Case Briefing and Problem Solving

content Spotters Delta Tools, Inc. , food trades a product that nether few bunch is capable of earnestly injuring consumers. Does Delta owe an ethical concern to remove this product from the market, even if the injuries import single from mis consumption? Why or why non? I view Delta Tools, Inc. doesnt owe an ethical duty to remove the product from the market unless the fraternity doesnt warn its customers of the danger they john meet upon misuse of the product. If the comp well-nigh(prenominal) takes wholly the measures to warn their customers of the danger of the product once its misused, customers dumbfound friend send off of the risk and voluntarily assume it.For example, the use of whatever antibiotics with the alcohol female genitalia lead to m whatever harmful processes and activities. Nevertheless, pharmaceutical companies dont remove these products from the market because of that. Its a customers responsibility to use the product victorianly. Case problem s 81 melodic line Ethics. Jason Trevor avouchs a commercial bakery in Blakely, Georgia, that produces a variety of goods exchange in grocery stores. Trevor is required by ripe(p)fulness to perform ingrained tests on food produced at his plant to check for contamination.Three convictions in 2008, the tests of food products that contained peanut only whenter were substantiating for salm iodinlla contamination. Trevor was non required to business relationship the results to U. S. Food and Drug Administration officials, however, so he did non. Instead, Trevor instructed his employees to simply go back the tests until the let oncome was negative. T f tout ensemble infore, the products that had originally tested positive for salmonella were ultimately shipped out to retailers. fivesome people who ate Trevors baked goods in 2008 became securely trouble, and one mortal died from salmonella.Even though Trevors conduct was legal, was it wrong for him to sell goods that ha d once tested positive for salmonella? If Trevor had followed the six-spot basic guidelines for reservation ethical business decisions, would he belt up guide exchange the contaminated goods? Why or why non? The issue in this fiber problem is whether Trevors actions were unethical. In my opinion it was unethical for Jason Trevor to sell goods that had once tested positive for salmonella. Salmonella is a bacterium that can cause m either illnesses. two basic ethical approaches can be utilise to this case. Firstly, Trevor shouldve thought about his customers from the religious position. He couldve foreseen that products positive tested on salmonella would harm people inevitably. Secondly, he had to consider the outcome of this cut-rate sale. He didnt think about the consequences that can follow. He acted negligent by letting his employees ship the products to the retailers. If Trevor followed the six basic guidelines for making ethical business decisions he would non necessi tate sell the contaminated goods to the public.Having five people seriously ill and one somebody died because of the contaminated products harms the name of the brand associated with this incident. Thus, comp whatsoever loses its customers and, as a result, part of the revenues. I think Trevor in whatever case should feel illegal about what happened to those people meaning that on the Conscience step, which is the 4th guideline, he wouldve reconsidered his actions and probably changed his mind. I guess he wouldve non been happy to be interviewed about the actions he was about to take.And the beneathmentioned step, which is Promises to his customers, wouldve made him doubt his decisions because of the self-reliance of the customers that he held in his hands. And I am sure Trevors hero would non pass on acted the way that can harm people. Thus, Trevor would non lose sold the contaminated goods had he followed the basic guidelines for making ethical business decisions. Brod y v. transitional Hospitals Corporation unite States coquette of Appeals, Ninth circle, 280 F. 3d 997 (9th Cir. 2002). http//caselaw. findlaw. com/us-9th-circuit/1019105. html FACTS Jules Brody and Joyce T.Crawford filed a kinsfolk action complaint against Transitional Hospitals Corporation (tetrahydrocannabinol) and its officers on alarming 28, 1997 accusing tetrahydrocannabinol of outlawed at bottomr duty after tetrahydrocannabinol bought 800,000 deals of its song amid February 26 and February 28 without first disclosing that Vencor and new(prenominal) parties had ex laboured involution in tetrahydrocannabinol. In addition, Brody and Crawford adopted that THC, in its defect 19 and April 24 ex mechanical press pushs, materially misled them about THCs intention to sell the company. The swayer judicature accustomed the defendants motion to dismiss the aims. The plaintiffs call downed to the US move of Appeal, Ninth Circuit.ISSUE Are Brody and Crawford the prop er plaintiffs to sue THC for