Full opinion text
I. Background Facts.........................................................1112 II. Standards of Review.......................................................1114 A. Pleading a Short and Plain Statement...................................1114 B. Pleading Fraud with Particularity......................................1114 C. Standard for Dismissal for Failure to State a Claim.......................1115 III. Discussion...............................................................1115 A. Form of the Complaint................................................1115 B. Reviewing the Complaint..............................................1117 C. Statute of Limitations Arguments.......................................1118 D. Count I: Section 10(b) and Rule 10b-5 “Fraudulent Scheme” Claims........1119 1. Distinguishing Primary Liability from Secondary Liability..............1119 2. The Prima Facie Case.............................................1121 a. Misleading Statements.........................................1121 b. Materiality...................................................1121 c. Scienter ....................................................1125 d. Causation....................................................1126 3. Reviewing the Specific Allegations in the Complaint Under Fed. R.Civ.P. 9(b) ...................................................1126 a. Allegations Common to Many Defendants........................1126 b. The Perrigo Defendants.......................................1127 i) Outside Directors..........................................1127 ii) The “Remaining Perrigo Defendants” ........................1127 c. Underwriter Defendants.......................................1128 d. The Main Hillman Defendants..................................1128 E. Count II: Section 10(b) “Misuse of Insider Information” Claims............1128 1. The Perrigo Defendants ...........................................1129 2. The Underwriter Defendants.......................................1129 3. The Main Hillman Defendants......................................1129 4. Defendant Swaney Associates ......................................1130 F. Counts III and IV: Section 20A “Insider Trading and Communication” Claims............................................................1130 G. Count VI: Section 11 “False Filings” Claims.............................1131 H. Count VII: Section 12(2) “Statutory Seller” Claims.......................1132 I. Counts V and VIII: Section 15 Securities Act and Section 20(a) Exchange Act “Controlling Person” Allegations...........................1133 1. The Perrigo Defendants ...........................................1134 2. The Underwriter Defendants.......................................1135 3. The Main Hillman Defendants......................................1135 J. Counts IX through XII: “Equitable” Claims.............................1136 K. Motion for Rule 11 Sanctions...........................................1137 L. Motion for an Undertaking of Costs and Attorneys’ Fees ..................1137 IV. Conclusion...............................................................1137 OPINION QUIST, District Judge. This ease arises out of the secondary public offering of Perrigo Company (“Perrigo”) common stock held in October of 1993. Plaintiffs, seeking to represent the class of all purchasers of Perrigo stock between May 11, 1993, and May 10, 1994, allege in the First Amended Consolidated Class Action Complaint that defendants perpetrated a “fraud on the market.” The Complaint seeks to recover damages under §§ 10(b), 20(a), and 20A of the Securities and Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated thereunder, and §§ 11, 12(2), and 15 of the Securities Act of 1933 (“Securities Act”). This matter is before the Court on motions to dismiss filed by the “Underwriter defendants,” defendant Swaney Associates, the “main Hillman defendants,” the “nominal Hillman defendants,” the “nominal H/K defendants,” and “the Perrigo defendants.” The Perrigo defendants’ motion is titled in the alternative as a motion to strike. Also before the Court are the Perrigo and the nominal H/K defendants’ motion for Rule 11 sanctions and the Perrigo defendants’ motion to require certain plaintiffs to post an undertaking for the payment of costs and attorneys’ fees. This case involves the consolidation of two separate cases. The first case, No. 1:95-CV-141, was filed on March 8, 1995, while the second, No. 1:95-CV-290, was filed on May 10, 1995. The first Consolidated Class Action Complaint was filed on June 9, 1995. The First Amended Consolidated Class Action Complaint (hereinafter “Complaint”) was filed on September 22, 1995. I. Background Facts Perrigo is a manufacturer and seller of over-the-counter (“OTC”) pharmaceutical and personal care products for the store (private) brand market. Perrigo’s nearly 2,250 customers are national and regional retail, drug, supermarket and mass merchandise chains. In October 1993, 13 million shares of Perrigo common stock were sold in a secondary public offering. The public offering was underwritten on a firm commitment basis at $31 per share by the Underwriter defendants. In May 1993, prior to the secondary offering, the price of Perrigo stock was $20 per share. After a Barron’s article dated January 31, 1994, suggested that the fiscal 1995 earnings forecasts for Perrigo may be too high, the stock dropped 1% points. The biggest one-day drop in stock price occurred after Perrigo’s March 15, 1994, conference with industry analysts, when the price dropped 6% points to $22 per share. As of May 10, 1995, the price had fallen to $12.25 per share. The Complaint is 129 pages and 161 paragraphs long. It asserts 11 counts against 19 defendants and 20 “nominal defendants.” After a description of the parties and class allegations, plaintiffs claim that there was a general scheme by defendants to artificially inflate the price of Perrigo stock so that defendants could sell their shares at a huge profit. The Complaint does not allege that the defendants “cooked the books.” Rather, the shareholder defendants are alleged to have utilized a registered secondary public offering accompanied by highly favorable press releases, influenced unaffiliated analysts and the press, and effected highly favorable filings with the Securities and Exchange Commission (“SEC”). The shareholder defendants are also alleged to have wrongfully manipulated the Perrigo stock price prior to October 1993 by announcing a stock split in July 1991 [132], and giving false reasons for the split [¶ 33]. The Underwriter defendants are alleged to have assisted in the shareholder defendants’ scheme by, among other things, issuing favorable press releases and research reports, performing minimal due diligence, holding “road shows” to tout Perrigo stock, influencing the press and unaffiliated analysts to issue favorable reports regardless of whether the reports were false or misleading, and promising to support the price of the stock. The plaintiffs’ complaint, in essence, is that defendants put a positive spin on Perrigo’s results, and made overly optimistic projections of Perrigo’s future performance while not disclosing fundamental problems which might enable the reasonable investor to understand that these profits and projections were not indicators of long term or