. at 1849-50. We agree.
a. Mr. Nakkhumpun’s Pleading Burden
To plead loss causation, a plaintiff must allege facts showing a
causal connection between the revelation of truth to the marketplace
10
In his reply brief, Mr. Nakkhumpun argues that two additional
risks existed:
1. The Vega Area assets were not worth $400 million.
2. Delta needed to sell the assets for a price high enough to
avoid bankruptcy.
By waiting until the reply brief, Mr. Nakkhumpun waived an
appellate argument based on the two additional risks. See United
States v. Jenkins, 904 F.2d 549, 554 n.3 (10th Cir. 1990) (stating that
an issue is waived when it is raised for the first time in a reply
brief).
23
and losses sustained by the plaintiff. In re Williams Sec. Litig.-WCG
Subclass, 558 F.3d 1130, 1136-37 (10th Cir. 2009). Under a theory of
materialization of a concealed risk, a plaintiff alleges loss causation
by showing that the defendant’s misrepresentation concealed a risk
that caused a loss for the plaintiff when the risk materialized. Lentell
v. Merrill Lynch & Co., 396 F.3d 161, 173 (2d Cir. 2005). We have
applied this theory in In re Williams Sec. Litig.-WCG Subclass,
where we affirmed award of summary judgment to the defendants
because the plaintiff’s expert could not say when the concealed risk
had materialized. In re Williams, 558 F.3d at 1138.
For loss causation under this theory, a plaintiff must allege two
facts:
1. The risk that materialized was within the zone of risk
concealed by the misrepresentation (foreseeability).
2. The materialization of the risk caused a negative impact
on the value of the securities (causal link).
Lentell, 396 F.3d at 173.
b. Foreseeability
The July 2010 statement concealed the risk that the Vega Area
assets were not marketable for $400 million. A fact-finder could
regard this risk as foreseeable to Mr. Taylor: If Opon decided (after
conducting its due diligence) that a 37.5% non-operating interest in
24
the assets was not worth $400 million, Delta might not find any other
potential buyers willing to pay $400 million.
But, this risk would not have been apparent to anyone
following Delta’s progress reports and Mr. Taylor’s explanation for
the impasse. Unaware that Opon had refused to pay $400 million,
investors would have believed that at least one party continued to
value a 37.5% interest in the Vega assets at $400 million even in the
face of a volatile market. As a result, a shareholder could have failed
to appreciate the risk that Delta would be unable to secure a buyer at
the needed price.
The risk materialized on November 9, 2011, when Delta
disclosed its inability to find a buyer:
With respect to a potential sale of the company or its
assets, [Delta] solicited offers from a significant number
of potential purchasers, including domestic and foreign
industry participants and private equity firms, and has
engaged in substantive negotiations with several such
potential purchasers. However, [Delta] has not received
any definitive offer with respect to an acquisition of
[Delta] or its assets that implies a value of the assets that
is greater than its aggregate indebtedness. . . . During the
three months ended September 30, 2011, [Delta]
evaluated the fair value of its properties based on market
indicators in conjunction with the progression of the
strategic alternatives evaluation process. Delta has not
received any definitive offer with respect to an
acquisition of the company or its assets that implies a
value of the assets that is greater than its aggregate
indebtedness.
25
Appellant’s App., vol. 7, at 1720. At this point, investors learned that
no other buyer had offered an adequate price. Thus, the market
became aware that the 37.5% interest was not marketable at or near
$400 million.
In sum, Mr. Nakkhumpun has adequately alleged that
 Mr. Taylor’s statement in July 2010 concealed a risk that
the assets were not marketable at or near $400 million,
and
 this risk materialized when investors learned that no one
would pay close to $400 million for the assets.
The defendants make two arguments:
1. Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336(2005), forecloses Mr. Nakkhumpun’s theory because of a
failure to show when the truth was revealed to the
market.
2. Delta did not conceal the risk that the 37.5% interest in
the Vega assets was unmarketable at $400 million.
We reject both arguments.
