Full opinion text
MEMORANDUM AND ORDER KEITH P. ELLISON, District Judge. On April 20, 2010, the Deepwater Horizon rig operated by BP pic exploded in the Gulf of Mexico, causing loss of life and the largest oil spill in this nation’s history. In the months that followed, lawsuits raising a variety of claims, including securities fraud claims, were filed across the country. A group later identified as the Ludlow Plaintiffs filed an action in the Western District of Louisiana on May 21, 2010. (Doc. No. 22, Ex. 1.) The Comptroller of the State of New York and the Attorney General of Ohio — representatives of a group later identified as the New York and Ohio Plaintiffs — filed suit in the Southern District of New York. (Transfer Order, Doc. No. 1.) Different plaintiff groups, including the Ludlow Plaintiffs, moved to centralize litigation in their respective districts. On August 10, 2010, the Judicial Panel on Multidistrict Litigation transferred all cases involving shareholder derivative claims, securities claims, and ERISA actions to the Southern District of Texas. (Id.) Claims involving personal injury, wrongful death, and property damage were centralized in a separate docket in the Eastern District of Louisiana. The Ludlow Plaintiffs’ claims were included in the group transferred to the Southern District of Texas. On December 28, 2010, this Court consolidated all of the securities class actions pending in the Court, appointed the New York and Ohio Plaintiffs as lead plaintiffs, and appointed the Ludlow Plaintiffs as lead plaintiffs of a subclass. (Order, 758 F.Supp.2d 428 (S.D.Tex.2010).) In its decision, this Court expressed its expectation that “the lead plaintiffs would work together as needed to prevent inefficiencies” and its hope that the two lead plaintiffs would file a joint complaint, if possible. (Id.) That did not happen. Instead, the two lead plaintiffs filed two separate and extremely lengthy consolidated amended complaints. On February 11, 2011, the Ludlow Plaintiffs filed a consolidated class action complaint (“the Complaint”) alleging securities fraud violations against two corporate defendants, BP pic and BP America, Inc., and against nine individual defendants (collectively, “Defendants”). (Complaint (“Compl.”), Doc. No. 112.) The New York and Ohio Plaintiffs filed a separate complaint (Doc. No. 113) on February 14, 2011. On May 6, 2011, Defendants filed a motion to dismiss the claims of the Ludlow Plaintiffs. (Doc No. 151.) The Ludlow Plaintiffs filed a response to the motion on June 6, 2011. (Doc. No. 187.) Defendants filed a reply in support of their motion on June 21, 2011. (Doc. No. 219.) After briefing concluded, the Court heard oral argument on the motion to dismiss on November 4, 2011. Pending before the Court is Defendants’ Motion to Dismiss the Claims of the BP ADS Purchasers in the Ludlow Plaintiffs’ Consolidated Class Action Complaint (Doc. No. 151). Having considered the parties’ pleadings, arguments and the applicable law, the Court finds that Defendants’ motion should be GRANTED. I. THE PARTIES Lead Plaintiffs are Robert Ludlow, Peter D. Lichtman, Leslie J. Nakagiri, and Paul Huyck (collectively, the “Ludlow Plaintiffs” or “Plaintiffs”). (Compl. ¶ 16.) The Ludlow Plaintiffs, all residents of California and purchasers of BP American Depositary Shares (“ADSs”), bring this consolidated class action on behalf of themselves and on behalf of the proposed plaintiff class: all others similarly situated who purchased American Depositary Receipts (“ADRs”) in BP pic between March 4, 2009 and April 20, 2010 (the “Subclass Period”). (Compl., at 2.) The Ludlow Plaintiffs have sued defendants BP pic and BP America, Inc. (collectively “BP” or “the Company”), and nine of BP’s present and former officers and directors. BP pic is a U.K. company with its principal place of business in the United Kingdom. BP America, Inc., a subsidiary of BP pic, is a Delaware corporation that conducts substantial business in Texas. At all times relevant to this litigation, BP leased and operated the Deepwater Horizon, an oil rig responsible for drilling the Macondo well in the Gulf of Mexico. (Compl. ¶ 22.) BP’s shares trade on the New York Stock Exchange (“NYSE”). The nine individual defendants were directors and officers of BP prior to and during the Deepwater Horizon spill. They are Anthony B. Hayward, BP’s Chief Executive Officer (“CEO”) since 2007 and a member of the Board of Directors during the relevant period (“Hayward”); Andy G. Inglis, executive director and Chief Executive of Exploration and Production from 2007 to July 2010 (“Inglis”); Carl-Henric Svanberg, a Swedish citizen and Chairman of the Board of Directors since January 2010 (“Svanberg”); H. Lamar McKay, Chairman and President of BP America, Inc. since 2009 (“McKay”); William Castell, a member of BP’s Board of Directors since 2006 and Chairman of BP’s Safety, Ethics and Environment Assurance Committee (“Castell”); Paul Anderson, a member of BP’s Board of Directors since February 1, 2010 (“Anderson”); Antony Burgmans, a member of BP’s Board of Directors since 2004 (“Burgmans”); Cynthia Carroll, a member of BP’s Board of Directors since 2007 (“Carroll”); Erroll B. Davis, Jr., a member of BP’s Board of Directors from 1998 to April 15, 2010 (“Davis”) (collectively, the “Individual Defendants”). (Compl. ¶¶ 24-34.) In addition, Hayward, Inglis, Castell, Anderson, Burgmans, Carroll, and Davis all served on BP’s Safety Ethics & Environment Assurance Committee. Castell served as Chairman of the SEEAC and Hayward held the position of “executive liaison.” (Compl. ¶¶ 24, 30.) Hayward and Inglis also served on BP’s Group Operations Risk Committee. (Compl. ¶¶ 24, 26.) II. SUMMARY OF THE COMPLAINT In a Rule 12(b)(6) motion to dismiss, the court must accept as true a plaintiffs well-pleaded factual allegations. Fed. R. Crv. P. 12(b)(6). The court does not, however, “accept as true conclusory allegations, unwarranted factual inferences, or legal conclusions.” Cent. Laborers’ Pension Fund v. Integrated Elec. Servs. Inc., 497 F.3d 546, 550 (5th Cir.2007) (citation omitted) (internal quotation marks omitted). Accordingly, the Court will set forth the relevant facts as alleged by Plaintiffs. The Ludlow Plaintiffs assert violations of section 10(b) of the Securities and Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 of the Securities and Exchange Commission (“SEC”) against BP and Individual Defendants Hayward, Inglis, McKay, and Svanberg. (Compl. ¶¶ 448-56.) Plaintiffs also assert violations of section 20(a) of the Exchange Act against all of the Individual Defendants. (Compl. ¶¶ 457-62.) Plaintiffs seek certification as a class action pursuant to Rule 23, damages against the Defendants, jointly and severally, prejudgment interest, costs, and attorneys’ fees. Following BP’s release of its 2008 Annual Report, which marks the start of the Subclass Period, the price of BP ADSs grew steadily. Plaintiffs claim the growth was buoyed by BP’s repeated misrepresentations and omissions calculated to conceal the true state of BP’s safety programs and the Company’s risk exposure and keep the value of BP ADSs artificially inflated throughout the Subclass Period. (Compl. ¶¶ 15, 415.) On April 20, 2010, BP ADSs closed at $59.49 a share. On April 20, 2010, the Deepwater Horizon