Full opinion text
OPINION AND ORDER CRABB, District Judge. In this proposed class action, plaintiffs allege that defendants artificially inflated the price of defendant Rayovac Corporation’s stock by making false and misleading statements in violation of the Securities Act of 1933, 15 U.S.C. §§ 77a-77aa, and the Securities Exchange Act of 1934, 15 U.S.C. §§ 78a-78mm. Jurisdiction is present under 28 U.S.C. § 1331. In an opinion and order dated September 23, 2002, I granted plaintiffs’ motion to appoint Eli Friedman, Lawrence M. Cox, Carol A. LoGalbo and Harold C. Eck as the lead plaintiff group. On November 12, 2002, I granted plaintiffs’ motion to appoint Cauley Geller Bowman & Coates LLP as lead counsel. Presently before the court are two motions to dismiss: one filed by defendant Thomas H. Lee Partners and one filed by the remaining defendants. In both motions, defendants raise multiple grounds for dismissing all of plaintiffs’ claims. I agree with defendant Partners that the statute of limitations has expired for plaintiffs’ claims against it under the 1933 Act. Thus, I will dismiss these claims against defendant Partners. I disagree with defendants that the heightened pleading standards of the Private Securities Litigation Reform Act and Fed.R.Civ.P. 9(b) apply to claims brought under §§ 11 and 12(a) of the 1933 Act because those claims do not include fraud as an element. Furthermore, I conclude that plaintiffs have stated a claim under Fed.R.Civ.P. 8 with respect to their claims against defendants Rayovac, Jones, Hussey, Shepherd, Schoen, Smith and Steward under § 11 of the 1933 Act, with respect to all defendants (except defendant Partners) under § 12(a)(2) and with respect to defendants Jones, Hussey, Shepherd, Schoen, Smith, Shanesy, Tomlin, Steward and Biller under § 15 of the 1933 Act. Turning to plaintiffs’ claims under the 1934 Act, I conclude that in some respects, plaintiffs have alleged with sufficient particularity the statements that are allegedly false and misleading, the reasons why the statements are false and misleading and the factual basis for plaintiffs’ belief, as required by the 15 U.S.C. § 78u-4(b)(l). However, plaintiffs have failed to allege sufficient facts to show that any of the defendants made the allegedly false statements, with the exception of defendants Rayovac, Jones and Hussey. Furthermore, plaintiffs have failed to allege particular facts that would create a strong implication that these defendants knew or recklessly disregarded the possibility that the statements were false or misleading, as required by 15 U.S.C. § 78u-4(b)(2). Thus, plaintiffs have failed to state a claim with respect to any of their claims under the 1934 Act. However, rather than dismiss these claims with prejudice, I will allow plaintiffs an opportunity to amend their complaint to attempt to cure the deficiencies detailed in this opinion. In setting forth the allegations of fact, I have included not only the allegations in plaintiffs’ amended complaint but also facts from documents referred to in the complaint and provided by defendants in their motion to dismiss. See Venture Associates Corp. v. Zenith Data Systems Corp., 987 F.2d 429, 431-32 (7th Cir.1993) (“Documents that a defendant attaches to a motion to dismiss are considered part of the pleadings if they are referred to in the plaintiffs complaint and are central to her claim.”) ALLEGATIONS OF FACT A. Parties Lead plaintiffs Eli Friedman, Lawrence M. Cox, Carol A. LoGalbo, Harold C. Eck and the other proposed class members are investors who purchased shares of Rayo-vac common stock between April 26, 2001, and September 19, 2001. Defendant Ray-ovac Corporation is a Wisconsin corporation that manufactures batteries. Defendant David A. Jones is chairman of the board and chief executive officer of Rayo-vac. Defendant Kent J. Hussey is president, director and chief financial officer. Defendant Steven P. Shanesy is executive vice-president of global brand management. Defendant Merrell M. Tomlin is executive vice president of sales. Defendant Randall J. Steward is executive vice-president of administration and chief financial officer. Kenneth V. Biller is executive vice-president of operations. Defendant Thomas H. Lee Partners is a firm located in Massachusetts; it owned approximately 26% of Rayovac’s issued and outstanding common stock between April 26, 2001, and September 19, 2001. Defendant Thomas R. Shepherd is a director of Rayovac and special partner of defendant Partners. Defendants Scott A. Schoen and Warren C. Smith are directors of Rayovac and managing partners of defendant Partners. Each defendant participated directly in the day-to-day operations of Rayovac. Each had access to confidential information about the company’s business and operations. Each directly and indirectly controlled the conduct of the company’s business, the information contained in its filings with the Securities and Exchange Commission and public statements about its business and financial results. B. Representations Regarding Sales Growth From September 1996 until December 2000, defendant Rayovac reported continuous sales growth, increasing from $417.9 million to $675.3 million. However, on December 19, 2000, Rayovac announced that its sales for the current quarter would be lower than anticipated. Rayovac stated that the demand in the previous year had been unusually high because of “Y2K” and an “active storm season.” In addition, Rayovac stated that sales were hurt by retailers’ reluctance to carry a “normal” inventory. Consistent with the December 2000 prediction, Rayovac announced on January 25, 2001, that its sales and earnings were down for the first time since 1996. Rayo-vac’s CEO, defendant Jones, stated that although the decrease was expected, “we remain confident that beginning in our second fiscal quarter, Rayovae will return to its history of strong growth.” On April 26, 2001, defendant Rayovae issued a press release announcing results for the second fiscal quarter of 2001. It reported that sales rose 4%, from $140.1 million to $145.2 million as compared to the same quarter in the previous year. In the same press release, defendant Jones stated that Rayovae had achieved “strong growth” in the second quarter and that “the market data suggests that the battery category is returning to its historical annual growth rate of six to seven percent in recent years.” Rayovae held a conference call on the same day of the press release. It began: This broadcast may include forward-looking statements which are based in part on management’s estimates, assumptions, and projections as of today. These statements are subject to certain risks and uncertainties and other factors that can cause results to materially differ from what we currently expect. Actual results may differ due to changes in external competitive market factors, changes in our industry or the economy in general, as well as various other factors including those we discuss today and those discussed in our securities filings, including our most recent annual report on form 10-K We assume no obligations to update these statements. During the conference call, defendant Jones stated again that “the market continues to rebound and is quickly returning to its strong historical growth trends.” With regard to Rayovac’s performance outside the United States, defendant Jones stated: Around the world, retailers are experiencing strong battery growth as a