PHILLIP J. SINGER, Individually and on behalf of all other persons similarly situated, Plaintiff - Appellant,
KENNETH REALI; JOSEPH P. SLATTERY; RICHARD RANDALL; MICHAEL LUETKEMEYER; TRANS1, INC., Defendants - Appellees. and JOEL CAPLIN, Individually and on behalf of all others similarly situated, Plaintiff, PHILLIP J. SINGER, Individually and on behalf of all other persons similarly situated, Plaintiff - Appellee, and JOEL CAPLIN, Individually and on behalf of all others similarly situated, Plaintiff,
KENNETH REALI; JOSEPH P. SLATTERY; RICHARD RANDALL; MICHAEL LUETKEMEYER; TRANS1, INC., Defendants - Appellants.
Argued: January 25, 2017
from the United States District Court for the Eastern
District of North Carolina, at Wilmington. James C. Fox,
Senior District Judge. (7:12-cv-00023-F)
Alan Lieberman, POMERANTZ LLP, New York, New York, for
Stephen L. Ram, Aaron C. Humes, STRADLING YOCCA CARLSON &
RAUTH, P.C., Newport Beach, California, for
Michele S. Carino, POMERANTZ LLP, New York, New York, for
F. Cannon, STRADLING YOCCA CARLSON & RAUTH, P.C., Newport
Beach, California; Jonathan D. Sasser, Thomas H. Segars,
Kelly Margolis Dagger, ELLIS & WINTERS LLP, Raleigh,
North Carolina, for Appellees/Cross-Appellants.
KING, AGEE, and FLOYD, Circuit Judges.
appeals arise from the dismissal of a securities fraud class
action complaint in the Eastern District of North Carolina.
The action relates to the healthcare provider reimbursement
practices of defendant TranS1, Inc., and four officers
thereof - defendants Kenneth Reali, Joseph P. Slattery,
Richard Randall, and Michael Luetkemeyer (collectively, the
"Officers") - in connection with TranS1's
AxiaLIF system (the "System"). According to the
operative second amended complaint of lead plaintiff Phillip
J. Singer (the "Complaint"), TranS1 and the
Officers (together, the "Company") conjured up and
carried out a scheme that enabled surgeons to utilize the
System and secure fraudulent reimbursements from various
health insurers and government-funded healthcare programs.
The scheme resulted in federal False Claims Act proceedings
against TranS1 in the District of Maryland and a fraud
investigation conducted by the Department of Health and Human
Services (the "DHHS"). On the theory that the
Company had concealed the fraudulent reimbursement scheme
from the market by way of false and misleading statements and
omissions - and that TranS1's stock price dropped
precipitously when the scheme was finally revealed - this
class action was initiated pursuant to, inter alia, section
10(b) of the Securities Exchange Act.
dismissing the Complaint with prejudice, the district court
concluded that, although the Complaint alleges the loss
causation element of the section 10(b) claim, it does not
sufficiently plead the material misrepresentation element or
the scienter element of that claim. By his appeal (No.
15-2579), Singer seeks reinstatement of the Complaint,
contesting the court's rulings on the misrepresentation
and scienter elements. TranS1 and the Officers have
cross-appealed (No. 16-1019), asserting that the court erred
in rejecting their challenge to the loss causation element.
As explained herein, we vacate in No. 15-2579 the court's
rulings that the Complaint fails to satisfy the
misrepresentation and scienter elements, and we affirm in No.
16-1019 the court's ruling that the Complaint
sufficiently alleges the loss causation element.
Consequently, we remand for further proceedings.
to the Complaint, TranS1 is a medical device company that
first received approval in 2004 to sell the System, which was
designed for minimally invasive surgery on the lower lumbar
spine to treat degenerative disc disease. See Compl.
