Full opinion text
ORDER ON MOTIONS TO DISMISS PHILIP A. BRIMMER, District Judge. This case is before the Court on the Motion of Defendant Deloitte & Touche LLP to Dismiss Plaintiffs’ Corrected Amended Consolidated Class Action Complaint [Docket No. 104], defendant Crocs, Ine.’s Motion to Dismiss Plaintiffs’ Corrected Consolidated Amended Complaint [Docket No. 107], and Individual Defendants’ Motion to Dismiss Plaintiffs’ Corrected Consolidated Amended Complaint [Docket No. 108]. Plaintiffs have filed both a response [Docket No. 114] and a corrected response [Docket No. 121] to the motions. The movants filed a reply in support of each of the three motions to dismiss [Docket Nos. 124, 126, and 127]. This case involves a class action lawsuit alleging violations of the Securities Exchange Act and associated federal rules and regulations against a company (Crocs, Inc.), its auditor and principal accounting firm (Deloitte & Touche), four of its executive officers, two members of senior management, and four members of its board of directors. This Court has jurisdiction over this case pursuant to the Securities Exchange Act of 1934, 15 U.S.C. § 78aa, and 28 U.S.C. § 1331. I. BACKGROUND Crocs, Inc. (“Crocs”) is a Colorado-based company whose core business is the manufacture and sale of plastic footwear [Docket No. 87 at ¶ 7]. Crocs was established in 2002, at which time Crocs sold only a single model of its shoes in six colors [id. at ¶ 48]. During 2006, Crocs expanded its product line and began offering various sports equipment as well as apparel and accessories, including t-shirts, sweatshirts, hats, beanies, and socks [id. at ¶ 49]. By the end of 2006, Crocs had over 5,800 individual product items, as represented by the over 5,800 stock keeping units (“SKUs”) assigned in Crocs’ accounting, warehousing, and point-of-sale systems [id. at ¶ 50]. These products were available at over 11,000 domestic retail store locations and over 8,000 international retail store locations during fiscal year 2006 [id. at ¶ 51]. Crocs has manufacturing and warehouse facilities in the United States, Europe, China, and elsewhere [id. at ¶ 7]. During 2006, Crocs obtained its footwear products from third-party manufacturers in China, Italy, Romania, and the United States, as well as from Crocs-operated manufacturing facilities in Canada, Mexico, and Italy [id. at ¶ 52], The majority of Crocs footwear was manufactured by Futai in China [id.]. Plaintiffs allege that Crocs failed to update its data management systems in an appropriate fashion considering the rapid growth of the company and its product line [id. at ¶ 53]. Crocs’ continued use of inadequate data management systems resulted in problems managing manufacturing, inventory, sales, distribution and assessment of current and future demand [id. at ¶ 53]. As a result of these problems, Crocs allegedly manufactured too much product, could not distribute its product efficiently and, hence, experienced a massive inventory buildup [id.]. Plaintiffs allege that this inventory buildup motivated defendants to perpetrate fraudulent schemes to mislead investors regarding Crocs’ financial condition [id.]. From late 2006 through at least the third quarter of 2007 during weekly meetings held at Crocs’ Aurora, Colorado warehouse and during nearly daily phone calls, defendant Scott Crutchfield (“Crutchfield”) allegedly learned that, because the purchasing and planning department did not have accurate data regarding sales, the department was “bulk ordering” all styles, colors and sizes of shoes, including those which did not sell [id. at ¶¶ 60, 61]. Crocs’ inventory increased fourfold from August to December 2006, increased fourfold in 2007 through the end of the third quarter, and increased fourfold in the fourth quarter of 2007 and the first quarter of 2008 [id. at ¶ 63]. The products in Crocs’ Colorado warehouses had a six-month turnaround, an amount alleged to be six times the industry standard [id. at ¶ 64], The information regarding the inventory buildup in the Colorado warehouses allegedly was reported in daily e-mail reports to defendants Crutchfield and John P. McCarvel (“McCarvel”) and, likely, to defendant Ronald R. Snyder (“Snyder”) beginning at least in April 2006 [id. at ¶ 65]. In these meetings and e-mail correspondence, defendants Crutchfield and McCarvel discussed the lack of accurate data due to the use of Excel spreadsheets [id. at ¶ 67]. Although modern supply chain management software allows for manufacturing, sales, and distribution data to be updated on a “real-time” basis, plaintiffs allege that the Excel spreadsheets used by Crocs allowed for the acquisition of only outdated and, hence, inaccurate data [id. at ¶ 70]. For example, plaintiffs allege that the spreadsheet generated by Crocs’ internal system would show that the warehouses contained none of a type of shoe; however, Crocs employees could see the shoes in the warehouse [id. at ¶ 71]. In a similar fashion, data on the amount of a particular shoe in stock would be off by a factor of ten [id]. In addition, single bar-codes often were assigned to numerous products, although each barcode was supposed to be assigned to an individual Crocs product in a specific color, style and size [id. at ¶ 73]. Plaintiffs allege that senior management engaged in daily discussions with the warehouse and sales staffs regarding the unreliable inventory counts and allocations and about the fact that Crocs could not match orders to available inventory [id. at ¶ 72], The complexity of Crocs’ business allegedly required the use of a data management system that included distribution requirements planning, materials requirements planning, and advanced planning systems software [id. at ¶ 80]. Crocs purchased an enterprise resource planning system that was intended to assist Crocs’ ordering and sales divisions, but this system was not deployed in the logistics, inventory control, and planning departments [id. at ¶ 81]. These systems were not upgraded appropriately until 2008 [id.]. In addition, Crocs lacked a procedure to verify the entries regarding inventory into the Excel spreadsheets [id. at ¶ 76]. This allegedly resulted in a materially incorrect assessment of inventory. The inventory management problems allegedly led to difficulties fulfilling retailers’ orders [id. at ¶ 78]. As none of the warehouses had accurate data regarding its inventory and retailers’ desired products were often at warehouses on other continents, Crocs’ ability to fill orders correctly and in a timely fashion was severely hampered [id.]. Crocs never had sufficient quantities of the high demand products, it sold out of the most popular styles and colors in late spring or early summer of 2006, and its deliveries for the rest of the summer of 2006 were late [id. at ¶ 79(a) ]. For example, Crocs allegedly expected high demand for its Athens-style shoe, introduced in 2006, yet ran out of the shoes in March 2006 and never caught up with demand [id. at ¶ 79(b) ]. In contrast, according to the Complaint, during 2006 and 2007, Crocs ordered large quantities of unpopular shoes, such as shoes in men’s sizes but in women’s colors (e.g. size 13 “fuchsia” and “butter” shoes) [id. at ¶ 79(c)]. The Complaint alleges that, in order to meet retailers’ deliver-by dates, Crocs had to lease jets to ship shoes on several occasions, an expensive, yet allegedly undisclosed, expenditure [id. at ¶ 79(d) ]. According to the Complaint, none of these problems were disclosed in a timely fashion [id]. Plaintiffs also allege problems with Crocs’ Chinese manufacturers. Crocs’ Chinese manufacturers produced goods improperly or of poor quality ninety percent of the time [id. at ¶¶ 82, 86]. The Complaint provides an example of Nordstrom’s return of a shipment of 10,000 pairs of Crocs footwear [id.]