Third Circuit disposition — 01-4132

PRECEDENTIAL
Filed October 3, 2002
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 01-4132
IN RE NAHC, INC. SECURITIES LITIGATION
Jack Brady, Roger W. Svec, Jacob A. Salzmann, David
Fisher, Chris Pietrafitta, Frank J. Siefert, Franz
Schleicher, Barry Weisberg and Bruce Bardone
Appellants
Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 00-cv-4020)
District Judge: Honorable Lowell A. Reed, Jr.
Submitted under Third Circuit LAR 34.1(a)
July 18, 2002
Before: McKEE, FUENTES and ALDISERT, Circuit Judges.
(Filed: October 3, 2002)
John F. Innelli
Michael J. Molder
Innelli and Molder
325 Chestnut Street, Suite 903
Philadelphia, PA 19106
Mark Levine
Stull, Stull & Brody
6 East 45th Street
New York, NY 10017
Peter S. Linden
Kirby, McInerney & Squire, LLP
830 Third Avenue, 10th Floor
New York, NY 10022
Attorneys for Appellants,
Jack Brady, Roger W. Svec, Jacob A.
Salzmann, David Fisher, Chris
Pietrafitta, Frank J. Siefert, Franz
Schleicher, Barry Weisberg and
Bruce Bardone
Timothy C. Russell
Spector, Gadson & Rosen, P.C.
1635 Market Street, 7th Floor
Philadelphia, PA 19103

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David W. R. Wawro
Edward J. Henderson
Torys LLP
237 Park Avenue, 20th Floor
New York, NY 10017
Mark C. Hansen
Kellogg, Huber, Hansen, Todd,
& Evans, P.L.L.C.
1615 M Street NW, Suite 400
Washington, D.C. 20036
Attorneys for Appellees,
NAHC, Inc., John Foster, Timothy
Foster, James W. McLane and
Robert E. Healy, Jr.
John W. Frazier, IV
John E. Caruso
Jill Baisinger
Montgomery, McCracken, Walker &
Rhoads, LLP
123 South Broad Street
Philadelphia, PA 19109-1099
Attorneys for Appellee,
PriceWaterhouseCoopers
2
Martin Flumenbaum
Maria T. Vullo
Robyn M. Sorid
Paul, Weiss, Rifkind, Wharton
& Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Howard M. Klein
Conrad, O’Brien, Gellman &
Rohn, P.C.
1515 Market Street, 16th Floor
Philadelphia, PA 19102-1916
Attorneys for Appellee,
Wasserstein Perella & Co., Inc.
OPINION OF THE COURT
ALDISERT, Circuit Judge.
A number of shareholders1 of NovaCare, Inc.’s (now
known as NAHC, Inc.) ("NovaCare" or "Company") appeal
from the dismissal of their consolidated amended complaint
("the Complaint") by the district court pursuant to Rule
12(b)(6), Federal Rules of Civil Procedure, and the Private
Securities Litigation Reform Act ("PSLRA"), 15 U.S.C.
SS 78u-4 et seq. They also appeal from the court’s granting
of NovaCare’s motion for judicial notice. Undergirding this

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appeal are SS 10(b), 14(a) and 20(a) of the Securities and
Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C.
SS 78j(b), 78n(a) and 78t(a), and Rules 10b-5 and 14a-9
promulgated thereunder, 17 C.F.R. SS 240.10b-5 and
240.14a-9.
The district court applied an "inquiry notice" standard to
determine when the limitations period begins to run in a
securities fraud action. Appellants contend that the court
should have applied an actual notice standard. Although
_________________________________________________________________
1. Jack Brady, Roger W. Svec, Jacob A. Salzmann, David Fisher, Chris
Pietrafitta, Frank J. Siefert, Franz Schleicher, Barry Weisberg and Bruce
Bardone.
3
we have adopted an inquiry notice standard in the context
of a RICO case, see Mathews v. Kidder, Peabody & Co., Inc.,
260 F.3d 239, 251 (3d Cir. 2001), we have not decided the
precise standard in the context of a securities fraud claim.
We do so now and conclude that the district court did not
err in applying this standard and dismissing, as time-
barred, the majority of Appellants’ contentions. We also
decide that the large number of other issues raised by
Appellants were properly decided by the district court and
affirm its judgment of dismissal in all respects.
I.
NovaCare, a national provider of physical rehabilitation
and employee benefits management services, operated in
three industry segments: (1) long-term care services,
consisting of physical rehabilitation services; (2) outpatient
services, comprising physical rehabilitation and
occupational health services ("PROH") as well as orthotic
and prosthetic services ("O & P"); and (3) employee benefits
management services, through a majority-owned
subsidiary, NovaCare Employee Services, Inc. ("NCES"). The
Company experienced substantial growth from its inception
in 1985; by the end of the fiscal year ending June 30, 1998,
NovaCare claimed the nation’s highest market share in the
long-term care and orthotic and prosthetic rehabilitation
markets. It was also the nation’s second largest provider of
outpatient physical rehabilitation and occupational health
services, and, through NCES, was the second largest
employee services provider.
Traditionally, long-term care services had been
NovaCare’s core business, and in fiscal 1998, it still
accounted for approximately 40% of the Company’s net
revenues and 60% of its operating income. By the
beginning of the relevant period in May of 1998, NovaCare
common stock, listed on the New York Stock Exchange,
traded generally in the range of $12 to $14 per share.
The future of the long-term care services business was
about to change, however. For many years, nursing homes

