Makor Issues & Rights, Ltd. v. Tellabs, Inc. (735 F. Supp. 2d 856, 2010)

MEMORANDUM OPINION AND ORDER

AMY J. ST. EVE, District Judge:

Before the Court is Defendants Tellabs, Inc. (“Tellabs”), Michael J. Birck, Brian J. Jackman, Richard C. Notebaert, and Joan A. Ryan’s (collectively “Defendants”) Motion for Summary Judgment. Defendants seek summary judgment on each of the remaining claims set forth in Plaintiffs Makor Issues & Rights, Ltd., Chris Broholm, and Richard Lebrun, et al.’s (collectively “Plaintiffs”) Second Amended Consolidated Class Action Complaint (“Complaint”). For the following reasons, the Court grants in large part and denies in part Defendants’ motion for summary judgment and grants in part and denies in part Defendants’ Motion to Strike.

BACKGROUND

I. Procedural History

This case has a long procedural history. In June 2002, Plaintiffs filed a putative class action lawsuit on behalf of various individuals and persons who purchased common stock of Defendant Tellabs between December 11, 2000 and June 19, 2001 pursuant to § 10(b) of the Securities and Exchange Act of 1934 (“Section 10(b)”) and SEC Rule 10b-5,17 C.F.R. § 240.10b-5 (“Rule 10b-5”). The Court has jurisdiction over this matter pursuant to 15 U.S.C. § 78aa and 28 U.S.C. §§ 1331 and 1337, and venue is proper in this district pursuant to 28 U.S.C. § 1391(b). (R. 336-1, ¶ 4.)

Initially, the Court granted Defendants’ motion to dismiss Plaintiffs’ complaint in its entirety, but permitted Plaintiffs to amend. See Johnson v. Tellabs, Inc., 262 F.Supp.2d 937, 939 (N.D.Ill.2003) (Johnson I). Shortly thereafter, Plaintiffs filed the operative Complaint, which contained additional factual allegations. {See R. 63-1; see also Johnson v. Tellabs, Inc., 303 F.Supp.2d 941, 945 (N.D.Ill.2004) (Johnson II)). After determining that the Complaint failed to properly plead an underlying 10b-5 violation, and reasoning that the remaining allegations were dependent on an underlying 10b-5 violation, the Court granted Defendants’ motion to dismiss each count of the Complaint, with prejudice. Johnson II, 303 F.Supp.2d at 971. On appeal, the Seventh Circuit affirmed in part and reversed in part, holding that Plaintiffs sufficiently had pled claims under § 10(b) against Defendants Tellabs and Notebaert and properly had pled control person liability claims under § 20(a) against both Notebaert and Birck. See Makor Issues & Rights, Ltd. v. Tellabs, Inc., 437 F.3d 588, 603-05 (7th Cir.2006) (Makor I). The Court of Appeals took no position on Plaintiffs’ § 20(a) insider trading claim against Defendant Birck. Id. at 605 (“No party in this litigation has provided more than cursory briefing of this issue, and therefore we take no position on its resolution, leaving it for further factual and legal development during the course of the litigation.”), modified by 2006 U.S.App. LEXIS 17252 (7th Cir.2006). The Supreme Court reversed the Seventh Circuit’s interpretation of the scienter requirement of a § 10(b) claim and remanded the case for further review consistent with the Supreme Court’s clarifications. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 127 S.Ct. 2499, 2509, 168 L.Ed.2d 179 (2007) (Makor II). On remand from the Supreme Court, the Seventh Circuit adhered to its prior decision in Makor I and remanded the case to this Court. Makor Issues & Rights, Ltd. v. Tellabs Inc., 513 F.3d 702, 705 (7th Cir. 2008) (Makor III).

On February 25, 2008, the parties filed a Joint Status Report identifying their positions regarding the remaining claims and defenses in the case. The parties reported that, as it currently stood, the Complaint alleged: (i) Section 10(b) and Rule 10b-5 claims against Notebaert and Tellabs, (ii) Section 20(a) control person liability claims against Notebaert, Birck, Jackman, and Ryan, and (iii) Section 20(a) insider trading claims against Birck. The parties agreed that the four categories of alleged misrepresentations that remained at issue in the lawsuit were: (i) statements regarding Tellabs’s financial results for fourth quarter 2000 and full year 2000, (ii) statements regarding the TITAN 5500, (iii) statements regarding the TITAN 6500 system, and (iv) Tellabs’s projections of earnings and revenues during 2001. (R. 149-1, Joint Status Report at 2-4.)

On May 23, 2008, after Defendants filed a renewed motion to dismiss, the Court dismissed Plaintiffs’ § 20(a) claim for insider trading against Birck for failure to state a claim under 15 U.S.C. § 78t-l(a). See Makor Issues & Rights, Ltd. v. Tellabs Inc., 2008 WL 2178150, *2, 2008 U.S. Dist. LEXIS 41539, *7 (N.D.Ill. May 23, 2008). On June 17, 2008, Defendants filed their answer and defenses to the Complaint. (R. 195-1.) On February 23, 2009, 256 F.R.D. 586 (N.D.Ill.2009), the Court granted Plaintiffs’ motion for class certification, appointment of class representatives, and appointment of class counsel. (R. 256-1, Memorandum Opinion and Order.) The Court entered an order certifying a class consisting of: “All persons who purchased the common stock of Defendant Tellabs during the period from December 11, 2000 through June 19, 2001, inclusive (the ‘Class Period’). Excluded from the Class are Defendants; the subsidiaries and affiliates of Tellabs; the officers and directors of Tellabs or its subsidiaries or affiliates, at all relevant times; members of the immediate family of any excluded person; the legal representatives, heirs, successors, and assigns of any excluded person; and any entity in which any excluded person has or had a controlling interest.” Id. at 26. The Court also appointed Makor Issues & Rights, Ltd. Lead Plaintiff pursuant to 15 U.S.C. § 78u-4. Chris Broholm, Richard LeBrun, David Leehey and Patricia Morris (now deceased) are additional named Plaintiffs. The named Defendants are Tellabs, Michael J. Birck, Richard C. Notebaert, Brian Jackman and Joan Ryan.

On October 16, 2009, Plaintiffs filed a Notice of Intent Not to Pursue Certain Allegations Further in this Action (“Notice of Intent”). (R. 284-1, Notice of Intent.) Plaintiffs indicated their intention not to pursue certain allegations of misrepresentation based on statements concerning the TITAN 6500 under § 10(b) and Rule 10b-5 promulgated thereunder. Id. at 1-2. On October 22, 2009, Defendants moved the Court to dismiss all allegations concerning allegedly false or misleading statements regarding the TITAN 6500 and to enter judgment in their favor. (R. 288-1, Motion to Dismiss.) The Court found that Defendants failed to establish that dismissal and judgment were warranted on the TITAN 6500 claims, but held that Plaintiffs were barred from pursuing the § 10(b) allegations of misrepresentation concerning the TITAN 6500. (R. 311-1, Minute Entry, p. 3.)

