BORIS FELDMAN, State Bar No. 128838
DOUGLAS J. CLARK, State Bar No. 171499
MARK D. FLANAGAN, State Bar No. 130303
DAVID LANSKY, State Bar No. 199952
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Telephone: (650) 493-9300
Attorneys for Defendants
JEFFREY LENCHES and FRED
ROSENZWEIG

INTRODUCTION

ARGUMENT

I. LIABILITY UNDER THE FEDERAL SECURITIES LAWS REQUIRES THE MAKING OF A FALSE STATEMENT

II. PLAINTIFFS CANNOT USE THE "GROUP PUBLISHED INFORMATION" DOCTRINE TO STATE A CLAIM

A. "Group-Published Information" Allegations Do Not Satisfy the Reform Act.

B. In Any Event, Plaintiffs Have Not Sufficiently Pleaded Facts To Trigger A Group Pleading Presumption.

III. THE COMPLAINT FAILS TO PLEAD THAT DEFENDANTS ARE LIABLE FOR THIRD PARTY STATEMENTS

IV. PLAINTIFFS HAVE NOT PLEADED SPECIFIC FACTS GIVING RISE TO A STRONG INFERENCE OF SCIENTER

A. Defendants' Positions and Access to Internal Documents.

B. Defendants' Stock Sales.

CONCLUSION

Acito v. IMCERA Group, Inc., 47 F.3d 47 (2d Cir. 1995)

Allison v. Brooktree Corp., 999 F. Supp. 1342 (S.D. Cal. 1998)

Allison v. Brooktree Corp., No. 97-CV-0852 TW (POR), slip op. (S.D. Cal.
     Nov. 27, 1998)

Branch v. Tunnell, 14 F.3d 449 (9th Cir. 1994)

Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A.,
     511 U.S. 164 (1994)

Coates v. Heartland Wireless Communications, Inc., 26 F. Supp. 2d 910
     (N.D. Tex. 1998)

Copperstone v. TCSI, No. C-97-3495 SBA, slip op. (N.D. Cal. Jan. 19, 1999)

DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655 (9th Cir. 1992)

In re Ascend Communications Sec. Litig., No. CV97-8861 MRP, slip op.
     (C.D. Cal. Feb. 5, 1999)

In re Caere Corp. Sec. Litig., 837 F. Supp. 1054 (N.D. Cal. 1993)

In re Comshare, Inc. Sec. Litig., No. 96-73711-DT, 1997 U.S. Dist. LEXIS 17262
     (E.D. Mich. 1997)

In re GlenFed, Inc. Sec. Litig., 60 F.3d 591 (9th Cir. 1995)

In re Glenayre Techs., Inc. Sec. Litig., 982 F. Supp. 294 (S.D.N.Y. 1997)

In re Home Health Corp. of Am. Sec. Litig., [Current Transfer Binder] Fed. Sec. L.
     Rep. (CCH) ¶ 90,414 (E.D. Pa. Jan. 29, 1999)

In re Informix Corp. Sec. Litig., No. C-97-1289-CRB, slip op.
      (N.D. Cal. Nov. 6, 1998)

In re Oak Tech. Sec. Litig., No. 96-20552 SW, 1997 WL 448168
     (N.D. Cal. Aug. 1, 1997)

In re Silicon Graphics Inc. Sec. Litig., [1996-97 Transfer Binder] Fed. Sec. L. Rep.
     (CCH) ¶ 99,325 (N.D. Cal. Sept. 25, 1996)

In re Silicon Graphics, Inc. Sec. Litig., 970 F. Supp. 746 (N.D. Cal. 1997),
     appeal docketed, No. 97-16240 (9th Cir. July 1, 1997)

In re Stac Elecs. Sec. Litig., 89 F.3d 1399 (9th Cir. 1996)
     cert. denied, 520 U.S. 1103 (1997)

