Zouras v. Hallman

2004 DNH 144

• Court: District Court, D. New Hampshire
• Decided: September 30, 2004
• Docket: CV-03-240-SM
• Status: Published

Opinion

Zouras v . Hallman CV-03-240-SM 09/30/04 UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

James B Zouras, Individually and on behalf of All Others Similarly Situated, Plaintiff

v. Civil N o . 03-240-SM Opinion N o . 2004 DNH 144 Robert W . Hallman, Neil Rossen, and Presstek, Inc., Defendants

O R D E R

James B . Zouras, representing a class of plaintiffs who

purchased Presstek common stock between December 1 0 , 1999, and

August 7 , 2001, brings suit alleging violations of section 10(b)

of the Securities Exchange Act of 1934 (15 U . S . C . § 78j(b)), and

Rule 10b-5 (17 C . F . R . § 240.10b-5), against all defendants (Count

I ) and violations of section 20(a) of the Act (15 U . S . C . §

78t(a)) against defendants Hallman and Rossen (Count I I ) . Before

the court is defendants’ motions to dismiss. F E D . R . C I V . P . 9(b)

and 12(b)(6). Plaintiff objects. For the reasons given below,

defendants’ motion to dismiss is granted. The Legal Standard

A motion to dismiss for “failure to state a claim upon which

relief can be granted,” F E D . R . C I V . P . 12(b)(6), requires the

court to conduct a limited inquiry, focusing not on “whether a

plaintiff will ultimately prevail but whether the claimant is

entitled to offer evidence to support the claims.” Scheuer v .

Rhodes, 416 U . S . 2 3 2 , 236 (1974). When considering a motion to

dismiss under F E D . R . C I V . P . 12(b)(6), the court must “accept as

true all well-pleaded allegations and give plaintiffs the benefit

of all reasonable inferences.” Cooperman v . Individual Inc., 171

F.3d 4 3 , 46 (1st Cir. 1999) (citing Gross v . Summa Four, Inc., 93

F.3d 9 8 7 , 991 (1st Cir. 1996)). However, while a court “deciding

a motion to dismiss under Rule 12(b)(6) . . . must take all well-

pleaded facts as true . . . it need not credit a complaint’s

‘bald assertions’ or legal conclusions.” Shaw v . Digital Equip.

Corp., 82 F.3d 1194, 1216 (1st Cir. 1996) (quoting Wash. Legal

Found. v . Mass. Bar Found., 993 F.2d 9 6 2 , 971 (1st Cir. 1993)).

Finally, “[d]ismissal under Fed.R.Civ.P. 12(b)(6) is only

appropriate if the complaint, so viewed, presents no set of facts

justifying recovery.” Cooperman, 171 F.3d at 46 (citing

2 Dartmouth Review v . Dartmouth Coll., 889 F.2d 1 3 , 16 (1st Cir.

1989)).

Background

Defendant, Presstek, Inc., has developed and commercialized

proprietary direct imaging (“DI”) technology for use in color

offset printing. That technology employs laser diodes to

transmit digital data directly onto plates, while they are in the

press. Historically, a significant portion of Presstek’s sales

have been to Heidelberger Druckmaschinen AG (“Heidelberg”), a

manufacturer of color offset printing presses. Heidelberg used

Presstek’s DI technology in its Quickmaster DI printing press,

but subsequently turned to Creo, a Presstek competitor, to supply

DI technology for its new Speedmaster 74DI printing press. On

December 1 0 , 1999, the commencement date of the class period,

Presstek announced that it was entering into arbitration

proceedings with Heidelberg. Subsequently, Presstek announced

its intention t o : (1) develop and market a new product, the

Dimension 4 0 0 , a thermal computer-to-plate (“CTP”) device; (2)

pursue a joint venture with Xerox to market a line of direct

3 imaging presses; and (3) operate a subsidiary, Lasertel, to

produce high-quality laser diodes.

The price of one share of Presstek common stock on December

1 0 , 1999, the first day of the class period, was $13.75. During

the class period, that price rose to a high of $28.75 and fell to

a low of $7.20 on August 7 , 2001, the last day of the class

period.

Plaintiff has sued Presstek, its former Chief Executive

Officer and President (Hallman), and its former Chief Financial

Officer (Rossen), both of whom were Presstek officers during the

class period. Plaintiff says defendants are liable for: (1)

failing to adequately disclose problems with the Heidelberg

relationship; (2) recklessly misleading investors concerning the

commercial viability of the Dimension product line in 2000 and

2001; (3) knowingly projecting inflated sales forecasts for Xerox

DocuColor units in 2001; and (4) failing to disclose severe

quality control problems and production issues at Presstek’s

Lasertel subsidiary.

4 Discussion

Section 10(b) of the Securities Exchange Act of 1934

provides:

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange–

(b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, or any securities-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley A c t ) , any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

15 U.S.C. § 7 8 j . Rule 10b-5, promulgated by the Securities and

Exchange Commission, provides:

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,

(a) To employ any device, scheme, or artifice to defraud, (b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statement made, in the light of the

5 circumstances under which they were made, not misleading, or (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,

in connection with the purchase or sale of any security.

17 C.F.R. § 240.10b-5.

A statement is false or misleading if the person making it

has actual factual knowledge, at the time of the statement, that

makes the statement false or misleading. See, e.g., Mesko v .

Cabletron Sys., Inc. (In re Cabletron Sys., I n c . ) , 311 F.3d 1 1 ,

36 (1st Cir. 2002); Aldridge v . A.T. Cross Corp., 284 F.3d 7 2 , 79

(1st Cir. 2002).

In the First Circuit, “general averments of defendants’ knowledge of material falsity [do] not suffice.” Gross, 93 F.3d at 991. A 10b-5 plaintiff must allege “details of [defendants’] alleged fraudulent involvement,” including specifics as to what defendants had knowledge of and when. Id. To satisfy this requirement, complaints typically identify internal reports, memoranda, or the like, and allege both the contents of those documents and defendants’ possession of them at the relevant time. See, e.g., Serabian [v. Amoskeag Bank Shares, I n c . ] , 24 F.3d [357,] 368 [(1st Cir. 1994)] (plaintiffs, “cit[ing] to reports and documents presented to defendants at relevant times that were inconsistent with the defendants’ public statements . . . satisfies the necessary pleading

6 requirements.”) Moreover, such citation must be “specifically” made. Id. Recently, in Shaw, the Court ruled that merely alleging the existence of a highly efficient reporting system – even one that would logically lead to internal reports on the relevant subject matter – was not enough. The Court wrote that such allegations “may speak to the question of how defendants might have known what they allegedly knew, but [they are insufficient] absent some indication of the specific factual content of any single report generated by the alleged reporting system.” 82 F.3d 1224 & n . 38 (emphasis in original).