continuous growth. The time and manner in which statements were allegedly made appears in the headings below, while the allegedly material omissions which are supposed to demonstrate the misleading nature of these statements are listed thereunder: Statements of May 11 to August 17,1993: 1) increasing raw material costs [¶ 29(a) ] 2) increasing expense of maintaining market share [¶ 29(b) ] 3) retail consolidation, shrinking shelf space, and expanded competition [¶ 29(c)] 4) increased inventory risk [¶ 29(d) ] 5) gross margin risk due to customer demands that Perrigo assist in marketing, [¶ 29(e) ] and 6) analgesic market risk due to new product competition [¶ 29(f) ]. Statements of August 23 to September 23, 1993. Plaintiffs reallege numbers 1-6 and add: 7) the adverse effects of companies switching from the prescription to the OTC market, [¶ 47(a) ] and 8) Perrigo’s lack of plans to invest more money in fiscal 1994 [¶ 47(b) ]. The Registration Statements of September 23, October 1, and October 20, 1993, and the Statements in the October 1993 Prospectus. Plaintiffs reallege numbers 1-7 and add: 9) price cuts by name brand manufacturers [¶ 51(a) ] 10) entry into store brand market by name brand manufacturers [¶ 51(b) ] 11) resistance by customers to expansion by Perrigo [¶ 51(e) ] 12) threat of new regional store brand companies [¶ 51(d) ] 13) encouragements to customers to stockpile inventory [¶ 51(e) ] 14) threat of unfair competition lawsuits [¶ 51(f)] 15) declining purchases by main retail customers [¶ 51(g) ] 16) “SKU paring” by major retail customers in order to reduce inventories and reduce product confusion [¶ 51(h) ] 17) threat to vitamin sales by proposed FDA rules [¶ 51(i) ] 18) hidden cost increases due to a cost of goods sold accounting change from the LIFO to FIFO system [¶ 51(j) ], and 19) high dependence on cough and flu seasons which make predictions of growth highly speculative [¶ 51(k) ]. Statements made at October 1993 Roadshows. Plaintiffs reallege numbers 1-7, 9 and add: 20) necessity of granting price discounts to retain market share [¶ 56(a) ], and 21) customers’ reluctance to grant Perrigo more shelf space for fear of becoming too dependent upon Perrigo [¶ 56(d)]. Post-Offering Statements through January 14, 1993. Plaintiffs reallege numbers 1-7, 9, 21 and add: 22) earnings and revenue were artificially inflated in the first two quarters of fiscal 1994 due to increased revenues generated by sales promotions which had borrowed large sales from the last two quarters [t 74(a) ], and 23) no international prospects due to WalMart’s stated preference for regional suppliers [¶ 74(b) ]. Statements through March 15,1994. Plaintiffs reallege numbers 1-6, 9, 13, and 15-18. Statements of April 19 to May 9, 1994- Plaintiffs reallege numbers 1-7, 9, 11, and 15-18. II. Standards of Review A. Pleading a Short and Plain Statement Rule 8(a)(2) of the Federal Rules of Civil Procedure requires that a complaint contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Rule 8(e) requires that “each averment of a pleading shall be simple, concise, and direct.” The determination of whether a complaint complies with Rule 8 is made on a case by case basis based upon “the nature of the action, the relief sought, and the respective positions of the parties in terms of the availability of information.” 5 Wright & Miller, Federal Practice and Procedure § 1217 (2d ed. 1990). B. Pleading Fraud with Particularity Rule 9(b) of the Federal Rules of Civil Procedure provides: In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally. Compliance with Rule 9(b) should be reviewed as to each of the elements of the claim of fraud in a complaint and as to each of the named defendants because each defendant must be informed of the specific nature of his alleged participation in allegedly defrauding a plaintiff. See Sears v. Likens, 912 F.2d 889, 893 (7th Cir.1990) (holding that a complaint may not lump all the defendants together, but must specify who was involved in each activity); In re Consumers Power Co. Sec. Litig., 105 F.R.D. 583, 592-93 (E.D.Mich.1985). The pleading must be sufficiently particular to serve the three goals of Rule 9(b) which are (1) to provide a defendant with fair notice of the claims against him; (2) to protect a defendant from harm to his reputation or goodwill by unfounded allegations of fraud; and (3) to reduce the number of strike suits and fishing expeditions. Vicom, Inc. v. Harbridge Merchant Servs., Inc., 20 F.3d 771, 777 (7th Cir.1994); DiVittorio v. Equidyne Extractive Indus., Inc., 822 F.2d 1242, 1247 (2d Cir.1987). In order to satisfy Rule 9(b), plaintiffs must allege: (1) the time, place and content of the alleged misrepresentation; (2) the fraudulent scheme; (3) the fraudulent intent of the defendants; and (4) the injury resulting from the fraud. Michaels Bldg. Co. v. Ameritrust Co., N.A, 848 F.2d 674, 679 (6th Cir.1988). The pleading requirements of Rule 9(b) “may be relaxed where information is only within the opposing party’s knowledge.” Id. at 680. In such circumstances, a plaintiff may plead upon “information and belief.” Such allegations, however, must be accompanied by a statement of facts upon which the belief is founded. Schlick v. Penn-Dixie Cement Corp., 507 F.2d 374, 379 (2d Cir.1974), cert. denied, 421 U.S. 976, 95 S.Ct. 1976, 44 L.Ed.2d 467 (1975). In this vein, plaintiffs will be held to satisfy Rule 9(b) through reliance upon a presumption that the allegedly false and misleading “group published information” which forms the basis of a suit sounding in fraud is the collective action of corporate officers and directors. In re GlenFed, Inc. Sec. Litig., 60 F.3d 591, 593 (9th Cir.1995). In other words, in a securities ease where the allegedly false and misleading information is “conveyed in prospectuses, registration statements, annual reports, press releases, or other ‘group-published information,’ it is reasonable to presume that these are the collective actions of the officers.” Id. Under these circumstances, a plaintiff is still required to plead the misrepresentations with particularity and where possible the roles of the individual defendants in the misrepresentations. Id. Rule 9(b) also applies to § 11 and § 12(2) claims under the Securities Act to the extent they are grounded in fraud rather than negligence. Shapiro v. UJB Fin. Corp., 964 F.2d 272, 288 (3d Cir.1992), cert. denied, 506 U.S. 934, 113 S.Ct. 365, 121 L.Ed.2d 278 (1992); In re Consumers Power, 105 F.R.D. at 594. C. Standard for Dismissal for Failure to State a Claim An action may be dismissed if the complaint fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). The moving party has the burden of showing that no claim exists. Although a complaint is to be liberally construed, it is still necessary that the complaint contain more than bare assertions of legal conclusions. Allard v. Weitzman (In re DeLorean Motor Co.), 991 F.2d 1236, 1240 (6th Cir.1993). All factual allegations in the complaint must be presumed to be true, and all reasonable inferences must be made in favor of the non-moving party. 2A James W. Moore, Moore’s Federal Practice, ¶ 12.07[2.5] (2d ed. 1991). The Court need not, however, accept unwarranted factual inferences. Morgan v. Church’s Fried Chicken, 829 F.2d 10, 12 (6th Cir.1987). Dismissal pursuant to Rule 12(b) is proper “only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.” Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984). Dismissal is also proper if the complaint fails to allege an element necessary for relief or “if an affirmative defense or other bar to relief is apparent from the face of the complaint, such as the official immunity of the defendant....” 2A James W. Moore, Moore’s Federal Practice, ¶ 12.07[2.5] (2d ed.1991). In practice, “a ... complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory.” Allard, 991 F.2d at 1240 (quoting Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir.1988)). III. Discussion A. Form of the Complaint In this particular case, this Court considers whether the form of a complaint conforms to the basic guidelines of Rules 8(a) and 9(b) of the Federal Rules of Civil Procedure to be a question precedent to whether the allegations in the complaint manage to state an actionable claim. See In re Buffets, Inc. Sec. Litig., 906 F.Supp. 1293, 1301 (D.Minn.1995) (“Deferring a ruling on a Rule 12(b)(6) motion allows the self-policing functions of the Rules of Civil Procedure to operate”). But see Greenberg v. Compuware Corp., 889 F.Supp. 1012, 1015 (E.D.Mich.1995) (court applied Rule 12(b)(6) first because it presents an easier standard for plaintiff to satisfy). Although plaintiffs complain about the inherent tension between Rules 8(a) and 9(b), courts should try to harmonize and apply each rule. Craighead v. E.F. Hutton & Co., Inc., 899 F.2d 485, 491 (6th Cir.1990). At least one court has suggested that the rules work in complementary fashion. See In re Buffets, 906 F.Supp. at 1299. In Buffets, the court maintained that because Rule 9(b) requires the plaintiff to particularize the allegations and eliminate the conelusory and argumentative verbiage in a complaint, the court and the parties are better able to recognize and analyze the claims before the court. Id. at 1299. When applying Rules 8(a) and Rule 9(b) in conjunction, the court must normally require the pleader to “ ‘state the time, place and content of the false misrepresentations, the fact misrepresented and what was retained or given up as a consequence of the fraud.’ ” Kowal v. MCI Communications Corp., 16 F.3d 1271, 1278 (D.C.Cir.1994) (quoting United States ex rel. Joseph v. Cannon, 642 F.2d 1373, 1385 (D.C.Cir.1981), cert. denied, 455 U.S. 999, 102 S.Ct. 1630, 71 L.Ed.2d 865 (1982)). “However, [to the extent] plaintiffs seek to base a claim of securities fraud on false and misleading projections or statements of optimism, their complaint must also plead sufficient facts that if true would substantiate the charge that the company lacked a reasonable basis for its projections or issued them in less than good faith.” Kowal, 16 F.3d at 1278. The problem presented by the Complaint is to discuss the coherent picture of fraud which plaintiffs seek to allege. Cf. In re GlenFed Sec.Litig., 42 F.3d 1541, 1553-54 (9th Cir.1994) (dismissing complaint as a “puzzle” under Rule 8(a)). If one gives the plaintiffs the benefit of the doubt, the length of the Complaint could be attributable to plaintiffs’ desire to set forth sufficient factual particularity under Rule 9(b). A cynic might conclude that the length of the Complaint and the running together of statements of fact with alleged omissions was designed to throw up enough chaff to create confusion and enable plaintiffs to engage in wide ranging, expensive, and intrusive discovery to coerce a settlement from defendants. This Court’s task is to determine whether there are viable claims for securities fraud alleged against all or some of the defendants and then to focus the parties upon the viable claims so that those claims can be resolved justly, speedily, and inexpensively. Fed.R.Civ.P. 1. Regarding Rule 9(b), the Complaint generally sets forth its allegations of fraud with sufficient factual particularity regarding the time, place, and content of the alleged misrepresentations and omissions to put defendants on notice of the illegal course of conduct plaintiffs allege against them. See 5 Wright & Miller, Federal Practice and Procedure § 1296 (2d ed. 1990). Thus, this Court will decline to dismiss the entire case as a result of the length or complexity of the Complaint or the failure to allege fraud with sufficient factual particularity. The Court, however, will exercise its discretion under Fed.R.Civ.P. 12(f) to order stricken from the Complaint immaterial or redundant information in the name of efficiency. See In re Clearly Canadian Sec.Litig., 875 F.Supp. 1410, 1416 (N.D.Cal.1995). Dismissing the Complaint without prejudice under Rule 8(a) would only invite the filing of a new complaint and a new round of motions to dismiss. Id. Furthermore, striking non-actionable, immaterial, and redundant matter from the Complaint should narrow the scope of discovery for the litigants. In addition, where the Complaint fails to allege fraud with sufficient particularity against any of the individual defendants, this Court will dismiss those claims with prejudice. “After consolidation of the [two] lawsuits comprising this litigation, plaintiffs, represented by experienced and competent counsel, were given an adequate opportunity to file a new complaint setting forth their best theories in this ease.... Given the high stakes in securities litigation, two bites at the apple are enough.” In re Exabyte Corp. Sec. Litig., 823 F.Supp. 866, 873 (D.Colo.1993); see also In re VeriFone Sec. Litig., 784 F.Supp. 1471, 1486 (N.D.Cal.1992). This proposition is especially apt in the instant case because the Joint Report filed in accordance with this Court’s Order of July 28, 1995, explicitly states that the Amended Complaint would be filed in order to allow plaintiffs to, among other things, clarify both the relationships of the defendants to the claims alleged against them and the relationship between the various representations and omissions. B. Reviewing the Complaint Plaintiffs argue that it is inappropriate for a court to engage in “atomistic consideration” of the specific statements and omissions alleged in the Complaint when resolving a motion to dismiss. Courts have declined to engage in such consideration in other cases, choosing instead to determine whether defendants’ representations, when read as a whole and in context, may have worked as devices designed to mislead investors. See, e.g., McMahan & Co. v. Wherehouse Enter., Inc., 900 F.2d 576, 579 (2d Cir.1990), cert. denied, 501 U.S. 1249, 111 S.Ct. 2887, 115 L.Ed.2d 1052 (1991); S.E.C. v. C.R. Richmond & Co., 565 F.2d 1101, 1106-07 (9th Cir.1977) (statements literally true may be misleading in their overall effect). However, where plaintiffs file claims against multiple defendants this Court is obliged to go through the Complaint allegation by allegation in order to determine if the claims are properly and specifically alleged against each named defendant. This is no easy task, but it would be manifestly unjust to require defendants against whom no actionable claim has been asserted to undergo the expense and discomfort that the discovery process imposes simply because plaintiffs have asserted actionable claims against different defendants. It is certainly not uncommon for a court presiding over a comparable securities case-to engage in precisely the type of atomistic consideration opposed by