result of adding Rayovae high performance value array and products to their assortments. Our strategy is not only working, but also gaining significant momentum in all important geographic regions. And we expect more major wins to come our way in the near future. After all, why wouldn’t every retailer carry Rayo-vac, the fastest growing battery company in the world? Overall, we are very encouraged that industry growth trends are returning in virtually all important segments of the battery industry and Rayovae continues to outperform the market in all key segments. Next, defendant Jones discussed the company’s future performance: Rayovac’s long-term top line sales growth should be in the 8-9% range, outperforming the overall industry growth rates of 6-7%. Gross margins and operating margins should continue to improve 50-100 basis points annually in the future. We confirm our previous fiscal year ending 9/30/01 guidance from $1.30 to $1.32 cents earnings per share. Our guidance for calendar year ’01 would be in a range of $1.36 to $1.38 EPS. Our preliminary guidance for fiscal year ’02 is in a range of $1.50 to $1.55 earnings per share in line with our previously communicated long term EPS growth rate target of 15-18%. In response to several questions regarding the rate of sales growth, defendant Jones confirmed that “we believe that sales growth over the second half of ’01 should be about that 8-9% range and we feel actually pretty comfortable with that number” and that “a good assumption for modeling” during the second half of the year “would be high single digit sales.” When asked how inventory positions held by retailers may affect shipments, defendant Jones responded: [W]e think our inventory position is very good, we are not over inventoried anywhere, having said that we are cautious and with the economic slowdown that has occurred over the last six months retailers have pulled their horns in and they want to make sure that they plan their business appropriately, not just in batteries but in all categories you know we’re seeing cautious retailers but I can only talk about inventory at retail is in extremely good shape and we think we have no excess out there. These statements were made with the understanding and expectation that they would be repeated in analyst reports. On April 26, 2001, H. H. Murren, an analyst at Merrill Lynch issued a report stating: We expect [Rayovac] to continue to deliver solid results in F2001 due to increased distribution and market share gains. We expect the battery category overall to return to more normalized levels of growth (up 6-8%) in C2001 post the Y2K comp. We reiterate our Accumulate rating and believe the shares are exceptionally inexpensive trading at 12.4X our C2001E of $1.44. ****** We expect [Rayovac’s] sales to be up mid/high single digits in F2Q01 (March) due to an expected improvement in the general battery category, new product launches, and increased distribution and market share gains. On May 14, 2001, defendant Rayovac filed a Form 10-Q (a quarterly financial report) with the Securities and Exchange Commission, which confirmed the previously-announced financial results. The form was signed by defendant Steward. On July 26, 2001, defendant Rayovac issued a press release announcing its financial results for the third fiscal quarter of 2001, ending June 30, 2001. Defendant Raypvac stated that revenue had risen 6% as compared to the third fiscal quarter of 2000. Defendant Jones commented on these results in the press release: The Rayovac brand continues to build momentum in the marketplace as our sales outpaced both our competition as well as the industry as a whole.... Despite a weakened economy and slower than anticipated overall battery category growth, Rayovac continues to gain unit share as more and more consumers recognize the value of our brand. The Form 10-Q filed on August 9, 2001, confirmed these results. Again, defendant Steward signed the form. An analyst report from Merrill Lynch responded to these announcement positively, reiterating its “accumulate” rating. An analyst at UBS Warburg wrote in a report that Rayovac “expects an upturn in 4Q from new accounts” and estimated sales growth at 4%-6%. The report gave a Ray-ovac a “Buy” rating. At the annual stockholder meeting on July 31, 2001, defendant Hussey, Rayo-vac’s CFO, commented on the value of Rayovac’s stock: ‘We still think the stock is undervalued. We think it should be in the high $20s ... and it will be in six months.” C. Representations Regarding Distribution During the conference call following the April 26, 2001 announcement, defendant Jones discussed the company’s “significant distribution wins during the quarter,” noting gains it had made with respect to Toys R Us, Kmart, UPS and Procter and Gamble. In addition, Jones stated that Rayo-vac had experienced a 169% increase in distribution in Latin America “with more entities currently on the way.” On May 21, 2001, Rayovac issued a press release, announcing that it would begin shipping batteries to Home Depot. Following this announcement, Rayovac stock increased 11% to $24.50. In two Forms 10-Q filed between April 26, 2001, and September 19, 2001, defendant Rayovac attributed its sales growth to gains in distribution. D. Defendants’ Sales Practices Defendants knew that the statements regarding growth in sales and distribution would be issued or disseminated to the investing public. They also knew that the statements were all false or misleading because demand for Rayovac products was actually in decline. However, defendants hid this fact from investors by giving their customers large incentives to purchase substantially more product than they could use, thus threatening sales for the future, a practice known as “channel stuffing.” According to former Rayovac sales representatives, Rayovac “loaded customers with inventory.” Rayovac would sell $50,000 worth of product in one quarter to a customer that purchased only $100,000 of product over the course of a year, meaning that the customer would not have a need for any product the following quarter. One former sales person further explained: I mean you are jamming product down the throat of your current customers ... they have no place to move this product. Essentially what you are doing is pre-selling the next quarter. That’s all fine and dandy, because you put those numbers in the quarter to pump those numbers up, but as a salesperson, you hear what the forecast was for Rayovac as a whole, you kind of sit back and go, how the hell are they going to do that. Let’s do it now and worry about that later. This is what steamed a lot of sales managers because all of a sudden, growth that we may have seen from a client, we are not going to see because we just saturated them with a year and a half of product. Nevertheless, when this occurred, Rayovac would not make adjustments to the following quarter’s sales projections, according to a former employee and a sales district manager. Companies regularly pushed to take more inventory included Poco Sales, PSI Protection Services, Bob’s Barricades and Grainger. Instead of adjusting sales projections, defendants Tomlin and Jones directed management to exert pressure on salespeople to generate unrealistic sales forecasts. A former salesperson explained: There was a forecasting system that came out in 2000. It was the most godawful complicated thing you ever saw. Every time you sent in a forecast