¶¶ 2, 25, 27. A System surgery utilizes a
"pre-sacral approach" - i.e., the surgery is
performed straight up the tailbone, with the patient
remaining on her stomach - differentiating it from more
common surgeries performed through the anterior portion of
the spine. Id. ¶¶ 2, 26. TranS1 derives
its revenues almost entirely from sales of the System and
related surgical instruments, as well as from a share of the
reimbursements made by health insurers and government-funded
healthcare programs to surgeons for spinal surgeries using
the System. Id. ¶¶ 3, 25. The financial
success of the Company largely hinges on surgeons'
reimbursement claims being paid, not only because TranS1
receives a share of those reimbursements, but also because,
if the reimbursement claims were denied, surgeons "would
simply stop utilizing the [System]." Id. ¶
securities fraud class action, the putative class includes
those investors in TranS1 who purchased common stock between
February 23, 2009, and October 17, 2011 - the period in which
the Complaint alleges that the Company's fraudulent
reimbursement scheme was concealed from the market.
See Compl. ¶ 1. Each of the Officers was, in
one capacity or another, involved in the management of TranS1
during the relevant time frame.
Complaint explains that a healthcare provider submitting a
reimbursement claim for a surgery is obliged to use Current
Procedural Terminology codes ("CPT codes")
promulgated by the American Medical Association (the
"AMA"). See Compl. ¶ 4. For spinal
surgeries, the AMA generally adheres to the coding
recommendations provided by the National Association of Spine
Surgeons (the "NASS"). Id. The various CPT
codes fall into three categories, which are designated as
Categories I, II, and III. Only the Category I and Category
III codes are relevant here. A Category I code indicates that
a surgical procedure is "traditional" and widely
accepted in the medical community, assuring a full or
substantial reimbursement. Id. ¶ 6. On the
other hand, the use of a Category III code reflects that the
procedure is "experimental" and not widely
accepted. Id. ¶ 5. A Category III code often
results in no reimbursement at all, dissuading healthcare
providers from performing Category III procedures.
Id. ¶ 6.
here, the System was initially coded as a Category I anterior
fusion procedure and thus garnered a full or substantial
reimbursement. See Compl. ¶¶ 5, 29. In
February 2008, however, the NASS recommended that the coding
for the System be changed to Category III, because the System
is unlike traditional anterior fusion procedures and
"suffered from a dearth of safety and efficacy
data." Id. ¶¶ 5, 30. The AMA adopted
the NASS recommendation and, effective January 1, 2009,
required the System to be coded under Category III.
Category III coding requirement threatened TranS1's
revenue stream and financial viability, in that surgeons
could no longer count on reimbursements from health insurers
and government-funded healthcare programs for using the
System. See Compl. ¶¶ 6, 30. The Complaint
alleges that, as a result of the new Category III code, the
Company concocted and carried out its multifaceted and
sophisticated fraudulent reimbursement scheme. Id.
¶ 7. The crux of that scheme was "to convince
surgeons to engage in improper reimbursement practices in
direct violation of" various statutes, including the
federal False Claims Act. Id. ¶ 31. That is,
the Company "encouraged and coached surgeons to utilize
alternate codes, instead of the mandated experimental
Category III designation assigned to [the System], in order
to allow for reimbursement for the procedure."
Complaint describes the fraudulent reimbursement scheme as it
was perpetrated and carried out by the Company. Pursuant to
that scheme, the Company on occasion acknowledged the
System's new Category III code and some of the difficulty
in securing reimbursement for it, but at other times
encouraged and instructed surgeons to nevertheless use a
Category I code for the System. The fraudulent reimbursement
scheme was executed by way of, inter alia, the following:
• The Company formed a reimbursement committee to train
surgeons on how to avoid the mandatory Category III code for
the System. The head of the committee, a TranS1 employee,
gave presentations detailing exactly which non-Category III
codes to use and in what manner, and she established a
"hotline" for surgeons to call to get coding
advice. Pursuant to her instructions, when surgeons did use
the Category III code, they were to "bury" it in
the reimbursement claim so that the insurer might overlook
it. See Compl. ¶¶ 32, 51.
• During conference calls with its third-party product
distributors, the Company instructed the distributors to
advise surgeons that the System should be coded as a Category
I anterior fusion procedure, as it had been prior to the
AMA's adoption of the Category III code. In an effort to
quell the concerns of surgeons who were aware of the new
Category III designation, the Company further advised the
distributors to tell such surgeons that "all
surgeons" were using a Category I code for the System.
