Full opinion text
MEMORANDUM AND ORDER YOUNG, Chief Judge. Remember when we were One Ls? How the civil procedure professors extolled the virtues of notice pleading? See, e.g., Jack H. Friedenthal, Mary Kay Kane & Arthur R. Miller, Civil Procedure § 5.7, at 253 (2d ed.1993). This case writes a sad (and overlong) epitaph to that era. Who could have expected that, in little over half a century, society would become so chary of dealing with cases on the merits that the law, like some ancient amphibian, would begin to slip back into the primeval ooze of common law forms of pleading? 1. Introduction This securities class action is brought on behalf of all persons who purchased shares of common stock of the defendant Number Nine Visual Technology Corp. (“Number Nine”) in or traceable to Number Nine’s initial public offering (the “Offering”) of May 26, 1995, and all persons who purchased or otherwise acquired shares of Number Nine common stock between May 26, 1995 and January 31, 1996 (collectively, the “Class”). The defendants (collectively, the “Defendants”) in this action are (1) Number Nine, (2) a group of individuals who were principals in Number Nine (the “Insiders”), (3) a group of individuals who served as outside directors on the board of directors of Number Nine (the “Outsiders”), and (4) Robertson, Stephens & Co., Cowen & Co., and Unterberg Harris (collectively, the “Underwriters”). Two principal claims are brought in the Consolidated Class Action Complaint (the “Complaint”). First, the Class has alleged that the Defendants violated Section 11 of the Securities Act of 1933 (“the Securities Act”) through misrepresentations and omissions contained in the Prospectus for the Offering (the “Prospectus”). Second, the Class charges that Number Nine and the Insiders, through certain misrepresentations and omissions, violated Section 10(b) of the Securities Exchange Act of 1934 (“the Exchange Act”), and Rule 10b-5 promulgated thereunder by the Securities Exchange Commission. Each defendant has moved to dismiss all claims brought against it. Although the Securities Act claims and the Exchange Act claims primarily rely on the same factual allegations, they are subject to different pleading standards. Moreover, even within the Securities Act claims, different allegations are subject to different standards under controlling First Circuit precedent. Thus, this Memorandum engages in detailed and seemingly repetitive analysis, and also renders seemingly conflicting rulings. Specifically, the Court GRANTS the motions to dismiss the claims under Sections 11 and 15 of the Securities Act insofar as those claims rely on factual allegations other than Number Nine’s inability to obtain memory supplies at the time of the Offering. The Court further GRANTS the motions to dismiss the claims under Section 10(b) and 20(a) of the Exchange Act insofar as those claims rely on factual allegations other than Number Nine’s alleged overvaluation of inventory. II. Factual Background Taking all allegations in the Complaint as true and granting all reasonable inferences in favor of the Class, see Lirette v. Shiva Corp., 27 F.Supp.2d 268, 274 (D.Mass.1998) {“Shiva ”), the following tale of corporate malfeasance emerges: A. The Offering Number Nine is a Massachusetts corporation engaged in the design and manufae-ture of graphics accelerator cards for personal computers. See Compl. ¶¶ 14, 16. During the relevant time periods, Number Nine’s principal products included: (a) a 128-bit family of products known as the “Imagine 128”; (b) two 64-bit products including the newer 64--bit 9FX card and the older 64-bit GXE card; and (c) an obsolete 32-bit GXE family of products. See id. at ¶ 16(c). In the Prospectus, Number Nine reported inventory of $17,-333,000 as of the close of the first quarter of 1995 (the last full quarter prior to the Offering). See id. at ¶ 37. Included in that invéntory were millions of dollars of inventory of “(a) 64-bit VL Bus graphics accelerators that were rapidly approaching obsolescence and (b) excess printed circuit boards that Number Nine could not realistically hope to sell at a cost even approaching the cost of producing those products.” Id. Despite the dubious value of this inventory, Number Nine admitted in the Prospectus that it only carried an “immaterial” provision for excess and obsolete inventory on April 1, 1995. See id. This representation violated several generally accepted accounting principles (“GAAP”), including the principle that inventory must be carried at the lower of cost or market. See id. at ¶ 38(e). Moreover, by failing to include a write-down of Number Nine’s inventory of 64-bit VL bus products and printed circuit boards, the financial statements included in the Prospectus materially overstated Number Nine’s inventory, net income, earnings per share, and stockholder equity. See id. at ¶ 39. The Prospectus also represented that Number Nine’s product line represented a broad and diversified range of products that “faeilitate[ ] the penetration of the retail channel by spanning a range of prices, beginning at $150 and extending to $2,000.” Id. at ¶ 43. This representation was false and misleading because, at the time it was made, Number Nine’s inventories were overstocked with 64-bit VL bus products which were “rapidly becoming obsolete,” and Number Nine’s competitors “were offering significantly less expensive alternatives to [Number Nine’s] high-priced Imagine 128 products that offered features such as 3-D graphics and superi- or motion video which were not available in Number Nine’s products.” Id. at ¶ 44(a). Moreover, the second generation Imagine II line of products, which Number Nine specifically touted in the Prospectus as an example of its broad product line, was experiencing numerous difficulties in technical development which precluded Number Nine from meeting its announced 1995 shipment date. See id. at ¶ 44(b). Number Nine also misrepresented the expected profitability of its main product offerings. Specifically, Number Nine stated in its Prospectus that margins could increase through (a) potential cost reductions from efficiency gains and volume purchasing, (b) potential changes in product mix toward a greater concentration of higher-margin products like the Imagine 128 line, and (c) potential changes in its distribution methods. See id. at ¶ 45. These representations were false and misleading for a number of reasons. First, recalling the inflated value at which 64-bit VL bus cards were carried on the books, Number Nine’s margins were certain to decline in light of the impending and inevitable inventory markdown. Second, Number Nine’s proposed Imagine 128 card for the Apple PowerMac, a product which Number Nine relied upon for at least part of its expectation of increased margins, was experiencing significant production delays that would cause Number Nine to lose millions of dollars in high-margin sales due to its failure to fill outstanding orders. Finally, Number Nine knew that it was unable to procure needed DRAM and VRAM memory chips from its normal suppliers, and instead had to turn to the much more expensive “spot market” for the parts. Relying on such alternative sources for memory chips significantly increased the cost of goods sold and therefore was hurting Number Nine’s margin by the time of the Offering. See id. at ¶ 46. This failure to