In re Boston Tech., Inc. Sec. Litig., 8 F. Supp. 2d 4 3 , 57-58 (D.

Mass. 1998) (footnote omitted).

“Liability under section 10(b) and Rule 10b-5 also requires

scienter, ‘a mental state embracing intent to deceive,

manipulate, or defraud.’” Cabletron, 311 F.3d at 38 (quoting

Ernst & Ernst v . Hochfelder, 425 U.S. 185, 193 n.12 (1976)). In

addition, “this circuit has rejected any rigid formula for

pleading scienter, preferring to rely on a ‘fact-specific

approach’ that proceeds case by case.” Cabletron, 311 F.3d at 38

(citing Aldridge, 284 F.3d at 8 2 ; Greebel v . FTP Software, Inc.,

194 F.3d 185, 196 (1st Cir. 1999)).

7 Complaints brought under section 10(b) are subject to a

heightened pleading standard, set out in rule and statute. “In

all averments of fraud or mistake, the circumstances constituting

fraud or mistake shall be stated with particularity.” FED. R .

C I V . P . 9 ( b ) . “The particularity requirement is regarded by the

Court of Appeals for this Circuit as being of fundamental

importance.” Boston Tech., 8 F . Supp. 2d at 5 2 . Substantively,

the particularity “requirement ‘entails specifying in the

pleader’s complaint the time, place, and content of the alleged

false or fraudulent representations.’” Arruda v . Sears, Roebuck

& Co., 310 F.3d 1 3 , 19 (1st Cir. 2002) (quoting Powers v . Boston

Cooper Corp., 926 F.2d 109, 111 (1st Cir. 1991)). In addition,

“the complaint must set forth specific facts that make it

reasonable to believe that the defendant knew that a statement

was materially false or misleading. The rule requires that the

particular times, dates, places, or other details of the alleged

fraudulent involvement of the actors be alleged.” Boston Tech.,

8 F . Supp. 2d at 53 (quoting Gross, 93 F.3d at 991 (emphasis

added)).

8 Under the provisions of the Private Securities Litigation

Reform Act (“PSLRA”) of 1995:

In any private action arising under this chapter in which the plaintiff alleges that the defendant–

(A) made an untrue statement of material fact; or (B) omitted to state a material fact necessary in order to make the statements made, in light of the circumstances in which they were made, not misleading;

the complaint shall specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed.

15 U.S.C. § 78u-4(b)(1). Furthermore:

In any private action arising under this chapter in which the plaintiff may recover money damages only on proof that the defendant acted with a particular state of mind, the complaint shall, with respect to each act or omission alleged to violate this chapter, 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).

The First Circuit has held that “[t]he PSLRA imposes

requirements for pleading with particularity that are consistent

9 with [the] circuit’s prior rigorous requirements for pleading

fraud with particularity under Fed.R.Civ.P. 9(b).” Greebel, 194

F.3d at 188. Moreover, “[u]nder the PSLRA, the complaint must

state with particularity facts that give rise to a ‘strong

inference’ of scienter, rather than merely a reasonable

inference.” Cabletron, 311 F.3d at 38 (citing 15 U.S.C. § 78u-

4(b)(2); Greebel, 194 F.3d at 195-96). That i s , “[i]t is clear

that scienter allegations now must be judged under the ‘strong

inference’ standard at the motion to dismiss stage.” Greebel,

194 F.3d at 197.

Finally, “[i]t is not the law that a 10b-5 complaint is to

be judged on the basis of the general flavor derived from an

issuer’s collective statements over a long period of time.”

Boston Tech., 8 F. Supp. 2d at 5 6 . Rather, “[10b-5] allegations

[must be organized] into discrete units that are, standing alone,

each capable of evaluation.” Id. at 55-56 (quoting Shapiro v .

UJB Fin. Corp., 964 F.2d 2 7 2 , 284 (3d Cir. 1992)).

10 A . The Heidelberg Arbitration

According to plaintiff, defendants failed to adequately

disclose problems developing in the relationship between Presstek

and Heidelberg. Specifically, plaintiff alleges that Presstek’s

actionable false and/or misleading statement is composed o f : (1)

a December 1 0 , 1999, Presstek press release that stated, in

pertinent part: “Presstek . . . and Heidelberger Druckmaschinen,

A.G. . . . today announced they have entered into an arbitration

to resolve certain conflicts concerning on-press imaging;” and

(2) a December 1 7 , 1999, report on seybold.com that stated:

“Presstek said the dispute doesn’t involve the Quickmaster.”

Plaintiff does not contend that the first statement, standing

alone, was either false or materially misleading. Rather,

plaintiff’s claim depends upon both statements, read together.

Plaintiff’s claim necessarily fails, however, because the second

statement cannot be attributed to Presstek.

In Cabletron, the First Circuit expressly adopted the Second

Circuit’s “entanglement” test for determining whether the

statements of a third party may be attributed to a defendant for

11 purposes of establishing liability under section 10(b) and Rule

10b-5.

This test requires the plaintiff to demonstrate the defendants’ involvement with third-party statements:

[L]iability may attach to an analyst’s statements where the defendants have expressly or impliedly adopted the statements, placed their imprimatur on the statements, or have otherwise entangled themselves with the analysts to a significant degree. . . . [T]he court will determine whether the complaint contains allegations which, favorably construed and viewed in the context of the entire pleading, could establish a significant and specific, not merely a casual or speculative, entanglement between the defendants and the analysts with respect to the statements at issue.

Schaffer [v. Timberland C o . ] , 924 F. Supp. [1298,] 1310 [(D.N.H. 1996)]. Entanglement also includes situations where company officials “intentionally foster a mistaken belief concerning a material fact.” Elkind [v. Liggett & Myers, I n c . ] , 635 F.2d [156,] 163-64 [2d Cir. 1980)].

311 F.3d at 37-38 (footnote omitted). However, “an entanglement

claim will be rejected if it merely suggests or assumes that

company insiders provided the information on which analysts or

other outsiders based their reports.” Id. at 38 (citing Suna v .

Bailey Corp., 107 F.3d 6 4 , 73-74 (1st Cir. 1997); In re Number

Nine Visual Tech. Corp. Sec. Litig., 51 F. Supp. 2d 1 , 31 (D.