they would fuck with it. They’d massage it. They’d come back and say, “that number’s not good enough.” Well, okay, you would give them the number that they wanted, which was always an increase. It could be 10, 15, 20% more. You knew you couldn’t make it. People just made up the shit. Then, 3 or 4 or 5 days before the end of the quarter, when top management knew they weren’t going to make this number, that’s when they would go out and make the really big deals, They would go out to the Kmarts, the Walmarts, the Targets. That’s how they pumped up the number. Management would always make salespeople increase their sales forecasts “knowing full well that we’re not going to reach it.” In order to induce customers to buy more product than they needed, Rayovac would use incentives such as extended payment terms. According to former employees, Rayovac’s normal terms were 30 days. However, at quarter-end Rayovac would extend the time for payment to 60 or 90 days, a practice known as “dating.” Rayo-vac also used generous advertising credits and discounts. Rayovac would sell $100,000 worth of merchandise and give the customer back 10% for advertising or 20% or 25% if the customer would buy a larger volume. A former salesperson stated that Rayovac would provide extended payment terms and discounts if the customer agreed to purchase “pallet quantities of batteries where that type of inventory would take someone out six months.” A former district sales manager stated that the dating and price discounting “were part of every day business.” Rayo-vac used these incentives with both retailers and wholesalers. Because of these quarter-end incentives, many customers would wait until the end of the quarter to buy. A former employee stated, “It got to the point where Rayovac would do about 60% of the business in the last 2 or 3 weeks of the quarter.” Another former employee commented, “[Y]ou know they always work miracles in the last ten or twelve working days. ... We never knew where it came from, but you know, who are we to say it wasn’t right.” Salespeople at Rayovac were under “tremendous pressure” to “make the quarter.” “There was always a drive to get orders up at the end of the month,” one salesperson stated. Another said that it was “inevitable” that at the end of the quarter, “your sales manager would call you up and say— stop travelling, stop spending expense money, hit the phones and it was basically dialing for dollars.” One former employee visited the company’s Hong Kong office where he saw numerous boxes of batteries. The employee was told that the batteries were there to help make the quarter. At sales meetings, defendant Jones threatened salespeople that the numbers had to be met. Rayovac’s use of channel stuffing to create the appearance of growth became more aggressive over time. One sales person stated, “I don’t think anybody had a long term vision about how to get us out of that downward spiral — it was just, what did you do today and what are you going to do tomorrow. You just did what you had to do to make your number today.” Rayovac did not say that it would be unable to maintain the same growth rate of past quarters. In addition, Rayovac was carrying tens of millions of dollars of receivables from customers who were in financial distress and would be unlikely to pay in full. These customers included Kmart, which accounted for 10% of Rayovac’s business, Ames Department Stores, Inc. and Phar-Mor, Inc. At one point, Kmart receivables were outstanding six or seven months. Each of these companies filed for bankruptcy between August 20, 2001, and January 22, 2002. Rayovac did not increase its expenses related to uncollected receivables to account for this problem. A former employee stated, “[T]he Kmart thing really angered a lot of people.” Defendant Tomlin circulated a memo, telling employees they would not get a bonus check unless they cleaned up “pricing discrepancies.” Rayovac failed to write-off its uncollected receivables during the class period. Ultimately, however, Rayovac took a $2.7 million bad debt write-off for uncollected receivables from Ames, Phar-Mor and Western International and increased its bad debt reserves to $16.1 million to account for its problems with Kmart. Defendants were “hands-on” managers, dealing with the important issues facing Rayovac’s business, including the decline in demand for Rayovac product and the increasing accounts receivables. They were regularly updated on current issues at management meetings and were provided access to Rayovac’s financial and revenue information if they did not already have it. As Rayovac’s chief financial officer, defendant Hussey was responsible for the decision to create adequate allowance for doubtful accounts and he received monthly and quarterly sales reports showing the pattern of the pulling forward of sales. Because of their positions at Rayo-vac, defendants controlled the contents of quarterly and annual reports, press releases and presentations to securities analysts. Rayovac’s ability to meet increased sales predictions was of primary importance to defendants and the success of the secondary offering. However, Rayovac knew that demand for its products had declined and that it needed to substantially increase its allowance for uncollected receivables. To insure a successful secondary offering, defendants embarked on a scheme to artificially inflate the price of Rayovac’s common stock. E. Registration Statement and Prospectus On May 31, 2001, defendant Rayovac issued a press release announcing that it had filed a registration statement with the SEC for a secondary offering that would be completed in June. Rayovac was offering 3,500,000 shares; the remaining defendants were offering a total of 4,000,000 shares. In June 2001, defendant Rayovac filed the final registration statement, which incorporated a prospectus, and commenced the secondary offering. Defendants Jones, Hussey, Steward, Jones, Schoen, Shepherd and Smith each signed the registration statement. With respect to Rayovac’s sales growth, the prospectus stated: The success of our business strategy is evidenced by our consistent improvement in operating results over the past five years. From the twelve months ended in September 30, 1996, through the twelve months ended April 1, 2001, we have grown net sales and adjusted income from operations from $417.9 million to $675.3 million and $27.0 million to $83.3 million, respectively. This growth represents an 11.3% and 28.4% compound annual growth rate in net sales and adjusted income from operations, respectively. In addition, adjusted income from operations margins [has] improved 580 basis points, from 6.5% for the twelve months ended September 30, 1996, to 12.3% for the twelve months ended April 1, 2001. * * * * * * The growth in retail sales of general batteries in the U.S. is due largely to (1) popularity and proliferation of battery-powered devices, such as toys, personal digital assistants, digital cameras, camcorders, pocket televisions, remote controls, personal radios, pagers, portable compact disc players and electronic and video games, (2) the miniaturization of battery-powered devices, which has resulted in consumption of a larger number of smaller batteries and (3) increased purchases of multiple-battery packages for household “pantry” inventory. These factors have increased the average household use of batteries from an estimated 23 batteries per year in 