Unlike the plaintiffs in Dura, Mr. Nakkhumpun has pinpointed
when the truth was revealed to the market. In Dura, the plaintiffs
relied solely on allegations of an inflated purchase price and failed to
identify how the market learned of the truth. Dura, 544 U.S. at 346-
47. The Supreme Court held that more was needed. Id. at 346. We
have more here, for Mr. Nakkhumpun has identified precisely when
26
the risk materialized: November 9, 2011, as the marketplace learned
of Delta’s inability to find any buyers.
The defendants argue that the risk about the marketability of
the Vega assets had already been known, adding that investors knew
that marketability depended on the price of gas, the cost of extracting
gas, and the amount of reserves. According to the defendants, they
revealed these risks in Delta’s 2009 10-K. The defendants point to
four disclosures in Delta’s 2009 10-K that revealed this risk to
investors:
1. “Historically, the markets for natural gas and oil have
been volatile and they are likely to continue to be
volatile.”
2. “Declines in natural gas and oil prices . . . could in the
future have a material adverse effect on our financial
condition, results of operations, cash flows, and
reserves.”
3. “There are numerous uncertainties inherent in estimating
quantities of proved reserves and cash flows from such
reserves, including factors beyond our control. Reserve
engineering is a subjective process of estimating
underground accumulations of oil and natural gas that
cannot be measured in an exact manner.”
4. “If oil or natural gas prices decrease or exploration and
development efforts are unsuccessful, we may be required
to take further writedowns. . . . There is a risk that we
will be required to take additional writedowns in the
future, which would reduce our earnings and
stockholders’ equity. A writedown could occur when oil
and natural gas prices are low or if we have substantial
downward adjustments to our estimated proved reserves,
27
increases in our estimates of development costs or
deterioration in our exploration and development results.”
Appellant’s App., vol. 2, at 399-401.
But, Delta’s 10-K reported risks that existed as of December
13, 2009―before Delta announced that Opon would be willing to pay
$400 million for a 37.5% interest in the Vega assets. See Appellant’s
App., vol. 2, at 400 (noting that the 10-K was for the fiscal year
ending December 31, 2009). 11 Thus, even with disclosures of the drop
in gas prices, shareholders presumably would have continued to
believe that Opon was willing to pay $400 million for a 37.5%
interest in the Vega assets.
In these circumstances, Mr. Taylor could have foreseen that the
eventual news (about termination of the Opon deal) would harm
investors. After disclosing price drops in the 10-K, Delta continued
to condition the market to believe that Opon remained willing to pay
$400 million for the assets.
c. Causal Link
For loss causation, Mr. Nakkhumpun had to allege not only
concealment of the risk but also negative impact on the share price
11
Delta reminded the marketplace of Opon’s $400 million offer
on May 10, 2010 (in a conference call) and June 1, 2010 (in a press
release). These statements post-dated the reporting date for the 2009
10-K by five to six months.
28
based on materialization of the risk. Lentell v. Merrill Lynch & Co.,
396 F.3d 161, 173 (2d Cir. 2005).
Mr. Nakkhumpun alleged that the stock price had dropped after
the November 2011 announcement, resulting in materialization of the
risk. Appellant’s App., vol. 7, at 1716. Given the contents of the
November 2011 disclosure, it is plausible that the stock price
dropped at least partly because the market learned that Delta could
not market the 37.5% interest in its Vega assets at or close to $400
million.
The defendants point to the passage of time between the false
or misleading statement (July 2010) and materialization of the risk
(November 2011). In this sixteen-month period, other events might
have disrupted the causal link. But, the defendants have not pointed
to any intervening events that would show disruption of the causal
link as a matter of law.
For purposes of Rule 12(b)(6), Mr. Nakkhumpun has alleged a
causal link between the false or misleading statement and
materialization of the risk.
D. Separate Treatment of the Defendants
On the Opon-related claim, the parties have not differentiated
between the various defendants. But, we must do so.
29
In his opening brief, Mr. Nakkhumpun seems to confine his
appellate argument to Mr. Taylor. See Appellant’s Opening Br. at 25
(arguing that “Defendants (and specifically Defendant Taylor)
misleadingly represented to investors” that Opon had terminated
discussions after it was unable to obtain financing).