In re Stratosphere Corp. Sec. Litig., 1 F. Supp. 2d 1096 (D. Nev. 1998)

Jefferies & Co. Inc. v. Arkus-Duntov, 357 F. Supp. 1206 (S.D.N.Y. 1973)

Lilly v. State Teachers Retirement Sys., 608 F.2d 55 (2d Cir. 1979)

Lirette v. Shiva Corp., 27 F. Supp. 2d 268 (D. Mass. 1998)

Neubronner v. Milken, 6 F.3d 666 (9th Cir. 1993)

O'Sullivan v. Trident Microsystems, Inc., [1993-94 Transfer Binder] Fed. Sec. L.
     Rep. (CCH) ¶ 98,116 (N.D. Cal. Jan. 31, 1994)

Ronconi v. Larkin, [1998 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶ 90,212
     (N.D. Cal. May 1, 1998)

Scone Invs., L.P. v. American Third Mkt. Corp., [1998 Transfer Binder] Fed. Sec.
     L. Rep. (CCH) ¶ 90,207 (S.D.N.Y. Apr. 28, 1998)

Wenger v. Lumisys, Inc., 2 F. Supp. 2d 1231 (N. D. Cal. 1998)

Wool v. Tandem Computers Inc., 818 F.2d 1433 (9th Cir. 1987)

15 U.S.C. § 78u-4(b)(1)

15 U.S.C. § 78u-4(b)(2)

Federal Rules of Civil Procedure 12(b)(6)

PLEASE TAKE NOTICE that on August 13, 1999, at 9:30 a.m. or as soon thereafter as counsel may be heard, in the Courtroom of the Honorable Charles A. Legge, at the United States District Court for the Northern District of California, located at 450 Golden Gate Avenue, San Francisco, California, defendants Jeffrey Lenches and Fred Rosenzweig will move this Court for an Order dismissing with prejudice Lead Plaintiffs' Class Action Complaint (the "Complaint").

Pursuant to the Private Securities Litigation Reform Act of 1995 (the "Reform Act") and Federal Rules of Civil Procedure 12(b)(6), the Complaint should be dismissed as to these defendants on the following grounds:

1) The Complaint fails to allege that defendants Lenches or Rosenzweig made any allegedly fraudulent statements;

2) Defendants Lenches and Rosenzweig cannot be held liable for the alleged statements of other defendants;

3) Defendants Lenches and Rosenzweig cannot be held liable for the alleged statements of third-party analysts; and

4) The Complaint fails to plead specific facts giving rise to a strong inference of scienter as required by Section 21D of the Reform Act, 15 U.S.C. § 78u-4(b)(1) and (2).

This Motion is based on this Notice of Motion and Motion, the Memorandum of Points and Authorities, the Declaration of Mark D. Flanagan (the "Flanagan Decl.") together with exhibits, all pleadings and papers filed herein, and any oral argument of counsel or other matters that may be submitted.

Electronics for Imaging, Inc. ("EFI") is a company located in Foster City whose technology and products permits color printers to achieve the quality of color photograph replication devices with the speed of copy machines. After twenty-three consecutive quarters of revenue growth, on December 11, 1997, the Company announced that its anticipated net revenue for the fourth quarter, ending December 31, 1997, would not meet analysts' expectations. EFI attributed the anticipated shortfall to delays in purchases due to new products and reductions of inventory by EFI's major Original Equipment Manufacturer ("OEM") customers. Flanagan Decl. Ex. 1.¹ EFI's stock price fell and plaintiffs sued three weeks later, on December 31, 1997.

Defendant Jeffrey Lenches was, at all relevant times, EFI's Executive Vice President of Sales. See Complaint ¶ 18(a). Defendant Fred Rosenzweig was, at all relevant times, EFI's Vice President, Manufacturing and Support. See Complaint ¶ 19(a).² The Complaint does not allege that either defendant made any statements concerning the Company to the public or to securities analysts, or that they even signed any of the Company's SEC filings.