1986 to an estimated 44 batteries per year in 2000. The prospectus also discussed the company’s status with respect to retail distribution. It stated that the “mass merchandiser channel, where we have our strongest presence, with 34% of the U.S. market share, is the fastest-growing channel for the general battery category and provides opportunities for continued growth for us through incremental market share gains and the global expansion of new and existing customers.” It noted new distribution agreements with Home Depot, Toys R Us and Kingfisher. With respect to demand for Rayovac products in Latin America, the prospectus stated that Rayovac had made “sizable distribution gains in the region,” acquiring 800 new accounts in Argentina, Mexico, Columbia and Venezuela. It added, “We plan to continue our growth in Latin America.” The prospectus cautioned that “we are still vulnerable to the effects of currency exchange rate fluctuations.” According to a former field salesperson, “[I]t was obvious in 2000 that Rayovac was seeing a decline in its Latin American business” because of outdated manufacturing facilities, poor product quality and channel stuffing. The prospectus did not disclose how Rayovac had achieved its sales growth and how its sales practices would negatively affect the company’s future growth. In addition, it did not disclose the fact that some of the company’s largest customers were experiencing severe financial difficulty and carrying large accounts receivable balances with Rayovac. Defendants failed to conduct an investigation to provide reasonable grounds for a belief that the statements in the registration statement and prospectus were true. By the end of June 2001, defendants had sold 7.5 million shares of common stock for $19.50 a share. Rayovac generated approximately $65,000,000 from the secondary offering; the remaining defendants collected approximately $74,000,000 collectively. Defendant Jones sold 437,000 shares for $8.1 million. Defendant Hussey sold 100,000 shares for $1.85 million. Defendant Schoen sold 15,000 shares for $276,000. Defendant Shepherd sold 7,500 shares for $139,000. Defendant Shanesy sold 75,000 shares for $1.4 million. Defendant Tomlin sold 69,000 shares for $1.3 million. Defendant Biller sold 86,000 shares for $1.6 million. Because of the false and misleading statements of defendants, Rayovac’s common stock traded at artificially inflated prices. F. Generally Accepted Accounting Principles Although defendants said that Rayovac’s financial statements were prepared in accordance with generally accepted accounting principles, this was not true. Under these principles, revenue should not be recognized until it is “realized or realizable” and earned. These conditions are met when assets are exchanged for cash or claims to cash, and when the entity has substantially performed the obligations that entitle it to the benefits represented by the revenue. Profit is “realized” when the collection of the sales price is reasonably assured. Rayovac violated these principles by improperly accelerating revenue at the expense of future sales, shipping to its own warehouses to create fictitious sales and inducing customers to buy product immediately that otherwise would have been sold in later periods. Under generally accepted accounting principles, an estimated loss from a loss contingency, such as the collection of receivables, should be accrued as a charge to income when it is probable that an asset has been impaired and the amount of loss can be estimated reasonably. In addition, an expense or loss is recognized if it becomes evident that the previously recognized future economic benefits of an asset have been reduced or eliminated. Rayo-vac violated these principles by failing to timely record expenses for uncollected accounts receivables. G. Fiscal Fourth Quarter Results On September 20, 2001, Rayovac issued a press release, announcing that its fiscal fourth quarter results would be affected negatively by a slowdown in battery sales in its United States and Latin American markets. As a result, it estimated, earnings for the quarter would be flat to down slightly from the same period for the previous year. After this announcement, the price of Rayovac common stock fell 23% to $12.74 a share. On November 6, 2001, Rayovac announced its results for the fourth quarter of fiscal year 2001. It reported that it was taking a charge of $3.5 million for the quarter and $22.3 million for the full fiscal year. In addition, Rayovac’s operating expenses increased, in part because of $2.7 million in bad debt write-offs, which did not include the uncollected receivables from Kmart. On January 15, 2002, an analyst report from Prudential Securities lowered the rating for Rayovac stock from “Buy” to “Hold” because of Rayovac’s dependence on Kmart.. On January 24, 2002, two days after Kmart declared bankruptcy, Rayovac announced its results for the first quarter of fiscal year 2002. It increased its bad debt reserves to $16.1 million. On March 27, 2002, Rayovac announced that it would be reclassifying its financial results for 2001 as a result of new accounting procedures. The new figures excluded reimbursed distribution costs, cutting net sales for 2001 by $59.3 million. Each of the proposed class members purchased shares of Rayovac common stock during the class period at artificially inflated prices, relying on the integrity of the market price and mai'ket information. Each has been damaged as a result of defendants’ misrepresentations. OPINION Plaintiffs assert violations of §§ 11, 12(a)(2) and 15 of the Securities Act of 1933 and §§ 10(b) and 20(a) of the Securities Exchange Act of 1934. Section 11 of the 1933 Act imposes liability for making false or misleading representations in a registration statement. 15 U.S.C. § 77k. Section 12(a)(2) prohibits the sale of a security through a prospectus that contains false or misleading statements. 15 U.S.C. § 111 (a)(2). Section 15 imposes liability on those who “control” persons liable under other provisions of the 1933 Act. 15 U.S.C. § 77o. Section 10(b) of the 1934 Act and Rule 10b-5 promulgated thereunder prohibit fraudulent acts in connection with the purchase or sale of a security. 15 U.S.C. § 78j; 17 C.F.R. § 240.10b-5. Section 20 imposes liability on any person who “controls” those liable under other provisions of the 1934 Act. 15 U.S.C. § 78t. Defendants contend that plaintiff has failed to state a claim upon which relief may be granted with respect to each of these provisions. A. Statute of Limitations Before addressing the sufficiency of plaintiffs’ complaint, I must resolve a preliminary question regarding the statute of limitations. Under 15 U.S.C. §§ 77m and 78i(e), parties asserting violations of the Securities Act of 1933 or the Securities Exchange Act of 1934 must bring an action within one year of the date on which they had notice of their claim. See also Lampf Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 111 S.Ct. 2773, 115 L.Ed.2d 321 (1991) (limitations period of § 78i(e) applies to claims brought pursuant to § 10(b) and Rule 10b-5). Defendant Partners contends and plaintiffs do not deny that they had notice of their claim on September 20, 2001, the day defendant Rayovac announced that its fourth quarter results would be “flat to down slightly.” Although plaintiffs filed their complaint in case no. 02-C-308-C on May 31, 2002, they did not add Thomas H. Lee Partners