For Mr. Taylor, we conclude that in the proposed amended
complaint, Mr. Nakkhumpun adequately alleged falsity, scienter, and
loss causation for Mr. Taylor’s July 2010 statement. Therefore, we
reverse the dismissal and denial of leave to amend on the claim
against Mr. Taylor for his July 2010 statement concerning the Opon
transaction. But, Mr. Nakkhumpun has not adequately pleaded
culpability on the part of other defendants regarding the Opon
transaction. Thus, we affirm the dismissal and denial of leave to
amend on the Opon-related claims against all defendants other than
Mr. Taylor.
IV. Financial Condition (Cash Flow and Liquidity)
Mr. Nakkhumpun also claims that the defendants made false or
misleading statements about Delta’s financial condition through six
statements between March 2010 and August 2011. On appeal and in
the district court, the defendants challenged these claims based on
failure to allege falsity or scienter. The district court granted the
defendants’ motion to dismiss as to these statements on the ground
30
that they were not false. But, we may affirm the judgment on any
ground supported by the record, so long as Mr. Nakkhumpun had a
fair opportunity to address that ground. See Merrifield v. Bd. of Cnty.
Comm’rs, 654 F.3d 1073, 1077 (10th Cir. 2011).
We affirm the dismissal and denial of leave to amend,
concluding that the claims involving the six statements are missing
necessary allegations of either falsity or scienter.
A. Mr. Wallace’s Two Statements on March 11, 2010
Defendant John Wallace was Delta’s President and Acting
Senior Executive Officer from May 2009 to July 2010. According to
Mr. Nakkhumpun, Mr. Wallace misled the market on March 11, 2010,
in two statements about Delta’s liquidity. Both statements address
Delta’s earnings for the fourth quarter and full year of 2009.
Mr. Wallace’s first statement was made through a press release
on behalf of Delta:
Clearly, 2009 proved to be a very challenging year for
Delta beginning with the drop in natural gas prices during
the first half of the year, and further compounded by
liquidity and bank covenant concerns for much of the
year. Yet, I am very pleased with how far we have come
and, from an operational and liquidity perspective, how
much we improved during the latter half of the year. Cash
flow provided by operating activities totaled $61.0
million for the fourth quarter, which is up meaningfully
over the third quarter. The fourth quarter of 2009 was the
third consecutive quarter of substantial growth in
EBITDAX (a non-GAAP measure), up 134% from third
quarter levels. We have also been able to reduce our lease
31
operating expenses to $1.26 per Mcfe for the fourth
quarter, down 14% from the third quarter 2009. More
importantly, the EBITDAX for the fourth quarter is
sufficient to be in compliance with the leverage ratio
covenant of our senior credit facility. While we obtained
waivers for the first quarter of 2010, under the current
commodity price forward curve, our current financial
projections suggest that we will be in compliance with
our financial covenants for the remainder of 2010.
Our liquidity situation has also improved
materially, aided in no small part by the offshore
litigation settlement proceeds received from the federal
government at the end of the year, which netted
approximately $48.7 million to Delta. . . .
Appellant’s App., vol. 7, at 1666 (emphasis added). Mr.
Nakkhumpun’s claim is based on the italicized portions of the
statement.
Mr. Wallace’s second statement was made during a conference
call discussing the announced results with market participants. There,
Mr. Wallace commented:
As we all know, 2009 was a challenging year for our
industry and for Delta in particular. Looking back I’m
very pleased with how Delta weathered the storm, and I’m
proud to present to our investors a company that is in a
far better liquidity and financial situation than we were
in at this time last year.
Id. at 1667 (emphasis added). Again, Mr. Nakkhumpun bases his
claim on the italicized portion of the statement.
Mr. Nakkhumpun claims these statements were inaccurate
because Delta’s financial situation was deteriorating over this time-
32
period. The district court rejected Mr. Nakkhumpun’s arguments.
But, even if these statements were false, Mr. Nakkhumpun has not
alleged scienter. 12
To plead scienter, Mr. Nakkhumpun must have alleged that Mr.
Wallace acted with the intent to mislead shareholders or in reckless
disregard of an obvious risk that shareholders would be misled.