Id. ¶¶ 33, 56.
• The Company conducted on-site training sessions
designed to encourage surgeons to exchange tips on how to
"manipulate" coding to get reimbursed. The most
popular site was Cincinnati, Ohio, where TranS1's top
consultant gave numerous presentations wherein he coded the
System under Category I. Id. ¶¶ 34, 62.
• The Company drafted and distributed a reimbursement
guide, dated January 1 through June 30, 2009, for surgeons to
use in making successful claims for reimbursement of System
surgeries. It was only on the guide's last page that the
Company acknowledged the required Category III code for the
System and the unlikelihood of reimbursement for Category III
procedures. Id. ¶ 35.
• At the behest of the Company, TranS1's top
consultant created a template demonstrating how to improperly
code the System as a Category I anterior fusion procedure.
The template contained suggested post-operation notes meant
to disguise the fact that a surgery involved the
non-reimbursable System. Id. ¶¶ 36, 63.
• At TranS1's annual national meeting in 2009 -
attended by many of its employees and executives - the
Company promoted the continued use of a Category I code for
the System, despite the AMA's mandatory Category III
code. The "official company line" to surgeons was,
"'We have a [Category III] code, but here's how
other [surgeons] are coding it.'" Id.
¶¶ 37, 64.
Complaint describes the Company's fraudulent
reimbursement scheme - and especially its efforts to have
surgeons code the System under Category I, rather than
Category III - as "blatant gamesmanship [that] created
an acute risk that [TranS1] would be subject to legal action
as well as scrutiny by the DHHS and other regulatory
Id. ¶ 38.
implementing the fraudulent reimbursement scheme, the Company
concealed the scheme from the market by numerous false and
misleading statements and omissions. See Compl.
¶ 12. The Company specifically failed to disclose, inter
alia, that it "engaged in a scheme to encourage surgeons
to continue using the [Category I] code for anterior
procedures in direct disregard of the AMA's Category III
code assignment for [the System], " and that
TranS1's "revenues, derived primarily from sales of
[the System] as well as a portion of the insurance
reimbursement each performing provider received as a result
of using improper billing codes for [the System], were
generated as a direct result of [the Company's] improper
coding scheme." Id.
Complaint describes various false and misleading statements
and omissions of the Company. For example, on February 23,
2009, Officers Randall and Luetkemeyer participated in a
conference call with analysts for TranS1's fourth quarter
of 2008. See Compl. ¶ 69. During that
conference call, without acknowledging the fraudulent
reimbursement scheme, Randall stated that the Company was
assisting surgeons in obtaining so-called
"'appropriate reimbursement for our
procedure.'" Id. Both Randall and
Luetkemeyer opined that there would not be "'any
significant additional headwind'" with respect to
the new Category III coding requirement for the System.
Id. They did not explain that the reason they
expected continuing reimbursements was that the Company was
coaching surgeons to improperly avoid the mandatory Category
III code. Id. ¶ 72.
2008 Form 10-K filed by TranS1 with the Securities and
Exchange Commission (the "SEC") on March 13, 2009,
TranS1 reported a single source of revenue, i.e.,
"'sales of [the System] and related surgical
instruments.'" See Compl. ¶¶
70-71. By that Form 10-K, the Company acknowledged the new
Category III code for the System and related that merely
"'some'" health insurers and
government-funded healthcare programs "'may not
reimburse'" Category III procedures. Id.