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had been reimbursed for therapy services on a cost-basis,
subject to guidelines designed to ensure that costs were
4
reasonable. On May 12, 1998, the Health Care Financing
Administration ("HCFA") issued preliminary regulations
implementing the Balanced Budget Act of 1997 (the"BBA").
The regulations drastically altered the method of
reimbursement by Medicare and Medicaid to long-term care
providers of contract therapy services, switching from
reimbursement on a cost basis to reimbursement based on
a per diem and specific fee schedule structure.
Approximately one week following the issuance of the HCFA
guidelines, 10 NovaCare executives collectively sold nearly
600,000 shares of NovaCare stock. One of the executives
was Defendant T. Foster, who sold roughly $4.1 million in
shares on May 20, 1998.
Following implementation of the HCFA guidelines,
NovaCare reported increasingly diminished revenues for its
long-term care services segment in each quarter of the
1999 fiscal year. The Balanced Budget Act’s impact on
NovaCare’s long-term care business eventually led to a
significant decline in the Company’s stock price listing. It
then issued a warning in its 1998 Annual Report:
Due to the extensive nature of the reimbursement
changes specified by the BBA, the uncertainty
regarding the application of fee schedules and an
annual cap on Medicare Part B services, the effect
these changes may have on the demand for services
and management’s inability to predict what portion of
the PPS and fee schedule rates that NovaCare will be
able to receive based on negotiated term of service
contracts with its customers, the Company is unable to
determine the impact that the BBA will have on its
financial position on results of operations.
App. at 331.
On September 22, 1998, after the Company announced
expectations of significant declines in first quarter earnings
as a result of unanticipated delays in the transition to the
new reimbursement system, the Company’s stock dropped
by approximately $3 per share from $7 to $4. By April 1,
1999, NovaCare was trading at $1.188. Notwithstanding the
new statute’s materially adverse effect on the Company’s
financial condition, the Company did not adjust the value
5
of goodwill as an asset of the long-term care division in the
financial statements on the Securities and Exchange
Commission ("SEC") Form 10-K for the 1998 fiscal year (the
"1998 Form 10-K") or on the SEC Forms 10-Q for the first
and second quarter of the 1999 fiscal year (the"1st Quarter
10-Q" and "2nd Quarter 10-Q," respectively).

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From April 1999 onwards, NovaCare began to implement
a series of restructuring plans to retire its bank debt and
improve its capital structure, and this ultimately resulted in
the sale of all of the Company’s operating lines of business.
On April 5, 1999, the Company announced that it had
entered into an agreement to sell its Orthotic and Prosthetic
business to Hanger Orthopedic Group, Inc. for $455
million. On May 28, 1999, NovaCare announced that it had
agreed to divest its long-term care services business to
Chance Murphy, Inc. for only nominal consideration.
On May 30, 1999, T. Foster, McLane and Healy
renegotiated their employment contracts, providing for
transaction and retention bonuses tied to the sale of NCES,
the sale of PROH, and the earlier of either the liquidation of
the Company or June 30, 2000.
On August 16, 1999, the board of directors of NovaCare
announced that it had approved a proposal to sell the
PROH division and the Company’s shares in NCES to
satisfy the Company’s outstanding debentures, and to
reinvest or to liquidate and distribute to stockholders any
remaining proceeds (the "Restructuring Plan"). On August
13, 1999, NovaCare filed with the SEC, and mailed to its
shareholders, proxy materials announcing a special
meeting for the shareholders to vote on the Restructuring
Plan (the "Proxy Statement"). The Proxy Statement
estimated that the proceeds available for distribution in the
event of a liquidation would range from $1.76 to $3.94 per
common share. On September 8, 1999, the Company
announced that it had entered into an agreement, subject
to shareholder approval of the Restructuring Plan, to sell its
shares in NCES to an investment group at $2.50 per share,
amounting to approximately $48.5 million. On September
10, the Company filed and sent additional proxy materials,
which included an opinion letter by Wasserstein assessing
the fairness of the NCES transaction.
6
On September 20, 1999, the Company filed an SEC Form
10-K for the 1999 fiscal year. The Company did not
reassess its goodwill in light of the Restructuring Plan or
adjust the value of goodwill as an asset in the 1999 Form
10-K’s financial statements.
The shareholders of NovaCare approved the
Restructuring Plan on September 21, 1999. On October 4,
1999, the Company announced that it had agreed to sell
the PROH division to Select Medical Corporation ("Select
Medical") for approximately $200 million in cash and debt
assumption.
On November 22, 1999, the Company filed its Form 10-Q
with the SEC, releasing its financial results for the first
quarter of the 2000 fiscal year. This Form 10-Q disclosed
the following developments:

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(a) Hanger had claimed there was a $29 million
shortfall in NovaCare’s calculation of the O & P
division’s working capital, for which NovaCare was
responsible pursuant to the sale agreement’s working
capital guarantee;
(b) NovaCare was writing off assets that it had retained
from the long-term care services business, and that
between the write-off and the working capital
guarantee that it provided to Chance Murphy, the
Company would incur roughly $24.4 million in losses
related to the long-term care services business;
(c) NovaCare had placed more than $13 million in
escrow in support of the guarantee to the NCES
investors for four years of gross profits from a services
agreement with the PROH business, a guarantee on
which NovaCare was required to perform when Select
Medical declined to enter into the agreement; and
(d) the Company had to hold in escrow $36.8 million of
the sale proceeds from the PROH sale, and pay $26
million in transaction costs and other liabilities, so
NovaCare would receive only $99 million in cash
proceeds from Select Medical.
App. at 6. The Form 10-Q also revealed that as a result of
the foregoing developments, the estimated liquidation value
7
now ranged from $0.10 to $1.00 per share. On November
26, 1999, the first day of trading following the release of
Form 10-Q, NovaCare’s stock price dropped 75% to $0.125
per share. On November 14, 2000, NovaCare disclosed that
there would be no liquidated dividend, and that the
Company held insufficient funds to satisfy its outstanding
debt.
Because of the broadband attack launched by the
Appellants before us, it is necessary to set forth, in
considerable detail, the comprehensive nature of the district
court proceedings, and the seven separate contentions of
reversible error asserted in this appeal.
II.
On August 9, 2000, Jack Brady filed a complaint against
NovaCare, a certain number of its officers and directors,
and Wasserstein Perella & Co. The complaint asserted that
defendants had misrepresented NovaCare’s divestiture of its
four operating businesses during 1999. It alleged claims
under SS 10(b), 14(a) and 20(a) of the Exchange Act and the
rules thereunder on behalf of stockholders who purchased
NovaCare stock from May 20, 1998, through November 22,
1999, or who were eligible to vote on a restructuring plan
in September 1999. Brady published notice of the action in
accordance with the PSLRA, 15 U.S.C. S 78u-4(a)(3).

