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Singer v. Caplin

United States Court of Appeals, Fourth Circuit

February 22, 2018

PHILLIP J. SINGER, Individually and on behalf of all other persons similarly situated, Plaintiff - Appellant,
v.
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,
v.
KENNETH REALI; JOSEPH P. SLATTERY; RICHARD RANDALL; MICHAEL LUETKEMEYER; TRANS1, INC., Defendants - Appellants.

          Argued: January 25, 2017

         Appeals 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)

         ARGUED:

          Jeremy Alan Lieberman, POMERANTZ LLP, New York, New York, for Appellant/Cross-Appellee.

          Stephen L. Ram, Aaron C. Humes, STRADLING YOCCA CARLSON & RAUTH, P.C., Newport Beach, California, for Appellees/Cross-Appellants.

         ON BRIEF:

          Michele S. Carino, POMERANTZ LLP, New York, New York, for Appellant/Cross-Appellee.

          John 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.

          Before KING, AGEE, and FLOYD, Circuit Judges.

          KING, CIRCUIT JUDGE

         These 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.

         In 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.

         I.

         A.

         According 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.[1] 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. ¶ 4.

         In this 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.[2]

         The 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.

         Relevant 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.[3] The AMA adopted the NASS recommendation and, effective January 1, 2009, required the System to be coded under Category III. Id.

         B.

         The 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." Id.

         The 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.

         The 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 bodies."

Id. ¶ 38.

         C.

         1.

         After 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.

         The 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.

         In the 2008 Form 10-K[4] 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. ¶ 72.

         In the subsequent 2009 and 2010 Form 10-Ks and in the various quarterly filings of Form 10-Qs[5] 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.

         2.

         As 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.

         Similarly, 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.

         3.

         In sum, 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 scrutiny. Id.

         D.

         According 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-K[6]with 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.

         As 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 reimbursement).'" Id.

         The 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 employee.'" Id.

         The 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.

         E.

         In July 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.[7] 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.

         The qui 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.[8] 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. at 951.

         On June 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.[9]

          F.

         1. On 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, 2012.[10]

         In sum, 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 10(b).

         On 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.

         2.

         Singer 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 system").

         3.

         On July 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.

         During 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.

         4.

         After 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 Order").

         The 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.

         With 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. § 1291.

         II.

         These 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.

         III.

         We 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 ...


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