rig, which BP operated, exploded. By June 25, 2010, BP’s share price had fallen to $27.02 a share, reflecting a 55.3% drop in the two months following the explosion. (Compl. ¶ 15.) Plaintiffs claim that they purchased their shares in reliance on BP’s representations that it had implemented appropriate safety mechanisms to reduce the risk of catastrophic incidents in the Company’s deepwater drilling operations. (Compl. ¶ 418.) Plaintiffs suffered the loss of a substantial portion of their investment when the true state of BP’s operations was revealed, tragically, through the Deepwater Horizon catastrophe and subsequent oil spill. (Id.) III. PLAINTIFFS’ FACTUAL ALLEGATIONS AND CLAIMS BP is a British oil company engaged in “every area of the oil and gas industry,” including deepwater exploration and drilling. (Compl. ¶ 52.) Following a 1998 merger, BP became the third largest oil company in the world. (Id. ¶ 56.) In fiscal year 2009, BP’s business generated $264 billion in revenues and over $16 billion in profit, making BP the single largest producer of oil and gas in the United States. (Id. ¶ 52.) BP’s continued success has been tied to the Company’s aggressive development of deepwater wells in the Gulf of Mexico. (Id. ¶ 53.) Through a series of mergers in the late 1990s, BP “embarked on an aggressive campaign of exploring, developing and increasing (through the acquisition of regional leases) its Gulf assets.” (Id. ¶ 58.) Despite its financial success, BP is also a company plagued by years of safety incidents. This timeline of safety failures reaches back years before the Subclass Period and includes incidents such as: (i) a gas line rupture on BP’s Forties Alpha rig in the North Sea in 2003 (Id. ¶¶ 106-07), (ii) a 2005 explosion at BP’s Texas City refinery, which resulted in the death of fifteen people (Id. ¶¶ 108-09), and (iii) a 2006 oil spill at a BP pipeline in Prudhoe Bay, Alaska (Id. ¶¶ 128, 135). In addition to the leaks, spills, and explosions, regulatory reports — such as the Baker Report and a report by the U.S. Chemical Safety and Hazard Investigation Board (“CSB”) — identified problems rooted in BP’s safety processes. (Id. ¶¶ 3, 155-57.) Plaintiffs also point to reprimands — regulatory, civil, and criminal' — that BP has received as a consequence for prior safety failures. For example, BP’s guilty pleas include (1) felony violations of the Clean Air Act and a corresponding $50 million criminal fine arising out of the Texas City explosion; (2) a violation of the Clean Water Act and a corresponding $20 million fine arising from the Prudhoe Bay spill; and (3) a three year period of corporate probation. (Id. ¶ 145.) In view of this record, BP launched a campaign, marked by the arrival of new CEO Tony Hayward, to resurrect BP’s image with respect to safety. Shortly after taking over as head of the Company, Hayward promised to “ensure [that] BP becomes an industry leader in process safety management and performance,” to “[champion] process safety as a foundation of BP’s operations,” and “to focus like a laser on safe and reliable operations.” (Id. ¶¶ 4, 152-53.) According to Plaintiffs, Hayward’s public statements were calculated to change public — specifically, the investing public’s — opinion on the safety of BP’s operations. But even as BP promoted its risk management and process safety reform efforts, it simultaneously glossed over the trouble brewing in its Gulf operations. In March 2009, BP filed an Initial Exploration Plan (“IEP”) for “Mississippi Canyon Block 252,” a nine square mile plot of land in the Gulf of Mexico that BP leased for more than $34 million. (Id. ¶ 192.) The Macondo well, located approximately forty-eight miles from the nearest shoreline, was BP’s first well on the site. (Id. ¶ 193.) The Macondo well site was notorious for high temperatures, high pressure, highly gaseous hydrocarbon reservoirs and brittle rock formations. (Id. ¶ 194.) Even the letter BP received from the U.S. Minerals Management Service (“MMS”) approving drilling warned: “Exercise caution while drilling.” (Id. ¶ 195.) BP received a permit to drill up to a total depth of 19,650 feet at the Macondo well site and the Company began drilling operations in October 2009. (Id. ¶ 200.) After the Marianas rig was evacuated later that year following a hurricane, BP brought in the Deepwater Horizon rig, which it leased from Transocean, to continue drilling. (Id. ¶¶ 203, 208.) As drilling progressed, BP departed from its original well design on multiple occasions. For example, BP ultimately used a “long string” casing design at the Macondo well instead of a “liner/tieback” design, which would have added four barriers against blowouts. The method BP selected provided only two. (Id. ¶ 213.) Internal BP emails reveal that the long string method was chosen because it saved time and money. (Id. ¶ 214.) In addition, BP installed only six centralizer subs instead of the sixteen called for in the original well design. The shortcut was approved after BP employees learned they would have to wait for their supplier to order more centralizers to supply the number called for in the plan, causing delay. (Id. ¶¶ 220-21.) Even though a Halliburton engineer analyzed the situation and determined that using only six centralizers would cause a “severe” gas flow problem in the well, a BP employee overrode the initial decision to wait for the delivery of more centralizers, stating “who cares, it’s done, end of story, will probably be fine.” (Id. ¶ 228.) BP also made multiple modifications to the cementing work — such as limiting the circulation of drilling mud through the wellbore, pumping cement down the well at a slow rate, and limiting the total volume of cement pumped into the well — that departed drastically from the original cementing design, standard industry practices, and BP’s own internal guidelines. (Id. ¶¶ 229-34.) Despite these modifications, BP decided not to conduct cement log evaluations after the cementing was completed, even though such tests would have gauged the success of the cement job. (Id. ¶ 226.) Tests performed just before the explosion alerted BP to problems with the slurry, the type of cement used in a deepwater cement job. Because pressure and temperature at the bottom of a deepwater well can alter the strength and curing rate of slurry, slurry is typically tested at the start of a pumping job, to ensure the cement will behave as required when it reaches the bottom of the well. (Id. ¶ 90.) Halliburton performed the slurry tests for BP, and the first test was conducted in February 2010, just after the Deepwater Horizon began work on the well. (Id. ¶ 237.) The test results revealed that the slurry was unstable. (Id.) A second test was conducted later in February; the slurry failed that test as well. (Id. ¶ 238.) A final test was conducted on April 18, 2010. Though the test takes forty-eight hours to complete, BP completed cementing on the well without awaiting the final test results. (Id.) BP bypassed or curtailed other tests as well. For example, before BP could put the well into temporary abandonment, it had to perform a positive pressure test and a negative pressure test. (Id. ¶ 245.) BP successfully performed the positive test to evaluate the ability of the casing to hold under pressure. BP also performed a