Mass. 1999)).

12 Here, plaintiff has not alleged that defendants expressly or

impliedly adopted the statement reported on seybold.com, or that

they placed their imprimatur on that statement. The quotation

from seybold.com plainly does not identify any specific Presstek

source for the statement. Thus, plaintiff has failed to allege

any facts which, if proven, would demonstrate significant and

specific entanglement between Presstek and seybold.com. See

Cabletron, 311 F.3d at 38 (holding that two analyst statements

reporting information provided by named Cabletron executives were

attributable to Cabletron under the entanglement test);

Walsingham v . Biocontrol Tech., Inc., 66 F. Supp. 2d 669, 677

(W.D. P a . 1998) (rejecting defendant’s argument that certain

media reports were non-actionable because “[t]he majority of the

[third-party] statements identified by the defendants [as non-

actionable third-party statements] contain what purports to be a

direct quote of a specifically named BICO official.”).

Moreover, Aldridge does not support plaintiff’s position.

In that case, two of the three company statements reported in the

Providence Journal were directly attributed to a named company

official, 284 F.3d at 79-80, while the third was “obviously”

13 attributable to company officials, id. at 8 0 . Here, by contrast,

as pled in plaintiff’s complaint, the statement reported by

seybold.com is not obviously attributable to Presstek. It does

not directly quote either a named or an unnamed Presstek

official. It is but a paraphrase of a statement attributed to

“Presstek,” rather than to any specific individual. Thus, the

seybold.com statement is plausibly read as the website’s own

interpretation of Presstek’s December 10 press release. Finally,

the mere fact that Robert Hallman has written for seybold.com at

some time or another is not enough to demonstrate “entanglement

between the defendants and the analysts with respect to the

statements at issue.” Cabletron, 311 F.3d at 38 (quoting

Schaffer, 924 F. Supp. at 1310) (emphasis added).

Because plaintiff has failed to allege facts adequate to

meet the entanglement test as adopted in this circuit, the

seybold.com statement is not attributable to Presstek for

purposes of establishing liability under section 10(b) and Rule

10b-5. And, because plaintiff’s claim of fraud surrounding the

Heidelberg arbitration depends upon the seybold.com statement

(Pl.’s Mem. of Law (document n o . 27) at 27 n.51), plaintiff has

14 failed to state a claim on which relief can be granted with

respect to the Heidelberg arbitration.

B . The Dimension Product Line

According to plaintiff, defendants recklessly misled

investors regarding the commercial viability of the Dimension

product line. Specifically, he points to statements contained in

four Presstek press releases (three reporting quarterly earnings,

one commenting on “recent market conditions”), two third-party

reports posted on industry websites, and one quarterly 10-Q

filing. In the words of plaintiff’s amended complaint, “[t]he

statements set forth in ¶¶ 37(a)-(g) were materially false and

misleading in that they failed to disclose serious critical

flaws, both with the Dimension products and their production.”1

(Am. Compl. ¶ 38.) In plaintiff’s view, when Presstek made the

statements detailed in paragraphs 37(a)-(g) of his amended

complaint, it was obligated to disclose that: (1) the laser

diodes supplied by Lasertel for use in the Dimension product

1 More specifically, plaintiff contends that those statements are actionable because defendants: (1) initially mislabeled production delays as shipping or scheduling delays; and (2) ultimately, but belatedly, admitted to production delays, but never disclosed critical flaws in the Dimension products and in the production process that caused the delays.

15 performed poorly; (2) the electrical boards in the Dimension

product were faulty; and (3) Dimension products suffered from

malfunctions caused by dust generated during the production

process.

Defendants move to dismiss the Dimension-related claims on

grounds that: (1) plaintiff does not allege any actionable

misstatements or any statements that were so incomplete as to be

misleading; (2) the forward-looking statements they made are

protected by the PSLRA’s “safe harbor;” (3) most of the

statements plaintiff challenges consist of non-actionable

puffery; and (4) plaintiff alleges no facts to support an

inference that any defendant made a statement known to be

materially false when it was made. For the rules governing the

duty to disclose in section 10(b) cases, defendants cite Backman

v . Polaroid Corp., 910 F.2d 10 (1st Cir. 1990) (en banc), and

Boston Technology, 8 F. Supp. 2d 4 3 .

Without addressing either Backman or Boston Technology,

plaintiff counters that: (1) the amended complaint identifies

defendants’ misrepresentations concerning the Dimension product;

16 (2) the amended complaint pleads why those statements were false

when made; and (3) defendants’ misrepresentations were more than

mere puffery. Plaintiff does not, however, address defendants’

invocation of the PSLRA safe harbor, although he does clarify his

theory of liability on the Dimension-related claim:

Defendants misapprehend the thrust of the Dimension allegations: Plaintiffs do not claim that Presstek failed to meet predictions as to future prospects after falsely claiming that there was strong market demand for Dimension. Rather, the positive statements made in connection with the introduction of Dimension, e.g., encouraging response to commercial release in Q3 2000, sales expected to climb steeply in Q4 2000, conceal that Dimension was released before it was commercially viable and that purchasers of early units would have to obtain numerous repairs/upgrades.

(Pl.’s Mem. (document n o . 27) 21 n.43 (emphasis added).)

In other words, plaintiff asserts that it was misleading for

Presstek to issue positive statements about customer response to

the introduction of the Dimension product line without also

disclosing some combination of production and/or performance

problems with its Dimension platesetters. More specifically,

plaintiff asserts that Presstek intentionally attempted to

mislead the market by: (1) saying that the company was

17 experiencing shipping or scheduling delays, when it was actually

dealing with production delays; (2) saying that the company was

experiencing production delays, when it was actually dealing with

production issues; and (3) saying that the company was

experiencing production issues, when it was actually dealing with

product performance issues; and (4) only belatedly disclosing

that the Dimension platesetter was experiencing performance

issues.

As noted above, section 10b-5 cases are properly “decided by

a statement-by-statement analysis in which the inquiry made is

restricted to the immediate context of each statement – namely,

the balance of what was said on the particular occasion, and the

immediate circumstances in which the particular statement was

made.” Boston Tech., 8 F. Supp. 2d at 5 5 . Before analyzing each

of the seven Dimension-related statements that plaintiff

identifies as false and misleading, one issue common to all seven

statements must be considered.