Plaintiffs apparently targeted Lenches and Rosenzweig as defendants because they held relatively high positions within EFI and because they sold some EFI stock during the Class Period. Neither of those two attributes is a sufficient basis for a securities claim and, absent plaintiffs' usual boilerplate, it is all the Complaint has to say about Lenches and Rosenzweig.

Defendants Lenches' and Rosenzweig's motion to dismiss should be granted for the following reasons. First, plaintiffs try to implicate these defendants in a purported "scheme" to defraud (Complaint ¶ 25), but plaintiffs' theory is foreclosed by the United States Supreme Court's decision in Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (1994).

Second, plaintiffs use the pre-Reform Act "group published information" pleading presumption to hold defendants liable for EFI's statements by virtue of supposed access to unspecified non-public information concerning EFI. See Complaint ¶ 33. The Reform Act does not permit such a pleading presumption, and even if it did, the allegations are insufficient to trigger any group pleading doctrine.

Third, plaintiffs seek to hold defendants liable for the statements and forecasts of third-party analysts, whose forecasts ultimately proved erroneous. Plaintiffs' failure to plead any statements made by Lenches or Rosenzweig to these analysts, or any specific interactions between Lenches or Rosenzweig and the analysts, let alone any "adoption" of the analyst reports, renders these efforts futile as well.

Finally, the Complaint fails because it does not plead a "strong inference" that either defendant "acted" with scienter in violation of the Reform Act, 15 U.S.C. § 78u-4(b)(2). Plaintiffs' vague references to unspecified documents and defendants' positions are insufficient to demonstrate the requisite scienter. Plaintiffs' reliance on defendants' sales of stock also is misplaced because plaintiffs do not allege that the sales were suspicious in timing or amount, and the pleaded and judicially noticeable facts show that they were not.

The foregoing deficiencies are not capable of cure by amendment. Accordingly, the Complaint should be dismissed as to these defendants with prejudice.

I. LIABILITY UNDER THE FEDERAL SECURITIES LAWS REQUIRES THE MAKING OF A FALSE STATEMENT

To establish that a defendant violated Section 10(b) or Rule 10b-5, plaintiffs must allege that each defendant made a misleading statement. The Reform Act expressly requires that in actions arising under Section 10(b) and Rule 10b-5 "plaintiff allege[] that the defendant (A) made an untrue statement of material fact; or (B) omitted to state a material fact necessary in order to make the statements made, in light of the circumstances in which they were made, not misleading . . . ." 15 U.S.C. § 78u-4(b)(1)(emphasis added); see Neubronner v. Milken, 6 F.3d 666, 673 (9th Cir. 1993) (affirming dismissal where no false or misleading statement attributed to defendant). Simply put, without any misleading statements, there can be no liability. Because the Complaint does not allege that either Lenches or Rosenzweig made any statements, it should be dismissed as against these defendants.

Unable to allege that Lenches or Rosenzweig made a false or misleading statement, plaintiffs strain to keep these defendants in the case under a "scheme to defraud" theory. See Complaint ¶ 25. The law is not on plaintiffs' side. In Central Bank, the Supreme Court held that Section 10(b) prohibits only "the making of a material misstatement (or omission) or the commission of a manipulative act" and does not impose liability on persons who merely "giv[e] aid to a person who commits a manipulative or deceptive act." Central Bank, 511 U.S. at 177. The Ninth Circuit has held that Central Bank eliminated all non-statutory theories of secondary liability under Section 10(b), such as aiding and abetting or conspiracy. In re GlenFed, Inc. Sec. Litig., 60 F.3d 591, 592 (9th Cir. 1995). Thus, a defendant may be sued for securities fraud only where the allegations meet "all of the requirements for primary liability under Rule 10b-5 . . .. " Central Bank, 511 U.S. at 191.³ Boiled down to its essentials, the Complaint merely alleges, vaguely, that these defendants somehow aided the defendants who did make Class Period statements. That is not enough.