plaintiffs. See, e.g., In re Gupta Corp. Sec. Litig., 900 F.Supp. 1217 (N.D.Cal.1994); In re Clearly Canadian Sec. Litig., 875 F.Supp. 1410 (N.D.Cal.1995); In re Medimmune, Inc. Sec. Litig., 873 F.Supp. 953 (D.Md.1995); In re Marion Merrell Dow Inc., Sec. Litig. (II), 1994 WL 396187 (W.D.Mo., July 18, 1994); In re Ross Sys. Sec. Litig., 1994 WL 583114 (N.D.Cal., July 21, 1994). As an initial matter, the Complaint is replete with statements made by defendants which concern nothing but Perrigo’s past or current performance. (See, e.g., Complaint at ¶¶28, 30, 36, 52, 60, 62, 63, 79, 85.) Plaintiffs do not dispute the accuracy of these statements. In and of themselves, these statements are not actionable as being materially misleading because they are not misleading at all. Greenberg, 889 F.Supp. at 1017; see Serabian v. Amoskeag Bank Shares, Inc., 24 F.3d 357, 361 (1st Cir.1994). Making a historically accurate statement does not fraudulently create the impression that such conditions will occur in the future. Cione v. Gorr, 843 F.Supp. 1199, 1205 (N.D.Ohio 1994) (“to argue that the statements are misleading because the true statements of past performance somehow paint a falsely optimistic picture of the future reaches too far”). In fact, accurate statements concerning Perrigo’s recent growth, standing alone, are evidence that projections of future growth were reasonable when made. Plaintiffs’ case hinges on the alleged material omissions, which are alleged to demonstrate that the projections were either not made in good faith or lacked a reasonable basis in fact. Furthermore, this Court must reject plaintiffs’ assertion that accurate statements of fact may be actionable when transmitted to the public embedded in a series of falsehoods. While plaintiffs correctly note that “a misleading statement will not always lose its deceptive edge simply by joinder with others that are true,” Virginia Bankshares, Inc. v. Sandberg, 501 U.S. 1083, 1097, 111 S.Ct. 2749, 2760, 115 L.Ed.2d 929 (1991), lumping a number of historically accurate statements in with a number of allegedly misleading predictions does not render the accurate statements untrue. Rather, to the extent defendants are alleged to have harped on Perrigo’s past success in connection with predictions of future growth, the viability of these claims is entirely contingent upon the allegedly misleading economic projections themselves. (See, e.g., Complaint at ¶¶ 37-39, 45, 47, 49, 50.) Thus, in parsing through the Complaint, this Court will not focus on accurate statements of fact, but will focus instead on the allegedly misleading predictions of economic growth and the allegedly material omissions upon which plaintiffs depend to make their case. As a means of facilitating its analysis, this Court will initially determine whether the predictions or material omissions attributed to defendants can form the basis for liability. Only after the Court concludes that the Complaint alleges a factual basis for liability will the Court determine if the allegations set forth in the Complaint were pled with sufficient particularity as to each defendant. C. Statute of Limitations Arguments The main Hillman defendants, except Henry Hillman and C.G. Grefenstette, and defendant Swaney Associates claim that they should be dismissed because they were not named as defendants until the statute of limitations had run under both the Exchange and Securities Acts. This Court will address this issue prior to addressing the form and substance of the Complaint because if plaintiffs’ claims are time-barred as to these defendants, the Court need not investigate the claims alleged in the Complaint. A claim under both the Exchange and Securities Acts “must be commenced within one year after the discovery of the facts constituting the violation and within three years after such violation.” Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 364, 111 S.Ct. 2773, 2782, 115 L.Ed.2d 321 (1991). While plaintiffs concede that the statute of limitations begins to run under the Securities Act when plaintiffs are placed on “inquiry notice” of the facts giving rise to the action, they contend that “actual notice” is required to get the clock ticking under the Exchange Act. Their argument is not supported by recent case law. Appellate courts hold plaintiffs to an inquiry notice standard under the Exchange Act as well. See, e.g., Tregenza v. Great American Communications Co., 12 F.3d 717, 718 (7th Cir.1993), cert. denied, — U.S. —, 114 S.Ct. 1837, 128 L.Ed.2d 465 (1994); Menowitz v. Brown, 991 F.2d 36, 41-42 (2d Cir.1993); Anixter v. Home-Stake Prod. Co., 947 F.2d 897, 899 (10th Cir.1991), vacated on other grounds, 503 U.S. 978, 112 S.Ct. 1658, 118 L.Ed.2d 382 (1992), cert. denied, 507 U.S. 1029, 113 S.Ct. 1841, 123 L.Ed.2d 467 (1993); Howard v. Haddad, 962 F.2d 328, 330 (4th Cir.1992). Inquiry notice is defined as the time “when the victim of the alleged fraud became aware of facts that would have led a reasonable person to investigate whether he might have a claim....” Tregenza, 12 F.3d at 718. In attempting to set a date for when plaintiffs were put on inquiry notice, defendants attach particular significance to a Barron ’s article, dated January 31, 1994, which posited that Perrigo stock may be overvalued. Defendants also direct this Court’s attention to the drop of $6.25 in the price of Perrigo stock on March 15, 1994, which followed Perrigo’s conference with analysts wherein a number of facts which had a negative impact on Perrigo’s business were disclosed. In contrast, plaintiffs claim that they were not put on inquiry notice until May 10, 1994, when Perrigo issued a press release reporting its third quarter fiscal results, the stock price plunged $8.75 a share, and financial analysts began to question the credibility of the company. The statute of limitations is an affirmative defense, and plaintiffs are not required to negate an affirmative defense in their Complaint. Tregenza, 12 F.3d at 718 (citing Gomez v. Toledo, 446 U.S. 635, 640, 100 S.Ct. 1920, 1923-24, 64 L.Ed.2d 572 (1980)); see Fed.R.Civ.P. 8(c). Thus, defendants bear the burden of proof on this issue. This Court holds that there is a genuine and material question of fact about whether a reasonable investor would have been put on inquiry notice on March 15, 1994, as defendants claim. As such, this issue could not be resolved upon a motion for summary judgment and is therefore inappropriate for the Court to address when faced with a motion to dismiss. See Nevada Power Co. v. Monsanto Co., 955 F.2d 1304, 1307 (9th Cir.1992). Defendants’ arguments concerning the impropriety of a “lulling” defense — that plaintiffs were subsequently lulled into a state of repose by defendants’ explanations and bullish reports — are, therefore, premature because it is not yet resolved as to whether plaintiffs were put on inquiry notice in the first instance by the events noted by defendants. Because defendant Swaney Associates and the main Hillman defendants, except the Harry L. Hillman Trust and Elsie Hillman, were named in the complaint dated May 10, 1995 — within one year after the date plaintiffs admit they were put on notice of their claims' — these claims are not barred by the statute of limitations. With regards to the Henry L. Hillman Trust and one of its trustees, defendant Elsie Hillman, neither was