as a defendant until January 9, 2003. Thus, defendant Partners argues, the statute of limitations expired in September 2002, and this action must be dismissed as to it. In response, plaintiffs point to the recently enacted Sarbanes-Oxley Act of 2002, P.L. 107-204, arguing that the one-year statute of limitations in §§ 77m and 78i(e) no longer applies. Section 804 of the Sarbanes-Oxley Act is entitled “Statute of Limitations for Securities Fraud” and amends 28 U.S.C. § 1658 to state that a plaintiff has two years from the date of discovering the violation in which to bring a claim under the 1934 Act. Although the Sarbanes-Oxley Act did not expressly repeal the limitations period in § 78i(e), to the extent that the two statutes conflict, the more recent statute would control. Watt v. Alaska, 451 U.S. 259, 266, 101 S.Ct. 1673, 68 L.Ed.2d 80 (1981). However, on its face, the new act does not apply to claims brought under the 1933 Act. Thus, the one-year statute of limitations in § 77m still applies, which plaintiffs missed by more than three months with respect to defendant Partners. Accordingly, plaintiffs claims against defendant Partners under the 1933 Act must be dismissed. The next question is whether the one-year limitation of § 78i(e) still applies. Defendant Partners contends that it does because that was the law in effect at the time the alleged violations occurred. The Sarbanes-Oxley Act was enacted on July 31, 2002; the alleged violations occurred between April 26, 2001, and September 19, 2001. Relying on Landgraf v. USI Film Products, 511 U.S. 244, 265, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994), defendant Partners contends that the longer statute of limitations in the new act should not be applied retroactively. In Landgraf, the Court recognized the “deeply rooted” presumption against retroactive legislation, reasoning that “individuals should have an opportunity to know what the law is and to conform their conduct accordingly.” Id. at 265, 114 S.Ct. 1483. Of course, this concern does not necessarily apply to statutes of limitations, which are grounded in concerns of repose, not notice. It would be difficult for defendant Partners to argue that it would have acted differently in 2001 if it had known that Congress was going to extend the limitations period for securities fraud actions. Even assuming that the presumption against retroactive legislation applies to a statute of limitations, this would not necessarily mean that the former limitations period would apply. When Congress has “expressly prescribed the statute’s proper reach” to include conduct that occurred before the enactment, the court should apply the statute as prescribed. Landgraf 511 U.S. at 280, 114 S.Ct. 1483. Section 804(b) of the act provides that the new limitations period “shall apply to all proceedings addressed by this section that are commenced on or after the date of enactment of this Act.” This provision makes clear Congress’s intent to permit application of the new statute of limitations to some conduct that occurred before the statute was enacted on July 31, 2002. The date the conduct occurred is irrelevant; it is the date that the “proceedings” commenced that is determinative. All three of the cases consolidated in this action were filed before July 31, 2002 and are therefore not proceedings “commenced on or after the date of enactment of this Act.” However, plaintiffs did not amend their complaint to include defendant Partners until January 2003. Thus, the “proceedings” against defendant Partners commenced after the effective date of the act. Seeking to avoid the longer limitations period, defendant Partners contends that “proceedings” should be interpreted to include only the date the lawsuit was filed and not subsequent amendments to the complaint adding new parties, but its view is inconsistent with the Federal Rules of Civil Procedure and with common sense. Under Fed.R.Civ.P. 3, “[a] civil action is commenced by filing a complaint with the court.” However, under Rule 15(c), a new party may not be added to the complaint after the statute of limitations has expired except in very limited circumstances. Specifically, the plaintiff must show that the amended complaint “relates back” to the initial complaint, as if the new party had been in the case all along. Worthington v. Wilson, 8 F.3d 1253 (7th Cir.1993). This suggests that serving an additional party with a complaint commences a new “proceeding,” even if the new claim is part of a lawsuit that was filed previously; otherwise, there would be no statute of limitations problem because the date of the original filing would always control. Defendant Partners cannot argue successfully that January 2003 is the date that the proceedings commenced against it for the purpose of the statute of limitations under the 1933 Act, but that May 2002 is the date proceedings commenced for the purpose of determining the application of the longer limitations period in the Sarbanes-Oxley Act. Furthermore, as plaintiffs point out, they could have filed a separate action against defendant Partners in January 2003, in which case there could be no dispute over the application of the new statute of limitations. It would make little sense to create a rule encouraging judicial inefficiency by requiring separate lawsuits for claims against different defendants arising out of the same conduct. The two-year limitations period of the Sarbanes-Oxley Act applies to plaintiffs’ claims against defendant Partners under the 1934 Act; these claims are not barred by the statute of limitations. B. Securities Act of 1933 There are two initial disputes regarding plaintiffs’ claims under the 1933 Act. First, defendant Partners contends that because lead plaintiffs allege that they purchased their securities on the open market rather than directly through the offering, they lack standing to assert claims under § 12(a)(2) and, therefore, those claims must be dismissed. Second, the parties dispute whether the court should apply the same standard in evaluating the sufficiency of plaintiffs’ allegations under the 1933 Act and the 1934 Act. 1. Standing In support of its argument that plaintiffs lack standing under § 12(a)(2), defendant Partners cites Gustafson v. Alloyd Co., 513 U.S. 561, 115 S.Ct. 1061, 131 L.Ed.2d 1 (1995). In Gustafson, 513 U.S. at 584, 115 S.Ct. 1061, the Court interpreted the word “prospectus” in § 12(a)(2) to mean “a document that describes a public offering of securities by an issuer or controlling shareholder.” Therefore, the Court concluded, shareholders who purchased securities in a “private, secondary transaction” (that is, on the open market) could not obtain relief under § 12(a)(2). Id. at 564, 115 S.Ct. 1061. Plaintiffs do not deny that lead plaintiffs purchased shares of Rayovac stock in a “private, secondary transaction.” However, they argue persuasively that this issue is not about the sufficiency of the complaint but about the adequacy of lead plaintiffs to serve as class representatives under Fed.R.Civ.P. 23. Defendants cannot deny that some members of the class purchased shares directly in the offering. The proposed class includes everyone who purchased Rayovac shares between April 26, 2001, and September 19, 2001; the secondary public offering was announced on May 31, 2001, and completed in June. Thus, those who purchased shares as part of the secondary offering are members of the proposed class and would be entitled to relief under § 12(a)(2) if a violation could be proven. It may be that lead plaintiffs cannot adequately represent those class members, but this is an issue to be decided in the context of a motion to certify the class. However, plaintiffs will have to be prepared to explain at that time how lead plaintiffs can serve as adequate class representatives even though they do not have claims under § 12(a)(2) or, alternatively, why plaintiffs may choose class members who do have claims under § 12(a)(2) to serve as class representatives instead of the lead plaintiff group, even though the Reform Act states that the lead plaintiff group itself must satisfy the requirements of Fed.R.Civ.P. 23. 