¶ 71. The Company further downplayed the significance of
the Category III code by suggesting that the System was
gaining in popularity and thus unlikely to carry the Category
III code for long. Id. The Company also represented
that the Category III code for the System "'is only
one of up to 10 different CPT codes physicians may submit to
capture the entirety of a spinal fusion [surgery, ] lessening
the impact should payment for [the System] be initially
denied.'" Id. Meanwhile, the Company
omitted the fraudulent coding practices that it advised be
utilized and that were then being employed by surgeons to
secure reimbursements for the System itself. Id.
subsequent 2009 and 2010 Form 10-Ks and in the various
quarterly filings of Form 10-Qs submitted by TranS1 to the SEC,
the Company substantially repeated the false and misleading
statements and omissions of the 2008 Form 10-K. See
Compl. ¶¶ 75- 76, 78-79, 81-82, 84-86, 89-90,
92-93, 95-96, 98-100, 102-103, 105-106. Those filings
variously touted a growing acceptance of the System among
health insurers and providers, see, e.g.,
id. ¶¶ 81, 85, 99, and attributed revenue
losses to "'concerns and uncertainty in the
marketplace surrounding physician reimbursement for our . . .
procedure, '" id. ¶¶ 89, 92, 95.
Like the 2008 Form 10-K, the subsequent filings with the SEC
omitted mention of the Company's reliance on the
fraudulent reimbursement scheme to generate the revenues that
TranS1 did have. Nevertheless, two or more of the Officers
signed each of the Form 10-Ks and Form 10-Qs filed by TranS1
during the relevant timeframe, and two Officers certified
"'that the financial information contained in [each
filing] was accurate and that they disclosed any material
changes to [TranS1's] internal control over financial
reporting.'" Id. ¶¶ 70, 75, 78,
81, 84, 89, 92, 95, 98, 102, 105.
TranS1 suffered losses from 2009 to 2011, the Company
communicated the losses to the market through press releases.
See Compl. ¶¶ 73, 77, 80, 83, 87, 91, 94,
97, 101, 104. On April 27, 2009, for example, the Company
reported a net loss of $5, 000, 000 for the first quarter of
2009. Id. ¶ 73. That very day, Officer Randall
participated in a conference call where he assured investors
that "'we remain diligent about helping our surgeons
obtain appropriate reimbursement for our
procedure.'" Id. ¶ 74. Randall cited,
for example, the reimbursement committee's
"hotline" and the Company's reimbursement guide
- without revealing that the Company was instructing surgeons
to improperly code the System. Id.
on May 4, 2010 - after reporting a net loss of $6, 000, 000
in the first quarter of 2010 - Officers Slattery and Reali
participated in a conference call with financial analysts.
See Compl. ¶¶ 87-88. During that call,
Slattery and Reali described a strategy to earn a Category I
code for the System by "'working with the payers to
remove our experimental designation over time, '"
"'working with the spine societies to gain
endorsement and acceptance of our procedure in a broad
manner, '" and "'working with our physician
customers getting further clinical data published and
presented at key meetings.'" Id. ¶ 88.
Additionally, Slattery falsely asserted that the System's
Category III code was "'not an experimental code,
'" but was in fact "'a tracking
code.'" Id. Once again, the Company did not
disclose the fraudulent reimbursement scheme it had devised
to ensure reimbursements despite the Category III code.
Id. ¶ 90.
none of the Form 10-Ks or Form 10-Qs filed with the SEC, or
the various press releases or conference calls, revealed that
the Company was "engaged in a scheme to encourage
surgeons to employ CPT codes meant for anterior and other
non-Category III procedures in direct disregard of the AMA
mandated Category III code for [the System]."
See Compl. ¶ 72. Nor did any of those SEC
submissions or other statements explain that "a
substantial portion of [TranS1's] earnings and
revenues" were generated by the Company's ongoing
fraudulent reimbursement scheme, and that the scheme put
TranS1 at "substantial risk" of regulatory
to the Complaint, the truth about the Company's
fraudulent reimbursement scheme finally began to emerge in
October 2011. See Compl. ¶¶ 9-10, 108-11.
Specifically, after the market closed on October 17, 2011,
TranS1 filed a Form 8-Kwith the SEC, reporting that it had
received a subpoena on or about October 6, 2011, issued by
the DHHS "'under the authority of the federal
healthcare fraud and false claims statutes.'"