damages for violation of the statute and recipe? visualizeing the inside(a)r dish out? DECISION No. US Court of Appeal, Ninth circuit, endorseed the zone judicial systems decision to dismiss Brody and Crawfords complaint for misfortune to land a read upon which relief can be give. REASON The Court noted that plaintiffs did not meet a synchronous duty requirement, a judicially-created stand up requirement, which condition in divide 14(e) and observe 14e-3 that the plaintiffs essential(prenominal)(prenominal) select traded in a companys stock at about the same time as the so-called insider.In addition, the Court influenced that the plaintiffs complaint must specify the reason or reasons why the narrations made by THC in its press run throughs were misdirect. Brody and Crawford thread dod that in order for statement not to be lead astray, once disclosure is made, in that location is a duty to make it complete and accurate, for which the Court piece no support in the case law. The case law? only exterminates take and untrue statements, not statements that be half(prenominal). FOOTNOTES ? elements 10(b), 14(e), and 20(a) of the Exchange Act, 15 U. S. C. 78j (b), 78n (e), and 78t (a), and ascertains 10b-5 and 14e 3, 17 C.F. R. 240. 10b-5 and 240. 14e-3, pro aim at that place on a lower floor by the Securities Exchange counselling ( arcsecond) ? convening 10b-5 and plane section 14(e) Full case BRODY v. TRANSITIONAL HOSPITALS skunk Jules BRODY Joyce T. Crawford, Plaintiffs-Appellants, v. TRANSITIONAL HOSPITALS CORPORATION Wendy L. Simpson Richard L. Conte, Defendants-Appellees. No.? 99-15672. Argued and Submitted July 11, 2001. February 07, 2002 Before HALL, WARDLAW and BERZON, Circuit Judges. Jeffrey S. Abraham, New York, NY, for the plaintiffs-appellants. Mark R. McDonald, Morrison & Foerster, Los Angeles, CA, for the defendants-appellees.In this case we mention several securities fraud iss ues, centering on whether a plaintiff must have traded at about the same time as the insider it plead violated securities laws. ? Jules Brody and Joyce T. Crawford brought suit against Transitional Hospital Corporation (THC or the company) and its officers claiming violations of the Securities and Exchange Act of 1934 (Exchange Act) and state law because the defendants both traded in reliance on inside knowledge and released misdirect public study. ? The govern solicit granted the defendants motion to dismiss for failure to state a claim. Brody and Crawford now appeal the district speak tos order on several grounds. BACKGROUND In determining whether the complaint states a claim upon which relief could be granted, we assume the positions asseverate in the complaint to be true. ?Ronconi v. Larkin, 253 F. 3d 423, 427 (9th Cir. 2001). ? The facts swand in the complaint are as follows THC was a Nevada corporation that delivered long-term acute care services through with(predi cate) hospitals and satellite facilities across the United States. ? In August 1996, the company announced its plan to buy back from time to time on the opened market up to $25 one million million million in company stock. two calendar months later, THC expanded the re barter for plan to $75 million. On February 24, 1997, Vencor, Inc. submitted to THCs table of directors a written adduceing to acquire the company for $11. 50 per share. ? THC did not disclose this strain publicly. ? Between February 26 and February 28, THC purchased 800,000 shares of its own stock at an average price of $9. 25 per share. ? This $7. 4 million buy-back was in addition to an some other $21. 1 million that THC had fagged purchasing its stock in the ternary month period that finish on February 28, 1997. The plaintiffs do not allege that the total repurchase exceeded $75 million. THC issued a press release on inch 19, 1997, exposit the progress and extent of its stock repurchase syllabus. ? The press release did not mention Vencor or any other partys interest in getting THC. The plaintiffs argue that because of this omission, the March press release was lead astray. On April 1, 1997, Vencor increased its offer to purchase THC to $13 per share. ? In the next few weeks, THC correspondently legitimate offers from two other competing bidders. ? On April 24, after receiving all hree offers, THC issued another press release, stating that the company had received observations of interest from certain(p) parties who have indicated an interest in acquiring it. ? The same document likewise stated that THC had hired financial advisers to advise the company in continuative with a possible sale. ? The plaintiffs argue that this press release was similarly misleading because it did not state that substantial due diligence had already taken place, that THC had received competing offers exceeding $13 per share, or that a THC board meeting would take place two age later to cons ider these offers.At the board meeting, the THC board voted to negotiate a merger agreement with Select Medical Corporation (Select). ? On May 4, THC publicly announced that it and Select had entered into a unambiguous merger agreement and that Select would purchase THC at $14. 