15 U.S.C. § 78u-4(a)(3) (B) (iii) (I) (cc). 2. Standard for reviewing the sufficiency of the complaint The parties agree that the heightened pleading standards of Fed.R.Civ.P. 9(b) and 15 U.S.C. § 78u-4(b) apply to claims made under the 1934 Act. Rule 9(b) requires allegations of fraud to be pleaded with “particularity.” Section 78u-4(b) requires a plaintiff to (1) identify each statement alleged to be misleading; (2) specify the reasons why the statement is misleading; and (3) “state with particularity all facts on which that belief is formed” if “an allegation regarding the statement or omission is made on information and belief.” In addition, the plaintiff must allege with particularity sufficient facts allowing the drawing of a “strong inference” that the defendant acted with scienter, or an intent to deceive. Section 78u-4(b) was enacted as part of the Private Securities Litigation Reform Act of 1995 in response to perceived litigation abuses in class actions brought under the 1934 Act. In re Party City Securities Litigation, 189 F.R.D. 91, 103 (D.N.J.1999). Members of Congress believed some courts were not applying the requirements of Rule 9(b) in securities fraud cases with sufficient rigor and were permitting suits lacking merit to proceed. In re Ad-vanta Corp. Securities Litigation, 180 F.3d 525, 531-32 (3d Cir.1999). Congress hoped that the pleading requirements imposed in § 78u-4(b) would create greater uniformity and help weed out frivolous suits brought by counsel for the sole purpose of obtaining a quick settlement. Behlen v. Merrill Lynch, 311 F.3d 1087, 1090-91 (11th Cir.2002). On its face, § 78u-4(b) applies only to claims brought under the 1934 Act. Further, Rule 9(b) applies only to “averments of fraud.” Unlike the 1934 Act, §§ 11, 12(a) and 15 of the 1933 Act do not require a plaintiff to prove that the defendant acted fraudulently. Compare Herman & MacLean v. Huddleston, 459 U.S. 375, 382, 103 S.Ct. 683, 74 L.Ed.2d 548 (1983) (under § 11 of the 1933 Act, liability may be imposed for “innocent” misstatements); Casella v. Webb, 883 F.2d 805 (9th Cir.1989) (applying negligence standard for claim under § 12 of the 1933 Act); Wertheim & Co. v. Codding Embryological Sciences, Inc., 620 F.2d 764 (10th Cir.1980) (scienter not an element under § 12 of 1933 Act); Phillips v. Alabama Credit Coup., 403 F.2d 693 (5th Cir.1968) (fraudulent intent not an element under § 12); with Ernst & Ernst v. Hochfelder, 425 U.S. 185, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976) (use of terms “manipulative” and “deceptive” in § 10b of 1934 Act demonstrates intent of Congress to limit liability under act to fraudulent conduct). The provisions under the 1933 Act impose strict liability for all false and misleading statements made in a particular context; generally, there is no mental state requirement. As a result, many courts have held that plaintiffs do not need to plead with particularity claims brought under the 1933 Act. See, e.g., Lone Star Ladies Investment Club v. Schlotzsky’s, Inc., 238 F.3d 363 (5th Cir.2001); In re Nations-Mart Corp. Securities Litigation, 130 F.3d 309 (8th Cir.1997); Feiner v. SS & C Technologies, 11 F.Supp.2d 204 (D.Conn.1998); City of Painesville, Ohio v. First Montauk Financial Corp., 178 F.R.D. 180 (N.D.Ohio 1998); see also 2 Thomas Lee Hazen, Law of Securities Regulation, § 12.13, at 547 (4th ed. 2002) (“The particularity requirements should not be extended to claims under section 11 of the 1933 Act or section 12 of that Act since those claims do not require fraud.”); 5 Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure, § 1297, at 144 (Supp.2003). The Court of Appeals for the Seventh Circuit has not discussed this issue in depth. However, in Sears v. Likens, 912 F.2d 889 (7th Cir.1990), the court applied Rule 9(b) to a claim brought under §§ 5, 12, 15 and 17(a) of the 1933 Act. In a brief discussion, the court concluded that the plaintiffs’ claims were “misplaced” because they “failed to state with particularity how any prospectus was false and misleading.” Id. at 892. The court did not explain why the pleading requirements of Rule 9(b) applied even though fraud was not an element of the claims under the 1933 Act. As other courts have noted, in Sears, when the court discussed the pleading requirements for claims brought pursuant to the 1933 Act, it did so in dicta. See In re Initial Public Offering Securities Litigation, 241 F.Supp.2d 281, 339 (S.D.N.Y.2003) (citing Danis v. USN Communications, Inc., 73 F.Supp.2d 923, 932 (N.D.Ill.1999), and In re First Merchants Acceptance Corp. Securities Litigation, No. 97-C-2715, 1998 WL 781118, at *11 (N.D.Ill. Nov.4, 1998)). Before addressing the issue of particularity, the court concluded that the plaintiffs’ claims under the 1933 Act failed because the plaintiffs had not alleged the existence of a prospectus and because the securities at issue in the case were exempt from the requirements of the act. Thus, the statements regarding pleading requirements were not essential to the holding and are not binding. Kling-man v. Levinson, 114 F.3d 620, 628 (7th Cir.1997) (statements not essential to court’s holding are dicta). As a general rule, district courts should be guided by the views of the court of appeals or the Supreme Court, even when those views are expressed in dicta. See Reich v. Continental Casualty Co., 33 F.3d 754, 757 (7th Cir.1994). However, when dicta is not supported by reasoning, its persuasive force is greatly diminished. See Wilder v. Apfel, 153 F.3d 799, 803 (7th Cir.1998) (dicta “may not express the judges’ most careful, focused thinking”); Indiana Harbor Belt Railroad Co. v. American Cyanamid Co., 916 F.2d 1174, 1176 (7th Cir.1990) (choosing not to follow dicta because it was not “considered” or “well-reasoned”). In Sears, the court provided no reasoning for the conclusion that Rule 9(b) applies to claims brought under the 1933 Act. However, courts in other circuits have reached the conclusion that Rule 9(b) applies when a claim under the 1933 Act “sounds in fraud.” In re Stac Electronics Securities Litigation, 89 F.3d 1399 (9th Cir.1996); Melder v. Morris, 27 F.3d 1097 (5th Cir.1994); Shapiro v. UJB Financial Corp., 964 F.2d 272 (3d Cir.1992). Of these cases, only Shapiro has a rationale for its conclusion. The court noted that Rule 9(b) applies to “all averments of fraud” and therefore, it applies whenever the complaint contains allegations suggesting fraudulent conduct, even if fraud is not an element of the claim. Shapiro, 964 F.2d at 288. Relying on this reasoning, defendants argue that the particularity requirements of Rule 9(b) should apply to plaintiffs’ claims under the 1933 Act because the complaint “is devoted almost entirely to an alleged intentional ‘scheme’ by the defendants to inflate the price of Rayovac’s common stock.” Dfts.’ Br., dkt. # 37, at 8. Plaintiffs disagree, asserting that their claims under the 1933 Act do not “sound in fraud” because they have expressly disavowed any suggestion that defendants acted fraudulently when they issued the prospectus and the registration statement. In my view, the parties miss the mark in focusing on whether a complaint “sounds in fraud.” Although I agree with the holding in Shapiro that Rule 9(b) applies to all “averments” of fraud, this requirement has little significance with respect to claims that do not include fraud as an element. For the purpose of plaintiffs’ claims under the 1933 Act, it does not matter whether defendants acted with an intent to deceive; plaintiffs must prove only that defendants made a material misstatement. Plaintiffs cannot add an element to a claim by making unnecessary allegations. In claims under the 1933 Act or in any other claim that does not include fraud as an element, inadequate allegations of fraud do not require dismissal for failure to state a claim. Rather, to the extent that the allegations of fraud are insufficiently particular, the proper judicial response is to ignore them. Lone Star, 238 F.3d at 368 (“Where averments of fraud are made in a claim in which fraud is not an element, an inadequate averments of fraud does not mean that no claim has been stated. The proper route is to disregard averment not meeting Rule 9(b)’s standard.”) It makes little sense to scrutinize allegations that ultimately will have no bearing on defendants’ liability. ■ Thus, it is unnecessary to consider whether plaintiffs’ claims under the 1933 Act “sound in fraud” and, if so, whether the allegations of fraud satisfy Rule 9(b). Rather, it is necessary only to determine whether plaintiffs have stated a claim under Rule 12(b)(6), that is, whether plaintiffs have alleged sufficient facts to put defendants on notice so that they can file an answer, and whether there is any set of facts consistent with plaintiffs’ allegations that would entitle plaintiffs to relief. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512, 514, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002). 3. Alleged false and misleading statements To establish a violation of § 11, a plaintiff must prove that a registration statement “contained an untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading.” 15 U.S.C. § 77k(a). The statute sets forth five groups of people who may be liable for the misrepresentation: (1) anyone who signed the registration statement; (2) anyone who was a director or partner in the issuer at the time of the filing; (3) anyone who is named in the registration statement as being a director or partner; (4) anyone who has certified any part of the registration statement; and (5) any underwriter of the security. - To establish a violation of § 12(a)(2), a plaintiff must show that a defendant offered or sold a security to the plaintiff by means of a prospectus or oral communication that was false or misleading with respect to material facts. Under either §§ 11 or 12(a)(2), a plaintiff does not have to show reliance, causation or scienter. Alpern v. UtiliCorp United, Inc., 84 F.3d 1525, 1541 (8th Cir.1996); Wright v. National Warranty Co., 953 F.2d 256 (6th Cir.1992). However, a defendant may avoid liability by proving that the plaintiff knew the statement was false when it was made. In addition, under § 12(a)(2), a defendant is not liable if he or she can prove that he did not know and could not have reasonably discovered that the statement was false. In their complaint, plaintiffs assert their claim under § 11 against defendants Rayo-vac, Partners, Jones, Hussey, Shepherd, Schoen, Smith and Steward and under § 12 against all defendants. Defendant Partners argues that it was not sufficiently involved in the preparation of the registration statement to be held liable under § 11. As noted above, however, plaintiffs’ claims against defendant Partners under the 1933 Act must fail because the statute of limitations has expired. It is therefore unnecessary to consider whether these claims must be dismissed for other reasons. The remaining defendants do not deny that they either signed the registration statement for the purpose of § 11 or sold or offered securities under § 12(a)(2). Plaintiffs rely on representations made in the prospectus for the claims under both §§11 and 12 because the registration statement incorporated the prospectus by reference. Defendants do not dispute the inclusion of documents incorporated by reference in determining the basis for liability under § 11. Accordingly, I will presume at this stage that the information in the prospectus was also part of the registration statement. See Pompano-Windy City Partners, Ltd. v. Bear Stearns & Co., Inc., 794 F.Supp. 1265 (S.D.N.Y.1992) (assuming that documents properly incorporated by reference may be deemed part of registration statement). Plaintiffs identify several statements in the prospectus that they contend are false or misleading. With respect to Rayovac’s sales and income growth, the prospectus touts the company’s “consistent improvement in operating results over the past five years.” It notes specific increases in net sales ($418 million to $675 million from 1996 to 2001) and income ($27 million to $83 million). The prospectus cites greater popularity in battery-powered devices as a reason for the increase. Plaintiffs allege that these statements are false and misleading because they fail to disclose that Rayovac was able to achieve its growth through sales practices such as channel stuffing, meaning that Rayovac would use various incentives to sell its customers more than they could reasonably use and thus diminish demand for its product in the future. See Greebel v. FTP, Software, Inc., 194 F.3d 185, 202 (1st Cir.1999) (“ ‘Channel stuffing’ means inducing purchasers to increase substantially their purchases before they would, in the normal course, otherwise purchase products from the company. It has the result of shifting earnings into earlier quarters, quite likely to the detriment of earnings in later quarters.”) With respect to Rayovac’s performance in Latin America, the prospectus stated that Rayovac had acquired 800 new accounts and that “We plan to continue our growth in Latin America.” Plaintiffs allege that these statements are false and misleading again because they do not disclose that Rayovac was engaging in channel stuffing. In addition, plaintiffs allege that, according to a former Rayovac salesperson, “it was obvious that Rayovac was seeing a decline in its Latin American business,” and that Latin America was experiencing currency devaluation. Regarding the status of its distribution channels, the prospectus states that the “fastest growing channel” is with mass merchandisers, “where we have our strongest presence” and there are “opportunities for continued growth.” It notes new distribution agreements with several large retailers. Plaintiffs allege that these statements were false and misleading because they do not disclose Rayovac’s sales practices and because it was known that Kmart and many other large accounts were experiencing serious financial difficulties and would be unlikely to pay their debts to Rayovac after their accounts receivable had remained unpaid for more than six months. Finally, the prospectus states that it was prepared in compliance with Generally Accepted Accounting Principles. Plaintiffs allege that this is not true because under GAAP, revenue may not be recognized until it has been earned and is collectible. In addition, uncollectible receivables must be accounted for. Generally Accepted Accounting Principles “are the conventions, rules and procedures that define accepted accounting practices.” United States v. Arthur Young & Co., 465 U.S. 805, 811, 104 S.Ct. 1495, 79 L.Ed.2d 826 (1984); see also Young v. Lepone, 305 F.3d 1, 5 (1st Cir.2002) (generally accepted accounting principles “embody the prevailing principles, conventions, and procedures defined by the accounting industry from time to time”). Under the regulations of the Securities and Exchange Commission, filings that do not comply with GAAP “will be presumed to be misleading and inaccurate.” 