named prior to the Complaint filed on September 22, 1995 — a date fully 16 months after plaintiffs admitted they were put on inquiry notice of their claims. However, Rule 15(c)(3) of the Federal Rules of Civil Procedure allows for the substitution of parties where the original party was named due to mistaken identity. At oral argument held March 13,1996, plaintiffs argued that these defendants were substituted for Juliet Challenger, Inc., a wholly owned subsidiary of the Hillman Company, which is in turn owned and controlled by the Henry L. Hillman Trust. (Transcript at 44-47.) Juliet Challenger, Inc., was named as a “nominal” defendant in the Amended Complaint; there are no present allegations that this company violated the securities laws. Plaintiffs also contended at oral argument that they have yet to fully understand the true nature of the relationship between the various Hillman entities. (Transcript at 46.) While defendants question the veracity of plaintiffs’ assertions of ignorance, this Court will accept plaintiffs’ assertions as true. This Court will allow plaintiffs’ substitution of parties pursuant to Rule 15(c). Thus, the claims against the main Hillman defendants and defendant Swaney Associates are not time-barred as a matter of law. D. Count I: Section 10(b) and Rule 10b-5 “Fraudulent Scheme” Claims In Count I of the Complaint, plaintiffs allege that the Perrigo defendants, defendant Swaney Associates, the main Hillman defendants, and the Underwriter defendants violated § 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder by: (1) participating in a scheme to defraud; (2) making untrue statements of material fact or omitting to state material facts necessary to render the statements made not misleading; or (3) engaging in acts or business practices which operated as a fraud in connection with plaintiffs’ respective purchases of Perrigo common stock during the class period. (Complaint at ¶ 103.) Section 10(b) of the Exchange Act makes it unlawful to use or employ, in connection with the purchase or sale of securities, any “manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [Securities and Exchange] Commission may prescribe----” Section 10(b) was designed as a “catchall clause to prevent fraudulent practices.” Chiarella v. United States, 445 U.S. 222, 226, 100 S.Ct. 1108, 1113, 63 L.Ed.2d 348 (1980). Pursuant to § 10(b), the SEC adopted Rule 10b-5. Smith v. American Nat. Bank & Trust Co., 982 F.2d 936, 942-43 (6th Cir.1992). Rule 10b-5 makes it unlawful, in connection with the purchase or sale of any security “(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.” 17 C.F.R. § 240.10b-5. 1. Distinguishing Primary Liability from Secondary Liability The Supreme Court has held that secondary liability for aiding and abetting a violation of § 10(b) does not exist. Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 114 S.Ct. 1439, 128 L.Ed.2d 119 (1994). The Supreme Court also held, however, that peripheral actors in the securities markets may be subject to primary liability under the section when it said, “[a]ny person or entity, including a lawyer, accountant, or bank, who employs a manipulative device or makes a material misstatement (or omission) on which a purchaser or seller of securities relies may be liable as a primary violator under 10b-5, assuming all of the requirements for primary liability under Rule 10b-5 are met.” Central Bank, 511 U.S. at —, 114 S.Ct. at 1455. “The critical element separating primary from aiding and abetting violations is the existence of a representation, either by statement or omission, made by the defendant, that is relied upon by the plaintiff. Reliance only on representations made by others cannot itself form the basis of liability.” Anixter v. Home-Stake Production Co., 77 F.3d 1215, 1225 (10th Cir.1996) (citing Central Bank, 511 U.S. at —, 114 S.Ct. at 1448); see also O’Neil v. Appel, 897 F.Supp. 995, 999 (W.D.Mich.1995) (“Section 10(b) liability may be incurred only by the one who actually makes a material misstatement”). This Court holds that those post-Central Bank decisions which have held that a third-party defendant may be held liable for materially misleading statements made by others where the defendant “substantially participated” in preparing the statements do not comport with Central Bank insofar as these eases reformulate the “substantial assistance” element of aiding and abetting liability into primary liability and allow liability to attach without requiring a representation to be made by defendant. Anixter, 77 F.3d at 1226 n. 10. (citing In re Software Toolworks, Inc., 50 F.3d 615, 628 n. 3 (9th Cir.1994) (accountant may be primarily liable based on “significant role” in drafting letter client sent to SEC), cert. denied, — U.S. —, 116 S.Ct. 274, 133 L.Ed.2d 195 (1995); In re ZZZZ Best Sec. Litig., 864 F.Supp. 960, 970 (C.D.Cal.1994) (accounting firm that was “intricately involved” in creating false documents published by client is a primary violator); and Cashman v. Coopers & Lybrand, 877 F.Supp. 425, 432-34 (N.D.Ill.1995) (primary liability attaches where accountant charged with playing a “central role in the drafting and formation of the alleged misstatements” that were incorporated into prospectus)). However, it must be noted that the alleged violator need not directly communicate misrepresentations to plaintiffs for primary liability to attach. Anixter, 77 F.3d at 1226 (citing SEC v. Holschuh, 694 F.2d 130, 142 (7th Cir.1982) (“actual or first-hand contact with offerees or buyers [is not] a condition precedent to primary liability for anti-fraud violations”)). A third-party defendant may be held liable as a primary violator for the materially misleading statements made by others where the third-party defendant controlled the content of the statement. See Greenberg, 889 F.Supp. at 1020-21 (discussing a company’s potential liability for independent analyst reports). When a defendant controls the content of another actor’s statement, the actor is essentially operating as the agent of the defendant, unlike the situation wherein a defendant provides “substantial assistance” in aiding the actor’s individual course of conduct. Furthermore, primary liability will attach where an actor “knew or should have known that his representation would be communicated to investors because § 10(b) and Rule 10b-5 focus on fraud made ‘in connection with the sale or purchase’ of a security.” Anixter, 77 F.3d at 1226. In such circumstances, it was the defendant’s original statement which misled investors — the person who communicated the statement to investors served as a mere conduit for defendant’s statement. The key to determining primary liability is that plaintiff must allege that defendant was the original and knowing source of the misrepresentation. The Underwriter defendants claim that they should be dismissed as parties to this case because Central Bank bars liability for mere participation in a conspiracy or scheme. This claim is rejected. The Complaint alleges that the Underwriters are liable for making materially misleading representations in the form of baseless predictions of growth for Perrigo in their reports to the public. (See, e.g., Complaint at ¶¶ 41-43, 46, 59, 61, 69, 70, 72, 73, 77, 89, 90, 91.) In each instance, the Underwriter defendants were not alleged to have merely assisted