Id. ¶ 108. TranS1's Form 8-K explained that
the DHHS sought "'documents for the period January
1, 2008 through October 6, 2011.'" Id. The
Complaint alleges that, based on the Form 8-K, the market
fully apprehended "that the focus of the subpoena
related to [TranS1's] reimbursement practices, given that
insurance company reimbursement for [the System],
[TranS1's] flagship product, accounted for a majority of
its revenue." Id. ¶ 9; see also
id. ¶¶ 109-110.
evidence of the market's realization of the Company's
fraudulent reimbursement scheme, the Complaint points to an
analyst report issued on October 18, 2011, the day after the
revelatory Form 8-K was filed. See Compl.
¶¶ 9, 109. That analyst report revealed factual
information about TranS1 and its subpoena from the DHHS,
including that the subpoena "'included 19 items
ranging from patient names to serial lot traceability to
reimbursement communications with physicians.'"
Id. ¶ 109. Additionally, the analyst report
revealed the fact that "'half of TranS1's
revenues come from physicians still using [a Category I] code
(which provides reimbursement), rather than the designated
[Category III] code (which does not provide
analyst report also expressed opinions and beliefs, including
that "'we think that [TranS1] has been making strong
efforts to educate physicians about correct
coding.'" See Compl. ¶ 109 (noting
that "ultimately the decision regarding which code to
use lies in the hands of the physician"). Nevertheless,
premised on the known facts, the analyst report concluded
that TranS1's subpoena from the DHHS "'could be
due to reimbursement communications.'" Id.
The analyst report also deduced that, in light of recent
downsizing by TranS1, "'the subpoena could perhaps
stem from allegations by a disgruntled former
very day of the analyst report - October 18, 2011 - the stock
price of TranS1 collapsed, as its "securities plummeted
$1.27 or 40.7%, to close at $1.85." See Compl.
¶ 111. The Complaint describes "a massive selloff
of [TranS1] shares" and an "unusually heavy trading
volume of 2.1 million shares." Id. ¶ 10.
2013, it was publicly confirmed that federal False Claims Act
qui tam proceedings relating to the fraudulent reimbursement
scheme had been commenced against TranS1 by a former employee
in April 2011 - six months before TranS1's stock price
collapse. See Compl. ¶ 8. In other words,
the October 18, 2011 analyst report had "surmised with
radar precision that the subpoena [issued to TranS1 in early
October 2011 by the DHHS] was triggered by 'allegations
by a disgruntled former employee' relating to
[TranS1's] illicit 'reimbursement
communications.'" Id. ¶ 9. The qui tam
action against TranS1 had been initiated by relator Kevin
Ryan, a former sales manager for TranS1, in the District of
Maryland on April 21, 2011. Id. ¶¶ 8,
39-44. The action was commenced under seal and remained
sealed until July 1, 2013. Id. ¶ 8.
tam complaint of April 2011 alleged in detail the fraud
scheme being carried out by TranS1 in contravention of the
federal False Claims Act, as well as the Medicare Act and the
North Carolina False Claims Act. See J.A.
929-64. Similar to the Complaint in these
proceedings, the qui tam complaint specified that TranS1 had
"knowingly caused to be submitted and facilitated the
submission of false and fraudulent claims, statements and/or
documents to federal agencies by causing physicians and
hospitals to submit improper claims for payment to Medicare
and state health insurance programs and insurers."
Id. at 930. The qui tam complaint also alleged that,
"[t]hrough the use of incorrect and misleading billing
and description codes to represent the [System], [TranS1]
fraudulently caused hospitals and physicians to obtain and
continue to obtain reimbursement from Medicare and the State
of North Carolina Health Plan." Id. at 931. The
qui tam complaint explained, inter alia, that once the
Category III code for the System took effect at the beginning
of 2009, the System could "only" be billed
as a Category III procedure. Id. at 941.
Nevertheless, TranS1 instructed its sales staff and surgeons
"to disregard the [Category III code], " as part of
"an intentional and systematic effort to bypass the
[Category III code] designation and to obtain reimbursement
from Medicare and other insurance programs despite the
non-reimbursable status of [the System]." Id.