negative pressure test, designed to check both the integrity of the casing and the integrity of the cement job at the bottom of the well to ensure the pressure is properly balanced. (Id. ¶¶ 246-47.) The test involves use of a “spacer,” a liquid mixture which separates drilling fluids from seawater. (Id.) Instead of using the typical liquid mixture, BP used “leftover unused lost circulation materials or pills,” which allowed the Company to bypass hazardous waste disposal procedures. (Id. ¶ 248.) BP conducted three negative pressure tests on the well, and the results failed each time, signaling a leak — or at least a “very large abnormality” — in the well. (Id. ¶¶ 253-54.) Despite the readings, BP continued with the temporary abandonment process. BP made three additional, critical errors during the temporary abandonment process. First, BP set the cement plug on top of the easing, nearly 3,300 feet down into the well. (Id. ¶ 258.) Second, BP displaced the 3,300 feet of mud above the plug with sea water, thereby greatly reducing the amount of pressure on the well from the top. Third, BP began displacement before the cement plug had actually been set, leaving an opening for the well contents to rise up toward the rig. (Id. ¶ 260.) Displacement began shortly after 8:00 p.m. on April 20, 2010. Just after 9:00 p.m., pressure in the drill pipe began rapidly and inexplicably rising. (Id. ¶270.) BP employees failed to notice or investigate the pressure change. (Id.) Shortly after 9:30 p.m., mud began spewing onto the rig floor and the crew finally noticed the “kick.” The rig crew was unable to activate the blowout preventer (“BOP”) in time, and the explosion occurred six minutes after mud first spewed onto the rig floor. (Id. ¶ 272.) After the first explosion, the crew tried to engage the Emergency Disconnect System (“EDS”) to sever the drill pipe and disconnect the rig, but they were unsuccessful. (Id. ¶ 274.) Even the automatic “deadman” system on the BOP failed to activate properly. (Id.) Subsequent investigation by the Presidential Commission — the group tasked with investigating the spill — revealed that poor maintenance and the modifications BP had authorized reduced the effectiveness of the BOP. (Id. ¶¶ 274-75.) Despite the string of ill-advised decisions and the warning signs leading up to the Deepwater Horizon disaster, BP disseminated positive public representations throughout the Subclass Period concerning its process safety programs, its risk management infrastructure, its spill response capabilities, and the Company’s prioritization of safety in the Gulf. According to Plaintiffs, these representations lulled investors into a false sense of confidence with respect to BP’s control over and commitment to the safety of its operations. The Deepwater Horizon explosion shattered the fagade BP had so carefully crafted, revealing instead a slipshod safety program beset by financial, management, and personnel problems. After Deepwater Horizon, it became clear that BP’s safety efforts trailed far behind the Company’s representations, as measured by both internal BP markers and external regulatory standards and industry peer comparisons. According to the Ludlow Plaintiffs, BP’s rocky safety record — highlighted most tragically in the Texas City explosion and the Prudhoe Bay spill — added value to the subsequent corporate professions of a renewed safety commitment. Against this sober backdrop of failures, promises of new safety initiatives, like BP’s Operating Management System, provided greater reassurance to the market and acquired added significance for shareholders. BP’s representation that it was strengthening the safety of its operations made the ultimate revelation — played out tragically in the Deepwater Horizon explosion — all the more shocking as the market learned that “the story spun by BP to outside investors was far different from the reality of its internal operations.” (Id. ¶ 9.) Unbeknownst to the market and the public, the Deepwater Horizon catastrophe was a predictable outcome of BP’s continued disregard for process safety. (Id. ¶¶8, 391.) A. Alleged Misrepresentations and Omissions The Ludlow Plaintiffs claim that they paid inflated prices for BP ADSs based on Defendants’ materially false and misleading misrepresentations and omissions, made on or after March 4, 2009. Plaintiffs allege thirty-five specific misstatements and omissions, all centered on BP’s process safety efforts. Each alleged misrepresentation or omission is identified by the number given in Plaintiffs’ Appendix A (Doc. No. 187, App. A) and the corresponding paragraph identifying the statement in the Complaint. The alleged misrepresentations began on March 4, 2009 — the start of the Subclass Period — when BP issued its 2008 Annual Report, Form 20-F. That Annual Report included a section titled “Safety,” which addressed safety and risk management. The section included such statements as: — “Throughout 2008, senior leadership across the group continued to hold safety as their highest priority.” (App. Stmt. No. 12; Compl. ¶ 353.) — “We remain fully committed to becoming a recognized industry leader in process safety management.” (App. Stmt No. 14; Compl. ¶ 353.) BP formed two internal committees— the Safety, Ethics and Environment Assurance Committee (“SEEAC”) and the Group Operations Committee (“GORC”)— and charged them with oversight and coordination of its safety programs. As described in BP’s 2008 Form 20-F, SEEAC responsibilities included “[Reviewing material to be placed before shareholders which addresses environmental, safety and ethical performance and mak[ing] recommendations to the Board about their adoption and publication.” (Compl. ¶ 425.) The GORC was “tasked with assuring the group chief executive [Hayward] that group operational risks [we]re identified and managed appropriately” and was “expressly charged with analyzing safety incidents in BP’s operations.” (Id. ¶¶ 357, 428.) In outlining the role of these safety committees, the 2008 20-F stated: — “Safety performance has been scrutinized by the ... GORC, chaired by the group chief executive (Hayward) and tasked with assuring ... Hayward that group operational risks are identified and managed appropriately. We continued to build our team of safety and operations auditors. A team of 45 audi- • tors is now in place, with 36 audits completed in 2008.” (App. Stmt. No. 15; Compl. ¶ 353.) According to Plaintiffs, September 2009 audits of the Deepwater Horizon revealed that, contrary to this statement, safety goals were not commonly known or properly communicated to employees. (Compl. ¶¶ 310-11.) BP also developed and began to implement a company-wide safety program — the Operating Management System (“OMS”)' — that was to be methodically phased in across BP sites worldwide. The 2008 20-F made the following representation about the OMS program: —• “Eight sites completed transition to OMS in 2008; two petrochemical plants ... two refineries ... and four exploration and production sites, North America Gas, the Gulf of Mexico, Colombia and the Endicott field in Alaska.” (App. Stmt. No. 13; Compl. ¶ 353.) According to Plaintiffs, these statements were materially false and misleading because BP failed to disclose that it had not in fact implemented safety measures in its Gulf of Mexico