In In re: 2007 Novastar Financial Inc., Securities Litigation, No. 08-2452 (8th Cir. Sept. 1, 2009), the Eighth Circuit recently addressed the issued of whether the plaintiffs’ complaint satisfied the pleading requirements of the PSLRA which requires a plaintiff to “specify each statement alleged to have been misleading [and] the reason or reasons why the statement is misleading.”
In Novastar, the lead plaintiff filed a 104 page consolidated complaint. The consolidated complaint included a thirty-six page section which “reproduce[d], either in their entirety or lengthy excerpts from, press releases, SEC filings, and transcripts of conference calls made by Novastar and the individual defendants during the class period.” Noting that the “PSLRA’s heightened pleading requirements compel the plaintiff to ‘plead the ‘who, what, when, where and how’ of the misleading statements or omissions,’” the Eighth Circuit stated:
[Lead Plaintiff] also argues that the district court erred in concluding that his complaint failed to specify the reasons why the allegedly misleading statements were false or misleading. However, absent an indication of precisely what statements [Lead Plaintiff] alleges to be misleading, it is difficult, if not impossible, to determine whether the complaint adequately specified why each statement was misleading. Even if we were able to identify specific statements that were alleged to be misleading, we would still conclude that [Lead Plaintiff's] complaint failed to specify the reasons why each statement was false or misleading. The complaint does not provide any link between an alleged misleading statement and specific factual allegations demonstrating the reasons why the statement was false or misleading, as the PSLRA requires. See Cerner, 425 F.3d at 1083; 15 U.S.C. § 78u-4(b)(1). Instead, the complaint merely contains “[a] litany of alleged false statements, unaccompanied by the pleading of specific facts indicating why those statements were false.”