the Perrigo defendants in making an alleged misrepresentation, nor were the Underwriter defendants alleged to have served as mere “mouthpieces” for Perrigo’s statements, nor was any individual statement made by an Underwriter controlled by Perrigo. At most, the Underwriter defendants are alleged to have received the information contained in their fraudulent public statements from Perrigo. However, whatever information was received from Perrigo was invariably edited or incorporated in a broader analysis by the Underwriter defendant in question. As such, the Underwriter defendants are consistently alleged to have been the original source of each statement, even if the information upon which these allegedly fraudulent predictions of growth was obtained from Perrigo. Because the Underwriter defendants are alleged to be the original source of each alleged material misrepresentation, they may be held primarily liable for securities fraud under Central Bank. As a consequence, Perrigo may not be held primarily liable for any predictions of future growth made by the Underwriter defendants under Count I. The “close communications” between the Perrigo and Underwriter defendants that plaintiffs claim is alleged in the Complaint does not give rise to an inference of control over any particular statement. (See Docket # 96, at 96.) 2. The Prima Facie Case In order to state a primary liability claim for securities fraud in violation of section 10(b) and Rule 10b-5, the following elements must be alleged against the defendant with the specificity required by Federal Rule of Civil Procedure 9(b): (1) a misstatement or omission, (2) of a material fact, (3) made with scienter, (4) justifiably relied on by plaintiff, which (5) was causally related to plaintiffs injury- In re Royal Appliance Sec. Litig., 64 F.3d 663, 1995 WL 490131, at * 2-3 (6th Cir. Aug. 15, 1995) (citing Malone v. Microdyne Corp., 26 F.3d 471, 476 (4th Cir.1994)). Regarding the fourth element, where plaintiff alleges a “fraud on the market” theory, reliance will be presumed. See Basic Inc. v. Levinson, 485 U.S. 224, 247, 108 S.Ct. 978, 992, 99 L.Ed.2d 194 (1988). In the instant suit, justifiable reliance will be presumed because plaintiffs have in fact advanced a “fraud on the market” theory. (Complaint at ¶ 10.) The remaining elements are discussed below. a. Misleading Statements Plaintiffs have alleged in their Complaint that defendants made — or caused to be made — numerous statements predicting growth for Perrigo which were either false or unreasonable when made. (Complaint at ¶¶ 31, 32, 34, 35, 37-39, 41-47, 49-50, 53-55, 57-59, 61, 64-73, 75, 77, 78, 80, 81, 83, 84, 86, and 88-91.) As factual support for this proposition, plaintiffs have alleged that defendants omitted a number of material facts with respect to adverse economic conditions known to defendants which undermined their predictions of growth. (Complaint at ¶¶29, 33, 40, 51, 56, 74, 82, 87, and 92.) “Silence, absent a duty to disclose, is not misleading under Rule 10b-5.” Basic, 485 U.S. at 239 n. 17, 108 S.Ct. at 987 n. 17. However, “[w]hen a corporation chooses to disclose information, it must reveal any information in its possession necessary to render the disclosure not misleading.” In re Clearly Canadian Sec. Litig., 875 F.Supp. 1410, 1418 (N.D.Cal.1995) (citing In re Apple Computer Sec. Litig., 886 F.2d 1109, 1113 (9th Cir.1989), cert. denied, 496 U.S. 943, 110 S.Ct. 3229, 110 L.Ed.2d 676 (1990)). Thus, defendants’ duty to disclose all material information under 10(b) was only triggered when they made projections of Perrigo’s future performance. At paragraph 29 of the Complaint, plaintiffs charge defendants with certain material omissions where defendants had made no prior economic projections. The May 11, 1993, press release referred to in this paragraph merely refers to past performance. Thus, because defendants had not triggered their duty to disclose all material information, these “pure” omissions are not actionable. b. Materiality Whether or not a statement or omission is material is determined with reference to whether there is a substantial likelihood that the statement or omission would be viewed by the reasonable investor as having significantly altered the total mix of available information. Basic, 485 U.S. at 231-32, 108 S.Ct. at 983. In a fraud on the market case, plaintiffs are assumed to have relied on the stock price established by the market rather than on any individual statements made by corporate insiders. In re Apple Computer, 886 F.2d at 1114; see also Basic, 485 U.S. at 247, 108 S.Ct. at 992 (holding that a plaintiffs reliance on the market would be presumed). Thus, where plaintiff alleges fraud on the market, “the materiality requirement of Rule 10b-5 judges a statement in light of the total mix of information available to the market.” In re Clearly Canadian, 875 F.Supp. at 1419; cf. 3 Alan R. Bromberg & Lewis D. Lowenfels, Bronmberg and Lowenfels on Securities Fraud & Commodities Fraud § 8.3 (2d ed. 1994) (distinguishing materiality in direct-personal sales cases with materiality in an open-market context). Materiality is a mixed question of law and fact and is appropriately decided as a matter of law if reasonable minds could not differ on the issue. TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449-50, 96 S.Ct. 2126, 2132-33, 48 L.Ed.2d 757 (1976). In making its determination, the court should balance the probability that the predicted event will occur, with the magnitude of the event and the nature of the statement. Basic, 485 U.S. at 238, 108 S.Ct. at 987; Sinay v. Lamson & Sessions Co., 948 F.2d 1037, 1040 (6th Cir.1991). There are specific types of statements and omissions which are considered not to be material as a matter of law. As an initial matter, where the allegedly false statements are worded as vaguely optimistic predictions of growth, they are not material as a matter of law. Raab v. General Physics Corp., 4 F.3d 286, 289-90 (4th Cir.1993). Such statements are considered “mere puffery” upon which no reasonable investor would rely. Id. Statements which are generally not considered mere puffery include predictions worded as guarantees or predictions supported by specific factual assertions. Combining puffery with accurate historical statements does not render puffery material. This Court holds that the following allegations are mere puffery because they are vague optimistic assertions made without any specific factual support. (Complaint at ¶¶ 32, 35, 37, 38, 64, 75, and 80.) If a prediction is not mere puffery, it becomes necessary to apply the “Bespeaks Caution” doctrine. Under this doctrine, a potentially material economic prediction is rendered not material when it is accompanied by sufficient cautionary language. Mayer v. Mylod, 988 F.2d 635, 639 (6th Cir.1993); Sinay, 948 F.2d at 1040. However, it must be noted that “not every mixture with the true will neutralize the deceptive. If it would take a financial analyst to spot the tension between the one and the other, whatever is misleading will remain materially so, and liability should follow.” Virginia Bankshares, Inc. v. Sandberg, 501 U.S. 1083, 1097, 111 S.Ct. 2749, 2760, 115 L.Ed.2d 929 (1991). In this vein, a boilerplate disclaimer that merely “warns the reader that the investment has risks will ordinarily be inadequate to prevent