. In addition to these problems, the Chinese manufacturers were selling knockoff, unauthorized copies of Crocs shoes on the black market [id. at ¶ 84], Because of the problems with Crocs’ Chinese manufacturers, McCarvel spent the majority of his time from 2006 until the beginning of 2008 in China [id. at ¶ 83]. No later than early 2007 Crocs attempted to order its factories in China to operate twenty-four hours a day, seven days a week [id. at ¶ 85], which was intended to eliminate the production of knockoff Crocs shoes [id]. Crocs bought a Futai factory in China in order to stem the production of knockoffs and to meet anticipated demand, but failed to record the purchase on its books [id at ¶ 87]. Crocs also allegedly had problems with distribution in Europe. From late 2006 through 2007, Crutchfield repeatedly was informed on daily phone calls and in meetings that Crocs’ distribution center in Rotterdam was having serious problems moving goods to Europe [id. at ¶ 88]. Specifically, Crocs’ Rotterdam distribution center delivered shoes at a rate of 25,000 a day, while the distribution center in Aurora, Colorado could deliver at a rate of 100,000 a day [id. at ¶ 91]. The Rotterdam distribution center allegedly also had difficulties utilizing the Excel software, contributing to its difficulty filling orders [id. at ¶ 92]. As the distribution center in Rotterdam was Crocs’ main conduit to the European market, this problem was material to Crocs’ ability to sell its products in Europe and allegedly cost Crocs lost sales of between 1 million and 1.5 million shoes in the last half of 2006 through the end of 2007 [id. at ¶¶ 91, 93]. During this time frame, Crutchfield regularly reported to Snyder and McCarvel. The problems with the Rotterdam distribution center were reported to the Individual Defendants [id. at ¶ 17]. Plaintiffs allege that Crocs’ inventory problems reached crisis levels in the third quarter of 2007. Plaintiffs allege that, as the inventory continued to build, a very large shipment of size 12 pink Crocs shoes was found at a Chinese warehouse and 10,000 pairs of size 13 sage-colored Crocs shoes were found in Aurora, Colorado in September 2007 [id. at ¶ 94]. As a result of the failed launch in July 2007 of apparel and gear lines, inventory from these lines also increased [id. at ¶ 95]. In addition, shoes and apparel were discovered as of August and September of 2007 and through the rest of 2007 in Crocs’ Colorado warehouses which were listed as sold, yet contained no listing of a delivery destination [id. at ¶ 96]. During the third quarter of 2007, Crocs’ senior management informed employees that, although demand for its shoes was decreasing, Crocs anticipated that demand would rebound; therefore, Crocs planned to continue the around-the-clock manufacturing of its shoes in China, Romania, Canada and Mexico [id. at ¶ 100], In order to store the increasing volume of product, Crocs leased six or seven additional warehouses in Aurora, Colorado from third-party companies in August and September 2007 [id. at ¶ 102]. The amount of Crocs’ excess inventory allegedly exceeded industry standards [id. at ¶ 64]. Plaintiffs allege that the data management problems were reported by Crocs employees to their managers by at least September 2007 and that this information was passed up the chain of command [id. at ¶ 97]. Plaintiffs allege that in late September 2007 the newly-hired head of Crocs’ information technology (“IT”) gave McCarvel a written report which was highly critical of problems with the data management system [id. at ¶ 98]. The report, along with proposed solutions and attached memoranda, allegedly was circulated to other members of Crocs’ management [id.]. During the time frame of the alleged concealment of the inadequate data management systems and the resulting inventory buildup, Crocs’ stock price increased by 246% from January to October 31, 2007 [id. at ¶ 54], On October 31, 2007, Crocs announced that it had distribution problems as well as a large buildup of inventory; however, plaintiffs allege that only a portion of the existing problems was revealed [id. at ¶ 55]. As a direct result of the partial disclosures, the price of Crocs common stock decreased on the NASDAQ stock market from $74.75 a share on October 31, 2007 to $47.74 a share on November 1, 2007, a decrease of over 36% [id. at ¶ 55]. This one-day decrease in the value of Crocs common stock allegedly caused Crocs’ management to order an immediate end to the manufacture and importing of many of its shoe lines [id. at ¶ 108]. During the fourth quarter of 2007, Crocs stated its desire to reduce its inventory buildup by 20 percent in internal communications such as daily conference calls [id. at ¶ 109]. In December 2007, Crocs allegedly conducted a physical count of the products in its warehouses [id. at ¶ 110]. During this count, Crocs employees discovered numerous shipments that were supposed to have been shipped out weeks or months prior to the accounting [id. at ¶ 110(a) ]. Plaintiffs allege that, during this inventory count, Crocs executives ordered trucks filled with unsold shoes to remain in transit during key days of the inventory count in an attempt to conceal the excess inventory [id. at ¶ 110(b) ]. Moreover, from December 1, 2007 to December 23, 2007, Crocs shipped approximately 400,000 shoes to Rotterdam that Crocs did not include in its inventory count [id]. At least one Crocs compliance officer raised this inventory count problem to McCarvel, who did nothing to stop the deceptive devices allegedly used to exclude inventory from the count [id. at ¶ 110(c) ]. On April 14, 2008, the price of Crocs common stock closed at $17.79 a share on the NASDAQ exchange [id. at ¶ 57]. After the close of the normal trading day on the NASDAQ, Crocs disclosed that its inventory had increased between 5% and 10% in the three months between December 31, 2007 and March 31, 2008 [id. at ¶¶ 57, 112], The price of Crocs common stock closed at $10.11 a share on the next day, April 15, 2008, a decrease of almost 45% [id. at ¶ 57]. Between April 2, 2007 and April 14, 2008, plaintiffs allege that some of the defendants collectively sold 2.8 million Crocs shares having a value of at least $195.6 million [id at ¶ 59]. During the next seven months, the price of Crocs common stock continued to decline. In November 2008, plaintiffs allege that Crocs disclosed the full truth concerning its financial and inventory problems [id. at ¶ 58] and announced that it was taking a write-down of over $70 million of inventory, stating that “[b]ased on current trends we have lowered our projected sales volumes and made the strategic decision to further right-size our operations to better align with our lower volumes and revenues.” [id. at ¶¶ 58,167]. II. PLAINTIFFS’CLAIMS