As a result of this procedural history, three categories of alleged misrepresentations remain at issue in this lawsuit: (i) statements regarding Tellabs’s financial results for fourth quarter 2000 and full year 2000, (ii) statements regarding the TITAN 5500, and (iii) Tellabs’s projections of earnings and revenues during 2001. Defendants now seek summary judgment on each of these claims contained in the Complaint.

II. Northern District of Illinois Local Rule 56.1

When determining summary judgment motions, the Court derives the background facts from the parties’ Local Rule 56.1 statements. Specifically, Local Rule 56.1 assists the Court by “organizing the evidence, identifying undisputed facts, and demonstrating precisely how each side proposefs] to prove a disputed fact with admissible evidence.” Bordelon v. Chicago Sch. Reform Bd. of Trs., 233 F.3d 524, 527 (7th Cir.2000). Local Rule 56.1(a)(3) requires the moving party to provide “a statement of material facts as to which the moving party contends there is no genuine issue.” Cracco v. Vitran Exp., Inc., 559 F.3d 625, 632 (7th Cir.2009). “The opposing party is required to file ‘a response to each numbered paragraph in the moving party’s statement, including, in the case of any disagreement, specific references to the affidavits, parts of the record, and other supporting materials relied upon.’ ” Id. (citing N.D. Ill. R. 56.1(b)(3)(B)). In addition, Local Rule 56.1(b)(3)(C) requires the nonmoving party to present a separate statement of additional facts that require the denial of summary judgment. See Ciomber v. Cooperative Plus, Inc., 527 F.3d 635, 643-44 (7th Cir.2008). Pursuant to the Local Rules, the Court will not consider any additional facts proposed in the nonmoving party’s Local Rule 56.1(b)(3)(B) Response, but instead must rely on the nonmovant’s Local Rule 56.1(b)(3)(C) statement of additional facts when making factual determinations. See id. at 643; Cichon v. Exelon Generation Co., L.L.C., 401 F.3d 803, 809 (7th Cir.2005) (“Local Rule 56.1 requires specifically that a litigant seeking to oppose a motion for summary judgment file a response that contains a separate ‘statement ... of any additional facts that require the denial of summary judgment.’ ”) (internal citation omitted).

Moreover, the purpose of Rule 56.1 statements is to identify the relevant evidence supporting the material facts, not to make factual or legal arguments, see Cady v. Sheahan, 467 F.3d 1057, 1060 (7th Cir.2006), and thus the Court will not address the parties’ arguments made in their Rule 56.1 statements and responses. Also, the requirements for responses under Local Rule 56.1 are “not satisfied by evasive denials that do not fairly meet the substance of the material facts asserted.” Bordelon, 233 F.3d at 528. Further, the Court may disregard statements and responses that do not properly cite to the record. See Cichon, 401 F.3d at 809-10. Finally, “hearsay is inadmissible in summary judgment proceedings to the same extent that it is inadmissible in a trial.” Eisenstadt v. Centel Corp., 113 F.3d 738, 742 (7th Cir.1997). With these standards in mind, the Court turns to the parties’ Local Rule 56.1 statements.

III. Evidentiary Objections

Both Plaintiffs and Defendants contend that portions of the opposing parties’ statements of material facts are deficient and fail to comply with Local Rule 56.1 The Court will address each of these arguments in turn.

A. Defendants’ Motion to Strike Portions of Plaintiffs’ Response to Their Statement of Facts

In their Motion to Strike Portions of Plaintiffs’ Response to Defendants’ Statement of Facts and to Deem Certain Facts Admitted (“Motion to Strike”), Defendants first argue that Plaintiffs have provided evasive answers to paragraphs, or portions of paragraphs, 7-8, 14-15, 20-21, 29, 31-33, 35, 37, 38-41, 43, 47-48, 53-55, 64, 66, 68, 70, 73, 79-80, 82, 92 and 102 of Defendants’ Rule 56.1 Statement. (R. 342-1, Defendants’ Motion to Strike, pp. 3-5, Ex. A.) Specifically, Defendants argue that in each of these instances, Plaintiffs fail to admit or deny the facts alleged, and instead provide evasive responses or fail to respond entirely to the facts at issue. Defendants are correct that, in many instances, Plaintiffs have failed to respond to the facts alleged, but instead improperly dispute characterizations in the statement of facts. In response to paragraphs 7-8, for example, in which Defendants assert facts regarding the alleged “bottoms-up” process, Plaintiffs dispute that Tellabs based its guidance on a “bottoms-up” process. Plaintiffs cite facts that they assert demonstrate that Tellabs followed, at least in part, a top-down process and deny that Tellabs employed a “bottoms-up” process. Plaintiffs, however, fail to admit or deny the facts that support Defendants’ contentions regarding the “bottoms-up” process. (R. 336-1, ¶¶ 7-8). While it is clear that Plaintiffs are disputing that Tellabs followed a “bottoms-up” process, Plaintiffs’ response to Defendants’ Rule 56.1 statement is not the proper forum for presenting arguments or additional facts. See Ciomber, 527 F.3d at 643-44 (a court will not consider any additional facts proposed in a nonmoving party’s Local Rule 56.1(b)(3)(B) Response, but instead must rely on the nonmovant’s Local Rule 56.1(b)(3)(C) Statement of Additional Facts when making factual determinations). Although the Court will not belabor a point by point analysis of each of Defendants’ objections, where Plaintiffs failed to specifically admit or deny a particular fact, the Court has deemed the fact admitted.

Defendants also argue that in each instance where Plaintiffs responded to Defendants’ statement of facts without a corresponding record cite, the facts should be deemed admitted. Specifically, in response to a large number of facts, see ¶¶ 13, 28-29, 34, 37-38, 40, 42-M4, 46, 48-49, 53-56, 82, 84-85, 88-89 and 102-104, Plaintiffs, rather than providing a cite to the record in order to dispute a particular fact, instead cite to paragraphs contained in their statement of additional facts. This is contrary to both the letter and spirit of Local Rule 56.1. As the Seventh Circuit has explained:

The requirements of such rules are not onerous, but they are exacting. Local Rule 56.1 makes explicit the responding party’s burden of controverting the movant’s position with adequate citations to the record.... [W]e have often repeated, that a party contesting summary judgment has a responsibility under such rules to “highlight which factual averments are in conflict as well as what record evidence there is to confirm the dispute.” It is reasonable to assume that just as a district court is not required to “scour the record looking for factual disputes,” it is not required to scour the party’s various submissions to piece together appropriate arguments. A court need not make the lawyer’s case.

