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The full case caption appears at the end of this opinion. KENNEDY, Circuit Judge. Plaintiffs, A. Carl Helwig, et al., on behalf of themselves and others similarly situated,appeal the decision of the district court granting summary judgment in favor of the defendants, Vencor, Inc., et al., in thissecurities fraud action. Plaintiffs contend that the district court erred in converting defendants’ motion to dismiss into amotion for summary judgment without providing the plaintiffs with sufficient notice to defend against a summary judgmentmotion. Defendants argue that this court can affirm the district court’s opinion on summary judgment grounds or on thegrounds that the plaintiffs have failed to state a claim upon which relief can be granted. While we agree with the plaintiffsthat the district court could not convert the defendants’ motion to dismiss to a motion for summary judgment withoutnotice, we also agree with the defendants and affirm the district court’s dismissal of the action on the grounds that theplaintiffs have failed to state a claim upon which relief can be granted. I. Facts [FOOTNOTE 1] Vencor, which is located in Louisville, Kentucky, is a provider of managed health care services, including long-termhospitals and nursing homes. On October 22, 1997, prior to the opening of the stock market, Vencor announced its earningsresults for the third quarter of 1997 and issued a statement indicating that its expected fourth quarter earnings would belower than previously forecast. Vencor stated that rather than the $0.59-$0.64 earnings per share that it had forecast,earnings for the fourth quarter of 1997 were expected to be in the range of $0.40-$0.45 per share. Vencor explained that thechange in projected earnings was due to the adverse effect of the Balanced Budget Act on Vencor’s operations. In responseto this announcement, the price of Vencor’s stock fell from a per share price of $42-5/8 on October 21, 1997 to a per shareprice of $30 on October 22, 1997. Soon after this development, Vencor announced that its anticipated sale of one of itsdivisions would not be consummated due to the buyer’s unwillingness to purchase the division for cash. This announcementresulted in a further drop in the price of Vencor’s stock to a level of $23 per share. At the time plaintiffs filed this action,Vencor stock was trading at less than $25 per share. On December 24, 1997, plaintiffs filed this class action against Vencor [FOOTNOTE 2] and six of its directors alleging that thedefendants had proffered false and misleading statements, from February 10, 1997 until October 21, 1997, in violation ofSection 10(b) of the Securities Exchange Act of 1934. [FOOTNOTE 3] Plaintiffs also alleged a violation of Section 20(a) of theSecurities Exchange Act of 1934 [FOOTNOTE 4] against each of the individual defendants. [FOOTNOTE 5] Plaintiffs’ complaint sets forth numerousallegations of false and misleading statements made by the defendants either directly to the public or to the public throughfinancial analysts. These allegedly false and misleading statements can be classified as falling into one of the followingcategories: 1) statements relating to the effect of the Balanced Budget Act on Vencor’s earnings; 2) statements relating toVencor’s acquisition of TheraTx and Transitional; and 3) statements relating to the proposed sale of one of Vencor’sdivisions, Behavioral Healthcare (“BHC”), to Charter Behavioral Health Systems. Plaintiffs’ remaining allegations concernthe individual defendants’ sale of personal stock. On February 6, 1997, President Clinton proposed the Balanced Budget Act. This legislation included numerousrevisions to the Medicare reimbursement laws. [FOOTNOTE 6] At the time plaintiffs initiated this lawsuit, Vencor was the nation’slargest operator of long-term hospitals and the second largest operator of nursing homes. Medicare reimbursement made upa significant portion of Vencor’s revenue. Prior to the proposal of this specific legislation, the President had initiated anumber of unsuccessful attempts to institute Medicare reform. The Balanced Budget Act was signed into law on August 5,1997. During the six months that the legislation was before Congress, changes were made to the Administration’s proposaland the enacted legislation differed in many ways from the proposed legislation. [FOOTNOTE 7] While this proposed legislation was being debated in Congress, Vencor received reports on the progress of thelegislation from its lobbyists in Washington, D.C. In late April and early May, Thomas Schumann, Vice-President andDirector of Vencor’s Reimbursement Department, directed his employees to prepare detailed cost analyses of the BalancedBudget Act. Although some of these analyses focused on the effects the Act would have on specific departments of Vencor,defendant Reed and Richard Lechleiter, Vice-President for Finance and Corporate Controller, directed that analyses bedone studying all possible effects of the Act on Vencor’s revenues and earnings. At the end of July, around the time that theAct was passed, Vencor issued an internal memorandum setting forth the impact of the new legislation on its finances. Over the six months that the Balanced Budget Act was before Congress, Vencor issued numerous statements about itsfinancial health. From February 10, 1997 until its announcement on October 22, 1997 of revised earnings projections,Vencor stated that it was “comfortable” with a Fourth Quarter earnings projection of $0.59-$0.64 earnings per share and ayearly earnings projection of between $2.15 and $2.20 for 1997 and $2.60 and $2.65 for 1998. Vencor’s positive statementsabout its earning potential led numerous financial analysts to recommend Vencor’s stock as a “buy.” Vencor, however, didnote that
the Company cannot predict the content of any healthcare or budget reform legislation which may be proposed inCongress or in state legislatures in the future, and whether such legislation, if any, will be adopted. Accordingly, theCompany is unable to assess the effect of any such legislation on its business. There can be no assurance that anysuch legislation will not have a material adverse impact on the Company’s future growth, revenues and income. [FOOTNOTE 8]