Adams v. Kinder-Morgan, Inc., 340 F.3d 1083, 1105 (10th Cir. 2003).
The alleged facts must create an inference of scienter that is at least
as strong as any competing inference. Tellabs, Inc. v. Makor Issues &
Rights, Ltd., 551 U.S. 308, 326 (2007).
Mr. Nakkhumpun’s alleged facts are not susceptible to an
equally strong inference of scienter. To support his scienter
argument, Mr. Nakkhumpun relies on a number of confidential
informants. Even when we view the informants’ statements in the
light most favorable to Mr. Nakkhumpun, he has not alleged facts
indicating that Mr. Wallace would have known that his statements
would have misled investors. Mr. Wallace was speaking about indicia
12
In reviewing the motion for leave to amend, the district court
focused on three words in the March 2011 statements: “materially”
(press release) and “far better” (conference call). Appellant’s App.,
vol. 7, at 1854-55. The court determined that these three words could
not be considered false because they were incapable of objective
verification. Because we affirm on the ground of scienter, we need
not address the district court’s analysis.
33
of liquidity in the publicly filed earnings data. Though Mr.
Nakkhumpun’s confidential informants refer to cash flow problems,
these references do not suggest that Mr. Wallace knew or should have
known that his discussion of the publicly filed documents would
mislead investors.
Confidential Informant 1 (who was responsible for budgeting
and financial forecasting for Delta) provided general information
about Delta’s poor financial condition in 2009 and 2010, recalling
that
 Delta’s financial position was dire for the years 2009,
2010, and 2011,
 “red flags” were raised to Mr. Wallace,
 Delta “‘couldn’t pay [its] bills’” and had to sell assets to
pay debts,
 Delta’s leaders were urged to raise capital through sales
of equity in 2009, 2010, and 2011, and
 the years 2009, 2010, and 2011 were “‘all about selling
assets and paying debts.’”
Appellant’s App., vol. 6, at 1642-43.
Other informants (in Delta’s accounts payable department)
stated that Delta had become increasingly slow in paying bills. For
example, Delta’s Restructuring Officer stated that Delta’s liquidity
problems had “‘bec[o]me more acute’” in early 2010 because of
Delta’s inability to sell assets and recalled that Delta had defaulted
34
on its credit line in early 2010. Id. at 1638 (quoting Declaration of
John T. Young, Jr., Chief Restructuring Officer of Delta Petroleum
Corporation).
Notwithstanding the allegations based on these informants’
statements, an innocent inference is stronger than an inference of
scienter because Mr. Wallace was discussing benchmarks of liquidity
reflected in the publicly filed documents on earnings, and Mr.
Nakkhumpun has not challenged the truthfulness of Mr. Wallace’s
reporting on these benchmarks. A fact-finder might view Mr.
Wallace’s report as overly rosy in light of Delta’s continued inability
to pay its bills. But, none of the allegations suggest an intention to
deceive investors or awareness of facts that would have alerted Mr.
Wallace to a risk that his assessment would mislead anyone.
Therefore, we affirm dismissal of the claims related to Mr. Wallace’s
statements on March 11, 2010.
B. Mr. Wallace’s Statement in May 2010 (Concerning
Improvement in Delta’s Liquidity)
Mr. Nakkhumpun also alleged that Mr. Wallace had made a
misleading statement in May 2010 regarding Delta’s financial
condition. In May 2010, Delta held a conference call to discuss the
financial results for the first quarter of 2010. There, Mr. Wallace
commented:
35
While the current gas prices and forward curve are more
than adequate to provide solid returns on the completion
capital we must be mindful of our liquidity position. We
believe we are in a far better financial situation than we
were a year ago and the preservation of our liquidity is
essential to maintain and improve our balance sheet.
Appellant’s App., vol. 7, at 1675 (emphasis added). Mr. Nakkhumpun
complains about the italicized portion of this statement.
The district court characterized this portion of the statement as
an opinion, and Mr. Nakkhumpun does not challenge this
characterization. An opinion is considered false if the speaker does
not actually or reasonably hold that opinion. Omnicare, Inc. v.