II. PLAINTIFFS CANNOT USE THE "GROUP PUBLISHED INFORMATION" DOCTRINE TO STATE A CLAIM

Paragraph 33 of the Complaint contends that defendants should be held responsible for "EFI's press releases, corporate reports to shareholders and filings with the SEC" under the group- pleading doctrine.⁴ Complaint ¶ 33; see, e.g., Wool v. Tandem Computers Inc., 818 F.2d 1433, 1440 (9th Cir. 1987). That doctrine, however, did not survive the passage of the Reform Act and, even if it had, it cannot be applied against defendants Lenches and Rosenzweig in this case.

A. "Group-Published Information" Allegations Do Not Satisfy the Reform Act.

The group pleading doctrine, a judicially created exception to Rule 9(b), cannot be reconciled with the Reform Act. Coates v. Heartland Wireless Communications, Inc., 26 F. Supp. 2d 910, 916 (N.D. Tex. 1998) (Reform Act "codifies a ban against group pleading").⁵ Such a pleading presumption is directly at odds with the Reform Act's requirement that plaintiffs state particularized facts as to each defendant's purported wrongdoing. 15 U.S.C. § 78u-4(b)(2) ("[W]ith respect to each act or omission" plaintiffs must "state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.").⁶ Accordingly, plaintiffs' "group-published information" allegations fail as a matter of law.

B. In Any Event, Plaintiffs Have Not Sufficiently Pleaded Facts To Trigger A Group Pleading Presumption.

Even if the group pleading doctrine could be reconciled with the Reform Act, it could not be applied in the wholesale manner plaintiffs attempt here - holding each defendant liable for anything said by any defendant. "[T]he group published presumption 'is grounded in reasonableness' and it is not reasonable to presume in every case that every officer joined in a scheme to defraud investors." Brooktree I, 999 F. Supp. at 1350 (citation omitted). Indeed, it is unreasonable to presume, as the Complaint does, that EFI's officers "had either direct or indirect involvement with the preparation or communication of information outside their respective fields of expertise and spheres of influence . . . ." Id. at 1351.

Accordingly, the group-published information doctrine has been applied only to a "narrowly defined group of officers who had direct involvement not only in the day-to-day affairs of [the company] in general but also in [the company's] financial statements in particular." Wool, 818 F.2d at 1440. Judge Breyer recently stated the requirements for obtaining the group-pleading presumption:

In order to state a claim against a defendant for a statement which the defendant did not make and did not sign, plaintiff must plead with particularity each defendant's participation in the day-to-day control of the corporation and each defendant's participation in the preparation of the allegedly false statement.

In re Informix Corp. Sec. Litig., slip op. at 2. Plaintiffs do not come close to satisfying this standard.

The Complaint's boilerplate allegation that every defendant participated in "the drafting, preparation or approval" of every statement (Complaint ¶ 23) is insufficient. There are no particularized facts (or even reason to assume) that defendants Lenches (Vice President, Sales) or Rosenzweig (Vice President, Manufacturing and Support) were involved in the preparation of the challenged statements involving EFI's financial and general business prospects. Nor do the "additional" conclusory allegations as to Lenches, that as a result of his position, he "knew" the allegedly adverse non-public information and that he "reviewed and endorsed as accurate" EFI's public statements (Complaint ¶ 18)⁷ add anything to plaintiffs' empty cabinet of pleaded facts.⁸ For example, the Complaint alleges that EFI's November 13, 1997 Report on Form 10-Q for third quarter of 1997 (ending September 30, 1997) was false and misleading. The Complaint quotes a few paragraphs from the Report's Management's Discussion and Analysis and concludes "[t]he third quarter 1997 Form 10-Q was signed by defendants Avida and Saltzman, who together with defendants Lenches and Rosenzweig prepared, drafted and caused the Form 10-Q to be filed with the SEC." Complaint ¶ 70. Which portion of the Form 10-Q did Lenches "prepare"? Or "draft"? And Rosenzweig? The Complaint's lack of particularity suggests that the plaintiffs would have the Court endorse the validity of an enormous assumption: the defendants were officers and they are liable for anything the Company says, even if they had nothing to do with it. This assumption, and the defective allegations that beg the assumption, are not sufficient to trigger the group-published information doctrine, even under pre-Reform Act standards.