17 C.F.R. § 210.4-01(a)(l). a. Sufficiency of the allegations Defendants advance several arguments to support their contention that each of these alleged false and misleading statements fails to state a claim. First, they argue that plaintiffs have failed to plead sufficient facts showing, for example, that defendants knew that Kmart’s financial difficulties were so serious that defendants violated GAAP by failing to increase Rayovac’s reserves for uncollected receivables. However, I have concluded that the heightened pleading requirements of Fed. R.CivP. 9(b) and the Reform Act do not apply to claims under the 1933 Act. Rather, plaintiffs’ allegations regarding violations of the 1933 Act need satisfy only the liberal notice pleading requirements of Fed.R.Civ.P. 8. Thus, the complaint does not need to contain “all of the facts that will be necessary to prevail.” Hoskins v. Poelstra, 320 F.3d 761, 764 (7th Cir.2003). Under Rule 8, the “plaintiff is not required to plead facts or legal theories or cases or statutes, but merely to describe his claim briefly and simply.” Shah v. Inter-Continental Hotel Chicago Operating Corp., 314 F.3d 278, 282 (7th Cir.2002); see also Walker v. Thompson, 288 F.3d 1005, 1007 (7th Cir.2002) (“[TJhere is no requirement in federal suits of pleading the facts or the elements of a claim.”). So long as the complaint gives the defendant sufficient notice of the claim to file an answer, it “cannot be dismissed on the ground that it is conclusory or fails to allege facts.” Higgs v. Carver, 286 F.3d 437, 439 (7th Cir.2002). In this case, plaintiffs have identified the statements they believe were misleading and provided the reasons why there were material omissions in the statements. This is sufficient to provide notice to defendants of their claims. Accordingly, plaintiffs’ claims under the 1933 Act cannot be dismissed for failing to allege sufficient facts. b. Materiality Defendants also argue that they cannot be liable under the 1933 Act because the prospectus and registration statement contained no material misstatements. With respect to the allegations regarding Rayovac’s customers’ financial difficulties, defendants argue that they sufficiently disclosed the risks that the company faced from large accounts. They point to a statement in the prospectus noting Rayovac’s “dependence on a small number of key customers for a significant percentage of our sales [that] may negatively affect our profits.” The prospectus also has a section stating: “Concentrations of Credit Risk, Major Customers and Employees. The Company has one customer that represented over 10% of its net sales.” In other words, defendants contend, the alleged omissions were not material because the prospective purchasers had sufficient information to make an informed choice. An omission is material if 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.” Basic, Inc. v. Levinson, 485 U.S. 224, 231, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988); see also Searls v. Glasser, 64 F.3d 1061, 1065-66 (7th Cir.1995). I cannot conclude as a matter of law that defendants’ omissions were immaterial. The cautionary statements in the prospectus do little more than acknowledge that Rayovac has several large, important accounts. There is nothing in these statements suggesting that there were problems with these accounts at the time. Assuming the truth of plaintiffs’ allegations that defendants should have known that many of its largest customers would be unable to pay their debts to Rayovac, there is a colorable argument that a reasonable investor would view the failure to disclose this information as material. Defendants also argue that allegations regarding uncollectible receivables fail as a matter of law, because when Rayovac ultimately disclosed its bad debt reserves with respect to Kmart on January 24, 2002, Rayovac’s stock price did not fall the following day. Citing Grimes v. Navigant Consulting, Inc., 185 F.Supp.2d 906 (N.D.Ill.2002), defendants argue that if disclosure of negative information does not “move the market” (that is, if the price of shares does not go down), the omission is immaterial as a matter of law. The parties disagree whether the Court of Appeals for the Seventh Circuit has adopted the “move the market” rule. I question whether it is appropriate to apply a rigid rule of materiality that is not included in the statute and that cannot adapt to different factual circumstances. There may be reasons unrelated to the disclosure that insulate the price of stock from adverse effects, at least initially. See No. 8k Employer-Teamster Joint Council Pension Trust Fund v. America West Holding Corp., 320 F.3d 920, 935 (9th Cir.2003) (concluding that information was material even though disclosure had no immediate effect on market price); see also Folger Adam Co. v. PMI Industries, Inc., 938 F.2d 1529, 1533 (2d Cir.1991) (“[I]t is well-established that a material fact need not be outcome-determinative.”). Moreover, as plaintiffs point out, they allege a failure to disclose bad debt reserves for several of Rayovac’s large customers, not just Kmart. Thus, I cannot conclude on the basis of the effect of the Kmart announcement alone that the omissions regarding uncollectible receivables were immaterial as a matter of law. Because the omissions concerning channel stuffing and problems in the distribution channels may have made the prospectus and registration statement materially misleading, I need not decide whether defendants violated generally accepted accounting principles. However, I agree with defendants that plaintiffs cannot base a claim of liability under the 1933 Act on the statements about Rayovac’s performance in Latin America that it had acquired new accounts and planned to “continue [its] growth.” Plaintiffs do not challenge the accuracy of Rayovac’s statements regarding the new distribution agreements it made. Even if plaintiffs’ announced sales growth was misleading because of channel stuffing, this would not affect the accuracy of statements about obtaining new customers. Further, although plaintiffs allege that defendants failed to disclose in the prospectus “the additional high cost of selling in Latin America due to continued currency devaluation,” as defendants point out, they admitted in the prospectus that “we are still vulnerable to the effects of currency exchange rate fluctuations.” 4. Liability under §15 Plaintiffs argue that all defendants except defendant Rayovac may be held liable as “control persons” under § 15 of the 1933 Act. 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