On February 10, 1997, Vencor announced its acquisition of TheraTx. The press release relaying this information statedthat “[t]he inclusion of TheraTx is expected to be accretive to earnings based on projected synergies.” At the time of thisacquisition, TheraTx was carrying approximately $25 million of bad debt from patients who could not pay their bills. OnJuly 24, 1997, Vencor announced its Second Quarter earnings and defendant Lunsford stated that Vencor had “successfullyintegrated the operations of TheraTx.” TheraTx’s existing computer system, however, was not fully operational until Marchof 1998 due to the need to teach Vencor employees how to use the system. On June 20, 1997, Vencor acquired Transitional Hospitals Corporation, giving Vencor control over 58 of the estimated109 long-term acute care hospitals in the U.S. In connection with this acquisition, Vencor announced on June 27, 1997, a$500 million senior subordinated debt private placement. On or about July 15, 1997, Vencor announced that it had sold$750 million of senior notes, scheduled to mature in July of 2007. On October 8, 1997, Vencor initiated an offer toexchange the senior subordinated notes, issued in July 1997 in the private placement, for publicly registered notes havingidentical terms and conditions. The old notes issued in the private placement provided that if a registration statement wasnot filed by September 19, 1997, declared effective by November 18, 1997, or consummated or not declared a shelfregistration statement effective by December 18, 1997, then Vencor would have to pay additional interest on the old notes. On September 16, 1997, Vencor announced a definitive agreement to sell Behavioral Healthcare Corporation, a divisionof Transitional, to a subsidiary of Charter Behavioral Health Systems. The press release accompanying this announcementstated that “[t]his transaction, which is subject to acceptable financing, due diligence by CBHS and certain regulatoryapprovals, is expected to close during the fourth quarter of 1997.” On November 3, 1997, Vencor announced that it wouldnot be selling BHC due to a failure to agree to final payment terms. During the Class Period, the individual defendants sold portions of their stock holdings in Vencor. Between July andSeptember, Vencor’s officers and directors sold more than 222,000 shares for proceeds of approximately $9.5 million.During the month of July, defendant Lunsford sold 50,000 shares realizing proceeds of over $2,137,500, defendant Barrsold 52,500 shares realizing proceeds of over $2,232,500, defendant Ladt sold 12,000 shares realizing proceeds of over$500,000, and defendant Gillenwater sold 4,100 shares realizing proceeds of over $174,000. On September 18, 1997,defendant Force sold 17,812 shares realizing proceeds of over $789,000. Between September 18, 1997 and September 19,1997, defendant Reed sold 69,400 shares realizing proceeds of over $3,030,580.[FOOTNOTE 9] In their complaint, plaintiffs allege that the defendants made false and misleading statements in relation to Vencor’sfinancial activities from February 10, 1997 until October 21, 1997. Plaintiffs contend that these statements were made in anattempt to elevate the price of Vencor stock. During the Class Period, the stock price rose from a per share price of $31 to ahigh of over $44 per share. After Vencor’s announcement of lower than expected Fourth Quarter earnings on October 22,1997, the stock price fell from $42-5/8 to $30 per share. Plaintiffs filed this action in district court on December 24, 1997. On September 10, 1998, defendants filed a motion todismiss the complaint pursuant to Fed. R .Civ. P. 9(b) and 12(b)(6) and the Private Securities Litigation Reform Act of1995, 15 U.S.C �� 78u-4 & -5. The district court judge sua sponte converted the motion to dismiss into a motion forsummary judgment. Ruling in favor of the defendants, the district court dismissed plaintiffs’ complaint with prejudice.Plaintiffs filed a timely appeal. II. Discussion On appeal, plaintiffs argue that the district court erred in converting the defendants’ motion to dismiss into a summaryjudgment motion without giving the plaintiffs sufficient notice to prepare a defense to a summary judgment motion. Weagree with the plaintiffs that the district court did err. Rule 12(b) provides that

[i]f, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon whichrelief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall betreated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonableopportunity to present all material made pertinent to such a motion by Rule 56.

Fed. R. Civ. P. 12(b) (West 2000). Plaintiffs only learned of the district court’s decision to convert the motion to dismiss toa motion for summary judgment upon receiving the district court’s opinion dismissing the plaintiffs’ complaint withprejudice. Although the district court stated that it was deciding a motion for summary judgment, the documents which itrelied upon were, for the most part, documents “referred to in the complaint” and “central to the plaintiffs’ claim.”Defendants submitted authentic copies of these documents in their entirety to the court. The court’s consideration of thesedocuments did not require the conversion of the motion to dismiss into one for summary judgment. See Greenberg, 177F.3d at 514 (holding that when a document is referred to in the plaintiff’s complaint and is central to the plaintiff’s claim thecourt may consider the document in ruling on a motion to dismiss). The reasons given by the district court for grantingsummary judgment were based, in most instances, on plaintiffs’ allegations, these documents, judicial notice[FOOTNOTE 10] and legalanalysis which would support a decision to dismiss a plaintiff’s complaint for failure to state a claim upon which relief canbe granted. In Briggs v. Ohio Elections Commission, 61 F.3d 487, 493 (6th Cir. 1995) this court held that reversal is required if aplaintiff is not given notice and a reasonable opportunity to present evidence after the court has converted a motion todismiss to a motion for summary judgment. The district court, in this case, gave no notice to the plaintiffs. In Routman v.Automatic Data Processing, Inc., 873 F.2d 970, 972 (6th Cir. 1989), this court held that “where a district court iscontemplating entering sua sponte summary judgment against one of the parties, that party is entitled to unequivocal noticeof the court’s intentions.” Because the plaintiffs did not receive “unequivocal notice” of the court’s decision to convert thedefendants’ motion to dismiss into a summary judgment motion the district court abused its discretion. See Salehpour v.University of Tennessee, 159 F.3d 199, 203 (6th Cir. 1998) (holding that a court’s decision to enter summary judgment suasponte is reviewed for abuse of discretion). In addition, the district court abused its discretion when it did not provide theplaintiffs with a reasonable opportunity to present evidence to defend against a summary judgment motion. Although this court finds that the district court was incorrect in converting this case without notice to the plaintiffs, wedo not believe that we need to remand this case to allow the district court to correct this procedural error. “[A]n appellatecourt may affirm on any ground supported by the record, even though the ground relied upon by the lower court wasdifferent from the one chosen by the appellate panel.” Warda v. Commissioner, 15 F.3d 533, 539 n.6 (6th Cir. 1994). Wefind that the dismissal of the complaint should be affirmed on the grounds that the plaintiffs have not pled sufficient facts topermit a strong inference that the defendants engaged in securities fraud. In 1995, Congress passed the Private Securities Litigation Reform Act (“PSLRA”) which heightened the pleadingstandard in securities litigation. Section 78u-4(b) states:

(b) Requirements for securities fraud actions

(1) Misleading statements and omissions

In any private action arising under this chapter in which the plaintiff alleges that the defendant –

(A) made an untrue statement of a material fact; or

(B) omitted to state a material fact necessary in order to make the statements made, in the light of circumstances inwhich they were made, not misleading;

the complaint shall specify each statement alleged to have been misleading, the reason or reasons why the statementis misleading, and, if an allegation regarding the statement or omission is made on information and belief, thecomplaint shall state with particularity all facts on which that belief is formed.

(2) Required state of mind

In any private action arising under this chapter in which the plaintiff may recover money damages only on proof thatthe defendant acted with a particular state of mind, the complaint shall, with respect to each act or omission alleged toviolate this chapter, state with particularity facts giving rise to a strong inference that the defendant acted with therequired state of mind.

15 U.S.C. 78u-4(b)(1) & (2) (West 1997). This Circuit, in In re Comshare, Inc. Securities Litigation, 183 F.3d 542, 551(6th Cir. 1999), interpreted this provision of the Act as requiring plaintiffs to allege facts that give rise to at least a stronginference of reckless behavior in order to satisfy the scienter requirement. The Comshare court held that allegations of fact”that illustrate nothing more than a defendant’s motive and opportunity to commit fraud” do not satisfy the pleadingrequirements of the PSLRA. Id. We find that the plaintiffs’ complaint does not allege sufficient facts to establish either (1)the falsity or the misleading characteristics of the defendants’ statements or, (2) a strong inference that the defendants hadthe state of mind required by the statute. The plaintiffs allege that the defendants made numerous false and misleading statements designed to inflate the price ofVencor stock. The plaintiffs contend that the defendants attempted to elevate Vencor’s stock prices in order to ensure thesuccess of Vencor’s bond offering in July of 1997.(11) Plaintiffs also allege that the individual defendants benefitted fromthe elevated stock prices through sales of portions of their personal stock holdings. Plaintiffs allege that the individualdefendants sold more than 222,000 shares of Vencor stock realizing proceeds of approximately $9.5 million. Each allegedlyfalse or misleading statement made by the defendants concerned at least one of the following aspects of Vencor’s business:(1) the effect of the Balanced Budget Act on Vencor’s revenues and earnings; (2) the effect of the acquisition of TheraTxand Transitional on Vencor’s revenues and earnings, (3) the proposed sale of BHC to Charter. The plaintiffs’ remainingallegations relate to the sale of the individual defendants’ stock holdings. We believe that the plaintiffs do not allegesufficient facts to demonstrate that any of the statements attributable to the defendants were false or misleading. In addition,we do not believe that the plaintiffs allege any facts to show that the defendants had the requisite state of mind. Because theplaintiffs’ complaint does not allege sufficient facts to state a claim upon which relief can be granted, we affirm thedismissal of the plaintiffs’ complaint. Initially, it is necessary to determine which statements, contained in the complaint, can be attributed to the defendants.Plaintiffs allege numerous statements made by financial analysts which they contend are based on information provided tothese analysts by one or more of the defendants. Relying on In re Syntex Corp. Securities Litigation, 95 F.3d 922, 934 (9thCir. 1996) and In re Time Warner Inc., Securities Litigation, 9 F.3d 259, 265 (2d Cir. 1993), defendants argue and thedistrict court held that the financial analysts’ statements cannot be imputed to the defendants unless the analyst’s reportdirectly attributes the statements to one or more of the defendants. In In re Time Warner, the Second Circuit held that Rule9(b) requires a plaintiff to identify the speaker of allegedly fraudulent statements. Id. In reaching this conclusion, the courtstated “[f]ew reporters or analysts would knowingly abet a fraud, and many will detect and reveal a corporation’s efforts touse them as a channel for fraudulent statements. . . . Thus, the opportunity to manipulate stock prices through the plantingof false stories is somewhat limited.” Id. We believe that the Second Circuit is correct in its holding. Although acorporation provides analysts with information about the financial status of the corporation, the analyst does not simplyrepeat that information verbatim in his report. Instead, the analyst does what his job title suggests – he analyzes andsynthesizes the information before reporting it to the public. We agree with the district court and the Second Circuit andhold that a corporation cannot be held responsible for analysts’ statements about the corporation’s financial health unless thecorporation takes more affirmative action than simply providing information to the analysts. See id. Because the statementsin the complaint by financial analysts do not satisfy the heightened pleading requirements this court will analyze thedefendants’ motion to dismiss based only on those statements in the complaint that can be directly attributed to one or moreof the defendants. 1. Statements relating to the Balanced Budget Act Plaintiffs allege that the defendants made numerous false and misleading statements about the effect of the BalancedBudget Act on the financial prospects of Vencor.[FOOTNOTE 12] In assessing this aspect of the plaintiffs’ complaint, there are tworelevant time periods. The plaintiffs have alleged a Class Period of February 10, 1997 until October 21, 1997. Statementsmade by the defendants during the time period from February 10, 1997 until August 4, 1997 are not actionable because thedefendants could not know whether the proposed legislation would be enacted. Although the plaintiffs could state a claimfor statements made after the enactment of the legislation on August 5, 1997, the plaintiffs do not allege sufficient facts todemonstrate that the defendants made any statements after the enactment of the legislation that were false or misleading. 