III. THE COMPLAINT FAILS TO PLEAD THAT DEFENDANTS ARE LIABLE FOR THIRD PARTY STATEMENTS

The bulk of the allegedly false and misleading statements identified in the Complaint are statements by or to third-party securities analysts. See Complaint ¶¶ 52-54, 58-60, 65-67, 69 and 71. Lenches and Rosenzweig cannot be held liable for these statements.

As with the Company's statements, plaintiffs have failed to allege any factual connection between the statements and Lenches or Rosenzweig. Plaintiffs claim that third-party analysts issued reports "which [were] based on and repeated information provided by" defendants Avida or Saltzman (Complaint ¶¶ 53, 54, 59, 60, 66, 67, 71) or unnamed defendants (id. at ¶ 69), and that analysts received assurances that their information "was not at material variance with the defendants' knowledge of EFI's operations and prospects." Id. at ¶ 45. There is not a single mention of defendants Lenches or Rosenzweig in the allegations relating to securities analysts.

The absence of any allegations of contact between defendants Lenches and Rosenzweig means quite simply that plaintiffs have failed at the most basic level to satisfy the high standards courts of this District and the Ninth Circuit have set for establishing liability for statements by or to third-party analysts. See In re Stac Elecs. Sec. Litig., 89 F.3d 1399, 1140 (9th Cir. 1996) (affirming dismissal of claims alleging vague connection to analyst statements) cert. denied, 520 U.S. 1103 (1997); In re Caere Corp. Sec. Litig., 837 F. Supp. 1054, 1059 (N.D. Cal. 1993) (stating that a complaint must "(1) identify specific forecasts and name the insider who adopted them; (2) point to specific interactions between the insider and the analyst which gave rise to the entanglement; and (3) state the dates on which the acts which allegedly gave rise to the entanglement occurred.")

IV. PLAINTIFFS HAVE NOT PLEADED SPECIFIC FACTS GIVING RISE TO A STRONG INFERENCE OF SCIENTER

The Complaint also fails to state with particularity facts giving rise to a strong inference of scienter. See 15 U.S.C. §78u-4(b)(2). Plaintiffs attempt to establish the required "strong inference" of scienter on two sets of "facts": (1) defendants' high-level positions and purported access to unspecified internal reports (Complaint ¶¶ 18(a), 19(a), 33); and (2) their sales of stock during the Class Period. Id. at ¶¶ 10, 11, 35- 36, 79. Neither attempt succeeds.

A. Defendants' Positions and Access to Internal Documents.

Plaintiffs' general and conclusory allegations about the positions occupied by Lenches and Rosenzweig and their access to internal documents do not support a strong inference of fraud. The Complaint alleges that both defendants had access to:

Information about [EFI's] business, finances, products, markets and present and future business prospects via access to internal corporate documents (including the Company's operating plans, budgets and forecasts and reports of actual operations compared thereto), conversations and connections with other corporate officers and employees, attendance at management and Board of Directors' meetings and committees thereof and via reports and other information provided to him in connection therewith.