Laborers Dist. Council Constr. Indus. Pension Fund, __ U.S. __, __
S. Ct. __, 2015 WL 1291916, at *6 (2015); Va. Bankshares, Inc. v.
Sandberg, 501 U.S. 1083, 1095 (1991). The district court concluded
that Mr. Nakkhumpun had failed to allege falsity, reasoning that none
of the alleged facts would cast doubt on Mr. Wallace’s belief in the
truth of his statement in May 2010. We agree.
Mr. Nakkhumpun presents two factual allegations, stating they
conflict with Mr. Wallace’s statement:
 “[B]eginning in 2009 and continuing through the Class
Period[,] Delta ‘had a liquidity issue’ and ‘couldn’t pay
[its] bills.’”
 “Delta had ‘cash flow problems’ and was experiencing a
‘long slow demise that began in March 2009.’”
36
Appellant’s Opening Br. at 43-44. Mr. Nakkhumpun argues that he
alleged discrete facts supporting these more general statements.
But, Mr. Nakkhumpun’s factual allegations do not suggest
scienter. In expressing his opinion, Mr. Wallace focused broadly on
Delta’s “financial situation.” Appellant’s App., vol. 7, at 1675. Mr.
Nakkhumpun tries to poke holes in that opinion based on others’
accounts of worsening cash flow problems. But, Mr. Nakkhumpun
has not alleged any facts that would cast doubt on the sincerity or
reasonableness of Mr. Wallace’s statement of his opinion. See
Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension
Fund, __ U.S. __, __ S. Ct. __, 2015 WL 1291916, at *8 (2015) (stating
that an issuer’s opinions do not become misleading simply because
they are undercut by some facts known to the issuer). Thus, we
uphold dismissal of this claim based on the failure to adequately
allege falsity.
C. Mr. Lakey’s Statement in March 2011 (Concerning
EBITDAX and Cash Flow)
In March 2011, Delta issued a press release announcing its
financial results for its fourth quarter and full year ending December
2010. Mr. Nakkhumpun challenges the truthfulness of this press
release, but he has not adequately alleged falsity.
37
The press release touted Delta’s new cost-cutting measures and
the results. Defendant Carl Lakey (Delta’s President and CEO as of
July 2010) spoke about the fourth quarter results:
We are very pleased with our results for the fourth
quarter. Our EBITDAX [earnings before interest, taxes,
depreciation, depletion, amortization, and exploration
expenses] is 20% higher than the third quarter driven by
lower operating and overhead costs, despite lower
production related to asset sales and lower average Henry
Hub gas prices in the quarter. We have been committed to
reducing our operating and overhead costs, and I’m
pleased to state that we have been able to deliver such
results. We drove our LOE/Mcfe down by 38% compared
to the third quarter. Additionally, our overhead costs are
down 25% from the third quarter. We remain focused on
sustaining costs at or near these levels for 2011. We’ve
also had very positive results from the well completion
activity performed in the fourth quarter and to date in the
first quarter of this year. The larger frac design, which
we call Gen IV, has increased our initial production and
our estimated reserves per well. We have completed a
total of 16 wells with the Gen IV frac design and all have
performed better than we would have expected under
prior completion designs. Thus, we expect first quarter
production to increase 4% to 7% over the fourth quarter.
These new cost control measures substantially improve
our EBITDAX.
Appellant’s App., vol. 7, at 1693 (emphasis added). Mr. Nakkhumpun
bases his claim on the italicized portion of the statement.
The district court characterized this statement as an expression
of fact rather than opinion. 13 To allege falsity of this factual
13
The defendants contend that this statement involved an opinion
rather than a fact. We need not decide whether the defendants are
38
statement, Mr. Nakkhumpun had to explain why Mr. Lakey’s
statement was misleading. See Adams v. Kinder-Morgan, 340 F.3d
1083, 1097 (10th Cir. 2003) (stating that falsity is adequately
pleaded when a plaintiff alleges a factual statement was misleading).