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On September 19, 2000, Chris Pietrafitta filed a
complaint against the same defendants and also
PriceWaterhouseCoopers LLP ("PwC"), alleging claims
arising from the impact of the BBA on NovaCare’s long-term
care services business. The district court consolidated all
pending actions, appointed lead plaintiffs and approved the
selection of lead plaintiff ’s counsel.
On February 20, 2001, Appellants filed a consolidated
and amended Complaint, incorporating the allegations of
six previously filed complaints. On March 12, 2001, the
district court granted plaintiffs leave to file a further
amendment to correct certain misstated allegations in the
consolidated Complaint.
Count I of the Complaint asserted Rule 10b-5 claims
against the NovaCare Defendants. The plaintiffs alleged that
8
the NovaCare Defendants engaged in a course of conduct
from May 20, 1998, to November 22, 1999, in which they
knowingly or recklessly issued materially false and
misleading financial statements and failed to disclose
significant terms of various asset sales in order to
artificially inflate and maintain the price of NovaCare
common stock.
The district court categorized the claims contained in
Count I into six groups: (A) failure to adjust the goodwill of
the long-term care services division in light of the BBA’s
impact; (B) failure to disclose that proceeds from the sale of
the O & P division would be reduced because of overstated
working capital; (C) failure to disclose that proceeds from
the sale of the long-term care division would be reduced
because of (i) overstated working capital and (ii)
uncollectible accounts receivable; (D) failure to disclose that
proceeds from the sale of the NCES division would be
reduced because (i) the purchaser of PROH would not enter
into an employment services contract with NCES, nor
assume the Company’s guarantee of the contract and (ii)
NovaCare had placed funds in escrow to support the
guarantee of the employment services contract; (E) failure
to disclose that proceeds from the sale of the PROH division
would be materially reduced because (i) the Company
would lose the funds escrowed in support of the financial
representations in the sales agreement due to the
overstatement of the PROH working capital and accounts
receivable and (ii) the Company would place $36 million in
escrow in support of the financial representations and
would incur $26 million in transactions costs and
liabilities; and (F) failure to adjust the Company’s goodwill
despite the planned sale of all operating assets under the
Restructuring Plan.
Count II of the Complaint asserted Rule 10b-5 claims
against PwC, averring that PwC issued materially false and
misleading audit reports for NovaCare’s 1998 and 1999
Forms 10-K.

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Count III of the Complaint asserted Rule 10b-5 claims
against Wasserstein for issuing a materially false and
misleading fairness opinion regarding the NCES transaction
in the proxy materials.
9
Count IV of the Complaint asserted S 20(a) claims against
the Individual Defendants, as control persons of the
Company during the time of the alleged underlying
violations of Rule 10b-5 and Rule 14a-9.
Count V of the Complaint asserted Rule 14a-9 claims
against all of the defendants except PwC for issuing proxy
materials with materially false or misleading statements
regarding Claims (B) through (E) of Count I of the
Complaint as listed above.
On April 20, 2001, the NovaCare defendants filed a
motion to dismiss the amended Complaint and a motion for
judicial notice of certain press releases and SEC filings
referred to in the Complaint, other SEC documents filed
during the relevant period, and NovaCare’s published stock
price throughout the alleged class periods.
On October 17, 2001, the district court issued a
Memorandum and Order dismissing the consolidated
amended Complaint under Rule 12(b)(6). In re NAHC Sec.
Litig., Master File No. 00-4020 (E.D. Pa. Oct. 17, 2001)
(hereinafter "D. Ct. Op."). The district court concluded that:
(1) Appellants’ claim arising from the impact of the BBA on
NovaCare’s long-term services business was time-barred
under the relevant statute of limitations; (2) most of
Appellants’ other claims under S 10(b) of the Exchange Act
failed to plead any misrepresentations; and (3) that
Appellants’ remaining S 10(b) claims were either based on
alleged misrepresentations that were immaterial as a
matter of law, or were not alleged to have been made with
the requisite scienter. Furthermore, the district court held
that Appellants’ claims under S 14(a) of the Exchange Act
failed to plead material misrepresentations or transactional
causation and that Appellants’ claims under S 20(a) of the
Exchange Act were not viable in the absence of sufficiently
pleaded claims under S 10(b) or S 14(a). The district court
therefore entered an Order which dismissed the Complaint.
Furthermore, the court denied Appellants the opportunity
to further amend their Complaint, determining that any
further efforts to amend would be futile. This appeal
followed.
10
III.
The district court had jurisdiction of the underlying
action pursuant to 15 U.S.C. S 78aa. We have appellate
jurisdiction pursuant to 28 U.S.C. S 1291.

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We exercise de novo review of the district court’s
dismissal under Rule 12(b)(6), Maio v. Aetna, Inc., 221 F.3d
472, 481 (3d Cir. 2000), and must accept as true all
material allegations in the complaint, but we need not
accept as true "unsupported conclusions and unwarranted
inferences." Id. at 485 n.12 (quoting City of Pittsburgh v.
West Penn Power Co., 147 F.3d 256, 263 n.13 (3d Cir.
1998)).
Furthermore, a court’s decision whether to take judicial
notice of certain facts is reviewed for abuse of discretion.
Lozano v. Ashcroft, 258 F.3d 1160, 1164 (10th Cir. 2001)
(citing United States v. Wolny, 133 F.3d 758, 764-765 (10th
Cir. 1998)).
Finally, we review the district court’s denial of leave to
amend the complaint for abuse of discretion. Singletary v.
Pa. Dep’t of Corrs., 266 F.3d 186, 193 (3d Cir. 2001) (citing
Urrutia v. Harrisburg County Police Dept., 91 F.3d 451, 457
(3d Cir. 1996)).
IV.
This appeal requires us to determine whether the district
court properly dismissed Appellants’ consolidated
Complaint alleging various violations of the Securities and
Exchange Act of 1934.2 The district court initially
_________________________________________________________________
2. Appellants’ original Complaint was extremely convoluted. However, the
district court did an outstanding job of organizing the varied, haphazard
claims into a coherent, intelligible structure:
Count I of the Complaint asserts Rule 10b-5 claims against the
NovaCare Defendants. The plaintiffs allege that the NovaCare
Defendants engaged in a course of conduct from May 20, 1998, to
November 22, 1999, in which they knowingly or recklessly issued
materially false and misleading financial statements and failed to
disclose significant terms of various asset sales in order to
artificially inflate and maintain the price of NovaCare common stock.
11
determined that Appellants’ "overstatement of goodwill"
claim, located in Count I of the Complaint, was time-barred
_________________________________________________________________
Although allegations of the misrepresentations are strewn
throughout the Complaint, for purposes of convenience and clarity,
and as guided by the motion papers and responses of the parties, I
will categorize the claims brought against the NovaCare Defendants
in Count I of the Complaint into the following six groups:
Claim (A): failure to adjust the goodwill of the long-term care
services division in light of the BBA’s impact;
Claim (B): failure to disclose that proceeds from the sale of the O &
P division would be reduced because of overstated working capital;