Little v. Cox’s Supermarkets, 71 F.3d 637, 641 (7th Cir.1995) (internal citations omitted). Here, directly contrary to Local Rule 56.1’s requirement that a party make “specific references to the affidavits, parts of the record, and other supporting materials relied upon,” Plaintiffs’ response requires the Court to turn to its statement of facts and take the further step of verifying the citations contained therein. Most problematic, in many instances, Plaintiffs have cited as many as ninety paragraphs of their statement of facts to support a denial of a fact proffered by Defendants. See, e.g., R. 354-1, Pis.’ Resp. to ¶ 55 (citing 75 paragraphs), ¶ 56 (same), ¶ 84 (citing 33 paragraphs), ¶ 85 (same), ¶ 103 (citing 90 paragraphs). Due to the large volume of citations to Plaintiffs’ statement of facts, many of the cited facts do not in fact contradict the facts posed by Defendants. Indeed, it is unclear why Plaintiffs chose not to cite to the evidentiary materials and other parts of the record in support of some of their denials given that, in many instances throughout their response to Defendants’ statement of facts, Plaintiffs appropriately complied with the strictures of Local Rule 56.1. While Plaintiffs argue that Defendants have cited no case law prohibiting a party from cross-referencing its statement of additional facts, the text of Local Rule 56.1(b)(3)(C) is exceedingly clear and requires “specific references to the affidavits, parts of the record, and other supporting materials relied upon.” Plaintiffs have failed to adhere to this Rule. Again, the Court will not belabor a point by point analysis of Plaintiffs’ 104 responses, but has deemed admitted any statements to which Plaintiffs have not appropriately responded with citation to supporting evidentiary materials.

Additionally, Plaintiffs have cited to their own statement of facts where they present improper legal arguments. In paragraph 55 of their statement of facts, for example, Defendants present evidence that as a result of a forecast review, Tel-labs’s finance department recommended to Notebaert that Tellabs revise its public guidance downward for 2001. (R. 354-1, Pl.’s Resp. to ¶ 55.) In response, Plaintiffs argue that the revised guidance was unachievable and unrealistic despite the fact that Defendants do not make any assertions regarding the content of the guidance in ¶ 55 of their statement of facts. Accordingly, in this and many other instances, Plaintiffs’ responses citing to their statement of facts are improper for the further reason that the responses contain improper legal arguments. See Cady, 467 F.3d at 1060.

Finally, while the deficiencies in Plaintiffs’ response to Defendants’ statement of facts required admission of many of the facts proffered by Defendants, “the court did not turn a blind eye to the facts elsewhere available, though it is permitted to do so by non-compliance with the local rule.” Little v. Cox’s Supermarkets, 71 F.3d 637, 641 (7th Cir.1995). Indeed, in many instances it appears that while Plaintiffs failed to provide evidence that would specifically contradict a fact proposed by Defendants, in their own statement of additional facts Plaintiffs have presented facts that must be considered in conjunction with the facts presented by Defendants. Though while the Court need “not scour the record ... to make [Plaintiffs] arguments,” Jackson v. Xerox Corp., 349 F.Supp.2d 1119, 1123 (N.D.Ill.2004), Plaintiffs have cured some of their deficient responses by presenting evidence in their statement of additional facts which is supported by proper evidentiary citations. In addition, while Defendants criticize Plaintiffs’ citations subsequent to multiple sentences, where Plaintiffs’ intention for a single citation to apply to multiple preceding sentences is clear, the Court has not deemed the facts admitted for Plaintiffs’ failure to use string citations.

For the foregoing reasons, the Court grants in part and denies in part Defendants’ Motion to Strike.

B. Plaintiffs’ Evidentiary Objections

Plaintiffs similarly raise a series of objections to the evidence submitted by Defendants in support of their motion for summary judgment. Plaintiffs contend that certain documents relied on by Defendants are inadmissible as business records, Defendants’ Exhibits 95-97 are inadmissible hearsay, and portions of the affidavits of both Pfefferle and Notebaert are inadmissible. Because Defendants have demonstrated that each of these materials is proper evidence in support of their motion for summary judgment, the Court will not strike the evidence.

1. Business Records

Plaintiffs first argue that the Court should strike the documents listed in the appendices to the declarations of Charles W.L. Kennedy and Todd Camm because they are not proper business records. Plaintiffs specifically object to the following exhibits as inadmissible as business records: Exs. 2, 3, 12, 18, 20-22, 36-38, 40, 46, 49-50, 55-57, 59-62, 64-67, 69, 75-77, 82-86, 89, 99 and 117. (R. 354-1.)

The Federal Rules of Evidence prohibit the admission of hearsay evidence — statements made out of court that are offered to prove the truth of the matter asserted. Fed.R.Evid. 801-802. Federal Rule of Evidence 803(6) sets out an exception to the rule against hearsay for business records. Under Rule 803(6), the following is excepted from the bar on hearsay:

A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinions, or diagnoses, made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a regularly conducted business activity, and if it was the regular practice of that business activity to make the memorandum, report, record or data compilation, all as shown by the testimony of the custodian or other qualified witness ..., unless the source of information or the method or circumstances of preparation indicate a lack of trustworthiness.

Fed.R.Evid. 803(6); United States v. Given, 164 F.3d 389, 394 (7th Cir.1999) (“A party establishes a foundation for admission of business records when it demonstrates through the testimony of a qualified witness that the records were kept in the course of regularly conducted business activity, and that it was the regular practice of that business to make such records.”).

Plaintiff argues that the Kennedy and Camm declarations fail to demonstrate the procedures under which any of the documents referenced in their affidavits were created. (R. 329-1, Pis.’ Opp’n at 32-34.) “While Rule 803(6) does not require that the qualified witness be the person who prepared the record, see United States v. Moore, 923 F.2d 910, 915 (1st Cir.1991), or that the witness have personal knowledge of the entries in the records, see United States v. Lawrence, 934 F.2d 868, 870 (7th Cir.1991), the business records exception does require that the witness have knowledge of the procedure under which the records were created.” Collins v. Kibort, 143 F.3d 331, 337-338 (7th Cir.1998). Plaintiffs are correct that the Kennedy and Camm declarations fail to include any detail regarding the procedure under which the records referenced in the appendices to their declarations were created. (R. 301-1, Exs. 4, 5.) Defendants, however, have supplemented their evidentiary submissions with the affidavits of the individuals who authored the documents in question or have personal knowledge of the creation of the documents and the job responsibilities of the author(s) of the document. (R. 351-1, Exs. 131, 150-58.) The declarations of Christine Pfefferle, Brian Jackman, Michael Birck, Maryangela Daum, Robert Pullen, James Roche, Joan Ryan, Tom Scottino, George Stenitzer, and Mark Striepling contain sufficient information from knowledgeable witnesses regarding the procedures under which the exhibits referenced in the Kennedy and Camm declarations — with the exception of Exhibit 137-were created. Specifically, the following affidavits submitted by Defendants establish that the vast majority of exhibits objected to by Plaintiffs are admissible as business records: (i) Pfefferle: Exs. 20, 24, 27-29, 41, 46-50, 53, 55-56, 59-61, 66, 75-77, 83, 85, 88-90, 128 and 147-148; (ii) Birck: Exs. 30 and 36; (iii) Daum: Ex. 84; (iv) Pullen: Exs. 31, 52 and 99; (v) Roche: Ex. 117; (vi) Ryan: Exs. 12, 21, 37, 39^40, 42, 65, 67 and 82; (vii) Scottino: Exs. 105-107, and various transcripts of Tellabs’s investor relations teleconferences, including Exs. 22 and 64; (viii) Stenitzer: Tellabs’s press releases and annual reports, including Exs. 2-3, 38, 62 and 69; and (ix) Striepling: Ex. 86.