operations. (Compl. ¶ 354.) Plaintiffs also claim that BP conducted operations in the Gulf without any legitimate oil spill response plan and understated the risks of the Gulf operations while overstating its ability to extract oil. (Id.) Further, the 2008 Annual Report failed to disclose that BP disregarded warnings about its operations, lacked robust management processes that left it exposed to accidents, and lacked adequate internal safety and risk management controls. (Id. ¶¶ 352, 354.) BP followed its 2008 Annual Report with additional statements specifically addressing the Company’s work in the Gulf of Mexico. For example, on March 10, 2009, BP filed its IEP, under which BP proposed to drill two offshore wells in the Mississippi Canyon Block 252 plot. (Compl., Ex. B.) The IEP is marked “received by” the MMS on February 23, 2009. (Id.) In Section 14, titled “Environmental Impact Analysis,” the IEP concludes: “[I]t is unlikely that an accidental surface or subsurface oil spill would occur from the proposed activity.” (App. Stmt. No. 16; Compl. ¶ 356.) In addition, Section 7, titled “Oil Spills Information” states that BP “has the capability to respond to the appropriate worst case spill scenario” presented in BP’s regional Oil Spill Response Plan (“Regional OSRP”) and includes the following certification: “I hereby certify that BP Exploration & Production Inc. has the capability to respond, to the maximum extent practicable, to a worst-case discharge, or a substantial threat of such a discharge, resulting from the activities proposed” in the IEP. (Compl., Ex. B, at 71.) BP’s Regional OSRP estimated the volume of an uncontrolled blowout in the Gulf at 300,000 barrels of oil per day. (Id.) The IEP estimated the volume of an uncontrolled blowout at the Macondo site at 162,000 barrels of oil per day. (Id.) Plaintiffs contend this document was false and misleading because it failed accurately to detail the true risks and dangers associated with operation of the Deepwater Horizon. Plaintiffs allege that both BP’s estimate of 162,000 gallons as the “worst-case discharge scenario” and the Company’s assurances that it was ready to respond to such an amount were false. (Id. ¶ 356.) Plaintiffs also suggest that BP did not provide all the assurances required by federal regulations. (Id. ¶¶ 357-61.) In support of these allegations, Plaintiffs point to testimony given by BP officers during the Senate investigations following the Deep-water Horizon explosion, acknowledging failures in BP’s response preparedness efforts. (Id. ¶¶ 362-64.) At the annual Howard Weil Energy Conference on March 25, 2009, Defendant McKay, the Chairman and President of BP America, discussed BP’s work in the Gulf of Mexico. In connection with the discussion, McKay stated, “By the way, let me add that managing costs down does not mean BP will be skimping when it comes to ensuring our operations remain safe, reliable and compliant in years ahead.” (App. Stmt. No. 10; Compl. ¶ 365.) McKay also remarked, “Safety will continue to have first call on the company resources.” (App. Stmt. No. 11; Compl. ¶ 365.) Plaintiffs allege that McKay’s statements were false and misleading because McKay was aware of serious safety problems throughout BP’s Gulf of Mexico operations. Specifically, McKay, as CEO of BP America, knew of systemic safety problems at BP and knew that BP managers had issued directives to put profit before safety. (Compl. at ¶ 366.) McKay also allegedly knew that BP skimped on operational safety and that its safety program was recklessly underfunded. (Id. ¶ 367.) While testifying before the Senate and Energy and Natural Resources Committee on November 19, 2009, David Rainey (“Rainey”), Vice President for Gulf of Mexico Exploration for BP America, stated that: ‘While our intent is to prevent all accidental discharges, we conduct regular emergency drills with local, state, and federal agencies. All of our production facilities have contingency plans that identify the procedures, response equipment, and key personnel needed for responding to incidents.” (App. Stmt. No. 17; Compl. ¶ 370.) Rainey’s testimony also provided specific information regarding oil operations in the Gulf. According to Plaintiffs, Rainey’s statements were misleading because he omitted facts about BP’s inadequate safety protocols and failures to implement adequate safety provisions. (Compl. ¶ 372.) BP’s 2009 Annual Review, issued on February 26, 2010, contained further representations addressing BP’s progress on the safety front. Several BP board members issued written statements as part of the Annual Review. For example, Svanberg, in his capacity as Chairman of the Board, wrote a letter that accompanied the Annual Review stating, among other things, the following: — “Risk remains a key issue for every business, but at BP it is fundamental to what we do. We operate at the frontiers of the energy industry, in an environment where attitude to risk is key. The countries we work in, the technical and physical challenges we take on and the investments we make — these all demand a sharp focus on how we manage risk. We must never shrink from taking on difficult challenges, but the [BJoard will strive to set expectations of how risk is managed and remain vigilant on oversight.” (App. Stmt. No. 9; Compl. ¶ 374.) Plaintiffs claim this statement was false because BP’s Board was “trying to manage risk in the least costly way possible” instead of setting proper risk management expectations and procedures. (Compl. ¶ 374.) The Board allegedly “intentionally chose not to implement safety and risk management protocols, including those recommended to senior management,” thereby rendering false the Annual Review’s portrait of the Board’s oversight of safety. (Id.) Also included in the Annual Review were statements by Hayward, who wrote: — “Despite ... difficult conditions, a revitalized BP kept up its momentum and delivered strong operating and financial results while continuing to focus on safe and reliable operations.” (App. Stmt. No. 1; Compl. ¶ 376.) — “These successes make us the largest producer and leading resource holder in the deepwater Gulf of Mexico.” (App. Stmt. No. 2; Compl. ¶ 2.) — “We continue to show our ability to take on and manage risk, doing the difficult things that others either can’t do or choose not to do. This is why we are able to form such strong relationships with governments and national oil companies and why we continue to have a critical role to play in supplying the world with its future energy needs.” (App. Stmt. No. 3; Compl. ¶ 377.) Hayward also answered questions in the “Group Chief Executive’s Review,” which was disseminated to BP shareholders along with the Annual Review. In discussing BP’s priorities, Hayward noted, “Achieving safe, reliable and compliant operations is our number one priority and the foundation stone for good business.” (App. Stmt. No. 4; Compl. ¶ 378.) According to Plaintiffs, all of Hayward’s statements were false and misleading because Hayward was aware of the risks associated with drilling in the Gulf yet falsely reassured investors that risks were being handled appropriately. (Compl. ¶ 377.) Hayward also allegedly omitted the fact that BP’s safety protocols were “woefully inadequate” and that BP had failed to implement all recommended