Complaint ¶¶ 17(a), 18(a). These allegations could be levied against any senior officer of any company.⁹

In particular, plaintiffs' failure to specify the "internal reports" to which defendants allegedly had access is fatal. See Wenger v. Lumisys, Inc., 2 F. Supp. 2d 1231, 1251 (N. D. Cal. 1998) (no strong inference of fraud where defendants allegedly knew adverse facts based on "access to internal corporate documents"); Silicon Graphics II, 970 F. Supp. at 767 ("To establish a strong inference of fraud, plaintiffs must provide . . . the titles of the reports, when they were prepared, who prepared them, to whom they were directed, their content, and the sources from which plaintiffs obtained this information."); Lirette v. Shiva Corp., 27 F. Supp. 2d 268, 283 (D. Mass. 1998) ("[g]eneral allusions to unspecified internal corporate information are insufficient to withstand a motion to dismiss.") In the face of this clear authority, plaintiffs' allegations fail.

B. Defendants' Stock Sales.

Plaintiffs also seek to establish defendants' scienter based on their sales of stock during the Class Period. Not only do plaintiffs fail to meet the most basic pleading requirements, the facts of Lenches' and Rosenzweig's stock sales are insufficient, as a matter of law, to support a strong inference of scienter.

Plaintiffs do not plead that defendants' trades were unusual and suspicious with respect to the timing or amount of the sales in order to raise even an inference of fraud. Silicon Graphics II, 970 F. Supp. at 767; Wenger, 2 F. Supp. 2d at 1251; Acito v. IMCERA Group, Inc., 47 F.3d 47, 54 (2d Cir. 1995). Plaintiffs do not allege any facts as to "defendants' trades before or after the class period to establish that their sales during the class period were unusual." In re Ascend Communications Sec. Litig., No. CV97-8861 MRP, slip op. at 15 (C.D. Cal. Feb. 5, 1999). Moreover, plaintiffs do not allege, in support of any purported inference of scienter, the percentage of available holdings sold by either defendant.

The only facts that are alleged negate any inference of scienter. Plaintiffs concede that these defendants' trades occurred many months before the December 11 announcement. Rosenzweig last sold stock on July 15 -- five months before the December 11 press release. Complaint ¶ 79. Lenches last sold stock on September 3, 1997 -- more than three months before the announcement. Id. These sales, so far in advance of the December 11 announcement, cannot support a finding that Lenches or Rosenzweig acted with the requisite scienter. See O'Sullivan v. Trident Microsystems, Inc., [1993-94 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶ 98,116 at 98,905-06, 98,912-13 (N.D. Cal. Jan. 31, 1994) (no scienter where stock sales were five months before disclosures); Acito, 47 F.3d at 54 (stock sales from two months to five weeks before adverse announcement "fail to provide any inference of an intent to deceive the public"); In re Glenayre Techs., Inc. Sec. Litig., 982 F. Supp. 294, 300 (S.D.N.Y. 1997) (sales of stock one month before adverse announcement did not provide "strong inference" of scienter).¹⁰

As threadbare as the Complaint is in general, it fails to allege any facts that can give rise to a securities violation by defendants Lenches and Rosenzweig. Neither defendant said anything to the market; neither is chargeable with any statement made by any other person. Likewise, plaintiffs have failed to, and cannot, allege any facts showing a strong inference of scienter. As the Ninth Circuit has held, "where the amendment would be futile," leave to amend is properly denied. DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992) (citation omitted). For the foregoing reasons, defendants Lenches and Rosenzweig respectfully request that this Court dismiss the Complaint as to them with prejudice.

¹ This Court may take judicial notice of EFI's filings with the Securities and Exchange Commission (the "SEC"), as well as all documents referred to or quoted in the Complaint. Ronconi v. Larkin, [1998 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶ 90,212, at 90,888 (N.D. Cal. May 1, 1998) (citing inter alia, Branch v. Tunnell, 14 F.3d 449, 453-54 (9th Cir. 1994)); In re Silicon Graphics, Inc. Sec. Litig., 970 F. Supp. 746, 758 (N.D. Cal. 1997), appeal docketed, No. 97-16240 (9th Cir. July 1, 1997)("Silicon Graphics II"). All citations to SEC filings, press releases, and slip opinions are included as Exhibits in the Flanagan Declaration.