Rule 9(b) and the PSLRA require a 10b-5 claim to be pled

with specificity. That requirement is especially important given

18 plaintiff’s theory of the case. He claims Presstek is liable not

for saying that market interest in Dimension was high when it was

actually low, or for saying that Dimension was a good platesetter

when it was actually a poor one, but for saying that market

interest in Dimension was high without also saying that Dimension

was not a very good platesetter.2 Plaintiff’s theory of

liability requires not only that defendants knew about

Dimension’s alleged production/performance issues, but, also,

that defendants understood the effect those issues would have on

Presstek’s bottom line. See Cabletron, 311 F.3d at 36

(explaining that plaintiff had not shown why any of defendant’s

statements were materially misleading when made, in part because

“[t]he supply delays might or might not have been visible to

defendants [when they made their statements], but in any event it

may also have been reasonable to believe they would soon be

resolved”).

2 In Boston Technology, the court held that a statement about the deployment of a new product and the importance of one particular customer “neither inherently concerned, nor implicitly referred to the quality or condition of the product line.” 8 F. Supp. 2d at 5 9 .

19 Thus, under plaintiff’s theory of the case, specific

allegations about what Hallman and Rossen knew, when they knew

i t , and what they likely would have inferred from their actual

knowledge, are all vital to a claim that what they said about

market acceptance was in conflict with what they knew to be true

about product production and performance. See Cabletron, 311

F.3d at 36 (holding that plaintiff failed to adequately allege

that a statement was misleading when made because “[t]he

complaint fail[ed] to demonstrate that the problems which later

plagued the SmartSwitch were known to the individual defendants

by mid-March when the first two statements were made”).

Plaintiff’s complaint falls short in alleging factual

knowledge on the part of Hallman or Rossen that would have made

any of the statements attributed to them false or misleading.

Only one of plaintiff’s confidential witnesses, CW 1,3 says that

he or she spoke to Hallman and none claims to have spoken to

According to plaintiff, “CW 1 is a former Presstek employee who, throughout the Class Period, supervised engineers who made product repairs and trained customers to use Dimension products.” (Am. Compl. ¶ 38(a).)

20 Rossen.4 No dates are given for the meeting or meetings between

CW 1 and Hallman, and the contents of CW 1’s communication(s) to

Hallman are vague, at best.5 Plaintiff also fails to allege any

4 Plaintiff’s only allegations that Hallman had knowledge making his statements false and misleading are: (1) “CW 1 attended meetings where Hallman was present and CW 1 candidly gave assessments of Dimension’s failures to Hallman.” (Am. Compl. ¶ 38(a)); and (2) “CW 1 personally informed Hallman and Vice President Lieber of the known problems with the Dimension product. Whereas this occurred at various meetings, defendants were aware that serious problems existed and were not being remedied.” (Am. Compl. ¶ 39(a)). 5 The facts alleged by plaintiff in this case contrast sharply with those alleged in Cabletron. In Cabletron, which also involved the rollout of a new product, the SmartSwitch, “virtually every SmartSwitch manufactured from April to at least September 1997 was subject to individualized re-wiring by hand.” 311 F.3d at 26-27. Moreover:

Information about the [SmartSwitch] problems was widely known within the company and was addressed extensively at weekly quality control meetings. The problems were also described in two internal Cabletron databases that were routinely circulated in hard copy to managers, including to defendants Levine, Benson, and Oliver. According to a former employee alleged to have personal knowledge, Benson directed that these reports should not be provided to salespersons “in order to insulate them (and the Company’s customers) from knowledge of problems relating to SmartSwitches.”

Id. at 2 7 . Here, plaintiff has alleged that CW 1 , at unspecified times and places, provided unspecified information to Hallman, and that certain other individuals were aware of several problems with the Dimension products. Notably missing from plaintiff’s complaint are allegations of either the kind of systematic, institutional data reporting alleged in Cabletron, or the kind of deliberate

21 concrete knowledge, or a basis for inferring knowledge, on

Hallman’s part concerning the link between production/performance

issues and revenue. Without a more specific indication of

precisely what CW 1 said to Hallman, and when, plaintiff’s

complaint fails to “specify . . . the reason or reasons why [any]

statement [attributed to Hallman] is misleading.” 15 U.S.C. §

78u-4(b)(1). Not only does the complaint’s lack of specificity

preclude analysis of discrete units subject to individual

evaluation, see Boston Tech., 8 F. Supp. 2d at 55-56, but the

complaint also comes very close to alleging “fraud by hindsight,”

a liability theory long disfavored in this circuit. See

Cabletron, 311 F.3d at 36-37 (citing Gross, 93 F.3d at 991;

Greenstone v . Cambex Corp., 975 F.2d 2 2 , 25 (1st Cir. 1992)).

Having identified the complaint’s general deficiency

regarding specificity, the court now turns to each of the seven

Dimension-related statements plaintiff claims to have been false

and misleading.

concealment of systematically reported data alleged in that case. 22 Statement 1

In paragraph 37(a) of his amended complaint, plaintiff

identifies as false and misleading the following statement,

contained in Presstek’s October 2 6 , 2000, third-quarter 2000

earnings announcement:

[CEO Robert] Hallman continued, “Drupa2000 and GraphExpo2000 demonstrated the widespread adoption of direct imaging on-press technology, which was further confirmed by the recent announcements of our partnerships with Ryobi and Xerox Corporation. The entry of Xerox into the ink-on-paper arena with the internal cylinder designed DocuColor DI series of presses is expected to expand the short run color market to which DI contributes a high level of value.”

“We are encouraged by the response to the recent commercial releases of our new Dimension platesetter series and Anthem plate,” said Hallman. “These new products represent an area of exciting revenue potential. The Dimension, using the same ProFire DI technology used in our DI presses, in combination with the chemistry-free, highly consistent Anthem plate provide a unique opportunity in the expanding computer- to-plate market. Initial shipments of Dimension and Anthem commenced in the third quarter of 2000, and we expect volume increases in the fourth quarter and beyond.”

Looking forward to the fourth quarter of 2000, the company anticipates continued sequential revenue and earnings growth, subject to the risks set forth below. The company is presently focused on meeting the production challenges that come with these projected additional revenues. In addition, due to the increased industry acceptance of Presstek’s technology, there is

23 potential for accelerated revenue growth in the fourth quarter of 2000.

(emphasis added by plaintiff). Plaintiff asserts that the

foregoing statement was false and misleading because “defendants

continued to tout Dimension’s acceptance” (Am. Compl. ¶ 37(a))

and because of Presstek’s alleged “fail[ure] to disclose serious

critical flaws, both with the Dimension products and their

production” (Am. Compl. ¶ 3 8 ) .