55 per share. ? Vencor thereupon threatened a hostile takeover. ? To fend off that maneuver, THC in the long run agreed, on June 12, to a takeover by Vencor rather than Select, at $16 per share. Brody and Crawford sold shares at times that sandwich the April 24 press release. ? Two days before that press release was issued, Crawford sold 500 shares at $8. 75 per share. ? Brody sold 3,000 shares of THC stock at $10. 50 per share on April 24, righteous after the press release was made public. ? The plaintiffs argue that had they not been misled by THC, they would have held onto their shares, and benefitted from their subsequent increase in prize. Brody and Crawford filed a class action complaint against THC and its officers on August 28, 1997. ? In addition to alleging violations of Nevada state law, Brody and Crawford alleged violations of particles 10(b), 14(e), and 20(a) of the Exchange Act, 15 U. S. C. ? 78j(b), 78n(e), and 78t(a), and tackles 10b-5 and 14e 3, 17 C.F. R. ? 240. 10b-5 and 240. 14e-3, published thereunder by the Securities Exchange Commission ( atomic number 16). ? These claims focus on two aspects of THCs course of action Brody and Crawford accuse the company of illegal insider concern because THC repurchased 800,000 shares of its stock surrounded by February 26 and February 28 without first disclosing that Vencor and other parties had expressed interest in THC. In addition, Brody and Crawford claim that THC, in its March 19 and April 24 press releases, materially misled them about THCs progress toward its eventual merger.The district court dismissed all of Brody and Crawfords claims. ? In so doing, the district court held that Brody and Crawford are not prope r parties to assert any insider calling claims, as Brody and Crawford did not trade coevally with THC. In addition, the district court decided that the plaintiffs failed to state a claim under loom 10b-5 or any other law based on materially misleading selective knowledge, as the press releases were not misleading under the applicable standards. The plaintiffs appeal these aspects of the district courts dismissal. We review de novo the district courts dismissal for failure to state a claim pursuant to Federal master of Procedure draw rein 12(b)(6). ?Zimmerman v. urban center of Oakland, 255 F. 3d 734, 737 (9th Cir. 2001). DISCUSSION A.? Insider Trading As they pertain to insider trade, Section 10(b), feel 10b-5, Section 14(e) and regularisation 14e-3 make it illegal in some circumstances for those possessing inside tuition about a company to trade in that companys securities unless they first disclose the information. rule, e. g. , United States v. Smith, 155 F. 3d 1051 , 1063-64 (9th Cir. 998). ? This type of barricade era is known as an abstain or disclose rule, because it requires insiders both to abstain from transaction or to disclose the inside information that they possess. The district court dismissed the insider art claims, holding that the named plaintiffs could not assert them because they did not trade contemporaneously with THC. On appeal, Brody and Crawford argue that nothing in the applicable securities laws requires investors to have traded contemporaneously with insiders in order to maintain a suit for insider occupation. In addition, they argue that even if much(prenominal) a requirement exists, they in fact did trade contemporaneously with THC. 1.? Section 10(b) and govern 10b-5 Neither section 10(b)1 nor manage 10b-52 contain an express right of action for snobbish parties. ? The dictatorial Court has held, however, that proper plaintiffs whitethorn sue for damages for violation of the statute and rule. ? run into S uperintendent of Ins. v. Bankers Life and Cas. Co. , 404 U. S. 6, 13 n. 9, 92 S. Ct. 165, 30 L. Ed. 2d 128 (1971). Because incomplete the statute nor the rule contains an express right of action, they also do not delineate who is a proper plaintiff. ? In the absence of explicit congressional guidance, courts have developed various standing limitations, primarily on polity bases. 3 For example, in Blue Chip Stamps v. Manor Drug Stores, 421 U. S. 723, 95 S. Ct. 1917, 44 L. Ed. 2d 539 (1975), the Supreme Court held that to bring an insider affair claim under ordinance 10b-5, a plaintiff must have traded in the same stock or other securities as the insider trader. The contemporaneous occupation requirement, at issue in this case, is another judicially-created standing requirement, specifying that to bring an insider trading claim, the plaintiff must have traded in a companys stock at about the same time as the alleged insider. ?In Neubronner v. Milken, 6 F. 3d 666, 669 (9th Cir. 19 93), the Ninth Circuit adopted a contemporaneous trading requirement for Section 10(b) and regularization 10b-5 actions. ? See also In re Worlds of Wonder Sec. Litig. , 35 F. 3d 1407, 1427 (9th Cir. 1994). Neubronner explained that two reasons animate this rule First, noncontemporaneous traders do not require the protection of the disclose or abstain rule because they do not suffer the disadvantage of trading with someone who has tops(predicate) access to information. ? 