misinformation. To suffice, the cautionary statements must be substantive and tailored to the specific future projections, estimates or opinions ... which the plaintiffs challenge.” In re Donald J. Trump Casino Sec. Litig., 7 F.3d 357, 371-72 (3d Cir.1993), cert. denied, 510 U.S. 1178, 114 S.Ct. 1219, 127 L.Ed.2d 565 (1994). Application of this doctrine requires the court to assess the communications at issue on a point-by-point basis. Id. In the context of defending against plaintiffs’ claims under §§ 11 and 12(2) of the Securities Act, the Underwriter defendants argue that because the Prospectus contained language warning potential investors that the market for Perrigo’s products is highly competitive, none of the statements in the Prospectus relating to Perrigo’s future performance in the OTC market are actionable. (See Complaint at ¶¶57, 58.) This Court disagrees. General language concerning the highly competitive nature of the market is not tailored to any specific projections of growth and as such, amounts to nothing more than a boilerplate warning. As a result, this warning will not insulate defendants from liability under Count I for any materially misleading omissions or statements. Finally, misrepresentations are not material if the investors have knowledge of the truth. Basic, 485 U.S. at 231-32, 108 S.Ct. at 983-84. In a case where plaintiffs allege fraud on the market, “the defendant’s failure to disclose material information may be excused where the information has been made credibly available to the market by other sources.” In re Apple Computer, 886 F.2d at 1115. While it normally does not matter if the market is aware of certain facts if the plaintiff remains unaware, where a plaintiff alleges fraud on the market he is implicitly asserting reliance on the integrity of the market. In re Convergent Technologies Sec. Litig., 948 F.2d 507, 512 n. 2 (9th Cir.1991); In re Clearly Canadian, 875 F.Supp. at 1418-19; see In re Apple Computer, 886 at 1114. The market may be assumed to be aware of general economic trends, regulatory matters, competition, and other publicly-available information. Wielgos v. Commonwealth Edison Co., 892 F.2d 509, 515 (7th Cir.1989); see In re Worlds of Wonder Sec. Litig., 35 F.3d 1407, 1419 (9th Cir.1994) (competition), cert. denied sub nom. — U.S. —, 116 S.Ct. 185, 133 L.Ed.2d 123 (1995); Basic, 485 U.S. at 246, 108 S.Ct. at 991 (“Recent empirical studies have tended to confirm Congress’ premise that the market price of shares traded on well-developed markets reflects all publicly available information....”); cf. In re Leslie Fay Co. Sec. Litig., 871 F.Supp. 686, 694-95 (S.D.N.Y.1995) (Rule 10(b)’s “in connection with” requirement encompasses all SEC filings, even those not readily available to the investing public). However, the Ninth Circuit has held that because the investing public places a heavy emphasis on the pronouncements of corporate insiders, when corporate insiders seek to insulate themselves from liability for allegedly false or misleading representations (or omissions) through a “truth on the market defense,” the insiders must demonstrate that the truth was transmitted to the public “with a degree of intensity and credibility sufficient to effectively counter-balance any misleading impression created by the insiders’ one-sided representations.” In re Apple Computer, 886 F.2d at 1116. This Court holds as a matter of law that, where information is contained in a document filed with the SEC, the market has knowledge of such matters. Cf. In re Leslie, 871 F.Supp. at 694-95; Lovelace v. Software Spectrum, Inc., 78 F.3d 1015, 1018 (5th Cir.1996) (court may take judicial notice of the content of statements contained in documents filed with the SEC, but not the truth of such statements). This Court believes that it is incongruous, in a fraud on the market case, to hold that the investing public knows of allegedly false omissions or statements in SEC filings but does not know of the accurate information in SEC filings. Thus, because Pértigo disclosed the costs of its raw materials in its Prospectus for its October 1993 public offering, the financial market will be held to be aware of Perrigo’s raw material costs (alleged omission # 1). Moreover, this Court holds that the total mix of information available in the market to a reasonable investor also includes an understanding of the competitive nature of the American economy. The market knows that there are general inflationary pressures on raw materials and on wages. The market knows that large companies, such as Proctor & Gamble and the major drug manufacturers, would not sit by and permit Perrigo to deprive them of profits with its private label manufacturing and marketing. The market knows that these companies fight back by developing new products, manufacturing private brands themselves, competing for shelf space, giving discounts to meet competition, utilizing sophisticated advertising, etc. The market knows that persons with capital observing success of a private brand manufacturer often seek a piece of the action for themselves. The market knows that the principal customers of Perrigo would not be so naive as to become totally dependent upon Perrigo for its store name brands. The market knows that the huge retailers such as Wal-Mart would get as much out of Perrigo as they could in the form of price cuts, quality packaging, marketing assistance, quantity discounts, just-in-time delivery, inventory financing, etc. The market knows that the marketing pressure on Perrigo would and will, in all respects, grow, as Perrigo has grown and will, perhaps, grow. A person relying upon the market knows that the market (increasingly influenced by professional managers of huge mutual funds and pension plans, the people who are supposedly reading all of these press releases and SEC filings) takes all of these facts into consideration and applies common sense (reason) to these facts. Accordingly, those alleged omissions which relate to general market conditions are held to be known to the market and thus not actionable, even under the Ninth Circuit’s high standard for “truth on the market” defenses where a corporate insider attempts to actively mislead the public. See In re Apple Computer, 886 F.2d at 1116. These alleged omissions are the increasing expense of maintaining Perrigo’s market share (#2), “retail consolidation, shrinking shelf space, and expanded competition” (#3), increased inventory risk (#4), the gross margin risk due to customer demands that Perrigo assist in marketing (# 5), analgesic market risk (# 6), companies switching from the prescription to the OTC market (# 7), price cuts by name brand manufacturers (# 9), entry into store market by name brand manufacturers (# 10), resistance by customers to expansion by Perrigo (# 11), the threat of unfair competition lawsuits (# 14), necessity of granting price discounts to major retail customers to retain Perrigo’s market share (#20), and Pemgo’s major customers’ reluctance to grant Perrigo more shelf space for fear of becoming too dependent upon Perrigo (# 21). This Court holds that certain other alleged omissions are immaterial as a matter of law simply because no reasonable investor would consider them to significantly alter the total mix of information available to him. See Basic, 485 U.S. at 231-32, 238, 