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Claim (C): failure to disclose that proceeds from the sale of the long-
term care division would be reduced because of (i) overstated
working capital and (ii) uncollectible accounts receivable;
Claim (D): failure to disclose that proceeds from the sale of the
NCES division would be reduced because (i) the purchaser of PROH
would not enter into an employment services contract with NCES,
nor assume the Company’s guarantee of the contract; and (ii)
NovaCare had placed funds in escrow to support the guarantee of
the employment services contract;
Claim (E): failure to disclose that proceeds from the sale of the
PROH division would be materially reduced because (i) the Company
would lose the funds escrowed in support of the financial
representations in the sales agreement due to the overstatement of
the PROH working capital and accounts receivable, and (ii) the
Company would place $36 million in escrow in support of the
financial representations and would incur $26 million in
transactions costs and liabilities; and
Claim (F): failure to adjust the Company’s goodwill despite the
planned sale of all operating assets under the Restructuring Plan.
Count II of the Complaint asserts Rule 10b-5 claims against PwC.
The plaintiffs claim that PwC issued materially false and misleading
audit reports for NovaCare’s 1998 and 1999 Forms 10-K.
Count III of the Complaint asserts Rule 10b-5 claims against
Wasserstein for issuing a materially false and misleading fairness
opinion regarding the NCES transaction in the proxy materials.
Count IV of the Complaint asserts Section 20(a) claims against the
Individual Defendants, as control persons of the Company during
12
because Appellants were on inquiry notice for more than
one year prior to the filing of their claim.
A.
Before the district court, Appellants asserted that the
NovaCare Appellees knowingly overstated the value of their
long-term care services business by failing to write down
goodwill in the financial statements presented in
NovaCare’s Annual and Quarterly Reports filed in fiscal
1998 and 1999. Appellants further alleged that this
overstatement was a violation of generally accepted
accounting principles. The district court determined that
this claim was time-barred because Appellants were on
inquiry notice of the claim for more than a year before
actually filing it.
In Lampf v. Gilbertson, 501 U.S. 350, 364 (1991), the
Court determined that claims arising under S 10(b) of the
Exchange Act are governed by the limitations rule set forth
in S 9(e) of the Exchange Act: "No action shall be
maintained to enforce any liability created under this

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section, unless brought within one year after the discovery
of the facts constituting the violation and within three years
after such violation." 15 U.S.C. S 78i(e). Allegations
regarding the impact of the BBA on the goodwill of
NovaCare’s long-term care services division were first
asserted by Appellants in their consolidated Complaint
dated September 19, 2000.3 Thus, to the extent that
Appellants were on notice of the alleged overvaluation of
goodwill prior to September 19, 1999, this claim of
fraudulent misrepresentation is time-barred.
_________________________________________________________________
the time of the alleged underlying violations of Rule 10b-5 and Rule
14a-9.
Count V of the Complaint asserts Rule 14a-9 claims against all of
the defendants except PwC for issuing proxy materials with
materially false or misleading statements regarding Claims (B)
through (E) of Count I of the Complaint as listed above.
D. Ct. Op. at 7-8 (internal citations omitted).
3. Appellants do not dispute that September 19, 2000, is the appropriate
date from which to measure the statute of limitations.
13
1.
Appellants argue that the district court improperly
applied an "inquiry notice" standard to determine when the
limitations period begins to run in a securities fraud action,
and instead should have applied an actual notice standard.
They primarily rely on the language of Berry v. Valence
Tech., Inc., 175 F.3d 699, 703 (9th Cir. 1999), in which the
court stated:
Plaintiffs contend that Lampf established an actual
discovery standard for triggering the statute of
limitations. Lampf does appear unequivocal on this
point: "The 1-year period, by its terms, begins after
discovery of the facts constituting the violation." 501
U.S. at 363 . . . Moreover, in applying section 9(e)’s
limitations period to actions under section 10(b), Lampf
explicitly chose a provision requiring actual discovery
over other provisions allowing inquiry notice. In
contrast to section 9(e), section 13 of the Securities
and Exchange Act of 1933 . . . stipulates that actions
under that Act must be brought "within one year after
the discovery of the untrue statement or the omission,
or after such discovery should have been made by the
exercise of reasonable diligence." 15 U.S.C.S 77m. The
Supreme Court in Lampf acknowledged the difference,
and was clear about its choice: "[T]he various 1-and-3-
year periods contained in the 1934 and 1933 Acts
differ slightly in terminology. To the extent that these
distinctions in the future might prove significant, we
select as the governing standard for an action under
S 10(b) the language of S 9(e) of the 1934 Act." 501 U.S.

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at 364 n.9 . . . .
Berry, 175 F.3d at 703 (emphasis omitted).
Although, the above passage indicates that court’s
preference for an actual notice standard when confronted
with a securities fraud situation, the Berry court did
recognize that "[c]ourts can impute knowledge of public
information without inquiring into when, or whether,
individual shareholders actually knew of the information in
question." Id. at 703 n.4.
14
2.
This is an open question in this court. We have yet to
determine when the limitations period begins to run in a
securities fraud action, although other courts of appeals,
and district courts within this judicial circuit, have
generally applied an inquiry notice standard, coupled with
some form of reasonable diligence requirement in
determining whether a plaintiff ’s securities claims are
timely filed. Recently, we adopted an inquiry notice test for
securities fraud claims in a RICO context. See Mathews,
260 F.3d at 251. We are not inclined to follow the analysis
of the Court of Appeals for the Ninth Circuit, and accept
the approach followed by the other Courts of Appeals and
the district courts in this judicial circuit.4
To the extent a securities fraud plaintiff was on inquiry
notice of the basis for claims more than one year prior to
bringing the action, his or her claim is subsequently time-
barred by the requisite statute of limitations.
_________________________________________________________________
4. See Rothman v. Gregor, 231 F.3d 81, 97 (2d Cir. 2000) ("[W]e conclude
that whether the [plaintiffs’] claim against[defendant] is time-barred
turns on when, after obtaining inquiry notice . . . , the [plaintiffs], in the
exercise of reasonable diligence, should have discovered the facts
underlying the alleged fraud . . . ."); Sterlin v. Biomune Sys., Inc., 154
F.3d 1191, 1199-1201 (10th Cir. 1998); Great Rivers Coop. v. Farmland
Indus., Inc., 120 F.3d 893, 896 (8th Cir. 1997) ("Inquiry notice exists
when the victim is aware of facts that would lead a reasonable person to
investigate and consequently acquire actual knowledge of the defendant’s
misrepresentations."); Marks v. CDW Computer Centers, Inc., 122 F.3d
363, 368 (7th Cir. 1997) ("[I]nquiry notice does not begin to run unless
and until the investor is able, with the exercise of reasonable diligence
(whether or not actually exercised), to ascertain the information needed
to file suit."); Caviness v. Derand Res. Corp., 983 F.2d 1295, 1303 (4th
Cir. 1993) ("[S 13] provides for the commencement of the one-year
limitations period when the plaintiff knows of the facts on which the
action is based or has such knowledge as would put a reasonably
prudent purchaser on notice to inquire, so long as that inquiry would
reveal the facts on which a claim is ultimately based."); Dodds v. Cigna
Sec., Inc., 12 F.3d 346, 350 (2d Cir. 1993) ("[W]hen the circumstances
would suggest to an investor of ordinary intelligence the probability that
she has been defrauded, a duty of inquiry arises, and knowledge will be
imputed to the investor who does not make such an inquiry."); Rosen v.