6 F. 3d at 669-70 (quoting Wilson v. Comtech Telecommunications Corp. , 648 F. 2d 88, 94 95 (2d Cir. 1981)). ? Second, the contemporaneous trading requirement puts reasonable limits on Section 10(b) and predominate 10b-5s reach without much(prenominal) a limitation, an insider defendant could be liable to a very large number of parties. Id. at 670. Brody and Crawford offer two reasons why the contemporaneous trading rule adopted in Neubronner should not here apply. ? First, they argue that the rule does not make sense, as a liaison of statutory interpretation. ? In other words, they request that we declare that Neubronners interpretation of Section 10(b) and overtop 10b-5 was incorrect. ? Although the decision in Neubronner is not beyond debate, we do not consider the question further, as a Ninth Circuit plank may not overrule a prior Ninth Circuit decision. ?Hart v. Massanari, 266 F. 3d 1155, 1171 (9th Cir. 2001).Brody and Crawford attempt to avoid this precedential barrier by claiming that Neubronners implementation of the contemporaneous rule was dictum, and therefore not binding on us. ? It was not. ?Neubronner explicitly described its ruling regarding the contemporaneous trading requirement as a holding. ? 6 F. 3d at 670. ? In addition, the determination was a necessary predicate for the cases ultimate conclusion that contemporaneous trading must be pleaded with particularity. ? Id. at 673. Brody and Crawfords second submission in avoidance of Neubronner is that United States v. O Hagan, 521 U. S. 642, 117 S. Ct. 2199, 138 L.Ed. 2d 724 (1997), overruled Neubronner. ? That assertion is simply wrong. ? OHagan, which was a criminal case, addressed incomplete the contemporaneous trading requirement in private actions nor any other standing rule. ? Instead, by approving of an exalted concept of who qualifies as an insider under Section 10(b), the Supreme Court in OHagan clarified that to a greater extent defendants may be liable under Section 10(b) than some courts have antecedently thought. ? Id. at 650, 117 S. Ct. 2199. ? In so doing, the Supreme Court did not misrepresent be notions concerning whom insiders harm when they trade based on privileged information. Brody and Crawford next argue that even if the Section 10(b) and Rule 10b-5 contemporaneous trading requirements remain, the court should define contemporaneous trades as trades that take place within six months of one another. ? Under this definition, Brody and Crawford would have standing, as they s old their stock just under two months after they allege THC bought the large impede of stock in February. 3? In Neubronner, this court did not decide the duration of the contemporaneous trading period for insider trading violations under Section 10(b) and Rule 10b-5, 6 F. d at 670, nor has this court decided the question since. ? Because the two-month time period presented by the facts of this case exceeds any possible delineation of a contemporaneous trading period, it is not necessary in this case either to define the exact contours of the period. ? We simply note that a contemporaneous trading period of two months would gut the contemporaneous trading rules premise-that there is a need to filter out plaintiffs who could not possibly have traded with the insider, given the manner in which public trades are transacted. 2.?Section 14(e) and Rule 14e-3 Brody and Crawford also argue that the district court erred in dismissing their claims under Section 14(e)4 and Rule 14e-35 by hold ing that insider trading actions brought under Section 14(e) and Rule 14e-3 must also conform to a contemporaneous trading requirement. ? In making this argument, the plaintiffs urge that we hold for them on two matters of first scene (1) whether a private right of action exists under Rule 14e-3 and (2) if a private right of action does exist, whether it contains a contemporaneous standing requirement. We can assume, without deciding, that a private right of action exists under Rule 14e-3, for we see no reason why the same contemporaneous trading rule that applies under Rule 10b-5 would not apply in such an action. ?As noted, this court has definitively adopted a contemporaneous trading requirement under Rule 10b-5. ? Although Rule 14e-3 differs in some respects from Rule 10b-5, (and was adopted in order to plug some holes the SEC perceived in Rule 10b-5),6 its core, like the core of Rule 10b-5, is an abstain or disclose requirement. And, as is true of the abstain or disclose requi rement of Rule 10b-5, the similar requirement of Rule 14e-3 is knowing to prevent the disadvantage that inheres in