disclose the problem of obtaining memory chips also appeared in the “Risk Factors” section of the Prospectus. Number Nine did disclose that memory shortages “have from time to time required the Company to obtain memory from distributors or on the ‘spot market’ at higher than anticipated prices,” and that “[a]ny shortage of [memory chips] in the future could materially adversely affect” results. Id. at ¶ 47. Number Nine did not disclose, however, that it was experiencing just such a shortage of supply at the time the Prospectus was signed and the Offering was made. Nor did it disclose that it was resorting to alternative sources of memory chips that were significantly more costly than its normal suppliers, and that this increased cost could only be passed on to consumers to a limited extent, given the competitive nature of the graphics accelerator market. Finally, Number Nine failed to disclose that the memory crunch also caused it to fail to fill some orders and, consequently, some customers, including Number Nine’s largest customer, sought alternate suppliers for graphics accelerators. For all of these reasons, many of the key financial measures included in the Prospectus were misleading at the time they were made. See id. at 48. B. Post-Offering Misrepresentations The Complaint also alleges a variety of misrepresentations and omissions that form the basis, along with the above facts, for the claims under the Exchange Act. Following the Offering, Number Nine issued additional financial reports — a July 27, 1995 press release, a second quarter 1995 Form 10-Q filing, and a third quarter 1995 Form 10-Q filing — that contained misrepresentations and omissions similar to those contained in the Prospectus. See id. at ¶¶ 49-57. Certain allegedly actionable statements by individuals were also made. For instance, in the July 27, 1995 press release, Andrew Nadja (“Nadja”), president, chief executive officer, and chairman of the board of Number Nine, is quoted as stating that Number Nine experienced difficulties obtaining memory chips during June. See id. at ¶ 59. In actuality, however, Number Nine experienced such difficulties well before the Offering took place on May 26, 1995. Likewise, an August 7, 1995 press release plugged the company’s forthcoming Imagine 128 product for Apple PowerMac, noting specifically that “[vjolume shipments ... are currently anticipated to begin in September 1995.” Id. at ¶ 62. On September 26, 1995, Number Nine trumpeted certain distribution agreements relative to its Imagine 128 for PowerMac product, again stating that shipment would begin immediately. See id. at ¶ 66. These representations were misleading in light of the fact that Number Nine was experiencing delays in producing the Imagine 128 for PowerMac that would prevent shipment until late November 1995. See id. at ¶ 63. Moreover, as a result of the delay, Number Nine would lose millions of dollars in potential sales as competitors usurped the brief and lucrative opportunity to capture the Macintosh market share. An October 6, 1995 press release disclosed that Number Nine would not meet analysts’ forecasts. See id. at ¶ 69. The same release, however, made much of the - company’s $22,000,000 in backlog orders, apparently as evidence that “sales will increase significantly in the fourth quarter.” Id. at ¶¶ 70, 71. In truth, however, Number Nine knew that a large portion of the $22,000,000 in backlog orders was for the Imagine 128 PowerMac product, and that those orders had been placed on the assumption that Number Nine would be able to ship the 128-bit product ahead of its competitors. See id. at ¶ 72(a). At the time of its October 6 representation, Number Nine knew or recklessly disregarded the fact that its was experiencing significant delays with its PowerMac products, that its competitors would beat it to market, and that consequently, much of. the $22,000,000 order backlog would not become sales in the fourth quarter. See id. at ¶ 72(b). Finally, in an October 25, 1995 press release, the 'company stated that “[bjased on increased OEM orders, historie seasonal demand in the fourth quarter, and the introduction of the Apple PowerMac version of Imagine 128, we currently expect sales to increase significantly from the third quarter.” Id. at ¶ 80. This projection was misleading for a variety of reasons. In addition to those already identified with respect to other misleading statements, Number Nine’s October 25 statement was misleading .because high-margin Imagine 128 products were comprising an increasingly smaller percentage of the company’s sales. See id. at ¶ 82(a). Moreover, the company’s margins were also decreasing due to the fact that its sales were being made to an increasingly concentrated group of customers, while its costs were simultaneously “skyrocketing.” See -id. at ¶¶ 82(b)-(c). At the same time, Number Nine was experiencing significant difficulty in bringing its second generation Imagine II product to market. Contrary to the Prospectus’ representation that Imagine II products would be shipped in 1995, no production shipments were made until the second quarter of 1996 and even those shipments suffered from a serious design flaw that increased the product’s cost and seriously hampered its marketability. See id. at ¶ 82(d). Finally, other nondisclosed information made the October 25 statement misleading, including the fact that Number Nine had lost approximately $4 to $5 million in sales from its largest customer, and the fact that sales through the retail distribution channel had declined approximately $1 million on a sequential basis from the third quarter 1995. See id. at ¶¶ 82(e)-(f). C. Communications Through Analysts The Class also makes a variety of allegations regarding misrepresentations that Number Nine accomplished through the use of securities analysts. See id. at ¶¶ 83-107. Specifically, the Class alleges that Number Nine embroiled itself in a network of communications with analysts for the ultimate purpose of disseminating false and misleading information to the market. Thus, the Class seeks to hold Number Nine and the Insiders responsible for a variety of misleading statements contained in various analysts’ reports. D. The Unraveling Finally, on January 31, 1996, Number Nine announced that it was forced to report $8 million of charges “primarily for excess inventory.” Id. at ¶ 109. This charge, which was specifically necessitated by Number Nine’s carrying VL bus graphics cards and excess printed circuit boards at inflated values, resulted in a net loss that exceeded the company’s cumulative net income for at least the previous five years. See id. at ¶ 110. Overall, during the relevant time period, the price of Number Nine’s common stock rose from its offering price of $15.00 to a high of $25.00 per share on July 7 and 8, 1995, and then fell drastically within only six months to $5,125, the price at which it traded following the company’s revelations. See id. at ¶ 120. In other words, by the end of the relevant time period, the Class’ shares had lost approximately eighty percent of their value from the market high. III. Analysis A. Standard of Review In reviewing a motion to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(6), the Court must “take the allegations in the complaint as true and grant all reasonable inferences in favor of the plaintiff.” Shiva, 27 F.Supp.2d at 274 (quoting Monahan v. Dorchester Counseling Ctr., 961 F.2d 987, 988 [1st Cir.1992]). The Court may grant dismissal only if “it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Roeder v. Alpha Indus., 814 F.2d 22, 25 (1st Cir.1987) (quoting Conley v. Gibson, 355 U.S. 41, 45-16, 78 S.Ct. 99, 2 L.Ed.2d 80 [1957]). In a securities action, two additional considerations bear upon the motion to dismiss: Federal Rule of Civil Procedure 9(b) and the Private Securities Litigation Reform Act (the “PSLRA”). Rule 9(b) imposes a heightened pleading requirement on plaintiffs alleging fraud: “In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” Fed. R.Civ.P. 9(b). The PSLRA makes the pleading standard in securities fraud cases even more rigorous than Rule 9(b). Under the PSLRA a complaint alleging securities fraud must set forth “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.” 