Plaintiffs have filed the Complaint on behalf of themselves and all persons or entities that purchased and/or acquired securities of Crocs between April 2, 2007 and April 14, 2008, inclusive (“Class Period”). Plaintiffs allege that defendants Crutch-field, Snyder, McCarvel, Russ Hammer (“Hammer”), and Peter S. Case (“Case”), collectively the “Individual Defendants,” and Crocs violated Section 10(b) (Count One) and Section 20(a) "(Count Two) of the Securities Exchange Act. Plaintiffs also allege a violation of Section 10(b) by defendant Deloitte (Count Three). Plaintiffs allege a violation of Section 20(A) of the Securities Exchange Act against Ronald R. Snyder, Peter S. Case, John P. McCarvel, Michael Marks, and Raymond Croghan, as well as against Richard L. Sharp, Thomas J. Smach, and Michael C. Margolis (the “Insider Trading Defendants”); a violation of Section 20A(e) against Crocs and the Insider Trading Defendants; and a violation of Section 20A(b)(3) against the Insider Trading Defendants (Count Four). III. ALLEGED MATERIAL MISREPRESENTATIONS AND OMISSIONS Plaintiffs generally allege that all of the Individual Defendants were senior officers of Crocs; each of them had access to the material adverse undisclosed information; each of them directly participated in the management of Crocs and was directly involved in the day-to-day operations of Crocs; and each of them was involved with the drafting, producing, reviewing, signing and/or disseminating the information in the SEC forms and press releases [id. at ¶¶ 258-59, 261-62, 265]. A. Crocs Form 10-K for the Year Ending December 31, 2006 On April 2, 2007, Crocs filed its SEC Form 10-K for the year ending December 31, 2006 (“2006 10-K”) [id. at ¶ 113]. This 10-K was signed by Snyder, Case, Michael Marks (“Marks”) and Raymond Croghan (“Croghan”) and allegedly contained materially false and misleading statements [id.]. Page two of the 2006 10-K contains the statement that “[w]e are a rapidly growing designer, manufacturer and marketer of footwear for men, women and children under the Crocs brand” [id. at ¶ 113(a) ]. Plaintiffs allege that this statement is false and misleading and omitted to state the material facts based on the following: inventory was rapidly increasing, requiring a substantial write-down to reflect its value accurately; Crocs was losing revenue due to its inability to deliver product as ordered; large orders were routinely returned for non-compliance; and distribution problems in Rotterdam were resulting in a large loss of sales [id. at ¶ 113(a)(i-iv)]. The 2006 10-K also included the following statement: “We have substantially increased the depth and breadth of our distribution and currently sell our products in over 11,000 domestic store locations and in over 80 countries worldwide.” [id. at ¶ 113(b) ]. Plaintiffs allege that this statement is false and misleading and omitted to state the material facts based on the following: Crocs’ distribution system relied on archaic, outdated software which was inadequate to service Crocs’ business; Crocs had failed to deploy up-to-date inventory management and other systems; Crocs was facing material operations and logistical problems at its Rotterdam distribution center that were negatively affecting Crocs’ ability to service its European customers; Crocs was unable to locate, ship or sell material quantities of its inventory and, as a result of this inability, Crocs had bulk-ordered shoes irrespective of sales; and, finally, Crocs lacked internal operational and financial controls or control systems capable of managing its expanded facilities [id. at ¶ 113(b)(i-vi) ]. Crocs’ 2006 10-K additionally provided that “[i]n December 2006, we began operating a warehouse ... in Aurora, Colorado, which has enabled us to terminate our relationship with Expeditors in January 2007 reducing our reliance on third party distribution facilities ... We have additional company-operated warehouse and fulfillment operations in Canada, China ... [and] the Netherlands.” [id at ¶ 113(c) ]. Plaintiffs allege that these statements are false and misleading and omitted to state the material facts based on the following: much of the new warehouse space was procured to store excess, unsaleable, over-produced inventory and because Crocs’ Rotterdam distribution center was then experiencing severe delays and other problems in processing orders due to the lack of adequate internal controls and oversight, which allegedly had cost Crocs tens of millions of dollars in lost sales [id. at ¶ 113(c)(i-ii) ]. According to Crocs’ 2006 10-K, Crocs’ “in-house manufacturing capabilities enable us to rapidly make changes to production, providing us with the flexibility to quickly respond to orders for high-demand models and colors throughout the year ... this production strategy will enable us to continue to minimize our production costs and increase overall operating efficiencies.” [id. at ¶ 113(d) ]. Plaintiffs allege that these statements were false and misleading and omitted to state material facts because Crocs’ Chinese supplier, Futai, responsible for more than half of Crocs’ footwear production, was manufacturing large quantities of counterfeit copies of Crocs products; Crocs had directed Futai to produce Crocs footwear around-the-clock; Fu-tai also produced product of poor quality or otherwise not to specifications, resulting in large returns by customers; and Crocs chose to purchase the Futai facility but keep it off of the books [id]. At page F-2 of the 2006 10-K, Crocs provided a year-end balance sheet for 2006, which included a listing for “Assets, Inventories” of $86,210,000; and a further breakdown of inventory values as $78,938,000 for finished goods, $445,000 for work-in-progress, and $6,827,000 for raw materials [id. at ¶ 113(j) ]. Plaintiffs allege that this inventory valuation was materially false and misleading and omitted to state material facts because of the alleged facts that the bulk of Crocs’ inventory was unsuitable or unsaleable product; Crocs had no basis to report inventory accurately; and Crocs had failed to take required and necessary write-downs and write-offs in accordance with Crocs’ stated policy and Generally Accepted Accounting Principles (“GAAP”) [id.l B. Press Release Regarding the First Quarter of2007 On May 3, 2007, Crocs issued a press release with its results for the first quarter of 2007 (“1Q07 press release”). The 1Q07 press release was filed as an appendix to Crocs’ Form 8-K for the first quarter of 2007 and incorporated a balance sheet which included a valuation of Crocs’ inventories at $94,432,000 as of March 31, 2007 [id. at ¶ 117(b) ]. Plaintiffs allege that this valuation was materially false and misleading and omitted to state material facts because Crocs’ inventory consisted in large part of unsuitable or unsaleable shoes; Crocs had failed to deploy appropriate inventory management systems; Crocs was unable to locate, ship or sell material quantities of product; and a large portion of Crocs’ stated inventory was subject to write-downs and write-offs [id. at ¶ 117(b)(i-iv) ]. C. SEC Form 10-Q for the First Quarter of2007 On May 15, 2007, Crocs filed its SEC Form 10-Q for the first quarter of 2007 (“Crocs’ 1Q07 10-Q”) [id. at ¶ 118], Crocs’ 1Q07 10-Q, which was signed by Case, included the following statements: “The accompanying condensed consolidated financial statements of Crocs ... have been prepared in accordance with [U.S. GAAP] ... [and] in the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature” [id.]