trading with an insider with superior access to information. ?45 Fed. Reg. 60411-12 (1980). ? So we would have to have some excellent reason to adopt a different standing rule under Rule 14e 3 from the one we use under Rule 10b-5. ? We are convinced that there is no founding for drawing such a distinction. The best candidate appellants have advanced as a basis for differentiating the standing requirement under the two Rules is Plaine v. McCabe, 797 F. d 713 (9th Cir. 1986). ?Plaine held that a plaintiff suing under Section 14(e) need not have traded at all, let alone contemporaneously. ? Id. at 718. The fulcrum of Plaine was a distinction suggested by bagpiper v. Chris-Craft Indus. , Inc. , 430 U. S. 1, 38-39, 97 S. Ct. 926, 51 L. Ed. 2d 124 (1977), between the types of shareholder protections contained in Sections 10(b) and 14(e) genus Piper noted that while Section 10(b) was enacted to protect only individuals who actually traded in stocks, Section 14(e) can be understood as protecting not only those who buy or sell stocks but also shareholders who decide not to trade. 430 U. S. at 38-39, 97 S. Ct. 926. ? Because Rule 14e-3 was promulgated under Section 14(e), the argument that a plaintiff who alleges insider trading under Section 14(e) or Rule 14e-3 need not worry about the contemporaneous trading requirement-because he need not have traded at all-has some sign plausibility. On a closer examination, however, Plaine does not speak to the issue at hand. Rather, Plaine focused only on non-insider trading claims brought under Section 14(e), and did not consider the standing requirements for an insider trading claim brought under Rule 14e-3. Section 14(e) broadly prohibits fraudulent, deceptive, or manipulative acts or readings, in connection with any cutter offer it does not contain any specific source to insider trading. ? Rule 14e-3, on t he other hand, focuses on one type of behavior, insider trading, whose prohibition is thought to prevent fraudulent, deceptive, or manipulative acts. ? See OHagan, 521 U. S. at 672-73, 117 S. Ct. 2199. ? In accordance with its specific, prophylactic focus, Rule 14e-3 applies to a different set of behaviors than does Section 14(e) Section 14(e) centers on the actual hearty offer, whereas Rule 14e-3 regulates illegal insider trading that takes place while a kindly offer is under consideration. ? As appellants brief states, all the elements of a Section 14(e)/Rule 14e-3 insider trading violation are supplied by the language of Rule 14e-3. A comparison of the facts in Plaine with the facts in this case illustrates the difference between the Section 14(e) claim considered in Plaine and the Rule 14e-3 claim considered here. ? Plaine held shares in a company subject to a declare oneself offer. ? She complained that false information in proxy materials had induced other shareholders to legal tender their shares. ? Because so many other shareholders tendered their shares, the merger went through at a price Plaine viewed as inadequate. Although Plaine did not tender her shares, the court ruled that she alleged injury occurring as a result of fraudulent activity in connection with a tender offer and had standing to assert her claim. ?797 F. 2d at 717. ? Plaine did not, however, allege insider trading, and therefore could not have made out a claim under Rule 14e-3. Brody and Crawford, on the other hand, did allege insider trading but did not allege that THC manipulated the tender offer process through the use of false information or by any other message. ? As such, the facts in the current case present a very different situation than that presented in Plaine. The circumstances do, however, prove a much closer resemblance to those in Neubronner, a Rule 10b-5 case centering around accusations of insider trading in violation of an abstain-or-disclose requirement. ? See Neubronner, 6 F. 3d at 667. Despite the similarities of the issues here and in Neubronner and between Rules 10b-5 and 14e-3, as applied to insider trading allegations, Brody and Crawford emphasize the differences between the Rules. ? Unlike Rule 10b-5, Rule 14e-3 does not require proof that a individual traded on information obtained in violation of a duty owed to the source of the inside information. Instead, Rule 14e-3(a) creates a duty for a person with inside information to abstain or disclose without regard to whether the trader owes a pre-existing fiduciary duty to respect the confidentiality of the information. ? OHagan, 521 U. S. at 669, 117 S. Ct. 2199 (quoting United States v. Chestman, 947 F. 2d 551, 557 (2d Cir. 1991) (en banc)). ? Although Rule 14e-3 thus expands the notion of who is an insider, it does not follow that the Rule also expands the class of shareholders who may complain when an insider trades without disclosing insider information. As a result, the fact that Rule 10b-5 and Rule 14e-3 are not identical does not lead to the conclusion that one has a contemporaneous trading