As with most of the dimension-related statements plaintiff

identifies as false and misleading, statement 1 is not a single

statement subject to evaluation. It i s , instead, an extensive

commentary that includes any number of statements. In other

words, here, as in much of the complaint, plaintiff has offered

“general flavor” pleading, see Boston Tech., 8 F. Supp. 2d at 5 6 ,

rather than making “allegations [in] discrete units that are,

standing alone, each capable of evaluation,” id. at 5 6 .

More importantly, plaintiff’s claim is insufficient as a

matter of law because the complaint does not adequately allege

knowledge on Hallman’s part that made statement 1 false or

24 misleading. To be sure, plaintiff alleges that CW 1 attended

meetings with Hallman and offered negative assessments of the

Dimension product. But absent allegations detailing when those

meetings occurred and precisely what CW 1 told Hallman, plaintiff

has failed to allege that Hallman made a false or misleading

statement.

Moreover, plaintiff does not indicate how Presstek’s failure

to simultaneously disclose production problems with Dimension

made it misleading to report on initial customer response to the

introduction of that product line. Presstek’s ability to produce

the product has, at best, an attenuated relationship to customer

interest in its introduction. It is overreaching, on the facts

alleged, to argue that Presstek “touted the Dimension line as

immediately successful.” (Pl.’s Mem. at 18.) In short, “[i]t

would not be reasonable to conclude from such an announcement [as

Presstek made] that no [production] problems were being met.”

Boston Tech., 8 F. Supp. 2d at 59 (rejecting plaintiff’s claim

that defendant was “obligated . . . to disclose their alleged

knowledge of ‘technological problems with the . . . new

products’”). Plaintiff’s suggestion that Presstek’s “statement

25 was misleading because it failed to explain that unresolved bugs

in the new product would prevent its commercial acceptance,” id.

at 6 2 , also falls short because “the fact that a new product

might face problems in the market is obvious to a reasonable

investor, and therefore omission of it is not culpable,” id. at

63 (citing In re Donald J. Trump Casino Sec. Litig., 7 F.3d 3 5 7 ,

377 (3d Cir. 1993)).

Because the complaint fails to adequately allege knowledge

on the part of Hallman sufficient to make statement 1 false and

misleading, and because Hallman’s optimistic appraisal of

customer interest did not reasonably imply that Dimension was

without flaws, statement 1 is not actionable.

Statement 2

In paragraph 37(b) of his amended complaint, plaintiff

identifies as false and misleading the following statement, found

in dotprint.com’s October 3 0 , 2000, report on a conference call

held by Hallman: “Shipments of the Dimension, worth $800,000 in

Q 3 , are also expected to climb steep[ly].” Plaintiff offers only

a generalized assertion of falsity, based upon Presstek’s alleged

26 “fail[ure] to disclose serious critical flaws, both with the

Dimension products and their production.” (Am. Compl. ¶ 38.)

As a preliminary matter, the statement plaintiff identifies

as false and misleading appeared on a third-party website rather

than in a press release or other publication attributable to

Presstek. However, even assuming the statement is attributable

to Hallman rather than dotprint.com,6 the complaint does not

adequately allege any knowledge on Hallman’s part that would make

statement 2 false or misleading. Moreover, even assuming Hallman

had knowledge of the problems identified by plaintiff, mere

knowledge of those problems would not make the statement

misleading for failure to mention them. See Boston Tech., 8 F.

Supp. 2d at 5 3 . As with statement 1 , “[i]t would not be

reasonable to conclude from [defendant’s statement] that no

[production] problems were being met.” Id. at 5 9 . Accordingly,

statement 2 is not actionable.

6 While a direct quote from a company official appearing in the news media is properly attributed to the company, see Cabletron, 311 F.3d at 3 5 , the allegedly false and misleading statement identified in paragraph 37(b) is plainly a statement by dotprint.com rather than by Hallman.

27 Statement 3

In paragraph 37(c) of his amended complaint, plaintiff

identifies as false and misleading the following statement, drawn

from a November 1 , 2000, report found on the PFFC-online.com

website:

Presstek has named VIP Offset & Graphic Arts Supplies & Equipment Inc. a distributor for its new computer-to- plate (CTP) prepress products. According to Presstek, the distributor will service customers located primarily in New York, New Jersey, and Connecticut. Among the Presstek products VIP will distribute: the Dimension Series CTP systems with Anthem thermal plates, both of which were showcased for the first time at September’s Graph Expo in Chicago, I L . Says Carl Brucher, Presstek’s eastern regional sales manager, “The quality of [these products] combined with the expert guidance VIP provides to its customers surely will result in higher productivity.”

(brackets and emphasis supplied by plaintiff). As with statement

2 , plaintiff offers only a generalized assertion of falsity based

upon Presstek’s alleged “fail[ure] to disclose serious critical

flaws, both with the Dimension products and their production.”

(Am. Compl. ¶ 38.)

Statement 3 was published by an industry website, but,

because PFFC-online.com directly quoted a named Presstek

28 employee, the entanglement test appears to be met. See

Cabletron, 311 F.3d at 35 (“This court has previously attributed

direct quotes of company officials in the news media to the

company . . . and does so again here.”) (citing Aldridge, 284

F.3d at 79-80). Plaintiff makes no allegation, however, that the

quoted employee, Presstek’s eastern regional sales manager, was

aware of the alleged production and performance issues that, in

plaintiff’s view, rendered optimistic sales projections false or

misleading, much less that the quoted employee had such knowledge

at the time he made the statement reported on PFFC-online.com.

In addition, the only portion of statement 3 that is

remotely susceptible of an interpretation that might make it

actionable is that portion added by plaintiff, in brackets.

Without a copy of the actual report, which plaintiff has not

provided, or specific allegations detailing the precise

statements made, it is not possible to determine what the

adjective “quality” modified. Thus, plaintiff has failed

adequately to “specify[] . . . the . . . content of the alleged

false or fraudulent representation[].” Arruda, 310 F.3d at 19

(citation omitted).

29 Because plaintiff has not alleged knowledge on the part of

the speaker, and because the complaint lacks the necessary

specificity, plaintiff has not adequately stated a claim with

respect to statement 3 .

Statement 4

In paragraph 37(d) of his amended complaint, plaintiff

identifies as false and misleading the following statement, taken

from a December 2 2 , 2000, Presstek press release titled “Presstek

Comments on Recent Market Conditions”:

Presstek, Inc. (Nasdaq: PRST) a leading provider of direct digital imaging technologies to the printing and publishing industry, commenting on recent market conditions, stated today that management believes that the recent downturn in the company’s stock price is not reflective of the strength of the company’s ongoing operations and future business outlook.