Mr. Nakkhumpun relies on allegations that Delta’s cash flow
became a growing problem. Appellant’s App., vol. 1, at 21, 27, 108;
Appellant’s App., vol. 6, at 1395-96. But, Mr. Nakkhumpun has not
pleaded any facts suggesting that the cost control measures had failed
to improve Delta’s cash flow. Thus, the allegations do not suggest
that Mr. Lakey was misleading anyone about the impact of Delta’s
cost-control measures.
D. Mr. Taylor’s and Mr. Lakey’s Statements in August
2011 (Concerning Share Price and Trading Discount)
In August 2011, Delta held a conference call with market
participants to discuss the financial results for the first quarter of
2011. Defendants Daniel Taylor and Carl Lakey spoke during the
call. Mr. Nakkhumpun challenges the truthfulness of their statements,
but he has not adequately alleged scienter.
Mr. Taylor (who was then Delta’s Chairman of the Board)
presented information about new results in the Vega Area assets:
correct because the statement would not be actionable even if it
involved a fact rather than an opinion.
39
[W]e’re very excited about what we are seeing in this
[Vega Area] well, the potential it holds and what it means
for Delta. . . . [W]e are pleased to have a flowing well
that is in the process of confirming substantial quantities
of economic reserves in the deeper shale formations of
the Piceance Basin.
* * * *
We fully believe that our total resource recently
evaluated by Netherland Sewell, coupled with current
market conditions, will be driving the valuations in the
strategic alternatives process. Our current distressed
market valuation levels should not be considered as
constraints during the process.
Delta is currently trading at an amazing 50%
discount to the lowest of these transactions at only $0.16
per Mcfe of [its] 2P reserves from the Williams Fork
alone.
Appellant’s App., vol. 1, at 82 (emphasis added). Mr. Nakkhumpun
alleged that the italicized portion of the statement was misleading.
In the same call, Defendant Carl Lakey (Delta’s CEO at the
time) commented: “Dan [Taylor] earlier pointed out that our current
share price is apparently not in alignment with the value of the asset
and the company. I hope this helps you understand why we feel this
way.” Id. at 84. Mr. Nakkhumpun characterized this conclusion as
misleading.
The district court concluded that these statements involved
opinions and were not false or misleading. We need not address this
rationale because Mr. Nakkhumpun has not pleaded scienter.
40
For scienter, Mr. Nakkhumpun’s allegations must create an
inference that the defendants acted with the intent to mislead
shareholders or in reckless disregard of the likelihood that
shareholders would be misled. Adams v. Kinder-Morgan, Inc., 340
F.3d 1083, 1105 (10th Cir. 2003). That inference must be at least as
strong as an innocent inference. Tellabs v. Makor Issues & Rights,
Ltd., 551 U.S. 308, 323 (2007).
Mr. Nakkhumpun has not adequately alleged scienter. He has
made only general allegations that all defendants should have known
that Delta’s financial situation was poor:
 Delta could not pay its bills and was trying to sell assets
to pay debts.
 Confidential informants had encouraged leadership to
generate capital through equity offerings.
 The years 2009, 2010, and 2011 “were ‘all about selling
assets and paying debts.’” 14
 Delta’s accounts were aging.
 Delta’s cash flow and liquidity problems got worse in the
beginning of 2011.
 By the spring of 2011, the defendants were aggressively
attempting to sell assets.
14
Appellant’s App., vol. 6, at 1643 (quoting Confidential
Informant 1).
41
But, none of these allegations indicates that the defendants would
have known that their comparison with other transactions would be
misleading in the absence of discussion about Delta’s debts. As a
result, these allegations are too broad to satisfy the heightened
pleading requirements for scienter. In light of this shortcoming, we
conclude that the allegations involving the August 2011 statements
failed to state a valid claim.
V. Conclusion
For Mr. Taylor’s Opon-related statement in July 2010, the
proposed amended complaint stated a valid claim. Thus, we reverse
the dismissal of the claim against Mr. Taylor for a false or
misleading statement concerning the Opon transaction. For all other
defendants, however, we affirm the dismissal on the Opon-related
statements.
Mr. Nakkhumpun has not adequately alleged a basis for
liability involving statements about Delta’s financial condition.
Thus, on these claims, we affirm the dismissal and denial of leave to
amend.
42