requirement and the other does not. More importantly, perhaps, in this case, the allegation is that THC traded in its own stock on the basis of inside information. ? Such allegations would state a traditional or unequivocal theory of insider trading liability under Rule 10b-5 based on a relationship of trust and confidence between the shareholders of a corporation and those insiders who have obtained information by reason of their position with that corporation. ? OHagan, 521 U. S. at 651-652, 117 S. Ct. 2199 (quoting Chiarella, 445 U. S. at 228, speed of light S. Ct. 1108). ? As such, this case is one that could be-and indeed, was-brought under both Rule 10b-5 and Rule 14e-3, and as to which any differences between the two rules regarding the necessary relationship between the insider and the source of information is not germane(predicate). Brody and Crawford note another reason that, they argue, suggests an expansive reading of Rule 14e-3 is appropriate. In OHagan, the Supreme Court ruled that the SEC is permitted to promulgate rules under Section 14(e), such as Rule 14e-3, that prohibit acts not themselves fraudulent under the common law if the rules are moderately designed to prevent acts that are. ?521 U. S. at 671-73, 117 S. Ct. 2199. ? This authority derives from the prophylactic rule-making power granted to the SEC by Section 14(e), a power that has no correspond in Section 10(b). ?Id.That the SEC had more power to protect investors when it promulgated Rule 14e-3 than it did when it promulgated Rule 10b-5 does not mean, however, that the SEC exercised that power so as to protect noncontemporaneous traders under Rule 14e-3. ? And, in fact, what evidence there is demonstrates that the SEC did not intend to protect investors who could not have possibly traded with the insiders. In OHagan, the Supreme Court quoted at length from and afforded deference to the SECs write up of why it promulgated Rule 14e-3. Part of the Federal Register pull out quoted in OHagan stated The Commission has previously expressed and continues to have serious concerns about trading by persons in possession of material, nonpublic information relating to a tender offer. ? This practice results in unfair disparities in market information and market disruption. ? Security holders who purchase from or sell to such persons are effectively denied the benefits of disclosure and the substantive protections of the legislation that includes Section 14(e). 21 U. S. at 674, 117 S. Ct. 2199 (quoting 45 Fed. Reg. 60412 (1980)). This quotation evinces a particular concern for those who purchase from or sell to insiders, and suggests that these shareholders, and not others who trade later, are the intended beneficiaries of Rule 14e-3. ? The contemporaneous trading requirement, designed to limit the class of potential plaintiffs to only those who cou ld have possibly traded with the insider, is therefore precisely congruent with the SECs expressed purpose in promulgating Rule 14e-3.In sum, Rule 10b-5 and Rule 14e-3 contain similar insider trading prohibitions, triggered by similar concerns. ? While Rule 14e-3 focuses on the tender offer context, the circumstance history and language of Rule 14e-3 indicate that the Rule does not qualify the premise that a shareholder must have traded with an insider or have traded at about the same time as an insider to be harmed by the insiders trading. ? We conclude that there is no principled distinction between Rules 10b-5 and 14e-3 as regards the need for a contemporaneous trading allegation.We therefore extend the contemporaneous trading requirement to insider trading actions brought under Section 14(e) and Rule 14e-3 actions. ? Because Brody and Crawford traded approximately two months after they allege THC traded, they did not trade contemporaneously with THC. The district court was co rrect in dismissing their Rule 14e-3 insider trading claims. B.? thaumaturgy We next consider a different set of concerns addressed by the securities laws Rule 10b-5 and Section 14(e)s explicit prohibition against the making of untrue or misleading statements. The plaintiffs do not maintain that either press release issued by THC was untrue. ? They do argue, though, that THC violated the prohibitions against making misleading statements when it issued the two press releases here at issue. ? In order to give-up the ghost a motion to dismiss under the heightened pleading standards of the Private Securities litigation Reform Act (PSLRA), the plaintiffs complaint must specify the reason or reasons why the statements made by THC were misleading. ?15 U. S. C. ? 