15 U.S.C. § 78u-4(b)(l). In addition, in order sufficiently to allege scienter, the complaint must “state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.” Id. at § 78u~ 4(b)(2). When a complaint fails to meet the above two requirements, dismissal is required. See id. at § 78u-4(b)(3)(A). “Such heightened scrutiny is hardly new to this Circuit, which traditionally has set the bar for securities plaintiffs quite high under Rule 9(b).” Shiva, 27 F.Supp.2d at 275; accord Gross v. Summa Four, Inc., 93 F.3d 987, 991 (1st Cir.1996) (“We have been especially strict in demanding adherence to Rule 9[b] in the securities context ...Romani v. Shearson Lehman Hutton, 929 F.2d 875, 878 (1st Cir.1991) (“We have been especially rigorous in demanding such factual support in the securities context To support properly an allegation of fraud, pleadings must go beyond mere information and belief to specify the source of the information and the reasons for the belief. See Romani, 929 F.2d at 878; New England Data Servs. v. Becher, 829 F.2d 286, 288 (1st Cir.1987). Thus, a complaint alleging fraud must specify (1) the statements that the plaintiff contends were fraudulent, (2) the identity of the speaker, (3)where and when the statements were made, and (4) why the statements were fraudulent. See Suna v. Bailey Corp., 107 F.3d 64, 68 (1st Cir.1997) (citing Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1127-28 [2d Cir.1994]). “Furthermore, as to scienter, the courts of this Circuit already require a securities plaintiff ‘to allege facts that give rise to a strong inference of fraudulent intent.’ ” Shiva, 27 F.Supp.2d at 275 (quoting Suna, 107 F.3d at 68) (citations and internal quotation marks omitted). A securities plaintiff must allege “specific facts that make it reasonable to believe that defendant knew that a statement was materially false or misleading.” Greenstone v. Cambex Corp., 975 F.2d 22, 25 (1st Cir.1992). Citing the Greenstone language, the First Circuit recently noted that “we do not interpret the [PSLRA] standard to differ from that which this court has historically applied.” Maldonado v. Dominguez, 137 F.3d 1, 9 n. 5 (1st Cir.1998) (citing Greenstone, 975 F.2d at 22). B. Standing 1. The Defendants’Argument The Underwriters and the Outsiders assert that the Class lacks standing to bring claims against them under Section 11 of the Securities Act. Because the Class has only alleged that they purchased shares “in or traceable to the [Offering],” • Compl. ¶¶ 1, 15, 29, 162, 170, the Underwriters and the Outsiders do not think that the standing requirements of Gustafson v. Alloyd Co., 513 U.S. 561, 115 S.Ct. 1061, 131 L.Ed.2d 1 (1995), have been satisfied. Instead, they believe that a plaintiff must show that shares were purchased “in” a public offering; that is, “pursuant to a registration statement and through a transaction requiring the delivery of a prospectus.” Outsiders Mem. at 13 (citing Gould v. Harris, 929 F.Supp. 353, 358 [C.D. Cal.1996]; Gannon v. Continental Ins. Co., 920 F.Supp. 566, 575 [D. N.J. 1996]; Murphy v. Hollywood Entertainment Cory., No. CIV. 95-1926-MA (LEAD), 1996 WL 393662, at *2-4. [D. Or. May 9, 1996];, In re Valence Tech. Sec. Litig., No. C 95-20459JW, 1996 WL 37788, at *4 [N.D. Cal. Jan. 23, 1996]). More specifically, the Underwriters and the Outsiders argue that Section 11 of the Securities Act does not “extend! ] to securities purchases that are merely ‘traceable’ to the offering. Under Gustafson, Section[ ] 11 applies] only to purchases made in the initial offering .... ” Gould, 929 F.Supp. at 359. These and other district court cases support the Underwriters and the Outsiders’ position that, following Gustafson, there is no standing under Section 11 for plaintiffs who purchased securities in aftermarket trading. Among the named plaintiffs, only one actually purchased shares on the date of the Offering and at the Offering price. Moreover, at the time of the Offering, some 195,948 shares of Number Nine common stock were eligible for immediate sale to the public without registration under Rule 144(k). Thus, the Underwriters and the Outsiders argue that the Class could have purchased shares that did not require delivery of the Prospectus, either because the Class members purchased some of the Rule 144(k) shares or because they bought shares in aftermarket trading. Accordingly, the Underwriters and the Outsiders argue that dismissal is appropriate. 2. The Class’ Argument The Class argues against dismissal for several reasons. First, they claim that plaintiff Robert Schoenhofer (“Schoenhofer”) in fact purchased 100 shares of Number Nine stock from one of the Underwriters, and they offer to amend the Complaint to plead these facts. Second, they believe that Section 4(a)(3) of the Securities Act, when read in conjunction with Rule 174(d) promulgated thereunder by the Securities Exchange Commission, requires that a prospectus be delivered to all persons who purchase securities within twenty-five days after completion of a public offering for a company that was not previously subject to reporting obligations. Thus, the argument goes, because plaintiffs Schoenhofer and RBI purchased their shares within twenty-five days of the Offering, they were legally entitled to receive a copy of the Prospectus and should be deemed to have standing even under the Underwriters and the Outsiders’ interpretation of Gustafson. Finally, the Class takes issue with the Underwriters and the Outsiders’ characterization of the relevant case law. Rather than expressly abolishing the “traceable” aspect of securities standing under Section 11, as the Underwriters and the Outsiders claim, the Class argues that Gustafson simply did not address the issue. According to the Class, Gustafson dealt with the substantive requirements of a Section 12(2) claim, noting that a claim could only be brought when there had been a public offering. See Gustafson, 513 U.S. at 569, 115 S.Ct. 1061. Admittedly, this aspect of the case seems directly relevant to a Section 11 claim. That does not, however, mean that Section 12(2) standing principles should also be incorporated into Section 11 analysis, as the District Court of California appears to have done in Gould. Indeed, the Class argues, there are many reasons to retain “traceable” standing under Section 11 while not permitting it under Section 12(2). First, the text of the actual statute seems to require it. Section 11(a) provides that “any person acquiring such security” may sue on a false registration statement, and even provides that a person acquiring a security more than a year after a registration statement becomes effective can sue if she proves that she relied on untrue statements contained therein. 