safety measures. (Id. ¶ 379.) Inglis, BP’s Chief Executive of Exploration and Production, similarly underscored that “[s]afety, both personal and process, remains our highest priority,” in a statement included in the Annual Review. (App. Stmt. No. 7; Compl. ¶ 380.) Plaintiffs claim Inglis’s statement was misleading because, as Chief Executive, he was aware of safety problems in BP’s Gulf operations and knew that BP was unprepared to confront safety issues in connection with its drilling in the region. (Compl. ¶ 382.) In a Strategy Presentation given in London on March 2, 2010, BP highlighted the Gulf of Mexico as the Company’s greatest prospect for future growth. The statement “safe and reliable operations remains # 1” appeared in the presentation. (App. Stmt. No. 20; Compl. ¶ 390.) Plaintiffs acknowledge that the Gulf of Mexico was an important economic driver for BP, but argue that BP was not committed to safety as it represented. (Compl. ¶ 391.) According to Plaintiffs, an incident like the Deepwater Horizon disaster was “virtually inevitable” given BP’s history of safety failures and continued lack of commitment to safety. (Id.) In further support of their allegations, Plaintiffs point to information provided by confidential witnesses attesting to BP’s failure to implement safety processes and to the “Abbott whistleblower action,” in which BP allegedly covered up one employee’s prediction of an eminent catastrophic safety failure. (Id.) On March 5, 2010, BP filed its 2009 Annual Report, Form 20-F, with the SEC. This document also reiterated that safety was BP’s priority. It included the following statements: — “The priorities that drove our success for 2009 — safety, people and performance — remain the foundation of our agenda.” (App. Stmt. No. 21; Compl. ¶ 394.) — “In Exploration and Production, safety, both personal and process, remains our highest priority.” (App. Stmt. No. 22; Compl. ¶ 394.) — “Our priorities remain the same, safety people and performance, focusing on the delivery of safe, reliable and efficient operations. In 2010, we aim to use the momentum generated in 2009 to continue to improve operational, cost and capital efficiency, while ensuring we maintain our priorities of safe, reliable and efficient operations.” (App. Stmt. No. 23; Compl. ¶ 394.) According to Plaintiffs, these statements were false and misleading because BP failed to disclose that the OMS was only partially implemented in the Gulf and that the Company had actually terminated some of the employees responsible for implementation. The OMS was initially rolled out in 2008, but, according to Plaintiffs, was not implemented as promised by the time of the Deepwater Horizon disaster. Plaintiffs rely on information provided by a “confidential former BP senior employee with Gulf of Mexico responsibilities” to support their allegations. (Compl. ¶ 395.) The 2009 Annual Review, Form 20-F, contained additional representations specifically related to BP’s progress in implementing OMS, including: — “Safe, reliable and compliant operations remain the group’s first priority. A key enabler for this is the BP operating management system (OMS), which provides a common framework for all BP operations, designed to achieve consistency and continuous improvement in safety and efficiency. Alongside mandatory practices to address particular risks, OMS enables each site to focus on the most important risks in its own operations and sets out procedures on how to manage them in accordance with the group-wide framework.” (App. Stmt. No. 18; Compl. ¶ 383.) — “The reduction in the number of oil spills in 2009 follows several years of focus across BP on procedures such as ‘integrity management’ and ‘control of work,’ which are elements of BP’s OMS.” (App. Stmt. No. 19; Compl. ¶ 385.) According to Plaintiffs, these statements were false because the implementation of OMS lagged far behind target in the Gulf, OMS remained in pilot stage only, and BP had terminated many of the employees responsible for implementation at the time of these statements. (Compl. ¶ 402.) BP disseminated its Code of Conduct along with its public filings. (Id. ¶ 406.) The Code of Conduct stated, “no activity is so important that it cannot be done safely,” and listed rules for BP employees such as, “stop any work that becomes unsafe,” “make sure you know what to do if an emergency occurs at your place of work,” and “only undertake work for which you are trained, competent, medically fit and sufficiently rested and alert to carry out.” (App. Stmt. No. 24, Compl. ¶ 406.) According to Plaintiffs, these statements were false and misleading because BP was unprepared for a safety disaster in the Gulf, and BP lacked proper internal controls and risk management procedures. (Compl. ¶ 407.) On March 22, 2010, Defendant Inglis spoke at the Howard Weil Conference and stated that: “Safety and operational integrity underpins everything we do, and we are now in the final phase of rolling out our operating management system that provides a single, consistent framework for our operations, covering all areas from personal and process safety to environmental performance.” (App. Stmt. No. 8; Compl. ¶ 401.) Plaintiffs allege that Inglis’s statement was false because BP was not in the final stage of rolling out OMS in the Gulf. In reality, the program was stuck in its infancy stages. (Compl. ¶¶ 334, 402.) On April 15, 2010, BP published its 2009 Sustainability Review online. The Sustainability Review included a section titled “Safe and Responsible Energy.” (Id. ¶ 408.) This section contained the following statement: “Our commitment to safe and reliable operations starts with the group chief executive and leadership: a commitment that filters down through the organization and is regularly communicated to all staff.” (App. Stmt. No. 25; Compl. ¶ 408.) Other statements in the Sustainability Review referenced OMS specifically, stating: “Safety is fundamental to our success as a company and 2009 was important because of the progress we made in implementing our operating management system (“OMS”).” “I see [OMS] as the foundation for safe, responsible and high-performing BP.” “Having been initially introduced at 8 sites in 2008, the OMS rollout extended to 70 sites by the end of 2009 ... [t]his means implementation is 80% complete.” (App. Stmt. No. 5; Compl. ¶ 408.) Plaintiffs attribute this statement to Defendant Hayward and allege that it was misleading because it overstated the status of OMS implementation. On the same day, BP issued its 2009 Sustainability Report. In his introduction to the Sustainability Report, Hayward wrote that, “I am extremely proud of BP’s 2009 safety performance — it reflects a sustained effort across all our operations over many years.” (App. Stmt. No. 6; Compl. ¶¶ 408, 410.) Plaintiffs allege that the Sustainability Report contained a slew of misrepresentations related to BP’s safety efforts, including the following: — “BP constantly seeks to improve its safety performance through the procedures, processes and training programmes that we implement in pursuit of our goal of no accidents, no harm to people and no damage to the environment.” (App. Stmt. No. 26; Compl. ¶ 410.) — ‘We believe our focus on changing BP’s safety culture over the last few years is yielding