78u-4(b) (1) see also Ronconi, 253 F. 3d at 429.As an initial matter, Brody and Crawford correctly assert that a statement that is literally true can be misleading and thus actionable under the securities laws. ? See In re GlenFe d Sec. Litig. , 42 F. 3d 1541, 1551 (9th Cir. 1994). ? however they err when they argue that in order for a statement not to be misleading, once a disclosure is made, there is a duty to make it complete and accurate. This proposition has no support in the case law. ?Rule 10b-5 and Section 14(e) in terms prohibit only misleading and untrue statements, not statements that are incomplete.Similarly, the primary case upon which Brody and Crawford rely for their in advance(p) completeness rule supports only a rule requiring that parties not mislead. ? Virginia Bankshares, Inc. v. Sandberg, 501 U. S. 1083, 1098 n. 7, 111 S. Ct. 2749, 115 L. Ed. 2d 929 (1991). ? Often, a statement will not mislead even if it is incomplete or does not include all relevant facts. 8 ? Further, a completeness rule such as Brody and Crawford suggest could implicate nearly all public statements potentially affecting securities gross revenue or tender offers. No matter how detailed and accurate disclosure state ments are, there are probable to be additional details that could have been disclosed but were not. ? To be actionable under the securities laws, an omission must be misleading in other words it must affirmatively create an impression of a state of affairs that differs in a material way from the one that actually exists. ? See McCormick v. The Fund American Cos. , 26 F. 3d 869, 880 (9th Cir. 1994).We conclude that neither Rule 10b-5 nor Section 14(e) contains a freestanding completeness requirement the requirement is that any public statements companies make that could affect protective cover sales or tender offers not be misleading or untrue. ? Thus, in order to stretch forth a motion to dismiss under the heightened pleading standards of the Private Securities judicial proceeding Reform Act (PSLRA), the plaintiffs complaint must specify the reason or reasons why the statements made by THC were misleading or untrue, not simply why the statements were incomplete. 15 U. S. C. ? 78u -4(b) (1) see also Ronconi, 253 F. 3d at 429. ?Brody and Crawfords allegations do not comport with this requirement. ? They allege, first, that the press release issued on March 19 was misleading because it willd information about THCs stock repurchase program but did not contain information regarding THCs possible takeover. ? Although Brody and Crawford specify what information THC omitted, they do not indicate why the statement THC made was misleading. ? If the press elease had affirmatively intimated that no merger was imminent, it may well have been misleading. ? The actual press release, however, neither stated nor implied anything regarding a merger. ?Brody and Crawford also claim that THCs second press release, issued on April 24, was misleading. ? Again, the plaintiffs do not argue that the press release was untrue. ? Instead, they argue that it was misleading because it stated generally that THC had received expressions of interest from potential acquirers, when in fact it had received actual proposals from three different parties. Importantly, the complaint does not provide an explanation as to why this general statement was misleading, nor is it self-evident that it was. A proposal is certainly an expression of interest. ? Moreover, the press release did not simply state that there had been timid expressions of interest it went on to state that the expressions were from certain parties who have indicated an interest in acquiring either the entire company or in acquiring the company, with the companys shareholders retaining their pro rata interests in Behavioral Healthcare Corporation a THC subsidiary. ? This specificity concerning the character of the parties proposals certainly suggests that something more than preliminary inquiries had taken place. Further, the press release to boot stated that the Board of Directors has engaged financial advisors to advise the company in connection with a possible sale. ? This additional information again sug gested proposals that were cover enough to be taken seriously. ? And the reference to multiple parties contained in the press release suggests an ongoing auction for THC was taking place with at least two participants.In short, the press release did not give the impression that THC had not received actual proposals from three parties or other than mislead readers about the stage of the negotiations. ? Instead, although the press release did not provide all the information that THC possessed about its possible sale, the information THC did provide-and the reasonable inferences one could draw from that information-were entirely consistent with the more detailed explanation of the merger process that Brody and Crawford argue the press release should have included. Put another way, Brody, if he read the press release, would have been on notice, before he sold his shares, of the distinct possibility that the value of the shares would increase in the near future because of a takeover con test. 9 11 Because Brody and Crawford have not alleged facts indicating that THCs April 24 press release was