15 U.S.C. § 77k(a). Additionally, the measure of damages provided in Section 11(e) clearly contemplates that people may purchase at a rate higher than the offering price and, hence, also contemplates that aftermarket purchasers can sue under Section ll. Second, the legislative history of Section 11 makes clear that the statutory remedy was intended to protect purchasers “regardless of whether they bought their securities at the time of the original offer or at some later date (so long as those shares were issued on the offering).” H.R.Rep. No. 85, 73rd Cong., 1st Sess. 7 (1933). Third, respected commentators appear to reject the Gould position that “traceable” standing no longer applies under Section 11. See IX L. Loss & J. Seligman, Securities Regulation 4249 (3d ed. 1995) (“Suit may be brought by any person who acquired a registered security, whether in the process of distribution or in the open market.”) (emphasis in original). Thus, the Class asks the Court to reject the Gould court’s interpretation of Gustaf-son and retain the First Circuit’s established view that standing is proper under Section 11 whenever a plaintiffs shares are “traceable to” an initial public offering. See, e.g., Versyss Inc. v. Coopers & Lybrand, 982 F.2d 653, 654 (1st Cir.1992) (purchaser may bring a Section 11 action even when shares were acquired from individual shareholders in a merger subsequent to an initial public offering). If the Court does so hold, then standing is proper as to all named plaintiffs, even those who purchased securities after the twenty-five day period following the Offering. 3. Analysis Because the parties briefed these motions over a year ago, they cited neither of the recent thoughtful opinions by Judge Woodlock and Judge O’Toole on this very issue. In Cooperman v. Individual, Inc., No. 96-12272-DPW, 1998 WL 953726 (D.Mass. May 27, 1998), aff'd on other grounds, 171 F.3d 43 (1st Cir.1999), Judge Woodlock addressed an argument that Gustafson had effectively overruled the “traceable to” formulation of standing under Section 11. In rejecting the argument, Judge Woodlock first acknowledged that the district courts have split on the issue. He also indicated that the holding of Gustafson with respect to Section 12(2) should apply with equal force to Section 11. “As a result, however, it is critical that the holding be characterized accurately.” Id. at *5. Notably, “Gustafson was a decision not on standing, but rather on the substantive elements of a § 12(2) action.” Id. at *6. The Supreme Court simply held that for Section 12(2) liability to attach, a misrepresentation must be made in an initial public offering, not other types of transactions. “In other words, the Court held that there is no right of recovery for misrepresentations in the aftermarket, but it did not preclude an aftermarket purchaser from recovering for misrepresentations in an [initial public offering].” Id. Because Gustafson did not control his decision, as the defendants claimed, Judge Woodlock simply reaffirmed existing First Circuit standing jurisprudence for Section 11 suits. “Specifically, the text, structure, and history of § 11 demonstrate that, rather than mirroring the privity requirement of § 12(2) and focusing upon the sale transaction, § 11 focuses upon the offered security itself, which becomes — and remains — a security registered pursuant to other provisions of the 1933 Act.” Id. Consequently, Judge Woodlock held “that Plaintiffs have standing under Section 11 if they purchased shares registered through the registration statement at issue — i.e., if them shares are .‘traceable to’ the public offering.” Id. at *7. An identical result was reached by Judge O’Toole in In re WebSecure, Inc. Semrities Litigation, 182 F.R.D. 364 (D.Mass.1998). After analyzing the Gus-tafson decision in much the same manner as Judge Woodlock, Judge O’Toole concluded, “[t]o plead proper standing under § 11, a plaintiff may plead a purchase in the public offering itself or a purchase traceable to the offering and its Registration Statement.” Id. at 368. This Court joins its District of Massachusetts colleagues in holding that a plaintiff may satisfy Section 11 standing requirements by purchasing securities “traceable to” an initial public offering. Because the Class alleges as much in its Complaint, the Court DENIES the motions to dismiss for lack of standing. C. The Claim under Section 11 of the Securities Act 1. Whether Rule 9(b) Applies The parties dispute whether Fed. R.Civ.P. 9(b) applies to the claim under Section 11. Essentially, the determination comes down to whether that count of the Complaint “sounds in fraud.” Shaw v. Digital Equip. Corp., 82 F.3d 1194, 1223 (1st Cir.1996) (noting that when a complaint asserting violations of Section 11 “sounds in fraud,” the otherwise inapplicable requirements of Rule 9[b] are triggered). The Court addressed this issue in In re Computervision Corporation Securities Litigation, 869 F.Supp. 56 (D.Mass.1994), aff'd on other grounds sub nom. Glassman v. Computervision Corp., 90 F.3d 617 (1st Cir.1996). After reviewing several of the key allegations from the complaint in Computervision, which together charged the defendants with engaging in a scheme to purposefully “dump” stock on an unsuspecting public at inflated prices, the Court concluded that “[t]hese are clearly allegations of fraud perpetrated on the investing public, so the particularity requirements of Rule 9(b) apply.” Id. at 64. Because they believe that the allegations in this case are more fraud-like in nature than those at issue in Computervision, the Defendants argue that this Court must hold the Class to the demands of Rule 9(b). A subsequent case from the First Circuit has significantly changed the picture with respect to the level of alleged conduct that will suffice to make a complaint “sound in fraud.” In Shaw, the First Circuit addressed the issue as follows: “Although the complaint [at issue] does assert that defendants actually possessed the information that they failed to disclose, those allegations cannot be thought to constitute ‘averments of fraud,’ absent any claim of scienter and reliance. Otherwise, any allegation of nondisclosure of material information would be transformed into a claim of fraud for purposes of Rule 9(b).” Shaw, 82 F.3d at 1223. Thus, in order to prevent Section 11 claims from becoming analytically indistinct from 10(b) claims, courts must ensure that the former truly do “sound in fraud” before the heightened pleading standard associated with the latter attaches. The Complaint appears, to have been crafted with these considerations in mind. Indeed, the claim under Section 11 of the Securities Act expressly excludes “(a) paragraphs 126-60 [relating to scienter of Number Nine and the Insiders for the 10(b) claim] (b) any element of any paragraph that alleges that defendants’ misconduct was done intentionally, knowingly or with reckless disregard for the truth; or (c) any element of a paragraph that otherwise sounds in fraud.” Compl. ¶ 161. Courts differ in deciding whether to credit such disclaimers. Compare In re Stac