results.” (App. Stmt. No. 27; Compl. ¶ 410.) — “BP has well-developed systems, processes and metrics for reporting safety performance in support of internal performance management and to enable learning and public reporting.” (App. Stmt. No. 28; Compl. ¶ 410.) — “BP is fully committed to becoming a recognized industry leader in process safety management and continues to work to achieve this.” (App. Stmt. No. 31; Compl. ¶ 410.) — “[W]e seek to ensure an infrastructure is in place to deal effectively with spills and their impacts. Our operating facilities have the capacity and resources to respond to spill incidents and we participate in industry and international forums to coordinate planning and emergency response.” (App. Stmt. No. 32; Compl. ¶ 410.) — “Incidents are recorded locally by our staff and contractors using our web-based incident tracking system. BP’s executive management is notified quarterly about numbers and volumes of spills and spills of more than 100 barrels.” (App. Stmt. No. 33; Compl. ¶ 410.) — “BP recognizes the risk posed to the environment from spills and takes a range of measures to prevent any loss of hydrocarbons.” (App. Stmt. No. 34; Compl. ¶ 410.) — “To track our progress in process safety management, we measure lagging indicators which record events that have already occurred, such as oil spills, and leading indicators that focus on the strength of our controls to prevent undesired incidents, such as inspections and test of safety-critical equipment.” (App. Stmt. No. 35; Compl. ¶410.) According to Plaintiffs, the statements in both the Sustainability Review and the Sustainability Report were false and misleading for the following six reasons: (1) BP had failed to implement adequate safety procedures; (2) BP did not have a legitimate Regional OSRP for the Gulf; (3) BP understated its risk exposure from drilling operations in the Gulf; (4) BP lacked adequate internal safety controls; (5) the OMS was not fully implemented in BP’s Gulf operations and employees responsible for implementation had been terminated; and (6) BP’s officers knew that the Company’s Gulf operations had caused spills in 2008 and two of BP’s rigs in the Gulf, including the Deepwater Horizon, had reported recent operational safety problems. (Compl. ¶¶ 409, 411.) In addition, BP allegedly audited certain facilities selectively and omitted audit results that uncovered facts contrary to the statements BP publicly repeated to investors. (Doc. No. 187, App.A.) BP’s selective presentation of audit findings rendered false additional statements in the 2010 Sustainability Report, such as the following: — “BP’s safety and operations audits assess compliance with standards and the effectiveness of operational risk management. The audits provide a rigorous check on safety and operations programmes. Progress is reported quarterly, at which time issues, such as overdue action closures, are highlighted to executive management in the executive-level GORC.” (App. Stmt. No. 30; Compl. ¶ 410.) — “If an incident occurs, it is recorded locally by employees, contractors and management using our internal web-based data management system. All fatalities, other major incidents and many that had the potential to become major incidents are discussed by the GORC, chaired by [Defendant Hayward].” (App. Stmt. No. 29; Compl. ¶ 410.) Plaintiffs claim that the statements outlined above were widely disseminated to the securities markets, investment analysts, and to the investing public. Plaintiffs allegedly relied on BP’s statements that the Company had implemented appropriate risk management and safety mechanisms to reduce the risk of catastrophic disasters. By the time the true state of BP’s safety protocols was revealed through exactly the type of disaster BP represented it was working to prevent — the Deep-water Horizon explosion- — Plaintiffs had already lost a substantial percentage of their investment. B. Alleged Involvement of the Individual Defendants According to Plaintiffs, the Individual Defendants were aware of the falsity of the statements outlined above due to their corporate positions, specifically, their membership on either the SEEAC or the GORC committees. Because Defendants Castell, Anderson, Burgmans, Carroll and Davis served on the SEEAC, which was tasked with making day-to-day and strategic decisions regarding BP’s safety programs, Plaintiffs contend these Individual Defendants were aware of the specific safety problems in the Gulf region. (Compl. ¶¶ 423-26.) Plaintiffs make similar scienter arguments with respect to Defendants Hayward and Inglis and their membership on the GORC. In addition to their corporate roles and committee memberships, the Individual Defendants were allegedly aware of the true state of safety in the Gulf region because BP’s internal reporting structures shuttled safety problems up to the Board of Directors. Additionally, the testimony of three confidential witnesses suggests that BP relied on an internal database to track all safety incidents, that reports were prepared from the database and delivered to the Board, and that Gulf operations were audited by BP’s internal audit committee and audit results were reported to the Board. Finally, the Complaint sets forth a list of factual allegations which it presents as evidence of what all of the Individual Defendants knew of BP’s safety problems in the Gulf. The allegations include the following: — Internal communications, including an April 15, 2008 email, by project managers to senior staff in BP advised that project managers and engineers in the Gulf were submitting outdated information in violation of BP’s Code of Conduct. ■ — ■ Communications, including safety incidents recorded via an internal web-based data management system, related to safety failures on the Atlantis and Deepwater Horizon rigs were made available to GORC members. — BP’s Ombudsman and an independent firm hired by BP in 2009 confirmed that BP failed to complete certain engineering documents that left it in violation of its own policies on the Atlantis rig. — BP terminated the highest ranking employees responsible for Gulf operations in the fourth quarter of 2009 and the first quarter of 2010 after these individuals raised process safety concerns. — A December 2008 internal strategy document warned that BP did not adequately plan for serious safety risks in its Gulf operations. — Maintenance was delayed on the Deepwater Horizon rig because of a tight cost budget. — An internal BP document recommended against use of the long string option on the Deepwater Horizon rig, and testing by BP and Halliburton engineers confirmed the unreliability of cementing with a long string casing. — Internal BP emails from late March 2010 acknowledged the risk of the long string design but justified selection of the method because it saved time. — Senior management approved installation of six centralizers at the Macondo well even though BP’s original design called for a minimum of sixteen centralizers. Installation was authorized to minimize delay. (Compl. ¶¶ 220-27.) When a Halliburton engineer wanted to perform further testing to determine whether the six centralizers would sufficiently stabilize the cement job, a BP employee told him “who cares, it’s done, end of story, will probably be fine.” (Id. ¶ 228.) — BP