Defendants, however, have failed to establish that Exhibit 137 is admissible as a business record. Exhibit 137, a document produced by Terra Nova Financial in response to a subpoena, is a third-party document. Defendants have not demonstrated that Exhibit 37 is a business record, including failing to establish that the document was incorporated into Defendants’ business records, and therefore Defendants have not demonstrated that it is admissible under Rule 803(6).

2. Hearsay Objections to Exhibits 95-97 and 99

Plaintiffs assert that Defendants’ Exhibits 95-97 and 99 are not admissible evidence. See R. 354-1, Resp. to ¶ 91. Exhibits 95 and 96 are reports prepared by industry analysts regarding Tellabs’s reported results. (R. 301-15, Exs. 95-96.) Because Plaintiffs fail to offer any argument or cite any legal authority to demonstrate the inadmissibility of these documents, it is unclear why Plaintiffs claim these exhibits are inadmissible. Moreover, if Plaintiffs claim the documents are inadmissible hearsay, Defendants offer the documents not for the truth of the matters asserted, but instead to show how industry analysts used and understood the term “end user.” Exhibit 97 is a March 14, 2001 email from Cathie Kozik to a group of Tellabs’s employees regarding statements made by Sprint executives regarding growth in demand for certain Sprint services. (R. 351-15, Ex. 97.) Plaintiffs claim that Exhibit 97 is inadmissible hearsay. (R. 354-1, Resp. to ¶ 92.) Defendants offer Exhibit 97, however, not for the truth of the matters asserted, but instead for the effect those statements had on Tellabs. Jewett v. Anders, 521 F.3d 818, 827 (7th Cir.2008) (statements “offered to demonstrate the effect of [the] information on person who heard statement to explain person’s actions are not inadmissible hearsay”)

Plaintiffs also contend that Exhibit 99 is inadmissible hearsay because Defendants did not properly demonstrate that the document is a business record pursuant to Rule 803(6). (R. 354-1, Resp. to ¶ 46; R. 329-1, pp. 32-34.) Exhibit 99 is a presentation prepared by Robert W. Pullen entitled “The Optical Networking Group.” (R. 301-16, Ex. 99.) As of the date the document was created, Pullen was the Senior Vice President of the Optical Networking Group at Tellabs. (R. 351-1, Ex. 152, ¶ 2). While Plaintiffs contend that the relevant statement in the slide is unsubstantiated and conclusory, Pullen averred that he created the document and had direct personal knowledge of its contents, and asserted that it was the regular practice of Tellabs to create and maintain such documents in the course of its regularly conducted business. Exhibit 99 is therefore admissible. See Fed.R.Evid. 803(6); United States v. Given, 164 F.3d 389, 394 (7th Cir.1999) (“A party establishes a foundation for admission of business records when it demonstrates through the testimony of a qualified witness that the records were kept in the course of regularly conducted business activity, and that it was the regular practice of that business to make such records.”).

3. Pfefferle and Notebaert Declarations

In a footnote, Plaintiffs argue that the supporting declarations submitted by Pfefferle and Notebaert are self-serving, eonelusory and fail to cite to supporting deposition testimony or documentary evidence, and that the Court should therefore disregard them. Rule 56(e)(1) of the Federal Rules of Civil Procedure sets forth requirements for affidavits submitted at the summary judgment stage:

A supporting or opposing affidavit must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant is competent to testify on the matters stated. If a paper or part of a paper is referred to in an affidavit, a sworn or certified copy must be attached to or served with the affidavit. The court may permit an affidavit to be supplemented or opposed by depositions, answers to interrogatories, or additional affidavits.

Fed.R.Civ.P. 56(e)(1). “While personal knowledge may include inferences and opinions, those inferences must be substantiated by specific facts.” Vakharia v. Little Co. of Mary Hosp. & Health Care Ctrs., 62 Fed.Appx. 122, 125 (7th Cir.2003); Drake v. 3M, 134 F.3d 878, 887 (7th Cir.1998) (“Rule 56 demands something more specific than the bald assertion of the general truth of a particular matter, rather it requires affidavits that cite specific concrete facts establishing the existence of the truth of the matter asserted.”).

Contrary to Plaintiffs’ assertions, neither Pfefferle’s nor Notebaert’s affidavit contains conclusory, unsubstantiated claims. In Pfefferle’s affidavit, she averred that during the relevant time period she was Director of Product Management and Quality of the Optical Networking Group and, beginning in 2001, Director of Global Forecasting. (R. 301-1, Ex. 8, ¶¶ 3-4.) Pfefferle provided detailed information regarding Tellabs’s “bottoms-up” process for collecting information on expected revenues and expenses in 2001. Id. at ¶¶ 6-8. Indeed, she specifically explained that the various product units supplied information to her or the finance department after speaking directly with Tellabs’s sales force and its customers, and that the finance department and employees responsible for forecasting spoke directly with operating unit heads and sales personnel to better understand the bases for the “bottoms-up” projections. Id. at ¶ 9. Because the process she describes is directly within her duties as head of forecasting, Pfefferle has made statements within her personal knowledge and there is no requirement that she cite to other portions of the record to support her affidavit. See Fed.R.Civ.P. 56(e). Notebaert’s declaration is also directly based on his own personal knowledge. (R. 301-1, Ex. 9) Specific cites to evidentiary materials are therefore not mandated.

Finally, Plaintiffs’ argument that the Court should strike the declarations of Pfefferle and Notebaert because they are “self-serving” is without merit. While the Court may strike self-serving affidavits not supported by the record in the context of a motion for summary judgment, Ozlowski v. Henderson, 237 F.3d 837, 840 (7th Cir.2001), here the record reflects that both Pfefferle’s and Notebaert’s affidavits are based on their personal knowledge. Due to their personal knowledge of the issues, these affidavits are properly before the Court. See Payne v. Pauley, 337 F.3d 767, 772 (7th Cir.2003).

IV. Relevant Facts

A. Background

Tellabs is a global supplier of optical networking, broadband access, and voice-quality enhancement solutions to telecommunications carriers and internet service providers. (R. 324-1, ¶ 1.) Throughout the Class Period, Tellabs’s common shares were actively traded on the NASDAQ National Market under the symbol “TLAB.” Id. In 2000, Tellabs’s Optical Networking Group accounted for approximately 64% of sales. Id. Statements regarding the sales of the Optical Networking Group form the basis for the majority of the allegations contained in the Complaint. The TITAN 5500, Tellabs’s principal seller in this category, was the Company’s “flagship” product. Id.