Elecs. Sec. Litig., 89 F.3d 1399, 1405 n. 2 (9th Cir.1996) (holding that Rule 9[b] applies despite presence of disclaimers because “[t]hese nominal efforts are unconvincing where the gravamen of the complaint is plainly fraud and no effort is made to show any other basis for the claims levied at the Prospectus”) with In re AnnTaylor Sec. Litig., 807 F.Supp. 990, 1003 (S.D.N.Y.1992) (holding that “[s]inee plaintiffs disavow any claim of fraud ... in Count I [alleging Section 11 liability], it need not comply with Rule 9[b].”). This Court holds that Counts I (Section 11) and II (Section 15) of the Complaint do not “sound in fraud” and are therefore not subject to the heightened pleading standards of Rule 9(b). There are two alternative reasons for so holding. First, the Court rules that the Complaint’s disclaimer of fraud-type allegations is effective to prevent the Securities Act claims from “sounding in fraud.” This will minimize litigation costs by ensuring that plaintiffs need file only one complaint and one civil action to pursue their securities claims. The Court emphasizes, however, that the Class will be held to its word; that is, in pursuing the Securities Act claims, the Class can in no way rely on allegations of conduct that “sound in fraud.” Thus, when litigating the Securities Act claims, the Class cannot rely on any evidence suggesting that the conduct of Number Nine, the Insiders, the Outsiders, or the Under-miters was done knowingly, intentionally, or with reckless disregard for the truth, or was otherwise fraudulent. Second, the Court rules that, even ignoring the Complaint’s disclaimer, the allegations under Counts I and II do not “sound in fraud” because they “appear to contend only that there was a negligent or even innocent misrepresentation.” Cooperman, 1998 WL 953726, at *7 (holding that Rule 9[b] does not apply to a Section 11 claim); accord In re WebSecüre, 182 F.R.D. at 367 (holding that Rule 9[b] did not apply to Section 11 and 12[a][2] claims because no allegations of scienter were made). The most damning- allegation that the Defendants can muster from the Complaint is that “it was apparent that the Registration Statement contained materially false and misleading statements which a reasonable and diligent investigation would have uncovered.” Compl. ¶ 169. This allegation, however, merely tracks the language of Section 11(b)(3) of the Securities Act to negate the “due diligence” defense. Moreover, it does not contain allegations that the Defendants knew the false or misleading character of their statements. Thus, the Court holds that Rule 9(b) does not apply to the claims under the Securities Act, both because the Complaint expressly excludes all allegations of fraudulent conduct for purposes of Counts I and II, and because even without the disclaimer those counts merely allege “that defendants actually possessed the information that they failed to disclose.” Shaw, 82 F.3d at 1222. 2. The Value of Inventory Although Rule 9(b) does not apply to the Securities Act claims, the requirements of the PSLRA still do. Thus, the Class 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, the complaint shall state with particularity all facts on which the belief is formed.” 15 U.S.C. § 78u-4(b). Naturally, the Defendants argue that these requirements have not been met. For expositional clarity, this Memorandum addresses these arguments separately with respect to each group of allegations, examining whether the group is supported by sufficient facts to survive a motion to dismiss. First, the Class contends that the Prospectus contained several misleading statements because certain 64-bit VL bus inventory was carried on Number Nine’s books at a value far exceeding its true market worth. See Compl. ¶ 37 (noting that “64-bit VL Bus graphics accelerators ... were rapidly approaching obsolescence” at the time of the Offering). The Class has sufficiently identified the misleading statements (a number of representations from the Prospectus that GAAP principles have been followed and the financial figures are otherwise accurate), and why they were allegedly misleading (because they overstated the value of inventory on hand, thereby artificially elevating the perceived worth of the company prior to its Offering). The only remaining question is whether the Class has alleged a sufficient factual basis for these claims, and as the First Circuit has noted, “it is plaintiffs responsibility to plead factual allegations, not hypotheticals, sufficient to reasonably allow the inference that the defendants [engaged in the alleged conduct].” Glassman, 90 F.3d at 629. The Defendants argue that the Class has merely cited an event — the eventual $8 million markdown of Number Nine’s inventory — and reasoned that the inventory must have been overvalued at the time of the Offering some eight months earlier. Such hindsight pleading, they argue, is insufficient to withstand this motion. It is important to note, however, that because the Class is not subject to Rule 9(b) for purposes of the Securities Act claims, this is not the typical case in which the “fraud by hindsight” doctrine applies. See Gross, 93 F.3d at 991. (“Furthermore, we have consistently held that a securities plaintiff does not satisfy the requirements of Rule 9[b] merely by pleading ‘fraud by hindsight.’ ”) (quoting Greenstone, 975 F.2d at 25). Gross involved a Section 10(b) claim subject to Rule 9(b) in which the plaintiffs failed to “set forth sufficiently particular facts from which one could reasonably infer that [the defendant] knew about the alleged delays at the time it issued the [misleading statement].” Id. at 995. In the instant case, no such issue is raised as the Court must accept as true the Class’ allegation that the Defendants knew about the inferior value of the 64-bit VL bus inventory at the time of the Offering. Nevertheless, the First Circuit has held that a doctrine similar to the “fraud by hindsight” rule applies in the context of certain Securities Act claims even without the force of Rule 9(b). Specifically, the First Circuit held that “[i]n many circumstances, the relationship between the nonpublic information that plaintiffs claim should have been disclosed and the actual results or events that the undisclosed information supposedly would have presaged will be so attenuated that the undisclosed information may be deemed immaterial as a matter of law.” Shaw, 82 F.3d at 1211. In light of this language, the Defendants argue that the crucial issue with respect to the inventory becomes whether the alleged misrepresentations in the Prospectus were “sufficiently remote in time or causation from the ultimate events of which [they] purportedly forewarned.” Id. If so, dismissal is appropriate. Notably, the Shaw court cited, apparently with approval, a string of cases in which dismissal or summary judgment was granted under circumstances similar to the instant case. See In re VeriFone Sec. Litig., 11 F.3d 865, 867-70 (9th Cir1993) (affirming dismissal of claim that registration statement failed to disclose information concerning development that came to light six months later); Krim v. BancTexas Group, Inc., 989 F.2d 1435, 1439, 1450 (5th Cir.1993) (affirming summary judgment when prospectus allegedly failed to disclose information of developments that matured four months later); In re Convergent