15 U.S.C. � 78u-5(c) establishes a safe harbor for forward-looking statements. Statements fall into this safe harbor ifthey are identified as forward-looking when made and are accompanied by cautionary statements. See 15 U.S.C. �78u-5(c)(1)(A) (West 1997). Statements also are entitled to this protection if the plaintiff cannot prove that the speaker hadactual knowledge that the statement was false or misleading when made. See 15 U.S.C. � 78u-5(c)(1)(B). All of thestatements alleged by the plaintiffs relating to the effect of the Balanced Budget Act on the earnings and revenues ofVencor that occurred before the legislation was passed are entitled to this safe harbor protection. These statementscontained “soft information” concerning potential earnings and projected growth. See In re Sofamor Danek Group, Inc.,123 F.3d 394, 401 (6th Cir. 1997) (finding that “soft” information “includes predictions and matters of opinion”). ThisCircuit has held that “soft” information “must be disclosed only if . . . virtually as certain as hard facts.” Id. at 402 (quotingStarkman v. Marathon Oil Co., 772 F.2d 231, 241 (6th Cir. 1985)). Although the Sofamor Danek case precedes theadoption of the PSLRA, we believe that it is appropriate to apply its holding to this case. In Comshare, this Circuit held that”the PSLRA did not change the scienter that a plaintiff must prove to prevail in a securities fraud case but instead changedwhat a plaintiff must plead in his complaint in order to survive a motion to dismiss.” 183 F.3d at 548-49. The SofamorDanek court’s interpretation of the substantive law of scienter is not affected by the PSLRA’s requirements for pleading;thus, its holding that “soft information” is not actionable continues to be the law of this Circuit. Because the enactment ofthe Balanced Budget Act was uncertain until August 5, 1997 defendants cannot be held responsible for not disclosinginformation about the possible effect that this legislation would have on Vencor’s business. In addition, plaintiffs do notallege sufficient facts to permit a strong inference that any of the defendants had actual knowledge that the statements werefalse or misleading when made. The plaintiffs also do not allege sufficient facts to demonstrate that Vencor made any false or misleading statementsafter the enactment of the Act. The pleadings set forth no statements, after August 5, 1997, which are directly attributable toany of the defendants. The alleged statements after the enactment of the Act are all statements made by financial analysts.The plaintiffs have failed to allege facts that demonstrate that the defendants took affirmative action allowing us to attributethese statements to the defendants. In addition, the plaintiffs have not alleged sufficient facts to demonstrate that thedefendants knew these statements were false or misleading when made. Plaintiffs allege that the defendants received aninternal memorandum in late July, after the bill had passed both houses, but prior to receiving the President’s approval,informing them of the negative effect of the legislation on Vencor’s earnings and revenues. This memorandum[FOOTNOTE 13] isincluded in the exhibits attached to the defendant’s motion to dismiss and does not support the plaintiffs’ allegations.[FOOTNOTE 14]Although the memorandum acknowledges that the legislation may have a negative impact on Vencor, it clearly states thatno definite findings have been made and that further study is required before an accurate assessment of the effect of thislegislation can be made. Even if plaintiffs’ allegations are accepted as true and this court assumes that the defendants knewof this document, we do not believe the facts support a finding that the defendants knew that any statements about earningsand growth were false when made, nor that they were reckless. Because the plaintiffs do not allege any statements afterAugust 5, 1997 that can be attributed to the defendants and plaintiffs do not allege sufficient facts to establish that thedefendants knew any of the statements made prior to August 5, 1997 were false or misleading when made, plaintiffs do notstate a claim for fraud based on their allegations associated with the effect of the Balanced Budget Act on Vencor’s earningsand revenues. 2. Acquisition of TheraTx and Transitional Plaintiffs allege that the defendants made false and misleading statements about the effect that the acquisitions ofTheraTx and Transitional would have on Vencor’s earnings and revenues. In particular, plaintiffs allege that Vencor’sstatement on February 10, 1997, that the acquisition of TheraTx would be “accretive to earnings” was false and misleading.Plaintiffs state that defendants knew that TheraTx had $25 million in bad debt. Accepting that defendants knew of thisdebt, the plaintiffs’ allegation does not state a claim. Plaintiffs do not allege how the existence of this bad debt makesVencor’s statement false and misleading. In addition, this statement is a prediction or opinion and constitutes “soft”information. As stated above, “soft” information statements are not actionable. Plaintiffs also allege that defendants’ statement on July 24, 1997, that Vencor had successfully integrated TheraTx’soperations was false and misleading because TheraTx’s computer system was not fully operational until March 1998. Theplaintiffs’ allegations state that the computer system was not implemented until all of the Vencor employees were trained touse it. Plaintiffs’ allegations, however, fail to establish a strong inference that the defendants’ statements were false andmisleading when made. For this statement to constitute fraud, the plaintiffs would have to allege facts that demonstrate thatthe inability of Vencor to utilize TheraTx’s computer system until all of its employees were trained in the new systemprevented the integration of TheraTx’s operations into Vencor, i.e. that this computer problem caused TheraTx’s operationsto be run separately from the rest of Vencor. The complaint lacks allegations connecting the computer system to thesuccessful integration of the companies; thus, the plaintiffs have not established a strong inference that this statement wasfalse or misleading. Plaintiffs allege that defendants’ statements about the acquisition of Transitional were false and misleading. Plaintiffs,however, do not allege any statements with regard to this transaction which cannot be classified as forward-lookingstatements about “soft” information. Plaintiffs allege that on or about the last week in June of 1997, defendant Barr gaveTransitional employees notice that they would be laid off in sixty days and told these employees that they probably wouldhave been laid off anyway due to the proposed Medicare regulations. The plaintiffs proffer this statement as evidence ofdefendant Barr’s knowledge of the effect of the Balanced Budget Act on Vencor’s operations. Plaintiffs, however, fail toconnect this statement to any of their allegations concerning the defendants’ false and misleading statements. Withoutalleging a link between this statement and defendants’ allegedly false and misleading statements, the plaintiffs have failedto allege sufficient facts establishing a strong inference of scienter. On its own, this statement is not actionable because itconstitutes defendant Barr’s opinion and is “soft” information. In the plaintiffs’ other allegations involving the Transitionalacquisition, they contend that the defendants made false and misleading statements about the benefit of the Transitionalacquisition because they knew that the Balanced Budget Act would have a negative effect on Vencor. As stated above, thedefendants cannot be held liable for any statements about the Balanced Budget Act prior to its enactment. In addition,plaintiffs’ allegations fail because they allege only motive and opportunity and do not establish a strong inference ofrecklessness. Because the plaintiffs have failed to establish that any of defendants’ statement regarding either the acquisitionof TheraTx or Transitional were false or misleading the plaintiffs have not stated a claim of fraud. 