. Plaintiffs allege that these statements were false and misleading and omitted to state material facts because Crocs had not implemented appropriate, up-to-date sales tracking and forecasting systems across the company; hence, it could not state with any accuracy what it had sold or would be selling; Crocs had failed to ensure that its internal financial controls produced financial statements that were in accordance with U.S. GAAP; and Crocs had failed to ensure that its financial statements were fairly presented by representing that the balance sheets were produced in accordance with GAAP [id.]. Crocs’ 1Q07 10-Q also listed values of inventories by major classifications as $83,369,000 for finished goods, $742,000 for work-in-progress and $10,321,000 for raw materials [id. at ¶ 118(b) ]. Plaintiffs allege that these statements were false and misleading and omitted to state material facts because the bulk of Crocs’ inventory of finished goods consisted of unsaleable or unsuitable shoes; Crocs had failed to implement up-to-date inventory management systems throughout the company; hence, it was unable to locate, ship or sell material quantities of its inventory; and Crocs bulk-ordered shoes irrespective of customers’ orders [id. at ¶ 118(c) ]. Crocs’ 1Q07 10-Q provided that “[o]n February 1, 2007, we implemented a new accounting and operational software package for European and Mexican operations” [id. at ¶ 118(e) ]. In a certificate appended to the 1Q07 10-Q, Snyder certified that he reviewed the quarterly report; that it did not contain any untrue statement of material fact or omit to state any material fact; and that he had disclosed “all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect [Crocs’] ability to record, process, summarize and report financial information” [id.]. Case made an identical certification, also appended to the 1Q07 10-Q [id.]. Both Snyder and Case certified that the “information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company for the period covered by this report” [id.]. Plaintiffs allege that these statements were false and misleading and omitted to state material facts for, essentially, all of the reasons identified above. D. Press Release Regarding the Second Quarter of2007 On July 26, 2007, Crocs issued a press release with its results for the second quarter of 2007 (“2Q07 press release”) [id. at ¶ 120]. The 2Q07 press release was filed as an appendix to Crocs’ Form 8-K for the second quarter of 2007 and provided that “our overseas markets — in particular Europe — remained very strong[,] driven by a broader merchandise assortment, increased distribution, and additional shelf space within our existing retailers” [id.]. Plaintiffs allege that this statement is false and misleading and omitted to state material facts because Crocs’ European distribution system, based in Rotterdam, was experiencing multiple problems and was capable only of delivering a fraction of the product that Crocs sought to move in Europe [id.]. The 2Q07 press release, like the 1Q07 press release, incorporated a balance sheet with a valuation of assets and inventories [id.]. Plaintiffs allege that the values represented in this balance sheet were materially false and misleading for the previously-mentioned reasons regarding inappropriate inventory valuation in the 1Q07 press release, supra Section III.B [id]. E. SEC Form 10-Q for the Second Quarter of2007 On August 14, 2007, Crocs filed its SEC Form 10-Q for the second quarter of 2007 (“2Q07 10-Q”) [id. at ¶ 122]. Case signed Crocs’ 2Q07 10-Q [id.]. The 2Q07 10-Q included the statement that “[t]he accompanying condensed consolidated financial statements ... have been prepared in accordance with [U.S. GAAP] for interim financial information and with the rules and regulations for reporting on Form 10-Q” [id]. Plaintiffs allege that these statements were false and misleading and omitted to state material facts for the same reasons referred to in regard to Crocs’ first quarter 10-Q for 2007, supra, Section III.C. Plaintiffs also allege that Crocs’ 2Q07 10-Q contained inventory valuations which were materially false and misleading and omitted to state material facts for the same previously-discussed reasons regarding inappropriate inventory valuation in Crocs’ 1Q07 press release, supra Section III.B, in Crocs’ 1Q07 10-Q, supra Section III.C, and in Crocs’ 2Q07 press release, supra Section III.D [id]. Crocs stated in its 2Q07 10-Q that “[w]e have also improved efficiencies in managing inventory requirements and improved leverage of fixed operating costs due to higher volume” [id. at ¶ 122(c) ]. Plaintiffs allege that this statement was false and misleading and omitted material facts for the same reasons identified above in regard to inventory valuation in the 1Q07 10-Q, supra, Section III.C. [id. at ¶ 122(d) ]. Snyder and Case each made identical certifications regarding the 2Q07 10-Q as they made with respect to the 1Q07 10-Q, supra Section III.C [id. at ¶ 122(e) ]. Plaintiffs allege that the statements in the certifications were false and misleading and omitted to state material facts for similar reasons as previously discussed with respect to the 1Q07 10-Q, supra Section III.C [id. at ¶ 122(e)(i-viii) ]. F. Statements by CEO Snyder at the End of the Second Quarter of 2007 At the end of the second quarter of 2007, CEO Snyder stated that “we have continued to invest in our global operating platform, including key personnel and production capacity” [id. at ¶ 124]. Crocs then increased its earnings guidance for the third quarter of 2007 and fiscal year 2007 as a whole [id.]. Allegedly in response to the increased guidance on earnings, Crocs’ stock price increased by almost 10% [id.]. On September 27, 2007, Snyder stated at a Piper Jaffray Annual London Consumer Conference that “[o]ver the past, I guess, two years, we have built some very sophisticated global infrastructure ... So, we are creating a very sophisticated global infrastructure of sales, marketing, accounting, logistics, warehousing in all those markets” [id. at ¶ 126], Plaintiffs allege that these statements were false and misleading because Crocs’ global infrastructure had serious problems, preventing Crocs from performing basic sales, marketing, accounting, logistics or warehousing tasks; and because Crocs had not implemented any new software to increase the sophistication of its data management system [id], G. Press Release Regarding the Third Quarter of2007 On October 31, 2007, Crocs issued a press release with its results for the third quarter of 2007 (“3Q07 press release”) [id. at ¶ 128]. The 3Q07 press release was filed as an appendix to Crocs’ Form 8-K for the 3Q07. According to this press release, Crocs has “executed several important initiatives that have strengthened our operating platform, namely the opening of a new 320,000 square foot European distribution facility that will allow us to better support our future growth in the region” [id. at ¶ 128(a) ]. It also included the statement that “[e]ven as we achieve record results and reach important objectives in our financial, strategic, and operational development!,] we are confident that we are positioned well for continued growth in 2008” [id]. Plaintiffs allege that these statements were false and misleading and omitted to state material facts because Crocs and the Individual Defendants did not include that Crocs had an enormous amount of excess inventory which was overvalued; that Crocs was facing severe problems with its offshore manufacturer; and that Crocs’ Rotterdam distribution facility was incapable of distributing product based on demand, resulting in lost sales in Europe [id.]