drilled at a depth in excess of its MMS permit. After the Deepwater Horizon explosion, a BP crewman admitted that this depth had been misrepresented to MMS, and that BP has in fact been drilling in excess of 22,000 feet, in violation of its permit. (Id. ¶200.) — BP had advance knowledge of failed negative pressure tests of the slurry used at the Macondo well site. BP completed the cementing job before receiving the final test results, which arrived six days after the blowout. (Id. ¶¶ 237-88.) — BP knew that the manufacturer of the Deepwater Horizon’s BOP had a history of BOP failures. — Studies by governmental agencies revealed frequent failures by BOPs in the Gulf of Mexico and in deep-water drilling environments. — An April 6, 2009, letter from MMS to BP indicated the high risk associated with drilling at the Macondo well. — An internal BP audit confirmed outstanding safety items on the Deep-water Horizon, and a September 2009 audit found that the Deepwater Horizon suffered from excessive overdue maintenance totaling 390 jobs and 3,454 man hours. Six of the overdue jobs related to BOP maintenance. — BP mandated 7% cost reductions for all of its drilling operations in the Gulf. (Compl. ¶ 436.) Plaintiffs also allege that BP’s executive compensation structure-which tied 70% of the executive performance bonus to financial metrics as opposed to safety metrics — provided the Individual Defendants with the motive to commit fraud. (Id.) IY. LEGAL STANDARDS A. Rule 12(b)(6) To survive a motion to dismiss, a complaint must contain sufficient factual allegations, accepted as true, to state a claim for relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). A claim has “facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. It follows that, where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged— but has not shown — that the plaintiff is entitled to relief. Id. at 1950; see also Fed. R. Civ. P. 8(a)(2). Well-pleaded factual allegations must be taken as true, but the court does not “accept as true eonclusory allegations, unwarranted factual inferences, or legal conclusions.” Cent. Laborers’ Pension Fund v. Integrated Elec. Servs., Inc., 497 F.3d 546, 550 (5th Cir.2007). In considering a Rule 12(b)(6) motion to dismiss, a court must limit itself to the contents of the pleadings, with two exceptions. First, the Fifth Circuit allows the courts to consider certain documents attached to the motion to dismiss. Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498-99 (5th Cir.2000). The Fifth Circuit restricts such consideration to documents that are referenced in the complaint and are central to the plaintiffs’ claim. Scanlan v. Tex. A & M Univ., 343 F.3d 533, 536 (5th Cir.2003). Second, in securities cases, courts may take judicial notice of the contents of public disclosure documents that the law requires be filed with governmental agencies, such as the SEC, and that are actually filed with the agency. Lovelace v. Software Spectrum, Inc., 78 F.3d 1015, 1018 n. 1 (5th Cir.1996). However, these documents may be considered only for the purpose of determining what statements they contain, not for proving the truth of their contents. Id. As is required for Rule 12(b)(6) analysis, the court must draw all reasonable inferences in favor of the plaintiff. However, for scienter only, in keeping with the requirements of the Private Securities Litigation Reform Act (“PSLRA”), the court must take into account plausible inferences opposing as well as supporting a strong inference of scienter. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 314, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007). Accordingly, for purposes of a Rule 12(b)(6) motion to dismiss, a strong inference of scienter is one at least as compelling as any opposing inference of non-fraudulent intent. Id. B. Section 10(b) Under Section 10(b) of the Securities Exchange Act of 1934, It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange ... (b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, ... any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [SEC] may prescribe as necessary or appropriate in the public interest or for the protection of investors. 15 U.S.C. § 78j(b). SEC Rule 10b-5, promulgated pursuant to section 10(b), implements section 10(b) by forbidding, among other things, the making of any “untrue statement of a material fact” or the omission of any material fact “necessary in order to make the statements made ... not misleading.” 17 C.F.R. § 240.10b-5. The Supreme Court has implied from the text of section 10(b) that it affords a right of action to purchasers or sellers of securities injured by its violation. Tellabs, 551 U.S. at 318, 127 S.Ct. 2499. To state a private claim under section 10(b), a plaintiff must allege the following: (1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation. Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 157, 128 S.Ct. 761, 169 L.Ed.2d 627 (2008); R2 Invs. LDC v. Phillips, 401 F.3d 638, 641 (5th Cir.2005). 1. Material Misrepresentations and Omissions Because Plaintiffs assert securities fraud claims, they must satisfy the heightened pleading requirements of Rule 9(b) and the PSLRA. See Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 239 (5th Cir.2009); see also Tellabs, 551 U.S. at 322, 127 S.Ct. 2499 (noting that the PSLRA’s twin goals are to curb frivolous, lawyer-driven litigation, while preserving investors’ abilities to recover on meritorious claims). Rule 9(b) requires that, “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed. R. Crv. P. 9(b); see also Rosenzweig v. Azurix, 332 F.3d 854, 866 (5th Cir.2003) (noting that the PSLRA’s particularity requirement incorporates, at a minimum, the pleading standard for fraud under Rule 9(b)). The PSLRA enhances the requirements of Rule 9(b) in two ways. First, plaintiffs must “specify each statement alleged to have been misleading, [and] the reason or reasons why the statement is misleading.” 15 U.S.C. § 78u-4(b)(l). Second, for each act or omission alleged to be false or misleading, plaintiffs must “state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.” Id. at § 78u-4(b)(2). In order to meet these additional requirements of the PSLRA, a plaintiff must, therefore: (1) specify each statement alleged to have been misleading; (2) identify the speaker; (3) state when and where the statement was made; (4) plead with particularity the contents of the false representation; (5) plead with particularity what the person making the misrepresentation obtained thereby; and (6) explain the reason or reasons why the statement is misleading, i.e., why the statement is fraudulent. ABC Arbitrage Plaintiffs Group v. Tchuruk, 291 F.3d 336, 350 (5th Cir.2002). These allegations constitute the “who, what, when, where, and how” required under Rule 9(b) and the PSLRA. Id. What constitutes particularity will necessarily differ with the facts of each case. Guidry v. Bank of LaPlace, 954 F.2d 278, 288 (5th Cir.1992). A dismissal for failure to plead fraud with particularity as required by Rule 9(b) is a dismissal on the pleadings for failure to state a claim. Southland Sec. Corp. v. INSpire Ins. Solutions, Inc., 365 F.3d 353, 361 (5th Cir.2004). General allegations, which lump all defendants together and fail to segregate the alleged wrongdoing