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Comm. Servs. Group, Inc., 155 F. Supp. 2d 310 (E.D. Pa. 2001); Leach v.
Quality Health Servs., 902 F. Supp. 554, 557 (E.D. Pa. 1995).
15
Under the "inquiry notice" standard, the one-year period
begins to run when the plaintiffs "discovered or in the
exercise of reasonable diligence should have discovered the
basis for their claim" against the defendant. Gruber v. Price
Waterhouse, 697 F. Supp. 859, 863 (E.D. Pa. 1988) (citing
Hobson v. Wilson, 737 F.2d 1, 34 n.103 (D.C. Cir. 1984)).
Whether the plaintiffs, in the exercise of reasonable
diligence, should have known of the basis for their claims
depends on whether they had "sufficient information of
possible wrongdoing to place them on ‘inquiry notice’ or to
excite ‘storm warnings’ of culpable activity." Id. at 864. The
test for "storm warnings" is an objective one, based on
whether a "reasonable investor of ordinary intelligence
would have discovered the information and recognized it as
a storm warning."5 Mathews , 260 F.3d at 252. Plaintiffs
need not know all of the details or "narrow aspects" of the
alleged fraud to trigger the limitations period; instead, the
period begins to run from "the time at which plaintiff
should have discovered the general fraudulent scheme." In
re Prudential Ins. Co. Sales Practices Litig., 975 F. Supp.
584, 599 (D.N.J. 1997) (quoting McCoy v. Goldberg, 748 F.
Supp. 146, 158 (S.D.N.Y. 1990)).
"Once on inquiry notice, plaintiffs have a duty to exercise
reasonable diligence to uncover the basis for their claims,
and are held to have constructive notice of all facts that
could have been learned through diligent investigation
during the limitations period." Gruber, 697 F. Supp. at 864
(citing Maggio v. Gerard Freezer & Ice Co., 824 F.2d 123,
127-128 (1st Cir. 1987); Mosesian v. Peat, Marwick, Mitchell
& Co., 727 F.2d 873 (9th Cir. 1984); Robertson v. Seidman
_________________________________________________________________
5. As the Mathews court recognized:
[S]torm warnings may take numerous forms, and we will not
attempt to provide an exhaustive list. They may include, however,
substantial conflicts between oral representations of the brokers and
the text of the prospectus, . . . the accumulation of information over
a period of time that conflicts with representations that were made
when the securities were originally purchased, or any financial, legal
or other data that would alert a reasonable person to the probability
that misleading statements or significant omissions had been made.
Mathews, 260 F.3d at 252 (internal citations and quotations omitted).
16
& Seidman, 609 F.2d 583 (2d Cir. 1979); Cook v. Avien,
Inc., 573 F.2d 685 (5th Cir. 1978)).
The district court correctly applied the inquiry notice test
in determining that Appellants’ claim that NovaCare had

-- 13 of 23 --

overstated the value of its long-term care services business
was time-barred. The court reasoned that Appellants were
on inquiry notice of that claim no later than June 16, 1999,
when NovaCare filed a Form 8-K announcing the
completion of the sale of the long-term care services
business for nominal consideration. This announcement
was the culmination of a series of disclosures that put
Appellants on notice that NovaCare’s long-term care
services business was in trouble. These disclosures
included a press release in September 1998, and Quarterly
Reports in November 1998 and February 1999, indicating a
material decline in the revenues and earnings of that
business. Then, beginning in early May 1999, NovaCare
issued a series of specific disclosures which revealed that
the long-term care services business had no valuable
goodwill:
1) On May 11, 1999, NovaCare issued a press release
stating that it was writing off the goodwill of its long-
term care services business.
2) On May 17, 1999, NovaCare filed a Form 10-Q
explaining that it was writing off goodwill because it
had concluded "that it will be unable to recover its
investment in long-lived assets in the long-term care
services segment."
3) In the May 17, 1999, Form 10-Q NovaCare also
disclosed that it was considering abandoning the long-
term care services business entirely.
4) On May 28, 1999, NovaCare issued a press release
disclosing that it had agreed to sell the entire long-term
care services business to Chance Murphy "for a
nominal amount."
NAHC Appellees’ Brief at 34-35.
Thus, the district court concluded, that by June 16,
1999, when NovaCare completed the sale of its long-term
care services business for nominal consideration,
17
Appellants, as reasonable stockholders, "were at least on
inquiry notice of their claims . . . and, in the exercise of
reasonable diligence, should have discovered the basis for
the claims within one year." D. Ct. Op. at 18. The district
court is correct in its analysis. Appellants conceded in their
Complaint: "By April 1999, the financial markets had
discounted the long-term care services segment entirely,
and Novacare [sic] common stock reflected the valuation of
Novacare’s [sic] other lines of business." App. at 111. This,
coupled with NovaCare’s repeated disclosures that it was
writing off the goodwill and selling the business for nominal
consideration, constituted " ‘storm warnings’ sufficient to
place [Appellants] on inquiry notice that the previous
valuations of goodwill had been overstated in derogation of
GAAP." D. Ct. Op. at 18.