² Defendants EFI, Dan Avida and Eric Saltzman have answered the Complaint. The Complaint is legally defective as to these defendants as well, and they have preserved in the answer their defense of failure to state a claim.

³ See In re Informix Corp. Sec. Litig., No. C-97-1289-CRB, slip op. at 2 (N.D. Cal. Nov. 6, 1998) (dismissing Rule 10b-5 claims against individual defendants and holding that "scheme to defraud" claims are impermissible); In re Oak Tech. Sec. Litig., No. 96-20552 SW, 1997 WL 448168, at *10 (N.D. Cal. Aug. 1, 1997).

⁴ The pre-Reform Act "group-published information" doctrine does not extend to statements contained in analyst reports or oral remarks of other individuals. Allison v. Brooktree Corp., 999 F. Supp. 1342, 1350 (S.D. Cal. 1998) ("Brooktree I"). Accordingly, this doctrine does not extend to the allegations made in the following Complaint paragraphs: 44-50, 52-54, 58-60, 65-67, 69, and 71.

⁵ See also Brooktree I, 999 F. Supp. at 1350; Allison v. Brooktree Corp., No. 97-CV-0852 TW (POR), slip op. at 16 (S.D. Cal. Nov. 27, 1998) ("Brooktree II") (group pleading doctrine "did not survive enactment of the [Reform Act]"); In re Home Health Corp. of Am. Sec. Litig., [Current Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶ 90,414, at 91,863 (E.D. Pa. Jan. 29, 1999).

⁶ See also Scone Invs., L.P. v. American Third Mkt. Corp., [1998 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶ 90,207, at 90,852 (S.D.N.Y. Apr. 28, 1998) ("complaint may not rely upon blanket references to the acts of all of the defendants without identifying the nature of each defendant's participation in the fraud"). To the extent that In re Silicon Graphics Inc. Sec. Litig., [1996-97 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶ 99,325 (N.D. Cal. Sept. 25, 1996) ("Silicon Graphics I") and In re Stratosphere Corp. Sec. Litig., 1 F. Supp. 2d 1096 (D. Nev. 1998) continued to apply the group pleading doctrine in Reform Act cases, these courts did so without analysis of the Reform Act's express requirement that facts be pleaded with particularity as to each defendant.

⁷ Plaintiffs do not, nor can they, allege that Lenches (or Rosenzweig) even signed any of the SEC filings alleged in the Complaint. See Flanagan Decl., Exs. 2-5.

⁸ Plaintiffs do not level even these vague allegations against Rosenzweig.

⁹ See Copperstone v. TCSI, No. C-97-3495 SBA, slip op. at 24 (N. D. Cal. Jan. 19, 1999) ("These general allegations could be alleged against any corporate executive."); Oak, 1997 WL 448168, at *6 ("[g]eneral allegations of internal reports, presentations and meetings" insufficient); In re Comshare, Inc. Sec. Litig., No. 96-73711-DT, 1997 U.S. Dist. LEXIS 17262, at *24-25 (E.D. Mich. 1997) ("Nowhere does the complaint state which defendants knew what; or how and when they knew it. Simply alleging that the defendants knew or should have known of a problem at the foreign subsidiary because of their position in the Company and the fact that documents were available to them does not raise a strong inference of fraudulent intent.").

¹⁰ The O'Sullivan court compared instances where sales did occur at suspicious times, [1993-94 Transfer Binder] Fed. Sec. L. Rep. (CCH) at 98,913: Jefferies & Co. Inc. v. Arkus-Duntov, 357 F. Supp. 1206 (S.D.N.Y. 1973) (sale of 40,000 shares two days before the SEC suspended trading); Lilly v. State Teachers Retirement Sys., 608 F.2d 55 (2d Cir. 1979) (sale of 80,000 shares nine days before an adverse announcement). Such was not the case here.