Richard C. Notebaert was Chief Executive Officer, President, and a member of Tellabs’s Board of Directors throughout the Class Period. (R. 324-1, ¶ 2.) Defendants Joan Ryan, Chief Financial Officer, Brian Jackman, President of Global Systems and Technology, and other senior executives reported directly to Notebaert on a regular basis. Id. Notebaert kept himself informed about Tellabs’s performance, products, sales, operations, inventory levels, and industry and market conditions. Id. at ¶ 3. Notebaert also attended meetings at which the participants looked at Tellabs’s revenue forecasts, reviewed Tel-labs’s press releases prior to their release, reviewed and signed the 2000 Annual Report to shareholders, spoke on behalf of the company at its investor relations teleconferences, and dealt directly with Tel-labs’s customers. Id. Notebaert left Tel-labs in June 2002. Id. at ¶ 2. A co-founder of Tellabs, Michael J. Birck was President and CEO from 1975 until September 2000, when he became Chairman of the Board of Directors. (R. 324-1, ¶ 4.) Throughout his tenure as Chairman, Birck remained actively involved in the company’s management. Id. After Notebaert resigned, Birck resumed his role as President and CEO. Id. Currently, he is Executive Chairman of Tellabs. Brian Jackman joined Tellabs as Director of Marketing in 1982. (R. 324-1, ¶ 5). During the Class Period, he was President of Global Systems and Technology and was responsible for all product planning, product management, and research and development worldwide. Id. He also was a member of Tellabs’s Board of Directors. Id. Jackman left Tellabs in August 2001, shortly after the end of the Class Period. Id. Joan E. Ryan was Chief Financial Officer of Tellabs during the Class Period until she left the Company in February 2003. (R. 324-1, ¶ 6.) According to Notebaert, he and Ryan “talked a lot ... [ajbout everything.” Id.

The Court appointed Makor Issues & Rights, Ltd. (“Makor Issues”), Richard LeBrun and Nolan Howell as class representatives in this lawsuit. (R. 324-1, ¶ 7.) LeBrun purchased 300 Tellabs shares on February 2, 2001 and sold those shares on March 12, 2001. (R. 330-22, Ex. 1161.) Howell purchased 600 shares on May 30, 2001 and 700 shares on June 11, 2001. Id. Makor Issues bought 1000 shares on March 30, 2001 and sold those shares that same day. The remainder of Makor Issues’ trades in Tellabs stock during the class period occurred after April 18, 2001. Id.

B. Tellabs’s Forecast and Planning Process

Tellabs employed a series of internal methods for forecasting quarterly and yearly sales revenue and tracking Tellabs’s actual sales as compared to those forecasts. Tellabs engaged in an annual budgeting and planning process. (R. 336-1, ¶ 7.) As the first step in the process, product houses, sales teams, marketing, finance, and senior executives participated in a strategic planning exercise during which the company set preliminary targets for revenue, margins, and spending for the upcoming year. Id. Following the strategic exercise, each operating unit conducted a “bottoms-up” forecasting process. (R. 301-1, Ex. 8, ¶8; R. 301-1, Ex. 10; pp. 123-28.) During the “bottoms-up” process, each operating unit gathered information about expected demand for Tel-labs’s products by talking directly to the members of Tellabs’s sales force about what they had heard from their customers regarding impending sales. (R. 336-1, ¶ 8.) After gathering this information, each operating unit totaled the data and supplied the information regarding expected revenues and expenses to the finance department. Id.

To facilitate this process, in January 2001, Tellabs reorganized its marketing department and appointed Christine Pfefferle, previously responsible for forecasting for the Optical Networking Group for two years, Director of Global Forecasting. (R. 336-1, ¶ 9.) As part of the reorganization, Pfefferle became responsible for the newly formed Global Forecasting Organization. Id. Prior to the formation of this organization, the Tellabs employees responsible for forecasting had reported their results to the individual product houses. Id. Under the reorganized group, these employees reported their results directly to Pfefferle. Id.

After the operating units provided the expected sales information to the finance department, the finance department aggregated and reviewed the information. (R. 336-1, ¶ 10.) The finance department and employees responsible for forecasting also had discussions with and made factual inquires of operating unit heads or sales personnel as needed to better understand the “bottoms-up” projection. Id. at ¶ 11. To confirm the accuracy of the projections, the finance department and employees responsible for forecasting also compared the “bottoms-up” information to the historical information, market data, and other available sources of information in order to identify any potential issues and to see whether additional follow up was needed. Id. When new or additional data became available, the employees revised the draft operating plan accordingly. Id. The information provided by the operating units became the foundation for a draft operating plan submitted to the executive leadership team. Id. at ¶ 10. After several drafts, the executive leadership team agreed to a final operating plan and presented the final operating plan to the Board of Directors. Id. at ¶ 10.

In addition to this “bottoms-up” forecasting process, Tellabs employed a series of internal checks called forecast sanity checks to track Tellabs’s actual sales as compared to its forecasts derived from the “bottoms-up” process. Since the mid-1990s, Tellabs’s finance department has issued forecast sanity checks at least weekly. (R. 301-1, ¶ 12.) During the last week of the quarter, updated reports are issued and distributed daily. (R. 301-1, ¶ 12.) Joan Ryan, head of finance, testified that she was responsible for ensuring the accuracy of the checks. Id. The weekly forecast sanity checks, inter alia, tracked bookings to date for each product line and calculated what percentage of the quarter’s forecasted total bookings needed to be made in order for Tellabs to meet its forecast. (R. 336-1, ¶ 77; R. 301-6, Ex. 48; R. 354-1, Resp. to ¶ 77.) The forecast sanity checks compared the “percent yet to book” with an historical average of the “percent yet to book” for the same week in the quarter over the previous five years. (R. 336-1, ¶ 77; R. 301-1, Ex. 7, p. 76.) Tellabs calculated the historical average based on its performance during the previous three to five years. (R. 301-1, ¶ 12.)

The parties dispute the usefulness of the forecast sanity checks in predicting sales figures for each quarter. (R. 324-1, ¶ 105; R. 345-1, Resp. ¶ 105.) Notebaert, Jack-man, Ryan and other senior management personnel regularly received and reviewed the reports. (R. 301-1, ¶ 12.) Jackman testified that it was his “standard practice” to review the weekly forecast sanity checks and that he “found the document to be useful in looking at historical trends.... ” Id. Ryan testified that the forecast sanity checks were only one data point that Tellabs considered when addressing sales, and that, during the Class Period, historical trends were becoming less and less predictive of the forecast. (R. 301-3, Ex. 18, p. 318; R. 324-1, ¶ 103.) Rich Tatara, Marketing, testified that his group would rely more heavily on information that they received directly from the sales team and that, as of 2001, Tellabs was seeing its customers holding their business until the end of the quarter. (R. 301-2, Ex. 16, p. 191.) The forecast sanity checks were also presented and discussed at management team meetings in connection with the forecast. (R. 301-1, ¶ 13.) One Tellabs employee explained: “So it was kind of a progress report, if you will, an indicator of where the company stood versus the goal.” Id. According to Birck, the Forecast Sanity Cheek “was done along the way to make sure that there was a correlation between reality and forecast.” Id.