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Once the existence of storm warnings has been
adequately established "the burden shifts to the plaintiffs to
show that they exercised reasonable due diligence and yet
were unable to discover their injuries." Mathews, 260 F.3d
at 252. If plaintiffs do not investigate the storm warnings,
they are "deem[ed] . . . on inquiry notice of their claims." Id.
at n.16. Appellants did not allege any facts in their
Complaint to show why, in the exercise of due diligence,
they could not have discovered the overstatement of
goodwill prior to September 19, 2000. However, they now
contend before this court that because NovaCare did not
separately report the value of goodwill for each acquisition
NovaCare made during its rapid expansion, "[Appellants]
could not have been able to assess [Appellees’] failure to
record losses in the value of its intangible assets."
Appellants’ Brief at 39-40.
Appellants’ argument fails for a number of reasons. First,
Appellants allege that the overstatement of goodwill arose
from the BBA’s impact on NovaCare’s entire long-term care
services business, not from any particular acquisition.
Second, there is no reason to believe that if Appellees
individually recorded the writing-off of goodwill of individual
acquisitions, the problem would have been disclosed to
Appellants any sooner. NovaCare wrote off all long-term
care services goodwill in May 1999. Third, Appellants’ claim
is seriously undermined by their own admission that the
18
financial markets had discounted the long-term care
services business entirely by April 1999. Finally, Appellants
cannot bolster their cause by arguing the difficulty of
discovering the alleged fraud. This court has previously
held that "excus[ing] Appellant’s lack of inquiry because, in
retrospect, reasonable diligence would not have uncovered
their injury . . . would, in effect, discourage investigation
. . . ." Mathews, 260 F.3d at 252 n.16.
3.
Therefore, because the claim regarding the overstatement
of the long-term care services’ goodwill was not asserted
until September 19, 2000, this action was not commenced
within the one-year limitations period. Consequently, the
district court did not err in dismissing Appellants’ BBA-
related claims as time-barred.
V.
Appellants contend also that the district court erred
when it: (1) dismissed Appellants’ remaining S 10(b)
allegations against NovaCare for failure to state a claim; (2)
dismissed Appellants’ S 14(a) claims against NovaCare for
failure to demonstrate materiality and transactional
causation; (3) dismissed Appellants’ S 10(b) claims against
PricewaterhouseCoopers LLP because they were time-barred
and they failed to allege any material misrepresentations in

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their statements; (4) dismissed Appellants’ S 10(b) and
S 14(a) claims against Wasserstein Perella & Co., Inc.
because any alleged misrepresentation was immaterial as a
matter of law; (5) improperly took judicial notice of certain
documents filed during the relevant period; and (6) abused
its discretion in denying Appellants leave to amend.
A.
The district court did not err in dismissing Appellants’
remaining S 10(b) allegations against the NovaCare
Appellees for failure to state a claim.
To state a valid securities fraud claim under Rule 10b-
5, a plaintiff must first establish that defendant, in
19
connection with the purchase or sale of a security,
"made a materially false or misleading statement or
omitted to state a material fact necessary to make a
statement not misleading. See In re Burlington Coat
Factory Sec. Litig., 114 F.3d 1410, 1417 (3d Cir. 1997).
The plaintiff must additionally establish that the
defendant acted with scienter and that plaintiff ’s
reasonable reliance on defendant’s misstatement
proximately caused him injury. See In re Phillips
Petroleum Sec. Litig., 881 F.2d 1236, 1244 (3d Cir.
1989).
Oran v. Stafford, 226 F.3d 275, 282 (3d Cir. 2000).
In addition, a party asserting a claim under the federal
securities laws must meet the heightened pleading
standard set forth under the PSLRA, enacted in 1997 to
restrict abuses in securities class-action litigation. First,
the PSLRA requires a party alleging a Rule 10b-5 violation
to "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."
In re Advanta Corp. Sec. Litig., 180 F.3d 525, 530 (3d Cir.
1999) (quoting 15 U.S.C. S 78u-4(b)(1)). Second, the PSLRA
requires that a securities fraud complaint "state with
particularity facts giving rise to a strong inference that the
defendant acted with the required state of mind." Id. at
531-532 (quoting 15 U.S.C. S 78u-4(b)(2)).
Appellants initially attempt to attack the district court’s
dismissal of their S 10(b) claims by arguing that the court
applied too stringent a standard when reviewing their
allegations. Appellants contend that Rule 9(b), Federal
Rules of Civil Procedure requires that a " ‘relaxed’ pleading
standard applies to securities fraud actions brought under
the PSLRA." Appellants’ Brief at 42. We do not agree.
We have recognized that "[c]omplaints alleging securities
fraud must also comply with Rule 9(b), which provides: ‘In

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all averments of fraud or mistake, the circumstances
constituting fraud or mistake shall be stated with
particularity. Malice, intent, knowledge, and other condition
20
of mind of a person may be averred generally.’ " Advanta,
180 F.3d at 531 (quoting Rule 9(b), Federal Rules of Civil
Procedure).
We have held that "Rule 9(b)’s provision allowing state of
mind to be averred generally conflicts with the Reform Act’s
requirement that plaintiffs ‘state with particularity facts
giving rise to a strong inference’ of scienter . . . In that
sense, we believe the Reform Act supersedes Rule 9(b) as it
relates to Rule 10b-5 actions." Id. at n.5 (internal citations
omitted). The standard applied by the district court here
was correct.
In an extremely thorough discussion, the district court
dismissed Appellants’ S 10(b) claims against NovaCare. We
accept the reasoning and conclusion set forth in its
opinion. D. Ct. Op. at 12-28.
B.
In addition to their Rule 10b-5 contentions, Appellants’
argue that the proxy materials distributed by the NovaCare
Appellees on August 13, 1999, and September 10, 1999,
violated S 14(a) and Rule 14a-9 because they had
misrepresented the liquidation values of NovaCare. They
further allege that the proxy materials failed to disclose
fully the extent of bonuses that the Company executives
had negotiated for themselves.
Rule 14a-9, promulgated by the SEC pursuant to Section
14(a) of the Exchange Act, provides, in pertinent part that:
No solicitation subject to this regulation shall be made
by means of any proxy statement . . . which, at the
time . . . it is made, is false or misleading with respect
to any material fact, or which omits to state any
material fact necessary in order to make the
statements therein not false or misleading . . .
17 C.F.R. S 240.14a-9.
"To prevail on a S 14(a) claim, a plaintiff must show
that (1) a proxy statement contained a material
misrepresentation or omission which (2) caused the plaintiff
injury and (3) that the proxy solicitation itself, rather than
21
the particular defect in the solicitation materials, was ‘an
essential link in the accomplishment of the transaction.’ "
Gen. Elec. Co. v. Cathcart, 980 F.2d 927, 932 (3d Cir. 1992)
(citing Mills v. Elec. Auto-Lite Co., 396 U.S. 375, 385