The company also stated it is pleased with the demand for its new Dimension CTP product.

(emphasis added by plaintiff). In addition to offering a

generalized assertion of falsity, plaintiff asserts that this

statement is false and misleading because it “emphasized the

success of Dimension.” (Am. Compl. ¶ 37(d).)

30 Presstek did not “emphasize the success of Dimension” at

all. It merely communicated that the company was “pleased with

the demand for its new Dimension CTP product.” But, again,

because plaintiff has not adequately alleged contemporaneous

knowledge that would make statement 4 false or misleading, and

because nothing in statement 4 fairly implies a representation

that Dimension was free from flaws, that statement is not

actionable.

Statement 5

In paragraph 37(e) of his amended complaint, plaintiff

identifies as false and misleading the following statement in

Presstek’s February 2 1 , 2001, fourth-quarter 2000 earnings

announcement:

Presstek, Inc. (Nasdaq: PRST), a leading provider of direct digital imaging technology, today announced financial results for the fourth quarter and fiscal year ended December 3 0 , 2000. Commenting on the fourth quarter, Presstek’s Chief Financial Officer Neil Rossen said, “While we are pleased with the double-digit growth in revenues over the third quarter of 2000, we believe it could have been an even stronger quarter based on the momentum our products are generating in the marketplace.” “As we previously announced, we were facing some uncertainty entering the fourth quarter about the

31 outlook for shipment levels and schedules for our new DocuColor and Dimension products. And we did, in fact, experience some shipping delays in the fourth quarter that kept our revenues below the upper range of what we had projected. Demand, however, continues to be strong and our partnerships continue to be active.” President and Chief Executive Officer Robert Hallman said, “Over the course of the past few years, Presstek established and implemented several strategic initiatives to improve the company’s performance. These initiatives included exploiting Presstek’s technology leadership position to grow the DI press market, establishing a strong foothold in segments of the off-press computer-to-plate (CTP) markets, making chemistry-free imaging media the industry standard, and creating a strong brand identity. The solid results for fiscal year 2000 demonstrate the progress we are making with these initiatives.” These include: -- Presstek’s successful launch of new products at Drupa 2000. * * * * * -- Technological innovation, that has redefined the industry in terms of off-press applications; Dimension/Anthem’s platesetter/plate system is the next generation, chemistry-free CTP.

(emphasis and ellipsis supplied by plaintiff). In addition to a

generalized assertion of falsity, plaintiff asserts that this

statement is false and misleading because in i t , “defendants

continued to tout the Dimension product line.” (Am. Compl. ¶

37(e).)

32 Assuming defendants “touted” the Dimension product line,7

statement 5 is not actionable for substantially the same reasons

that the previously discussed Dimension-related statements are

not actionable. Plaintiff has not adequately alleged knowledge

that would make that statement false or misleading, and the

statement does not fairly imply the absence of production or

performance issues with the Dimension line.

Statement 6

In paragraph 37(f) of his amended complaint, plaintiff

identifies as false and misleading the following statement in

Presstek’s April 2 1 , 2001, first-quarter 2001 earnings

Our core graphics business continues to gather momentum with revenues growing to $25.8 million from $23.5 million in the fourth quarter of 2000. Demand for product in our core business remains strong despite the general economic slowdown. In particular, our Dimension/Anthem computer-to-plate (CTP) offering appears to be gaining widespread interest across our industry. In addition, during the first quarter we addressed many of the production delays we experienced late last year.

7 The statement reported in paragraph 37(e) is decidedly more measured than plaintiff suggests.

33 (emphasis added by plaintiff). As with all the Dimension-related

statements, plaintiff makes a general assertion of falsity based

upon Presstek’s alleged “fail[ure] to disclose serious critical

flaws, both with the Dimension products and their production.”

(Am. Compl. ¶ 38.) Plaintiff seems to attempt to make another

claim of falsity, but it is difficult to determine the precise

contours of that claim. In addition to incorrectly stating that

Presstek claimed to have resolved the Dimension production delays

when, in fact, Presstek only claimed to have addressed those

delays, plaintiff calls attention to Presstek’s statement that

“during the first quarter [it] addressed many of the production

delays we experienced late last year.” However, plaintiff

alleges no facts tending to show that Presstek did not address

those delays, and does not appear even to argue that point.

Thus, plaintiff is left with a generalized assertion of falsity,

which fails, as a matter of law, due to the failure to allege

knowledge on Presstek’s part that would make any portion of

statement 6 false or misleading.

34 Statement 7

In paragraph 37(g) of his amended complaint, plaintiff

identifies as false and misleading the following statement in

Presstek’s May 1 4 , 2001 first-quarter 2001 10-Q: “The Company

also experienced volume increases in sales of its CTP Dimension

platesetter products.” In addition to offering a generalized

assertion of falsity, plaintiff asserts that this statement is

false and misleading because in i t , “defendants reaffirmed the

growing success of the Dimension line.” (Am. Compl. ¶ 37(g).)

Defendants may well have reaffirmed the growing success of the

Dimension product line, but because they did so by reporting past

results, the accuracy of which plaintiff does not challenge, and

because “accurate reports of past results or events are not

actionable,” Boston Tech., 8 F. Supp. 2d at 59 (citing Serabian,

24 F.3d at 3 6 1 ) , the complaint fails to state an actionable claim

with regard to statement 7 .

Scienter

In Aldridge, the court of appeals explained that “the fact

that the defendants published statements when they knew facts

suggesting the statements were inaccurate or misleadingly

35 incomplete is classic evidence of scienter.” 284 F.3d at 83

(citing Fla. State Bd. of Admin. v . Green Tree Fin. Corp., 270

F.3d 645, 665 (8th Cir. 2001)). In Cabletron, the court held

that a strong inference of scienter supported by several other

factors was reinforced by an allegation that “many people within

the company . . . received regular information about . . .

problems which they should have realized contradicted the

company’s public statements about the rollout of the product.”

311 F.3d at 3 9 . Conversely, however, where a plaintiff fails to

adequately allege a defendant’s knowledge of facts that would

make his or her statement false or misleading, it is difficult to

argue that the plaintiff has adequately alleged that the

defendant acted with the intent to defraud.