Forecast sanity checks had some limitations. With respect to sales, forecast sanity checks only included information regarding orders that Tellabs had already received. (R. 336-1, ¶ 78; R. 554-1, Resp. to ¶ 78.) Forecast sanity checks did not include any “bottoms-up” information on possible orders that the sales force believed would come in later in the quarter. (R. 336-1, ¶ 78.) In addition, Pfefferle testified that the historical averages reported by the forecast sanity checks did not fully reflect the “hockey stick” trend, discussed in more detail below, which was more pronounced in fourth quarter 2000, and which Ryan testified was becoming more pronounced from the first to the third quarter as well. (R. 336-1, ¶ 79; R. 354-1, Resp. to ¶ 79; R. 301-3, Ex. 18, p. 82.) Because the forecast sanity checks averaged bookings over a five-year period, they did not capture this change in the bookings trend. (R. 336-1, ¶ 79.)

C. Pre-Class Period Events

A number of Tellabs’s employees raised concerns regarding slow sales of the TITAN 5500, the company’s flagship product, prior to the commencement of the Class Period. An internal October 9, 2000 report showed that, “Titan 5500 demand was weak going into the last few weeks of the quarter____” (R. 301-1, Ex. 1056, TEL 291602.) While revenues for the TITAN 5500 for the third quarter 2000-$482.9 million-exceeded the July 13, 2000 forecast of $470 million, they did not meet the September 13, 2000 or September 22, 2000 revised forecasts of $490 million or 487.6 million. Id. at TEL 291601. In an October 16, 2000 email, John Brots, Vice President, Global Manufacturing, wrote that, “532L revenues look terrible and the 5500 revenue is not much better.” (R. 301-1, Ex. 1057, TEL 291637.) Brots testified during his deposition that he was referring to first quarter of 2000 and that he was concerned that Tellabs would be back-end loaded that quarter, a strain on manufacturing capacity. (R. 351-1, Ex. 127, p. 115.) In a November 1, 2000 memorandum to the North American Sales organization, Pfefferle also highlighted slow TITAN 5000 sales and stated that, “We had originally forecasted that we would need a large number of 5514DD’s and 5517A’s for the 3Q00. Unfortunately, demand was low and left us with a large inventory position on these key TITAN 5000 modules. It would be good for the corporation if we could move these before year end.” (R. 801-1, Ex. 1058, TEL 346263.) In an email dated December 9, 2000 to Ryan and Jackman, John Kohler, Tellabs’s Senior Vice President, Global Business Operations, stated, “[t]he 4th quarter continues to present significant challenges to our team. As of today ... we need $142.5 million in TITAN 5500 Bookings to reach our goal.” (R. 324-1, ¶ 11.) Finally, Tatara testified that, “in late 2000, 2001 we started to see the start-up telephone operating companies, largely known as competitive local exchange carriers, CLECs, start to run into financial problems, leading us to be concerned about their creditworthiness.” Id.

Despite these various concerns, overall sales of optical networking products, which included the TITAN 5500, were up 62.5% over the prior year for third quarter 2000, and up 49% over the prior year for fourth quarter 2000. (R. 301-5, Ex. 38, TEL 657032, R. 301-1, Ex. 2, 671554.) The forecast sanity check for the week ending December 8, 2000, just prior to the beginning of the Class Period, showed the percentage of TITAN 5500 sales yet to book for the quarter was 15.4% below the historical average (25.4% vs. 10.0%). (R. 324-1, ¶ 13.) The percentage of total product sales yet to book was 9.8% below the historical average (19.6% vs. 9.8%). Id.

D. Industry Players and Market Conditions in 2000-2001

Some of Tellabs’s customers were experiencing lessened demand for Tellabs’s products in mid-late 2000. SBC was one of Tellabs’s largest customers during the Class Period. (R. 324-1, ¶ 9.) Jim Joling, the Tellabs’s employee responsible for managing the SBC account, testified that SBC’s planning organization advised him that SBC intended to reduce spending at the end of 2000 and into first quarter 2001. Id. When asked which individual he notified at Tellabs’s of this reduction, Joling responded, “I can’t recall, but I — my history would’ve been to generate an email or memo” to the respective heads of divisions at Tellabs. (R. 301-1, Ex. 1008, p. 142.) Joling also testified that he had conversations with SBC representatives regarding overcapacity concerns on their network during first quarter 2001 and that those discussions “always centered around what particular project would have to be delayed or canceled, what long-term plans would have to be changed because of the lack of funding.” Id. at p. 144. In addition, Nancy Sayer of Verizon, Tellabs’s largest customer, also recounted that Verizon’s demand started leveling out from mid-2000 to the end of 2000. (R. 301-1, Ex. 38, p. 38.) Sayer did not recall if she relayed this information to Tellabs. Id. In fact, for three weeks in fourth quarter 2000 and eleven weeks in first quarter 2001, the forecast sanity checks showed that the percentage of TITAN 5500 sales yet to be booked for the quarter was greater than Tellabs’s historical average. (R. 301-1, Exs. 1214.1171-1211.)

E. Tellabs’s December 11, 2000 Guidance

On the first day of the Class Period, December 11, 2000, Tellabs hosted an analyst conference. (R. 336-1, ¶ 5.) During that conference, Tellabs provided a forecast of 30% growth in revenue and earnings per share for 2001. Id. Notebaert does not recall the meeting or making a statement regarding 30% growth at the meeting. (R. 301-1, Ex. 1156, Resp. to Interrogatory No. 3, p. 19.) Tellabs based this guidance on data that Tellabs had begun assembling in the early fall of 2000 during its annual budgeting and planning process. The guidance was the result of the “bottoms-up” forecasting process. (R. 336-1, ¶¶ 8-13.)

When Notebaert joined Tellabs as its CEO in September 2000, the process for developing the 2001 operating plan was already under way. (R. 336-1, ¶ 14.) At that time, Tellabs’s finance department had the responsibility for coordinating the preparation of the “bottoms-up” forecasts and working with the operating units to consolidate that information. Id. Tellabs employees, however, did keep Notebaert informed as to the progress of the operating plan. Furthermore, once the heads of each of the operating units and the finance department had come to an agreement on the plan for 2001, they presented the plan to Notebaert as the consensus of the other executives. Id. The December 7, 2000 iteration of the 2001 operating plan forecasted 36% revenue growth. Id. at ¶ 12. Accordingly, the guidance figures Tellabs presented on December 11, 2000 were the result of a consensus recommendation presented to Notebaert by his CFO, the finance department, the employees responsible for revenue forecasting for each product line, and his executive team. Id. at ¶ 15. Notebaert testified that he personally believed that the build-up of the operating plan as of December 2000 supported Tellabs’s public guidance for 2001 of 30% growth. Id. Joan Ryan, Tellabs’s CFO, also testified that as of December 11, 2001, based on the result of the planning process, she believed that Tellabs would achieve at least 30% growth in both earnings and revenue in 2001. Id. at ¶ 13.

When distributing the 2001 operating plan targets, Notebaert expressed that the targets were “ ‘expected’, if not minimum,” requirements for the 2001 operating plan. (R. 301-2, Ex. 12.) Indeed, several Tel-labs sales personnel testified that executives informed them of their revenue targets. (R. 325-1, Ex. 1010, p. 234-35; R. 325-1, Ex. 1008, p. 125.)