. Like the 1Q07 and 2Q07 press releases, the 3Q07 press release incorporated a balance sheet containing valuations of inventories [id.]. Also, like the 1Q07 and 2Q07 press releases, plaintiffs allege that the inventory valuations in the 3Q07 press release were false and misleading and omitted to state material facts for the aforementioned reasons regarding inappropriate inventory valuation in the 1Q07 press release, supra Section III.B [id. at ¶ 128(b)(i-v) ]. H. October 2007 Crocs Conference Call On October 31, 2007 Case, McCarvel and Snyder spoke as part of Crocs’ third quarter 2007 earnings conference call [id. at ¶ 129]. During this call, Snyder stated that “during the third quarter, we opened a new much larger distribution facility in Europe, increased production capacity, [and] upgraded world wide IT systems” [id. at ¶ 129(a)(1) ]. Regarding inventory, Snyder stated that “[w]e very consciously have been aggressive in building inventory because we just haven’t been able to catch the wave of demand for our product ... So, we consciously built our inventory up ... [of] high margin products. It is very high velocity product that we have got ... [A] majority of [the inventory] is in the high velocity classics and some of the other high velocity models that we have” [id. at ¶ 129(a)(4-5) ]. Snyder disclosed that Crocs’ U.S. inventory had grown by about ten percent [id. at ¶ 129(a)(6) ]. Given the alleged facts regarding Crocs’ use of outdated Excel spreadsheets, the buildup of unsaleable and unsuitable product, and the reasons behind the inventory buildup already discussed, plaintiffs allege that these statements were false [id. at ¶ 129(d-f) ]. When an analyst questioned the rationale behind the buildup of inventory, Snyder continued to assert that it was a strategic decision by management, stating that Crocs had “decided that with our higher margin product we will just put more on the shelves” [id. at ¶ 129(c), (e) ]. According to the Complaint, Snyder falsely stated that any problems with Crocs’ infrastrue-ture had been resolved and Crocs would be stronger going forward [id. at ¶ 129(e) ]. I.SEC Form 10-Q for the Third Quarter of2007 On November 17, 2007, Crocs filed its SEC Form 10-Q for the third quarter of 2007 (“3Q07 10-Q”) [id. at ¶ 137]. Crocs’ then-CFO Case signed the 3Q07 10-Q, stating that it had been prepared in accordance with GAAP and that “[i]n the opinion of management, all adjustments considered necessary for a fair presentation have been included” [id. at ¶ 137(a) ]. The 3Q07 10-Q also included inventory valuations by major classifications. Plaintiffs allege that these statements in Crocs’ 3Q07 10-Q are false and misleading and omitted to state material facts for the previously-mentioned reasons regarding inappropriate inventory valuation in the 1Q07 10-Q, supra Section III.C [id. at ¶ 137(a) and (b) ]. Crocs’ 3Q07 10-Q included the statement that its “company-operated manufacturing facilities have allowed us to maintain a relatively low cost structure while enabling us to achieve significant production flexibility and decrease lead times to our respective markets” [id. at ¶ 137(c) ]. Given the aforementioned allegations regarding inventory valuation, see, e.g., supra Section III.C, the alleged need to air ship product to meet deadlines, and the alleged counterfeiting by Crocs’ Chinese manufacturer, plaintiffs allege that this statement in the 3Q07 10-Q is false and misleading and omitted to state material facts [id]. Snyder and Case each made identical certifications regarding the 3Q07 10-Q as they did for the 1Q07 10-Q and the 2Q07 10-Q, see supra Section III.C, E [id. at ¶ 137(d) ]. The 3Q07 10-Q included the statement that “[i]n August and September 2007, we implemented a new accounting and operational software package at our subsidiaries in Canada and Japan” [id.]. Plaintiffs allege that this statement and the certifications by Case and Snyder were false and misleading and omitted to state material facts due to the alleged inventory valuation problems described previously, see supra Section III.B; and because Crocs relied on outdated, inappropriate software; could not deliver product that had been ordered by clients; and lacked written procedures and an operations manual [id], J. Press Release Regarding the Fourth Quarter of2007 On February 19, 2008, Crocs issued a press release with its results for the fourth quarter of 2007 (“4Q07 press release”) [id. at ¶ 146]. The 4Q07 press release was filed as an appendix to Crocs’ Form 8-K for the 4Q07 and included the statement that “our inventories are on plan and we believe we are well positioned to achieve our short and long-term growth objectives” [id. at ¶ 146(a) ]. Plaintiffs allege that this statement is false and misleading and omitted to state material facts due to the inventory valuation problems described previously, supra Section III.B; and because Crocs relied on outdated, inappropriate software; could not deliver product that had been ordered by clients; lacked written procedures and an operations manual; and Crocs’ inventory of unsaleable or unsuitable shoes was increasing rapidly [id.]. K. Crocs’ Form 10-K for the Year Ending December 31, 2007 On February 29, 2008, Crocs filed its Form 10-K for the year ending December 31, 2007 (“2007 10-K”) [id. at ¶ 150], The 2007 10-K, which was signed by Snyder, Hammer, Marks and Croghan, includes many statements that are similar or identical to the statements in Crocs’ 2006 10-K, such as that Crocs was rapidly growing; that Crocs’ significant growth was driven largely by the shoes’ popularity and Crocs’ “ability to significantly expand the breadth and depth of [Crocs’] distribution network”; statements regarding the sufficiency of Crocs’ warehouse and distribution capabilities and its warehouse management system; statements regarding Crocs’ manufacturing; that Crocs “actively com-batted] counterfeiting”; and statements regarding inventory valuation as reported in the year-end balance sheet [id. at ¶ 150(a)-(f), (i) ], mpra Section III.A. Plaintiffs allege that these statements are materially false and misleading and omitted material facts for the reasons discussed previously [id. at ¶ 150(a)-(f), (i) ], supra Section III.A. In addition, the 2007 10-K includes the statement that “[w]e have experienced rapid growth ... and as a result have made substantial investments in our inventory” [id. at ¶ 150(g) ]. Because of the previously-discussed factual allegations regarding Crocs’ problems with its inventory management and control systems, such as its use of Excel spreadsheets to track inventory; regarding the unsuitable product which made up the majority of the inventory; and regarding the deceptive devices utilized to keep significant amount of product out of the inventory count, plaintiffs allege that this statement regarding the reasoning behind the inventory buildup is false and misleading and omitted material facts [id.]