Techs. Sec. Litig., 948 F.2d 507, 511, 517 (9th Cir.1991) (same for six month delay); Zucker v. Quasha, 891 F.Supp. 1010, 1012-13, 1018 (D.N.J.1995) (dismissal for four and one half month delay), aff'd 82 F.3d 408 (3d Cir.1996). The Shaw court itself did not follow these cases because in Shaw, “the prospectus in question was filed 11 days prior to the end of the quarter in progress [which turned out to be disastrous].” Shaw, 82 F.3d at 1211 (emphasis added). The court simply could not hold, as matter of law, that information foretelling a disastrous quarter need not be disclosed in a prospectus issued a mere eleven days before the end of such quarter. See id. Given that the inventory markdown in this case occurred some eight months after the alleged misrepresentations rather than a mere eleven days, the Defendants argue that the implicit spectrum established by Shaw mandates dismissal. While the Defendants rely on this aspect of Shaw as controlling, the Class cites another part of the opinion that follows a quite different course. The plaintiffs in Shaw also challenged the misleading nature of certain prospectus representations by the defendant that restructuring reserves were adequate to cover presently-planned restructuring activities. While the defendants’ March 21, 1994 prospectus stated that existing reserves were adequate,- the company nevertheless took an additional $1.2 billion restructuring charge on July 20, 1994. Although this delay was considerably longer than eleven days — indeed it would seem to require dismissal under the implicit spectrum established by the previously cited cases — the First Circuit allowed the plaintiffs to proceed on the claim, pausing only to consider whether the “bespeaks caution” doctrine should immunize the alleged misrepresentations. See id. at 1212-14. The Shaw court did not attempt to reconcile the dissonance between these two holdings. Crucial to the analysis seems to have been the fact that the third-quarter results gave rise to a claim of nondisclosure, while the restructuring reserve adequacy claim rested on an affirmative misleading statement. Compare id. at 1202 (“Actionability of Alleged Nondisclosures Under Section 11”) with id. at 1211 (“Ac-tionability of Statement Concerning Restructuring Reserves”). While the theoretical chasm between fraud by omission and commission may provide abstract comfort to those seeking principled distinctions in the securities law, to the workaday district judge the chasm often provides only a temptation to jump. In this case, for instance, the Class has cited a number of affirmative allegations that it believes are actionably misleading based on the failure to disclose the inventory valuation problem. The Court must ask: Are these allegations claims of nondisclosure subject to the exacting treatment that the First Circuit afforded the third quarter results in Shaw, or are they claims of affirmative misstatement such as the Shaw reserve adequacy claim, which the court apparently looked upon with a more generous gaze? Simply referencing financial statements that were allegedly made misleading by a failure to disclose certain information seems to give securities plaintiffs an easy escape from the heightened Shaw standard. Given the continuous reporting requirements of the Securities Exchange Commission, plaintiffs could almost always find some generic GAAP reference or other statement in a company’s reports that is allegedly made misleading by nondisclosure of material information. At heart, the Class’ claim in this case is one of nondisclosure; yet the Class is able to cite a number of affirmative statements in the Prospectus. This Court will not allow circumvention of Shaw in such a manner. The question therefore remains: How is the Court to distinguish the treatment of the third quarter results from the restructuring reserves in Shaio? One way to do so would be to examine the nature of the alleged problem and determine how long such a problem typically takes to develop and, hence, how early one could reasonably expect a company to know about the problem and incur disclosure obligations (or how early such a problem could have made company statements misleading). See Cooperman, 171 F.3d at 48 (contrasting order processing delays, which could not be inferred to exist five weeks prior to board meeting minutes discussing them, with board-level conflicts, which could be inferred to exist at the time of an IPO by the departure of the CEO, past president, and founder of the corporation four and one-half months after the IPO). Thus, information regarding the impending results of a quarter might need only be disclosed when statements are made very near to the end of that quarter. See Shaw, 82 F.3d at 1210 (noting that the remainder of a quarter’s results can always be different than quarter-to-date information would portend, thus rendering quarter-to-date information less probative the earlier in the quarter it is obtained); see also Glassman, 90 F.3d at 632 (refusing to hold that a duty of disclosure attached to negative internal information “only seven weeks into the quarter — and where mid-quarter results were not particularly predictive”); Richard A. Rosen, The Statutory Safe Harbor for Forwardr-Look-ing Statements after Two and a Half Years; Has It Changed the Law? Has It Achieved What Congress Intended?, 76 Wash. L. Quar. 645, 669 (1998) (opining that Shaw and Computemsion indicate that “the earlier in the quarter is the offering, the less predictive the intraquar-ter information is likely to be of the actual results”); Note, Living in a Material World: Corporate Disclosure of Midquar-ter Results, 110 Harv. L.Rev. 923 (1998) (discussing Shaw and Computemsion and arguing for refinements in the test of materiality). In contrast, a $1.2 billion restructuring charge is of such magnitude and consequence that its necessity develops and should be recognized by management over a much longer horizon. Therefore, it is not unreasonable to infer that management knew of impending restructuring necessities some four months’before their announcement. In the instant case, then, the question for the Court is whether the alleged inventory problem is of such a nature that it is reasonable to infer its existence at the time of the Offering from a disclosure some eight months later. At least one other court has addressed this issue. In In re Starter Corporation Securities Litigation, No. 94 Civ. 718 TPG, 1996 WL 406624 (S.D.N.Y. July 19, 1996), Chief Judge Griesa dismissed a Section 11 claim predicated upon an inventory markdown some eighteen months after the issuance of a prospectus, noting that “[n]o possible inference can be drawn from these write-downs, occurring long after the prospectus, that the questioned statements in the prospectus about inventory controls were false.” Id. at *3. The Class attempts to distinguish In re Starier because in that case, the adverse disclosures were made eighteen and twenty months after the prospectus and because Rule 9(b) applied. In contrast, the Class in this case alleges an adverse disclosure only eight months after the prospectus and brings Securities Act claims to which Rule 9(b) does not apply. Because it is not at all clear that Chief Judge Griesa based his opinion on the applicability of Rule 9(b), and because the First Circuit has held Section 11 plaintiffs to a standard similar to Rule 9(b) in any event, that aspect of the Class’ argument can be safely ignored. Thus, the question truly becomes a judgment call: is the eight month time lag in this case more like the eleven days of Shaw or the eighteen months of In re Starter? On that question, and on the allegations as they are currently framed in the Complaint, the Class loses. Ample precedent exists for the proposition that the computer industry is a “field marked by rapid technological advances.” In re Stac Elees., 89 F.3d at 1410 (citation.