3. Proposed Sale of BHC Plaintiffs allege that defendants made false and misleading statements in their announcement of the anticipated sale ofBHC to Charter. Plaintiffs contend that defendants made these statements in an attempt to bolster the price of Vencor stockand to prime the market for its sale of $750 million in senior notes. In announcing the “definitive agreement” betweenVencor and Charter, defendants stated that Charter was to pay $140 million in cash for BHC. Plaintiffs state that thisannouncement of a cash sale was designed to alleviate concerns about the substantial debt Vencor had incurred in itsacquisition of Transitional. On November 3, 1997, Vencor announced that the sale would not be made because of a failureto agree to payment terms. Plaintiffs’ allegations that Vencor’s statements about the sale were false and misleading is incorrect. Clearly stated inVencor’s announcement is that the sale is conditional: “This transaction, which is subject to acceptable financing, duediligence by CBHS and certain regulatory approvals, is expected to close during the fourth quarter.” This alleged statementwhich, on its face, is not false does not support plaintiffs’ claim of fraud. Because Vencor never stated that the sale hadbeen consummated we find that the statements associated with this announcement are not false and misleading. 4. “Controlling Person” Liability and Insider Trading The plaintiffs bring claims against the individual defendants both as “controlling persons” of the corporation and asindividual insider traders. Because plaintiffs fail to state a claim against the corporation they also fail to state a claimagainst the individual defendants as “controlling persons.” See Comshare, 183 F.3d at 554 n.11. In order for plaintiffs’claim of insider trading to stand against the individual defendants, plaintiffs must allege that the defendants had knowledgeof non-public information that they utilized in a manipulative and deceptive manner. See 15 U.S.C. � 78j(b) (West 1997).Plaintiffs’ only allegations attributing inside information to the defendants concern the internal memorandum discussing thepotential effects of the Balanced Budget Act. The individual defendants, like the corporation, did not know whether theBalanced Budget Act would be passed; thus, they cannot be held liable for actions alleged to be taken in reliance on thepassage of the Balanced Budget Act. Because the plaintiffs do not allege that the individual defendants had insideinformation stating that the Balanced Budget Act would pass they fail to state a claim against the individual defendantswho sold their stock prior to the passage of the legislation.[FOOTNOTE 15] In addition, the internal memorandum upon which theplaintiffs rely states that further study is needed to make an accurate assessment of the effects of the Act on the corporation.We do not believe that this memorandum provided those defendants who sold their stock after the passage of the Act withinside information.[FOOTNOTE 16] While plaintiffs’ allegations may establish motive and opportunity, they are insufficient todemonstrate a strong inference of the individual defendant’s use of inside information deceptively. III. Conclusion For the foregoing reasons, we find that the plaintiffs’ complaint does not contain sufficient factual allegations to state a claim under the PSLRA and should be dismissed. _________________ DISSENT _________________ MERRITT, Circuit Judge, dissenting. The plaintiffs satisfy the pleading requirements of Rule 9(b) and 15 U.S.C., thenew Private Securities Litigation Act, � 74u-4(b)(1) and (2). In their seventy-four page complaint, plaintiffs allege withsufficient specificity (1) statements the defendants made during the April – October 1997 class period to the investingpublic and to financial analysts that the Balanced Budget Act would have no adverse impact on Vencor’s future earnings (2)when they well knew that the Act would have a serious negative effect on earnings. In cases of securities fraud, plaintiffs need only plead one material misrepresentation or omission in order for this courtto sustain the complaint. See In re Fidelity/Micron Sec. Litig., 964 F. Supp. 539, 543 (D. Mass. 1997). In reviewing theplaintiffs’ complaint and alleged misrepresentations concerning the Balanced Budget Act, the court errs in its treatment ofso called “forward-looking” statements by the defendants. The panel majority found that all of the statements alleged by theplaintiffs relating to the effect of the Act on the earnings and revenues of Vencor made before the legislation was signedinto law were entitled to safe harbor protection as “forward-looking” statements. This is an untenable position because itlets the defendants get away with talking out of both sides of their mouths saying “yes” to the investing public and “no” totheir own employees. Plaintiffs plead that defendants knowingly made false and misleading statements as to expected earnings and revenuesof Vencor. As evidence of defendants’ knowledge, they allege in their complaint that in June 1997, Vencor was aware ofthe probable negative ramifications that the Balanced Budget Act’s Medicare reforms would have on the company.Specifically, plaintiffs state that in late June 1997, after acquiring Transitional Hospitals Corporation, defendants MichaelBarr, executive vice president and chief operating officer, and James Gillenwater, senior vice president of the company,gave a presentation to approximately one hundred Transitional employees. At that meeting, Barr gave Transitionalemployees notice that they would be laid off in sixty days. Barr went on to tell the employees that there were “tough timescoming in the industry because of likely cutbacks in Medicare” and that “they would have been laid off anyway because theproposed Medicare regulations were going to make it difficult for Vencor to make money and stay profitable.” Am. Compl.