misleading, the district court properly dismissed that aspect of the plaintiffs complaint. CONCLUSION Brody and Crawford have not met the contemporaneous trading requirements necessary to have standing in the insider trading claims they assert. Additionally, they have failed properly to allege misrepresentation against THC. As a result, we affirm the district courts decision to dismiss Brody and Crawfords complaint for failure to state a claim upon which relief could be granted. AFFIRMED FOOTNOTES 1. ?Section 10, in relevant part, states It shall be outlaw(a) for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any rapidness of any national securities exchange-?..... b)? To use or employ, in connection with the purchase or sale of any warrantor registered on a national securities exchange or any se curity not so registered, or any securities-based swap agreement (as specify in section 206B of the Gramm-Leach-Bliley Act), any manipulative or deceptive invention or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors. 2. Rule 10b-5 states 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,(a)? To employ any device, scheme, or artifice to defraud,(b)? To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or(c)?To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the pur chase or sale of any security. 3. ?These standing limitations are not, of course of the constitutional variety, grounded in Article III of the Constitution, but simply delineate the scope of the implied cause of action. 4. ?Section 14(e) states It shall be unlawful for any person to make any untrue statement of a material fact or omit to tate any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or to engage in any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer or request or invitation for tenders, or any charm of security holders in opposition to or in favor of any such offer, request, or invitation. ? The Commission shall, for the purposes of this subsection, by rules and regulations define, and prescribe means passably designed to prevent, such acts and practices as are fraudulent, deceptive, or manipulative. . ?Rule 14e-3(a) states(a)? If any person has taken a substantial step or stairs to commence, or has commenced, a tender offer (the pass person), it shall form a fraudulent, deceptive or manipulative act or practice within the meaning of section 14(e) of the Act for any other person who is in possession of material information relating to such tender offer which information he knows or has reason to know is nonpublic and which he knows or has reason to know has been acquired directly or indirectly from(1)? The offering person,(2)? The issuer of the securities sought or to be sought by such tender offer, or(3)?Any officer, director, partner or employee or any other person acting on behalf of the offering person or such issuer, to purchase or sell or cause to be purchased or sold any of such securities or any securities convertible into or interchangeable for any such securities or any option or right to obtain or to dispose of any of the foregoing securities, unless within a reasonable time prior to any purchase or sale such information and its source are publicly disclosed by press release or otherwise. 6. ?Chiarella v. United States, 445 U. S. 222, 100 S. Ct. 1108, 63 L. Ed. d 348 (1980), considered, but did not decide, the viability of a misappropriation theory of liability under Rule 10b-5. ?445 U. S. at 235-37, 100 S. Ct. 1108. ?(A misappropriation theory extends liability to some parties who trade in a companys securities on the basis of confidential information but who have no special relationship with the companys shareholders. ) Following Chiarella, the SEC promulgated Rule 14e-3, which clearly creates liability for insiders who trade in connection with a tender offer and do not disclose the inside information, regardless of their relationship to the shareholders or the source of the information. Then in 1997, the Supreme Court decided OHagan, answering the question left open by Chiarella and deciding that Section 10(b) and Rule 10b-5 do create liability under a misappropriation theo ry. ?521 U. S. at 650, 117 S. Ct. 2199. ? The upshot is that Rules 10b-5 and 14e-3 largely overlap with regard to the scope of insider trader liability, although they differ in some respects not here pertinent. ? See p. 1004, infra. 7. As we discuss below, in OHagan the Supreme Court approved Rule 14e-3 as a prophylactic rule designed to prevent core violations of Section 14(e). ? See p. 1004, infra. 8. ?For example, if a company reports that its sales have risen from one year to the next, that statement is not misleading even though it does not include a detailed segmentation of the companys region by region or month by month sales. 9. ?We note that Crawford sold his shares before the April 24 press release, so he could not have been influenced in his trading by the release. BERZON, Circuit Judge.