F. Tellabs’s January 23, 2001 Guidance

Plaintiffs only identify one piece of evidence between Tellabs’s December 11, 2000 guidance and the reiteration of that guidance on January 23, 2001. On January 11, 2001, Birck forwarded to Notebaert, Jackman, and Ryan a UBS Warburg analysis lowering estimates for the telecom equipment sector, commenting: “In our case, I believe they have a reasonable viewpoint — for now. While we may not see as much diminished demand as some of our contemporaries, this is going to be a trying year — for a while, anyway.” (R. 301-1, ¶ 17.)

Tellabs announced its fourth quarter and full year 2000 results in a January 23, 2001 press release, issued before the market opened, and an accompanying analyst call later that morning. (R. 336-1, ¶ 16; R. 324-1, ¶ 18.) The earnings release stated that Tellabs had 38 consecutive quarters of year-over-year growth, including fourth quarter 2000, and 30% annual growth in sales and earnings from 1995— 1999. (R. 336-1, ¶ 6.) According to the press release: “Strength in Tellabs’s core business drove record sales and earnings in the fourth quarter of 2000.” (R. 324-1, ¶ 18.) For fourth quarter 2000, Tellabs achieved sales of $1,018 billion, which represented year-over-year growth of 42%. (R. 336-1, ¶ 16.) Tellabs also achieved earnings per share of 56 cents for the quarter, or growth of 44% year-over-year. Id. Tellabs’s Optical Networking Group, which housed the TITAN 5500 product line, reported sales of $641 million during the fourth quarter, an increase of 49% year-over year. Id. In total, Tellabs’s fourth quarter 2000 represented its best quarter in history. Id. For the full fiscal year 2000, Tellabs posted net sales of $3.3 billion, an increase of 43% over 1999. Id. Tellabs’s new income grew by 33% to $669 million and its earnings per share also grew by 33%. Id. Optical networking products, including the TITAN 5500, accounted for about 63% of all fourth quarter sales. (R. 324-1 ¶ 18.)

At the January 23, 2001 teleconference, during which Notebaert, Jackman, and Ryan spoke, Tellabs reiterated the 30/30 (revenue/earnings per share) guidance. (R. 336-1, ¶ 17; R. 324-1,¶ 18.) Such teleconferences were open to the public and also could be heard through a simultaneous live webcast at www.tellabs.com, or through a taped replay. (R. 324-1, ¶ 18.) The guidance presented on January 23, 2001 was lower than Tellabs’s 2001 internal operating plan, finalized on January 11, 2001, which forecasted 35% revenue and 31% earnings growth for full year 2001. (R. 336-1, ¶ 17.) Tellabs also reported that it began 2001 with a backlog, orders or letters of intent that had been placed with Tellabs but scheduled to ship in 2001, of $439 million. (R. 336-1, ¶ 18.) The backlog was Tellabs’s largest year-end backlog ever and 70% higher than its backlog entering 2000. Id. In reiterating Tel-labs’s previous forecast of 30% growth in revenues and earnings, Ryan stated: “We are targeting revenue growth slightly higher than our 30/30 financial mantra or approximately $4.4 billion with full year growth by our product group,” “[f]rom an earnings perspective, we expect to deliver another 30% increase in 2001 ...,” and “Tellabs’s 30/30 model is very much intact and we are comfortable with these targets.” Id. Birck also testified that the 30/30 forecast was “realistic, yet aggressive” and that 30 percent growth over the prior year “is a fairly challenging thing to do.” (R. 301-1, Ex. 1003, p. 87.) Plaintiffs’ expert, Professor Linda Allen, found that “[tjhese optimistic statements propped up [Tellabs’s] stock price.” (R. 324-1, ¶ 18.) On January 23, 2001, the price of Tellabs shares rose $5,375 to close at $58,875. Id.

G. Tellabs’s March 7, 2001 Revised Guidance

The day after Tellabs issued its January 23, 2001 guidance, Tellabs’s Board of Directors met. (R. 324-1, ¶ 19.) Notebaert, Birck, Jackman, and Ryan were all present. Id. The Audit Commit tee reported: “There are ... a number of items to watch carefully on a going-forward basis as the economy slows. Specifically, the accounts receivables, inventory levels and customer financing arrangements merit special focus.” (R. 301-1, Ex 1063.) Indeed, Birck testified that as early as January 24, 2001, the Board discussed “industry concerns.” (R. 301-1, Ex. 1152, p. 1203, 1209.) Also on January 24, 2001, in an email to Notebaert, Birek, Jackman, and Ryan, among others, attaching the most recent weekly forecast sanity check (for the week ending January 19, 2001), Stephanie Glowacki of the finance department reported: “The achievement of the Q1 '01 forecast is dependent on an additional book & ship of $294.0M for TITAN 5500, $56.6M for MAS, $28.0M for Cablespan, and $28.0M for Echo/Coherent OEM. The scheduled shipments as of Week 3 for these products areas are below the historical averages .... ” (R. 301-1, ¶ 19.) The same day, Kohler wrote to Jackman, Ryan, Gustafsson, and McCarthy: “Sales in the current quarter are extremely slow.” Id.

As they had in prior quarters, Tellabs executives tracked the progress of sales in first quarter 2001. (R. 336-1, ¶ 19.) Throughout January, Tellabs’s forecasting organization continued to forecast more than 30% year-over-year growth for the quarter, as well as the full year. Id. at ¶ 20. In response to an inquiry from Kohler regarding slow sales, on January 25, 2001, Steve McCarthy, Tellabs’s Senior Vice President of Global Marketing, requested that Tellabs’s Global Forecasting Organization update their first quarter forecast. Id. at ¶20. In response, Pfefferle provided him with an updated forecast using the most recently available information from the product houses. Id. Like the process for developing the initial operating plan, the process for updating the forecast was primarily a “bottoms-up” process. The forecasting group worked with the sales force and product houses, who in turn worked with customers to identify and track potential sales opportunities. Id. Once a sales opportunity was identified, an employee placed the opportunity into a tracking system, referred to as the “pipeline.” Id. For each sales opportunity, the pipeline listed the name of the customer, anticipated product, revenue amount, estimated date for purchase order, and responsible salesperson. Id. The salesperson would also classify the opportunity based on his or her confidence that the opportunity would turn into an actual order by assigning it a confidence level of 80%-100%, 60%-79%, or less than 60%. Id. As additional information became available throughout the quarter, Tellabs’s employees would make changes to the pipeline figures. Id.