� 72. A month later, on July 25, 1997, Vencor filed its second quarter 10-Q with the SEC. Even though defendants had justtold employees they were laying off that “tough times” were ahead and that it would be difficult to stay profitable, in theirreport to the SEC, defendants continued to indicate that Vencor’s business would not be adversely affected by any pendinglegislation. Amazingly, defendants made these “predictions” even after the Balanced Budget Act had already passed boththe House and the Senate a full month earlier and when it was certain the proposals would be implemented. In their secondquarter 10-Q, defendants did issue a general warning that Congress was considering various proposals that could reduceexpenditures under certain governmental health and welfare programs such as Medicare and Medicaid, but unequivocallystated that it could not predict the impact of this legislation. As plaintiffs allege, defendants went on to selectively warn ofproposed Health Care Financing Administration regulations, but made absolutely no specific mention of the passage orimpact of the Balanced Budget Act. Plaintiffs assert that Vencor’s 1997 second quarter 10-Q was misleading as to thenegative impact caused by the passage of the Balanced Budget Act. Moreover, even after the Balanced Budget Act had been signed into law on August 5, 1997, plaintiffs allege thatdefendants continued to issue the same earnings forecasts to the marketplace as they had earlier. On September 25, 1997,seven weeks after the Act was signed into law and six months after Vencor began analyzing the Act’s effect on thecompany, defendants Bruce Lunsford, chairman of the board, CEO, and president of Vencor, and Earl Reed, executive vicepresident and CFO, continued to publicly predict rosy earnings estimates of $2.10 and $2.60 per share for 1997 and 1998respectively. Am. Compl. � 100. It is ludicrous to think that by this time Vencor management had no knowledge ofnegative implications the Act would have on the future of Medicare and Medicaid reimbursements. I think that plaintiffs’allegations are sufficient to allow them their day in court. The law in this area is clear. Rule 10b-5, promulgated under Section 10(b), states in relevant part: “It shall be unlawfulfor any person… to make any untrue statement of a material fact or omit to state a material fact necessary in order to makethe statements made, in light of the circumstances under which they were made, not misleading.” 17 C.F.R. �240.10b-5.Plaintiffs allege that defendants did exactly what Rule 10b-5 forbids. To escape any liability, defendants and the panelmajority hold that their statements regarding Vencor’s earnings were “forward-looking” statements and included sufficientcautionary language as to the uncertainty of those projections, thus triggering the safe harbor provision of the PrivateSecurities Litigation Reform Act. 15 U.S.C. �78u-5(c). This is wrong. A forward-looking statement is defined, among other things, as a statement including a projection of revenues, income,earnings per share, capital expenditures, dividends, capital structure, or other financial terms. See 15 U.S.C.�78u-5(i)(1)(A). A company is allowed to make a forward-looking statement without fear of liability if the statement doesnot hold true when the statement is accompanied by “meaningful cautionary statements identifying important factors thatcould cause actual results to differ materially from those in the forward-looking statement.” 15 U.S.C. � 78u-5(c)(1). This isthe so-called safe harbor provision. The statutory safe harbor operates in the alternative in two steps. First, unless acomplaint pleads specific facts demonstrating that defendants have actual knowledge of the falsity of the forward lookingstatement, then there is no liability as a matter of law. See 15 U.S.C. � 78u-5(c)(1)(B). Second, even if actual knowledge offalsity is factually pled, the statutory safe harbors bars liability of the forward looking statement if the statement isaccompanied by a cautionary statement about its uncertainty. See 15 U.S.C. � 78u-5(c)(1)(A). With this in mind, I wouldfind that the “cautionary statement” proffered by defendants does not meet the criteria set by the statute. Nowhere inVencor’s 1997 public disclosures or statements prior to October 22 ,1997, does Vencor identify important factors orspecifically warn of any negative impact by the proposed Medicare legislation. Defendants simply continued to warn thatmanagement could not predict whether such proposals would be adopted or if adopted, what effect, if any, such proposalswould have on its business. In point of fact, defendants knew that the Medicare legislation was likely to have a seriousadverse effect and should have said so. Defendants should not be allowed to make exaggerated earnings projections and then abstractly warn of pendinglegislation in Congress claiming that they say they have no idea how it will affect revenues, while at the same time tellingemployees whom they are laying off that “tough times” are ahead because of certain pending Medicare legislation. This would not be the first time that this circuit has held that a defendant could be held liable to investors for failing todisclose certain material information in connection with a stock investment. In Rubin v. Schottenstein, Zox & Dunn, 143F.3d 263 (6th Cir. 1998), we held, en banc, in an opinion from which Judge Kennedy dissented, that an attorney could beheld liable because he had chosen to speak to investors about material details of their proposed securities investment withthe issuer without revealing certain additional facts necessary to make his statement not misleading. See Rubin, 143 F.3d at267-68. We reasoned that even when a person is not under an independent duty to provide information, a person “assumesa duty to provide complete and non-misleading information with respect to subjects on which he undertakes to speak.” Id.at 268 (citing Ackerman v, Schartz, 947 F.2d 841, 848 (7th Cir. 1991). Applying Rubin to this case, when defendants choseto speak they have a duty to provide complete and non-misleading information regarding those statements. Defendantsfailed to do so. Accordingly, I would reverse the judgment of the district court, deny defendants’ motion to dismiss, andremand to the district court for further proceedings. The narrow, rigid interpretation our Court has given the Private Securities Litigation Reform Act makes it now almostimpossible to allege securities fraud successfully. The effect of the Court’s decision seems to be that no statements aboutthe future prospects (“forward-looking” statements) of a company are actionable, no matter how dishonest as long as theyare accompanied by “magic words” disclaiming knowledge. It makes no difference that insiders are selling their stock withsecret knowledge that the company’s prospects are bad while saying the opposite to the public. It reminds me of the rigiditywith which the common law courts came to interpret the old forms of action in the seventeenth century. Our system ofequity or code or notice pleading is supposed to have changed all that once and for all, but our Court has returned to it witha vengeance in this case under the Private Securities Litigation Reform Act. :::FOOTNOTES::: FN1 These facts are either alleged by the plaintiffs or found in the documents filed with the defendants’ motion to dismiss.We are required to accept the plaintiffs’ allegations as true in ruling on a motion to dismiss. See Mayer v. Mylod, 988 F.2d635, 638 (6th Cir. 1993). We also are permitted to consider those facts contained in documents referred to in the plaintiffs’complaint and central to the plaintiffs’ claim in ruling on a motion to dismiss. See Greenberg v. The Life InsuranceCompany of Virginia, 177 F.3d 507, 514 (6th Cir. 1999); see also infra note 13. FN2 On May 1, 1998, Vencor reorganized into two public companies, Vencor and Ventas. On July 27, 1998, plaintiffs filedan amended complaint against the original defendants as well as Ventas. FN3 Section 10(b) provides:

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstatecommerce or of the mails, or of any facility of any national securities exchange –

(b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

15 U.S.C. � 78j(b) (West 1997). FN4 Section 20(a) provides:

Every person who, directly or indirectly, controls any person liable under any provision of this chapter or of any rule or regulation thereunder shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable, unless the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the violation or cause of action.

15 U.S.C � 78t(a) (West 1997). FN5 Vencor, Inc. filed a voluntary petition for Chapter 11 bankruptcy on September 13, 1999. Pursuant to section 362 ofthe Bankruptcy Code, this proceeding against Vencor, Inc. has been stayed by the bankruptcy court. The remainingdefendants include Ventas, Inc., and the following individuals: W. Bruce Lunsford, President and CEO of Vencor, Inc.,W.Earl Reed, III, Executive Vice-President and CFO of Vencor, Inc., Michael R. Barr, Executive Vice-President, COOand Director of Vencor, Inc., Thomas T. Ladt, Executive Vice-President of Vencor, Inc., Jill L. Force, SeniorVice-President, Secretary and General Counsel of Vencor, Inc, and James H. Gillenwater, Jr., Senior Vice-President ofVencor, Inc. FN6 There were four provisions in the Administration’s proposal that the plaintiffs allege would have a negative impact onVencor’s business. These were:

a) The Administration’s proposal eliminated all incentive payments made to hospitals that kept their actual costs below their TEFRA target, the amount computed pursuant to the Tax Equity and Fiscal Responsibility Act of 1982.

b) The Administration proposed reductions, beginning in 1998 at the amount of 1.5% below the market basket index, of Medicare payments to PPS-exempt hospitals such as those owned by Vencor. Generally, Medicare reimbursementsare based on a fixed payment per patient basis (“PPS”). PPS-exempt hospitals are entitled to reimbursement on anactual cost basis linked to the TEFRA target.

c) The Administration proposed caps on increases in TEFRA target amounts based on the average cost per patient for all long-term care hospitals.

d) The Administration’s proposal denied all new long-term care hospitals any exemption from Medicare PPS.

FN7 Of the four provisions of the Administration’s proposal only two were enacted. The enacted legislation included thefollowing provisions:

a) The legislation retained incentive payments for hospitals that keep their actual costs below TEFRA targets, setting them at the lesser of either: (1) 15% of the difference between the TEFRA target and operating costs, or (2) 2% of the TEFRA target.

b) The legislation reduced Medicare payments to PPS-exempt hospitals at the rate of 0% in 1998 and according to a sliding scale based on a comparison of the hospital’s actual costs to its target for 1999-2002.

c) The legislation capped TEFRA limits at 75%.