108 S.Ct. at 983-84, 986. These alleged omissions include the threat of new regional store brand companies (# 12), SKU pairing by major retail customers to reduce inventories (# 16), and the threat to vitamin sales posed by proposed FDA rules (# 17). This Court discerns certain omissions alleged in the Complaint may be found to be material omissions — some singly and some only in combination with others listed. These potentially material omissions are the failure to disclose: Perrigo’s lack of plans to invest more money in fiscal 1994 (# 8); encouragements to customers to stockpile inventory (# 13); the declining purchases by main retail customers (# 15); the hidden cost increases due to a change from the LIFO to the FIFO system of accounting (# 18); that artificially inflated earnings and revenue figures had resulted from the first two quarters of fiscal 1994 due to increased revenues generated by sales promotions which had borrowed large sales from the last two quarters (#22); and the lack of international prospects due to Wal-Mart’s stated preference for regional suppliers (#23). These material omissions arguably could have misled the investing public into believing that Perrigo was going to continue growing in sales and profits for a period of time. c. Scienter Scienter is defined as “a mental state embracing intent to deceive, manipulate, or defraud.” Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n. 12, 96 S.Ct. 1375, 1381 n. 12, 47 L.Ed.2d 668 (1976). The Sixth Circuit has held with reference to a § 10(b) claim that scienter includes the concept of recklessness. Auslender v. Energy Mgmt. Corp., 832 F.2d 354, 356 (6th Cir.1987); see O’Neil v. Appel, 897 F.Supp. 995, 1001 (W.D.Mich.1995). In this context, “recklessness” is defined as “highly unreasonable conduct which is an extreme departure from the standards of ordinary care. While the danger need not be known, it must at least be so obvious that any reasonable man would have known of it.” Mansbach v. Prescott, Ball & Turben, 598 F.2d 1017, 1025 (6th Cir.1979). With respect to scienter, Rule 9(b) provides that allegations of “condition of mind ... may be averred generally.” While the Sixth Circuit has not spoken directly to the issue, other circuits have set forth a variety of standards regarding the scienter requirement. See, e.g., Acito v. IMCERA Group, Inc., 47 F.3d 47, 52 (2d Cir.1995) (facts alleged must give rise to “strong inference” that defendants possessed fraudulent intent); Serabian v. Amoskeag Bank Shares, Inc., 24 F.3d 357, 361 (1st Cir.1994) (facts alleged must “make it reasonable to believe that defendants knew that a statement was materially false or misleading”); In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1547-49 (9th Cir.1994) (plaintiffs may aver scienter generally by simply declaring that scienter existed). Because the plain language of Rule 9(b) exempts “conditions of the mind” from its particularity requirement, this Court believes that the Ninth Circuit has set forth the correct standard. However, Rule- 9(b) also expressly states that “the circumstances constituting fraud or mistake shall be stated with particularity.” A plaintiff will therefore not survive a Rule 9(b) motion to dismiss on the pleadings by simply alleging that a defendant had fraudulent intent. See GlenFed, 42 F.3d at 1548 (“To allege fraud with particularity, a plaintiff must set forth more than the neutral facts necessary to identify the transaction. The plaintiff must set forth what is false or misleading about a statement, and why it is false.”); see also DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir.1990) (plaintiffs must plead “the who, what, when, where, and how: the first paragraph of any newspaper story”), cert. denied, 498 U.S. 941, 111 S.Ct. 347, 112 L.Ed.2d 312 (1990). To the extent plaintiffs allege that defendants made materially misleading economic predictions, the plaintiffs must allege particularized facts demonstrating that these predictions were either false or lacked a reasonable basis when made. See Arazie v. Mullane, 2 F.3d 1456, 1467 (7th Cir.1993). Only if plaintiffs are able to plead the facts underlying the alleged fraud with sufficient particularity, are “allegations of motive and opportunity in the complaint [ ] sufficient to establish a basis for inferring [defendants’] fraudulent intent.” In re Wells Fargo Sec. Litig., 12 F.3d 922, 931 (9th Cir.1993), cert. denied, — U.S. —, 115 S.Ct. 295, 130 L.Ed.2d 209 (1994). In the instant suit, plaintiffs have averred fraud generally with respect to all of the defendants by stating that they engaging in their allegedly fraudulent course of conduct “knowingly or recklessly.” (Complaint at ¶ 103.) Whether the facts underlying the fraud were pled with particularity with respect to each defendant will be addressed shortly. d. Causation In order to state a claim using a fraud on the market theory under rule 10b-5, plaintiffs must allege “loss causation,” i.e., that defendants’ material misrepresentations or omissions actually caused plaintiffs’ injury. To adequately plead loss causation, plaintiffs may allege that the price of Perrigo common stock was artificially inflated by defendants’ materially misleading statements when plaintiffs made their respective purchases. Scattergood v. Perelman, 945 F.2d 618, 624 (3d Cir.1991) (plaintiffs adequately pled loss causation by alleging that “the market price paid by the plaintiffs exceeded the value of the stock at the time of purchase based on the trae facts”); In re Clearly Canadian, 875 F.Supp. at 1419. Plaintiffs have met this minimal burden. The Complaint clearly alleges that defendants’ fraud caused plaintiffs’ economic injury in its very first page. (See Complaint at 1.) Whether each alleged misstatement could have actually been the cause in fact of the price of Perrigo stock is a question properly reserved for a motion for summary judgment or a jury verdict. 3. Reviewing the Specific Allegations in the Complaint Under Fed.R.Civ.P. 9(b) a. Allegations Common to Many Defendants A few allegations may be reviewed without referring to specific defendants. For example, the Complaint frequently alleges that defendants gave misleading information to independent third parties, such as newspapers or unaffiliated financial analysts, which formed the basis for the third party’s misleading public statements concerning Perrigo’s business. (See Complaint at ¶¶ 31, 34, 44, 45, 53, 54, 66, 71, 78, 81, 84, 86, and 88.) As stated earlier, defendants may be held primarily liable for third-party accounts which simply passed along material misrepresentations without editing them if defendants knew that their comments were not going to be edited. See Opinion, supra, at Part III.D.1 (citing Anixter v. Home-Stake Production Co., 77 F.3d 1215, 1225-26 (10th Cir.1996)). Furthermore, defendants may be held liable for misleading third-party accounts if defendants controlled the content of the accounts. Id. Only by exercising such control would defendants become sufficiently “entangled” with the third-party accounts for liability to attach. See Greenberg v. Compuware Corp., 889 F.Supp. 1012, 1020-21 (E.D.Mich.1995) (harmonizing the “entanglement theory” presented in Elkind v. Liggett & Myers, Inc., 635 F.2d 156, 163 (2d Cir.1980) with the “control theory” espoused in Raab v. General Physics Corp