6, 2013, the United States intervened in the qui tam action
for purposes of settlement. By a settlement agreement
consummated on June 28, 2013, TranS1 agreed to pay the United
States the sum of $6, 000, 000 to resolve the fraud
allegations of the qui tam action with respect to federal
government programs. See J.A. 905-28; see
also Compl. ¶¶ 11, 46. The settlement
agreement included various recitals of the contentions of the
United States against TranS1. For example, the United States
contended that TranS1 had "knowingly caused providers to
submit claims [to publicly funded healthcare programs] for
[System] procedures using incorrect diagnosis or procedure
codes, . . . which in some cases resulted in providers
receiving greater reimbursement than that to which they were
entitled." See J.A. 906. In entering the
settlement agreement, however, TranS1 denied liability and
the various contentions of the relator and the United States.
Id. at 907.
January 24, 2012, plaintiff Joel Caplin filed this securities
fraud class action against TranS1 and the Officers in the
Eastern District of North Carolina. Shortly thereafter,
Singer moved for appointment as lead plaintiff. The district
court appointed Singer as the lead plaintiff on May 8, 2012,
and he filed an amended complaint on July 9,
the amended complaint alleged that TranS1 and the Officers
violated section 10(b) of the Securities Exchange Act - as
well as § 240.10b-5 of Article 17 of the Code of Federal
Regulations ("SEC Rule 10b-5") - by concealing the
fraudulent reimbursement scheme from the market through false
and misleading statements and omissions. According to the
amended complaint, the Company thereby artificially inflated
TranS1's stock price during the course of the fraudulent
reimbursement scheme and injured investors when the scheme
was finally revealed to the public and the stock price
plummeted. The amended complaint also spelled out a claim
against the Officers, under section 20(a) of the Securities
Exchange Act, alleging that they were control persons subject
to individual liability for TranS1's violation of section
September 7, 2012, the Company moved to dismiss the amended
complaint pursuant to Rules 9(b) and 12(b)(6) of the Federal
Rules of Civil Procedure and the Private Securities
Litigation Reform Act of 1995. On September 19, 2013, the
district court granted the dismissal motion, focusing on the
loss causation element of the section 10(b) claim.
See Order, Caplin v. TranS1, Inc., No.
7:12-cv-00023 (E.D. N.C. Sept. 19, 2013), ECF No. 48. In so
ruling, the court recognized that "federal courts have
developed two somewhat distinct theories of loss causation:
(1) corrective disclosure theory and (2) materialization of a
concealed risk." Id. at 13. The court analyzed
both theories of loss causation and concluded that the
amended complaint had not sufficiently pleaded the loss
causation element of the section 10(b) claim under either
theory. The court dismissed the amended complaint with
prejudice, on the belief that "allowing further
amendment would be futile." Id. at 28.
promptly requested the district court to alter or amend its
judgment and submitted his second amended complaint, which is
now the operative Complaint. Upon reconsideration of its
dismissal ruling eight months later, on May 5, 2014, the
court changed its earlier ruling and agreed that the
Complaint sufficiently pleads the loss causation element of
the section 10(b) claim under the materialization of a
concealed risk theory. See Order, Singer v.
TranS1, Inc., No. 7:12-cv-00023 (E.D. N.C. May 5, 2014),
ECF No. 54 (the "Reconsideration Order"). That
Order relied on the Complaint's allegations that the
October 18, 2011 decline in TranS1's stock price resulted
from the revelation - by way of TranS1's October 17, 2011
Form 8-K, coupled with the October 18, 2011 analyst report -
of the Company's long-concealed fraudulent reimbursement
scheme. Id. at 12 (explaining that the analyst
report, "when considered in conjunction with
[TranS1's] disclosure of the subpoena, . . . calls into
question [TranS1's] prior representations that it was
educating physicians about proper coding and reveals to the
public, at least in some sense, that [TranS1] was potentially
improperly manipulating the insurance reimbursement
3, 2014, the Company moved to dismiss the Complaint,
contending that it fails to allege the material
misrepresentation and scienter elements of the section 10(b)
claim. TranS1 then filed a bankruptcy petition in Delaware,
which resulted in an automatic stay of the class action
proceedings with respect to TranS1.
the bankruptcy stay, this litigation could only proceed in
the district court with respect to the Officers. On May 14,
2015, the court dismissed the Complaint as to the Officers.