. For similar reasons, plaintiffs also allege that the following statements in Crocs’ 2007 10-K are false and misleading and omitted material facts: “During the quarter ended December 31, 2007, we increased our inventory positions in order to meet anticipated demand for the six months ending June 30, 2008 ... [and] [w]e expect that new product introductions, limitations on production capacities and seasonal variations may cause our inventory to increase or decrease materially in the future” [id. at ¶ 150(h) ]. Snyder executed a certification dated February 29, 2008 regarding the 2007 10-K [id. at ¶ 152], This certification was similar to the certification Snyder executed in support of Crocs’ 1Q07 10-Q, supra Section III.C, and provided that Snyder had reviewed Crocs’ 2007 10-K and that it did not contain any untrue statement of a material fact or omit to state a material fact [id.]. Snyder also certified that the financial statements in Crocs’ 2007 10-K fairly presented Crocs’ financial condition and results of operations and cash flows in all material respects [id.]. Plaintiffs allege that Snyder’s statements in the 2007 10-K certification are false and misleading and omitted to state material facts for the same factual reasons alleged regarding the certification in support of Crocs’ 1Q07 10-Q and for the additional reason of the alleged instruction to keep product on trucks to avoid an accurate inventory count [id. at ¶ 152(d)(i)-(viii) ]. L. Press Release Regarding the First Quarter of2008 On April 14, 2008, Crocs issued a press release with its results for the first quarter of 2008 (“1Q08 press release”) [id. at ¶ 154]. The 1Q08 press release, which was filed as an appendix to Crocs’ Form 8-K for the first quarter of 2008, included the statement that “given our current inventory position, coupled with our demand driven manufacturing model, we believe we are well positioned to meet any potential upside that materializes during our peak summer season” [id. at ¶ 154(a) ]. Plaintiffs allege that statement is false and misleading and omitted to state material facts because of the factual allegations regarding inappropriate software and inventory management systems discussed previously, supra Section III.B, as well as because Crocs allegedly was not utilizing a “demand-driven manufacturing model,” but was increasing manufacturing to stop its Chinese manufacturer from producing knockoffs for the black market [id. at ¶ 154(a) (i)-(viii) ]. M. SEC Form 10-Q for the First Quarter of2008 On May 12, 2008, Crocs filed its SEC Form 10-Q for the first quarter of 2008 (“1Q08 10-Q”) [id. at ¶ 159], Crocs’ 1Q08 10-Q was signed by Hammer [id]. Crocs’ 1Q08 10-Q included a statement that the financial statements were prepared in accordance with U.S. GAAP, which was allegedly false and misleading and omitted material facts due to the allegations regarding excessive unsuitable product [id. at ¶ 159(a) ]. Plaintiffs also claim that the valuation of inventories by major classification listed in Crocs’ 1Q08 10-Q and the statements that Crocs “continued to increase our inventory positions in order to meet anticipated demand for the quarter ending June 30, 2008 ... [and] [w]e believe that our inventory levels will decrease over the remaining quarters of 2008 due to projected sales for the remainder of the fiscal year,” were false and misleading and omitted material facts [id. at ¶ 160, 161]. N. Allegations of False Certifications by Deloitte & Touche, LLP Deloitte & Touche, LLP (“Deloitte”) provided unqualified Independent Auditor’s Reports, which were included in Crocs’ 2006 and 2007 10-Ks [id. at ¶ 20]. These audit opinions stated that Crocs’ financial statements were presented in conformity with GAAP and that Deloitte’s audit was performed in accordance with Generally Accepted Auditing Standards (“GAAS”) [id. at ¶¶ 199-200]. Plaintiffs allege that these statements were false and misleading and omitted material facts because Crocs’ 2006 and 2007 10-Ks were not presented in conformity with GAAP [id. at ¶¶ 176-185, 195, 197]. The alleged GAAP violations by Crocs include the failure to reflect the risk in a timely fashion of excess or obsolete inventory through reserves or charges against income, as required by GAAP and Crocs’ disclosed policies [id.; id. at ¶ 201], The audit opinion for the 2006 10-K stated that “we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements” and that “[i]n our opinion, [Crocs’] consolidated financial statements present fairly, in all material respects, the financial position of Crocs, Inc. ... and the results of their operations and their cash flows ... in conformity with [U.S. GAAP].” [id. at ¶ 199]. According to the Complaint, Deloitte knew or recklessly disregarded many adverse facts concerning Crocs’ improper financial reporting during the Class Period. Deloitte allegedly knew of these adverse facts due to the nature of the services provided to Crocs; the fact that Deloitte’s personnel were regularly present at Crocs; and due to the fact that Deloitte had intimate knowledge of Crocs’ financial reporting practices based on its access to confidential internal corporate, financial, operating and business information [id. at ¶ 196]. According to the Complaint, De-loitte failed to exercise professional skepticism when performing audit procedures, and numerous “red flags” should have prompted Deloitte to procure additional “evidential matter.” [id. at ¶¶204, 208]. For example, according to plaintiffs, De-loitte knew of the risks related to using Excel spreadsheets to account for inventory; knew or recklessly disregarded the fact that Crocs did not have formal written operating procedures or accounting processes to properly account for or control inventory, that Crocs’ internal system showing the location, number or destination of inventory was almost always incorrect, that Crocs failed to update its management systems as it grew, that Crocs’ cost accounting, reporting and internal control systems were outdated and inadequate, and that Crocs was experiencing material increases in returns [id. at ¶¶ 205-208]. Plaintiffs also allege that Deloitte violated GAAS by failing adequately to plan its audit, supervise the work of assistants, and establish and carry out procedures reasonably designed to search for and detect the existence of errors and irregularities affecting financial statements, as well as by allegedly failing to study properly Crocs’ existing internal controls [id. at ¶¶ 214-15]. According to the Complaint, Deloitte reviewed and approved Crocs’ quarterly 10-Qs and press releases [id. at ¶ 217]. IV. ANALYSIS A. General Pleading Standard Under Rule 8 “Federal Rule of Civil Procedure 8(a)(2) requires only ‘a short and plain statement of the claim showing that the pleader is entitled to relief,’ in order to ‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests.’ ” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), overruled on other grounds by Twombly, 550 U.S. at 561-63, 127 S.Ct. 1955). In order to survive a Rule 12(b)(6) motion to dismiss, a complaint “does not need detailed factual allegations [but] ... [flactual allegations must be enough to raise a right to relief above the speculative level.” Id. at 555, 127 S.Ct. 1955 (citations omitted). When presented with a motion to dismiss, the Court will assume for the purposes of the motion that all properlypled allegations within the complaint are true. Daigle v. Shell Oil Co., 972 F.2d 1527, 1533 (10th Cir.1992). A plaintiffs claim for relief, assuming all factual allegations as true, must “ ‘state a claim to relief that is plausible on its face.’ ” Robbins v. Okla. ex rel. Dep’t of Human Servs., 519 F.3d 1242, 1247 (10th Cir.2008) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955). Determining whether or not a claim for relief is plausible is “‘a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.’” Phillips v. Bell, 365 Fed.Appx. 133, 139 (10th Cir.2010) (quoting Ashcroft v. Iqbal, — U.S.-, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009)); see also Robbins, 519 F.3d at 1247-48 (“the degree of specificity necessary to establish plausibility and fair notice, and therefore the need to include sufficient factual allegations, depends on context”). B. Pleading Standard Under the Private Securities Litigation Reform Act Under Section 10(b) of the Securities Exchange Act, it is unlawful for any person “[t]o use or employ, in connection with the purchase or sale of any security ... any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [SEC] may prescribe.” 15 U.S.C. § 78j(b). SEC Rule 10b-5 provides that it is unlawful for any person (a) To employ any device, scheme, or artifice to defraud, (b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security. 17 C.F.R. § 240.10b-5. In order to state a claim under Section 10(b) and Rule 10b-5, a plaintiff must allege that a defendant (1) in connection with the purchase or sale of a security, (2) “made an untrue statement of material fact, or failed to state a material fact,” (3) with scienter; and (4) “that plaintiff relied on the misrepresentation, and sustained damages as a proximate result of the misrepresentation.” Anixter v. Home-Stake Prod. Co., 77 F.3d 1215, 1225 (10th Cir.1996) (citing Farlow v. Peat, Marwick, Mitchell & Co., 956 F.2d 982, 986 (10th Cir.1992)). A representation or omission is only material “ ‘if a reasonable investor would consider it important in determining whether to buy or sell stock,’ and if it would have ‘significantly altered the total mix of information available’ to current and potential investors.” City of Philadelphia v. Fleming Companies, Inc., 264 F.3d 1245, 1265 (10th Cir.2001) (quoting Grossman v. Novell, Inc., 120 F.3d 1112,1119 (10th Cir.1997)). In 1995, Congress enacted the Private Securities Litigation Reform Act (“PSLRA”) in order to stem abuses in private securities fraud suits, Fleming Companies, 264 F.3d at 1258-59 (citing H.R.Rep. No. 104-369, at 31 (1995), reprinted in 1995 U.S.C.C.A.N. 730); see also 15 U.S.C. § 78u-4, and “to discourage frivolous litigation.” H.R. Conf. Rep. No. 104-369, at 26, 1995 U.S.C.C.A.N. at 731. In addition, it was meant to “protectf] outside directors, and others who may be sued for non-knowing securities law violations, from liability for damage actually caused by others.” Id. The Conference Committee recognized “the need to reduce significantly the filing of meritless securities lawsuits without hindering the ability of victims of fraud to pursue legitimate claims.” Id. at 33, 1995 U.S.C.C.A.N. at 738. In order to meet this need, Congress sought to establish a “[hjeightened pleading standard.” Id. at 35, 1995 U.S.C.C.A.N. at 740. The PSLRA amended the Securities Act of 1933 and the Securities Exchange Act of 1934 and imposed specific and more stringent pleading requirements on complaints alleging securities fraud under Section 10(b). See id.; Adams v. Kinder-Morgan, Inc., 340 F.3d 1083, 1095 (10th Cir.2003). The PSLRA provides: (b) Requirements for securities fraud actions (1) Misleading statements and omissions. In any private action arising under this chapter in which the plaintiff alleges that the defendant— (A) made an untrue statement of a material fact; or (B) omitted to state a material fact necessary in order to make the statements made, in the light of the circumstances in which they were made, not misleading; the complaint shall specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed. (2) Required state of mind.... In any private action arising under this chapter in which the plaintiff may recover money damages only on proof that the defendant acted with a particular state of mind, the complaint shall, with respect to each act or omission alleged to violate this chapter, state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind. 15 U.S.C. § 78u-4(b)(1) and (2) (1995). In order to satisfy the pleading requirement of the PSLRA, plaintiffs must “specify each statement alleged to have been misleading,” why the statement is misleading and, regarding each act or omission, “state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.” See id. When a complaint contains allegations made on “information and belief,” the PSLRA requires that “the complaint shall state with particularity all facts on which that belief is formed.” 15 U.S.C. § 78u-4(b)(1). Moreover, allegations based upon “investigation of counsel” are treated as if made on “information and belief.” Adams, 340 F.3d at 1098. Therefore, when a complaint contains allegations based on investigation of counsel, see Complaint, ¶ 2, the PSLRA “requires a plaintiff to identify in the complaint specific facts that support the allegations about the misleading nature of the defendant’s statements. Generalized or conclusory allegations of fraud will not be sufficient.” Id. at 1098. The Tenth Circuit concluded that this provision of the PSLRA does not require plaintiffs to include “all” facts on which their beliefs concerning false or misleading statements are based, as this “would produce absurd results that Congress could not have intended.” Id. at 1098-99 (quoting Novak v. Kasaks, 216 F.3d 300, 313-14, 314 n. 1 (2d Cir.2000) (other citations omitted)). Instead, the Tenth Circuit adopted the approach of “evaluating the facts alleged in a complaint to determine whether, taken as a whole, they support a reasonable belief that the defendant’s statements identified by the plaintiff were false or misleading.” Adams, 340 F.3d at 1099 (citing with approval Novak, 216 F.3d at 313-314, 314 n. 1). This approach involves an evaluation of the following factors (which will be referred to herein as the “Adams factors”): (1) the level of detail provided by the facts stated in a complaint; (2) the number of facts provided; (3) the coherence and plausibility of the facts when considered together; (4) whether the source of the plaintiffs knowledge about a stated fact is disclosed; (5) the reliability of the sources from which the facts were obtained; and (6) any other indicia of how strongly the facts support the conclusion that a reasonable person would believe that the defendant’s statements were misleading. Adams, 340 F.3d at 1099 (citing In re Cabletron Sys., Inc., 311 F.3d 11, 29-30 (1st Cir.2002)). If an analysis of these factors leads to the conclusion that a reasonable person would find the defendant’s statements to be false or misleading, “the plaintiff has sufficiently pled with particularity facts supporting his belief in the misleading nature of the defendant’s statements.” Adams, 340 F.3d at 1099. Although whether or not the source of the plaintiffs knowledge is disclosed “can significantly strengthen the[] pleading,” a plaintiffs complaint need not “always identify the source, either personal or documentary, of the facts alleged.” Adams, 340 F.3d at 1101, 1102. The PSLRA requires that plaintiffs must “state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.” 