Here, plaintiff has failed to “state with particularity

facts giving rise to a strong inference,” 15 U.S.C. § 78u-

4(b)(2), that defendants made statements with an “intent to

deceive, manipulate, or defraud,” Cabletron, 311 F.3d at 3 8 , or

that they made false or misleading statements with a degree of

“extreme recklessness that is ‘closer to a lesser form of

intent,’” id. (quoting Greebel, 194 F.3d at 198-99). Thus, in

36 addition to its other shortcomings, plaintiff’s complaint does

not contain an adequate allegation of defendants’ scienter, which

is an essential element of a successful section 10b-5 claim. See

Cabletron, 311 F.3d at 3 8 .

Regarding scienter, plaintiff makes much of a December 2 2 ,

1997, cease and desist order issued by the Securities and

Exchange Commission (“SEC”) as a result of an administrative

proceeding brought against Presstek. The following excerpts from

that order, SEC Release N o . 39472, demonstrate that plaintiff’s

allegations in this case bear only a scant resemblance to the

violations for which Presstek was found liable by the SEC:

Presstek violated the antifraud provisions by falsely stating in its November 7 release that Heidelberg “has sold over 500" Quickmasters, when in fact Heidelberg had merely received that many orders. (SEC Release N o . 39472, at 7.)

Presstek’s management directly participated in preparing a report that it knew, or was reckless in not knowing, included forecasts that were far more optimistic than Presstek’s contemporaneous internal projections. (SEC Release N o . 39472, at 9.)

Presstek also violated the antifraud provisions by disseminating various Cabot Market Letters . . . that contained earnings projections that management knew, or was reckless in not knowing, greatly exceeded

37 Presstek’s own forecasts and lacked a reasonable basis . . . (SEC Release N o . 39472, at 10.)

Presstek violated Section 13(a) of the Exchange Act and Rules 13a-1 and 12b-20 thereunder, as well as the antifraud provisions, by providing an incomplete and materially misleading disclosure in its 1995 Form 10-K concerning Heidelberg’s delayed shipments of Quickmaster presses and Presstek’s reduced production schedule . . . [which] referred merely to a “schedule change requested by Heidelberg . . .” [while] fail[ing] to describe the “schedule change” as a reduction [in Heidelberg’s order from Presstek] . . . [that reduced] Presstek’s production rate . . . by twenty-five percent. (SEC Release N o . 39472, at 10.)

(Pl.’s Mem. (document n o . 27) Ex. F (emphasis in the original.)

While some superficial associations might be made between

the violations found by the SEC and the allegations plaintiff

makes in this case, those associations fade under even mild

scrutiny. For example, in the 1997 SEC action, Presstek’s

disclosure of a “schedule change” was actionable fraud because

Heidelberg did not merely ask Presstek to reschedule its

shipments; Heidelberg substantially reduced its order – by

twenty-five percent. Here, by contrast, there is no allegation

that Presstek attempted to disguise a reduction in orders as a

shipping or scheduling delay. Nor is there an adequate

allegation that when Presstek announced shipping delays, those

38 who made that announcement knew that the delays were the result

of production issues, or could reasonably predict that there

would be performance issues with the Dimension product.8 In

short, Presstek’s SEC proceeding cannot bear the weight that

plaintiff asks it t o . If anything, comparison of the prior SEC

order and plaintiff’s allegations in this case suggests, rather

than scienter, that Presstek may have learned a lesson and

attempted to do better.

C . The Strategic Alliance with Xerox

According to plaintiff, defendants gave sales projections

for 2001 that were knowingly false when made. Specifically,

plaintiff points to the following report on Presstek’s third-

quarter 2000 financial-results conference call, which appeared on

October 3 0 , 2000, on dotprint.com:

The third quarter results set the platform for what should be a bonanza year for Presstek. The company

8 Similarly, while the SEC found that Presstek had violated the antifraud provisions by adopting and/or issuing revenue forecasts that were far more optimistic than its own internal forecasts, plaintiff in this case seeks to hold Presstek liable for making revenue projections for its entire product line that were different from the internal projections made by Xerox for two products that Presstek and Xerox planned to produce as a joint venture.

39 predicts sales for 2001 running 50% above this year. This will come from increasing consumables sales and from sales of the Xerox DocuColor 4 0 0 , built by Adast, and the DocuColor 233, the OEM version of the Ryobi Direct Image press. Shipments of the Dimension 400 platesetter, worth $800,000 in Q 3 , are also expected to climb steeply.

(Am. Compl. ¶ 51 (emphasis added by plaintiff).) Defendants are

entitled to dismissal of the Xerox-related claim because the

statement at issue is a third-party statement that, like the

Heidelberg statements, fails to meet the First Circuit’s

entanglement test.

D. The Lasertel Subsidiary

According to plaintiff, defendants materially misled

investors by failing to disclose production problems experienced

by its Lasertel subsidiary. Specifically, he points to

statements published on Lasertel’s website and five Presstek

press releases (three reporting quarterly earnings, one

commenting on “recent market conditions,” and one announcing a

repositioning of the Lasertel subsidiary). Plaintiff asserts

that the six identified statements were materially false and

misleading because they recklessly failed to disclose known

problems at Lasertel. In plaintiff’s view, when Presstek made

40 the statements alleged to be false and misleading, it was

obligated to disclose that Lasertel had no consistent procedures

for growing laser wafers, for acid-etching the wafers, or for

reactive ion etching (due to a lack of automation). According to

plaintiff, these defects in the production process caused

Lasertel to produce low-quality laser diodes that lacked

durability.

Defendants move to dismiss the Lasertel-related claims on

grounds that: (1) they are time-barred; (2) plaintiff has not

alleged any false statement concerning Lasertel; (3) the

Lasertel-related statements were not misleadingly incomplete; (4)

the Lasertel allegations do not adequately allege materiality;

and (5) plaintiff has failed to plead scienter regarding the

Lasertel allegations. Plaintiff counters that: (1) defendants

made false and misleading statements regarding Lasertel; (2) the

amended complaint pleads with particularity why those statements

were false when made; (3) defendants’ false statements and

omissions were material; (4) defendants’ misrepresentations

cannot be immunized by unspecific “cautionary language;” (5)

defendants’ misrepresentations concerning Lasertel were not

41 puffery; (6) Lasertel’s misrepresentations and omissions were

made with scienter; and (7) the Lasertel allegations are timely.

Defendant is entitled to dismissal of the Lasertel

allegations because they are untimely.

According to plaintiff’s amended complaint, the market

realized, no later than July 2 6 , 2001, that defendants had

previously made false and misleading statements about Lasertel’s

viability and market-readiness. (Am. Compl. ¶ 8 0 . ) 9 Plaintiff’s

original complaint was dated May 3 0 , 2003, and was filed on June

2 , 2003, while his amended complaint was dated and filed December

1 5 , 2003.