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(1970)).
Here, too, we agree with the district court’s reasoning set
forth in its opinion and its conclusion:
Under the heightened pleading standard of the PSLRA,
the complaint in a Section 14(a) action must 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, all facts
with particularity on which that belief is formed. See
15 U.S.C. S 78u-4(b)(1). As explained above, plaintiffs
have failed to allege particularized facts to support the
allegation that the statements regarding the following
issues were materially false when the NovaCare
defendants issued the proxy materials: (1) the O & P
divestiture; (2) the divestiture of the Company’s long-
term care services division; (3) the NCES divestiture;
and (4) the PROH divestiture. Thus, I conclude that the
plaintiffs’ Section 14(a) claims with regard to these
issues will be dismissed.
D. Ct. Op. at 39.
C.
In addition to their claim against the NovaCare Appellees,
Appellants assert Rule 10b-5 claims against PwC which
allege that: (1) PwC failed to reassess the long-term care
services goodwill in NovaCare’s 1998 Form 10-K and the
goodwill of the company in NovaCare’s 1999 Form 10-K as
required under GAAP and generally accepted auditing
standards ("GAAS"); and (2) PwC issued an unqualified
audit report for the 1998 and 1999 Forms 10-K that were
materially false and misleading. Both of these allegations
were properly dismissed.
Considering Appellants’ claim regarding the 1998 10-K,
under an inquiry notice standard, Appellants, as
22
reasonable stockholders "discovered or in the exercise of
reasonable diligence should have discovered the basis for
their claim" against the PwC Appellees by June 16, 1999,
when NovaCare filed a Form 8-K announcing the
completion of the sale of the long-term care services
business for nominal consideration. See Gruber v. Price
Waterhouse, 697 F. Supp. 859, 863 (E.D. Pa. 1988). For the
same reasons as discussed earlier, because the claim
regarding the overstatement of goodwill in the 1998 Form
10-K was not asserted until September 19, 2000, it is time-
barred pursuant to the one-year statute of limitations for
securities fraud claims.
Appellants’ claim regarding the alleged misstatement of
goodwill in the 1999 Form 10-K was also properly
dismissed. As previously mentioned, under S 10(b), a

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private cause of action arises when purchasers or sellers
can identify a false representation of material fact or
omission that makes a disclosed statement materially
misleading. Burlington, 114 F.3d at 1419. However, a fact
or omission is material only if "there is a substantial
likelihood that it would have been viewed by the reasonable
investor as having significantly altered the ‘total mix’ of
information" available to the investor. Basic Inc. v.
Levinson, 485 U.S. 224, 231-232 (1988). The proxy
materials filed with the SEC on August 13, 1999, disclosed
the impact of the proposed liquidation of the company. This
disclosure rendered immaterial any subsequent
misstatement regarding the goodwill of the company in the
1999 Form 10-K because it did not alter the "total mix of
information available" to Appellants. The district court did
not err in dismissing Appellants’ claims against PwC.
D.
Appellants also assert S 10(b) and S 14(a) claims against
Wasserstein which allege that Wasserstein fraudulently
omitted material information regarding the loss of the $13.4
million escrow for the NCES employment guarantee from
the opinion letter included in the proxy materials dated
September 10, 1999. Again, this claim was properly
dismissed by the district court.
23
To be actionable, a statement or omission must have
been misleading at the time it was made; liability cannot be
imposed on the basis of subsequent events. In re Nice Sys.,
Ltd. Sec. Litig., 135 F. Supp. 2d 551, 586 (D.N.J. 2001).
Appellees are not obligated to predict future events unless
there is reason to believe that they will occur. Zucker v.
Quasha, 891 F. Supp. 1010, 1017 (D.N.J. 1995). The
eventual loss of the NCES escrow occurred after the PROH
sale was completed on November 19, 1999. Therefore,
insofar as Appellants’ claims are based on events that took
place after Wasserstein’s allegedly fraudulent statements,
they are not actionable for securities fraud. Wasserstein
cannot be held liable for not disclosing a loss that had not
yet occurred.
Thus, we must turn to the contention that Wasserstein
failed to disclose that the Company was required to escrow
$13.4 million of the NCES proceeds to support the
guarantee for the employment contract with PROH. The
Wasserstein Appellees argue that this claim was properly
dismissed because it is immaterial as a matter of law.
"In . . . an ‘efficient’ market, the concept of materiality
translates into information that alters the price of the firm’s
stock." Burlington, 114 F.3d at 1425. If the disclosure of
certain information has no effect on stock prices, it follows
that the information disclosed was immaterial as a matter
of law. Id. As previously discussed, the need to escrow
$13.4 million was disclosed November 2, 1999, in the SEC
Form 8-K. According to the Dow Jones Interactive Quotes

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and Data Market, this disclosure had no negative effect
whatsoever on the price of NovaCare stock on or
immediately following November 2, 1999. App. at 1385.
Accordingly, the district court was correct in dismissing
Appellants’ claim that Wasserstein’s delay in releasing
statements regarding the need to escrow $13.4 million was
materially misleading.
Appellants further argue that even if their Rule 10b-5
claims against the Wasserstein Appellees are deemed
immaterial, their S 14(a) claims are not precluded because
the test for materiality under S 14(a) is different than that
for S 10(b). Appellants are mistaken. Information is deemed
material for purposes of a S 14(a) claim "if there is a
24
substantial likelihood that a reasonable shareholder would
consider it important in deciding how to vote." TSC Indus.,
Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976). The test
for materiality is whether there is a "substantial likelihood
that the disclosure of the omitted fact would have been
viewed by the reasonable investor as having significantly
altered the ‘total mix’ of information made available." Id.
This definition of materiality is the same for bothS 10(b)
and S 14(a) claims. See Basic, 485 U.S. at 231-232
(adopting TSC standard for Rule 10b-5 claim).
Consequently, in light of the foregoing information, the
district court was correct in dismissing Appellants’S 10(b)
and S 14(a) claims against Wasserstein.
E.
Appellants additionally argue that the district court erred
in taking judicial notice of certain documents during the
prior proceedings. Although this is Appellants’ principal
argument, it warrants only cursory consideration. The
district court took judicial notice of three different
categories of documents at the urging of the NovaCare
Appellees in support of their motion to dismiss. The
relevant documents included: (1) documents relied upon in
the Complaint (thirty-two documents, comprising Company
SEC filings and press releases); (2) documents filed with the
SEC, but not relied upon in the Complaint (seven
documents); and (3) stock price data compiled by the Dow
Jones news service (two exhibits, including a printout of the
historical prices of NovaCare stock and a corresponding
graph).
Rule 201(b), Federal Rules of Evidence permits a district
court to take judicial notice of facts that are"not subject to
reasonable dispute in that [they are] either (1) generally
known within the territorial jurisdiction of the trial court or
(2) capable of accurate and ready determination by resort to
sources whose accuracy cannot reasonably be questioned."
Rule 201(b). Under Rule 201(d), Federal Rules of Evidence,
a district court must take judicial notice "if requested by a
party and supplied with the necessary information." Rule
201(d).