At the end of January, it was clear that January sales were slower than Tellabs had hoped. (R. 336-1, ¶ 23.) January, however, was traditionally a slow sales month as Tellabs held its annual meeting which took much of the sales force away from their work and Tellabs’s customers were typically still setting their budgets. Id. On February 6, 2001, commenting to Notebaert, Birck, Jackman, and others on the forecast sanity check for the week ending February 2, 2001, which showed the percentage of TITAN 5500 sales, yet to book was 13.6% below Tellabs’s historical average (52.6% vs. 39.0%) and the percentage of all product sales yet to book was 13.1% below the historical average (48.4% vs. 35.3%), Ryan stated:

For your information, bookings to date that will translate into revenue for Q1 are alarmingly slow, and slower than for any quarter in recent memory. The scheduled bookings rate for Q1 comes closest to that of 4Q 1998, but is still lower than for that period. That means we are booking at a rate below any of the quarters in 2000, and we know how difficult and hair-raising all those periods were for making our revenue target. I suppose I don’t need to say it (but I will anyway), WE NEED BOOKINGS NOW!!!!

(R. 324-1, ¶ 21.) Notebaert acknowledged “[i]t was a concern” to him, as well, that Tellabs was performing below historical levels. Id. Three days later, on February 9, 2001, Ryan wrote Notebaert:

January results will be available late Monday. First read is that they are not good — slow revenue, high cost of goods. We may have even lost money for the month. There is a formal meeting which you are invited to on Thursday to discuss January results and revised Q1 forecast. At this point, the forecast for revenue looks to be below our Board forecast by about $20-$30M, with various upsides/downsides.

(R. 324-1, ¶ 22.)

While sales were slow in January, Tel-labs’s quarterly sales were typically more heavily concentrated in the last month or few weeks of each quarter. (R. 336-1, ¶ 24.) Tellabs’s employees referred to this trend as the “hockey-stick” effect, referring to the picture created graphically by the timing of sales. Id. Jackman testified that the “hockey stick” trend varied in its severity and timing from quarter to quarter. (R. 330-22, Ex. 1152; R. 324-1, ¶ 103.) In addition to being an intra-quarter phenomenon, the “hockey stick” effect was also a seasonal phenomenon, as sales were slower in first quarter and significantly higher in the fourth quarter. (R. 336-1, ¶ 25.) The “hockey stick” trend had become more pronounced in the periods leading up to fourth quarter 2000. (R. 301-3, Ex. 18.) Nine days before the end of the third quarter 2000, for example, Tellabs had not brought in sufficient sales to meet its sales forecast for the quarter. (R. 336-1, ¶ 26.) Ultimately, however, Tel-labs reached record-breaking sales for the quarter. Id. Similarly, in fourth quarter 2000, midway through the quarter Birck noted that making the fourth quarter’s guidance would require “a scramble” and John Kohler, Senior Vice President of Global Operations, noted that the fourth quarter “presented significant challenges to out team.” Id. Ultimately, however, Tellabs exceeded its fourth quarter forecast with its largest quarter for revenues in its history. Id.

In early 2001, Tellabs scheduled a meeting for February 15 to review January results and the first quarter forecast to “formally discuss how we get back on track.” (R. 336-1, ¶ 27.) At the February 15, 2001 forecast review meeting, which Notebaert attended, the participants discussed several “action items.” Id. The participants tasked Pfefferle and Don Jones, head of North American Sales, to “[ojutline all opportunities for IQ for TITAN 5500.” Id. Notebaert and other Tel-labs executives directed the Tellabs forecasting organization to determine whether Tellabs’s current forecast remained achievable and realistic. Id. at ¶ 28. Notebaert made this request because if the forecast needed to be revised, he wanted to let the market know sooner rather than later, thereby defusing any build up of expectations. Id.

Also on February 15, 2001, Notebaert instituted a hiring freeze as a “preventive action relative to the overall economy.” (R. 336-1, ¶ 29; R. 324-1, ¶ 23.) A “Suggested Spending Optimization Plan,” dated February 19, 2001 assigned “immediate” action tasks to Notebaert, Ryan, Jackman, and others, including: “[fjreeze hiring,” “[s]everely restrict temporary employees,” “[sjtretch merit increase from 12 months to 15 months,” “[ejliminate all overtime,” “[mjandate 3% cut across the board,” “[djismiss all special-project consultants,” “[sjeverely reduce travel and entertainment,” “[n]o seminars, non-essential internal training,” “[rjestrict new orders for supplies,” “[r]e-evaluate ‘all-expenses-paid’ cellular phone and pager programs,” “[n]o new PCs or upgrades,” “[rjeview advertising timing and extent,” “STC only critical lab equipment,” and “[cjritically review, then re-justify necessity of $167M facility additions in 2001.” (R. 324-1, ¶ 23.) Notebaert referred to these actions as “preventive costs constraints” and a “triage on the costs.” (R. 301-1, Ex. 1014, p. 218-19.) Furthermore, the forecast sanity check for the week ending February 16, 2001 indicated that the percentage of all product sales yet to book for the quarter had fallen to 21.6% below the historical average (42.9% vs. 21.3%). (R. 324-1, ¶ 24.) The percentage of TITAN 5500 sales yet to book was 21.5% below the historical average (46.0% vs. 24.5%). Id.

During this time period, certain portions of the telecommunications industry and the economy in general were beginning to exhibit signs of a slow down. Id. While they paid attention to the economy and reacted with caution to developments in the economy, Tellabs executives also believed that Tellabs was in a product niche that would better protect it from economic difficulties. (R. 336-1, ¶ 29.)

Typically, Tellabs’s finance organization, headed by CFO Ryan, distributed a Monthly Executive Financial Summary to senior management, including Notebaert, Birck, Jackman and Ryan about two weeks after the end of the first and second months of each quarter. (R. 324-1, ¶ 25.) McCarthy confirmed that, “[fit’s one of the documents that we used in the course of doing business.” Id. Among other things, the Monthly Executive Financial Summaries regularly reported inventory turns. Id. Jackman testified that lower inventory turns could have one of several meanings, including ramping up inventories in anticipation of later orders or slow sales. (R. 301-1, Ex. 1007, p. 114.). The January 2001 Financial Summary, which was distributed in mid-February and which Jackman recalled receiving, reported: “Monthly results fall short of forecasts: Soft orders prevented level-loading [ ] of TITAN 5500 ...,” “[rjevenues below plan due primarily to lower than expected optical networking sales,” “January revenue below forecast due to soft bookings (5500) and credit/demand issues,” “78% of revenue required to ship and meet revenue recognition guidelines in February and March — significantly higher than historical levels,” and “TITAN 5500 bookings were at the lowest level since July, 2000.” (R. 324-1, ¶ 25.) Ballatine testified that it was a regular practice to review the results of the period at a meeting with Birck or Notebaert, and that Ryan typically attended those meetings as well. (R. 301-1, Ex. 1002, p. 282.)

On February 19, 2001, Notebaert informed the Tellabs’s Board of Directors, in a letter to Birck, of the disappointing January results. (R. 336-1, ¶ 30.) The letter stated:

Attached to this letter are the financials for January. As you look at them you will note that revenues were very soft, at 58% of plan. This is the whole story for the month and does not portend well for the quarter. Making our revenue plan in the current environment will be a challenge.

Revenues came in at 176 million, down 136 million against our plan of 312 million. Of additional concern is that our product bookings and product backlog are down 142 million and 67 million respectively compared to October of 2000. Th