15 U.S.C. § 78u-4(b)(2). According to the Supreme Court, “courts must consider the complaint in its entirety ... [in order to determine] whether all of the facts alleged, taken collectively, give rise to a strong inference of scienter.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322-23, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007) (citations omitted). “The term ‘scienter’ has been defined by the Supreme Court of the United States as ‘a mental state embracing intent to deceive, manipulate, or defraud.’ ” Fleming Companies, 264 F.3d at 1258 (quoting Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n. 12, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976)). Analyzing the text of the statute, the Supreme Court concluded that “[t]he words ‘manipulative or deceptive’ used in conjunction with ‘device or contrivance’ strongly suggest that § 10(b) was intended to proscribe knowing or intentional misconduct.” Ernst & Ernst, 425 U.S. at 197, 96 S.Ct. 1375 (citations omitted). The scienter requirement for Section 10(b) also can be satisfied by “[Recklessness, defined as ‘conduct that is an extreme departure from the standards of ordinary care, and which presents a danger of misleading buyers or sellers that is either known to the defendant or is so obvious that the actor must have been aware of it.’ ” Fleming Companies, 264 F.3d at 1258 (quoting Anixter v. Home-Stake Prod. Co., 77 F.3d 1215, 1232 (10th Cir.1996)). In order “to establish scienter in a securities fraud case alleging non-disclosure of potentially material facts, the plaintiff must demonstrate: (1) the defendant knew of the potentially material fact, and (2) the defendant knew that failure to reveal the potentially material fact would likely mislead investors.” Fleming Companies, 264 F.3d at 1261. The Tenth Circuit has emphasized that “ ‘it is the danger of misleading buyers that must be actually known or so obvious that any reasonable man would be legally bound as knowing.’ ” Fleming Companies, 264 F.3d at 1260-61 (emphasis in original) (quoting with approval Schlifke v. Seafirst Corp., 866 F.2d 935, 946 (7th Cir.1989)). In addition, in order to determine whether or not a complaint’s scienter allegations give rise to such a strong inference, “a court governed by [§ 78u-4(b)(2) ] must engage in a comparative evaluation; it must consider, not only inferences urged by the plaintiff, ... but also competing inferences rationally drawn from the facts alleged.” Tellabs, 551 U.S. at 314, 127 S.Ct. 2499. In order for the inference of scienter to qualify as strong, it “must be more than merely plausible or reasonable — it must be cogent and at least as compelling as any opposing inference of nonfraudulent intent.” Id. at 314, 324, 127 S.Ct. 2499. C. Presumption of Reliance Under circumstances “involving primarily a failure to disclose, positive proof of reliance is not a prerequisite to recovery” for Section 10(b) claims. Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 153, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972). In a case where plaintiffs allege both misrepresentations and material omissions, the court must “analyze the complaint to determine whether the offenses it alleges can be characterized primarily as omissions or misrepresentations in order to determine whether the Affiliated Ute presumption should apply.” Joseph v. Wiles, 223 F.3d 1155, 1162 (10th Cir.2000). Because the Complaint contains allegations of misrepresentations as well as material omissions, the Court must determine whether the allegations in the Complaint “can be characterized primarily as omissions or misrepresentations in order to determine whether the Affiliated Ute presumption [of reliance] should apply.” Joseph, 223 F.3d at 1162. In Section III, the Court has noted many of plaintiffs’ alleged misrepresentations and material omissions. The affirmative statements in the Complaint identified as misrepresentations tend to be general statements regarding the functioning of Crocs, while the reasons provided as to why these statements are alleged to be false and misleading and omitted material facts tend to be very specific. For example, the statement that “[w]e have substantially increased the depth and breadth of our distribution” is alleged to be false and misleading because it omitted material information regarding the reliance of Crocs’ distribution system on outdated software; Crocs’ failure to deploy appropriate inventory management and other systems; Crocs’ material operational and logistical problems at Crocs’ Rotterdam distribution center; Crocs’ inability to locate, ship or sell material quantities of its inventory; and Crocs’ bulk-ordering of shoes irrespective of sales, supra Section III.A. Such supporting facts often are themselves supported by additional factual allegations of omitted material information (e.g. descriptions of the outdated software and the resultant problems; specific descriptions of the alleged problems at Crocs’ Rotterdam distribution center; and descriptions of specific errors in inventory management, among other factual allegations). While plaintiffs allege that certain specific statements are false and misleading, they allege a greater amount of material information was omitted. Based on this fact and the Court’s review of all of the alleged falsities, misrepresentations, and material omissions, the Court concludes that the allegations in plaintiffs’ Complaint can fairly be characterized as omissions. Therefore, plaintiffs’ reliance is presumed. See Affiliated Ute Citizens, 406 U.S. at 153, 92 S.Ct. 1456; Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 159, 128 S.Ct. 761, 169 L.Ed.2d 627 (2008); Joseph, 223 F.3d at 1162. D. Claims Against Individual Defendants (Count One) 1. Ronald R. Snyder, Crocs’ Chief Executive Officer a. Material Misrepresentations and Omissions Ronald R. Snyder has served as Crocs’ Chief Executive Officer (“CEO”), as well as its President, since January 2005 [Complaint at ¶ 30]. Plaintiffs allege that Snyder made a number of specific false and misleading statements and omissions of material facts [Docket No. 87 at ¶¶ 13, 124, 126, 129] and that he certified documents containing false and misleading statements and omissions of material facts [id. at ¶¶ 118, 122, 137, 152], Snyder signed the 2006 10-K, dated April 2, 2007. Although plaintiffs allege that the 2006 10-K made false and misleading statements, see supra, Section III.A, the Court finds none of them to be false or misleading. Statements that Crocs was “rapidly growing,” had increased its distribution, had added a warehouse in Aurora, Colorado, and had flexible in-house manufacturing capabilities suggest a company that had been growing rapidly and that