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25
As was correctly pointed out by the district court, prior
decisions of this court sufficiently support judicial notice of
the three categories of documents urged by the NovaCare
Appellees in this case. See, e.g., Burlington, 114 F.3d at
1426 (court may consider a document "integral to or
explicitly relied upon in the complaint" on motion to
dismiss); Oran, 226 F.3d at 289 (taking judicial notice of
properly-authenticated public disclosure documents filed
with SEC); Ieradi v. Mylan Lab., Inc., 230 F.3d 594, 600 n.3
(3d Cir. 2000) (taking judicial notice of stock prices
reported by Quotron Chart Services).
On appeal, Appellants concede that the district court was
entitled to take judicial notice of the aforementioned
documents to ascertain their contents. However, they
contend that the district court erred by accepting"for the
truth of the matter asserted" certain statements in
NovaCare’s Proxy Statement filed with the SEC on August
13, 1999, and in its Quarterly Report (Form 10-Q) filed with
the SEC on November 22, 1999. Appellants’ Brief at 32-34.
We find no reversible error and completely accept the
district court’s discussion of this particular issue and all
aspects of the judicial notice contention. D. Ct. Op. at 9-12.
F.
Finally, Appellants challenge, as an abuse of discretion,
the district court’s decision to dismiss the Complaint with
prejudice and to deny Appellants’ request for leave to
amend. Appellants maintain that under Rule 15(a), Federal
Rules of Civil Procedure, "leave [to amend] shall be freely
given when justice so requires." Burlington , 114 F.3d at
1434 (citing Glassman v. Computervision Corp. , 90 F.3d
617, 622 (1st Cir. 1996)). Appellants are correct in noting
that normally, leave to amend is granted when a complaint
is dismissed on Rule 9(b) "failure to plead with particularity
grounds." Id. at 1435. However, leave to replead is often
denied on other grounds, such as undue delay, bad faith,
dilatory motive, prejudice and futility. Id. at 1434.
This case presents a situation in which amendment of
the Complaint would be futile. We have made it clear that
an amendment would be futile when "the complaint, as
26
amended, would fail to state a claim upon which relief
could be granted." Id; see also Oran , 226 F.3d at 291
(affirming the district court’s denial of leave to amend
because of futility of amendment); Doug Grant, Inc. v.
Greate Bay Casino Corp., 232 F.3d 173, 188-189 (3d Cir.
2000) (upholding district court’s denial of leave to amend
because it found that "it would be futile to amend the
complaint to include a meritless claim").

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Many claims asserted by Appellants would obviously be
futile to amend. The claim alleging overstatement of
goodwill in the 1998 Form 10-K is time-barred under the
statute of limitations. The claims regarding the need for the
NCES escrow and the overstatement of goodwill in the 1999
Form 10-K will not survive a Rule 12(b)(6) motion even if
the claims had been made with more particularity. In its
opinion, the district court noted that Appellants had made
"no representation as to any new information that[they]
might have received since filing the Complaint, nor did they
provide proposed amendments or specific facts that would
cure the Complaint’s pleading deficiencies." D. Ct. Op. at
47; see also Confederate Mem’l Ass’n v. Hines , 995 F.2d
295, 299 (D.C. Cir. 1993) ("[A] bare request in an opposition
to a motion to dismiss -- without any indication of the
particular grounds on which amendment is sought . . . does
not constitute a motion within the contemplation of Rule
15(a)"). Before this court, Appellants again do not specify
what additional facts, if any, they would plead if given
another opportunity to amend their Complaint.
Moreover, the district court adopted the reasoning of In re
Champion Enters., Inc., Sec. Litig., 145 F. Supp. 2d 871
(E.D. Mich. 2001), in which the court concluded that the
PSLRA limits the application of Federal Rule of Civil
Procedure 15 in securities fraud cases. As the district court
recognized, some factual distinctions exist between
Champion Enters. and the case at bar; however, the
underlying policy considerations apply equally to both
situations. The district court noted:
The PSLRA’s stay of discovery procedures was intended
by Congress to protect innocent defendants from
having to pay nuisance settlements in securities fraud
actions in which a foundation for the suit cannot be
27
pleaded; rather than lead to the conclusion that
plaintiffs should receive more leniency in amending
their pleadings, the stay of discovery procedures
adopted in conjunction with the heightened pleading
standards under the PSLRA is a reflection of the
objective of Congress "to provide a filter at the earliest
stage (the pleading stage) to screen out lawsuits that
have no factual basis." [Champion Enters. , 145 F.
Supp. 2d] at 874 (quoting Selected Bill Provisions of
the Conference Report to H.R. 1058/S. 240, 141 Cong.
Rec. S19152 (daily ed. Dec. 22, 1995)). This objective
would be thwarted if, considering the history of this
case, plaintiffs were liberally permitted leave to amend
again; this is particularly true where, as here, there is
a stark absence of any suggestion by the plaintiffs that
they have developed any facts since the action was
commenced which would, if true, cure the defects in
the pleadings under the heightened requirements of the
PSLRA.

-- 22 of 23 --

D. Ct. Op. at 48.
Based on the foregoing considerations, we conclude that
the district court did not abuse its discretion in denying
Appellants leave to amend their deficient Complaint.
* * * * *
We have considered all contentions presented by the
parties and conclude that no further discussion is
necessary.
The judgment of the district court will be affirmed.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
28

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