-omitted). Indeed, the Court may take judicial notice, see Fed.R.Evid. 102, of the fact that a product, such as a 64-bit VL bus graphics card, can go from viability to obsolescence in the retail market in a time span of less than eight months. Thus, the mere announcement, eight months later, of an inventory markdown is not sufficient to raise an inference that inventory was obsolete at the time of the Offering. Still, this issue is an extremely close one. A comparison with Judge Harrington’s opinion in Friedberg v. Discreet Logic Inc., 959 F.Supp. 42 (D.Mass.1997), is instructive. Faced with a nearly identical issue, Judge Harrington was able to deny the motion to dismiss, but only because he found significant additional facts to support an inference that the defendant was aware of a problem at the time of its public offering. In Friedberg, defendant Discreet Logic, Inc. (“Discreet”) manufactured software products that worked in tandem with popular Silicon Graphics (“Silicon”) workstations. Some three months after a public offering by Discreet, it announced that its financial results had been “devastated” by the introduction of a new Silicon workstation that rendered Discreet’s software obsolete. See id. at 45. The question for Judge Harrington was whether the plaintiffs had alleged facts sufficient to support an inference that Discreet was aware of its impending doom at the time of the , public offering. He held that the plaintiffs had met their burden, but only because he found significant facts besides the mere announcement some three months later that the problem had occurred. For instance, Discreet .touted in its prospectus that it “obtain[ed] advance access” to Silicon technology as part of a strategic alliance agreement. Id. at 44. Also, a Silicon executive was quoted in the Wall Street Journal as saying that Discreet “knew for a long time” that its product would be rendered obsolete and Discreet “could have planned accordingly.” Id. at 45. Thus, because the defendants were “armed with information that [their] current product line [was] about to become obsolete,” id. at 50, Judge Harrington was able to find that the “strong inference of scienter” test under Section 10(b) had been met, see id. at 51-52. Although Judge Harrington’s opinion focused on the heightened scienter pleading requirements of Section 10(b) claims, the Court nevertheless rules the factual comparison instructive. Accordingly, the Court holds that the Class has insufficiently alleged material misstatements based solely on the subsequent announcement of inventory markdowns by Number Nine. As the First Circuit has made clear, even under Section 11 claims, “the relationship between the nonpublic information that plaintiffs claim should have been disclosed and the actual results or events that the undisclosed information supposedly would have presaged [can] be so attenuated that the undisclosed information may be deemed immaterial as a matter of law.” Shaw, 82 F.3d at 1211. The instant claim presents just such a situation. Absent some other allegations supporting contemporaneous existence of an inventory overvaluation, the representations in the Prospectus are not actionable as matter of law. 3. The “Broad Product Line” The Class next claims that the Prospectus contained misleading statements by representing that Number Nine offered a broad and diversified range of products. At the outset, it is important to examine the challenged statement: The Company’s product line addresses both mainstream and high-end segments of the PC video/graphics accelerator subsystem market. A broad product line not only allows the Company to serve as a single-source supplier for OEMs seeking to streamline the procurement of video/graphics solutions, but also facilitates the penetration of the retail channel by spanning a range of prices, beginning at $150 and extending to $2,000. The Class does not challenge the factual assertions contained in this statement. Instead, the Class contends that the statement amounts to a claim by Number Nine that it offers “a broad line of products appealing to consumers at all levels of the market for graphics accelerators.” PI. Mem. at 39. This implicit representation was false and misleading, in the Class’ view, because at the time it was made: (a) Number Nine’s competitors were offering significantly less expensive alternatives to Number Nine’s high-priced Imagine 128 products that offered features such as 3-D graphics and superior motion video which were not available in Number Nine’s products; and (b) the second generation Imagine II line of products, which Number Nine touted in the Prospectus as an example of its broad product line, was experiencing numerous difficulties in technical development that Number Nine knew would preclude it from meeting its announced 1995 shipment date. The Defendants counter that the “broad product line” representation is not actionable because: (a) the Defendants had no obligation to disclose the information that allegedly rendered the statement misleading; (b) the Complaint specifically “bespoke caution” with respect to the nature of Number Nine’s product line; (c) as matter of law, the statements regarding the introduction of the second generation Imagine 128 product cannot be misleading because they specifically disclaimed certainty of timing; and (d) the “broad product line” statement constitutes an innocuous characterization upon which no reasonable investor could have relied. The Defendants’ first two arguments collapse quickly. First; the Defendants rely on an incomplete statement of the controlling law when they argue that Number Nine had no obligation to disclose the information that allegedly rendered the “broad product line” statement misleading. The Defendants claim that, even if Number Nine’s competitors did offer superior products at a lower price, Number Nine was under no obligation to disclose this information. See In re Syntex Corp. Sec. Litig., [1993 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶ 97,747, at 97,-569, 1993 WL 476646 (N.D.Cal. Sept. 1, 1993) (“A company has no duty to disparage its own competitive position in the market .... ”). While it is true that the federal securities laws “do not ordain that the issuer of a security compare itself in myriad ways to its competitors, whether favorably or unfavorably,” In re Worlds of Wonder Sec. Litig., 35 F.3d 1407, 1419 (9th Cir.1994) (citation omitted), they do impose a duty to provide complete and accurate disclosure once a company decides to make a given claim, see Lucia v. Prospect Street High Income Portfolio, Inc., 36 F.3d 170, 175 (1st Cir.1994) (“[W]hen a corporation does make a disclosure — whether it be voluntary or required — there is a duty to make it complete and accurate.”). Thus, the cases upon which the Defendants rely also state that