See Order, Singer v. TranS1, Inc., No.
7:12-cv-00023 (E.D. N.C. May 14, 2015), ECF No. 72 (the
"Officers Order"). With respect to the material
misrepresentation element, that Order explained that the
Complaint is inadequate to show that any of the Officers
"knew TranS1's reimbursement practices were
illegal" or "failed to sufficiently disclose
TranS1's reimbursement practices." Id. at
13-14. On the scienter element, the Officers Order specified
that the Complaint "does not allege when and how the
[Officers] knew or recklessly failed to know that their
disclosures and statements were false or misleading, much
less make a powerful or cogent inference of [the
Officers'] scienter." Id. at 20 (internal
quotation marks omitted). The Officers Order further observed
that, despite being given "three opportunities to submit
a complaint that meets the requirements set forth herein,
" Singer had "failed to do so." Id.
at 23. The Officers Order thus dismissed the Complaint as to
the Officers with prejudice.
lifting the bankruptcy stay on May 14, 2015, the district
court requested supplemental briefing on whether the
dismissal motion should also be granted as to TranS1. On
December 18, 2015 - after receiving further briefing - the
court granted TranS1's motion to dismiss. See
Order, Singer v. TranS1, Inc., No. 7:12-cv-00023
(E.D. N.C. Dec. 8, 2015), ECF No. 92 (the "Final
Final Order first explained that, because the Complaint had
been dismissed as to the Officers, "the only way . . .
to establish liability as to [TranS1], the corporate
defendant, is (1) to identify some other corporate agent who
made a material misrepresentation or omission, and (2) to
make allegations manifesting a strong inference of scienter
as to at least one authorized agent." See Final
Order 5. The court then concluded, on the material
misrepresentation element of the section 10(b) claim, that
the Complaint "does not sufficiently allege that any
authorized corporate agent made a material misrepresentation
or omission." Id. at 6. With respect to the
scienter element, the Final Order reiterated that, as with
the Officers, the Complaint fails to allege that TranS1
"knew that its public disclosures and statements were
misleading." Id. The Final Order thus dismissed
the Complaint as to TranS1 with prejudice.
the Complaint fully dismissed, Singer noted his appeal in No.
15-2579, challenging the district court's rulings that
the Complaint does not allege the material misrepresentation
and scienter elements of the section 10(b) claim. The Company
thereafter cross-appealed in No. 16-1019, taking issue with
the Reconsideration Order's earlier ruling that the loss
causation element is sufficiently pleaded. We possess
jurisdiction over these appeals pursuant to 28 U.S.C. §
appeals relate solely to the sufficiency of the Complaint,
which we review de novo. See Teachers' Ret. Sys. of
La. v. Hunter, 477 F.3d 162, 170 (4th Cir. 2007). In
reviewing the district court's dismissal, we accept all
factual allegations in the Complaint as true, and we consider
the Complaint in its entirety. See Matrix Capital Mgmt.
Fund, LP v. BearingPoint, Inc., 576 F.3d 172, 176 (4th
Cir. 2009). We also draw all reasonable inferences in favor
of Singer. See Nemet Chevrolet, Ltd. v.
Consumeraffairs.com, Inc., 591 F.3d 250, 253 (4th Cir.
2009). In addition to the Complaint, we are entitled to
consider matters of which the district court took judicial
notice, including the qui tam complaint and the qui tam
settlement. See Katyle v. Penn Nat'l Gaming,
Inc., 637 F.3d 462, 466 (4th Cir. 2011); see also
supra note 9.
first consider Singer's appeal (No. 15-2579), which
implicates the Officers Order and the Final Order. If we were
to affirm the district court's rulings in those Orders,
the Company's cross-appeal would be moot, as it ...