Until the enactment of the Sarbanes-Oxley Act on July 3 0 ,

2002, “the statute of limitations applicable to . . . federal

9 Plaintiff now argues that the first “storm warnings” he received came in Presstek’s March 2 9 , 2002, Form 10-K for 2001, which announced the reversal of a sale due to a customer return that was related to product quality. (Pl.’s Sur-Reply (document n o . 36) at 3.) Plaintiff’s argument is not persuasive, given the plain affirmation, in paragraph 80 of his complaint, that the market realized, as a result of Presstek’s July 2 6 , 2001, statement, that previous Presstek statements had been false and misleading.

42 securities claims barred all actions if they were filed more than

one year after the discovery of the facts constituting the

violation.” Glaser v . Enzo Biochem, Inc., 303 F. Supp. 2d 7 2 4 ,

732 (E.D. V a . 2003) (citing Lampf, Pleva, Lipkind, Prupis &

Petigrow v . Gilbertson, 501 U.S. 3 5 0 , 364 (1991)). However, the

Sarbanes-Oxley Act established a new, more generous statute of

limitations, providing, in pertinent part:

a private right of action that involves a claim of fraud, deceit, manipulation, or contrivance in contravention of a regulatory requirement concerning the securities laws . . . may be brought not later than the earlier of (1) 2 years after the discovery [of] the facts constituting the violation, or (2) 5 years after such violation.

Glaser, 303 F. Supp. 2d at 733 (quoting 28 U.S.C. § 1658(b)).

Not surprisingly, plaintiff argues that this case is

governed by the new, two-year statute of limitations while

defendants argue that the old, one-year statute applies, o r , in

the alternative, that even if the two-year statute applies, the

Lasertel allegations are still time-barred because they were

first raised in the amended complaint and do not relate back to

the initial complaint. Because plaintiff’s claims are subject to

43 the one-year statute of limitations, there is no need to address

the question of relation back.

“The Historical and Statutory Notes [to the Sarbanes-Oxley

Act] provide that this ‘limitations period . . . shall apply to

all proceedings addressed by this section that are commenced on

or after the date of enactment of this Act [July 3 0 , 2002].’”

Glaser, 303 F. Supp. 2d at 733 (quoting Pub. L . 107-204 § 804(b),

116 Stat. 801 (2002)). In plaintiff’s view, the fact that he

filed his original complaint after July 3 0 , 2002, requires a

conclusion that the two-year Sarbanes-Oxley statute of

limitations applies.

However, by the time the Sarbanes-Oxley Act became

effective, the applicable one-year statute of limitations had

already run on plaintiff’s claim. As has been widely held, the

Sarbanes-Oxley Act’s enlargement of the statute of limitations

for securities fraud claims did not revive claims already time-

barred by the date of its enactment. See, e.g., In re Worldcom,

Inc. Sec. Lit., N o . 02 Civ.3288(DLC), 2004 WL 1435356, at *7

(S.D.N.Y. June 2 8 , 2004) (“Sarbanes-Oxley does not revive

44 previously time-barred private securities fraud claims.”);

Lieberman v . Cambridge Partners, L.L.C., N o . Civ.A. 03-2317, 2004

WL 1396750, at *3 (E.D. P a . June 2 1 , 2004); Newby v . Enron, (In

re Enron Corp. Sec., Derivative & “ERISA” Litig.), N o . Civ.A. H-

01-3624, 2004 WL 405886, at *17 (S.D. Tex. Feb. 2 5 , 2004);

Glaser, 303 F. Supp. 2d at 734; Great S . Life Ins C o . v . Enter.

Mortg. Acceptance C o . (In re Enter. Mortg. Acceptance C o . Sec.

Litig.), 295 F. Supp. 2d 3 0 7 , 317 (S.D.N.Y. 2003); In re Heritage

Bond Litig., 289 F. Supp. 2d 1132, 1148 (C.D. Cal. 2003). 10

Those decisions hinge on the principle that “[w]hile Congress may

enlarge a limitations period, Congress’ acts do not revive a

cause of action that has become time-barred unless Congress

specifically provides for retroactive application.” Glaser, 303

F. Supp. 2d at 733 (citing Hughes Aircraft C o . v . United States

ex rel. Schumer, 520 U.S. 939, 950 (1997)).

10 The one opinion that goes the other way, Roberts v . Dean Witter Reynolds, Inc., N o . 8:01-CV-2115-T-26 (EAJ), 2003 WL 1936116, at *2-*4 (M.D. Fla. Mar. 3 1 , 2003), relies largely on legislative history, and has been widely criticized. See, e.g., Lieberman, 2004 WL 1396750, at *3 n.12 (“Roberts . . . reached the opposite conclusion, but its reasoning rests on unpersuasive citations to the [Sarbanes-Oxley Act]’s legislative history. The Court agrees with those courts that have concluded that Roberts should be rejected.”) (citing Enron, 2004 WL 405886, at *12 n.39; Enter. Mortgage, 295 F. Supp. 2d at 316-17).

45 Here, the Sarbanes-Oxley Act does not provide for

retroactive application and, as a consequence, plaintiff’s claim

is governed by the one-year statute of limitations, under which

he had until June 2 5 , 2002, to file suit based upon the Lasertel

allegations. He did not do s o . By the time he did file his

initial complaint, in 2003, any claim based upon the Lasertel

allegations was time-barred. Accordingly, defendants are

entitled to dismissal of the Lasertel allegations.

Conclusion

Plaintiff has failed to state a claim under section 10(b) of

the Securities Exchange Act, and, because he has no section 10(b)

claim, his claim under section 20(a) must necessarily fail. See

Aldridge, 284 F.3d at 84 (“there must be a primary violation [of

section 10(b)] for liability under section 20(a)”); Greebel, 194

F.3d at 207 (citing Suna, 107 F.3d at 7 2 ) . Accordingly,

defendants’ motions to dismiss (document nos. 23 and 25) are

granted. The Clerk of the Court shall enter judgment in

accordance with this order and close the case.

46 SO ORDERED.

Steven J. McAuliffe United States District Judge

September 3 0 , 2004

cc: Alexander J. Walker, Esq. Avi N . Wagner, Esq. Brian E . Pastuszenski, Esq. Paul B . Kleinman, Esq. Robin A . Freeman, Esq. Peter G. Callaghan, Esq.