an issuer is only absolved from disclosure “where it has provided accurate hard data from which analysts and investors can draw their own conclusions .... ” In re Syntex, Fed. Sec. L. Rep. at ¶ 97,569; accord In re Worlds of Wonder, 35 F.3d at 1419 (issuer relieved of duty only when it “fully disclosed ... sales” and “[t]his disclosure revealed a significant decline in both net sales and net income”); In re Donald Trump Casino Sec. Litig., 7 F.3d 357, 375 (1st Cir.1993) (when issuer fully and accurately disclosed debt-equity ratio, it was not required to make comparisons with other casinos). Because the Class alleges that relevant material information was not disclosed in connection with Number Nine’s “broad product line” claim, it is not enough for the Defendants simply to argue that they are under no duty to explicate the state of their product line vis a vis their competitors. Equally unavailing is the Defendants’ “bespeaks caution” argument. The “bespeaks caution” defense is inapplicable where, as here, the plaintiffs challenge the truthfulness of a claim regarding present facts as opposed to forward-looking statements. See Shaw, 82 F.3d at 1213 (“To the extent that plaintiffs allege that the reserve ‘adequacy’ statement encompasses [a] representation of present fact, and that such a representation was false or misleading when made, the surrounding cautionary language could not have rendered the statement immaterial as a matter of law.”). Because the challenged statement claims that Number Nine was currently offering a “broad product line,” and the Class contends that the statement was misleading at the time it was made, the “bespeaks caution” doctrine is inapplicable. The defense is available, however, against the Class’ contention that Number Nine falsely claimed that the second generation of Imagine 128 cards would be introduced in 1995. In truth,- Number Nine merely stated that “[i]n late 1995, the Company plans to introduce a second generation of video/graphics products based on enhancements to the Imagine 128 architecture.” Prospectus at 34 (emphasis added); see also id. (“There can be no assurance, however, that the Company will be successful in developing, manufacturing and marketing second generation Imagine 128 products”). Under these circumstances, cautionary language regarding a planned target date for introducing a complex, technical new product is simply not actionable. “Especially where, as here, a product is understood to be in development, plaintiffs may not assert merely that, because the’product did not come out.when projected, plans for an earlier release were false.” Berliner v. Lotus Dev. Corp., 783 F.Supp. 708, 710 (D.Mass.1992) (Tauro, C.J.) (dismissing Section 10[b] claim under Rule 9[b]). The Class’ attempts to distinguish Berliner are unavailing. First, as noted above, see supra Section 111(C)(2), in certain situations the First Circuit applies a heightened pleading standard under Section 11 despite the inapplicability of Rule 9(b). Second, contrary to the Class’ assertion, the Complaint does not allege “specified developmental problems” in addition to the subsequent announcement of delays. PI. Mem. at 41 n.50 (emphasis added). Rather the Complaint merely asserts, without the slightest factual support, that Number Nine was experiencing developmental problems at the time of the Offering. Chief Judge Tauro rejected just such a bootstrap approach in Berliner. See Berliner, 783 F.Supp. at 710, Thus, the Court holds that the “broad product line” statement is nonactionable insofar as the Class relies on the projected introduction of second generation Imagine 128 cards to demonstrate the falsity of the statement. To rebut the remaining ground for the Class’ claim — that the “broad product line” statement was misleading in the absence of disclosures regarding the superiority of competitors’ product — the Defendants rely on the simple argument that the “broad product line” statement was so innocuous that, as matter of law, there is no “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.” TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976). The Court accepts this argument and rules that the “broad product line” statement is nonac-tionable on any ground because it is a subjective characterization that any reasonable investor would perceive as harmless and standard corporate hyperbole. As the First Circuit said in Shaw: [Cjourts have demonstrated a.willingness to find immaterial as a matter of law a certain kind of rosy affirmation commonly heard from corporate managers and numbingly familiar to the marketplace — loosely optimistic statements that are so vague, so lacking in specificity, or so clearly constituting the opinions of the speaker, that no reasonable investor could find them important to the total mix of information available. Shaw, 82 F.3d at 1217. One commentator recently advocated a two-step analysis of such “puffery” claims: first, the court should consider whether the statement is so vague, so general, or so loosely optimistic that a reasonable investor would find it unimportant to the total mix of information; second, the court should ask whether the statement was also considered unimportant to the total mix of information by the market as a whole. See R. Gregory Roussel, Note, Securities Fraud or Mere Puffery: Refinement of the Corporate Puffery Defense, 51 Vand. L.Rev. 1049, 1064-66 (1998) (citing Shaw, 82 F.3d at 1217). If the answer to either of these questions is no, the puffery defense ought not apply. The careful reader will note that this analysis depends on the unstated assumption that securities markets sometimes fail to achieve rational equilibria; that is, even well-functioning securities markets sometimes do not achieve in the aggregate what a “reasonable” investor would achieve individually. Otherwise, there would be no need for the second step of the analysis. Some commentators disagree with this proposition, arguing that the evolutionary forces of the market “drive out” behavior that does not replicate economic ideals: “Often [business managers] thrash about quite innocent of economic theory. No matter. Those who offer what consumers want — by design or by accident — and produce it at low cost will prosper. Rewards and punishments arise automatically in any market system.” Frank H. Easter-brook, The Supreme Court, 1983 Term— Foreward: The Court and the Economic System, 98 Harv. L.Rev. 4, 8 (1984). Despite the theoretical appeal of this argument, it is hardly surprising that markets sometimes fail to exhibit perfectly wealth-maximizing behavior, given the plethora of evidence from cognitive psychologists and decision theorists suggesting that humans frequently behave in nonrational ways, and that these “cognitive biases” are largely incapable of being unlearned. See generally Jon D. Hanson & Douglas A. Kysar, Taking Behavioralism Seriously: The Problem of Market Manipulation, 74 N.Y.U. L.Rev. 632 (1999) (providing an overview of such findings). Moreover, the problem is particularly acute in market settings, given that certain actors in the market will have strong incentives to exacerbate and exploit nonrational behavior. See id.; Nathaniel Carden, Implications of the Private Securities Litigation Reform Act of 1995 for Judicial Presumptions of Market Efficiency, 65 U. Chi. L.Rev. 879 (1998) (suggesting that