FN8 This language was found in Vencor’s 1996 Form 10-K filed on March 27, 1997. Similar warnings can be found inVencor’s First and Second Quarter 10-Q. FN9 Plaintiffs allege that, on September 25, 1997, Bear Sterns issued a report on Vencor which included an explanation forReed’s sale of stock. The report stated that Reed sold the stock to retire a $2 million personal loan that Reed had obtained toexercise stock options. FN10 In reaching the conclusion that the plaintiffs have failed to state a claim upon which relief can be granted, we haveconsidered not only those documents referenced in the plaintiffs’ complaint, but also documents filed with the SEC. Webelieve that it is appropriate to take judicial notice of public documents and that our consideration of these documents doesnot require conversion of defendants’ motion to dismiss to a motion for summary judgment. See Kramer v. Time Warner,Inc., 937 F.2d 767, 774 (2d Cir. 1991) (holding that the district court did not err in taking judicial notice of publicdocuments when considering a motion to dismiss). FN11 On or about July 15, 1997, Vencor announced a sale of $750 million of senior notes. The proceeds of this sale wereused to replenish the credit facility which was depleted in connection with Vencor’s $574 million acquisition ofTransitional. FN12 As stated above, many of plaintiffs’ allegations of false and misleading statements cannot be attributed to thedefendants. Of the remaining allegations, only defendants’ statements in Vencor’s press release announcing acquisition ofTheraTx ( Compl. � 32), announcement of Fourth Quarter 1996 results (Compl. � 41), annual report (Compl. �44), 1996Form 10-K (Compl. � 45), announcement of First Quarter results (Compl. � 50), First Quarter 10-Q (Compl. �� 54-56),Courier-Journal article (Compl. � 59), announcement of acquisition of Transitional Hospital Corporation (Compl. � 65),Transitional presentation (Compl. � 72), announcement of sale of notes (Compl. � 76), announcement of Second Quarterresults (Compl. � 78), Second Quarter 10-Q (Compl. � 83), announcement to sell network of hospitals (Compl. � 89), andannouncement of agreement to sell BHC (Compl. � 92) should be considered in assessing plaintiffs’ complaint. Of thesestatements only the last two occurred after the enactment of the Balanced Budget Act. FN13 Although this document is referenced in the plaintiffs’ complaint, it could be argued that it has not been formallyincorporated into the complaint. It still is appropriate for this court to consider this document and the others attached to thedefendant’s brief in support of their motion to dismiss. “When a document is referred to in the complaint and is central tothe plaintiff’s claim . . . the defendant may submit an authentic copy to the court to be considered on a motion to dismiss,and the court’s consideration of the document does not require conversion of the motion to one for summary judgment.” 11JAMES WM. MOORE ET AL., MOORE’S FEDERAL PRACTICE � 56.30[4] (3d ed. 1998); see also Greenberg, 177F.3d at 514 (citing this proposition with approval). Because the documents referred to in this opinion are “central” to theplaintiffs’ claim this court may consider them in assessing the plaintiffs’ pleadings on a motion to dismiss. FN14 Plaintiffs also allege that Vencor’s financial department had undertaken numerous studies to discern the effect of theproposed legislation on Vencor during the months of April through July. Because the effect of proposed legislation can beconsidered a prediction or opinion the defendants had no duty to disclose these studies. In addition, if the court makes theassumption that the internal memorandum promulgated in late July would incorporate any other relevant studies, there is noallegation that permits a strong inference that any of these studies produced any “hard” information which should have beendisclosed. Knowledge of the effects of the legislation cannot be imputed on the defendants. The memorandum does notcontain any “hard” information, but rather, simply warns of the possibility of negative effects. FN15 Plaintiffs allege that defendants Lunsford, Barr, Ladt and Gillenwater sold stock prior to the enactment of theBalanced Budget Act. FN16 Plaintiffs allege that defendants Force and Reed sold stock after the Balanced Budget Act was enacted.


Pursuant to Sixth Circuit Rule 206 ELECTRONIC CITATION: 2000 FED App. 0145P (6th Cir.) File Name: 00a0145p.06 UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT _________________
A. Carl Helwig, on Behalf of Himself and AllOthers Similarly Situated; Gary Barnes;Meredith Wilson Brown; Robert Brown; S.KayLutes; Sybil R. Meisel; Barbara E. Shuster, Plaintiffs-Appellants, v. Vencor, Inc.; W. Bruce Lunsford; W. Earl Reed,III; Michael R. Barr; Thomas T. Ladt; JillL.Force; James H. Gillenwater, Jr., Defendants-Appellees.No. 99-5153
Appeal from the United States District Court for the Western District of Kentucky at Louisville. No. 97-00835–Charles R. Simpson, III, Chief District Judge. Argued: December 15, 1999 Decided and Filed: April 24, 2000 Before: MERRITT, KENNEDY, and SILER, Circuit Judges. _________________ COUNSEL ARGUED: Arthur R. Miller, HARVARD LAW SCHOOL, Cambridge, Massachusetts, for Appellants. Gregory P. Joseph,FRIED, FRANK, HARRIS, SHRIVER & JACOBSON, New York, New York, for Appellees. ONBRIEF: Kenneth J.Vianale, MILBERG, WEISS, BERSHAD, HYNES & LERACH, Boca Raton, Florida, for Appellants. Gregory P. Joseph,Kirsa Phillips, Rachel S. Fleishman, FRIED, FRANK, HARRIS, SHRIVER & JACOBSON, New York, New York, DavidB. Tachau, TACHAU, MADDOX, HOVIOUS & DICKENS, Louisville, Kentucky, for Appellees. KENNEDY, J., delivered the opinion of the court, in which SILER, J., joined. MERRITT, J. (pp. 22-26), delivered aseparate dissenting opinion.
 
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