of one from those of another, do not meet the requirements of Rule 9(b). The court will reject the “group pleading” approach and instead look to the state of mind of the individual corporate official or officials “who make or issue the statement (or order or approve it or its making or issuance, or who furnish information or language for inclusion therein, or the like) rather than generally to the collective knowledge of all the corporation’s officers and employees acquired in the course of their employment.” Indiana Elec. Workers’ Pension Trust Fund IBEW v. Shaw Group, Inc., 537 F.3d 527, 533 (5th Cir.2008). To be actionable, a misrepresentation of a fact, or an omission of a fact, must be material. The Supreme Court recently reaffirmed that there is no bright-line rule for determining whether information withheld from a company’s filings is materials as a matter of law. Matrixx Initiatives, Inc. v. Siracusano, — U.S. -, 131 S.Ct. 1309, 1318-23, 179 L.Ed.2d 398 (2011). Unwilling to allow materiality to be reduced to a test of “statistical significance,” the Court held instead that assessing materiality involves a “fact-specific inquiry ... that requires consideration of the source, content, and context” of the allegedly omitted information. Id. at 1321. The misrepresentation of a fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in making an investment decision. Basic Inc. v. Levinson, 485 U.S. 224, 231, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988). For an omission to be material, there must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the “total mix” of information made available. Id. at 232, 108 S.Ct. 978; see also Krim v. BancTexas Group, Inc., 989 F.2d 1435, 1445 (5th Cir.1993) (explaining that the appropriate inquiry is whether the statement or omitted fact is significant, “such that it alters the total mix of information available about the proposed investment”). Materiality is not judged in the abstract, but in light of the surrounding circumstances. Rubinstein v. Collins, 20 F.3d 160, 168 (5th Cir.1994). With regard to misstatements, the PSLRA establishes a “safe harbor” protecting a forward-looking statement from liability where such a statement is made by a natural person, unless plaintiffs prove that it was made with actual knowledge that the statement was false and misleading. 15 U.S.C. § 78u-5(c)(l)(A). A statement is forward looking if it is: (A) a statement containing a projection of revenues, income (including income loss), earnings (including earnings loss) per share, capital expenditures, dividends, capital structure, or other financial items; (B) a statement of the plans and objectives of management for future operations, including plans or objectives relating to the products or services of the issuer; (C) a statement of future economic performance, including any such statement contained in a discussion and analysis of financial condition by the management or in the results of operations included pursuant to the rules and regulations of the Commission; (D) any statement of the assumptions underlying or relating to any statement described in subparagraph (A), (B), or (C); [or] (E) any report issued by an outside reviewer retained by an issuer, to the extent that the report assesses a forward-looking statement made by the issuer[.] 15 U.S.C. § 78u-5(i)(l)(A). The safe harbor provision protects individuals and corporations from liability for forward-looking statements that prove false if the statement is “accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement” or where the forward-looking statement is immaterial. Id. at § 78u — 5(c)(l)(A)(i)-(ii). Where the forward-looking statement is not accompanied by cautionary language, a plaintiff must demonstrate that the defendant made the statement with “actual knowledge” as to its falsity. Id. at § 78u-5(c)(1)(B). Vague, optimistic statements are not actionable. Allegations that amount to little more than corporate “cheerleading” are puffery, projections of future performance not worded as guarantees, and are not actionable under federal securities law because no reasonable investor would consider such statements material and because investors and analysts are too sophisticated to rely on vague expressions of optimism rather than specific facts. Krim, 989 F.2d at 1446. Additionally, “it is well-established that generalized positive statements about a company’s progress are not a basis for liability.” Nathenson v. Zonagen Inc., 267 F.3d 400, 419 (5th Cir.2001). Statements that are predictive in nature are actionable only if they were false when made. Shushany v. Allwaste, Inc., 992 F.2d 517, 524 (5th Cir.1993). 2. Scienter Section 10(b) and Rule 10b-5 do not protect investors against negligence or corporate mismanagement. Shaw Group, 537 F.3d at 535. Under the PSLRA, it is not enough to particularize false statements or fraudulent omissions made by a defendant; rather, for “each act or omission alleged” to be false or misleading, 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). To establish a section 10(b) claim, a private plaintiff must prove that the defendant acted with scienter. Tellabs, 551 U.S. at 319, 127 S.Ct. 2499. Tellabs outlined a three step approach to reviewing scienter allegations in a motion to dismiss a federal securities fraud case pursuant to the PSLRA. Id. at 323, 127 S.Ct. 2499. First, the allegations must, as in federal pleadings generally, be taken as true. Id. Second, courts may consider documents incorporated in the complaint by reference and matters subject to judicial notice. Id. The facts must be evaluated collectively, not in isolation, to determine whether a strong inference of scienter has been pleaded. Id. at 324, 127 S.Ct. 2499; see also Barrie v. Intervoice-Brite, Inc., 397 F.3d 249, 260 (5th Cir.2005) (“While [the Fifth Circuit] will view a complaint in toto when considering whether a complaint has adequately pled scienter ... each allegation of fraud must individually meet the particularity requirements of the PSLRA.”) (citation omitted). Third, a court must take into account plausible inferences opposing as well as supporting a strong inference of scienter. Tellabs, 551 U.S. at 324, 127 S.Ct. 2499. The inference of scienter must ultimately be “cogent and compelling,” not merely “reasonable” or “permissible.” Id.; see also Shaw Group, 537 F.3d at 533-34 (adopting Tellabs’ three step approach). In the context of federal securities fraud, scienter is “defined as ‘an intent to deceive, manipulate, or defraud or that severe recklessness in which the danger of misleading buyers or sellers is either known to the defendant or is so obvious that the defendant must have been aware of it.’ ” Flaherty & Crumrine Preferred Income Fund, Inc. v. TXU Corp., 565 F.3d 200, 207 (5th Cir.2009) (quoting R2 Invs. LDC v. Phillips, 401 F.3d 638, 643 (5th Cir.2005)); see also Plotkin v. IP Axess Inc., 407 F.3d 690, 697 (5th Cir.2005) (“[A] securities fraud plaintiff must prove that the defendant either consciously misbehaved ... or was so severely reckless that it demonstrates that the defendant must have been aware of the danger of misleading the investing public.”). Severe recklessness is “limited to those highly unreasonable omissions or misrepresentations that involve not merely simple or even